Impact of common stocks on global economy

A common stock is offered as IPO, stocks or issues, where the company sells shares for which they get cash from investors.  Investors get ownership to stocks, which can be sold at stock markets at profit or loss.  Stocks can be bought in small numbers or one can invest to own up to 5 to 10 per cent of all the stocks of a company. Company making profits gives dividends, which can be quarterly, half yearly, or per annum dividend issued by the company. Shares can be bought from other owners at the stock exchanges.

Stocks have a few disadvantages as it does not promise to give back the investment money and sometimes, the investors’ loose huge money in a single transaction in a few minutes time.  One cannot predict what could be the wrong or the right investment, in a particular market conditions.   There are many variables involved in stock trades and investors are advised to select the ones with lowest risk factors.  Minor changes in global political, geographical or economical conditions e.g. devaluation of currencies, trade issues between countries, environmental factors, employment reports, labour market conditions, mortgage, interest rates, political factors, mergers, annual results of companies and various other factors can lead to loss or gain at markets.  Some factors can lead to global market crisis, causing huge losses in a few minutes during a day’s trade, or subsequent loss in months or years time. Recently, the slide in Turkish Lira against USD had ripple effects on global stocks, but this did not have long term impact on markets and most markets recovered the losses.

Even bonds provide ways to invest but the risk factors is higher in shares, where the earnings can be one of the highest.  Stocks of profitable companies can pay more, and flawed investment can lead to complete loss of money. Bonds are issued by a company or the local government, and there are provisions for government compensation on loss. Bonds have fixed returns but the rates are low as compared to stocks.

Most stocks are traded through stock exchange which can be central exchange such as NYSE, NASDAQ, and AMEX etc. Historically stocks have been able to provide more than 10 per cent returns each years since 1929.  A lot of research is required to invest in stocks and bonds, some investors hire stock brokers who are experts in these areas and can provide detailed information related to trade, companies and benefits attached to each transaction.

Investors try to diversify into various sectors to buy stocks - one can select media stocks, bank stocks, technology stocks, pharma etc.  Some stocks such as bank stocks in US currency are able to provide more earnings as compared to investments. Recently, the earning reports of technology stocks led to a decline at NASDAQ and S&P. Technology sector represents highest value stocks of almost US$1 trillion value where the five leading stocks are of Apple, Amazon, Facebook, Microsoft, Google – Alphabet – making for 20 per cent of the GDP of the US. In 1999, the five main companies - General Electric, Cisco, Intel and Walmart accounted for more than 15 per cent of US GDP and the dot.net bubble led to severe losses.   

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