Children Savings Accounts - Making the Best Decisions Now for Your Child's Future

From the first flutter we feel inside to the first time we hold our children in our arms, we realize that we are responsible for a life other than our own. We want to make the best decisions we can and ensure that our child’s needs are provided for. But what if something happens to us? What would happen to them?

529 & Other College Savings Plans for Dummies by Margaret A. Munro A simply way to find a reasonable solution to a seemingly unreasonable problem: saving for future college costs in the sanest, least stressful way possible for you. In keeping with the theme of stress reduction, you can use this book in a variety of ways: As a reference: It’s all here: the ins, the outs, the do’s, and the don’ts. The world of college savings is one of very specific rules, and they’re here, in all their glory, and they’re all explained. As an advisor: It’s a case of the very good savings techniques, the merely okay savings techniques, and the truly ugly techniques (which you really want to avoid), and this book highlights them all. As a little light reading: Amazingly enough, the topic of money can be mildly amusing, and college savings is no exception. Read this with an eye towards the absurd, and you won’t go far wrong.

While life insurance can provide some security that our children will be provided for, by starting a child’s savings account or purchase bonds in their name we can secure their financial future. In the beginning, we will be the ones who will add money to our children’s accounts for the purpose of offsetting the increasing costs of college tuition or private education. Unlike college savings plans, a children savings account offer the flexibility of accessing money when your child needs it most; whether that is before they are of college-age or after.

The money that has been invested in a children savings account will be available to the child immediately without penalty. A number of financial institutions offer a children savings account, so search for the best rates possible with the fewest restrictions. Many banks have a children savings account that offers no minimum age, but require that an adult take trust of the money until the child reaches a certain age, usually 18 years of age.

Bonds are another option for brightening your child’s financial future. Because bonds hold the initial monetary investment for a set amount of time before they mature, they may have a higher interest rate than the more flexible children savings account.

However, in order for bond purchasing to be beneficial you have to be prepared to wait for the bonds to mature over a period of time, usually a minimum of three years and in most cases, much longer. By opening a children savings account or purchasing bonds, we create a cash flow cushion available when our children may need it as well as the peace of mind of knowing that the small investments we make over time will give to our children in more ways than we imagined. Whenever you are doing a research on one subject, try to get to the essence of what you are studying. It is true of mundane areas as well.

As you search for information about savings accounts try and reach the best value, definitions and clarity. Read what we have on our site on savings accounts and if you need more material on this you can always go to the world wide web again to finish up on your studies. In this information age, there is a lot of options for increasing your knowledge base.

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Understanding the Difference Between Investment Advisors & Investment Managers

People are often confused by the number of different professionals who provide investment advice. There are financial advisors, brokers, investment consultants, wealth managers, financial consultants and financial planners. Given the fact that there is an ever-increasing amount of the nations liquid investable wealth in the hands of these investment professionals, it is important for investors to be knowledgeable about the role of the different persons involved in the investment process. If you add in the fact that people are becoming increasingly concerned about their retirement security, it is entirely possible that investors are going to have much higher expectations of their financial professionals as time goes by.

The Big Investment Lie: What Your Financial Advisor Doesn't Want You to Know by Michael Edesess Reveals the unfortunate truth behind the financial advisory industry that professional investors cannot, and never have been able to, beat market averages.

In order for investors to make an informed choice among the various financial service providers, they should first understand that any firm or individual who receives compensation for providing advice about securities (“investment advice”) is required to register with the SEC (or at the state level) and is regulated under the Investment Advisers Act of 1940. This applies to any firm or individual, such as financial advisors, brokers, investment consultants, wealth managers, financial consultants and financial planners. With that said, here are the main differences between Investment Advisors and Investment Managers.

The Investment Advisor is best defined as a professional who makes decisions about asset allocation, developing the investment strategy, implementing the strategy with appropriate Investment Managers and monitoring the strategy on an ongoing basis.

The role of the Investment Advisor is considered the most important, yet most misunderstood, role in the investment process. The Investment Advisor is a professional who provides comprehensive and continuous investment advice; the operative words being “comprehensive” and “continuous.” Because of the trust and confidence clients put in them, an Investment Advisor is considered a fiduciary.

A fiduciary is a person responsible for managing the assets of another person and stands in a special relationship of trust, confidence, and/or legal responsibility. Investment Advisors have a fiduciary duty to clients, which means they must put their clients interests ahead of their own. He or she must recommend the best investment for the client. The compensation of an advisor cannot be dependent upon which products or assets a client ends up investing in. This distinguishes Investment Advisors from those who are product driven, with more of an interest in selling financial products, rather than providing reliable investment advice.

• Types of Investing Risks
  Investing in stocks is a risky business. There are some risks you have some control over and others that you can only guard against. Thoughtful investment selections that meet your goals and risk profile keep individual stock and bond risks at an acceptable level.

The Investment Manager, on the other hand, is responsible for making investment decisions, including buying and selling individual securities (such as individual stocks) for an investment portfolio. Examples include money managers who are responsible for separate accounts and mutual funds.

Although it is possible to serve in both capacities, as an Investment Advisor and as an Investment Manager, it is very difficult to be an expert in both. You should keep this in mind when choosing a financial advisor. In other words, if you follow the time proven maxim of doing what you do best, you could choose an Investment Advisor whose role is to manage the investment process and to delegate the investment decisions about individual stock and bond picks to the Investment Managers.

In summary, the Investment Managers make the decisions about which stocks or bonds to buy and sell. Investment Advisors manage the Investment Managers.

• Creating Cash Flow Formula for Your Investment
  there may be times when you need to generate some cash flow and there are some relatively safe strategies you can use to produce income...

Do you understand the importance of the role of Investment Advisors in helping people manage their wealth? Do you have any questions about the difference between Investment Advisors and Investment Managers?
What is your opinion? Do you believe investors are going to have increasingly higher expectations of their Investment Advisor as a result of their concern about retirement security?

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401k Options When Changing Jobs

What should you do with your old 401k plan if you change jobs? As you know, a 401k or other defined contribution plan is an excellent retirement savings vehicle. You can accumulate a substantial amount of money over many decades providing you let the money grow. With a traditional 401k, you also get the additional benefit of tax-deferred growth. With a Roth 401k, you forego the pre-tax advantage for tax-free withdrawals later in life when you take your money out.

IRAs, 401(k)s & Other Retirement Plans: Taking Your Money Out by Twila Slesnick, John C. Suttle Discusses all common types of retirement plans, including 401(k)s and other profit-sharing plans, Keoghs, IRAs and tax-deferred annuities. It covers: tax strategies before and at retirement penalties for taking money out early minimizing taxes distributions you must take distributions to your heirs

Now suppose you have built up an impressive account balance over the years when suddenly you are faced with having to make a difficult decision. Every year, many people obtain new jobs or careers. Along with the excitement of a new transition comes apprehension and uncertainty over what to do with the old retirement plan. Discrepancies and inaccurate advice can cause anxiety for some and catastrophic financial consequences for others.

What you do can have a significant effect on your financial future. One mistake can cost thousands if not hundreds of thousands of dollars or more. The choice you make depends on your personal situation and whether your new employer offers a similar defined contribution plan.

If you have been investing money in your 401k plan for any length of time, you most definitely know about the benefits of tax-deferred growth. You may also be aware of the tax consequences and potential penalties on premature withdrawals if you take your money out early. That said, taking your money out of your old retirement plan is the least favorable option. Here’s why. Say you have an old account balance worth $200,000. If you take it all out in one lump sum to buy a house or whatever, you will owe taxes of approximately $70,000 in addition to a potential penalty of $20,000 leaving you with only $110,000 out of $200,000. If you leave your current job prior to age 55, withdrawals from your 401k are subject to a ten-percent early withdrawal penalty. You should never use the money in your 401k for any reason other than for providing an income during retirement.

