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10-06 Summary

Congratulations! You made it through the basic investing course unscathed, armed, and ready to begin a long, successful investment career. You have enough information to begin with some confidence. Remember, you can test your personal investment strategy using the real world simulation. You’ll get all the excitement and results you’d achieve in the market – Read More…

10-04 Practice, Practice, Practice

Like all good athletes, musicians, actors, and astronauts, the word “practice” is central to performance success. The newer investor should adopt this action plan. Just as few people are born knowing how to hit a baseball or play the piano, successful investors are made, not born.Your investment education should not stop with this course. Continue Read More…

10-03 Staying Informed

Even if you start out as a “buy and hold” investor, staying informed at all times is a critical component to your investment career. Should you be tempted to walk the ever-exciting and dangerous tightrope of day trading, your stream of current information is even more important.Here are some suggestions that will keep you informed, Read More…

10-02 Ten Mistakes to Avoid

Over-diversification. Sure, every expert with a pencil, computer, or microphone keeps telling you to diversify your portfolio. They are right, but they often neglect to tell you the rest. For example, assume you only have $200 to invest. You buy 40 different stocks at $5 each. Guess what? Now you’re too “thin” and you have Read More…

10-01 Ten Keys to Remember

Here are ten important things to remember as you take the next step in your investing journey. These are real world keys that you should embed into your conscious brain to help you become a consistently smart or profitable investor.Understand and control the fees and costs of your investing activities. Ask your broker how they Read More…

9-10 Resources

SummaryOptions are exciting investment “vehicles,” but to be used profitably, you need to understand what they mean and what they can or cannot do for you. You have now scratched the surface of the option world. Before you make a real-world decision, for better or worse, use the wonderful benefit offered by Howthemarketworks.com, and use Read More…

9-09 Put Versus Call Interest

Put and call interest does not involve the banking definition of interest, but the market excitement – or lack thereof – regarding puts or calls for a security. Before you start thinking we’ve all lost our analytical minds, try to understand that market prices for stocks and put/ call options The right, but not the Read More…

9-08 Option Pricing – Black-Scholes Model

 Any discussion of options and option prices would be incomplete without a mention of the Black-Scholes The most generally accepted option pricing model. option pricing model.Academics Fischer Black and Myron Scholes, in a paper they authored in 1973, stated their theory that an option was implicit to the pricing of any traded security.Referencing the work Read More…

9-07 Implied Volatility

Often used in relation to options, implied volatility is a calculation that compares the current market price of a stock with the theoretical value of the market price in the future, all to predict the true value of an option. This may sound like a risky probability equation – and it is – yet it’s Read More…

9-06 Volatility

Volatility is a concept that involves all stocks and other securities. For good reasons, high volatility is most often viewed as a negative in the investment world since rapid movements in market prices inherently involve both wins and losses. In investment language, volatility implies two scary conditions for you: uncertainty and risk.For example, if you Read More…

9-05 Writing Covered/Naked Calls

We noted earlier that 35% of option buyers lose money and that 65% of option sellers make money. Option trading comes down to the turtle and the hare story. Option buyers are the rabbits that are generally looking for a quick move in stock prices, and the option sellers/writers are the turtles that are looking Read More…

9-04 Making Your First Option Trade

Now that you have a high level understanding of what options are, let’s look at option trading in a little more detail. When you get a quote on a stock you can also call up its option chain:First of all, you must realize that not all stocks have options. Only the most popular stocks have Read More…

9-03 Put Options

Whereas a call option gives the holder the right to buy the stock at a certain price, a put option gives the holder the right to sell the stock at a certain price. A trader that buys a put option The right, but not the obligation, to sell a stock at a certain price before Read More…

9-02 Call Options

A call optionThe right, but not the obligation, to buy a stock at a certain price before the expiration date. is the option (remember, not an obligation) to buy 100 shares of a stock for an agreed price (the strike price The price at which the option contract can be executed.) by an agreed date Read More…

9-01 What Are Options?

