It’s made up of stock exchanges from around the world – including the London Stock Exchange (LSE) – as opposed to being a single market.
A stock exchange is a marketplace where these trades, and other types of investments, take place. An exchange can be an online platform or have a physical location.
Here, we look at:
How does the stock market work?
What is stock market volatility?
What are stock market bubbles?
The stock market allows companies to sell shares – also known as equities – in their business to raise money to fund expansion. They typically do this through an initial public offering (IPO) on a stock exchange, like the LSE.
Once a company’s shares are listed on an exchange it becomes a ‘publicly listed company’. From that point, its shares can be bought and sold by investors and its share price will move up or down depending on demand and how well the company is doing.
If the company does well or it’s predicted to do well, its share price will typically go up and shareholders may stand to make a profit. Either through capital growth (selling shares for more than you bought them) or dividends, which are portions of a company’s profit paid out to shareholders.
If the company doesn’t do well or isn’t expected to, its share price may go down.
News reports on stock market performance often refer to specific indexes, like the FTSE 100 or S&P 500. These track the share prices of some of the largest companies – offering a good gauge of overall performance.
Stock market volatility is how sharply the market moves, and the impact this has on share prices.
As well as individual company performance, prices can be driven higher or lower by what professional investors think will happen next in the wider world economy. These factors include economic data, geopolitics and other global developments. For example, when the US announced its plan to put tariffs on countries and specific industries, the value of those industries went down across the world in expectation that higher prices would mean lower demand.
You can’t avoid volatility when investing – the two go hand-in-hand. But understanding more about market volatility and what you can do to minimise its impact on your investments can help.
Stock market bubbles occur when share prices rise rapidly and out of proportion to the value of the underlying companies. A bubble can relate to the whole stock market, or a specific sector or industry. This tends to happen when a topic becomes very high profile very quickly, leading to people wanting to ‘buy in’ at the start. In a world of fast-moving trends, with technology leading the way, these kinds of trends can quickly impact a market.
But bubbles can burst, causing a dramatic drop in share prices. In some cases, this can lead to stock market crashes and economic instability. You can find more about this and what’s happening in markets around the world on the HSBC Wealth Insights Hub.
Most stock exchanges are open for around 7 to 8 hours a day and close for weekends and public holidays.
The London Stock Exchange opens Monday to Friday from 8:00 to 16:30 GMT for retail investors. However, institutional traders who manage very large volumes, such as pensions funds, are allowed to trade outside of these hours – known as after-hours trading.
Opening times for other stock exchanges can vary. For example, the New York Stock Exchange opens from 14:30 to 21:00 GMT.
As an individual investor, you can put in an order to buy and sell shares out of hours, but the order won’t be processed until the market opens.
When it comes to investing in the stock market, you have a few options with HSBC UK:
Remember, the value of investments can go down as well as up, and you may not get back what you invest.
You can invest in a fund that includes companies listed in the stock market.
When you invest in funds, you’re buying a mix of investments. If some of the investments in the fund perform badly over a certain period, others may perform well. This helps spread your risk – known as diversification. They can give you access to the stock market without having to pick out individual stocks.
We offer a wide range of funds on our online fund platform, including index funds and unit trusts, that's designed for more confident investors, as you can make your own decisions. You can also find a range of exchange-traded funds (ETFs) on our online share dealing account. You can dip a toe in the market and start investing with £50. Eligibility criteria and some fees apply.
New to investing? Our ready-made portfolios could be more suitable if you're getting to grips with investing. Here, you choose the level of risk you feel comfortable with, and our investment specialists will take care of the rest. Eligibility criteria and some fees apply.
Try our investment calculator to see how much your money could be worth in years to come.
If you prefer to make your own investment decisions, another option is to buy individual shares in companies listed in the stock market. This option potentially carries more risk than investing in funds because you’re investing in a single stock rather than a diversified portfolio, but there is also the potential for an immediate gain if markets or stocks spike.
You can buy individual shares using our online share dealing platform. Eligibility criteria and some fees apply.
If you have an HSBC current account or eligible savings account, you can start investing with £50. Starting with a small amount can be a good way to dip your toe into the water. You can watch what happens with your investment and invest more at a later date if you want.
Before you invest, consider your personal finances, goals and appetite for risk. Not all investment risk is equal, and you can find a level of risk that you’re comfortable with.
Investing should also be seen as a medium to long-term commitment. This means you should be prepared to invest for at least 5 years to give your money the potential to grow and recover from any drops in the market.
Having an emergency fund can provide a safety net to prevent you from having to sell your investments too early.
