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Individuals known as market makers act as intermediaries between buyers and sellers. How can brokers buy and sell stocks in your account instantaneously? However, stock trades typically go through in seconds. Specifically, there aren't always buyers to match up with sellers of stocks.
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One extremely important concept when it comes to understanding the stock market is the idea of a market maker. Market makers ensure there are always buyers and sellers By purchasing shares of a stock, you become an investor in the underlying company. If you want to buy shares of Microsoft ( NASDAQ:MSFT) and hit the "buy" button through your broker's website, you are buying shares that another investor has decided to sell - not from Microsoft itself. The vast majority of stock trades take place between investors. Stock markets facilitate the sale and purchase of these stocks between individual investors, institutional investors, and companies. That said, you don't need to get too deep into the weeds to gain a good basic understanding of the stock market. How does the stock market work? There are entire books explaining the stock market, and there's too much to explain in a few paragraphs. In other words, instead of being owned by an individual or a private group, some companies choose to " go public." This means that anyone can become a part owner by purchasing shares of the company's stock. If you buy a share of Apple ( NASDAQ:AAPL), you own a small part of the business and get to share in the company's success. Stocks, also known as equities or publicly traded companies, represent ownership interests in businesses that choose to have their shares available to public investors.Ī share of stock represents an ownership interest in a company. Here are a few basic concepts that can help new investors understand how the stock market works. Before we get into stock markets, you need to understand stocks and how they work on a basic level.