In Short
The stock market is a place where people can buy ownership in various companies around the world. It’s a marketplace. The same way someone would go to the supermarket to buy an apple, a person goes to the stock market to buy stocks (ownership in a company).
Origin of the Stock Market
The stock market is a very old concept. While there is some evidence that it emerged in ancient Rome and Mesopotamia, the prevailing view is that the idea of trading debt comes from 12th century France. The first time company ownership was traded was in Amsterdam with the Dutch East India Company in 1602. Dutch traders also created stock derivative trading (see here for definition) and short selling (see here for definition). The first dedicated stock exchange (public marketplace where information is provided to the public) emerged in London in 1698.
Purpose of the Stock Market
The primary purpose of the stock market is to allow companies to raise money. In exchange for giving up some ownership they can raise the capital they need to grow their businesses. A secondary reason is that it allow people to get involved in the companies that shape the world, but the most important reason is fundraising.
Benefits of the Stock Market
In addition to corporate fundraising and allowing people to get involved, it also gives people a very effective way to grow their money that, on average, far outpaces inflation. The stock market is extremely liquid (you can move money in and out very quickly and easily).
Disadvantages of the Stock Market
The main disadvantage is that in comparison to other ways of making money, the investor has much less control. An investor chooses when to buy and when to sell. They don’t (unless they’re very large) have any say in the running of the company. So they’re taking on faith that the management knows what they are doing, that dividends payments will keep coming, that management isn’t doing anything illegal, etc. It is a completely passive form of income. Depending on the personality type of the investor that might be a big mental roadblock.
Conclusion
I personally feel investing in stocks is a great way of sharing in the prosperity and economic success of the world. The disadvantages can be addressed via diversification (see here for definition). I think stocks should be a part of every portfolio.
Fee Structure
| Rate | Assets Under Management |
| 1.44% | Below $125,000 |
| 1.00% | Between $125,000 and $750,000 |
| .85% | Between $750,000 and $1,250,000 |
| .80% | Between $1,250,000 and $1,750,000 |
| .75% | Between $1,750,000 and $2,500,000 |
| .70% | Between $2,500,000 and $3,250,000 |
| .65% | Between $3,250,000 and $4,250,000 |
| .60% | Above $4,250,000 |
A single rate is applied to the entire account. So a person with a $750,000.01 account pays less than a person with a $750,000 account. I will waive personal tax return fees for accounts over $1 million. For accounts that are above $5,250,000, we’ll need to discuss a custom rate.
As I’m writing these to help my readers, I would be very appreciative of any input in regards to what I should write next. If you want me to write about a particular topic, please contact me. If you would like to submit a post to my blog, please contact me.
If anything that I mentioned above interests you, please consider downloading my free e-book. The book contains my thoughts on investment management and some information that I think everyone should know. You can also download it below.
E-Book Download
Questions for the comments
Did my explanation make sense? Do you agree or disagree with what I said?
