Tips on How to pick the winning stocks

Investment can be one of the ways to be rich... Here investment mean picking the right stock.

Given below are some tips to help one pick the winning stocks:

Stock Research Report or Company Report Get the Revenue figure. What you want to know, is whether it has steady growth evidenced by sales figure on an upward climb. Understanding more about the Cost of Goods Sold figure. This tells you more about the costs of all materials and expenses incurred in making the product. Rental in keeping stocks is not accounted.

Financial Ratios' The few favourite ratios :

• P/E (Price to Earnings Ratio) , EPS (Earnings Per Share) and ROE (Return on Equity) This ratio reveals about the value of a stock. The price of a stock divided by the earning per share is called the p/e ratio. Every stock has a trailing p/e and a forward p/e. The trailing p/e uses earnings from the past 1 year while the forward p/e uses next year's projected earnings. Compare the current p/e with its historic p/e during its last 3 years. Try to "aim" for a stock with low p/e. If the p/e is high, its risky as it is more difficult to meet the high earning expectations of its shareholders. Companies with low p/e ratios usually operate in slow growth industries. Also mature companies with low p/e often pay dividends while high p/e ratios usually does not.
• EPS : This ratio reveals the growth of the stock. It takes what the company earned and divides it by the number of outstanding stock shares. This ratio is usually reported at the end of the year. But realise that this figure can be manipulated due to market pressure. Of course, the bigger this ratio is, the better.
• ROE: Some people consider this to be the "it" to measure the stock's success. This ratio shows you the rate of return to shareholders by dividing the net income by the total shareholders' equity. Big is good. Anything above 20 percent is good for me... 3. Sector Outlook A few things must be enquired before compiling a list of stock possiblities a) Does the company produce high end services/ products? b) Does the company management have experienced/ qualified personnels in the industry they are in? (For me personally, I believe that in highly specialised fields, higher value added performance is obtained from people who are "skilled specialist" : That explains why Google is superb in the things they do ) c) Is the stock reasonably priced? d) What about comparisons with the other stocks? e) Does a company have patents to keep potential rivals at bay? There you are.. good luck!

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Mobilizing Savings for Investment

Stock exchange or bourse is a mutual organization which provides facilities for stock brokers and traders, in trading company stocks and other securities, and for the issue of redemption of securities and other financial tools and capital events like the payment of income and dividends.

• Government & Corporate Bonds Investment
  Most people know about the basics of investing in the stock market but many people are puzzled as to what bonds are. In one word a bond is a loan. The loans can be form

The securities traded on a stock exchange include shares issued by companies, unit trusts and other pooled investment products and bonds. To be able to trade a security on a certain stock exchange, it has to be listed there.

Usually there is a central location at least for record keeping, but trade is less linked to such a physical place. Electronic networks run modern markets are, providing them great speed and cost of transactions.

Stock exchange is often called the most important element of a stock market. The Demand and Supply in the stock markets is attracted by number of factors that affect the price of stocks.

Mobilizing savings for investment:
When people draw their savings and invest in shares, it leads to a more balanced allotment of resources because funds, which could have been consumed, or kept in idle deposits with banks, are mobilized to promote business activity that benefits several economic sectors like agriculture, commerce and industry, resulting in a stronger economic growth.

History of stock exchanges:
In 12th century France, the courratiers de change were concerned with managing the debts of agricultural communities on behalf of the banks and these men also traded in debts. These men were the first brokers. In the middle of the 13th century, Venetian bankers traded in government securities. In 1351, the Venetian Government outlawed spreading rumors about lowering the price of government funds. Because of this rumor people in Pisa, Verona, Genoa and Florence also started trading in government securities which was possible because there were independent city states ruled by a council of powerful citizens during the 14th century.

Raising capital for businesses:
The Stock Exchange helps current and newly-formed companies raise capital for building and expanding their business through selling shares to the investing public.

Creating investment opportunities for small investors:
The Stock Exchange provides opportunity for small investors like the big investors to own shares of the same or different companies.

