The stock market is a network of places where stocks and other investments are bought and sold. The stock market helps companies raise money often referred to as capital for expansion by selling shares of ownership in their businesses. People invest in stocks for a variety of reasons. Some may hold on to their shares and collect regular dividends (a portion of the company’s profits). Others invest for the long term, hoping that their share will grow in value. Still others might purchase stocks for the potential to have a say in how companies are run by voting at shareholder meetings based on their number of shares.
The price of a stock is determined by supply and demand. If lots of investors want to buy a certain stock, its price will rise and entice current shareholders to sell their shares. Conversely, if sellers outnumber buyers, the price of a stock will fall. Demand can be influenced by many factors, from a company’s profit growth to the overall health of the economy here and abroad.
The stock market is highly regulated, which protects investors and encourages honest trading practices. The Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) oversee market participants, from large banks and investment funds to individual retail investors. In addition to creating rules and regulations, these agencies promote public confidence in the overall markets.
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