Stock & Options Trading

Is It The Right Time for Mid-Cap?

Sun, 29 Apr 2007 19:48:35 -0800

Interesting WSJ article that pitches domestic mid-cap stocks for its timeliness. However, the PEG ratio comparison is quite misleading. Given that the economy has more downside risks than upside ones, it is prudent to assume the growth potential implied in these growing P/Es will not materialize. Disclosure: I'm still in favor of large-caps. There are still quite a few value plays.

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Vonage: IPO to Bankruptcy in One Year?

Sun, 22 Apr 2007 22:13:28 -0800

Vonage's invitation to partcipate in its IPO. Less than one year after, the VOIP company is seriously looking at bankruptcy as an option.]]>

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Foreign Markets Provide Better Diversifaction Now

Sun, 22 Apr 2007 20:55:28 -0800

WSJ reports that the correlation between US market and other developed markets is becoming weaker, suggesting exposure in foreign markets can achieve better diversification now.

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Finance Market Commentary, The UK Flavor

Sat, 03 Mar 2007 18:47:13 -0800

Finance Markets is one site you can get some fresh content of what's happening in London, another capital of financial capitals. Elaine Frei, the sole author of the site, regularly delivers 3-5 posts a day on various financial market topics since 2005. For example, recently she provided a day-by-day account of the volatile global markets, and shed light on many UK-specific financial events, like the transition away from salary pension scheme, the UK real estate market fever, the public worker pay raise stalemate, and Financial Services Authority (FSA)'s crackdown of excessive mortgage exit fees. While I should say most of the posts stop at an account of the event, and some more personal opinion will certainly fit into my taste more, it still provides a good reading for me from a US-centric point of view. (Hey, US is not lonely in having all the scandals; UK has its fair share too.) Plus, some of Financial Markets' report on individual UK companies are also quite helpful when I look at stock investment candidates. (While the above is a sponsored post, PFBlog is not required to provide a favorable review. Quality time was spent to study the subject website in completing this post.)]]>

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10 Tips for Value Investors

Tue, 13 Feb 2007 15:04:52 -0800

In 2002, Fool.com recommended some of Bob Olstein's wisdom on value investing. I am a huge fan of value investing and do believe in the right hands, it can be used to consistently beat the market. Despite the passage of five years, it is still worth reading:

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Managed-Futures Funds Available To Small Investors Soon

Fri, 09 Feb 2007 22:11:12 -0800

Want to play in the future market? Mutual fund innovator Rydex is going to launch an open-end managed futures fund next month, enabling anyone with at least $2,500 to have access to the future market.

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What Is Mortgage REIT?

Tue, 06 Feb 2007 12:06:54 -0800

Morningstar's analyst Erin Swanson masterfully explained what is Mortgage REIT, and why it is not a timely bet in today's market. I invested in one of the Mortgage REIT before (which later merged with an investment firm to today's Friedman, Billings, Ramsey Group - FBR) with some good gains, but that's back in 2003.

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Exxon Mobile Is Minting Money

Thu, 01 Feb 2007 22:04:01 -0800

$39.5 billion annual profit! That's more than $100 million a day and $1,252 per second. It will be hard to exceed, even by Exxon itself.

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The China Stock Market Is Red Hot

Mon, 29 Jan 2007 22:07:59 -0800

The China stock market is obviously a bubble that will surely burst. Two good examples: 1) More brokerage accounts were opened in one week in 2007 than the whole 2004. 2) China Life, a local life insurer, is trading at 200 times of P/E Since November, I have gradually downsized my exposure in the China market from a peak of $40,000 to about $5,000 now. It is always good to know when to call the stop.

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Common Misunderstandings of Stock Market

Thu, 14 Dec 2006 23:13:37 -0800

Here is a list of some of the biggest misconceptions that the average trader believes. 1. There is a such thing as a perfect system. I assure you there is no perfect system. You may feel you need to convince yourself that technical analysis, trend following, fundamentals, options hedging, or any other system does not work, but there is always somebody somewhere making a lot of money using those very things. Simply find an approach that fits your personality and develop it. 2. Day trading does not work. Day trading absolutely works. Though I would not recommend it for most traders, those with the time, the resources, and a high level of discipline do very well. 3. You are using the proper time frame in your trading. This is a big one. Generally speaking, most people overtrade. If you are having little success with your trading, stop holding stocks for only days or weeks at a time. Consider holding your stocks for several months, or years. Use weekly and monthly charts instead of hourly or daily ones. This saves considerably on commissions and gives your trends time to develop. Is it boring? You better believe it. Is it profitable? Absolutely. 4. Rely on advice from others. If you find yourself looking to others for advice about your positions, then you should not be trading (unless your profitable system was designed specifically around advice from others). You are not confident in what you are doing. If you don’t know the probability of a trade working out, if you don’t know the percentages of trades that make you money, if you don’t know how much money those trades make you, if you don’t know the strengths and weaknesses of your system, if you don’t have a profitable entry or exit strategy, you should not be trading. Stop everything and develop a system. Then test if for free on a trading simulator. Don’t put your real money on a strategy that you are not confident in. 5. You will get rich quickly by trading. While it is absolutely possible to become wealthy very quickly by trading, it is not going to happen for the vast majority. Sit down with pen, paper, and calculator and write out your expected returns. Try to be realistic. If you have $100,000 to start with, and make 20% a year, write out your profits in one year, five years, ten years. Remember to include commissions and capital gains taxes. Unless you seriously plan on becoming a day trader or a money manager, you may not be able to trade for a living. My advice for those people? Find a legitimate wealth building system that is unrelated to trading and live off of that. It will free you of your day job and let you concentrate on trading. Plow that extra profit into your trading account. When you get around the million-dollar mark or higher (totally depending on your living expenses and your returns, though, of course), you can seriously consider just trading for a living.

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Bank of America Surpassed Citigroup in Market Cap

Tue, 28 Nov 2006 20:21:16 -0800

Bank of America (BAC) finally reached this milestone. I have both horses in my portfolio since last November and I cannot complain the performance so far: 22.5% return on BofA and 12.7% on Citigroup (C).

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Is Anheuser-Busch (BUD) A Buy?

Sun, 26 Nov 2006 19:22:05 -0800

Bob Frick at Kiplinger's Personal Finance argues Anheuser-Busch is a great value now. Although I drink Bud a lot, the current P/E ratio is too rich for my taste.

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How To Buy QQQQ Without Commission

Sat, 25 Nov 2006 15:11:54 -0800

QQQ Direct is NASDAQ-100's DRIP program, which allows you to buy into NASDAQ's top companies at as little as $10 a month without paying commission. Good deal for starters!]]>

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Kraft (KFT) Spin-Off At Altria (MO) Is Near

Thu, 16 Nov 2006 12:37:26 -0800

Today is a good day for Altria investors, myself included. Management of Altria (originally Philip-Morris) is now fully committed to spinoff the food maker Kraft Foods Inc., which will supposedly unlock lots of the value in both companies. Should I sell today, Altria will be my first double-bagger in stock investment.

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Stock Holdings By Our Congressmen

Sat, 04 Nov 2006 14:36:27 -0800

If only judged by stock holdings, I should probably be labeled as a pure Republican. I own Altria and Coca-cola outright, and also have a drug company (Pfizer, PFE) and an oil company (Conoco-Phillips, COP).

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What Does A Democrats' Win Mean To Your Financial Life?

Fri, 03 Nov 2006 15:17:30 -0800

The Winners: 1. Those who have student loans (Dem will reduce student loan rates) 2. Fannie Mae and Freddia Mac The Losers: 1. Defense companies (Dem = less military spending) 2. Drug companies (Dem = more Medicare hard bargaining) The Shakers: 1. Those who barely makes the national minimal wage (Dem will increase the minimal wage, but they can lose job too.)]]>

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Warren Buffett Loves Retailing

Wed, 01 Nov 2006 15:35:24 -0800

It seems Buffett is hedging his bets by investing in both Target (TGT) and Wal-Mart (WMT). We probably already missed the boat: TGT is already 20% higher than it was two months ago.

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Six Banks May Receive Triple-A Credit Rating

Wed, 01 Nov 2006 15:32:50 -0800

AAA credit rating is probably only of cosmetic value to the big banks, but I'm glad to see S&P reaffirms the financial soundness of my portfolio holdings in Bank of America Corp. (BAC), Citigroup Inc. (C) and J.P. Morgan Chase and Co. (JPM).

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The Cash Machine at Exxon

Tue, 31 Oct 2006 00:45:36 -0800

$10.8 billion quarterly revenue pale.]]>

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Wisdom from Value Investing Legend Christopher Browne

Tue, 31 Oct 2006 00:45:32 -0800

The man behind the success of Tweedy Browne speaks up. Yes, the truth is many can understand value investing, but it is the "emotional discipline" that completes the circle.

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Invest With Margin Loan? Use It At Your Own Risk

Sat, 28 Oct 2006 12:24:38 -0800

John Waggoner at USA Today reminds us why it is not wise to invest on borrowed money. You may lose more than you want.

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Basics of Option Trading

Fri, 27 Oct 2006 22:13:26 -0800

In For a Dollar or a Dime One of the most important options trading terms a beginner needs to completely understand is risk capital. Most reputable brokers will advice you to invest in options with risk capital. Risk capital is that portion of your total investment capital that you can afford to lose. Long term bonds, savings accounts, mutual funds are the places for your retirement income, and your landlord's checking account is the place for the rent money. A beginning investor in the option market needs to know exactly how much he is willing to invest, and once this amount is established, he needs to stick with it. There are practical reasons for this. One of them will be investor's personal financial security concerns. If you are overly worried about loss, you would not be able to make decision with a clear head and in a confident manner. Determine what amount you are going to invest, and set it aside, and stick with it. Do you Speak the Language Calls, puts, strike price, margin, leverage, long position, expiration date, bid, and ask are all Option related terms. If you are unsure of the meaning of any of them then you need to go to Option's language school for awhile. Investing has its own unique terminology, and you can not afford to be confused. Take the time to learn what everything means. It is going to be important to give yourself a bit of education in quite a few different areas of trading. You are not going to be able to evaluate Broker's websites, or decide on a personal method of analysis until the basic framework is in place. And the basic framework is terminology. Start in First Gear You have to crawl before you can walk. Learning to invest your money in any market, and even more so the complex Option Trading market is not the kind of thing that is best served by jumping into the deep end of the pool right at the start. You are almost certainly going to drown. Experience is very important here, and experience is only gained by the actual doing. Start slowly and make a few small investments. It is good to have a sample option trading strategy in place. It should be on a rather small scale involving only a small percentage of your available risk capital. Once you gain a little confidence, you can increase the amount of your investments. How long this takes is going to depend completely on you. Remember that there is no magic formula here. The beginning investor should not be too nervous. There may be a lot to learn and it may seem a bit confusing, but it is learnable. In the end, it is going to be his own intelligence, and his own instincts that are going to determine his success or failure. Most people would ask for nothing else, but to have their financial fate in their own hands. Remember the words of a wise old investor who once said, "Every Option Trader was a beginner at one time, even if for some, it was only a few minutes."]]>

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What Is Buy-And-Hold?

Thu, 26 Oct 2006 22:28:39 -0800

Investment analysts say that buy-and-hold is the best investment strategy for the average consumer. But do you really understand why? After all, the idea of a fast dollar on a stock is appealing. Buy low and sell high. Do this enough and you should come out on top, right? Well, not exactly. Timing the market is almost impossible to succeed at. Eventually, you will lose. There are some that win using market timing, but you have a good chance that it won't be you. A study by the Financial Analyst Journal compared the results between market timing and buy-and-hold strategies. The authors looked at data from 1929 to 1999. They looked at all six major US asset classes to see if market timing is effective when compared to buy-and-hold investing. The study looked at several different market timing methods. And what they found was that sometimes it does work. Two people out of every 1,000 will come out on top with market timing. Ninety-eight percent of buy-and-hold investors will come out on top. The trick to making money in stocks is not really found in buying and selling. It is found in investing for the long term. Do you know what your chances are in making money on a stock. You have a 70% chance that an investment in stocks will make money in any given year. If you leave your money in for the long run, you have a better chance of coming out on top. However, I'm not saying invest and forget. You need to know why you invested in the first place. Before you invest, know what your objectives are. You need to make sure that your investments are goal orientated. You sell investments that become inappropriate for your portfolio and goals and buy ones that fit in. This is buy-and-hold in action. If you want to protect an investment, don't look at the individual stock price. Set yourself out points on the high and low side. You sell if it reaches this high or if it goes this low. If you don't set these guidelines and realize a loss, what are you going to do? Do you wait it out or take the loss? You start over with the money you have right now and choose a new investment. This time you will set yourself out points. There is nothing you can do about the money you have lost, but you can prevent losing even more. Don't hold onto stocks just to be stubborn. Realize when you made a mistake and start over. Change what you are doing so that you don't return to this place again. Set goals. Know why you are investing. Know your top price and your low price. And don't try to time the market, you have a 99.8% chance it won't work.

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The Difference Between Full Service and Discount Brokerage

Wed, 25 Oct 2006 22:27:04 -0800

When it comes to choosing a brokerage, you will have to decide between full service or discount. The difference is basically in the amount of money you pay and the amount of help you receive in making decisions. A full-service brokerage firm will offer you every imaginable financial service. You will find everything from professional advice to even tax preparation. But you will pay for it. All of these services cost money, which you pay in high commissions. A discount broker does not offer you all of the extras. Therefore, you pay significantly less in fees. Many people do quite well with discount brokers, and manage to save money as well. Many people out there are cautious when dealing with a broker. I think that this is good. You should always be careful when handing your finances over to anyone. Make sure that you choose the right broker for you. You should feel as if the broker is acting in your best interests. That means that you don't feel pressured to make trades that you don't want to. One of the best ways to start a relationship with a broker is to be upfront from the start. Remember, you are the boss here. Tell the broker your financial goals and make sure that your instructions are followed. Watch your account for excessive trading, which can cost you. Watch to make sure that you are making money. That is the number one sign of a good broker. When you use a broker, you should see a return equal or better than the return on the S&P 500 Index. If you aren't, you would be better off cutting out the commissions and investing directly into a S&P index fund. If you are already a good customer with a full-service broker, you can always ask for a discount on your fees. The worst the broker can say is no. If your account is a good one, many brokers are more than happy to adjust their commissions for you. Most full-service brokers feel the competition from discount brokers and are willing to compete. You have to look at what you need out of a brokerage. If your financial situation is one in which you would really utilize a full-service brokerage, then that might be the right decision for you. But the key is making sure that all your needs will be met by the brokerage. You want to get your money's worth. When you first meet with a full-service broker, you should ask a few questions: How much do you charge to invest my money? Ask about wrap accounts, commissions and fee-based accounts attached to asset size. Do you have a good research department with a good track record? Do you monitor your brokers? You can always ask ot see the conduct record of the brokers to see if they are disciplined. Do they provide on-line services? Can I see a sample statement? You want to make sure that the statement is easy to understand. Keep in mind that discount brokerages don't mean that you will make less on your investments. You simply pay less because there are fewer services. In some cases, you will pay 90% less. Discount brokers do not give investment advice, though many do provide research reports from experienced analysts. They are available to contact 24 hours a day and many have a strong Internet presence.

