Archive for December, 2009


The World of Penny Stocks

Filed Under: Stock Trading Systems by Bill — Comments Off
December 7, 2009

When you are first starting off in investing in the stock market, one great way to increase your portfolio dramatically is to begin to buy penny stocks. These stocks which are usually less priced at less than $1 each can easily double or even triple in price which means big profit potential. It is also important to remember that the risks are much greater than with ordinary stocks. To get you started, I’ve put together a number of FAQ’s that hopefully will help:

Are penny stocks safe?

Penny stocks can be safe, but most are very risky investments. Most of the tradable penny stocks are not listed on any of the major stock exchanges and information about the company offering them can be very limited.

What sort of profits can I make from penny stocks?

Let’s say you purchase $100 in penny stocks that are worth $0.25 each which allows you to get 400 shares. The next day those shares increase to $0.75 each and as a result your $100 has become $300 overnight. However, for every deal you make like this, you will undoubtedly make several more that are not as profitable.

How much can I lose investing in pennies?

You can only lose as much as you are willing to invest and just like the chance of the stock tripling in a single day, that same stock can also easily drop to a third of the price in the same time period. The key piece of advice when investing in this type of stocks is to keep them only as a small part of your portfolio, and not to invest more than you can afford to lose.

Can I get rich from penny stocks?

In most cases you will never become extremely wealthy investing in pennies, but you can make reasonable amounts of money as long as you make sure to plan your strategy well in advanced and leave room for those potential losses.

Why don’t more investors buy pennies?

In reality they do. Penny stocks are the most frequently traded stocks around and more of them are traded daily then any other stock type. However because of the higher risk, most established traders tend to stay clear of these stocks unless they have the information needed to make a well informed decision on their purchase.

When you take the time to come up with a good strategy for investing in penny stocks, you can make a fairly good income. Because of the high risk involved, you have to remember to pay attention and leave emotions out of the investments or you will always end up losing money. Investing wisely, whether they are penny stocks or fortune 500 stocks, is the key to making good money as an investor.

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Streamline Your Investing With Checklists

Filed Under: Stock Trading Systems by Bill — Comments Off
December 5, 2009

One of the best things you can do to help improve your investing results is by documenting every step you take and analyzing your results. One of the first things you need to do to make money in the stock market is to learn from your mistakes. The second thing you need to do is pick one investing strategy and stick to it. The final step is that whatever strategy you choose, know it completely. Be the expert and make the strategy your own and do not deviate from it.

Once you’ve started honing your investment prowess, you’ll find that a lot of the steps you take are repetitive and you will also find yourself doing the same thing over and over. This is a good thing as you should get into a groove to make sure that you always check everything about your stocks that is important to your personal strategy in the same way each time. Once you see this happening you should start to write down these steps on paper, in text file or by using software like Checklist Investor.

Your goal should be to streamline your investing with checklists so that you could hand off those decisions to someone else and they would be able to pick stocks exactly like you do and make money with them. Consider them a set of instructions for you to follow each time you put on your investment “hat”.

I always feel that doing the same thing each time you are screening stocks for potential winners is so crucial. It is so easy to say to yourself, well, I’ll skip that step because you fall in love with the stock. Take each and every stock you evaluate through its due diligence without making any exceptions.

You’ll find that if you do that, your stock picking will improve and you’ll improve your efficiency. And, once you’ve documented all of the steps in your investing system, you’ll be able to work faster and in less time. Start using an investing checklist today.

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Which Natural Gas ETF is right for you?

Filed Under: Stock Pick of the Day by Bill — Comments Off
December 1, 2009

Much has been written about natural gas. It has been one of the hottest markets this year. You may want to venture into this market, but how do you want to trade it?

Perhaps the easiest way to trade natural gas is to invest in a natural gas etf. ETF stands for Exchange Traded Fund. These investment vehicles are similar to mutual funds. Both are typically made up of a basket of related stocks.

There are several natural gas ETFs to choose from. But which one suits your investing style?

There are many ways to trade natural gas. There is SPDR S&P Oil & Gas Equipment & Services ETF, stock symbol XES. This Gas ETF tracks an index of oil and gas equipment and services companies. What this fund tries to do is to replicate (as close as possible) before fund expenses the total return performance of the S&P Oil & Gas Equipment & Services Select Industry®Index. The goal of this fund is to have low portfolio turnover and lower costs. Some of the companies in this fund are Schlumberger, Haliburton and Diamond Offshore Drilling. These companies may not be in the index when you purchase this ETF. Check the website for its current holdings.

The SPDR S&P Oil & Gas Exploration & Production ETF (symbol XOP) and the Dow Jones US Oil and Gas Exploration & Production ETFs (symbol IEO) invest primarily in natural gas exploration. These ETFs purchase baskets of stocks that are involved in the exploration and production of natural gas. Some of the stocks in these funds have been Exxon-Mobile, Chevron and Conocophillips. Once again, check the fund websites to see the current holdings.

If you want to trade in a fund that attempts to reflect the daily price change of natural gas futures, then the United States Natural Gas fund (ticker symbol UNG) and the United States 12 Month Natural Gas Fund (ticker symbol UNL) may be for you. Both invest primarily in natural gas futures contracts traded on the New York Mercantile Exchange. These are un-leveraged funds, meaning they do not purchase futures contract on margin. By doing so, these funds can never have a margin call. The difference between these 2 funds is that the UNG fund must roll over the entire funds spot month futures contract each month. The UNL is a 12-month fund, meaning it has purchase natural gas futures in each of the firs 12 contract months of trading. Then each month, the fund only need to roll over 1/12 of its portfolio, there by lowering it cost and mitigating the effect of contango or backwardation on the fund.

There you have a brief look at the opportunities to trade the Natural Gas ETF.

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