Stocks Mutual Funds | Mutual Funds

Dividends are like the golden child's of the stock investment

2010-12-22T06:42:00.000-08:00

Dividends are like the golden child's of the stock investment world. If you take a look back at stock history you'll see that dividend stocks are the safest stocks to invest in because not only does the price on them not change much but when they price does change for the worse the change in price is often off set by the dividend income you receive. This makes dividend stocks the ultimate investment tool for investors who want to safely own stocks and getting an income at the same time. If you own a collection of dividend stocks and you continue to build up your portfolio until you retire, during your retirement years you can get a nice large steady income from your stocks to support yourself. And the really good thing about dividend stocks is that you don't have to sell them to get the money you want.

With stocks that don't pay a dividend or don't pay a large enough dividend to be worth investing in for a dividend over the long wrong. These kind of stocks you have to sell in order to get your money from them. And when you sell the stocks the shares are gone and you can't get them back unless you buy more stocks. So your basically uprooting your money making tree without putting down a replacement. The beauty of dividend stocks is that not only does the dividend increase but the stock price also increases and to take your wealth out of the new money being put into the stock that you own you don't have to sell your stock to get profit.

This makes dividend stocks an ideal tool for people who want to live long and prosper and pass their wealth onto their family. Once the transfer of stocks is complete they will continue to pay dividends and grow. And since you don't have to sell them you never have to worry about running out of stocks like you would if you were only investing in stocks with capital gains potential and payments.

Antonio Seegars is the owner of the in-home computer repair company Hampton Roads Pc Repair

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Interest Rates and Preferred Shares

2010-12-22T06:41:00.003-08:00

It has been written about to the point where investors are tired of hearing it, but it is worth repeating that dividend based investments are going to take on heightened importance and relevance in the future and particularly for 2011. Arguably the biggest reason why investors who need to derive income from their investment portfolios will start turning to dividend paying securities is that these types of income producing securities will not be impacted as much as bonds when rates start to increase.

Interest Rates and Preferred Shares

One of the safest ways to draw an income out of equities is through the purchase of preferred shares. While these types of securities will received a preferred dividend payout compared to common shares, there is also a lot less volatility in price. Still, these securities will deal with yield and whenever yield is involved, interest rate fluctuations will have a counter-corresponding impact on price... albeit much more muted here.

Interest Rates and Common Shares

Unlike preferred shares that will have muted price fluctuations with interest rate increases, common shares will have wider fluctuations. The biggest difference here is that once the immediate "shock" passes, common shares are apt to increase in value as rising rates tell investors that companies are doing well and the economy is seen as expanding. This spells profits and cash flow for companies, which bodes extremely well for their stock price.

The problem with common shares is that their dividends are normally lower than the dividends paid on preferred shares. This leaves the investor more inclined to hold such securities more for their growth attributes than for their income producing abilities.

Preferred or Common for Income

Most investors looking for a way to replace their bond income payments with a security that will not fluctuate as broadly as bonds will once rates start climbing will look to preferred shares. Yields are not only marginally better than they are on common shares (for the most part), but the security price will not move as much.

On the other hand, investors looking to cash in on the growth potential of an economic recovery and expansion can also earn dividend income through many of the common shares that trade on the markets. The trade off is greater volatility and lower income (again for the most part).

Either way, replacing bond income is not so much an issue for many investors, but deciding which way to invest (preferred shares or common shares) is the greater problem to solve. And while this may not seem like such a big problem to work through for 2011 when bonds may suffer market losses, a long-term investment plan needs to look beyond the next twelve months.

Chris has more than 17 years of financial services experience. He currently manages a website about Shipping Crate options at ShippingCrate.org as well as another about investing through Tax Lien List opportunities at TaxLienList.org.

Article Source: http://EzineArticles.com/?expert=Christopher_Fitch

Trading stocks involves buying and selling stocks

2010-12-22T06:41:00.001-08:00

Trading stocks involves buying and selling stocks. Unfortunately, all the hype surrounds the buying side of the stock market. Once you are committed all the sales people seem to disappear.

You see lower lows, you see trend lines breaking, you see volume increasing on the downside, you see negative news, you see insiders selling yet with all the information saying this stock is going down you hang on. Selling stocks is tough.

Perhaps you are a long-term investor and never sell. That is one way to play the game. However, when you are a trader and do not want to become an investor you must sell.

Why do people have such an emotional attachment to a losing stock?

Why can't they sell the loser and use the cash to buy a winner?

I think one of the main reasons traders find it difficult to sell is that from an early age people are trained not to make mistakes. This training happens without most people even realizing it and it begins at home and at school.

At the end of the school year the higher your marks are the happier you are. During the year you may have made some errors however, when it counted you came through and passed your test.

Now think of the reaction a child gets when they come home with a failed grade. Do they get heaps of praise, presents, rewards or do they get ridicule, told to buckle down, privileges taken away or worse. In most cases, my guess is the latter. This is unfortunate as in order to learn people generally fail first and succeed second.

What happens to many is that they get so frustrated about losing that as they grow older they will do anything not to lose and as such end up living a very average life.

You have to understand that trading is a probability game. In order to win you have to play and when you play you will eventually lose. The trick is to lose less than you win.

One of the first rules of trading is to cut your losses and let your winners run.

Let's look at a basic example:

School

90% pass, brilliant
10% fail, stupid

Stocks - 100 trades

90% of trades make $100 (+9,000)
10% of trades lose $1000 (-10,000)

Results in a loss of $1,000

Or

10% of trades make $1000 (+10,000)
90% of trades lose 100$ (-9,000)

Results in you making $1,000 even though you were right just 10% of the time.

This is why you repeatedly hear stock traders say: cut your losses and let your winners run.

This is not an easy job because while teachers and society in general are quick to tell you below 50% is a failure there is very little said about the subconscious mind.

The subconscious mind works on habits. You are programmed from an early age to win. Therefore, selling a losing stock for most people goes against their training whether they realize it or not. Essentially, selling a loser has not become a habit.

However, since most people do not start to play the stock market until they are 20+ years old they have 20+ years of subconscious programming to erase.

To trade well you need to develop the habit of selling your losers quickly and without emotion. Look at the evidence and sell. No remorse, no second guessing just get rid of the position.

Your job is to break this unconscious habit that has been developed over 20+ years. It will take time.

Prior to buying your next stock, identify when to sell your stock and get out of the position. Next, either place a stop loss with your broker or sell the stock when it breaks through your sell zone. In some cases, traders will place a stop loss order as soon as they have purchased a stock.

Move your stop up as the stock advances and never move it down. There will be times that your stop will be hit and the stock will rebound right after that. I have been taken out on the low of the day, it happens. Expect it and live with it. This is why trading is an art not a science.

You cannot control everyone that owns the stock that you own. When someone gets a margin call and chooses to sell a large volume of a stock you own, resulting in your stop being hit, don't take it personal, it is just part of the game.

Over time and a number of trades you will see that the weak stocks are being taken out while the strong stocks continue to advance.

Trading is a probability game. All you can do is put as much probability on your side as you can prior to entering a trade.

Mark trades stocks for fun and profit. To learn the basics of building a stock trading system please visit http://www.knispo-guide-to-stock-trading.com/stock-market-trading-system.html. Find more information on stock trading, stock market screeners and using technical analysis to buy and sell stocks at http://www.knispo-guide-to-stock-trading.com.

Article Source: http://EzineArticles.com/?expert=Mark_Kelly

London Stock Market 1945-2007 history

2010-12-22T06:40:00.001-08:00

This is a book on the history of the London Stock Market which goes from 1945 to 2007, it details how the markets stars were made and crushed, many of them turned into success stories while others just faded away.

It gives great examples, such as Jim Slater's, whose card house collapsed which left the Bank of England in a hole and they had to pick up the cards and repack them, then comes the washing machine that blew bubbles by John Bloom and Asil Nadir who made his millions out of oranges. Its gives examples from a range of industries from the recessions, booms and bubbles created throughout the years. Fruit packing, mining, dot com, textiles there all covered in there.

The dot com boom brought it all, how a bull market drives the population in buying shares without thinking, it was a classic. 9 names found their way into the London Stock Market and none survive, they took over the old brewers however it was the brewers who had the last laugh and had you sold your shares in time and got in with the brewers you would have been laughing all the way to the bank while the rest of the world was weeping with dot com loses.

Companies come fly all the way to the sky and suddenly drop, crashing straight on to the ground. Adils orange business was a prime example, Polly Peckers went from nothing to £1.5 million and back to nothing in just a short time of 9 years, the smart ones made money while the pigs got slaughtered.

Visit us to learn more on The London Stock Market

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Deferred Sales Charges (DSC) Is Just Another Hidden Cost Built Into Mutual Funds

2010-05-22T07:12:00.003-07:00

If you see the letters 'DSC' next to a Canadian mutual fund that you own, you can rest assured that you are getting hosed...'DSC' refers to Deferred Sales Charges or fees that an investor has to pay over and above the actual und's management fee.

A deferred sales charge is a "penalty" that the investor has to pay if and when the investor decides to withdraw his/her money. Often it can be as much 6% of the original amount of the investment.

For instance, take an investor who buys $10,000 of a mutual fund with a deferred sales charge. Let's say, the market as a whole does well over the course of a year but this particular fund loses 10%. Not surprisingly, the investor wishes to withdraw his money due to the fund's poor performance. If the investor withdraws his money, he will be hit with a penalty and his investment will be further depleted upon withdrawal. Assuming a 5% penalty on the original investment, the investor is left with $8,500 or a loss of $1,500.

Interesting enough, while the investor winds up with a loss of 15%, the fund company actually does quite well. First, over the course of the year it earns a management fee. In Canada, the average management fee for mutual funds is 2.5-3.0%. So assuming a fee at the low end of 2.5%, the fund company makes $250. It then makes another $500 from the deferred sales charge.

All in, the fund company makes $750. Not a bad pay day for a fund that just underperformed the market.

Of course, the investor could limit his losses by keeping his funds invested with the mutual fund company. In this way, he would save the $500 in deferred sales charge. That would make the fund company very, very happy. Indeed, the fund companies are counting on it. They know that most investors are unlikely to move their investments out if they are forced to pay a penalty.

It really is quite incredible that the big banks are able to get away with this kind of unethical behaviour. In fact, many funds sold by bank financial advisors fall into this category. Unfortunately, the average investor just does not know where to look for pricing information. It certainly is not well publicized by the fund companies for obvious reasons. And unfortunately, our Canadian government has no interest in exposing the mutual fund industry for what it is, unlike Australia or Britain where mutual funds are much better regulated.

The Deferred Sales Charge is just one more way for the Canadian Mutual Fund companies to keep fees hidden from their customers.

Jeff Kaminker Portfolio Manager, CFA, MBA, P.Eng

Jeff Kaminker is a licensed Portfolio Manager for Frontwater Capital based in Toronto, Ontario.

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Why Mutual Funds Are Your Best Investment Option

2010-05-22T07:12:00.001-07:00

Without question, there are some disadvantages with mutual funds. They charge management fees that ultimately cut into annual return figures, they invest the way they feel most appropriate without any consideration given to the investor who pays the manager's fees, they can be narrowly focussed, and a few others that are well publicized in the investment industry.

However, mutual funds offer tremendous advantages for the majority of the population. Three of the most overlooked benefits are discussed here and they point to the very fact that mutual funds are, for the most part, an investor's best option.

1. Mutual funds offer tactical investment management. Although many funds will take a buy and hold approach, the securities they own are part of the overall portfolio for a very specific reason. It is rare that a fund manager will purchase a security that he or she feels is a losing proposition. Instead, securities are purchase for their specific appeal, whether it is short-, mid-, or long-term capital growth, income, or a combination of both.

2. Mutual funds provide expertise in niche areas where the investor lacks sufficient knowledge and skill to take positions in individual securities. With asset mix being such an important, vital part of any investor's long-term success with their investment portfolio, it becomes increasingly important to incorporate niche sectors, whether short-term bonds, high yield investments, small-cap equity, foreign equity, and so on. Almost no investor will have professional-level investment knowledge in every asset class and sub-class, requiring them to seek assistance from other professionals. Rather than relying on a rogue neighbor who dabbles in a specific asset for "fun," enlisting the expertise of a highly (often overly) qualified investment manager makes a great deal of sense for the price they cost (often, minimum investment levels are under $2,500) and you usually pay less than 1.5% in expenses.

3. Mutual funds can have specific or general functions depending on an investor's needs. Whether an investor needs a complete investment solution (such as with a target date balanced fund or portfolio) or something on a more specific level (such as filling a gap in their overall asset mix), a mutual fund exists on the market to fill those gaps, and everything in between.

As shown with these three simple examples, there is a mutual fund available to everyone, regardless of his or her immediate and long-term needs. Of course, other options exist but the closest one will find to a mutual fund alternative is an exchange traded fund, which often will not satisfy the investor's long-term and/or specific need.

--> Ten Small Cap Funds Reviewed during month of May at MutualFundSite.org.

Chris has more than 17 years of financial services expertise. He currently manages a website about Used Pallets at ShippingCrate.org.

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How to Know When to Trade Penny Stocks

2010-05-22T07:11:00.000-07:00

Many people invest in the stock market without understanding the basics about selection of stocks and how to make money this way. The Penny Stock Prophet system has been invented to help save the investor from losing money by doing the stock picking for the investor. Read on for a full review.

The idea behind Penny Stock Prophet (PSP) is to analyse the stock market with the purpose of targeting good quality stocks trading at a cheap price. Cheap stocks can advantage the investor more than highly-priced stocks as they have more potential for an increase in value provided the underlying fundamentals are sound. An analytical stock picker such as PSP is designed to sift out the low risk quality companies from the cheap but high risk companies. This should mean consistently good trading.

The main benefit behind this system is its programmed ability to determine the stocks that are about to hit a profitable up-cycle. It is based on a similar system to the top investing or trading houses where tracking of real time market data is used to compare the present with trends of the past. This is a commonly used process because stock market trends are always based on recurring cycles of high and low growth.

By tracking past profitable trends by cheaply priced stocks it is possible to find similar indicators with current real time market data. This can enable a fairly precise estimate of how these same stocks are likely to perform in the short-term future.

I have tried this stock tracking system and found that a purchase of cheap stocks trading around 15 to 18 cents have in most cases generated significant capital gains of between 20 and 80 cents a share. Obviously some stocks have done better than others and some have failed to make money but a 75 percent success rate has been impressive.

Another benefit of PSP is that the package comes with a recommended online broker to work in with you the investor. While you naturally need to understand that stock market investing contains risk it is also the best way to make profits quickly on an investment and it is far easier to buy in and out quickly by making a profit than the housing market for example. In fact, many people generate an ongoing income by wisely using this type of system for regular stock trading.

With a one-time fee of $US97.00 http://app-products-info.webs.com and an 8 week 100% money back guarantee this software program is definitely worth trying as a valuable stock market investing tool.

I have a background in business as well as having worked for a boss in various employment from politics to the civil service. I am currently involved in a consultancy where I advise on business start-ups in the renewable energy and building sectors.

Article Source: http://EzineArticles.com/?expert=Anthony_Parker

Stock Investment Software and Stock Broker Fees

2010-05-22T07:09:00.000-07:00

When you use Stock Investment Software you will get recommendations on which stocks to buy. The next thing you need to know is how to place your trade. Well you will need a stock broker. Making that choice can become confusing. You see their advertisements every few minutes on TV. If you start to check them all out you can get very confused.

One of the things is they offer is premium services. Stock Charts, Stock Patterns, Reviews, Analyst opinions, Stock Patterns etc.

Guess who pays for it. If you bought Stock Investment Software all this work has been done for you. So you have to ask yourself do I need all this? All you need is a reliable stock broker to place your trade. You will find that one of the prime considerations for you is Price. Because you pay when you buy the stock and you pay when you sell it.

Many people fail because of Broker Fees they pay. While when you see the advertised price for example $10.99 a trade verses $5.00 a trade it does not seem significant. But it is. Say you buy shares at $1.00 per share, your cost is $100. Depending on the stock broker you use your fess are 5.00% 0r 10.99%. Today with the unpredictable future people are not buying stock and holding it forever. They trade often. Many are day traders. The more trades the higher the broker fees.

It is wise to play the stock market with Stock Investment Software. But keep your costs down, do not give a large chuck of you profits to the Stock Broker. Watch you Stock Broker fees. Here is another factor you need to consider. When you buy 100 share if you use the $5.00 Stock Broker your fess were 5%, but what percentage would it be if you bought 1000 shares--.005%. So what you should do is never buy or sell less than 500 shares.

My name is Al Villa. I am not a Stock Broker, Analyst, or some kind of guru. I am just a person that has been on the internet since the beginning. What you read here is from my experience. For a long time I did it the hard way. What I have learned in the school of hard knocks I share with you. You can use this or any article any way you choose as long as you share it in its entirety. You can read all my articles all here: More Stock Information

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Advantages of Selling Covered Calls

2009-06-10T03:17:00.001-07:00

Selling Covered calls is a great strategy to help you create consistent cash flow from the stock market. It can significantly help you to increase the return of just buying and holding.

So what are the advantages?

1. It gives you cash Flow

By selling calls on a stock every month you can create a somewhat consistent cash flow from that stock. Selling options is the only way to create an income from the market that is consistent and covered calls are the safest ways to sell them.

2. Help you During Down Times

If you own a stock and just hold it for the long term, eventually that stock will have a rough time. It is pretty hard to see one of your investments take a dive. But by selling calls on that stock you can recapture some of the losses that occur during a bears market, poor earnings, or just downward pressure.

3. Easy to manage

As far as trading goes covered calls are very easy to manage. All you have to do is sell a call on your stock and wait until expiration day. You do not have to manage the trade by constantly monitoring it and adjusting stops.

It is also a lot less stressful then something like swing trading which can really be hard to handle emotionally at times, especially for new traders.

4. The Returns are pretty Good

There are times when it is possible to get a 5% return or more in a month by selling calls on a stock. It would take a whole year for you to get that kind of cash flow from dividends.

For more on covered calls visit http://www.stocks-simplified.com/covered_calls.html

For some times to avoid selling covered calls visit http://www.stocks-simplified.com/Selling_covered_calls.html

Article Source: http://EzineArticles.com/?expert=Shaun_Rosenberg

Chinese Stock Market - Time to Invest?

2009-06-10T03:16:00.001-07:00

After almost two-year bull market, the benchmark Shanghai Composite Index, which tracks both A and B shares, recorded a dismal performance since October 2007. In 2008, The Shanghai Stock Exchange (SSE) suffered an annual loss of over 60%, plunging 2560 points and being the worst performing market in Asia. No doubt, the primary mission of the SSE is to maintain stability in market development. Trading security and smooth operation of the market, the construction of blue chip market, market trading mechanism, product innovation such as the SHSE-SZSE300 Index ETF, and the bond market are among the priorities.

Shanghai, a city historically with deep ties to the western world, has been an international business center, but the Chinese capital market in some ways is still relatively isolated from the international markets. To fulfill China's goal to build Shanghai into an international financial and shipping center by 2020, Shanghai is taking steps to develop more sophisticated investment products, offer favorable tax policies to attract international investors, build a multi-layered financial market system, and promote the opening of financial services in the city. Investors embrace the idea of building Shanghai into an international financial center, which resulted in an instant Shanghai indext's 3.1% increase to 2361.70. One action to note is, for the first time ever, China will allow foreign companies to list in Shanghai. Foreign companies would be allowed to raise money through the Shanghai Stock Exchange and also to issue bonds in China. This could mean new territories for companies that are interested in extending their business to China or Asian markets. As the financial system of the third largest economy opens up and becomes more global, players of the financial world will become more interrelated.

China does not take this route without caution. To nurture start-ups, China has cautiously developed Growth Enterprise Market (GEM), which is an experimental, technology-based, Nasdaq-style stock market. Only more mature firms that have met requirements will be first listed. One can also judge by where GEM is planned to open, possibly in 2009: on the Shenzhen Stock Exchange. Shenzhen has traditionally been a test ground for new programs before they were rolled out to the broader market. Investors are cautious but remain interested, with vivid memories of the 2006/2007 SSE's over 300% gain as well as more than $3 trillion of loss in value from listed companies during the downturn; and it all happened when the Chinese economy still had a growth of 9% in 2008.

A growth of about 8% is widely expected. Investors keep a close eye on companies like Baidu (BIDU), China Mobile Ltd. (CHL), and both recently posted strong quarterly growth with warnings. Baidu reported a better-than-expected 23.5% increase in first-quarter net profits, but warned the global downturn was affecting online advertising including paid search listings, keywords, and ads on Baidu's pages. Holding over 60% of China's online search market share, Baidu, however, faces competitions from Google. China Mobile had a 5.2% first-quarter net profit increase, but warned about its slowing subscriber growth. On April 23, Baidu, the China search engine giant, has a market capitalization of 7.2 billion and a P/E ratio of 47.5x, and China Mobile, China's largest provider of mobile telecom services, 179 billion and a P/E ratio of 11x, although P/E multiples may not be as reliable in a downtime if forecasted earnings is used. In the territory of wireless technology, China's Ministry of Industry and Information Technology estimates that 170 billion yuan, or about $25 billion, will be spent on 3G networks in China in 2009. In 2009, China Mobile, will spend around 58.8 billion yuan, or US$8.6 billion in 2009 to build out its 3G network, while China Unicom (CHU) and China Telecom (CHA) will spend around 30 billion yuan, or US$4.4 billion each on building 3G networks. Two companies that are worth mentioning are Huawei and ZTE, which are winning contracts as China rolls out its 3G wireless technology, taking more market shares from their foreign competitors.

China's fiscal $586 billion stimulus and its planned spending of a third of the stimulus on railways, highways and power grids-related projects tends to benefit companies like China Zhongwang Holdings Ltd., Asia's largest aluminum-extrusion manufacturer by capacity, which has a railway compoent in its business and is promoting its IPO. Foreign investors are welcome in this market especially as joint-venture partners. China's government spending on infrastructure will certainly have an impact on some international players.

For information on business resources, stocks, real estate, business travel, culture and entertainment in Shanghai as well as shopping for Shanghai, China, or Asia related products and services, please visit http://shanghaipinnacle.com/

Article Source: http://EzineArticles.com/?expert=Bilu_Manzella

Mutual funds are the average or inexperienced investor's best friend

2009-05-27T23:21:00.000-07:00

Mutual funds are the average or inexperienced investor's best friend. They are designed for every-day people who want help from professionals in managing their investments. To get technical, they are "open-end investment companies" that pool investors' money and manage it for them.

Investing in mutual funds is quite simple. Tens of millions of Americans trust their money to these investor-friendly investments. Let's take a look at how investing in mutual funds works.

Jack has a $10,000 CD maturing at the bank in a joint account with his spouse. He also wants to start investing about $5000 a year in a Roth IRA. He is looking to earn more interest on his CD, and wants more investment options for his IRA than his bank offers.

Jack does not really know how to invest his money, so he asks his old friend Jim for advice because he knows that Jim is an experienced investor. Plus, Jack is thrifty and does not trust salesmen, and that includes those who charge you to invest with them.

Jim suggests mutual funds with a major no-load fund family that he does business with. Jim knows how to invest, and helps Jack with the mutual fund applications. This required two different applications. The first was to open a joint account with the $10,000 CD money. The second was to open a Roth IRA.

The $10,000 was spit evenly with half going to a high-quality bond fund, and half to a money market fund. They did this because Jack wanted safety, but also wanted to earn higher interest than he could get at the bank. Jack would not receive the interest income the funds paid in dividends, but decided to have it automatically reinvested to buy more shares, so his investment would grow.

They opened a Roth IRA and set things up so that $400 a month would automatically flow from Jack's checking account to the IRA with the mutual fund company. Half would go to a balanced fund that invested in both stocks and bonds, and half to a money market fund. Once again, all dividends (and capital gains) would automatically be reinvested to buy more shares.

Jack wanted growth, but Jim knew him very well. Jack did not know how to invest, he was cost conscious, and he avoided risk whenever possible. That's why Jim had half of Jack's money going into money market funds. These funds pay competitive interest rates in the form of dividends. If interest rates in the economy change, the rate paid by money market funds change in step. Plus, they have a great record for low risk and high safety.

For now, Jack is happy, especially since all of this cost him nothing in sales charges or fees. For example, he sent the fund company $10,000. All of his money was invested to buy shares, with no sales charges. Plus, he has $400 a month going into funds in his Roth IRA. Once again, all of the $400 is going to work to buy shares, with no sales charges or fees.

The only cost to Jack is yearly expenses. Every mutual fund takes these costs directly from fund assets. Jack wouldn't even know this if Jim hadn't told him. On the other hand, Jack's expenses were very low compared to most funds.

Jim explained to Jack that on average, his yearly expenses for the type of funds he was in would amount to almost 1% a year with most mutual fund companies. Jack was paying about one-fourth of that, which put a smile on his face.