Generally speaking, options are used in many areas of business and investment. Employees of larger companies frequently get stock options as an incentive to stay with the company for a long time and help the company increase in value. A lot of real estate transactions involve the option to purchase additional neighboring acreage at a certain Read More…

8-10 Resources

SummaryThis lesson focused on hot topics in the investment world. Obviously, by the nature of discussing “hot” topics, conditions can change quickly, sometimes making hot topics cold and others newly hot. However, the issues in this lesson have been “hot” for some time and should continue to be important for the foreseeable future.Further, just because Read More…

8-09 Arbitrage

The subject of arbitrage Taking advantage of price differences in at least two different markets by buying the same security at the cheaper price and immediately selling it at the higher price. is a bit confusing for the new investor, but you will undoubtedly hear the term as you start reading more and more about Read More…

8-08 Investor Sentiment

Investor sentiment, sometimes also called market sentiment, typically relates to the stock market’s “attitude” towards specific securities, industries, or overall market conditions (bullish, bearish, or neutral. While of limited importance to a buy-and-hold investor, investor sentiment can be an effective tool if you decide to live in the fast lane by adopting a day or Read More…

8-07 Insider Transactions

Insider transactions and trading has become a sensitive topic in recent years. Most thoughts tend to be negative (images of Martha Stewart in prison may spring to mind), giving the impression that all insider transactions are illegal or unethical. Not true.Technically, insider transactions involve an employee of a company trading his own company’s stock or Read More…

8-06 Growth at a Reasonable Price (GARP)

During the height of the dot.com explosion, a popular strategy – growth at any price – became the rallying cry for many investors. After the bubble burst, a more conservative strategy known as growth at a reasonable price, or GARP, became and remains a popular investing action plan.Paying a high price for a rapidly rising Read More…

8-05 Buy and Hold

The most popular investment strategy preached by brokers, fund managers and even famous investors like Warren Buffet is “buy and hold.” In its most basic form, this strategy believes that you should only buy stocks of solid, well managed companies that will deliver profits for decades to come; furthermore, that you should hold onto these Read More…

8-04 Penny Stocks

Penny stocks are often popular with the newer and smaller investor. These investments are classically defined as any stock that sells for less than $5.00, traded outside the major exchanges, and often traded on the OTCBB (Over-the-Counter Bulletin Board Stocks that trade on the NASD with tickers that end in an “.OB”, but have no Read More…

8-03 Swing Trading

Swing trading Identifying “channels” or “tunnels” of price movements on a stock’s chart and then buying when the price gets to the bottom of the channel and selling when it gets to the top, usually over a few days. is identifying “channels” or “tunnels” of price movements on a stock’s chart and then buying when Read More…

8-02 Day Trading

The buying and selling of investments (stocks, futures, stock options, commodities, currencies, etc.) within the same trading day, so that all positions are closed before the end of each day, is called day trading The buying and selling investments (stocks, futures, stock options, commodities, currencies, etc.) within the same trading day, so that all positions Read More…

8-01 Manias, Bubbles, and Crashes

  Your first order of business in looking at current investing trends is to see if the hot trend is worthy and justifiable, or whether it is just a mania leading to a bubble. While it can be profitable to ride the bubble as it is getting started, it is extremely important to make the leap Read More…

7-15 Resources

Alright, everyone, take a deep breath and relax. You’ve just been assaulted with a lot of information. Don’t panic. As you view real-world examples of these charts, you’ll become more familiar and comfortable with their interpretations. This and other sites will give you all the additional information you need to continue your current journey and prepare Read More…

7-14 Bollinger Bands

In the 1980s, John Bollinger developed a new technical analysis tool to measure the highs and lows of a security price relative to previous trade data. These “trading bands” help investors track and analyze the “bandwidth” of stock prices over a period.The object of Bollinger Bands is to identify a “relative” definition of high and Read More…

7-13 Support and Resistance

Support Support in a stock chart forms at an area where the stock’s price seems to not want to move lower. This is due to the presence of buyers at this lower target price. and resistance Resistance in a stock chart forms at an area where the stock’s price seems to not want to move Read More…

7-12 Relative Strength Index (RSI)

RSI is the acronym for “Relative Strength Index.” The RSI was created in 1978 by J. Welles Wilder to compare the strength and magnitude of a stock’s gains and losses in recent time periods. The simple formula converts this winning and losing data into a number ranging from 0 to 100.To keep the analysis simple, Read More…

