Penny Stocks - Profit Or Loss?

What is a penny stock? The term penny stock refers to any stock that is traded outside one of the major exchanges. The definition of a penny stock is a low priced speculative security. The Counter Bulletin Board stocks (OTCBB) and Pink Sheets. These are the two types of penny stocks that you will encounter. With penny stocks do not think for a minute that the game has changed

When investing in penny stocks you have the opportunity to dramatically increase your profits, however, you can just as equally loose your capital quickly. To this day like in any other money making opportunity I see lots of articles out there telling people how easy it is to make thousands, in the stock market with penny stocks. Like any other opportunity, diligence, discipline, patience and understanding are required to make money.

Because of the term penny stock, you may think that the cost of investing is minimal. This is why many folks are lured to invest in penny stocks. Penny stocks also have the potential to grow very quickly. One must also understand what goes up can come down, so rapid growth can mean rapid decline.

The low price along with the lack of stability can make penny stocks a risky investment. There is also the element of fraud. Penny stocks are often hyped through spam e-mail or offshore brokers and con-artists alike. These people are able to con people due in large part by the lack of regulation that penny stocks are required to abide by.

The bottom line is this. Don't be fooled by the notion of minimal investment and rapid profits. Apply caution.

How To Invest In Stocks

There are three popular ways for individual investors to invest in the stock market: buying stocks directly, mutual funds, and ETFs (exchange traded funds). Each of these options have their plusses and minuses.

Buying stocks: The most simple and straightforward method to invest in stocks is to just buy them! All you need to do is sign up at a broker and buy whichever companies you decide are the best investments. The benefits of this method is you choose which companies you believe will perform best. Of course, the drawbacks here are that you may not have enough time to identify which stocks make the best investments. It is also sometimes hard to diversify your portfolio, since you likely will not have substantial knowledge on a variety of stocks from various sectors.

Mutual funds: If you decide you want someone to do the investing for you, consider investing in mutual funds. When you put money into a mutual fund, you are pooling your money with other investors and allowing professionals to invest it for you. The advantage here is that you do not have to follow your investments yourself, since someone else is doing the work for you. Also, mutual funds tend to buy hundreds or even thousands of stocks, so even just buying one mutual fund can give you diversification. The drawback is that most mutual funds underperform the market (due to fees and asset bloats), so most of the time you are actually better off just randomly picking stocks yourself!

ETFs: An ETF is like a mutual fund, except it passively tracks an index like the S&P 500. The advantages of the ETF are the same as the advantages of the S&P 500. Also, since ETFs just buy whatever stocks make up an index, they have lower fees than mutual funds. However, by its nature, an ETF will never beat the market since it just attempts to mirror the market. ETFs have become increasingly popular though since many investors have become disillusioned with mutual funds.

Stock Market Cycles - Can They be Predicted?

The stock market goes up when investors put their money into stocks, and it falls when investor activity is down. There are a number of different factors that influence whether or not investors buy or sell stock, along with when and why they do so. A change in the direction of the market dose not always mirror the state of the economy. However, most of the time the strength or weakness of the stock market at any given time can be traced back to economic and political forces.

It is virtually impossible to pinpoint the bottom of a slow market or the top of a hot one until after it has happened. However investors that buy stocks in companies that do well in growing economies, and they buy them at the right time, are able to profit from their wise decisions. One of the characteristics of an expanding company is their ability to raise their prices as the demand for their products or services grows. Raising prices means more profits for the company and increased dividends and higher stock prices for its investors.

Because no economic cycle will exactly repeat an earlier one, it is impossible to predict with any degree of accuracy just what will happen in a growth or recovery period. Since only some companies do poorly in a slump, it is hard to determine which company's will take the biggest hits, or find it harder to recover. the underlying strength of any company is probably as important to its performance as the state of the economy.

The stock market moves up and down in recurring cycles, gaining ground for a period of time and then it reverses and falls for a period of time, before it rises again. Generally the market has to drop 15% before it is considered a bear. Sometimes market trend can last years. Overall though, bull markets tend to last longer than bear markets. This dose not mean that markets rise farther than they fall. It just means that drops in the market tend to happen quickly, while rises tend to take along time.

Investing in Stocks or Managed Futures � A Wise Decision?

The most tested wealth creation tool is investing in stocks. Once you have made up your mind to create wealth over a long-term, it is advisable that you detect the areas in your budget where you tend to overspend. Adopt the corrective measures and utilize the money saved from such correction in investments.

Invest in the stock market:-

For those who are interested in investing, acquiring knowledge about the financial world and its fundamentals, this investment is a must. Keeping a constant watch on the financial market and its daily events gives investors an idea about what investment tools are available in the market currently.

The investors must find out what kind of investments fit their long-term goals and accordingly invest in them. The mantra for success in the stock market is making the right choice and sticking to it for a long time.

Stick to small stocks initially:-

For many investors, investing in the stock market seems to be very exciting. It is however advisable that they do not get carried away by the excitement and stick to only small investments in the beginning. In this way you will get an idea of the crests and troughs of the stock market without placing yourself at a great risk.

For the beginners it could be a good idea to start investing in the stocks whose prices have constantly increased over a period of time. In case you plan to sell high, it is important that you know what your tolerance level is, in case the stock does not perform as per your expectations.

Understand the market:-

You must do adequate research before you begin investing in stocks. You must understand the market operation and particularly how the stocks' (in which you plan to invest) past performance has been. Such research could take some time but is very important and determines your success in the market.

There is professional help available in the market to guide the investors towards wise investment strategies. You can seek help from reputed brokers or brokerage houses to help you select the appropriate investment option, especially if you are just beginning. After you have been in the field for quite sometime, you can choose to make decisions on your own and can afford to buy and sell stocks without any professional help.

Invest in managed futures:-

Managed futures are investment options and are similar to mutual funds. Managed futures, are however, positioned in government securities and are managed through future contracts or various options on future contracts.

Those who invested in managed futures just few years back have made double the money they originally invested. Analysts are generally very optimistic on the future of managed futures.

Managed futures come across as an attractive investment option because of their potential of reducing portfolio risk. Market studies indicate that when asset classes are combined with alternative investment options like managed futures, risk significantly reduces. This is because such a combination diversifies the portfolio through negative correlation between various asset groups.

Random Behaviour in the Stockmarket

Over the years there have been many research projects which aimed to find out if market action was random or whether there was proof that it could be predicted on a regular basis. If you are trading the stockmarket, there would be no point in playing the game if it was purely random, and various important papers have shown a distinct repetition of patterns both in price and time cycles, which effectively confirm that market action is not random.

Charts often exhibit similar pattern behaviour in indices, forex, treasury bonds and commodities, aswell as share prices. Nevertheless, there are times when action does appear haphazard, and one explanation for this is what is called the �random walk theory'.

Random walks and efficient markets

There have been three main works of note which attempted to �explain' random action. In 1973 Burton Malkiel wrote "A Random Walk Down Wall Street", which has become one of the most widely known investment works. The book expounded on his stock market theory in which he stated that the past movement or direction of the price of a stock or overall market could not be used to predict its future movement.

This was an extension of work carried out twenty years before, when Maurice Kendall put forward a theory that stock price fluctuations are independent of each other and have the same probability distribution, but that over a period of time, prices maintained an upward trend.

It all comes down to how �efficient' the market is viewed to be, and "The Efficient Market Hypothesis" evolved in the 1960s from a Ph.D. dissertation by Eugene Fama. EMH stated that at any given time, security prices fully reflected all available information, which is a fairly radical statement.

His view was that in an active market that included many well informed and intelligent investors, securities would be appropriately priced. They would reflect all available information, and if the market was efficient, no information or analysis could be expected to result in outperformance of an appropriate benchmark. In the market, there were large numbers of competing players, with each trying to predict future market values of individual securities, and where important current information was almost freely available to all participants.

This would lead to a situation where current prices of individual securities already reflected the effects of information based both on events that have already occurred and on events which were expected to take place in the future.

Trying to dismiss technical and fundamental analysis

EMH was seen to have three forms:

The "Weak" form asserted that all past market prices and data were fully reflected in securities prices. In other words, technical analysis was of no use.

The "Semistrong" form asserted that all publicly available information was fully reflected in securities prices. In other words, fundamental analysis was of no use.

The "Strong" form asserted that all information was fully reflected in securities prices. In other words, even insider information was of no use.

Those three forms effectively dismiss all analysis as futile, whether it be technical or fundamental. Obviously when a trader takes a position, this is based on a view of mispricing in their favour, and in this respect there have been many papers proving that the market is indeed not random. A glance at chart books from the 1970s for instance often shows remarkably similar price action to that seen on current charts, and again similar patterns are often visible to forex and commodity traders.

The other view � the market is not random

A cursory glance at the long term performance of many consistent money managers would indicate that the idea of a purely random market is nonsense. There are many examples of traders who have not only made money in both bull and bear markets, but regularly beaten their respective benchmarks. To do this over a decade or more indicates more than a random distribution of performance, or indeed luck.

The problem in trying to prove that the market is not random is simply that an approach that might work for a statistically valid period of analysis may suddenly become useless once it is widely known. This is because the edge the trader might have had in pricing will be negated if many more participants influence the opening and closing prices that are achieved by their participation. The great majority of studies of technical theories have found the strategies to be completely useless in predicting very long term prices of securities, but there continue to be technical anomalies that occur regularly, and it is up to the smart trader to constantly search for that edge to �beat' the market.