If you do not cash it in, what else could you do with it? Maybe you have heard about the possibility of rolling your old 401k account over into your new employer’s plan. Rolling over to a new employer’s plan will preserve your account for retirement with the added benefit of continued tax-deferral. You should consider this option after careful consideration of other factors, such as the investments held outside of your retirement plan and the investment choices available with the new plan as well as your personal situation. One disadvantage with many 401k plans is the lack of quality investment choices within all asset classes. This makes it difficult to construct a well diversified portfolio consistent with every investors risk profile.

Depending on the options available in the new employer’s plan, you may be inclined to leave your money in your old employer’s plan. Letting it remain in the old plan is easy and certainly better than cashing out as described above. Maybe there are better investment options in the old plan than in the new one. The option to leave your money in your old plan or roll it into a new plan depends largely on the quality and quantity of options available in either 401k as compared to an IRA.

The advantages of rolling your old plan into an IRA are continued tax-deferral and a wider range of investment options. Having the entire universe of investment choices makes constructing diversified portfolios a much easier task. There are virtually no limitations. In addition to the advantage of more and frequently better investment options, an IRA offers the potential for significant tax savings for non-spousal beneficiaries. However, those who change jobs frequently may find themselves with several old employer accounts and/or IRAs. It can certainly become more difficult to manage many different retirement accounts making it easier to ruin a well diversified retirement plan.

Each option, leaving the money in the old plan, rolling over to the new plan or rolling into an IRA, has advantages and disadvantages. The right choice depends on each person’s specific financial situation. A thorough review and understanding of plan documentation and assistance from a qualified professional can help to make the decision easier.

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The Hedge Fund Manager Evaluation And Transparency

According to Lionel Barber, editor of the Financial Times, "Hedge funds are the vanguard of a financial revolution. Once little known and secretive fringe forces, they have become leading actors in reshaping the corporate world. As active investors capable of mobilizing billions of dollars of capital, these new institutions have become enormously powerful as well as impressively innovative."

Inside the House of Money: Top Hedge Fund Traders on Profiting in the Global Markets by Steven Drobny Lifts the veil on the typically opaque world of hedge funds, offering a rare glimpse at how today's highest paid money managers approach their craft. Author Steven Drobny demystifies how these star traders make billions for well-heeled investors, revealing their theories, strategies and approaches to markets.

Here are some pointers from the 2007 State Street Hedge Fund Research Study. I can't supply the report because it had to be requested and is not available online yet. There is a story here; "State Street Study Shows Institutional Investment - In Hedge Funds Is on the Rise" which is also included in the report.

Among the greatest perceived risks to hedge funds cited by institutions in the study are headline risk (20%) and investment loss (20%). Here are some things to look for before investing in a hedge fund;

• Ownership structure - Review the ownership structure to ensure that the terms, including redemption policies and lockups abide by expectations and that compensation of employees motivates performance.
• Background check - Conduct a complete background check on the hedge fund and its principals, including their history, NASD and NFA filings, both civil and criminal records. Complete confidence in your manager is essential to a successful strategy.
• Adherence to strategy - Analyze current and historical statement to confirm that they adhere to the specific hedge fund strategy for which the manager is being hired. Doing so could reveal managers who have become opportunistic investors once there style comes under performance pressure.
• Trading - Thoroughly analyze the hedge fund's securities dealing and clearing procedures. Whether these procedures are conducted internally or via the service of a third party provider, details can provide insight into a funds risk management philosophy and fee structure.
• Documentation - Review the hedge fund or separate account documentation, including ADV, offering memorandum and disclosure documents. For US plan sponsors, Employee retirement income Security Act qualifications, SEC and CFTC registrations and filings, and SAS 99 fraud checks also if necessary.
• Internal procedure - Review the hedge fund manager's internal procedures. It is important to know what tasks the manager performs itself and what duties are undertaken by third party service providers. It is important to ensure the proper risk controls and that procedures are in place.

Hedge funds are not equal in the level of information they provide to investors, yet it is important to find out all you can.

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Win / Loss Ratio in CFD Trading

Among the questions often asked by clients when selecting an adviser or a system for CFD trading is what percentage of recommendations they can expect to be winners, and how much should they expect to make each month, year or whatever. These form part of a natural psychological comfort zone, but may be part of the reason why so many people fail as traders.

The Complete Guide to Online Stock Market Investing by Alexander Davidson Provides all the information and techniques needed to make money as an online stock market investor. The strategies revealed are tried and tested. In 20 easy modules, readers will discover the secrets of buying bargain stocks and trading. Drawing on the author's most recent experience in the City (London's financial district), this latest edition of the classic guide shows how to: get the most from the broker, select value and growth stocks, read the charts, choose promising investment funds, trade derivatives for fast profit, deal foreign exchange, and manage your money and win.

In any area of speculation, whether it is stockmarket investment, spreadbetting, forex trading or CFDs, if the underlying system has a small edge, it is only the first part of potential success. The key to achieving constant returns lies with a correct approach to the win/loss ratio and not in expecting any particular level of gains, which can distort the underlying methodology. CFD traders have the ability to go long and short at will, and online trading makes it easy to adjust stops and targets at any time.

An example of a good win/loss ratio that fails
Consider this example: a CFD trader selects a system where there is a supposedly proven record of seven out of each ten trades proving to be winners. The idea might be that each trade has a target return of 3%, and if it is achieved the position is closed. If the trade however shows a loss of 3%, the expectation is that it should recover and the position is doubled up, with the hope of returning to parity or even making a 6% gain. Now if market or share movements were a random sequence, it would not make any difference where one entered or exited. The overall returns would over time be neither a gain nor a loss, but costs and the spread on trading would result in a virtual guaranteed loss in due course (the casino approach).

Having a slight edge is not enough
If this system had an edge though, the expectation might be that the 3% target would possibly be hit six out of ten times, thus making it a virtual winning approach. But the problem lies in the fact that although markets and shares do have short term periods when there appears to be random action, they can both trade a range and trend strongly at other times – this is what is known as regular irregularity, which might seem a paradox, but happens all the time in financial markets.  Shares often move very quickly in one direction, and this trend can continue for far longer than expected, which creates two problems.

First, taking a 3% profit on a trade may appear to be very satisfactory, but it can often be seen in hindsight that the profit was taken too early, so despite achieving a winning trade there is an element of regret that more was not taken. Second, if the position is showing a loss, then the trade should in the real world be deemed to be incorrect and closed out. But in using such a system as this, by doubling up or averaging the position on losses, all that is achieved is an increase in risk – the trader might be lucky in some situations, but one or two trades out of the ten may cause severe problems. There is also the emotional capital that is tied up in losing trades.

This type of system typically might produce say six 3% winners, two evens (where one position was doubled up and returned to parity) and two 10% losers. Here the overall loss would be 2%, despite the good win/loss ratio, and this is clearly a dangerous way to play the markets, but many traders operate exactly in that way.

Improving the risk/reward
The first point is to set a stop loss on each trade and stick to it. Doubling up simply doubles the risk – that is fine if there is another system signal that reinforces the first trade, but generally that is not the case. The problem that then occurs is that if the stop and targets are quite close in percentage terms, the bouts of short term randomness mean that it can almost be like coin tossing, which with costs is a futile approach.

The key is therefore to ensure the gains are much greater than the losses, so that even if one only achieves four wins out of ten, there may be two big winners in there. If a trader decides that a 3% average loss is acceptable, then what average gain should be sought? This is the $64 question, and the key is to let profits runs as much as possible within a clearly defined trend. The following rules are part of the methodology used at Blue Index for the longs and shorts CFD portfolio, and the long term results have so far proved more than satisfactory.

