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Research the Nasdaq Db 3 Financial Management Aiu

Essay by   •  April 12, 2012  •  Essay  •  602 Words (3 Pages)  •  1,669 Views

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Investing in the stock market can be both risky and beneficial for a small investor. It is true that in order to become a successful small investor an individual will have to overcome some real disadvantages (Brooks, R.,2010). Capital is the biggest challenge for investors and not knowing the inner workings of the stock market. Larger investors have more pricing power than small investors and usually get the better price. At the transaction level, a client that is larger would be able to negotiate a lower price on fees and commissions as compared to the smaller investor. Also, a smaller investor is not allotted the same opportunity to subscribe for an IPO that a large institution would. The most Important or "Hot IPO's" are reserved for the high earner individuals, pension funds and hedge funds ( Abraham, S. 2010, July 27). Once the high earners or the preferred clients have been offered the chance to elect the IPO then the small investor is offered it which leads you to think if this is a good option at all if it has been rejected by the high earner investors. Then last but not least are the connections that high earner investors have to lobbyists and government officials that look after the best interest of the preferred clients. Most of the ordinary every day investor does not have these connections and depend on the same elected officials that are influenced by big investors that we depend on to write our laws and have our best interest at heart.

However, small investors should not get discourage but remain hopeful with a strategic plan in mind. The internet has become a very beneficial tool and can equal the playing field. Financial based websites such as e-trade can give small investors the tools needed to make their investment choice options. It takes time requiring research in news and business, current trends, reading profiles and reports and watching the marke( Abraham, S. ,2010, July 27)t. It is important to protect yourself by setting a stop loss therefore you don't go overboard even with a company you may particularly like. Small investors can do what their larger counterpart's pension funds or mutual funds can't do because they are large. It limits big investors from producing great returns. Small investors are able to allocate their capital to the best choice which allows the opportunity for a greater return. Larger institutions cannot do this because of the vast money which it must distribute among hundreds of stock (Hanson, T. 2006, January 9). Small investors have the ability to practice market timing entering and exiting the market at their own discretion. The flexibility they have also allows them to adjust to changing markets quickly focusing on areas of profit.

In conclusion the stock market while advanced and technical in its functionality is not un accessible to small investors. There are laws that are in place as well as governing bodies such as the Securities and Exchange

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