Archive for the 'Stock Market' Category

If you are into trading and investing, you would know what diversification in investment is. Investors are encouraged to diversify their investment portfolio. This is a good personal finance decision that will in many ways protect you against losses on investments. It is fairly easy for some investors to place their money on hot assets while others require a more cautious approach.

So what is diversification?

When people speak of diversification, they generally refer to the act or process of placing investments on various types of assets in different proportions. When you are making an investment, you generally consider various factors like your tolerance for risks, personal finance goals and time map.

Diversification, by itself, is not an assurance or a guarantee against risks and potential losses. However, this approach helps in significantly alleviating or minimizing the risks from speculative investments. You can offset the loss from one investment with the gain in another.

Now, why should you diversify?

Diversification is not only advisable, it must be mandatory if you are an investor. If you would like to ensure your money’s safety, you need to diversify.

There are various reasons why you should diversify. First off, diversification is a way to ensure a long-term investment return. It is a good way to maintain your long term investments. You minimize the risks on volatile investments and undervalued assets. You can say that the when you diversify you minimized your risk exposure level. You also temper the volatility of hot asset investments as well as the unpredictability of the market. With diversification, you can offset your losses, participate in the upside of some investments and mitigate the downside on other investments.

You however need to be careful with the investments you are diversifying into. Seek the advice of a trained profession when making any kind of diversification decisions.

If part of your personal finance plan is an interest in making investments, there are two factors that would primarily concern you – the cost of the product and its subsequent selling price. Your goal is to buy the product at a low price and be able to sell the product at a high price. Unfortunately, you cannot always predict how the market would go. It’s difficult to know when the market would be favorable to you. You may be putting your personal finance at risk if the market turns against you. Because of this, people would oftentimes resort to dollar cost averaging.

What is Dollar Cost Averaging?

When you dollar cost average, you basically regularly invest a fixed amount of money into the market. The investor would use a systematic investment approach without much regard to the market conditions. Dollar cost averaging is great when you are creating your personal finance plans and you do not want to leave your finances at the hands of the market’s whims. Dollar cost averaging is basically used when you are making investments on stocks or unit trusts.

If you would like to create an investment that would produce long term return on investment, dollar cost averaging is the most effective method of maximizing investments especially when you do not want to consider the market. Usually, when you compare the cost of your investment with the average market cost, you would incur lower cost with dollar cost averaging. This method is ideal when the market is quite volatile. You might reconsider, however, using this method when it comes to other funds or forms of investment.

Before you invest however make sure that you have as much information as you can get your hands on. It is always better to make informed decisions when investing. Also you should never invest what you cannot afford to lose.

Most of you would have thought “the Fed cuts rates, stocks are going to jump higher and higher.” Similar to what they’ve been doing over the past week or two. The stock market has been on the rise.

But today, when the Feds announced a quarter point cut stocks plummeted. I mean dropped like a rock, loosing almost 300 point overall. This after a morning of strong movement upwards.

Stocks like Google, GOOG, went from being up $5 to dropping nearly $20. Almost everything else followed suit, on the NASDAQ and the NYSE stocks just dropped.

The reason being, is because there was a general though that Feds would drop rates a half point and they didn’t. We’ll see how things rebound tomorrow.

If you’ve ever wanted to jump into the stock market there’s a lot you should know first. Most people think that if they read a few wikipedia articles about how there’s cost and price and capitalization and their set. But what about the history of the stock market? What about what the stock market actually is?

Well this little site all about the stock market can help you get started and learn the history about not only the New York Stock Exchange but also other stock exchanges around the world. The NYSE isn’t the oldest in the world so knowing what other markets have done might be able to help you better understand and “beat” the market wherever you are.

The article that I would start out with is the article titled how does the stock market work?. If you don’t know already, the stock market exists so companies can get more money to grow with. Of course the stock market makes a lot of company owners rich. But really, that’s just a by product. Go find out what the market really means to a companies bottom line.

The next article I would read, actually, if you have one to read read this one, is the article on the stock market crash of 1929. It’s probably the most important crash in history. More important than the ‘87 crash or the recent Bubbly Burst. It sent the nation into a depression. To help the world avoid repeating history you have to know what happened in history. If everyone knew about this market crash and why it really started maybe we could avoid later crashes. But then again we’d have to eliminate greed too.

This is the Year of the Pig and experts in Asian markets predict that earthy stocks such as banks and properties will fare well. If you are looking for Chinese property plays, stocks such as Shimao Property Holdings Ltd., China Resources Land, and China Overseas Land and Investment Ltd. may be of interest.

Stocks in keeping with the water element like tourism, logistics, and transportation will be good bets according to geomancy specialist Yeung Tin-ming. Another guru said the best bets lie with fire-related sectors such as electronics and computer makers, as these will do well given the strength of the fire element in the new lunar year. In Hong Kong, masters of feng shui warn that these elements of fire and water clash in the year ahead, causing markets to roil in the new lunar year, beginning on February 18. Beware of turbulent times ahead, they caution.

