Finance Q3 - 1. Investing Basics The article starts off by...

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1. Investing Basics The article starts off by highly encouraging investing in the stock market no matter what your financial goal maybe. According to Motley Fool an investors best ally is time, which young investors have plenty off. To illustrate this, Motley Fool used an example of an investor investing about $2000 at an 11% return which ends up growing to about $53,416.19 in 30 years. Due to the power of compounding investing as early as possible is one of the most important steps an investor can take towards securing a financially stable future. Some of the steps Motley encourages taking in order to become a successful investor includes reducing all high interest debts, saving at least 10% of your annual income, and planning for retirement. Some of the common mistakes made by investors include starting to invest late, playing it safe (if young), and investing short term. The second article about " investing concepts" starts off by emphasizing that the value of a dollar today is more than the value of a dollar tomorrow or one year from now due to the negative effects of inflation. In the article Motley Fool again mentions the importance and power of compounding, patience, and time which are essential towards accumulating wealth. Fool also suggests calculating your real return, making informed choices before investing, setting short & long term goals, investing in the stock market, and determining your investment style. It also mentions that there are two kinds of investing methods which are called active and passive management. The Standard and Poor's 500 index is known as the most famous passive investment strategy. Article 3, "Stocks", begins by talking about the advantages and disadvantages of owning common stock. Some of the advantages include ease of ownership requirements, part ownership of a business, and one vote per share of stock to elect the board of directors while some of the disadvantages include risk inherent which includes bankruptcy. The article goes on to define some of the common terms which confuse new investors such as "volume" which is the number of shares that are traded on a given day. When it comes down to how stocks trade, NYSE trades still take place face-to-face in the trading pit although computers play a big part in the process these days. All stocks at the NYSE are considered auctions, which is the highest amount any given buyer is willing to pay at a given point in time. The Nasdaq is a major example of an over-the-counter market. In over-the-counter markets, market markers maintain an inventory of shares to meet the demands of the market and match up buyers and seller. Investors in these markets can also set their own ask price and bid price. "Short selling" is an advanced investing technique of buying security with the expectation that those prices will go down. Although some people believe shortening is un-American, the Motley Fool looks at it in
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This note was uploaded on 09/25/2008 for the course FIN 3403 taught by Professor Tapley during the Spring '06 term at University of Florida.

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Finance Q3 - 1. Investing Basics The article starts off by...

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