Is the Stock Game Rigged?

I think the stock market is rigged because the following issues continue to bother me unless I can find a reasonable answer:

1. Pre-market and after-hour trading. Why can only some people trade in those exclusive hours? Why not regular guys like you and me? Who are those people anyway?

2. Mutual Fund Index. If I buy into a mutual fund, I want a small percentage of the money the fund makes proportional to my shareholding. However, I can never tell the real profits from the index that the fund invents for me to see. They want to show me a fictional index number about how much they make (or lose) while hiding their real profits through heavy trading on a daily basis. I want transparency about how my money is being used by the fund. Due to this lack of transparency, I never want to buy into a mutual fund.

3. Board of Directors. Who has the qualification to sit on the Board of Directors of a public company? I have no problem that major shareholders (holding more than 5% of all the company shares) deserve a shot. They must insist on having a seat by virtue of their big holdings. Do the directors have access to insider information such as sales and profits for the next quarter in advance of publication? You bet they do! Does it open the door for the big shareholders to gain while the small ones are in the dark?

4. Preferential shares. Why are preferential shares created? Are they exclusive to certain group of people? Who are those people? Preferential shares are rarely traded in the open market so they are immune to the down side affecting common shares. There is also an artificial rate of conversion from preferential to common shares, but not the other way around. Why?

5. Short Sell. Why are short sell invented? If the purpose of investing in shares promotes business growth, short sell is doing just the opposite. It is counter-productive to growth that the stock market facilitates. However, it is not counter-productive to the big traders. Short sell enables the big traders to make money even when the stock is coming down.

6. Stock news. Stock news are fake news for the public to immerse in for they will never get tired of it. When a stock rises, the analysts will find many reasons to explain it, and vice versa. We know that the big guys drive the stock price simply because of the large volumes they buy and sell. So they initiate the price fluctuations. Hence they make the news and the public just follows. Big guys do not buy and sell by reading the news for they have insider information. If they do, they are no big guys. They are just like you and me.

I never hope to have the answers because the stock market is not transparent. Nevertheless, if you think about those questions, you will be able to play wisely and profit from the rigged game.

January 2014

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