7-11 Moving Averages

Moving averages The Moving Average is a line on a chart that smooths out the recent price history by calculating the average price over 30 or 60 days (or any number of days). are among the most popular and – important for the newer investor – easy to use and understand trading “tools” available to Read More…

7-10 Fibonacci Ratios

Often called the most accomplished mathematician of the Middle Ages, Leonardo Fibonacci is best known for his “numbers”. It is a sequence starting with 0 and 1, after which every third number is the sum of the previous two numbers. A Fibonacci “sequence” is 0,1,1,2,3,5,8, etc. The Fibonacci “ratios” are 23.6%, 38.2%, 50%, 61.8%, and Read More…

7-09 MACD

This is the acronym for “ moving average The Moving Average is a line on a chart that smooths out the recent price history by calculating the average price over 30 or 60 days (or any number of days). convergence/divergence.” Got it? OK, here’s the simple explanation. This graph shows the difference between a fast- Read More…

7-08 Candlesticks

Candlesticks are a type of stock chart developed in Japan. Instead of lines, a vertical block, which looks like a candlestick, is used to symbolize a day or week’s worth of price action.Candlestick charts track price movements of a security over some time period. An interesting combination of a line and a bar chart, candlestick Read More…

7-07 Wedges and Flags

 A wedge in the financial universe describes a triangular shape formed by the intersection of two trendlines, which form the apex. The wedge need not be upward facing and can easily be an inverted triangle. The “falling wedge” is often called a “flag” since it more resembles a pointed flag more than a typical triangle.A Read More…

7-06 Trendlines

You’re probably aware that trendlines are important to all of your research on potential purchases or sales of securities. Base numbers are equally important to understand the true meaning of any trends you identify. Depending on the type of chart you are viewing, you’ll also want to establish a solid, unbroken trendline of your own Read More…

7-05 Double Bottom

A double bottom chart will look like a “W.” It indicates that the stock hit bottom market price, had a quick – albeit brief – uptick, and decreased again to turn a “V” shape into a “W.” The two reverse peaks should be around the same floor price and the time period should be similar Read More…

7-04 Breakouts

A breakoutA breakout occurs when a stock’s price moves up quickly above former resistance levels. occurs when market prices move through and continue through former highs/lows that had formed ceilings or floors in the past. Commonly called levels of “ support Support in a stock chart forms at an area where the stock’s price seems Read More…

7-03 Head and Shoulders

Don’t you love the terminology that pictorially associates these charts with their graphic representations? The Head and Shoulders is an extremely popular pattern among investors because it’s one of the most reliable of all chart formations. It also appears to be an easy one to spot. Novice investors often make the mistake of seeing Head Read More…

7-02 Cup with Handle

The Cup with a Handle pattern is one of the best-known stock chart patterns. The Cup patterns follow outlines that simulate an inverted semi-circle (U-shape), indicating a price fall, a bottoming out, and a price rise. Afterwards, there tends to be a rather unstable period marked by a sell-off generated by investors who acquired the Read More…

7-01 How to Read Stock Charts

This chapter will expose you to the most common charts available. Their names and meanings are important to your continuing education and the number of tools you carry in your toolbox in order to evaluate stocks.Understand that it will take some time before you are comfortable reading and interpreting many of these charts. Don’t become Read More…

6-10 Competition

Everyone knows that for a company to become and remain successful, it must pay attention to its competition. When analyzing a stock, investors must also do some competitive analysis.Companies do not operate in a vacuum. They are in constant competition for consumer and investment dollars. To make the best investment decisions, you need to have Read More…

6-09 New and Improved Products?

