The stock market is a platform for buying and selling ownership shares in a public company. It is like purchasing a portion of the company. U.S Securities and Exchange Commission regulates the stock market by facilitating capital formation, protecting investors, and maintaining efficient, fair, and orderly markets. To build wealth over a long period, invest in the stock market.
The stock market is made up of a web of exchanges. An initial public offering, or IPO, is when a company sells shares of its stock on a stock exchange. Investors buy those shares, allowing them to raise funds to expand their operations. (Giglio et al., 2020) The exchange then tracks the supply and demand of each listed stock, allowing investors to purchase and sell these stocks among themselves.
That supply and demand help determine the price for each security or the levels at which investors and traders are willing to buy or sell. Buyers offer a “bid,” or the highest amount they’re willing to pay, which is usually lower than the amount sellers “ask” for in exchange. (Thakkar & Chaudhari, 2021)This difference is called the bid-ask spread. For a trade to occur, a buyer needs to increase the price, or a seller needs to decrease.
Stocks are bought online through the stock market, which anyone can access with a brokerage account. When buying stock, your broker’s website will show you the bid, ask, and the bid-ask spread, but the difference will be insignificant in most situations. (Shah et al., 2019) You can purchase individual stocks through a brokerage account opened at an online broker, through which you can buy and sell investments. The broker acts as the middleman between you and the stock exchanges.
Investing in the stock market entails some risk. However, it can be done safely and with minimum threat of long-term losses with the correct investment strategy. Long-term investing in the stock market, on the other hand, has proven to be an effective strategy to accumulate wealth.
Giglio, S., Maggiori, M., Stroebel, J., & Utkus, S. (2020). Inside the Mind of a Stock Market Crash (Working Paper No. 27272; Working Paper Series). National Bureau of Economic Research. https://doi.org/10.3386/w27272
Shah, D., Isah, H., & Zulkernine, F. (2019). Stock Market Analysis: A Review and Taxonomy of Prediction Techniques. International Journal of Financial Studies, 7(2), 26. https://doi.org/10.3390/ijfs7020026
Thakkar, A., & Chaudhari, K. (2021). A comprehensive survey on deep neural networks for the stock market: The need, challenges, and future directions. Expert Systems with Applications, 177, 114800. https://doi.org/10.1016/j.eswa.2021.114800