You finally have money to call your own. Now that you have your own money, you naturally want to see it grow. Maybe saving money in a bank simply doesn't entice you because there is so little growth potential. You want something with more risk so you have the potential to realize a far greater financial return. You decide to turn to the stock market.
Wait a minute! Are the risks involved in investing in today's volatile stock market worth your hard-earned cash? Investing can be an effective tool to grow your money, but you must have an open mind and know exactly what to look for.
As everyone knows, investing in the stock market is a risky endeavor. There are certain risks you simply cannot control.
One example is to exercise caution when investing in "hot" stocks. Of course there are some people that get wealthy investing in "hot" stocks, such as the "dot com" bubble that happened in the 1990s. However, when the initial buzz about these "hot" stocks starts to slide, so does your investment in them.
Once these stocks fall, they tend to fall really hard in a short period of time. Your money and the money of others like you falls along with the stocks. If you really feel the need to invest in "hot" stocks, you must keep a constant eye on them and sell them right away as they start to level off or drop.
To avoid risks such as these, diversify your investment portfolio. Buy a little bit of a lot of different types of stocks and bonds. By doing this, if one stock goes down another is likely to go up so you can attempt to recover some of your losses. It is always a wise idea to have a few stocks in the technology sector, biomedical, consumer corporations and telecommunications.
Over time, add to your portfolio with diamond and precious metal indexes and some general investment funds. A diverse portfolio increases your chances of profiting from the stock market.
There are companies that exist offering "safety stocks" to investors. It is a solid decision to have several shares of these type of "safe" companies in your investment portfolio. These types of stocks rarely fluctuate and usually offer steady, slow growth so you have some level of assurance in your investments.
Never rely on tip that says a stock is "going to be really big" or other related hype. These tips are usually unfounded and the stocks are often almost worthless. When you invest in these stocks you may get a higher return at first but in the long run, these stocks will be your greatest concern.
Take time to carefully read the Wall Street Journal or read the latest stock report on the news networks to find out more about your investments. Check relevant websites to verify how your stocks have been performing in the past few weeks. Lastly, keep up to date with the current stock market to make sure your investments are still smart.
Thursday, November 20, 2008
Monday, November 17, 2008
Create Wealth In The Stock Market
First and foremost, an opportunistic strategy for creating wealth in the stock market is needed. And the opportunistic strategy for creating wealth in the stock market must have two ingredients, a plan and a goal. The plan must be a definite, concrete plan of investing that would profit you and your family for the rest of your lives.
This opportunistic investment plan you begin should not profit anyone else – not a stockbroker, a mutual fund or a financial advisor. This means you have to have confidence in yourself and in your own judgment as to whether the investment plan you begin has merit. And this means that the investment plan would and should have already been proven to you!
This definite, concrete plan you begin for creating wealth through opportunities in the stock market must also have a goal. The goal should be clear and specific, and once your have made up your mind to achieve that goal, then go forward and make that goal a reality.
What are the opportunistic traits of a strategic investment plan built on a concrete foundation that would actually allow the shareholder to profit through all the turmoil of an up and down stock market? The secret for creating wealth in the stock market; no matter what direction the market is heading?
As in what appears to be the most difficult investment question of all to answer, the answer lies in simplicity itself – investing in those companies that have a historical record of raising their dividend every year. Whether or not you can take this statement of fact to heart is your own judgment call. But it is this opportunistic trait that can and will create wealth for you and your family for the rest of your lives.
A company’s ability to raise its dividend every year, coupled with stock appreciation is a very powerful wealth creating formula!
I’m going to provide you with two examples, though there are many more, some with even better results. The two examples are from my book, published by American-Book Publishing – ‘The Stockopoly Plan – Investing for Retirement’ (where an investment plan and a goal are written in stone).
The first example would be a stock purchased in 1990, Comerica (CMA). What led to the purchase of CMA? – In 1990 CMA had a 21 year history of raising their dividend every year. Today’s CMA has a 35 year history of raising their dividend every year. This opportunistic trait in CMA stock has garnished a little better than a 15 percent return a year, compounded annually (just by having the dividends reinvested back into the stock each quarter through those years – I prove this to you in The Stockopoly Plan), for the past 14 plus years. Today’s CMA stock just recently touched a new high at $60 dollars a share, with a dividend yield of around 3½ percent. In April of 2003 the stock was selling around $37.50 a share, paying a dividend yield of around 5% a year. Am I tempted to sell my position in CMA? Do I care if the stock drops from this lofty price back to $37 a share? Why should I? If the stock drops back to $37 a share, my dividends being reinvested back into the stock each quarter purchases more shares, and my dividend income from CMA simply and dramatically accelerates. I am also already prepared that if a buy-out offer is ever made for the company to reap the profits of owning the stock (as well as the possibility of another stock split).
