The stock market is considered to be one of the best places to invest money. But why do we even have a stock market? Simple, the stock market exists because it makes sense to help businesses grow and investors to make money at the same time.
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 it up into bite sized pieces and sells each of them individually to investors he will be able to obtain the $200,000 by simply selling 20% of the company. If he sells 40% of the company he could set up 2 additional stores and expand at an even faster rate. And as long as he keeps over 50% of the company he still controls it.
The idea here is that the store will grow so that this really becomes a win-win situation. Investors benefit as the store grows and as demand for the "stock" in the store grows with it. Business owners benefit because they have more money to invest into their company. This idea of selling shares in the company to raise capital dates back to the 1600s and will likely keep going on until the future for one simple reason. It works.
And as an investor if you are able to pick the right stocks you can make a large return by investing into companies with great fundamentals and that are likely to grow in the near future.
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 it up into bite sized pieces and sells each of them individually to investors he will be able to obtain the $200,000 by simply selling 20% of the company. If he sells 40% of the company he could set up 2 additional stores and expand at an even faster rate. And as long as he keeps over 50% of the company he still controls it.
The idea here is that the store will grow so that this really becomes a win-win situation. Investors benefit as the store grows and as demand for the "stock" in the store grows with it. Business owners benefit because they have more money to invest into their company. This idea of selling shares in the company to raise capital dates back to the 1600s and will likely keep going on until the future for one simple reason. It works.
And as an investor if you are able to pick the right stocks you can make a large return by investing into companies with great fundamentals and that are likely to grow in the near future.
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For more on the history of the stock market visit this history facts of the stock market page.
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