Why there is a Stock Market

The stock market has been around for centuries, but why?  Why does it help the economy?  Does it help in any way?  The answer is yes.

The stock market was created to help 2 people.

1.       Business owners

Say you open up a new shop that cost you $1,000,000 after a couple years your business grows and you are making $200,000 a year from your business.  But what if you want to expand?  You need another $1,000,000 to open up another shore, and this can be pretty hard to come by.

So what can you do?  Well you can sell shares of your business to investors who will profit as your company grows.  By doing so you will be able to raise cash that will allow you to open up a 2nd store and eventually, more.    

As long as the business owner maintains at least 51% of the company they will be able to control the company and make the decisions on how to run it.

2.       The Investors

Inflation is a killer.  If you do not let your money grow somehow you will be going backwards and actually be getting less purchasing power as your money sits there without growing.  So you need to have some place you can put it where you are actually making money.

The stock market turns out to be perfect for this.  As you invest in the stock market you are able to grow your money as the company grows.  You also get to profit in the company’s earnings if the company offers dividends.  This means, if the company makes money, you can get monthly checks, based on how much of that company you own.

Since its creation the stock market has been growing and now offers many different options to invest and grow your money.  But this is the basics of why it started.

For the history of the stock market visit http://www.stocks-simplified.com/History_of_The_Stock_Market.html