The other point that has been put forward by proponents of efficient markets is that if one takes a random distribution of fund managers, it is not possible for more than half to beat the respective benchmark. Because of costs, using an active manager will on average do less well than simply matching the benchmark using a passive or tracking fund. Whilst this cannot be disputed, there are two important points: first, using a long-side only tracking fund for instance will cause losses in a bear market. Second, successful money or fund mangers tend on average to continue to beat their benchmark over time, and it is possible to have the talent to beat the market in the long term. Just ask Warren Buffett.

Proof the market is not random � a simple comparison against a major theory

The New York Times on 6th Sept 1998 noted a study that was published in the US Journal of Finance by Stephen Brown of New York University, William Goetzmann of Yale, and Alok Kumar of the University of Notre Dame. They tested the widely known Dow Theory system against a simple buy-and-hold strategy for the period from 1929 to 1998 on the US stockmarket.

Over the 70-year period, the Dow Theory system outperformed the buy and hold strategy by about 2% per year. In addition, the former's portfolio carried significantly less risk, and risk-adjusted, the margin of outperformance would have been even greater.

Another way of looking at it is to consider the markets both efficient and predictable. In a debunk of the earlier work, Lo and Mackinlay's "A Non-Random Walk Down Wall Street" book concluded that in reality, markets were neither perfectly efficient nor completely inefficient. All markets were efficient to a certain extent, some more so than others. Rather than being an issue of black or white, market efficiency was more a matter of shades of grey, and in markets with substantial impairments of efficiency, more knowledgeable investors could strive to outperform less knowledgeable ones.

Conclusion

Just like predicting the weather, which still cannot be done with any great accuracy over more than a few days, it is difficult and almost impossible to predict future share prices. There are however patterns of human behaviour which are predictable, whether these correspond to the cycle of business investment and profits, how fear and greed manifests itself, and how traders react to outside news events.

All these inputs make it possible for a dedicated CFD trader to achieve outperformance by exploiting regular market anomalies and seeking out the best probability trades.

Make More Money Trading the Stock Market

If you are a stock trader, how often do you base your buy and sell decision on technical analysis? If you use technical indicators in your trades, Ashkon Stock Predictor can help you make closer predictions of the stock market. Thanks to the dozens of simple pre-defined trading rategies and literally hundreds of combined ones, there will be no lack of strategy for any stock and any market situation. Choose the right trading strategy and increase your trading profits with Stock Predictor! Download Free Trial (16 MB)

Traditionally, analytical packages for the stock market cost thousands of dollars, and require their operators a high degree of competency in mathematical statistics. Ashkon Software innovative product provided, for the first time, an intuitive and simple to use graphical user interface to the complex process of trading, analyzing data and making predictions. Stock Predictor allows you to make weighted decisions on whether to buy, sell, hold, or avoid a particular stock or stock index by plotting stock charts and technical indicators. You can glance at the charts and make a quick trade decision, or scrutinize them with any of the built-in trading strategies.

Are you sure you are selling your stocks at the right time? Limiting your losses and protecting your gains is a rule of thumb for every investor. Making a trade decision is risky and time-consuming. You can reduce your risks and save time by using proper analytical tools. Stock Predictor saves your time by providing comprehensive analysis of technical indicators for all of your stocks.

Do you have a trading strategy? If you do, how do you know that the strategy of your choice is the most effective one for a given stock and under the circumstances? Stock Predictor helps you choose the right trading strategy for a given stock or group of stocks, supporting multiple pre-defined trading strategies. Running the strategies against a single stock, stock index or a group of stocks makes it easy to calculate and compare cumulative and summarized returns on investment. Choosing the best trading strategy for a particular stock or group of stocks can increase your bottom line dramatically.

Having access to prior performance of a given stock certainly helps developing the right trading strategy. Stock Predictor provides access to historical data at no extra fee with built-in downloader. You can import data into Stock Predictor from a different source, or export data to process it in an analytical application of your choice.

Despite having all the features of advanced analytical packages, Stock Predictor does not cost an arm and a leg. At only $295, Stock Predictor is extremely affordable for any stock trader.

Stock Predictor is available for immediate download. Get your free evaluation copy at http://www.ashkon.com/sp.html and bring your trades to the new level of competency!

Stock Market Wisdom Gained from The Tortoise and the Hare

Once upon a time, there was a young hare, a hotshot rabbit investor who would always brag to anyone that would listen and that he was the smartest, fastest, best performing investor in the world. He would constantly tease the old tortoise about his slow, solid investment style.

Then, one day, the annoyed tortoise answered back: "There is no denying that you are very aggressive in your investment strategy. You take very high risks and get high returns. But even you can be beaten."

The young hare squealed with laughter. "Beaten? By whom? Surely not by you. I bet there's nobody in the world that can win against me, because I'm so good. If you think that you can beat me, why don't you try?"

Provoked by such bragging, the tortoise accepted the challenge. Each of them put an equal amount of money into a new account and the race was on. The hare yawned sleepily as the meek tortoise trudged slowly off.

As might be expected, the tortoise invested in high quality blue chips, companies with household names.

The hare, as anticipated, invested his money in dotcom stocks and options.

You know the story. The aggressive hare jumped out to a big early lead. In a rising market, the highest risk stocks perform the best. This is called momentum investing. Money flows into the investments that are performing the best.


The hare, having jumped out to such a large early lead, stopped paying attention to the market environment. Basically, he fell asleep. He thought to himself, "I'll have 40 winks and still remain way ahead of that stupid old turtle."

The hare awoke from his sleep and gazed around looking for the tortoise, who was nowhere in sight. Unfortunately, while he was sleeping, dreaming about what he would do with his winnings, the market turned against him.

His very high-risk portfolio had taken a terrible beating and was now practically worthless.

The tortoise, a Warren Buffett style investor, had passed the sleeping rabbit long ago. He had been plodding forward, steadily, since the beginning of the contest. The Tortoise never for a moment stopped, but went on with a slow but steady pace straight to the end of the course.

The hare realized that the tortoise was way ahead of him, and away he dashed. He leaped and bounded while gasping for breath, but it was too late. The tortoise had beaten him.

There are two very important lessons to be learned here.

First � slow and steady wins the race.

Second � never confuse your own intelligence with a bull market.

Stock Picks: Day Trading or Swing Trading

Trading stock picks is a great way to make a lucrative living, but trading is never a no-brainer. In the trading fast lane there are always trade-offs. In particular, there are trade-offs between day trading and swing trading. Each has pros and cons.

How do you decide whether to day trade or swing trade? When day trading, your position will always close, no matter how high or low it is, when the stock market closes at the end of the day. This means there's a greater potential for profit, you can use higher leverage, and you can make your money work harder. Your finger had better always be on the pulse of the market with day trading.

In a swing trading situation, your trade won't be completed the same day. It will probably close over the course of a few days. In other words, your trading finger doesn't have to stay quite as close to the market as it would in day trading. You can think of the swing trade as having a much broader scope than the day trade.

Day traders spend a lot of time very close to their stock. They have to pay unflagging attention to their positions, staying focused, and keeping their minds alert and plastered to the stock chart. If the position starts to fall rapidly, day traders must be ready to react in time.

This means you can't manage lots of positions at once. Do you have the margin to hold a position overnight? This margin can be as much as four to one in one day, but it can only be two to one overnight.

In addition, if the trade goes against you, the brokerage may force you to sell your position or even give you a margin call if you go right up against your margin limit. So, day traders can make a larger profit, which is incentive enough for most. Swing traders don't have to glue their eyes to the position. They have a larger time frame in which to sell their stocks if they should happen to lose value. And, of course, they can handle more positions due to not having to pay such close attention to each.

The most important thing to watch out for if you opt for swing trading is the threat of the "position trade". If it does come to a "position trade", you should realize you're eating up your margins. As mentioned before, in swing trades, overnight margin requirements don't allow you to work your money as hard.

Your choice about whether to day trade or swing trade will depend on where you find the most success. You will naturally lean toward one or the other. Just remember to minimize the risk and maximize the profit. Happy trading!


Article written by Douglas Newberry

Stock Investing Newsletters are now available on website that consolidates newsletters from investing gurus from a range of investing styles.

Toronto, ON April 28, 2007 � The investment and personal finance book industry is a multi-million dollar industry as North Americans hope to glean tips to invest their money to obtain a maximum return on their investment portfolio, retire early and live a comfortable life.

From �Hedge Funds for Dummies' to �The Intelligent Investor,' there are a number of resources available for today's investors. But how do they access the information that those in the industry have access to on a daily basis to help their clients amass wealth? The answer is simple � one website hosts a comprehensive list of stock investing newsletters to provide stock guidance, and share experiences with today's beginner and savvy stock investor. Stock market gurus have the ability to list their newsletter on the website for free.

The financial industry is perhaps the fastest moving of all industries and often before a book is published, the world has changed. This is not the case with newsletters that can be published weekly, daily or hourly, as the market changes. This enables investors to stay on top of changes and adjust their portfolios, as they deem necessary.

