What is the stock market?
What you'll learn
Understand what the stock market is and how owning a share means owning a slice of a company.
The stock market is where people buy and sell shares in companies. Buy a share and you own a tiny slice of that business, including a stake in its future profits.
Shares mean ownership
A company divides itself into many shares. If a business is split into 100 shares and you hold one, you own 1% of it. Hold a share in a large company and you are one of millions of part-owners.
That ownership can pay off two ways:
- Growth - the share price rises if the company is worth more.
- Dividends - some companies pay shareholders a slice of profits.
Why prices move
Prices change constantly as buyers and sellers weigh up a company's prospects. Strong results push interest up; bad news pushes it down. The whole market can swing on the wider economy too.
| Term | Plain meaning |
|---|---|
| Share | A unit of ownership in a company |
| Shareholder | Someone who owns shares |
| Dividend | A share of profits paid to owners |
| Stock exchange | The marketplace where shares trade |
This is why single shares are risky on their own: one company's fortunes ride on its own results. Spreading money across many companies (covered in later lessons) softens that.
Key takeaways
- The stock market is where shares in companies are bought and sold.
- A share is part-ownership of a business, not a loan to it.
- You can gain from a rising price and from dividends.
- Prices move as buyers and sellers reassess a company's prospects.
Illustrative only: shows how owning shares is a fraction of a whole company. The numbers are made up to explain the idea. Not a forecast.
Frequently asked questions
What do I actually own when I buy a share?
A share is a small unit of ownership in a company. Own one and you own a tiny fraction of that business, including a claim on its future profits.
Why do share prices go up and down?
Prices move as buyers and sellers change their view of how a company will perform. Good news, bad news and the wider economy all feed in.
Where does the stock market actually happen?
On stock exchanges, where shares are bought and sold. Most people now trade through an online platform rather than in person.
General information, not financial advice. The value of investments can fall as well as rise, and figures and rules can change; check the current position before acting.