The stock market is a place where people sell and buy investments. Investors hand over their money to buy shares in companies they hope will grow and earn them a profit when they sell. The market also brings together people who want to invest in companies that are not publicly traded.
The stocks of public companies are traded on major exchanges such as the TSX and NASDAQ. The Dow Jones Industrial Average and the S&P 500 are widely followed indices that give you a picture of the overall market. You may have heard news reports referring to the “ups and downs” of these indexes.
In addition to stocks, the market includes securities like real estate investment trusts (REITs), debt instruments and commodities. REITs are companies that own, manage or finance real estate and legally must distribute 90% of their profits to investors each year. Debt instruments like bonds allow governments and corporations to raise funds by lending money to investors who will get a return from interest payments.
A healthy, active stock market helps support the economy by allowing businesses to raise capital when they need it, and by encouraging employees to buy company shares, which can help drive business growth. The market is regulated by agencies such as the SEC, FINRA and others worldwide to ensure fair practices, protect retail investors and encourage confidence in the market.