Describe any five advantages of the Stock Exchange Market.

Answer Details

Five advantages of the Stock Exchange Market

• Provides a ready and continuous market for securities: holders of shares and stocks can sell them at any time, and buyers can readily acquire them, giving investments liquidity.
• Mobilises savings for investment: it channels the idle savings of the public into productive use, enabling companies and government to raise long-term capital for expansion and development.
• Fixes fair prices of securities: through the free interplay of demand and supply, it determines and publishes fair market prices, guiding investors.
• Protects investors: its strict rules on listing and dealing ensure that only sound securities are traded and that dealings are honest, safeguarding the investing public.
• Acts as an economic barometer: the movement of share prices reflects the general state of business and the economy, providing useful information to investors and to government for policy making.

(A further advantage is that quoted securities are accepted as good collateral for bank loans, since they are easy to value and to sell.)