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Shane Wise
Malcolm Campbell
English 1102
29 April 2014
The World of Wall Street

As kids that grew up in a nation wide recession, generation Millennial seems to
think about money a lot. From a young age this generation was taught to make the most
out of the money they had. That new age of kids is growing older now, and they are
beginning to look ahead and think about the possibilities of making more money. One
way to make more is by investing money, particularly in stocks. Stocks allow one to earn
more money basically by living a normal life without taking away from an existing job or
adding any extreme differences to ones everyday life.
In todays world there are many people that are looking for an easier way and
quicker way to make money. Everyone has different goals and everyone has different
motives and ways to go about reaching them. Investing is all about using the financial
situation one is currently in to its advantage in order to reach future goals. To efficiently
invest in stocks it takes research, analysis and then re-analysis. It is all about helping
yourself out, and jumping in to stock investment without the proper knowledge on each
investment can be risky. If invested correctly, stocks can be very useful in creating a
better future. This can be retiring earlier or just being able to afford the nicer things in
life. Prior to getting started however, one must know a little background information on
Shane Wise 4/28/14 11:42 PM
Comment [1]: Changeu to Nillennial
Shane Wise 4/28/14 11:48 PM
Comment [2]: Rewoiueu to explain that I
uiun't mean the investoi shoulu quit theii
uay job.
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stocks, learn the proper way to invest, and devise a customized and effective strategy for
their selves.
Before jumping into investment the question to ask is, what are stocks, and why
should I invest in them? Stocks are a type of security that gives stockholders a share of
ownership in a company. Stocks are also call equities (Stocks). One reason investors
use stocks is because of their upside potential. Stocks have potential for strong returns,
or the ability to make money off of an initial investment. They can be bought at a low
price and sold at a high price for a very solid profit. According to the article Why
Investors Use Stocks, on the New York Stock Exchange website, accessibility is another
reason to use stocks. There are thousands of different stocks that can be invested in.
Stock trading is a very convenient style of trade. The last reason to invest in stocks is
because of the dividends. Dividends are payments given to stockholders. Companies
take portions of their profits and divide it among their shareholders (Why Investors Use
Stocks).
The next step to learn about is the five different types of stocks. The first stock is
called an income stock. Income stocks do not usually rise or drop in the overall price, but
they pay large dividends. The next stock is blue-chip stock. Blue-chip stocks are very
reliable. They have long histories of consistent growth no matter the economic condition.
Growth is the third type of stocks. These are shares in young companies that are
experiencing fast expansion compared to industrial companies. They are riskier than
most stocks, but they show much greater potential than other stocks as well. The fourth
type of stock is called a cyclical stock. These stocks are very consistent with economic
trends. If the economy is thriving then so are these stocks but also vice-versa. The last
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stock is a defensive stock. These stocks are mainly very consistent with their price,
meaning they do not usually increase or decrease. Even in a recession period, these
stocks will still hold their value (Stocks).
Now that all of the background information is laid out, the next investment step is
to research stocks. It is very helpful to learn about the histories of companies and their
future plans when thinking of investing in them. Obviously, one way to research stocks
is through the Internet. Financial websites, such as NASDAQ, can provide a lot of
information about stocks, including past performance and current performance. Annual
reports are another useful source for stock research. Every year companies are required
to report their financial being to the SEC. These reports are open to the public, and they
give inside information like management policies and future plans. In addition to annual
reports, balance sheets are a very informative source on companies. They summarize a
companys health based on assets, liabilities, and their net worth. It takes into account
loans, taxes to be paid, stock worth, investments, and many other factors to determine the
companys well being (How to Research Stocks). Resources such as these allow one to
gain the knowledge needed to begin investing in a company or companies.
Once a decision has been made on companies to invest in, one must begin a
portfolio. A portfolio is a record of all investments. Although a portfolios main focus is
to keep track of your investments that is not its sole purpose. The first thing to add to it
will be goals that one makes for his or herself. Investing should have a purpose, and if
one is trying to make money he or she should know what that money is for (Mueller).
To begin investing it is good to diversify among many different stocks. A
portfolio of 12 to 20 different stocks that are researched and chosen well will account for
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plenty of diversification. This will not be too much for a beginning investor to handle.
From here one can adjust his or her portfolio as needed as their experience starts to grow.
More money can be added for more investments or stocks can be dropped if they are not
thriving (Mueller).
A portfolio like that, of course, is a very generic portfolio meant to dip your toe
in the water of stocks. Specific strategies tailored for individuals are a must have before
diving in. There are a wide variety of strategy styles, but a goal assessment and current
financial state evaluation must be made to make a solid decision. An obvious strategy is
buy low and sell high. It can be a risky, based on the chances of a stock not rising, but
rewarding strategy, based on future upside potential. Then there are more stable
approaches from the most famous investor himself, Warren Buffett. His methods are a
bit more complicated, and they take more time to work on, but they can be the most
rewarding.
The most known strategy of buying low and selling high has a fairly basic idea. It
is a very difficult approach that even very experienced investors make mistakes with, thus
meaning it is an approach not meant for beginning investors. Buying stocks with a low
price can mean one acts as a contrarian, or one who does the opposite of the majority. If
a lot of people are selling a particular stock you may buy, or sell when a lot of investors
are buying. You run the risk of selling a stock that may have huge upside, long-term
potential, and buying a stock that will never recover (Strategies for Investing in
Stocks). However, there is also a chance of completely succeeding and getting an
