A stock market is a place where entrepreneurs raised money to help launch their businesses. Investors handed over cash, in return for shares in the business – making them part owners of the company. As the business grew or shrunk, so did the value of those shares. In turn, investors would sell those shares on the market to raise cash or book a profit. The stock market also sets standards for how publicly traded companies report their results to the public, allowing investors to rate their returns against those of other stocks.
Today, the stock market is a high-tech system that runs on computers operating at lightning speed. It matches many investors who want to buy a stock at a specific price with sellers that are willing to sell it to them. The sellers can be private companies that have their own shares on the market (like Coca-Cola or Johnson & Johnson) or they can be other investors who already own those shares and are looking to sell them.
You can invest in the stock market by opening a brokerage account with a broker and placing trades yourself or you can work with an investment advisor that will make trades on your behalf. Regardless of how you choose to invest, experts agree that focusing on buying shares in great businesses at reasonable prices and holding them for long periods of time can produce excellent investment returns. But it’s important to remember that stocks carry risks, too – a company can go bankrupt and you could end up losing your original investment.
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