It doesn’t matter whether you are interested in how a country’s economy works or not, one way or another, the term “stock market” might have made its way to your ear. If you haven’t heard about it, then the simple way to define the stock market is: an institution or an organization where human beings sell and buy shares of companies.
Stock markets are one of the most important factors of today’s global economy. There are many countries around the world whose economic growth depends on stock markets. The downfall and the rise of a country’s economy depend on stock ratings. Though the history of stock market dates back to 12th century, it didn’t always have a major impact on a country’s economy. With that in mind, let’s dig into a brief history of global stock markets:
The first genuine stock markets didn’t arrive until the 1500s, although there were a lot of examples of markets which bore a resemblance to a stock market. The first major example of a stock market was the French system “courretiers de change.” This was in the 1100s. The system managed agricultural debts throughout the country on behalf of banks. The group of men who were managing became knowns as the first brokers. After that, in the 13th century, merchants of Venice were credited for trading government securities. Bankers in Italy also started doing the same; especially in cities like Pisa, Verona, Genoa, and Florence.
The world’s first stock market system was established in Antwerp. Antwerp was the commercial center of Belgium and the influential Van der Beurze family lived there. Because of this family’s name, the early stock markets were called Beurzen. But these stock markets were missing one crucial part of a stock market: the stocks. The way these institutions worked were incredibly similar to how a stock market works today, but none of them were trading shares of a company. Instead, the markets were dealing with affairs of business, government and individual debts.
Today, the stock market is one of the most important parts of the major world economies. Fifty-four percent of Americans invest in the market, according to money.cnn.com. They invest in the stock market so they can have a strong financial portfolio. But how is a stock market useful? Here are a few points:
Economic Drive. Both the US and UK are economic powerhouses. Why? The answer is simple: their stock markets are strong. Nations whose stock markets are slowly emerging are considered to be emerging economies, while those countries that already have well-established stock markets are considered strong economies. This motivates other countries to invest in such economies that are on the rise or are already established, and that is how economies start growing.
That being said, there are two sides to every coin. If an economic boom has a positive effect on the overall image of the country, an economic malaise affects nations negatively. The Great Depression is considered among some of the very worst economic failures — and it was the result of a historic stock market crash. But don’t be alarmed; there are a lot of ways in which you can reduce your stock trading risks.
Business Capital. If stock markets didn’t exist, those who wanted to start a large business would have had to ask for loans from banks or wealthy people. And they would have had to repay the loan with interest. But luckily, paying back isn’t something that is a must in a stock market.
Increased Investment. It’s no secret that savvy investors look to invest in companies that show a significant growth potential. When foreign countries see how well another nation’s stock market is doing, it encourages them to invest in that country.
If you’ve invested in the stock market, there will always be ups and downs. The key is to not panic and give in. So keep your eye on the news and you’ll be well prepared to deal with potential unexpected situations as they arise.
Photo Credit: kenteegardin