Stock Investing Newsletters on the web at http://www.stockinvestingnewsletters.com is a one-stop resource for the information investors need. Search for newsletters on topics like blue chip stocks, high dividend yield, growth stocks, value stocks and Contrarian stock investments. Tips, resources and data are available 24/7, every day keeping you up-to-date on the latest trends and thoughts on the future.

Never before has this much information been consolidated, normally reserved for those in the investment industry, been made available to the average investor. Stock Investing Newsletters is the resource for those wanting to learn more about the stock market and who are looking to take control over their investment portfolios.

A Beginner's Guide to Stockbrokers

Stockbrokers are the people who look after the buying and selling on the stock market. They are the guides of the investors in the market, and especially of the amateur investors who have little experience of the manner in which the market works. Brokers can provide a large number of options to the investors so that they may achieve whatever goals they might have. Such brokers will tell the investors when to buy or sell stock, and they also provide results of market trends they analyze and predict which way the market would be likely to move. Brokers who provide such additional facilities are known as full-service brokers.

Full-service brokers are the costliest brokers in the stock market. They charge high commission rates. However, using a full-service broker is much to the advantage of a novice investor who doesn't know the market very well.

Discount brokers are another type of brokers. These charge lower commissions, but they do not provide as many services. They would not provide any analysis of the market, and would not give any additional advice about the investment. Such brokers are good for hardcore investors who are very familiar with market rules.

Some investors like to play it safer and use both types of investors. The investor can use more than one broker if he/she so wishes.

Online brokerage could be the least expensive kinds of brokerage in the market. Full service and discount brokers generally have their own websites through which they provide their services online. While operative online, the broker would provide much lower rates than physical services.

Trading in stock requires the investor to first open an account. This account must be accessible to the broker. The limit of investment for the account would be set by the broker, but it is usually between $500 and $1,000. There would be some additional fees involved, and this has to be understood in advance by the investors. Brokers also charge an annual maintenance fees and there are penalty charges if the account balance falls below the minimum.

Brokerage accounts are of two types � cash accounts and margin accounts. Cash accounts are those which do not provide any credit. When buying, the investor must pay the full amount of the stock price. A margin account allows credit in the form of margins. The investor can buy on margin, while the brokerage will include some of the cost of the stock. Margin depends from broker to broker, but it needs to be protected by the value of the client's portfolio. In case the value falls below the predetermined limit, then the investor would need to add more funds into it or to sell some of the stock. Thus, investors can buy more stock with margin accounts with less cash. This helps them to gain more and even lose more, if the situation so arises. Margin accounts thus carry more risks than cash accounts. They are not recommended for amateur traders.

It is important that the investor consider what he/she wants before zeroing in on some broker. The decision should depend on whether he/she only needs to buy stock or needs to get tips and advice on market trends also. If all this is required, then he/she would need to go to a full service broker. If the investor is very well aware of the way the market functions, then a discount broker would do.

Once the type of the broker is decided, the investor must check out the market for the competition. There could be differences in annual fees and the brokerage rates. This would depend on how much trade you plan to make in a year, how much cash you deposit in your account, whether you will use margin accounts and what services you will need. This will help to calculate the actual costs of the brokers.

Forex Forcast

The Foreign exchange market or forex market occurs wherever one foreign currency is traded for another. It is the largest market in the world with daily trading of US $1.9 billion. Individuals actually make up a very small part of this market and when they do participate they do so through a broker or other professional trader. In order to play the trading game, one must know how to forex forecast correctly. There are two major ways to do this: technical analysis and fundamental analysis.

To forex forecast using technical analysis, you must understand a variety of technical analysis tools. Such tools include the relative strength index (RSI), stochastic oscillator, moving average convergence divergence (MACD), number theories, waves, gaps, and trends. The RSI, stochastic oscillator, MACD, gaps and trends are all extremely common technical analysis tools for those trying to forecast as well as play the stock market. While these tools can be used for the stock market, they can be used equally as well in forex forecasting.

Both the RSI and stochastic oscillator measure whether a currency is overbought or under-bought. The MACD on the other hand measures whether or not a trend will continue going up or down. When using charts to forex forecast, one may notice gaps between the bars. This occurs when no trading took place and an up-gap usually represents a strong market force, while a down-gap will indicate the opposite. The trends or Trendlines indicate an upward price movement or downward price movement based on the peaks and troughs of the trendline. None of these technical analysis tools require you to do the math. There are plenty of charts services on the web that are either free or require a fee that can do these calculations for you.

Other technical analysis tools that were mentioned include number theories. The two main number theories are the Fibonacci and the Gann. The Fibonacci numbers involve adding numbers to come to a ratio of 62% that is a popular retracement number. The Gann numbers are based on the theory of W.D. Gann who during the 1950s made an extraordinary amount of money performing forex forecasting. Gann used a variety of forecasting methods in order to measure price movement and time. These are presently known as price/time equivalents. To learn more about technical analysis tools and how to use them, one can turn to the web or their local bookstore. There are plenty of sites and books whose goal it is to teach people the art of forex forecasting. Keep in mind, that forex forecasting using technical analysis is not easy and it will require a great amount of studying. When it comes to performing technical analysis, some people prefer one analysis tool to another and this is not an indicator of which method is actually better. It is just a matter of personal preference.

The other method of forex forecasting, fundamental analysis, involves using factors outside of charts and numbers. The factors include political, environmental, and economic issues. For example, if a hurricane hit the United States coast and shut down a lot of major refineries the result on gas prices could influence the strength of the dollar. The fundamental analyst looks at the big picture of a country and the world and they must be extremely familiar with political, economic, and environmental news around the world. Fundamental analysis is not for someone who picks up a paper once a week. It requires devotion and a true interest in issues around the world.

When forex forecasting, some people choose to use either fundamental or technical analysis based on what works the best for them. However, it is probably best if you have strength in one method of analysis, but still reference the other. This is because there is not one single method that will provide you with the right answer. Also, while the technical chart may show a strong currency, if you are not aware of political and economic issues within a country then you could be blindsided, thusly losing a lot of money. Prior to forex forecasting, you should practice by paying attention to trading levels and picking your entry and exit points. When you feel you have reach a good point in successful forex forecasting practicing then you can move on to real forex forecasting.

Using the Internet to learn about stock investing

The Internet presents a great deal of interesting information about various subjects. Since its first appearance diverse improvements have been made and today one can find practically any kind of info he/she is interested in. The stock market and stocks in general do not make an exception, the online world holding numerous resources for these subjects and other connected procedures.

The information offered is accurate and absolutely free. The people that provide it are true professionals, promoting the powerful industry of stock trading online and hoping to attract people to it. The truth is that money can be made from successful stock investing but this business is extremely risky and certain precautions should be always taken.

By using available online information, people are able to make informed decisions and start investing themselves. Stock trading is not as easy as it seems; on the contrary, it represents a process that requires an extreme amount of concentration and dedication, not to mention the courage to face potential risks. Practical details about stock investing are provided online for free and many people discover their investment abilities after gathering more information on the subject.

Online, one can discover the difference between common stocks and preferred stocks. The first are widely used, being held by corporations. The latters are also called preference shares are of higher priority when it comes to dividens dispersion. Such kind of information can be found with the help of the Internet. Also, there are presented diverse methods for appraising stock options, all with their advantages and disadvantages.

Stock trading is not something that one can learn over night. It takes some time to take a grasp of things and the Internet can prove out to be a very handy tool, especially for novices in the field. The data promoted online refers also to shareholders rights, listed companies on the stock market and their potential investments not to mention the obligations of stoke brokers.

Experts advice starting the process of stock investing with small steps. They recommend a thorough research and then taking action. A study analysis of pros and cons is important and it is useful to know the risks involved in stock exchange. People can buy or sell shares; either way, there are specific guidelines that must be followed and all of them are equally important. Using the World Wide Web to check on them is good and can really help.

The stock exchange industry has certainly changed over time. New methods and techniques were implemented, people starting to use the Internet for stock trading and other operations. With the assistance of online specialized resources, interested Internet users had the ability to learn about stocks and brokers. Brokers are involved in the stock buying/selling process. They can be full service or discount, helping both the seller and the buyer.

There are few fundamental points that must be taken into consideration when it comes to stock investing. They are widely presented online and they mainly refer to market fluctuations and possible gains. There are persons who prefer taking risks and speculating the above mentioned variations. They stand a chance to win as big as the one to lose. At the opposed pole, come the rational-thinking stock traders, interested to observe the long-term evolution of a company before investing.

One thing is sure. For many years to come, the business of stock exchange is going to continue to gain popularity. The Internet has only helped to its promotion and many people decided to participate after reading some found articles online. It is a good thing that people feel the need to be informed and stocks are part of that large information collection.

FOREX Trading � One Way of Making Money

The largest exchange market worldwide is represented by Foreign Exchange. The availability of the Internet and the explosion of its technology, as well as the possibility to make quick profits have turned FOREX trading into a very popular way of investing. However, it takes knowledge on the part of the trader regarding the currency traded and the venue. In fact this condition is applicable to any securities market.

FOREX trading is a form of day trading, which specializes in opening and closing market positions, or buying and selling securities in the same day. This type of trading allows high margins, which means that investors can have small amounts of actual cash, but they can control large amounts of currency. This, in its turn can lead to either huge profits or huge losses. The possible financial loss must never be excluded by a FOREX trader.

