When most investors—whether new or experienced—think about buying and selling stocks, they probably think of the New York Stock Exchange (NYSE), made famous by countless movies and television shows that feature the New York City landmark. But the NYSE is more than just a building. It’s a critical component of the financial market, facilitating the buying and selling of millions of securities (or investments) daily.
Below, we answer some of the most common questions about the NYSE—what it is, when it was founded, the types of stocks that are traded on it, how it can be invested in and more—so that you can better understand this important institution.
What is the NYSE?
When somebody refers to the New York Stock Exchange (NYSE), they may be referring to one of two different things, depending upon the context.
Before anything else, the NYSE is a stock exchange located at 11 Wall Street in New York City. It allows investors to buy and sell shares of the more than 2,300 different companies that have listed themselves on the exchange.
The exchange was founded in 1792 when 24 stockbrokers in New York City banded together and signed the Buttonwood Agreement, which established a set of rules by which brokers and traders would operate. At its debut, the NYSE traded five securities, including government bonds and the stock of two banks—the Bank of New York and the First Bank of the United States. The companies that list and trade on the NYSE include some of the oldest publicly traded U.S. companies. It is the largest stock exchange in the world as measured by total market capitalization (or market cap) of all of the companies included.
Beyond this, the term “NYSE” is often used to refer to the NYSE Composite Index. Similar to other stock market indexes like the Nasdaq, S&P 500, and the Dow Jones Industrial Average, the NYSE specifically tracks the performance of all of the companies which are listed on the exchange. In this sense, the NYSE is used by many investors as a quick reference point to determine whether the market is up or down at any given moment in time.
What types of stocks are traded through the NYSE?
The vast majority of stocks listed on the New York Stock Exchange are issued by American companies, though hundreds of foreign stocks also call the NYSE home.
The companies on the NYSE come from all segments and sectors of the market, including technology, healthcare, energy, financials, consumer services, manufacturing, and more. Some of the largest and most important companies listed on the NYSE include: Walmart (WMT), Berkshire Hathaway (BRK.A, BRK.B), Visa (V), Johnson & Johnson (JNJ), Exxon Mobil (XOM), Walt Disney Company (DIS), and Pfizer (PFE), among many others.
While the Nasdaq has acquired a reputation for listing a large portion of technology and growth-oriented stocks with the potential for increased volatility, the NYSE has maintained a reputation for listing primarily well-established, mid- and large-cap companies. Despite this reputation, companies of all sizes and maturities list on the NYSE, just as they do on the Nasdaq and other exchanges.
When is the NYSE closed?
For investors who are considering purchasing stocks through the NYSE, it is important to bear in mind that the exchange is not open every day of the year. The New York Stock Exchange observes all U.S. holidays, which means that trades cannot be completed on those days. NYSE holidays include:
- New Years Day
- Martin Luther King Jr. Day
- Washington’s Birthday
- Good Friday
- Memorial Day
- Independence Day (July 4)
- Labor Day
- Thanksgiving Day
- Christmas Day
Exact dates of some of these holidays vary by year depending on which day of the week the holiday falls. Additionally, certain other days feature early closings, such as Christmas Eve, the Friday after Thanksgiving, and the day before Independence Day.
Beyond these holidays, the NYSE is typically open Monday through Friday, from 9:30 a.m. through 4 pm. Eastern Standard Time (EST) each day.
How can someone invest in the NYSE?
When someone asks this question, they may actually be asking one of two questions, each of which has a different answer. It may mean:
How can someone invest in the NYSE itself?
Intercontinental Exchange Incorporated is the parent company that owns the New York Stock Exchange (as well as a number of other exchanges). It is a publicly traded company listed on the NYSE under the ticker symbol ICE. As such, any investor with the desire to do so can invest directly in the company which owns the NYSE.
How do you purchase stocks on the NYSE?
For investors who would like to purchase shares of stock of companies that are listed on the NYSE, there are a number of potential paths to take.
The first would be to hire a broker to buy and sell the stocks for you. Brokers make their money by charging you a fee for their services. According to Value Penguin, the average broker-assisted fee is $30, though these fees can range from a low of $19.95 to a high of $55 per trade.
The second would be to open an account through an online brokerage firm like TD Ameritrade or E*Trade. Once you have successfully opened an account, you will be able to directly make your desired stock purchases, including for companies listed on the NYSE. These services will typically charge you a set fee per trade. Because you are making the trades on your own without the assistance of a broker, these fees tend to be lower but are not insignificant, averaging $8.90.
The third—and likely most cost-effective—option is to invest in an index fund whose holdings include companies listed on the NSYE. Investing in a low-cost index fund or exchange traded fund (ETF) that track the NYSE are both efficient ways to invest in all of the companies that make up the NYSE Composite Index.
Why invest in funds that mirror the NYSE?
Many investors invest in ETFs and index funds that mirror the NYSE out of a desire to diversify their investment portfolio. Because the NYSE Composite Index consists of more than 2,300 individual companies, investing in an ETF modeled after the index is essentially the same as investing in each of those companies—a strategy that can reduce some of the risk associated with investing. This may also help avoid significant swings in the value of your portfolio.
It is important to note, however, that investing in an index-tracking ETF alone does not remove all risk. To further limit risks involved in investing, experts recommend diversifying your investment portfolio further with other types of investments, such as bonds. (Acorns portfolios include exchange-traded funds with exposure to thousands of stocks and bonds.)
Whether or not investing in the NYSE is the right decision for you will depend on your own personal and financial goals. That being said, tracking the performance of the NYSE Composite Index can be a very effective way of understanding current market performance—whether stocks, in general, are up or down.
Investing involves risk including loss of principal. This article contains the current opinions of the author, but not necessarily those of Acorns. Such opinions are subject to change without notice. This article has been distributed for educational purposes only and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed.