Stock Markets provide a platform for buyers and sellers to come together and transfer ownership in a controlled, safe and manageable way. The organisation and regulation of stock markets make the process more convenient. Stock Markets are not a novice idea. They have been existing for centuries, dating back to 1531 in Belgium. They traded using promissory notes and bonds rather than stocks. The Amsterdam Stock Exchange, formed in 1602, is the first accurate stock exchange. Stock markets help in serving the economy. It can be an alternate income for individuals and a way to raise capital for companies.
Here are why stock markets are essential:
Stock markets provide companies with a platform to raise money without worrying about repayment. In addition, public companies don’t have to pay dividends in case of losses. Companies would have had to depend on banks for expansion if stock markets did not exist, which would have been a substantial financial burden. Moreover, this decreases unemployment, helps get tax benefits and increases consumer expenditure.
Increasing personal wealth in the economy is one of the essential advantages of stock markets. Stock markets enable individuals to earn a company’s share through individual investment. As a result, an increase in personal expenditure can help reduce unemployment and growth in investment.
Investment In Economy
An increase in investments is an indicator of a prosperous economy. If the stock market is going well, it can lead to more foreign investments as investors invest in companies with significant growth potential. Therefore, the Stock Market is considered one of the best choices for people to invest money.
The performance of the stock market is a reflection of the performance of the economy. Conversely, a rise in shares can reflect a recession or vice versa. Therefore, the stock market and the level of the economy are interlinked. Most of the time, analysts analyse the stock market’s performance to bring up better economic policies.
A rise or fall in the stock market can indirectly affect the non-investors. For instance, pension funds and retirement accounts are linked to stock markets. Hence, low stock prices can badly impact people with such statements. When a company’s share goes down, it can affect employment as the number of employees would be cut down to reduce the expenditure. In addition, the stock market affects the rate of taxes and interests.
On the whole, stock markets affect those involved in it, but as the stock market is interlinked with the economy, the performance impacts everyone. Moreover, it helps individuals and companies to transfer ownership and capital securely. Increasing employment and providing a convenient way to increase investments helps build a prosperous economy.