"Addicts in the Stock Market"
Posted on January 24, 2007
What makes gambling so addictive? Easy. Quick and easy profits.
What makes the stock market addicting? Easy. See answer above.
Although stock trading and gambling have as many disparities as they have commonalities, the comparison is entirely legitimate. Both deal with playing with money and both deal with risks. Both also have hope and fear components which often lead to addiction.
According to Paul Ashe, president of the National Council on Problem Gambling, the most gambling performed in the world is performed in the stock markets.
The active investor’s addiction to trading is as strong as any form of addiction. Like gambling, active investing can be extraordinarily exciting for investors who, in turn, get carried away by winning.
Even medical studies confirm the release of the chemical, dopamine, when presented with the opportunity of a rising stock. The powerful allure of monetary rewards leads to the overwhelming urge of trading stocks.
It has been shown through brain imaging studies that the human brain treats the prospect of big profits the same way as the addictive nature of gambling, alcohol, drugs and other addictions.
So what specifically makes stock trading addicting? The reasons may actually be a lot more and may differ from person to person but the following can be considered true with most cases.
a.) Control. Investors appreciate the control they have over their situation and the freedom of making decisions for themselves in terms of trading and buying stocks.
b.) Excitement. Like gambling, trading provides a certain level of excitement by making decisions and risks for the sake of a good return in investment. The more risk they take, the bigger potential for profit, the greater excitement it gives.
c.) Easy return of profit. Casino gambling, lottery, raffle draws provide people a quick and easy way of earning money with minimal effort. This is true for stock trading as well.
d.) Game. Active investors see trading as a game. It has entertainment value, a means of passing time, and the component of winning and losing.
e.) Perpetuation. The problem with addictions such as gambling and active trading is the pitfall of perpetuation. As investors earn more profit with every stock trade, the more they are encouraged to continue trading, and at times investing more and more money. And with every loss, there is the desire to reverse the loss by intensifying their trading.
Investing via the stock market is a good way to grow your finances. But this should be coupled with the responsibility of keeping yourself in check before you cross the line into addiction.
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Buying Stocks? Learn the Art of Timing Stock Market Investments
Posted on January 23, 2007
A stock is simply a form of a person’s ownership and claims in an incorporated company. A person who owns stocks in a company has a claim on its properties and profits. He also takes part in decision making. As he buys more and more shares in that particular company’s stocks, his ownership stake increases and becomes greater.
Timing stock market investments affects the value of the stocks that are bought or sold in the market. Market timing affects the profit returns of a buyer or a seller in the stock market. It is also a method of strategic importance in the stock market. Market timing is attributed to logic and can become an acquired skill. It is a skill that can be an asset to a person who participates in the market, whether as an investor, or as a stock broker who knows how to play with stock market timing.
Market timing determines whether a stock seller or a buyer will benefit monetarily or otherwise from his purchases or sales. Most stock holders hold their stocks up and wait for the value to increase. When the value of these stocks increase in the market, this is the time when they plan to sell because it is at this time that profits are projected to be high.
However, peaks and lows in the stock markets are unpredictable and irrational. But this does not mean that timing stock market investments is not good. It is not advisable to ignore the times when there is significant undervaluation and overvaluation in the stock market. This is the importance of timing stock market investments. To buy stocks which are guaranteed to peak while they are still selling low; and to sell high value stocks which are expected to fall. If an investor ignores these important market movements, then he is bound to lose instead of gaining huge profits from overvaluation in the stock market.
Timing stock market investments can also be compared to stock picking, and the two concepts can go hand in hand. Stock picking is also an important skill and like market timing, one that can be done using logic and reasoning.
If a stock market buyer or seller is an expert at timing stock market investments and stock picking, he must focus on sourcing stocks which are guaranteed to outperform. He must also find corporations with competitive advantages, sustainable growth, and important values for these companies are guaranteed to have more stability and therefore, profit.
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The thrills of investing in the stock market
Posted on January 22, 2007
Investing in the stock market has its thrills. That is why it is not surprising that there are more and more Americans investing in the market, despite the risks of losing their money to invest. Why not save, you might ask? It is easier to sleep at night knowing that your money is safely kept in the bank rather than knowing that your money you invested in a certain company gone profit after the company stock crashes.
But, you see investing has its rewards. True, there are risks, but risks are part of the game of investing. The hope of having bigger money after investing looks promising on a variety of reasons.
What are some of these thrills that make someone go out and invest in the stock market, hoping for a larger financial return?
First is that, compared with saving, investing is the proactive use of your money to earn more money. In investing, it is your money working for you. Unlike saving which is a passive activity, you invest your money in the stock market and hope for a larger money return. Now, ain’t that fun?
