The stock market is a financial marketplace that matches people who want to buy stocks with those who want to sell them. The biggest exchanges are the New York Stock Exchange (NYSE) and Nasdaq, where companies like Apple and Nike trade. People invest in stocks with the hope of earning returns from price appreciation and dividends. They also often use their investments to generate retirement income.
When a company’s stocks rise, it’s a sign that the company is doing well. It might be bringing in more money, growing its revenues or getting more customers. Stock prices can also increase from dividends, share repurchases or from the perception that the company will grow in the future. Other factors that might affect stock prices include global events, interest rate changes and political uncertainty.
Investors buy and sell shares of a company through a brokerage firm. A broker acts as a go-between for buyers and sellers, and it charges a fee for each trade. Generally, investors will look up the ticker symbol–a string of 1 to 5 letters that’s unique to each investment–then choose a dollar amount or number of shares. Some investors may be required to put up a certain percentage of the purchase price as margin money.
Individual stock prices can vary widely, depending on what each investor believes will happen in the future. But large market and economic trends tend to affect most stocks in similar ways. For example, tax cuts might make Americans more likely to spend, boosting the economy and lifting most stocks.