The New York Stock Exchange is one of the largest exchanges in the world and trades stock from every sector of the economy.
Not all companies issue stock to raise investor capital, but the ones that do are called public companies. Most stock from public companies trades in organized exchanges around the world. In the United States, the largest exchange is the New York Stock Exchange (NYSE). To trade on an exchange like the NYSE, companies have to meet specific income and stock-value requirements.
Definition
A share of stock represents an equity stake in a public company. As an equity stake, you have a claim on profits and company value based on the number of stocks you own. In addition to dividends, stock holders benefit from an appreciation in stock value. So if you bought stock at $25 today and the price increases to $27 tomorrow, you have made $2 on every share you bought.
Types
Stocks exist in two main forms: common and preferred. Owners of common stock can exercise votes during annual shareholder meetings to elect the board of directors. Preferred stock holders do not have voting rights but are a priority group to receive dividends and proceeds from asset liquidation if the company fails.
Indexes
A stock index is a group of related stocks whose combined average stock price helps investors gauge the health of a particular sector of the economy. For example, the Dow Jones Industrials comprise a group of stocks called blue chips. These stocks are the 30 largest companies in the U.S. By monitoring the Dow Jones Industrial Average, investors and the public have an estimate of business activity and expectations of the largest companies. Other indexes are used to measure the performance of specific sectors such technology, utilities and transportation.
Prices
The price of a stock is affected by supply-and-demand forces within the financial markets. However, these forces are influenced by factors such as the financial health of a particular company. According to the New York Stock Exchange, corporate financial health influences investor decisions to invest if the company shows consistent profits and prospects of future profitability.
Expectations
In addition, expectations for a particular industry influence how much investors want to invest in a particular stock. For example, if you own stock in a particular company that is proven to be profitable, future profits may decrease if the industry in which your company operates is on a decline or faces slower growth. This means your investment may lose value in the future. For this reason, investors monitor economic and industry developments.
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