The stock market lets anyone buy or sell fractional ownership of publicly traded companies. It distributes control of some of the world’s largest businesses among hundreds of millions of individuals, and the buying and selling decisions of those investors help determine the value of those companies. It also acts as a key indicator of the economy: rising stocks are often associated with healthy business conditions, while falling ones may signal trouble ahead.
The market is a network of exchanges, brokerage firms and over-the-counter markets that match those who want to buy shares — called stocks — in publicly traded companies with those who are willing to sell them. Investing in stocks can be done directly through investment firms or robo-advisors, or through funds that are composed of many different stocks and other investments like bonds. The term “stock market” can also refer to a particular index, such as the TSX or the Dow Jones Industrial Average; these track the performance of a specific group of stocks and are used as benchmarks for investors.
Publicly traded companies must meet strict disclosure and financial reporting requirements when they first list their shares on a stock market, which helps maintain investor confidence in the market. As a result, the market has become an essential tool for funding the global economy. It’s also come to be seen as critical to distributing and creating wealth, mirroring broader socioeconomic changes that have increased the power of financial institutions and markets.