Your Questions About Advantages And Disadvantages Of Investing In The Stock Market

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Thomas asks…

Stock market vs Forex what recommended for beginners and why ?

hi all
i want to know what exactly are the advantages and disadvantages of each market In relation to the other market .

so a beginner like me who only has few 1000s’ dollars ( 5000$ – 6000$ something in between ) do you recommend me to learn and invest my money in forex or stock market ?

Or maybe just any good third option 🙂


financi4 answers:

Hi Alex,

First of all, let me tell you that the two markets have different kind of style. Yet, they are very risky venture to conduct by newcomers who do not have all the necessary things like the knowledge, education, tools and experience. So, it is not recommended for anyone who still new in these two types of business to just make some deposit and trade. There are steps you should know and take before you can be sure that you will be succeed in this paper money investment business.

So, the difference between those two markets are as described below;

The Stock Market,
Advantages of doing stock trading is that we can focus to rumors and news more deeply before the technical analysis. It is because doing stock trading means that you are trading on the rise or fall of one particular company. So, it is more focus and you can be more focus on following that company’s progress rather than to have moving from one company to the other trying to look for the best candidate that you think will make significant progress after sometimes.

Disadvantages of doing stock trading is quite many I’d say, First, you have to conduct your research of one particular company and you have to do this very deeply. You want to know how much is their starting capital, what kind of products they make, what steps they’ve taken to promote their company and products, how many people involved in that company, what about their competition etc. The research is extensively long and it is required deep thoughts and experiences in learning about some or new company that just been listed in the stock market. And also, they are traded on office hours only. The brokers will charge you with quite commissions whenever you make trades and the amount of capital needed to start this venture is usually too big for ordinary person like me. So, in short, stock trading is not my kind of investment.

The Forex Market,
Advantages, We can make quite small deposit to participate in the currency markets. Since many brokers nowadays are offering us with micro accounts so I think it will be worth a while to try to do live trading activity with such small account for practice purpose. And this markets open 24/7, so this means that we can trade this anytime we like and we can adjust our time to trade where ever we are right now. We could also get quite nice leverage, which in the States, the max leverage we can use now is 1:50 this number just been regulated by the NFA not too long ago. And also, since the Forex brokerage business is so fierce these days, we can take more advantages from brokers by getting their sophisticate trading platform that we can use for free.

Because the currency market is so wide and huge, it is hard to keep up with all the pairs. And this could be very dangerous too because the currency price is moved by market sentiment, rumors, fundamental, political issue of particular country and events that may or presently taking place in one of those particular countries. What I mean is that the currency market is so dynamic, it can turn 180 degree in a sudden without warning from any news releases or something. Just a slight bit of political news, for instance, could change the whole analysis of the pairs.

Good luck

Joseph asks…

Should I buy U.S stocks or others’? And what’re bull vs bear market prospects?

Hi all,
I am pretty much a newcomer in stock investing. If I am not mistaken, right now U.S are still under the bear market. So should I start investing on current market or should I find other countries’s stocks which have bull market? I personally have no idea what’re the advantages and disadvantages of bull or bear market so please enlighten my curiosity thanks.
Great answers! I like all of your inputs and ideas so I will leave to others to vote for the best one. Thanks for replying my question.

financi4 answers:

Good question. First off, depending on who you talk with, US stocks have had a fairly strong bull run from late 2002. There are several schools of thought as to the current market trend. My view is that leading US stocks that drove this rally (GOOG, EBAY, YHOO, APPL, etc.) are being distributed, if this continues, the general market is probably going lower. Could change at any time.

The US and western Europe have the best developed, most liquid equity markets. Other markets have excellent potential, however there is more risk as well. For the most part, financial statements released by US companies are reliable. Other countires may not be as rigorous. There may be other risks in less developed markets as well.

There are so many different ways to invest in stocks, it’s very hard to determine if you should start now.

You need to learn about the market and develop the skills to decide what is best for you.