The second example is (unfortunately) in my book, also. I say unfortunately because my book is in the final copy edit stage, so no one has had a chance to read and benefit from it, and since a buy-out offer was made for the stock last week or so, the stock will no longer exist (this means a rewrite for me, before publication). The company in question is the Rouse Co. (RSE), which was just purchased by General Growth Properties (GGP). Oddly enough, you’ll find GGP in my book, also – if you bother to pick it up. Anyway, that’s neither here nor there - RSE, on the takeover bid jumped over $16.00 a share in one day! Whew! Why couldn’t they have waited a couple of months until my book was released? RSE had the opportunistic trait of raising their dividend every year since 1993 and I was quite content with its performance through the years.
Well, that last paragraph blew my train of thought on this article. All I can think about at the moment is my rewrite.
I would like to take this time to explain something to you. I have never considered myself a writer nor am I a stock market professional. I am simply a man with 39 years of experience and a passion for the stock market, trying to share what wisdom those years have given me. When I sit down to write an article, I seldom have an idea on what I’m going to say. It was the same way when I sat down to write my book. I just meant to put down a few words on paper for my 18-year old son so he would have a sound, concrete plan for investing in those companies that make up the stock market (quite frankly – I didn’t want him to blow his inheritance). Whether you find merit in what I say, I have no idea. What I do know is that life is just too short to learn everything you need to learn by yourself, without the help of others.
There, now I’m satisfied with that ending!
Friday, November 14, 2008
Stock Marketing and Investing Mistakes To Avoid
Investing in the stock market is probably one of the riskiest ventures you can delve into with your money. It is also one of the most profitable. So it is only normal that you may have reservations about actually trying your luck in the stock market.
There are two people that you need to find and make friends with to get started investing in the stock market. If you are a brand spanking new beginner then first find a friend that invests in stocks. Preferable you want to find someone you have known for a while and someone that you can trust as a friend. You can use your friend to bounce ideas off of and get help from. Also you want to find a good stockbroker to begin trading. You might ask your friend who he or she uses as a stockbroker. Later on once you have gotten your feet wet you will want to strike out on your own but have a safety net in place before doing that.
One of the worst stock moves you can make is with variable annuities using the premium of your insurance. A variable annuity is an insurance contract that allows you to invest your premium in mutual fund-like investments. This sounds good in paper, but if you look at it a little harder, you will find that they are bad investments in the long run for the following reason:
Some other things that you want to watch out for and be carefully when considering investing follow.
Tax cuts
Ordinary investments in stocks and mutual funds qualify for low capital gains treatments, thus smaller taxes. Your gains from investing your premium, on the other hand, get taxed as income as soon as you withdraw the money.
Early withdrawal penalties
Insurance plans are designed for retirement. Taking out money from your premium entails a certain amount of penalty from both the insurance company as well as the government. So if you withdraw your profits, you will be penalized.
Death benefit
If your stocks are down upon your death, your beneficiaries can get as much as the investments you put in. Unfortunately, if your stocks are up, they get taxed as a regular income.
Costs
Annuities with insurance features are actually more expensive than ordinary mutual funds. The more insurance features your annuity has, the more annual feels are heaped against it, which naturally eats up your profits.
Timing
There are specific times as well, when to and when to not make an investment. For example times of natural calamity may drive prices of stocks down but there are no insurance these would recover to make a good profit.
Of course investing money in the stock market is inherently risky and you will lose some money at some point in your stock investing career. It is natural and a part of the learning process. The important thing is don't give up and stop just because you have a lost a little money. Take the loss as a learning experience and move on. Now if you find all of your trades end up losing money then you might decide to take a different route. However by following the advice and tips above along with your own knowledge you will end up profitable int he long run.
There are two people that you need to find and make friends with to get started investing in the stock market. If you are a brand spanking new beginner then first find a friend that invests in stocks. Preferable you want to find someone you have known for a while and someone that you can trust as a friend. You can use your friend to bounce ideas off of and get help from. Also you want to find a good stockbroker to begin trading. You might ask your friend who he or she uses as a stockbroker. Later on once you have gotten your feet wet you will want to strike out on your own but have a safety net in place before doing that.
One of the worst stock moves you can make is with variable annuities using the premium of your insurance. A variable annuity is an insurance contract that allows you to invest your premium in mutual fund-like investments. This sounds good in paper, but if you look at it a little harder, you will find that they are bad investments in the long run for the following reason:
Some other things that you want to watch out for and be carefully when considering investing follow.
