History of Investing: Stock Exchanges, Life Insurance, Real Estate and More

Read now for a brief history of investing, including life insurance, stocks, and real estate investing. Our guide gives you insight into the history of investment banking, helping you better understand how the system works using a timeline of major milestones in investment banking from medieval times to the modern-day.

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Natasha McLachlan is a writer who currently lives in Southern California. She is an alumna of California College of the Arts, where she obtained her B.A. in Writing and Literature. Her current work revolves around insurance guides and informational articles. She truly enjoys helping others learn more about everyday, practical matters through her work.

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Laura Walker graduated college with a BS in Criminal Justice with a minor in Political Science. She married her husband and began working in the family insurance business in 2005. She became a licensed agent and wrote P&C business focusing on personal lines insurance for 10 years. Laura serviced existing business and wrote new business. She now uses her insurance background to help educate...

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Reviewed by Laura Walker
Former Licensed Agent

UPDATED: Nov 14, 2020

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Financial markets and services have an essential role in driving and developing a country’s economy. Activities such as investing, banking, and stock trading support the financial market in order to produce other products and services.

A clear understanding of the activities, history, and current processes is definitely beneficial in enhancing financial literacy. This knowledge will not only help individuals to make wiser decisions when it comes to personal finances, but it will also help to provide the proper tools to understand just what is going on in the national as well as international financial market scene.

To give you a place to start, the following is a short but information-packed timeline highlighting several of the different milestones that have proven to play a part in the history and development of our modern investing, banking, stock exchanges, insurance, and retirement funds.

Timeline of Major Milestones

Investment banking is primarily concerned with providing long-term financial capital for governments and businesses. Here, we will trace its roots in the Medieval times up to its current state offering more complex forms of bonds and securities.

Medieval Times: Merchant Banks

Although the term ‘investment banking’ was only coined in the United States around the late 19th to early 20th centuries, activities done by these types of banks have been going on for much longer and pre-date the banks themselves.

Scholars trace the first instances of what could be considered investment banking to Medieval cities like Siena, Genoa, and Florence where merchants traded commodities using bills. Eventually, these merchants would take on limited-liability partners from whom they borrowed capital to fund their own ventures and investments. These types of financial activities would soon come to be practiced in other European cities from London to Antwerp in the 16th century when merchant banks began investing in trade and exchange. Some examples of such banks are the Medici Bank in Florence and the Fuggers Bank of Augsburg.

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17th and 18th Centuries: Early Versions of Stocks and Investments

The 17th and 18th centuries would come to see the rise of British houses such as the Barings and Rothschilds taking the place of the prior merchant banks of the Medicis and Fuggers.

The time period was also when early versions of corporate stock and long-term securities were first sold to investors outside the bank circle. One good example of this is the East India Company, a successful joint-stock company that conducted business through trade in the areas around the Indian Ocean.

Inthe United States things were already starting to build. The New York Stock and Exchange Board was created in 1792, with the Philadelphia Stock Exchange having been created two years earlier.

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19th Century to World War I: Investment Banking

Investment banking would begin to truly evolve during the early 19th century and would eventually turn into what we know it as today. During this time, banks began trading in larger-scale security instruments with governments, who used the capital for war and infrastructure expansions. Those governments would become their largest clients.

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20th Century: Investment Banking in Rising Economies

By the early 20th century, almost every industrialized nation in the world participated in investment banking. The time would also see the rise of universal banks worldwide.

English banks focused on long-term capital and short-term finance needs while other European banks including those in the United States began forming universal banks. The line between bankers and business owners also dissolved with bankers and investors participating in the governance of corporate assets.

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1920’s to Present: Financial Regulation and Deregulation

With the first world war leaving countries in debt and on the verge of financial crisis, governments intervened in financial activities and began regulating them. Another era of regulation would soon emerge after the boom and crash that resulted in a global depression in the 1930s when American government officials began noticing the power that investment bankers had over the country’s economy. This wary regulation in the financial market would last well into the late 20th century.

The global financial crisis of 2007 would further confirm the concerns of experts about the need to regulate the investment banking sector and its related markets. It is no surprise that new laws and regulating authorities, with a goal of cushioning the blow of risky investments on the rest of the economy, were formed following the crisis to prevent another from happening in the future.

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Additional Resources

Investing and banking have an interrelated and complicated history which would be impossible to cover in full. To give you a more detailed and academic overview of the activities and how they relate to stocks, insurance, and retirement funds, we have compiled several excellent resources you can get information from. In them, you will find more specific information about the history of investing and banking in the context of the United States, including information that covers the development of the New York Stock Exchange, as well as brief summaries on the origins of various types of insurance in the United States.

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