Investment Psychology and Discipline †MyAssignmenthelp.com

Question: Discuss about the Investment Psychology and Discipline . Answer: Investment Psychology Every investors objective to investing is to earn high interests or dividends. Investment Markets are unpredictable and investors need to keep cost low and a working strategy for long term investment success (Yang Wagner, 2014). It requires an investor to maintain and have psychological discipline to make rational investment decisions. Psychological discipline is important for avoiding or minimizing bias when making investment decisions. Investors with psychological bias make decisions based on their emotions rather than reason. An average human behavior to investment is influenced by herd mentality and the bull and bear market that hinder making of rational decision in the stock price though peaks and trough (Maheu, McCurdy Song, 2012). The herd mentality makes investor to follow what others are doing in the investment market forgoing their independent thoughts (Dang Lin, 2016). The bull market make investors to think in optimism thereby buying a stock that eventually lead to the stock being overpriced. On the other side, bear market is characterized with investors pessimism that leads to share price losing in the stock market value. The share prices are not static and keep changing. The peak share price is the highest price while trough is the lowest price of a stock at a specified period of time. An investor should buy shares at trough and sell them at peak to minimize cost of buying and maximize the price of disposing thereby earning a high interest. The following paper with discuss three companies that I choose to invest in. These companies are Amazon Inc, Google Inc, and Dominos Pizza Inc. The paper will discuss their financial history and current standing, reasons to invest in the companies both emotional and logical and a comparison to each companys competitor. The paper will also outline prediction of the companys future performance. Amazon.com Inc Amazon is a cloud computing and electronic e-commerce company with head offices in Seattle Washington. Amazon started it operations in 1994. The company is the largest internet retailer measured by market capitalization and revenue in the globe. Amazon sells products online that include books, software, video games, furniture, food, toys, apparel, jewelry, consumer electronics, and cloud infrastructure. The company also offers shipping services to their customers in different countries. Amazon is listed in the NASDAQ stock exchange and it trading name is AMZN. The company stock price is US$1405 as at 6th April 2018. Amazon had total equity amounting to $27.709 billion and assets amounting to $131.31 at the end of 2017 financial year. The company recorded revenue amounting to $117.86 billion in 2017 financial year from $89 billion in 2014 FY. Amazon has a share volume of 5882 257 trading with $6.15 earnings per share. Amazon past peak price was $1617.54 while the trough was $884.49. Amazon close competitor is Alibaba Group Holding. Alibaba is a multinational ecommerce, AI, internet, retail, and Technology Company. Alibaba is listed in New York Stock Exchange and trading name is BABA. Alibaba stock price is $172.07 compared to Amazon stock price of $1405. The company total equity in 2017 FY was $48.33 and it revenue amounted to $ 23.82 billion. Alibaba revenue increased by 23% in 2016 financial year while the stock price increased by 79% from 2014 financial year. Amazon is a good company to invest. First, Amazons has a high revenue of $177.87 billion compared to it close competitor Alibaba which recorded $23.82 in 2017 financial year. The Amazon Stocks value also increase by 192% as compared to Alibaba which increased by 79% from 2014. Secondly, there is an increasing trend to use internet for purchasing product. This trend will enable the company to increase its sales and revenue thereby increasing return on capital. On the other side, Amazon is led by the founder. Amazon CEO Jeff Bezos knows the company intimately and is likely to care about the company performance more than any other person. A Company led by founder tends to outperform in the stock market (Chen Vincent, 2016). The CEO also owns 78.89 million shares that are 10.1% of the company. The CEO interests are therefore aligned with investors interests. The Amazon stock price will therefore increase as a result of stock demand in the stock market and company sales performance Dominos Pizza Inc Dominos Pizza Inc is a pizza restaurant headquartered in Ann Arbor in Michigan. Dominos was founded in 1940 and has grown to be the biggest pizza seller in retail sales worldwide. The company operates involve food delivery, franchising and restaurants. Dominos products are chicken wings, pasta, pizza, dessert, and submarine sandwiches. The company is led by David Brandon as the chairman and Patrick Doyle as the CEO. Dominos Pizza is listed in the New York Stock Exchange and trades under the name DPZ. The company stock price is $231.46. The company recorded revenues that amounted to $2.79 billion in 2017 FY. The total equity in 2017 FY was $1.88 billion. The revenues increase from $1.8 billion in 2013 to 2.79 billion in 2017. The company past peak for 52 weeks is $236.93 and trough price is $166.74 ("Topic: Domino's Pizza", 2018). The Dominos Pizza Inc close competitor is McDonalds. McDonalds is an American restaurants dealing with fast food and was