Spend time on Investopedia. There's too much to say regarding the stock market, if you are asking simple questions like those.
Beginners should always invest in blue chips to start with, as they have the least risk.
When a company goes public, they offer little tiny slices of ownership to the whole country for a set amount of dollars (maybe $20 a share). Maybe a hundred thousand people buy a thousand shares each, spending $20,000 each (X100,000 = $20 million) Now the company has $20 million in working capital. If the company is successful, the price of the shares will go up. When the shares go up $1, each of those investors has a potential $1000 gain on their 1000 shares, or a 5% capital gain. However, the company could fare badly and the stock could go down 10%, 50%, or even to zero, in which case the investors have lost a lot of money. Inexperienced investors usually use mutual funds and rely on the mutual fund managers to make the selections for them, and they just look at their statement a few times a year to see if their account has gone up or down. You can learn a lot by reading financial journals such as Kiplingers, Smart Money, or Money magazine. Also, use CNBC.com website. Seeking Alpha is another helpful website about stock investing.
Okay, the above comment on how firms go public is close to correct. Generally what happens is that an existing firm needs extra money, sometimes to expand, but also sometimes to avoid going bankrupt. They go to the public in what is called an initial public offering or IPO and they offer to make new shares of the company in exchange for money. As stated above, if you started out wanting to invest $20,000 in the new company and you thought the shares would be around $20 per share at the beginning, then you would put in an order for 1000 shares. You may end up getting them at a different price, however, though it is usually close.
After the stock becomes public, these initial shares can be sold to anyone who wants them or you can hold them until you die or the firm goes bankrupt. You can sell your shares through a broker and that broker will place your order either at a stock exchange or on the NASDAQ market.
The stock exchange is a bidding system. All the people who want to buy place a bid and all the people who want to sell place a bid. If you offer $21 per share to buy and someone will only sell at $22 per share then nothing happens. Your offer has to be greater than their asking price. Money is kept by the middle men so you cannot just match the numbers, you have to pay more and they have to get less so there is money to pay the broker. Lets say you bid 22 and they asked 21. The broker would take 22 from you and give 21 to the other person and pocket the dollar. If the spread between the numbers isn't enough, the brokers just let the bids sit until someone comes along and either offers more to buy, in which case the new buyer and the old seller would match up, or someone who will take less comes along and you and the new seller are matched up. The other party is just left out of the game. Nothing happens. The order just sits there either until it expires or a new person comes and makes an acceptable offer.
The NASDAQ works more like a store. Firms called broker-dealers place a bid and ask price for a certain number of shares. They will buy or sell at your request at that fixed price up to as many shares as they have made a public offer on. As long as no one beats you to it, you get that price. In most circumstances if you just checked then you are entitled to the amount you saw even if it expired a fraction of a second ago due to someone else taking it.
The price is based on how much money you think you will get from the company if you held it until either you die or it goes bankrupt. Companies pay an amount, usually quarterly, called a dividend. A dividend is the money the company made recently from its sales that it has no use for, so it returns it to the owners of the company. If the company made an extra $1 per share this quarter then its board would send the $1 back to shareholders. Firms do not have to pay out dividends and the shareholders generally cannot make it happen. So it is possible you will never receive a dime.
What you do is figure out how much money you think the company is going to send back to you over some period of time, lets say the next seven years. You then subtract out the interest you could have earned at the bank or some alternative for that same amount of money. If you are better off with the company than the bank then you buy the shares.
You base your purchases on how much money you think the company is going to give back to you over some extended period of time, but seven years is a nice number. You figure this out from their past behavior from reading the corporation's annual report. Generally pick twenty or so companies and take five percent of your money for each one. If the game gives you $100,000 then divide that by 20 for $5000 each. Lets imagine the share price is 13.11. Take $5000/$13.11 and round down to order 381 shares.
There is a lot more to it, but this is the nuts and bolts for a high school kid. Find twenty companies you should know something about like McDonalds or Subway or Nike. Get their annual reports. Figure out if they are going to pay you enough money that you are better off with them than in the bank. You may have to decide to drop some companies. You may read their annual report and realize they are a load of garbage. Some big name companies are not doing well. Just because their name is big doesn't mean they will still survive. You really do have to at least read their annual report. You can get these online, sometimes from the company site, and always from the Securities and Exchange Commission.
I have super oversimplified it. There is an enormous amount you should know, but this is the simplest set of rules I could devise for someone who does not know what they are doing yet.
You know companies like Apple and Microsoft? They're called public because anyone with enough money to buy and sell small pieces of their companies (called shares). The stock market is simply a marketplace for people to buy and sell shares. Your other questions are too complicated to answer here.
Read a book on investments. Consider a book on the stock market by Jim Cramer.
The stock market is a huge, rigged system - like Las Vegas.
It's designed to take money from the guests, and give it to the owners. Everything else is just details.
Read "Investing for Dummies."
My class is doing a virtual stock market game so it's not really money. I'm really confused on how the stock market works. Also, how do you get started? How do you know what to invest in and how many shares to invest in?