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What Is P/E Ratio?

Wed, 25 Oct 2006 22:13:35 -0800

One of the most common stock valuation methods is the Price Earnings Ratio or often referred to as PE ratio. The definition of the PE ratio is quite simple just as the name indicates: Take the current stock price and divide it over the earnings per stock. So, as an example suppose stock A is currently at 15$ and its earnings mount up to 0.56$. The calculation of the PE then is: 15$/0.56$ = ca. 27. It’s now important how to interpret this number. What does it tell me? What you will almost never read anywhere is what kind of unit this PE has. Most of the authors simply present us the bare number of the PE calculation. In order to know which unit you get at the end it’s important to know what you use in the beginning of the calculation. And that is: The price of the stock: unit: $/stock Earnings per stock and year: unit: $/stock/year If you divide $/stock over $/stock/year you will only get “year” as the unit of the calculated number. So 27 means 27 years. In other words: If company A continues to earn 0.56$ per stock each and every year it will need 27 years to reach the current stock price. That’s why it’s better to choose those stocks with a lower PE as they don’t need so much time to reach their current stock price. Thus, the decision to make is: Buy those stocks with a low PE ratio. That is ok, but what does “low” mean? Low, compared to the average PE of the same branch. Therefore, the only thing you have to pay attention to is that you can only compare stocks of the same or similar branch when deciding to buy a stock based on the PE ratio alone. The problem with the PE ratio is that the company must already earn something in order to use this PE figure. When it only generates losses (mostly the case with start-up firms) you can switch to the Price/Sales ratio because every company has at least a certain amount of turnover.

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Profitting From Penny Storys

Wed, 25 Oct 2006 16:19:21 -0800

Penny stocks, as the name suggests, are shares that are available at extremely cheap rates. Being available literally for pennies, you can purchase such stocks for as low as $2 per share. These stocks are usually of very small companies, which have a market capitalization of less than $500 million. They are not traded at the major stock exchanges like NASDAQ or NYSE, but are listed in the pink sheets or the OTCBB (Over The Counter Bulletin Board), because these stocks are of companies that are unable to meet their listing requirements. They are also referred to by other names such as pink sheet stocks, nano stocks, small caps, micro caps or juniors. Investing in penny stocks is considered very risky as they are traded without any regulatory or listing requirements, which provide security to shareholders. There are no accounting standards, and the shareholder gets no information about the change of ownership of shares etc. This makes it a potential source of fraud. However, with proper research, investment in penny stocks can be a tremendous earning potential. Not all companies listed with pink sheet stocks should be considered fraudulent. Some of them represent good companies, which are too small to meet the requirements of the NYSE or NASDAQ. Many such companies have a bright future. Unlike blue chip stocks, penny stocks have greater volatility; hence, they have the potential of sometimes reaping rich dividends in a relatively short span of time. Thus, investing in these startup companies at rock bottom prices can end up in making investors very wealthy. However, finding these companies requires research. The number of shares that the company has on ‘float’ is one indicator that needs to be ascertained. ‘Float’ is the technical term for the number of shares of the company being traded. Since penny stock companies are unregulated, they are not bound to report these details to the public. The information, however, can be found in TV interviews, and the like, given by the representatives of the company occasionally, and are sometimes archived on their websites. There are forums on these websites where stock brokers chat with each other. You can also get the information on the message boards. Find and read the articles and reviews written about the company, which will give you a good idea of the float. For instance, if a company’s float were very high, it implies that it is merely issuing extra ones to keep afloat, hence would not be worth investing in. Companies that have five million to one hundred million shares are considered fit for investment. The product of the company also needs to be scrutinized. For example, it is important to find out if the company would face obstacles in selling its products for various reasons, or whether patent issues would allow some other company to introduce a similar product in the market, all of which would affect the value of the stocks. Another important consideration would be whether the product is going to find appeal with the target consumers. While investing in penny stocks may be more perilous than putting your money in bonds or the shares of established companies, the chances of striking it rich is also a strong possibility, which makes it a risk well worth taking.

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Go, PPD, Go!

Mon, 23 Oct 2006 08:01:12 -0800

Pre-Paid Legal Serivices, Inc., one of my longest holdings, reported terrific results today, and its stock jumped over 11% within the first hour of market opening. It seems that management is executing a cash-cow strategy to keep membership growth in control and extract more cashflow to return to shareholders. Good job! (Full disclosure: I currently own 580 shares of PPD, including 280 shares bought in 2002 and 300 shares bought in August 2006.)

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Should Microsoft (MSFT) Buy Yahoo (YHOO)?

Sun, 22 Oct 2006 22:09:42 -0800

Now that MSFT is at multi-year high and YHOO is at multi-year low, it makes perfect sense for the Bill/Steve Co. to buy out Yahoo even with a premium. How can Microsoft unseat Google (GOOG) otherwise?

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The Priceless Heart Attack

Sun, 22 Oct 2006 19:26:57 -0800

legal background of the Judge's decision.]]>

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Berkshire Hathaway And Its $100,000 Stock

Sat, 21 Oct 2006 23:26:21 -0800

As Berkshire Hathaway's class-A share (BRK.A) is approach a six-figure price, MarketWatch briefly reviews Warran Buffett's success. We might never see Berkshire Hathaway to break seven figures ... it is more a value play than a growth story, and the law of large numbers has already hit the stock (thinking about Buffett's $40 billion cashpile). (P.S. I hold six shares of BRK.B in my portfolio. Nice gain of 14% in about a year's time. It is a keeper!)

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The World's Biggest IPO: Industrial & Commercial Bank of China (ICBC)

Fri, 20 Oct 2006 06:04:55 -0800

It is wise for the Chinese government to unload most major national banks before it has to open its financial market later this year due to its WTO obligations. (Disclosure: The last time I had an ICBC bank account was over a decade ago. I'm currently enjoying excellent service from China Merchants Bank.)

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Bill Gates' Successful Drug Investment

Tue, 17 Oct 2006 19:46:33 -0800

Bill Gates is making a killing in Icos (ICOS). I have no doubt he is the sharpest men in this world and he will be as successful in his charitable efforts as he is in Microsoft.

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Is BofA's Free Trading Program A Good Deal?

Sat, 14 Oct 2006 15:34:25 -0800

BofA's latest foray into brokerage business. His conclusion: only active traders will benefit from the free trades associated with $25,000 deposit. ]]>

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What Is A Unit Investment Trust (UIT)?

Wed, 11 Oct 2006 04:49:04 -0800

UIT is the invention of Morgan Stanley.

