Equity markets are places where enterprises come to seek funding for their projects and for investors to seek productive channels to deploy their surplus resources. It is not that equity markets are the only places where investors and enterprises can get what they seek, but it is definitely the most dynamic of all markets where the risk and reward range on offer is the widest and participation is allowed to almost anyone,Â no matter how small his financial capacity is. It makes it possible for a salaried class citizen to vie for and own a part of a mega corporation and also have a share in its profits. Moreover, the investor also has the flexibility to get in and get out of the investment any time he likes by buying or selling his stake in a secondary market, without impacting the corporationâs capital base. The London Stock Exchange, The New York Stock Exchange, The NASDAQ and the Hong Kong Stock Exchange are some of the most prominent of Equity markets in the world.
The idea of an equity market is an old one; it is when businesses were needed to be funded without their risk of failure being cast singularly on the promoter or entrepreneur was felt, that equity markets were born to take away that risk. Over a period of time this idea became the prime source of enterprise funding and the birth of mega corporations as we know them today. In fact, stock markets have today become the biggest catalyst of value creation in the world more than any other source, providing taxes to governments, salaries to employees, share of profit to shareholders and bringing about economic development and prosperity in general.
Equity markets have another very important aspect that is not seen in debt or other markets which gives them their dynamic edge in that it is not only a place to raise funds but also a place where businesses are amalgamated, broken apart and reorganized in order to create value or preserve value in the most efficient way possible. This market does not allow for the creation for fictitious assets and prices shares most optimally factoring in the latest and most reliable information. The market values each and every individual enterprise differently and determines its net worth and also decides which sectors are the most efficient and productive and channelizes most of the resources coming into its way towards them.
Equities are also a measure of wealth, while also being a reflection of an individual investorâs ingenuity to have deployed money and created wealth under varied economic and financial conditions of a country. As corporations grow and their share prices rise so does value of investments held by individual investors. An individual investor who is invested in the equity markets for a long time and has been giving the required time to study and understand the business dynamics and future prospects of different corporations can channelize his funds in the most optimum manner and be rewarded handsomely for it. In fact, equity markets are regarded as the most potent source of value creation for investors, whose wealth is now tied with the growth of the country, its major corporations and the economy at large, and grows at a compounded rate as the companies grow over time.
Most of the countries today have one or more stock exchanges. Â Amongst the worldâs foremost stock exchanges are the London Stock Exchange, New York Stock Exchange, The NASDAQ, The Shanghai Stock Exchange and the Hong Kong Stock Exchange. Each of these exchanges are home to the largest and the most influential companies of the world and have been the source of creation of immense wealth for their host countries. In fact, the success of many of these Stock exchanges has been such awe-inspiring that it attracts the interest of foreign companies as well as foreign investors who wish to emulate the successes of its existing constituents.
London Stock Exchange is an International Stock Exchange. Though situated in London In the United Kingdom and regulated by the laws, by-laws of that country and overseen by institutions created by the Crown, it is home to a large number of Foreign companies, multinational companies and foreign institutional investors. The stock exchange is not only one of the oldest in the world but is also one of the wealthiest. It is divided into two segments; the main market segment and the Alternative Investment Marker (AIM) segment. The main market segment plays host to the largest, wealthiest, most influential and companies with the most geographical reach. The operations of the constituents of this segment of the stock exchange are so widespread that it provides enough indications so that the activities and business operations of the exchange are least affected by economic headwinds prevalent in any part of the world, be it in the United Kingdom itself. The Exchanges Alternative Investment Market (AIM) segment in particular provides funding to novel business ideas and start-ups who would other wise find it difficult to get funding going through the conventional route either in the other segment of the London Stock Exchange or any where else. Over the years the Alternative Investment Market (AIM) is proving itself to be the catalyst for the largest value creation in United Kingdom and abroad.
By Investing in equities thus an investor contributes in nation building. He not only gets a share of the collective wealth created by the corporations and the economy at large but also shares the risk generally associated with the business activities of a country and in particular that of the corporations. One of the critical steps of creating an enterprise is to aggregate resources so that they may be productively deployed. In a country with millions of citizens each having a small surplus of resources than he requires can add up to a very large resource if congregated and could be a catalyst of the general value creation in a country, economic growth and enhancement of prosperity of its citizens. By Investing in equity markets an investor not only stands a change increase his personal wealth but also contributes to the growth and development of the country.