Tyrone Schiff 1Holding a Share in Achievement
Introduction
All around the world, economic activity takes place through the purchase and sale of publicly traded companies on various exchanges. In London, people trade on the FTSE, and inChina, trading takes place on the Schenzen Stock Exchange. These exchanges, or markets, arecritically important to their respective country, because they act as a barometer of economic prosperity. In the United States, stock in companies is generally traded on one of two exchanges,the New York Stock Exchange or the NASDAQ. There are literally thousands of companies tochoose from on either one of these exchanges (NYSE, 2007). Every day, people invest exorbitantamounts of money in hopes that their company’s stock will climb. Yet, there are terrible risksassociated with investing in the stock market as well. Stock prices move up or down everytrading day, which means that an investment is just as likely to go sour as it is to soar. Individualschoose to invest in the stock market, instead of placing their money in a fixed-interest savingsaccounts or government bonds, because they want to grow their assets faster and larger. Bondsand savings accounts typically offer a constant interest rate, whereas, stocks in companies canexpand or contract enormously in a significantly shorter amount of time. The stock exchangeseems to follow the maxim, “with great risk comes great reward,” yet, simultaneously, thereexists substantial downside if you choose incorrectly.As a result of wanting to be right more times than wrong, economists and pundits havetried to establish methods to “predict” the future progress of a stock. Some methods includetechnical analysis; in which most of the scrutiny is based on the stock’s chart over time, andfundamental analysis; in which analysts look at financial statements, management techniques,and competitive advantage of a company. However, the problem persists; sometimes they are
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