What Do People Mean When They Say the Market Is Up/Down?

Investing in the stock market isn't like putting money in "guaranteed" investments like federally-insured certificates of deposit or money market accounts sold by banks. When you buy shares of stock, you're purchasing pieces of individual companies. If you invest in stock mutual funds, you're purchasing a portfolio of stocks chosen by professional managers. When people refer to the stock market going up or down, they're referring to whether overall stock prices are rising or falling.

When people refer to stocks going up or down, they're often referring to the 30 major companies that make up the Dow Jones Industrial Average. These are the top companies in United States industry. As of 2013, companies included in the Dow include household names such as Walmart, Microsoft, Home Depot and McDonald's. Over time, some companies are dropped and others added. The financial health of the Dow companies often reflects the economic state of the nation.

You can make a lot of money in the stock market. You can also lose your shirt. The basic adage of stock market investing is "Buy low, sell high," but that's easier said than done. When the market is in a period of continuous rise, it's referred to as a bull market. When the opposite occurs and stock prices keep trending downward, it's a bear market.