The stock market is a complex network where shares of publicly traded companies are bought and sold, protected by laws against fraud and other unfair trading practices. Its role is vital to modern economies. It distributes control of some of the world’s largest companies among hundreds of millions of individual investors, who in turn determine their value. Investors purchase stocks for a variety of reasons, from earning dividends to having a say in company matters. But it’s often the case that the same economic and political factors impact most or all stocks in similar ways.
A key feature of the stock market is its open nature, meaning that buyers and sellers constantly negotiate prices with one another as new information arises and demand changes. This is different from shopping at a store, where prices remain fixed.
Stocks are listed on exchanges like the NYSE and Nasdaq, where people who want to buy a stock can match up with those who are selling it. Brokers facilitate the transaction, which can happen almost instantly. As the number of buyers outpaces the number of sellers, a stock’s price goes up. When the opposite is true, a stock’s price falls.
Investors choose which stocks to own based on their belief that a particular company’s earnings will rise to a level at which they can sell their shares for a profit. Earnings are driven by many factors, including how profitable a company’s goods and services are and the general state of the economy and the global market.
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