Posts Tagged ‘bonds’

Tips And Tricks For Investing In The Stock Market

Thursday, May 10th, 2012

Everyone, from novice investors to financial experts, can benefit themselves by reviewing stock market basics. There is plenty to learn about the stock market, from basic tips and beyond. Keep reading to discover how to earn as much money from investing in the stock market as possible.

Follow your own intuition first. Even the most well meaning advice can be an invitation to disaster. Always go with your instincts when thinking of investing in the stock market. When it comes to trading in the stock market, this is probably the best advice to follow.

When you choose an equity to invest in, don’t allocate more than 10% of your portfolio into that company. If the stock ends up plummeting in the future, your risk will be reduced.

Try an online broker if you can do your own research. When it comes to both commissions and trade fees, online brokers are significantly cheaper than ordinary brokers, or even discount ones. If you aim to make a profit, you want to consider the cheapest way to operate your buying and selling technique.

Despite the breathless copy you read, the stock market road is not paved with instant wealth. To do well, you must learn the basics about the market. When you first begin trading, you need to be prepared to make mistakes and give yourself the time to learn from them. If you’re looking for instant riches, you’ll have better luck looking at the end of a rainbow.

Never invest too much of your money in the company that you work for. A lot of employees are temped to invest in the company they work for, but this carries a risk. Should something happen to the company, both your paycheck and that portion of your portfolio are in danger. Yet if employees get discounted shares, then you might consider investing a portion of your money.

Keep in mind that stocks aren’t simply just a piece of paper you purchase and sell when trading. While you own them, you are a member of a collective ownership of the company in question. This can also entitle you to assets and earnings, depending on the debts of the company. In several cases, you can vote in major corporate leadership elections.

Treat your stocks as if they are and interest in your own company, instead of just tickets to trade. Take some time to look into both the weaknesses and strengths of a given business and asses your stock’s value. This way, you can carefully ponder about whether you ought to own a particular stock.

Having patience and staying knowledgeable are both vital to success in trading in the stock market. You don’t need a degree in finance or business to find out what you need to know about your chosen companies. Keep these tips in mind so you will earn more from your investments.

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Tried And True Methods For Successful Investors

Sunday, May 6th, 2012

If you are looking to gain extra income, investing in stocks is the way to go. You can become shocked when you realize how much profits you can make at times when you invest. In order for you to reach your investing earning potential you must have some knowledge of it and a desire to be a success. To understand exactly how the stock market works, read on.

Rather than locking all of your money up in a few high-priced stocks, consider investing in a larger group of more affordable ones. Stocks like these are easy to sell and manage. Owning a variety of less expensive stocks creates much less pressure in comparison to owning a small amount of very expensive stocks.

Don’t invest your life saving into your employer’s stock. It is okay to purchase a bit of stock in your company, but be sure to diversify. If you are mainly invested in your company and it does poorly, you will lose a lot of money.

You should have a goal fixed clearly in mind before you purchase a new stock. You might want to gain income through low-risk trading, or maybe you’re looking for quick investments with high-risk. Whatever your goal, being specific about what you are looking for will help you develop strategies to achieve results.

As a rule of thumb, someone who is new to stock trading should begin with a cash account instead of a marginal one. These types of accounts have a lower risk because you will be able to control how much loss there is, and they are usually a better way to learn all about the stock market.

Try to purchase stocks that will do better than average. Average is typically defined as 10% annually. To estimate what return you’ll receive, research the expected earnings growth rate then add it to the dividend yield. A stock whose earnings are growing at 12% that also yields 2% in dividends offers you a potential return of 14%, for example.

Keep in mind that all of the cash you have is not profit. All financial operations need to have good cash flow. This includes your entire life and your portfolio. Although it’s fun to spend your money or reinvest it, you should make sure you have enough money available in order to pay off your bills. Always maintain six months worth of cash in case of emergencies.

