The stock market is the place where a large group of people buy and sell shares of publicly owned companies. It’s a crucial tool for saving for retirement and building wealth, and it provides an opportunity to earn higher returns than the rate of inflation. It’s also a major indicator of the health of an economy, with rising stock prices associated with greater business profitability and economic growth while declining ones can be seen as a warning signal.
The stock market includes all the buying and selling of company shares that are publicly available to investors, regardless of whether those companies are public, private, or foreign. The process of a private company becoming public and making its shares available to the general public is called an initial public offering (IPO). Any further buying or selling of those shares after that point is known as trading, and it takes place on marketplaces like exchanges.
These marketplaces bring together multiple buyers and sellers, with the intention of matching them up on a first-come, first-served basis based on price. They also offer real-time information on stock prices, and they’re the reason why you can find up-to-the-minute stocks news on nearly any financial website.
The most widely watched stocks are those of the Dow Jones Industrial Average and the S&P 500, but there are many others that are tracked, as well. Other popularly referenced measures of the stock market include real estate investment trusts (REITs, which own or finance commercial property), commodities markets (where you can buy and sell raw materials such as oil and wheat), and bonds (which are debt instruments issued by governments and corporations that pay investors interest payments in return for their face value at maturity). The stock market is also closely linked to broader socioeconomic changes, including the growing popularity of robo-advisors that automatically invest money for individuals.