The Stock Market

(The weekly series - Pocket Money - where I explain financial basics in fewer than 200 words. Feel free to make suggestions!)

The stock market is a marketplace where people buy and sell shares in companies - a bit like eBay.

Shares are tiny bits of ownership in public companies and the price of them goes up and down according to supply and demand. If lots of people want that share (there’s been good news in the industry for example) then the price will go up but if lots of people want to sell their shares (rumours that the CEO is a bad lad for example) and the price will go down.

Companies list on stock exchanges in an Initial Public Offering (IPO) in order to raise money and people buy those shares because they hope they’ll increase in value or that they’ll earn money through dividends. They are then free to sell the shares to secondary buyers.

The main UK stock market is the London Stock Exchange but you’ll have heard of the New York Stock Exchange, the Tokyo Stock Exchange and maybe even the Nasdaq Stockholm (a.k.a. the Stockholm Stock Exchange). The London Stock Exchange started off in a coffee house, became more formal with a trading floor and has now, for around 40 years, been totally digital. 

Love Eleanor. xxx