FOREX trading comes with attractive and unique investing opportunities. This variety is one of the reasons why a FOREX trader has to safeguard himself or herself by getting to know the risk management concepts. The actual use of this investment tool must be preceded by a thorough analysis of the market. It is most advisable that you find a reputable FOREX broker for this type of investment.

When it comes to making an educated choice, there are some aspects which should not be overlooked, such as lower spreads, a reliable financial institution to back your broker, whether or not the broker provides market tools and research, as well as many leverage options, and so forth. You also have to make sure that your FOREX broker follows some strict margin rules. This is all the more advisable if you are trading with borrowed money.

Global FOREX trading is a way of making money that not many people are familiar with, because it does not get the amount of publicity that the stock market does. However, it is safe to say that the global FOREX trading market surpasses markets such as the stock one or even the commodities one.

This is also the largest tradable market because foreign exchange can be traded at any time, as opposed to other markets, which have specific times for opening and ending trading. The trading availability comes from the fact that the currency price fluctuates all the time. This is how global FOREX trading offers the prospect of quite nice profits.

The main key to global FOREX trading is leverage, which gives the possibility of creating wealth from a small amount of money. However, this powerful tool can go both ways, meaning that it can also work against you and get you bankrupt. This is why a the need for a good education in FOREX trading arises. It is this particular feature � the leverage � that gives this type of activity a speculative tint, and consequently attracts a great deal of people. While it is true that there are many speculators in global FOREX trading, it is also true that there are traders who have the ability of making continuous and consistent profits.

Gold-Safe Investment

Gold has always been known as a number one investment option. But is it really that profitable to invest in gold? The gold prices differ each year. Some years are favorable for investments, some are not. Gold has always been considered a safe investment. However, in 1980 the closing price was $ 593.8 per ounce; in 2004 it was $ 442.1 per ounce.

So this rally has come as a relief to the gold bulls, who were all but
extinct. Back in year 2000/2001, few were recommending gold, when it
was trading at about U$ 260 per ounce. Today however, after a 70 per
cent rise in the price of gold, the interest in this commodity has
only increased. Our advice to you, be realistic and invest in gold
only to the extent it suits your risk/return profile.

The comparative table puts in perspective the returns
generated by different asset classes viz. equity, debt and gold over
different periods of time. It is important to note that during these
different time periods, the stock and debt markets have been through
at least one significant instance of erosion in value. Gold however,
has pretty much had a steady run. Despite this, gold, purely from an
investment perspective, does not compare well with the other avenues.
Then, why the persistent interest in gold?

There are a few reasons for the same:

* The increasing uncertainty pertaining to the US economy and fear
that the US Dollar will continue to weaken has led investors to
move some money into real assets such as gold.

* Rising oil prices, coupled with high liquidity, have contributed
to a rise in inflationary pressures globally. Inflation, simply
put, is an erosion in the value of money and therefore in such
times there is a strong case to move money into real assets such
as gold.

* The threat of terrorist attacks has led investors to diversify
into assets such as gold, which is considered to be a good store
of value (an attack on the US may cripple the US economy and
result in lower stock and property prices for example, but will
not have a material impact on the price of gold).

* Then there is a belief that the long-term bull market for
commodities, including gold, may just be taking off. This view has
been underscored by a persistent rise in the prices of other
commodities too.

Indeed, over and above these, there are 'emotional' reasons why you
should have gold in your portfolio. But in such instances, the
'return' is really not that important.

In our view, gold is a "must" in every portfolio as it brings in an
element of diversification. The price of gold is driven by factors,
which are broadly speaking different from those that drive the price
of other assets such as stocks. This results in what is generally seen
as a contrararian trend. To take an instance, even as stock markets
corrected after the 9/11 terror attacks and the worsening economic
outlook, the price of gold spurted.

Another argument in favour of gold is that from time to time, like all
assets, it may present an attractive short-term investment opportunity
(like in 1999 when it was undervalued by a significant margin). So if,
and that is a big 'if', you can identify such an opportunity, an
investment makes sense. Of course it is important that you square off
the transaction when the price has corrected. Such a transaction would
suit few investors as it involves a very good understanding of
fundamentals as well as timing of the purchase and sale.

But having said that, gold should ideally not account for more than 5
per cent of your long-term investment portfolio. The reason is that in
the long term it is likely that other asset classes, including
equities and property, will outperform gold in terms of generating a
return. While this may not hold true for economies like the US which
are likely to slow down in the future, surely for investors in markets
such as India, other investment avenues are more beckoning.

Pros and Cons of Online Stock Investing

Online stock investing has opened up the world of investing to the simple investor. However, with that privilege comes the problem of new investors making mistakes that will cost them money. I personally think many new investors are actually gamblers rather than investors.

In my opinion, anyone who has a desire to trade stocks must absolutely read and learn as much as they can before ever putting one red cent into the stock market. As I browse the web and see some questions by new investors it is sad to know that they are in for a big wake up call. This because they think the stock market is an easy game to play.

The truth is that most new investors will lose money and lose it quickly if they try investing in individual stocks. I truly think new investors need to stick with simple index funds or exchange traded funds as their first venture into the stock market. Nothing will turn a person away from investing quicker than losing a lot of money right off the bat quickly. This will probably happen to most new investors if they invest in individual stocks.

Once you understand how stock prices move up and down then start small with a handful of shares. Nothing is more depressing then buying a large amount of shares in any one stock just to see that stock price go down 10 minutes after you place your buy order. This may sound simple enough, but I personally think the greed factor kicks in very quickly with new investors. New investors need to understand that stocks tend to fall in price much more quickly than they rise. So trust the golden rule of diversification because putting all your money into one or two stocks is going to catch up to you eventually.

While I personally have enjoyed my venture into online investing, I have also learned that it is not always a fair game for the small investor. The boys on Wall Street have a lot more control than anyone sitting in front of their computer at home. If you think you will beat them everyday you will be sadly disappointed. So keep it real when you first start investing and do not try to become rich overnight. Learning both the pros and cons of online investing will prepare you for the mentally challenging world of investing in stocks.

An Introduction to Stock Quotes

Stock quotes provide important statistics about each stock traded in different stock markets, which is very important for technical analysis. Stock quotes can be obtained from many sources as decimals or as fractions. Stock quotes are important for all sorts of traders trading stocks and are the primary tools for executing their trades. Apart from stocks, quote information are also offered for forex currencies, options and future contracts. Getting stock quotes was difficult in olden days, but with the introduction of computers and electronic networks they became so much easier.

In respect to the timing of the quotes, stock quotes can be divided into historical, delayed and real-time stock quotes. Historical stock quotes provide the price details and trend patterns of a particular stock at some point in its trading history. These are provided by some dedicated financial institutions, which keep trading history details. Historical stock quotes are useful for finding stock market trades that occur in cyclical manner or in some special situations.

Delayed and real-time stock quotes are more important for traders. They provide updated stock market information. Delayed stocks quotes, as the name suggest, have a delay of 15 to 20 minutes. Most of these quotes are free and can be assessed from a lot of sources like newspapers, journals, financial portals, television & radio updates, search engines, company websites, daily newsletters, e-mail alerts, etc. They are useful for almost all types of traders and investors except day traders.

Real-Time or live or streaming stock quotes are stock information with a delay of less than a minute. But they are often not free, and are provided by special quote sites and by brokers through specialized platforms. Live stock quotes are most important for day traders, who trade stocks with very small price changes. Many brokers will provide you live stock quotes for free, but you may have to fulfill certain requirements like minimum trading volume, account minimum etc. It has been heard that google and CNBC, through their financial portals, are willing to offer real-time stock quotes for free and have filed a request for it to SEC.

Stock quotes can be simple or complex ranging from only yesterdays closing price to more details like the top and bottom most position of the day, traded volume, traded range, 52 week range, day trading price change, average trading volume, EPS, dividend yield, P/E ratio etc. Also their presentation may vary from single line phase having abbreviations and values to tables and graphs having visual enhancements. Some also have foot notes with useful remarks. Trading systems go beyond these limits and have alerts and triggers to better execute trades.

Foreclosures Are Exploding�Values Are Down�Homeowners Are Stressed�Rates Still Low!

A homeowner holding this hand looks around the room to see if there are any players to help. Personal self-defense is based on fight or flight. The decision then is to stay and fight or choose flight and run away and take off to a safer place. When a borrower is faced with this situation there are three options for additional cash flow. Make more money, reduce expenses or do both. Once a decision is made to keep the home then the strategy must be developed to make that happen. If flight is the choice, decisions must be made to make that happen while perhaps downsizing and reducing the monthly housing expense. One of the best options, IF there is any equity at all, is to refinance to a lower fixed rate, which is now available. This is one of the great positives of the current market, low interest rates can save the day and give borrowers a chance to get into a stable payment situation. If a borrower can't do that then other alternatives must be considered.

