What Is The Stock Market?

It dawned on me that some of my readers are beginning investors and may wonder: what is the stock market? I don't know about an official definition, but this is how I describe it. The stock market is a place where buyers and sellers meet to trade stocks. It's much like when you go to the store to buy groceries. All of the sellers send their goods to the store and all the of the buyers can go to one place to purchase the things that they need instead of having to go to each individual seller to buy it.

It's the same for companies shares of stock. In the stock market today, companies issue stock to raise capital. An investor buys the stock in hope of getting a return on their investment. However, when he wants to sell his stock, he needs an efficient way to find a buyer. If he had to go door to door or call all of the people he knew to sell it, he might not find a buyer and he also might not find the best possible price if he only finds one buyer.

In order to transact the buying and selling of stocks, the stock market was created to bring buyers and sellers together in one place and allow them to bid on how much they want to pay. Prices are determined then by supply and demand for the stock. Prices are also affected by the stock market investing news each day. Rightly or wrongly, this news affects the price regardless of whether it might be true or not. Therefore, you've got to be careful to know the companies you buy stock in and not be swayed back and forth by talking heads in the media.

Those new to investing, might be concerned about a stock market crash and that they might lose money in the market. This is entirely true. But, the market doesn't have to crash for you to lose money. You can lose money in stocks regardless of the overall direction of the market. It's up to you to study the market and only you can protect your capital by being prudent and following a set strategy to maximize the return. The stock market can provide higher returns but along with those potential returns comes extra risk that you might lose money.

That being said, if you start to study the market, you'll find that the United States has two of the most active stock markets in the world -- the New York Stock Exchange and the NASDAQ. Both of these markets provide ready access to buyers and sellers and you can check stock market quotes any where in the world.

There are many stock markets in the world, including an Indian Stock Market, Australian and China. I was amazed to learn that. For our purposes, there are plenty of investment opportunities right here on the stock market exchanges in the United States.