Understanding the Stock Market 101
The stock market used to be reserved for the rich, but that has changed. Many people use the stock market to grow wealth, thanks in part to advances in trading technology, which opened up the markets to nearly anybody, according to Investopedia.
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Significance
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When you buy stock, you are buying part of the company. The more stocks you buy, the more you own. A company typically offers stock to raise money. The two main stock types are preferred stock--stock that pays regular dividends--and common stock, which offers the stockholder more privileges than preferred stock.
Identification
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Investors can buy stock through the primary market, which is when a company sells its stock through its initial public offering or the secondary market, such as the New York Stock Exchange or the Nasdaq. The secondary market can be a physical location where you buy and sell stock, or an over-the-counter market where you buy and sell stock over the phone or the Internet. The primary and secondary markets put together are the stock market.
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Features
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The reason you would want to own stock is to have a claim on the company's assets and earnings, but you have no guarantee that you will get dividends or make money selling your stock. You are not personally liable, however, if the company goes bankrupt. If that happens, all you lose is the money you spent on buying stock.
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References
- Photo Credit Stock Market image by Paul Heasman from Fotolia.com