A retired financial planner, James Leitz has an MBA (finance) and 35 years of investing experience. For 20 years he advised individual investors, working directly with them helping them to reach their financial goals.

Jim is the author of a complete investor guide, Invest Informed, designed for average investors or would-be investors of all levels of financial background and experience. To learn more about investments and investing and his new financial guide go to http://www.investinformed.com

Article Source: http://EzineArticles.com/?expert=James_Leitz

Best Ways to Invest $10,000 - The Growth Stock Mutual Fund

2009-01-03T21:32:00.001-08:00

What is the best way to invest $10,000? If this is something that you really want to know, know that there are plenty of ways in which you can invest this money. First, you have to determine how long you want to sit on this money. When do you want to see a return? You know that the faster you want to see a return the higher the risk that you are dealing with.

So let's say you want to sit on this money for 5 years. You can take your money and put it in a growth stock mutual fund. These may include international, aggressive growth, stable, etc. There are several different kinds. You just have to make sure that what you are investing in are stock mutual funds. Now, if you can't leave your money alone for a period of 5 years, then you may need to consider a CD or a bond.

But if you do plan on leaving it alone and you plan on investing in growth stock mutual funds, you will find that the risk to return ratio is quite amazing. You could make more in individual stocks, but you have to determine if the risk is worth it. But with stock mutual funds, the risk to return ratio is what you want to focus on. In the end, you may net more money due to the fact that the risk is lower.

So if you're wondering how to invest your money, this is a great way to go about that. So go ahead and invest and have a great time doing it. You might be quite pleased.

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Using Mutual Fund Ratings to Invest Wisely

2009-01-03T21:32:00.000-08:00

I've been looking at a couple of growth funds, as well as some no-load funds to get started. Since I don't have a lot of capital to invest at the beginning here, I figured that these types of funds would be my best bet. They'll allow me to diversify my portfolio to an extent that wouldn't be possible if I simply bought stocks on my own, and this will of course protect me from short-term market fluctuations. By using mutual fund ratings to identify good investment opportunities, I'm giving myself an excellent head start.

Mutual fund reviews can come from a variety of sources, including financial journals, investment magazines, and the Internet. Since I don't have much experience with the stock market, I've been sticking to trusted names for my information, such as The Wall Street Journal, Forbes, Fortune, Kiplinger's Personal Finance, and Money. All of these publications regularly feature comprehensive mutual fund ratings, and I can even access recent archives by visiting their respective websites.

I've also found a number of independent websites that publish their own ratings, but I'm a lot more wary of following any advice from these places. After all, sometimes it's hard to tell if a particular site is part of a class project for a 19-year-old college student or if it's actually run by people who know what they're doing. The last thing I need is to follow terrible advice and lose all my money!

I know that fund ratings are only the beginning, and even funds that score the highest in these reviews carry a certain amount of risk. But by reading as much as I can about these investments before putting my money in, I'll be in a better position to assess the risk vs. reward ratio and will be able to make smarter decisions that will hopefully pay off in the form of a nice, big retirement account that will sustain me through my golden years.

If you're in the same boat and want to start planning for a secure future, I recommend that you review fund ratings from trusted sources before you invest your hard-earned dollars. The extra research will be worth it!

Chris Jonas is a chef working in Soho, New York.

Check out these great Mutual Fund reviews and articles or the more specific Mutual Funds Comparisons articles and resources.

Article Source: http://EzineArticles.com/?expert=Chris_Jonas

Mutual Fund Investment Advice

2009-01-03T21:31:00.000-08:00

First off, why should you invest in mutual funds? Mutual funds are helpful for those who have limited time and resources, and would prefer to leave the management of their money to someone else. Mutual fund managers offer the expertise to invest in highly specialized areas such as international equities, and may thus be attractive if you would like to gain exposure to these markets without having to do the legwork yourself.

With such a wide array of mutual funds, choosing among them can be difficult. Nonetheless, there are three major criteria you should use to evaluate any mutual fund: the mutual fund's investment objectives, investment track record, and the mutual fund's expenses.

Mutual Fund Objectives

Choose mutual funds based on whether you are comfortable with their investment objectives. Different mutual funds have different investment objectives: growth, value, income, international exposure, contrarian investing. These will dictate the type of strategies followed by the fund - are the fund managers value investors? Or do they invest primarily for growth? Other funds adopt a strictly contrarian approach.

Extreme investment objectives naturally lead to more risky investment strategies - these are specifically the type of mutual funds you should be careful about investing in.

One indicator you should become familiar with is the Sharpe ratio. The Sharpe Ratio compares performance to fund volatility and is a good measure of risk. The lower the ratio, the better. The Sharpe Ratio is a very important measure of the level of risk you would expose yourself to.

Mutual Fund Performance

While past performance does not necessarily imply future success, it is nonetheless an important indicator. Compare the mutual fund's performance to the overall market and sector performance. Note that more than 70 percent of all mutual funds underperform, so scrutinize the performance figures carefully. What is the time span, what did the fund compare itself against, and what is the mode of comparison?

Mutual Fund Expenses
The third major factor you should carefully evaluate is the mutual fund's expenses. Look at the expense ratio. This ratio sums up all the costs of investing in the fund, which typically include the management costs, 12-b-1-, operating costs, loads and other miscellaneous costs.

For specific information on each mutual fund and to retrieve the different ratios mentioned above, Yahoo Finance and Morningstar are my personal favorites.

Yuen is a financial expert, personal finance specialist and motivational speaker who writes for the Financial Freedom Guide and other major financial blogs. His writing emphasizes financial independence and the creation of long term residual income streams. Learn how to emulate his success at Site Build It Reviews.

Article Source: http://EzineArticles.com/?expert=Pak_Man_Yuen

Stock Versus Mutual Funds - Safe or Sorry?

2008-09-02T04:13:00.001-07:00

It seems a little odd to compare stocks to mutual funds. Actually, mutual funds are largely composed of stocks. It is important to make the distinction between the two as there are some very real advantages to using mutual funds.

It is fun to invest in individual stocks because each company has its own story to tell. However, you want to focus on making money! Investing is not a game and should not be taken lightly.

When you invest in mutual funds, you are able to diversify and reduce your risk of losing money. Do you think that those wealthy investors out there just put their money in a couple of stocks? No! Either they are investing in mutual funds or are buying large numbers of stocks.

When you purchase mutual funds, you are hiring a professional manager at a relatively inexpensive price. It would be a little off the wall to think that you have more knowledge than a mutual fund manager! Most managers have been around the track a number of times and have the academic credentials to back up their knowledge.

Mutual fund companies have the advantage of capitalizing on economies of scale because they pool investors’ monies together. Since these companies have large amounts of money to invest, they usually have personal contacts at many brokerage firms and often trade commission-free.

Mutual funds are easy to take care of. The bookkeeper is much more challenged when there are hundreds of stocks to keep track of!

Mutual funds are very liquid. Put in your order for money in the morning if you are short on cash, and by the time the market closes you may have a check waiting for you. Stocks, on the other hand, are much more difficult. It all depends upon what you have invested in. CDs are not at all liquid and bonds are difficult as well.

If you are new to investing then mutual funds may be the way to go. You can invest small increments of money at regular intervals and not have to pay a trading cost. If you invest in stocks, you will find that they carry high transaction fees. This makes it quite difficult for the small investor to realize a profit.

If you are a wealthy stock investor, then you have it made because you get preferential treatment from the brokers. Wealthy bank account holders usually get the red carpet treatment from the banks. However, mutual funds do not discriminate. Whether you only have a paltry $50 or a huge sum of $500,000, you all get the same manager, the same investment and the same account access.

Generally speaking, mutual funds have a much lower risk than stocks. This is largely to diversification which was mentioned earlier. With stocks, there is always the worry that the company you are investing in will go belly up! With mutual funds, that is next to impossible.

As you can see, there are many advantages in investing in mutual funds over stocks. It is not to be said that you should never invest in stocks, but if you are just getting your feet wet with investing it would be best to go with mutual funds!

The Stock Market If you want to discover your pot of gold in the stock market, then you have to know it inside out. And for all the inside-out information on the stock market explained in simple, concise, layman terms, all you need to do is click on this link: Stocks Versus Mutual Funds. Learn How To Find stocks Which Will Double. Simple enough, huh?

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Which One is Better for Investing: Mutual Funds or Stocks

2008-08-25T22:12:00.001-07:00

Comparison between Mutual Funds and Stocks

Diversification

Mutual fund companies invest in a variety of stocks, bonds, and money-market investments, so mutual funds carry much lower risk than stocks.

Professional Management

Mutual funds enable investors to pool their money and place it under professional investment management. These managers have been around the industry for a long time and have the academic credentials to back it up.

Greater Upside Potential

Individual stocks have a greater upside potential than most mutual funds. Fluctuation in stocks is greater than mutual funds, so you have greater chance to earn more return.

Risk and Return

In general, Risk and return depend each other, the greater the risk, the higher the potential return; the lower the risk, the lower the expected return. Mutual funds try to reduce their risk by investing in a diversified group of individual stocks, bonds, or other securities.

Efficiency

Mutual funds have large sums of money to invest and often they trade commission-free and have personal contacts at the brokerage firms.

Conclusion

By investing in stocks you can get more return than mutual funds but, by investing in mutual funds your risk is lower. Mutual funds are great for funding retirement plans and investors that don't have the time or energy to consider individual stocks.

It is noticeable that most expert traders in stock market invest in mutual funds too. I recommend investing in both of mutual funds and stocks but, if you have experience, time and energy you can invest most of your money in individual stocks.

By Mostafa Soleimanzadeh. Investing in the Stock Market Tips, Learn how to Invest in Mutul Funds.

Article Source: http://EzineArticles.com/?expert=Mostafa_Soleimanzadeh

Mutual Funds are not Investments

2008-08-25T22:12:00.000-07:00

Mutual funds simply are a method through which people invest. People often asking, "What are mutual funds paying?" The truth is that mutual funds don't pay anything! People also say, "I don't like mutual funds because they're risky." But there's no such thing as a "risky" fund. Nor has anyone ever lost money in a mutual fund. Mutual funds are not good, and they're not bad.
A mutual fund, in fact, is merely a mirror - a reflection of something else. Thus, if you invest in a mutual fund that invests in stocks, and you are as likely to make money or lose money as any other person who invests in stocks.
In fact, you can use mutual funds to buy virtually any kind of investment: stocks, bonds, government securities, real estate, gold and other precious metals, international securities, foreign currencies, natural resources, even hedge positions and money markets. You can find funds that engage in virtually any type of trading activity, including options and futures contracts, derivatives, and even selling short.
Technically, mutual funds are called "open-end" investment companies because they forever buy and sell their shares. In industry jargon, mutual funds "sell" shares to the public, and when you want your money back, the fund will "redeem" them for you.

About the author: Tony Reed is the author of " Mutual funds are not investments", please visit his website Mutual Funds & Stock Trading for more information.

This article is free for republishing as long as you leave the article title, author name, body and resource box intact (means NO changes) with the links made active.

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Investing In Mutual Funds For Youngsters

2008-08-04T22:31:00.002-07:00

Is your age anywhere between 18 and 35? Are you someone who just finished your graduation? Are you someone who just started your career?

If your answer is yes to those questions, then you must be thinking about investing some money for your future. Of course, retirement plans and pension plans are not for you. You must be thinking more aggressively! At the same time, you should be careful not to lose out. So what can be done? How do you get enough money for the next few years (reasonably fast) and not lose out?

One possible place where you can invest is in mutual funds. Of course, not every fund meets your objectives and shares your long (or short) term vision to generate money. Some of the possible types of funds that you can look to invest are the described in this article.

The Emerging Markets Funds

Emerging markets funds invest in economies that grow very fast (like India, China, Brazil, Russia, Mexico etc.). These economies create wealth both at home and also for foreign investors. These funds have posted impressive returns. Many funds have given more than 50% return. However, in the current world economic scenario, such returns may not be possible consistently for a long time. But these funds tend to diversify their portfolio across different countries and mitigate several risk factors. Hence investing in emerging markets funds is a quick way to earn money.

Small-cap and Mid-cap funds

These funds are for those people who tend to take more risk than an average investor. Recent history says that the small-cap and mid-cap have consistently outperformed large-cap stocks. But there is no guarantee that it may continue to do so in the future too. These funds concentrate on growth stocks and therefore have larger returns but the major drawback in such stocks is their volatility. Therefore it is always better to invest in small-cap and mid-cap funds for a smaller period of time. Investment should be made in funds that have a diversified portfolio and smaller asset base (it means that the fund has enough flexibility).

Target 20XX funds

If you are an adventurous person who wants to do a lot of things in life and at the same time see your money grow over a period of time, then target 20XX funds are the ones that you should be looking to invest. The portfolio of these funds will be biased in favour of equity to provide higher returns in the initial years. But over a period of time, it will be revised and more funds will be shifted to bonds to ensure safe returns before maturity. Hence these funds are the ideal foil for the passive investor who wants to have an adventurous life (or whatever) and get some money at a later date.

The Conditions For Growth of Good Stocks

2008-08-04T22:31:00.001-07:00

A smart investor is always on the look out for growth. Share prices are directly proportionate to the respective company's worth in the stock market. So, it is always wise to seek companies which are rising in value. When you hold on stocks of companies that manifest relentless growth, handsome stock market returns are achieved.

But in this aspect don't always focus on the projected growth rates. If all of a sudden the stock market start to lose faith in the said company's prospects, the result can be horrific.

The characteristics of the best growth stock are a combination of potential upward growth along with sizable safety margin. They ought to satisfy three conditions:

1. A good growth rate

It is preferable if the company has fast growth instead of a slow one when the rest of the factors are equal. This is because even the minute relative changes in growth rate can make a substantial difference to the investors.

2. Sustainability

Stretch your vision beyond the growth estimates. Not the 'estimate' but the 'sustainability' of growth is more important in order to achieve great returns. This is a common mistake done by even the clever growth investors. They focus so much on the growth rate that they stand to ignore the logical sustainability of that growth. This myopic vision is the prime reason behind the tech bubble. People get allured by the high growth projections but fail to notice that the company has negligible or few competitive advantages. When the bubble pops, the company disappears and the investors bite the dust.

3. A good price

Don't end up paying far too much for growth. It makes sense if occasionally you pay a hiked up price, because you can rely on the sustained growth of the company. But take care not to defy logical calculations that it makes virtually impossible for you to uphold even a marginal profit even in the situation where the growth is not hampered. It is a good idea to select a growth stock which is fairly priced or undervalued. A discounted cash flow (DCF) calculation will aid you to calculate the fair value of a growth company.

These three central ideas shouldn't lead you to think that value investment strategy is to look for unpopular penny stocks You need to look for growth stocks from strong companies that possess reasonable positive growth prospects. And when you get growth stocks at a reasonable price offering sustainable growth, you can rest assured about your long term profits.

Buying Options on Stock Splits

2008-08-04T22:31:00.000-07:00

In order to buy options on stock splits and to make the investments on these stocks worthwhile, it is imperative that a proper understanding of what stock splits are should be in order. Simply put, what is referred to as a stock split or a stock divide is the way in order to increase the number of shares in one company, but the market capitalization of the company remains and no dilutions happen in the process of the split. This can be best understood by way of an example. Say a company with 20 shares is priced at $10 each. If the company decides to do a 2-1 split, then there will be now 40 shares that are available to the company's stockholders. After the split, the price of each stock will be adjusted.

With the split, the cost of one stock stands at $5. Any ratio can be used by the company but the ratio that is usually used is the 2 for 1 split, the 3 for 1 split and the 3 for two splits. Some people will argue that with buying options on stock splits come higher stock prices. Research and experiences suggest that this isn't true. One good thing that can be done by splitting the stocks of one company is that this can increase the liquidity of the stock. In layman's terms, the stock will move better and stocks can exchange hands faster. Investors will snap up stocks that cost $ 5 dollars fast than stocks that cost $10 each.

If the effects of buying options on stock splits can't be substantiated by research and experience, then why do a number of investors buy options on stock splits? This could be explained by psychological factors.

For example if investors will expect and believe that stock splits can increase the price of shares, then stock prices may increase as well. Often stock splits can be a vote of confidence of the company, as a split can signify that the management of the company has confidence in the company's future. The stock split has a number of so-called stages. These stages include the pre-announcement, the announcement, the dormancy, the pre-split run, the split execution and the post split depression. The pre-announcement of the split will tend to have an impact on the stocks as stocks will climb faster than usual. The announcement of the split will usually be the time when the price of the stocks of the company jumps sharply. And the valuation of the stocks may increase for a period of time. After announcement of the stock split comes dormancy. This is the time when the price of the stock of the company will level off.

There are some instances when the stock of one company doesn't enter this phase as the price of stocks tend to increase some more. The split execution can be a great time to buy stocks on split as well. The post split depression is where the excitement tapers off. This is also the stage where the short sellers and who has low-risk opportunity to profit from the brief pull back. Most stocks will retreat after this time, but some will continue to post gains. This is the challenge to those who may want to engage in buying options on stock splits.

Don't Dread Filing Your Income Taxes - Money-Saving Strategies May Be Available!

2008-03-11T23:26:00.000-07:00

Many people groan at the word "taxes", and usually do so with good reason. First of all, having to pay taxes on an annual basis often presents a financial burden for people. Each time you examine your paycheck, you might feel abused or cheated, considering the withholding amounts of federal income tax (that's not even mentioning state taxes, Social Security or Medicare taxes).

Even though taxes can be boring and tedious remember that there are some tax regulations that may benefit you. Be aware of all the possible tax deductions that are available and see if you are qualified for any of them. There are some deductions that let you take some of your financial output off your reportable income and some give you the right to not report certain income at all.

Tax Credits and Tax Deductions

There are currently five tax areas where tax deductions and credits can be taken and receive special treatment under the US tax laws:

1. Tax-free income is money you get that you do not have to pay taxes on. Tax exclusions or exemptions are examples of tax-free income. Most of the time, you do not have to report items such as these to the IRS since it does not affect your tax calculations.

2. Capital gains are profits you get from selling or exchanging property that has been held for at least a year or more. These capital gains, which are considered long term, will be subject to reduced tax rates, in comparison with taxes for other types of income, like salary or income from interest. Regular stock dividends, as well as stock mutual funds, get taxed with the same lower rates as capital gains.

3. Tax-deferred income is not currently taxed, but will become taxable at a later date. You could accumulate a larger amount, as income is growing, without incurring taxation.

4. Tax deductions are payments or expenses that reduce your taxable income. There are two classes of deductions: "above the line" deductions are subtracted from gross income, and can only be claimed if you file an itemized statement rather than the standard deduction (which will be explained later).

5. Tax credits are used to offset taxes owed, usually in a dollar-for-dollar exchange. There are usually separate forms that need to be filled out when claiming tax credits.

You can get your taxes done easily and quickly, while decreasing the amount of your money that goes to Uncle Sam.

Stocks vs Mutual Funds

2008-03-02T21:47:00.000-08:00

Stocks have several pros and cons associated with them. Stocks are a great option if you know what companies you want to invest in. They are also a great option if you are interested in day trading. While stocks offer you flexibility and control over the diversity of your investment portfolio they require a lot of work to keep your portfolio properly diversified. A lot of financial experts recommend that your investment portfolio contain investments in at least 20 different companies and in at least 10 different industries. Making this many stock selections can be difficult to do.

Mutual funds are another investment option that you have. A mutual fund is basically an investment set that is controlled by a financial management company. This management company selects the stocks, bonds and other investments that are held by the mutual fund. Mutual Funds are a great way to easily diversify your investment portfolio. The management company does all of the leg work for you. While mutual funds are a great investment option they do have a few drawbacks. The first drawback is that they charge management fees and carrying fees. These fees cut into your profits and investment capital. The second drawback is that the performance of the mutual funds depends partially on the management company’s ability to select good investments and the company’s ability to manage the fund’s investment portfolio. Another drawback to mutual funds is that you don’t have any say in which investment products the mutual fund invests in. Because of this the fund may invest in a company that you would prefer not to invest in, or they may select an investment product that you think is a bad investment. Finally, mutual funds are susceptible to fraud. In recent years there has been several high profile fraud cases filed against mutual fund management companies.

The Problem With Hedge Funds

2008-03-02T21:45:00.000-08:00

Are hedge funds a suitable investment for you? Hedge funds are an appropriate investment for qualified purchasers with a net worth above one million dollars and an annual income exceeding two hundred and fifty thousand dollars. Purchasers are often required to sign an acknowledgement confirming their qualifications to invest in hedge funds. However, just because one is qualified to invest in a hedge fund doesn’t necessarily mean they should do so. There is a major problem with this type of investment. Oftentimes, the risk associated with the fund is misrepresented, leading to investors being misguided into skewing their qualifications.

The term “hedge fund” is a generic term used to describe many unique investments. Put simply, the phrase is derived from the purpose – hedging the risk of investing. Hedge funds provide lower long-term returns in exchange for less volatility. The form of investment is not new, but their popularity certainly is. The newfound popularity of hedge funds has left many investors wondering what they are all about.

To shed a little light on a decidedly illusive investment tool, a quick run down is necessary. A hedge fund is typically a privately organized pooled investment fund, predominately invested in publicly traded securities. They are normally created as limited partnerships, consisting of one general partner and up to one hundred limited partners. The general partner usually receives a management fee and 10-20% of the profits from the fund. The success or failure of a hedge fund is often dependant on the competency of the fund manager, since they are more aggressively managed and traded than traditional mutual funds.

It should be noted that hedge funds have a higher failure rate than traditional funds. Numerous hedge funds fail by the second or third year of operation. Also, hedge funds are less transparent than traditional funds because some hedge fund managers do not reveal the securities they hold, or the extent to which they are leveraged. Hedge funds may have a higher turnover rate and be less tax efficient than traditional funds.

Along with the aforementioned downfalls associated with hedge funds, several more negatives should be noted. The management and performance incentive fees charged by the hedge fund manager, together with the trading costs and administrative fees can quickly add up, making B share mutual funds seem like a bargain. As stated earlier, only “qualified” purchasers are eligible to invest in hedge funds, leaving many would-be investors out in the cold. And liquidity, if available, is limited to quarterly release, and even then, investors are left at the mercy of the hedge fund manager.

The bottom line is, when dealing with hedge funds, get educated about your investment before jumping in. Discuss the option, both pros and cons, with your dealer, and know what you are getting into.

Basics About Mutual Funds

2008-03-01T04:36:00.000-08:00

A company dealing in mutual funds invests your money in a variety of bonds, stocks, assets, securities and many other short-term investment instruments. You will earn dividends when a mutual fund earns profit and on the other hand, the value of your shares will decrease if the mutual fund company faces a loss. Usually a professional investment manager will do all the buying and selling on your behalf to ensure that you get the best returns for your investments.

There are different types of mutual funds, namely equity funds, fixed income funds and balanced funds.

Equity funds involve just common stock investments. They are extremely risky but can end up earning you a lot of money. Fixed income funds are government and corporate securities. Fixed income funds offer fixed returns and the risk associated with these funds is very low. Balanced mutual funds are a combination of bonds and stocks. These funds have a very low risk factor but your investment will not earn a lot of returns.

Mutual fund shares can be purchased either through the mutual fund company or from a broker. The mutual fund share is bought at the net asset value of the fund. This is the price you have to pay when you buy a mutual fund share and it includes the shareholder's fee.

The shares of a mutual fund are redeemable. You can sell your shares back to the broker or to another customer. Most mutual fund companies continue creating new shares and selling them so that they can accommodate new investors.

Basics About Mutual Funds

2008-03-01T04:34:00.000-08:00

Tax Credits and Tax Deductions

There are currently five tax areas where tax deductions and credits can be taken and receive special treatment under the US tax laws:

3. Tax-deferred income is not currently taxed, but will become taxable at a later date. You could accumulate a larger amount, as income is growing, without incurring taxation.

5. Tax credits are used to offset taxes owed, usually in a dollar-for-dollar exchange. There are usually separate forms that need to be filled out when claiming tax credits.

You can get your taxes done easily and quickly, while decreasing the amount of your money that goes to Uncle Sam.

Mutual Funds Basics

2008-02-26T02:16:00.000-08:00

There are a number of investment options available. Many people have chosen mutual funds as their primary means of investing. Mutual funds provide professional management, diversification, convenience and liquidity. As with all investments, mutual funds are not risk free. It is essential that you make an informed investment decision and choose a mutual fund which is right for you depending on your goals, investment time frame and risk tolerance.

Over the long-term, the success (or failure) of your investment in a fund also will depend on factors such as:

Fund's sales charges, fees, and expenses;
Taxes you may have to pay when you receive a distribution;
Age and size of the fund;
Fund's risks and volatility;
Recent changes in the fund's operations.