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Visa Is Contemplating IPO

Wed, 11 Oct 2006 04:49:02 -0800

First Goldman Sachs, then Mastercard. Now Visa is planning to put itself for sale too. As a good franchise, it may be a nice investmen at the right price.

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Google Docs & Spreadsheets: Word and Excel From Google

Wed, 11 Oct 2006 02:11:00 -0800

While the offering is certainly interesting, I couldn't imagine too many people will love to work on documents online.

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Will Fed Continue To Hike Interest Rates?

Tue, 10 Oct 2006 16:55:22 -0800

WSJ reported that Fed governor Richard Fisher said interest rate raise is still a choice. It might well be lip service. And how can he say anything different?

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MSN Money: 50 Best Stocks In The World

Tue, 10 Oct 2006 06:13:19 -0800

MSN Money columnist Jim Jubak recommends the following 50 stocks for buy-and-hold investors. I don't fully agree with his approach. These are at most 50 best-run companies, but if you buy at the wrong price, they are not going to be good investments.

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Big Tobacco Companies Spending Big To Fight State Taxes (RAI, MO)

Tue, 10 Oct 2006 05:39:14 -0800

It is probably fair to say both litigation and public relationship costs are cost of doing business for the big tobacco companies.

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Stocks With Dividend Growth Potentials (GE, MSFT, NI)

Tue, 10 Oct 2006 05:39:05 -0800

Vanderlee mentioned the following stocks with high potential for dividend growth: General Electric Co. (GE) NiSource Inc. (NI) Microsoft Corp. (MSFT)

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Silver Linings Of Housing Industry (DHI, PHM, CTX, LEN, KBH, MDC, MTH)

Tue, 10 Oct 2006 04:42:42 -0800

Morningstar's analyst Eric Landry is making a case why housing industry's economics is attractive. The following stocks are mentioned in the article: DR Horton (DHI) Pulte (PHM) Centex (CTX) Lennar (LEN) KB Home (KBH) MDC Holdings (MDC) Meritage (MTH)

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Berkshire Hathaway (BRK) Adds Its USG Corporation (USG) Stake

Mon, 09 Oct 2006 00:47:19 -0800

Buffett is buying USG again, but do you have the gut to follow Buffett to a falling knife?

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China's ICBC On Track To Complete The Largest IPO, Ever

Mon, 09 Oct 2006 00:13:06 -0800

While the IPO will surely be a success, I don't think high of the bank. I normally bank with China Merchant Bank, also a public traded bank in China. ICBC is just too big to be successful.

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How To Select Your Broker?

Sun, 08 Oct 2006 02:12:58 -0800

Think through your financial objectives and prepare a personal financial profile. Talk with potential salespeople at several firms. If possible, meet them face to face at their offices. Ask each sales representative about his or her investment experience, professional background, and education. Find Out about the disciplinary history of any brokerage firm and sales representative by calling 1-800-289-9999, a toll-free hot line operated by the National Association of Securities Dealers, Inc. (NASD). The NASD will provide information on disciplinary actions taken by securities regulators and criminal authorities. Your state securities regulator also can tell you if a sales representative is licensed to do business in your state. This is very important, because if you do business with an unlicensed securities broker or a firm that later goes out of business, there may be no way for you to recover your money—even if an arbitrator or court rules in your favor. Understand how the sales representative is paid; ask for a copy of the firm's commission schedule. Firms generally pay sales staff based on the amount of money invested by a customer and the number of transactions done in a customer's account. More compensation may be paid to a sales representative for selling a firm's own investment products. Ask what "fees" or "charges" you will be required to pay when opening, maintaining, and closing an account. Determine whether you need the services of a full service or a discount brokerage firm. A full service firm typically provides execution services, recommendations, investment advice, and research support. A discount broker generally provides execution services and does not make recommendations regarding which securities you should buy or sell. The charges you pay may differ depending upon what services are provided by the firm. Ask if the brokerage firm is a member of the Securities Investor Protection Corporation (SIPC). SIPC provides limited customer protection if a brokerage firm becomes insolvent. Ask if the firm has other insurance that provides coverage beyond the SIPC limits. SIPC does not insure against losses attributable to a decline in the market value of your securities. For further information, contact SIPC at 805 Fifteenth Street, N.W., Suite 800, Washington, D.C. 20005-2207; or call (202) 371-8300. Remember, part of making the right investment decision is finding the brokerage firm and the sales representative that best meet your personal financial needs. Do not rush. Do the necessary background investigation on both the firm and the sales representative. Resist salespeople who urge you to immediately open an account with them. ]]>

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What Is Day Trading?

Sun, 08 Oct 2006 02:12:58 -0800

Day traders rapidly buy and sell stocks throughout the day in the hope that their stocks will continue climbing or falling in value for the seconds to minutes they own the stock, allowing them to lock in quick profits. Day trading is extremely risky and can result in substantial financial losses in a very short period of time. If you are a day trader, or are thinking about day trading, read our publication, Day Trading: Your Dollars at Risk. We also have warnings and tips about online trading and day trading. Under the rules of NYSE and NASD, customers who are deemed "pattern day traders" must have at least $25,000 in their accounts and can only trade in margin accounts. For more information, you can read the NASD's Notice to Members and the New York Stock Exchange's Information Memo.

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How To Get Corporate Reports?

Sun, 08 Oct 2006 02:09:27 -0800

- The SEC You can find out whether a company files by using the SEC's database known as EDGAR. For companies that do not file on EDGAR, you can contact the SEC at: Office of Public Reference 100 F Street, NE Room 1580 Washington, D.C. 20549-0102 phone: (202) 551-8090 fax: (202) 777-1027 e-mail: publicinfo@sec.gov Please note that you may have to pay a photocopying charge of $0.26 per page, plus postage, for any filing you order. - The company Ask the company if it is registered with the SEC and files reports with us. That information may be listed on its Web site. Check out new or smaller companies thoroughly because many frauds involve these types of companies. Our brochures on Internet fraud and microcap companies provide valuable information you shouldn't miss. - Other government regulators Banks do not have to file reports with the SEC, but file with banking regulators. Visit their Web sites: Federal Reserve System's National Information Center of Banking Information, the Office of the Comptroller of the Currency, or the Federal Deposit Insurance Corporation. ]]>

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How To Avoid Internet Investment Scams

Sun, 08 Oct 2006 02:09:23 -0800

You should be skeptical of investment opportunities you learn about through the Internet. When you see an offering on the Internet – whether it's on a company's website, in an online newsletter, on a message board, or in a chat room – you should assume it's a scam until you've done your homework and proven otherwise. Get the facts before you invest, and only invest money you can afford to lose. You can avoid online investment scams by asking – and getting answers to – these three simple questions: Is the investment registered? To find out, check the SEC's EDGAR database. Some smaller companies don't have to register their securities offerings with the SEC, so always check with your state securities regulator. You'll find that number in the government section of your phone book. Or call the North American Securities Administrators Association (NASAA) at (202) 737-0900 or visit NASAA's website. Many online investment scams involve unregistered securities. But the fact that a company has registered and files reports with the SEC doesn't guarantee that the company will be a good investment. Likewise, the fact that a company hasn't registered and doesn't file reports with us doesn't mean the company is a fraud. You may be asking for serious losses if you invest in a small, thinly traded company that isn't widely known solely on the basis of what you read on a bulletin board posting or saw in an online newsletter. One simple phone call o your state regulator could prevent you from squandering your money on a scam. Is the person licensed and law-abiding? Find out if the person or firm selling the investment needs to be licensed. Call your state securities regulator and ask whether the person or firm is licensed to do business in your state and whether they have a record of complaints or fraud. You can also get this information by calling NASD's public disclosure hotline at (800) 289-9999 or visiting their website. Does the investment sound too good to be true? If it does, it probably is. High-yield investments tend to involve extremely high risk. Never invest in an opportunity that promises "guaranteed" or "risk-free" returns. Watch out for claims of astronomical yields in a short period of time. Be skeptical of "off-shore" or foreign investments. And beware of exotic or unusual sounding investments, especially those involving so-called "prime bank" securities. To learn more about "prime bank" securities, visit the Division of Enforcement's Prime Bank Fraud Information Center on our website. Make sure you fully understand the investment before you part with your hard-earned money. Always ask for – and carefully read – the company's prospectus and latest financial statements.

