The idea of investing in stocks seemed like a bright prospect a few months back but now it sends shivers down the spines among prospective investors. Share investors have witnessed a tough time over the past six months. Investing in stocks or shares has always been a risky affair, but more so during the past few months as the stock prices went tumbling down, with a steep fall in the economy. Interestingly stock trading is not a new thing and its history can be traced back to the Romans, but the first company to issue stocks was the Dutch East India Company. They pooled in public investment and used it primarily for the building of ships.
Experts in the stock market claim that the one thing that is important for a person trading in stocks is his timing. Investors were quick to realize that they needed to be on the tip of their toes to trade effectively in the stock market. However in the olden days, not everybody had the time to keep a track on the stock prices on a daily basis, and that itself gave rise to a new profession- the Stock Broker. He kept a watch on all your stocks and helped you make a decision on what to buy and what to sell, and charged you a commission (called the brokerage) for his services.
With the advent of technology, the stock markets have seen a radical change over the years. Increasingly sophisticated broking software has not only made it easy for Stock Brokers to trade on the market, it has also meant that a newbie, with a little knowledge about the share markets can take a plunge. The internet has also made it easy for people to trade on stocks sitting at the comfort of their homes, with millions of dollars changing hands in a few milliseconds. Technology has made it possible for algorithmic trading to take place, wherein computer systems are programmed to buy or sell shares when a certain market condition is met.
As with all things related to money, the Stock Market has seen its share of financial scams amounting to millions of dollars. Among the various major scams that have hit the Stock Market hard, the earliest was in 1986 when Barry Minkow claimed to be building a multi-million dollar company and went public with a market cap of $200 million before being discovered that it was a mere scam. However the largest investor fraud ever committed by a single person amounting to a whopping $65 billion was the one orchestrated by Bernard Madoff. He introduced his Ponzi scheme, where instead of investing the money offered to him by his clients it was simply deposited to his business account in Chase Manhattan Bank.
A totally different form of stock scam came into picture in the form of the boiler room. A lot of people have been hit most by boiler room scams, where a smooth talking salesman calls up and tries to peddle worthless shares to unsuspecting customers. Police have called it the biggest threat to households, much bigger than credit card frauds. These are called boiler room scams because the people involved operate out of cramped office spaces with desks and telephones. Police have estimated that there are about 500 boiler rooms operating out of Spain, employing over 400 people. Other favourite Boiler room destinations are USA, Dubai, Berlin and France.
With the economy in recession, investors are thinking twice before plunging into the Stock Market. With statistical figures showing that approximately more than 50% of American households invest in the stock market, it is something that is still considered to be a good investment. It is just a matter of time before the Stock Market hits back with a vengeance. Better hold on to your money until then.