“Hold on, ‘the market’ is several markets? Why are you trying to confuse me?”
Sorry, there’s no Wal-Mart of investing, though you can invest in Wal-Mart if you like. The infamous ‘market’ is kind of like a mall- many individual markets and exchanges to choose from, and plenty of inventory (or companies) to shop for within those markets. In each market, you can buy shares of a company or sell your piece of the company pie. When you become a shareholder in a company or mutual fund, you’re staking a claim in the business- so when the business or fund does well, the value of your shares increases; but if business isn’t doing so hot, your share value might decrease.
Public companies are listed on a stock exchange. The largest American exchanges are:
NYSE: The New York Stock Exchange. Unless you’ve lived under a financial rock, you’ve heard of this. Most major American companies trade on the NYSE. It also happens to be the largest stock exchange in the world. Go figure.
NASDAQ: The National Association of Securities Dealers Automated Quotations. Glad we use that abbreviation. Nasdaq is the second largest stock market in the world after the NYSE and it largely contains technology and internet companies. Fun fact: Because Nasdaq is all about electronic trading, it doesn’t have a trading floor like the NYSE.
AMEX: The American Stock Exchange. You’ll find smaller companies, exchange traded funds (ETFs) and options trading here. It’s the third largest of the stock exchanges in the U.S. and it doesn’t have as strict requirements for companies like the NYSE- for instance, NYSE requires companies to have at least $60 million in market capitalization to be listed on the exchange; AMEX only requires $3 million to $20 million.
Though NYC is the financial capital of the world, Boston and Chicago are big hubs too; you’ll hear investors talk about the Chicago Mercantile Exchange and the Boston Stock Exchange, among others. There are also separate exchanges in every country, which you’ll find out if you invest abroad- there’s the London Stock Exchange in the U.K., the Shanghai Composite in China, and the BM&F Bovespa in Brazil to name a few.