For those who haven’t done much investing, the stock market can seem like a foreign language. But it’s not impossible to understand, and doing so can make the prospect of investing more manageable.
The stock market is a place where investors buy and sell fractional ownership of companies like Citigroup, Nike or Walt Disney. It also provides a way for corporations to raise money without borrowing. Shares are traded on an exchange (the biggest in the US is NYSE, but Nasdaq is also a major player) and buyers and sellers meet each other through brokers.
Once an investor has picked a broker, the next step is to open an account. Depending on your investment choice and account type, this may involve providing personal information such as your Social Security number and employment details, as well as a bank transfer of funds. Most robo advisors and brokerage firms provide this process through an online application.
When a person wants to invest in shares of a company, they typically look up that investment’s ticker symbol—a string of 1 to 5 letters unique to each investment—and decide how many shares they want to purchase. They can then enter that information into a broker’s trading platform and complete the transaction. The price of a share fluctuates each day according to the laws of supply and demand: If lots of people are interested in buying a particular stock, it will rise in price; if many people are selling, it will fall.
