What Is The Stock Market?

The Stock Market is a marketplace of a collective group of companies that individual traders, financial institutions, and funds can buy and sell shares within. Shares are defined as individual ownership units of a company.

How Does the Stock Market Work?

Shares can be bought and sold in both private and public companies. The buying and selling of stock (shares) are usually done utilizing a stockbroker and or a stockbroker’s corresponding online trading platforms also referred to as an electronic trading platform.

Why Does the Stock Market Exist?

Raising money is one of the most common practice actions a business can take. There are various ways a company can raise money, however arguably the most effective and important ways are by going public on the stock market. Companies that go public on the stock market can raise money by selling shares of their stock in exchange for ownership of the company. The buying and selling of shares of a stock are referred to as liquidity. Often the more liquidity a stock has the more money can be raised.  

How Does the Stock Market Affect the Economy?

The Stock Market is based on the law of supply and demand. The more demand a stock has and the fewer supply of shares that exist the higher the price will be. On the other hand, the lack of demand and the more supply of shares a stock has the lower the price will be.

Historically the overall price of the stock market has shown to be a consistent and direct indicator of both positive and negative economic activity. An economy wherein the stock market is moving up is often considered thriving and or up and coming. The stock market is often considered one of if not the primary indicator of a country’s economic strength and development.

Rising share prices within a country’s stock market are considered a sign of strength and stability within that country’s economy. This positive financial growth is often an indicator for major financial institutions which affect the percentage rates at which banks loan money to businesses and individuals.

How Are Stocks Categorized Within the Stock Market?

The primary way stocks are categorized are by country. For example:

  • Google and or Alphabet Inc Class A (GOOGL) is in Mountain View, California in the United States and listed on the NASDAQ Stock Exchange.
  • Tesla Inc (TSLA) is in San Carlos, California in the United States and is listed on the NASDAQ Stock Exchange.
  • Royal Bank of Canada (RY) based in Toronto, Canada is listed on the TSX (Toronto Stock Exchange).
  • Toronto-Dominion Bank (TD) based in Toronto, Canada is listed on the TSX (Toronto Stock Exchange).
  • Walt Disney Co (DIS) based in Los Angeles, California in the United States is listed on the NYSE Stock Exchange.

The total market capitalization of all equity-backed securities worldwide within all global stock markets is up from US$2.5 trillion in 1980 to US$89.475 trillion as of April 2020.

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