The stock market is a place where private and public companies raise money to grow by selling shares of ownership to the general public. Shareholders, who buy the shares, can earn a profit in one of two ways: from dividends paid at regular intervals or from capital appreciation when the price of the stocks rise. The market also provides a way for people to invest their wealth in a large variety of companies, including those in their own neighborhood or region as well as those around the world.
The market’s existence reflects changes in the economy over time. Early stock markets evolved to meet the needs of investors, who were eager to buy into a business that might grow or prosper. Moreover, the market became an indicator of social mood and sentiment, which could be reflected in rising or falling stock prices.
For a trade to occur, both a buyer and seller must agree on a price. This is why textbooks often talk about buyers and sellers coming together in a marketplace, bargaining hard with each other until they agree on a figure. But the reality is that you find prices listed in your online brokerage account or a chart of how stocks have changed over time, not in the back rooms of exchanges.
Today, the stock market is conducted largely on computers operating at lightning speed to match many investors who want to buy shares in a company with others willing to sell theirs. Some public companies are traded on the major exchanges, while private ones may only offer their shares to their employees or to the general public through private offerings. There are also markets for real estate investment trusts (REITs), bonds and commodities.
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