When you buy stock shares of a company, you are in effect buying a piece of that company. In short, you become a part owner. Being a stock holder of the company entitles you to certain rights. This includes voting on important company matters and getting profits if the company distributes dividends. Doesn’t it feel great, for example, if you own stock shares of Coca-cola?
Another reason to be a stock holder is that you participate in that company’s growth of the company. If for example the value of the company increases, your investment also increases too. If profits increase, don’t be surprised if you receive bigger dividend checks. Some stock prices increase for a long period. For instance, some long-time employees of Microsoft became millionaires because of the dramatic increase in their stock value.
“No pain, no gain.” It’s a cliché, of course, but that is the one thing that you must remember in investing in the stock market. How can you get more money if you don’t try investing? Do you really think that your money will increase if you invest it in a bank (which offers low interest deposit rates) compared with investing?
Risks are part of investing, as in any other decisions you make. But given the thrills of investing, shouldn’t you be investing too?
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Win the Stock Market With A Winning Attitude!
Posted on January 21, 2007
Many people often wonder why some make it in the stock market and some don’t. They sometimes sigh and say, “They have all the luck, that’s why.” True enough, luck can be a factor in one’s success or failure in the stock market. As most experts will allow, trading at the stock market is very similar to gambling. They both involve a great deal of risk. But unlike gambling, success or failure in the stock market is not solely dependent on luck. It has much to do with two things information and attitude.
Information has much to do with success or failure at the stock market. First of all, information makes stock trading more than just guesswork. Analyzing trends can help investors make educated guesses regarding their investments.
One important aspect that often goes unnoticed is the proper attitude investors must have towards investing. Too often, investors fall prey to the wrong type of attitude in investing. This leads to wrong decisions, and impulsive buying or selling. What are these attitudes, and how should they be avoided?
1. Many Investors Exhibit an Impatient Manner
Unfortunately, many investors get into the mix just because they are under the impression that they could get rich overnight as result of a few investments. This is so far from the truth. In fact, successful portfolios are built over time. Stocks take time to mature and appreciate. If the investor never realizes this, he or she might be looking to make a quick buck. And when he or she is unable to, he or she may become discouraged or may sell his or her shares for a lower price.
2. Many Investors Look to Take the Risk to Be Overnight Millionaires
Warren Buffet, the Wall Street Tycoon has this advice for investors: don’t bet all your marbles on stocks that seem to be skyrocketing today. They could crash tomorrow. Buffet confides that he has always built his empire over stocks that were stable and exhibited continued growth over the years. He says that these stocks are preferable to volatile stocks that could crash anytime.
Other investors fail to diversify their portfolios. Depending on how much risk one is willing to take, an investor should divide his or her portfolio into low-risk, medium-risk, and high-risk categories, and invest in such stocks. Some people are too risky and put their heads on the guillotine with high risk investments. Others will not risk their necks on any investments. One should choose an attitude that is just right for his or her risk tolerance.
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Beating the stock market trends
Posted on January 18, 2007
The stock market trend refers to the condition of the trading system. Because of the stock market’s instability, it should be known that your stocks could win, could lose or could break even.
Since breaking the stock market system is complicated and has never been done. Here are some guidelines in following the trends of your stocks.
1) Research and planning. The stock market is a place where people should always be informed of their environment, the prices, and all the factors needed in determining the value of your stocks. In entering the market, you should be ready and well-planned. Simple information about the companies, indexes, and a competent trading system could help you move your stocks forward.
2) Think rationally. Although the stock market could provide you with significant income, it requires time and attention to details. When trading, you shouldn’t expect to that you would automatically receive millions of dollars. Although it is a possibility, always remember that the stock market is never a hundred percent accurate all the time. So if you have an intention of quitting your day job, you should think again.
3) Street talk. This means that information by someone you know about the stock market trends could not be always reliable. Make sure that before believing in someone about the trading system, you should always research first. And after researching, always try to verify the facts before placing your money in danger.
4) Emotional burden. In the stock market, emotions are not needed your daily routine. You should be able to let go of your emotions and ego for you to succeed in what you need to do. Remember that when you enter the stock market, you should release your fears and greed from your mind. Replace these with discipline, patience and confidence in doing what you know you have to do. It is important that you control the negative side of your mind because having emotional burdens does not help you in the success of your trade.
5) Management. Planning how to manage your money and preventing it from risks is a vital key to trading success. Management is a serious aspect of the stock market. Before stepping into the stock market floor, you should be able to follow your steps in trading for you to keep the profits you have earned and make it grow.
6) Trading. You should know what to do in trading both a rising and falling market. When you know the facts in dealing with your stocks when the market falls, you could make more money and adjust smoothly with the trends.
Follow these tips and beat the stock market trends easily.
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Getting acquainted with the stock market trading system
Posted on January 17, 2007
If you are a beginner in the stock market, you should be familiar with how the system works. It is important that you know what you are getting into.