A company with well-respected and reliable products that have been accepted by the consumer market is often a valuable investment. How many rolls of Charmin toilet paper have you purchased in your lifetime? How many tubes of Colgate toothpaste? How many boxes of Tide laundry detergent? How many gallons of BP gas have you pumped Read More…

6-08 Management

As a potential investor, you need to know about the quality of the management team, the continuity of the management team, and projected future stability of the management team. After all, the performance of any organization is ultimately related to the leadership and direction provided by its leaders.History is full of examples of CEOs moving Read More…

6-07 Balance Sheet

In financial accounting, a balance sheet or statement of financial position is a summary of a person’s or organization’s balances. Assets, liabilities and ownership equity are listed as of a specific date, such as the end of its financial year. A balance sheet is often described as a snapshot of a company’s financial condition. Of Read More…

6-06 Revenue and Earnings Estimates

When you’re considering buying or selling a stock, it is just as important to look at future expectations as historical performance. We can read all of the 10-KsThe annual SEC filing by public companies that includes their audited Income Statement, Balance Sheet, Cash Flow Statement and other detailed notes about the companies financial and operating Read More…

6-05 EPS, PE Ratios, Cash Flow per Share and ROE

OK, so we have discussed sales, operating income, EBITDA Earnings before interest, taxes, depreciation, and amortization. , and net income. Which is the best measure of a company? The answer, unfortunately, is NONE OF THE ABOVE!If Stock A and Stock B are in the exact same industry, have the exact same revenues, costs, EBITDA and Read More…

6-04 Understanding Cash Flow Statements

Once you have understood a company’s profitability, take a look at the Statement of Cash Flows because this is the second most important element of Fundamental Analysis and it frequently needs more than a cursory examination. Many experts strongly contend that good cash flow is more important than earnings to ensure company viability for the Read More…

6-03 Operating Income, EBITDA and Net Income

A company’s net income is one of the most critical pieces of data you can pull out of the financial statements because it is this profit that generates cash and cash drives value. A company can produce the most innovative products, be in an industry with minimal competition, and have superior management, but the company Read More…

6-02 The Income Statement-An Introduction

You have to know how to read an Income Statement if you want to understand Fundamental analysis.An Income Statement follows this format:Revenue/Sales – The “top line” number on an Income Statement is usually the revenue/sales number that indicates the total sales of the company. This is the total cash register receipts of all of the Read More…

6-01 Information: 10-Ks, 10-Qs, and 8-Ks

The first place to start analyzing a company is to go straight to the source and review the financial information that the company is publishing about itself.In previous chapters we talked about IPOs and what it takes to be a public company in the U.S. To remain a public company in good standing with the Read More…

5-08 Resources

SummaryYou’ve made your first purchases and now you have some idea what to do with them. While you’re not yet an expert, you should now have enough information to create a basic holding strategy and an exit plan. You understand that you should ride your winners and dump your losers. Having a sensible exit strategy Read More…

5-07 Keep to Your Exit Strategies

Exit Strategies Are Designed to Protect Your ValueRule #7 – Have an Exit Plan and Target for Every StockFew experienced traders ever invest in any stock without having an exit strategy. In its simplest form, an exit strategy is a plan to get you out of something you’re in. In the investment universe, it means Read More…

5-06 Watch the Volume!

Identify Market Tops to Maximize ProfitsMarket tops are subjective opinions that often quickly become fact, for better or worse. How can you possibly identify a market top? Here are some suggestions that many experts believe will help you identify market tops.Closely watch the Dow Jones Industrial Average, NASDAQ Composite, and S&P 500. Pay particular attention Read More…

5-04 Diversify, Diversify and Diversify

Rule #4 – Diversify, diversify, and diversifyReminder: Always diversify your portfolio into at least 10 different stocks. It doesn’t matter if you are starting with $10,000 or $100,000–you’ll have more success if you think big and proceed as though you were a major-league investor. Diversification is important because while one sector of the economy might Read More…

5-03 Never lose more than 10%

Rule #3 – Never, ever, ever lose more than 10% on any single trade.Traders, finance professors, and common sense all say that you should never let one sour apple ruin all of the other apples in your basket! Picking 9 stocks that gain 10% will be a waste of time if your 10th stock loses Read More…

5-02 Don’t Fall in Love With Your Stocks

Rule #2 – Don’t fall in love with your stock purchases – winners OR losers (particularly losers).Remember, you are not a welfare agency, rehab specialist, or air/sea rescue professional. If an investment is going south, sell it – without remorse and move on. Don’t forget, investing is a business, not a hobby or a charity. Read More…

