The use of borrowed money “levers” or exaggerates the result of price movement. Suppose the stock moves to $200 a share and you sell it. If you had used your own money exclusively, your return would be 100% on your investment [($20,000 -$10,000)/$10,000]. If you had borrowed $5,000 to buy the stock and sold at $200 per share, your return would be 300 % [(20,000-$5,000)/$5,000] after repaying the $5,000 loan and excluding the cost of interest paid to the broker.
Equity investments historically have enjoyed a return significantly above other types investments while also proving easy liquidity, total visibility, and active regulation to ensure a level playing field for all. Investing in the stock market is a great opportunity to build large asset value for those who are willing to be consistent savers, make the necessary investment in time and energy to gain experience, appropriately manage their risk, and are patient, allowing the magic of compounding to work for them. The younger you begin your investing avocation, the greater the final results – just remember to walk before you begin to run.
The Intelligent Investor by Ben Graham ought to be required reading for every private investor. While the innovations he brought to stock analysis have long been outdated and the red flags he used to watch out for in a company's accounts are now regulated against by the SEC, many of his insights about thinking about investment still stand. For example, his description of Mr Market is still an excellent way of understanding how a crowd moves with the daily news.
The trading products you can purchase using these platforms can include stocks, commodities, derivatives, bonds etc. which can be traded between the traders on the stock market with intermediates such as investment banks, stock exchanges, brokers and market makers. A communication network is set-up between the various intermediates and the traders, which facilitates proper execution of the whole system.
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