Tax cuts
Ordinary investments in stocks and mutual funds qualify for low capital gains treatments, thus smaller taxes. Your gains from investing your premium, on the other hand, get taxed as income as soon as you withdraw the money.
Early withdrawal penalties
Insurance plans are designed for retirement. Taking out money from your premium entails a certain amount of penalty from both the insurance company as well as the government. So if you withdraw your profits, you will be penalized.
Death benefit
If your stocks are down upon your death, your beneficiaries can get as much as the investments you put in. Unfortunately, if your stocks are up, they get taxed as a regular income.
Costs
Annuities with insurance features are actually more expensive than ordinary mutual funds. The more insurance features your annuity has, the more annual feels are heaped against it, which naturally eats up your profits.
Timing
There are specific times as well, when to and when to not make an investment. For example times of natural calamity may drive prices of stocks down but there are no insurance these would recover to make a good profit.
Of course investing money in the stock market is inherently risky and you will lose some money at some point in your stock investing career. It is natural and a part of the learning process. The important thing is don't give up and stop just because you have a lost a little money. Take the loss as a learning experience and move on. Now if you find all of your trades end up losing money then you might decide to take a different route. However by following the advice and tips above along with your own knowledge you will end up profitable int he long run.
Wednesday, November 12, 2008
Rules for Successful Tax-free Income Investing
Do you sometimes question the performance of your investment portfolio? If you are like most investors you have your income producing assets thrown in together with your equity portfolio. You look at the total mix of dividend paying stocks, bonds, mutual funds and equities, and you’re confused as to why they’re not producing enough income or growing your portfolio value sufficiently.
I have found that part of the reason is the nearly universal propensity of investors to ignore the long-term implications of their income investment decisions while they focus on short-term effects.
Because fixed income investing simply isn’t regarded as being as exciting as other stock market investing, it has often been relegated to the “ho-hum” category by writers and not as much ink has been devoted to its ins and outs as has been expended on other types of investing. I think that’s a disservice to those interested in this type of investment.
Investing for income, be it taxable or tax-free, -- and, for the record, my preference for generating tax-free income for clients is the use of CEETBFs (Closed End Exchange Traded Bond Funds) as described in my free e-book “How to earn 5% - 6.5% tax-free income.” -- has some common denominators, which I have broken down into 10 rules. These will help you make better decisions and, at the same time, view income oriented investments with the correct mindset, so that you don’t constantly try to second guess yourself.
1. It’s important to consider the performance of the Fixed Income portion of a portfolio separately from the equity portion. Why? Because the objectives are entirely different.
Equity investments are for growth, while the primary purpose of owning fixed income securities is to generate a secure cash flow—either for spending or reinvesting until it is needed. For most people, the long-term goal of an Investment program is to generate enough income to live on, without having to touch the principal.
To most effectively analyze and manage your investments, keep your equity account separate from your income generating account.
2. All fixed income securities are “interest rate sensitive.” Because of this their market price will always “vary inversely” with the anticipated direction of interest rates. Interest rates on the rise, prices will fall. Interest rates thought to be headed south, investment prices will move higher.
This applies to all Bond, Preferred Stock, & REIT prices. Accept it and live with it! The variables for the movement in price are the quality rating of the issuer, the length of time until Maturity, or the Call Date.
Do remember that price changes in Fixed Income Securities are not an indicator of, and have little impact on, the ability of the issuer to pay interest. So instead of beating yourself up when interest rates start to rise, take advantage of higher yields.
3. Because of what they are, Fixed Income Securities are generally held for the long term. The factor to consider is the amount of income being received. There is no benefit in trying to predict the future direction of interest rates, and I strongly suggest you avoid that—along with constant monitoring of changes in portfolio value.
Remember, fixed income investing works in a way like your day-to-day personal finances. You pay your expenses from your income, not from your net worth.
4. Buy only fixed income instruments where the costs are transparent. In other words, many new issues sold by brokers can carry hidden costs. While commissions have to be disclosed mark-ups don’t.
There are often extremely large mark ups—3% or more is not uncommon—on new issues. Buyer beware.
5. Seek out instruments with the longest duration and only those that are Investment Grade. If you’re conservative, you can find many closed end funds that are insured and use no leverage, though they offer a slightly lower yield.
6. All Interest Rate Sensitive Securities follow the same rules! This means the value of everyone’s bonds will be going in the same direction as yours at any given time. Don’t submit to temptation. Emotions, fear, or other non-objective motives are not good reasons to switch from one Fixed Income fund to another.
Focus on diversification and avoid investments with yields that seem too good to be true. In that aspect, Fixed Income investing and Equity investing share a couple common guidelines: (1) if it seems too good to be true, it probably is, and, (2) no matter how good the hype, you can’t make a silk purse out of a sow’s ear.
