When a large amount of money is needed for any enterprise, from building a factory to funding a corporation to drilling wells in a new oil field, that money is raised from investorsóusually a large number of them.
Commonly, the enterprise raises that money by either selling ownership shares in itself or simply borrowing the money. When ownership is sold, the investor gets stock shares. When money is borrowed, the investor gets bonds. Stocks and bonds are both securities. Investors buy and sell individual securities through brokers, also called securities dealers.
Additionally, mutual fund companiesóand other so-called asset management firmsóform funds, which consist of a variety of securities. The asset management company buys and sells the securities in a fund, seeking to maximize its value, and it sells shares in these funds to investors directly and through securities brokers.
More people invest in securities today than ever before, and they have more choices. Not only are there more investments to choose from, including stocks, bonds, real estate trusts, limited partnerships, and an ever-growing diversity of mutual funds; there are also more ways to invest: full-service brokerages, discount brokerages, and electronic trading for most of us; exclusive opportunities such as hedge funds and venture capital funds for so-called high-net-worth individuals, such as multimillionaires, and institutional investors, such as pension funds, insurance companies, and university endowments.
There is an unimaginably large amount of money chasing investments these days, which is part of the reason that the stock market rose so steeply during the 1990s. Brokerages and mutual funds are the two primary means by which all these investments are made.