found in 1940. The company is listed in the New York Stock Exchange and trade name is MCD. McDonald stock price is $161.25 as at 6th April 2018. The company revenue reduced from $28.11 billion in 2013 FY to $22.82 billion in 2017 FY. McDonald past peak for 52 weeks is $178.70 while trough is $129.52 ("McDonald's Corp.", 2018). Dominos Pizza is attractive company to invest fund. First, the company revenues have been increasing for the past 5 year as compared to its competitor McDonald whose revenues have been decreasing. The company share price is at peak. Therefore the company revenues, financial metrics, current valuation, and dividend growth show that Dominos is a good long term investment (Frank Sanati, 2015). On the other side, Dominos Pizza Inc has loyal customers and an increasing customer attraction will increase the company sales and revenues (Bouville, 2016). Therefore, Dominos Pizza stock value will continue to increase in the future offering investor higher returns on investments. Google Inc Google is a multinational technology business that specializes in internet services and products. The company products include search engine, online advertising technologies, software, cloud computing and hardware. Good was founded in 1998 by Sergey Brin and Larry Page and was it IPO was done in 2004. Google ranked as the most valuable brand in the globe. Google is led by Larry Page as the CEO. Google is listed in the NASDAQ stock exchange and trading name is GOOGL. Google stock price is $1007.04 as at 6th April 2018. The company recorded revenues amounting to $111.02 billion in 2017 FY that had increased from $59.73 billion in 2013. Google had total equity at $152.50 at the end of 2017 FY. The company past peak for the 52 weeks is $1186.89 while the trough is $817.02. The company earnings per share stand at $17.96 ("Alphabet Inc. Cl A", 2018). Google close competitor is Microsoft Corporation. Microsoft Corporation is a multinational technology company that has its headquarters in Washington. The company manufacture, develops, supports, licenses, and sells personal computers and software, consumer electronics and services. The company is listed in the NASDAQ stock exchange and it trade name is MSFT. The company stock price is $90.23. Microsoft past peak was $97.24 and trough was $64.85. Microsoft Corporation recorded revenues amounting to $89.95 billion in 2017 FY from $77.65 billion in 2013. There are several reasons to choose Google for investments. Google revenues have consistently increased for the past five years. The upward trend in increased sales will increase the company earning and stock value. Secondly, the company has attractive valuation and reliable growth. Google is the most valuable brand in the globe and it consistency in increasing sales will increase the company stock value (Distinguin, Hasan Tarazi, 2009). Google Inc is an innovative company that periodically unravels new products in the market. This will enable the company to maintain market leadership in online technologies. Lastly, adoption of online advertising by many businesses will increase the companys revenues in the future (Yang Wagner, 2014). Therefore, Google Stock Price will increase value in the future making it a good investment option. Conclusion In summary, investment markets are unpredictable that can lead to loss or gain of invested funds. Investors psychological bias is a barrier to successful investment. Investors need to separate their emotions with reason when making investment decisions. From the analysis of three companies in the write-up, Amazon has the highest stock price, followed by Google Inc and then Dominos. Amazon and Google have a large stock price variance with their close competitors. It is therefore recommendable to invest in Amazon as the first priority, Google Inc the second and lastly Dominos Pizza as the last. References Alphabet Inc. Cl A. (2018). MarketWatch. Retrieved 7 April 2018, from https://www.marketwatch.com/investing/stock/googl Bouville, M. (2016). When Investing in Stocks, The Long Term Starts at Three Decades. SSRN Electronic Journal. https://dx.doi.org/10.2139/ssrn.2739602 Chen, Y., Vincent, K. (2016). The Role of Momentum, Sentiment, and Economic Fundamentals in Forecasting Bear Stock Market. Journal Of Forecasting, 35(6), 504-527. https://dx.doi.org/10.1002/for.2392 Dang, H., Lin, M. (2016). Herd Mentality in the Stock Market: On the Role of Idiosyncratic Participants with Heterogeneous Information. SSRN Electronic Journal. https://dx.doi.org/10.2139/ssrn.2863657 Distinguin, I., Hasan, I., Tarazi, A. (2009). Predicting Rating Changes for Banks: How Accurate Are Accounting and Stock Market Indicators?. SSRN Electronic Journal. https://dx.doi.org/10.2139/ssrn.1289013 Frank, M., Sanati, A. (2015). How Does the Stock Market Absorb Shocks?. SSRN Electronic Journal. https://dx.doi.org/10.2139/ssrn.2652911 Maheu, J., McCurdy, T., Song, Y. (2012). Components of Bull and Bear Markets: Bull Corrections and Bear Rallies. SSRN Electronic Journal. https://dx.doi.org/10.2139/ssrn.1939486 McDonald's Corp.. (2018). Marketwatch.com. Retrieved 7 April 2018, from https://www.marketwatch.com/investing/stock/mcd/financials Topic: Domino's Pizza. (2018). www.statista.com. Retrieved 7 April 2018, from https://www.statista.com/topics/1688/dominos-pizza/ Yang, Z., Wagner, J. (2014). Probabilistic Market Timing Using Bull Bear Cycle Statistics. SSRN Electronic Journal. https://dx.doi.org/10.2139/ssrn.2453507