Government capital-raising for development projects:
Governments at various levels may decide to borrow money for financing infrastructure projects like sewage and water treatment works or housing estates by selling another category of securities known as bonds. These bonds are raised through the Stock Exchange where public buy them, thus loaning money to the government. The issuance of such municipal bonds can prevent the need to directly tax the citizens in order to finance development, although by securing such bonds with the full faith and credit of the government instead of with collateral, the result is that the government must tax the citizens or otherwise raise additional funds to make any regular coupon payments and refund the principal when the bonds mature.

Listing requirements:
Listing requirements are the set of conditions forced by any given stock exchange upon companies that want to be listed on that exchange.

Requirements by stock exchange:
For companies to have their stock and shares listed at the stock exchange have to meet certain requirements of the exchange. But requirements vary in different exchanges.

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• Guide to Buying / Selling Stock
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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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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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Creating Cash Flow Formula for Your Investment

Many of us invest in the stock market for long term growth. However, 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. One of these strategies is known to many stock brokers as channeling.

Winning the Cash Flow War: Your Ultimate Survival Guide to Making Money and Keeping It by Fred Rewey A proven path to success for anyone seeking financial freedom in today’s challenging world

There are certain stocks that move within a specific price range in a repeatable pattern and while this can be frustrating for a long term growth investor, it provides a wonderful opportunity for those who could use some extra cash.

The following is an example to show you how this plan works. You bought a stock we will call “xyz” at four dollars a share. In a few weeks, the stock moves up to around six dollars a share before falling back down to the four dollar price range. How is this going to make you money you ask? Simply by selling the stock at six dollars. And when it falls back down around four dollars, buy again. Repeat this method over and over again, of course each time you will have more money to buy more stock.

Let’s say you bought 1,000 shares of xyz at $4.00. That would mean you had to come up with $4000.00 for your initial investment. Several weeks later, the stock has moved up to $6.00 and you sell. You now have $6,000.00 which means you have made $2,000. The stock falls

back down to $4.00 a share and you buy in again, only this time you buy 1500 shares at $4.00 which equals $6,000 cash out. When the stock rises back up to $6.00 sell again. This time you will have made $3,000.00. 1500 shares X’s 6.00 a share equals $9000.00 minus $6,000.00 equals

$3,000. See how it works? Eventually, you will build up quite a bit of money from doing this play over and over again.

However, there are a few things to keep in mind. What if you buy the stock at $4.00 and then it falls down to $3.00 and never goes back up? You will have lost money then. One way to keep this from happening is to set a stop loss order. For example, place the order so that if the stock falls below a certain price, then the stock will automatically sell before the stock can fall any lower. You will lose a little bit, but you won’t lose the whole thing, and your money will be free to do something else.

What if the stock goes higher than $9.00? Won’t you lose out on the potential to make more? When you see the stock begin to climb close to the $6.00 mark, move up your stop loss order. Be careful to not squeeze it too closely, because sometimes a stock can fall back momentarily only to surge up higher and limit your potential by selling too soon. So when the stock climbs up to $6.00 place your stop loss order at $5.75 (example only) and then if it moves on up to $6.50 then move the stop loss up to $6.25 and so on.

You should however, have a pretty good idea of when to buy and when to sell. If you wait to sell too long, thinking it will go higher, then you could lose out because the stock can drop back down quickly. Just be sure to use these strategies to keep that from happening.

I am sure many of you are now wondering where you can find these stocks? One thing you can do is buy a Wall Street Journal and the use a free Internet stock chart and then start researching the stocks. It is important to realize though that when you are starting out, especially with a small amount of money to buy stocks within the $1.00 to $15.00 ranges. You can buy more stock this way and your returns are really not that much different from the more expensive stocks at this point.

