What are Stocks?
The companies offer up little bits of ownership (called stocks) to anyone who wants to buy them. When someone buys stocks, the company is then allowed to use that money to do with as they please (usually this money goes to products, or property, or other assets the company needs to grow).
Two basic things happen when someone invests in a company and buys stock:
The buyer legally owns a small portion of the company
- Usually, a single stock is worth very, very little of the company’s overall ownership.
- Rather than “owning some of a company,” the buyer owns stocks in said company.
The company or business gains money from the sale to use to improve their company.
What Exactly is the Stock Market?
The stock market is a general term used to define a place (either a physical location, or a digital server) where stocks are sold, bought, and traded.
- An investor is a person that buys stock in one or multiple companies.
- A stock market is a term used to describe anywhere that deals with stocks and the trading of stocks.
○ This term is often used when teaching individuals about trading stock at a stock exchange, but can also be used to describe the entire process of trading stocks.
- A stock exchange, on the other hand, is a specific location that deals in the buying, selling, and trading of companies’ stocks.
To help you keep these terms straight in your head, think about when you go to get pizza for dinner. If you say “I’m going to get pizza for dinner,” it allows people to know what you’re doing, but doesn’t tell them the details. Anyone listening in understands that you’re going to get a pizza from somewhere. Saying “I’m going to get pizza for dinner” is equivalent to the stock market. It’s a general statement that tells people basically what you’re doing in a nutshell.
If you were to say “I’m going to Domino’s to pick up a pizza,” you’re telling anyone that’s listening what you are doing and where. Domino’s Pizza is the stock exchange you choose to use.
Just remember: The stock market is general, the stock exchange is specific.
The stock market as a whole allows companies to put themselves out there to the public. This creates a sort of mutually beneficial (or mutually destructive) relationship between the company and its investors.
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What is a Stock Exchange Then?
Stock exchanges are the individual places that a person may buy, sell, or trade stocks. While the term “Stock Market” refers to the business, as it were, of buying, selling, and trading stocks, the exchanges that make up the stock market are the veritable storefronts of the stock trading world.
Some stock exchanges are common in media such as film and television shows to show the hussle and bussle associated with the business world. The most commonly named stock exchange is the New York Stock Exchange (also known as NYSE or “The Big Board”). The New York Stock Exchange is the largest stock exchange in the world and more than 1.5 billion dollars can be bought, sold, and traded through the New York Stock Exchange daily. Whenever a movie shows crowds of men and women in suits yelling and waving papers around in a room full of television monitors, they are usually depicting this specific stock exchange.
While a large percentage of the larger stock exchanges (the New York Stock Exchange being a prime example) are stressful and fast-paced and a bit over the top for anyone who hasn’t made a living out of trading stocks, there are alternatives for any person just wanting to dip their big toe, so to speak.
A relatively recent form of stock exchanges are the online stock exchanges, which are any held through a website or internet domain. They often times require a subscription fee to use their services, but offer a much more relaxed environment for anyone just starting out.
Are there risks involved with online stock exchanges? Of course there are. There is still that looming risk of losing money through poor decisions or plain old bad luck, but there isn’t the stress and fast moving atmosphere most people associate with buying, selling, and trading stocks.
In either case (whether you prefer to go into a physical location to trade stocks, or decide to stay home and do it on the computer), there are tons upon tons of options to choose from. Each stock exchange functions the same, more or less, with a few tweaks to rules, subscriptions, and other details here and there, so if you can learn to use one, you probably will do alright with the others.
In terms of physical location stock exchanges, it depends on where you live or work. You’ll have to do some research regarding the surrounding areas to see what is available to you. You can also find a stockbroker.
A stockbroker is someone you pay to buy and sell stocks for you. And don’t worry, he or she will have your best interests at heart because, after all, the more you make, the more he or she makes in the process. Interested in learning more about trading stocks? Check out our other blog about best swing trading strategies.
If you would rather dive into the world of online stock exchange, there are still plenty of choices to choose from, and chances are you’ve seen a commercial for one or two over the last few years.
Commonly used and popular online stock brokerages include:
You’ll have to look more into the details of each individual brokerage to find one that suits your needs best (never just go with the first one you happen upon, always compare).