A stock market is a place where companies sell shares of their company to raise capital. This money can be used for many things, including to expand their business, pay off debt or reward shareholders. The stock market also acts as a kind of barometer for the economy: when the market is up, it may mean that people have more money to spend on goods and services. When it’s down, it may suggest that the economy is slowing down or going into recession.
When you hear that the market is up or down, it’s usually referring to a specific index of stocks. There are several different indexes, the most well known being the Dow Jones Industrial Average and the S&P 500, which track large U.S. and foreign companies, respectively. Individual stocks can go up or down for a variety of reasons, from something as simple as a bad earnings report to something more complicated like a product recall. Largely because of these fluctuations, most investors choose to diversify their investments across a variety of different stocks.
Investing in stocks is typically done through online brokerages and investment platforms that are accessible on your computer or phone. When you’re ready to buy, simply follow the prompts to enter the stock symbol for what you want to invest in, along with the number of shares and the type of order (like a market or limit order). Your purchase will be executed according to your specifications.