The stock market acts as a giant marketplace where companies can raise money and investors can buy and sell pieces of ownership in those companies. Here’s a simplified breakdown of how it works:

Companies Raise Capital:

• Initial Public Offering (IPO): When a company wants to raise money by selling stock to the public for the first time, they go through an IPO. This process involves meeting specific requirements, working with investment banks, and issuing shares at a set price.

• Selling Shares: By selling shares (representing ownership in the company), the company raises capital to fund operations, growth, or new ventures.

Investors Buy and Sell Shares:

• Stock Exchanges: Investors don’t directly buy shares from companies, but rather through stock exchanges like the New York Stock Exchange (NYSE) or the Nasdaq. These exchanges connect buyers and sellers.

• Orders & Trades: Investors place orders to buy or sell shares at a specific price. When a buyer’s offer matches a seller’s asking price, a trade is executed.

Share Prices Fluctuate:

• Supply & Demand: Stock prices constantly change based on supply and demand. If more investors want to buy a particular stock (high demand), the price will tend to rise. Conversely, if more investors want to sell (high supply), the price will likely fall.

• Company Performance & Market Sentiment: A company’s financial performance, industry trends, and overall market sentiment can all impact stock prices.

Making Money:

• Capital Gains: Investors aim to buy stocks at a lower price and sell them at a higher price to earn a capital gain. This is the most common way to make money in the stock market.

• Dividends: Some companies share a portion of their profits with shareholders through dividends, which are periodic payments per share.

Understanding Risks:

• Volatility: Stock prices can be volatile, meaning they can go up and down quickly. There’s always a chance that you could lose money on your investments.

• Market Corrections & Crashes: The stock market can experience periods of decline (corrections) or even crashes. Investors need to be prepared for these possibilities and have a long-term investment horizon.

Additional Factors:

• Market Participants: The stock market involves various participants, including individual investors, institutional investors (like mutual funds), and investment banks. Each plays a role in influencing stock prices and market activity.

• Regulations: Government regulations help ensure fair and orderly trading in the stock market.

This is a basic overview, and there’s much more to learn about the stock market. athworthacademy.in can give you a starting point to understand how companies and investors interact to create this dynamic marketplace.