The History of the Stock Market

When you buy stocks or get stock advice from your financial advisor, have you ever wondered how this huge stock market came to be? The roots of the U.S. stock market go back more than two hundred years.

The first investment in the United States occurred when the government sold bonds to finance a war. Investors were promised a return on their investment. And thus the investment and return contract was born.  

As a result of that investment strategy, bankers decided to use a similar approach to raise money for lending and investment in bank growth by selling shares in the bank.  

In the late 1700s the New York Stock Exchange was formed by twenty four large businesses. These business owners formed an organization designed to trade stocks and investments within the market they had created, all for the purpose of growing their investments and the money in their accounts for use in their businesses, and to start and run new companies. As time passed, this market expanded and the business consortium began to sell stock and shares to others outside the group of the original twenty-four investors. 

In the early years of the New York Stock Exchange, the exchange built its reputation on stable, well established companies where the sale of stock and shares had little risk. But when investors realized how much money they could make, the market changed. Riskier, rapid growth company investment meant more money for investors, presuming these companies were successful. Unfortunately, there was more demand for investment and new companies than the dependable, stable growth companies could offer.  

As the market grew and more companies were added to the index, more investors came to play and the entire market dynamic changed. Today, investment is very speculative and individual investors who would once have been forbidden to trade in the company market environment, now trade shares online with little or no knowledge of the market, the companies in which they invest and the overall affect of their investment on the global market. What was once a market in which only wealthy investors with professional advisors made money, is now frequented by the average man who has chosen to invest his savings in the volatile stock market instead of in real estate or in a savings bank.