Stock Market Returns are the returns that the investors generate out of the stock market. This return could be in the form of profit through trading or in the form of dividends given by the company to its shareholders from time-to-time.
Stock Market Returns are not fixed ensured returns and are subject to market risks. They may be positive or negative. Stock Market Returns are not homogeneous and may change from investor-to-investor depending on the amount of risk one is prepared to take and the quality of his Stock Market Analysis. In opposition to the fixed returns generated by the bonds, the stock market returns are variable in nature. The idea behind stock return is to buy cheap and sell dear. But risk is part and parcel of this market and an investor can also see negative returns in case of wrong speculations.
An investor speculates on the basis of fundamental and technical analyses.
Fundamental Analysis analyzes relevant data (cash flow, return on assets, history of profits, etc.) associated with the company, which could have an effect on the intrinsic or face value of the stock. This analysis helps in predicting the price movement of the stock based on its fundamental strength. Fundamental Analysis is generally relevant for the long-term.
Technical Analysis tries to evaluate the future trend of stock price s by using various statistical tools , chart s, etc. Technical analyst s focus on the historical price movement of a stock and predict accordingly.
They consider that the price movement s are repetitive in nature because the psychological setup s of the investors are seen to follow a certain pattern. The intra-day traders, momentum traders and the swing traders use technical analysis extensively.
Stock Market Returns are subject to risk but now days there are many derivative instrument s like future s, option s, etc. for hedging the risk associated with such investments. These tools can also be utilized by many speculators for leverage d speculative purposes. Derivative s are used by many for arbitraging by utilizing the price discrimination between different markets. Hedging and Arbitraging don't give higher return s but do help in minimizing losses and in protecting the capital.
Hence we can conclude by mentioning the following points: -
- Stock Market Returns are not fixed or ensured ones.
- Stock Market Returns are subjected to market risks .
- Stock Market Returns could be positive or negative.
- Investors invest in the stock market on the basis of fundamental and technical analysis .
- Derivative instrument s help investors in hedging , and arbitraging in order to decrease the risk s associated with the Stock Market Investments.
- Derivative instrument s are also utilized by many speculators for leverage d speculative purposes.
- Stock Market Returns include profit through trading in the secondary market and dividends given by the company to its shareholders from time-to-time.