7. Income production is the primary reason to purchase Fixed Income Securities. Once you truly understand that you will realize that the only thing you need to pay attention to on your monthly statement is the “Income Received” number. I suggest you ignore the others.
8. To become a successful Income investor, you must also understand the following points and agree with them:
* Higher interest rates are a boon to the Fixed Income Investor; they put more money in your pocket.
* Lower interest rates also offer benefit for the Fixed Income Investor; they give you the chance to add Capital Gains to the total spending money your investments generate.
* Changes in the market value of Investment Grade Fixed Income Securities should have absolutely no meaning to you 95% of the time.
9. Open Ended Income Mutual Funds will not serve your objectives. It is no secret that the fixed income variety almost never go up. As interest rates cascaded downward over the last several years, Open Ended Income Mutual Funds did not show the same degree of gains enjoyed by individual securities—while Closed End Funds did respond to these factors.
10. There are a number of reasons why it’s to your benefit to primarily use Closed End Exchange Traded Funds: Low acquisition costs, complete liquidity, professional fund management and monthly predictable cash flow. Additionally, you’re offered the opportunity to buy more when prices fall and to realize capital gains when interest rates are on the downturn.
Why haven’t you heard about these funds from your financial professional before? Especially now when many are yielding around 6% tax-free? For the simple reason that there is no money to be made for the financial professional recommending them. While these funds may increase your monthly income, they won’t do a thing for the commission hungry salesman.
If you manage your portfolio, hopefully these 10 points will assist you in more profitable investing. If you’re unsure about putting an income portfolio together by yourself, find a professional who works with these types of funds and is aware of the principles I have described, and let him or her assist you in creating the income you need to enjoy a dignified retirement.
I have found that part of the reason is the nearly universal propensity of investors to ignore the long-term implications of their income investment decisions while they focus on short-term effects.
Because fixed income investing simply isn’t regarded as being as exciting as other stock market investing, it has often been relegated to the “ho-hum” category by writers and not as much ink has been devoted to its ins and outs as has been expended on other types of investing. I think that’s a disservice to those interested in this type of investment.
Investing for income, be it taxable or tax-free, -- and, for the record, my preference for generating tax-free income for clients is the use of CEETBFs (Closed End Exchange Traded Bond Funds) as described in my free e-book “How to earn 5% - 6.5% tax-free income.” -- has some common denominators, which I have broken down into 10 rules. These will help you make better decisions and, at the same time, view income oriented investments with the correct mindset, so that you don’t constantly try to second guess yourself.
1. It’s important to consider the performance of the Fixed Income portion of a portfolio separately from the equity portion. Why? Because the objectives are entirely different.
Equity investments are for growth, while the primary purpose of owning fixed income securities is to generate a secure cash flow—either for spending or reinvesting until it is needed. For most people, the long-term goal of an Investment program is to generate enough income to live on, without having to touch the principal.
To most effectively analyze and manage your investments, keep your equity account separate from your income generating account.
2. All fixed income securities are “interest rate sensitive.” Because of this their market price will always “vary inversely” with the anticipated direction of interest rates. Interest rates on the rise, prices will fall. Interest rates thought to be headed south, investment prices will move higher.
This applies to all Bond, Preferred Stock, & REIT prices. Accept it and live with it! The variables for the movement in price are the quality rating of the issuer, the length of time until Maturity, or the Call Date.
Do remember that price changes in Fixed Income Securities are not an indicator of, and have little impact on, the ability of the issuer to pay interest. So instead of beating yourself up when interest rates start to rise, take advantage of higher yields.
3. Because of what they are, Fixed Income Securities are generally held for the long term. The factor to consider is the amount of income being received. There is no benefit in trying to predict the future direction of interest rates, and I strongly suggest you avoid that—along with constant monitoring of changes in portfolio value.
Remember, fixed income investing works in a way like your day-to-day personal finances. You pay your expenses from your income, not from your net worth.
4. Buy only fixed income instruments where the costs are transparent. In other words, many new issues sold by brokers can carry hidden costs. While commissions have to be disclosed mark-ups don’t.
There are often extremely large mark ups—3% or more is not uncommon—on new issues. Buyer beware.
5. Seek out instruments with the longest duration and only those that are Investment Grade. If you’re conservative, you can find many closed end funds that are insured and use no leverage, though they offer a slightly lower yield.
6. All Interest Rate Sensitive Securities follow the same rules! This means the value of everyone’s bonds will be going in the same direction as yours at any given time. Don’t submit to temptation. Emotions, fear, or other non-objective motives are not good reasons to switch from one Fixed Income fund to another.
