The Last year’s (2008) financial meltdown has obliterated long term accumulative gains of the investors, no sector of the economy escaped unhurt. All investment segments whether traditional or alternative suffered with severe value erosion. So, the crisis can be classified as systematic risk because it affected the entire market and cannot be avoided through diversification.The average individual taxpayers have suffered the most, with cease on salary hikes and companies firing employees as cost cutting drives, many individuals left financial broke. Also with wealth erosion in investments, rising debt burdens and tight credit situations, many people including senior workers or retirees keep looking for work to keep their ends meet.
The financial crisis strikes unfortunately at the time of US elections. Aggressive opinions and hot debates on the crisis took the center stage. The ousted bush administration has taken some hasty steps, without much thinking. This is a strange fact that many acts from the authorities to use the public money could surely be considered as manipulative and without any precise explanation.
Why do people invest?
The money saved in a savings account merely earn interest at rate that don’t even keep up with inflation. Many individuals want to invest money somewhere just to beat inflation. There are two basic ways to earn money’ One is in exchange of labor either physical or mental and the other by making money with the money, like from business, investing or trading.
Stock Markets - Investment Paradigm
Investors casually use forecasts and probabilities for investing in stocks markets. Different quantitative models have been built to calculate future estimates. Valuations are calculated on medium to long-term growth estimates.
Determining future is a slippery concept when applied to financial markets, as evident by the present crisis phase and other similar phases before. One should not be only dependent on the estimates as conditions may change in a short notice.
Many experts use the term ‘risk just too informally and rarely use the term ‘uncertainty, if they are still using it. Traders keep looking for the facts that confirm their biased beliefs and avoid for the facts that would clash them.
One must remember, anything can happen in the stock markets, irrespective of any theory or analysis.
An average investor lacks patience required to pass tough times. The emotions, perceptions, tides of hope, greed, and fear among the investors govern the short-term returns generated in the markets. The emotional factors curtail or reduce the core of economic reality, and in such an environment, investors may take wrong decisions.
It always help investors to pre-determine the time period for investment, Patience is a virtue, the term suited perfectly for investing!
Successful investing simply based on the reviewing of facts over quantitative estimates. The return on stocks has proven to be connected to the reasonable expectations. The initial dividend yield’ (annual dividend each year relative to a share price) a crucial but belittled factor in realizing stock returns. Regular and reasonable rate of earnings growth, although hardly certain, is relatively stable. U.S. Corporate earnings have grown with remarkable consistency at the rate of the GDP. There have been nothing like radiation effects of the crisis in long-term investment returns.
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Investing Money Stocks Analysis Crisis U.S. financial Review Quantitative term rate phase inflation Banks Risk Investment Return Divident Long-term Markets Patience Calculate Value erosion estimates