Although there is major hand wringing going on with these high risk hybrid subprime (higher credit risks) mortgages there is also an opportunity for many to finance to a lower fixed rate loan. There will be heavy refinances going on with those who can qualify and move into the lower fixed rate loans. This will be an answer for many. If the credit must be tweaked and improved to make that possibility a reality, then so be it. Pay off credit cards, settle collections, pay off judgements, put time and distance from any past bankruptcy actions while improving the debt to income ratios all as a means to better qualify for a low rate fixed rate loan. If a borrower is behind on their payments a lender may offer a "forbearance" option where the payment arrears are set up on a parallel pay back schedule while the normal payment is being made. This is a catch up mechanism. All of these options invoke the stay and fight decision, which comes to the front by selecting these choices. This selection must make sense and there must be a reasonable chance of making it happen. Employment needs to be solid and dependable income steams must be in place. If a part-time job is necessary, it must be done. As far as reducing expenses, trading down cars with large car payments to free and clear transportation may be necessary in the reducing expense mode. Gym memberships may need to be cancelled and settled, any ongoing sundry expenses can be eliminated until the mortgage crisis situation has passed and settled down in a year or two. Cable extras may need to be pared back. Dial up service versus a more expensive high-speed service may need to be likewise pared back. Cell phones may need to be converted to pay as you go throwaways to further cut expenses or eliminate them entirely. Eating out will be a thing of the past for the short term. Packing lunches may be an option. These are all tough options. If after all of this takes place and there is still a desire to stay and a borrower is still under the gun, a Chapter 13 Repayment Plan may need to be selected. This will not cut any mustard with the mortgage lender or other secured debt, but the non-secured debt such as credit cards can be lumped into the BK option. A Chapter 7 Bankruptcy may be selected if the borrower(s) do not make too much money per the new Bankruptcy Law restrictions. This would wipe out all the non-secured debt. It may take a few years to reestablish credit to the point where a new lower rate fixed rate mortgage can be put in place. Over time, values MAY appreciate a bit to assist in qualifying for a loan. If a borrower is not up to any of this, then the flight option can be selected.

The flight option basically comes down to selling the property and taking whatever equity is available and possibly renting or finding a lower priced opportunity in a market populated with the same disparate sellers all begging for offers. When a homeowner gets beat up on the price in selling there is a real possibility in making up the loss on the purchase of a depressed value property. When borrowers select to buy a lower price property then the family budget may be positioned to make a comeback with saving opportunities to stabilize the asset side of their financial statement.

When the stock market is in the full "Bull Market Mode" and keeps running up unabated until finally the "Bear Market" shows up then major corrections are experienced. When the chickens come home to roost and stocks with weak fundamentals, high price earning ratios, low or no dividends, and perhaps bad sales and profit news the stocks fall big time. Some stocks will get pounded more than others. Perhaps it was just a weak quarter or extenuating circumstances with big one time write downs, or it might be a big problem like a Chapter 11 Bankruptcy filing like many of the airlines and other companies are dealing with. When this happens in mass, the Dow Jones Average together with other stocks fall as a group due to fundamentals and consumer perception and confidence. Now, the spill over from the defaults in the Subprime, Fannie Mae and Freddie Mac are impacting the financial markets as well. Investors are nervous. It will be a period of adjustment until this "problem" is handled one way or the other. Much like the RTC fiasco of the Savings and Loans debacle, serious and painful resolutions will be required until these troubled properties get folded back into the housing stock through new family ownership. Supply and demand principles are in full effect.

Much is the same with housing. Stable and steady increases in some communities in the 3% to 5% appreciation ranges have had minor effect in the market depreciation fall with all other things being equal. In other areas where appreciation was hitting 12%-20% per year where investors were flipping left and right and making major hits it was the "new wild west gold rush" of money making opportunities. Many property flippers (buy, fix up and sell) were making $50,000 to $100,000 per deal. Buyers were camping out at builder's offices to get in on the property gold rush. Builder concessions were non-existent. Builders did not have to offer anything to get buyers through the front door, so they didn't. Then "It" hit the fan. Reverses occurred. New homes sat vacant. New and resale inventories swelled. Builders were gone with many seeking Bankruptcy protections. Existing homeowners selling their homes remained mired with no sales activity. Sales prices were adjusted down where homeowners absolutely had to sell and move. If owners found themselves in a situation of being upside down (owed more than the home was valued) only a few options were available. (1) Walks away and move out and let foreclosure take its course. (2) Stays in the house until the foreclosure happened and let the sheriff put them out on the curb. (3) Consider "deed in lieu of foreclosure" where the lender takes the property back and avoids a foreclosure action and moves out and moves on. (4) Consider structuring a lease-option with a buyer at favorable terms with hopes of appreciation that will kick in over a two or three year period. (5) Offer sales concessions to buyers paying all their closing costs and prepaid escrow and even hold a second mortgage for any shortfall behind a new first mortgage. (6) Propose to the lender to consider a "short sale" where the mortgage amount is reduced to accommodate a new buyer that puts a new mortgage in place. This particular option does not put one penny in the seller's pocket, but the property is sold and the buyer can move on. The lender takes the hit, BUT it may be less of a hit for the lender then going to the full foreclosure option. This is by no means an exhaustive list of options but is a few of the more prominent ones.

On the positive side, this is a great time to buy with great interest rates in play. Values are down and good buys can be found. Sellers are motivated and flexible terms can be negotiated. Lenders holding loans on "upside" down properties are willing to make deals to mitigate the loans hanging on the books on a non-performing basis. Much like in the Dot.com era, many investors chasing the "good story" stocks lost big time. Likewise, buyers chasing the "good story" properties with multiple offers on listings and builder inventories will lose as values in many areas have fallen. A real estate value correction is underway. Warren Buffet has made billions seeking out values and taking long term positions. A little of this philosophy will go along way in profiting from future real estate cycles. No one is good enough to determine the absolute bottom or top of the market, but good values will always pay dividends with proper due diligence of the underlying elements. A deal is a deal is a deal. When a deal is found people of action can find rewards and long term returns. There is no reward for overpaying for real estate in the near term. This is a time of incredible opportunities to make sense out of the madness and profit during this period of market correction in this real estate arena.


Dale Rogers
http://www.brokencredit.com

Stock Investing � General Motors, Ford asleep at the SWITCH � Now DaimlerChrysler hits the pillow too!!!

Stock Investing has told us here at StocksAtBottom.com that it has been more than 25 years since Japan's automotive juggernaut served notice on Detroit that we are going to eat your automotive base for lunch. Each successive year since then, our domestic car manufacturers have given away market share to the Japanese. For General Motors, Ford and then Chrysler before the Daimler merger, the only question was how many car sales are we going to lose this year to the Japanese.

Each of the Big Three must put together 3 to 5 year budgets in order to project their cash flow needs. Ford for the next three years in their budget process is showing continued market share erosion in each of the next three years. It is likely that both General Motors and DaimlerChrysler are acting out the same scenario.

UAW Union Caving to Facts of Life

Jerry Sullivan is the head of the largest UAW car worker's union at Ford. He has 36 years with Ford, and the last 10 years as head of UAW Local 600. Sullivan is urging his fellow workers to accept the present Ford buy-out agreement which is on the table for Ford workers to consider.

Ford lost almost $13 billion in the last 12 months. The union recognizes that Ford's back is up against the wall, and it's time to try to save the company. Ford is reorganizing the way it builds cars, more along the lines of Japanese manufacturing techniques. As an example, many of their employees are now working 4 day shifts of 10 hours. These shifts can include weekends. The workers are agreeing to work at regular wages as opposed to overtime rates.

This summer, the national Union will be negotiating health care benefits among other issues. Right now health care costs are at least 50% higher than overseas employees. It's very tough for Ford, or anyone for that matter to make up the incremental difference in these costs, and still sell cars at a competitive price in view of world markets. The Japanese operating under a different pricing structure are in a position to simply put more goodies into the cars, and still sell them at a cheaper price than our domestic products, and then there's the quality issue.

Let's look at it this way. Our stock research shows that the average car Ford produces compared to Japan has about $2400 of additional profits built into the Japanese car compared to the American produced vehicle. About half of that gap is higher labor costs for the American product, and about half of the labor costs are higher medical care costs for retired automotive workers. The Japanese companies have -0- costs, that's right, zero associated medical care costs for their RETIRED employees. This is because in Japan those medical care costs are picked up at the national level by the government, who picks up medical costs for all retired people.

General Motors Delays Filing

General Motors like all publicly traded companies must file its annual report with the Securities Exchange Commission on a timely basis. Would you believe that GM has asked the SEC for an extension for its filing to March 16th of this year? GM continues to be unable to act its financial act together. This coupled with an inability to manufacture cars that people want to buy makes the future not altogether too bright for America's largest car producer.

GM has also expressed an interest in acquiring the Chrysler unit of DaimlerChrysler which is up for sale. This assumes there will be bids for the Chrysler unit. DaimlerChrysler in German has announced that if there are no bids, they will keep the unit, and continue to attempt to turn it around.

It's seems that GM's latest problem is their General Motor Acceptance Corporation (GMAC) subsidiary. The financing subsidiary was partially sold to a group of private equity players last April. The problem is when you do such a deal; you have to put in stipulations that everything is beautiful, or just as it should be. Apparently GMAC has quite a few creditors who are what you would call subprime borrowers.

If you have been reading the newspapers lately, subprime is not so prime anymore. With the housing market still on its back, borrowers with less than super credit seem to be in trouble. Translated, that means they are not paying their bills on a timely basis. This entire huge market is called the subprime market. When the economy has something of a downturn historically, these borrowers surface as individuals who just can't keep up with their debt payments.

