Stock market: where ownership changes hands every second

The stock market is where shares of publicly listed companies are bought and sold. Here’s how it works, and how to get started as a newcomer.

What is the stock market?

The stock market is a collective term for the exchanges and marketplaces where shares of publicly listed companies are bought and sold between investors. Rather than a single physical place, it’s an interconnected system of exchanges, such as the New York Stock Exchange and the Nasdaq, along with the electronic infrastructure that matches buyers and sellers and records transactions.

How the stock market actually works

According to Investor.gov⁠(opens in new window), placing an order to buy or sell a stock means a broker routes that order to be executed, and where and how it’s executed can affect the overall cost of the trade. Prices on the stock market are determined continuously through this buying and selling activity, moving up when more investors want to buy a specific stock than sell it, and down when the opposite is true, reflecting the constantly shifting collective judgment of everyone participating in the market at any given moment.

Beyond individual stock exchanges, market indexes like the S&P 500 or the Dow Jones Industrial Average track the combined performance of a specific group of stocks, giving investors and commentators a convenient shorthand for describing how “the market” as a whole is performing on a given day, even though any individual stock can move quite differently from the broader index.

Primary versus secondary markets

It’s worth distinguishing between two related but distinct parts of the stock market. The primary market is where a company first sells its shares to the public, typically through an initial public offering, raising capital directly for the company itself. The secondary market, where the vast majority of everyday stock market activity takes place, is where investors buy and sell existing shares among themselves, with the company that originally issued those shares no longer directly receiving proceeds from these ongoing trades. Understanding this distinction clarifies that most day-to-day stock market activity involves investors trading with each other, not directly with the companies whose shares are changing hands.

The stock market and immigrant investors

Immigration and investing intersect in some specific, less commonly discussed ways worth understanding. Certain visa categories, such as the EB-5 immigrant investor program, are specifically built around a significant capital investment in a U.S. business as a pathway toward permanent residency, a genuinely distinct use of investment capital from simply building a personal stock portfolio. Reviewing the EB-5 visa program in detail⁠(opens in new window) clarifies how this specific investment-based immigration pathway works, which is an entirely different consideration from the everyday stock market participation most immigrant investors are actually engaging in when opening a standard brokerage account.

For the much larger group of immigrants simply looking to build long-term wealth through ordinary stock market investing, the process works the same regardless of immigration status in most cases, generally requiring only a valid form of identification and, depending on the brokerage, either a Social Security number or an ITIN to open a standard account.

Currency risk note

The U.S. stock market is priced and traded in U.S. dollars, meaning any gain calculated in dollar terms needs to be converted before it reflects what that gain is actually worth in another currency it might ultimately be spent in. An immigrant investor building a U.S. stock portfolio while planning to eventually convert some proceeds to support family abroad should understand that the dollar’s movement against that other currency, between now and whenever a conversion actually happens, adds a layer of uncertainty on top of the stock market’s own, already significant, volatility. This compounding of two separate sources of uncertainty, market performance and currency movement, is a factual feature of cross-border investing worth understanding clearly rather than assuming a strong dollar return automatically translates into an equally strong result in another currency.

Getting started with stock market investing

1. Open a brokerage account with a firm that serves the specific situation. Requirements vary, so confirming what identification and documentation a specific brokerage accepts is a reasonable first step.

2. Consider starting with diversified options rather than individual stocks. A broad index fund or ETF spreads investment across many companies, reducing the impact of any single company’s poor performance.

3. Understand that the stock market moves in both directions. Prices can decline substantially over short periods, and investing money that might be needed in the near term carries real risk of loss at an inconvenient time.

4. Research the tax implications for the specific situation. Dividend income and any gains from selling stocks are generally taxable, and the specific rules can depend on residency and citizenship status.

Why the stock market experiences both booms and downturns

Understanding that the stock market moves in cycles, sometimes rising steadily for extended periods and other times declining sharply, helps set realistic expectations for anyone entering the market for the first time. A bull market refers to a sustained period of rising prices, generally accompanied by investor optimism and economic growth, while a bear market refers to a sustained decline, often defined as a drop of 20 percent or more from a recent peak, typically accompanied by pessimism and often, though not always, broader economic difficulty. These cycles have occurred repeatedly throughout the stock market’s history, and while their specific timing and severity are notoriously difficult to predict, their eventual occurrence in some form is a well-documented, recurring feature of how markets have historically behaved. Building an awareness of this cyclical nature, rather than assuming either continuous growth or continuous decline will persist indefinitely, supports a more realistic, resilient approach to long-term investing.

In Summary

The stock market is the ongoing, continuous system through which company ownership changes hands, with prices reflecting the real-time collective judgment of everyone participating. For immigrant investors building a portfolio with eventual plans to convert some proceeds to support family abroad, understanding that currency movement adds a separate layer of uncertainty on top of the market’s own volatility helps set realistic expectations.

This publication is provided for general information purposes only and is not intended to cover all aspects of the topics discussed herein. This publication is not a substitute for seeking advice from an applicable specialist or professional. The content in this publication does not constitute legal, tax, or other professional advice from Remitly or any of its affiliates and should not be relied upon as such. While we strive to keep our posts up to date and accurate, we cannot represent, warrant, or otherwise guarantee that the content is accurate, complete, or up to date.