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How Does the Stock Market Work?

The stock market operates on the principle of supply and demand. When a company issues stock, it is essentially selling ownership shares in the company to investors. The price of the stock is determined by the market, based on factors such as the company’s financial perfor mance, industry trends, and economic conditions.

When investors buy stock in a company, they become part owners of the company and are entitled to a portion of the company’s profits through dividends. They also have the potential to profit from an increase in the stock price, which can occur if the company’s financial performance improves or if investor sentiment toward the company becomes more positive.

Conversely, if a company’s financial performance deteriorates or if investor sentiment toward the company becomes more negative, the stock price may decline, potentially resulting in losses for investors who own the stock.

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