The stock market is similar to a farmers’ market. It is a group of buyers and sellers that come together to trade. Instead of buying goods, investors can buy and sell stocks.
The purpose of the stock market is to provide investors an easy way to connect with companies that are attempting to sell their stock. It also helps investors buy or sell their shares quickly. This can be crucial if an investor is attempting to purchase a stock before it increases in value.
Why would companies want to sell their stock on a stock market? Remember, when an investor buys a stock, they are trading cash for partial ownership of a company. A company will sometimes sell their shares in order to receive cash, which they can use to fund new projects or grow faster.
The stock market is often characterized as a bull or bear market. A bull market would indicate that stocks are on the rise and a majority of the stock market is increasing in value, while a bear market means the opposite.
Since the stock market handles sensitive information for tens of millions of investors, it is regulated by the Securities and Exchange Commission (SEC for short). The SEC is a government agency that enforces government regulations in the stock market to ensure that everyone is doing the right thing. Essentially, the SEC are the police of the stock market. They punish those who are doing anything illegal and make sure the stock market is fair.
In the past, the stock market was facilitated in physical locations, where an investor would have to go in person to purchase the stock of their choice. Today, things are a little different. Everything is digital. Similar to ordering food through an app, an investor can buy stock online in only a few seconds.
The physical locations are called stock exchanges and it will be the next Bite we will be diving into.