Make no mistake about it when people think about global stock trading, Wall Street is not far behind.
Wall Street located in New York City is, after all, the nerve center of global financial trade. Whether we’re talking about stocks, bonds and other investment instruments, New York City captures the global imagination. You can thank Hollywood for its glamorization of everything Wall Street for your easy mental association of Manhattan with global finance.
In fact, financial players, whether they’re big or small as long they are institutional, tend to have some sort of connection to New York and the New York Stock Exchange in particular. However, as iconic as the New York stock trading market and the NYSE may be in particular, the New York Stock Exchange is not the only game in town. Far from it.
In fact, if you are in Asia, chances are your local stock portfolio would probably be more influenced by local bourses like the Hang Seng in Hong Kong, the Tokyo Stock Exchange or the Indian Stock Exchange. Similarly, if you are in Europe, the Frankfurt or the London Stock Exchange might have a greater role to play in the overall health of your local stocks.
Still, this does not take away from the fact that when it comes to macroeconomic changes, trends and opportunities, people can profit quite handsomely paying attention to what goes on in the United States. That goes without saying.
After all, how many times have your local stock market tanked or exploded like a rocket because of what happened overnight with the Dow Jones Industrial Average. It would seem like they are joined at the hip. It would seem that there is a strong causal connection between what goes on in your local stock exchange market and what happens in the New York Stock Exchange.
That’s just an illusion. As global markets continue to mature, it seems that we have reached a point where we have decoupled what happens in New York and the United States in general with economic factors and considerations in the rest of the world. In fact, it may easily flow the other way.
If there is any kind of turbulence, for example, in Southeast Asia or China, sometimes this leads to tremendous downward pressure on the Dow Jones Industrial Average and stocks traded on the New York Stock Exchange and NASDAQ. In fact, if you look at the Shanghai Composite and its fluctuations, if it suffers a pretty nasty drop, you can bet that there will be some sort of reverberation when the market opens in the United States.
This doesn’t always happen with a tight correlation. This doesn’t always mean that if things pan out badly in Asia, then it necessarily means that there will be a bloodbath in the stock markets in the United States. While by and large this is the case, this is not always the case. In fact, in many situations, the turnaround happens in the US.
If, for example, the Shanghai Stock Exchange crashes, everybody with bated breath what would happen on the New York Stock Exchange the following day. The same applies to the NASDAQ figures. However, when it appears that nothing happened or it’s as if the disaster in Asia influenced Western and American markets very lightly, this may trigger a rally on the other side of the globe.
What does this teach us? Well, this background should give you enough information to answer whether stocks traded in the New York Stock Exchange are necessarily better than NASDAQ stocks. The answer is absolutely not.
You have to step past the historical prestige of the New York Stock Exchange. Sure, there’s a lot of history with that exchange and, believe me, stocks traded there are by no means shabby or lightweight. If you’re looking for heavy industrial players that pretty much own or dominate their industries, there are a lot of them in the New York Stock Exchange.
With that said, however, Wall Street is a solid historical market, but there are other markets. There are other needs, and when you look at NASDAQ, it seems like a lot of the most innovative, fast-moving and solid companies have grown up and blossomed in that exchange. NASDAQ is a completely electronic exchange. It has a distributed network and it’s easy to think that this is not as prestigious as the New York Stock Exchange.
Make no mistake about it restricting yourself to NYSE stocks might mean you lose out on other opportunities. There are lots of highflying stocks poised for growth traded on the NASDAQ. They were introduced in the NASDAQ, they stayed in the NASDAQ. Indeed, this exchange is the historical home of tech stocks. If you have a computer, chances are a lot of the programs that you are running are made by companies that trade on the NASDAQ.
This means that you should look at opportunities regardless of exchange. Why not look beyond exchanges and prestige? Focus on overseas markets. Believe it or there are overseas markets with specific stocks that are outpacing US indexes and even highflying American stocks. In fact, they put them to shame. Similarly, within the US market, there are OTC (over-the-counter) or even pink sheet stocks. There are penny stocks.
Focus on the company. More importantly, focus on its growth potential. Don’t get taken in by the exchange that it trades or its reputation because chances are you are paying a premium for those elements. With everything else being equal, you really have no business paying extra for those.
You should instead zero in on the pure, unadulterated potential of the company that you are thinking of trading. That’s the bottom line. Focus on the opportunity, not the exchange. If you did this, then you probably would have made quite a bit of money on hot Biotech and Internet stocks traded on the NASDAQ. You might have also made tons of money from emerging market stocks.
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