Focus on diversification and avoid investments with yields that seem too good to be true. In that aspect, Fixed Income investing and Equity investing share a couple common guidelines: (1) if it seems too good to be true, it probably is, and, (2) no matter how good the hype, you can’t make a silk purse out of a sow’s ear.
7. Income production is the primary reason to purchase Fixed Income Securities. Once you truly understand that you will realize that the only thing you need to pay attention to on your monthly statement is the “Income Received” number. I suggest you ignore the others.
8. To become a successful Income investor, you must also understand the following points and agree with them:
* Higher interest rates are a boon to the Fixed Income Investor; they put more money in your pocket.
* Lower interest rates also offer benefit for the Fixed Income Investor; they give you the chance to add Capital Gains to the total spending money your investments generate.
* Changes in the market value of Investment Grade Fixed Income Securities should have absolutely no meaning to you 95% of the time.
9. Open Ended Income Mutual Funds will not serve your objectives. It is no secret that the fixed income variety almost never go up. As interest rates cascaded downward over the last several years, Open Ended Income Mutual Funds did not show the same degree of gains enjoyed by individual securities—while Closed End Funds did respond to these factors.
10. There are a number of reasons why it’s to your benefit to primarily use Closed End Exchange Traded Funds: Low acquisition costs, complete liquidity, professional fund management and monthly predictable cash flow. Additionally, you’re offered the opportunity to buy more when prices fall and to realize capital gains when interest rates are on the downturn.
Why haven’t you heard about these funds from your financial professional before? Especially now when many are yielding around 6% tax-free? For the simple reason that there is no money to be made for the financial professional recommending them. While these funds may increase your monthly income, they won’t do a thing for the commission hungry salesman.
If you manage your portfolio, hopefully these 10 points will assist you in more profitable investing. If you’re unsure about putting an income portfolio together by yourself, find a professional who works with these types of funds and is aware of the principles I have described, and let him or her assist you in creating the income you need to enjoy a dignified retirement.
Monday, November 10, 2008
Stocks Are Your Best Friend
History suggests that stocks are the best investment you can make when you're in it for the long haul. No matter the investment vehicle, be it bonds, cash, diamonds, silver, gold, in the long run stocks give the best returns. I read in a lot of places that stocks returns are higher than real estate returns but I don't personally agree. Real estate returns are calculated on the basis of the property's appreciation, but if you want to calculate your personal return on a real estate investment, you have to account for the fact that only part of your investment was financed with your own money... But I digress...
What happens if you compare stocks to cash over the long term? A good example of a cash investment is money invested in three-month Treasuries or a first-rate money market fund. A cash investment is NOT the emergency savings fund that is recommended you keep on hand for a rainy day. Over the past 60 years, cash has turned out to be a loser. After accounting for inflation, cash has returned an average 0.5% per year since 1926, compared to 6.9% for the S&P 500.
If you want to invest in financial instruments but don't think you can handle the short term volatility of stocks, you might consider bonds. But how to they fare? Together, returns on large and small-company stocks averaged 11.3% a year since 1926. Long-term Treasury bonds did significantly less wel, averaging a 5.02% return over the same period. In all fairness, it has to be pointed out that bond yields don't generally match stock returns in the long run, but investing in bonds doesn't come with the wild swings that are a given with stock investing.
As for other investment vehicles like precious metals, diamonds, oil, collectibles, there are times when they indeed return much higher yields than run-of-the-mill stocks. As a rule, stashing your cash in such vehicles is considered smart in times of high inflation, where stocks and bonds tend to underperform, but not in the long run. Returns on those assets vary wildly from year to year, and what is hot this year can be the biggest loser next year.
It's undeniable that investing in the stock market requires a strong stomach, not only to stay in the market when stock values are going south, but to keep investing in those troubled times. But 80 years of financial data have shown us that the market has always rebounded from downturns, reaching higher levels each time. If the past is indicative of the future (and most analysts seem to think so), if you're considering investing, stocks may be your best friends. Just make sure you don't panic when there's a crash. How you allocate your portfolio among broad categories is probably more important than what specific stocks or bonds you buy.
What happens if you compare stocks to cash over the long term? A good example of a cash investment is money invested in three-month Treasuries or a first-rate money market fund. A cash investment is NOT the emergency savings fund that is recommended you keep on hand for a rainy day. Over the past 60 years, cash has turned out to be a loser. After accounting for inflation, cash has returned an average 0.5% per year since 1926, compared to 6.9% for the S&P 500.
