The world's first public company also founded the first stock exchange
In 1602 the Dutch East India Company, the VOC, became the first company to offer shares to the public, and trading in them created the Amsterdam Stock Exchange. It grew so large that the government had to help organise the market. Amsterdam, with its exchange bank and merchant bank, became a world centre of capital.
The impulse behind it was old. Rules touching on investment appear as far back as the Code of Hammurabi around 1700 BCE, but the modern form is usually dated to the seventeenth century, when British, Dutch and French ships sailed to Asia for goods. The voyages were perilous, so shipowners sought backers who put up money in exchange for a share of the profits when, and if, the ships came home. That trade-off still defines investing: committing resources now in the hope of receiving more later, with the possibility of losing some or all of the money.
America's market grew from a handshake deal. On 17 May 1792 traders signed the Buttonwood Agreement, setting rules so that stocks changed hands only between trusted parties; shortly before, Alexander Hamilton had used federal bonds to pay off Revolutionary War debts. By 1817 a formal board met twice a day to trade 30 securities, and when the Civil War closed in 1865 the count exceeded 300.
Investors have developed distinct philosophies. Value investors, with Benjamin Graham and Warren Buffett as famous examples, hunt for assets priced below their worth, often using ratios such as price to earnings; Graham and Dodd's book Security Analysis appeared in the aftermath of the 1929 crash. Growth investors chase companies expected to earn more in future, a strategy some credit to Thomas Rowe Price Jr., who launched a growth fund in 1950. Momentum investors ride recent trends, though economists disagree on whether that works.
Risk and reward tend to travel together, and higher possible returns usually come with bigger possible losses. Biotechnology shows how extreme that can get: roughly 90 percent of products researched never reach the market, and an average prescription drug takes ten years and 2.5 billion dollars to develop.
Source: Investment