Some simple rules for a consistent winning approach

• If searching for stock trades, try to choose high volatility or beta shares – these have a higher chance of being in a trend rather than trading a range or exhibiting random action.
• The expected initial target should always be at least twice the stop loss. If the average stop loss set is 3%, the CFD trader should look for 6%-plus gains on each trade as a starting point.
• Try to set individual stops and limits with reference to the underlying action. If a share has moved 10% one day, it is likely to exhibit an intra-day range of much more than 3%, so the stop and target should be widened accordingly. Also support and resistance levels are very useful reference points for setting price targets.
• If the trade hits the initial target, either close the position if support or resistance around that area is seen to be valid, or move the stop up to protect profits and let the position run.
  5. If there is a sudden reversal in share price trend, close the position, whether it is winning or losing.  The swings and roundabouts of trading usually mean that these unexpected trend changes even themselves out.
• Make sure you are never exposed too much in one direction. If for instance the market falls heavily from the open, then it doesn’t matter, as even if there are more longs and shorts in your list of open positions, the huge gains on the shorts should outweigh the stops hit on the longs.

Target returns
As for target returns, many traders have unrealistic expectations. A system that can offer huge returns inherently has to have a higher risk, but bear in mind this simple fact. Warren Buffett has achieved just over 20% per annum returns on his investment fund, and he did not need to use leverage to become the world’s second wealthiest man.

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Types of Investing Risks

Investing in stocks is a risky business. There are some risks you have some control over and others that you can only guard against. Thoughtful investment selections that meet your goals and risk profile keep individual stock and bond risks at an acceptable level.

However, other risks are inherent to investing you have no control over. Most of these risks affect the market or the economy and require investors to adjust portfolios or ride out the storm.

Here are four major types of risks that investors face and some strategies, where appropriate for dealing with the problems caused by these market and economic shifts.

High-Risk, High-Return Investing by Lawrence W. Tuller Shows how to make unconventional, offbeat but always calculated speculative investments. Contains sound financial planning and prudent investment management guidance. Explores emerging, undervalued, third-world stock markets, debt/equity swaps and reverse LBOs. Securitized assets, troubled and start-up companies, foreclosed properties and junk bonds are also included.

Economic Risks: One of the most obvious risks of investing is that the economy can go bad. Following the market bust in 2000 and the terrorists' attacks in 2001, the economy settled into a sour spell. A combination of factors saw the market indexes lose significant percentages.

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Top 11 Stocks for 2006 America's 11 Leading Experts Share Stock Investing Picks.

Winning Stock Pick: Remember CKXE .10 to $30.00 30,000% Gain RRGI next? It has taken years to return to levels close to pre-9/11 marks. For young investors, the best strategy is often to just hunker down and ride out these downturns. If you can increase your position in good solid companies, these troughs are often good times to do so. Foreign stocks can be a bright spot when the domestic market is in the dumps if you do your homework. Thanks to globalization, some U.S. companies earn a majority of their profits overseas.

Least Risk Investing by Michael L. Gay; MBA; CFP (R) Investing is about probabilities and statistics and meeting your financial goals for the one life you have to live! Least Risk Investing will show you how to avoid the many investment risks that have negative expected payoffs and how to expose yourself to only those risks that have positive expected payoffs, and then, only to the extent that taking those risks buys you something of value, like achieving your most important lifestyle goals. In investment management there IS a right answer. There IS a right way to invest. Most people who will take the time to learn will significantly increase the probability of achieving their financial and lifestyle goals while decreasing the level of risk in their portfolio.

Older investors are in a tighter bind. If you are in or near retirement, a major downturn in stocks can be devastating if you haven't shifted significant assets to bonds or fixed income securities.

Inflation Inflation is the tax on everyone. It destroys value and creates recessions. Although we believe inflation is under our control, the cure of higher interest rates may at some point be as bad as the problem. Investors historically have retreated to "hard assets" such as real estate and precious metals, especially gold, in times of inflation.
Inflation hurts investors on fixed incomes the most, since it erodes the value of their income stream.

Stocks are the best protection against inflation since companies have the ability to adjust prices to the rate of inflation. It is not a perfect solution, but that is why even retired investors should maintain some of their assets in stocks.

Market Value Risk: Market value risk refers to what happens when the market turns against or ignores your investment. This happens when the market goes off chasing the "next hot thing" and leaves many good, but unexciting companies behind.

Some investors find this a good thing and view it as an opportunity to load up on great stocks at a time when the market isn't bidding up the price.

On the other hand, it doesn't advance your cause to watch your investment flat-line month after month while other parts of the market are going up.

The lesson is don't get caught with all you investments in one sector of the economy. By spreading your investments across several sectors, you have a better chance of participating in growth of some of your stocks at any one time.
Too Conservative There is nothing wrong with being a conservative or careful investor. However, if you never take any risk it may be difficult to reach your financial goals. You may have to finance 15 to 20 years of retirement with your nest egg. Keeping it all in savings instruments may not get the job done.

Conclusion I believe if you learn about the risks of investing and do your homework on individual investments, you can make decisions that will help you meet your financial goals and still let you sleep at night.

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Forex Markets & Its Trading Characteristics

There are a number of reasons why FOREX trading is such a great way of entering the capital markets. Among them we can find it’s easy accessibility thanks to the use of the internet, the fact that currency trading is all commission-free and also the low transaction costs involved.

Thirty Days of FOREX Trading: Trades, Tactics, and Techniques by Raghee Horner The foreign exchange (forex) market is one of the most dynamic markets in the world. Its flexibility and 24-hour accessibility offer traders tremendous profit-making opportunities. But it takes more than a firm understanding of the tools and techniques of this discipline to make the most of your time in the forex market. What it really takes is the guidance of someone who has participated, and prevailed, in this type of fast-paced environment. In Thirty Days of Forex Trading, Raghee Horner—one of today's top forex traders and a master teacher of trading systems—shares her experiences in this field, by chronicling one full month of trading real money...

There is one important characteristic about Forex that makes it what it is. This important characteristic is that there is not a single unified foreign exchange market in the world. Instead of this, due to the over-the-counter nature of currency markets, there exists a number of interconnected marketplaces, where many different currency instruments are traded. What this implies is that there is not a single dollar rate in the world, but different rates, depending on what bank or market maker you are asking a quotation to. In practice these rates are often very close as you can easily find on the web.

As a piece of general knowledge you must learn that the main forex trading centers are placed in New York, London, and Tokyo, but this doesn’t mean they are the only ones; there are other banks throughout the world that also participate. For example, as the Asian trading session ends, the European trading centers open, then the US session, and then the Asian centers open again. This kind of “continuos” market has the advantage that traders can react to news immediately, instead of waiting for the markets to open.

There are many factors that can influence the exchange rate of a particular currency. These rate fluctuations are usually caused by changes in inflation, GDP growth, interest rates, budget and trade deficits or surpluses, and other macroeconomic conditions of the country emitting the particular currency. Also major news that are released publicly can affect the prices of currencies; so many people have access to the same news at the same time that they can shake a currency price really hard.

According to a specialized study, the most heavily traded products on the spot market are: EUR/USD - 28 %, USD/JPY - 18 %, GBP/USD - 14 % and the US currency was involved in 89% of transactions, followed by the euro (37%), the yen (20%) and sterling (17%).

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Forex KISS Strategy: Profits For Sure?

Most experienced traders consider that the best and most profitable of the capital markets is without doubt the Forex market. During many years Forex trading had been not for everyone but the sole domain of the major banks, large financial institutions and countries central banks; for example the U.S. Federal Reserve Bank. Fortunately these days, thanks to the internet the market has been opened to anyone willing to learn the appropriate techniques in forex trading and with the intention of making substantial profits using the same pathway the large institutions use to consistently make pretty high profits from trading in the Foreign Exchange market.