When you invest in a mutual fund, your money is combined or pooled with the money of other investors and used to purchase specific types of securities. Mutual funds are run by investment professionals who decide which investments to buy or sell for the fund. The professional picks from a wide variety of stocks, bonds, money market instruments, or other financial instruments. The investments selected will depend on the fund's investment objectives. That's why it's so important for you to choose a fund with objectives compatible with yours.

Generally, the success of your investments over time will depend largely on how much money you have invested in each of the major asset classes – stocks, bonds, and cash – rather than on the particular securities you hold. When choosing a mutual fund, you should consider how your interest in that fund affects the overall diversification of your investment portfolio. Maintaining a diversified and balanced portfolio is key to maintaining an acceptable level of risk.

The types of investments that a mutual fund holds, its investment goals, the fees charged, and information about who manages and advises the fund are described in a prospectus . You should receive and review a prospectus before investing.

Top Mutual Funds By Category - Info To Help You Find The Top Mutual Funds To Invest In

2008-02-25T02:50:00.000-08:00

There are many different websites that will offer information on the top mutual funds by category. Mutual funds are the best ways you can save for retirement.

You work so hard and yet if you do not save for rainy days, then what good is it? While choosing a mutual fund you should always check the returns it has given in the last five years or at least 3 years. Find out the top mutual funds by category and be with the winner.

It is important to understand mutual funds by category as there are different risks and rewards associated with it. As per the index there are different types of mutual funds ranging from small cap funds, Blue chip funds, mid cap funds, large cap funds and many more. These mutual funds are then further categorized by the way they yield returns to individuals. They can be global, growth, fixed income, mixed equity, core, and sector.

Listed below are the Top mutual funds by category

Global: Index of different countries would be the determining factor of such mutual funds performance. E.g. ishares: Brazil has given a return of 59.11% in the past 3 years; Fidelity Latin America (FLATX) has a return of 53.45%

Growth: One of the top mutual funds by category is growth. These are the most popular ones. CGM: Focus fund with a return of 31.46% over the past 3 yrs.

Mutual Funds To Invest In - Are They Safe?

2008-02-25T02:38:00.000-08:00

If you have considered investing with a mutual fund, you are not alone, millions of Americans are flocking to these open end mutual funds because they are recognizing the common sense of such a proposal.

Unlike hedge funds, Mutual Funds are very heavily regulated by the FTC making them a safe option for small investors. These work by pooling together many investors funds and controlling those funds to take advantage of opportunities that come about. Typically they will invest in stocks, bonds, and various security instruments, including even real estates and property like shopping centers or buildings. They tend to be very conservative with their choices however they are typically aggressive about getting in and out of investments. This means the return is usually quite good, depending on the fund.

The key point to remember when choosing a mutual fund is that past performance does not in any way indicate future results. Past performance can however indicate if the fund is consistent or not. It is wiser to avoid volatile funds that make large gains one year, then losses the next because this can indicate a measure of instability and risk taking. However, this must be a personal choice you make.

Also mutual funds are not guaranteed or insured by the FDIC or the government. Even if you bought the shares of your chosen fund from a bank, (which is insured by the government) they will typically be acting as brokers for the product and there banking status is not transfered to the product you purchase.

Understanding The Basics of Mutual Funds

2008-02-19T01:56:00.000-08:00

When investing in the stock market there are a growing number of ways to actually get your money in to play. Traditionally this involved buying individual shares of a company through one of the world’s many stock exchanges. With a mutual fund you are actually investing in a lot of companies while only putting your money in to one thing.

It is best referred to as a money pool. A mutual fund company has investors that buy shares and all of its investors’ money is gathered and then spread out in many smaller investments.

This is basically instant diversification. While an average investor can not afford to invest in more than a handful of stocks on their own, through a small investment in a mutual fund their relatively small amount of money is able to be spread out amongst hundreds of stocks.

By spreading out the money in all sorts of different investments the mutual fund has its hand in a variety of businesses and industries around the world. This means that even if one industry fails one year the other ones should pick up the slack.

This, of course, leads to the big misconception about mutual funds which is that they are guaranteed money. While they are more secure than most investments there is definitely no guarantee. Not only can mutual funds lose money year to year but when they earn money it is by no means certain to be a large amount of money.

Further more, because of the vast diversity of their investments, the returns a mutual fund earned one year is not really an indication that it is the right mutual fund for you to invest in. Anything can happen in the second year.

That said when choosing a mutual fund it is important to look at their history. It can tell you a lot about the fund and how they do business and, basically, if they seem to be making the right decisions with everyone’s money.

A strong downside to mutual funds though is that there are a lot of ongoing costs associated with them. Unlike investing through the government there are heavy taxes and fees virtually every step of the way.

First and foremost the mutual fund company will be taking a cut of the funds profits; that’s just a given. But also there is the ongoing cost of buying and selling stocks. Not only is the investor there to share in the earnings and losses of the overall fund, but they are responsible for paying their share of those fees the fund has to endure. Lastly there is often a charge to withdraw from the fund.

That last note though is also one of a mutual fund’s perks. Unlike some other forms of group investing, typically government connected ones, a mutual fund is relatively liquid. An investor can cash out virtually any time they wish.

Start Investing in Mutual Funds

2008-02-19T01:55:00.000-08:00

Haven’t you become a member of the large family of mutual fund investors yet? If you keep waiting you may never be able to feel the positive effects mutual funds have on your account. However, you are not the only one who has not managed to overcome some of the basic mental barriers that come in your way toward mutual fund investing.

First of all you may think that you don’t have enough money to invest in a mutual fund. However, as little as $100 can get you started in your trip to a rich mutual fund account, which will provide you with financially secure retirement. No trading costs exist when you invest in the majority of mutual funds, which allows you to invest small amounts of money. As compared to stock investing, the latter eats up a big portion of your money in terms of broker commissions and you end up with less money for investing.

On the other hand, you may be reluctant to invest in a mutual fund, because you find it non-guaranteed or non-insured. However, you should not be worried about the security of a mutual fund because it cannot go bankrupt. A mutual fund usually holds shares of a large number of companies and in order to go bankrupt all of these companies should altogether become insolvent. On the other hand, the insurance companies or bank accounts that are generally viewed as safer can easily go bankrupt and you will end up losing your hard-earned money. What is more, inflation tends to eat up the money you accumulate in your savings account, whereas your mutual fund account enjoys compounding interest.

You may also prefer not to invest in a mutual fund, because you believe you are better at selecting individual stocks. We don’t want to undervalue you stock picking skills, but by purchasing shares of a mutual fund, you immediately enjoy the professional management of your assets by experts that have been in this field for many years. You may really have success at times, but it is equal to your chances of winning in the lottery.

Additionally, many investors make the mistake to invest in the company they work for. This is totally wrong tactic, unless you include in your portfolio other stocks to diversify it. Mutual funds include stocks and bonds of many different companies, which is extremely beneficial in restful economic times.

Finally, most investors don’t want to invest in a mutual fund, because they are worried they don’t understand how it functions. The first step is to browse through our website and get all the information you need to get you started. We have made it easy to use and full of different articles on the subject so that we turn you into an educated and successful mutual fund investor.

What are the Best Business and Investment Opportunities?

2008-02-18T03:19:00.001-08:00

There are an almost limitless number of business opportunities available today. They include everything from sales, real estate, small business, home business, marketing, franchising, advertising, business services, internet business, etc. But many of them require a large investment. Many internet businesses only require an initial small investment, but many are not profitable. A lot of people have spent a large amount of time and money on businesses that failed. Some of the best business opportunities do not take a lot of time or money. Most of these are internet businesses. One of the best ways to make money on the internet is by becoming an affiliate with another internet business. ClickBank is one of these. With ClickBank you promote a product as an affiliate with an internet marketer. You will get a percentage for every referred customer sale.

There are many investment opportunities available: mutual funds, stocks, bonds, Treasury securities, savings bonds, variable annuities, commodities, commodity futures, options, Real Estate Investment Trusts (REITs), and a lot more. But, you need to trust the company that is making these investments on your behalf or you may lose money. Also, you need a substantial amount of money to produce a substantial profit. If you have money to invest, I would recommend either mutual funds or real estate.

To invest in mutual funds, find a reputable broker. I do not recommend using online brokers unless you have a great deal of knowledge and experience investing in stocks and mutual funds. Determine what kind of investor you are. Do you fit in the conservative, moderate, or aggressive category. A word to the wise though. Watch your funds to make sure they are performing well. Brokers will not call you if your funds are doing poorly.

To invest in real estate, find a reputable real estate agent. Buying houses to rent is an excellent way to boast your income. Make sure your down payment is enough so that you receive a positive cash flow from your rent after you subtract your mortgage payment, maintenance expenses, etc.

Why Would You Even Consider Mutual Funds?

2008-02-18T03:17:00.000-08:00

· In addition, corporate "road shows" stop off at various professional management offices to bring them up to date, but don't expect them to come knocking on your door. Finally, influential Wall Street professionals share their opinions first with large, commission-generating customers—like mutual fund managers.

· Instant Diversification: To achieve even bare-bones diversification on your own at a reasonable cost, you would need several hundred thousand dollars to invest.

· Low Costs: Funds charge management expense fees that approximate 50 to 75 basis points (.50 to .75 percent), and go as high as 75 to 150 basis points for some equity funds. If you stick to no-load funds that keep expenses low, however, you'll find that investing in mutual funds is a great deal cheaper than investing in stocks on your own and paying commissions and transaction costs. Some index mutual funds have expenses as low as 12 basis points (.12 percent). Try topping that!

· Terrific Variety: Whatever you want, the fund industry offers. Want to invest in Japanese companies? Health care? New Jersey municipal bonds? Indonesian utilities? There's a fund somewhere doing just that.

· Ease and Convenience: Usually, you can complete your transaction with one phone call and a bit of paperwork. And if you stay within a particular fund family, you can switch funds with no—or at the very least, minimal—expense, over the phone.

Mutual Funds - How To Pick A Winner

2008-02-13T02:33:00.001-08:00

There are a variety of things to look for in a mutual fund before you invest. As mentioned before, the stock market has averaged nearly 11% during the past 70 years. Depending on how aggressively you invest your money, I think you can generally count on a rate of return somewhere in the 10% - 12% range.

Now, what to look for in a mutual fund...

I usually recommend an index mutual fund for most of your investments. An index fund tracks a specific index, such as the S&P 500, which are the largest 500 stocks on the New York Stock Exchange (NYSE). Most index mutual funds do not have specific managers that are in charge of the fund, but rather are mostly automated in their day-to-day operations. If the fund does have a manager, it is important to note that he should have a long track record of good returns on that fund. If that manager or management team has only been with that fund for the past year or so, there is not much chance that the returns will continue to be what they have been over the past few years.

Another important number to look at is the expense ratio. It is fairly easy to find a fund with good returns and expenses less than 1%. The lower the better, but remember, if you buy a fund with an expense ratio of 1.5% that returns 12%, it would be better than a fund with expenses of .5% that returns 9%.

Usually I find that most people only care about one particular number; the past returns of a fund. While this is great information to be armed with, I always caution that past performance is no guarantee of future returns. That is especially true if a new manager is on the job.

An excellent website for free mutual fund research is Morningstar. In addition, they also have a free investor's classroom which contains some great information about not only mutual funds, but also stocks, bonds and other investments. In general, we suggest to start out small with a single mutual fund covering a broad range of the stock market, such as small and large companies as well as international stocks. When you have over $10,000 in investments, you can start branching out to ideally hold 25% in International, 25% in Aggressive mutual funds, 25% in Small companies, and 25% in large companies that pay dividends.

Start Investing in Mutual Funds

2008-02-13T02:32:00.000-08:00

Best Penny Stocks To Invest In

2008-02-11T03:41:00.000-08:00

Are you in search of some recommendations on what are the best penny stocks to invest in, that you should add to your investment portfolio? There is a weekly newsletter in circulation, entitled "Doubling Stocks" that issues a hot penny stock pick every week. Ever since the newsletter has gone into circulation in early 2007, its stock picks have been consistent winners.

The stock picks are based on the recommendations made by MARL, a stock analysis computer program, that was also developed in early 2007. MARL analyzes thousands by compiling and computing statistics relevant to each stock's past and present performance and makes recommendations on which stocks are likely to see a significant increase in value in the upcoming days or weeks.

Week after week, since its inception, MARL has consistently, without fail, chosen stocks that have seen an average of 105% return on investment. In fact, the company that licenses MARL claims that over 100 people have achieved millionaire status since 2007 thanks to their investments in MARL's recommendations.

For example, in January of 2008, one of MARL's recommendations was a penny stock with ticker symbol IDGJ. It quickly rose from $0.09 per share to a high of $0.32 cents per share, before leveling out at about $0.19 per share. This represents an increase of 100% to 200% in an extremely short span of time. Had you invested $1,000 in IDGJ stock per MARL's recommendation, when it was at $0.09, you could have bought 11,111 shars. Had you sold your shares at their peak value of $0.32 per share, you would have made a profit of $2,555.53 minus any trading commissions.

Stock Market Terminology

2008-02-11T03:40:00.000-08:00

1 Year Target Estimate: An estimated value of a particular stock that has been calculated by an investment expert who has been tracking the performance of the stock or investment product.

12(b)1 Fee: A fee charged by a mutual fund to cover the fund’s promotional expenses. In order for a mutual fund to charge this fee they must disclose to investors that it charges a 12(b)1 Fee and they must also register it with the SEC.

Common Stocks: An investment product that allows an investor to purchase a share of equity ownership in a public company.

Deleted: When a security is removed from the NASDAQ.

Dual Listed: This term is used to describe several things, however, it commonly is used to describe companies that have listings on both the New York Stock Exchange and the NASDAQ.

Family of Funds: This term is used to describe a group of mutual funds that are all managed by the same financial investment company.

Held: When a security is temporarily taken off the market.

IPO Date: IPO stands for initial public offering. This term refers to the date that the public was first able to purchase shares in a company.

Long Term Gain: A long term gain is a profit that is made on an investment that is held longer than 12 months.

Short Term Gain: A short term gain is a profit that is made on an investment that is held for less than 12 months.

Maturity Date: A maturity date is the calendar date that a bond matures and will pay the holder its full face value.

Mutual Funds - A Secure Investment

2008-02-08T03:05:00.000-08:00

Mutual funds are a collection of stocks and/or bonds invested in different securities, which include fixed market securities and money market instrumentals. It facilitates investors to put their money under an efficient investment management. There are three types of mutual funds namely, income funds, growth funds, and balanced funds.

The basic principle underlying mutual funds is to pool in money with other people to convert it into funds. Mutual funds generally buy shares in stocks wherein an experienced fund manager performs the task of selecting, purchasing and selling off the stocks himself. Certificates are then issued to the shareholders as a testimony of proof of their partnership and participation in the emoluments of funds.

There are particularly three ways in which you can make money from a mutual fund. They are:

1. Benefits can be earned from the commission on stocks, and interests on bonds. All the income received all round the year is paid by the funds in the form of a distribution.
2. The fund will have an outstanding benefit provided the funds sell high priced securities. Most of the profits are given back to the investors in a distribution.
3. The value of the fund’s share automatically increases with an increase in the value of unsold high priced fund holdings. Accordingly, you can always sell shares of your mutual fund for profits.

Many people find investing in mutual funds an attractive option to that of dealing directly with the stock market because it is comparatively safe. In fact, these days, mutual funds have become the first preference of many investors. Mutual funds provide a balanced and better approach compared to conventional stock market alternatives. It has an added advantage of investing in several distinct sectors and firms, so, if one company suffers losses, the others may be rising. Investing in mutual funds, therefore, minimizes the loss-bearing risk of monetary assets.

In a nutshell, here are the salient points of the advantages of mutual funds:

1. Cost-effectiveness of investing in mutual funds: The main advantage of investing in mutual funds is the efficient management of your finances. Investors buy funds because they lack the competence and time to manage their own portfolio. It is a cost effective method, especially for a small investor because it is expensive to get a manager to manage individual investments.

2. Diversification: Compared to individual stocks or bonds, mutual funds diversify the risk of bearing loss. The basic intention being to invest in a diverse number of assets in order to overcome the negatives of loss making stocks or bonds by the profits reaped by others.

3. Economy of Scale: The transaction expenses are relatively low as a mutual fund is bought and sold in large amounts of credits.

4. Liquidity: Mutual funds provide the opportunity of converting shares into cash at any point of time.

5. Simplicity: It is easy to buy a mutual fund. Most companies have their own automatic purchase plans, and the minimum investment rates are very small.

Therefore, investing in mutual funds is certainly a secure investment as the chance of loss is spread out, and the opportunity for gains are numerous. At the same time, it is both cost-effective and an investment that gives great future returns.

Investing Basics - Stocks, Mutual Funds, Real Estate & Online Investing

2008-02-08T03:03:00.000-08:00

Have you ever thought of investing? Do you have a family that you would like take care of? Does the idea of making money with stocks, bonds, mutual funds and real estate interest you?

Investing is essential to making money. Whether it be stock investing, investing online, real estate investing, finance investing, investing in bonds, investing in mutual funds. All are essential in helping secure your finances, and financial stability for you and your family. If you are interested in investing, continue reading about ways to make money. We will briefly discuss the concepts of investing with stocks and mutual funds, investing with real estate and investing online.

Stock & Mutual Fund Investing

The stock market is a great place to make money. If you intend on investing with stocks and mutual funds, we highly suggest that you first do research on the companies you wish to invest in. Although the stock market is a great place to make money, there is also a degree of risk involved.

Real Estate Investing

Investing in real estate is safer than the stock market. A lot of people purchase homes that need are in need of remodeling, and can make a lot of money by fixing them up and selling them. Be advised that it isn’t as simple as buying a house, painting it, and then selling it. There are a lot of factors that you should consider before you attempt to invest in real estate.

Online Investing

Another fast growing way to invest is through trading online. Traders have the capability of doing research, buying and selling and making money with their investments all with the simplicity of sitting in front of a computer. It’s amazing at how easily you can work your finances online, and make money without even leaving the house!

If you plan on investing, make sure you educate yourself in the market or means in which you wish to proceed. Whether it be investing with stocks, investing with mutual funds, investing with real estate or investing online, do your research and make some money! If you are looking for a resource to help you with investing, you can visit our website and you will find ample information about investments, and how to make money.

Different Types Of Mutual Funds

2008-02-07T03:03:00.001-08:00

A mutual fund can be described as professionally managed form of collective investments that pools money from many investors and invests it into stocks, bonds and other securities.

Mutual funds are a great way for investors with limited resources to participate in the financial market. There are various types of mutual funds including open-ended funds, close-ended funds, equity funds, exchange-traded funds and gold-trading funds. It is important to know about the way these funds operate and the criteria required for choosing the right type of fund so as to become a successful investor.

The foremost factor that needs to be determined while choosing a mutual fund is to know about the financial goals. Depending on this, one can have a fair idea about the type of fund one can invest. Each type of fund has its own share of risks and disadvantages.

1. When the objective is capital growth, funds that invest primarily in stocks are a good option. These are high-risk funds and the prospect of getting high returns is good with these types of funds. However, growth of stocks depends entirely on the stock market trading.

2. When the objective is to have a steady growth involving less risk, funds investing in bonds should be considered. However, the returns are often lower in these funds when compared to growth funds.

3. Investment in money market funds can be beneficial when the objective is to preserve the principal investment amount. These are highly stable funds and do not fluctuate according to the stock market. But these mutual funds generate very little income when compared to bond or growth funds.

Basics About Mutual Funds

2008-02-07T03:01:00.000-08:00

Mutual funds are good investment option if you are looking to meet your financial goals. The best part about mutual funds is that they are managed by investment professionals and the risk involved reduces as the funds invested in the mutual funds get diversified.

A company dealing in mutual funds invests your money in a variety of bonds, stocks, assets, securities and many other short-term investment instruments. You will earn dividends when a mutual fund earns profit and on the other hand, the value of your shares will decrease if the mutual fund company faces a loss. Usually a professional investment manager will do all the buying and selling on your behalf to ensure that you get the best returns for your investments.

There are different types of mutual funds, namely equity funds, fixed income funds and balanced funds.

Equity funds involve just common stock investments. They are extremely risky but can end up earning you a lot of money. Fixed income funds are government and corporate securities. Fixed income funds offer fixed returns and the risk associated with these funds is very low. Balanced mutual funds are a combination of bonds and stocks. These funds have a very low risk factor but your investment will not earn a lot of returns.

Mutual fund shares can be purchased either through the mutual fund company or from a broker. The mutual fund share is bought at the net asset value of the fund. This is the price you have to pay when you buy a mutual fund share and it includes the shareholder's fee.

The shares of a mutual fund are redeemable. You can sell your shares back to the broker or to another customer. Most mutual fund companies continue creating new shares and selling them so that they can accommodate new investors.

Finding Stocks That Will Make You A Handsome Profit

2008-02-06T02:45:00.000-08:00

With the advent of technology we have things at our finger tips. We have access to software, expensive newsletters, radio and television stock pickers and multitude websites that all claim they can assist you in finding stocks that will make you rich. However, one can never be sure whether these claims can be substantiated, and none of us want to risk our hard earned money.

Therefore, before investing in stocks, it is imperative that you do research on the company whose stocks you are interested in buying. Find out everything you can about the company. Most might end up contacting their broker who will send you tons of information or get in touch with Morningstar who would happy to sell you complete information on the company.

However, if you and everyone else has information, it surely cannot be worthwhile because the information would be factored into the price of the stock. That why it important to find out something that is a secret. The best way to get this sort of information about a company is through the internet.

There are many websites that rate mutual funds' performances and they rate the funds accordingly. Do not get carried away by websites the list Top 20 Mutual Funds as these websites are busy listing mutual funds based on their assets and not performance. Look for sites that list and rate mutual funds by performance and this will give you an idea about how the company performed over the last few months.

Once you find out the best performers, check out the stocks they have in their portfolio. You can do this either by requesting the mutual fund to send you're a prospectus or you can check it online. After you get an inkling of which stocks are going up, you will have an idea about which companies to invest in and you will have good equities to choose from.

A Look At Mutual Funds

2008-02-06T02:43:00.000-08:00

Mutual Funds are a very common way of investing. In theory they are a professionally managed investment that is diversified into a range of securities including stocks, bonds and other securities. The person who manages the fund is known as the "Fund Manager" or "Portfolio Manager". It is the fund managers responsibility to buy securities taking a speculative view that they will appreciate in value.

There are many people who have some money to invest and would like to earn a better rate than the basic benchmark rate. Investing in mutual funds offers the opportunity to do this in a trade off for some risk. It is important one does some research on different mutual funds because a lot of products on the retail market are very poor. One thing to be weary off with mutual funds is the fund managers get paid even in they perform very poorly, so they are essentially earning commissions and earn well if they lose some of your funds.

There are many different types of mutual funds, the major types are:

Exchange Traded Funds

These are relatively new and are aimed to track a specific security. Common ETFs track major stock indices, commodities and metals.

Equity Funds

These mutual funds are the most popular. They invest a large proportion of the pool into stocks.

Bond Funds

These funds invest in both government and corporate bonds. Often it is better to buy the bonds directly.

Fund of Funds

These funds invest in a selection of mutual funds, in an attempt to give you a diverse portfolio. They are often best suited to people who don't currently have enough money to invest in a broad range of mutual funds.

Exchange-Traded Funds are an Interesting Alternative to Mutual Funds

2008-02-05T01:24:00.001-08:00

Exchange-traded funds (or EFT for short) have recently become a more and more interesting alternative to classic mutual funds. As of today, there are over 175 EFTs accumulating over 200 billion dollars - and these numbers are growing. While it is improbable for EFT to completely supersede classic mutual funds (at least in the near future), they are an interesting alternative and probably a must-have in every beginners portfolio.

What is EFT?

Basically, an exchange-traded fund is a fund made of a portfolio of stocks from a single market. The portfolio is composed based on an index, industry sector or (more rarely) a country the companies are tied to. There are many stocks in each EFT portfolio, so the risk of the losses is roughly the same as in case of mutual funds. However, the expenses are tied thus keeping EFT funds from going much lower, and the fees charged by EFTs are minimal, giving investors additional income. What's more, EFTs trade like stock, making life easier both for investors and fund managers.

Benefits

1. Low fees The most obvious strong point of EFTs is their low fees. While lowering them to such levels as 0.2% a year may look like magic, it is completely normal - due to the fact that all the stocks are tied to some single slice of the market, the funds can reduce the amount of money spent on market analyses. 2. Lower taxes Unlike mutual funds, exchange-traded funds distribute nothing but a dividend from time to time, so there are few reasons to get taxed. 3. They're transparent You can check real-time what your EFT is actually doing with your money, while mutual funds report their holdings only twice a year. 4. Extra trading opportunities EFTs are sold just like normal stocks, thus creating many different trading options. Stop-loss and limit orders are but one of many opportunities available only to stock trading.

