The stock market is the place where anyone can buy and sell fractional ownership of public companies. It spreads control of some of the world’s largest companies among hundreds of millions of people. Their buying and selling decisions collectively shape the market’s value, which is how a company’s shares are priced.
Companies issue shares to raise money, and when a company does a well-publicized initial public offering (IPO), its stocks are traded on an exchange like the New York Stock Exchange or Nasdaq. Afterward, those shares can be bought and sold on the secondary market by individual investors who own brokerage accounts. Private companies don’t usually offer shares to the general public, though some private companies may have employees who own stock.
Stock prices rise and fall in response to market and economic factors, including the company’s profit margin, growth in sales of its goods or services, and other factors that influence how a business will do in the future. When a stock price goes up, it means more investors are willing to buy the stock. When the stock prices of many stocks rise, it’s called a bull market. Business news reports often refer to the performance of a broad market index, such as the Dow Jones Industrial Average or the S&P 500.
The stock market is regulated, with rules and standards set by government agencies such as the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA). The goal of these regulations is to protect retail investors and maintain fair and efficient markets.