investment poll

Archive for December, 2008

“Investors often cause stock market problems”

With the advent of online banking and online trading, the stock market has opened its doors to virtually every person willing enough to grow their money.

And yet, despite this, not everyone has joined the bandwagon. The biggest factor being the potential risk involved in trading stocks.

The stock market is among the most volatile financial institutions in business. And it’s this volatility that tends to be the biggest problem with the stock market.

Almost any reason, real or imagined can cause these extreme fluctuations that often affect the stock market’s credibility.

Real factors such as the weather, political instability, political decisions, war, terrorist threats, boycotts and strikes, economic trends and international trade or even company scandals also become factors to the stock market problems.

Bad weather such as hurricanes affects certain industries such as oil production. This then drives the cost of petroleum products higher as production gets limited. This causes a cascading effect that drives stocks of oil companies higher.

Political instability in a country can affect investor confidence thus lesser investing is done. This causes the shares of local companies to slide downwards.

Boycotts, strikers and terrorist threats have also proven to be the bane of the airline industry. Shares of airliners have tumbled throughout the years with every terrorist attacks all over the world.

But aside from uncontrollable factors such as natural disaster (or war), the common underlying link that allows these other reasons to affect the stock market so significantly is investor psychology.

Humans are prone to herd mentality. Often, people confirm with the actions and directions of other people.

This is a common mistake in investing.

An example of this is during the early 90s when dozens of dot com companies sold their stocks in the stock market. It created an artificial demand for stocks of companies that did not even provide real and concrete services.

These stocks soared in value as more and more enthusiastic investors bought them. This happened up until the time it was realized that these companies did not actually post any considerable profit to sustain the value of the shares.

The stocks then tumbled and virtually lost value as investors frantically sold their shares.

This tendency to panic and depend on the direction of others is among the real causes of problems with the stock market.

There are two actions arising from this mentality:

a.) panic buying

b.) panic selling

Of the two, panic selling causes the most harm since it causes a steep and quick drop in the value of shares.

The best way to avoid causing these problems is to practice due diligence and to keep a level head while investing.

Numerous studies show that girls’ self-esteem and self-confidence tends to plummet after about age nine as girls enter puberty. Is there any way to promote and increase self esteem and confidence during the earlier years to help pave the way for this important transitional time? The good news is yes, there are things that can be done. Some of them you already know, but a few reminders can’t hurt.

For one, limit television. Yes, we’ve all heard it before, and it’s easier said than done, particularly when there are a number of things to be done. However, studies show that programming and advertising can have a negative affect on viewers. Beginning at very young ages, shows geared toward children are mixed with many advertising messages, some subtle, and some not so subtle. While we can’t blame the media for everything, we can acknowledge that too much television may negatively affect our children’s self esteem and confidence.

Children who learn at a young age that food equals happiness, for example, may have problems with body image later in life. Ongoing messages that things are the solutions to problems only exaggerates feelings of low self worth if a child doesn’t have the right things. As children age, the “things” can change into a perfect body, and not having the right things can translate into body image problems and other self-destructive behaviors.

Provide positive role models. As girls age, they become increasingly aware of how women around them act and respond to various situations. Women who stuff their anger or express it “sideways” show girls that it’s not okay to be angry, stand up for oneself, and be open and honest about their feelings. Young girls learn from this behavior, and internal anger can express itself in feelings of low self-esteem and low confidence.

Depression increases, and unexpressed anger can come out in very self-destructive ways, including eating disorders and substance abuse. Unfortunately, many women never learned how to express their feelings in an appropriate manner, because they themselves did not have positive role models. If this is an issue, consider seeking professional help, not only for your own sake, but for those of your children.

Encourage learning and education. Some studies show that girls with a strong educational background are less likely to run into trouble as teens. The more girls know, the better able they are to make decisions. It’s also important to encourage learning in math and science. While this is improving, girls are still viewed as less likely to succeed in these areas.

Encouragement in these learning areas cannot only promote increased self-confidence, but it can also prepare girls for the changing work environment that relies more and more on technology. Of course, this isn’t to say that other areas of learning are less important; only that encouragement in these areas can help provide balance to an education that is still not quite equal.