The stock market is a place where people buy and sell shares, or little parts of companies. Companies offer these shares for sale so they can get money to improve their businesses.
Investing in shares can be a good way to make money. Shares can go up in value, so when they’re sold again, you get more money back than you spent. Just by owning shares, you sometimes receive a payment too; this is called a dividend.
What are stocks and what are shares?
- ‘Shares’ are small pieces of companies that people can buy. Once you buy a share you own a small part of a company.
- ‘Stocks’ is a more general word, and is used when describing multiple shares in multiple companies.
Why does the price of a share change?
The price of a share can vary; the main thing that affects it is whether it’s popular or not. If lots of buyers want a certain company’s shares because the company is doing well, or they think it will do well in the future, the price goes up. If buyers don’t want a certain company’s shares, maybe because lots of people think the company is doing badly, or will do badly, the share price will go down.
Who buys and sells shares?
Stockbrokers are the people who buy and sell stocks, and advise other people on how to manage their stocks in the best way to make more money. Their basic advice is:
- If they think the company will do well – buy
- If they think the company will stay the same – keep it
- If they think the company will do badly -sell
Where does this all happen?
The world’s biggest stock exchange is The New York Stock Exchange, which is in New York City. Other big stock exchanges are based in Shanghai, Tokyo, Hong Kong, Amsterdam and London. However, buying and selling stocks can take place almost anywhere in the world, because a lot of activity takes place online.