The trading system, in definition, is the choice you would make on what method to use in entering or buying and exiting or selling the stocks. Choosing the trading system is the most vital part for your money’s success.
In choosing a trading system, it is important to research and find a low-risk and high-opportunity companies when buying stocks. Knowing the fundamentals in the price signals and when to sell your stocks when losses occur, would maintain your money’s growth.
The trading system has been divided into several groups for the investors to know which company they would enter shares with.
1) Blue chips. This refers to the shares of the huge companies. These companies have a trace of profit progression and usually have at least 4 billion dollars in returns yearly. Although entering in to blue chips would provide a large capital in the investor’s part, the payment from the shares would be consistent – the dividend is in the middle of winning and losing shares.
2) Growth stocks. This refers to the companies that grow quickly. The management of these companies invests the profits from the stock for the development of their company. Companies with growth stocks seldom pay dividends to investors. And if they do, the payments are lower than other companies.
3) Income stocks. This refers to the companies’ stocks that have high earnings. Income stocks are stable and pay a large dividend or payment to the shareholders. These kinds of shares usually make use of mutual funds for senior citizen plans.
4) Defensive stocks. This refers to the companies’ stocks that always remain stable even if the market falls. These are the kinds of stocks that could easily reclaim its place in the market when it losses stocks. Since these companies defend their stocks, the investor would lessen the risk in losing money. Defensive stocks are always suitable to purchase because it is suitable in an unstable market and when the economy suddenly falls.
But before entering into one of these categories, one should analyze the risks and dividends of the company. Plus, you should think outside the box and cautiously examine the company’s accounting flow, the distribution of the profits to all investors, and other profile of the company.
When you have established the trust on a company’s stock, it would be easy for you to buy or sell in the trading system.
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7 Stock Market Tips to Live By
Posted on January 17, 2007
Planning to go into stock market investment? Here are some general tips to live by.
1. Understand the basics of economics.
The stock market follows the laws of economics, particularly the law of supply and demand. If there is a greater demand for the stocks of a particular company, the price of its stocks will go up accordingly. On the other hand, if there are more stocks available for selling (more sellers) than stock buyers, the unit price of that company’s stocks will go down.
2. Study your prospective company/ies.
Read up on the company’s profile: products, services, operations, and track record in the business. This is important to assess the company’s stability and capability to deliver its promises and meet its profit targets.
3. Choose companies that are more likely to stay.
With so many existing companies in the stock market, choosing becomes a big challenge for beginners. Government-owned companies and businesses are relatively stable, unless there is a political revolution in the horizon. Telecommunications and gasoline companies are also stable and profitable since the demand for these products and services is constant. Although IT companies are the fastest growing in the market today, be careful because there are so many of them that it checking on their profiles could be very taxing. Choose IT companies that have proven track records of profitability and stability of at least 10 years.
4. Always read and watch the news.
Dealing with the stock market is not a guessing game. Sound decisions and good intuition are results of constantly learning about the local and global political and economic happenings. Give particular attention to the industry where your company belongs. Even stable companies can suddenly go bankrupt or experience a big blow that can bring them down. Remember Enron?
5. Spread your investments.
Avoid investing in just one company. If all your stocks are concentrated to one company, the chance for loses is also greater. Spread them out so that earning investments can cushion those investments that earn less.
6. Do not rely solely on stock brokers.
Do your homework. Remember, the stock broker is “gambling” with your money. When an investor does not understand how the stock market works, he/she becomes vulnerable to scrupulous brokers.
7. Do not be greedy.
Although stock market investment is all about profits, becoming greedy will make an investor lose his/her better senses. He/She might suddenly forget to check on economic rumors and decide right away to buy or sell thinking that he/she would make big profits by doing so.
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Choosing the right stock market simulation game
Posted on January 15, 2007
A stock market simulation game is a game, usually played online, where people can experience investing in shares in the stock market without any risks or costs or any fear of losing money when they get it wrong.
Many teachers and professors of banking and finance are now using stock market simulation games to teach their students about the rudiments of investing in stocks. Most stock market simulation games come with a fee but there are some that are free of charge. One does not need have prior knowledge about the stock market to join.
This is how stock market simulation games usually works: First the player must register. After registration, he or she will be given an initial sum of virtual money with which to invest in companies. You can then build a portfolio of stocks by buying and selling shares in companies. Most stock market simulation games use real market data.
The objective of most stock market simulation games is simple: to increase the value of your portfolio of stocks greater than that of the other game players.
Below are some tips on choosing a stock market simulation game:
• Choose a stock market simulation game that is used and recommended by reputable colleges, high schools, middle school, investment clubs, brokers in training, corporate education courses and any other group of individuals studying markets in the U.S. and worldwide.
