Of all the categories of money management, you’ve probably got a pretty good hold on things. Income? Check! Making a budget? Check! Savings? Check! You might even feel pretty comfortable with insurance, 401k, retirement and basic investing. But that last one – investing – can feel a little eluding. Investments can come in many shapes and forms, but one common investment is in the stock market.

For a lot of us, the “Stock Market” conjures images of crowded rooms of sweaty people, sleeves rolled up, staring at computer screens and yelling at each other. And for a lot of us, that’s where our knowledge stops. It’s complicated and we think it doesn’t have much impact on our day-to-day lives. You might think, “that’s something that someone else does, not me.” You might even think that the stock market is only for rich people. 

But what is the stock market? How does it affect you? Let’s break it down in the most basic terms.

Just as a disclaimer, I’m not a financial planner. I’m just someone who enjoys managing my own personal finances and this post is meant for info, not direct investing advice.

What is the Stock Market?

Just like you use the corner store to buy food and goods, you can use the stock market to buy investments. Most of the time, these investments are in the form of stocks. Stocks are shares of ownership in a company. If you have a share of stock in Amazon, you are a part-owner (even a small one) of Amazon. Just about anyone can buy and own stocks in the stock market.

The stock market exchange (such as the New York Stock Exchange) is a listing of all the companies that can be bought and sold to the public in that particular market.

Where is the stock market?

There are several different stock markets. The world’s biggest stock market is the New York Stock Exchange (NYSE), which is in New York. Other large stock markets are the Nasdaq, which is also in New York, the Nikkei in Japan, the London Stock Exchange in the United Kingdom and the Shanghai Stock Exchange (SSEC) in China.

What does it mean when the stock market is up or down?

Generally when you look at the news and see the stock market is up or down, what you’re seeing is a representation of companies (a sampling of stocks) in that particular stock exchange is up or down. Up or down means the sample of companies is selling higher or lower than the previous day.

Is it risky to buy and sell stocks?

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