Pros of Investing in the Stock Market Research Paper

  • Length: 6 pages
  • Sources: 2
  • Subject: Economics
  • Type: Research Paper
  • Paper: #8729870

Excerpt from Research Paper :

Pros of Investing in the Stock Market and the Increased Benefits it provides for Global Stability.

One of the strongest areas of investing is the stock market. This is because it is known for providing above average historical returns. Evidence of this can be seen by looking no further than information that was collected by Anspach (2012). She found that the stock market has produced an average return since 1990 of 9.14%. This is higher than what most investors are earning in other asset classes.

As a result, these views are illustrating how investing in these areas will produce a larger overall return. To fully understand how this takes place requires examining the benefits of investing in the stock market and the merits that it is providing when it comes to global stability. This will be accomplished by focusing on: the advantages, the role that credit card debt will play in personal finance, how the annotated bibliography is highlighting the benefits to investors and evaluating the contributions of other professionals in this area. Together, these different elements will provide the greatest insights as to how the stock market is supporting global stability. (Anspach)

The Advantages of Stock Market

The biggest advantage of the stock market is that it can help to improve the overall personal net worth of individuals. This is because it is using a principal known as compounding to increase the overall return in the portfolio. For example, if investors are making an annual return of 10% a year, they will be able to increase the value of their holdings by 100% over the course of a decade. When this is applied to even longer periods of time, these increases become larger. This will improve stability by providing investors with a way of going beyond any kind of rise in wholesale or retail prices from inflation. (Manajin) (Khan 1 -12)

Evidence of this can be seen with observations from Khan (1999) who wrote, "Since 1926, stocks have outpaced the inflation rate significantly, while fixed income investments have not. In general, it has been observed that the higher the volatility of an investment. The greater it's potential to outpace the inflation rate over the course of time. Based on historical returns, the stock market is the best protection against inflation." This is illustrating how stocks can produce a dramatically higher return in comparison with other asset classes. (Khan 2)

Moreover, the stock market is considered to be very liquid. This means that if an individual or organization needs access to the funds, they can easily sell it and use the proceeds to invest in the local economy. This will help to spur retail spending in the area. (Khan 1 -12)

At the same time, the ability to use the stock market to raise capital will help firms to continue with expansion programs. This will create jobs and improve the standard of living in communities where their operations are located. There is also the possibility that employers will begin offering staff members' direct ownership in the firm through the common stock. This will help the employees to plan for retirement and it will ensure that they can increase their overall return. (Khan 1 -12) These benefits are showing how the stock market will promote long-term stability by providing a way of helping stakeholders to increase their net worth. Once this takes place, is when they will focus on activities that will increase their return (which will help to support businesses and create jobs).

Credit Card Debt and the Role it plays in Personal Finance

Credit card debt can provide consumers with the ability to have access to short-term financing. This can be used to address liquidity issues that someone is facing. Then, once they receive their other forms of income is when they will pay down these balances. In this aspect, credit card debt can used to help businesses and individuals address monetary challenges. Once this takes place, is when the firm can use this flexibility to help increase their income. For example, many different sized businesses will often use credit cards to provide executives with additional liquidity without carrying lots of cash. This helps them to track spending and monitor the activities of personal. While at the same time, this is giving the firm the ability to address critical customer issues (i.e. meeting new clients) which could have a positive impact on the profit margins of the firm. (Garman 195 -- 210)

However, if credit card debt is not managed properly, it could have an adverse impact on the personal finances of the individual or firm. In this case, the interest and fees on these kinds of loans can be as high as 21%. For consumers and businesses, this could cost them several thousand dollars a year in added fees. At the same time, this will have an impact on their credit rating and the ability to obtain additional financing. (Garman 195 -- 210)

Evidence of this can be seen with observations from Garman (2011) who said, "Credit cards can be an appropriate tool in personal financial management -- but only when used appropriately. The goal is to use credit cards in a manner that will avoid all fees including finance charges. This means paying the balance off in full each month. Otherwise, credit card loans are the most expensive form of financing. If you do not manage your credit cards wisely, you will unnecessarily pay thousands of dollars a year in: interest, penalties, late fees and other charges. This can have an impact on the ability to obtain low interest loans in order to make other purchases. Moreover, there is the possibility that someone could miss a job opportunity because employers do not work with individuals who have poor credit history." This is highlighting how credit card debt can help to address short-term liquidity challenges. Yet at the same time, there is the possibility that this could result in higher interest rates. (Garman 205 -- 206)

Therefore, the role of credit card debt in personal finance is focused on showing how well an organization can manage these levels. For investors, this will have an impact upon the way they look at a particular individual or firm. This will have an effect on the kind of economic opportunities that are available and how much interest they will pay. Once this takes place, is when individuals and firms can make more informed decisions based upon these variables. (Garman 195 -- 210)

Discuss the annotated biographies with account that each bring positive outlook for future investors

The first source by Chen, is talking about how human resources will play a critical role in helping to motivate employees and addressing their most important needs. For investors, this will provide them with increased profit margins. The way that this will occur, is though motivated employees will go the extra mile for the corporation. This is when: customer service, quality and productivity will increase. Once this takes place consistently, is the point that the profit margins of the firm will improve dramatically. This will help the company to realized higher earnings per share. When this happens, the price of the stock and dividends received by investors will rise (resulting a in a larger total return).

The article that was written by Luse is talking about how employers will often look at an employee's Facebook page and Internet postings to determine their personality traits. These areas will be used to decide if they are good fit for the position and if they need to be extensively monitored. As these kinds of searches are offering them with specific insights into various personality traits, which can be used to determine: the morals, common sense and judgment of the person.

For investors, these kinds of tools are providing the firm with ability to screen potential employees. This will make certain that they are attracting key talent, who has the kind personal attributes they are looking for. Over the course of time this will help a company to adjust with changes in the marketplace by locating and retaining the best talent. This will help to increase the total returns for investors, by ensuring that the firm can be able to improve sales (through offering customers the products they are demanding). In the future, this will lead to an increase in the value of the stock and the dividends that are being received.

The article that was written by Mitsuhashi is talking about how networked organizations are able to improve communication and collaboration. This is because they are taking a focus on increasing communication between the different stakeholders. Once this takes place, is when everyone is able to more effectively work together in achieving the larger organizational objectives. In contrast to a stand-alone organization, these ideas will help a firm to address a host of challenges by having everyone work together in talking about possible issues. Over the course of time, this will give them the ability to identify and…

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