Archive for January, 2010


How to Buy Penny Stocks

Filed Under: Penny Stocks by Bill — Comments Off
January 18, 2010

With the rebound of the stock market in full swing, many investors are itching to get in on the action. Often, the inclination is to go with penny stocks, as they have a great chance of turning some exponential profits in a short period of time. There are a couple things that you can do to help your chances in turning a profit on penny stocks however. Not everyone knows the top penny stocks to buy and it is really not as simple as blindly choosing a few and praying for huge returns.

When choosing stocks of any price, you want to do some research on the company first. Knowing how to buy penny stocks or having a strategy to sell after a certain gain or loss is not enough. Getting familiar with the company you are investing in will help your confidence in that pick; regardless of the way the stock is trading. If you are confident in the company and its financial position, then you will be rewarded in time. That’s where patience comes into play. Without patience, you will likely sell your shares after a minimal profit, or even on the smallest decline in value.

Now that we have discussed how to choose a penny stock, what is some helpful guidance on how to buy penny stocks? Trading commissions are lower today than they have ever been, and that plays into the hand of the average investor. Many companies offer commissions under $10 a trade, which is an excellent rate. Watch out though, because many companies charge a per share fee for stocks under a certain price, such as $5 or even $2. Pairing low commissions with a high volume of shares will cut the percentage that the commission takes out of your capital. These are just some of the guidelines that should come in handy when buying penny stocks.

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Annuities Explained (As Best As One Can)

Filed Under: Personal Finance by Bill — Comments Off
January 12, 2010

I’ve talked a lot about stock investing, a bit about 401k’s, and a healthy chunk about saving.  An annuity is another investment vehicle sold by the insurance companies.  If there is one thing insurance companies are very good at is knowing their numbers.  An annuity is a way they can provide you a guaranteed income while they make themselves a healthy percentage.

There are many different packages of annuities, but all of them are essentially a standard investment (bonds, stocks, CDs, etc) that the insurance company guarantees a return for you (and then keeps the rest for their profit.)

The great part about an annuity is it grows tax free, the bad part is you are locked in until you are  59 or you pay big penalties to your friendly federal tax collector.

When you go to buy annuities you need to remember that it isn’t an investment professional selling them, but an insurance broker.  The commissions are higher for the sales person so often your information is less than helpful.  There are two major types of annuities:

  1. Fixed Annuity – A fixed annuity simply gives you a guaranteed rate of return – these are usually invested in bonds, but can be invested in stocks as well.  What they are invested in doesn’t matter much to you because you’ve agreed to your rate of return no matter what.
  2. Variable Annuity - A variable annuity is almost invested in mutual funds.  Your return is often tied to the performance of the funds, with a guarantee that you’ll earn so much per year, or won’t lose your principal, only if you hold the annuity for a certain number of years (usually more than 7.)

If you plan on holding a mutual fund for more than 7 years than there isn’t much risk in making the investment yourself.  If it wasn’t a great bet the insurance companies wouldn’t guarantee it for you.  I won’t be using annuities until all of my standard retirement accounts are being maxed out.  After that they are my next choice for tax free growth.  With investment bonds rates so low, some of the variable annuities offer better returns with the same safety than bond funds.

An interesting side benefit of an annuity is you can pass them on to someone after you die without being tied up in your estate.  If you wish to pass some money to someone the family may not agree with it’s a good way to make it happen automatically without a fight in probate court.

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The Stock Market And The Ticker Tape

Filed Under: Glossary by Bill — Comments Off
January 11, 2010

The old stock market ticker tape is now made even more advanced than it was before. It is now a computerized unit that can relay information about any stock trading activity to the investors around the world in just a blink of an eye. The stock market ticker tape’s information is now complete and it now includes stocks’ symbol on the exchanges, the latest price per share, and its trading volume in its report.  More than just the stock market 101.

Before the computerization method began, the stock market ticker symbols were just simply printed out in a thin piece of paper that was continuously streamed from a ticker-tape machine. During that time it took a lot of effort and time for a broker to create a report.

However, for those who don’t know about it, the stock market ticker symbols are letters or once in a while also will include numbers that are used by a broker to denote a particular company’s security that is being traded publicly.  The location where the security, or stock, is sold is known as a stock exchange. The stock symbol is chosen by a certain company when it decides to go public.  When a company decides to go public, it determines the amount of shares it wants to issue.  It also decides what price it wants to try and open its initial public offering (IPO) at.  The company will set up a financial broker to offer its stock to the public.  It will also go around the country trying to drum up interest in its stock.  This is so the IPO is not a flop.  During the 1990’s, there was a lot of interest in IPO’s.  If you could manage to get in on the ground floor, you could make a killing in just a short time in which you would buy shares and then wait for the price to go up which it usually did.  Then you would get out before the price went down.

IPO’s are not so prevalent now and are not so volatile. People are more cautious about what they invest in.  They tend to take a more wait and see attitude.  However, there are still opportunities for the person with the right trading system and knowledge.

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Shorting Stocks as an Investment Strategy

Filed Under: Stock Trading Systems by Bill — Comments Off
January 11, 2010

When it comes to trading stocks, one method used in order to earn profit out of it is by short selling stocks.  Shorting stocks is a method done by selling the stock first before buying it.  The stocks are obtained via credit and later on bought at a lower price.

Shorting stocks is a method that is not advisable for inexperienced investors even with the use of stock option software.  An investor needs plenty of experience in trading before bordering towards this territory.  The reason behind this requisite is the fact that shorting stocks requires you to get the stocks in credit in the beginning.  Looking for a stock that has a dropping price is necessary to benefit out of it.  Because unlike the usual strategy of waiting for the stock price to appreciate, short selling stocks is done the other way around.  If an investor is looking to employ this method of investment, it is a process that allows him to gain profit from the falling prices of the stocks rather that its increase.   The idea of borrowing the stocks in the first place is confusing for most investors.  Experience in the stock market is needed because the method can be very risky.  Short selling can be done easily online.  Once an investor already has a margin account, the option to short sell can be seen through the screen when trading online.

The concept of short selling is risky.  This is due to the fact that while it requires trading stocks in the same way, the investor is trading stocks that are not his.  In short selling, because an investor needs to obtain the stocks by credit, he needs to watch out for the decline in the price in order to profit once he decides to buy the stocks back.  Short selling may be difficult to handle for some because stocks can be hard to borrow and possible gains are limited because the stock price can only go down.  Short selling has high potential of losses which is why it is best to have the experience before choosing it as an investment method.

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