All You Need to Know about Stock Market

The thought of investing in the stock market can be intimidating. Knowing what the stock market is and what does it do can help with the fear, and see investing with an objective perspective.

Whenever we talk about the stock market, what usually comes to mind is the New York Stock Exchange (NYSE) or the NASDAQ. They operate like an auction house where buyers and sellers can negotiate prices and market trades.

What is the stock market?

The term "stock market" can also refers to one of the major stock market indexes, such as the Dow Jones Industrial Average or the S&P 500. In addition to these two indexes, there are about 5,000 others that make up the U.S. equity market.

Stock market indexes around the world are powerful indicators for global and country-specific economies. Because it's hard to track every single stock, these indexes include a section of the stock market and their performance is viewed as representative of the entire market.

You might see a news headline saying that the stock market 'hit market high'. Often, this means stock market indexes have moved up, meaning the stocks within the index have gained value as a whole.

How does the stock market work?

The stock market provides a place where buyers and sellers can make transactions. Companies issue and sell their shares to the public through a process called an initial public offerings(IPO). Investors can buy those shares, which allows the company to raise money to grow its business.

For example, a company can divide itself into 50 million shares and sell a part of those shares(say, 10 million shares) to the common public at a price like &5 per share.

Investors can then buy and sell these shares, and the exchange tracks the supply and demand of each listed stock.

This supply and demand help determine the price at which stock market participants are willing to buy or sell.

Nowadays, this seemingly complicated process is left to computer algorithms for most of price-setting calculations.

What is the stock market like today?

S&P 500, date: 22/10/2020

Investors can track the stock market's performance by looking at an index like the S&P 500 or the DJIA.

Investing in the stock market comes with risks. But looking at the long-term, the return rate can be fairly high, an average of up to 10%. With the right strategies, long-term investment in the stock market can be an excellent way to build wealth over time.

However, if you're buying and selling on a daily basis, or frequently, the chances of losing can also be really high.

How to invest in the stock market?

There are a few ways investors can buy stocks:

-Through a broker-dealer

-Through a robo advisor

-In an exchange-traded fund or mutual fund

Regardless of how or where you invest, remember that stock prices are volatile. With any investment, there are risks. But stocks carry more risk.