Investing Basics

How to invest in the right types of stocks

Posted October 30, 2008 by Bernz

Stocks and stock markets can be really confusing! This article will clear up a few misconceptions and help you understand how stocks and markets work and how to invest in the stock market.

By Dustin M.

Quite simply, stocks or shares are small parts of a publicly traded companies. Companies sell these parts to raise capital for future investment in buildings, employees, and other resources. There are two types of stocks or shares called, common and preferred.

Common stock

Common stock/shares is the most common kind as you can imagine. This is the kind of stock traded on the stock market every day. It is the kind of stock that is bought for mutual funds and 401K plans.

Preferred Stock

Preferred stock/shares are high level, very expensive stocks. Sold only to hand-picked investors by companies with stocks that run into the thousands of dollars. Usually founders of the company and their friends end up with these privileged shares. Also, private banks also tend to hold these shares as well. These are not often traded on the open market because people who own these shares tend to sit on the board of the company or have other controlling interest.

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Bargain stocks, a good deal?

Posted October 24, 2008 by Bernz

Diving stocks are hugely tempting. Despite intense speculation and high hopes of locking in tax benefits. But watch out. Bargain stocks might not be the good deal they seem.

As put by CNBC.com, “You know when Warren Buffett starts buying stocks that we are at least within a 500-mile radius of the bottom”.

When a company is going through bankruptcy its shareholders are the last people to get paid. There is also a chance you might not get paid at all, meaning the stock you hold for that company could be completely worthless. I say “could be” because there is a chance that some pre-existing shareholders will receive some payment, but it’s a major gamble.

Friends, a smarter investment in these tumultuous times could simply be taking better care of what ever new money you have coming in. For instance a reallocation program that adjusts contributions to under-funded areas in your portfolio can keep you from locking yourself in to future losses. Talk to your financial advisor or your employer’s benefits manager about setting up a program that reallocates your new money.

And another thing: diversify. With the risks of having all your eggs placed in one basket, diversification should be among your top investment priorities. I’ve covered a few strategies that lend to automatic diversification. Click here to learn about a common way to instantly diversify your portfolio.

Posted in Investing Basics, Stock Market Investing, Stock Watch | 1 Comment »

Fund Vocabulary. Demystifying important investing terms

Posted October 11, 2008 by Bernz

Now that you’re familiar with mutual funds, you’ll want to get comfortable with some of the common terms used when dealing with them.

novice-investing1As a reminder, a mutual fund is a large compilation of individual stocks.

Stocks – Shares a company sells to fund future business growth. When you purchase a share of stock, you own a fraction of the company.

Diversification – Different kinds of stocks: growth and value, as well as stock representing large, small, and mid caps.

Money manager/portfolio manager – A person or team of people who decide what stock to purchase, sell, and hold.

Index funds –Funds not managed by a financial professional. Instead these funds track existing marketing indexes such as the Dow Jones Industrial Average and Standard & Poors 500 Stock Index. Note: Index funds traditionally out-perform managed mutual funds because investors don’t have to pay fees and other costs that reduce earnings.

The Dow Jones Index – An index composed of thirty stocks.

Standard & Poors Index – is made up of 500 stocks of big companies

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