The stock market is a global marketplace that brings together people who want to sell investments with those who want to buy them. It includes traditional physical exchanges like the New York Stock Exchange (NYSE) and Nasdaq, as well as electronic markets that bring buyers and sellers together over the internet.
Companies raise money for their businesses by selling shares of their company — a piece of ownership in a business — to investors. The share prices rise and fall in value based on demand and supply. The stock market also helps distribute capital to companies more likely to succeed and away from those less so.
Most Americans are not directly invested in the stock market, but its movements affect them in several ways. First, the stock market is essential to bringing about innovations like smartphones and medications that require billions of dollars for research and development. Second, the stock market is important because it is a place where millions of individual people invest their savings in the hopes that they will get back more than the rate of inflation over time.
A person who wants to buy or sell an investment can use a brokerage firm to match them with other parties seeking the same type of opportunity. The brokerage firm facilitates the transaction for a fee, which is called a commission. In addition to brokerage firms, the stock market is populated by a variety of large and small financial institutions that are active participants in the trading of stocks and other securities.