Risk and Captial

Lea Pratt

American InterContinental University

Risk and Capital

Unit 3 Discussion Board

June 24, 2012

Recently I wrote a position article containing information on our firm's intentions to invest in small investors. It has come to my attention that there are some unanswered questions regarding the article. In the following I will address what a stock market is and some detail information on why it is not a no win situation. The following will also address the advantages and disadvantages that small investors face while investing in the stock market.

The stock market is where stocks and bonds are traded, bought and sold (Mint, 2012). There are two main markets that are available. The first one is the primary market which is the market of first sale. This market is when companies first put their shares up for sale (Brooks, 2010). The second type of market is the secondary market which comprises the after sale markets of the existing outstanding shares (Brooks, 2010). Companies sell stock and bonds in their company to gain more money to either expand their horizons or make more profit.

A small investor purchases small amounts of securities for their selves. Along with purchasing small amounts come some disadvantages. Small investors spend too much time studying the way the market works. By wasting too much time studying the market they will have less time of doing other things they need to be more concerned about. Small investors face many disadvantages when investing in the stock market from having the lack of diversification, extra charges, and administrative costs that apply. Even though small investors has some money to purchase a few stocks they will have difficulty in building a portfolio that shows diverse city in types of stock, that they might have already invested in (Smallivy, 2010). Another disadvantage is that small investors usually get stuck with high minimum payment that large investors do not have to pay.

With every disadvantage come many more advantages. Small investors have fewer issues when they invest in stock. For example big investors do not buy small stocks due to the fact the cost will go up. Being a small investor in the stock market allows the investor the comfort of having someone looking out for them which is usually themselves. There are times when the stock market has panic issues and the investor wants to pull themselves from their position. A large investor is not able to pull out due to the amount of money that has already been invested in that stock. If they decide to do it anyways it will only cause the market to work against them. Small investor has the opportunity to pull out without any issues that follow. According to Raymond Brooks (2010) a small investor can deposition themselves at any