On the charts you should be able to see a repeatable pattern of the stock fluctuating between a certain price. Of course it isn’t as clear cut as it never falling below 4.00 or rising only up to $6.00. You should take a piece of paper and place it horizontally across the chart and see how many times it has hit a certain price, also where the basic support line is at the bottom price range also.

Take your time and be patient. Research your companies well. Keep in mind here though that many lower priced stocks up to $5.00 don’t always have just a whole lot of information. Only use money that you can afford to gamble with a little bit. But if you will use these strategies, then you should be able to greatly reduce the risk of losing which will enhance your chances of creating a steady stream of cash flow.

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Choosing & Maintaining Your Brokerage Accounts

The craze of online trading seems to have lulled itself to sleep. A lot of people lost a lot of money while others made money handling their own brokerage accounts. Trading stocks is not as easy as one would think. It's more than luck to make money on stocks, it takes skill and knowledge.

• Learning to Evaluate Stock Market Risks
  The first thing that you should keep in mind is that the stock market isn't a tool for instant success. Yes, you can get wealthy playing the market, but that often takes a diverse portfolio, a lot of work, and years of time. It's true that a lot of people get rich off of sudden "hot" stocks, such as the "dot-com" boom of the 90's, but once the initial swell ends the stocks tend to crash...

Before choosing which stock you're going to buy, you need to do your homework. This means you need to research the history of the company as well as their stock history. Look at the high/low trends of the market. If a company has had a lot of lows and very few highs, then go on to another company.

• Investment Guide in Startup Companies
  Startup companies are usually small companies and usually new companies. They are unproven, frequently having little money and less market share. Often they are started on a shoestring and a dream, a song and a prayer--but you want to find them before they become a household name.

If the company is new and their product is cutting edge, look to see who is on the Board of Directors and their business history. If they're known to have poor management tactics, walk away from that company no matter how promising the product looks. For example: My former husband wanted to buy stock in some ophthalmologic equipment. He thought the stock would take off and $8.00 a share was a very good buy. He asked my opinion and my gut level told me not to do this. Why? Because he hadn't done his homework. I looked into the Board of Directors and told him my misgivings. He bought the stock any way. Within six months, the company declared bankruptcy and their stock was pulled off the market. My former husband lost $800 because the stock needed to be purchased in 100 stock options increments.

On the other hand, Apple Computer's stock had been very low for years. My former husband bought this stock and within three months, the stock prices went up. Within one year, I couldn't keep track of how many times the stock split. Apple Computer defied the odds of their low term history of low return on their stock. Just because this company did, doesn't mean that other companies will so you need to keep that in mind.

Now that you've done your research and have purchased your stock, you need to maintain your brokerage account. The best way to do this is to take the advice of the stock brokers, once your stock has doubled sell your stock. While there are a lot of people who have made a very good living off the stock market, there are others that have lost everything because they didn't sell when they were advised to or who purchased stocks that weren't a good choice from the beginning. There are people who have sold their stock once it had doubled only to lose out on a higher dividend. What you need to remember is to err on the side of caution because how do you know that if you hadn't sold when you did, that the stock price would have gone through the floor and you would have lost more money than you had invested?

It's best to sell your stock once it has doubled and take part of the earnings and put it in a money market or a long-term CD; then you take the other portion and reinvest into another company. Remember the stock market isn't the only way to get a return on your money. Remember to have other venues for residual income so you can make the most of the proceeds from your brokerage account.

If this seems like a lot of work to you and don't have time to handle this, the best route to go is through T. Rowe Price and Associates. Their brokers work for a salary and will do the best possible job for you. Other brokers work strictly on commission and tend to watch their high end investor accounts more than the low end. With T. Rowe

Price brokers, they treat everyone equally.

If you think that you're ready to go this alone, remember to do your research before you part with your money.

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Buying Blue Chips as An Investment

When people on Wall Street talk about “Blue Chips” they refer not to an assortment of fancily colored crunchy munchies, rather, they speak of the most valuable and stable stocks on the stock market. The phrase “Blue-Chip” originated in 1904 and comes from the blue chips people used as the highest bidding chip in the game of poker. Blue-chip stocks are still considered by many in the industry to be the highest bidding chips in the investing game.

