Whether you’re an investor or just watching your 401(k) grow, the stock market can seem like it’s speaking a language that you don’t understand. It’s a market where companies sell shares (partial ownership) in their businesses to investors, and those stocks are traded on an exchange. The biggest stock exchange is the New York Stock Exchange, but there are many others. It’s also important to remember that the stock market is global, so a calamity in one corner of the world can quickly affect your investments. The Securities and Exchange Commission regulates the market in the United States, while other countries have their own rules and regulations.
The stock market began as a way for entrepreneurs to raise money without borrowing. They handed over their business profits to investors, who got a share of the company and watched as the fortunes of the company rose and fell. Today, the market is conducted largely on computers that match buyers who want to buy shares at the current prices with sellers willing to sell at those same prices. A share of a publicly-traded company means you own part of that business, but private companies can only issue their shares to employees or friends and family members.
Investors look to stocks to grow their wealth over time and support the growth of other companies in turn, which supports the economy as a whole. But the stock market is complex, and it’s easy to get lost in the lingo when listening to pundits yapping on the TV or radio about their best stock picks.
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