From the course: Understanding Capital Markets

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Investing in stocks

Investing in stocks

From the course: Understanding Capital Markets

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Investing in stocks

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- [Presenter] A lot of people think about the stock market as a way for investors to make money, and that's true, but the reason the stock market exists is bigger than that. The stock market helps drive the economy by connecting investors who have money to companies that need to raise money for their business. In the US, companies raise money to invest in their business by selling stock to the general public. They sell that stock through the stock market. Investors buy stock because they get an ownership stake in the company, and then they earn a part of the company's profit. This leads to what we call investment returns or simply returns. The alternative to a company raising money by selling part of itself to investors is to instead borrow money. Now, companies don't go get a bank loan like you or me in most cases, so instead they often borrow money by selling bonds to investors. Stocks and bonds are alternatives for investors. One is an ownership stake in the firm while the other is…

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