Blue-Chip stocks are large-cap companies, meaning their market price, a value achieved by calculating the number of shares outstanding by the price of one individual share, exceeds five billion dollars. Not all companies represent large-cap stocks; there are three other descending categories of capitalization; mid-cap for companies totally between one and five billion, small-cap for companies at the two-hundred fifty million to one billion mark, and lastly, micro-cap companies, those whose value is below two-hundred and fifty million.

Many of these Blue-Chip corporations are found in the market indexes. There are several indexes on the market, the two main being The Dow Jones Industrial Average and the S&P Index. The Dow is the most popular market index. It is comprised of the shares of thirty public U.S. companies from a variety of industries—industries ranging from computer manufacturing to fountain drink production. Some of the companies that are considered Blue-Chip and that make up the Dow are American Express, AT&T, Boeing, Caterpillar, CitiGroup, ExxonMobil, General Electric, Hewlett-Packard, Home Depot, Wal-Mart, 3M, Intel, IBM, Disney, and United Technologies. This partial list of thirty shows represents a popular measure against which an investor makes his or her decisions. Some investors not only use the Dow as a comparison tool, rather, they make their most significant investments in the index itself.

Popular Blue-Chip stocks are also found on the S&P, which is another market index. The S&P is composed of five-hundred companies based not just on market cap, rather, the percent of influence a company has within its own industry. A stock may be part of the DJIA index but may not be included on the S&P if another company within its industry outperforms it. Some of the industries covered by the S&P are telecommunications, health care, biotechnology, food and beverage, and consumer brands. Like the Dow, the S&P attracts many investors not only because of its value as a stock performance index, but as a source of solid investment.

Blue-chip stocks, particularly those found on the Dow and S&P are popular choices for investors because of their potential to outperform the market. Investing in large-cap companies is generally less risky than buying smaller, lesser-known stocks. For instance, companies that have already proven their salt; a UPS or an American Express, will likely provide a stable investment for you where as a relatively new company with no history can prove volatile and unsuccessful. With Blue-Chip stocks the income may be gradual and profits will take quarters and years to realize, you have made a reliable, long-term, high yield investment. Blue-Chip stocks do carry a greater risk due to their high price-per-share cost when compared to micro-cap companies, however, they are generally safer picks due to their predictability and tendency to stay on top of the market.

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Basic Investment Strategies

Everyone should have a financial plan that includes long-term investment strategies. These can range from no risk to significant risk, depending on the type of program you decide to invest in.

Guide to Investment Strategy: How to Understand Markets, Risk, Rewards And Behavior by Peter Stanyer, Elroy Dimson With detailed analysis supported by data and anecdotes drawn from investment experiences, this practical guide emphasizes the importance of basing recommendations for investment strategy on the principles of traditional finance.

Before sinking your hard-earned funds into an account that may not hold up during times of economic uncertainty, explore some of the available options to make the best choice for your investment dollars.

The New Investment Superstars: 13 Great Investors and Their Strategies for Superior Returns by Lois Peltz New Investment Superstars provides you with a unique opportunity to get to know these market masters and learn the original investment strategies they have used in many markets to outperform their peers.

The safest type of investment plan is a simple bank savings account. Since the federal government insures most financial institutions of this type, you should not fear losing your deposits or the interest they earn. However, the return on this investment is quite small, especially when the economy slows.

Savings bonds are another safe but slow investment. They mature after seven years, doubling in value. These provide a great option for teaching children how to save by purchasing small bonds and watching them grow over time. Other types of bonds, such as municipal or treasury, are slow-growing and involve little risk.

The next level of investment is the certificate of deposit, or CD. These accrue interest at the prevailing market level, which usually follows the current prime rate. Insured by the FDIC, they provide a safe investment but offer a relatively small rate of return. However, there is no penalty for early withdrawals except quarterly interest, so your money remains “liquid,” or available when you need it.

