What Are the Benefits of the Stock Market?

What Are the Benefits of the Stock Market?
The stock market is an important part of many financial systems.

Capitalization

Companies require money and resources in order to expand their products and services and to reach more consumers. The public, in return, often benefits from the offerings from a company. But sometimes the capital needed to provide these products and services is too great for a company to fund alone. When a corporation decides to go public and become listed on a stock exchange, it offers shares of stock to any individual or institution who wishes to invest in the company. The initial public offering (IPO) immediately raises a large amount of capital quickly. A company can have millions or billions of dollars at is disposal nearly overnight after selling its shares to the public. This money is then used to develop new products and services which will hopefully influence society positively. The manufacture of goods is often an expensive process that requires the kind of capital that only public investing can provide.

Investment Returns

While a company can benefit handsomely from an IPO, individual investors get access to potentially lucrative returns on their investment if the company performs well. This relationship is mutually beneficial to both parties. There is no guarantee of corporate success but the potential rewards match these risks. There is technically no limit to the profit that corporate investment can generate. Share prices can rise by extraordinary amounts and provide investors with excellent returns.

Economic Activity

When companies perform well on the stock market, the economy benefits in many ways. Hopefully, a company develops products and services that are in high demand. As the public purchases these offerings from the company, income is generated at many levels. Stores sell goods from the company which affects businesses all over the country. The income generated by these sales is taxed which provides income to the government. As investors in a successful company make profits from their investments, they are more likely to go out and spend this money which further boosts economic activity by generating more income and more revenue. The stock market fuels this cycle repeatedly for thousands of companies that choose to go public.