The Stock Market: A Rundown (2024)

Wall Street, shareholders, investments.

You’ve heard it said before: “Markets are down.” Or “Markets are up.” But what exactly does it mean?

The Stock Market

For starters, a market is where “buyers and sellers can meet to facilitate the exchange or transaction of goods and services.” ¹⁵ But the market you are probably wondering about is the U.S. Stock Market. The U.S. Stock Market is regulated by Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA). ⁴

“Stock markets are components of a free-market economy because they enable democratized access to investor trading and exchange of capital.” ⁴ Put a little more simply, the stock market provides a secure environment for share transactions to take place. ⁴ A share is a unit of ownership within a company. ¹⁷

“When you buy a share, you are investing in that company and hoping that its value will increase over time. When you sell a share, you are getting back the money you invested, plus or minus any change in the share price.”
James Chen ⁴

Shares are listed and traded on different exchanges. We’ll discuss that next.

Market Exchanges

Market exchange refers to an economic system in which goods and services are produced, distributed, and exchanged by the forces of price, supply, and demand. ²

The main exchanges I’ll go over include the New York Stock Exchange (NYSE) and the NASDAQ – these are the two major stock exchanges in the United States. ²¹

The New York Stock Exchange (NYSE)

Located at 11 Wall Street, Lower Manhattan, New York City, NYSE is the world’s largest stock exchange by market capitalization. ^{16, 22}

“The NYSE is where companies raise capital that they use to shape the future. As we’ve grown, our community has expanded to include leaders across sectors, and we strive to help make connections, facilitate conversations, and advance the interests of our listed companies and a broad range of investors.”
NYSE ¹⁶

NYSE is open for trading Monday through Friday from 9:30 a.m. to 4:00 p.m. ET. ¹⁶It lists the most important, publicly traded American companies and is the premier venue for stock trading. ¹⁶

NASDAQ

The Nasdaq is known for listing many technology and growth-oriented companies – think Apple, Microsoft, Amazon, and Tesla. ²⁸

“NASDAQ is a U.S. based stock exchange that is dominated by technology stocks.”
Kane Pepi ²⁵

The main difference between the two exchanges is that the NYSE is an auction market that uses specialists, whereas the NASDAQ is a dealer market with many market makers in competition with one another. ¹⁴

What Can They Tell Us About The Economy?

Both exchanges track the performance of thousands of companies across various sectors and industries and are followed by economists as indicators of the economy. Other sources of data and analysis used include the S&P 500 – a stock market index that tracks the performance of 500 of the largest publicly traded companies in the United States. ³⁶

“On average, a company is dropped and replaced by another only about once every two years. When they do it’s because a company’s importance or influence in its industry has fallen.”
Jim Probasco ²⁷

Stock exchanges play a vital role in the functioning of the economy – for instance, they help companies raise money to expand, hire more qualified staff and repair or replace equipment. ⁵ “Exchanges are the principal indicator and reflection of a country’s financial condition and stability”. ⁵

When you hear the market is ‘up’ or ‘down’, consumer confidence is up or down.

What Does Consumer Confidence Have To Do With Anthing?

Basically, everything. It measures the degree of optimism that consumers feel about the state of the economy and their personal financial situation. ³¹

“Consumer confidence is important for investors because it can indicate consumer spending and the effectiveness of monetary policy.”
Justin Kuepper ¹⁹

It literally predicts consumer spending patterns – thus, allowing companies to adjust their spending (whether on staffing, product, etc.).

You can visit MarketWatch.com to see live updates.

Stocks, Shares, And Bonds

A stock is a very generalized term that refers to a share of ownership of one or more companies. ³³Shares, on the other hand, is more specific and refers to a single unit of ownership in a company. ³⁰

“Holding a company’s stock means that you are one of the many owners (shareholders) of a company, and, as such, you have a claim (albeit usually very small) to everything the company owns.”
Desjardins Securities Inc ³³

Companies issue stocks on stock exchanges to raise money. ²³ Investors then buy and sell them in publicly traded companies. ¹³ Most individuals invest in stocks online, through a brokerage account. ⁶ As far as money goes… yes, you certainly can make money from investing in stocks. However, it’s not necessarily a simple process and additionally, it can be very expensive to get started. ³ “You need to buy stocks that cost hundreds or thousands of dollars per share and diversify your portfolio to reduce risk.” ³ However, stock investments can help you grow your wealth if done correctly. ²³

You earn money from dividends.

Dividends are payments that public companies distribute to their shareholders. ²⁰ They’re paid on a regular basis via cash or additional shares. ²⁴

It’s worth noting that there are a lot of different types of stocks. I’m not going to get too much into that right now, but you can learn more about the different types of stocks by visiting the RBC Direct Investing Inc. Website.

