Investing in stocks can lead to positive financial returns if your shares grow in value, but you also face the risk of losing everything you invested. The stock market is a global network of investors and financial institutions that trade shares in publicly owned companies. Investors can access the market through exchanges, like the New York Stock Exchange or Nasdaq. Publicly owned companies issue shares to raise money and then trade those shares on the exchanges. The value of those shares rises and falls based on demand and supply.
The stock market is a matchmaker, matching people who want to buy or sell their shares with others who do the same. Buyers and sellers are often individual investors, but can include institutional investors such as pension funds, investment firms or banks. Publicly traded corporations trading their own shares and robo-advisors that automate investments for individuals are also major players.
A stock’s price fluctuates based on whether the market believes a company’s sales and profits will rise or fall. Investors also consider news events and political uncertainty. The results of a US presidential election or the impact of trade deals among major powers can move a stock’s price.
A person who wants to buy or sell a share first offers an ask, or lowest price they are willing to accept, and a bid, or highest price they are willing to pay. Then buyers and sellers agree on a price, either in-person or online. The process is facilitated by a marketplace, often a large corporation called a “market maker.”