Why world needs a stock market?
1. Capital formation
☛ The stock market allows companies to raise funds by issuing shares to the public. These funds are critical for businesses to grow, innovate, and expand, which drives economic development.
2. Investment Opportunities
☛ For individuals and institutions, the stock market provides a platform to invest in companies, enabling them to grow their wealth over time.
3. Price Discovery
☛ The stock market reflects the value of companies based on their financial health, market conditions, and investor sentiment. This helps businesses, governments, and individuals make informed decisions.
4. Liquidity
☛ Investors can buy or sell shares easily in a stock market, making it a liquid marketplace. This accessibility attracts more participants and fosters a dynamic financial environment.
5. Wealth Distribution
☛ By enabling public investment, stock markets allow individuals from different economic backgrounds to participate in wealth creation.
6. Economic Growth Indicator
☛ The performance of the stock market is often seen as a barometer of a country’s economic health. Rising markets typically indicate economic optimism and growth, while falling markets may signal economic trouble.
7. Encourages Corporate Governance
☛ Publicly traded companies are subject to regulatory oversight and shareholder scrutiny, encouraging transparency and better management practices.
8. Job Creation
☛ Companies that raise funds through the stock market can expand their operations, leading to job creation and economic development.
9. Risk Management
☛ Through derivatives and other financial instruments traded on stock exchanges, investors can hedge against risks and protect their investments.