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Major Advantages Of Options Trading

Sun, 08 Oct 2006 01:22:54 -0800

I am amazed at how many investors have no idea about what Options really are. Many continue to provide the argument on how Options Trading is very risky…I would have to disagree as Options Trading is safer than just trading stocks. Now hold on a minute and let me explain. You are correct in that Options Trading does have risks. But, so does any strategy used in the Stock Market as no one knows what the stock will be in the future. So, let’s say you purchase stock in DELL so you are looking for an increase in value so that your investment increases. Now, what happens if DELL drops in price? Your portfolio value drops along with DELL. A $5.00 drop in stock price and you will be down $500 on your investment in DELL. What would I have done differently? Let’s say I match your investment in DELL and purchase 100 shares as you have done. I however would sell a call again DELL ( in other words, sell someone the option to purchase my shares from me at a fixed price above what I paid for the stock) other wise know as a Covered Call. For selling these calls I would immediately receive $100 (or $1 per share for such a call sale). Time to compare situations…your account value would be down $500 but mine would only be down $400. Therefore, I have effectively provided some downside protection while also reducing my per share cost in DELL. I would be able to do this every month to generate income and at some point I could exit DELL with a profit even though it never gained a penny in value while you on the other had would still be down $500. Now…does Options Trading seem as risky as you first thought? Covered Calls are just one of the many option trading strategies I use in trading the Stock Market. Although Options Trading does involve risk there are ways in which they greatly help to reduce the risks of trading. Therefore, make sure you have a good understanding of any trading strategy before you invest your money.

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Basics of Stock Option Trading

Sun, 08 Oct 2006 01:22:54 -0800

Stock options are an excellent way to reduce risk in trading or to leverage your capital. While advanced stock option strategies are for experienced investors only, the basic option strategies can also be used by novice traders. Basically an stock option is nothing complicated. There are just a few things to consider. There are two basic option types which are the call option and the put option. The call (put) option gives you the right to buy (sell) a stock at a fixed price before a certain date, the expiration date. The option expires at this date and does no longer trade. Until this date your strategy should have worked out, otherwise your stock option expires worthless. Buying the stock option is nothing else then buying the stock itself. Just that you need much less money to buy the option instead of the shares and that the option expires one day. But the rest is almost the same. When the stock moves, the option moves as well. The difference and the big advantage of options is the leverage involved. To buy the option you need about 10% of the capital which would have been needed to buy the shares directly but with the same profit potential. There lies the risk as well. One option contract equals 100 shares. If you want to own 1000 shares of Microsoft then you either can buy the 1000 shares at the stock exchange or you buy 10 Microsoft option contracts at the options exchange. You will figure out that there are many options for one stock. The reason is that options have different expiration dates and strike prices. The strike price is the price where you could buy the stock if you want. In the praxis you don't want to buy the shares through the options so this remains a theory. Most options are not exercised but sold before expiration with a profit or expire worthless otherwise. So the option is just a bet with limited investment. You can never loose more than your option purchase price with the basic option strategies. There are various combinations of covered and uncovered call and put options. Different strike prices and expiration dates have different option prices, leverage and risks. To learn the basic option trading strategies you must first explore the possibilities of simple call and put options. Instead of a short sale you could buy a put option. Instead of going long in shares you buy a number of call contracts. Following the option prices for several days will show you that the option price decreases slowly although the stock price hasn't changed at all. This is the price you pay for the leverage.

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What Is A Stock Split?

Sun, 08 Oct 2006 01:22:54 -0800

Companies will split their stock when they feel that the share price has grown to the point that it will no longer be considered affordable by many investors. Since most stock transactions are in round lots (lots of 100 shares), the total cost for 100 shares might be out of reach for some investors. Once a stock price hits $100 a share, for instance, evidence shows that many investors consider it to be too expensive. If the price per share were reduced it would be more affordable. The effect of more people buying the shares will hopefully lead to a price gain. What effect does a Stock Split have on the Share Price? When a company splits it stock it sends the message that the company has been profitable and it will probably continue to prosper. Companies normally announce their upcoming stock split some time in advance. Many investors and traders search for these companies and consider them prime candidates for a further price increase. In theory a stock split should have no impact on the value of the stock, it should be a neutral event. The only thing that has changed is the share price and number of shares. When you do the math you still have the same value and the same percentage of ownership in the company. In practice however, companies who split their stock most often see price increase when the split is announced or after the split actually occurs. The company knows this and is eager to see it's stock price increase.

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What Is A Reverse Split?

Sun, 08 Oct 2006 01:22:54 -0800

Sometimes a company will issue a reverse split. When this happens the shareholder will have less shares at a greater price. For example, a typical reverse split is a 1 for 10 split. For example, if a company has been trading at $1 a share and you have 100 shares, after a 1 for 10 split you will have 10 shares at $10 a share. A company might perform a reverse split when their share price has dropped to a very low level and they want to increase the share price to appear more respectable to potential investors. In addition, some exchanges will de-list a stock when the price drops below a certain level for 30 days.

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What Happens To A Company After Bankruptcy?

Sun, 08 Oct 2006 01:22:54 -0800

Federal bankruptcy laws govern how companies go out of business or recover from crippling debt. A bankrupt company, the "debtor," might use Chapter 11 of the Bankruptcy Code to "reorganize" its business and try to become profitable again. Management continues to run the day-to-day business operations but all significant business decisions must be approved by a bankruptcy court. Under Chapter 7, the company stops all operations and goes completely out of business. A trustee is appointed to "liquidate" (sell) the company's assets and the money is used to pay off the debt, which may include debts to creditors and investors. The investors who take the least risk are paid first. For example, secured creditors take less risk because the credit that they extend is usually backed by collateral, such as a mortgage or other assets of the company. They know they will get paid first if the company declares bankruptcy. Bondholders have a greater potential for recovering their losses than stockholders, because bonds represent the debt of the company and the company has agreed to pay bondholders interest and to return their principal. Stockholders own the company, and take greater risk. They could make more money if the company does well, but they could lose money if the company does poorly. The owners are last in line to be repaid if the company fails. Bankruptcy laws determine the order of payment.

