What is the Stock Market?

A stock market is a place where buyers and sellers trade company stock for a set price. In the financial world, “stock” simply means a supply of money a company has raised from individuals or other organizations. If you buy stock, then you own a part of a company. This part is called a “share.” People who own stock are referred to as "shareholders" or "stockholders." Shareholders hope the companies they invest in go on to earn money, because they will then receive a share of the profits. If the company they buy stock in loses money, however, then the stockholders won't even regain the money they invested. Shareholders usually have voting rights, typically one vote for every share they own. Many companies have yearly meetings where the shareholders can vote on company issues. Stockholders also receive annual or quarterly reports that let them know how the company is doing financially. When a corporation wants to sell shares of its company, it lists its stock on an exchange. The New York Stock Exchange (NYSE) and the National Association of Securities Dealers (NASDAQ) are commonly used stock exchanges in the United States. These exchanges are set up to make it faster and easier for people to buy and sell company stock. When individuals want to buy or sell stocks, they can simply call a stock broker, which is a firm authorized to trade at stock exchanges. The stock broker relays the trade message to the floor of the correct exchange, and a representative of the company then completes the trade request. A stock broker receives a commission for providing this trading service. However, it is becoming increasingly popular for people to use online trading sites instead of stock brokers. If an individual believes the stock market is going to go down, he or she is referred to as “bearish.” These bearish investors buy stock very cautiously. People are called “bullish” when they believe the stock market will go up. Bullish investors tend to put more money into the stock market. Likewise, if the prices of stocks as a group tend to rise, the stock market is called a "bull market." If stock prices as a group tend to fall, however, the stock market is referred to as a "bear market." The first public stock market is reported to be the Amsterdam Stock Exchange. This Dutch exchange was founded in the early 17th century and started the trend of buying and selling shares of company stock. There are now stock markets in a majority of developed countries. The largest stock markets are in the United States, the United Kingdom, Canada, Germany, China and Japan