If you want to invest in financial instruments but don't think you can handle the short term volatility of stocks, you might consider bonds. But how to they fare? Together, returns on large and small-company stocks averaged 11.3% a year since 1926. Long-term Treasury bonds did significantly less wel, averaging a 5.02% return over the same period. In all fairness, it has to be pointed out that bond yields don't generally match stock returns in the long run, but investing in bonds doesn't come with the wild swings that are a given with stock investing.
As for other investment vehicles like precious metals, diamonds, oil, collectibles, there are times when they indeed return much higher yields than run-of-the-mill stocks. As a rule, stashing your cash in such vehicles is considered smart in times of high inflation, where stocks and bonds tend to underperform, but not in the long run. Returns on those assets vary wildly from year to year, and what is hot this year can be the biggest loser next year.
It's undeniable that investing in the stock market requires a strong stomach, not only to stay in the market when stock values are going south, but to keep investing in those troubled times. But 80 years of financial data have shown us that the market has always rebounded from downturns, reaching higher levels each time. If the past is indicative of the future (and most analysts seem to think so), if you're considering investing, stocks may be your best friends. Just make sure you don't panic when there's a crash. How you allocate your portfolio among broad categories is probably more important than what specific stocks or bonds you buy.
Best Stock to Invest In
So, you’re looking to secure your future, huh? And the best way you thought how to do so is by investing in the stock market. Well, let me tell you something… good choice! The business of stock trading and stock investing is a very rewarding one indeed, but only if you dedicate enough discipline and hard effort is put into understanding it. I guess your immediate question would be, which is the best stock to invest in?, right?
I could talk to you about all the popular and good stocks to buy out there, but that’s just the problem… their too popular. From my own experience I can say that one of my best stock picks was of a small company back in ’89… now one of the – if not the most – powerful multinational corporations in the world. I’m not going to reveal the company’s name though, but at the time I bought them, is was selling penny stocks. It cost be around $0.70 to buy one stock, so I bought a bunch of them. It was risky but, then again, I only spent around $400 bucks.
The Early Years
The first year, my little NASDAQ penny stocks went up around +0.30. That means they were up to $1.00! that was good knows! But I wanted them to go up a little further and then sell them so I could make the difference… To my surprise they dropped to $0.90 – something like that. But this wasn’t a bad surprise for me, somehow I ended up buying a whole bunch more… spent around $2,000! To this day I don’t know why, but I took the risk!
For the next 10 years the stocks skyrocketed and I was selling and buying and selling and buying… From a bunch of day trading penny stocks, I made a great deal of money, but the thing is… by 1999 they weren’t penny stocks anymore! Their price had gone up to a whopping $50 per stock! How about that! Life was good! And still is… Thanks to that moment!
In Short
What I’m trying to say here is, the best stock to invest in isn’t always the one that’s worth hundreds of dollars. Sometimes you just have to go for it and take the risk with penny stocks, and sometimes with enough research you know the penny stocks are going to explode some day and make you a real fortune!
I could talk to you about all the popular and good stocks to buy out there, but that’s just the problem… their too popular. From my own experience I can say that one of my best stock picks was of a small company back in ’89… now one of the – if not the most – powerful multinational corporations in the world. I’m not going to reveal the company’s name though, but at the time I bought them, is was selling penny stocks. It cost be around $0.70 to buy one stock, so I bought a bunch of them. It was risky but, then again, I only spent around $400 bucks.
The Early Years
The first year, my little NASDAQ penny stocks went up around +0.30. That means they were up to $1.00! that was good knows! But I wanted them to go up a little further and then sell them so I could make the difference… To my surprise they dropped to $0.90 – something like that. But this wasn’t a bad surprise for me, somehow I ended up buying a whole bunch more… spent around $2,000! To this day I don’t know why, but I took the risk!
For the next 10 years the stocks skyrocketed and I was selling and buying and selling and buying… From a bunch of day trading penny stocks, I made a great deal of money, but the thing is… by 1999 they weren’t penny stocks anymore! Their price had gone up to a whopping $50 per stock! How about that! Life was good! And still is… Thanks to that moment!
In Short
What I’m trying to say here is, the best stock to invest in isn’t always the one that’s worth hundreds of dollars. Sometimes you just have to go for it and take the risk with penny stocks, and sometimes with enough research you know the penny stocks are going to explode some day and make you a real fortune!
Thursday, November 6, 2008
Guide To Choosing A Stock Broker
There are many types of brokerage services available. Even the average investor will use a broker to handle his stock market transactions. Some brokers will even give advice about which stocks to buy and sell based on their market trend research.
Obviously these tips are not free. In fact, full service brokers will charge the highest commission rate in the industry. Your choice of broker should depend upon your knowledge of the stock market and how regularly you trade.
