Definition

• Although the word "stock" might sound like a product, stocks aren't physical goods. A share of stock represents money, specifically money used by companies for business purposes. When you buy stock from a company, your money is used to help that company improve its business. When you buy stock, you become a partial owner of a company, meaning when the company thrives, the value of your stock goes up and you earn money. If the company suffers, the value of your stock goes down and you lose money.
  
  

Function

• The stock market functions as a way for companies to fund various business endeavors such as expansion, creating new products or merging with other companies without having to rely on loans from banks. Stocks, more or less, function on a supply-and-demand basis --- meaning when a company's goods and services are high in demand, stocks are more expensive. On the other hand, when a company isn't popular with the public, its stock value drops.
  
  

Methods

• Although the method of stock trading used to involve physical pieces of paper and in-person transactions, most trading is now done electronically. If you want to invest in stocks, you can use a full-service broker, discount broker or do a direct purchase from a company. Full-service brokers will give you extensive financial advice, but they can be expensive to hire. Discount brokers simply perform your trading transactions, but don't provide advice or input on your investments. To purchase from a company, look for an "Investor Relations" page on its corporate website. You might pay a fee for this option, but direct purchase can be much less expensive than hiring a broker.
  
  

Benefits

• Many people invest in the stock market to save for retirement. This option is best if you're 20 years or more away from retirement, because it will take time for you to see much growth on your investment. It is common to buy stocks from your own company or a company whose goods or services you often use. Keep in mind that your retirement shouldn't rely solely on stocks: invest in a low-risk account like a 401(k) or Roth IRA just in case your stocks don't grow as expected.
  
  

Warnings

• If you are considering investing in the stock market, you'll need to be aware that stock investments are akin to gambling. Although stocks have the potential to grow massively in a short period of time, they have the same potential to do the opposite. You can review a company's financial history by reading its annual reports to see if the company is growing or receding.