Unlike stocks, bonds issued by companies give you no ownership rights. ³³ A bond is a loan from an investor to a borrower (usually a company or the government). ³² Bonds are issued by governments and corporations when they want to raise money. ³⁴

“An investor who buys a government bond is lending the government money. If an investor buys a corporate bond, the investor is lending the corporation money. Like a loan, a bond pays interest periodically and repays the principal at a stated time, known as maturity.”
Sara Adjir & Jeroen Van Bezooijen ¹

The benefits of bonds are that they provide you with a steady stream of income as well as offset some of the volatility you might experience with stocks. ³⁴

For more information on bonds and choosing the right one for your needs, visit Vanguard.

What Is The Stock Market’s Relevance To You?

I think the first point of mention is that well, the stock market is extremely competitive. Why, might you wonder? Because there are hundreds of buyers and sellers. “The price of stocks will always reflect the ‘true’ market value because if it is overvalued, it becomes profitable to sell. If it is undervalued, it becomes profitable to buy.” ²⁶

“The markets allow for price discovery for shares of corporations and serve as a barometer for the overall economy.”
James Chen ⁴

The stock market allows companies to issue and sell their shares to the public through a process known as an Initial Public Offering (IPO). ⁴ Ultimately, it helps companies raise money from investors. ⁴

This all sounds great for companies… But what about you? According to Kiril Nikolaev, CFA, the top three reasons you should care about investing in the stock market are:

It helps you keep up with inflation. ³⁵(I don’t know about you, but inflation has everything to do with whether I consider myself comfortable or struggling).
Stocks have proven to offer the most growth potential. ³⁵ “Studies have shown that stocks have earned more than bonds in the longer term.” ³⁵
You don’t have to put all of your money into them. ³⁵ ”As Spiderman once said, with great power comes great responsibility. In this case, with great return comes great risk!” ³⁵

There are a lot of sites/apps that can allow you to grow your portfolio slowly and as risk-lessly as possible. If you are interested in learning more about growing your portfolio as a beginner, I would highly recommend checking out: Robinhood, Acorns, Charles Schwab, or SoFi.

**Once again, I am not affiliated with any of the above-named sites.

Terms To Know

Bond: A binding agreement; an obligation made binding by a forfeitof money; the amount of the money guarantee. ⁷

Dividend: An individual share of something distributed such as
a share in a pro rata distribution (as of profits) to stockholders. ⁸

IPO: An Initial Public Offering of a company’s stock. ⁹

Share: Any of the equal portions into which property or invested capital is divided; the part allotted or belonging to one of a number owning together property or interest. ¹⁰

Shareholder: One that holds or owns a share in property. ¹¹

Stock: The proprietorship element in a corporation usually divided into shares and represented by transferable certificates. ¹²

NASDAQ: National Association of Securities Dealers Automated Quotations. ²⁹

NYSE: New York Stock Exchange. ¹⁶

References

1- Adjir, S. (2023, December 1). Everything you need to know about bonds | PIMCO. Pacific Investment Management Company LLC. https://europe.pimco.com/en-eu/resources/education/everything-you-need-to-know-about-bonds#:~:text=An%20investor%20who%20buys%20a,stated%20time%2C%20known%20as%20maturity.

2 – Bell, K. (2014). Market exchange definition | Open Education Sociology Dictionary.Sociologydictionary.org. https://sociologydictionary.org/market-exchange/

3 – Brockman, K. (2021, September 13).Can Penny Stocks Make You Rich? 3 Things to Know. The Motley Fool. https://www.fool.com/investing/2021/09/13/can-penny-stocks-make-you-rich-3-things-to-know/

4 – Chen, J. (2022, March 12).Stock Market | Investopedia. Investopedia. https://www.investopedia.com/terms/s/stockmarket.asp

5 – Cohen, G. (2019, March 9). The Role of the Stock Exchange in the Economy. Finance.zacks.com. https://finance.zacks.com/role-stock-exchange-economy-5026.html

6 – Davis, C. (2023, November 21). How to Invest in Stocks: A Step-by-Step for Beginners. NerdWallet. https://www.nerdwallet.com/article/investing/how-to-invest-in-stocks

7 – Definition of BOND. (2019). Merriam-Webster.com. https://www.merriam-webster.com/dictionary/bond

8 – Definition of DIVIDEND. (2016). Merriam-Webster.com. https://www.merriam-webster.com/dictionary/dividend

9 – Definition of IPO. (2024, January 3). http://Www.merriam-Webster.com. https://www.merriam-webster.com/dictionary/IPO

10 – Definition of SHARE. (n.d.). http://Www.merriam-Webster.com. https://www.merriam-webster.com/dictionary/share

11 – Definition of SHAREHOLDER. (2018). Merriam-Webster.com. https://www.merriam-webster.com/dictionary/shareholder