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Hedge Short Selling Losses By Call Options

Sun, 08 Oct 2006 01:22:50 -0800

The most significant difference between short selling and put options is the time element involved for the strategy to pan out. Bearish investors often favor short selling because there are no time limits, other than a possible situation when the registered holder calls in the borrowed stock. Short selling has time on its side whereas put options have a limited life. Given this, for investors favoring short selling, risk can be minimized by initiating a Synthetic Put. This short-term strategy allows the bearish investor to profit when the stock declines to the downside, but at the same time, protects the short position in case the position goes against the short seller. A Synthetic Put is also desired when a specific put option may not be available. The use of a call option in a short selling strategy helps to minimize the risk of substantial losses that can arise. In addition, be aware that should the call option expire prior to the stock moving down to where you want it, you could simply buy another call option to maintain the hedge.

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40,000 Starbucks (SBUX) Stores?

Sun, 08 Oct 2006 01:12:10 -0800

If nothing else, 40,000 stores of Starbucks will be too boring.

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Google (GOOG) To Acquire YouTube?

Fri, 06 Oct 2006 19:30:25 -0800

Google can leverage its hefty stock price to buy another mega content site, but for companies like Microsoft (MSFT), it will be hard to justify the price tag of $1.6 billion.

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How Mid-Term Election Will Affect Drug Companies

Fri, 06 Oct 2006 14:43:11 -0800

Stock investing is tough enough when you have to deal with the specifics of a company and an industry. When you throw politics into the equation it becomes a whole new ball game. Now stock investing can be a crap shoot at best. Let’s take a look at what’s going on currently, and you decide. First let’s look at a little history. For the better part of 50 years, the drug industry has been nothing short of a fabulous stock investment. Whether it was Johnson & Johnson, Pfizer, Merck, or any one of a dozen other drug companies that developed into giants, you would have made a killing with these stocks. One of these companies Johnson and Johnson is the best performing publicly traded stock of the last 100 years with a compounded growth history surpassing 15% per year. It was a simple concept, but yet difficult to execute. These companies created drugs and then marketed them via advertising to a captive audience of doctors, and their captive audience the patients. As a stock investment, the industry was basically unsurpassed. The reason is that every other high tech investment as a rule had a longevity of about 7 years. Technology can obsolete technology very easily as you know. This was not true of drug manufacturers, where it takes a long time to bring a drug to market. You then have a long patent life, and usually you can extend that patent life at least once. Big Pharma as the drug companies came to be called were making a fortune, and the stockholders with them. When it came to stock investing, you couldn’t own enough of these wonderful companies. It all started to change in the 1980’s. A marvelous new, but small industry started to emerge called the biotech industry. Rates of growth for Big Pharma started to slow down. Something was needed to kick-start the drug industry once again, and the Federal government was more than willing to lend a helping hand. By the 1980’s government had become big sponsors of drug research. Our government had poured billions of tax payer dollars into supporting basic and applied research at the college, and university level. Myriad PhD’s were hired, laboratories built, and graduate students employed to go find, and develop the next marvelous drug. Congress then passed a law that mandated that the discoveries taking place in these government sponsored research labs (usually the top 50 colleges in the United States) would have to be given to the giant drug companies for final testing, and distribution. This meant that Big Pharma would be the recipient of all this largess bestowed on the government labs. The giant drug companies would be the direct beneficiaries of tens of billions of dollars of citizen sponsored research. It was the best of all worlds. Throughout the 1980’s, and 1990’s, these actions sustained the growth of the major drug companies. Unbeknownst to the general citizen, the major drug companies come up with less than 5% of all the major drugs sold in this country. The real creators have been those government sponsored labs, and the small bio-tech companies that have been spawned everywhere. Even with the giant government outlays, by the beginning of the 21st century, we started once again to see a slow-down in growth rates for Big Pharma. What was needed was a shot in the arm. In 2003, the federal government supplied the adrenalin, and the drug companies were only too glad to accept it. Congress passed a new part III to the Medicare law which meant that the government was going to start picking up prescription drugs for citizens 65 years of age and older. This program would cost tens of billions of dollars. More importantly, the government would not be allowed to negotiate the prices of the drugs that they would pay for under the act. This meant that the drug companies would be able to charge BILLIONS OF DOLLARS more than if they had to negotiate. It was the ultimate bonanza for the drug companies, and their profits were inflated by billions. As an aside, the program also called for insurance companies to come in between the user which was the senior citizen, and the Medicare program. This was a successful attempt to also reward the insurance industry with billions in profits. Democrats may have last laugh? The problem is that it seems likely that the Democrats will take over the House of Representatives in November. If successful, they have already stated their intent to change the program immediately. The Democrats want the federal government to now have the right to negotiate lower drug prices on behalf of the senior citizens. This will result in lowering drug company profits to the tune of billions of dollars. Here’s the wild part of the whole deal. For decades the Democrats wanted to create a prescription drug coverage program as part of the Medicare Program. They couldn’t get it done. They tried, and tried, and failed, and failed. It took the Republicans to do it, but they only did it, to benefit the drug companies, and the insurance companies as well. Now that the Democrats may take control, they will have the opportunity to roll back the drug companies participation in the outlandish profits they are making. At the same time, the Democrats will be able to keep a program in effect, that they desperately wanted, but could never make happen on their own. It’s fascinating how what seems to come around, always goes around. Our advice is don’t be caught dead owning drug stocks if the Democrats take over the House in the November election. They are in for some ride on the downside, as we all will be watching the granddaddy of federal giveaways get taken away.

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Berkshire Hathaway (BRK) Breaks $100,000

Fri, 06 Oct 2006 03:48:05 -0800

Berkshire Hathaway hit $100,000 briefly during the day, making it the first U.S. stock worth six-figure. Disclosure: I own six class-B shares of of the stock (BRK.B).

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Is Qualcomm (QCOM) A Buy?

Wed, 04 Oct 2006 17:47:44 -0800

Morningstar things high of Qualcomm, which is in a multi-year low now. Is this a right entry point?

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Stocks For The Long Run: General Electric (GE)

Tue, 03 Oct 2006 14:50:17 -0800

Consistent Growers: Companies with a long record of increasing their earnings every year are good bets as buy-and-hold investments. Of more than 15,000 publicly traded U.S. companies, fewer than 2% have raised their earnings for 10 straight years or longer. Through 2005 or the closest fiscal year, just 21 have boosted earnings 20 years in a row, according to America's Finest Companies, an annual reference guide. General Electric is perhaps the most visible of these consistent growers, having posted increased earnings 30 years in a row. Nonetheless, the share price is down almost 10% since late 2004. GE's yearly growth rate is no longer at the 15% level of Jack Welch's day, in part because the company's sheer size makes that number difficult to reach. But since CEO Jeff Immelt took over in 2001, he has divested insurance operations and focused on more promising businesses. Analysts think Immelt's efforts will pay off with double-digit earnings growth. In addition, GE offers a 2.9% dividend yield, a generous payout for such a quality stock.]]>

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Stocks For The Long Run: FPL Group (FPL)

Tue, 03 Oct 2006 14:50:13 -0800

Electric Utilities: To help balance your portfolio, include a top-quality electric utility. Demand for electricity grows with the overall economy - and also with the population. Much of an electric company's business is subject to rate regulation, which limits its profit margins. So revenue growth is the key to above-average earnings increases. FPL Group, the holding company for Florida Power & Light, provides electricity to much of eastern and southern Florida. The population in this area is growing 2.3% a year. FPL also owns a wholesale energy business that isn't subject to rate regulation. It focuses on cleaner energy, including wind and solar power, and operates in 24 states. This business accounts for more than 20% of FPL's net income and is growing faster than 20% a year. Thanks to the boost from this profitable sideline, total earnings are projected to grow as much as 10% annually over the next five years. That's very fast for an electric company. The stock yields 3.4%, and FPL has boosted its dividend every year for the past decade.]]>