A number of companies who have been catering to them, all of a sudden start to take hits. If you are a company doing business with a subprime borrower, you have a certain reserve or cushion built into your numbers for the statistical number of people that you believe will default. It is becoming increasingly apparent in our stock research as stock investors that the subprime companies involved with such borrowers have FRANKLY lost control of their numbers. These companies simply have no idea where their borrowers stand today in their ability to service their debt.

Witness what is happening with Countrywide Financial Corp. which is the largest U.S. home mortgage lender. At the end of 2006, the number of people at least 30 days late is 2.9% of their prime home-equity loans. The number for 2005 was 1.6% and 0.8% for 2004. It is our opinion at StocksAtBottom.com based on stock market information that we use, and stock investing that we do that the subprime industry players RIGHT NOW have no idea where they stand in reference to their loans. The industry is hanging on by their thumbnails hoping that it gets better.

GMAC is in the same position as the subprime industry, and that is why in our opinion they have asked the SEC for a delayed filing authorization. They are literally trying to figure out where they stand. Assuming the situation is worse than what they told the private equity players who purchased a majority of GMAC last year, GM will be responsible depending upon the covenants in the agreement to ante up additional cash to the buyers.

This is just one more illustration of inept management at General Motors. They are a management team that lets things happen to them. They are in a reactive mode as opposed to being out in front of the problems trying to anticipate, and fix them before they get blown out of proportion. At our firm we have been observers of the American automotive adventure for several decades. We know there are Lee Iacocca type individuals out there that can turn around GM, Ford, and Chrysler. These guys just aren't in the automobile industry anymore.

Goodbye and Good Luck

Richard Stoyeck
http://www.stocksatbottom.com

Real Estate Right Now

In the past few years, we've watched housing prices skyrocket all over the U.S. It definitely seems to be a seller's market, but what are buyers supposed to do? Well, if the big names in business are correct, the market is beginning to turn. People who bought homes out of their price range are beginning to water down the market.
Baby Boomers, the biggest group of retirees ever, are downsizing. The older members of the generation are opting for community housing, and even apartments, where upkeep is virtually nonexistent. They're dumping their mortgages and adding to the tide of available houses. This, experts predict, is the beginning of a huge opportunity for people prepared to buy real estate.
Recovery from the recent real estate boom means lower prices for investors. Basic principles of investment realty � buy it for less than you can sell it � still hold true. But if housing prices in the United States are dropping, how long will this trend last and is it still wise to put your money in real estate?
All business trends see peaks and valleys. Real estate, however, is REAL. It has tangible value that may have momentary dips but will always see an up-swing in the long run. Still, smart money managers find property that has plenty of potential and is still cheap enough for its purchase to make sense. Investment property in Latin American countries, such as Costa Rica, shows amazing potential.
While homes are depreciating elsewhere around the world, in Costa Rica, property is appreciating. The tropical forests and exotic wildlife add a specific pull-factor to Costa Rican real estate. But there is a wealth of potential there beyond what is available in American markets. First of all, the property in Costa Rica is prime. The government protected such a large part of the country from development that any property you buy is probably going to have either trees or a water view.
There are other benefits to purchasing land in Latin America, like significantly lower taxes. People are still often reluctant to consider investing in property or building a second home in a foreign country. Concerns about personal crime rates, language barriers, rules and regulations should not deter people from considering great opportunities in Costa Rica.
Real estate is still the most sound investment you can make, and it is becoming more so every day. With retirees cashing in their stock market-based 401ks to relieve the financial burdens resulting from lack of social security, the stock market is subject to it predicted and inevitable crash in upcoming years. Unless you are very adept at trading options in an up, down or sideways market, steer clear of the stock exchange.
When you buy land, you are buying more than a piece of paper. You will actually own something real. While stocks and bonds can't be guaranteed to have a worth beyond the paper they are printed on, property will always have value. In a market like Costa Rica, you can safely bet on a huge return on your investment. Property there has proven to appreciate in rapid record pace.
What's the best part about owning your own land in a tropical paradise? When you go on vacation, you really do feel like you're home � because you will be. Put your money into something you can physically enjoy that will net you large profits when you're ready to move on.

by David Lovendahl, Costa Vista Marketing

Playing the commodities boom

Commodities have become an attractive investment in recent years, even for those who may not know much about them but would like to participate in the profit potential from dramatic price advances posted by energy, grains, metals and other commodities, lifting them to the highest overall levels in more than 30 years.

Fundamental factors based on simple supply and demand account for much of increased price activity, of course, but other factors are behind these price moves as well � factors you should understand if you are one those investors thinking about putting some of your money into commodities. Although commodities are a hot topic for investors, it is also an area where newcomers can get stung if they are not aware of some pitfalls that can trap the unwary.

So let's first look at some of the factors promoting this increased interest in commodities and then, if you are interested in trying to tap profit opportunities in this area, at some instruments you can use to exploit this possibility.

Getting �real'

You are probably well aware of the "dot.com bubble" that took stock market indexes to record-high levels in the late 1990s into early 2000. The stock market was the place to be for many investors, evident by the growing amount of money that poured into mutual funds, 401(k)s and other investments tied to the value of stocks. Investors enjoyed the run of a bull market since 1982 as they focused on investments in paper instruments rather than physical products.

As with most meteoric rises, however, the accelerated rise in stock prices at the end of the 1990s couldn't last forever and they began to fade. Then came the Twin Towers disaster on Sept. 11, 2001, the followup U.S. war on terror marked by armed incursions into Afghanistan and Iraq, accounting and other corporate fraud scandals (Enron, Worldcomm, et. al.) and a slowdown in global economies, all of which contributed to a decline in stock indexes, especially those reflecting technology stocks.

Many investors became disenchanted with prospects in stocks and began to look elsewhere to place their funds. Some put their money into housing and other real estate investments, causing a building boom and rapidly escalating property prices. China's economic growth of more than 9% annually and the rebuilding required after two devastating hurricane seasons in a row along the Gulf Coast added to the huge demand for cement, copper and other building materials of all types (for more on the economic effect of hurricanes, see www.hurricaneomics.com).

Oil's key role

Adding to the expanding worldwide demand for commodities, the ongoing war on terrorism re-emphasizes U.S. vulnerability to disruptions in oil supplies from the volatile Middle East, and prices skyrocketed above $80 per barrel in 2006. The higher oil prices get, the more attractive alternate energy sources look. The favorite alternative that has emerged from the pack is ethanol, produced primarily from corn.

With a big boost from Congressional mandates for ethanol production and usage, prices for corn began to shoot up last fall to the highest levels in more than 10 years, topping $4 a bushel after years of being closer to $2. Ethanol became the buzz word of the day, reinforced by President Bush's comments about energy in his State of the Union message. When the government is pushing something, it's best to trade in line with the government's wishes, as interest rate traders know from watching actions of the Federal Reserve.

As demand for corn for ethanol grows, the higher corn prices may be driven and the more likely farmers will plant more corn at the expense of crops such as soybeans and wheat as crops compete economically for acreage. Livestock and poultry producers will also feel the effect of higher corn prices as will America's grocery shoppers when they go to the meat counter.

With what some describe as a "housing bubble" cooling and investments in stocks still not having overwhelming appeal, investors have turned to where the hottest action is � real things like commodities. Commodities have particularly become the darlings of a rapidly proliferating number of hedge funds, which can trade anything, adding further fuel to the general advance in commodity prices.

Ready or not . . .

Some commodities have backed off from their price peaks, leading some to believe that a "commodity bubble" may be breaking just like the bubbles in stocks and housing. Never has an understanding of intermarket relationships been more important to traders as the domino effect of commodity price moves extends throughout a number of commodities.

Where prices of commodities now stand in the overall economic scenario is just one of the issues investors have to face today. With all the media buzz, is there still time to jump on the commodities bandwagon? If so, should you venture into futures or options based on commodities or get into one of the new commodity-based hedge funds or exchange-traded funds (ETFs) or invest only in stocks of companies involved in raw commodities?

Commodity futures trading involves an agreement by an investor to purchase or sell a specific amount of a commodity for delivery at a specific time in the future. The key points are the price at which you initiate a trade and the time that is left until the contract expires, at which time both parties are obligated to fulfill the terms of the contract unless they have offset or liquidated their position. If you think prices will rise before the contract expires, you buy or go long. If you think prices will fall from the current level, you can sell or go short as easily as you can buy.

ETFs are set up to achieve the same general return as an index � for example, the Spyders (SPY) ETF invests in all the stocks contained in the S&P 500 Index to mimic the results of the index. Commodity-based ETFs can invest in commodities directly through futures or in stocks from a sector influenced by what happens in commodities � a gold ETF based on a basket of gold mining stocks, for example. The advantages of ETFs are that they trade like a stock, don't have the high leverage or risk that futures do and can diversify into a number of commodities or stocks that can dilute the effect of adverse moves in one commodity or stock.

Like any development that capitalizes on the hottest new trend, new ETFs are being offered every day. You have lots of choices so sift through them carefully. Some ETFs may be thinly traded so you need to understand what this investment can do before getting into it.

The commodities-related investment that may be most familiar � and, therefore, most prudent � for many investors involves investing in those companies that are most influenced by prices of commodities. If you think prices of copper will go up, for example, buy those stocks that would benefit most from higher copper prices. Ditto for oil prices or grain prices. Again, you have a number of choices so you will have to do your research to see which prices will mean the most to which companies.

