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Arguing about the risk of investment in a certain kind of stock - Essay Example

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Risks Involved in Investing into Stocks- a case study of 3 Stocks Introduction World Economy is going through tough times owing to economic crisis emerging in most of the developed countries of the world. Since 2007, the overall state of the economy is not healthy and as such many sectors and markets of the economy are suffering from low demand and depressed activity…
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Arguing about the risk of investment in a certain kind of stock
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Download file to see previous pages Since stocks are considered as most volatile and risky investments, therefore, to make an investment into any stock requires considerable analysis and exploration of different factors which may have a direct or indirect impact on the stock prices. Since 2007, overall activity in the stock markets has been depressed due to different factors and currently the markets are suffering due to sovereign debt crisis in EU zone. (Elliott). Despite such economic uncertainty and decline in economic activity, there are sectors which are booming and can provide one of the most lucrative investment avenues to the investors. Stocks like Facebook, semi-conductor industry stocks, as well as 3M are some of the stocks which can provide real benefits to the investors at every level. It is also, however, important to note that the personal risk and return preferences are always individual and remain as an individual decision. This paper will discuss the risks involved in the stocks such as Facebook, NXP and 3M, as well as will explore as to how the risks may emerge and how investors can actually invest into such stocks. Stocks Investment Before discussing the different stocks, it is important to provide a general introduction to the stock investment and how they can be approached from the investment point of view. Historically, the returns on the stocks, as well as bonds remained volatile; however, stocks have returned more over the period of time. It is also critical to note that the bonds are considered as safer investments because they hold the preference over the stocks and the bondholders are paid fixed interest income over the period of bond maturity. It becomes the obligation of the bond issuers to pay regular interest over the period of the bond and return the principal at the end. However, this is not the case with the stocks and the shareholders are not paid any principal at the end neither they are guaranteed that they will be paid regular dividends. These characteristics of the stocks, therefore, make them risky and investors can only invest into them if they believe and understand the overall risks involved. It is critical to note that stockholders, however, are given the ownership into the firms and they can also participate into the overall decision making for the firm (Siegel). The value, return and risks on the stocks, therefore, are relatively unique and different and need expertise and certain degree of business acumen to decide as to whether to invest or not. Facebook Shares World is experiencing a new internet boom and internet websites are becoming one of the hottest investment avenues for the investors. Different types of websites and services such as Facebook, Google, Zynga have been able to attract huge attention of the investors due to the sheer potential of growth involved in them. Recently Zynga, one of the leading makers of social games, launched its IPO and was successfully oversubscribed by the investors in the global markets (Raice and Randall). Such receptivity towards these types of stocks, therefore, suggests that the investors are ready to understand the risks involved into dot com companies and are also willing to assume them. Facebook Inc. is the leading social networking site with millions of active users who use Facebook every day. What is important to note, that the overall user base of the site is global and as such it has global ...Download file to see next pagesRead More
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