The History and Evolution of Investing

Common stock investments have helped to make the United States prosperous and powerful. Investing affects the U.S. economy in a myriad of ways. It impacts the life of companies, individual investors, and even those who do not invest. The stock market originally went through a process of brokers and telephones to sell shares. Now these transactions are all made digitally over the Internet.

Companies are not involved in trading shares in the market; however investing has a significant indirect impact on companies. Companies only receive the money when they make the initial public offering; the rest of the money made is personal for the investors who are actually doing the buying and selling. Stocks are what allow for company expansion because they provide the funds for growth. Companies make use of their stock similar to a bank loan or credit card, in the sense that IPO’s raise immediate cash to expand. This is known as taking the company public and signals a company status as successful enough to go through the expensive Initial Public Offering Process. IPO’s can be a double-edged sword because if the company tries to maintain control on the interest by owning 51% of the shares and the stock does poorly, it will hurt the company workers or owners who own large shares and not just the outside stock shareholders.

But the pros outweigh the cons, as IPO’s are often one of the only ways to obtain funds for a great expansion, and investors invest at their own risk so the company will not have to go in debt to pay back a loan. Furthermore, owners of the company normally award themselves with large portions of the stock so that when the stock first goes public, they have an opportunity to receive millions because the initial value will s...

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... had to drastically change to keep from allowing a situation like this to happen again. The government had to make the FDIC, social security, and incorporate programs like the New Deal.

The stock market has now evolved into a sophisticated system and if a crash were to happen again, the effect would be nothing like the effect it had in the Great Depression. Now banks are set up with insurance, so if a crash were to happen, banks would still have money instead of giving it all away to the shareholders who cashed out. The 1930’s investing consisted of gambling on stocks that had the best price. There were no actual strategies for money managers to obtain accurate information and analyze the results. The stock market has evolved a long way as people now consider things like risk and began to utilize the idea of stock portfolios from Markowitz’s Modern Portfolio Theory.