Historically, investment in shares has generated a return, over time, between 11 and 15 per cent a year depending on how aggressive you are. Stocks overcome other investments since they incur more risk. Stock investors are at the bottom of the corporate “food chain”. First, firms must pay their employees and suppliers. Then they pay their obligations. After it is preferred shareholders. Companies are required to pay all the actors first, and if there was the money paid to shareholders through dividends or undistributed. Sometimes there’s a lot of money left for shareholders and in other cases there is not. Thus, investment in shares is risky, because investors do not know exactly what they are to receive for their investment.

What are the attractions of blue chip stocks? 1. Great long term rates of return.

2nd Unlike mutual funds, another relatively safe, the category of long-term investment, there are no ongoing fees.

3rd He became an owner of a company.

So much for the benefits – as regards the risks? 1. Some investors can not tolerate the risks associated with investing in the stock market and the risk associated with investing in a company. Not all blue chips are created equal.

2nd If you do not have the time and the ability to identify a good quality at a fair price do not invest directly. Rather, you should consider a good mutual fund.

Selecting a blue chip is only part of the battle – to determine the appropriate price is the other. In theory, the value of evidence is the present value of all future cash flows discounted at the appropriate discount rate. However, like most theoretical answers, this does not explain fully the reality. In reality, the supply of and demand for a range of stocks daily stock price, and demand for a stock to increase or decrease depending on the perspective of a society. Therefore, stock prices are driven by investor expectations for a company, the more favorable the expectations the better stock price. In short, the stock market is a voting machine and most of the time which is voting based on investors’ fear or greed, not on their rational assessments of value. Stock prices may fluctuate widely in the short term, but then converge to their intrinsic value in the long term.

Investors should look at companies with high expectations that are not yet included in the price of a stock.

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