Personal finance Term Paper Example | Topics and Well Written Essays - 2000 words

Personal pay - Term Paper ExampleMost m angiotensin-converting enzymey grocery store securities give up interest income. Even if ones liquidity needs are covered, one may invest in these securities to maintain a low level of risk. Yet, he apprise also consider some alternative securities that typically provide a higher rate of return but are more risky. Stocks Stocks are certificates representing partial self-will of a wet. Stock investors become shareholders of the firm. Firms issue armorys to obtain currency to expand their business operations. Investors invest in stock when they believe that they may earn a higher return than alternative investments offer. Primary and vicarious Stock Markets Stocks can be traded in a primary or a secondary mart The primary market is a market in which newly issued securities are traded. Firms can raise funds by issuing new stock in the primary market. The first offering of a firms stock to the public is referred to as an initial public of fering (IPO). A secondary market facilitates the trading of existing securities by enabling investors to sell their shares at any time. These shares are purchased by separate investors who wish to invest in that stock. Thus, even if a firm is not issuing new shares of stock, investors can easily obtain shares of that firms stock by purchasing them in the secondary market. On a typical day, more than a million shares are traded in the secondary market. The price of the stock changes each day in response to changes in supply and demand. Types of Stock Investors Stock investors can be classified as institutional investors or individual investors Institutional investors These are professionals employed by a financial institution who are responsible for managing gold on behalf of the clients they serve. They attempt to select stocks or some other securities that will provide a reasonable return on investment. The employees of financial institutions who make investment decisions are re ferred to as portfolio managers because they manage a portfolio of securities (including stocks). More than half of all trading in financial markets is imputable to institutional investors. Individual investors commonly invest a portion of the money earned from their jobs. Like institutional investors, they invest in stocks to earn a reasonable return on their investment. In this way their money can grow by the time they wish to use it to make purchases. The number of individual investors has increase substantially in the last 20 years. Many individual investors hold their stocks for periods beyond one year. In contrast, some individual investors called day traders buy stocks and then sell them on the same day. They hope to benefit on very short-term movements in security prices. In many cases, their investments last for only a few minutes. Many day traders conduct their investing as a career, relying on their returns from investing as their main source of income. This type of inv esting is very risky because the stock prices of even the best-managed firms periodically decline. day trading is not recommended for most investors. Return from Investing in Stock Stocks can offer a return on investment through dividends and stock price appreciation. Some firms distribute quarterly income to their shareholders in the form of dividends rather than reinvest the earnings in the firm