It seems that every time the UK economy takes a dip many people start to question whether the stock market really is the place to invest your money in the long term. While the facts and figures speak for themselves, with the stock market out performing any other invest class over the long term, there are times when it might be best to stay out of the market, but in the long term where else would you invest your money?

The stock market is the barometer of the UK economy and whiles some asset classes will do better than others over different time spans, it is the mix of asset classes which offers investors comfort that the long term performance will mirror that of the UK economy. Many people seem to miss the bigger picture with the stock market, assuming that the main aim of the exchange is to allow investors to buy and sell shares, when in fact this is what is known as the secondary market. We hereby list some useful aspects of the stock market which often go unnoticed :-

Treasury Funding

The government use the GILTS market to raise funding to cover the peaks and troughs of government budget requirements. You will see that when the economy is doing well and public spending is under control, the government may actually redeem part of their GILTS portfolio which is held by fund managers and private investors alike. When the economy is under a little pressure as it is now, you will very often see the government selling off GILTS to investors in return for a fixed rate of return and money to fund public services.

GILTS are the most secure of any investment in the UK as they are backed by the government. If the government was ever to renege on repayment of a GILT then we would all be in deep trouble.

Primary Market

While we all see the headlines about new companies listing on the UK stock market, they can raise funds at this stage or it can be used as a way for a large investor to reduce or dispose of their holdings. More often than not the company coming to the market will sell new shares and raise extra capital but this is not always the case.

Secondary Market

The secondary market is probably one of the main attractions of the stock market to investors and companies alike, this is the time when companies will attempt to sell additional shares to investors for what could be a number of reasons, expansion plans, a take over bid or a desperate rescue rights issue to save a company.

A lot will depend upon the reason for the fund raising, how much they are trying to raise and the general state of the market. A company looking to raise funds at this moment in time, no matter how strong the argument, would probably struggle or need to price the new shares lower than a couple of years ago when the market was much stronger.

There is a lot more to the stock market than just buying and selling shares, it is the heart beat of the UK economy and assuming that you give yourself a good spread of investments it is possible to benefit from the long term economic growth which is expected in places such as the UK.