Chapter 2 - Don't be Rushed into Buying Stocks

http://www.nytimes.com/2008/10/16/business/16views.html?_r=1&ref=yourmoney&oref=slogin

Summary
The media report I am blogging about is that you shouldn’t be rushed into buying stocks. Even though the stock levels are the same as 1999, it isn’t a good idea to buy stock because it seems like a bargain. The world stock markets are still jumping around and have gone to extreme lows. Even though the shares are cheap right now, they will get cheaper when the profits fall. So basically it means that the true opportunities in the stock market may still be in short supply and if you invest a lot of money, it might not really work out for you. So because of the tight credit everywhere, consumer spending, corporate profits and investor enthusiasm are set to squeeze for risky assets. So the article is trying to say that investing in stocks now wouldn’t be a good idea because the stocks might decrease even more and that would put the investor in a really bad position.

Connections
The connections between this article and chapter 2 are that this really affects the shareholders. Since the stocks have decreased quite badly, the shareholders that bought shares in the company have lost a lot of money too. The earnings per share have been affected and the financial statements have been affected too. Since the stock market has crashed, the shareholders earnings per share have decreased that sort of played a domino effect and ruined everything else about the company. The crash of the stock market really has connections with the Income Statement and Balance Sheet too, because this affects a lot of things about the Shareholders’ Equity. Investors and shareholders are always looking to buy, sell, or trade shares to enhance their financial position but the stock market crash really makes this a difficult thing to do. The stock market crash also connects with transactions that occur in Chapter 2 because since this crash occurred, many companies are in deep need of selling their assets to make their financial position rise and they would have to do a lot of transactions like getting loans and things in that area. So basically, the two connect because when either the stocks or company go down, the other one gets affected strongly and takes a lot of damage too.

Personal Reflection
I believe that people shouldn’t go out and invest in stock markets right now because it wouldn’t be that great of an idea. Keeping your money under the bed would be a better solution then buying stocks at this moment in my opinion. There are many inexperienced investors right now that may jump into the market in which may break them or make them. I believe that is a huge risk financially and that everyone should just conserve their money at this point of time. I think that if you’re going to invest in the market, you should leave enough money with yourself that will still make you financially fit, instead of taking a risk and maybe even having it all be blown away. To me it seems that many younger investors might actually make the jump into the market but after it’s all done, I believe they will come out with a valuable experience. So basically, I think that if you’re going in, keep enough money to keep yourself financially fit, and if you’re not, this may be a very smart decision on your behalf. So if you’re going in you can either make it or break it.

Mandeep Dhami
Financial Accounting 12
Block A