The Forex markets are open 24-hrs a day during most of the week, allowing forex traders a huge flexibility to enter end exit their trades. As long as the markets keep open the prices will be constantly fluctuating and reacting to news and market conditions. All this activity can be easily seen by looking at the forex charts. And is thanks to this fluctuations that traders can have the potential of profitable trades the whole day.

But the simple potential of high profits is not enough to feed your bank account. What you need is a reliable system that will turn the profit potential into real cash for you. Here is where the KISS strategy can work marvels for you if you know how to implement this great and reliable forex system.

What is the Forex KISS strategy?. In short; this forex trading strategy is an original system that relies on the long operating week of the currency markets and it shows you how to make a wise use of your stops and entry orders applying them in such an order and sequence that you can easily duplicate your account capital in less than three months without having to worry everyday about losing much money from your account. Maybe the only drawback of the system is that you have the keep your computer working on the markets most of the week. The goood news is the system works alone most of the time.

KISS if without doubt one of those Forex system that will make many people turn to the currency markets as a reliable source of income.

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What are Pips on Basic Forex Trading

If you are a forex trader, everything is usually about pips. For example, you might say, "I am up 35 pips for the day," or, "I made 127 pips on my last trade."

Although this sounds like a lot of fun, it would probably be helpful to explain what a pip actually is.

Forex Conquered: High Probability Systems and Strategies for Active Traders by John L. Person Written with the serious trader in mind, Forex Conquered: Examines what it takes to develop a trading system, how to evaluate it from a hypothetical standpoint, and apply it in real-world forex trading situations Covers the fundamentals of candlestick charting and explains how to utilize them Highlights the benefits that leading price indicators like Fibonacci price corrections, extensions, and projections analysis have to offer Introduces Elliott wave theory and illustrates how to apply this method in the forex market Outlines three effective trading systems based on pivot points—the stochastics system, the MACD histogram system, and the pivot point moving average system—that can be immediately implemented in your forex trading endeavors Explores essential trade and risk management issues

"Pip" stands for "percentage in point." Sometimes, people also refer to pips as "points." Basically, a pip is the smallest price unit for a currency. It is the last decimal point in every exchange rate or currency pair.

For most currencies, this means a pip is 0.0001. Therefore, if you bought USD/CHF 1.2475 and sold at 1.2489, you made 14 pips.

However, there are exceptions. One is USD/JPY. This currency pair only has two decimal places so that a pip is equal to 0.01.

Pips are very important because they are the basis by which a profit or loss is calculated.

What is a Pip Value?
Even when you utilize different currency pairs and deal with fluctuating prices, the pip usually remains the same. If the USD is the base currency, you divide the pip (which is usually 0.0001) by the exchange rate. If the USD is the quote currency, the pip value is always just one pip, such as 0.0001.

Therefore, if the exchange rate for USD.CHF is 1.2489, it goes like so:

0.0001 / 1.2489 = 0.0000800704

That probably seems like a small number, but remember that with forex trading, you can leverage small sums of money to move large amounts of currency. Therefore, it is entirely possible to make a profit off of such a small number.

For example, if your broker lets you trade with leverage of 100:1, you only need to put up $1000 to buy a standard lot of $100,000. You can see that trading in larger lots boosts the pip value so that your profit or loss is also affected, like so:

If you trade on $1000 in currency, your pip value is calculated thusly:

0.0000800704 X 1000 = $0.08 per pip.

This means that you have a profit of $112.14; not bad.

With forex trading, you don't invest in a single company or group of companies as you do with stocks or mutual funds, for example. Instead, you're investing in a particular national economy. You are pinning hopes on one nation's economic health versus that of another.

Therefore, fundamental analysis is very important. When trading currencies you need to know about the countries economic situation.

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Investing in Socially & Environmentally Responsible Stocks

Investing with your conscience rather than against it may be a good idea. How can you fully enjoy profits from a company that pollutes, subjects animals to painful testing or lure teens to smoke if you're morally opposed to its practices? On the other hand, charity has a time and a place - and this isn't it. You invest money to earn a decent return, otherwise you might as well keep it in your mattress. So how do you strike a sensible balance between sound investment and doing your part in making the world a better place?

Start with a gut check. Are there any industries that are out right off the bat? Tobacco? Fast food? Guns? Write them down and try to identify specific companies to avoid. Then run through your checklist before executing any trades. This will prevent temporary greed and general forgetfulness to cause buyers remorse later on.

Next, use the Internet to do some basic homework. Many companies have multiple branches, some of which are perfectly acceptable to you while others may be objectionable. For example, Altria, formerly Philip Morris, controls half the US tobacco market but is also deeply involved in the food industry through its subsidiaries. In other words, you'll need to take a good look under the hood to identify the members of your 'black list'.

With the bad guys out of the way, it's time to focus on the good guys. Which companies are really living up to your standards as being 'socially responsible'? Remember, glitzy ads mean very little, so it's time to hit the Internet again. Fortunately, there are tons of helpful sites out there that help make your job a lot easier. Do a search for 'socially responsible stocks' in Google and you'll get dozens of reputable sources served on a platter.

But here's the caveat; just because a company strives to be a good citizen doesn't automatically mean it's a good investment. While some are as good for your wallet as they are for the environment, others stink to high heavens. What you're looking for is a company run by experienced managers, producing good products, with a solid balance sheet and with good growth potential. In other words, use the same criteria you would use for any other stock.

If individual stock picking is not your thing, you may want to go with a mutual fund. With these, all you do is cut a check and let the fund manager take it from there. But make sure to read the prospectus carefully so that you're on the same page as the fund manager when it comes to deciding what's socially responsible and what isn't. Some examples of such fund companies are Domini, PAX World, Citizens Trust and Green Century.

Last but not least, don't forget to keep an eye on the 'regular' stock market. Companies change course due to necessity, new management philosophies, pressure from consumer groups and whatnot. That can make a previously so-so company right on target for your socially responsible portfolio even though the watchdogs have not yet caught wind of it. If you're lucky, you'll catch a good thing in the early stages before the fruits of the changes have come into effect from both a financial and environmental perspective. But remember: Dealing with virtuous stock doesn't prevent you from losing your shirt if you make the wrong call. Don't invest the rent money.

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Shorting Stock: What are the Basics of & How to do it?

You need a securities brokerage account before you can trade stocks, bonds, options or other financial instruments.

How to Make Money Selling Stocks Short (Wiley Trading) by William J. O'Neil, Gil Morales The mechanics of short selling are relatively simple, yet virtually no one, including most professionals, knows how to sell short correctly. In How to Make Money Selling Stocks Short, William J. O'Neil offers you the information needed to pursue an effective short selling strategy, and shows you with detailed, annotated charts on how to make the moves that will ultimately take you in the right direction.

There are many reputable discount brokers that will establish an on-line account for you. You can open the account without depositing any funds, but, obviously, you must fund the account before you can trade securities. Normally, a new account must be funded with a minimum of about $1000. Some may let you start with a minimum of $500.

If you don’t want to trade on-line, your discount brokerage account is usually also accessible via touch-tone phone, either via automated menu or dealing directly with an account representative. Be aware that on-line commissions are generally the cheapest, with phone commissions being a little higher. You’ll pay the highest commissions if you deal directly with a human account representative.

Normally, if you are inexperienced in trading securities, you broker will restrict the type of securities you can trade in your new account. Novice investors are usually only allowed to buy shares of stock, and later sell shares they bought previously.

Options for the Stock Investor by James B. Bittman Straightforward option strategies that reduce your risk and increase your profit potential in virtually any investing or trading program, provide you with new option techniques and strategies, this comprehensive handbook explores: Risk-reduction strategies for conservative investors, including buying calls and covered writing Profit-generating strategies for aggressive traders, including vertical spreads, straddles, and strangles Flexible strategies for improving your risk/return profile, including covered straddles, covered combos and ratio spreads

After the account has been active for awhile, investors must ask their broker, in writing, for permission expand the account’s capabilities, such as trading stocks on margin or trading options. It’s not likely that many brokers will permit new investors to “short” stocks.

