Right now we have a crisis of consumer confidence. This is because we don’t trust our personal savings in the hands of the stock exchanges, and whether you like it or not, that is where our money ends up.

When we see the stock indices, Down Jones, NASDAQ, ASX 100, Fortune 500 etc., what we are seeing in the news is the equivalent of an average of taking the weather report from 100 different cities and being told that the weather on Earth today was 17°C.

The difference between US and European Stock Markets and a quick interpretation of what it means.

The European market is much as we expect markets to be. Individual investors, choosing and following a company through its ups and downs while the US market is built up of diversified portfolios managed by funds as are many of the Americanised stock exchanges and investment funds around the world, who ‘Hedge’ their bets to reduce portfolio risk.

This significant difference between investment methodologies began with the work of a fellow name Harry Markowitz (Modern portfolio theory, 1952) and basically it means have a range of different stocks to spread out your risk. All finance, interest, insurance is based on how it relates to the likelihood of being achieved, or risk.

It is believed that the majority of investors are made up of ‘Mum and Dad ‘investors. That’s not entirely true, whilst it is our money; it is not deliberately our investment. This investor category only accounts for about 20% of all investment globally, with the remaining 80% being institutional investors. These are AXA, UBS, Goldman Sachs etc., investing money for funds. An increase in revenue is projected of 5.1% growth over the next 5 years for Finance in Australia (IBISWorld July 2011), in revenue in the finance sector, who get their money from their consumer divisions, basically money from us in the form of superannuation, private medical insurance etc.