AI Finance Awards 2018

14 Acquisition International - 2018 International Finance Awards 1 AICPA Survey AICPA Survey Shows Nearly Half of Americans Say VolatileMarkets Are an Easy Way toMake a Profit So far this year, the U.S. stock market has been a financial roller coaster that has continued into summer. It has not been unusual to see the Dow swing in both directions by hundreds of points. At the conclusion of the first quarter, the S&P 500 had already seen 23 days with one percent movements. That is nearly three times the number of days this occurred in all of 2017. It appears volatility has become the new norm. Surprisingly, even with that significant increase in fluctuations, one-third of Americans (37%) characterized the financial markets during the first few months of 2018 as stable, according to a telephone survey in April of 1,014 U.S. adults conducted by The Harris Poll for the American Institute of CPAs (AICPA). For many, increased market volatility may actually signal an opportunity. According to the survey, nearly half of U.S. adults (48 percent) believe that a volatile market gives them an easy opportunity to make a profit. Interestingly, both Millennials (aged 20-37) and Gen Xers (aged 38-53) are much more likely than Boomers (aged 54-72) to agree about the potential profitability of this short-term buying and selling high-risk behavior (62 percent and 55 percent vs. 37 percent). Experience in the markets appears to make a difference to more seasoned investors. Many Millennials have only experienced a bull market as adults and may not be as aware of the dangerous downturns that are a natural part of the market cycle. “Investing is not a get-rich-quick scheme and trying to time a volatile market with hopes for huge gains is a serious financial risk,” said Greg Anton, CPA, chairman of the AICPA’s National CPA Financial Literacy Commission. “Many people who enter the market looking for a quick buck find they can’t handle watching their investment lose value, which leads them to sell at a loss. For most people, seeking incremental gains over a longer time horizon is a safer, more sustainable approach.” Cryptocurrency appears to be foreign to many investors. The survey found that nearly half of U.S. One-third of Americans characterized the financial markets during the first few months of 2018 as stable according to study. adults (48 percent) are not familiar with Bitcoin, Ethereum, or Litecoin. Of the 42 percent who are familiar with cryptocurrency, there was wide speculation regarding how they would perform in the next year. A quarter (24 percent) felt they would rise in value, more than a quarter (29 percent) thought they would fall, over a third (35 percent) believed they will fluctuate wildly, and 12 percent said they will remain stable. Thus far in 2018, wild fluctuations have lead the five largest cryptocurrencies to decline in value substantially. Year-to-date, the global crypto market cap has fallen from $598.5 billion to just $234.9 billion, meaning more than $360 billion of cryptocurrency wealth has disappeared. Investing Vs. Speculating The risk associated with an investment opportunity is a crucial element to help Americans differentiate between investing and speculating. Investing is usually considered lower-risk and longer-term focused, whereas speculation is high-risk and short-term focused. An investor’s understanding of their own risk tolerance, the potential amount of money they can endure losing, is essential when building a balanced portfolio. The time over which an investment is expected to be held before it is liquidated (time horizon), your net worth, income and the ease in which an investment can be bought and sold (liquidity) all impact risk tolerance. In addition to knowing your own risk tolerance, investing involves carefully researching business fundamentals such as quarterly financial earnings, profit margins and market positioning to make sure the opportunity fits your portfolio. Surprisingly, according to the survey, three in ten Americans involved in household investment decisions (28 percent) say they never do research into investment strategies and potential investment opportunities. And of those who do research, the majority (63 percent) do it quarterly or less. Perhaps this lack of research is what causes nearly a third of Americans involved in the investment