5-01 Ride Your Winners

Selling a stock is just as important of an investment decision as buying and you must have a strategy to maximize your profits and minimize your losses. Developing a trading strategy is important to your future investing activities. Even a flawed strategy is better than having no strategy. And trust me, your strategy will always Read More…

4-08 Resources

SummaryIt’s time to decide on how you’d like to construct your portfolio. Whether you decide to invest virtual money or real funds, you should now have a basis to create your own thoughtful plan and strategy. Using your virtual portfolio and trading ability, you can test your strategy and “tweak” it, if necessary, to achieve profitable Read More…

4-07 Popular Analysts and Websites

There is an astounding volume of information available from a myriad of “experts” and a plethora of websites. Most are useful to people, but you’ll decide which sources are most useful to YOU. Here is some information on a few popular sources.MSN Money: Offering you stock quotes, financial news, rumors, strategies, and blogs, MSN Money Read More…

4-06 Stock Screeners

Once you get out of the shopping malls, don’t forget to make sure you are diversifying. Buying a shoe company, a hat company, a jean company, a sock company, and a dress company is NOT exactly what we mean by diversificationA way of reducing the risk and variances in your portfolio returns by buying a Read More…

4-05 Meet Peter Lynch

Peter LynchPast portfolio manager of Fidelity Magellan, which became the largest mutual fund in the 1990s., another globally respected investment genius, also embodies a solid – not exotic – investing strategy. After graduating from Boston College (1965), Lynch was hired as an intern at the company that came to be forever linked with his name, Read More…

4-04 Meet Warren Buffet

Investing in “what” you know based on “how much” you know can provide an excellent return and a higher level of comfort.As an example, the legendary investor Warren BuffetChairman and CEO of Berkshire Hathaway, and generally regarded as the greatest buy and hold investor of the last 30 years. has amassed his fortune without using Read More…

4-03 Buying Stocks that you Know

With so many stocks out there, what does the new investor buy? If you have plenty of time and wish to become an information and opinion junky, you could spend thousands of hours reading all of the newspapers, websites, financial blogs, discussion boards and newsletters out there that cover just about every single one of Read More…

4-02 Measuring Risk: The Sharpe Ratio

To measure your success of diversifying, several calculations have been developed to provide an indication of how well your portfolio is performing in terms of its variance and its return. There is more than 1 way to get a 10% return. Graph 1 below shows a smooth portfolio increase upwards at a 10% return over Read More…

4-01 Risk, Reward, and Diversification

Risk, reward, and diversificationA way of reducing the risk and variances in your portfolio returns by buying a variety of stocks across different industries, market caps, etc. are the most important concepts to understand before you start your portfolio. They are factors in all investment decisions. You must learn more than the textbook definitions of Read More…

3-09 Resources

SummaryOk new investor, you should be ready to begin. You can now leave the bleachers, put on a uniform, cross the white lines, and play. Stay focused, positive, and realistic. You might not make the Majors right away, but you can enter the investment world armed with solid knowledge, upon which you can expand by Read More…

3-08 Set Goals and Targets

You should have a “game plan” for your investing life. Just as you plan your workday, vacation, college financing, golf matches, and other areas of your personal and professional life, you need a plan, objective, and goal for your investment activities.Spend some quality time with yourself, thinking about what you really want to accomplish. Stating Read More…

3-07 How to Record Gains and Losses

Unfortunately, when it comes time to file your tax return, the IRS wants to know how much money you made or lost in your brokerage account. Your brokerage firm will even report to the IRS your total proceeds from all of your sales of stocks, but they don’t report your gains and losses. The reason Read More…

3-06 Short Selling?

In its simplest form, short selling is selling shares that you don’t own. Just like the broker will loan you cash to buy more shares, the broker will also loan you shares that you can sell. When you sell shortBorrowing shares from your broker to sell a stock that you don’t own with the hope Read More…

3-05 Buying on Margin

When you are opening a real brokerage, you will be asked if you want to open a Margin Account. Buying on margin means that you purchase securities using some of your own cash and you take a loan from your broker to complete the purchase. The collateral for the loan is the stocks or cash Read More…

3-04 Types of Orders-Day, GTC, and Fill or Kill

As you might expect, just because you place an order, it does not necessarily get executed. Both the timing and the duration of your orders are important to successfully managing your portfolio. When you place the orders mentioned above, you will usually be allowed to specify the duration of the order. You might be placing Read More…

