why do we have the stock market
The primary purpose of a stock market is to provide a structured and where investors can safely buy and sell shares of stock in a public corporation and where company owners can acquire equity investment. Company operators can seek new cash from debt, private investment or public investment. Taking a company public and listing shares of stock for trade on the open market enables a massive infusion of equity cash. The process of an initial public offering enables
some of their own shares of stock. The business itself benefits from the capital it raises through the issuance of shares to the public. Businesses and investors benefit from the much more liquid trading environment offered by a public stock market, according to the BusinessDictionary website. High liquidity makes it easier for investors to get in and out of stocks. The liquidity itself often strengthens the value of a stock, simply because a buyer knows he has a large pool of other potential buyers when he chooses to sell. Because of the relatively high liquidity, companies listing shares to the public typically get much more per-share equity value than they likely would in the private market.
Investors can purchase and sell shares at any point that the market is open, as long as they abide by U. S. Securities and Exchange Commission, or SEC, regulations. This open market forum allows for varying strategies, ranging from long-term investments to day-trading activity. A is to protect the interests of investors and the integrity of stock exchanges. Rules on insider trading and trade settlements are among the SEC's oversight areas. The SEC is also in charge of enforcement when companies or investors violate regulations. The real birth of what we think about today as the stock market started way back in 1602, with theВ. Historians claim it to be the first company to ever offer shares to investors in exchange for a portion of its profits. The stock market exists so that companies can raise money without incurring any debt (such is the case of a loan). They issue shares of their company to the public in what is known as anВ. Investors buy and sell these shares (or stocks) to one another on the stock exchange, thus making stock prices move up and down.
If there are more people buying a stock than people selling it, the price goes up with the demand. If more people are selling than there are people buying a stock, thatвs a sign that the company is unfavorable to own and the stock price drops. Letвs say you really love Starbucks coffee. You have aВ demand В for a daily cup of Starbucks coffee. In order to buy your daily cup of coffee, you need money. You make a pretty nice income from your job as a Coffee Critic, but youвd like to have some extra disposable income so that you can afford your daily cup of Joe (Youвd think as a coffee critic, theyвd supply you with free coffee. But such is life. ) You decide to grow your money by investing it in the stock market. Starbucks understands that you (and millions of other people all around the world) have a demand for a daily cup of coffee.
In order to satisfy that increasing demand, Starbucks needs to grow; and they need money to do that. The company needs to buy more beans, hire more employees, open new stores, etc. So, in order to raise this money, they issue stock to investors on the stock market. This means that they cut up the company into millions of (figurative) pieces. They sell these little pieces of the company, known as stocks, to people like you and me. If you own a stock, you own a little piece of the company. Since you love Starbucks coffee so much, you believe that theyвll be able to successfully grow and satisfy more peoplesв demand for coffee. You think theyвll buy fresh beans, hire skilled employees, and open beautiful new stores. So you decide to buy Starbucksв stock. This means that you own a little piece of the company. If Starbucks grows and makes more money, your money grows along with it. Now letвs look at the places where millions of these transactions take place each and every day:В stock exchanges.
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