Market Myths Essay Example | Topics and Well Written Essays - 4500 words

Market Myths - Essay ExampleMyth Number One is that any(prenominal) volume equate investing in the stock market to gambling with their money. As a result of this f aloneacy, a significant number of individuals avoid the stock market. An understanding of the reasoning behind purchasing stocks needs to be well-known in order for an individual to understand how investing in them is different from gambling. It is important to return that a sh are of stock represents partial ownership in a company, and it gives the psyche who owns the stock some of the profits that the company makes and allows that individual to share assets (Investopedia, 2008, pg. 1).Too often, investors think of shares as simply a employment vehicle, and they forget that stock represents the ownership of a company. In the stock market, investors are constantly trying to valuate the profit that will be left over for shareholders. This is why stock prices fluctuate. The outlook for business conditions is unendingl y changing, and so are the future earnings of a company (Investopedia, 2008, pg. 1).It is a rather daunting business to determine the value of a company at any given point. The Random Walk speculation applies, and this theory states that there are so many variables involved that the short-term price movements appear to be random (Investopedia, 2008, pg. 1). ... 1)Also according to the article by Investopedia (2008, pg. 2), Gambling, on the contrary, is a zero-sum game. It merely takes money from a loser and gives it to a winner. No value is ever created. By investing, we increase the overall wealth of an economy. As companies compete, they increase productivity and develop products thatcan make our lives better. Dont confuse investing and creating wealth with gamblings zero-sum game.Myth Number 2 is that the stock market is some type of fancy, executive club reserved for the wealthy and for brokers and that the average person cannot play, or at least cannot play very well. The fa ct is that brokers do not hold all of the secrets anymore. Thanks to advances in technology and the advent of the Internet, all of the forecasting a research tools that brokers use are available to the general public as well, and they are really easy to get at handsome much any retail store that sells books and electronics (Investopedia, 2008).Actually, individuals take away an advantage over institutional investors becauseindividuals can have to be long-term oriented. The big money managers are under extreme pressure to get tall returns every quarter. Their performance is often so scrutinized that they cant invest in opportunities that take some cartridge holder to develop. Individuals have the ability to look beyond temporary downturns in favor of a long-term outlook (Investopedia, 2008, pg. 3).The ordinal market myth is that stocks that have risen high and fallen will rise again. This is not necessarily true. Investopedia (2008, pg. 3) offers the following exampleSuppose y ou are looking at two stocksXYZ made an all time high last year around $50 but