• Choose a stock market simulation game that is comprehensive and easy to implement in any Finance, Economics, or Investments class. A good stock market simulation game feature trading of stocks, options, futures, mutual funds, bonds from the U.S. and many of the world’s major markets.
• Choose a stock market simulation game that provides a valuable, reliable, and realistic trading simulation at a reasonable price to students and other individuals who are interested to learn more about the markets or test a strategy.
• Choose a stock market simulation game that has a toll-free customer service phone number and an excellent e-mail support to their users worldwide our users worldwide to quickly answer any questions that the users may have. This customer service must allow the individuals to concentrate on concepts and leaves the customer service to answer all trivial questions e.g. about ticker symbols, dividends, splits, etc.
• Choose a stock market simulation game that is easy to use and easy to teach even to those who have never invested in the stock market in their entire life.
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AMIDST ALL HYPE: STOCK MARKET SCAM AND HOW TO AVOID THEM
Posted on January 15, 2007
With all the prices going high these days, people would instantly grab the opportunity on anything that will make them earn money. And this is basically where fraudulent people take advantage of.
Today, there are many scams as there are starts in the sky. They had been so rampant that people became so aware of its alarming condition. But still, even if they know that there is a bound to be a scam out there, they could not yet distinguish what is a scam and how can they avoid it.
In the industry, one of the proliferating scams is the stock market scams. A lot of people are getting enticed to join these simply because their offer seems so hard to resist.
Why? Because who wouldn’t resist a “get rich quick” strategy? These are just petty things but are actually bigger problems than what you thought it is.
For people to know what stock market scams are and how to avoid them, here’s a list of the common stock market scam lurking mostly in the Internet today:
1. The “Pump and Dump” stock market scam
This type of stock market scam is mostly disseminated in the Internet. Here, people usually get to see messages posted in the Internet advocating them to purchase a stock at once. This type of scam also urges those who have stocks already to sell their stocks immediately before the value depreciates.
These deceptive scammers claim that they have reliable sources about a threatening development. They even assert that they utilize a foolproof combination of the stock market and the trade and industry data so as to get some stocks.
The bottom line is that this type of stock market scam is detrimental especially to those who are starting small. In reality, people behind this scam would want to manipulate the stock market through small time businesses because small businesses are easier for them to manipulate.
2. Pyramid scam
Just like its motherboard, this pyramid scam in the Net tries to hoard money from the consumers by letting them invest their little amount of money and grow it really big provided that they recruit more people into the company.
These two are the most common stock market scams lurking in the Internet today, and the only way to avoid them is information. It’s a must that people should be aware of them, know their styles, and how they recruit people. If in case, they cannot determine if it is a scam or not, they should verify the claims from the right people. That’s the simplest thing to do.
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Rocket Investing: Stock Market Research Advice
Posted on January 14, 2007
The stock market is not a black hole. People come out of it successful, business savvy and rich! Here are 5 things you must remember to conquer the investing black hole:
1. Be resourceful. The key to investing is knowledge: know anything and everything about the company and the factors affecting its performance. There are 2 excellent resources for your stock market investment:
a. The newspaper. Get the most-updated information on the country or the region’s economy. These largely influence the health of the stock market. Aside from the economy, news on politics, society and weather can affect your stock market investment.
b. The Internet. From Stock Market 101 to How-to-Be-the-next-Warren-Buffet (Forbes Magazine’s 2nd richest man in the world), everything is in the Internet. Thank God for search engines: type a word and a host of information awaits! Make sure to visit the website of the company you intend to invest in, to get the official information on their corporate set-up, financial health, historical stock performance.
2. Be analytical. Information on the Internet can be overwhelming, but not all are accurate. Carefully scrutinize everything. The devil is in the detail … or the lack of it. If you do not find credible information to support one claim, then move on to the next site. One quick tip: use your bookmarks when researching. Skim first through each link on the list and bookmark the ones that are useful, for later reading. Once you have 3 or 4 bookmarked, start your detailed stock market research.
3. Be strategic. You have the data, you know which ones to use, now decide … is this the right time to invest on this company? Use your data to calculate your next move. The goal is always to end up at the earning more than what you invested. At this point, reading expert advice, or better yet, paying for one, will definitely help.
4. Be patient. Hand-in-hand with being strategic is being patient. If you do not need the money immediately, it is best to let it hold for a longer time. Stock market investment gains average 10-12% over a 10-year period. Net, if you hold on to your stock for or about that long, chances are, you will realize such level of gains.
5. Be on your toes. At the extreme end of patience is complacency. A good investor is never one. Watch out for IPO’s that have a bullish outlook. Use digital tools (like SMS stock alerts or Blackberry breaking news) to get news as they happen. Do all the necessary moves before the bell rings!
Follow those 5 advices on stock market research and zoom your way to a profitable future!
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