The Effect Of The Stock Market On Investment: A Comparative Study

 


The stock market trends affect the nature of individual and business investment. When the market is bullish, retail investors pump in more money in the market, increasing the buying activity in the market. It leads to higher stock prices and added wealth for equity investors. On the other hand, when the market is bearish, investors get insecure about their money and withdraw from the market. It leads to depleted wealth for equity investors. At such times, investors look for safer investment options like commodities and bonds, which offer assured returns. Business investment also suffers when the stock market plummets.

The lending capacity of banks and other financial institutions decreases at such times, making it difficult for businesses to arrange for capital to increase their operations. When the market is on the rise, the investor's wealth and confidence increase. When individuals spend more, business activities increase, leading to higher demand for goods and services. It makes way for more production and thus, new employment opportunities. Stock market losses reduce the personal wealth of individuals, which negatively affects spending activities, and people tend to save more and spend less at such times. Let us see how the stock market affects the investment patterns of investors. 

Retail investors also have faith in the market and often use the margin trading finance facility to make profitable deals at such times. 

Read also:- 6 Key Features of Margin Trade Funding Every Investor Should Know About


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