Essay Example on Investing in Stocks: Benefits and Risks of Financial Gains

The decision to invest in stocks was driven by various factors, such as the possibility of making investment gains. It is not recommendable from a financial point of view to keep funds staying idle in a bank since the interest rates that it can attract is less compared to when it is invested in the stock market. They tend to rise in value, especially when the market conditions are favorable, and the economy is improving. Making an investment in stable organizations can guarantee positive returns in future with consistent dividends being paid at the end of every fiscal period. The trick in the stock market is to diversify on the investments and ensure that an investor buys from various quarters to lower possible risks. Therefore, investing in stocks will be favorable, for there is a surety that the initial investment will be recovered in future irrespective of whether some counters have lost value in the market or not. The gains made in some counters will cover the losses covered in others. However, in most cases, investors that are keen with the market process make positive returns when they dispose their investment.

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Another reason why i decided to invest in this sector is due to the opportunity to earn dividend income while the initial capital is still available. The income is paid by a company irrespective of whether the stock has increased or decreased in the market value from the moment that it was bought. The amount received serves as an extra source of income in addition to the profits that can be made when the stocks are sold. The income can be used to fund for the retirement process, or support the purchase of extra shares and grow the portfolio.

The other reason why I decided to take this investment is due to the desire to become part of the ownership of a firm. Therefore, I believe that I will enjoy the benefits that come with being part of the owners of a company. I will manage to have the power to over the appointment board of management, and this means that I will have control over the way that an organization is being run. The move will enable me to guard my investments. Additionally, I will be in a position to get annual reports on the performance of the company a move that will help me to make decisions pertaining to either a sale or more purchases of the entity's shares.

When making an investment in the New York Securities Exchange, an amount totaling $10,000 will be used and distributed in five different stocks, each stock will receive $2,000. The stocks that will be bought include NIO Limited (NIO), Momenta Pharmaceuticals, Inc. (MNTA), PG&E Corporation (PCG), Barnes Group Inc. (B), and Virgin Galactic Holdings, Inc. (SPCE). They will be observed over a four week period and their performance over this period is also shown in the excel attachment given.

Based on the performance on company stock in the market, any positive outcome in a firm is always likely to trigger a rise in the value of its stocks while any negative event leads to a decline in the value of shares. NIO Limited (NIO) share has been on an upward trend for the last four weeks with the highest price of $4.02 recorded from $.48 recorded in the Mid-December 2019 (Yahoo Finance). It can be noted that the electric vehicle sector was experiencing a form of softness in the market, and this was due to China's reduction of the EV subsidies. Additionally, the firm has been working on undertaking cost-cutting measures that have helped to trigger a value gain in the market. Additionally, it is speculated that additional financing will be made available to the company an indication that there is a possibility of more investment and these are some of the reasons that may have triggered the stock to gain value of over the last four weeks.

Momenta Pharmaceuticals, Inc. (MNTA) stock has experienced a similar grown over the last four weeks. The proposal by the management to offer common stock to the public may have applied a role in the rise in the price of stocks. The expectations in the market on the offer may have triggered investors in the market to demand more of the stocks leading to a price rise.

PG&E Corporation (PCG) has remained experience a slight rise over the last four weeks with the prices oscillating between a low of $9.67 and a high of $11.92. The stagnation on prices changes may have been triggered by various negative issues that have been affecting the performance of the business (Gold, and Blunt, 2019). In the recent past, the firm agreed to make a settlement for the wildfires that lead to the loss of innocent lives (Denning, 2019). The California governor gave restrictions on the way that the firm is supposed to operate. It is supposed to follow the set rules to manage its power lines and avoid future incidents and this is another factor that may have triggered the stagnation in the market prices.

Barnes Group Inc. (B) has experienced mixed returns over the last four weeks with the prices oscillating between $61 and $63. The rise to $63 can be attributed to the news that the firm is likely to earn from strong end markets. There has been a huge demand for spare parts in the market, and this has led to a growth in share value. The entity has been adding its asset base with the view of strengthening its business activities. However, it has also been experiencing a rise costs of sales, and the combinations of these factors may be contributing to the limited growth of the stock.

Virgin Galactic Holdings, Inc. (SPCE) has over the last four weeks experienced massive growth from a low of $9.29 to a high of $13.97 per share. Speculators in the market have been analyzing the stock and stating that there is a possibility that the business is entering its next phase. It seems to have overcome its initial IPO. The organization has in the last four weeks hired more professionals, and this can be translated to mean that it is working on raising the quality of products. It is a testament that it is financially healthy for it will manage to pay the added workforce (Robinson, 2020). Additionally, more employees will translate to an increased output that will lead to more earnings in future. The investors in the market are guaranteed better returns in future and these are some of the reasons that have propelled the firm's share to such great heights.

The S&P 500 (^GSPC) has been on a slow growth for the last four weeks moving from 3192 to 3283 over the same period an indication that the market has been improving as given in the excel document. The investment performance has a positive correlation to the S&P 500 (^GSPC), considering that both have improved. In this investment, least performing stocks have experienced minimal growth, but none of them recorded a loss from the beginning to the end of the four weeks. The tracking of the Dow Jones Industrial Average, Russell 2000 index for small caps, and S&P 500 stock index and it can be noted that they have been on an upward trend for the last four weeks.

References

Denning, L. (2019, 16 December). Whatever PG&E Does, Markets Can't Ignore Newsom's Letter. Bloomberg Opinion. Retrieved from https://www.bloomberg.com/opinion/articles/2019-12-16/gavin-newsom-s-pg-e-letter-gives-debt-market-reason-to-worry

Gold, R. and Blunt, K. (2019, 17 December). PG&E, California Agree to $1.68 Billion Settlement for Wildfires. The Wall Street Journal. Retrieved from https://www.wsj.com/articles/pg-e-california-agree-to-1-68-billion-settlement-for-wildfires-11576628070

Robinson, J. (2020, 7 January). Here's The Case for and Against Virgin Galactic Holdings, Inc. (SPCE). Retrieved from https://uspostnews.com/2020/01/07/heres-the-case-for-and-against-virgin-galactic-holdings-inc-spce/Yahoo Finance. (2019). NIO Limited (NIO). Retrieved from https://finance.yahoo.com/quote/NIO/history?p=NIO