Watch the stock market closely prior to jumping in. Keeping track of the market before you decide to buy can help you know what you’re doing. A sensible rule to follow is to withhold any major investment until you have spent three years closely watching market activity. This will give you some perspective and a better sense of how the market gyrates. This will make you a better investor.

Try to view every stock you purchase as owning a portion of a company, instead of just a meaningless card to be traded. This means that you will really want to be knowledgeable about any investment you’re making. Learn a lot about the company and its various strengths. Learn about where you’re vulnerable. This will give you the opportunity to decide whether or not you should own particular stocks.

As said before, more income may be generated in stocks. That being said, unless you know exactly what you are doing, you may actually lose money rather than making a profit. Try the tips you find here to make consistent money in the market. Successful investing doesn’t take an advanced degree, but it does take effort and a willingness to learn.

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Do Low Prices Mean Low Risks With Penny Stock Investing?

Sunday, May 6th, 2012

It is common for new investors to think that penny stocks are the best way to invest their money. Because of the word penny in the name, penny stocks are perceived as being low risk investments.

The truth is that investors, novice and seasoned pros alike, need to be mindful that while penny stocks may not cost a lot upfront in the form of cash in hand, it could cost you more if the company’s stock that you’re trading with collapses.

A company’s financial history is as important as their potential for future earnings.

Brokerage firms that help penny stock investors trade in this type of transaction, are required to disclose the risks using a document that tells the customer exactly what the risks are before they choose to hand over their money.

Since penny stocks aren’t traded as often as other types of stocks, you might be stuck with them for a while after purchasing them. And since they’re not traded often, the pricing you’re seeing can be inaccurate or out of date.

It is possible that the biggest risk involved with penny stock investing is the false excitement that builds around it. One of the down sides is the amount of spam notices clogging penny stock investors every day.

Some questionable brokerage companies buy large amounts of penny stocks and then turn around and sell them to their clients for a higher value than they will be worth once the momentarily inflated demand is over.

Because penny stock investing requires such a small initial monetary investment, some brokers even break the rules and charge far more for their mark-up commissions. It is good to check and make sure you are not being overcharged.

It can also happen that your broker will tell you that you can’t cash out your penny stocks. In this case, you won’t be able to cash them out and you will be stuck with your purchase.

While most brokerage firms are serious, you should still do a little research to ensure they have your interest at heart, and are doing their best to minimize your risks.

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Easy Methods To Make You A Better Trader

Sunday, May 6th, 2012

Trading stocks can be very complex, even for the best traders. The rewards for investing in it can be incredible, but there are also chances for huge losses as well. By considering the advice here, you can improve your investing strategy and increase the odds of seeing more profits over the long term.

If you get pleasant surprises from a company, you might realize it will continue to happen. This also applies for a negative surprise. This stability, or lack of it, is one of the most important things to look for before choosing to invest in a particular company’s stock. Generally one occurrence leads to other consequences bad or good.

Before you dive head first into trading stocks, make sure to watch the market for a while to get a feel for it. Especially before making that first investment, you should get in as much pre-trading study time of the market as you can. In general, watching the market for three years is the recommended time before making your initial investment. By doing this, you will possess more knowledge of how the stock market works. Therefore, you’ll have a greater possibility of making some money in the future.

As a general rule, invest in stocks which have growth rates just a little higher than average. These slightly above-average growth stocks generally have a valuation that is more realistic and within reason when compared to stocks with a higher growth rate. High-growth stocks are usually high in demand, and become overpriced and unable to fulfill the inflated expectations of a return-hungry market of investors.

Cash isn’t necessarily profit. One of the crucial elements to any financial investment is having a positive cash flow for in your portfolio. It’s crucial to reinvest and keep money on hand for bills and day to day needs. It is a good idea to save enough to cover six months of bills if you have some sort of financial problems.

Start out with stocks you are familiar with. For example, if you have knowledge of stocks that have performed well in previous years or you have insider knowledge about an industry, then buy stocks of companies in that industry. This might be a helpful way to get your feet wet in the market before you move on to riskier ventures. It allows you to get returns immediately, giving you motivation to keep trying.