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Stocks For The Long Run: Anadarko Petroleum (APC)

Tue, 03 Oct 2006 14:50:12 -0800

North American Energy: Oil prices may back off from current highs, but the era of cheap energy is over. Oil sold for less than $20 a barrel for 11 of the 15 years from 1986 to 2000. Most economists today would breathe a sigh of relief if the price settled around $45. So oil and gas companies will likely enjoy a favorable market over the next 20 or 30 years. In addition, companies with large reserves in North America and other safe places have an important strategic attraction. It's likely that the parts of the world with most of the oil will be at risk for either war (the Middle East) or political disruptions (Russia, Venezuela). Reserves in the U.S., Canada, Australia and the North Sea deserve a premium for safety. Anadarko Petroleum is one of the world's largest independent producers, with 85% of its reserves in Canada, the U.S. and the Gulf of Mexico. And the company is using the flood of cash it's been earning to buy growth. In August, Anadarko completed the $4.8 billion acquisition of Western Gas Resources, which has sizable gas reserves in the Rocky Mountains. The same month, Anadarko completed the $16 billion acquisition of Kerr-McGee, which has big reserves in the Rockies and the Gulf. Both deals were all cash.]]>

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Stocks For The Long Run: J.P. Morgan Chase (JPM)

Tue, 03 Oct 2006 14:50:10 -0800

Banking Giants: As the global economy continues to expand over the coming decades, businesses will have to be financed and consumers will need credit. The banking industry has also been consolidating, putting more power in the hands of industry giants, particularly Bank of America, Citigroup and J.P. Morgan Chase. Moreover, these stocks now look timely, trading at less than 12 times earnings projected for 2007 and yielding at least 3%. Nothing gets your long-term results off to a better start than buying low. As an added attraction, the banks stand to benefit from from an improving interest-rate environment. For the first time in more than two years, the Fed recently let a meeting pass without raising interest rates. And with the economy likely to slow in the second half, it's unlikely that short-term interest rates will go much higher and possible that they will soon start coming down. Declining short-term rates give financial stocks a major boost as long as they aren't overly dependent on mortgage business, according to research by the Leuthold Group, an institutional investment adviser. The major banks all have similar investing outlooks, but I lean toward J.P. Morgan Chase. Today's bank is the result of a string of acquisitions since 1990 that have yet to fully pay off. CEO Jamie Dimon is pushing to bring returns closer to the industry average. Whatever success he achieves will likely mean superior performance for J.P. Morgan compared with other major banks.

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Stocks For The Long Run: Burlington Northern (BNI)

Tue, 03 Oct 2006 14:50:09 -0800

Railroads: Buying a railroad sounds quaint. You won't even be able to do it in the new version of Monopoly. But the fact is, the products that industrial companies make still have to be shipped - and railroads are likely to enjoy increasing cost advantages over competing forms of transportation. For starters, trains are three or four times as fuel efficient as trucks, not to mention airplanes. High energy costs help indirectly as well. Both of the industry's giants - Burlington Northern Santa Fe and Union Pacific - profit from hauling low-sulfur coal from the Powder River Basin in Montana and Wyoming. In addition, the rails are benefiting from new technology. Major railroads are built on very complex information systems that keep track of how trains are moving and where all the freight is. Sophisticated computer systems can greatly raise efficiency and prevent freight from sitting in rail yards. And if you still wonder about the potential of the transportation sector in a growing economy, consider this: Since the low four years ago, the Dow industrials have risen nearly 50%, but the transport stocks have doubled. Both Burlington Northern and Union Pacific trade at low P/Es, but I prefer Burlington. UP has had lots of problems since it acquired Southern Pacific 10 years ago. Some analysts argue that UP has more room for improvement, but I'd favor the railroad with the better record.]]>

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Stocks For The Long Run: Procter & Gamble (PG)

Tue, 03 Oct 2006 14:49:58 -0800

Dividend Hikers: Some companies that can't maintain a perfect earnings record still manage to increase their dividends like clockwork. In fact, more than 100 have hiked dividends for 30 years in a row, and 22 dividend machines have rolled past the 40-year mark. Procter & Gamble has raised its payout for an incredible 50 straight years. The company's great array of soaps and personal-care products (Tide, Crest, Head & Shoulders and Pampers, among others) are recession-resistant. People don't stop washing their hair or diapering their babies because the economy is sluggish. So P&G generally enjoys great earnings stability. When the company acquired Gillette last year, some analysts thought that P&G had overpaid and that the merger would take too long to pay off. Whether the deal was well priced or not, P&G's earnings are expected to be up 13% this year and next. That should allow the dividend, which now provides a 2% yield, to keep rising.]]>

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Stocks For The Long Run: Applied Materials (AMAT)

Tue, 03 Oct 2006 14:49:58 -0800

Tech Dominators: Technology may change, and tech shares may be very unpredictable, but one type of stock in particular benefits from a very long holding period. A company that dominates an important business can maintain its position for years and turn in above-average growth. If the business is highly cyclical, however, even the No. 1 player's stock will bounce up and down, and investors can get burned if they mis-time a trade. But hold for 30 years, and you won't care about volatility. In the end, you'll reap the rewards of decades of earnings growth. Applied Materials is the leading producer of semiconductor-manufacturing equipment. Even in good times this is a cyclical business. Because chipmaking equipment is so expensive (from $1 million to $3 million apiece for one of the latest systems), producers put off buying new machines as long as they can. But then, when overall demand picks up enough or a new kind of chip becomes popular, makers have to upgrade. Recently, Applied Materials has warned that orders could be flat in the second half of the year. Nonetheless, the company's earnings have grown at an 18% compound annual rate over the past five years. That's impressive for a stock trading at less than 15 times estimated earnings. Just be sure you balance a stock like Applied Materials with more conservative choices so you'll be comfortable hanging on through the ups and downs.]]>

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How To Make A Fortune In The Stock Market?

