The role of the stock exchange is to facilitate the obtaining of money by companies, to ensure a liquid and transparent market for securities issued by them, to offer an alternative to investors and to increase awareness and visibility of companies that choose to List. Last but not least, the stock exchanges are genuine barometer of the economy, developments and prospects of sectors, being visible in the way they behave on the stock share price belonging to players in the field. More than a barometer stock sometimes anticipates some major economic developments since the stock price incorporates a wealth of information they have access to investors at that time.
Stock exchanges are organizations that facilitate the transfer of securities such as stocks, bonds or futures contracts (on stocks, currencies, etc.). Another important role is that of providing an organized framework for raising capital (funding) through the issuance of such securities by companies, either through IPOs or by subsequent capital increases (for action). If the stock can create instruments for the tradable goods (financial derivatives) based on existing interest in a particular product category, where stock exchanges issuing company must comply with a set of rules to the list of shares / bonds on that market. The main conditions refer to minimum capitalization, free float, history of profitability and a solid business plan living, plus the company’s commitment to maintain a degree of transparency in investor relations.
Among the advantages of investing in stock markets we mention:
- Obtaining superior returns compared to returns on bank deposits or units. The best argument in favor of this statement stands evolution indices. A stock market index is a statistical indicator that reflects the evolution of the market prices of the shares making up. Analysts use as benchmark indices (as a reference) to compare the yields of individual portfolios of investors with the return index.
- The possibility of rapid liquidation of the investment – an investor may at any time sell shares and collect money that is not possible in the case of real estate investments, where the investor is locked to finding buyer.
- Revaluation of investment opportunity at any time.
- Direct control over their own investment.
- Possibility to use derivatives to call complex investment strategies (stocks and futures contracts, stocks and bonds, stocks and index futures contracts etc.).
- The possibility of diversifying risk by investing in many issuers.
- Investing in stocks is a much more accessible to investors in real estate where assets are substantially higher amounts and liquidation of the investment is much lower.