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| *Ostroff, Fair and Company>>>Investing |
1 simple question about stocks? |
To me this does not make sense. Let say I buy 1000 stocks of Disney's $50 stocks ($50,000 worth). Could I just sit there and wait till the prices climbs up and sell? That money seems TOO easy to be true. Basically, what I am taught about stocks in math class is that it is more about waiting rather than about risk. I must be missing a puzzle piece? Oh god I am going to fail the stock test. let's say that your stock market is efficient, this mean that stock return will take the normal distribution, i.e, 50% rising and 50% falling. but keep in your mind that market risks can be divided as systematic" can be avoided by using the DERIVATIVES( options, futures, swaps....) and the second type is unsystematic risk" can be avoided by diversification" for this reason its not waiting matter, you have to know manythings about stock markets............... its a very easy if you can analysis with good opened mind. There are many factors that can cause your investment value to drop. For higher risk investments such as stocks, the chance of falling values are closer to the chance of rising values. For bonds, the chance of falling is much slimmer than rising. Not all stocks go up. Many stocks will become worthless. Buy stocks of high quality companies that are not overvalued. Don't put all your money into one stock. Spread your money among at least 10 different good stocks. That way, if one becomes worthless, you will still have the other nine. Its as simple as that. You can buy it and hold it as long as you want. Until you, or the company, cease to exist, and leave it to your heirs if you want. But, the risk is always there. It may go down, or even out of business someday. That is right. If the price goes up and you sell your stock, then you make money. However, the price can also go down; in this case if you sell, you will sell at a loss. |
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