enormous payout with a few stock purchases and sells.
Shane Wise 4/28/14 11:46 PM
Comment [3]: Auueu uefinition to the
iiskiness anu possibility of high iewaius.
Wise S
A more reliable style of investing comes from the best investor of all time,
Warren Buffett. This strategy requires more research and more patience. The first idea
Buffett has is to look for a durable and competitive company. A company must have a
strong advantage over other companies and the ability to create a large profit over long
periods of time. The second is to find a company with responsible and trustworthy
management. Buffett believes in only investing in companies that have honest,
intelligent managers. He also needs the company to have high customer retention rates
and loyalty. His last thought requires patience. It is to buy at a reasonable price. All of
the research may be satisfying, but until that stock reaches a sensible price for an investor
then there is no need to buy at that time (Strategies for Investing in Stocks). This is a
tried, true and tested form of investment. It is ultimately one of the safest investment
types, and it can be one of the most beneficial. However, despite this investment styles
positive track record, there are some changes to be made to every investment strategy
depending on the nature of the economy.
Throughout history the economy has moved up and down and sideways over and
over again. It will also continue to do this forever. When investing in stock it is smart to
take the state of the economy and use it to ones advantage. There are ways to invest in a
bull market, when the economy is strong, and in a bear market, when the economy is
weak. Strategies need to be adjusted and hopefully the changes continue to create
financial stability. Major adjustments are not necessary. Simple changes can easily be
made to weaken losses and strengthen gains.
Bear markets tend to make it more difficult on investors. Many investors lose
confidence in their strategies based on articles they read and things they hear others say.
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Loss of confidence should not happen if basic changes are made. Bear markets cause
stocks to lose their value. Since this is the case the smart move would be to put more
money into blue chip stocks than on growth stocks or cyclical stocks. Blue chip stocks
are better equipped to handle the downfalls of a bear market. In addition to that, more
money in blue chip stocks means that higher dividends will pay out because there will be
a higher investment amount in those stocks (How to Adjust). Other stocks that can be
solid investments in a bear market are defensive stocks and lesser-known stocks.
Defensive stocks usually keep their value no matter what way the economy turns. That is
extremely useful. When the economy falls, this is when defensive stocks shine. To earn
the money needed to invest in those blue chip stocks, defensive stocks can be sold. They
do not lose value therefore a profit will be made when they are sold. This gives an
investor a lot of breathing room to focus on other types of stocks, like the lesser-known
stocks. When the market falls, it is smart to invest in the sturdy companies that hold their
value or continue to grow. On the other hand, bear markets free up the time to research
new stocks. The unknown stocks and younger companies that can withstand a weak
economy set the table for themselves to thrive in a strong economy. Recognition of that
ability in companies can be crucial. Investment in such stocks can result in remarkable
profits when the economy strengthens into a bull market in the future (Barnes).
As the economy does take a turn for the better, stock investment can become a lot
more freeing. Bull markets give investors much more room to invest in stocks that they
would not normally invest in. More risks can be taken on many stocks because more
than likely investors have extra financial room to get creative with. Young and risky
companies are able to thrive in bull markets. This makes it a smart move to invest when
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their stock price is low because if their performance meets their upside potential then
rewards on that stock will be tremendous. Another smart move in a bear market is to
resupply ones portfolio with defensive stocks that were possibly sold in a prior bear
market. Buying defensive stocks can once again be helpful if the economy takes another
downward turn. All in all however, bull markets increase the amount of space available
to get creative with ones investments because there is less of a chance of downfall
(How to Adjust).
To conclude, stock investment is a step-by-step process when trying to enter into
the stock market. Research is a key factor in order to know what one is getting into.
Knowing a companys ins and outs is a very important component to investment. Stocks
are not a gamble if enough knowledge is obtained through research. After investments
have been made, staying up to date with information on stocks is key. Eliminate the risk
with information and awareness of a stocks performance. The ultimate key to
investment is to obtain enough evidence to prove that a company will grow financially.
Specific and custom made strategies and approaches to stock investment are a must.
Every person in the world is unique, and every person has his or her own financial
situation that must be taken into account while investing. Certain methods will work for
certain investors. The world of Wall Street can be challenging. If not handled carefully
it can be very risky and damaging. Especially when dealing with certain markets, such as
bear or bull markets. Changes have to be made very often depending on what is
happening in the nations and worlds economy, and depending on what is happening in
the companies invested in. Less risk should be taken under specific circumstances and
more should be taken in others. If models of investment are not followed correctly then
Shane Wise 4/28/14 11:43 PM
Comment [4]: New auuitions to the final
uiaft.
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the financial consequences can be extremely devastating. However, if investment is
treated right the proper investments can create a better life for investors and the people
around them.




















Shane Wise 4/28/14 11:44 PM
Comment [5]: Reviseu conclusion that is
upuateu accoiuing to new infoimation
auueu to the papei.
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Works Cited

Barnes, Ryan. "Adapt to a Bear Market." Investopedia. Investopedia, 19 Oct. 2013. Web.
24 Apr. 2014.

"How To Adjust Your Portfolio In A Bear Or Bull Market." Forbes. Investopedia, 04
Apr. 2013. Web. 24 Apr. 2014.

"How to Research Stocks." New York Stock Exchange. NYSE Euronext, n.d. Web. 10
Apr 2014.

Mueller, Jim. "Getting Started In Stocks." Investopedia. N.p., 26 Jan 2014. Web. 10 Apr
2014.

"Stocks." New York Stock Exchange. NYSE Euronext. Web. 10 Apr 2014.

"Strategies For Investing In Stocks." Massresources. N.p., n.d. Web. 10 Apr 2014.

"Why Investors Use Stocks." New York Stock Exchange. NYSE Euronext. Web. 10 Apr
2014.
Shane Wise 4/28/14 11:43 PM
Comment [6]: Reviseu Woiks Citeu