For many, hearing about the stock market feels like listening to a foreign language. But it’s actually a very important part of our economy, and something that everyone should understand at least a little bit better.
The stock market is the collection of physical and electronic markets where people can buy and sell shares of companies. Companies raise money through stock issues by selling shares to investors who then become partial owners of the company. The value of the shares rises or falls based on the fortunes of the business and other market factors. Investors can invest in stocks through individual companies, mutual funds or exchange-traded funds (ETFs), which track a group of companies across multiple industries.
Most Americans learn about the stock market through indexes like the Dow Jones Industrial Average and S&P 500, which show how the overall market is performing at a given time. These indexes are often used on news programs because they provide a quick snapshot of Wall Street.
In the late 1700s, a group of merchants met under a buttonwood tree on Wall Street and signed an agreement that would eventually lead to the New York Stock Exchange. Today, the NYSE is one of the largest exchanges in the world and has an immense impact on global economies.
A stock trade is only completed once a buyer and seller agree on a price. There is usually a period of a few days before a share is officially considered owned by the buyer.