The Stock Market Essay, Research Paper
The Stock Market
Have you ever noticed how everyone thinks they know what is best for you?
Everyone telling you what to do when you are the only one who knows what is the best
for you. You maybe wondering what this is about, would you believe me if I told you it
is about the stock market. Well it is, you may have thought that this had nothing to do
with the stock market, but actually it is everything about the stock market. Why trust
everybody else when you can invest yourself ? Develop your own system of trading
and get started. This may raise another question, ” How can I find the right stock and buy
them with out the assistance of a stock broker?” In the following information I will take
you through the process of finding hot stock picks and turning them into tremendous
profits. Eventually you will even develop a trading system.
First of all lets get the basic steps down before we move to the more advanced
steps. The two main ways to make money in the stock market is from dived ends and
buying low and selling high. To make great outrageous profits you will have to riley on
buying low and selling high. This is very easy to say but very difficult to do. With dived
ends you will receive a small percentage gain every quarter of the year, this helps with
your profits but not much. To buy low and sell high you first have to find some stocks or
funds. With this information and your motivation with stocks you can rule the world!
O.K. maybe not the world but definitely your own portfolio.
Morgan 2
Now that you have the main concepts down we can move on and try to find some
hot stocks. You never want to buy over bought stocks, because over bought stocks
means that they are over valued. If you bought a over valued stock chances are that you
bought high, and this may force you into selling low and take a loss. An easy way to get a
round about feel for a stock to see if it is over or under valued is to look at its PE ratio. To
calculate a PE ratio you take the price per share and divide it by the earnings per share
and this will give you the PE ratio. Most of the time you don’t even have to find out the
p.e. ratio because It will be calculated before hand , so all you have to do is look at it.
Many analysts like PE ratios under 60 or so, but it depends on the industry PE ratio also
( another figure that is pre calculated) (Frailey ,50). This is one of the most important
figures of a stock. Try to avoid buying stocks with high PE ratios for long term holdings,
even if it’s a good company. For example Cisco Systems is a fantastic company, it has
split nine times in the last ten years, it has never disappointed Wall Street with earnings but
with a PE ratio of 125 this stock is over valued. I would buy this stock at about fifty
dollars a share with a PE ratio of about 60. Even the best companies get over valued.
Buy stocks like Cisco on short term pull backs and sell them when they become over
valued.
It is important to develop some type of trading system that will protect your
capital and extend your gains. I do not think there is one trading system out there that
will apply to every stock, so what you must do is modify other systems and develop your
own ( “cut and paste” ). The “pyramid system” is the most practical and useful trading
system in the world. In this particular system you start off with about ten or so individual
Morgan 3
stocks that you think will do very well. There is no way around it, some stock will go up
and some go down, face it. In this particular system you will sell your stocks that decline
by ten percent. Now that you have liquidated some of your stocks you must have a place
to put the money. You will then put that money into your stocks that are going up.
Typically the stocks that start to do well will continue to do so and the ones that do bad will
also continue (Snell 4). You now have started your pyramid system. Selling your stocks
is one of the most difficult things to do and often trading systems do not hold the correct
answers to the question of when to sell your stock. This is where the modification comes
in to play. If you followed this system you would sell when your stock declined by ten
percent. This is a good time to sell if something fundamentally went wrong with the
company, but if your stock was over sold it would have been a bad time to sell. For
example, if you bought into Digital Equipment just before Compaq announced they were
going to buy them out, you would have lost about ten percent. If you followed the
trading system you would have sold and accepted a loss of ten percent. If you had
realized that this particular stock was being over sold because this announcement was really
nothing to worry about you would have held on to the stock. Well as a result of being
over sold the stock shot up almost 100 percent in the next month, alone (Shimo 44).
To find these sold great companies you have to know what to look for in a stock.