Futures pros and cons

Of the various choices, futures are the most direct play on price movement � and usually carry the most risk. The major lure of trading futures is the ability to make a large amount of money in a short time with a relatively small down payment. For example, to trade a 5,000-bushel contract of corn worth $20,000 with corn priced at $4 a bushel, the Chicago Board of Trade currently requires a minimum margin or good-faith deposit of $1,350 � less than 7% of the value of the contract. If you invest in stocks, you have to put up at least 50% of the value of the shares.

Every 1-cent change in the price of corn amounts to a $50 change in the value of a corn futures contract. If you buy corn futures and the price goes up 20 cents, your profit is $1,000. That's a gain of nearly 75% on your initial margin of $1,350! And a 20-cent move in corn prices in today's market conditions is very possible, sometimes in just one day. No wonder futures trading is so attractive to investors looking at commodities compared to other investment areas.

But beware. There is another side of the corn that a newcomer to futures needs to recognize before becoming involved in this type of trading. While the futures market can boost your account quickly, it can also diminish your account just as quickly. Commodities are generally much more volatile than stocks, making them a rough-and-tumble marketplace for the inexperienced.

Timing is a critical factor in trading futures. In fact, you can be right about the direction of prices but wrong about the timing of the move and lose a significant amount of money. That's true in any market but is compounded in futures due to the larger increments and high leverage involved in futures. Even a relatively small adverse price move against your position can deal a big blow to your trading account.

Still, for those who can tolerate the risk, the possibility of large profits has an obvious appeal for investors seeking more action for their investment money. If you do decide to trade futures, you can improve your odds for success by first learning about and understanding how futures markets operate, then getting reliable information about markets and what is moving them from sources such as www.TradingEducation.com, a free educational web site.

The Three Essential Rules For Profitably Trading On The Stock Market

Profiting from trading stocks is not a matter of luck. Successful traders develop a set of trading rules and diligently stick to those rules, no matter what. Here are the three essential rules that should be part of every trader's strategy.

Rule number one is that you do not know what the market is going to do.

No matter how skilled and how experienced you become, you do not know, with any certainty, what the market is going to do. All you ever have is an estimate, or educated guess, as to the path that the market is following.

Some of the greatest mathematical geniuses of all time have spent many years trying to write a system to accurately predict the ups and downs of the market and they have all failed. The reason why they failed is that there is no system. The market is a mass of individual psychology. It is impossible to predict all the various things that are going to influence that psychology let alone predict what that influence will be.

One of the great temptations for traders, who are experiencing a run of successful estimates, is to believe that they now understand the market. My advice to you, if you are experiencing this delusion, is to take a holiday in a nice, relaxing environment and then come back to trading only when sense has returned to your brain.

Rule number two is to decide, before entering a trade, what your strategy will be if your market estimate is wrong.

The biggest losses in trading occur when the traders have neglected to predetermine their loss cutting strategy or when a trader fails to follow their predetermined loss cutting strategy. Once the emotions of potential loss come into play our sound decision making ability takes a sudden and profound decrease. We start to kid ourselves that we know that the market will turn around and that we won't need to take a loss. If that ever happens to you then it is a good time for you to read rule one again.

If you were in the retail sales business then you would have to spend money buying your stock from the wholesaler in order to have the stock to sell at a retail profit. That is the nature of retailing. I see the inevitable losses in stock market trading as being equivalent to those wholesale purchases and the profitable trades as equivalent to the retail sales revenue. As long as the profits outweigh the losses then you have a sound business.

Of course in retailing you try to minimize the cost of acquisition of your stock. By the same logic, in trading you have a system to minimize the size of each loss and that is what rule two is all about.

Rule number three is to decide, before entering a trade, what your strategy will be if your market estimate is right.

The stock market is a volatile entity. You may be in profit today but if you don't collect that profit then it could turn into a loss tomorrow. For this reason you need a strategy for collecting your profit.

In discussing rule two I spoke about the psychological pressures and influences that you experience when you are in loss. Well the psychological issues are just as prevalent when you are in profit. I have seen so many new traders who fall victims to greed and hold their profit for so long that it turns into a loss before they collect a single cent.

Remember rule one; you don't know what the market is going to do. So make sure that you have a predetermined profit collecting strategy and that you have the strength of character to stick to it when the time comes.

The three rules above should be the first three rules in your personal trading system. If you can't accept and abide by these rules then I suggest that you stay away from trading.

If You Are Still Getting Ready To Start Then You Are Probably Going To Fail

One of the biggest differences between winners and losers in life is that winners start immediately whether they are ready to or not, but losers want to learn everything they think they need to know before they get started. There is a very good reason why the second method is a recipe for disaster.

Before you experience something it is almost impossible to know what is going to be important knowledge and what is not. It is only by experiencing a thing they we gain some understanding of what is involved.

The person who prepares, prepares, prepares and then prepares some more usually discovers when they finally do start (if they ever do) that what they have been preparing all this time is actual the wrong thing.

People who become successful take a completely different approach. The get an idea and then they immediately start working toward that idea. They often have no notion of what is the right thing to do to succeed or of what knowledge they will need to acquire. However by following their gut instinct and starting to do something, they soon discover what works and what doesn't and they discover from practical necessity what knowledge they need to seek out.

Once, after I had finished giving a two hour talk on residential property investing, a man came up to me and announced proudly that he had been studying property investing for 18 years and that he had read over one hundred and fifty books on the topic and that he agreed with almost everything I said in my talk.

I thanked him for the compliment and asked how many properties he had. He told me that he was in the process of negotiating his first one. The truth is that if he had read absolutely nothing and just bought virtually any house in any major city on day one, then it would have been worth at least four times what he paid for it at the time he was talking to me.

You have to be in the game to have any chance of winning the game!

The other reason why the successful people are the one's who jump in and learn of the go is that the psychological side of winning can only be developed by doing.

Take the stock market as an example. Many people study the stock market and then paper trade in order to learn the principles. If you are not familiar with the term "paper trade" it means that you do everything you would do in trading, except actually buying the stock.

These people often get good at analysis and at making the right decisions. They get good at knowing when to enter into a trade and when to exit that trade. Then they start investing for real and totally mess it up. They discover that when their hard earned cash is on the line the psychological pressure suddenly becomes the major factor in decision making.

They would have been far better off to have started real trading on day one, using very small amounts of money and then gradually increase the size of their trades over time. Nothing can prepare you psychologically for the game like actually being in the game.

Whatever you have been thinking about doing start it today and then be mindful of what is happening. By all means read and study everything you can but do it while you are playing the game, your results will prove the wisdom of what I am saying.

Safe Market: Jobs Thrown At Wall Street

First week of the year at the Wall Street stock market closed with hefty losses. The only sector which registered significant rises is the one of .

While Dow Jones industrial average registered an 82 points lowering with the value of 12, 398, the Nasdaq fell 19 points and the S&P went down with 8 points, the figures from the jobs market were the only ones to go high.

The Labour Department showed that payrolls went up at 167,000 in the last month of 2006 even though predictions were that they will go down at 100,000 from the November value of 132,000.

One of the companies which felt the direct effect of the stock market is the electronic retail chains "Best Buy" which reported like for like sales growth for the last December caused to the demand of flat screen TVs. "Circuit City Stores" is also sharing the same financial period as "Best Buy".

Other lucky case is the one of "Wendy's International" which registered a growth in sales of 3.1 percent for the same store at company owned restaurants, in the fourth quarter of 2006. On the other side of the hill, there stands Motorola with a fell that came right after it reduced its profit and sales forecast for the same fourth quarter of the year as the other companies.

Therefore, on a general view of financial lowering levels in all sectors, are really on the thrown of the Wall Street stock market.

The 10 Step Investment Process

This is the system that I use in my investing and it is also the system that I have taught to many other professional investors.

1. Desired Outcome

Always start the assessment of any potential investment by having a clear picture of what you want to achieve through this investment and why you want that particular outcome.

It is important that your desired outcome is compatible with the larger picture of your major goals and purposes

2. Select a Strategy

Decide what investment strategy is appropriate to meet your desired outcome. You may modify this as you go through the other steps in this process.

Of course the greater your knowledge of investment strategies the better equipped you will be to choose an appropriate strategy to meet both your goals and your current circumstances.

3. Identify Risks

It is crucial to identify the likely risks and then design a practical, sensible, effective risk management plan. Also note that you go through the risk identification before the profit analysis. This is to ensure that you don't get swept away with enthusiasm for a potential profit and forget to manage the risks.

Make sure that your risk analysis is realistic rather than optimistic. There is a place for optimism in wealth creation but it is certainly not in the risk management phase.

4. Identify Profit Potential

Profit potential needs to be thoroughly analysed and you also need a profit management plan to ensure that you actually collect on profits at an appropriate time.

So often, particularly in the stock market, would-be investors have paper profits but, because they have no strategy for when or how to collect, they hang in until the profits have evaporated.

Also it is important to decide the form of your profit. Will it be in cash or in assets, for example?

5. Compared to What & Cost versus Benefits Analysis

This is where you consider alternate investments and/or strategies and do a cost benefits analysis on each to help you decide the most appropriate investment for your desired outcome.

6. Identify and Overcome Obstacles

Almost all investments have potential obstacles that you will have to overcome in order to maximize your returns and minimize your risk. It helps to have identified them in advance and to have formulated a strategy to overcome or avoid them.

