The stock market is the generic term for the place where stock brokers buy and sell company stock. Companies sell stock to make money to operate their business. They usually sell stock so that they have money to grow.

Investors buy stock to make money. Remember that when you own stock, you're a part owner in the business regardless of how few shares you own. If the business is profitable and pays dividends, their shareholders get a certain amount of money based on how many shares they own. Investors also hope to buy the stock at one price, and sell it for a higher price sometime down the road.

As an investor, you also share some of the risk. The price you paid for the stock might be higher than it's worth now, or the company might go bankrupt. If the company declares bankruptcy, your shares might become worthless. The company, however, doesn't owe you any money if this happens. It's your risk. In exchange, you have some voting privileges with your ownership. Remember that with corporate bonds, you don't have the same risk, and the company may have to pay you back even if it goes bankrupt. Stocks offer the possibility of higher returns. As with all investments, the greater the risk, the greater the potential for reward or failure.

Stock Market Videos

Take a look at this video, What Makes Us Tick?, from the Prelinger Archives. The video might seem dated, but the process as it relates to why companies sell stock, and how they go about doing it is still relatively the same today.

Note that some of the numbers such as minimum requirements are out-of-date, as is the technology used to trade stock.

Investing in the Stock Market

Now that you have a general understanding of how and why companies sell stock, and how the stock exchange works, let's look at some more detailed information about buying and selling stocks. Since understanding a company's stock price and earnings is an important part of being an informed investor, we'll go over the common types of data that are included in a stock price and places you can get that information. Click the player button to begin.

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