A stock market is an exchange for people to buy and sell shares of publicly-traded companies. A share represents a partial ownership stake in a company, and a company issues shares to raise money to grow their business. People can buy individual stocks, or they can invest in funds, such as index funds or exchange traded funds (ETFs), that track a specific market or industry.
A person or organization who wants to buy a stock matches up with another buyer through a brokerage firm, and the trade takes place almost instantly. Stock prices rise and fall based on supply and demand. The more people who want to buy a stock, the higher the price. Similarly, the less people who want to sell a stock, the lower the price.
The stock market is a crucial part of modern economies. Its movements help fund technological advances like smartphones and medicines that require billions of dollars to develop, as well as drive home values in middle-class neighborhoods across the country. The market is also central to the retirement and investing strategies of millions of Americans.
The most common way for Americans to participate in the stock market is through a mutual fund or an ETF, which pool money from many investors to purchase a basket of stocks. There are also opportunities to buy and sell individual stocks, but this can be more challenging for beginners. If you do choose to buy individual stocks, you can use different order types to control the price at which you buy or sell, such as a stop order, a limit order, or a market order.