1.

) What are the factors considered by investors regarding their decision to invest in
stocks?
1. Stocks aren't just pieces of paper.
When you buy a share of stock, you are taking a share of ownership in a company. Collectively, the
company is owned by all the shareholders, and each share represents a claim on assets and
earnings.
2. There are many different kinds of stocks.
The most common ways to divide the market are by company size (measured by market
capitalization), sector, and types of growth patterns. Investors may talk about large-cap vs. small-cap
stocks, energy vs. technology stocks, or growth vs. value stocks, for example.
3. Stock prices track earnings.
Over the short term, the behavior of the market is based on enthusiasm, fear, rumors and news.
Over the long term, though, it is mainly company earnings that determine whether a stock's price will
go up, down or sideways.
4. Stocks are your best shot for getting a return over and above the pace of inflation.
Since the end of World War II, through many ups and downs, the average large stock has returned
close to 10% a year -- well ahead of inflation, and the return of bonds, real estate and other savings
vehicles. As a result, stocks are the best way to save money for long-term goals like retirement.
5. Individual stocks are not the market.
A good stock may go up even when the market is going down, while a stinker can go down even
when the market is booming.
6. A great track record does not guarantee strong performance in the future.
Stock prices are based on projections of future earnings. A strong track record bodes well, but even
the best companies can slip.
7. You can't tell how expensive a stock is by looking only at its price.
Because a stock's value depends on earnings, a $100 stock can be cheap if the company's earnings
prospects are high enough, while a $2 stock can be expensive if earnings potential is dim.

8. Investors compare stock prices to other factors to assess value.

To get a sense of whether a stock is over- or undervalued, investors compare its price to revenue,
earnings, cash flow, and other fundamental criteria. Comparing a company's performance
expectations to those of its industry is also common -- firms operating in slow-growth industries are
judged differently than those whose sectors are more robust.
9. A smart portfolio positioned for long-term growth includes strong stocks from different
industries.
As a general rule, it's best to hold stocks from several different industries. That way, if one area of
the economy goes into the dumps, you have something to fall back on.
10. It's smarter to buy and hold good stocks than to engage in rapid-fire trading.
The cost of trading has dropped dramatically -- it's easy to find commissions for less than $10 a
trade. But there are other costs to trading -- including mark-ups by brokers and higher taxes for
short-term trades -- that stack the odds against traders. What's more, active trading requires paying
close attention to stock-price fluctuations. That's not so easy to do if you've got a full-time job
elsewhere. And it's especially difficult if you are a risk-averse person, in which case the shock of
quickly losing a substantial amount of your own money may prove extremely nerve-wracking.
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2.) Why do people invest in stock market?

You're not buying a stock; you're buying a company.

The primary reason you invest in a stock is because the company is making a profit and
you want to participate in its long-term success.

If you buy a stock when the company isn't making a profit, you're not investing you're
speculating.

A stock (or stocks in general) should never be 100 percent of your assets.

In some cases (such as a severe bear market), stocks aren't a good investment at all.

A stock's price is dependent on the company, which in turn is dependent on its

environment, which includes its customer base, its industry, the general economy, and the
political climate.

Your common sense and logic can be just as important in choosing a good stock as the
advice of any investment expert.

Always have well-reasoned answers to questions such as "Why are you investing in
stocks?" and "Why are you investing in a particular stock?"

If you have no idea about the prospects of a company (and sometimes even if you think
you do), use stop-loss orders.

Even if your philosophy is to buy and hold for the long term, continue to monitor your
stocks and consider selling them if they're not appreciating or if general economic
conditions have changed.
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3.) What are the opportunities associated in investing in stocks? & 4.) What are the
risks associated in investing stocks?

Eight Stock Investment Opportunities and Challenges

By Paul Mladjenovic from Stock Investing For Dummies, 4th Edition
Stock investing doesn't happen in a vacuum; it operates in a world swirling with issues and
events that affect your stocks and stock investing decisions. Fortunately, it can still be profitable
if you see clearly what the stock marketfaces today.
Events and conditions in today's economic and social landscape will either help or hurt your
stock picks. Here are eight things to watch out for.
Debt
We are living in the age of overindebtedness. For stock investors, the point is loud and clear: If a
company is too overindebted or has customers that are overindebted, the risk to the economic
health of that company becomes obvious. If you invest in a stock that's exposed to debt
problems, directly or indirectly, you'll be at risk.
Take a close look at the company's financials and ask yourself how exposed the company is to
excessive debt. Too much debt means too much risk for its stock. Look elsewhere for potential
investments because there are plenty of stocks with low (or controllable) levels of debt.
Inflation