7. Design Your Exit Strategy

You should never enter an investment, or business, without having a clear strategy for exiting in the event that things go badly wrong or in the event that you have made a large profit and wish to move on.

8. Make a Decision

Once you weigh up all your research it is time to decide whether you will proceed or whether you will look for a different investment.

9. Take Action

A decision has no power until it is acted upon. If you have decided to proceed then take the necessary action step to put your investment into reality. If you have decided not to proceed then start taking action to find a better investment opportunity.

10 Review Your Outcome

Every action produces an outcome of some kind. If your outcomes are favourable then keep on with your plan, if they are unfavourable then review your plan as required, if they are disastrous then action your exit strategy.

The Bulls And Bears Game: Risks And Survival Strategies In Investments

The stock market is never constant, but one thing that is constant in the bulls and bears game is this question in people's minds as to how to make money with investments. Price movements keep changing the character of the stock market and the bulls (buyers) and bears (sellers) oscillate from financial highs to lows.

A bull market time in the stock market is when prices are steadily rising, outdoing past averages, accelerating optimism among investors and thereby raising their confidence. A bear market is the opposite, a state of pessimism when prices are falling by 20% or more in a key stock market index from a recent high over a minimum of two months. Evidently, investors indulge in some amount of risk as they invest. Nevertheless, the stock market never wanes in economic importance because it is a significant money-making arrangement for the big business houses.

Risks

You may have numerous investment opportunities to choose from. But it is always advisable to keep a watchful eye while choosing which company to invest on and how. A little less careful and you may walk into one of those fraudulent investment networks across the world. First and foremost, be wary of too many attractive offers like �huge profits in no time' or �zero risk involved' etc. Some opportunities even flaunt lofty claims of IRA approvals, tax-free offshore investments and more. Chances of these being authentic are close to nil. Other investment opportunities will assure you of a perfect offer that will reap good returns. Yet some others may pressurize you to act promptly, saying that the market is moving. In either case, do your homework. Get detailed information of the company, the fees involved and never share your bank information or personal financial details with anyone unless you are completely sure.

Strategies

Once you are clear on mind about the potential risks in the bulls and bears trade, it is time to plan strategically. There are two rudimentary approaches to investing money and being successful with that. These are: the fundamental analysis and the technical analysis. The former focuses on the analyses of the financial statements of companies, available in SEC Filings, market trends and more. Technical analysis involves market studies of the price actions, with the help of stock market charts and other quantitative methods to forecast future trends.

Besides these two base strategies, there is the index method strategy, in which one has a weighted or non weighted portfolio of the whole stock market or a part of it. This strategy helps to maximize diversification and minimize taxes on very regular trading, apart from ensuring a position in the general stock market trend.

Yet another, often unethical, survival strategy for investment is the insider trading method. In this, the investor has to rely on inside information.

Marketing Strategies For Real Estate Investors

People are increasingly investing in real estate after the uncertainties of the stock market. Many real estate investors are new to this market and often make mistakes leading to losses. They need to plan strategies for investing in real estate. People invest in real estate for selling at a later stage for a handsome profit. For this they need to have a marketing strategy in place.

Buy At Bargain Prices; Many real estate investors have entered the business because they saw someone else do the same, and make oodles of money. This is a big mistake, as it may not always work for you. As you will be selling your property later, you need to make bargain purchases, where you pay only around 80% of the current market value. Not easy, but possible.

Buy foreclosure properties; buy properties that are off the beaten path; properties that people avoid due to some adverse aspect they have � such as a massive roof leak condemned by the board of health.

Foreclosed properties are always bargain buys, and you may even get them cheaper than 80% of the current market value.

Upgrade The Properties; By upgrading the properties, you add market value to them. A property condemned by the board of health due to a massive roof leak, with a market value of $300,000 could be bought for, say, $200,000.
You can upgrade the property by effecting roof repairs, which could cost about $40,000. You can make a neat little profit, just by effecting little repairs, and easily selling for about $280,000, which is below the current market value.

Upgrading does not mean cosmetic changes. Cosmetic changes will not fetch you a high price, though you may have spent a bundle on it.

Flipping This is a very common strategy, but is risky at times. Some real estate investors, as a form of marketing strategy, buy and hold real estate properties for a short period and sell it at a profit. This is based on the assumption that the real estate prices will rise.

Flipping is not an easy way to make money, and you need to have enough cash flow, if you are not able to sell your property fast, and may have to hold on to it because of adverse real estate prices. Real estate investors, who are real flippers, combine the strategies of bargain buying and upgrading the properties to make decent profits.

Real estate investors must develop a marketing strategy for their properties. Depending alone on the tenet that all property prices always go up and never come down, may not be safe, as there are times of slump in the markets. Real estate prices do come down occasionally, and real estate investors should not believe in blind faith.

Alexander Gordon is a writer for www.smallbusinessconsulting.com - The Small Business Consulting Community. Sign-up for the free success steps newsletter and get our booklet valued at $24.95 for free as a special bonus. The newsletter provides daily strategies on starting and significantly growing a business.

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Saving for Retirement - How much will you need?

How much do you need to save to fund your retirement?

If you've ever looked what kind of nest-egg you are going to need to retire, you've undoubtedly come across the standard rule of thumb only allows withdrawing 4% a year if you want to have your savings last at least 30 years.

So if you wanted to start withdrawing $80k a year, you would need to have $2 million dollars in savings. Now that is a mighty sum, and many may consider it out of reach, especially if you are starting late in the game.

But, why only 4%? If the stock market averages 11% a year, why shouldn't your nest-egg last forever if you were taking out anything less than 11%. Let's take a quick look at the original study that forms the basis of this recommendation to understand its underlying assumptions. With that information we will see if we can shape our investment strategies to give us more from our savings.

The original work that many of these projections are based on was a paper by Philip L. Cooley, Carl M. Hubbard and Daniel T. Walz. As you read through this work, you'll find a few basic assumptions:

1) The goal of the analysis is to maximize the likelihood that your nest-egg will last for the desired period of time (in the study it is varied from 15 to 30 years). This is quite different from maximizing the most likely size of the portfolio.

2) The analysis is done by running a simulation using the historical data from 1926 to simulate the probable rates of return on your portfolio.

3) It also assumes the CPI (Consumer Price Index) predicts the inflation rate that you would need to match in your withdrawals (e.g. if you took $10k out the first year, and the CPI in the simulation went up 5%, in the 2nd year you would withdraw $10.5K)

4) The rate of withdrawal is never modified based on the portfolio performance. (Basically you would never reduce your spending as a function of your remaining funds.)

5) No tax or transaction costs were taken into account.


The working assumption was that the portfolio would need to last 30 years. This matches the most common retirement scenario (retire at 65, median life expectancy would be around 20 years, but a 50% chance of greater than 20 years life expectancy).

Finally, the only investment options were those with historical returns tabulated in the Ibbotson report, basically the S&P 500 as the stock market, and a family of differing maturity bonds for a bond portfolio.

With those constraints, then it turns out that you would not pursue a strategy of maximum returns on your portfolio (which is the case with a portfolio of 100% stocks), but more one that gives the best risk/ reward performance. The portfolio that gave the highest probability of lasting 30 years was found to be a 75%/25% mix of stocks and bonds, even though a 100% stock portfolio yielded about 1% more a year, the risk (as measured by the standard deviation of the annual returns) was reduced by about 20% with the diversified portfolio. For a 4% withdrawal rate, there was a 98% probability that it would last 30 years.

So, what are the factors that would allow us to increase the amount we could withdraw each year (or in effect reduce the amount we need to save)?

1) Reduce the number of years you want to ensure income. The only practical way to do this is to retire later. Helpful, but not the solution most of us want to count on. Also, to give some idea of how effective this is, if the target lifetime of your nest-egg is reduced from 30 to 25 years, the withdrawal rate can't even be increased from 4% to 5% and still keep a greater than 90% probability that it will last the target lifetime. You have to reduce the target time period to 20 years just to increase the withdrawal rate from 4% to 5%.

2) Accept a lower inflation rate. If you think your costs will be fixed, or expect that your rate of spending as you hit the 80's and 90's will go down, it may be appropriate to target a higher rate of withdrawal. Of course this has it's own set of risks, but the reality is that most 95 year olds are not traveling, eating out as much, keeping a vacation home, etc. as most 65 year olds. The flip side of that is the medical and extended care costs, which aren't captured by the CPI anyhow.

If you assumed no inflation at all in the analysis above, you could increase your withdrawal rate to 6% and still have a 98% chance the portfolio would last 30 years. That may not seem like much, but it's a 50% increase in income.

3) Increase the returns on your investments. This is the holy grail that most folks look for when evaluating their investment performance. While that can be helpful, keep in mind that the best result above was achieved with a lower yielding, lower risk portfolio than the 100% stock portfolio.

4) Reduce the risk of your portfolio. This is actually the key to success, especially when coupled with an increased return. To give some idea of the leverage of risk, if you can cut the risk (in this case the standard deviation or the amount of variation of the annual returns) in half without increasing the yield at all, you could increase the amount withdrawn each year by more than 50%.

Few investors understand the impact of improving the risk reward ratio of their portfolio. Not only will that help stay the course on following our investment plans, but in the long run it can actually reduce the target amount needed to sustain the a retirment income stream.