A well operating software package is something you might consider purchasing. It will make it easier for you to track stocks and better understand your investments. You can also use it to keep track of your portfolio, allowing you to see if you have diversified your investments properly. There are so many software packages, so in order to get the best one, look at reviews on the Internet.

Keep your investment plan simple if you are just starting out. While diversity may be tempting, as is wanting to branch into areas prone to excitement and speculation, when you are new to investing the simple and reliable approach is always best. This will reward you with smaller losses, bigger profits and a solid base of experience.

Now that you have read this article, does the market still hold as much appeal for you? If the answer is yes, then you need to prepare yourself for entry into the world of stock market investments. Keep these tips in mind to give you confidence that you can find success and good fortune as you venture into the stock market.

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The Hows Of Trading Penny Stocks

Friday, April 27th, 2012

Penny shares are traded through the OTC Bulletin Board r the Pink Sheets and cost between 1 cent and $5. You may also trade these stocks via foreign and other securities exchanges. However , when trading penny shares you must be aware about the rules that apply to the trade of penny stocks. The rules set down by the Securities and Exchange Commission (SEC) to help control the trade of penny stocks and shares are as follows:

The SEC needs the broker to have documented proof of the transaction between them and their shopper, which can only happen if their customer is ready to complete the exchange.

The agent must provide their clients with paperwork outlining all the potential hazards that are involved with penny stock trading.

If there's a market quotation on the penny stocks they'd like to buy the consumers must be informed by their agent.

The broker must also disclose to their clients what their commission will be for the trades.

The low priced stock rules also say the brokerage company must also provide their clients with monthly statements that communicate the value of each low-priced share the consumer owns.

The rules governing the trade of penny stocks and shares were implemented to ensure that trades were fair and that investors knew about the risks before investing. These rules were set in place by the SEC to make certain that new stockholders knew what they were getting into and they wouldn't get in over their heads.

The penny stock rules include a Client Protection Rule (Rule 15c3-3) that states that all the money you pay to the broker is in their control. The broker must then periodically figure how much of the cash being held belongs to the client of has been gained through stocks owned by the shopper. If the broker dictates that there is additional cash on their books than what's owed to their customer or if the consumer has paid more to the broker than was needed then the remainder is placed into a reserve account. This money is then put aside for the specific usage of the customers. The rule stops brokers from employing a buyers cash to advance their own business.

These rules are designed to offer protection to the shoppers as well as the stock market and even the broker. Any broker who breaks the SEC’s rules is probably going to become the topic of and SEC inquiry which will be difficulty for the brokerage house as well as the broker themselves. SO it is important that any new investor knows these rules to make certain that their broker follows them all so that their investments are not tainted in any fashion.

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An introduction to investing in high yield bonds

Saturday, April 14th, 2012

Even though high yield securities are very common investments currently, this was not always so. During previous decades, investors associated high yield bonds with investment scams and dishonest bankers. Many investors still opt for the comparable safety of investment grade securities like United States Treasurys. But interest rates on all higher quality bonds have been gradually declining for decades. In 2012, they’ve reached all time lows, which makes it very hard to put together a good fixed income portfolio for retirement. Now could be a good time to reevaluate high yield bonds, because it’s one of the few areas that offers a decent yield in today’s markets.

At the onset, investing in fixed income can be very overwhelming at first. As a fixed income investor, you’ve got a wide range of possible options. First, you can invest in high grade bonds, often issued by governments. Second, you can invest in highly rated corporate debt. Doing this would be still relatively safe. In fact, some corporations are now actually paying lower interest rates than many sovereign (government) bonds. Finally, you could commit some of your capital to high yield bonds.

