How The Stock Market Functions

Illustration by Clarice Frude for Girls For Business

With a black and white graph as the Apple icon of the stocks app, it can seem like the sole function of this app is to depict stats, data, and famous company names. However, this app is one of many ways to determine what to trade, when to trade, and general trends of the market. The stock market has a great impact on the economy and society because it serves both the company and investors to raise capital and make money. The government is able to collect taxes from both sides as well. 

The origins of the stock market started in 1602 where the Dutch East India Company became the first publicly trading company. They made this choice in mind to raise capital by selling stocks to investors. Such a concept is the foundation of the stock market we see today; the market’s role in people’s lives has also continually progressed throughout the years as the economy fluctuates overtime.

An example of the significance of the stock market was during the Great Depression in 1929 where the US suffered greatly with large numbers of unemployment and lost funds due to the fact that Americans could not recover their savings from the bank. One of the causes of this was the stock market crash known as Black Tuesday. A stock market crash means a sudden decline of the prices of the stocks available.

If you were to buy a stock, you share the company's profit. When the company is performing well, your money that you invested in the market should increase as well. There are a variety of ways to buy a stock. However, research should be the first step. Since you are owning a part of the company in the means of shares, depending on how many shares you purchase and the price of each, you have to be careful of which companies to invest in. One way to take caution is to research the growth of the company in order to determine both its current and long term progression. After deciding on the company you want to invest in, there are multiple means of putting this into effect. Investing through an app can be an easy choice, but you can also open an online brokerage account or work with a professional. After purchasing however many shares you would like to purchase, all you have to do is watch how the company is doing. As the value of the stock goes up, then the company is doing well. Vice versa with when the value of the stock is decreasing. 

Evidently, no company is going to have a constant and linear stock value increase. Even the most successful companies will have decreases some day which is completely normal. Another thing to note is that you can buy back your shares whenever you would like, such as when the stock is not doing well or if you feel that it will continue to decrease in value. However, you can only sell and buy stocks during the stock market hours which is from 9:30 a.m. to 4 p.m. ET. The first trade in the morning creates the opening price for the stock while the last trade of the day provides the closing price. 

The stock market is complex and has several moving parts to it. It is more than just being able to buy and sell shares of the company, as there are a multitude of personal benefits gained from investing in the stock market; this market plays a major role in our lives and it is not going away anytime soon.