Short selling, or “shorting” a stock, is, simply, selling shares of stock you do not own. It’s where you, the investor, have identified a stock whose price you expect will fall. You want to profit from the price decline, so you ask your broker to permit you to sell the stock, even though you don’t own any shares of it.

If your broker has granted your permission to sell short in your account, he will either loan you the shares from his portfolio, or he will have to enter the market to see if he can find shares to borrow for you to sell short.

Most likely your short sale will be subject to a time limit, perhaps 30 or 60 days, at the end of which you will have to buy the shares back to repay the loan of the shares you sold short. Buying stock you have previously sold short is called “covering” or “short covering”.

Borrowing stock to short is similar to trading stocks on “margin”, which is when you put up part, say 50%, of the purchase price, and your broker loans you the other 50 percent. If you “short” stocks, don’t be surprised if your broker charges you interest, probably at the same rate as a “margin” trade, on the dollar value of the borrowed shares.

So, for a simple example, if you short 100 shares of XYZ Corporation at $10 per share, your account is credited $1000. Then, if the price declines, as you expect, to, say, $6 per share, you buy the 100 shares and your account is debited $600. You keep the difference, which is $400 (minus your broker’s commissions and interest).

But, if you guess wrong and the stock price goes to $14 per share, you are $400 down on this deal. Remember, you may be working under a time limit for replacing the shares you shorted. Let’s say your time’s up and you must replace the shares at $1400. You must come up with $400, in addition to the $1000 you got when you shorted the stock, to buy the stock back (“cover the short”). In this case, you have lost $400 (plus commissions and/or interest).

Even if you do not have a time limit for covering, you need to decide in advance how long you will stay short if the price goes against you (up). A general rule of successful investors is to bail out of a position if the price goes against you by 5 to 10 percent.

An alternative to selling short is to buy “put” options. “Options” are the right, but not the obligation, to buy or sell a stock at a fixed price, called the “strike” price, before the date the option expires. Buy options are “calls”, sell options are “puts”.

Options are bought and sold in “contracts”. One contract “controls” 100 shares of the associated stock.

Put and call options are not available on all stocks. As a rule, a stock must have a substantial daily trading volume, perhaps 500,000 shares or more, before an options market will develop for it.

You can go two ways with options. If the price of the associated stock moves they way you had hoped, you can instruct your broker to “exercise” the put - sell the stock at the strike price and buy it back at its current price, which is lower than the strike price. If you exercise your put option, you profit on the difference between the strike price of the stock and the price you buy it back at, but you eat what you paid for the put.

Or, you can simply trade options as if you were trading stocks. If you buy a put expecting the price of the associated stock to fall, and it does, then the put will increase in value. You can sell the put at a profit under 2 conditions: It has not expired, and there is a buyer willing to buy it.

Be advised that broker commissions for options are higher than for stocks.

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Guide to Buying / Selling Stock

When to sell a stock is very difficult to know exactly when to sell. There has not been a lot of research on the subject, and when asking advice from a broker you usually get an answer like, “ Let’s watch for a few more days”, or “ It’s not doing well right now but let’s watch it a little bit more.” You never can get a straight answer. There are a few things to keep in mind; you must watch your stock. It is your money and no one is going to look after it better than you do. If the stock you have bought has gone up, there are two ways you can go, sell and take the profit or let it ride.

When it comes to determining how well an individual stock is going to be, look at the trend of the stock. The most important thing to look for is failure. A stock that has tried several times to make come back after a high sell, but sells lower each time is considered a failure. The stock must sell below the price level that it sold for the previous failure. This defines the stock’s trend as down not up.

When you have a failure, do not let the stock sit too long. Sell and sell fast, do not put it aside in hopes that it will come back up if you hold on to it long enough. This is a warning sign that you must heed to if you hope to recuperate any of your investment. The game of stocks entitles you to where you do not have to be concerned about what and why the stock is not doing well. When you have made that decision to sell you have made an objective decision, now stick to it and sell.

The best time to decide to sell is when the stock market has closed for the day, this way you will not let every up and down affect your decision emotionally. When you make the decision to sell use what is called a protective stop order. To issue a protective stop order all you have to do is notify your broker, tell him that when the stock drops below a certain point to automatically sell the stock.

Stock orders can and are used every day very effectively. You can use the system of stock orders when stock rises also. A stock order may be issued each time the price advances, all you have to do is cancel the old stop order and enter a new one. It is best to keep in contact with your broker if you decide to use stock orders. There is an important rule or stock secret to remember, when you decide to issue stop order either to sell or to buy, remember to set the stop order ten percent either below or above the current stock market price.

When the decision to sell is made keep in touch with your broker to make sure all transactions are handled professionally.

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What are Key Investment Ratios?

One aspect of smart investing is being able to determine whether or not a company is a healthy company in general and not just this past year. You also want to know if a stock is really a bargain or not. Stock price and dividends are good to know, but not the only pieces of information you need to make sound, long-term investment decisions. A good year of either doesn’t mean there will be more.

Magic Numbers: The 33 Key Ratios That Every Investor Should Know by Peter Temple Provides a straightforward primer to calculating and interpreting 33 key investment ratios. The book is organized into five sections that explain market-based ratios (e.g., market capitalization, P/E ratios), income statement ratios (margins, earnings per share), balance sheet rations (price/cash ratio, burn rate), cash flow ratios, and risk and volatility ratios. Each chapter clearly shows the inputs necessary to calculate a particular ratio and explains its relevance in evaluating a company's performance.

When making a decision about where to put their money, savvy investors use ratio analysis. There are three kinds of ratio analysis:

• Profitability Ratios: measure how much profit a company generates
• Gearing Ratios: assess a company’s leverage
• Liquidity Ratios: measure the ability of a company to meet its debts
• Investment Ratios: measure the performance of the overall business.

This article focuses on investment ratios. There are countless ratios you can know about, but those referred to as the key investment ratios are the ones that will help the basic investor get the information they need to make a sound decision. The good thing is that most of the information you need to do these ratio’s calculations can be found in the financial statement, annual report or balance sheet of the company whose stock you’re investigating.

P/E Ratio is the ratio most people are familiar with and helps one determine whether or not a stock is too expensive or a really good deal by looking at the earnings relative to stock price. You divide the current stock price by the last four quarter’s earnings. If your company’s stock is trading at $20 a share with a .50cent EPS (earnings per share), your P/E Ratio is 40. A low P/E ratio means the company is undervalued and the stock is probably a good deal. If the P/E ratio is too high, the company is overvalued and you probably don’t want to pay more for a stock than its worth.

Return On Equity is a simple calculation that allows an investor to look into the profitability, asset management and financial leverage of a company. A company’s ability to maintain good levels within these groups signify a good investment for many. For ROE, you divide a year’s worth of earnings by the average shareholder’s equity (found on the company balance sheet) for that same year.

Earnings per share (EPS) is the most basic ratio and probably the simplest. You divide the number of average shares outstanding by net income minus the dividends on preferred stock. So, if a company’s post-tax profits are $1.2 million and there are 20 million shares issued, the EPS is .06. You’re looking for smooth, consistent growth here.

Dividend Payout Ratio calculates the percentage of earnings paid to shareholders by dividing earnings per share by yearly dividends per share or dividing net income by dividends. More mature companies have a higher payout ratio and if you’re looking to use dividend payments as income, this is important.

P/E Growth Ratio is used to determine a stock’s value while considering earnings growth. You divide annual EPS growth by the P/E ratio. A lot of managers prefer this to the P/E ratio because of the growth component.