Going to "discount brokers" will help you save on commission fees while still using a brokerage. The commission rates are so low because these brokers do not offer advice or analysis. Using a discount broker is perfect for investors that like to make their own trading decisions.
The cheapest brokerages will be online companies. Some of these operate exclusively online, so it helps them offer you lower rates. Some full-service and discount brokers even offer discounts for placing orders online. The process is the same, regardless of which broker you choose. The first step is opening an account. You need to be familiar with all the fine print and understand all the fees involved.
Typically, you are required to maintain a certain account balance, which varies from broker to broker. Some brokers charge when your account balance falls below the minimum. Others charge an annual maintenance fee regardless of the balance.
There are two types of brokerage accounts, and the one you choose depends upon your goals. "Cash accounts" offer no credit. So when you purchase stock, you are paying the full amount of the stock price. On the other hand, the "margin account" allows you to buy stock "on margin.
Margin fluctuates between brokers, but it always has to be protected by the value of the client's portfolio. Unfortunately, if the portfolio falls between a certain amount, the investor would have to add more funds or sell some stock. These margin accounts are desirable because they allow people to buy more stock with less cash. This creates great gains but unfortunately greater losses, as well. Obviously, these margin accounts can be extremely risky, so they are not recommended for inexperienced traders.
The broker that you choose depends on your needs as an investor. Specifically, it depends on if the investor wants to receive advice about stock to purchase and whether or not the investor is comfortable making trades on the Internet. If the investor is nervous about trading, going with a full-service broker would make it much easier. Otherwise, if you are technology savvy and have the knowledge and confidence in your stock trading, a discount broker will surely save you money.
Make sure to compare a few competitors after you choose. There can even be significant cost differences between the same type of broker. You also need to make some final decisions on your account. After you choose a brokerage type, it is important to shop competitors of a few brokerage firms. But first you need to gather some information to take them. You need to estimate how often you will be trading and how much cash you will deposit into your account. You also need to decide between a cash account and a margin account. Deciding on all of this information early will allow you to accurately compare competitor's pricing.
Monday, November 3, 2008
Direct Access Stock Trading
Online trading of stocks offered many more advantages than traditional stock trading such as faster trade execution, updated market information and sophisticated market research tools. But for some stock traders, like day traders, online trading were not so enough, which is why direct access stock trading has its existence. In direct access trading, DAT or EDAT, the trades are executed in real-time with real-time market information. The process is very simple and is fully automated with minimum/no human interfere.
The major benefit of direct access stock trading is that it does not require any broker assistance. The trades are executed by the trader himself, giving him the full control of his money; also full risk. Direct access stock trading usually involves much less commission fees than online trading, is also offer liquidity rebates and slippage control. But this style of trading is not recommended for long-term investors or position trades and part-time traders, as the traders have to satisfy account minimums and trading minimums; other wise will result in penalties and inactivity fees.
Direct access stock trading is carried out through specialized stand alone trading platforms, the direct access or level2 trading systems. These systems are installed on computers connected to high-speed communication networks. Today most direct access stock traders trade from their home. With the level2 or even level3 market access they can monitor real-time market data like ask and bid prices, market makers involved in trading, and order sizes. He can begin his purchase by just clicking on his choice of price and entering his order size. Direct access stock traders, unlike online traders, can route his order to his choice of market maker. The market maker then matches this order and transfers the stock. The results can be seen instantly.
As trades are executed in real-time, direct access stock traders can react quickly to any profit making situation and also can limit their loss when market goes down. Most direct access brokers offer much more leverage to day traders and thus the trader can increase his buying power considerably. There are a variety of direct access trading platforms available, and one broker offering more than one platform, of different levels, is common. These platforms may have a monthly usage fee, which is decreased by the increase in number of trades as well as increase in volume per trade done by the trader. Most direct access stock brokers offer paper trading accounts for a limited period to test drive their software.
Lastly, direct access stock trading is not recommended for novice traders as well as doubtful traders. As most trades are margin trades, you are always on the risk of losing your money. Remember it is a broker independent trading procedure – so there is little chance of getting advices.
The major benefit of direct access stock trading is that it does not require any broker assistance. The trades are executed by the trader himself, giving him the full control of his money; also full risk. Direct access stock trading usually involves much less commission fees than online trading, is also offer liquidity rebates and slippage control. But this style of trading is not recommended for long-term investors or position trades and part-time traders, as the traders have to satisfy account minimums and trading minimums; other wise will result in penalties and inactivity fees.
