Business Finances

A short but informational history of investing

Nowadays the forex market is a fact of every investor’s life. People read in their daily newspaper about it and they invest in it. However, all investors should wonder how did people manage to get here and what the history of investment is. Similarly to human history, the investing history has experienced multiple turns and twists throughout the years. People nowadays take for granted that they can invest in a business with a simple phone or with a few clicks.

But do you know who was the first person who invested in something? We will take you on a trip to help you understand the details. Historical accounts reveal that the first investment can be traced down to the Code of Hammurabi, in Mesopotamia. That particular code is the one that offered the framework for many essential laws the civilisation still follows, and it also included a framework on how to invest. But, even if the code of Hammurabi is the one that offered the foundational laws for investing, the 17th century Europe is the one that established a clear framework for the action.

Modern investing has the Amsterdam Stock exchange as a predecessor. It worked the same way the majority of stock exchanges work; it facilitated the link between investors and possible investment opportunities. But the biggest financial investment was made in the 18th century, and it is important to focus on this chapter of history.

The first modern pension fund

In 1759 it was established the first modern pension fund, and it is considered one of the most important financial products the investing world has brought. Many people have no idea where the idea of pension fund first appeared, but they are thankful someone thought of it. The pension funds can be traced down to the Presbyterian Ministers’ fund, created by the First Presbyterian Church in Philadelphia in 1759. After this moment, more and more organisations and firms have started to understand its importance and they included it in the global investment capital.

The Industrial Revolution brought the idea of investing the economic surplus

The Industrial Revolution started in Europe in the mid-18th century, and the majority of historians date it to be the period between 1760 and 1840. The history of investing was highly influenced by the Industrial Revolution because people had for the first time the possibility to share their economic surplus. Their jobs were paid well enough to allow them to save money and they have started to look for ways to grow their income. The world has experienced a historic change that allows the banking industry to grow. This growth was beneficial to people because they needed a safe solution to save money. Some people remember this period as being a rough one because of child labour and rough working conditions. However, from the investing point of view, it was a great one.

The first Industrial Revolution was followed by a second one, favourable for the development of the electric power, internal combustion engine, flight, and radio. People had multiple opportunities to invest their money and they decided to do it instead of spending everything on food and comfortable accommodation.

The roots of modern investing

In the 19th century, the world’s largest banking companies and financial institutions were founded. Alongside with investing locally, merchant bankers from Paris and London have started to look for international opportunities. They were the main investors for industrial expansions throughout the United States, and they can be considered the founders of famous investment projects like the Transcontinental Railroad. The financial institutions founded with the help of European investors have started to sell bonds to the federal government to finance the American Civil War. It happened a decade later, but it was worth to wait because the bonds cost millions of dollars and the investors got great earnings.

That was the moment when everyone started to consider the option of investing internationally, and during the colonial period, the European financial institutions were the ones that sent capital to colonies worldwide.

1875 was an important moment for the forex market because it was the year when the standard monetary system was created. Before this moment people had to use silver and gold when they had to make an international payment. This moment is essential in the history of investing because it put the bases of the market and it facilitated the appearance of a forex market traders forum.          

Sharp turns

In the investing world, there are two words people do not want to hear, depressions and recession. In 1929, the stock market experienced one of the greatest crashes due to the Great Depression. This event influenced the way people spent and invested their money.

Another sharp moment in the history of investing was brought by the Securities Exchange Act in 1934. It established the main laws that organise the secondary trading market and the actions executed in it.

In July 1944, during World War II, more than 700 representatives from the Allies met to establish an international monetary system. They called the system the Bretton Woods system, and it established the method they will use to set fix exchange rates. They replaced the gold as the primary reserve currency with the U.S. dollar.

Modern investing

People nowadays have the possibility to invest their money in real estate, foreign currencies, commodities, mutual funds, bonds, ETFs, stocks, and many other ones. They can invest anywhere across the globe because all countries have their own stock market. If an investor is not interested in a market, they can easily find another one that brings them the benefits they want. Recently, more and more people have started to invest in digital currency. The impact of technology is the one that influences the main changes in the investing world at present.

The history of investing is as old as one of the human kind, and it is connected to the one of the human civilization. When the human civilisation experiences a profound change so does the investing world.

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