The ABC of Investing in Stocks

When it comes to investing in stocks, most people today trust the professional financial managers that are working their investments, but even the most trustworthy investor should educate themselves on the actual explanation of the trade itself.

Investing in individual stocks is not right for everyone, but you won’t really know if it is right for you until you understand how the stock market works.

Stocks are a small portion of ownership in a company by people playing the stock market. Each portion is referred to as a share, a small percentage of the total ownership for the corporation. Shares are trafficked electronically in today’s world whereas they were previously trafficked with actual paper certificates.

(People often wonder why owning a stock share is so intriguing to others.)

First, a share means you have a share of the company’s profits, meaning your share will increase as the company increases profits. The distribution of these profits are called dividends and you have the option of reinvesting your cut or cashing it out. Every time the stock rises you gain money based on your shares.

If the stock goes up $1 per share and you have 100 shares, you just made $100.

The stock table is where most shareholders track their stocks and these appear confusing and difficult to read to beginners, but spend a little time and you’ll figure it out. Let's run through what you need to know in order to read the details an understand them easily.

The ticker symbol is listed first as it is the abbreviated symbol that the stock market uses to identify your company. For example, GE is General Electric, WMT is Walmart. Once you select a company, you'll need to know its shorthand name to track its progress.

Another confusing idea is that the company’s name may be listed, but most omit the name to save space. After that the number of sales in the last trading day appears, usually listed in the 100,000’s, so 267 means 267,000 shares were bought and sold on the last day the market was open.

Stock tables are usually found in the Wall Street Journal, but can be found many other places as well.

Following that is the high and low price for the previous trading day that the stock was bought or sold. This is a great reference to see how much the stock is changing in a day because the price of shares moves all day long.

Closing price is listed next, the last price that the stock traded for as the market closed, this will also be the beginning price for the next trading day.

Following the closing price is the table that will list the change, or the amount the stock changed when you compare yesterday’s closing price with the closing price for the next trading day.

Finally, the table list will change after the closing price, listed as a positive number or a negative number.

Duncan Roberts has been learning, investing and writing about making money in the stock market for a number of years. You can read more of his ramblings and tips for investing in stocks at his investment site, http://www.theadvicecentre.info/investing/index.htm

The 3 Most Basic Thoughts for Mutual Fund Investing Online

If you are thinking of investing some money then you have thousands of options available in the forms of mutual funds.

However, how do you know what the right one or best one is for you to open?

Is investing online in mutual funds the right thing for you to do right now?

For you to even be able to begin to think about investing online then you must meet a few requirements regarding your computer’s capabilities first.

Your computer must be able to connect to the internet (obviously), your web browser must be at least 128-bit compatible such as Netscape 3.0 or Internet Explorer 3.0 or higher, and logically you must have at least a small amount of money - if not more - to start and actually invest. (Some online brokers require that you have as much as $1,000 or the equivalent in securities to open an account.)

If these things aren’t possible now or might stretch you a bit too thin in your personal life then mutual fund investing online may not be the best option right now.

Different accounts may be available for mutual fund investing online than are found in the bank you can walk into down the street and it is very worth your while to check in to this before making a final decision. With different companies comes different requirements, some require you to place cash up front and others may not require any cash to open the account.

You should (for "should" - read 'must') do an extensive detailed search to find an account that fits your needs as well as your bank account. Your best research tool is the World Wide Web and it is right at your finger tips 24 hours a day, seven days a week.

The subject of fees is always a tricky one to partake in and accounts online may be better for personal access as well as learning the subject, but the fees will still be there. Brokers online and brokers in big, fancy offices are going to charge fees whether you like it or not, but some may have “no fee” accounts that require certain balances or certain types of accounts.

Read the fine print, that is always where the important stuff is printed and you need to know everything about the place that is holding your money. No broker is truly going to “hide” fees and hang onto their trading licence for long, but it is up to you to read everything you sign, even the “terms of service” to understand exactly what you are getting yourself into.

Some websites will also help you by giving daily, monthly, and historical mutual fund data so you can make informed decisions. View everything available on the particular fund you are thinking of investing in, it is the best way to find the best account that is open to you or investors just like you.

Duncan Roberts is a keen investor - happiest when he sees the value of his portfolio climbing! To learn more tricks and tips on investing, check out his Mutual Fund Investing advice.