I believe that good companies will buy their own stock, so I like to look at the percentage
of institutional shareholders of a company before I buy”(Sheimo 26). When a company
announces a stock buy back plan it often gives the stock a boost because it attracts other
Morgan 4
buyers as well as the employees of the company. A low PE ratio is always nice to see
when looking for a stock to buy because it can mean that this particular stock has more
room to the upside than a stock with a high PE ratio. When a stock has good earnings it
will typically perform well through out the positive earning announcements. If you stay
with the stocks that have good earnings it will lower your risk of loosing your capital and
increase your chances of expanding your gains. If a stock has had a real nice
performance in the last few quarters there is a chance that the stock might split. When a
stock splits 2-for-1 the price is cut in half and the amount of shares you own will double.
A stock split is almost all the time positive for stocks because this will often attract new
buyers into the stock (Sheimo 89). When stocks get upgraded from brokerage firms with
target prices to go along with them you will often find a sharp price run up. Some
brokerage firms often project the company’s earnings for the next year or so and this is a
nice figure to go buy when researching for new stocks. A 25 percent of growth in a
company is a nice growth percentage to see in a years time and it would make for a nice
core holding in any portfolio.
Now that you know what to look for in a stock lets learn about what is good to
avoid in a stock. I become some what nervous when dealing with high PE ratio stocks
for long term holdings. Stay away from stocks with PE ratios in the triple digits, it seems
like it can be very easy to get burnt from these stocks especially on the long term aspect. I
try to avoid stocks without earnings, but if there is profitability in the near future and
revenue is strong I probably would not let that stand in my way of buying a stock.
“Never buy a cheap stock just because it is cheap” (Sheimo 75), this is one mistake many
Morgan 5
beginning investors make. Just because you find a cheap stock does not mean that it is a
good value. When looking for penny stocks you must do more research that just looking
at the price, treat it as you would treat any other stock. “Avoid heavy positions in thinly traded
stocks”(Sheimo 103). A thinly traded stock is considered to be a stock that has a volume of
10,000 or less a day. If you have stocks that are thinly traded there is a possibility that they
might not trade every day and this might cause you to be forced to delay a sell and increase your
losses in that particular stock. Be very careful when dealing with penny stocks, they are
extremely volatile especially thinly traded stocks.
If you have a serious interest in the stock market consider trading your own stocks and
save a little bit of money. Remember the most basic rule buy low and sell high. To effectively
use this very simple rule you must not panic, but you must spend endless time researching and
looking for the next big stock while its still small. Never forget the basic rules of investing,
because those rules are the rules that make the difference between the losers and the winners.
Never follow a trading system to the point where you never consider exceptions and special
situations. It is a good idea to research different trading systems to get a good feel of how to
trade stocks on your own. Research a lot of different stocks and apply the basic rules of the
stock market.
Frailey, Fred. “The King of Wired Investing.” Kiplingers. April 2000: 50-51.
Sheimo, Michael. Stock Market Rules. New York: McGraw-Hill, 1999.
Snell, JR. “How To Uncover and Trade Winning Stocks.” Trader’s Depot. Available:
9 April 2000
Другие работы по теме:
Yahoo Essay Research Paper Yahoo rode the
Yahoo! Essay, Research Paper Yahoo! rode the bull market Thursday, primarily on the strength of a report by Lehman Brothers, which raised its recommendation on the stock to a “Buy.”
The Right Stuff Day Traders Essay Research
Paper In today’s economy, it is no longer feasible to just put money in a savings account and expect to gain financial stability. If a person desires financial security, financial experts recommend stocks and mutual funds to secure one’s financial future. With the wide spread release of the Internet, stock trading is no longer a professional’s game.
Commercialization Essay Research Paper Of the eight
Commercialization Essay, Research Paper Of the eight stages involved in the new-product development process, commercialization is where the rubber meets the road. A complete market strategy for commercializing a new product must consider when, where, how, and to whom the product will be introduced.
Global Depression Essay Research Paper The crumbling
Global Depression Essay, Research Paper The crumbling of Western culture after World War I mirrored how the global economy would as well. After the War came what ultimately was the global state of depression. This was in no means meant to describe the world emotionally, but most likely it did. People were jobless, and some penniless.