12 – Definition of STOCK. (n.d.). http://Www.merriam-Webster.com. https://www.merriam-webster.com/dictionary/stock

13 – Hayes, A. (2022, April 23).A Breakdown on How the Stock Market Works. Investopedia. https://www.investopedia.com/articles/investing/082614/how-stock-market-works.asp

14 – Hayes, A. (2019).The NYSE and Nasdaq: How They Work. Investopedia. https://www.investopedia.com/articles/basics/03/103103.asp

15 – Kenton, W. (2021, October 30).Market: What It Means in Economics, Types and Common Features. Investopedia. https://www.investopedia.com/terms/m/market.asp

16 – Kenton, W. (2019).New York Stock Exchange (NYSE). Investopedia. https://www.investopedia.com/terms/n/nyse.asp

17 – Kenton, W. (2021, October 20).Shares. Investopedia. https://www.investopedia.com/terms/s/shares.asp

36 – Kenton, W. (2021, March 23).Understanding S&P 500 Index – Standard & Poor’s 500 Index. Investopedia. https://www.investopedia.com/terms/s/sp500.asp

18 – Key benefits of investing in stocks. (n.d.). https://www6.royalbank.com/en/di/hubs/investing-academy/chapter/key-benefits-of-investing-in-stocks/jv7atg13/jv7atg1j#:~:text=Taxes%20and%20inflation%20can%20impact,of%20both%20taxes%20and%20inflation.

19 – Kuepper, J. (2021, November 14). Consumer Confidence and Its Impact on the Markets. The Balance. https://www.thebalancemoney.com/consumer-confidence-and-its-impact-on-the-markets-1978947

20 – Marquit, M., & Curry, B. (2020, July 24).What Is a Dividend?Forbes Advisor. https://www.forbes.com/advisor/investing/what-is-dividend/

21 – Morah, C. (2019). What are all of the securities markets in the U.S.A? Investopedia. https://www.investopedia.com/ask/answers/08/security-market-usa.asp

22 – NYSE. (2019).The New York Stock Exchange | NYSE. Nyse.com. https://www.nyse.com/index

23 – O’Shea, A. (2023, October 11). What are stocks and how do they work? NerdWallet. https://www.nerdwallet.com/article/investing/what-are-stocks-how-they-work#:~:text=Companies%20issue%20them%20on%20stock,your%20long%2Dterm%20financial%20goals.

24 – O’Shea, A., Lam-Balfour, T., & Durana, A. (2024, January 10). What is a dividend and how do they work? NerdWallet. https://www.nerdwallet.com/article/investing/what-are-dividends#:~:text=They’re%20paid%20on%20a,the%20form%20of%20additional%20shares.

25 – Pepi, K. (2020, May 20). What is the NASDAQ? Complete Beginner’s Guide. Money Check. https://moneycheck.com/what-is-the-nasdaq/

26 – Pettinger, T. (n.d.).Do stock markets reflect the model of perfect competition?Economics Help. https://www.economicshelp.org/blog/345/finance/the-economics-of-the-stock-market/

27 – Probasco, J. (2020, December 7).The Dow Jones Industrial Average is one of the world’s most influential stock indexes. Here’s how it works. Business Insider. https://www.businessinsider.com/personal-finance/what-is-dow-jones

28 – Probasco, J. (2020, December 15).The Nasdaq is an electronic stock exchange where some of the fastest-growing, most innovative companies trade. Business Insider. https://www.businessinsider.com/personal-finance/what-is-nasdaq

29 – Rodini, L. (2023, February 9).What Is the Nasdaq Composite Index? Definition, Sectors & Companies. TheStreet. https://www.thestreet.com/dictionary/n/nasdaq-composite

30 – Team, K. S., & Securities, K. (2023, December 14). Stock vs Share: Key Differences, Types, and Investment Advice. Kotak Securities. https://www.kotaksecurities.com/share-market/difference-between-stock-and-share/

31 – Team, W. E. (2022, October 4).Consumer Confidence. WallStreetMojo. https://www.wallstreetmojo.com/consumer-confidence/

32 – Voigt, K., & Benson, A. (2023, December 6). What are bonds and how do they work? NerdWallet. https://www.nerdwallet.com/article/investing/what-is-a-bond#:~:text=What%20is%20a%20bond%3F,bond%20can%20change%20over%20time.

33 – “What Are Stocks?” (n.d.). Desjardins Securities Inc., http://www.disnat.com/en/learning/trading-basics/stock-basics/what-are-stocks#:~:text=Plain%20and%20simple%2C%20stock%20is,all%20means%20the%20same%20thing. Accessed 11 Jan. 2024.

