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Stock Market Since 1948 Stock Term Paper

(Vital Information for Stock Market Investors! What Every Investor Needs To Know) Regarding increases in the stock market, one has seen in the past that rises take place over a long-term, but the terms are very long. When the Dow crashed in 1929, it took 26 years to regain the ground that was lost. Again it fell to a level below 1000 in 1973 and then it took ten years before that level was reached again. In Japan, the Nikkei fell and has now continued to fall for the last 14 years, and does not seem to be recovering. According to these experts, the best measure for any investor is now to invest in shares that are historically safe and income producing and the income levels are around the historical average of Dow. (Vital Information for Stock Market Investors! What Every Investor Needs To Know)

The study of market history should be based on the real fundamental situations that have happened in the market. At the same time, it is true that the market rarely functions the way the investors' dream they would. (Stock Market Forecast for 2002 and Beyond) It is clear that both of the experts are talking about the same thing, but in diametrically opposite directions. This difference is caused by the bears and bulls. The bears bet on stock prices going down while bulls bet on stock prices going up. In part they are also the reasons for the movement of the stock prices in the way they bet as their money generally follows their inclination.

Present situation in the stock market

The first point to be considered is that the stock market also has been bitten by the Internet bug and now there is an online stock trading service offered by many brokerage firms. Direct online access means that one can go to the account every day, check the activity in stocks that the investor has invested in and even conduct stock trades if the investor is capable. This is a difficult issue and it is better to consult with brokers before making any trades. At the same time, experienced investors use this facility to go to the Internet regularly and trade the stocks that they have. There are day traders who move securities in and out of their accounts quite a few times in a day. These investors feel that it is very important to reach their accounts quickly as they feel they would not like to spend time in contacting their brokers also. (Stock Market Trading)

Let us now see the position in the market in United States over the last few months, and even according to stock market reporters the movement was so erratic that it increased the worries of investors who felt that the market was unstable. The main indicator, Dow has been moving very fast and erratically there are also no directions in its movement. Stocks had opened lower and continued to fall, but then the buyers stepped in and their view was that the shares were too cheap to let go. (Market Uncertainty Still Looms) Another major problem that is being seen now is the possibility of a dollar crash that is being seen now, though according to Federal Reserve that any collapse in the value of the currency is not likely to hurt the economy of United States. On the other side, many economists feel that any sharp decline in the value of the dollar would lead to a pandemonium in the markets for both credit and equity. (Wall Street/Fed at odds on effect of dollar crash)

The problem is likely to come from rapid withdrawal of foreign currency from U.S. market and to maintain the present position; many experts feel that the central bank should raise short-term rates of loans immediately. At the same time increasing short-term rates would starve the American economy as the consumers would probably try to save more money and borrow less. At the same time, United States is a buyer all over the world; this would mean that the rest of the world would also suffer from drop of the purchase capabilities. This would be a relatively rare experience as there had been a dollar crash in 1985-86 and at that time the yield from U.S. bonds fell by 4 percentage points. (Wall Street/Fed at odds on effect of dollar crash)

How to win in the stock market?

The greatest requirement for winning in the stock market is patience. The winners control their impulses and act decisively on trading signals. They do not act on a whim, but they wait for the correct trading time to come, and this is generally provided by experts. Discipline is the correct strategy for successful trading. To a certain extent discipline can be learnt, but there are some individuals who are more disciplined and self-controlled than others. The investor has to find...

Research has shown that some individuals have difficulty when their gratification is delayed, though their may be various reasons for it. In other words, those individuals do not like delays in the rewards which they feel they should get immediately. This mentality makes them take small profits immediately instead of waiting for bigger rewards which will come at later dates. (Patience is a virtue)
There are different types of investors -- day traders, swing traders or longer term trend traders. For all of them trying to cash immediately a reward which will be available only later may cause problems. The situation is clearer for a long-term investor as his investment has to be held for a long-term for the profits to be realized. The prices of the stock may vary during the interim period, but investors who have long-term experience know that they will have to wait for the period. On the other hand a new investor tries to collect all the benefit as for every shortage of stock there will be investors who will panic and try to buy their stock back, but that usually results in a loss for them in the long-term. For all types of investors, there are optimum times to sell, and any earlier sell will usually result in a loss.

