What is Wall Street?

By Eddie V. — Published April 01, 2018

What is Wall Street?

Everyone has heard of Wall Street at some point or another. Whether in the newspapers or in the movies, Wall Street has been referenced many times over. But for the uninitiated, what exactly Wall Street is can be quite puzzling. Is it a street, is it a company, and what exactly does it have to do with 'money'? We are here to break down Wall Street for you and tell you everything you need to know about it.

Wall Street, the place

Wall Street is, in fact, a street that is located in Lower Manhattan, New York. What makes this street so famous, however, is that the New York Stock Exchange stands on this street. Accompanying the NYSE are a number of other financial buildings which make this location a financial hub of the city. If the figures are anything to go by, then the offices located on Wall Street control trillions of dollars between them.

Wall Street, the term

Wall Street, the term is used to describe any person, company or action that deals in large financial transactions. Even businesses that are not physically located on the street itself are considered being of Wall Street if their main business involves billions and trillions of dollars in finances.

What is the importance of Wall Street?

Wall Street the place and Wall Street the descriptive term serve three main functions in the world of finance:

1. Capitalism: Issuance of stocks and bonds allows for the smooth flow of money to where it is required the most. There are always those who are looking to raise capital and there are those who have the capital to lend. Wall Street serves the important function of putting these two groups in touch with each other so that transactions can take place. This is capitalism at its core and brings about an improved way of life.

2. Secondary markets: The flow of money is like the circle of life. There is always someone bigger waiting in line for their share. Wall Street provides a platform for the secondary market to operate where those who own stocks and bonds can sell them to raise funds. The secondary market gives investors a chance to convert their investment portfolio into liquid assets. The whole system results in a greater demand for low-risk premiums.

3. Brokerage: Not everyone is familiar with how financial investments work and the best way to build a portfolio. Wall Street is where you can find a stockbroker or an investment firm which can help you with your investments. As per the US law, investment firms are bound by fiduciary duty, which means that the clients' interest comes first. Someone who does not understand the nitty-gritty of investing does not have to take a course just to read the mutual fund prospectuses but can hire an advisor to do it.

Individual investment brokers, small investment firms, and large investment firms can all be found on “Wall Street” and people can access them easily this way.

Stock markets are entities which can both fascinate and scare a person. People who actively invest are constantly affected by the rises and falls in the major stock markets in the US and around the world. People who hope to earn a good amount for their retirement fund and people who are looking for an extra source of income all invest in the stock markets. Some fluctuations might make the less experienced want to make some impulsive decisions with their investments, but it is always better to check with the experts what should be done.

Wall Street has come to be synonymous with the Stock Markets, especially the NYSE. It is a location and a term both of which bring to mind the trading of trillions of dollars worth.

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