Stock market: the basics
The stock market is a place where people buy and sell shares of companies. When you invest in a company, you become part owner of that business, which means your share in the company’s success can grow and your wealth can grow as well. The stock market distributes control of some of the world’s largest companies among hundreds of millions of individual investors. It also enables individuals to earn higher returns than they would get with a savings account (though that’s not guaranteed and short-term performance can vary from long-term averages).
Investors who want to buy a stock match up with investors who want to sell their shares on an exchange, like the New York Stock Exchange or Nasdaq. These transactions are facilitated by computers that operate at lightning speed, matching buyers and sellers almost instantly. Stock prices rise and fall on supply and demand, as well as broader economic factors.
To trade a stock, potential buyers and sellers must both agree on a price. A buyer offers a “bid” or lowest price they are willing to pay and a seller offers an “ask” or highest price they are willing to accept. If the bid and ask meet, a sale takes place. The amount of the transaction is recorded by the exchange.
TSX, located in Toronto, is the 9th largest exchange by market capitalization1 and lists a wide range of companies from around the world. Its markets are regulated and its information is widely available, which encourages public participation. But investing isn’t a get-rich-quick scheme, and it can be risky for inexperienced investors. Investors should stay disciplined, avoid emotional investment decisions, and consider a diversified portfolio.