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Insiders and executives have profited handsomely during this mega-boom, but how have smaller shareholders fared, buffeted by the twin engines of greed and fear? Stocks make up an important part of any investor’s portfolio. These are shares in publicly-traded company that trade on an exchange. The percentage of stocks you hold, what kind of industries in which you invest, and how long you hold them depend on your age, risk tolerance , and your overall investment goals. Discount brokers , advisors, and other financial professionals can pull up statistics showing stocks have generated outstanding returns for decades. However, holding the wrong stocks can just as easily destroy fortunes and deny shareholders more lucrative profit-making opportunities. Retirement accounts like k s and others suffered massive losses during that period, with account holders ages 56 to 65 taking the greatest hit because those approaching retirement typically maintain the highest equity exposure. That troubling period highlights the impact of temperament and demographics on stock performance , with greed inducing market participants to buy equities at unsustainably high prices while fear tricks them into selling at huge discounts. This emotional pendulum also fosters profit-robbing mismatches between temperament and ownership style, exemplified by a greedy uninformed crowd playing the trading game because it looks like the easiest path to fabulous returns. Despite those setbacks, the strategy prospered with less volatile blue chips, rewarding investors with impressive annual returns. Both asset classes outperformed government bonds, Treasury bills T-bills , and inflation , offering highly advantageous investments for a lifetime of wealth building. Equities continued their strong performance between and , posting The real estate investment trust REIT equity sub-class beat the broader category, posting This temporal leadership highlights the need for careful stock picking within a buy and hold matrix, either through well-honed skills or a trusted third-party advisor. Large stocks underperformed between and , posting a meager 1. The results reinforce the urgency of internal asset class diversification , requiring a mix of capitalization and sector exposure. Government bonds also surged during this period, but the massive flight to safety during the economic collapse likely skewed those numbers. In addition, results achieve optimal balance through cross-asset diversification that features a mix between stocks and bonds. That advantage intensifies during equity bear markets , easing downside risk. This polarity highlights the critical issue of annual returns because it makes no sense to buy stocks if they generate smaller profits than real estate or a money market account. While history tells us that equities can post stronger returns than other securities, long-term profitability requires risk management and rigid discipline to avoid pitfalls and periodic outliers. Modern portfolio theory provides a critical template for risk perception and wealth management. Diversification provides the foundation for this classic market approach, warning long-term players that owning and relying on a single asset class carries a much higher risk than a basket stuffed with stocks, bonds, commodities, real estate, and other security types. We must also recognize that risk comes in two distinct flavors: Systematic and unsystematic.
By investing in shares, one can earn either through capital appreciation, i.e., on the gains made on capital, or income in the form of dividends.
One way to make money on stocks for which the price is falling is called short selling or going short. Short selling is a fairly simple concept : an investor borrows a stock, sells the stock, and then buys the stock back to return it to the lender. Short selling is risky. Going long on stock means that the investor can only lose their initial investment. If an investor shorts a stock, there is technically no limit to the amount that they could lose because the stock can continue to go up in value.
Why should you do all the work yourself? Put some of your dollars to work for you! See which of these ways make the most sense for your situation.
Most of us are used to working hard for our money. We need our jobs in order to earn enough money to keep a roof over our head and food on our table. Most of us need to be saving for retirement, too, but that can be hard to do. It can help a lot to take some of our money and have it work for us. Here are a few ways you might be able to put your dollars to work. It’s not enough to just be making minimum payments on debts, especially high-interest-rate debts. Those need to be paid off as soon as possible. Not doing so can leave you further in debt and increasingly unable to build a secure financial future. Carrying significant debt at high interest rates is a lot like investing — in reverse. Instead of seeing your net worth grow, you’ll see it shrink as you pay substantial sums to your lender. Fortunately, that dire situation also means that every such dollar of debt that you retire will give you a guaranteed return, by letting you no longer have to pay interest on it. Once you’re no longer facing high-interest-rate debt, look into investing in the stock market. Few investments are likely to grow as quickly as stocks can, and grow more over the long run. Here’s some evidence of that, via Wharton Business School professor Jeremy Siegel, who calculated the average returns for stocks, bonds, bills, gold, and the dollar between and You don’t have to earn a master’s degree in finance in order to invest in stocks , either. Broad-market index funds will generally feature dividend payments, but their yields won’t usually be too hefty. You can do even better than that by including some dividend-paying stocks in your portfolio — or by investing in some dividend- or income-focused mutual funds. That can go a long way in retirement.
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All rights reserved. For reprint rights: Times Syndication Service. Personal Finance News. Market Watch. Pinterest Reddit. By Sunil Dhawan. ThinkStock Photos. Farn earn money from the equity market by investing in shares listed on stock exchanges like BSE or NSE may look easy to. After all, anyone can buy shares with the click of a button right? Well, not really. Building up a portfolio of shares that can generate dtock decent return over a long term on a consistent basis is what it takes to earn money from the share market. However, the reality is that investing directly in the stock market may not be everybody’s cup of tea as equity has always been a volatile asset class with no guarantee of returns. The only silver lining is that over longer period of time, equity has been able to deliver higher than inflation-adjusted returns among all asset classes. First, we look at how money can be made by buying shares.
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