Financial Markets The stock market is often compared to a gamble, while the bond

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Financial Markets
The stock market is often compared to a gamble, while the bond market is often described as being safe. In reality, neither is true.
Pick a question, two, or three, and give us your thoughts, preferably (as always) with additional reference material:
Why do people invest? What is the purpose, and objective of the investor? Why do individuals invest in stocks? In bonds? What do they actually own when they make an investment in a stock or a bond? When the stock market rises, is that an indication of a good economy? Or, is it something else? When a stock drops is that a sign of a bad company or economy? What is meant by the “real” return of an investment? Is the real return of stocks or bonds greater over time? Why? What market and economic concepts that we’ve discussed influence a stock or bond investment?

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The stock market is often compared to a gamble, while the bond market is often described as being safe. In reality, neither is true.
Pick a question, two, or three, and give us your thoughts, preferably (as always) with additional reference material:
Why do people invest? What is the purpose, and objective of the investor? Why do individuals invest in stocks? In bonds? What do they actually own when they make an investment in a stock or a bond? When the stock market rises, is that an indication of a good economy? Or, is it something else? When a stock drops is that a sign of a bad company or economy? What is meant by the “real” return of an investment? Is the real return of stocks or bonds greater over time? Why? What market and economic concepts that we’ve discussed influence a stock or bond investment?

Reply Quote Email Author Financial Markets
The stock market is often compared to a gamble, while the bond market is often described as being safe. In reality, neither is true.
Pick a question, two, or three, and give us your thoughts, preferably (as always) with additional reference material:
Why do people invest? What is the purpose, and objective of the investor? Why do individuals invest in stocks? In bonds? What do they actually own when they make an investment in a stock or a bond? When the stock market rises, is that an indication of a good economy? Or, is it something else? When a stock drops is that a sign of a bad company or economy? What is meant by the “real” return of an investment? Is the real return of stocks or bonds greater over time? Why? What market and economic concepts that we’ve discussed influence a stock or bond investment?

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Explanation / Answer

* Why do people invest? What is the purpose, and objective of the investor?

Solution: The basic objective of investment by individuals is to save the money, and the other good reason of investment is to get dividends from the money which they have saved as investment. The long term objectives of the investment would be to have socio-economic security once they retire from their job, to maintain and improve their life style, and live comfortably. To meet the financial needs during an emergency situation as a crisis stage of medical treatment. To meet the needs of family in a good manner and to live a standard life. The short term goals of investment would be to buy a product, to buy a house, or to have good holiday in good tourist destination etc. The main aim of investment is to have financial security to maintain a standard life and improve it accordingly.

* Why do individuals invest in stocks and bonds? What do they actually on when they make an investment in a stock or a bond?

Solution: Investing in stocks and bonds means people want to save money, as well as, get dividends for their money that is saved. Stocks and bonds increases the actual money that has been saved by the people,but these have risks with them.

The individuals who invest in stocks, own a share of money by buying the share or stocks of the companies, thus when the company is in profit, they too would receive their share of increased profit. But this is subjective to market volatility. If the company goes to bankruptcy, then they would the last to receive any money from the company, this means that they would loose all their money.

Investigating in bonds means lending money to the companies on a fixed interest rates by buying bonds from government regulated corporations or government owned organizations. This too is subjective to market volatility, that is when the companies on which the money was invested is running in a huge profit, the investors won't receive the increased share of profit as the stock holders would receive, they would only receive their fixed amount of interest. But, if the company goes into bankruptcy, they would recieve some amount of their invested money.

Stocks would earn more dividends to the investors, if the company runs in profit, while putting all their investment in danger if the company goes bankrupt. Bonds do give dividends but in a rate that remains fixed for the term of investment, but do give some security to the investment if the company goes bankrupt.

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