Switching to EFT

Switching to exchange-traded funds is relatively easy on tax-free accounts, such as IRA (Individual Retirement Account), where you simply cease to invest in mutual funds or stocks and start buying EFTs. However, when we're speaking about taxable accounts, you will have to make a switch only a little at a time to ease the taxation burden on your revenue.

Hurricanes, Stocks and Mutual Funds

2008-02-05T01:23:00.000-08:00

If you are forced to evacuate from a major category hurricane, which is approaching a shoreline near you, perhaps you should consider that you will want to call your broker and have definite points at which the stocks you own will be sold if they go down or if they go up. Consider if you will that you may be out of touch from your broker and your stocks or mutual funds for a while.

If you are an online trader you may not have immediate Internet access for a long period of time. Without the ability to check on your portfolio or manage your mutual funds or make a trade with your stocks it might be better if you were in cash and out of the market during this time period on the most risky parts of your portfolio.

If that is not possible you need to make arrangements with your broker in order to ride things out in more ways than one. Hurricanes do affect the stock market and can affect your mutual funds in an adverse way.

Consider if you will that oil prices could go up significantly if the Gulf Coast of the United States of America is hit again with the major hurricane of large category like it was during the 2005 Atlantic tropical hurricane season. Depending on the diversity of your stock portfolio this could be a significant problem for you and you have a chance of losing a lot of money if you do not plan ahead. Please consider all thisse in 2006.

Mutual Funds are not Investments

2008-02-02T02:46:00.000-08:00

Mutual funds simply are a method through which people invest. People often asking, "What are mutual funds paying?" The truth is that mutual funds don't pay anything! People also say, "I don't like mutual funds because they're risky." But there's no such thing as a "risky" fund. Nor has anyone ever lost money in a mutual fund. Mutual funds are not good, and they're not bad.

A mutual fund, in fact, is merely a mirror - a reflection of something else. Thus, if you invest in a mutual fund that invests in stocks, and you are as likely to make money or lose money as any other person who invests in stocks.

In fact, you can use mutual funds to buy virtually any kind of investment: stocks, bonds, government securities, real estate, gold and other precious metals, international securities, foreign currencies, natural resources, even hedge positions and money markets. You can find funds that engage in virtually any type of trading activity, including options and futures contracts, derivatives, and even selling short.

Technically, mutual funds are called "open-end" investment companies because they forever buy and sell their shares. In industry jargon, mutual funds "sell" shares to the public, and when you want your money back, the fund will "redeem" them for you.

Which One is Better for Investing: Mutual Funds or Stocks

2008-02-02T02:45:00.000-08:00

Mutual Funds What You Must Know

2008-02-01T02:20:00.000-08:00

Mutual funds are a group of stocks, which is managed by a professional. That professional uses the money from many different people to purchase stocks from various companies. This way, the people are not as affected by a drop in price by an individual company.

An analogy would be ordering desserts with a group of your friends. If everyone orders a different dessert and shares, then everyone can have a taste of many different things.

Likewise, a mutual fund allows an individual to own shares of many different companies' stocks without such heavy investment.

Mutual funds are attractive to beginning investors because they are relatively easy to understand. They are managed by a professional, so they don't require as much research by the individual investor. It offers a chance to "play the market" without taking the risks that would come with owning stock in individual companies. For example, if a person owned stock in one company that suddenly dropped, that person would be out a lot of money. But if it was part of a mutual fund, then the loss might be balanced out by other stocks in the fund that made gains.

Another attractive thing about mutual funds is that they often fall under several categories. For example, a person who wanted to invest in the technology sector could find a mutual fund that buys stocks from only technology companies. Other popular categories include environmentally friendly companies, pharmaceutical companies, and biotechnology companies.

The most popular mutual fund is probably the S&P 500, which is a group of 500 companies which tends to follow the same trend as the stock market as a whole.

Even though mutual funds present an easier way to invest than investing in individual stocks, an investor should still periodically check their mutual fund to make sure that it is performing the way that they like it to. Many people make the mistake of not reviewing their mutual funds only to find out too late that they have been losing money. Also, which investing in a mutual fund does present a way to diversify your investments, you should also diversify the mutual funds that you are investing in for greater diversification.

Avoid Bad Mutual Funds

2008-02-01T02:19:00.000-08:00

Since the mid 1980's, the market of the Mutual Fund industry has grown continuously. Billions of dollars has been invested into the Mutual Fund Industry. Unfortunately, not all of investors make money. Therefore, it is important for you to study a mutual fund carefully before investing. Here are some tips that can help.

Stay Away From Poor Performance Funds: It is important to look at the history of the mutual funds. If it has been bad for awhile, it is probably not for you. The average investor will sell a poor performance fund to find best performing fund.

Over-Diversified Funds Are BAD: Mutual funds are regulated by law to diversify seventy five percents of their assets. They should not have more than five percents of the portfolio in a single security. As the result of the laws, some fund managers are forced to invest in many different stocks due to the size of their funds. Some fund managers are forced to buy poor quality stocks.

Be Careful Of Fund Overlap: Many investors try to diversify their investments by placing their money in different type of funds. Unfortunately, they will be surprised to know that many stocks held by one fund are also held by the other funds. Some investors end up investing in the same stocks over and over without knowing.

Investors who have over $100,000 of investable assets should separate their investment accounts. Separate accounts allow investors to have greater control over taxes and security. Furthermore, these accounts are usually managed by highly professional fund managers.

Basics About Mutual Funds

2008-01-31T03:26:00.001-08:00

How To Invest In Stocks

2008-01-31T03:25:00.000-08:00

Buying stocks:

The most simple and straightforward method to invest in stocks is to just buy them! All you need to do is sign up at a broker and buy whichever companies you decide are the best investments. The benefits of this method is you choose which companies you believe will perform best. Of course, the drawbacks here are that you may not have enough time to identify which stocks make the best investments. It is also sometimes hard to diversify your portfolio, since you likely will not have substantial knowledge on a variety of stocks from various sectors.

Mutual funds:

If you decide you want someone to do the investing for you, consider investing in mutual funds. When you put money into a mutual fund, you are pooling your money with other investors and allowing professionals to invest it for you. The advantage here is that you do not have to follow your investments yourself, since someone else is doing the work for you. Also, mutual funds tend to buy hundreds or even thousands of stocks, so even just buying one mutual fund can give you diversification. The drawback is that most mutual funds under perform the market (due to fees and asset bloats), so most of the time you are actually better off just randomly picking stocks yourself!

ETFs:

An ETF is like a mutual fund, except it passively tracks an index like the S&P 500. The advantages of the ETF are the same as the advantages of the S&P 500. Also, since ETFs just buy whatever stocks make up an index, they have lower fees than mutual funds. However, by its nature, an ETF will never beat the market since it just attempts to mirror the market. ETFs have become increasingly popular though since many investors have become disillusioned with mutual funds.

Advantages And Investments In Fund Of Funds

2008-01-30T01:58:00.001-08:00

If you haven't heard of a fund of funds, you might think it is just a redundancy. The truth is a fund of funds has some important advantages and disadvantages that you need to be aware of. A fund of funds is exactly what it sounds like. It is a mutual fund that invests in other mutual funds. At first it may seem silly to you, but here are some big advantages to investing in a fund of funds:

Double Diversification -A mutual fund diversifies across many different stocks. A fund of funds diversifies amongst many different funds.

Simplicity -Instead of investing in many different funds to achieve the same result, you can just invest in one fund. This allows for much less paperwork.

Cheap for Beginning Investors -It is tough to diversify when starting out because of account minimums. A fund of funds allows for an investor to diversify amongst hundreds or thousands of stocks in one small account.

Institutional Advantages -Funds of funds can often invest in desirable institutional funds that are off-limits for retail investors. They also have the ability to invest in some load funds without paying the load.

Mutual Fund - The Most Popular Investment Vehicle

2008-01-30T01:57:00.000-08:00

Mutual funds are one of the most popular investment vehicles and there is a good reason for that. Mutual funds require small investments and an investor is able to buy a diverse array of stocks and other financial instruments in just one go.

If you have invested in one or more mutual funds, you can be assured that your portfolio is well diversified. Diversification is of great importance in mutual funds. If one your securities perform badly, you will not lose all your investment. There are other securities in your portfolio to offset the bad one.

Mutual funds are managed by investment professionals who have a lot of experience in analyzing and trading stocks and securities. It is the responsibility of the fund manager to select the securities that a particular mutual fund owns. A mutual fund is made up of stocks, bonds, and / or other financial instruments.

Just like stocks, mutual funds are divided into shares. A fund can own shares of different corporation and these in turn split further so that investors like you and me can invest in mutual funds.

All the shares of a mutual fund have a net asset value. So if the net asset value of a mutual fund is $1 billion then each share of that mutual fund would be worth $10. It is the responsibility of the fund manager to buy and sell shares that the mutual fund owns. However, you can also buy and sell your shares but only at the end of the trading day.

Each mutual fund comes with a prospectus which lists down the types of securities along with the investment objectives and strategies. You should read the prospectus before buying a mutual fund so that you know what you are getting into.

Mutual Funds are not Investments

2008-01-29T01:52:00.000-08:00

Mutual funds simply are a method through which people invest. People often asking, "What are mutual funds paying?" The truth is that mutual funds don't pay anything! People also say, "I don't like mutual funds because they're risky." But there's no such thing as a "risky" fund. Nor has anyone ever lost money in a mutual fund. Mutual funds are not good, and they're not bad.

A mutual fund, in fact, is merely a mirror - a reflection of something else. Thus, if you invest in a mutual fund that invests in stocks, and you are as likely to make money or lose money as any other person who invests in stocks.

In fact, you can use mutual funds to buy virtually any kind of investment: stocks, bonds, government securities, real estate, gold and other precious metals, international securities, foreign currencies, natural resources, even hedge positions and money markets. You can find funds that engage in virtually any type of trading activity, including options and futures contracts, derivatives, and even selling short.

Technically, mutual funds are called "open-end" investment companies because they forever buy and sell their shares. In industry jargon, mutual funds "sell" shares to the public, and when you want your money back, the fund will "redeem" them for you.

Which One is Better for Investing: Mutual Funds or Stocks

2008-01-29T01:50:00.000-08:00

Is Share Price Related to Marketability? Evidence from Mutual Fund Share Splits

2007-09-22T03:06:00.000-07:00

We examine the "marketability hypothesis," which states that stock splits enhance the attractiveness of shares to investors by restoring prices to a preferred trading range. We examine splits of mutual fund shares because they provide a clean testing ground for the marketability hypothesis, since the conventional rationales for common stock splits do not apply. We find that splitting funds experience significant increases in net assets and shareholders. Stock splits do appear to enhance marketability.

Although practitioners suggest that marketability is the primary reason for executing a split (e.g., Baker and Gallagher, 1980; Baker and Powell, 1993), few papers have rigorously explored this possibility. However, academic research on common stock splits has found some support for the marketability hypothesis. For example, Lamoureux and Poon (1987) and Maloney and Mulherin (1992) report that the number of shareholders increases following common stock splits. Schultz (1999) shows that the number of small orders increases following a stock split, and that the bulk of these orders are buys. [2] Angel, Brooks, and Mathew (1997) show that trading activity by small investors increases following a stock split. Fernando, Krishnamurthy, and Spindt (1999) show that firms going public appear to use the offering price to influence investor interest in the issue.

According to the trading-range hypothesis, round-lot constraints and transaction cost considerations result in a preferred price level, which is restored by the split. According to the signaling hypothesis, managers implement stock splits to communicate favorable private information about the firm's prospects.

However, these competing explanations do not fit very well the case of mutual fund splits. [3] Existing transaction cost and constraint-driven explanations of a trading range do not apply, since mutual funds do not trade in ticks and any transaction costs or trade size restrictions are not related to share prices. Also, in a recent paper, Rozeff (1998) finds that splitting funds do not subsequently outperform non-splitting funds. Rozeff argues that this result is inconsistent with managerial signaling. Therefore, mutual fund splits provide a relatively clean testing ground for the marketability hypothesis.

The marketability hypothesis states that a splitting fund will attract new money and new shareholders. Rozeff (1998) examines 167 stock splits by mutual funds. He finds no evidence of increased inflow following splits, a finding that appears to contradict the marketability hypothesis. However, Rozeff uses annual data and matches funds based on asset growth in the year the split occurred. This "screen" is coarse and thus might not detect noisy excess inflow that could only occur after the split.

In this paper, we extend Rozeff's work by examining data on 194 stock splits mutual funds executed between 1978 and 1993. We test for excess inflow by using quarterly data, and we control matching funds based on asset growth, performance, and size in the year before the split. We use quarterly data to estimate the timing of any excess inflow more precisely, and we match on prior period characteristics to minimize look-ahead bias in the results.

We find evidence of excess inflow into splitting funds in the quarter of the split and in the two subsequent quarters. The cumulative excess inflow of new money into the splitting funds during the two quarters after the split averages $8.5 million or about 5.6% of net assets.[4] We also find that relative to control funds, there is a significant increase in the number of shareholders in the split year. These findings support the hypothesis that splits improve marketability by restoring share prices to a preferred trading range.

We supplement our empirical work with survey evidence on the views of 52 mutual fund managers. Their responses are also consistent with the marketability hypothesis. These managers generally believe that a lower net asset value (NAV) per share attracts the attention of small investors. Moreover, they do not believe that mutual fund splits convey favorable information about future fund performance.

Conventional justifications of a preferred trading range do not explain why investors respond favorably to mutual fund splits. Although we cannot rule out some as-yet-undiscovered rational explanation for investors' positive response to splits, there may be behavioral (e.g., herding, as in Bikhchandani, Hirshleifer, and Welch, 1992) or cognitive (e.g., framing, as in Thaler, 1985) factors that lead investors to prefer a trading range. If behavioral or cognitive factors can explain mutual fund splits, they might also be able to explain common stock splits. Indeed, the rationale provided by our findings for why fund managers undertake splits is strikingly similar to the rationale corporate managers cite for undertaking splits of common stock.

Thus, behavioral or cognitive factors could also give rise to a preferred trading range. If so, managers would undertake splits in recognition of these factors to enhance the marketability of their funds. If the marketability hypothesis holds, we would expect managers to set post-split prices close to industry averages and for splits to attract new money and investors.

We selected all open-end mutual funds identified in the CDA Weisenberger Investment Companies Yearbook as executing a split during the period 1978 to 1993. [10] We also searched the CDA Weisenberger Mutual Funds Update from 1982 to 1993, the mutual funds section of the Nasdaq OTC Daily Stock Price Record from 1981 to 1993, and the Moody's Dividend Record and the S&P Dividend Record, both from 1978 to 1993 for additional splitting funds.

Our final sample consists of 194 mutual funds that executed a split during the 1978 to 1993 period. Approximately 1% of all mutual funds split in a given year during this period.

2000 new millennium, new funds - mutual fund evaluations

2007-09-22T03:00:00.000-07:00

FOR SHARON AND DARRYL WARD, THE ROAD TO wealth-building is paved with mutual funds. "We're in our 30s, so we have many years of investing before we retire," says Sharon, a financial programs specialist with the U.S. Treasury Department in Birmingham, Alabama. "Therefore, we invest mainly in stocks and stock funds where the long-term returns likely will be superior. I personally like to invest through mutual funds because I feel the diversified holdings provide safety."

Once a conservative investor, Sharon has evolved into a moderate risk-taker. On the other hand, her husband, Darryl, a mortgage banker, is a more aggressive fund picker. "We don't own a lot of small-company or international stocks," he says, "so our portfolio is tilted toward large- and mid-caps. I like to see a lot of technology stocks in the portfolio before I invest: I know they're volatile, but I think the long-term returns will be worth the risks."

As a result, the Wards have crafted an investment program that is a mix of moderate and aggressive funds. And as they have structured their portfolio, they have placed a high premium on consistent returns. "A few years ago, a specialized technology fund was suggested to me," says Darryl. "However, it had just returned 112% the previous year, so I was reluctant to invest because I didn't think it could repeat that performance. Instead, I invested in Fidelity Select Software and Computer Services Fund (FSCSX), which had a record that was good but not as great." Fortunately, he didn't regret that choice. Since he's held the investment, Fidelity Select has gained more than 30% per year.

Many investors go through the same arduous process as the Wards when it comes to figuring out the next hot fund. The more misguided, however, conduct research akin to throwing darts at a board. So just how can you truly determine which funds will give you the best bang for your buck? To help you make this decision, BLACK ENTERPRISE consulted Morningstar, the Chicago-based mutual fund tracking service. Susan Dziubinski, editor of Morningstar Fund Investor, a monthly newsletter, has reviewed and helped us prepare a list of 12 hot mutual funds for the new millennium (see chart). OK, they may not last a thousand years. But the process that she used to select the funds is one that can easily be passed on to any generation of investors.

Instead of established funds, Dziubinski is drawn to young `uns--those vehicles that have yet to establish track records of more than a half decade. Why new funds? "Young, relatively small funds have some advantages," she says. "They may be more flexible than large, established funds, so they can take advantage of emerging trends."

Some rookies offer lower costs--especially index funds. Byron Snearl of Los Angeles counts himself among those who have found the advantages of such vehicles. "I don't have the time to study the funds closely," says the retiree who now manages his own rental properties, "so I invest through index funds. They mimic the market and I'll settle for those kinds of returns. They're low-cost, tax-efficient and don't present the risks of picking the wrong fund manager."

The bargain-hunting Snearl, of course, prefers "no-load" funds--those without sales charges--because they tend to offer solid returns at cheap prices. His preference: low-cost index funds from Vanguard Group. "I use dollar-cost-averaging to lower my risks even more," he says, investing $400 each month, which gives him the opportunity to buy more shares when prices drop.

Retirement: when you're ready - retirement planning; includes mutual fund recommndations - Best Funds for Your Goals

2007-09-22T02:55:00.000-07:00

Christopher Solmssen knows more about stock picking than most mutual fund investors, so when he extols Selected American Shares, it's worth paying heed. Solmssen is a 30-year-old stock analyst with Sun-America Asset Management, in New York City. He notes that Shelby Davis, who managed Selected from 1993 until early 1997, and Davis's son Chris, who has assumed the reins from his father, practice a "really sound, long-term philosophy of investing with a five- to ten-year horizon, not week to week like some funds." Moreover, he says" with Shelby Davis, who remains active in the fund's management, you get one of the most talented investors in the business. "Who else has a 25-year track record of outperforming the market in both bull and bear markets?" asks Solmssen.

For a fund that specializes in large, undervalued stocks, Selected American -- one of only 253 diversified U.S. stock funds to have outperformed Standard & Poor's 500-stock index last year -- is fairly aggressive. Because Solmssen probably won't be tapping his savings for at least 30 years, that makes it ideal for his IRA and for this long-term retirement portfolio. The fund invests in large, moderate-growth companies -- typically those showing earnings gains of 7% to 15% a year. The Davises try to buy at favorable prices, often when a company is out of favor, and then hold the stock for at least five to seven years. "People call us value investors because we're price sensitive, but we don't want any stock that doesn't have growth potential," says Chris, who likens himself to a quarterback and his father to the coach.

High-tech stocks are a hallmark of Harbor Capital Appreciation. Spiros "Sig" Segalas, manager since 1990, recently had about about 28% of assets in technology stocks. That weighting isn't surprising for someone who specializes in finding large, rapidly growing companies. Unlike the Davises, who consider a 15% growth rate the ceiling, Segalas picks stocks that typically deliver earnings growth of al least 15%.

Berger New Generation, a newcomer to "Best Funds," buys rapidly growing companies, too, but smaller ones than the Harbor fund would consider. By the rules of its prospectus, it can Invest in companies of any size that are capable of changing the way things are done in their sectors. But the fund has a strong small-stock bias because, says manager William Keithler, "by definition, a lot of the innovation occurs with smaller companies, and the impact on those companies, if successful, is a lot more significant." Keithler expects the earnings of the fund's holdings to soar 52% this year.

Complementing New Generation is another "Best Funds" newcomer, Westcore Small-Cap Opportunity which invests in small, undervalued companies. Varilyn Schock, who has run Small-Cap since its inception in late 1993, looks for companies that are "mispriced" but have improving business outlooks. She uses a proprietary system that ranks companies by such measures as the ratios of price to earnings, book value and cash flow, then identifies the cheapest 10% of stocks in ten different economic sectors. These candidates for inclusion in the fund get a going-over by Schock and her analysts, who study such matters as a company's products, management and regulatory issues.

Artisan international rounds out the retirement portfolio. It is coming off a mediocre year, having returned just 3.5% in 1997, slightly less than the average diversified overseas fund. Manager Mark Yockey compiled an above-average record at both Artisan and United International, by first identifying countries that provide a good environment for growth and then searching for reasonably priced growth stocks. Yockey attributes his 1997 performance to not hedging against currency fluctuations, holding lots of small-company stocks, and owning stocks listed in Hong Kong (11% of assets at midyear) and Japan (9%). By early 1998 those figures had been trimmed to 5% and 3%, respectively, with three-fourths of Artisan's assets in European stocks and about one-fifth in emerging markets, including Hong Kong.

Good Stocks to Buy - You Got a Penny?

2007-07-09T02:20:00.001-07:00

In my area of work you get many questions just like this one: "Which is a good stock to buy?" And sometimes, depending on the person, I answer back with another question: "You pot a penny?" People always stare at me with a look on their face that says: "Is this guy a joke?" or "Is this guy for real?" Well no, I'm not a joke, and yes I'm for real.

I gotta tell ya, it's how I started out; penny stocks. They're one of the best stocks to buy because of the little cost they represent and the big chances you have to get money out of the deal. With normal stocks you're going to have to invest more than a thousand times more to begin making some real profit out off them. I'm not saying you shouldn't invest in them, by all means do so. The thing is that if you're starting out - even if you're already experienced - going with penny stocks is a wise decision.

But why?

Well, how many people have lost all their money in the stock market? Hey, it's not as unusual as you might think! But those people start off buying stocks from the all popular Apple, IMB, Google, and all the other big boys out there. Do you know how much one stock costs from some of these guys? It goes from $100 - $500, some reaching the +$1,000.

One hundred dollars is ten thousand pennies! Even though a stock penny hardly ever really costs just one penny, I think you can see my point. But coming across a good penny stock to buy isn't that easy. You have to do your research; you're homework. Once you do have a penny stock spotted, then all I can say to you is great job, good luck, and keep it up! Because on your path to success you'll see many riches many could just dream of.

More Investment Myths Exposed

2007-07-09T02:19:00.000-07:00

Investment Myth: Stocks always rise in the long term. Don't try and time the market; what you need is time IN the market ! Just buy and hold."

You have no doubt had the experience of being urged like this by your stockbroker or someone else with a vested interest in you owning shares. Or it might have simply been a well-meaning friend. "You can't pick the bottom, just like you can't pick the top. So just buy stocks, and even if they fall in value in the short term they will always rise to a new high later on."

This sort of advice often goes along with the "Cash is Trash" mantra. Of course, if it were a realtor urging you, the "advice" would be quite different.

So, is it true? Do shares always rise in the long term?

That depends on what you mean by long term.

Ignoring dividends, if you had bought the Dow Jones index in 1965/66, do you know how long you would have had to wait to get your money back? Nearly seventeen years! That's right. The Dow first touched 1,000 points in January 1966 and then fell back. It never got back to 1,000 points until October 1982.

If you had bought near the top in 1929, do you know how long you would have had to wait for stock prices to get back to pre-crash levels? Twenty-five years! Yep, it was 1954 before the Dow put in a new high.

Apparently in the previous century there was a 43-year period during which Wall Street failed to reach a new peak.

More recently, in Australia, if you bought shares before the October 1987 correction, you would have had to hold them for a whole decade before they reached their pre-crash level again (apart from one fleeting touch in February 1994).

If you bought the Japanese Nikkei index before its peak in December 1989, you would still be down 50%, seventeen years later!

Wall Street's NASDAQ index is still about half what it was more than 7 years ago.

Does that answer the question?

Yes, shares will always rise in the long term. But you need to understand what is meant by "long term." Most who parrot the mantra never give it a thought.

Far better to know where the stock market is according to the Wave Principle, and to have the socionomic insight.

If you have not read my book or my newsletters, then here's a tip: Investing is simple. Just remember one rule - buy when prices are low; sell when prices are high.

Where is the stock market right now? High or low? So what should you be doing? Then why aren't you? It's human nature to do the opposite, isn't it? Why is that? Why does that leave you in danger? How can you avoid the mistakes that most investors eventually make?

Don't you think you need to understand the socioeconomic insight and the Wave Principle?

Selecting a Commodity Broker

2007-07-06T02:07:00.002-07:00

One of the most important decisions that an investor will make does not include purchasing an option or future; this decision is choosing a commodity broker. Understanding the dynamics involved in choosing a commodity broker is as much about understanding yourself as it is getting to know the commodity broker. Since commodity trading can be more involved than trading stocks, it is more important to select the right commodity broker than it is to select the right stock broker.

