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A Comprehensive Study of the Major Asset Classes - Term Paper Example

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The paper contains information about the procedure of buying any financial market asset, different types of stocks, equities and mutual funds, options, and commodities. The paper also includes some of the advantages and disadvantages of the differing types.  …
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A Comprehensive Study of the Major Asset Classes
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Download file to see previous pages The classes include stocks, bonds, and cash equivalents, commodities, real estate, and other types can be included. Some investment professionals differ in terms of what is an actual asset class. Whatever the class is, each one is expected to perform in its own risk and return environment within the changing market. Before anyone even thinks about buying any stock thoughts need to include an investment strategy that fits your life, your personality, and your risk absorption. Upfront, what can you afford to lose? There are different methods of trading stocks or any asset in the market. While some might consider it a game, when your money is on the line, it’s not a game. Before you begin its best to paper trade (trading on paper without actually investing any money or a mock scenario) for a while until you are consistently making money through whatever strategy you choose. When your actual money is on the line, you will be dealing with your own emotions of fear and greed. Online trading has become very popular because of its convenience. Any investment has to be backed by an account that contains monetary funds. It depends on the bank or brokerage firm as to what the minimum deposit will be for opening a new account. The amount usually ranges from $500 to $2000. However, if you prefer to use online trading as an intraday trader, you would need a minimum of $25,000. An intraday trader buys and sells stocks repeatedly during the day. You will need to fill out forms with the brokerage firm and make a deposit into an account opened with them. Most brokerage firms furnish their own software for trading online; however, there are independent companies that provide online trading software. When you buy you can choose a market or limit order. The market order is purchased at whatever is the current price. The limit order is placed at a price you choose. It’s especially helpful to shop around for brokers and banks because they all have their own set of rules and fees. Purchasing Stocks Exactly what is a stock? When you buy stock in any company, you actually own part of that company. If the company does well, so will your stock. If the company does poorly, so will your stock. A stock is not diversified, so this can be seen as a disadvantage. Placing money into one stock can limit your options. You can reduce your risk somewhat by investing in larger more solid companies. Stocks can be purchased anytime through your broker, bank, or online. Online is the most desirable way to purchase stocks because it is convenient, quick, and very accessible. One very favorable advantage to stocks is they are very liquid; meaning you can convert them to cash very easily by selling them anytime. The average person is normally not very good at picking excellent performing stocks. All stocks have ups and downs and it usually takes a professional or an experienced trader to recognize the fluctuations in certain stocks and sectors. The easiest way is to pick stocks that you like or products that you use and would like to own. A good starting point would be to pick from 10 to 15 on average. Examples could include whatever you like in the way of foods, clothing, etc. such as Gap or Abercrombie. Just because it’s a popular brand does not mean the stock will do well.    ...Download file to see next pagesRead More
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