What are shares for?

June 2025 by Ana Carrisso

Almost every day we hear about the stock market: how much the shares are worth, whether they have fallen or risen in line with current events. However, one thing is what is familiar to us and another is understanding how the capital market works. This is reflected, for example, in the 5th online survey on investment conducted by the CMVM in 2024 among the university population: although 38.5% of respondents stated that they consider themselves knowledgeable or very knowledgeable about issues related to financial markets and products (67.4% stated that their knowledge is higher or much higher than the average for the Portuguese population), 48.6% of respondents said they had never traded stocks, bonds, or investment funds using digital tools.

This contrast in data suggests that, although there is a certain level of positive self-perception about knowledge of financial markets among Portuguese investors, about half of the population does not actively participate in stock market transactions, which may reflect a lack of practical understanding of how stock exchanges and securities work. Therefore, it may be pertinent to use this media space to briefly explain what an asset is and how it works.

How do stock markets work?

In very simple terms, stock markets act as a source of financing for companies, as an alternative to banking. Upon becoming listed companies, companies are required to comply with a series of information and transparency requirements, including the regular submission of financial statements and mandatory audits.

A share is a fraction of the value of that company on the stock exchange, and its price reflects what investors are willing to pay for it based on a range of factors, from the company’s financial health to the impact of macroeconomic and geopolitical events on its industry and overall business activity.

According to the guide “Questions that all shareholders of a listed company should ask,” published by the Investor Support Office of the Spanish National Securities Market Commission (CNMV), “investing in stocks means becoming a co-owner of a company, in proportion to the share acquired.” Therefore, the document continues, “the return on the investment will be linked to the evolution of the share price and the distribution of the company’s profits,” since, unlike bonds, the profitability of a share is not fixed in advance. 

According to the Statista data portal, the global stock market capitalization (i.e., the value of all listed companies worldwide) is expected to reach $128.07 trillion in 2025. The US is the largest stock market, with an estimated value of $55 trillion in 2025. Furthermore, market volume (i.e., the aggregate number of stock buy and sell transactions) is estimated to exceed $50 trillion by 2025.

In Portugal, the most representative stock index is the PSI 20

The most representative stock index in Portugal is the PSI 20, which was founded in 1992 with a starting price of 1,000 points. Currently, it monitors the performance of the 20 largest companies in the Portuguese economy, such as GALP, Jerónimo Martins, and Correios de Portugal.

The Amsterdam Stock Exchange is considered the oldest stock exchange in the world, having been in operation since 1602. The first company to be financed on the stock exchange, in the modern sense of the term, was the East India Company, also considered the world's first multinational and the first company to publish its results. The East India Company was formed through the merger of several pre-existing firms into a joint-stock company by the States General of the Netherlands. It was granted a 21-year monopoly on trade with Asia, among other powers. The idea behind this operation was that any inhabitant of the country could buy shares in the company and benefit from the revenues from its commercial operations. Thus, more than four hundred years later, the Dutch laid the foundations of the system we know as capitalism and which is still reflected today in the stock markets, through the rise and fall of shares.