Review of real time stock market quotes::How to Read Stock Quotes?
The Dow Jones Industrial Average recently closed above 10,000. While the broader economy has shown some " green shoots" of improved economic activity, the jobless rate is now above 10%. Why has the stock market recovered if the economy has only recently begun to recover? For one thing, the stock market and Wall Street in general is not the "rational" system that bankers and others in the world of finance had believed it was. Indeed, it was thought for much of the past decade that the market was somehow smarter than the institutional regulations they were enacted to protect the small bank depositor and investor. However, the stock market depends upon rumor and speculative guesses as much as the paparazzi and the tabloid press. When it looked like the world, and the United States, was headed for financial ruin, the Dow dropped to less than 7000. While certainly the economy did not, and in some senses still does not, look so rosy, this precipitous decline did not reflect the long-term value of several blue chip stocks in the Dow. The most prudent investment strategy involves long-term investment in companies which have a proven track record in addition to reasonable expectations and grow. However, due to increased trading volume on the markets over the past decades, the stock market has become more of an overall popularity index based on current reporting of the economy. This means that any recession, such as the one we're in, can greatly decrease the value of commonly held stocks in the short term. Conversely, when the market recovers, stocks can also experienced a marked increase in value. Of course, so called " fundamentals" of the companies that investors choose to invest in also will determine stock prices. However, the short term volatility of the market's made obscure true value of stocks. For example, commonly held stock such as financials, experienced in a market decrease in value during the current recession. Such that some stocks for banks such as Citigroup reached a low of less than a dollar during the past year, while reaching highs above fifty dollars over the past five years. Such volatility, is obviously based on real factors such as the gov't bailout which saved several large financial institutions from ruin. However, the 24 hour news cycle has more of an influence on stock prices than realistic expectations of future earnings. What does this mean for the average investor? In the long term, stocks are still a good choice for those looking to retire. However, a feature recession could lead to a similar decrease in if the Dow in future decades, which could lead to a similar situation in which retirees need to delay their retirement. The best way to avoid the negative impact the fluctuations in the stock market can happen your retirement portfolio is to decrease the percentage of your savings in stock as you get older. The best way to determine the best mix of stocks and other investment tools such as CDs is to talk to a financial adviser. In however, relatively young investors in their twenties or thirties can at this point and that's relatively risk free in mutual funds and broad indexes. The old rule of thumb was that 100 minus your age equals the percentage of your portfolio that should be in stock. Obviously, the recent swings in the stock market would make any rational investor jittery. However, with CDs offering very low rates of return, now may be a good time to buy certain stocks and freeze the ball prices. As Don Novello's character, Father Guido Sarducci, used to say on Saturday Night Live, all you need to know about the stock market is " by low, and sell high." While the Dow has recovered a good portion of the value that it lost off of it's highs above 14,000, there still is a long way to go, and young investors looking for a place to save some money should consider stocks over the next decade. Sources: http://money.cnn.com/2009/11/10/markets/markets_newyork/index.htm http://data.cnbc.com/quotes/.DJIA/tab/2 http://en.wikipedia.org/wiki/Father_Guido_Sarducci |
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