Greg Gildea Mr.

Campbell English 1102 2/13/14 The Stock Market: The Best Place for Your Money The stock market allows individuals to invest in publicly traded companies by buying shares, also known as stock or securities, in a desired company through a variety of different exchanges, the New York Stock Exchange and Nasdaq being the two most popular. These shares entitle the owner to a percentage of the income and net worth of the company. Over time the stock market has proven to be one of the best ways for investors to grow their wealth. Today however, almost half of Americans refuse to expose their hard earned capital to the ups and downs of the market. According to a CNN Money and Gallup Poll, Stock ownership among Americans is at a record low. Just 52% of adults say that they or their spouse own any stocks, either individually or through funds. What is it that keeps the other 48% of Americans from investing in a highly profitable market that increased approximately 30% in 2013? The fact the United States is just starting to recover from its worst economic crisis since the Great Depression, along with other current economic woes such as the nations growing debt and the instability of the banking system may be scaring away some investors. But there are a number of other complications keeping many Americans from benefitting from the stock market which recently hit an all-time high. According to the same Gallup Poll, only 65% of Americans were invested in 2007, before the recession, before the European debt crisis emerged, and before the government starting bailing out banks. This indicates that current economic conditions may play a role keeping away
Comment [GP4]: I might just be reading this wrong but the use of back-to-back before the seems redundant . Comment [GP3]: Like the mixing in of a question, that keeps me interested. Comment [GP2]: According to who? You? Let me know who says that.. Comment [GP1]: Good title. I can already tell what it is going to be about

some investors, but more importantly, it reveals that even in better economic times there are other deterrents keeping a large portion of Americans away from the stock market. One of the deterrents may be revealed through Bank of Americas Bridging the Knowledge Gap Survey conducted by New Harris, which shows how, 43 percent of U.S. adults believed they missed good financial opportunities due to their lack of knowledge and nearly four in five U.S. adults (78 percent) believe it is difficult to learn about personal finance. The lack of knowledge about personal finance and investing, along with the fact 32 percent of Americans are making roughly $15,000 a year (Huffingtonpost.com) and might not have available funds to invest, could be the main reasons why so many citizens never invest in the stock market and instead invest in a more accessible and safer government insured savings account or bonds. These deterrents may seem like valid reasons to seek other investments. However, an individual can safely and successfully invest in the stock market with very little starting capital and with no prior knowledge about stocks. One of the best and simplest ways for an average American to invest in the stock market is through ETFs (electronically traded funds) or index funds. Warren Buffet, arguably the best investor in history according to the Wall Street Journal, claims, "A very low-cost index is going to beat a majority of the amateur-managed money or professionally-managed money. The index funds Buffet is referring to are the ones that are made up of stock from all 500 of the largest companies in the United States, also known as the Standard & Poors 500 (S&P 500) . Due to the diversification of these funds, these investments over time have proven to be a relatively safe asset for investors. For example if an individual purchased the SPY ETF, which is made up of all the stocks in the S&P 500, at the worst period in their life time, right before the

Comment [GP5]: Good emphasis.

Comment [GP6]: Reads awkwardly. Great sentence but I may just take out this part and leave the rest. Watch out for a run-on.

Comment [GP7]: Like the use of Arguably. Gives room for a debate by the reader on if he is or isnt.

Comment [GP8]: Smart move by explaining what he was talking about because at first I was clueless.