3-03 Types of Orders-Market, Limit, Stop

Once you have the ticker symbol for the company you wish to trade, you are ready to place your first order.Go to your virtual trading account and you’ll see several options for order type—market, limit and stop.You have already found the symbol to trade “LUV” and you can enter any quantity of shares to buy. Many Read More…

3-02 Understanding Stock Quotes

You can easily use the quote page on your brokerage account to locate stocks you might want to buy. If you know the ticker symbol you want to buy, or know the co mpany’s name, you should be successful in locating the current price and status of any publicly traded security. Remember, some companies have Read More…

3-01 How to Look Up a “Ticker Symbol”

The first thing you must understand about trading stocks is that the exchanges have assigned each stock a unique “ticker symbol” for identification purposes. When researching stocks, getting quotes, and placing trades, you usually have to know the ticker symbol.Stock ticker symbols are usually 1 to 5 letters long. (Occasionally they contain a “.” or Read More…

2-11 Resources

GlossaryAsk Price:The price that sellers want to sell for is called the “Ask” price.Bear Market:A prolonged period of pessimism and falling stock prices that seems to feed on itself and generates even more pessimism and even lower stock prices.Bid Price:The price that buyers are willing to pay is called the “Bid” price.Bull Market:A prolonged period Read More…

2-09 Why Stocks Are a Good Choice to Earn High Returns

While the wild roller coaster swings of the market make the media highlights, stocks remain an excellent choice to achieve a high – and steady – return. In finance textbooks, this is called return on investment (ROI) and is one of the most important measures of all investments choices. After all, when comparing different investment Read More…

2-08 Brokers and How to Choose the Right Ones

When you are ready to make your first trade you must open a brokerage account. Brokers generally fall into two categories: full service and discount brokers. Full service brokers like to make the decisions for you and will call you frequently with their ideas, suggestions and corporate research—but they will also charge you a hefty Read More…

2-07 The Danger of Trying to Time the Market

 The mere perception that a market is becoming Bearish is not a predictor of disaster. Fortunes have been made in Bear MarketsA prolonged period of pessimism and falling stock prices that seems to feed on itself and generates even more pessimism and even lower stock prices.. The trick is to know when one is coming Read More…

2-06 Bull vs. Bear Markets

Bull and Bear MarketsA prolonged period of pessimism and falling stock prices that seems to feed on itself and generates even more pessimism and even lower stock prices. play a strong role in extending or ending business cyclesThe typical business cycle consists of periods of economic expansion, contraction (recession) and recovery to a new peak.. Read More…

2-05 Market Timing and Moving

Now that you know what the stock market is and what role the Stock ExchangeStock exchanges are simply organizations that allow people the ability to buy and sell stocks. play, let’s take a step back and look at how stock prices and the economy move. As you might expect, timing is extremely important in investing Read More…

2-03 Other Stock Exchanges

In addition to the New York Stock Exchange, there is also the American Stock Exchange (AMEX) and NASDAQ. In the past, the NASDAQ was for smaller companies that were just getting started, and it was prestigious for them to move up to the NYSE or AMEX. These smaller companies included a few you might have Read More…

2-02 A History Lesson – Wall Street

In the mid 1600s simple fences denoted plots and residences in the New Amsterdam settlement in what we now call lower Manhattan Island. This location on the island was critical as it allowed easy access to both the Hudson River and the East River. To protect this settlement, in 1653, the Dutch West India Company Read More…

2-01 What Are Stock Exchanges?

