Back to Basics: What is the Stock Market???


To understand the stock market, you first need to understand a stock.  According to the very popular investment website, Investopedia, “A stock is a type of security that signifies ownership in a corporation and represents a claim on part of the corporation's assets and earnings.”  In other words, when you purchase a stock you purchase a portion of the company you just invested in.  Based on a number of factors the stock will increase or decrease in value as time goes on.  

There are several major stock exchanges in the world.  In this article we will talk about the two largest in the U.S.  One of these stock markets is the NASDAQ, while the other is the NYSE.  The NASDAQ stock exchange stands for National Association of Securities Dealers Automated Quotations. The NASDAQ is a United States based stock market and the world’s first electronic based stock market.  In general, the companies that tend to trade on the NASDAQ exchange are younger technology based businesses.

The other large United States stock market is the NYSE.  The NYSE stands for the New York Stock Exchange.  The NYSE is widely considered the largest stock market in the world.  It opened its doors on May 17th, 1792.  The NYSE has been around for over 200 years and lists 2400 companies for people around the globe to buy and sell.  In general, companies that trade on the NYSE are older more mature businesses.  

Now that we have established the 2 major exchanges in the U.S. where people can purchase stocks, lets talk about how we can buy stocks.  To purchase a stock we need to rely on a stock broker.  Stock brokers are people who handle the buying and and selling of a stock. Their job is to buy and sell shares of a company upon their clients request.  In todays world, people have the luxury of using an online broker or a traditional full service broker.  If you need to know the difference between online and full service brokerage watch my youtube video .  

As previously mentioned, the value of your stock will change in price over time.  There are many factors to contribute to the valuation of a stock, but at the core there is really only one main reason.  The main reason stocks move up and down in value is supply and demand.  The more in demand a stock is the higher the price of the stock will move.  Conversely, when a stock has little demand, the price of each share will drop.  Now as I stated earlier, there are many factors that may move a share price.  A stock can have news reported in a press release, earnings announcements, social media posts, hype, etc.  Any and all of these incidents can change a stock price, but at its core supply and demand move the stock price.

Takeaways from this article about the Stock Market!!!

  1. A stock is a type of security that can be purchased on a stock exchange and represent ownership in a corporation.
  2. The 2 major Exchanges in the United States are the NASDAQ and NYSE.
  3. In order to purchase a stock from any exchange, you need a stock broker.
  4. The stock you purchased will change in value based on supply and demand of the security.

Happy Investing,


Investment Mob