Stock Market
Essay Preview: Stock Market
Report this essay
When a company decides to go “public”, it sells shares of the company to people called “shareholders”. People buy shares of stock or a share of the company in hopes of later selling it for a profit. The way to make a profit off of a share is to buy when it is low in price and sell when the price has increased to an amount above the original buying price. The share market can be a risky investment if you are not educated about the different shares and how they go up and down, but understanding the share market may be a difficult thing. However if one is aware about how the market works, no one can argue about the massive capital gain one can make by making the right decisions. In the recent years companies have plummeted whilst others have dramatically increased. For example supposing that you bought $10000 in shares with ABC Learning in 2001 when their shares were only $0.40 until now where 1 share sells for $8.46 thats twenty one times the price in 2001. That 10000 dollars would be $210000 now in 2006, If one made the right decision.
The price of shares constantly changes. There are many different factors that force the share prices to rise or fall such as economic trends, natural disasters, and the concept of supply versus demand. For example when hurricane Rita tore through the Gulf of Mexico, it destroyed a large amount of oil rigs, along with barrels of oil. This caused some what of an oil shortage resulting in increasing prices of oil and gas. Because of the rising price and demand of oil, many companies that dealt with oil and gas had significant increases in the price of their shares. This resulted in a profit for investors who owned the shares. Unfortunately, this natural disaster also brought great devastation to the country and its economy. Sometime the share market might go up or down based on the change in management, for example the news that a new Managing director has been appointed to a company may make the share prices to go up if that person is considered to be the right person for the job. Other reasons for change could be a Corporate takeover, a world event (twin towers collapsing) or a Technological breakthrough by a company. The changes are by no consequences of the share holders but although they cannot be managed on the short term, over a long term the imbalances generally level out. Often they go up in price to a profit after a downfall.
Some companies may be more or less reliable than other companies. Blue chip co-operations are companies that have an almost certain chance of success. These companies are normally banks and investment co-operations. An example of companies that are not always successful are usually mining co-operations, this is because it is not certain if they will achieve to ever find anything but when they do this would dramatically raise the price of shares. Some businesses pay dividends. Dividends are cash payments per share made by a company to their shareholders. These are usually paid quarterly, or every three months of the year. The shareholder can choose to either have their dividend deposited into an account, or they can choose to have the dividend re-invested into the same shares. Having the dividend re-invested is sometimes the best path to take when investing for a profit.
Short term share market investments compared to long term investments are very poor and unpredictable. Long term investments usually multiplies by an average or 4-10 times and sometimes even more over a period of 10 years (depending on the company), which is an excellent investment. On the other hand short term investments are unpredictable they constantly move up and down in price. You could gain or lose money or you might not even make anything at all in short term. Short term