It’s not impossible to purchase individual high yield bonds directly from the issuing corporation. But such individual purchases are hardly ever a practical approach for the average investor. The bond market is ruled by institutional players, who spend their days studying company financials and constructing portfolios with maximum returns and minimum volatility. Luckily for you and me, there are many excellent high yield bond funds and ETFs on the market. They’re managed by professional portfolio managers, and offer the necessary benefit of diversification. For instance, two of the most popular high yield bond ETFs (with ticker symbols JNK and HYG) currently hold 223 and 446 different fixed income securities in their fund respectively. The same is true for a lot of of the available high yield bond mutual funds: they hold hundreds of individual securities, mitigating some of the impact of default and capital depreciation. You can check out Morningstar, Yahoo Finance or any other popular investment websites and easily find good high yield mutual funds.

You need to be somewhat careful about when to invest in high yield. One approach is to keep an eye on the so-called interest “spread” between high yield and high grade securities. High yield bonds often yield between 4 and 6 percent more than safer bonds. During economic recessions, this spread rises, as investors sell speculative bonds and buy government and other less risky bonds. Companies selling high yield bonds then have to pay a high interest rate to get investors to buy their bonds, so the spread may be six percent or more. This is often the best time to buy high yield funds. For instance, during the global financial crisis in 2008 and 2009, the high yield spread increased to upwards of 7% over U.S. Treasuries. High yield bonds have performed really well since then.

You should also know that high yield bond prices frequently decline during economic recessions. In other words, they behave somewhat like stocks. This implies potential investment losses.

Don’t allow the bad reputation of high yield bonds prevent you from seriously considering them as a valuable source of income for your investment portfolio. But also bear in mind that high yield bonds are a lot riskier than many higher grade fixed income securities. With the added yield comes increased risk — in investing, there’s no free lunch.

The popularity of high yield bonds in recent years can be partly explained by the prevailing low interest rates. Learn all about these securities and how they can boost investment returns.

How to diversify your investment portfolio by using a commodity ETF

Friday, April 13th, 2012

Many money managers recommend that you put your retirement savings in a variety of different equity and bond funds. Even though this barebones portfolio diversification is a good thing, it shouldn’t end there. There are other asset classes worthy of your consideration. Let’s start with the most basic selection, and then add additional sources of diversification.

A solid beginner portfolio could be as simple as only two index funds: an equities fund and a bond fund. Low cost index funds are the best way to guarantee your fair share of market annual returns. Consider a broadly diversified stock index fund such as SPDR Dow Jones Total Market (TMW). For bonds, evaluate the Vanguard Total Bond Market Index Fund (VBMFX).

Now that you’ve got a basic domestic stock/bond portfolio in place, consider allocating a slice to international and emerging markets equities, for additional diversification. Here too, one well-chosen additional index fund will do the trick. Choices include Vanguard Total International Stock ETF (VXUS) for developed market international stocks and iShares MSCI Emerging Markets Index Fund (EEM) for emerging markets.

A good addition to these basics would be real estate, which during past periods hs shown low correlation to other asset classes. The simplest addition you can make here is to add a Real Estate Investment Trust (REIT), such as the iShares Dow Jones US Real Estate (IYR).

Now let’s turn to commodities. This is an asset class that’s often overlooked. There are at least 3 different ways to invest in commodities. You can make an allocation to a Managed Futures fund. Depending on which fund you choose, there may be a high initial minimum required investment. And the annual manager’s fees are often steep. You sometimes get what you pay for: the fund manager actively manages a (hopefully diversified) portfolio of commodity futures contracts. Many managed futures funds take both long and short positions, depending on how the strategy sees the prevailing market conditions for each commodity. And the best funds achieve high absolute returns. The challenge of course is picking one of the better funds before you invest, and not after the fact.

Another way to invest in commodities is by using an exchange traded fund (ETF) that tracks this market. These funds trade very much like stock shares, and you can place an order to buy and sell them through any broker. For most investors the most suitable commodity ETF is one that follows a broad index. One example of a commodity index fund is the iShares S&P GSCI Commodity-Indexed Trust ETF (GSG), but others exist which follow different indexes. For investors with larger portfolios, an allocation to more individual commodities could make sense. For example, to benefit from increasing prices in gold, you can invest in the iShares COMEX Gold Trust (IAU). Or to follow the price of natural gas, try the United States Natural Gas Fund (UNG).