Essay 2
Essay: #1 Overproduction And Its Weakness Essay, Research Paper There were many problems that occurred as soon as WWI ended. Such as overproduction. Overproduction was going on all through the war, and it did not stop as soon as
The Wheel Of Fortune Essay Research Paper
Robert Balgac Journal Entry #5 Mysticism Dr. Collinge The Wheel of Fortune According to Zen Buddhisim, the wheel of fortune rotates and the ones who are now poor will be rich in the future and vice versa. The stock of America Online, symbol AOL, is a perfect example of this belief.
Financial Article Essay Research Paper Goldman Sachs
Financial Article Essay, Research Paper Goldman Sachs is the last big Wall Street investment bank to go public. In this story they are explaining how is the timing of its IPO (Initial Public Offering) going to be affected by the market at this moment. The market at this moment is very volatile. Some people think that the market is too high and that a correction is in our way very soon.
VOICE OF DEMOCRACY Essay Research Paper VOICE
VOICE OF DEMOCRACY Essay, Research Paper VOICE OF DEMOCRACY AMERICAS ROLE FOR THE NEXT CENTURY Americas role for the next century will be to stay economically stable. That will be no problem unless
Efficient Market Theory A Contradiction Of Terms
Essay, Research Paper AbstractAccording to the Efficient Market Theory, it should be extremely difficult for an investor to develop a “system” that consistently selects stocks that exhibit higher than normal returns over a period of time. It should also not be possible for a company to “cook the books” to misrepresent the value of stocks and bonds.
Kodak Essay Research Paper Eastman Kodak Co
Kodak Essay, Research Paper Eastman Kodak Co. is suspending its $2 billion stock repurchase program in order to reduce debt and free up cash for possible acquisitions, the company said Friday.
Investing Online Essay Research Paper Personal Investing
Investing Online Essay, Research Paper Personal Investing with Computer Technology Introduction Computer technology has revolutionized the way people can invest their money. Online trading has become the newest fad for people trying to get more bang for their buck. Virtually anyone with access to the Internet can set up an online brokerage account.
Y2k 6 Essay Research Paper Y2K is
Y2k 6 Essay, Research Paper Y2K is also called a bug. Y2K is one of the big problems for everyone. Y2K means many computer systems use software that tracks dates with only the last two numbers of years such as 97 instead of 1997. When 00 comes up for the year 2000, many computers will view it as 1900 instead, potentially leading to failures in business, transportation, utilities and other services.
Paul Essay Research Paper Paul was always
Paul Essay, Research Paper Paul was always an insecure individual. His insecurity was a direct result from the lack of attention he received from his father, and love from his deceased mother. He grew up with minimal support from his father. Paul was never encouraged to do what he was interested in. For instance, when Paul s was at school and was interested in stocks, his father did not encourage his abilities to play the stock market; rather he pulled Paul out of school.
Shoe Industry Essay Research Paper Shoe
Shoe Industry Essay, Research Paper Shoe Industry The shoe industry is one of the biggest moneymakers in the market, but it?s facing many changes, rushes, and difficulties. The big power in the industry is Nike inc. which all the other companies are trying to be like. Some changes are the industry as a whole is moving there factories to the far east such as China.
Index Funds Essay Research Paper With the
Index Funds Essay, Research Paper With the growing popularity of index funds, one might be confused as whether to choose index funds or to use traditional money managers. If you are looking for an investment with low risk and a long term return that follows the market, then index funds is the choice for you. In fact, most private investors are better off investing in index funds.
Stock Market Rally Essay Research Paper Wow
Stock Market Rally Essay, Research Paper Wow, what a day on the market today. Technology stocks soared on the news of the new gigahertz processor release. Computer makers like Gateway and Dell saw their shares increase by 68 and 42 percent respectively. Both companies expect the release of this new computer chip to boost sales tremendously.
