The stock Market exists as means for businesses to grow. When businesses grow into corporations, the financial needs grow also. Banks meet their short-term needs and the stock market needs the long-term financing needs. This is when these corporations sell ownership interests in the company to the public, in exchange for cash. This is the main way of raising money for the business. .
The person who purchases stock is doing so as an investment, a means of making money. It's best used as a long-term investment in addition to one's retirement plan. Stocks can give you a high return but at a high risk, also. But, over the long term, investments in stocks have proven to be an excellent way to exceed keeping pace with the erosive effects of inflation.
There are risks in the stock market. It's like buying a lottery ticket; the most you can lose is the cost of the ticket. The most you can lose in the stock market is what you paid for the stock. Most stocks go up over a long period of time with ups and downs in between. Historically, stocks have returned dividends and capital gains more than ten percent annually. This has proven to out pace inflation.
The stock market is said to go hand in hand with the economy. Some say the stock market determines the economy, others say the market is determined by the economy. When the stock market crashed in October 1987, loans of recession, inflation, and unemployment, grew. This became the top news story. Fear and anxiety were the reactions to all the news coverage and as a result there was heavy selling of stocks.
The current sniper situation in the Washington D.C. area is effecting our economy, which in turn, effects the stock market. The gas stations and retail stores are reporting a 50 percent drop in sales. A tour company has reported they have lost an estimated $100,000 in business in the past two weeks. People have cancelled tours and if the sniper continues the impact will get worse.