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Wall Street has a powerful presence in our society. Its financial firms make decisions that affect the fortunes of millions of people in the U.S. and around the world.
A lot of our personal savings are invested through the financial services industry into the national and global economy.
How does Wall Street use our savings to provide value in our society?
Return On Investment
Investing is all about using assets — cash, savings, property, stocks — as capital to gain more assets in the future. This is called return on investment (ROI).
Professional investors invest our personal savings on our behalf into profitable business ventures to maximize ROI.
From Assets To Investments
Large institutions called Asset Owners, such as pension plans and others that invest on our behalf, can invest our savings directly or outsource them to asset management firms .
Asset Owners
individuals and high-net worth investors
pension funds, endowments, and foundations
often pay asset managers to manage investments
Asset Managers
assess the needs & risk factors of clients
recommend investment strategies to maximize returns while minimizing risks
manage those investments for fees and sometimes a share of the profits
Among other things, professional investors consider:
Time
What investment timelines serve their clients' best interests?
Should they take advantage of short-term trends, or is it more advantageous to invest long-term?
Risk
How much risk are clients willing to tolerate on their investment?
Should they invest in high-risk/high-reward stocks, or more predictable and safe investments like bonds?
Wider Effects
Professional investors use their expert knowledge to connect our long-term savings towards productive uses of capital.
This injects money into businesses across the country and around the world, creating jobs and driving innovation.
Take Action
Do you want to know more about the role financial investors play in the economy?
Research different types of investors to see how they allocate capital across different sectors of the economy:
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