In the 1600s, the Dutch East India Company needed capital to fund global trade expeditions and turned to private investors for support. This practice led to the world’s first stock market, allowing people to buy shares and benefit from the company’s profits. Today, companies use the stock market to raise funds by issuing shares through an IPO, making investors partial owners.
Stock prices fluctuate based on supply and demand, which can reflect the company’s perceived value. Numerous factors influence stock prices, including company performance, material costs, and investor confidence. Market forces drive cycles of buying and selling, impacting stock value and company valuation.
Although unpredictable, tools and knowledge help investors make informed decisions. Now, with internet access, everyday investors can also buy stocks, support businesses, and work towards their financial goals.
Vocabulary:
• IPO (Initial Public Offering) – The first sale of a company's shares to the public, launching it onto the stock market.
• Shares – Units of ownership in a company, allowing shareholders to earn a portion of profits.
• Fluctuate – To change frequently, especially in price or value.
• Market value – The current value of a company based on the stock price and demand.
• Supply and Demand – Economic principle determining price based on availability (supply) and desire (demand).
Source: Ted-Ed