The capital market is the main driver of the development of an economy. We can say that a country’s maturity and wealth can, to some extent, be assessed according to the maturity of the local stock exchange – and the number of companies that are listed on it.
Although a stock exchange represents only a small part of the so-called “real economy”, having a vigorous and developed stock exchange, with few bureaucracies for the entry of companies, brings a series of advantages for both companies and investors. Even a small investor, with little capital available, can take advantage of the advantages offered by buying shares in companies in his country. You can get more knowledge about trading and stock market at Broker.cex.io.
An example of how the stock exchange represents the development of a country can be evaluated in a simple comparison: the market value of all companies listed on B3, the stock exchange, is less than the market value of a single company American company, Apple. And, while in the United States more than half of the population invests in the stock market, here in Brazil we have more people arrested than CPFs registered on the stock exchange as investors. A monumental difference, which also manifests itself in the size of the economies of the two countries.
See now 6 advantages that the capital market brings to a country.
1) access to fast and cheap capital
When a company wants to grow and develop its activities, it usually needs more capital. The first option is to resort to a loan or bank financing, but the fees charged are usually quite high, especially if the amount is higher and the investment term is long.
Going public is an easier and faster way to obtain financing. The company will not have to pay interest, it will have access to investors from all parts of the country – and the world – and it will be able to grow in a much healthier way, without debt.
2) transparency
To be eligible to issue shares on a stock exchange, a company must undergo a series of regulatory checks, fulfill requirements and improve – or implement – transparency, good management, and governance models. This has great benefits for them to improve their management tools and become more attractive, competent, and solid.
3) access to capital from different parts of the world
A company listed on the stock exchange is not restricted to the national market, since most of the investors on the stock exchange are foreigners. With capital coming from countries with more accumulated wealth, companies get more money to finance their activities, grow and create value for shareholders.
4) possibility of passive income for shareholders
Speaking of generating value, companies that issue shares are an excellent way to generate income for investors. In Brazil, companies are required by law to distribute at least 25% of profits to shareholders. This distribution comes in the form of dividends paid periodically, which can be used by the investor to spend with you or to buy new shares, increasing your capital.
5) owning a business without having to undertake
When an investor buys a stock, he is buying a part of that business. Long-term investors follow the philosophy of buying companies instead of just stocks, which makes them have a long-term mindset for their investments.
If you have a job and don’t want to start a business directly, the stock market is a great option to “buy” companies at affordable prices.
6) stimulates the investor mentality
A consolidated and mature capital market reflects a long-term mentality, especially for those who invest thinking about obtaining passive income. Such behavior encourages frugality and savings at the expense of consumption, and it is this thinking that is responsible for generating wealth and increasing the quality of life in an economy.
