Key Takeaways

  • Securities markets provide two functions:
  1. They help companies raise funds by making the initial sale of stock to the public.
  2. They provide a place where investors can trade previously issued stock.
  • Stock sold through an IPO is issued through a primary market with the help of an investment banking firm.
  • Previously issued securities are traded in a secondary market, where the proceeds from sales go to investors rather than to the issuing companies.
  • The best-known exchanges are the New York Stock Exchange, the American Stock Exchange, and the NASDAQ.
  • They're all regulated by the Securities and Exchange Commission (SEC), a government agency that is charged with enforcing securities laws designed to protect the investing public.
  • Stock market trends are measured by market indexes, such as the Dow Jones Industrial Average (DJIA), the NASDAQ Composite Index, and Standard & Poor's Composite Index (S&P 500).
  • When the stock market is enjoying a period of large increases in prices, it's said to be in a bull market. When prices are declining, it's often called a bear market.
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