Stock Market Basics
The stock market is where shares of public companies are bought and sold.
What is a Stock?
Definition
- A share represents partial ownership in a company
- Buying stock = owning a piece of the business
- Price reflects market's view of company value
- You profit when company grows
Why Companies Issue Stock
- Raise capital for growth
- Fund research and development
- Pay off debt
- Enable employee compensation
Major Stock Exchanges
US Exchanges
- NYSE (New York Stock Exchange): Oldest, largest
- NASDAQ: Tech-heavy, electronic
- S&P 500: Top 500 US companies
International Exchanges
- London Stock Exchange (LSE)
- Tokyo Stock Exchange (TSE)
- Hong Kong Stock Exchange (HKEX)
- Frankfurt Stock Exchange (FSE)
How Stock Prices Move
Supply and Demand
- More buyers than sellers = price rises
- More sellers than buyers = price falls
- News and earnings drive sentiment
Key Price Drivers
- Company earnings reports
- Economic data
- Interest rates
- Industry trends
- Geopolitical events
Types of Stocks
By Size (Market Cap)
- Large Cap: $10B+ (Apple, Microsoft)
- Mid Cap: $2B-$10B
- Small Cap: Under $2B
- Penny Stocks: Under $5 (very risky)
By Style
- Growth: High growth potential (tech)
- Value: Underpriced relative to fundamentals
- Dividend: Regular income payments
- Cyclical: Tied to economic cycles
Getting Started
- Open a brokerage account
- Start with index funds or blue chips
- Learn fundamental analysis
- Practice with paper trading
- Invest only what you can afford to lose