The stock market brings together buyers and sellers of stocks. It’s made up of exchanges like the New York Stock Exchange and Nasdaq, and indexes such as the S&P 500, which you might see on business reports.
Stocks are securities that represent fractional ownership in a publicly traded company. Companies issue shares to raise money for expansion or other projects. Investors then buy or sell them to make a profit, and the prices that investors set for stocks reflect their expectations about future performance and risk.
Generally, a stock’s price reflects demand for the security, plus the supply that’s available to buy or sell it at. Hundreds of millions of individual investors decide whether to buy or sell stocks, and their collective decisions shape demand for and supply of stocks.
Investing in stocks can help you grow your savings over time, and it has historically delivered returns that have outpaced inflation. However, short-term returns can differ from historical averages, and you could lose some or all of your investment. A well-planned portfolio and diversification can help decrease the risks associated with investing in the stock market. Many people choose to work with a financial professional, who can help you choose appropriate investments for your goals and risk tolerance. They can also guide you to low-cost index funds that track the stock market, so your return might more closely mirror the historic average. Alternatively, you can do it yourself by opening a brokerage account.