About Commodity Futures and Commodity Brokers

By definition, a commodity market is the location where sellers and buyers are about to conduct business in futures trading. A commodities trading contract is a legally binding agreement that defines an asset, the quantity of that asset to be delivered and the month when it will be delivered. A margin is invested to purchase the contract and the full balance of the contract is only required if the buyer takes delivery. If a commodity contract is purchased, the correct term is to “take delivery” and if a futures contract is sold, it is referred to as “making delivery.”

Commodity future contracts can be written for any type of commodity such as gold, lumber, livestock, currency, and many others. There are several different futures markets that handle specific types of commodities, such as the CME (Chicago Mercantile Exchange), NYBOT (New York Board of Trade), CBOT (Chicago Board of Trade) and others.

Futures exchanges are regulated by strict guidelines, both imposed by the government and internally, and they are require that trading is done “in the pit”, which means that transactions are handled by commodity brokers that are licensed and have paid to be in that position. These commodity brokers serve as the connection between buyers and sellers. Such an important link requires that you select someone that is not only an excellent commodity broker but someone that can identify your investment shortcomings and help to overcome those flaws.

Two Types of Commodity Brokers

There are two types, or levels, of commodity brokers and the level of service they provide is based on the needs of the investor: full service and discount. Each type of commodity broker has advantages and disadvantages that should be considered when making a decision.

Full Service Brokers

This type of commodity broker is usually recommended for new or inexperienced investors, or for those investors who invest in numerous markets. Full service commodity brokers usually provide more information, advice and help to their clients; they often work with investors to create personalized investment strategies. The fees charged by these commodity brokers are generally higher because of the extra level of service they provide. Full service brokers that specialize in trading commodities are also known as Introducing Brokers.

Discount Brokers

This type of commodity broker typically works better for more successful traders. Discount brokers can charge less for the services that they provide since they provide a smaller range of services.

How Do You Find the Right Commodity Broker?

Finding the best commodity broker for you is more a product of knowing your tendencies than anything else. Remember that your ultimate investment philosophy is to make money and your commodity broker’s job is to help you do that. Some of the traits that you should seek in your commodity broker are:

Experience

Chances are if your commodity broker doesn’t have much experience, the results you receive will be spotty at best. You don’t want your commodity broker to learn how to invest at your expense. Not only is experience in general important, but experience in the commodities where you want to trade.

Support

While a commodity broker may tell you about world-class support, what you get after you sign on is what’s important. If you are considering a particular commodity broker, call and ask for an explanation of the difference between bull call spread and a bear put spread; the level of response you get may be a good indication of the support you will receive after you open your commodity account.

Trial Period

Many commodity brokers will give you a free trial to “test drive” their service. Take advantage of this offer and see what happens. Remember that part of sampling something is trying to find out if it is good, no just trying to find out if it’s bad.

Conclusion

Choosing your commodity broker is one of the most important decisions you will make during your investing career. Successful trading can be the result or the victim of a commodity broker decision. Find a reputable broker that meets your needs and compensates for your shortcomings and you are on the road to investment success.

The Role Of Brokers In Online Stock Trade

2007-07-06T02:07:00.001-07:00

The online stock brokers play a significant role in online stock trade for those who want to invest but do not possess a good amount of amount to play. They are different from the traditional stock brokers in terms of investing and managing money.

Significant Role Of Online Stock Brokers

In the world of financial ups and downs, it has become a difficult task to know the best method of investing your money. Stock exchange has always acted as a platform between the stock traders and the companies in the form of buyers and sellers respectively. The invested money of the investors is always utilized by the company in further expansion of the business to increase profits.

In the traditional method of stock trade, the investors were assisted by the stock brokers in the process of buying and selling of stock and in building the financial portfolio of the investors. But since the discovery of internet, a new easy method of stock trade has come up which is known as online stock trade and it only requires the turning ON of your computer. The online stock brokers play a significant role in the market of finance by helping the online traders to hit their financial goals.

There are numerous online stock brokers in the stock market but the most commonly used ones are Ameritrade, ETrade Financial, Fidelity, and Schwab. These stock brokers work in a very systematic way as they estimate the financial condition of the investor, they execute the financial plan, and assist the investors in investing in the stocks.

Online brokers keep on updating the investors with the updated and latest news and information in terms of stock quotes, performances of each stock, and company’s financial status via online accounts created through online brokers. This information really helps the investors in investing and coming out with the profitable results.

How To Select Online Stock Brokers

The online stock trade has proved to be very much beneficial with the assistance of online stock brokers. But it is in your hands to choose the best stock broker in order to be on the bright side in the world of finances. Therefore, you should consider the following points while choosing your online stock broker.

1 - It is always recommended to begin with a full service broker for the beginners in order to become confident and knowledgeable in the market of finance therefore you should not consider “discount” as the standard requirement if you are a beginner.

2 - You should keep on checking the website performance especially during the peaks hours so that you should be very much familiar with the site in order to clear the confusions else it may lead to mistakes.

3 - You should always opt for the broker who can be accessed by some different modes other than internet. For e.g. via telephone, fax, etc.

4 - It is always suggested to have a proper survey of the finance market in order to get an apt stock broker.

5 - It is recommended to go for the brokerage firms that require a minimum deposit for opening an account. There are many firms that do not possess any minimum deposit at all therefore you can enjoy the liberty of depositing and withdrawing amount according to your wish but the account will remain open.

6 - You should prefer to open an account with the broker offering lowest commission cost.

7 - You can opt for the broker who not only deals in stock market rather offer other financial services like CDs, municipal bonds, mutual funds, gold or silver certificates, etc so that you can withdraw profits from these financial services also.

8 - You should confirm beforehand that the brokerage firm in with which you are going to deal with should possess 24 x 7 hours customer care service in order to assist you every time whenever required by you.

Therefore, anyone can enjoy the thrill of online stock trade but should always begin this business of finance with the assistance of a good brokerage firm in order to be on the profitable side of the stock market.

If Options Are Easy To Trade Why Do So Many Lose So Much Money And Burn Out?

2007-07-02T02:48:00.001-07:00

Most option traders are like you and I, average people doing business on the stock market.

But what separates the professional option traders from the beginners is that the professionals keep it simple whilst the beginners are still finding their way and often are overcome by their emotions....or greed that usually results in them making losses.

It's true that if one could predict the directional movement of the markets on a regular basis then this person would be extremely wealthy.

What many traders don't realize though is that to make a great living with option trading you don't have to predict the direction of the move, something that is akin to gambling at the best of times.

Many professional option traders make a huge income by forecasting the "size" of an options price movement whether up or down or even if it is trading in a range by using volatility and probability analysis .

Now this is why many people get scared and run away at the mention of Volatility and Probability Analysis to trade in options.

In the years past you would have to have the great mathematician Archimedes to help you calculate volatility and probability, it could be the reason why only a select few were making money trading options.

But not now with powerful software that you can purchase from various online traders you only have to input the 20 days price history of an option you want to trade in and then "voila"! In an instant you have your answer of the likely movement of that options price.

You can also use standard deviation to calculate probability and with a quick glance you can simply look at a simple chart (no not one of those complicated ones, but the shaded area under a bell curve) and you can spot a 95% winner in an instant!

Yes this method is the method that many successful professional option traders have been using for years to make huge profits from trading in options.

In fact many successful global large financial institutions that trade in options use this very same method.

With basic knowledge in option trading and a relatively inexpensive piece of software you can now trade and profit like the professional option trader.

What is more, all you have to do is simply enter the 20 day historical prices of an option you want to trade in and the probability is given immediately.

You can even work out likely "scenarios" by using "what if" a price was such and such at an given time to work out your strategy.

Volatility and probability formulas are not simple formulas, you could do them on a calculator or in a spreadsheet like excel but for a small investment why bother working like an Elephant when you can sit down and concentrate on trading.

5 Tips To Make Money In Trading Stocks Online

2007-07-02T02:47:00.001-07:00

The discovery of internet has made the methods of doing businesses very easy and comfortable. It has also taken the market of stock to the heights as the large percentage of population has opted the method of trading stock online.

Tools To Start Trading Stocks Online

The method of trading stock online has been proved as the most convenient and successful method of trading stock. It is also very easy for anyone to start trading stock online by just possessing 3 important tools which are:

1 - Computer: If the whole procedure of trading has to be done online, then it is obvious that the main foundation of this trade is the computer. If anyone wants to start with online stock trading then he should possess a fast computer with Windows XP as its operating system.

2 - Internet: It is the major component of online trading as it will connect you to the various companies of the stock market. It is always suggested to go for a high speed cabloe or broadband internet connection.

It is always recommended to have an internet back up even if you possess a good net connection as there are the chances for the net to get down. You should always possess an access to a telephone line if, in any case, your system gets disrupted and you want to exit the trade then by using telephone you can inform the broker regarding the same.

3 - Brokers: In order to enjoy the excitement of trading stock online, one has to require a broker through whom you will be involved in online trading. There are many online brokerage firms possessing different fees and offering different services. You should always opt for the online broker that proffers good stock trading and charting software. You should always select that online brokerage firm which offers market data and the updated information to all its clients.

Before going to have the tools for online stock trading, you should jot down the things which will be required by you from each and every tool.

Tips To Make Money In Trading Stocks Online

There are many people who have been successful in making out huge amounts from the online stock trading. The following 5 tips will really help the online traders to make out dollars from online stock trading.

1 - Chart reading in stock trading is the most beneficial step for the traders to trade efficiently. By becoming skillful in the activity of reading charts, you can easily judge out the stocks that will move up.

2 - It should be habitual to set stop loss orders whenever you make trade else your entire account will get smashed. You should always proceed in the game by scraping down your losers early and by allowing the winner to continue. Basically, this is one of the tactics of the trade.

3 - You should never purchase the stock which is dropping down with a perception that it will increase suddenly after you will purchase it. You should always opt for the stock that is constantly moving up and will keep on touching the heights. Therefore, you should get rid of a myth "buy low and sell high" from your mind.

4 - You should never give an importance to the media personalities rather it is recommended to work independently while trading online. This is so because there are frequent ups and downs in the stock market and by the time information of the media persons reaches you, it becomes too late. Therefore, it is always recommended that you should always work with your brain instead of trading by using someone else’s brain.

5 - You should always search for the brokers whose commission share should be low else your profits will be spent in paying the commission to the brokers.

These five tips will really help everyone to hitting the jackpot while trading stock online.

A Financial Analysis of Magellan Midstream Partners LP

2007-06-28T04:13:00.002-07:00

The Oil & Gas Pipelines is a 5 trillion dollar industry. Corporations like Williams Company, Spectra Energy, and Kinder Morgan Energy Partners are all market cap-leaders in this Basic Material sector division. However, one company, Magellan Midstream Partners (MMP), a 3.1 billion dollar mid-cap equity, stands out from the rest of the industry. Looking at the companies' financial figures and overall strategic plan, there is clear evidence that this corporation has the potential to produce high capital gains for investors.

Like most of the companies in this industry, Magellan, according to Reuters, "is principally engaged in the transportation, storage and distribution of refined petroleum products." Having bases in the Gulf of Mexico, what separates Magellan from its rivals is its area of distribution. This Tulsa, Oklahoma-based corporation's, according to Yahoo! Finance, "pipeline system transports petroleum products and liquefied petroleum gases from the Gulf Coast refining region of Texas through the Midwest to Colorado, North Dakota, Minnesota, and Illinois." With such a limited geographic base, some skepticism may be allocated for serving only a handful of states. However, there is significant demand for oil in these regions. According to various gas price resources, the price of gas is around $3.50 in many places in Chicago. And in North Dakota, prices range around the $3.20 mark. High demand means higher prices, and with crude oil futures rising to near $65 dollars, up 20% from its lows earlier this year, coupled with a summer season with high travel rates and a strong potential for hurricane activity, Magellan would be a direct beneficiary of such news. It is true that companies like Williams and Spectra would also be impacted in a similar manner, but what further differentiates the "8,500-mile petroleum products pipeline system" Magellan has from its rivals is its fundamentals.

Magellan has only seen a drop in share price once year-over-year since its IPO near the beginning of this century. Much of this success can be attributed to strong revenue growth, especially over the past year. Year-over-year, Magellan has seen, according to Capital IQ, about 4.60% quarterly revenue growth. While many investors may argue against such a low number, out of the three aforementioned companies, Williams, Spectra, and Kinder-Morgan, only Spectra has a higher number. However, what Magellan has that is better than Spectra is 2.5 times the revenue per share. In addition, while both Spectra and Magellan support strong operating margins, Magellan especially with its 20% trailing twelve month figure beats out both Williams and Kinder-Morgan in this very important statistic. Success on the top-line should transcend to success on the bottom line as well.

Profit margin for Magellan is 15.70%. Much of this number directly is involved with this company's forward P/E ratio of 18.3. Not only is this figure significantly below the average multiple for the industry, but the ratio is below Spectra's 18.4 forward multiple and Kinder-Morgan's 26.2 forward ratio as well. Examining this number, would it be fair to assess that Magellan is not only a mid-cap growth stock, but a value equity as well? Unfortunately, while price to sales at 2.53, enterprise value to revenue at 3.21, and enterprise value to EBITDA at 12.47 are all pretty similar or below the other companies, it is more fair to say that Magellan is a still rapidly growing corporation. And eventually, if price stays the same as it is now there could be a strong argument that Magellan is undervalued in the coming months and years. While the PEG ratio of 2.41 is not generally a great number to assess strong growth for a company, relatively for the industry, the number is lower than most other companies and should also contribute to strong growth potential in the future.

What is also important when looking at any company is to examine the management team and the ratios that they directly affect. Fortunately, CEO Don Wellendorf and his 1,064 employees have done a great job relative to the company's competitors. Looking at the important ROE, Magellan reports a figure of 23.91%. This figure is not only higher than the industry at 14.30%, but higher than Spectra and Williams' figures as well. ROA of 8.62% over the next five years is also higher than the industry average, in addition to having an ROI of 9.70% over the next five years which is also higher than the industry. Cash flow, both leveraged and operating, is both positive, which is not the case for many of the other companies in this industry. Capital expenditure at 33.5 over five years is nearly double that of the industry. While solvency is not as strong as the industry or some of the competitors, again, Magellan has only recently started to trade publicly, and is still growing—quite impressively.

Therefore, once again, Magellan is not a value company, but a growth equity. Dividend yield at over 5.2% is phenomenal for this industry and sector, and investors should benefit from owning this stock even if there is an off chance that Magellan does not produce. However, with the aforementioned strategic plan and fundamentals, Magellan, trading below its 50 day SMA would be an excellent consideration of any investor's portfolio.

Your Target for Financial Stocks

2007-06-28T04:13:00.001-07:00

As the trouble with subprime lenders unravel, we need to be ready to be proactive and grab financial stocks that are getting hammered for unfair reason. This means that the company is either getting involved very little in the subprime business or people are concerned that even the AAA rated loans will be seriously affected.

That brings us to two possible candidates that I can think of:

Washington Mutual Inc. (WM). This company has little if any mortgage borrowers with subprime credits. Washington Mutual is the ninth biggest subprime lenders according to Marketwatch. However, due to its sheer size, it represents less than 5% of its total loans. Washington Mutual is also one of the biggest mortgage lenders in the country. If the housing sector weakened considerably, Washington Mutual will get hit in the process. What is attractive about Washington Mutual is its low valuation (forward P/E of 9 if all is well and good) and 5% dividend yield at current price of around $ 40. When default of subprime loans occur, Washington Mutual may take a hit for the current year's earnings, but if the incident is isolated, earning would rebound the following year. At $ 40 per share, I believe that Washington Mutual is too risky for the play. If it happens to go down to $ 30/ share, this has a significant chance of getting you a 50% return or so down the road.

Countrywide Financial Corp. (CFC). Countrywide is getting linked more to subprime borrowers than Washington Mutual Therefore, share price may drop more. At current price of $ 35, Countrywide has a forward P/E of 7. Still, forward P/E is misleading should many of the subprime borrowers default on their loan. Countrywide is the third largest subprime lenders in the country according to Marketwatch. However, subprime loans merely represent 7% of the company total loan. While the dividend is not enticing, its forward P/E is lower than Washington Mutual. For patient investors, Countrywide Financial might be a good investment at $ 25 per share.

Will there be any opportunity to pick up these shares at the forementioned price? Nobody knows. However, the goal in investing is to minimize risk. I feel that at current price, while cheap, has a little more risk that I can tolerate. Of course, you should not simply buy the shares just because the price hits certain point. Do further research to find out if the drop is warranted or not. The above mentioned price is merely a starting point for investor to do research.

7 Advantages Of Trading Stock Online

2007-06-25T04:11:00.001-07:00

Online stock trade is an exciting and thrilling way of investing in financial market via internet. One has to be properly well versed with the ups and downs of the stock trading in order to prevent dejections and losses for every time you trade.

Basic Concept Behind Stock Investing

Before getting involved in the stock trading, you should be well versed with its concept as this will help you in achieving success every time you trade. When you purchase a stock, you become a shareholder in the company. Now this invested money by the shareholder or investor will be used up by the company in expanding the business to earn profits.

These profits will be observed in the rising prices of the stock. Now the investors owning the stocks in the company can sell that growing stock in order to make profit as they will get more amount than they invested originally. The same concept is there behind the losses in stock trading that is after investing in stocks of a particular company if the company starts going in loss or the rate of that particular stock begins to decrease, the investors are also in the category of loss.

The stock trading has become very interesting and easy because of the discovery of internet. If you are interested in trading stock online, then create an online account through any online brokerage firm. It is always recommended to select a venerable and renowned brokerage firm so that you should not get into wrong hands.

For example, Ameritrade and ETrade Financial are most renowned in the stock industry. Now, the brokerage firms will create your an online account through the company. By using your account, you can trade stock online by setting financial goals, buying and selling stocks, etc.

Benefits Of Trading Stock Online

The discovery of internet has occupied its own space in the industry of stock market. There are numerous advantages by trading stock online:

1 - The most advantageous aspect of trading online is the immediate access to the account and one can easily be updated with the latest stock information and news of the company in which you have invested or want to invest.

2 - In this method of trading stock online, the charges of the brokers are also minimal which are around $7 to $10 per trade.

3 - There is a proper check over the portfolios by using the accounts opened through brokerage firms in online stock trading.

4 - The other most important benefit of the online trading is that the company permits the investor to chart the profitable stocks and to update the investor with latest news and updates of the stock market.

5 - Online stock investing has helped a lot in saving time and money by enjoying the thrill of trade at your convenience in the ambience of your home.

6 - There is another facility provided by the online brokerage firms to contact the other trained brokers and investment counselors for the guidance if required while trading.

7 - The online stock investors also enjoy liberty to decide the things in their own way. Therefore, it is the right method to invest money with complete freedom

Hence, enjoy the fun of online stock trading by investing liberally.

Do You Really Need A Broker To Trade?

2007-06-25T04:10:00.001-07:00

Is a broker really necessary to trade in the stock market? Years ago, the perception was that only grey haired men in pin stripped suits traded stocks in the stock market. The average person did not know any thing about the market, it was shrouded in mystery. Most people did not know what a Hedge Fund was, or for that matter understood anything at all about options or futures.

This has all changed in the computer age. But even so, just a few years ago, the average person trading in the stock market was limited to calling his broker and executing a trade. Most people relied on the broker to give them advice about buying and selling.

With the advent of online trading, the broker’s position has changed. He is no longer giving advice as to what to buy and sell, but is only processing the orders of his clients. With the deep discount brokers, there is very little contact between the trader and a live person at the brokerage. Now, the average person can remove the middleman from the equation, and as a result, have lower trading costs.

Getting involved in the market can be fun and rewarding. It can also be painful and costly. Each person trading the market needs to perform his due diligence and understand the market he is trading in.

There are both pros and cons to trading without a broker. The biggest con is not having the expert advice about a particular investment. Now, the individual investor has to research the stock on his own. Of course, this is offset by the fact that some brokers were nothing more than market churners, they recommended the hot stock of the day, sometimes just to drive the price on a thinly traded share, leaving the investor holding the bag.

There are many pros to trading without a broker. The biggest would have to be cost, it can cost as much as ten times more to use a full service broker compared to a deep discount broker. Also, you do not need a huge bankroll to get started; you can open an account for $500 with some firms. The low fees, along with small initial investments allow even the smallest investor to start trading online.

It is really easy to trade online. Most firms have a simple computer program to allow fast trading. Some firms will even allow naked selling of options. Of course, this is only allowed for the more experienced investor with the larger account.

Eliminating the broker opens up a lot of freedom for the investor and puts all of the control in his hands. The downside, there is no one to blame bad investments on other than yourself.

Trading in the stock market without a broker can be a lot of fun. It doesn’t matter if you are day trading or taking a long term holding approach, learning the ins and outs of trading the market without a broker can be exciting and rewarding. Online trading is a trend that is sure to continue.

Ten Simple Investment Tips

2007-06-21T02:42:00.003-07:00

When I first started trading the stock market, there was not the wealth of information available online like there is today. I read a lot of books and learned the terms and thought I knew everything necessary to make my fortune trading the market. I found a discount broker and started plugging away, and immediately lost my shirt.

Even though I had read these same tips in numerous places, I really didn’t understand the importance of them until I had learned them the hard way. As they say, experience is the best teacher, if you survive the lesson.

These are things that I wish I had really used when I first started trading.

1. Never invest money you can’t afford to lose.

2. Never invest money you are afraid to lose. If you are too uptight, you are guaranteed to make bad decisions.

3. Never buy a stock you receive in an unsolicited email or in a mass mailing. Many times, these turn out to be low cost, thinly traded penny stocks that some one is trying to pump up the price and dump them.

4. Most of them time, you should not buy stocks at the open of the market. The first hour of the trading day typically has a lot of volatility. Stocks tend to stabilize after the first hour; you could end up paying too much trying to get a stock, only to have it settle down in price 30 minutes later.

5. As a new investor, never buy stocks on margin. It is ok to have a margin account; just don’t use the margin until you have enough knowledge to keep yourself out of trouble.

6. Don’t worry if you think you just missed the biggest trade of the year. Never chase a stock trying to get on board, if you wait 30 minutes, another trade will come along that is just as lucrative. (This one tip would have saved me a fortune)

7. Learn how to use a trailing stop. Immediately after buying a stock, put in a stop loss order, and keep raising the stop limit. This will preserve your gains, but more importantly will preserve your capital.

8. Never buy until you have determined when you are going to sell. You need to know what point you will accept a small loss and move on. Then when you buy, keep that stop loss point; never change this point in the heat of the battle, because this is guaranteed to cost you money.

9. Never get greedy. The old market saying is Bears make money, Bulls make money, Hogs get slaughtered is very true.

10. Don’t treat the stock market like it is your private Las Vegas gambling casino. It’s ok for a small portion of your portfolio to gamble, but it’s called investing for a reason.

If you follow these simple tips, they will save you some of the misery that I went through early in my trading career. Try not to get bogged down in all of the information overload that is coming at you from all directions. Slow down, there will plenty of good trades available to you tomorrow, if your trading capital is still available.

Is Buy And Hold The Best Strategy For An Individual Investor?

2007-06-21T02:42:00.001-07:00

In this day and age of instant gratification, is “Buy And Hold” a good investment strategy? The answer is “It depends”. I know, this is taking the easy way out, but it really does depend on the individual investor.

The buy and hold strategy has several pluses and it is practiced exclusively by one of the greatest stock market investors of all times, Warren Buffet. Therefore, it can’t be all bad.

One big plus for the investor is you don’t have time to study the market, if you don’t have the time to study the charts, or you don’t have time to keep up with the news, then buy and hold is a great investment strategy for you.

Another big plus, you don’t have pay commissions for a lot of trades that eat into your profits.

Something that a lot people don’t consider is the tax benefits that come from buying and holding. It is much easier at tax time to only enter 3 or 4 trades instead of 300 to 400 trades.

The down side to the buy and hold strategy is when you try to hold on to your stocks during a bear market. You can find that a significant portion of your profits gets completely wiped out. For this reason, if you are going to utilize the buy and hold strategy, you should at least use trailing stops to preserve your gains (or more importantly, preserve your capital).

Don’t set the trailing stops too close or you will get closed out on a minor intraday correction, but don’t set them so far back that you lose a significant portion of your profits when the market has a major correction. You should also monitor your position on a regular basis to determine where the trailing stops should be placed.

The majority of the stocks used in the buy and hold strategy are the stogy old blue chips, for example, if you had bought Walmart when it first came out, you would be doing all right. However, for each Walmart there are hundreds of stocks that just barely stayed the same, you would have held on to them for minimal gain.

Another downside, most stocks tend to plateau or go down after a significant gain, so you end up holding a stock that is channeling and going nowhere. With some hands on application, your rate of return can be greatly improved. After all, the main reason you are investing is to make a return on your investment.