Net Asset Value (NAV) is a ratio for mutual funds and equals the total value of the fund’s portfolio less liabilities. You’ll get this dollar amount by dividing the current market value of a fund’s net assets by the number of shares outstanding. So, if your fund has net assets of $100 million and there are one million shares in the fund, the NAV is $100.

Return On Investment (ROI) is what a company does with assets to generate additional value for shareholders. It is a percentage ratio calculated as net profit divided by net worth. It is also defined as a measure of a corporation’s profitability. If a $100 stock returns $15 a year, your ROI is 15%. Obviously, you want this percentage to be as high as possible.

Profit Margin is a calculation that fits into investment ratios as a key indicator of profitability. Usually displayed as a percentage, profit margin is calculated as net earnings after taxes divided by revenues and is useful when you want to compare stocks within a particular industry to those in similar industries. As you’ve guessed, a higher margin indicates a more profitable company.

Turnover Ratio is a measure of the number of times a company's inventory is replaced during a given time period. Turnover ratio is calculated as cost of goods sold divided by average inventory during the time period. A high turnover ratio is a sign that the company is producing and selling its goods or services very quickly.

Leverage Ratio (also referred to as Debt To Equity Ratio) is found by dividing the company’s total amount of long-term debt (debts with interest rates that have a maturity longer than one year) by the total amount of equity. A company is likely able to make its interest payments on debt regardless of a moderate sales decline if their leverage ratio is under 50 percent. A company with a higher leverage ratio can offer greater returns to shareholders but can also be riskier.

Dividend Yield is a percentage ratio of a company’s annual cash dividends divided by its current stock price. To get your annual cash dividend, you multiply the next expected quarterly dividend by four. If a $100 stock pays $2.50 quarterly, then your annual cash dividend is $10. Divide this by $100 and you get your dividend yield: 10%.

Market Capitalization, the current market value of a company’s outstanding shares, can be found by multiplying the number of outstanding shares by the current price of each share. A company with 1 million shares outstanding, trading at $75 per share, has a market cap of $75 million.

Current Ratio can be calculated by dividing current assets by current liabilities. You would use this ratio to see if the company can pay their current debts without going against future earnings. You’ll want to see a ratio of 1 or higher here.

Price To Book Value Ratio is calculated by dividing the current price of a stock by the book value. Book value, an accounting term, is the net asset value of a company. Whether the ratio is high or low could be a result of a company being old or a new start up with stock that hasn’t yet depreciated. It’s not a tell-all ratio, but does help in your overall research.

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Reading & Understanding Stock Quotes

In the Internet age, with stock quotes easily available on-line, reading stock in the newspaper is becoming less necessary. There are times, however, when you will find it preferable or necessary to read printed stock charts. The format may vary slightly from newspaper to newspaper, but all will generally be the same. The Wall Street Journal’s (WSJ) stock charts are a good example of what you will find.

Fundamentals of the Stock Market by B. O'Neill Wyss Practical, hands-on blueprint to stocks and mutual funds provides a thorough overview of today’s stock market. From understanding how trends and policies affect markets and the basics of placing a trade to advanced issues including technical analysis, short selling, Modern Portfolio Theory, and more, this unique and useful workbook explains the stock market in clear, concise language.

The stock charts are broken down by stock exchange – NYSE, Nasdaq, etc. Each exchange will be listed separately, with the stock exchange’s listings categorized alphabetically. Several columns are associated with each stock. Reading from left to right, the columns are:

· 52 week high – The stock’s highest closing price in the last 52 weeks.

· 52 week low – The stock’s lowest closing price in the last 52 weeks.

· Stock – An abbreviated version of the company’s name.

· Sym – This is the symbol under which the stock is traded. The WSJ lists both an abbreviated version of the company name and the stock symbol. Many newspapers list only one or the other.

· DIV – The annual dividend the company has historically paid.

· YLD % - The percent return, in dividends and/or other company pay outs, a stockholder can expect to receive from the company. Based on the previous day’s closing price.

· PE – The Price to Earnings ratio (P/E).

· VOL 100s – Trading volume for the previous day, in hundreds of shares.

· HI – The highest per-share trade the previous day.

· LO – The lowest per-share trade the previous day.

· CLOSE – The previous day’s closing price.

· NET CHANGE – The change in share value from the close of trading two days ago to yesterday’s close.

The Stock Market Course by George A. Fontanills, Tom Gentile Avoid expensive trading blunders with this hands-on workbook designed to test readers' investment savvy. Developed by a popular stock trading instructor, The Stock Market Course Workbook quizzes readers on their knowledge of the concepts presented in Fontanills's The Stock Market Course. Because mistakes are costly in the stock market, this accessible study guide provides readers with the opportunity to trade "fake money" before risking their real assets in the market. The invaluable lessons learned in this workbook could save readers thousands of dollars in investment mistakes.

Most newspapers will also publish the same information based on the week’s trading. These stock charts often appear on Saturday, Sunday, or Monday.

Many times, there will be a small footnote near the stock’s name. You can find interpretations somewhere near the bottom of one of the beginning pages of the stock charts. Common notations are ex-dividend dates, new high, and new low. Rather unique to the WSJ is a shamrock notation, which means you can order that stock’s annual and quarterly reports from the WSJ Reports Service.

Without argument, Internet stock quotes are more up-to-the-minute. To some of us, however, nothing beats the relaxation of sitting on the sofa with the morning paper.

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Introduction to Folios Investment

There's a new investment vehicle on the horizon, a cross between mutual funds and discount brokerage. That new vehicle is called folio investing. You may to check it out.

The Folio Phenomenon: New Freedom to Customize Your Investments and Increase Your Wealth by Gene Walden Discusses everything investors need to know and constructs a number of sample folios, including: Powering up with a utility folio Selecting a folio of blue chip all-star stocks Investing

Here's how it works:
You purchase in a single transaction a folio of the stocks you select. You can allocate your investment among anywhere from one to 50 stocks. You can invest an equal number of dollars in all the stocks or specify the percentages. The company then invests according to your instructions.

Folio companies have model folios that you can invest in or modify. For example, you can select a folio based on a major index, such as the S&P 500. You can select a pre-made folio based on large cap growth stocks or mid cap value stocks.

If you see a model folio that almost fits your needs that you want to modify, that's no problem. If, for example, you like a particular folio, but don't like the tobacco stock in the folio, you don't have to own that stock. Just instruct the company not to purchase that stock for you and it won't.

You also are free to ignore the model portfolios and allocate your stocks according to your own criteria.

With folio investing, you can make changes in your portfolio any time you want--daily if you wish--by giving instructions online. You can send in more money and have it invested in the same proportion as your existing folio and you can withdraw part of your investment and keep the remainder invested in the same proportion. You can change your allocation as often as you want.

You can have an IRA inside a folio account.

One thing you cannot do with a folio is day trade using limit orders. To achieve economies of scale, the folio companies trade only a limited number of times each day. Therefore, you may or may not get a pre-determined price of the day either when you buy or sell. Folio companies do allow you to instruct them to cancel a trade automatically if the price of a stock rises or falls by a predetermined amount.

Folios charge a flat fee--usually about $300 a year. That fee allows an unlimited number of trades and changes in folios. Second and subsequent folios have lower costs.

To keep costs down, folio companies use the Internet rather than telephone or postal mail for many of their communications with you. Statements, trade confirmations, and other communications are sent by e-mail. You  send in all your instructions through the Internet as well.

At the end of the year, folio companies will send you a statement of trades that you can use with your tax program. IRA's are available.

As with any investment vehicle, folios are better for some investors than others. Here are the types of investors that would appear to benefit from folios.

If you have large holdings in mutual funds, the expense fees of the mutual funds may be more than the flat fee you would pay to the folio company. Look at your fund's expense ratio and how much you are paying for your holdings.  If it is significantly more than the folio fee, you might want to look at a folio.

