The stock market has proven to be a lucrative money-making asset for a wide range of people across the world. People have been entrusting their time and money to the stock market since May 17, 1792. In this article, I will review the rise and fall of the markets and how they can be caused by several different factors. In this article, I will cover a very important factor that contributed to the collapse of the financial sector in 2008: I will talk about what drives the markets, as well as a few things that everyone should know before investing their money no matter where. When investment banks, banks whose sole purpose was to buy and sell stocks, securities, and other investments, were founded in the early 1900s, the banking system established was relatively simple. Investment banks were then privately owned by partners who formed a company. The partners invested money for the business, so they watched their money very closely and did not want to make bad deals. They wanted to be well off but didn't want to put all their eggs in one basket. In the early 1980s, investment banks went public and gained access to an unimaginable amount of shareholder money. Now, shareholders are the ones who buy the stock of a company, meaning they own a small part of that company and the company can use the money it bought the stock with at its discretion. This gave a lot of power to investment banks. They no longer had to worry about losing their own money; if they made a bad deal, they lost someone else's money. This gave banks a false sense of comfort. They began entering into risky transactions such as credit default swaps, carried out via derivatives. "Standardization of contract terms allows a loan to be packaged...... middle of paper ...... a mutual fund on an individual stock is diversification, which you don't get if you invest small amounts of money in a few stocks For example, if you have $10,000 to invest, you can buy maybe 100 shares of five stocks. hold between 50 and 100 stocks So if one stock explodes, the entire fund will not go up in flames The manager ensures that the fund is not too exposed to any one stock or sector. Bold 1) You can also choose a large, medium or small size that is more value or growth oriented or get a mix of value and growth. It is important to have a professional managing your wealth because it has a broad scope. understanding of the markets and is very good at diversifying or spreading your money to create minimum risk and maximum profit. There is also another investment, usually aimed at the very wealthy. called hedge funds.