Be Careful of Inducement offer for Investment
There are so many ways the marketers of stocks make their product attractive (inducement) to prospective buyer. Stocks are products to be marketed by advertisements through financial newspapers and television channels. Investors prone to think and behave accordingly, but wise investors who realise these know how to read between the lines.
What and who attracts you to invest in stocks?
- To obtain dividends, rights and bonus which is tax free. Sometimes, companies have personal interest to give higher dividend and bonus to induce the buyer purchase their stock.
- To earn the easy money, faster than any other investments.
- To save capital gain tax by investing in stocks or mutual funds, ignoring the market trend.
- Traders buy the stock to arbitrage and eventually he holds as open position.
- Life Insurance companies give attractive advertisement to invest in their products which are often linked with stock markets.
- A call from the stock broker to purchase a stock based on tips merely because he wants to get his commission. Some of stock broker and mutual fund agents churning their clients investments.
- An IPO offer, attraction to make money instantly by applying. Indirectly induce the investor in the stock market.
- A steady government also interest to keep the market healthy by making tax law attractive for investors.
Once you observe how stocks dividend, split, bonus plays the game of marketing stocks, you will see how the market is structured. If you owned a privately held company and you were selling some or all of your company to someone else. How would you get bargain price? And what would you do to get best possible price for your company? Marketing is implemented by the owner of the companies in their own interest at the sack of assets of company and assets of the new shareholders.
Like retail stores, stock market has his own language to campaign his products. Take a look on the following list of comparison.
Retail stores vs. Stock Marketers
By one get one free - Stock split, bonus
More for less - 52 weeks lows
Buy with store’s credit card - No margin calls
Wednesday special discount - Market over-sold
Heavy sale ‘last three days left’ - Market in correction zone
Incredible new products - New issues with high potentials
Seasonal sale begins - Turnaround situation
Extra strength - New highs with volume
Heavy duty - Blue-chip Portfolio
Extra nutrition - Undervalued assets
Easy to use, no mess – Just sign the form
Clinically tested - Market analyst suggested
Goods sold will not taken back or exchanged - Investments are subject to market risk, please read prospectus carefully before investing.
Up to 90% off we are closing the store - Market touches 10 years low.
It is bad to buy stocks at overvalued price, because it has less potential for profit as the upside price moves would be limited. There are many ways that the stock marketer will make it easy for you to believe that the current over valuation of the price is justified, when it is not.
Still, bargain prices for the stock exists in the market. When price is under valued shareholder or promoter liquidate the stock in need of money and while the stock price fails to respond to the fundamental changes that has improved.
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