Individual retirement accounts, or IRA's, are long-term savings plans that, generally speaking, become available (with interest) when a person reaches retirement age. There are penalties in terms of lost interest with early withdrawal.

The Only Guide to a Winning Investment Strategy You'll Ever Need: The Way Smart Money Invests Today by Larry E. Swedroe Contains a new chapter comparing index funds, ETFs, and passive asset class funds, an expanded section on portfolio care and maintenance, the addition of Swedroe's 15 Rules of Prudent Investing, and much more.In clear language, Swedroe shows how the newer index mutual funds out-earn, out-perform, and out-compound the older funds, and how to select a balance "passive" portfolio for the long hail that will repay you many times over.

Purchasing stock shares of a publicly traded company is another way to invest your money to make money when the company does well. Profits are distributed to stockholders as dividends or can be compounded into the stock holding to accrue a greater amount of interest over time. Depending on the company's stability and the economic climate as well as the number of shares you hold, stock holdings can be a volatile or safe investment. Become familiar with the company so you have an idea of what to expect.

Mutual funds are an attractive and popular investment option for long-term moneymaking dividends. A mutual fund is actually a portfolio of varied stocks that is compiled by a broker who advises the client about what to buy, sell, or hold. Since mutual funds include a diversified array of stock shares and compound with interest, they can be a relatively secure investment. But there are low risk, moderate risk, and significant risk options. You can invest in American companies or acquire international portfolios comprising European, Asian, or Pacific Rim stock holdings, for example. Ask a broker for details on the best plan for your interests.

Start saving for the future by investing money in an account that will a rate of return that suits your temperament. You can begin with a savings account, progress to an IRA, and put a little aside for riskier ventures in the stock market. An important rule of thumb is never to invest what you cannot afford to lose.

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Fundamental VS Technical Analysis

There are two main ways of picking stocks (or any kind of investment).

Fundamental analysis is concerned with looking at the economic fundamentals affecting the particuar stock (etc) and covers everything from the economy it operates in (interest rates, unemployment, exchange rates etc), through sector prospects (is the sector growing or declining, the competition etc) down to the particular stock’s accounts, and management team.

Select Winning Stocks Using Technical Analysis by Clifford Pistolese Provides expert advice on tactical trading errors, controlling your emotions, and steering clear of the “herd mentality,” as well as how to: Locate companies with effective business models Use free technical analysis resources on the Internet Readjust your portfolio for bull, range-bound, and bear market phases Diversify your investments to control risk Recognize the signals that a stock should be sold Spot common investment pitfalls and avoid them

On the surface it seems fundamental analysis provides a reasoned and rational basis for investment decisions. The problem is that the information you’ve based your analysis on (plus that you missed) is also available to everyone else - including the smartest pro traders and analysts, their super dooper computer models, and the inevitable snippets they’ll discover that you won’t. Result, by the time you’ve done your fundamental analysis your findings (plus the stuff you didn’t take account of) is already reflected in the price.

Technical analysis is concerned with (don’t laugh) trying to guess future price movements by looking at historic price charts. In theory this would seem about as useful as trying to guess price moves from studying tea leaves. Technical Analysis is dismissed as useless by academic, author, and succesful investor Burton Malkiel (A Random Walk Down Wall Street). And yet the fact that technical analysis is still widely used might just make it a proverbial self-fulfilling prophecy; ie a technical buy signal occurs, lots of people buy, the price goes up… Though I suspect such a thing - if it exists - works only in the very short term.

Ultimately, the safest bet is simply to buy an index via a low-cost tracker fund, and that’s where your core investments should be. Either in a managed fund, or (if you can afford it) in a broad spectrum of diversified stocks.

But if you want a bit of fun, with non-critical money, do your fundamental analysis, do your technical analysis, but leave the final choice to that little voice within - your intuition.

