6 Merits / Benefits / Advantages of Stock Exchange

The stock exchange is the lifeblood of the country’s economy. There are lots of Advantages of Stock Exchange. The most common and important benefits of the stock exchange are as follows:

Advantages of stock exchange

  1. Long Term Finance
  2. Unlimited Opportunities for investment
  3. Economic Stability
  4. Investment opportunities for small savers
  5. Raising new capital
  6. Easy to participate

Long Term Finance

Banks may not be willing to provide long-term finance, so, the companies needing such financing turn to the public, inviting people to lend them money or take a share in the business in exchange for future profits.

This they do by issuing stocks and shares in the business through stock exchanges. By doing so, they can mobilize the savings of individuals and institutions. Thus, the Stock Exchange exists to provide a channel through which these savings can reach those who need finance.

Unlimited Opportunities for Investment

Everyone wants to save or invest in one form or another. The Stock Exchange provides a way in which money can be put to work. When the saver in shares needs his money back, he does not have to go to the company with whom he originally placed it.

Instead, he sells his shares to some other who is seeking to invest his money through the Stock Exchange. Stock exchanges have, thus, found different solutions to the problem of providing contiguous and free-market insecurities, with varying degrees of success.

Economic Stability

The economic stability of a country is essential for the growth of a healthy industrial atmosphere and the participation of people in productive economic investments. Capital is the lifeblood of industries.

The Government is providing the major equity for further expansion or to survive in a different economic condition. The Stock Exchange provides assistance to enterprises by creating avenues for selling shares and stocks to the public to generate funds.

Thus, the Stock exchange is a unique yardstick to assess the industrial activity and investment opportunities of a country.

Investment opportunities for small savers

The Stock Exchange is a system of arrangement which, in combination with other institutions, patterns the capital market of an economy.

In a free economy, the stock exchange is the pivot of the money market. It thus provides investment opportunities to small savers.

Merits/ Benefits / Advantages of Stock Exchange
Advantages of Stock Exchange

Raising New Capital

Companies, however, do not get their shares listed on the stock exchange automatically and, though the actual listing fees payable to the stock exchange are not big, the cost to the company of meeting the exchanges may be considerable.

A company willingly accepts these responsibilities because access to the Stock exchange brings benefits in the form of better marketability for their shares and, thereby, assists in the raising of new capital.

Easy to Participate

The Stock Exchange has no statutory authority, or monopoly, over anybody and no legal powers other than those which individual companies freely contract to give.

Members of the Stock Exchange agree to abide by its rules as a condition of membership and companies do so by signing the listing agreement or general undertaking.

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