Firstly shares may be referred to names such as stocks, equities, or securities. Now a share is simply a certificate which signifies that you own a part of a company and self-evidently the more shares you own, the more of the company you own. Note today most shares are traded electronically and not in paper form, thus speeding up trading and making online trading more convenient.
Stock markets initially provided a platform for companies to sell shares in their company to private individuals. In exchange private individuals received dividends on the performance of their shares, in other words a return on their investment.
Traditionally, when the company makes a profit the shareholder at the discretion of the directors may receive a dividend, or bonus share issues.
However, more recently world markets have shown that fewer companies are issuing dividends, in many instances many high profile companies are posting losses on increasing revenues and borrowing while at the same time their share price is soaring.
Valuation of companies has shifted from profit making manufacturing companies to companies perceived at having "good prospects" for the future.
Most countries have a stock market index, which represents Public Listed Companies whose shares are traded.
The stock market indices of the most economically stable countries in the world achieve the most media focus, and in many instances they are used to judge the economic state of that country.
Logically so, since the performance and profitability of large organizations in terms of world trade (import-export), competitiveness, will be subject to areas of government intervention such as interest rate adjustments, currency exchange rates and rates of inflation.
This can be seen looking back at stock market performance in times of economic depression (stock market crashes) and stock market performance in times of economic prosperity (stock market boom).
It's all about risk and return, and because your money is at more risk in the stock market than if you park it in a savings or CD (by the way, the money you invest in a CD is probably reinvested by the company offering the CD), the potential return is higher. It's true that the gyrations in the stock market can cause both large losses and large gains, but if your investment time horizon is long enough, these short-term fluctuations will result in relatively high returns.
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