Yet another way to invest in commodities is by owning commodity stocks. There are many publicly traded enterprises that focus on the production or distribution of commodities. Their company shares benefit from rising demand in commodities. Examples which come to mind include gold or copper miners like Randgold Resources (GOLD) and oil & gas exploration companies such as Exxon Mobil Corporation (XOM). You can also use an index funds that invests in commodity stocks. One example of this type of fund is the Energy Select Sector SPDR Fund (XLE). While the price of these stocks does move up and down with the market value of the underlying commodity that is important to their business, it is not an exact linear relationship. Still, this is a easy way for everyday investors to participate in the commodities market.

Hopefully this brief overview has provided some helpful insights into how the addition of a commodity ETF can take a basic portfolio to the next level of diversification.

Commodities can find a place in almost every investor’s portfolio. Learn about the benefits of adding a commodity ETF.

How Is A Dividend Defined

Wednesday, April 11th, 2012

The term ‘dividend’ is derived from the Latin word ‘dividendum’ (meaning ‘a thing which is divided’), and is one of the most frequently encountered words when listening to conversations about business and finance. The dictionary usually indicates that it is the part of a company’s earnings which is paid out to the shareholders.

The idea becomes more complex than that simple statement would seem to indicate, however. The money that is paid out is usually the result of profit made by the firm. When a firm has been successful enough to enjoy a profit then it can either opt to reinvest it in itself, a concept called ‘retained earnings’, or distribute it to the shareholders in some way. When opting for the latter, a cash payment is one of the most common methods used.

How a company pays out a dividend depends very much on the kind of company that it is. A joint stock company pays out a fixed amount per share when it chooses to allocate its payments; public companies make payments to a fixed schedule, though sometimes special ones are paid out in times of certain significance. This is not considered to be an expense. Instead, it serves as a process whereby profits after tax can be distributed to shareholders. The balance sheet of a such a company will show that retained earnings are part of shareholder equity.

Cooperative companies operate in a very different way, as they are entities which distribute dividends according to member activity rather than the company’s profits. These pay-outs are considered as pretax expenses for this type of company.

Cooperatives pay out their allocations in the form of cash, store credits (especially in retail cooperatives) or shares in the company. Worker cooperatives make their allocations according to the number of hours worked by the members, while consumer cooperatives often offer what are known as ‘patronage dividends’, which can take the form of store card credit or cash.

Public companies can sometimes offer dividend reinvestment plans to their shareholders. This is where the funds which would have paid out are used instead to purchase extra shares in the company on the shareholder’s behalf. Sometimes these shares are already available for sale but they can also be newly created.

While such regular pay-outs can divide option amongst financial experts, with many observers preferring to see companies reinvesting rather than paying out to shareholders. Studies have shown that companies with higher dividend pay-outs enjoy higher earnings growth.

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How to add a commodity ETF to a simple portfolio of stocks and bonds

Wednesday, April 11th, 2012

Most RIAs will tell you to put your retirement savings in a variety of different equity and bond funds. While this elemental portfolio diversification is a good thing, it isn’t sufficient. There are other asset classes worthy of your consideration. Let’s look at the most basic choices, and then add additional sources of diversification.

A solid beginner portfolio could be as simple as two index funds: an equities fund and a bond fund. Low cost index funds are the best way to ensure your fair shake of market annual returns. Consider a broadly diversified stock index fund such as iShares MSCI USA Index (EUSA). For bonds, evaluate the Fidelity U.S. Bond Index Fund (FBIDX).

Now that you’ve got a basic domestic stock/bond portfolio in place, consider allocating a slice of your holdings to foreign and emerging markets stocks, for additional diversification. One good additional index fund will be sufficient. Candidates include Vanguard Total International Stock ETF (VXUS) for developed market international stocks and iShares MSCI Emerging Markets Index Fund (EEM) for emerging markets.