Inflation is related to debt, especially government debt. When governments spend beyond their
means, they go into debt (like the rest of us). However, when push comes to shove, they, unlike
us, can print more money to pay this debt. Most governments that produce their own currency
tend to overproduce money, and when you have too much money chasing too few goods and
services, you get inflation.
Given this reality, it's important to keep some things in your portfolio that benefit from inflation,
such as gold- and silver-related stocks,exchange-traded funds (ETFs), and energy and grain
companies.
The growth of government
When you invest in stocks, you invest in companies. These companies, along with their
customers and investors, are producers in the private economy. The private economy, in turn,
supports government its programs, public sector employees, dependents, and so on. From a
functional point of view, the government is a burden that must be carried by the private sector.
This is neither a negative nor positive point; it's just a reality.
The private sector has been able to shoulder the government and its related programs for
decades, and it has generally worked well. However, the growth has crossed a troublesome line.
The federal government's debt recently exceeded 100 percent of the country's gross domestic
product (GDP) and has grown dramatically in recent years. Additionally, the federal annual
budget (in terms of outlays or spending) is now greater than 28 percent of the country's GDP, the
highest level in half a century.
History tells us that this type of development is unsustainable and that it can have profound and
troubling effects on the private sector. (Translation: the stock market goes down.) What's an
investor to do?
Investing in quality stocks is part of an overall, long-term wealth-building strategy, but along the
way, and especially during perilous times, prudent safeguards, such as stop-loss orders, should be
used.
International challenges
The world economy is getting more unstable. Financial crises, government mismanagement, and
regional conflicts around the globe will ultimately affect your stock portfolio. Given that, stock
investors are more apt to push the panic button when the headlines scream doom. Therefore,
check to see to what extent a company you're thinking of investing in is dependent on those
troubled lands.

Investing in a company that does business internationally isn't a bad thing; it can be good
because it shows that the company makes money in a diversified range of countries. But it's a
good idea to contact the company's shareholder department or visit its website to see what
exposure (if any) it may have to the world's trouble spots. Of course, if the company does
business with a country or region that's generally stable politically and economically, that's a
plus.
Recession/Depression
As this article is published, various sources have pointed out that the United States is in a very
slow recovery in the wake of the worst recession in decades. In addition, still more sources are
warning that it's in danger of relapsing into a second recession (the so-called "double-dip
recession"). Regardless of how you look at it, the economy is having its toughest time in modern
history. What's an investor to do?
"Human need" investing investing in those resources people will need regardless of the
economy should be the cornerstone of your investing, especially in tough times. No matter
how good or bad times are, people will continue to buy what they need from the companies that
fill their needs.
Technology
One great thing about the United States is that it still has a vibrant technology sector. Technology
just makes some of our social and business activities that much more productive or enjoyable.
No matter how bad the economy is, people will use their technology to ease the pain.
Technology is best broken up into two categories: technology that fills "wants" and technology
that fills "needs." Even though "wants" seem to have done very well (just ask Apple devotees),
investors should stick to technology that people and businesses need, such as technology for data
storage, accounting, and telecommunications. Your common sense, coupled with research, will
help you.
Commodities
In 2011, the world population crossed the 7 billion mark. That's a lot of people to feed, clothe,
and shelter. All of these people need more of what can be summarized in one word: commodities
(or natural resources). Commodities include corn, soybeans, cotton, cocoa, rice, copper, zinc, and
so much more. Stocks (and related ETFs) of profitable companies that provide and prepare
commodities for general consumption will do well, and investors should participate.
Energy

Energy has morphed into both a challenge and an opportunity. Energy as we have known it for
decades oil is indeed running toward empty. Specifically, our economy has been running
on sweet crude for a century or more. But oil supplies have been more and more difficult to come
by. The days are numbered for this type of energy investment.
Fortunately, new opportunities are opening up. New technologies are helping the country find
new energy supplies (such as natural gas and shale oil), and this is a very encouraging area for
investors to research for new stock opportunities.
Energy will always be a vital part of a modern economy, no matter what form it may take.
Energy is a necessity for businesses and consumers, and it belongs to some extent in almost any
portfolio.

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