If you have been reading the news lately, you have probably heard about Alibaba making headlines. The company filed an initial public offering, also known as an IPO, in the New York Stock Exchange under the ticker symbol BABA. Many are talking and speculating about their opening on Friday as a public company. The reason for the commotion is the media hype stating how this will be the largest public offering ever. So, everyone wonders: What’s all the fuss about? Should I buy shares? Am I going to miss an opportunity to make extra cash?
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Have you ever wondered what happens to the “cash” sitting in your checking and savings account? What does the bank do with it? Where does it go? In order to answer these questions, you need a little bit of history.
Money was not always used as the medium of exchange for any asset. It evolved after years of barter transactions (meaning, a physical exchange of one good for another). The problems arrived when some goods were harder to value, not easily accessible, divisible, counterfeited, etc.
Gold and silver were used as commodities whose value barely defaulted, was easily accessible, valued, divisible and harder to counterfeit. This led to a crucial development in the history of money, the promissory note.
Think about it for a second….
The $2,000,000 glances at you at first sight versus the 1 penny offer. If you analyze it further you will see how the $2,000,000 will rob you from a bigger prize.
A friend of mine asked me this and the analysis behind it was delightful. How a single penny can turn into something major if you compounding day after day or in such cases like capital investing years after years.
Let’s use the above example and analyze it:
You may not recognize the company name mentioned above, but I think it will become familiar very quickly —I have started my own investment advisory company.
As you know, I have been fascinated with the market since I came across my first finance book, Continue reading