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Manage Your Investment Account

Opening and maintaining an investment account can be handled in a variety of ways. Some investors take a hands-off approach, preferring to let the broker, as the voice of experience, call the shots and handle the transactions. Other stockholders take mixed roles. Here are some of the ways that you can oversee your stock holdings or mutual fund portfolio:

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1. Keep tabs on stock market reports. Even if you decide not to get actively involved, at least you'll have a general understanding of the market conditions and your holdings, and can monitor your investment broker's actions on your behalf. Read the business section of your local newspaper or get a subscription to a financial publication like The Wall Street Journal or Money. Make an appointment to meet with your broker every three to six months to discuss your account.
2. Follow the stock indexes along with your particular holdings. That way you'll have a pretty good idea of how well your stock is performing and what you would like to do with it. For example, when it goes up, you may decide to sell for a higher profit. Or when it falls, you might want to purchase additional shares. The more you understand about the market, the more effectively you can manage your accounts or collaborate with your broker to ensure maximum growth.
3. Decide if you are a low risk, moderate risk, or high risk investor. Some brokering firms offer an investment survey that will help to evaluate your financial attitudes toward the stock market and an investment account. Knowing your risk level can also help guide you toward the kind of strategies you will want to consider making. For example, moderate to high risk stockholders may be interested in buying and selling stock options as opposed to stock shares. A low risk taker may be more interested in a simpler strategy like rolling stock, or buying when it's cheap and selling when the price goes up.
4. If you are a take-charge person, it may be difficult for you to trust your holdings to an investment broker. While you may let that person do the actual trades with your stocks, you may prefer to make the decisions and advise him or her as to your choices. But if you feel unfamiliar with the market, it may seem more comfortable to let the broker make the decisions and keep you informed through monthly, quarterly, and annual reports.
5. Give some thought as to the purpose of your investment account. For example, you may want to earn interest on your holdings to pay for a son or daughter's college education. Or you might prefer to let the interest compound and increase your holdings over time. A broker can discuss options like these with you to provide clear-cut possibilities for the best use of your money.

Managing your financial assets can be exhilarating as well as sobering. It may be worthwhile to take an investment workshop or enroll in a seminar to learn more about this dynamic opportunity for financial growth.

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Knowing Your Bonds by Reading the Yield Curve

Yield curves depict how a bond’s yield is related to its maturity. Yield curves based on the US Treasury are published daily in major financial newspapers. Yields on shorter-term bonds, such as 1-month, 3-month, and 6-month Treasuries, are depicted on the left side of the curve. Yields for longer-term bonds, up to the 30-year bellwether Treasury, are on the right side of the curve.

Typically, higher yields are available on longer maturities. This is because investors expect to be compensated for giving up their capital for longer periods of time. On a yield curve, this translates into an upward-sloping line. A “flat” yield curve has only a small spread between the yields available on the shortest and longest securities. As a practical example of a flat yield curve, if the 1-month Treasury yielded 5.00% when the 30-year Treasury was yielding 5.80%, the spread would be just 0.80%, or 80 basis points. Conversely, if the 30-year Treasury was yielding 6.50%, the spread would be 1.50% and the yield curve would be considered “steep”. During times of steep yield curves, investors demand a significantly higher yield on their long-term securities.

Sometimes, however, higher yields are actually available on shorter maturities. This results in a downward-sloping or “inverted” yield curve. Usually inverted yield curves happen when investors believe that interest rates are about to decline. And since interest rates usually decline during recessions, an inverted yield curve can sometimes predict tough economic times ahead. However, the inverted yield curve tends to be somewhat pessimistic: it has predicted nine out of five recessions.

Historically the yield curve has moved all over the place. There have been periods of long bonds yielding much more than short bonds (steep yield curves), to long bonds yielding just a little more than short bonds (flat yield curves), to long bonds actually yielding less than short bonds (inverted yield curves.)