Perhaps less romantically but more realistically, decreasingly attractive valuations since last year’s unexpected gains and recent actions from Chinese authorities regarding the cooling of overheated domestic stocks could be what’s really behind a more volatile Asian market.

Exchange Traded Funds made quite an impression in 2006 and ETF’s look to make and even bigger splash in 2007.

The ETF is a great thing if you want to get into many a mutual fund but don’t want to deal with going through a management firm. Most management firms make you join with a lump sum and only allow you to buy with a certain amount. This can put a lot of restrictions on your investments.

With ETF’s you can buy and sell shares of “funds” just like a stock on any stock market. You can use your online discount broker to buy the shares and sell the shares. You can get into funds like SLV which trades silver or FXI which trades china related companies.

To find the most traded funds in one place and get into the funds look at iShares.com. It’s the company that’s putting ETF’s on the investment map and will be your single resource to find an ETF on everything.

If you’re looking for a good investment vehicle that’s as safe as some mutual funds but as easy to day trade as stocks then ETF’s are the thing for you.

If you’ve ever wanted to take that $2000 that’s been burning a hole in your pocket and play the markets, now may be your best shot.

TD Ameritrade is offering 45 Days of Free Trading if you open an account with them and fund your account with $2000.

I personally don’t use TD Ameritrade so I can’t attest to their services but I’ve read many reviews about them having just as good a service as E-Trade trading services. If I had the money I’d think about signing up. But my money’s tied up elsewhere.

However, If you’ve thought about trying your hand at day trading (a very risky venture and not all that recommended for the frugal money saving type) then you might want to check them out. I poked around their website demo area and it looks like they have tons of interesting tools you can use.

OK, so this post really isn’t going to help you save money, but how could we not write about it.

Google, Inc aka GOOG jumped above $500 in early morning trading today and looks like it’s going to close above the $500 mark as well. That’s right, it’s nearly 6 times what it was when they wen public in 2004 and with all the aquisitions it’s making, it doesn’t look like it’s going to stop anytime soon.

Well I guess this could make you money. If you think there is a chance this titan will tank, sell short, if you think there’s a chance, and word on the street is that many analysts say this is fully possibly, that the stock will keep right on going past $600 then buy it.

The price is a little too rich for my blood, but then again I always wanted to buy Berkshire Hathaway when I was in middle school and the price was at $900 a share. If I would have bought one share back then, in the 12 years since I could have payed off almost all of my student loans with that money.

Hmmm, maybe I should buy just one share?

Maybe we should all just buy one share. Does anyone know if these Google guys idolize Warren Buffet?

For those of you who follow Warren Buffet’s every move and the moves of his company Berkshire Hathaway you may be interested in learning the companies newest stock shifts in the past few months.

In their usual filing with the Securities and Exchange Commission (SEC) Berkshire didn’t show any holdings in GAP, the clothing dealer and a long time holding for Berkshire Hathaway. As of March 31 the company owned 10 million shares of GAP which would mean over the past few months Warren Buffet has made the move to drop all of that stock.

Berkshire also reduced shares of H&R Block from 16 million shares to 11.39 million shares.

Newest to the companies multi Billion Dollar portfolio was Johnson and Johnson of which Berkshire Hathaway reported having 1.97 million shares as of March 31, so we can only imagine that he has increased his share in that company, as he likes to keep buying until he gets a reasonable percentage of any company he owns into.

technorati tags:Warren, Buffet, Stocks, Market, Berkshire, Hathaway, Gap, Money, Investing

Short Selling is the opposite of buying long. When you buy long, or what has turned into just buying shares, you buy for the long term, usually above the actual value of the stock in the thought that the value of the company will increase over time and increase the value of your long term position in the stock.

Short selling is the bet you can make that the price of the stock will go down. Usually this transaction is made when buying long gets out of hand based on speculation rather than investing and the price of the stock is way over the actual value of the company on a per share basis.

Selling short comes in three steps but is done now a days with one step through online brokerage firms, so you can do it with the click of a button. The three steps to selling short are:

1. First what you do is you borrow shares from someone who already owns the security. So you essentially loan the shares from someone who already owns the shares.

2. You then sell the shares to someone immediately for some market price. Usually whatever the current market price is. This sets the price you need to eventually buy the shares back below so you can actually profit from the whole process.

3. Finally when you want to get out of the short sell you need to buy the shares back at some other market price and then fill out the loan you took in step one. If the price is lower than what you sold the shares in step 2 then you make money. If you buy the shares back at a higher price you lost money. You essentially took the loan on the shares for a price and then payed your loan back with those same shares for less.

It should be simple to follow but if not feel free to contact me or leave a comment and I’ll try and explain another way.

Just remember your trying to have the stock go down, you want it to loose. When it looses in a short sell, you win. People who saw the internet bubble of 1999 ready to burst due to stocks that had no chance of making money in the future sold short and more than likely made a small mint. Stocks went from $600 down to pennies in a matter of weeks. That’s a quick million.

But be warned, selling short is risky business. You’re taking a loan out on stock that you don’t have and you can loose a lot of money if the price of the stock goes up.