And don’t forget about real estate, which also has historically proven to have low correlation to other assets. The simplest change you can make here is to add a Real Estate Investment Trust (REIT), such as the iShares Cohen & Steers Realty Majors (ICF).

Next, let’s take a look at commodities. This is an asset class that’s often neglected. There are multiple different approaches to investing in commodities. You can make an allocation to a Managed Futures fund. Depending on which fund you go with, there’s not infrequently a high initial minimum required investment. Furthermore, the annual manager’s expenses are often significant. You sometimes get what you pay for: the CTA who manages the fund actively manages a (hopefully diversified) portfolio of commodity futures contracts. A good number of managed futures funds take both long and short positions, based on how the manager sees the prevailing market conditions for each commodity. The best funds secure high absolute returns. The trouble of course is choosing one of the winners prior to investing, and not in hindsight.

A second approach to investing in commodities is by owning an exchange traded fund (ETF) that invests in this market. These funds trade very much like stock shares, and you can buy and sell them through any online broker. For most investors the best commodity ETF is one that follows a broad index. One example of a commodity index fund is the PowerShares DB Commodity Index Tracking ETF (DBC), but there are other funds that follow different indexes. For investors with larger portfolios, moderate allocation to more specific commodities may make sense. For example, to benefit from increasing prices in gold, you can invest in the iShares COMEX Gold Trust (IAU). Or to track the price of natural gas, try the United States Natural Gas Fund (UNG).

One more way to invest in commodities is by owning commodity stocks. There are many publicly traded companies that focus on the production or distribution of one or more commodities. These company shares benefit from rising prices in commodities. Companies which come to mind include gold or copper miners like Hecla Mining Company (HL) and oil & gas exploration companies such as British Petroleum (BP). There are also index funds that invest in commodity stocks. One example of this type of fund is the Energy Select Sector SPDR Fund (XLE). While the price of these stocks does move up and down with the market value of the underlying commodity that is important to their business, it is not a “pure play”. Nonetheless, this is a convenient way for most investors to participate in the commodities market.

Commodities can find a place in almost every investor’s portfolio. Learn about the benefits of adding a commodity ETF.

Stock Options - A Pretty Penny

Monday, April 9th, 2012

Sometimes investors can feel that they do not have enough clout within the companies that they have invested in. If this happens it can become difficult for the investors to make the most of any opportunities and profit from them. Penny options can help you to increase both your portfolio and your leverage within the companies you deal with.

Many stock prices will usually increase in increments of either five or ten cents. Instead of using this pricing method, penny stock prices raise in degrees using pennies. This is a good way for investors to increase their leverage is this means they don’t need to put up lots of capital to get started and should the stocks fail they haven’t lost a great deal of money.

You can quickly turn a large profit from your penny options because you are competing on a smaller field with smaller amount of capital. Lots of investors are tempted by penny stocks because you cannot lose more than your starting investment. Buying options instead of normal stock does have drawbacks that come with the territory. Penny options can change a large amount in a very short amount of time. These changes will not always be for the better.

It is vital that you put some effort in to finding out if the options you are considering buying will suit your needs. Penny stocks are cheap but their liquidity may not be what you need. To stop yourself from making a big mistake you should always check your brokerage cancellation policies beforehand. Finding out what the time decay of any options you buy are very important. Plan for how long you are going to keep the options for before trading them and buy options that will expire well after that point.

You don’t need to worry about expiration dates if you are planning on trading your options in a single day. In this situation the front month option will work out just fine for you. Penny options are not the common now days. You will be playing catch up with many crafty brokerage firms and some savvy traders who already use this method.

You should always try to be patient when trading penny stocks. Penny options can move quite a lot in a short amount of time, so instead of stressing and panic sit down and relax. If you are a worrier then maybe penny stock are not for you.

If you want to increase your leverage but you don’t have the capital for blue chips then penny options are a great way to start.

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