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).

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.