Playing the Stock Market

By: Leroy A. Binns Ph.D.

In a world of economic uncertainties many have sought to offset inflation and recessions by resorting to an array of financial alternatives. To bolster security some have supplemented their incomes with second assignments, others have shown a preference for gambling and a percentage has pursued investments.

One of many investments is the stock market via The New York Stock Exchange (NYSE), The American Stock Exchange (AMEX), The NASDAQ or other local or international stock exchanges which unlike regular commercial banking although risky has the potential of providing greater dividends. Some participants of this Security Exchange Commission (SEC) licensed venture, purchase shares (e.g., blue chips, secondary issues, growth stocks and penny stocks) in lucrative corporations through stock and floor brokers on the assumption that such transactions will yield profitable returns. Others seek the assistance of professional in an attempt to acquire open and/or closed mutual funds with a similar objective in mind. However to avoid a loss which could result from high interest rates, unfavorable publicity and seasonal fluctuations such individuals have the option of selling their shares and if deemed prudent procure stocks elsewhere.

This process is increasingly complex. The players examine and formulate critical decisions utilizing fundamental and technical analyses which assess the potential of companies based on their history with reference to profit, service and competition and determine the value of their common preferred stocks, categories of preferred stocks and when necessary stock and reverse splits.

Empirical evidence applicable to the status of outfits is also gleaned through the following tools:

Stock Listings – Such entails dividends, percentage yield, PE ratio, volume, high, low and close and net change

Stock Price Charts – This instrument underscores historical performances, stock’s stability or volatility, stock’s current price relative to the past and stock’s growth rate

Despite protection offered by the SEC which prohibits the usage of insider information and dictates guidelines associated with the buying and selling of stocks, investors must act responsibly to minimize crises (e.g., the crashes of 1927 and 1987) by exercising expertise – the prerequisite for a climate of fiscal gain.

The following are commonly acceptable techniques:

 Short Selling – This endeavor involves selling lent stocks in anticipation of obtaining an advantage

Buying on Bargain – The utilization of margin accounts to borrow stocks with the intention of gaining interest.

Buying Warrants – This procedure includes the issuance of warrants to purchase pending stocks that could sell at an increased rate and therefore net a profit.

In short considering all the factors at play the stock market may several times be equated with typical speculation practices nonetheless many beg to defer on the grounds that such emulates intelligent investment executions.