If you have a diversified portfolio of stocks which you trade occasionally and are a "hands on" investor who buys and sells stocks on a somewhat regular basis, you might find that the annual fee for the folio is noticeably less than the fees that a discount broker charges.

You probably would not want to own a folio, however if the size of your portfolio would make the fees prohibitive. If you have, for example, only $5,000 in mutual funds, the annual fee would be more than your current expense ratio.

Also, if you trade very frequently to take advantage of small price fluctuations folios may not be for you. Since folios only trade at preset times, you may or may not get that extra 1/8 point. You are better off with a discount broker if you want to do that kind of frequent trading.

Folios investing are not for everyone, but for the right person, they can provide diversification and an opportunity to get diversification and control over your portfolio at an affordable price.

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What is Sector Analysis & it Used for?

There are three things that will affect the performance of a company's stock. The first is the performance of the individual company. The second is the performance of the market as a whole. The third is the performance of the company's sector.

Just as an individual company's stock tends to rise and fall with the market as a whole, a company's stock will also tend to rise and fall with its sector.

Sectors are groups of companies that perform similar functions within the economy. Sector analysis involves dividing the overall market into sectors and then studying the performance of each sector individually, so that sectors can be compared to each other or to the market as a whole.

Different analysts use different breakdowns of sectors, but a typical sector list would include consumer staples, consumer services, energy, financials, health care, industrials, technology, transportation, and utilities.

Investors can use sector analysis in three ways: to guide diversification, to find sectors with above-average performance, and to time the market.

Some sectors are more volatile than others, reacting more strongly to changes in the overall economy. For example, the technology sector tends to do well when the overall market is rising, and poorly when the overall market is falling. Consumer staples, on the other hand, are more stable, neither rising as much as technology during strong markets, nor falling as much during weak markets.

To use sector analysis to guide diversification, select stocks in both volatile and stable sectors. That way, when the economy is strong, you will benefit from the growth in the volatile sectors, and when the economy is weak, stocks in the more stable sectors will provide a cushion.

A more risky strategy is to concentrate investments in sectors that are currently outperforming the market. This is a form of momentum investing. The idea here is that sectors that are outperforming the market will attract more investors, which in turn will cause the price of the stocks in that sector to continue to rise.

A third strategy is a market timing strategy which is in some ways the opposite of momentum investing. Market timers look for trends within a sector. The idea is that sector performance is cyclical, and the rise and fall of a sector can be charted. Market timers try to sell their sector stocks just before the sector peaks, and buy their sector stocks just before the sector troughs.

The online financial sites are good sources of information on sector performance. You can find news and statistics for each sector, lists of the best-performing stocks within each sector, and charts that compare the performance of sectors to each other. Each sector may also be broken down into subgroups of industries. For example, the financials sector may be subdivided into consumer financial services, insurance, investment services, savings and loans, and banks. Statistical and other information is available for each of the subgroups, so you can fine-tune your research.

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Value Investing

The term "value investing" is usually mentioned opposite another investment strategy, "growth investing." Really understanding the difference between the two strategies requires a little bit of investment theory.

The price of a stock (just like the price of any other financial instrument) is supposed to equal the present value of its future cash flows. "Present value" refers to the concept that a dollar today is worth more than a dollar next year. "Future cash flows" refers to the amount of cash your business generates - after interest expense, after taxes, and after capital expenditures, how much cash is actually available to shareholders?

Value Investing: From Graham to Buffett and Beyond by Bruce C. N. Greenwald, Judd Kahn, Paul D. Sonkin, Michael van Biema Explores the history and principles of value investing, and sets up guidelines for its successful application. Discusses where to look for underpriced securities, how to determine the intrinsic value of a stock, and alternative methods for constructing a portfolio that control risk without restricting investment return.

Value investing and growth investing differ in the pattern of expected future cash flows of the company. Value investing involves investing in established companies that are projected to have basically stable or slightly growing cash flows. Growth investing involves buying stock in companies that are projected to grow much faster than the market as a whole - and paying a premium for those companies. The projected cash flows of growth companies are much bigger, but much further away, and hence usually riskier.

Some investors prefer the simplification that "value investing" means investing in companies with low P/E's (price-to-earnings ratios, a proxy for the amount of cash flow a company is producing) - usually under 10.0x. "Growth investing" means investing in higher P/E companies. Underlying the high P/E is the concept that an investor is paying upfront for expected growth.

It is impossible to mention "value investing" without also mentioning Warren Buffett. Buffett doesn't consider himself a value investor, but the things he watches for in investing: a solid business model, competent management, and an excellent price - are all worth watching for in your own forays into value investing.

The first thing Buffett looks for is a tried and true business model. That means a company must have established its line of business, competed successfully within its industry, and produced reliable profits for its investors year over year. Whether the business is airplane manufacturing or clothing retailing, a strong history of profits is the clearest way to demonstrate that a company's way of doing business will withstand the challenges of time. Most value investors like to target companies that have had consistent histories of profit for the past three to ten years. Looking exclusively for historically profitable businesses protects the value investor from the risks that new and unprofitable businesses represent.

The next thing to look for in a value investment is a competent, ethical management team. Ordinary investors may not have the opportunity to meet management face-to-face, but value investors can look for other ways to gain insight into a management's priorities, such as by reading the Company's "letter to shareholders" in its annual report and listening to company earnings conference calls. Value investors seek out managements that are focused on shareholder interests and capable of delivering excellent results.

If you have a stable, profitable business and a competent management team, then you're ready to move to the third critical pillar of value investing, "an excellent price." As mentioned above, value investments are usually considered those with P/E's below 10x. Ask yourself this: would you be willing to spend $10 today to earn $1 each year, every year into eternity? With a stable business, this is exactly the concept that a P/E of 10x symbolizes.

Value investing doesn't appeal to everyone. Rather than talking with friends about the latest hot medical device patent or IPO, value investors must invest time and effort looking for the best companies in traditionally stodgier industries. Rather than gleefully anticipating 30%+ returns, value investors must remain focused on the long-term cash-generating power of their portfolios. However, for investors looking to build long-term wealth in the stock market, a value investing approach will go a long way.

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Basics of Education IRAS & College Investment

As college tuition continues to rise, many people are faced with the question of how they will be able to afford to send their children to school. One way of investing in your child’s future is with an Education Savings Account; formally know as an Education IRA. New laws that took effect in 2002 have made Education Savings Accounts more tax beneficial; therefore, making them even more profitable.

You can contribute $2,000 a year to be used toward your child’s education. If your adjusted gross income is less than $95,000 and you’re single or less than $190,000 and you’re married, you can make the full $2,000 contribution per child. For example, if you have an 8% rate of return over 18 years on an annual contribution of $2,000, you would have an account balance of $80,000.

The contributions to this account are flexible. Qualified individuals, such as grandparents, other relatives, and friends, can contribute to an Education Savings Account on behalf of a student. The student can even contribute as long as his/her income doesn't exceed the allotted amount. There is also no maximum contribution limit per donor, as long as it is made on the behalf of a child who is 18 years or under.

Withdrawals from the Education Savings Account are free from federal income tax as long as they are used for specified costs associated with education. These qualified costs are tuition fees, academic tutoring, special needs services, books, supplies and equipment used for elementary, secondary and post secondary education. The accepted costs also include room and board, uniforms, and transportation, as long as the beneficiary or the beneficiary's family uses it during any year the beneficiary is in school. If withdrawals do not meet the tax-free requirements, earnings are taxed as income and maybe subject to a 10% withdrawal penalty.

You will be subject to federal income tax and penalties if the students do not make withdrawals by their 30th birthday. Of course, there are special exceptions, such as a special needs student. These consequences can be avoided a couple of ways. Before you reach your 30th birthday, you can roll over or transfer your account balance to another member of your family under 30 or a special needs student. You could also change the beneficiary of the account. This must be done no later than the day before you turn 30.

