Wednesday, March 14, 2018

Is The Stock Market Safe

Cameron Maderski
Insight
3/12/18
Is The Stock Market Safe

The stock market makes up a huge part of our economy and most people do not know how it works. The big question behind every investment is always to see if it is safe and that is a big issue with the stock market. When you buy a stock, you're buying a small part of the company. When a company needs some money, it will issue shares. The shares are bought an an initial public offering (IPO). At the IPO the company worth gets estimated and it is then that the price of shares, and how many shares will be issued. The company gets to keep the money raised to help grow its business and pay off loans, while the stocks continue to trade on an exchange.

When you buy stocks you are not just donating money you have the opportunity to make or lose money which is where the risk comes in. Companies will pay shareholders a dividend which is a small cut of the companies profit. The prices of the dividend can vary along with the prices of stocks but it makes sense that a company projected to do well in the future would have shares set at a higher price. Some of the risk in buying stock comes in the fact that you are placing your money on a business in hopes that it does well in the future and if it does poorly
then you can lose some of your investment.             10 Year Daily Chart of the Stock Market          According to Investopedia, dividends can be large or small – or nonexistent (many stocks don't pay them). Investors seeking regular income from their stock market investments tend to favor buying stocks that pay high dividends.

The chart shown is a current model of how the stock market and it clearly shows the stock market crash in 2008. If you look more recently the stock market is doing very well and had a great recovery. In a report written by The Balance they states that a rejected bank payout bill was the final blow needed to crash the market but it had been building for a very long time. U.S. h
omeowners lost a cumulative $3.3 trillion in home equity during 2008, according to a report from Zillow. One in six homeowners is underwater on their mortgage in 2009. The stock market erased $6.9 trillion in shareholder wealth in 2008 (Quora). Now that the risk is clear the question still remains is investing in stock safe. The answer to that is that now is a great time to invest in the economy. With Trump being able to boost the economy in his first year, many are projecting similar trends throughout 2018. Anything can happen and your money won’t stay safe for every but with the economy's condition right now investing in stock has a lot of promise. 

Works Cited
Amadeo, Kimberly. “When and Why Did the Stock Market Crash in 2008?” The Balance, www.thebalance.com/stock-market-crash-of-2008-3305535.

“Dow Jones - 10 Year Daily Chart.” MacroTrends, www.macrotrends.net/1358/dow-jones-industrial-average-last-10-years.

“How Much Money Did Investors Lose in the 2008 Financial Crisis?” How Much Money Did Investors Lose in the 2008 Financial Crisis? - Quora, www.quora.com/How-much-money-did-investors-lose-in-the-2008-financial-crisis.

Mitchell, Cory. “How the Stock Market Works.” Investopedia, 10 Aug. 2017, www.investopedia.com/articles/investing/082614/how-stock-market-works.asp.

Well. “Can the Stock Market Bull Keep Raging in 2018?” CNNMoney, Cable News Network, money.cnn.com/2018/01/02/investing/stock-market-2018-outlook/index.html.

2 comments:

  1. Cam, I think your thoughts on the stock market are interesting and I agree with really everything you said. What I will add however is the fact that you as the investor control how much risk there is in investing for the most part. You can pick more volatile stocks with higher risk but the upside can be huge. The other route is of course blue chip stocks that are very solid but also expensive and have less upside. So the safety you are bringing into question is really up to the investor.

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  2. This is a very important topic as investments factor into the GDP of our country. Everything you said was very important to know as we wrapped up our finance unit at Insight and it is also a benefit to know the economics side of it as investing doesn't just benefit the investor and the company. On the other hand I would have to agree with Michael when he says the risk factor is more in the investor's hands.

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