What is the stock market?

As the name suggests, the stock market is a marketplace for the trading of stocks or shares. There are many stock markets around the world, and the UK’s main exchange is The London Stock Exchange (LSE).

Market Indices

To form a market index, company shares are grouped together, and their value is combined as a weighted average (the bigger the company the larger its effect on the value of the index) resulting in a figure. Generally, companies of similar size and value are grouped together.

Often you hear the market being up or down. This relates to stock market indices rising and falling.

If a company you hold shares in pays dividends, you’ll receive dividend payments. If a company is successful and manages to grow profits over time, the amount it pays out as a dividend can increase.