Английский язык. Практический курс для решения бизнес-задач

7. the right (but not the obligation) to buy or sell an asset at a given price on or before a given date

8. a recovery in price after a period of decline

9. order type whereby an open position is automatically liquidated at a specific price

10. slang for a condition of a highly volatile market where a sharp price movement is quickly followed by a sharp reversal

Exercise 3. You are a journalist working for Business Week and you are to interview a prominent Wall Street broker who tries to explain secrets of his success. Make a dialogue between these two individuals using the following briefing material.

The Five Biggest Stock Market Myths

When fiascos like the Enron bankruptcy, and auditing scandals occur, investor confidence can be at an all-time low. Many investors wonder whether or not investing in stocks is worth all the hassle. However, it’s important to keep a realistic view of the stock market. Regardless of the real problems, common myths about the stock market often arise. Here we go over these myths in order to bust them.

1) Investing in stocks is just like gambling.

This reasoning causes many people to shy away from the stock market. To understand why investing in stocks is inherently different from gambling, we need to review what it means to buy stocks. A share of common stock is ownership in a company. It entitles the holder to a claim on assets as well as a fraction of the profits that the company generates. Too often, investors think of shares as simply a trading vehicle, and they forget that stock represents the ownership of a company.

Gambling, on the contrary, is a zero-sum game. It merely takes money from a loser and gives it to a winner. No value is ever created. By investing, we increase the overall wealth of an economy. As companies compete, they increase productivity and develop products that can make our lives better.

2) The stock market is an exclusive club in which only brokers and rich people make money.

Many market advisors claim to be able to call the markets’ every turn. The fact is that almost every study done on this topic has proven that these claims are false. Most market prognosticators are notoriously inaccurate; furthermore, the advent of the Internet has made the market much more open to the public than ever before. All the data and research tools previously available only to brokerages are now there for individuals to use.

Actually, individuals have an advantage over institutional investors because individuals can afford to be long-term oriented. The big money managers are under extreme pressure to get high returns every quarter. Their performance is often so scrutinized that they can’t invest in opportunities that take some time to develop.

3) Fallen angels will all go back up, eventually.

Whatever the reason for this myth’s appeal, nothing is more destructive to amateur investors than thinking that a stock trading near a 52-week low is a good buy. Think of this in terms of the old Wall Street adage, «Those who try to catch a falling knife only get hurt.»

All things being equal, a majority of investors choose the stock that has fallen from $50 because they believe that it will eventually make it back up to those levels again. Thinking this way is a cardinal sin in investing! Price is only one part of the investing equation (which is different from trading, which uses technical analysis). The goal is to buy good companies at a reasonable price. Buying companies solely because their market price has fallen will get you nowhere.

4) Stocks that go up must come down.

The laws of physics do not apply in the stock market. There is no gravitational force that pulls stocks back to even. Over ten years ago, Berkshire Hathaway’s stock price went from $6,000 to $10,000 per share in a little more than a year. Had you thought that this stock was going to return to its lower initial position, you would have missed out on the subsequent rise to $70,000 per share over the following six years

We’re not trying to tell you that stocks never undergo a correction. The point is that the stock price is a reflection of the company. If you find a great firm run by excellent managers, there is no reason the stock won’t keep on going up.

5) Having just a little knowledge, because it is better than none, is enough to invest in the stock market.