2008 recession, the individual could still sell that ETF today an receive a 21 percent return on that investment, not including 6 years of dividends paid to the ETF holder (as of 3/19/14). Although it may be easy to see this after the fact, investing in index funds or ETFs that are made up of all the stocks in the S&P 500 will produce approximately a 9 percent return annually (Motley Fool 1928-2010). The stock market also provides opportunities for investors willing to take more risks to try and earn larger returns, and just like with ETFs and index funds it doesnt take an expert to find these opportunities. Peter Lynch, author of The New York Times bestseller One Up on Wall Street and the most successful money manager from 1977-1990, claims, Any average American can pick stocks just as well, if not better, than the average Wall Street expert. When it comes to purchasing individual stocks, Wall Street experts may be more knowledgeable about what to look for on a companys income statement, balance sheet, and other financial statements but when it comes to the actual product and service of the company, which in reality dictates those financial statements, an average American may have the upper hand. For example, does one of Fidelitys stock analysts know if the new Grand Theft Auto video game is going to sell a million units and beat estimates better than a teenager who is online raving about it with his friends? As Peter Lynch writes in his book One Up on Wall Street You might have assumed its the sophisticated and high-level gossip that experts hear around the Quotron machines that gives us our best investment ideas, but I get many of mine the way the fireman got his I stumble onto the big winners in extracurricular situations, the same way you could. Picking a stock can be as simple as finding the next biggest trend in a certain field and in some circumstances the average consumer is more likely to pick up on these trends better than the
Comment [GP10]: Already gave me the name of his book. How about instead of naming the titlemaybe say Peter Lynch writes in his bestseller Comment [GP9]: Good credibility.

millionaires working on Wall Street. Warren Buffet says it best, Wall Street is the only place where people drive to in their Rolls Royce to take advice from those who took the subway. Wealthy Wall Street may be the ones investing in these companies but they arent the ones waiting an hour to get a table at Buffalo Wild Wings (BWLD up 79% year to date) or ordering Dominos (DPZ up 51% year to date) late at night as much as the average consumer is. Although it is important not to overlook a companys financials including the firms debt, and important ratios such as the Price to Earnings ratio (P/E) or the Price Earnings to growth ratio (PE/G), in most cases the ratios are already calculated for you, as Lynch explains in his book All the math you need in the stock market you get in the fourth grade. But with other popular and safer investment opportunities out there such as U.S. bonds or even just a simple savings account, what makes the stock market a superior investment today? The main advantage U.S. Bonds and savings accounts have over the stock market is that they dont force investors to necessarily risk their money. However, this advantage comes with a very small upside on these investments today. According to Bankrate.com most big banks are paying less than 1% a year on their savings accounts, that doesnt even make up for inflation, which from 2003-2014 was increasing 1.5% annually on average. That means saving account holders are actually losing value in their money just letting it sit in a savings account. Bonds are a slightly better alternative to a simple savings account and have some potential upside but today, with interest rates being as low as they are, the advantages arent much. For example today an individual can purchase a 10 year U.S. bond and lock in a 2.73% annual return on that investment for 10 years. If the individual wants to sell that 10 year bond and take out their money prior to maturity (10 years after purchased) than they are vulnerable to one of two
Comment [GP11]: Incorporating the title by asking why it is the best investmentnice.

things happening. If interest rates go higher than the locked in rate of 2.73% than the individuals bond will become less valuable and if sold, the investor will lose money on their investment. On the other hand, say interest rates on 10-year bonds went lower than 2.73% the investor can sell his bond and make a capitalized gain along with the 2.73% in annual interest for the years before it was sold. This displays how bonds do have a potential risk and upside, unless the investor waits for their bond to mature and just collects the locked in interest. Today however, interest rates are at their lowest levels since the 1950s according to the New York Times and have a very small chance of producing any upside in the long run besides very small annual interest. Interest rates will start to increase in upcoming years but ETFs or index funds that are made up of stock from the S&P 500 have outperformed bonds on average from 19282014.
Comment [GP12]: Awesome job dude. I didnt know you knew so much about the Stock Market. You taught me a lot of things that I didnt know whatsoever. I really liked your use of examples in order to explain things that at first were a bit confusing. Make note of some grammatical errors in punctuation for quotes and such. Other than that dude I thought you killed it. Nice job.

Still gotta do a closing paragraph but Im do that later tonight just look at this.