The stock market is a place where anyone can buy or sell fractional ownership in a publicly traded company. It distributes control of many of the world’s largest companies among hundreds of millions of individual investors whose buying and selling decisions determine how much each share is worth.
Besides helping companies raise money, the market also serves as a way for investors to make returns on their investments. Profits can be earned either from the dividends that some companies pay out on a regular basis or from capital appreciation which is when the value of a stock increases over time. In addition, the market gives you a say in how each company is run through voting rights that are attached to your shares.
Stock prices are driven by many factors on a stock-by-stock basis, but larger economic and market trends often affect most or all stocks. For example, tax cuts or high unemployment may buoy the stock market as the economy grows, while natural disasters or geopolitical events can cause it to falter.
Most trading takes place on exchanges like the New York Stock Exchange or Nasdaq where brokers match buyers and sellers of a particular stock. When you buy or sell a stock, the price you pay or receive is determined by the bid-ask spread which is established by a computer algorithm. You can try to control the price you buy or sell at by using a limit order or another more sophisticated type of trade.