While I do think a portion of your portfolio should be placed in solid blue chip stocks that you tend to hold for a long period of time, I have never been a strong proponent of the buy and hold strategy. I just happen to think you can do better with a more active trading strategy. With that being said, if you plan to use a buy and hold strategy, you need to monitor your position and be prepared to get out when the market starts to go south.

Online Stock Trader Tips - Discipline And Tape Reading

2007-06-13T03:39:00.002-07:00

• What does it mean to be a disciplined trader?
• Tape reading.

- What does it mean to be a disciplined trader?

In virtually every trading book or course, there is at some point talk about the need to be a disciplined trader. Of course there is the most basic and popular definition of “execute your stop losses when price gets to your number.”

I have a slightly more detailed version that I feel every active short term stock trader should know.

Trading Discipline:
• To exit a trade immediately when your stop loss is reached. To exit a trade when your profit target is reached
• To not trade when market conditions do not match your style, to trade actively when market conditions meet your criteria.
• To always manage risk appropriately for the particular stock you are trading. One share size does not fit all.
• To review your performance every day some time after the close.

I am sure everyone reading this is well schooled in taking a loss when you are supposed to. It is not however widely talked about how important it is to book a profit, when its time has come. If you are a scalper you must book profits on your entire position into momentum, there is no last second decision to scale out, get out and go to the next trade. If you are an intra day position trader and the trend is obvious, scale out and maximize the remainder of the trade. You shouldn’t be afraid of a temporary pullback and get out of your entire position because of noise.

One of the first considerations you should make before you write your trading plan is deciding what style of trader you want to be. This is important because you will then be able to fill out your plan with scenarios to enter and exit your stocks based on your style. It is very hard to make money in all market conditions. What conditions suit your style? What does the stock action need to look like for your method?

Once you have a clear answer, you should only trade actively when conditions match your method.

I have seen more position traders get chopped up in a market that is in consolidation, and scalpers lose their shirt when a trend has formed. Position traders keep trying to guess when the trend will start and scalpers, who make most of their money through sniper like attacks of the markets ebb and flow, get hammered when the market picks a direction. Discipline means waiting for the market to present the conditions that suit your plan, don’t try to force your plan on the market.

I once watched a very successful and long time trader complaining he was getting horrible fills for about a week. After listening to this for what seemed like an eternity because of the way he was carrying on, I decided to watch his trades.

He was normally a short term scalper who traded very liquid stocks. He decided he would trade faster moving stocks that were less liquid because there was a new trader in the room who was trading that style. After about 3 seconds of watching him trade it was obvious he was not trading in a disciplined manner. He was trading the same size blocks in the new stocks that he was trading in his old style.

There was no possible way he was going to get the same fills. The stock was too thin to warrant the size he was trading. It was trading 100 -400 share lots consistently in time and sales (quoting the same size as well) and he was trading 5,000 share blocks. To make a long story short, he lacked the disciple to adjust his old share size to the new stocks.

To be a discipline trader you must never just trade one size fits all for every stock. Stop loss parameters and liquidity vary from stock to stock.

Keep a trading Journal. You must have a method help yourself improve. Professional athletes have coaches, you should too. Your journal is your coach. Having the discipline to write entries every day after the close and reading your entries daily to monitor progress is the only for the average trader to improve. If you don’t keep a journal you will be depriving yourself of the most valuable class you will ever pay for, your own experience.

- Tape Reading

Tape reading is a method of forecasting the next immediate move in your stock

- A method of forecasting, from what is taking place now, to anticipate what is likely to happen in the future.
- The essence of tape reading is interpreting the action of the volume (the prints), combined with bids and offers.
- Are they “marking up” or “marking down” their inventory? (bid/offer quotes) Securities are similar to inventory in a department store. Is it flying off the shelf or is it being offered at a discount?
- How urgent are the participants? How do we see this? From the size and consistency of the prints.

One of the most common opinions our instructors hear during our Equity Trader 101 course is this:

“I don’t need to learn to read the tape, I trade off charts.” Well my trader friend, how are the charts formed? That’s right, from the trades (prints)

Let’s say your stock is trading at new highs, but all the prints are on the bid, and for size. Do you think you should look to tighten up a trailing stop on a good position or should you keep your eyes closed and wait till the stock breaks down on the chart and you give back half your profits?

One more example, let’s say you are short and your stock has a fast move against you. The stock normally trades 2,000- 4,000 share prints on the tape. During this bounce against you, I notice the only prints that went off were of the 100-300 variety. I stay in the trade and you bail out. What did I see? The circumstances did not change. The tape told me nobody stepped up to the plate and did any buying of significance.

Next time you are at your screen, give the tape a little more “eye time.” Watch for significant prints that actually move the stock, not every trade. Pay attention to where they are happening. Are the significant prints occurring at the end of a move or out of a breakout? These are all necessary observations to become a good tape reader and a better trader. Until next time, have a great week trading.

The Truth - Computerized Commodity Trading Systems, PART 2 - Include The Basic Human Fears!

2007-06-13T03:39:00.001-07:00

To get a computerized system edge, you need to figure out the basic human trading weaknesses and include them in your software. Anyone can buy a trading system these days, but it will have little value unless it is unique and different from the crowd. Here's some easy-to-understand ideas I use that add in the human fears!

What’s another advantage to using a trading companion for day trading the e-mini futures contract? The human emotions are sometimes unreliable for trading. We are all basically hardwired the same. I can tell you how you will react because it’s how I do too. You need to write a program that does the opposite of the normal human tendency.

Panic is a perfect example of human tendency under stress. Another is releasing ourselves from pain as quickly as possible. A third is the desire to enter comfortable situations. A forth is fear of compounding a mistake or painful situation. And a fifth is holding on, thinking good times will never end. All these are clues to what you need to find in the e-mini futures market and program into yourself and computer.

You want to identify things are against the human grain to do and are painful to do - remember that! What could possibly be an e-mini futures trading method that would simulate these ideas? First, a system with no stop loss orders will provide the requirement of not running away and releasing ourselves quickly from pain. Am I crazy? Maybe… but you need to be different, even if only a little bit.

Next, how about adding to a loser instead of running? Well, at least add once or twice, compounding your pain - but having an eventual “uncle” point, which is also painful. And how about entering a market when they are bleeding in the streets - when you are SURE it’s going to keep going? And, how about scaling out half the profitable position when we think the e-mini market will go on in our favor forever?

All these solutions sound crazy and opposite the conventional trading wisdom of going with the trend, limiting losses, using stops, never averaging down and letting your profits run. The conventional wisdom is meant to make us feel COMFORTABLE! You want to feel comfortable? Then spend a day at the beach or stay in bed. You want to trade e-mini futures contracts and make profits? Then expect to be uncomfortable, to sometimes feel pain, want to run and second-guess yourself!

I have some friends who put up radio towers for a living. I love to climb them. A 200' climb is easy. I remember the first time I climbed with an experienced buddy. I could barely make it up to 20’ before I froze and hung on for dear life. I had this crazy notion that I had to stay below the point where I could fall and die. I figured 20' was the limit.

My buddy, at 100' looking down, just laughed at me and said, “You wanna be a woman all your life?” HA! I saw that he could do it, and so could I! I worked my way higher and higher until I could finally climb to the 200' top alone. Over the next twenty years I’ve climbed thousands of times and can now climb without fear. Some of my non-climbing friends remark… “You’d never get me up on that tower!” We are all programmed to fear heights. Unless we get desensitized, it will always remain this way.

I feel my e-mini futures trading companion is the equivalent of my climbing buddy. My computer and program show me how it should be done. It has no fear and can take on positions with nerves of steel. It’s what we would all like to be. The computer is all business, getting the job done. No second-guessing. No fear of averaging down. No greed stopping it from scaling out half the profitable position early in case the market reverses. Isn’t this the biggest problem - not knowing when to get out? I know it is for me, so it is for you too.

The important thing is that we need each other to succeed - I need the computer and it needs me. More on this next.

Why A Dividend Payment Is Important To An Investor

2007-06-08T02:50:00.001-07:00

To an investor looking for high and fast capital gains, a company that makes a dividend payment is a low priority. However, for long term investors, research shows that such a payment is an important part of the overall return on investment.

Many of the biggest quoted companies have been paying an annual dividend every year for years. Part of the appeal of their shares as an investment, and part of the valuation in the price is this dividend policy and reliability.

As a general rule, the largest companies also make the largest and most secure dividend payment. Of course, this can never be true of every situation, but the bigger and more established businesses have the security and often the profits to cover a payment comfortably.

It may not be the most rewarding of actions for a company which has a track record of creating a high return on investment to pay funds out to shareholders. Unfortunately, there are too few businesses of this nature. Company management also recognize that by paying an annual dividend their company can potentially be called an income stock.

Income stocks are not necessarily viewed as 'sexy' in the market, but there is a wide array of mutual type funds that specifically invest in such companies. This of course opens the way to much larger institutional investment in a firm which in turn will help to underpin the price in the market. As big funds buy big holdings, the number of shares floating in the market will usually be reduced. By lowering liquidity, the share price will generally be assisted.

There are, of course, many investors that will purchase company stock and are specifically attracted by the payment of a dividend. These investors will use the payment to subsidize their income and as such, value stability.

It is for this reason that once company management has started paying an annual dividend, they will be fearful of ceasing payment. Should the income funds be forced to sell their holdings, the market price will almost certainly suffer. The bonuses and stock options of management are usually tied to this market price!

A private investor will almost certainly be required to pay income tax on any or all dividend income received. In many countries, some of this tax is deducted at source so that the dividend payment is reduced and the company sends money to the tax authorities on behalf of investors.

Surety Bond Retains Position

2007-06-08T02:49:00.000-07:00

Stability of surety bond market, most of the people try to differentiate the meaning of issuance of surety bond with stability of surety bond market. Actually, the meaning and the concept of these two terms are totally different. They both are not one and same. The term issuance of surety bond refers to offering surety bond to the general public at different surety bond amount. While stability of surety bond market is that, attaining a strong position in the market and constantly retains the position in the market. This is known as stability of surety bond market. Generally in a surety bond market, it is difficult to ascertain the stability of the market. Fluctuation usually occurs either in issuance time or stability of surety bonds in the market. Changes are uncertain and it is difficult to ascertain when it occurs.

Market finds changes at any time. Nowadays, stability of surety bond market becomes constant in most of the time. Most of the people tend to purchase surety bond from the bonding company. Surety bonds are of different types and it is issued in separate bond forms and at preferable bond amount. As per the requirements and needs of the people, surety bonds are issued to the public. More number of companies is ready to issue surety bonds to the general public. This surety bonds are issued as per the rules and regulations of state and federal government of appropriate state. The principal guarantees the obligee that he will satisfies the words filled in the bond without any default.

Most of the industrial companies started issuing surety bond to all the members. Nowadays, surety bond is almost needed in every part of the world. Today bond becomes an important and essential part in every business formalities and at the same time, it legally compiles. This is the main reason for the stability of surety bond. The common reason for the issuance of surety bonds is to protect the public i.e. the obligee against any unforeseen act or default act of the principal. Most of the contractors enter in to a contract and does not complete the contract work as per the terms and conditions of the contract. When basic requirements are legally compiled in the market, then the position of the surety bond market will be constant.

Sometimes they obtain payment from the obligee and fail to perform the work and sometimes the principal fails to pay any payment to the subcontractors for the labor and material supplied. In all this cases, when surety bond is obtained from the principal, obligee can claim for the damages or losses occurred. To facilitate the general public, different kinds of surety bonds are issued by the bonding companies to his clients. From this point, we can come to know about the stability of surety bond in the market. Usually, stability of surety bond market is difficult to ascertain but know because of its firmness, it is easy to define the stability of the surety bond market. When stability of surety bond market is at higher position we can easily define that nowadays, more number of surety bonds are issued to the general public.

Why Oil Stocks May be Good for Your Portfolio

2007-06-05T03:36:00.002-07:00

Stock markets love a consensus, but the oil market is one where consensus is very hard to achieve. There is much battle going about oil stocks. Some expect them to keep rising. Some expect them to peak soon. Others expect them to go down in the not-so near future, but down nevertheless. So, who to listen to?

Regarding oil stocks, a fundamental that has to be understood about the oil market is that is it driven by the market laws of demand and supply. Demand for oil is on the increase slope. Economic recovery by major world players means that there is more demand for oil. Other emerging big players, like China, are in more and more need of oil, thus raising demand. Countries like China, India and South Korea are also into building their own oil reserves in prediction for increased need in their own economy. This in turn, leads to an increase in demand. However, while supply of oil is still satisfactory, it is however to be noted that there is a tightening of supply on the market. Added to this is the fact that experts are remarking that oil supplies are dwindling. Combined with the other pertinent fact that there is an absence of supply growth, it all leads to imply that supply may not be able to meet the requirements of demand in the future.

Since the price mechanism is determined by these market laws, what happens when demand exceeds supply? Prices go up. Needless to say, increasing prices mean increase in value of oil stocks. This is why it is a good idea to hold on to those stocks.

A number of stock investment and stock broking companies provide advice and handling of stocks portfolios. These qualified companies thus look into the screening, research, and analysis needed to ensure the best oil investment for one’s portfolio and needs. However, in recent times, and especially due to the Internet, the layman can also attempt to invest on his own in oil stocks. Use of tools such as specialized web sites and business search trackers on the Web allow for screening and analysis of major market players. However, there is not much of a security net when one uses one’s own counsel for investment. Careful analysis and diligence is thus the key for these transactions.

Along For The Ride

2007-06-05T03:36:00.001-07:00

Along For The Ride, Just Like A Flea On An Elephant’s Back.

In the share market I do not mind hitching a ride with strangers because I understand that I am not a partner in that business or company.

Thinking you are a “Partner” just because you own some shares in the company is one of the most “FATAL” beliefs in the market.

Accept who you are and the role you play and that “Like that flea on the elephant” you are just along for the ride.

This is not a time based strategy; it can be for one day, one week or a month or longer. It all depends on the length of the ride and the trend of the stock as long as it is heading upwards.

As soon as the trend finishes or changes direction (goes downwards or sideways) then it is time to jump off.

You then wait till the trend restarts upwards or look for another ride elsewhere.

The only thing YOU have control of when you buy a stock is your “Entry point and your Exit point.”

I hate to say it, but you have no control over anything else not even the time. Of course if you want to make a profit your timing has to be spot on but then again that is the exit point.

You alone are the only person that can turn a small loss into a bigger one.

A Bit of Homespun Philosophy

Everyone has the same access to information that we do or earlier. But it is the same information none the less. Except for insider information.

Share Price behaviour reflects around EMOTION. Today’s price is a continuation of yesterday’s crowd emotion.

Future share price behaviour is best analysed as a probability factor.

Risk is directly related to price and is manageable.

Most people avoid the mistakes they have made in the past. And a lot of people spend their lives playing it safe. Avoiding the lessons their past mistakes have shown them.

Excuses are really lies you tell yourself. Make an effort not an excuse.

It is not the information you have that is important. It is what you do with that information that counts.

The main reason for the difference in the final result is our individual response to Fear and Greed.

Ignore “Hot Tips” unless they are backed by your OWN independent analysis

Stock Market Glossary - Where To Begin

2007-05-17T02:56:00.001-07:00

In order to get you started we have compiled a list of some of the common stock market terms. This way you might be able to talk the talk before you walk the walk.

Stock Brokers: Stockbrokers come in all shapes and sizes. Essentially stockbrokers guide their investors through the market. Beginner investors often find it useful to have an active broker, who will tell them when to buy and sell stocks. Stockbrokers take care of all of the buying and selling, the good ones stay on top of all the stock movements and the specialist ones take care of certain sectors of the market. A broker generally provides their clients with up to date market results, trends and market hypothesis. There are different kinds of brokers that offer different types and levels of services.

Full-Service Brokers: If you have the money to spend a Full-service broker is probably the easiest to way to navigate the market. As the name suggest a full-service broke, will offer you their full service, which means they will give you reports and results on a frequent basis and will take a high commission for doing so.

Discount Brokers: As their name suggests a discount broker will charge you a lower commission. In return you will receive a fair and reasonable service, but not an exubrent one. Discount brokers don’t give their clients reports, market analysis’ or additional advice. Discount Brokers are recommended for people who have been in the game for some time. It is not expected that you will only use one type of investor, many use both the discount and full-service broker.

Online Broker: Most brokers (both full-service and discount brokers) have a website where they also provide online brokerage. Online brokerage is the cheapest form of brokerage, mainly because the services are provided online rather than in person.

Trading Account: When you first start working with a broker, you will be asked to set you a bank account that your broker can access. The amount you need to put in the account will be set your broker. The broker will also require you to place their additional fees in that account , so that it doesn’t become overdrawn. You broker’s annual or monthly fees will also be taken out of this account.

Cash Accounts: There are two types of trading accounts, one of which is the cash accounts. Cash accounts do not have their own line of credit. Which means the investor needs to stay on top of crediting the account as needed and must also pay the full market price for stock.

Margin Accounts: Contray to cash accounts a margin account provides the investor with a line of credit. The investor is able to purchase their stocks on a margin. Investors with margin accounts are able to purchase more stocks than those with cash accounts. Which also means they can profit more, and lose more. Margin accounts are therefore the riskier of the two and are not recommended as a starting point.

What Are Penny Stocks

2007-05-17T02:55:00.001-07:00

Penny Stocks are usually priced below a dollar and trading with them is fickle and risky game. While Penny stocks look like they follow the “more bang for your buck” principle, having a lot of penny stocks is very risky. Penny stocks are also referred to as small caps and micro caps. As with all trading penny stock trading has its ups and downs. Penny stocks can give your large profits over a short time; they can also give you huge losses in the same short time. Because of the high risks and alluring prices of penny stocks traders should be mindful of a few things;

• Traders should spend some time investigating the current ownership distribution of the stock they are interested in. If stocks look unappealing to you, and you decide not to buy them, it is highly possible that if you had brought them you would have a hard time selling them. Simply because if you were apprehensive other traders will feel the same. For instance if a particular stock is priced very low, and most of the shares are owned by one overseas account, generally once an ‘at home’ investor invests there will be some heavy selling will then occur. Then once the stocks price (your stocks price) starts climbing other traders will be less interested in your stocks. Which leaves you will useless stocks. So be careful when buying stocks that have uneven ownership distribution.

• While it seem silly to include this point, many traded get duped by illegitimate stocks, so it’s worth mentioning. As with any stocks you would spend some time researching the corporation and checking how legitimate they are. The simplest and easiest way to check out a corporation is to phone them. Even if they are not legitimate they still may have a phone number. So look up their website and check their contact details with the local telecommunications provider. Then cross check that information using the interest and taxation websites. If you cannot find contact information for a company it’s probably not a good idea to invest in it. Also if you feel that the company is ‘too friendly’, perhaps the CEO speaks with you personally, then forget about it. Over interested normally means that that company isn’t already in good standing.

• Take a look at the companies history. If the penny stocks that you are interested in are at that low price for a reason, that means that they are risky and possibly not a good idea. For instance if a company has been through a lot of splits and mergers then you can never be sure what will happen next. Also if the company hasn’t been around for long, there isn’t a track record for you to rely on.

• As with purchasing any stocks you should look at your own finances before purchasing stocks of any value. Just because penny stocks can be purchased for very little it doesn’t mean you can afford to lose the amount. Have a look at your bankroll, which refers to the amount of cash you are willing to lose. Penny stocks are risky so if you can’t afford to lose the money don’t play the game.

Penny stocks are often associated with corporations with little history and information out about them. Getting on at the bottom floor can sometimes be a good thing, leaving you with high profits but if you make a mistake it can leave you with high losses.

Surety Bonds Roles and Responsibility

2007-05-17T02:53:00.001-07:00

Surety bond plays a major role in the development of the economy. In every business environment surety bonds are the most needed requirement to fulfill their aspects in a correct form. Nowadays, trends have been changed and people want to compile their requirements legally. So, every obligee requires their business to be done legally. Surety bond explains the essential factors and their requirements in the economy. The main purpose of issuing surety bonds is to give a guaranteed performance of contract. Generally, most of contractors enters in to a contract and do not complete the contract as per the terms and conditions of contract. Each party involved in the process has a defined responsibility and role with one another.

In case of breach of contract by the obligator, this surety bonds will be more helpful for the obligee to sue both principal and surety in the court of law. Surety bonds are issued in different types and at different premiums as per the requirements of the obligee. Nowadays, surety bonds are needed in all business environments. A surety bond determines the responsibility and roles of different people who are engaged in the contract. When the person engaged in the business, he is obliged to obtain a license from the department. To obtain this license, the applicant is required to procure surety bonds of many kinds as per their business. Without license, no person can engage in the business, also without surety bonds no person can obtain license from the prescribed department.

Therefore surety bonds describe the responsibility and role played in the economy. Surety bond classifies the main aspects needed for the business and provides a better solution to solve the problem. It offers responsibility to the people engaged as per their functionality and requirements. The roles and responsibility of surety bonds offers a better solution and benefit for the persons engaged. The roles and responsibility of surety bond determines the functionality and consideration of various activities involved in the process. The process will be made essential when it is organized by the contractor properly. It is the responsibility of the obligator to complete the contract within the time and contract price mentioned in the terms and condition of the contract.

The surety bond explains the roles and responsibility of the person involved in the contract, namely the principal, the owner, the surety. The obligator is a person who performs the contract as per the terms and conditions of the contract and gives a guaranteed performance to the owner. The obligee is an owner who has to make payment appropriately to the contractor within the contract time. Surety is a third party involved in the roles of surety bonds. A surety is a person who guarantees the obligee that the principal will perform the contract as per the terms and conditions of the contract. The surety explains the responsibility of the contractor to the obligee with a guaranteed compliance. When the principal fails to perform his obligation, the surety can be asked to complete the contract or pay any compensation for the loss incurred. Therefore surety bond will perform the roles and responsibility for the economy in the prescribed form.

Exchange Traded Funds Looking Good

2007-05-17T02:52:00.002-07:00

In recent years exchange traded funds (ETF's) have become the talk of the town. I have recently ventured into the world of ETF's and have been quite impressed with them.

An ETF is similar to a mutual fund with the exception that it is traded like a stock. The nice thing about ETF's compared to mutual funds is the initial cost. Most quality mutual funds will require a $3,000.00 initial deposit; while ETF's can be started for as little as $500.00. ETF's usually track a specific sector or index, and new ones are being created all the time.

The advantages of ETF's are their cost, liquidity, and the ability to give investors instant diversification. It is much easier to buy an ETF than to buy a basket of stocks on your own.

Some argue that the disadvantage of ETF's is that they are relatively new and do not have a long enough track record. However, I think ETF's have been around long enough now that investors who take their time can build a very solid portfolio consisting of ETF's.

If I was given the chance to start over again, I would definitely purchase ETF's before I started to invest in individual stocks. Investing in individual stocks for a person that is completely new to the market is simply not the way to go in my opinion. There is so much to know and learn about investing in individual stocks that make it almost impossible for a new investor to be successful. Therefore, I think the best advice for a person new to the markets is definitely to start with ETF's or at least a mutual fund.

Remember there are sharks out there on Wall Street looking to take the money out of the hands of the small individual investor. However, if you keep your investment portfolio well-diversified it is harder for them to manipulate the markets as a whole as opposed to one individual stock.

Doing the Opposite with Contrarian Investing

2007-05-17T02:52:00.001-07:00

Did you ever want to go back in time, and just do the opposite of what you actually did? Well then maybe you should become a contrarian investor. A contrarian investor is someone that prefers to do the opposite of what everyone else is doing. These investors search for well-known companies that mainstream investors have forgotten about.

In the 1990's when other investors were buying the high-flying technology stocks contrarian investors stayed away from them. After these stocks crashed, contrarian investors waited in the wings and then bought up shares in companies like Xerox. This was based on the fact that Xerox was a sound company that other investors had fallen out of favor with even though eventually it would rebound.

This type of trading involves a lot of fundamental analysis to figure out which companies will actually rebound, even though many other investors currently want nothing to do with it. Contrarian investors also love it when the media talks bad about a well-known company. This is because it will more than likely cause some investors to sell shares in a panic thus lowering the price of an other-wise sound company.

I personally agree with some aspects of the contrarian investors mind. I think chasing and believing news stories about stocks that everyone else is chasing too; is one of the worst ways for an average investor to make their investment choices. A contrarian investor has much more discipline and patience than an average investor who is just following the crowd. With that being said, many people simply will find it difficult to adapt into the contrarian investors mindset because people tend to follow the crowd. It is hard for a simple investor to buy a stock that no one else appears to have a desire to own. However, if you have been following the crowd and getting burned with your investments; then maybe it is time to start doing the opposite of what everybody else is doing.

