Why Do We Have The Stock Market?
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Why do we have the stock market? We all know that it is considered to be a great place to invest money, but why was it made and why would a business sell it's shares? The reason for the stock market is that it makes sense.
Let us take an example here, say Joe opened up a flower shop which cost him $200,000. The shop starts to make some good money so he decides that he wants to open up another shop so that he can expand.
However there is another problem that Joe will come across here. He simply doesn't have the money to open up a second shop. What he can do to raise the money is to sell shares of his company to investors. Let us assume that his company is valued at $1,000,000.
If he breaks these up into little pieces and sell then to individual investors he can get the $200,000 it cost to open up a new store simply by selling 20% of the ownership of the company. And as long as Joe keeps over 50% of the ownership of the store he still controls the company.
The idea behind this is to use that money to grow the business and benefit both parties. Business owners will benefits because they can expand their store and investors will benefit because they are able to see their investments grow as the store increases and demand for the shares increases. This win-win situation has been in place since the 1600s and is likely to continue forever.
Also as an investor you can check out the fundamentals of the company and can invest into many different companies so that you get to benefit from getting into strong companies and from diversification.
Article Source: Articlelogy.com
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