Stock Market Information

When you’re first starting out as an investor, there’s a lot to take in. Certainly in terms of investment vehicles you’re not short of options. The invention of Exchange Traded Funds and Exchange Traded Notes means that you can get into almost any asset class with the push of a button. Want in on gold? You can. Want to buy commodities? UBS has you covered.

But the biggest part of the puzzle to remember is that you need to understand yourself and your own tolerance for risk. Investing in any part of the equities markets means that you’re subjecting yourself to volatility. There will be bad times, when your portfolio can drop 10-30% or more in a given period, as we’ve seen over the past year. If you’re a long-haul investor with steely nerves, you can grasp the fact that you should hold on for the ride and that historically speaking time is on your side.

Many people overestimate their tolerance for risk, which can get tricky. Many people believe that they are ready to accept volatility. They think they understand that stock markets go down and that it could be some time before they come up again. Unfortunately when the hammer falls and you’re staring down the painful red ink in your brokerage account, many investors balk and bail out. They can’t take the pain.

How much can you take? Are you prepared to wake up one day and find 30% of your account’s value gone? Are you ready for a broad investment horizon that focuses on performance over decades, not months? If so then you should pick up an investment book and get to work, if not your best bet will be to consult a financial advisor, who can help you earn gains while not exposing your portfolio to excess risk.

I know, American Blue Chips seems like a bad place to be these days. The markets have been extraordinarily volatile over the last few days, 400 points up, 400 points down, etc. Blue chips in particular have scared off investors with historic collapses like Bear Stearns and Lehman Brothers, despite being one of the best available paths to investment success. A recent article in CNN Money examined the blue chip conundrum, and goes on to explain why U.S. Blue Chip stocks (still) deserve a spot in your portfolio.

The recent chaos in the markets has brought about a number of angry investors. I mean, financial institutions such as Bear Stearns and Lehman Brothers made it through the great depression but the overleveraged nature of their mortgage securities brought them both down. Some analysts believe this could signal a long term decline in America’s economy, and as such should be replaced with international stocks like those of Asia and Russia.

Of course there are still plenty of reasons for owning large cap U.S. stocks. It’s likely that investors are focusing too much on the short term, and that means there’s a lot opportunities out there and some holdings are available at a bargain price. Once everything is said and done, American businesses will still earn profits and, most importantly, send some of that money into the hands of shareholders via dividends. The founder of Vanguard, John Bogle, noted that 9.8 percentage points of stock in the 20^th century were driven by earnings and dividends out of the 10.4% annual return.

Historically speaking, your chances are quite good. Every time the market swings too much in one particular direction, through too much enthusiasm or selling to the point of depression, stocks will moderate one way or the other, while maintaining upward momentum.

This is one of the most unique sections of this site. Here we will go over in list form facts about the stock market. Each post in this section will contain one or more different stock market facts some of which will be surprising. The facts listed in this section will cover all aspects of trading stocks, from wall street to trading stocks online.

Posts in this section will have titles relevant to the facts that are listed in the post. For example, if the post lists three penny stock facts than the title of the post would be something like Facts About Penny Stocks.