So what exactly are “Wall Street” and the “New York Stock ExchangeStock exchanges are simply organizations that allow people the ability to buy and sell stocks.”? You have probably heard these words thousands of times, but unless you are a stock owner they might have gone in one ear and out the other.Stock exchanges are Read More…

1-13 Resources

Bond (Corporate, Treasury, or Municipal):A debt obligation of a company, the U.S. Treasury Department, or a city where the borrower receives funds (usually in increments of $1,000), makes semi-annual interest payments based on the coupon rate, and eventually repays the borrowed amount ($1,000) to the lender at the maturity date of the bond.Certificates of Deposit Read More…

1-12 Understand Risk and Investing

Regardless of your choice of investment types, you should learn about and understand the correlation of risk to the size and type of your investments. First, become familiar with the traditional risk levels of various types of asset groups ( stocksStocks are “equity investments” which means that individuals that own stock shares of a company Read More…

1-11 Recent Performance of Investments

For those just beginning, a good point of reference is the recent performance of the common investments described above. How have they done over the last five years? These charts illustrate their performance over the same time period. When looking at the charts, keep in mind what you read earlier in the lesson and what you’ve Read More…

1-10 Real Estate

Buying and selling real estate as an investment strategy is quite different from simply buying a home or commercial building. Just as important in determining FMV (fair market value) as comparable properties are when buying a home, the income stream generated by a property is a primary component for an investor. You typically have three Read More…

1-09 Foreign Currency and Foreign Stocks

Investing in FX (foreign exchange), currency speculation, and hedging are variations of the same basic investment strategy—you are betting that one currency will strengthen or weaken against the other. Not for the faint-hearted, these investments involve more due diligence and savvy than all of the other security types we have covered so far. Trading in Read More…

1-08 Gold and Other Precious Metals

Precious metals, particularly gold and silver, are attractive investments to many people. But as usual, you must learn to become a knowledgeable investor as precious metals can fluctuate in value as rapidly as common stocksStocks are “equity investments”, which means that individuals who own stock shares of a company actually own part of that company. Read More…

1-07 Bonds

Unlike stocksStocks are “equity investments” which means that individuals that own stock shares of a company actually own part of that company., which are equity instruments, bondsA debt obligation of a company, the U.S. Treasury Department, or a city where the borrower receives funds (usually in increments of $1,000), makes semi-annual interest payments based on Read More…

1-06 ETFs (Exchange-Traded Funds)

ETFs are a cross between mutual funds and stocks. ETFs are simply a portfolio of stocks or bondsA debt obligation of a company, the U.S. Treasury Department, or a city where the borrower receives funds (usually in increments of $1,000), makes semi-annual interest payments based on the coupon rate, and eventually repays the borrowed amount Read More…

1-05 Mutual Funds

A mutual fund is a type of investment where a money manager takes your cash and invests it as he sees fit, usually following some rough guidelines. For example, the Fidelity Group has a fund that specializes in finding high dividend paying stocksStocks are “equity investments”, which means that individuals that own stock shares of Read More…

1-04 Stocks

Stocks are “equity investments” which means that when you own shares of a company you own part of that company. For example, if you own 1,000 shares of Apple Computer stock and Apple has 1,000,000 shares that are “issued and outstanding,” then you own 0.1% of the company. If Apple were then to be sold Read More…

1-03 Certificates of Deposit (CDs)

With a CDAn investment choice at most banks where you agree to deposit a specific amount of money for a fixed period of time (this is called the maturity). By agreeing to keep your money at the bank for a certain length of time, the bank usually pays you an interest rate higher than savings Read More…

1-02 Bank and Credit Union Products

So, you just got your year-end bonus of $2,000. Now what are you going to do with it? Let’s review the obvious choices… Most financial institutions, banks, credit unions, and savings and loan associations have a similar menu of investment products from which you may choose. Here are the most common and popular products: Savings Read More…

1-01 Understanding Investment Choices

The first time Tiger Woods grabbed a golf club he couldn’t hit the ball perfectly straight 300 yards and the first time Michael Jordan touched a basketball he couldn’t dunk it, so don’t think that you will be able to earn a 100% return in the first year. Before Tiger could hit a golf ball Read More…

What is a Stock?

Large companies that have lots of investors often issue “stocks” or “shares” to the investors as a way of showing ownership. If you bought 100 shares of a company you might get a stock certificate like the one below indicating your ownership. If you decided you no longer wanted to own those shares you could Read More…

How Do I Diversify A Portfolio

How Do I Build a Diversified Portfolio?Understanding what it means to build a diversified portfolio is one of the first concepts a new investor needs to understand. When talking about stocks, diversification means to make sure you don’t “put all of your eggs in one basket.”What Does It Mean To Diversify?Simply put, to “diversify” means Read More…