Say you’ve looked at the yield curve and determined that it is upward-sloping; that is, longer-term bonds are yielding more than short-term bonds. Why would you ever buy a lower-yielding short or intermediate-term security under these conditions? The answer is that long-term securities present both greater risks and greater rewards. The primary risk for long-term bond investors is interest rate risk. If interest rates increase, the price of long-term bonds will decline more than the price of short-term bonds will decline. If you need to reclaim your capital before the bond matures, you will need to sell it into the market at a loss. This is a large and misunderstood risk for bond investors, and it is one that the yield curve can help you mitigate.

Shorter-term securities are less susceptible to interest rate risk, but they offer a lower yield. There is no perfect solution; only a tradeoff between security and maximum potential return. The yield curve captures this trade-off clearly, on a daily basis. For example, if 90% of the yield on a 30-year bond is available on a 10-year bond, you will probably be best served by buying the 10-year bond. The yield curve tells you that you will not be adequately compensated for the additional risk inherent in the long-term bond.

On the other hand, what if you are looking at an inverted yield curve? Why would you buy a longer-term, lower-yielding security rather than a less risky, higher-yielding security? The answer is simple: you will lock in returns for longer. During the 1980’s, interest rates rose to unprecedented highs. Investors who locked in the high yields for long periods of time made a lot more money than those who were forced to reinvest their money at lower interest rates just a year or two later.

In summary, a yield curve shows you how a bond’s yield is related to its maturity. A careful look at the yield curve can help you determine if you are being adequately compensated for the risk you are assuming with your bond portfolio, and thereby increase the security and return of your entire portfolio.

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Stock Market Investment: Via Online Brokerage

Online stock trading can be enabled with the services of a broker. Just like the stock exchange an online broker enables an investor to buy and sell stocks. But the only difference from the stock exchange is that investors have to contact the broker through the Internet. There are various sites that provide online brokerage services. In fact online brokerage has been found to be convenient for the broker as well as the investor as stocks are traded much more efficiently.

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.

Who is a Broker?
Brokers function as the back bone of the stock exchange shouting from one end of the stock exchange to the other for the various stocks that are to be traded on the stock exchange. It is the stock broker that has the knowledge of the market fluctuations and thus knows about the best prices for selling and buying stocks. In fact the broker functions as an agent to investors informing them about the latest market trend fixing an agreement with other investors that are listed on the Internet. It is when a deal is made between investors that an agreement is said to have brokered between the investors. This deal is brokered through the agent who is called the broker.

Advantages of Online brokerage
Similarly to the stock exchange, online brokerage renders the services of the broker, but through the Internet. However trading of stocks online enables the investor to know about the right market conditions. If the market is bullish than it is most likely that the broker will advise the investor to sell the stocks, if it is bearish it would be convenient to sell the stocks. Apart from just giving advice on the sale of stocks there are some other advantages of online brokerage which include the following:

• Testimonial and Quotes- Investors can gain information about the brokerage services that a particular website has to offer by reading the quotes and the testimonials of the broker. It is important to note the experience of the broker and whether the broker has the adequate license of providing brokerage services.
• Efficient handling of all financial transactions- Once investors have chosen a broker online it is necessary to provide the stock details that you would like to buy or sell. This is essential because the broker will only contact a stocks buyer or seller depending upon which industry he or she represents. Moreover it is the policy of a responsible online broker to secure the information of the investor.
• Options trading: Through online brokerage the investor can get help into the type of stock that an investor has to sell or buy. There are many different types of stocks available with an investor, but selling of these stocks depends upon the market fluctuation. For example if an investor has IT stocks and the stock market is bullish about IT stocks then it would be important to sell these stocks among others that are not currently suitable to be sold.

Therefore online brokerage is an alternative to trading stocks on the stock exchange. But while investing through a broker it is essential to keep in terms with the agreement that one has approved with the broker, otherwise one way end up with a broker providing poor information about your investments.

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What is an Index Fund?