Tue, 03 Oct 2006 14:43:11 -0800

Imagine being able to make a fortune every day from the stock markets by a strategy that's unfailing. Sounds good? However, if experts are to be believed there are no short cuts to making a fortune, although you can follow certain time tested principles to ensure that you come out a winner from the stock markets. First of all, you must realize that there is no single strategy that can be repeated every day to give you guaranteed and consistent results on the stock market. In order to maximize your returns form the stock markets, you need to develop skills to identify and play with hot stocks. Some of the things that you should be looking at are: 1. You can make a fortune in stock market by investing in the long term. If you want to make a fortune in the long-term look at small cap stocks today that offer the potential. How do you spot them? If you're not the expert, take the advice of one. Look at small cap stocks that offer potential. Review your portfolio frequently and hold on to the stocks as long as they are performing well. 2. The short-term approach is more risky but can give you greater profits within a short period of time. For this, you will need to closely attune yourself to the market sentiment. Pick on stocks that are currently on a rising trend, and invest in them. Spread your risks. 3. You should know when to quit. That's part of the secret of success. Set limits for your losses. For example, set yourself a limit of 10% and if your stock falls by more than 10% sell it off. Remember you can always buy it back if it reaches the price at which you sold it, and seems to be rising. 4. Know when to book profits. You should look for signs of a reversal of the rising trend and sell off at the peak. 5. Your preference should be towards lower priced stocks, as these will have a better chance of rising faster, and also reduce your risk. However, make sure that the stocks that you choose are showing a rising trend. 6. Remember that no one can guarantee the trends of prices. You must be prepared to make losses on individual stocks - that's where rule no. 3 comes in. What is important is that on the whole you make money - not that you should make money in each and every stock that you buy. 7. Take advantage of market variations. You will find that stocks that do well suddenly start losing - only to gain again later. The trick is to know when to invest in these stocks so that you make money. Ultimately, it's all about knowing when to buy and when to sell. 8. If you want to play it even safer, keep an eye on fundamentals. There are certain prices at which, irrespective of market performance, you are bound to make money in the long run, because the stock has the potential to earn. Invest a reasonable amount on such stocks. Don't hold on to them, you should book profits on them as you would in any other stock, but a good mix of such stocks in your portfolio will ensure that you will minimize your chances of losing any money.

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Stock 101: Market Order, Limit Order And Stop Order

Tue, 03 Oct 2006 14:40:55 -0800

There many different order types used to buy and sell stock. There three primary ones are market orders, limit orders, and stop orders. A market order is an order to buy or sell a stock at the current market price. The trader is not guaranteed to get the exact price they want, but he can be sure the order will take place. A limit order is an order to buy or sell a stock at a specific price or better. The order remains in place until the trade occurs or a specified amount of time elapses, usually the end of the trading day. The trader is not guaranteed to have their order executed, but they are sure to get the price they want. Stop orders remain until triggered like limit orders, but they are activated when a stock moves through the trader's specified price. At that point, they become a market order and the trade is executed. They are usually placed to minimize loss associated with a steep drop in share price. There are also market-with-protection orders. These are market orders that become limit orders if the price of the stock changes drastically between the placing of the order and its execution. They are often used when trading highly volatile stocks to ensure the trader doesn't end up with a price they didn't want. Stop-limit orders function like stop orders but become limit orders when triggered rather than market orders. They offer greater precision because stop orders can result in very poor trades if the market is very volatile.

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What Is Dow Worth Today?

Tue, 03 Oct 2006 00:17:41 -0800

Morningstar thinks the Dow 30 stocks as a whole is undervalued by 9%. Do you want to buy at low?

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First Data Spins Off Western Union

Tue, 03 Oct 2006 00:05:04 -0800

Both Western Union and the rest of First Data are two well-run franchises that one should consider at the right price.

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The Motley Fool To Measure Stock Pickers

Tue, 03 Oct 2006 00:05:04 -0800

It will be an interesting services, but it is hard to bet on stock based on stock picker's track record.

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Bank of America: Interest Rate Play

Sat, 30 Sep 2006 20:55:13 -0800

Kiplinger thinks the changing interest rate landscape will mean more profits for financial institutions, and encouraged investors to take a look at Bank of America as a value play. Actually BofA is the largest holding in my portfolio. I also have sizeable exposure in Citigroup (C) and JP Morgan (JPM), two fellow banking plays.

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Investment Managers Thinks U.S. Stock Markets Undervalued

Wed, 27 Sep 2006 17:48:17 -0800

Should we say these investment "gurus" are getting complacent again? In my humble opinion, This bull market is already over-extended.

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Microsoft To Broadcast Concerts Online

Tue, 26 Sep 2006 23:49:01 -0800

Nice run of MSFT lately, but it is still a long way to go to chip away Google's huge first-mover advantage.

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Judge Certifies Class-Action Lawsuit of "Light Cigarette" Smokers

Mon, 25 Sep 2006 18:23:02 -0800

Bad for my Altria (MO) holding, but is this a buying opportunity for Altria or Reynolds (RAI)?

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How To Pick A Stock Broker?

Tue, 19 Sep 2006 20:48:03 -0800

Don't jump for the big names. The first thing you need to know is the difference between full-service brokers and discount brokers.

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Fortune 40: The Best Stocks To Buy Now

Tue, 19 Sep 2006 20:38:31 -0800

Fortune is recommending the following 40 stocks. Among these stock picks, I only own two stocks: Altria (MO) and Conocophillipes (COP).

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How To Buy Stocks?

Tue, 19 Sep 2006 20:38:29 -0800

I learned two important lessons from stock investing in the last seven years: 1) Don't believe in charts or anything more sophisticated than that. 2) Good company does not necessarily make a good investment; good company and an attractive price do.

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Bottom-Fishing For Energy Stocks?

Tue, 19 Sep 2006 20:07:59 -0800

It is probably the right time to jump to the energy stocks again. I just bought several hundred shares of ConocoPhillips (COP).

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Fantasy Investing: The Ugly Reality

Tue, 19 Sep 2006 20:03:36 -0800

My take is fantasy investing at best teaches you what is a put option vs a call option, but don't confuse yourself with limited success in fantasy investing with true investing talent.

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The Long Case for Pre-Paid Legal Services

Fri, 15 Sep 2006 07:17:14 -0800

I bought into PPD in 2002 and have owned the stock since. I fully expect it to appreciate to $50 in a couple of years.

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Full-Service Broker Or Discount Broker

Thu, 14 Sep 2006 05:56:06 -0800

• Full-Service Brokers. If you need some advice about which stocks and bonds to purchase, then you'll probably want to consider using a full-service broker. You will pay this broker a commission. In exchange, you will have the benefit of his or her professional advice. • Discount Brokers. If you're willing and able to research your own investments, then a discount or deep-discount brokerage firm may suit your needs. Don't expect to get much advice from a discount broker. Most of these brokers will only take your orders to buy or sell stock and, then, carry out those orders. ]]>

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14 Stocks for Retirement

Tue, 12 Sep 2006 09:12:20 -0800

CNN Money picked these 14 stocks one year ago, but the advice of sticking to blue chips still holds. - Amgen (AMGN) Strong earnings and promising new drugs propel this biotech. - Cisco Systems (CSCO) This cheap networking giant awaits a pickup in IT spending. - FedEx (FDX) The overnight shipper would benefit from lower fuel prices. - Intel (INTC) New microprocessors could revive this leading chipmaker. - Lowe's (LOW) Store openings are bolstering growth for this DIY retailer. - General Electric (GE) This stellar industrial conglomerate looks cheap. - Johnson & Johnson (JNJ) A leader in drug, medical, and health and beauty products. - Procter & Gamble (PG) Acquisition of Gillette strengthens this consumer giant. - Raytheon (RTN) Rising defense R&D spending fuels this cruise-missile maker. - 3M (MMM) Higher dividends for 47 straight years, as well as growth. - Citigroup (C) Undervalued assets stir rumors of a corporate breakup. - DuPont (DD) Dirt cheap after damage to chemical plants by hurricanes. - Pfizer (PFE) New drugs could revive this deeply depressed drug giant. - Sara Lee (SLE) Restructuring could boost earnings growth over five years.

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Just Purchased: ConocoPhillips (COP) @ $58.50

Mon, 11 Sep 2006 10:13:10 -0800

I just purchased 300 shares of ConoCoPhillips. Here is what Morningstar's discussion on the valuatio of the stock:

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