There are advantages and disadvantages to an Education Savings Account. Some of the advantages have been discussed in previous paragraphs (tax free growth and flexible contributions). Another advantage is that the parent or guardian maintains control of the account. This helps to ensure the money is used for education purposes. Of course, once the student turns 18 they take over control of the account.

A disadvantage to an Education Savings Account is that a $2,000 a year contribution may not be enough to completely pay for your child's education. The Education Savings Account should be part of an overall financial plan. Another disadvantage is this savings account could affect the student's ability to receive financial aid. The financial aid is based on the student’s income more so than the parents. Also, you must remember that prices of shares fluctuate, and the rate of return is not guaranteed.

There is nothing more important for your child's future than education. Since the government changed the laws in 2002, the Education Savings Account has become a profitable way to save money for education costs. This may not be enough to cover the total cost of sending your child to school, but it is a great place to start.

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Advantages of Investing your Money Globally

Investors in the United States are blessed with a number of advantages. Liquid equity markets, a large number of listed companies and comprehensive disclosure combine to make the US equity markets exceptionally attractive. However, that attractiveness inevitably leads to lower returns for investors because of the overall efficiency of the market.

International Investments by Bruno H. Solnik, Dennis W. McLeavey Provides an authoritative and classic treatment in the field of international investments, with a clear exposition of theory and recent empirical research.

In contrast, international markets offer greater opportunities simply because they are smaller and not as widely pursued. For an investor willing to dig a little deeper into an investment, international investments can be a goldmine. But investing abroad can still offer substantial benefits for the investor who prefers leaving the heavy analytical lifting to a mutual fund.

The first and most obvious advantage of international investing is diversification. Other economies, be they in Western Europe, Russia, or Southeast Asia, will have a different set of economic circumstances than the United States at any given point in time. If the United States falls into a recession, Ukranian or Chinese equities may nevertheless be roaring along. A broadly invested portfolio will not be as adversely affected by negative movements in any one of its component companies or countries.

An internationally invested portfolio also allows an investor to capitalize on the higher growth rates available in developing economies. Many developing economies in Europe and Asia are currently growing much faster than the United States as they "catch up" to more developed countries. Companies operating in these countries have a built-in growth advantage. They have the "wind at their backs" - a growing economy will increase most business' revenues without any increase market share.

International companies are often significantly cheaper than US companies. This means that the same dollar of capital invested will often return substantially more in operating earnings and earnings per share than a comparable company in a comparable industry in the US. The price discount reflects the risks of investing abroad, but there is often also a discount for illiquid or hard-to-understand investments. This discount compensates investors for the increased research and complexity involved in international investments.

Finally, international investments can offer quite a few psychological advantages. Investing abroad means putting capital where it is most needed. Particularly for developing countries, foreign investment allows the kind of accelerated growth that lifts people and countries out of poverty. Furthermore, ownership of international investments will encourage you to keep up on current events in that country and make you into a more informed global citizen.

The exact nature of the company and country you are investing in will affect the balance of these advantages. Investing in developed western European nations is a good diversification strategy, for example, but you may not enjoy the higher-than-usual growth rates of investing in a developing country. Likewise, less developed countries frequently offer high discounts in relation to their US competitors, but the increased volatility of these investments will make them less useful as a diversification strategy.

The potentially high rewards of investing internationally are balanced by risks. These risks vary by country, but there are a few common threads. International companies frequently offer less disclosure. A company's website, investor information and news may not be available in English, which makes it difficult to keep tabs on portfolio companies. Investors also face currency risk - for example, if the dollar is appreciating strongly it may be difficult for your overseas investments to keep up. Finally, legal issues and country issues are always a concern in developing countries, as these countries may enact regulatory, tax or ownership laws that adversely impact investors.

However, there is indisputably money to be made abroad, and smart money will follow the opportunity. After weighing advantages and disadvantages, informed investors can frequently buy a very profitable stake in the global economy.

Related Post:

• Foreign Markets Investment Advice
• Exploring Online International Investments
• Stock Market Investment- Via Online Brokerage

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Investing Tips in Real Estate

At some point in time, almost every investor considers putting money into real estate. Real estate is attractive from a number of investment perspectives: it offers predictable cash flows, tends to appreciate more consistently than stocks, and is easily leveraged via mortgages to maximize potential returns.

However, investing in real estate is not as simple as opening a discount brokerage account and starting to trade stocks. Real estate is a more time-consuming process, from finding the right assets, to managing them properly, to keeping good financial records. Success in real estate depends on a few critical factors, and this is the first one: you must have the time and interest to find good properties and then keep your properties on track.

The Real Estate Investor's Handbook: The Complete Guide for the Individual Investor by Steven D. Fisher Must-have for beginning investors, real estate veterans, commercial brokers, sellers, and buyers. Real estate investing has created more millionaires than any other investment vehicle in this country. This comprehensive step-by-step proven program shows beginners and seasoned veterans alike the ins and outs of real estate investing. This book is a road map to successful investing in real estate.

If you're committed to trying your hand at real estate, then you need to make sure you have the right team of people around you. This team should start with your informal network of friends and acquaintances, some of whom probably own investment property themselves. Ask around, and once you've found a couple of people with property experience, quiz them on everything from legal technicalities in your city to tenant issues they've experienced.

From there, you must build your real estate investment team to include real estate professionals, including a real estate agent, a mortgage broker, an appraiser, and potentially a lawyer or accountant that you can call on. Almost everyone already knows a real estate professional or two. After all, you either own your place, in which case a real estate agent probably introduced it to you, or you rent, in which case your landlord should be the first person you chat with.

Fortunately, one real estate professional knows another, and it is more than likely that your real estate agent or landlord will be able to recommend other real estate professionals you should talk to. Be sure to check a professional's real estate credentials. Is your appraiser an expert in the neighborhood you're interested in? Has your accountant filed tax forms for individual real estate investors before?

The second critical factor for success in real estate is much more property-specific: cash flows. Crunch the numbers, and think of everything. On the plus side, will you be able to raise rent when you buy the property or soon thereafter? And on the expense side, make sure you've calculated your mortgage payments, insurance and utilities, and included a reserve for repairs and maintenance.

For carefully evaluating the numbers side of the equation, your appraiser is your best friend. A formal appraisal of a property is almost always required by your financing source (mortgage broker). Get your hands on this appraisal. It will include details of comparable rental properties in your neighborhood - sales prices, rental rates charged, and cost to build from scratch. It may also include a cash flow analysis, showing monthly revenues and expenses, which will crunch the numbers for you. An appraisal is invaluable, and you should carefully study yours.

After you're satisfied with your potential cash flows from the property, your main concern should be avoiding headaches that will eat up your time and sap your energy for the real estate business. And that means you simply must avoid problem tenants.

Many landlords advise that about one tenant in ten is a problem tenant. There are a couple of ideas you can use to get this proportion down considerably. After all, you have better things to spend your money on than broken windows and replacement carpet; and better things to spend your time on than answering midnight phone calls.

Neighborhood selection can help you avoid problem tenants, but suppose you've already got a place, and it's in the middle of fraternity row at your local college. The first step is to background check your applicants carefully. Perform a credit check, and give extra points to potential tenants whose applications appear clearly organized and complete. Once you've decided on a tenant, be sure you clearly explain the terms of the lease to them, and make sure you obtain an adequate security deposit. And if you find a good one, by all means keep them happy and in place, by offering a few extras like fresh paint.

Armed with these tips for building a real estate network, understanding cash flows, and getting good tenants, you're well on your way to starting or improving your returns - in terms of both money and peace of mind - on your ownership of rental real estate.

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