lectur4-page38

lectur4-page38 - to try and make a quick fortune with money...

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As the returns to investing in the stock market continue to accrue, people begin pulling their money from relatively low interest savings vehicles and putting that money into the higher risk stock market to earn a higher return. This steady stream of money into investments such as mutual funds fuels the market even higher. Resources tend to flow where they will earn their highest return subject to the relative risk of the investment, business enterprise, employment opportunity, etc. The stock market is riskier than a certificate of deposit, but as the stock market continues to make gains, money is lured into the market due to the higher potential return. Some people believe the increased risk they are taking is worth it. The safest way to invest in the stock market is to invest for the long term with funds that you will not need immediate access to in the future. Getting into the stock market
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Unformatted text preview: to try and make a quick fortune with money that you cannot afford to lose is a very dangerous financial proposition. On April 17 1991 the Dow Jones Industrial Average (DJIA) was at 3000 On On April 17, 1991 the Dow Jones Industrial Average (DJIA) was at 3000. On January 14, 2000, the DJIA hit a record 11,723. That is a 290.77% gain over this time period. That is an average gain of 33.23% per year over 8.75 years. So, what does all this mean. It means that if you had purchased $10,000 worth of stock in the 30 companies that comprise the DJIA on April 17, 1991, on January 14, 2000 your initial $10,000 investment would have been worth $39,077. Returns like the ones illustrated here lures a lot of money out of bank accounts and into the stock 38 market. For more information on the DJIA, go to: http://www.dowjones.com/corp/index_average.html...
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This note was uploaded on 12/29/2011 for the course ECO 210 taught by Professor Malls during the Fall '10 term at SUNY Stony Brook.

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