Here are a couple of investing tips from the Oracle of Omaha.  These are simple pieces of advice taken from the greatest value investor of our time.  These may sound really simple, but remember it has brought at least one man exponential returns over time.  It will sound like stock market 101 but so many investors disregard these principles.

First of all, understand the business you are investing in.  Too many investors buy stocks purely on it’s share price, or some other market valuation.  The market isn’t always right.  Very rarely will an investor actually go in and do research on a company before he invests.  This is vitally important for any trader or investor.

Take Buffett for example.  He reads tons of annual reports every year and that is how he finds his deals.  In fact, he often tells of when he first got starting in this business how he read through Standard & Poor’s directory of companies several times to find good companies to invest in.

Secondly, do your own business valuation.  Buffett does his own and only then does he go and look at what the market cap is.  If the market value is below what he thinks the business is worth, he goes in for the kill.  Otherwise, he stays out.

It doesn’t make much sense to invest in a company that you haven’t valued.  That is going in blind, usually following a trend or a fad.  This might be a good stock investment strategy for a day trader, but for a long term investor, you should know what a company is worth or at least have some idea.

Again, very simple advice, but so often ignored.  It is difficult to valuate a company, but you should learn how to do it and then do it.  It’s not an exact science but you can learn to do it.

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There are some great advantages to small cap stocks.  First of all, these cap sized stocks have room to grow.  If a company is gigantic, they can only grow so much more.  With small stocks, you have a lot more potential that it will grow and may even grow fast.

Secondly, many large institutional investors ignore small cap stocks.  The reason is because in order for a large investor to go to the trouble to buy these stocks, they have to buy a very large percentage of the ownership of the company.  In many cases, it means buying a controlling share in the company.  In order for them to do this, they must get approval from financial regulators.

Once these institutional investors file their regulatory applications, other players in the market see what’s happening.  While the paperwork is being process, other smaller investors and traders will come and buy the stock and drive up the price.  So there is very little benefit for a large investing firm to buy small caps.  Because of this, you don’t have these big guys as competitors and that is surely an added benefit.

The other great thing about small cap stocks is that you can afford to buy more of them.  That means you can diversify more and you should.  These stocks tend to be a lot more risky and volatile.  Many don’t make it big.

In order to offset the failure of a few, you should invest in enough of them to ensure that you have a good chance of at least a few of these to get big.  You can let someone else do this for you buy investing in small cap mutual funds that hold these cap sized stocks in their basket.  By doing this, you are diversifying without having to do your own stock picking which can get tedious with this category of stocks.

There are differences in investing in large cap vs small cap funds. There are different risk and rewards associated with it.  Each investor should decide after much research and getting advice from their investment advisor.

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But you assume no risk in simply having stock options explained to you. An option is simply the right to buy (in the case of a call option) or sell (for a put option) 100 shares of stock at a given price, at a given date in the future. Here are a few critical things to understand:

You are buying the right to buy the shares, not the shares. The right has a value that will fluctuate between now and the so-called expiration date of the option, based on movements in the share price. You may buy and sell this right before options expiration; most people do not buy options to actually purchase the shares, but to make money from the fluctuations in the value of the option.

Stock options have a strike price that is the amount at which you may purchase the shares, if you hold to expiration. If, at options expiration, the price of the stock is below the strike price (i.e. out of the money) the option will expire worthless, because having the right to buy something at a price that is above the current market price has no value.

If, at options expiration, the price of the stock is above the strike price (i.e. in the money) the option will have an intrinsic value that is determined by how many points the stock price is above the strike price, times 100 (because each contract covers 100 shares of stock).

Maybe the hardest thing conceptually about understanding stock options is the concept of time value. In addition to the intrinsic value, which as we have seen will be zero if the stock price is below the strike price of the contract, the market will ascribe a value to our contract based on how much time is left until expiration, and the likelihood that the option will expire in the money (as determined by the “collective wisdom” of the market). This means that while an options contract may have zero intrinsic value, it can still have value because of the time value component, and the stock’s potential to move higher than the strike price before expiration.

Even the most seasoned investors use only a portion of their investment funds to trade options. The old adage is: buy options only with money that you can truly afford to lose. The good news about options is that you cannot lose more than you invest, but studies have shown that approximately 90% of long put and call options positions either expire worthless or are sold at a loss. That should be your real lesson from this stock options explanation: buyer beware: do your homework and don’t get greedy.

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A dividends yield is a percentage return from dividends income, which is based on share pricing. This yield is paid annually . When there are not capital gains, dividend yield is defined by return on stock investment, in both dividend yield definition and ex dividend definition, dividend yield helps investors to determine the amount of cash flow obtained for every dollar invested in an equity position.

In the past, investors used to look at dividends coming from their share holdings to secure cash flow by investing in stock paying higher dividends. Today they are more concerned about capital gains investing in stocks that pay higher. Therefore, dividend definition can be explained as the portion of a company’s earnings  which are paid to shareholders.