Taxable Bond Market Outperformed The U.S. Stock
Market Essay, Research Paper For the first time since 1990, the taxable bond market, as measured by the Lehman Brothers Aggregate Bond Index, appeared nearly certain to outperform the U.S. stock market, as measured by the S&P 500?. The former was up nearly 10% year to date through November, while the S&P 500 was down by approximately the same amount.
Y2k Vs Stock Market Crash Essay Research
Paper The stock market crash of 1929 and the year 2000 bug are very similar. Black Thursday was not one of the brightest days in American History. This day was the cause of a nation downward spiral that closed 4000 banks, starting the great depression, and leading to stock that at one time would decrease 89% to the value some had bought.
Causes Of The Stock Market Crash Essay
, Research Paper Causes of the Stock Market Crash It has been said that all good things must come to an end. In the case of the Roaring Twenties that end came abruptly and unexpectedly. It is easy for one to look back upon the economic situation that lead to the crash and ridicule the experts for not seeing the signs of a potential disaster.
Admission Essay Research Paper Experience is what
Admission Essay, Research Paper ?Experience is what you receive when you don?t get what you want.” I remembered my father?s words as I tried to postpone the coming massacre. Like during the fall of the Roman Empire, my allies became enemies and my foes turned into partners. In fast and furious action with property changing hands again and again, I rested my fate on the words of one man, hoping he would rescue me from this dangerous tailspin.
Investing In The Millenium Essay Research Paper
Investing in the Millenium The stock market has been the major backbone in American and international earning since its origin. There have been major inclines and also, many major declines in the history of the stock market. Commonly, the best-known stock exchange is the New York Stock Exchange. Nasdaq, ASCAP, the Dow Jones Industrial, to name a few.
Depression Essay Research Paper The Great Depression
De[pression Essay, Research Paper The Great Depression, the worst economic downfall ever in United States history, began late in 1929. Supposedly triggered by the stock market crash. It lasted for nearly a decade. The main cause for the depression was the combination of the greatly unequal distribution of wealth throughout the 1920s and the extensive stock market speculation that took place during the latter part of that same decade.
Great Depression Essay Research Paper Great Depression
Great Depression Essay, Research Paper Great Depression began in the early 1930’s, and lasted about a decade. The main cause for the Great Depression was the combination of the greatly unequal distribution of wealth throughout the 1920’s and extensive stock market speculation that took place during the later part that same decade.
The Great Depression Essay Research Paper THE
The Great Depression Essay, Research Paper THE GREAT DEPRESSION The year of 1929 began a time period of horror in America. It was the beginning of the great depression. A time in which many lost their
Stock Market Crashs Of 1929 And 1987
Essay, Research Paper The Stock Market Crashes of 1929 and 1987 The stock market crash of 1929 occurred over a period of time that was the beginning of what is called the Great Depression. Everyone wanted to invest their money in the stock market. People thought that the stock market was the perfect place to make money.
Market Research Essay Research Paper Before I
Market Research Essay, Research Paper Before I started to manufacture my products I had to find out if there was a market for it. This is called market research. Like any other business I had to decide what market research methods are most likely to give me the information I need.
Recent Drops In The Stock Market Essay
, Research Paper Recently, the stock market has been very unstable. After a period of extremely good business and market highs, it seems we are experiencing just the opposite. The market has
How Did The Nazi Party Get So
Big? Essay, Research Paper Hitler’s Nazi party came to power almost entirely because of accidents. In 1929 the American Stock Market crashed, a powerful symbol of the growing
A Short Essay For A Intro To
( Bussiness Class) Essay, Research Paper In the October 14th issue of Businessweek there is an article entitled “Cavwat Entrepreneur” by Michelael Schroeder. This artical details how modern
Executive Compensation Essay Research Paper Executive CompensationExecutive
Executive Compensation Essay, Research Paper Executive Compensation Executive compensation should be pay for performance. The direct link between pay and the company s profitability is an important factor. It can either motivate an executive to work harder for the company or to work against the company.