Following the Crowd with Momentum Investing

2007-05-15T02:37:00.001-07:00

In the late 1990's many investors fell victim to the momentum investing craze that was sweeping the country. It seemed that no matter what stock someone bought the price of that stock would always go higher and higher. Many new investors even quit their jobs to become day-traders. Unfortunately, this all came to a crashing end when once high flying internet stocks came crashing back to reality.

Momentum investors look for stocks they feel are ready to take off with explosive growth upwards such as the internet stocks of the 1990's. These investors buy stocks that may already be considered high priced with the belief that the stocks are going to continue to go up in price.

In the 1990's simple news stories were sending stocks soaring even if those stories were not necessarily based on facts. Some stocks actually jump as much as 20 points in one day based on rumors alone.

Momentum investing is definitely based on the belief that an extended bull market is in effect. This method also requires a lot of knowledge about technical analysis. The biggest problem with being a momentum investor is you simply do not know for sure when your momentum will run out such as it did in the late 1990's. While a momentum investor may have some success with an occasional huge gain; they will also more than likely get stuck with over-priced stocks that simply take a sudden and drastic turn for the worse. Many professional traders will tell you the average investor will lose if they try momentum investing, because the professional investor will always have the upper hand when it comes to drastic downturns in the market. Therefore, the average investor who is trying to chase a stock higher will be left holding the bag of a stock that will soon be crashing down.

I am personally not a fan of chasing stock prices higher. It simply is a bit too much of a gambling method for my taste. I truly believe that smart, slow, and steady investment strategies will always result in wiser investment decisions.

Buy-and-Hold Investment Strategy

2007-05-15T02:36:00.001-07:00

The most well-known investment strategy in the world is the buy-and-hold strategy. The thought is that if you buy stock in a fundamentally sound company, then overtime that stock should be worth more than what you paid for it to begin with. One of the advantages of the buy-and-hold strategy is that the investor does not have to constantly watch his or her stocks. Investors who bought into companies such as IBM and GE in the early days saw their investments rise dramatically year after year without much effort. Another benefit of this strategy is that you will not be paying a lot in commission cost, because you are not constantly buying and selling stocks. This strategy works very well as long as there are more bull markets than bear markets.

Buy-and-hold investors try to hang on to a stock as long as a company remains fundamentally sound. They do not tend to chase stock charts or news. They simply look at the bottom line of the company itself. One of the most successful buy-and-hold investors in the world is Warren Buffett. If you look at many of his investments they tend to be in boring companies as opposed to high-flying technology stocks.

The main problem with the buy-and-hold strategy is it fails miserably in bear markets. Individual investors who hold onto stocks no matter what may find themselves losing everything they have gained if they can not recognize the signs of a bear market. This is brought on by the belief that eventually all stocks they own will have to return back to their original price. The truth is though that many stocks may never return to their past glory thus leaving the buy-and-hold investors hanging onto a huge loss year after year.

I personally have never been a big fan of this strategy, and feel it holds back potential huge gains that can be made with a little more hands on involvement with your portfolio. If you are someone that prefers the hands off buy-and-hold strategy, I still believe it is a must to use stop-loss orders to protect your investments when bear markets occur.

The Truth Exposed About Individual Retirement Account

2007-05-15T02:32:00.003-07:00

While preparing for a big tournament, no matter what it is, you will spend many hours planning and preparing. If it is a physical sporting type of event, you will train and work out extra hard. If it is more in the thinking category, you may study and work your brain in memorizing. An individual retirement account is much the same. You will need to plan and prepare for your future. There are things about the planning that you should consider much the same way as preparing for that big tournament. You want to come out a winner and not a loser. If you don't put some effort and time in it, you will not be victorious in the end. This article will expose the truth about what an individual retirement account is for and some things to consider when you are in the planning stages.

We need to be training up our young people in the importance of an individual retirement account. I can remember thinking in high school that I hope my parents live long enough to see me married and have children. My parents weren't that old, but to me at the time it seemed they were. Maybe as people are living longer lives this might not be so with young people, but I know it is with grandchildren because my own have said things to me that reminded me of what I used to think. Now is the time to get them thinking of college and their own futures, and an individual retirement account can and should begin at a young age.

Some things to consider when planning an individual retirement account is how much money it will have acquired at the age of retirement. This will help you in determining if this retirement fund will be enough for you to live on at that age. You will need to look into the future and set a future budget that you can reasonably live on. Make sure you include extra expenditures and trips that you may want to take. Once you have somewhat determined this amount of money requirement, then you can know if the plan you have is going to be enough, or if you will need to add more to your individual retirement account.

There are many businesses that can help you plan your individual retirement account. They can help you somewhat determine how much money you will need to have acquired in order to live the lifestyle you plan to live. There are many calculations to consider when planning a retirement. Will you be debt free. Will you own your own home by then and if not, can you afford the mortgage payment. Don't let your individual retirement account become an overwhelming project, but a wise person will make plans for their future. Don't be caught off guard because the unexpected can happen. Just remember an individual retirement account is for your own welfare in the future, so whatever you do, don't wait too long to get one started.

Trading Stocks Online - Top 5 Secrets to Making Money

2007-05-15T02:32:00.001-07:00

Want to make money trading stocks online? If you follow these five simple tips, you’ll be way ahead of the pack.

1) Listen to the charts

You may have found a great stock, and it could have the best fundamentals in the world, but here’s the truth-- that’s not enough! Even if a stock has a million fundamental reasons to go up, it’s not going anywhere unless people are buying it. People don’t always act rationally, so you can’t assume that a stock will behave as it should. That’s where technical analysis (chart reading) comes in. By learning to read charts, you can spot stocks that are poised to move up, or conversely, stocks hopelessly headed down. Reading stock charts will allow you to find stocks which actually will move up, not just stocks you think should move up.

2) Use stop losses

No one is ever right 100% of the time. That’s just the nature of the game. Even the best stock pickers sometimes pick lemons, but that’s not necessarily a problem. Picking losers, which is inevitable, is only a problem if you let them kill your account. You absolutely must set stop loss orders every time you make a trade, otherwise you may wake up and find your entire account decimated. Remember, to make money trading stocks online, you don’t always have to pick winners-- your winners just have to be bigger than your losers. You accomplish this by always cutting your losers early, and then letting your winners run.

3) Don’t step in front of a speeding train

One of the biggest myths about making money by trading stocks online is that you have to buy low and sell high. That’s a very dangerous way of thinking. Why? Because people, searching for stocks to buy low, eagerly buy stocks which are spiraling downward. They hope, often falsely, that soon after they buy the stock, it will turn around, go higher, and then they can sell for a profit. But ask any experienced trader and he’ll tell you that stocks which drop precipitously tend to keep dropping. Don’t step in front of a speeding train. Instead, find stocks which are healthily moving up and will keep moving up. Think of it not as “buy low and sell high,” but “buy high and sell higher.”

4) Ignore the people on TV

There is no shortage of media personalities who love to recommend stocks. Follow their advice and you’ll become rich, right? Wrong. If you could make millions by following the guy on TV, everyone would be rich. You’ve got to do your own homework. You see, it’s not necessarily that the people in the media don’t know what they’re talking about. They often do. It’s that by the time that information reaches you, it’s too late! Think about it...there are professionals who spend all day looking for the next great stock to buy. Do you really think that by the time a stock pick reaches the general public on TV, the smart money hasn’t already bought it? Of course it has, and by the time the little guy buys himself, he’s left holding the bag. If you want to make money trading online, you’ve got to think independently. Otherwise, you’ll be behind the curve.

5) Don’t overpay on commissions

Let’s say you start trading stocks online with one thousand dollars. Now let’s say you’re paying ten dollars per trade. And finally, let’s assume you make thirty trades per month. If you do the math, you’ll see that you’re doomed regardless of how good your stock picks are! People often get so excited about trading stocks online, they forget about all the money wasted on commissions. If you want to be successful over the long term, you have to find a broker with low enough commissions for your trading style. With some brokers charging as low as one penny per share, there’s no reason to waste all of your money in fees. In this way, researching online brokers is just as important as researching stocks.

Commodity Market Forecasts How Do I Trade Them? PART 3 Decrease Risk and Increase Staying Power

2007-05-15T02:30:00.001-07:00

Producing a high probability trade forecast is not easy. Just as difficult is determining the best trading strategy and vehicles to capitalize on the forecast. Read on to learn some of my favorites trading strategies.

How about futures contracts? Is there a way to reduce our risk when buying futures? The risk problem with futures is they are marked to the market. This means they always have a “delta” of 1.0, meaning they track the cash market closely. With options, as the market moves against you, the delta will shrink and erode more slowly. Plus, you can only lose what you paid for the commodity option.

With a futures contract, it’s more like trading on a razor’s edge. The advantage is the futures contract does not erode in premium like an option. Generally, if a cash market does not move for two months, the future stays flat with little or no loss while the option will surely lose its premium value.

So how do we hedge our futures contract? Here’s how: Let’s say we go long a futures contract. We then buy a put option with a strike price that is near the current futures contract price. If the market went sharply against us, normally the loss could be very large - holding a naked future.

But with the put option hedge, loss is limited to the premium we paid plus the difference between the option strike price and where we put on the futures contract. Bottom line is we can use the option as our synthetic futures contract “stop loss” order. If the maximum we can lose with the put option hedge is $1,000, we know our true risk no matter what happens.

The advantage here is STAYING power. Let's say the futures contract (with no hedge) took a $3000 dip against us, but then rallied to finally make a big profit. We would have probably been stopped out holding the naked futures contract, whereas the option hedge would let us ride through the adversity with a maximum limited loss at any time of $1,000, until option expiration. In addition, we have protection from an overnight market gap surprise. This one benefit alone may be worth the hedge.

Trading futures while using this option hedging technique will take some "insurance premium" profit out of the bottom line, but when you consider the possible risks of holding naked futures overnight, one has to wonder why someone would not always want to make their stop loss order in the form of a hedged long put. (Or for a short future, use a long call hedge)

Just having a market forecast is not enough. Not every “low-risk, high probability” trade works as we expect. Some turn into high-risk, low probability trades. Having a few strategies like this to reduce our risk will shave profits somewhat, but will usually help our equity curves to trend smoother without the chaotic dips.

Account survival is first, but second is a smooth, up-trending account equity curve. It is well worth the small hedging premium we pay. Scaling in and scaling out in both price and time will also help to smooth out this curve.

Having these techniques available to you will give you more confidence to hold through adversity for the bigger moves. It will also reduce your fear of market unknowns.

Stock Tips That Do Not add Up

2007-05-09T03:45:00.002-07:00

It works something like this: "Stock Broker," Ira Foghorn, a complete stranger to you, phones and tells you to watch Blowhard Networks on NASDAQ. Its stock is going to go up. You do. It does. A few weeks later he calls again and tells you to watch Simpleton Industries. Its stock is going to tank. Again you watch. It drops, just as he'd said it would. Another few weeks later, guess what? He calls a third time to tell you that Consolidated Bread's shares will rise. Very curious now, you repeat your observance. And, of course, once more, this mystic is proven to be correct.

How did he do it?

Simple! You were one of eighty people, whose names he'd gathered from the internet, phone book, a directory, or other list. His second call was to the remaining forty, those to whom he'd proved himself correct. By the time he calls the third time, his list is down to twenty. You were one of the remaining twenty.

The word "con," as in con man, is derived from the word, confidence And, I think you will agree that, based upon abbreviated face-time performance only, "Stock Broker," Ira Foghorn, has "performed," thus generating confidence.

In today's unreal, alternative universe, smoke and mirrors magic proliferate. In this setting it is most tempting to accept the infamous "free lunch," Now, Ira's suggestion that for a small up-front fee he will put you into Suckers, International, so that you, too, can share in the benefits of his omnipotence, sounds enticing indeed. (After all, lunch is always free, isn't it.)

If you bite, any further conversations with this flim-flam man will only get you a reaction akin to the fast-talking physician checking his watch as he mentally consigns you to his scrap heap of victims. To him, the surgery on your wallet is over. Successfully. Now it's time to brush you off, and get on to the next "mark."

Stock Picks 101 - "Why Didn't I See That?"

2007-05-09T03:45:00.001-07:00

Trading seems like it should be easy. A couple of mouse clicks here and there. Buy low, sell high. Pick a stock, buy it, wait for it to go up and sell. Easy, right?

But somehow, spectacular, consistent success eludes you. What gives? What is especially confounding is that it always seems crystal clear what you should have done when you look back.

Welcome to “hindsight bias.” There are many factors that separate successful traders from those who consistently trash their trading account. One of the most important of these factors is that successful traders learn from the past without judging themselves too harshly for their “mistakes.”

Let’s examine this notion of a trading “mistake” for a moment. At the moment you made a “bad” trade, you used the best information you had available to you at that time and took the trading action you did. You had to weigh a number of factors, some of which may have conflicted with each other. If that description does not describe your trading process, you have no business trading.

So why do bad things happen to good trades? The answer is simple: Because they can. You are in the perilous business of guessing the future. Trading is all about risk… and reward. Manage your risks and the rewards take care of themselves.

The human brain is constructed to do certain things well. There are other things it does not do well -- like comprehending the world of probability and odds. The brain likes to have clearly defined “yes” and “no” situations. Fuzzy “maybes” easily lead to confused decisions. This is what happens way too frequently when you trade.

This chronic, nagging confusion resulting from weighing vague and conflicting information sets you up to second guess yourself. You ask yourself, “Why didn’t I see that (at the time)?”

Be kind to yourself. You are trying to do something that is extremely unnatural to the working of your brain. You are trying to make decisions when the information available is incomplete and contradictory.

Warning: if this is not how you experience the trading decision process then it is likely you are setting yourself up for a fall. Doubt and confusion are a natural, even necessary part of the trading decision process. Confident certainty usually means you are missing something… either that, or you are working with inside information.

I repeat: Be kind to yourself. You will make mistakes. You cannot separate out the good decisions from the bad until after the fact. That is the nature of trading.

Harsh second guessing can cut your trading career short before it really starts. Don’t let yourself fall for this trap.

Stock Picks 101 - Avoiding "Revenge Trading"

2007-05-09T03:44:00.002-07:00

Did you recently have a losing trade that upset you? Or, at least, it would have upset you if you let it? Be careful, you may be setting yourself up for making rash trading decisions.

It’s only human nature to try to “make right” a “mistake.” I have put these terms in quotes because they are subjective judgment calls. “Mistakes” are trades that, in hindsight, did not work out. The trading market does not care whether you’re upset with how your trading has been going lately. But it will gladly take your money if you trade recklessly or with desperation.

The market does not care whether you are on a winning streak or losing streak. But it will take advantage of a hurriedly placed trade on which you may not have done your usual due diligence. You should have a well developed procedure for selecting your stock pick or other trading vehicle.

Perhaps you’ve noticed that sometimes you are anxiously looking for a stock pick you can use to “win back” a recent loss. In fact, you may be trying harder than usual to find your next trade. You may even find that you are trying to “force” a trade. This can be very dangerous and could lead to a death spiral of ill conceived trades.

The market is a harsh mistress, and you may become confused because sometimes these revenge trades just happen to work out. Then you come to expect that your forced trades will always work out. But the market is just setting you up for a fall. Sooner or later, you take a revenge trade and then become “married” to having it succeed. You hold on, and hold on, bleeding cash and peace of mind the whole way down.

How do you avoid getting trapped by the “revenge trading” mindset? The first part is to train yourself to be in touch with the emotional experience your trading provides. If you notice yourself getting anxious about putting on another trade, STOP! Call a time out. Catch your breath. DON’T enter into a new trade. Also, be careful about not compromising on your stop losses on existing trades.

The key here is self awareness and discipline. Nobody but you will know if you are contemplating an ill conceived trade. But sooner or later, you will pay the price of sloppy trade selection. There will always be another stock pick, at least until you lose your account in an undisciplined orgy of revenge.

So don’t become a victim of your desire to reverse a losing streak by forcing trades. Just say “no” to revenge trading.

Stock Market Fortune - Learn How To Make A Fortune In The Stock Market

2007-05-09T03:44:00.001-07:00

Learning how to make a fortune in the stock market is something that anyone can do as long as you have the correct foundation. Here are the seven stock market fortune rules that are the core principles of a very profitable trading system called phase trading.

Stock Market Fortune Fact: 75% - 80% of all stocks move in the overall direction of the market.

With most stocks following the overall market direction, why don't you let the market make you money? The easiest way to make a fortune in the stock market would then be to only trade with the long-term direction of the stock market. Don't try to fight the market, but let the market help you make you money.

Stock Market Fortune Rule #1 - Make faster and larger profits by investing with the market in both bull and bear markets. If you are not utilizing bear market to make additional profits it's like leaving money on the table.

Stock Market Fortune Rule #2 - Fully utilize the power of compounding to enhance your gains exponentially. You won't see the benefit on a single trade, but add up multiple profitable trades and you will start to see the power. Even Albert Einstein called the principle of compounding interest the “Eighth wonder of the world”.

Stock Market Fortune Rule #3 - Invests only in stocks that have the largest potential for huge gains. Stick with high volume stocks that move in phases for the safest and largest profits.

Stock Market Fortune Rule #4 - Eliminate emotional buying and selling of stocks. This leads to buying and selling too early or too late, which is the biggest reason why people lose big in the stock market.

Stock Market Fortune Rule #5 - Don't over diversify your portfolio. This is one of the biggest mistakes that people do without realizing the harm that it causes. Your portfolio diversity should be based on risk vs. reward not just a pure number of stocks you want to have. Would you like to trade only the best super high performing stocks if for every $1.00 lost you would gain $4.00?

Stock Market Fortune Rule #6 - Let your winners run. This is the golden rule of successful investing. You might not think it, but it is the hardest part emotionally to follow. It’s very easy to see a stock move up nicely. On the other side of the coin, how bad it feels when a stock takes a short-term stumble. Not fully knowing it will come back up or not. This is when it gets very difficult to keep your faith in a stock. If you sell now you could be missing an even bigger run right around the corner.

Stock Market Fortune Rule #7 – Sell your losers and don't dwell on them. As long as you are following your system and didn't let your emotions take over. Remember that no system is 100% correct all the time. Keep focused on the longer-term success of a system rather than individual trades.

If you precisely follow these seven stock market rules you can successfully eliminate the majority of the most common mistakes that traders make. With this information you should be on your way to making a fortune in the stock market.

Stop Loss Order - Are They Right For You?

2007-05-09T03:43:00.000-07:00

I have been trading stocks now for over ten years and have never used a stop-loss order. There are several opinions as to whether you should use a stop-loss order or not but it comes down to your personal preference and trading style. If you are the type of trader or stock investor that takes long positions it really doesn’t matter just as long as you have quality companies in your portfolio.

During my years trading stocks I have set-up several accounts where I only paper trade to try out new techniques. The dummy portfolios range from tech stocks to under three dollar stocks. I also have dummy portfolios set-up for the various sectors that include the ETF’s for those sectors along with stocks of the most prominent companies in the sector.

The dummy portfolios where I have lost the most “money” is the three dollar and under stocks. It seems that the smallest companies where you could really make some money if they took off provide you with an opportunity to lose the most also. The stocks may seem cheap but if you look deep into the fundamentals of the company you will see that they aren’t really cheap at all. They just appear cheap because the stock is only three dollars. For someone who wants to trade those cheap stocks a stop-loss order would probably benefit you because if the economy itself doesn’t cause the prices of the cheap stock to go down the company usually has a secondary offering to raise cash that drives the stock lower.

If you are trading large high-quality companies you could actually be worse off from using a stop-loss. Let’s say that you had a hundred shares of XYZ company that you paid thirty three dollars per share for and you place a stop loss order to exit the trade if the price drops to thirty two dollars. Ok, so you are two days into owning your one hundred shares of XYZ corporation at thirty three dollars and it has already gone up five percent so you are making money on it then out of no where comes a newsflash that a terrorist may have a bomb in a key government building and a bomb squad is on the way..etc. Once the news hits the airwaves the stock market takes a big tumble and your shares of XYZ company drop to thirty-one dollars for one second and your stop-loss order is executed. One hour later the news comes back on and says that the terrorist threat was a hoax it was only someone working on the elevators in the building that scared someone into calling 911.

Three hours after you were taken out of your trade the price of XYZ shares go to thirty four dollars per share and continues climbing due to good news that the company just announced about a new product it is bringing to the marketplace. In that example you were whipsawed out of your position and turned what would have been a winning trade into a loser. In those cases instead of using a stop loss it would have been better to buy more shares of XYZ company as they went on sale if only briefly.

If you have a really profitable position in a stock and you are concerned about the recent quarters earnings report you may be better off just selling your position, but the next best thing in that case would be a stop-loss order to preserve some of your profits should the earnings news come out bad.

Efficient Market Hypothesis - Can You Beat The Market?

2007-05-05T02:38:00.004-07:00

The Efficient Market Hypothesis, or EMH, is a concept developed by Eugene Fama, which asserts that the prices of financial instruments, reflect all known information about the future values and beliefs of the investors about those particular financial instruments. This means that you, the investor, cannot outperform the market in the long run.

Here is a quick example: Suppose you watch the evening news, and there is a report of how High-Tech companies are getting more popular. You think to yourself it will be a good investment, and you decide to buy stocks of High-Tech companies. Will you outperform everybody? probably not. What knowledge you have about the stock market is available to each and every individual. This means that you are not the only one that noticed that High-Tech companies are getting more popular and hence, these beliefs are already reflected in the price!

This may mean the price is higher if it were not for that particular belief. Please note that this does not mean that every idea and notion you may have about the market is already reflected in the price. You could predict something that nobody even considered, but that would be luck! You could also think you know how a particular sector or stock would perform and not get it right. This is what happens most of the time. Thus, in the long run, the prices of the financial instrument already reflect the consensus of beliefs about the particular stock/bond/etc and it's future performance.

The EMH is usually divided into three categories: The first is called the Weak Form Efficiency. This means that you cannot outperform the market in the long run by using historical prices. This includes Technical Analysis and other statistical methods. For example, You may analyze past prices and see that on a Monday, stocks usually rise by 2%. You think you have a good shot at making some money out of it. The problem is that everybody has access to past prices and everybody would try to make money that way and hence the price would already reflect the use of those tools. This may be debatable and some have showed that there are statistical anomalies that have existed over a long period of time (although most have faded away by now).

The second category is the Semi-Strong Efficiency. This means that the prices reflect all known information and news about it, which means that fundamental analysis cannot help you in analyzing the value of the stock because yet again, everybody has access to the news and information.

The last category is, of course, the Strong Efficiency, which means that the prices reflect ALL information and no one can earn excess return. Of course, that would have to take into account, the legal issues of insider trading. For those who do not know, insider trading means that someone INSIDE the company, that has knowledge that the public does not know yet (such as a big merge), uses it for personal gains. If insider trading is not legal, than you could, and people had, outperform the market. Insider trading is very lucrative and that is why each year you can read the news about someone being accused of it.

You could argue and say that you know several stars and hedge funds that outperform the market but do realize this: there are more that fail and the percentage that is consistently outperforming is VERY small. So small in fact, that this be may attributed to sheer luck.

So how efficient are the markets? The bigger the market the more efficient it is usually as more and more people try to use information to help them gain money and outperform it.

Graduating To Real Money From Paper Trading – Controlling Our Emotions

2007-05-05T02:38:00.001-07:00

Injecting A Little Common Sense

In the previous article we spoke about how the transition from paper to ‘real money’ trading can be much more difficult than you may imagine. Now we can aim at reducing these problems and increasing your chances of success first time around. To do this we need to inject a little common sense. On paper it is pretty likely that you will have built yourself up so that you are executing fairly large ‘paper’ orders. This will boost your confidence as you see just how much money you can make once you move to real money. Once again you may be setting yourself up for disaster by jumping straight in with large orders as soon as you switch to your live account. After all you were making two thousand dollars a week with paper so you will take that in real money thank-you very much!

Rather than taking this route and potentially exposing yourself to a large amount of emotional stress we are going to use our patients (lets face it, if you are successful on paper then it’s highly likely that you posses enough patients to be profitable with real money – you just have to remember it) and start off by executing the smallest order size possible. Why would we do this? After all it is possible that we may incur a small loss due to the costs of trading (exchange fees, commissions etc) even if we follow our trading strategy perfectly. The reason for doing this is to expose ourselves to the emotions of trading with real money as gently as possible. Think of it in another context; you don’t just wake up one morning, 70lbs overweight and run a marathon. Well you could but there is a good chance that it may kill you! It takes a dedicated and progressive training regime to adapt your body to the challenges it needs to meet. This is the philosophy we are going to implement in our trading.

Building Up

Just as someone training for a marathon would be able to gradually increase the distance they run week by week, we will be able to increase our order size but only if we are trading successfully. A runner who breaks down in a puddle of sweat after 2 miles is unlikely to attempt to run 5 miles the very next day. However if he/ she is able to run 2 miles, three times a week for two weeks then they may very well increase the distance they run by an extra mile. If the distance becomes too difficult then they will drop down a level or so.

