What is The Stock Market?

What Is The Stock Market?

The Stock Market is a place where you can buy and sell shares of a company. A share is a piece of ownership of that company. 

So if you buy 1 share of Apple. You are technically a part owner of Apple. What can you do as a shareholder? It depends on the company. But for most, you are able to participate in company votes and elections. But you don’t have to participate in that stuff if you don’t want to. 

A company issues shares in order to create capital for business endeavors. When a company issues shares, it is called an offering. This is commonly seen when companies are first starting to grow and need extra capital or are being listed for the first time (which is called an initial public offering or IPO) on a stock exchange. 

Stock Exchanges

Stocks are traded on what are called Stock Exchanges. The best way to describe a stock exchange is like a street market. There are different shops on the street that sell different products. Stock Exchanges are no different. 

There are two major Stock Exchanges in the United States and that is the Nasdaq and the New York Stock Exchange. There are many exchanges around the world including the London Stock Exchange, etc.

The nice thing about today’s world is that most platforms don’t require you to know which exchange you’re buying from. Personally, I think it’s good to know which exchange your stocks are on but it’s not necessary. Regardless, in the US you will only usually buy from the US exchanges. Certain platforms may only trade on certain exchanges. But for this course, we will solely focus on the US exchanges. 

What is so unique about the stock market is that it serves multiple purposes. It’s a place where you can invest large sums of money to grow over time, make money day trading super fast, or even get passive income. 

The Process Of A Stock Trade

Many people ask how does the stock market work? How does trading work if I’m at home? The process of a stock trade is actually pretty simple for us. From our point of view, it’s just a click of a button on our computer or phone. Or maybe just telling your broker a few words. 

But behind the scenes, there is a complex network of algorithms and computers processing trades in the blink of an eye. In reality it’s a complex system and it’s actually quite fascinating but for the sake of simplicity. It’s a system that helps you, the buyer, find a seller, and then create a transaction between the two, all in a matter of seconds. 

Market Participants

The market is filled with tons of people but it’s good to know who you’re going up against when investing. First off, the little guy, this is the individual person who is investing in the stock market. This would be what you and I are considered.

Oftentimes, we are referred to as retail investors. Retail investing can be just buying shares in your brokerage account. Next is institutions, these are banks, businesses, foreign companies, or the government investing in stocks. Institution’s make up 80% of the trades on the market. 

Where Can I Actually Get Stocks?

Today, there are so many different brokerage apps and websites you can use that it can become overwhelming. But for me there are few really good ones you can use depending on what you are looking to do in the market. 

For people who are looking to invest for the long term in the stock market, I recommend these brokers:

Fidelity: Super Reliable, Well Established, Great Customer Support! My only issue with fidelity is their app is behind the times a little and can be overwhelming at first. But I personally use Fidelity and think they are great! 

Link: https://www.fidelity.com

E*Trade: E*Trade easily has one of the best apps in my opinion for investing. It’s very simplistic and easy to navigate. I’ve never really used their customer support but I’ve heard they are alright. Another top choice!

Link: https://www.us.etrade.com 

TD Ameritrade: TD’s app is really good and simple. Easy to use. Another Solid Choice.

Link: https://www.tdameritrade.com

There are plenty of other brokers that are good to use but these are the ones I’ve used and have experience with!

If you are looking to day trade or do short term/more advanced trading, I recommend these:

Interactive Brokers: https://www.interactivebrokers.com

Webull: https://www.webull.com

Thinkorswim: https://www.tdameritrade.com

Thinkorswim is a TD product so you’ll have to download from there.

Once you finish downloading one of these brokerage apps. You will then need to choose your account type, put in your personal information, and then you can begin investing. Of course, it’ll likely feel overwhelming which is why we made this guide for you here!