The History and Evolution of Investing

Most of these funds are designed to provide interest income for the shareholder. Stocks are a way companies raise capital off of their business by selling partial ownerships of itself to the public. They are considered extremely risky, because of a business crashes you lose all your money since it is not F.D.I.C insured. A Bond is a debt security, and they are comparable to loans made to companies. Stocks on the other hand issue ownership stake in a

1. Scalping: The act of selling as soon as the trade becomes profitable, even if it is only a mere profit. Therefore, traders will buy multiple shares from different companies and sell immediately even if it is a few cents higher, because many small profits will eventually turn out to large profit gains. However, traders must have a strict selling strategy, meaning not selling the stocks, trusting that it will go up even more, thus, making the whole strategy in vain. 2.

Working with a Stock Broker is a wise way to go when one is starting to buy and sell stocks. The brokers advise and help people find stocks worth investing in. In the stock market, people can rush to buys shares or hold back, in other words, “Fools get rich” (13) “people who knew least about the stock market have made the most money out of it in the last few months. Fools who rushed in where wise men feared to go ran up high gains.” (13). Sometimes it is smart to rush in, but the stock market isn’t like that.

You have to put the idea into action. If you don't have the motivation and the enthusiasm, your great idea will simply sit on top of your desk or inside your head and go nowhere”-Donald Trump. The stock market is just a place where people invest in others ideas for profit. If all stock brokers take a legal oath or some type of legal agreement then there will be fewer frauds will take place. Many stock brokers are trusted with huge amounts of money given by their clients willingly.

In the early 1980’s though investment banks went public and then had access to an unimaginable amount of shareholders money. Now shareholders are the people who buy a company’s stock which means they own a small piece of that company and the company gets to use the money they bought the stock with at their discretion. This gave the investment banks a lot of power. They no longer had to worry about losing their own money, instead if they made a bad deal they lost someone else’s money. This gave the banks a false sense of comfort.

At some point the investor must buy back the stock from the market and return it to the broker. If the stock falls in price the investor can buy it back at a lower price than they sold it, therefore making a profit. This kind of action was not considered illegal in 1929, and Albert H. Wi... ... middle of paper ... ...the man for whom the scheme is named. It was also the largest investment fraud by a single person. The most important effect of the Madoff scandal is the reformation that occurred in the SEC afterward amid shock at their inability to catch Madoff in the act during their investigation.

Warning signs appear By the middle of 1929, consumer spending became less, the new construction was slowing down and the automobile sales were coming to an end. People borrowed billions of dollars to buy stock on margin and that was a very big problem, as more money was flowing in the country. (Buying on margin is a method by which investor put up only a portion of the purchase price for stock shares and borrow the remainder from their brokers.) Even when the prices were high, the Americans kept on investing on stock. The Federal Reserve Bank may have helped with the disaster of economic depression as it has inflated money supply during 1920’s.

Now if you a smart investor you would have invested a few years ago when we were in a recession, then you value in the Stock Market would have skyrocketed. You might not be sitting at home typing this paper now if you did, you might be making investments on companies you see a potential growth in and ... ... middle of paper ... ...y can get into it, can also be a great way to make your bank balance look large very quickly. The Stock Market is a financially smarter choice when considering alternative savings accounts, or CDs (Certificate of Deposit). The Stock Market will drop, it dropped about eighty-four years ago. If people had money to invest in the Stock Market at that time they would have been very rich when the market came back when World War II jump started the economy around the year 1939 when European countries started trading with America for supplies.

Significance of Financial Reporting The Collapse of the Corporate Giants like Enron and WorldCom have raised the imminent question, which always remains in the back of an investor¡'s mind, "Can I trust my hard earned Capital in somebody else's hand?" This is not the first time that investors have lost their trust in companies however the fact does not change that the cost of capital from the market has increased significantly for the companies. Investors have started to invest their capital in risk free securities rather than in company stocks. Investors have also started to look with contempt and doubt at a company¡¦s financial reports because some of these collapses were preceded by financial frauds cleverly covered by the management of such companies. Investors have arrived to a stage where they no more trust the financial reports provided by the company.

Over speculation is another main factor in the collapse of the stock exchange therefore it cannot be said that the governments laissez-fair attitude is solely to blame. There are many other factors which add to the over speculation and cause the collapse. Some banks chose to buy stocks u... ... middle of paper ... ...ernment could have prevented the collapse of the stock exchange but they were unable to because they did not act soon enough due to their laissez-fair attitude. The collapse of the stock exchange was due to many factors that built up and originated during the roaring twenties. There was a lot of over speculations which lead to a lot of people taking out loans and not being able to pay back, including banks that used up the money that had been deposited to them.