34 – What is a Bond and How do they Work? | Vanguard. (n.d.). https://investor.vanguard.com/investor-resources-education/understanding-investment-types/what-is-a-bond#:~:text=Bonds%20are%20issued%20by%20governments,way%2C%20usually%20twice%20a%20year.

35 – 3 Reasons Why You Should Care About the Stock Market – Investor Academy. (2016, April 13). Investoracademy.org. https://investoracademy.org/3-reasons-why-you-should-care-about-stock-market/

FAQs

What is the stock answer? ›

Stocks are shares in the ownership of a company, or investments on which a fixed amount of interest will be paid.

Read On ›

Was the stock market crash big enough to cause the Great Depression? ›

While it is misleading to view the stock market crash of 1929 as the sole cause of the Great Depression, the dramatic events of that October did play a role in the downward spiral of the American economy.

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At what age should I get out of stocks? ›

The 100-minus-your-age long-term savings rule is designed to guard against investment risk in retirement. If you're 60, you should only have 40% of your retirement portfolio in stocks, with the rest in bonds, money market accounts and cash.

What is the basic rundown of stocks? ›

A stock represents a share in the ownership of a company, including a claim on the company's earnings and assets. As such, stockholders are partial owners of the company. Fractional shares of stock also represent ownership of a company, but at a size smaller than a full share of common stock.

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What is the stock market simple answer? ›

The stock market is a trading network that connects investors looking to buy and sell stocks and their derivatives. An easy way to think about think about the stock market is to consider it as a network of stock exchanges where traders and investors buy and sell shares of publicly traded companies.

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What is stock in short answer? ›

A stock is a security that represents a fractional ownership in a company. When you buy a company's stock, you're purchasing a small piece of that company, called a share. Investors purchase stocks in companies they think will go up in value. If that happens, the company's stock increases in value as well.

Tell Me More ›

Who got rich during the Great Depression? ›

Howard Hughes grew up rich and got even richer during the Great Depression. In fact, the seeds of his eventual billion-dollar aerospace and defense empire were sown during this time.

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Do you lose all your money if the stock market crashes? ›

Again, you technically don't lose any money in the stock market unless you sell your investments. If you simply hold your stocks until the market rebounds, your stocks should regain their value. The key is to ensure you're investing in strong stocks that have the ability to weather market turbulence.

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Who profited the most from the stock market crash of 1929? ›

Several individuals who bet against or “shorted” the market became rich or richer. Percy Rockefeller, William Danforth, and Joseph P. Kennedy made millions shorting stocks at this time. They saw opportunity in what most saw as misfortune.

How much should a 72 year old retire with? ›

Financial experts generally recommend saving anywhere from $1 million to $2 million for retirement. If you consider an average retirement savings of $426,000 for those in the 65 to 74-year-old range, the numbers obviously don't match up.

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How much should a 70 year old have in stocks? ›

If you're 70, you should keep 30% of your portfolio in stocks. However, with Americans living longer and longer, many financial planners are now recommending that the rule should be closer to 110 or 120 minus your age.

Read The Full Story ›

How much money do I need to invest to make $1000 a month? ›

A stock portfolio focused on dividends can generate $1,000 per month or more in perpetual passive income, Mircea Iosif wrote on Medium. “For example, at a 4% dividend yield, you would need a portfolio worth $300,000.

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What is the 1 rule in stock market? ›

Enter the 1% rule, a risk management strategy that acts as a safety net, safeguarding your capital and fostering a disciplined approach to navigate the market's turbulent waters. In essence, the 1% rule dictates that you never risk more than 1% of your trading capital on a single trade.

Get More Info Here ›

What is the 5 rule in the stock market? ›

5% Rule: This rule applies to the total risk exposure across all your open trades. It recommends limiting the total risk exposure of all your trades combined to no more than 5% of your trading capital. This means if you have multiple trades open simultaneously, their combined risk should not exceed 5%.

What to do when stock hits 0? ›

When a stock's price falls to zero, a shareholder's holdings in this stock become worthless. Major stock exchanges actually delist shares once they fall below specific price values. The New York Stock exchange (NYSE), for instance, will remove stocks if the share price remains below one dollar for 30 consecutive days.

What does stock answer mean? ›

a stock answer: a pre-prepared response, a response which is always the same (for a particular type of comment or question) idiom.

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What does it mean to give the stock reply? ›

stock reply means the one gives when he does not wish to become involved with the questioner at all .

What does it mean to own stock answers? ›

When you own stock, you own a part of the company. There are no guarantees of profits, or even that you will get your original investment back, but you might make money in two ways. First, the price of the stock can rise if the company does well and other investors want to buy the stock.

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What is the stock exchange answer? ›

What is a Stock Exchange? A stock exchange is a marketplace where securities, such as stocks and bonds, are bought and sold. Bonds are typically traded Over-the-Counter (OTC), but some corporate bonds can be traded on stock exchanges.

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