Duncan writes for the Investing site - http://www.theadvicecentre.info/investing/mutual-fund-investing.htm

Investing Options Series: Money Market Funds

I decided to kick off the Investing Options Series by highlighting Money Market Funds. There's really no rhyme or reason behind it except that the next installment will be about Money Market Accounts and highlighting the difference between the two savings options.

What Are They?
A Money Market Fund (not to be confused with a Money Market Deposit Account) is a type of mutual fund that maintains its value by purchasing short-term investments (maturing in less than one year) such as Treasury bills, short-term certificates of deposit (CDs), and short-term commercial debt. Money Market Funds are required by law to provide a safe and liquid investment while at the same time providing returns slightly higher than a run-of-the-mill passbook savings account. Money Market Funds are becoming increasingly popular and more widely available every year. Even PayPal has a Money Market Fund! In fact, at the end of 2003, money market mutual funds had nearly $2.3 trillion in assets, or 36% of the $6.39 trillion invested in all mutual funds, according to the Investment Company Institute (ICI), an industry group that represents mutual fund companies.

What is the Investment Strategy?
As mentioned above, Money Market Funds’ main strategy is to preserve your invested principal by keeping the net asset value (NAV or share price) around $1. Although Money Market Funds are not insured by the FDIC, no retailer has ever lost money in a Money Market Fund – which has made Money Market Funds infamous for low-risk investing. In fact, there has been just one case of a money market fund "breaking-the-buck," or dropping below its $1.00 share price. In 1994 an institutional money fund, Community Bankers U.S. Government Money Market Fund, liquidated at 94 cents a share due to extensive derivatives-related holdings.

Different Flavors
There are a number of different Money Market Funds mainly based on the type of short-term investments that are used as well as the amount of the fund that is used to invest in “illiquid” assets in order to try and earn a larger dividend. There are portfolios, for example, that only invest in T-bills or only invest in CDs and there are even state-specific portfolios. The type of underlying investment might not seem very important, but it impacts the yield percentage as well as the taxability of the fund.

Taxable Money Market Funds invest in securities whose income is not exempt from federal income taxes, including funds that invest principally in Treasury securities. Tax-exempt money market funds invest in short-term securities whose income is exempt from federal income taxes, such as bonds issued by state governments and municipalities. The yield on tax-free funds is normally lower than the yield on taxable fund which means that those in upper-income tax brackets will benefit the most from those tax-free funds. If you’re thinking about a tax-free fund take a look at your tax bracket, the state your in, and monitor the yields that are often more volatile in the tax-free funds.

In order to calculate the taxable-equivalent yield:

1. Subtract your federal income tax rate from 100. For example, if you are in the 25% income tax bracket, the difference is 75. This figure is also called your reciprocal-of-tax-bracket.
2. Divide the tax-exempt fund's yield by your reciprocal-of-tax-bracket. If the yield on a tax-exempt fund is 1.8% and your reciprocal-of-tax-bracket is 75, the taxable-equivalent yield is 2.4%.

In other words, you would have to earn a yield of at least 2.4% on a taxable money market fund to make the taxable fund more attractive than the tax-exempt fund.

If your tax-exempt fund is also exempt from state income taxes, subtract your combined income tax rate from 100. For example, if your federal and state income tax rates sum up to 40% of income, your combined reciprocal-of-tax-bracket is 60.

Using the same formula, a 1.8% yield on the current tax-exempt fund has a combined taxable-equivalent yield of 3%.

Short or Long-Term Investment?
Definitely short-term! Money Market Funds are designed to be highly liquid – meaning that you could cash out in a matter of days. In fact, many investment firms allow you to write checks from your Money Market Fund or withdraw cash from an ATM.

Potential Risk
Since Money Market Funds are managed in such a way as to minimize risk, the biggest risk involved in investing in Money Market Funds is the risk that inflation will outpace the funds' returns, thereby eroding the purchasing power of the investor's money. Fidelity also mentions that the price of a Money Market Fund could decrease due to a decline in the credit quality of an issuer (i.e. The U.S. Government can no longer honor T-bills). And, as mentioned previously, a Money Market Fund is not a deposit at a bank and is therefore not insured by the FDIC.

Potential Return
Money market funds have an average return of 4 to 6 percent a year – rivaling your savings account and even most short-term CDs. PayPal’s Money Market Fund, which they claim is the country’s highest yielding, had a 7-day average yield of 4.73% as of the date of this post. The interest of a Money Market Fund is calculated daily, but only paid out at the end of the month unless you sell the fund, then it is paid at that time. The graph below shows an example of returns from the PayPal Money Market Fund which sweeps the leftover PayPal funds of investors into a larger Money Market Fund.

