A Yellow Flag For the Inexperienced Investor
Near the turn of the century, many inexperienced investors jumped into the stock market. They watched with glee as the market continued to skyrocket higher and higher, seemingly without a ceiling in sight. The NASDAQ 100 Trust (Ticker Symbol QQQ) is a very good indicator of this market. It represents the top 100 stocks in the NASDAQ market. When QQQ arrived on the market in March of 1999, the public offering price was $52.47. In March of 2000, QQQ reached a high point of $213.50. A year later, QQQ was valued at $39.15. As of February 2003, QQQ is priced at a paltry $24.21. To sum up these numbers, the top barometer of the NASDAQ stock exchange, QQQ, has lost nearly 89 percent of its value in the past three years. Many individual stocks have lost even more than the 89 percent that has been lost by QQQ. The stock market soared during the late 1990's because the economy was very robust. Many brokers and analysts proclaimed the Internet as the future of retailing. Many experienced investors shifted their resources and funds to upstart Internet companies, driving those stocks prices rapidly higher. For example, in January of 1999, a single share of
By June of 2000, QualComm was priced at $60. One of the main problems with the downshift of the stock market was that many analysts continued to hype stocks that did not have the earnings and the stability to reach the levels they were being touted to reach. 00 a share, a mere shadow of its former self. Even though many investment agencies and brokers are supposed to look out for their clients' best interests, the individual investors own research and instinct should not be disregarded so lightly. Many analysts continued to promote stocks such as Cisco Systems, Lucent Technologies, JDSUniphase, and Amazon. Eleven months later, the stock peaked at an astonishing $740. 12 a share! Thousands of rookie investor's poured money into stocks such as QualComm as it raced higher and higher by the day. Interestingly, Barnes & Noble had prior year sales of nearly $3 billion compared to Amazon. On top of everything else, war with Iraq and the unresolved nuclear situation with North Korea looms ominously on the horizon, causing a lot of people to take a "wait-and-see" attitude toward reinvesting in the market. Many inexperienced investors lost a lot of money on over-hyped stocks such as QualComm and many other upstart Internet companies. Analysts hyped QualComm, proclaiming it would continue this trend for years to come.
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