Direct access stock trading is carried out through specialized stand alone trading platforms, the direct access or level2 trading systems. These systems are installed on computers connected to high-speed communication networks. Today most direct access stock traders trade from their home. With the level2 or even level3 market access they can monitor real-time market data like ask and bid prices, market makers involved in trading, and order sizes. He can begin his purchase by just clicking on his choice of price and entering his order size. Direct access stock traders, unlike online traders, can route his order to his choice of market maker. The market maker then matches this order and transfers the stock. The results can be seen instantly.
As trades are executed in real-time, direct access stock traders can react quickly to any profit making situation and also can limit their loss when market goes down. Most direct access brokers offer much more leverage to day traders and thus the trader can increase his buying power considerably. There are a variety of direct access trading platforms available, and one broker offering more than one platform, of different levels, is common. These platforms may have a monthly usage fee, which is decreased by the increase in number of trades as well as increase in volume per trade done by the trader. Most direct access stock brokers offer paper trading accounts for a limited period to test drive their software.
Lastly, direct access stock trading is not recommended for novice traders as well as doubtful traders. As most trades are margin trades, you are always on the risk of losing your money. Remember it is a broker independent trading procedure – so there is little chance of getting advices.
Important Features Of Stock Trading System
Investors as well as traders, are greatly interested in the stock market. It has revealed itself as the best platform to help one's capital grow, provided the person is in tune with current market trends and knows where to put his/her money. The popularity of this method has prompted people from the trading community to go in for an efficient stock trading system.
Another reason for the demand to have a good stock trading system in place is the rise in global stock markets. As a matter of fact, traders/brokers as well as investors/shareholders are finding that the task of trading in equities or shares or stocks is proving to be extremely complicated, considering that newer companies and institutions are being launched all the time. And the Internet has not helped by bringing the world closer to home!
What are the features of a stock trading system?
(1) What is meant by a stock trading system? It is a tool to enhance the success of investments, especially if it works effectively and efficiently. It includes strategies related to investments, market guides and trading schemes.
There are experienced analysts and professionals to guide the trader or investor as needed. This is achieved by providing a constant flow of information and analysis regarding market trends and movements in the stock market arena. Without this in place, it would be difficult for smooth functioning of the stock market.
Lastly, there is a timing system included in the package. Thus, every investor is aware of the time limits for investing in a particular stock.
(2) A stock trading system is not something that can be just bought at any marketplace! There are special individual distributors or operators available--they can be found locally too. These dealers offer a customer much more than just a system. They are truly worth it because they can lessen your headaches! All the more better to go to them if you have linked up with other business partners.
(3) Another option is to check out those special companies offering to sell systems that are dependable and have already been well promoted.
(4) Traditional or conventional methods of transactions are giving way to more modern methods. So there is the automatic/electronic stock trading system which is faster and more interactive in nature.
Since trading in stocks has become a global activity, it is difficult for investors to be present physically at all locations. He/she need not attend auction venues or trading places for the express purpose of buying or selling shares or trading stocks. Hence, the launch of electronic transactions.
This sort of a stock trading system is quick and convenient since it is supported by wireless Internet and wireless telephone. More advanced technology is sure to evolve in future.
Another reason for the demand to have a good stock trading system in place is the rise in global stock markets. As a matter of fact, traders/brokers as well as investors/shareholders are finding that the task of trading in equities or shares or stocks is proving to be extremely complicated, considering that newer companies and institutions are being launched all the time. And the Internet has not helped by bringing the world closer to home!
What are the features of a stock trading system?
(1) What is meant by a stock trading system? It is a tool to enhance the success of investments, especially if it works effectively and efficiently. It includes strategies related to investments, market guides and trading schemes.
There are experienced analysts and professionals to guide the trader or investor as needed. This is achieved by providing a constant flow of information and analysis regarding market trends and movements in the stock market arena. Without this in place, it would be difficult for smooth functioning of the stock market.
Lastly, there is a timing system included in the package. Thus, every investor is aware of the time limits for investing in a particular stock.
(2) A stock trading system is not something that can be just bought at any marketplace! There are special individual distributors or operators available--they can be found locally too. These dealers offer a customer much more than just a system. They are truly worth it because they can lessen your headaches! All the more better to go to them if you have linked up with other business partners.
(3) Another option is to check out those special companies offering to sell systems that are dependable and have already been well promoted.
(4) Traditional or conventional methods of transactions are giving way to more modern methods. So there is the automatic/electronic stock trading system which is faster and more interactive in nature.
Since trading in stocks has become a global activity, it is difficult for investors to be present physically at all locations. He/she need not attend auction venues or trading places for the express purpose of buying or selling shares or trading stocks. Hence, the launch of electronic transactions.
This sort of a stock trading system is quick and convenient since it is supported by wireless Internet and wireless telephone. More advanced technology is sure to evolve in future.
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