These returns can be compared to the U.S. Treasury bill return over the past few years:

BankRate.com provides current Money Market Fund yields as well as graphs such as this one showing the yield comparison of the different flavors of Money Market Funds.

Who is this a Good Investment For?
In short, Money Market Funds are great for individuals looking for a safe and liquid short-term investment. Money market mutual funds are often used by people with brokerage accounts as a short-term holding place for money that's waiting to be invested in stocks, bonds or mutual funds. However, you must be aware of the expense ratio so that your interest revenue is not swept away from your brokerage firm.

If you’re looking to invest some cash for the short-term, Money Market Funds are an available option – but they are not the best option for most individual investors mainly due to the fact that other investment vehicles (CDs and Money Market Accounts) provide the same liquidity and safety while providing higher returns.

Break-Even-Or-Better Investing Strategy!

The Break-even-or-better strategy is designed to either (1) show a profit for the year or, (2) at least, show no loss.

How:
A portfolio invested in 1 year Treasury bills, purchased at a discount and maturing at face value provides the cash, through the interest earned, to purchase (hopefully) attractively priced options.

Results:
Best case: If an investor is good at picking the right options on the right stocks that rise or fall a good distance during the life of the options, the profits can be significant. And the investor gets to reinvest the interest.

Worst case: The interest earned on the maturing Treasury bills offset the option losses (break-even).

Advantages:
Leverage and truncated risk (no margin calls; no short squeezes). No fuss, no muss.

Heads you win, tails you break even.

Sort of like visiting a casino that pays off if you win or returns your bets if you lose. Not bad.

Caveat:
In an inflationary era, simply holding the same number of dollars over any period of time constitutes a real loss of capital. Capital value hinges on purchasing power and, as purchasing power erodes, so does capital.

That being said, I'm sure, at the end of some years, there are more than a few investors that wouldn't mind being in a break-even or better position. Know what I mean?

As an alternative, growth stocks, rather than options on those stocks, financed from the interest earned from the Treasury bills in your portfolio, replaces wasting assets with permanent assets.

Results: Win, lose or draw, the stocks are yours for better or for worse, for as long as you both shall live.

Seriously though, if you're a good enough stock-picker, you should enjoy capital appreciation through growth, increased income from dividends, and your rolling-over maturing T-bills will be throwing off a constant source of fresh cash with which to buy more stocks.

On the other hand, should your stocks go bust, your Treasury bill interest will provide the cash for you to try again. Again, not bad.

Because No One Cares More About Your Money Than You

http://dynamic-stock-market-strategies.com

Good trading,
Don Heggen

Investing in Equestrian?

The majority of us regular Joes wish we had more money, but it seems the only way to make more money, is to actually have money in the first place, i.e. to invest.

This is not strictly true. There are many ways of investing small amounts of money, some of them you would not necessarily class as “investing” but investing by definition means - laying out money or capital in an enterprise with the expectation of profit.

Now take betting on a horse for example, I’m sure your significant other isn’t going to buy into it when you tell them that you are investing, but by definition, you are. Every investment has an element of risk to it, betting on a horse of course, has a little more!

The other kinds of investing “Alternative Investments” are usually the area of collectors and hobbyists, but these can also generate a decent return on your money. This includes everything from art, antique furniture and wine to vintage cars, stamps and toys.

When it comes to wine, there is a convincing argument that as an investment, it produces returns comparable to equities and the cost of fine wines will keep on rising.

There are many other avenues to pursue when you are not wealthy enough already to invest your money into property and real estate. Taking a look in your attic to see what delights you may find could be a start.

The internet holds lots of information in regards to ideas for investing, there are bonds to consider, stocks and shares, gold or silver, even currency! Investing need not be for the privileged people, even us, the average Joes can start investing somewhere along the spectrum. Remember you have to start somewhere, and take your first little steps, but always think BIG.

Pearl Deloria is a proud contributing author. Find more articles here. For more info visit Finance or Investments

The Latest Investment Stocks Online Articles

Mutual Funds

A mutual fund is perhaps one of the most popular means of long term investing and is the vehicle of choice in IRAs and 401k accounts. A mutual fund is basically a way of investing in a pool of different companies in order to minimize risk.

More articles coming soon!

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