• The stock market is a common place for people to invest money with the goal of building wealth over time. Stock exchanges sell shares of stock--small units of ownership in a company--which go up or down in value over time based on investor demand for the stock. Holding stocks of companies that perform well can result in high returns on investment.
  
  

Buying Stock

• Stocks of large companies such as Coca-Cola and Microsoft are traded on large stock exchanges like the New York Stock Exchange (NYSE) and NASDAQ. Investors cannot simply buy and sell shares of stocks themselves. Stock transactions must be made through investment professionals called stock brokers that place trades on behalf of clients. Stock brokers can offer investment advice and typically charge a commission or transaction fee on each purchase order that is placed. An alternative to a human stock broker is using an online stock brokerage service. Websites like Scottrade, Etrade and ShareBuilder offer investors the opportunity to make their own trades with relatively low transaction costs. A common investment strategy is to buy stock in companies whose stock is selling for a low price that is likely to increase in the future.
  
  

Selling Stock

• Sales of stocks are also made by placing an order with a broker or using an online brokerage service. The most difficult part of selling stocks is often deciding when to sell. The goal of stock market investing is to sell stocks at a price that is higher than you bought them for originally, thereby making a return on your investment. If demand for the stocks you buy falls over time, the stock prices might be lower than your purchase price. If you were to sell at the lower price you would take a loss, but there is no guarantee the stock price will ever return to the original price. On the other hand, it could be tempting to sell a quickly rising stock to reap profits, but if the stock keeps rising, you might miss out on potential gains. A common investment strategy is to simply hold onto stocks for many years in the hopes that they will trend upward over time.
  
  

Mitigating Risk

• The stock market is an inherently risky place to invest money since stock prices can fluctuate unexpectedly. One way to mitigate risk is to hold stocks for long periods of time. Investors that buy and sell stocks very frequently incur transaction fees more often with no guarantee that they will make more money than if they simply held stocks long-term. Another way to mitigate risk is to buy stocks in many different companies and sectors. This practice is known as "diversification" and helps avoid losing too much if one or two investments don't pan out.