Investing with Exchange-Traded Funds Made Easy: Higher Returns with Lower Costs - Do It Yourself Strategies Without Paying Fund Managers by Marvin Appel "Today, exchange-traded funds are the most innovative and rapidly growing investment vehicles. Marvin Appel’s new book provides, in a highly readable framework, a wealth of information on what they are and–more importantly–how private and professional investors can use them to build wealth through a simple and easy-to-implement investment program."

Most investment and financial planning experts agree that a mutual fund is an ideal way to maximize the potential of your investment while at the same diversifying your portfolio and reducing your risk. This is because a mutual fund is a collective effort – rather than you as the individual investor selecting stocks or bonds or other investment vehicles in which you’d place your money, instead you give your money to a mutual fund manager. The manager takes all the money that all of the investors have given the fund, and then uses that money to buy quantities of shares in a variety of investments. In this way, by making one investment, you are able to own shares of stock from across the board. This is automatic diversification – if one company that the fund holds does poorly, it is a good bet that another of the myriad investments will do well. On the other hand, if you bought stock on your own, and it performed poorly, you would simply lose money.

The bet here is that the mutual fund manager is going to a better job than you in selecting stocks – this is their profession after all – and at the end of the year the return on the fund will depend on how well the manager predicted the markets. There are many kinds of mutual funds – large-cap, mid-cap, small-cap, aggressive-growth, etc. The list goes on and on, and sometimes it is difficult to know what kind of fund is best for you. Investment experts crow about the benefits of each type of these funds, but the fact of the matter is that unless the mutual fund manager is exceptional, there is little chance that he or she is going to do better than the market indexes themselves. In fact, it is estimated that only about 20% of actively managed funds have done better than the stock market average over the past two decades. If the idea of putting your money in the hands of a mutual fund manager who tries to beat the market sounds like too risky a proposition for you, then an index fund may be the answer.

An index fund is really quite simple in its premise: the investments in the fund are designed to behave as the market does as closely as possible. This is done by selecting an index – the S&P 500 and the NADSAQ 100 being two of the most popular, though others exist – and then buying shares in companies listed in that index at about the same ratio as they exist in the market. This takes the guesswork and the predictive element out of the fund’s investing practice. In fact, most of these funds are run by computers and a small support staff, since the buying and selling of shares are based purely on another quantifiable index. This has a number of advantages for investors.

First, index funds are cheaper than regular mutual funds. This is because mutual fund managers make millions of dollars a year to handle your money, and their support staff costs millions of dollars per year as well. This money needs to come from somewhere, and unfortunately, it usually comes from the investor in the form of a high expense ratio. While the expense ratio for some mutual funds can be between three and four percent, index funds are usually less than one percent. A matter of a few percentage points may not seem like a big deal at first, but consider that the money is coming out of your pocket – and your future earnings. That small percentage can actually translate into tens of thousands of dollars over the long term.

Second, index funds have a lot less risk, and actually on average make more money. While the upside to risk is that the payoff can be greater, the downside is that the losses can be considerable. Because index funds merely ape a chosen index, there is no chance that a manager is going to blow your investment by suddenly believing that cathode ray televisions are going to become popular again. As mentioned earlier, it is extremely difficult to “beat the market” (which is why mutual fund managers earn such egregious salaries), and for eighty percent of these highly paid managers, it has consistently proven too difficult to do. In fact, over the past two decades, the average return on the market has been about 13%, while the average return on a mutual fund has been about 11%, which makes index funds seem even more appealing.

One disadvantage to index funds is that they are more of a slow-growth investment. If you are the type of investor who likes to get in and out of the market, buying and selling frequently, index funds may not be for you. Because the market has traditionally grown slowly over the years, with very few years of seeing massive returns or losses, index funds are perfect for people who have a number of years to let their money mature. For this reason, many experts recommend index funds as part of a retirement portfolio, especially if you are fairly young.

Index funds are certainly not the most glamorous of investments. However, they consistently provide a better return than most mutual funds, providing all of the benefits of those investments without the risk.

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