When most people casually talk about the “market,” they are typically referring to the stock market which is like an exchange where investors (people with money) can go to buy and sell stocks. A stock is like owning a little piece of a company. If you own stock in Starbucks, don’t feel so bad the next time you buy an expensive $5 vanilla latte because you own part of the company! Each country has its own stock markets. Some of the well-known ones are the Toronto Stock Exchange (TSX) in Canada and the New York Stock Exchange on Wall Street in the US. I had the opportunity to attend a conference a few years ago at the New York Stock Exchange and I was surprised at how orderly and calm it all seemed. I was expecting to see traders climbing all over each other trying to get their trades placed. Of course, today all the markets are electronic so millions of transactions can be done quickly and efficiently all at once.
Traders gather on the floor of the New York Stock Exchange in October 2017. Brendan McDermid / Reuters. Retrieved from https://www.theatlantic.com/science/archive/2018/01/evolutionary-economics/549725/
You may hear people talking about how the stock market is doing on any particular day. Is it going up or down? Up means that stock market prices are rising which you’ll be happy about if you own stocks. To indicate how the market is doing, a sample size (a representative subset of all of the stocks traded on that market) is created and called an index. The TSX Composite Index is the most commonly used one in Canada. It has about 250 companies in it which are felt to be a good representation of the Canadian market. Similarly, the S&P 500 in the US includes the 500 biggest companies in the US. To correctly use the jargon, you say “What’s the TSX doing today” and if someone asked you that question you would check online and say, “oh it’s up 50 points or down 100”. A point is equal to one dollar. The change is also often expressed as a percentage.
Investing is just buying something with the hope that you will make money. For the purposes of our discussion we mean investing in the stock market.