People have used the bartering system to trade items or services they already have for the ones they need since around 6000 BC; you may be wondering when money markets came into play.
There is no denying the fact that without a constant exchange of money this world would not function as it currently does. To learn why financial markets exist continue reading this article.
Why Do Markets Exist?
1. To Make Trading And Exploring Affordable
In the 1500s Belgium began to form a rudimentary money market for managing debts and raising money for exploration expeditions and endeavors that required a lot of money.
By the 1600s a system was created wherein a group of people could invest in various business or exploration ventures. This allowed global exploration which lead to many discoveries.
Without these new financial investment systems, the world would likely not function or communicate and trade as it does today.
2. Brings Like-Minded People Together
Financial markets can bring people who have similar goals or interests together when they invest in the ideas, products, or services that bring them commonality.
When like-minded people come together they can accomplish more of their goals in a shorter amount of time because they are putting their money in with others so it lessens the burden.
Without the creation of financial markets, many of the products we have grown accustomed to using in our daily lives today would never have been created.
3. Creates Global Access
Financial markets are a way to unite countries on an international level so they can exchange goods, services, or ideologies that they would not otherwise have access to.
Financial markets help with currency exchange and make it easier to trade with foreign countries. They keep track of the exchange rate of money between countries.
Financial markets play a part in keeping the peace between countries. We always want what the other guy has and vice versa which means we need to get along if we want to trade.
4. Stock Market
The stock market exists as a way for people to make a lot of money very quickly so they can start a business.
Investors buy shares of the company as a sort of loan to keep the dream alive. When the company thrives so do the investors.
Investors share in the profits depending on how much they initially when they decide to sell their shares of a particular investment.
5. Bond Market
The bond market was established to help governments and large corporations raise money for future plans and continued upgrades.
Bonds are similar to stocks in that there are investors however, the borrower has a time limit on when the investment needs to be paid back.
This is different from investing as a shareholder in the stock market where you can buy and sell your shares when you feel it’s necessary.
6. Commodity Markets
Commodity markets are for the buying selling and trading of physical goods, however, in today’s modern world this is generally done through different financial channels.
In the past, you could imagine a bustling marketplace with livestock, produce, and other goods being passed around and auctioned off but that has all been replaced with technology.
Food, gold, oil, and other raw materials can all be traded and invested in with the click of a button now.
7. Gauge How Well The Globe Is Getting Along
A market can show how well the economy is doing on a national or global level. If there is civil unrest or any disagreement within or between countries it can affect the market.
If certain regions or countries are at war it can drastically affect the price of goods coming from the conflicted areas. Numbers don’t lie when the world is not getting along.
Markets can help mend the differences between countries and regions that need to trade by making leaders negotiate for items needed.
8. Help Companies Raise Capital
Financial markets were created to help people who cannot pay the entire start-up cost of their endeavor as a way of bringing their dream to life.
In simpler terms, they help people with big ideas but not a lot of money to see their plans to fruition and raise the funds they need to make the dream possible.
Even if they have to share some of the profits with their investors they have still been given the opportunity to achieve their goals in much less time than if they had attempted it solely.
9. Increases Public Economic Interest
When the public is able to purchase shares of large corporations it naturally causes them to take a personal interest in how the economy is performing.
If the economy is doing well, people’s interests and investments will do well which makes them happy. They will stay interesting in what is going on because they are making money.
If investors are happy they will keep investing and the economy will thrive, when people are financially invested in something they will pay more attention to it.
Therefore if the economy is not doing well investors will likely sell their shares and look for other more lucrative ventures.
10. Keeps The World Running
Money makes the world go ‘round and financial markets are a way to manage the money that motivates this world to keep moving.
The institution of financial markets unites countries and allows business to get done faster and more efficiently.
11. Markets Exist To Make You Rich
Many people utilize markets for the obvious reason that they want to make money. They want to be rich and not have to worry about how they are going to pay their bills.
Investing in various money markets can be risky but it can also be extremely lucrative if you are knowledgable and pay attention to what is going on in the world.
Many people around the world have learned that they don’t have to lift a finger to make money with the right investment.
Understanding what people want and investing in those companies is a surefire way to make money and lots of it.
12. Promotes Commerce
Financial markets help to promote the importing and exporting of goods between countries so we can all benefit from what each region has to offer.
If countries are able to communicate and exchange money it makes it easier to trade goods and services.
Markets allow smaller businesses an opportunity to (display) their goods and services so they can grow and thrive.
13. Transfers Risk
Markets exist to protect owners and shareholders from having to absorb too much risk if the endeavor does not succeed.
Having multiple investors in a particular company or project reduces the amount of financial risk on a single individual if the investment fails.
The risks and rewards are spread out evenly for all members who invest according to the size of their investment. They will never lose more than they invested.
To learn more, you can also read our posts on why nickels are bigger than dimes, why people hate NFTs, and why billionaires don’t end poverty.
Markets Keep Money Managed And The World Turning
Without the creation of financial markets, this world would be even more confusing than it already is. Markets promote trade and peaceful engagement between countries.
Understanding the importance of markets and how they affect all of our lives is necessary for the health and operation of our world’s economy.