Selling immediately will not generally lead to very rapid increases in the growth of value of the investment. It has been said many times that looking at the value of one's investments during the course of the trading day is like sitting in front of a slot machine and still not indulge in gambling on that machine. Still patience is a virtue when anyone tries to trade profitable. The general tendency among all humans is to take a position that will permit them to avoid loss at all costs. Generally this tendency protects us from harm, yet sometimes when the future is unknown, it may also cause us to act impulsively. (Patience is a virtue) Still one can only say that this is not a game for the faint hearted, and the best way to look at stock market investments is to take it as money that one could afford to loose.

Conclusion:

As we have seen clearly, stock market fluctuations are clearly not due to business cycles as there is no likelihood of any major change in business position of United States. The cause for fluctuations in the stock market is based on valuation as per the investor. For an individual who wants to earn constant money from the growth of stock values, it is better to invest in mutual funds as they are dealt with by experts.

Appendix

Graph 1 -- Business Activity in United States since 1914

(The Business Cycle)

Figure 2

Index

11/27/01

10/3/03

Change

S& P

-120

DOW

-301

NASDAQ

1936

-55

REFERENCES

Boshnack, Robert. "Vital Information for Stock Market Investors! What Every Investor Needs to Know" Retrieved from http://www.usafutures.com/stockmarketnews.htm

Accessed 27 August, 2005

"How to Invest in the U.S. Stock Market" Retrieved from http://www.market-barometer.com/how_to_invest.htm#Buy%20Stocks%20Direct%20from%20Companies Accessed 27 August, 2005

"Is the market overbought? Do you think stocks are overvalued?" Retrieved from http://www.market-barometer.com/archive_stock_market_articles.htm

Accessed 27 August, 2005

Knight, Jerry. "Market Uncertainty Still Looms" (April 22, 2005) Retrieved from http://www.washingtonpost.com/wp-dyn/articles/A33759-2000Jun21.html

Accessed 27 August, 2005

Olivari, Nick. "Wall Street/Fed at odds on effect of dollar crash" (August 26, 2005) Retrieved

http://today.reuters.com/news/newsArticle.aspx?type=reutersEdge& storyID=2005-08-26T165321Z_01_N26409411_RTRIDST_0_PICKS-MARKETS-FOREX-DOLLAR-COLLAPSE-DC.XML Accessed 27 August, 2005

"Patience is a virtue" Retrieved from http://www.timing.net/stock-market-article1.php Accessed 27 August, 2005

"Stock Market Forecast for 2002 and Beyond!" Retrieved from http://www.usafutures.com/stockmarketnews.htm Accessed 27 August, 2005

'Stock Market Trading" Retrieved from http://www.forbes.com/special/stock_market_trading.shtml Accessed 27 August, 2005

'The Business Cycle" Retrieved from http://www.socialstudieshelp.com/Eco_Business_Cycle.htm Accessed 27 August, 2005

Sources used in this document:
REFERENCES

Boshnack, Robert. "Vital Information for Stock Market Investors! What Every Investor Needs to Know" Retrieved from http://www.usafutures.com/stockmarketnews.htm

Accessed 27 August, 2005

"How to Invest in the U.S. Stock Market" Retrieved from http://www.market-barometer.com/how_to_invest.htm#Buy%20Stocks%20Direct%20from%20Companies Accessed 27 August, 2005

"Is the market overbought? Do you think stocks are overvalued?" Retrieved from http://www.market-barometer.com/archive_stock_market_articles.htm
Knight, Jerry. "Market Uncertainty Still Looms" (April 22, 2005) Retrieved from http://www.washingtonpost.com/wp-dyn/articles/A33759-2000Jun21.html
http://today.reuters.com/news/newsArticle.aspx?type=reutersEdge&; storyID=2005-08-26T165321Z_01_N26409411_RTRIDST_0_PICKS-MARKETS-FOREX-DOLLAR-COLLAPSE-DC.XML Accessed 27 August, 2005
"Patience is a virtue" Retrieved from http://www.timing.net/stock-market-article1.php Accessed 27 August, 2005
"Stock Market Forecast for 2002 and Beyond!" Retrieved from http://www.usafutures.com/stockmarketnews.htm Accessed 27 August, 2005
'Stock Market Trading" Retrieved from http://www.forbes.com/special/stock_market_trading.shtml Accessed 27 August, 2005
'The Business Cycle" Retrieved from http://www.socialstudieshelp.com/Eco_Business_Cycle.htm Accessed 27 August, 2005
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