Warren Buffett and William O’Neil are examples of people very successful investing in stocks. They share some similar views, but are very different investors. Search them on Yahoo! O’Neil’s book “How to Make Money in Stocks,” is excellent.

Taking a position in a stock or market takes research, planning and courage. Mutual funds, ETFs and hedge funds are excellent alternatives.

Paul asks…

Stock basics?

I’m interested in investing in the stock market (I’ve got my eye on some in the technology sector in the NASDAQ -yes I know it’s risky). I have some basic questions.

1. Do you have to go through a broker to buy and sell shares?
2. If so what are the advantages/disadvantages of going to online vs physical brokers?
3. How much should you typically invest in any particular company or how many shares should you buy?
4. Do you invest a set amount of money or do you buy a set number of shares at a given rate?
5. Can you pick and choose who to buy shares off (as different sellers may be asking different prices at any given time) or is this the role of the broker?
6. What is the situation regarding taxes? What taxes do you pay on stocks (if any) and how is it calculated if they are?
7. When investing in foreign markets which use different currencies, what role does currency conversion play?
8. Terminology wise (briefly) what’s the difference between a stock, share and a option?

financi4 answers:

1. A broker is needed. However, that can also be an online brokerage firm such as Fidelity, Schwab, Scottrade, etc. You don’t have to talk to anyone if you don’t want to.

2. Basic advantage of on-line is cost. Execution appears to be just as good if not better than going through a physical broker in most instances. You will avoid pressure tactics to trade as well as simply bad advice. You will miss out on good advice, if it’s available.

If you have to ask this question, I believe you’re better off on line.

3. It’s difficult to say how much to invest. It’s different for different people, depending upon how much in total you intend to invest over how many companies. Sorry, but there isn’t enough information to answer this point.

4. Both. It simply depends on what I’m trying to achieve at the time.

5. No. On the NYSE for instance, all trades go through the computer system and specialist. The buyers and sellers are blind. On the NASDAQ you won’t know who the bid and asks are from unless you pay for the service. Again, if you’re asking the question, you’re probably not ready for that level of service.

6. Taxes occur on sales and taxable exchanges as well as from dividends and interest. Capital gains taxes will depend on your tax rate and holding period.

7. That depends on whether you are buying the shares on a local exchange (e.g., Paris) or ADS in NY. An example of what you mean would be helpful.

8. No difference between a stock and common share. An option is a completely different animal. It’s a derivative investment that permits a leveraged return in exchange for high risk (the option will expire and it’s either got to work within that time frame or you lose). With stock, you can wait as long as you like before selling.

Daniel asks…

Which is better to invest in .. Stock market or forex ?

which is more profitable ?
which is more risky ?
what the advantage and disadvantage of both of them ?

financi4 answers:

From Money Magazine.
More than 80% of new forex traders lose money in their first year.
You are playing against big-boys.
Start with stocks.
Also google Forex scam so you can know how it works.

Chris asks…

Need help working calculations and answers to A and B.?

Need help working calculations and answers to A and B.?
A. requires investment of $20000 and should have positive net cf of $3200 annually for 7 years.

B. also investment of $20000 and estimates net cf of yr1, -$2000; yr2, $2675; yr3, $3200; yr4, $4550; yr5, $6550; yr6, $7000; yr7, $8000

1. How do the projects compare using the payback method?
2. Assume by investing $20000 in the stock market there can be certain of a 10% rate of return.
3. how do you calculate the NPV of B using 10% as the discount rate.

What are the advantages and disadvantages of using these methods? What would be the recommendations to invest?
1 second ago – 4 days left to answer.

financi4 answers:

Do you need help or do you want someone to do your homework?

1) Here’s help: A = 20,000 + 7 x 3,200 = 41,400 after 7 years. You calculate B.

2) 10% rate of return. A yields: 3,200 (1 – 1.1^(-7)) / (.1). You calculate B’s stream of payments at 10%.

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