What's the stock market? (where many people with suits are walking around and waiting for something?)?

[Nick]

Well what you saw was a stock exchange, which is basically the physical place were stock market trades are made. With computers and internet you can buy, trade, and sell all from your computer (or even your phone). However, back in the day you had to either go to an actual stock exchange (usually in big cities such as New York) or pay a stockbroker to do it for you. The tickets are a way of buying and selling stocks in the stock market, while at the stock exchange. All stock trades were made through tickets for a long time, but as I side before there are now computers to do this for you (I'm not sure if tickets are used at the stock exchange still in real life, or if they have computers there to). What a piece of stock is, is basically a share of a company. There are stock holder meetings were you can vote on certain things in the company and the more stock you own, the more your vote counts (essentially you just have more votes though). However, the company is still run by some head of the company, such as a CEO. If you bought more than 50% of the stock in a company you could make all the decisions that were presented at stock holder meetings (but to get enough money for this you would have to have an unrealistic amount of money). The real reasons that people buys stocks is usually money. Most people don't even bother to go to the stock holder meetings because they don't really care that much. They are in it for the money. There are essentially two ways to make money in the stock market:
1. buy low and sell high. As you probably know, stock prices go up and down, and generally are a reflection of the economy. When business is good it cost more to buy a share, but when the economy goes down, so does the price of stock. If you have enough money during a down economic times, then you can buy some stock, and then sell it when the economy goes back up. I'll give an example. If I bought stock in Apple for 20$ (it's much higher in real life, but this is just an example) and in two months it went up to 30$ and I sold it, then I would have made 10$ per share. Of course if it goes down then I will want to wait to sell another time.

2. The second way to make money is dividends. Dividends are payments made to shareholders. When a company makes profit it will ethier use this money in the company (buying materials, paying employees, etc.) or it will give it to shareholders as dividends. Again the amount of the dividends will rely on how well the company is doing and it will be proportional to how much stock you own.

The stock market affects everyone indirectly because when it is up, generally so is the economy, when it's down so is the economy. However, it dosen't affect you directly unless you actually own stock. Buying stock is a good investment right now for you because by the time you have been on your own for a few years it will probably have bounced back and you could have made some money. Of course if you don't have money to spare then your best not risking it because you may need it for college, bills, or other unexpected costs. If you only have a little money to invest then penny stocks is the way to go. These are stocks that cost less than a dollar a share, but you can still make a little money (it's the same concept as micro loans, a little money here and there can add up). If you are looking to buy stocks I would suggest looking at what will increase in the future. For example, do NOT invest in facebook. It will most likely be obsolete in a matter of a few years, while a company like Apple will keep products coming. Use a little innovative thinking to predict the market as well. Don't invest in a company just because you like them. Invest in companies you think with get the most use in the future. For long term investment put some money into a hearing aid company. Due to the use of loud music and ear buds, this generation is predicted to need more ear buds, and at an earlier point in life.