On the other hand, ex dividend definition refers to the classification of trading shares belonging to a seller instead of the person acquiring such shares, but once the corporation has authorized the seller to receive such dividends.

Shareholders remain qualified to receive dividends, but difference between dividend yield definition and ex dividend definition strives on the date in which shares are sold for  dividends payment, either coming from registrars or the stock exchange, so makes no difference who is the new shareholder when it comes to receive a payment after sale, although once an ex date is declared, stock drops often in price proportionally to the total amount of dividends a seller may expect.

There are companies that offer dividend reinvestment plans and these  are for those who are looking for good passive income by dividends.

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When you buy stocks on margin you are borrowing money for a portion of the purchase.  Typically average investors can only borrow half of what they wish to purchase.  Crazy hedge funds can get away with borrowing much much more.

If your investments fall in value and the amount of your investments is worth an amount close enough to the amount you owe the brokerage may initiate a margin call.  In most instances they will sell enough stock, regardless of the price, to pay off your loans usually leaving you with nothing or near nothing.  Unless you are well established you have very little say in the manner.  Any firm you buy stocks on margin with should provide a margin call formula or margin call calculator so there is no misunderstanding on when your account will be in danger.

Having your stocks sold on a margin call has two devastating impacts to the investor.  One is the stocks are sold when the price is down.  This is usually the exact opposite of when you wanted to sell unless it saved you from a plummeting stocks.  The other negative impact is to the psychology of the investor.  They now feel defeated and will be less capable of pulling the trigger on the next good investment they come across.  Hesitation on a well defined plan leads to lost profits.

Margin needs to be used as part of a well developed plan and not a guarantee of massive gains.  If your losses aren’t minimized to smaller swings than your wins than high margin accounts will wipe you out.

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Exchange Traded Funds allow an investor to invest in a large number of stocks thereby obtaining some level of diversification in their portfolio.  ETF’s are easy to get into as well as get out of as they are essentially the same as buying and selling any stock.  How long you hold them depends on your investment style or strategy.

Besides diversification there are many other advantages to Exchange Traded Funds when buying stocks, they tend to have lower costs as they are often not managed like mutual funds tend to be.   Unlike some mutual funds ETF’s are very transparent.  They are easily bought and sold at market prices any time during a trading day whereas mutual funds are purchased at the end of the day regardless of when you placed your order.  This also allows the investor to place strike points on their purchases or sales of an ETF.

Like mutual funds there are a wide variety of ETF classifications such as Income ETF’s that try to track the performance of a particular stock market, Commodity ETF’s that track certain commodities such as precious metals or futures.  There are also Bond ETF’s that track a wide array of bonds as well as Currency ETF’s tracking many of the world currencies.

One interesting area of exchange traded funds is inverse investing where the ETF can be used to invest in opposing market trends.  These use derivatives to try to obtain returns that are opposing the market.  For example a Bear market ETF can make gains in a declining market environment.

As with all investing ETF’s come with risk.  It is up to the investor to do his or her own research and decide if exchange traded funds are a worth while investment vehicle for their portfolio.

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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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Stock market is like gambling, you may win money in the start but if you get in the habit of making money through the market using short sells or intraday you may lose everything soon. So what are those short sell and intraday concepts? Short sell means selling the shares you don’t have. By doing a short sell you will gain the money equivalent to the share value that time and you will buy the same shares at the end of the day. Here the trick is you can gain money if the shares are falling in value and lose if they get hike in that day.

Intraday means you will buy the shares and sell them on the same day which enables you to get very high profit in a day as the charges on intraday trading are very low. These both tricks requires high study and knowledge of the share market but still you can try out your fortune by investing in emerging market like India. Indian stock market is getting very strong these years and the future looks good for it. This will save your money and you can try some of the above tricks too.

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The exchange pretty much evolved from there applying new technologies (tickers, phones, computers) and dealing with each scandal (bad accounting, watering stocks (unauthorized share dilution)) by applying new rules and regulations to protect the investors the NYSE has matured to where it is today:

• 5 billion daily shares traded
• Has expanded into options and futures
• Recently Acquired AMEX
• Almost completely electronic trading (except a few really high priced stocks)

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So you might be asking just what is the difference between preferred stock and common stock?

Common Stock

Common stock is the baseline proof of ownership in a  corporation.  When you are a common stock shareholder you have a right to vote, assets in a liquidation, and dividend payments as approved by the shareholders.  You also have the right (preemptive rights) to purchase new shares that are being released before the public in order to maintain your percent ownership.

Preferred Stock

Preferred stock is another form of ownership in the company.  The payout terms are prearranged – fixed dividend schedule etc.  Another perk is that you get paid before common stock holders in both dividend and asset liquidation.  This includes previously missed dividend payments.  You must be caught up in your agreed payments before the the common stock holders get any dividend payments.  The disadvantage is no voting right and virtually no capital appreciation over the long run.

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