Traders can make similar incremental steps; starting on 100 shares a trader may wish to increase their order size to 300 shares the following week, then 500, then 1000. At each stage the trader must record their success rate. Not in terms of dollar profit but their ability to follow their strategy, how nervous do they feel, are their palms sweaty, sweaty brow, becoming frustrated and angry etc. By keeping tabs at each stage a trader can make a natural transition into ‘real money’ trading rather than forcing an unnatural one.

Each Of Us Is Unique

You must have heard the phrase ‘each human being is unique’, or something very similar, several million times and surprise surprise, trading is no different. Each trader is likely to progress at a different pace through paper trading and on to using a real account. The important thing is that he/ she must move at their own pace and don’t be afraid to take a step back rather than feeling the heat and making mistakes. If you ever feel yourself falling into any part of the vicious circle we spoke about in the previous article it can be extremely costly if your pride or inpatients is too strong so as to prevent yourself from taking a step back and recomposing yourself. You should never be afraid of reducing the number of shares you trade or increasing you order size at a slow rate. Listening to and controlling your emotions is a strong sign of future success.

Graduating To Real Money From Paper Trading – The Problems We Face

2007-05-05T02:37:00.002-07:00

The idea of paper trading can seem like a tedious time waster to those of us who are eager to get started in the World of the financial markets. By starting with real money we can immediately tap into the excitement of the markets and start earning the millions we have always dreamed of. However, jumping straight in with real money very rarely works. There are several reasons for this: we have no robust strategy, the strategy we have that we believe to be robust is in fact a loser, the signal service we use is poor at best and is incapable of producing profitable trades and the most profound reason of all: we have no idea of the emotional roller coaster trading with real money creates and how it effects our decision making skills.

Patience On Paper Pays
Each of these problems can be overcome but this article will focus on the latter. Therefore we will assume that we have a profitable, proven strategy that has shown its effectiveness in a range of market conditions and we have proven our ability to work with our strategy (yes this means paper trading!). At this point I would like to stress the importance of paper trading. If you can’t make money in a practice account then guess what, you will just be giving money away in a real account. Sure, we’ve all done it but just don’t do it again OK! There is no substitute for patients in the financial markets and if you are the sort of person who lacks this quality (the sort of person who will skim read this article) then you will need to learn.

Fear Of Loss
Paper trading teaches us how to implement a strategy. It teaches us how to follow rules and recognise patterns, it even teaches us the basic of market dynamics such as how to enter an order. What it doesn’t teach us however is how to manage our emotions. Someone who has never traded with real money will be all to unaware of the emotional and psychological side of the vocation. Sure, there is some emotional involvement in our paper trading; we all want our strategy to prove itself and our skills to be refined with experience producing a higher success rate. However this emotional involvement doesn’t even come close to what we will feel on the first day our real money is at stake.

Changing Our Plans
As emotional discomfort increases so does the likelihood that we will change the way we trade. There is a common vicious circle that first time ‘real money’ traders expose themselves to that can quickly spiral out of control. Fear of loss can lead to hesitation on entries and exits. Now losing trades become even larger and winning trades are reduced in size or missed altogether. The first seeds of doubt are sewn and a trader will begin taking riskier entries in order to recoup what he/ she has missed out on. When these riskier trades begin to lose trading accounts begin to take a real battering and self-doubt controls our thoughts. Hesitation and frustration will lead to even more losses and most traders will either give up an emotional wreck or a few thousand dollars worse off, quite often both.

How to Get Started Trading Options Online

2007-05-05T02:37:00.001-07:00

Trading options online has become very popular, because not only is it fast but its easy too. Options trading is very similar to futures trading. They both involve the process of buying stocks at a pre-determined price and then selling them when the price is higher than what they were brought for.

Online options trading eliminate the need trade options face to face. You can simply log onto your favorite online options trading website and complete all of your transactions, simply, and easily at the click of a button.

The fact is, you will save more time and money trading options online because you will save yourself the hassle of meeting with your client or broker, this will give you more time to spend doing research and analysis of the different stocks and options that are on the market. With today's market being the way it is most online options trading websites have teleconference and even video conference facilities that allow you to communicate with your broker or client.

One of the best advantages to online options trading is that you are able to get real-time updated statistics on the options market just like you are with the stock market. You can monitor and observe the trends taking place in the market from the comfort of your own home. If you need assistance or needs or advice concerning the market, you can email, instant messaging or even use skype to communicate with your broker or other fellow investors.

Options trading forums allows you to communicate with your fellow investors. Forms are a good place to start if you are a beginner that is new to options trading. You can hang out in the forums and pickup advice from more experienced investors.

Many people have learned about the latest option trading techniques being used, in the forums from other forum members. However you should never take any advice that you are given as the truth, until you test the advice yourself or consult your broker for clarification.

Online options trading provides so many benefits that traditional trading doesn't. It is not difficult to get started because many online options trading websites provide a wealth of information to get you going.

Why Women Make Better Traders and Investors Than Men

2007-05-05T02:36:00.000-07:00

I am often asked whether men or women make better stock market traders and investors. My answer has always been women, and I have now been proved right. A recent study by Digital Look, who analysed 100,000 portfolios, revealed that ordinary women investors, living all over the country and dealing in shares via the internet, telephone or investment clubs are consistently doing better than highly paid professionals in the city. During the period of the study the average female portfolio rose by 10% compared to just a 4% rise for the overall FTSE index and a 6% increase for that of the average man.

Apart from being proved right, what is even more encouraging is that both the men and women outperformed the money men of the city. If it is therefore possible for these ordinary investors to outperform the so called professionals, why don’t more people handle their own investments? I have no doubt there are many reasons including, a lack of both time and knowledge, but I personally believe the main reason to be fear. The world of finance can seem intimidating and complex and it is an impression those on the inside do little to dispel. However, what they sometimes forget is that without the contribution of those on the “outside” this world would not exist at all. The money fuelling this industry comes from the everyday activities of ordinary men and women and from the mundane markets such as savings and pensions.

For women it is even more important that they overcome this fear as within the next generation they are forecast to own over 60% of all personal assets, the first time this has ever happened. More women are starting businesses and soon there are going to be more women millionaires than men. Many companies have recognised this trend and have been quick to develop specialist services, yet the financial industry seems extremely resistant to this trend, with only a handful making half hearted attempts. In general they only pay lip service to this huge and growing market.

Women make better traders and investors for many reasons. Firstly, and most importantly, women are prepared to listen, admit any mistakes and learn from them. Men, on the other hand, will blame the market or their advisers, rather than their own judgment and will stick doggedly to a view even when the facts are obvious that they are in fact wrong. Getting a man to admit an error of judgement or that they have made a mistake is very rare. In the trading world this can be a costly personality trait, and yet it is a common one in men. Ask most men the reason for this and they will answer that admitting a mistake is a sign of weakness. As all women know, it is in fact the reverse. A classic behaviour is in map reading. All men think they are natural navigators and will refuse the offer of help even when completely lost, preferring to carry on until they find some recognisable landmark. This is generally miles from where they wanted to be yet this small success will be offered in vindication of the major detour that has resulted. Women will stop and ask as soon as they are lost. In the trading world this is a major strength. Accepting a loss and moving on is one of the key characteristics that defines a good trader from one who will be wiped out very quickly.

Women are happy to learn, men are not. Give the same piece of technical equipment to a man and women and observe the different approaches. The man will not read the manual, but attempt to use the equipment straight from the box. Invariably this fails, but reading the manual is a last resort for the male, who ploughs on regardless until finally admitting defeat and is forced to grudgingly read the instructions. The woman on the other hand will probably read the manual first before attempting to use the equipment. If both are doing it together then conflict ensues!

Finally women make better traders as ironically they are more able to remove emotion from the trades. Men will become irate and take it as a personal insult when trades go wrong, whilst women are more philosophical about the loss and take a more dispassionate view. Being able to trade without emotion is one of the keys to success in the financial markets – just ask any successfully trader – this is a business and not personal.

Commodity Option Buying - The Hidden Dangers PART 4 What The Option Pros Don't Want You To Know

2007-05-03T02:57:00.001-07:00

The buying of options (rather than writing them) is the most popular way most new commodity traders start out. Little do they know that over time, their chance for success is 10% at best. The premium cost over a year is tremendous. Read about how the pros use commodity options and how you should too.

There are many ways to hold a speculative position in futures contracts and hedge yourself against unlimited risk. All methods will cost you something. The market is a wash and gives nothing away. It will reward you only if you uncover an advantage that the majority misses. You must use the proper trading vehicles and analysis to capitalize on these situations. The wild card is that the market and optimum tools are always changing.

I talk about the dangers of option buying from experience. Over the years, I've done well buying and selling futures contracts as well as other traders I know. But, except for a few tremendous gains when the market collapsed while holding put options, I've seen most traders lose consistently when straight buying options. This erosion happens even when the market forecast is correct. That is the most disheartening part - to have the move take place and the options erode in value. Unless you are expecting an unusually fast move in a short period of time, find a way to use futures contracts for the job.

Writing (selling) options is a good way to capitalize on this eroding asset. Again, there are no free lunches and it takes as much skill to make money writing options as it does trading futures contracts. Writing options also contains as much risk. This threat of risk is your reality check to make sure the market will pay you for your skills. Without taking on risk, you are an outsider trying to play a pro's game.

Let's not forget about the spreads when trading commodity options. Except for some very active financial markets, option bid and offer spreads are usually so wide you can drive a truck through them. The New York commodity option pit markets are notorious. An illiquid market is the problem with many commodity futures options.

Some trading is so thin you simply cannot get in or out without paying an outrageous price. After buying, try to sell it back minutes later and you might be down 30%. I've seen times when some option spreads have been one-bid to three-offered. Even 3/4 point is considered a good spread in some commodity option markets. Unless you follow a few rules to getting in and out, expect to pay. In defense, most financial commodity option markets are reasonably liquid and active.

When you add up the spreads in illiquid markets over a year's trading, they can be many times more than the brokerage commissions you paid! These are expenses that may take you from profitable, to break-even, to even losing for the year. Many traders think that they can pay these expenses "just this time" and the trade will take off and make it all up. This attitude gets contagious in a wild commodity bull market as traders buy at any price.

Trading has to be viewed over a long series of trades. Some trades will be losers, some will be break-even and some will be winners. They must be all taken together. Calculate your expenses to arrive at one bottom line. If the best pros have a hard time scratching out 50%-100% gains per year with their low overhead and expertise, how can you expect to cover greatly higher option expenses and come out ahead?

In contrast, most futures contracts are very fair in their spreads since they are more liquid. For example, the e-mini futures contract, (currently priced at 1200) if scaled down to equal 120, has an equivalent bid/offer spread of about 1/40th of a point! Now that a fair and low entry-exit expense!

I simply want to make you aware of what you're up against when buying options. Being aware is being prepared. You need to have skills, an edge, reasonable expenses, the proper trading vehicles and good advice to survive and prosper trading commodities. My advice is don't get lazy and depend only on the false security of buying options. Learn to use these trading vehicles like a pros. Take on the risk of futures, option spreads and other strategies that require more experience. Take on the challenge to learn more about commodity trading strategies.

Read my free course lessons #26 and #29 to find useful information on using futures and option hedges to avoid these pitfalls. I hope this lesson will help to clear the fog, false hope and comfort of buying these eroding assets. You will discover there are much better vehicles and techniques for position trading.

Good Trading!

Commodity Option Buying - The Hidden Dangers PART 3 What The Option Pros Don't Want You To Know

2007-05-03T02:56:00.004-07:00

The buying of options (verses writing them) is the most popular way most new commodity traders start out. Little do they know that over time, their chance for success is 10% at best. The option premium cost over a year is tremendous. Read how most pros use commodity options and how you should too.

There are special times when options can be bought. There are special reasons too. I've seen good buys when sugar is wallowing at its lows around 4-5 cents. Buying a nine-month-out call option near the money costs only 20 basis points. These are the times to take notice and buy options assuming you have a forecast showing a good rally. (or decline)

Another good time to buy is simply when the option gets way undervalued from current market volatility conditions and you are looking for it to swing back to its volatility norm. Reverse everything mentioned above when buying put options. You want to see panic buying and short covering so that the put premiums are deflated, of course.

The market pays you for having skills that are better than the average trader. It also pays you for taking on risk. Buying a load of inflated options based on the crossover of a moving average and then sitting on them for a few months takes no skill at all! In addition, there is really no "unknown risk" being taken. Yes, you pay your option premium, but it's really your bribe to the market to make you feel comfortable.

The option writer is the guy really taking on uncertain risk and is feeling uncomfortable. The market usually will favor him if only for that reason. A smart pro writing options will then lay off some of his risk by hedging some future contracts (or opposite side options) against the option write. How can he make money doing that? He locks in money because you were willing to pay a higher than normal option premium and/or were willing to buy at the offer price, giving him some spread and premium slush to work with.

It takes no skill to enter and maintain a position when buying a load of options. None at all. But entering a market with a futures contract and staying on-board requires sharp timing skills and a forecast that works out without a large adverse move against you. The good part is you have all the time in the world for the futures contract move to take place! No ticking clock eroding premium like an option. (there may be a small futures carrying charge when long, but it works for you when short)

Someone might say it's a wash... the advantages outweigh the disadvantages. But I say if you are a skilled position trader, holding futures have a tremendous advantage over buying put and call options. Generally, beginners have few skills and pay the price by getting wiped out due to eroding option premiums.

Many brokers will encourage beginners to buy options because they are very low time maintenance and of little risk for them. The broker and client become cheerleaders cheering or gagging as they watch the news. Lots of "safe, no risk" entertainment for a few months. Maybe one or two out of ten trades work out. But the end result is always the same.

These traders eventually lose all their money to the option writers and simply fade away. Nice ride while it lasted. Next. Buying a load of options removes "responsibility" to the market. If you're wrong, the account erodes slowly (or quickly) while you're fat, happy and hoping for a miracle .

In contrast, if you're sloppy entering a futures contract trade, you get booted out on your rear end within a day or two. There is instant feedback and pain. There's hard work and risk servicing a group of futures trading clients. But that's the price that must be paid for the chance for higher probability market success.

More advanced option buyers like to do "free" option trades where they buy two, and then sell one or two to take in some buffer cash. This is actually a decent idea and can reduce expenses or lock in some profits when the market chops or backs off after a rally. However, your upside potential is also reduced. No free lunches. See my free course lesson # 26 for more details on "free trades."

Commodity Option Buying - The Hidden Dangers PART 2 What The Option Pros Don't Want You To Know

2007-05-03T02:56:00.003-07:00

The buying of options (verses writing them) is the most popular way most new commodity traders start out. Little do they know that over time, their chance for success is 10% at best. The option premium cost over a year is tremendous. Read how most pros use commodity options and how you should too.

Let's talk about the time advantage futures contracts have over options. If you bought a futures contract and the market went sideways for a full year, depending on the carrying charge differences between months, you could possibly break even on the year. But there is a chance of getting stopped out. So what? Get stopped out of the futures contract and then re-evaluate the situation. You most likely have most of your capital still intact and can always get back in. Or simply let the trade go and look for something better.

With options, many traders feel locked in after a loss and go down with the ship. They figure they have "limited" loss and the market may come back. Maybe, maybe not.

Successful futures traders with accounts under $20,000 are more likely to buy small lots - one or two futures contracts with loose stops. They will also consider buying an option as a HEDGE against unlimited risk. That's the right reason to buy an option. (as well as selling (writing) them to collect the premium as they erode in time) Buying options to reduce the risk of a futures contract or naked option position for small, critical periods of time is the correct way.

Many new option buyers let their options erode to nothing once the market goes against them. Option premiums have a tendency to get slammed during adverse moves in percentages far greater than the underlying futures contact's move. It's not unusual to see an option get cut by 50% in one day while the futures contract has moved the equivalent of 10%. (this is the futures contact's actual move times the margin leverage) Of course, an option can double in one day, which keeps the public hoping and buying more.

Some option buyers purchase options when "the cat is out of the bag" and pay greatly inflated premiums. This happens when dramatic news hits the market and the futures move sharply. But if the cash market then goes sideways, the futures contract prices stay intact, while the premiums in the options get sucked back out. Again, I've seen times where options have dropped 50% in value in a single day's time, while the futures contract price went sideways.

The bottom line is that an option buyer is paying a huge price to avoid taking on "risk." The professional option sellers taking the other side are the ones putting their hands in the fire and taking on the risk. The market pays us to add liquidity and take on risk. It penalizes us (through high option premiums in this case) when ducking risk and liquidity to feel comfortable.

Buying options for EVERY trading signal is the path to ruin. It cannot be done successfully over a long period of time because of this heavy premium expense load. There is a time to buy options when the market falls asleep. This happens near a major, dull bottom. They can also be a good value after a big correction market clean-out, or generally when nobody wants the option, for whatever reasons.

You must pick your spots carefully. Remember that to get the very best option buys you want the previous holders to be panicking and dumping them wholesale. Always wait for a selling panic to buy and a buying panic to sell on whatever time scale you trade. This gives you a great price cushion buffer in case you are wrong and need to dump the position later yourself! At these panic times, call option premiums can be so deflated that you can sometimes own an option (at or near the money) for a little more than the carrying charge cost of a futures contract. (That's cheap!)

Commodity Option Buying - The Hidden Dangers PART 1 What The Option Pros Don't Want You To Know

2007-05-03T02:56:00.001-07:00

The buying of options (verses writing them) is the most popular way most new commodity traders start out. Little do they know that over time, their chance for success is 10% at best. The option premium cost over a year is tremendous. Read how most pros use commodity options and how you should too.

I am going to tell you some things about option buying that may save you a lot of money over your lifetime. This applies to both commodity and stock options. First of all, buying commodity options as a routine way to participate in a market's price move for long term trading is a losing proposition over the long haul. In fact, it's probably the leading cause for commodity trading failure by the public.

Most beginning speculative option buyers (and many brokers) wave the flag saying options have limited risk and you can only lose the money you put in. This is true. But at what cost? Paying a hefty option premium to the market for the privilege of holding it for several months is the price you pay. These premiums add up to a tremendous cost over time.

If you are in the market for a year, whether trading options in and out or holding long term option positions, the clock is always ticking and eroding those option premiums. There is a small window when commodity options are priced at good values and can be bought, but it is a tiny fraction of the time when markets get out of line and the historical volatility gets low. The majority of the time, long term option buying is a formula for failure.

In some cases, it may cost you 100% or more of your account value just to pay and maintain that eroding premium privilege for a full year. For example, it is common to pay about $1000 for a three month call option that is near the money. (near its strike price) If the futures market simply chops sideways, goes down or even rallies slightly, the option will expire worthless in three months. Do this three more times to cover a full year and you've spent $4,000 to simply hold ONE out-of-the-money call option for a year.

Multiply this times ten options and you're talking some serious money paid to the "insurance man" so you can feel comfortable for a year. Bear in mind it is not necessary to have an adverse move against your position for the entire year for this to happen. Think about these statistics and realize that most commodity pros consider it a great year if they earn "just" 30% on their accounts - for the year!

How can one pay many times that cost in option premiums and come out ahead? In compaison, if you were holding futures contracts, they would have been near break-even at year's end. That's a tremendous difference to start with. Also remember that when buying options, a good win/loss ratio for a skilled long term trader is only about 10-20% accuracy. This is low but normal and requires huge gains on the winning trades. This win/loss method information is throughly discussed in my free course lessons #2 and #21.

There is a tendency for many option buyers to "load up" and buy way too many options for their account size. I've seen it over and over. Option buyers are very prone to feeling comfortable and becoming "boy plungers." In contrast, serious futures contract traders are very aware of the potential risk and usually take extreme precautions by trading small for their account size. (small is always a good idea for survival - see free course lesson #28)

Remember that I am talking about the dangers of simply BUYING options and holding them. Selling options (writing them) or using them to hedge the risk of futures or using them in spreads to pay for an option buy position, can work well. To use options efficiently means spending the time to find the proper combination to lay off your risk while still participating in a chance for profit.

A Financial Analysis of Nuveen Investments Inc

2007-05-03T02:53:00.000-07:00

As bad as the financial sector has been over the past few months, there are still many industries which have high capabilities of producing strong growth. The asset management industry is one of these groups. With a low P/E ratio of 21 and revenue growth apparent in almost all the upper cap companies, investing in any of these stocks will more than likely reap some benefits. The question, however, is which one will reap the most benefits? Will it be the large caps of Franklin Resources, Brookfield Asset Management, or Principal Financial Group Inc? It is quite possible. However, after looking through the strategic and fundamental elements of various companies in this industry, I see a mid-cap stock, Nuveen Investments (JNC), to have to highest potential of producing capital gains.

Before going to the important financial numbers, it is vital to understand what this company offers in terms of business. While many investors may claim that all asset management firms are similar, if that were the case, why do so many differ in terms of fundamentals? With respect to Nuveen, this company "is primarily engaged in asset management and related research, as well as the development, marketing and distribution of investment products and services for the affluent, high-net-worth and institutional market segments," according to Reuters. While the general plan may seem standard for most related companies, the real difference comes in how Nuveen allocates its investment groups. The company "offers six primary investment styles: value equities; fixed-income; growth equities; global equities; blue-chip growth equities, and core equity, fixed-income and hedged alternative investments " With a variety of different options to turn to, pending on market conditions, Nuveen has set itself up to produce excellent gains for its retail and institutional investors. The process will, in turn, translate to better revenue and earnings growth—contributing to strong investor sentiment and a higher share price. As the company also controls three main branches related to managed accounts, mutual funds, and closed-ended funds, there is even more robust alternative strategies for Nuveen to utilize to maximize growth in the future. And as of right now, this plan has seemed to work. Nuveen has seen over 925% share price growth since its IPO launch in 1992 with little correction in linear form.

Looking at the 925% number, much of this success can be attributed to the strong fundamentals Nuveen had and currently has. Its revenue, according to Capital IQ, of near 710 million over the last year contributed strongly to a year over year quarterly growth rate of about 24.5%. That number leads to a gross profit margin of close to 61% in the past year, and a 45% operating margin during the same time—handily beating the top three market capitalization companies in this industry, not to mention the industry itself. As suspected, these high numbers, regardless of a share price near the company's historical high, has led to a forward P/E ratio of 15.3. The multiple beats out the industry's average of 21.2 and also beats out Franklin Resource's 16.77 forward ratio and Brookfield Asset Management's 32.02 multiple as well. In terms of some unconventional multiples, its trailing price to sales of 5.33 beats out Franklin Resources' 6.01 and its trailing enterprise value to revenue of 5.91 beats out Brookfield Asset's 6.04. What is even more enticing is that Nuveen's enterprise value to EBITDA of 10.583 easily comes below Franklin Resource's 13.0, Brookfield's 15.2, and Principal Financial Group's 11.0. Such high cash flow may be the reason for a Brookfield Asset beating PEG ratio of 1.48 over the next five years. Or, the strong number may a contributing factor to capital expenditures the company spent on. With a growth rate of 4.44 over the next five years, according to Reuters, the number easily beats out the poor industry average of -11.35% growth during the same time. From these numbers, it is assessable to say that the data, used in context, does provide a great illustration that Nuveen is performing quite well.

Nevertheless, it is crucial to examine the management of this or any company, because with a poor staff, these numbers could falter very easily. Fortunately for Nuveen, it's CEO Timothy R. Schwertfeger and group of 828 employees have yielded a lot of great management figures over the past year. Its astonishingly high return on equity of 83% easily beats Franklin Resource's 20.5%, Brookfield Management's 18.8%, Principal Financial Group's 13.2%, and the industry's 23%. Nuveen's ROA of 16.3% also beats the industry's 6.13% figure, and the company's ROI of 21.5% beats out the industry's 11.67% as well. These numbers along with the capital expenditure figure aforementioned are the key drivers of why this company is performing so well. Some may question the higher enterprise value of 4.19 billion compared to the market cap of 3.77 billion, when typically companies this industry has their numbers reversed. With the recent vend of Institutional Capital Corporation some extra debt may have accumulated, but, rest assured, there is reason to continue to be optimistic with this company. With a current ratio above one, this company has the ability to take on even more debt because of the tactfulness of upper management. In fact, without this excellent management team to assess what the company requires, I may have suggested another corporation in this industry.

Therefore, the statistics are clear to any smart investor. Nuveen is a great investment. It still trades currently below its 50 and 200 day SMA, and taking a technical position, throughout the past year the company has seemed to increase to a new resistance level, stay there for a bit, drop down after a few days, but immediately continue to grow to a new 52 week and historical high. Indication shows that this company is now at this dip and should begin to sharply rise very shortly. And once this trend occurs, because of an unusually high short ratio of about 15.4, there will be an incredible opportunity for capital gains because of short covering. Thus, now is a great opportunity to begin considering buying shares of Nuveen, even though I believe this company will be beneficial to your portfolio whenever you commit your capital.