Stock investment of Dow-Johns index
The basic advantages of stock investment of an index Dow-Johns (DJI30) are:
High reliability – since Dow-Johns index (DJI30) is the basic index of the American economy, and it includes the strongest companies, such as Boeing, General Electric, General Motors and others, world renowned and reputed leaders not only American, but also world economy.
The probability of bankruptcy of these companies is smallest, and it means that having taken shares of these companies, you at least won’t lose the investments, and in long-term prospect can get the big profit.
High yield – since, as a rule, shares of these companies in long-term prospect bring in the solid income. For example, if you in 1987 have purchased on $10 000 shares of company MICROSOFT (MSFT) today would receive more than 1 million 700 thousand dollars, or 30 % annual.
High liquidity – i.e. you can sell at any moment the shares block within several seconds.
Certainly, it is not necessary to forget that share purchase is accompanied always by certain risk, but risks at share purchase from an index Dow-Johns (DJI30) lower than risks at the share purchase, not entering into this index. To the basic lacks of stock investment from an index Dow-Johns (DJI30), as well as at purchasing of any other shares instability of a rate and absence of a stable component of the income concern.
Investments into options LEAPS on the share from Dow-Johns index (DJI30)
Options are an urgent exchange tool derivative of shares. Option purchasing (Call) means right purchasing in the future to take shares at determined price. For example, Microsoft shares of company stand today $25 US, and you buy an option (Call) strike price of $28 US and expiration date in 9 months for $3 US. In other words, you pay today $3 to have possibility within 9 months to take shares at the price of $28.
Let’s assume that in 3 months of share of Microsoft Company have grown in the price to $33 US. Accordingly, cost of the option purchased by you to $5 US will grow also. Thus, you, having enclosed 3$, in 3 months will get profit in $2, i.e. profitableness of your investments will constitute 266 % annual.
Certainly, there is a risk of that shares of Microsoft within 9 months won’t grow in the price to $30 US then option term will expire and you will lose enclosed $3 US. It in a case with purchasing of the traditional options which term of the expiration of 9 months, but it is the so-called options LEAPS, which term of the expiration 1,5-2 years. And, probably, within two years share price of the company of Microsoft will grow to $35 and more and then you instead of losses will get profit.
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