The Stock Market for the Uninitiated

The stock market is the place where public shares of the company are traded through exchanges. The stock market is one of the most important parts of a free-market economy because it gives companies access to capital in return for a small ownership of the company.

A Closer Look

With the stock market, investors can tag along with the failures and the successes of the company they hold shares in. Investors make money through the dividends the companies pay out and by selling appreciated stocks in order to generate a return.

Just as with any financial markets, investors stand to lose capital if the company which they hold stocks in lose money. The price of the stock will go down and the investor will have to sell the stock at a loss.

There are two sections that make up the stock market: that is the primary market and the secondary market. The primary market is where new issues are sold for the very first time through initial public offerings (IPOs). The secondary market is where institutional and individual investors come to buy stocks.

Indexes

Consulting stock indexes is a way of knowing how the stock market is performing. One of the major indexes is the Dow Jones Industrial Average (DJIA) that sports 30 of the most significant stocks that are traded in the New York Stock Exchange and NASDAQ. The index was invented by Charles Down in 1896 and it is one of the oldest and most prominent indexes in the world.

The DJIA’s 30 components have constantly changed throughout its lifetime. The most recent change it undertook was in March 19, 2015 was when Apple. Inc. replaced AT&T, Inc. as one of the DJIA’s components.