Monthly Archives: May 2012

Start Investing Money May Carnival Roundup

We are happy to have our articles included in the following articles. A big Thank You to all who hosted these amazing carnivals in May.

Carnival of Retirement at Young, Cheap Living
Yakezie Carnival at The Frugal Toad
Carnival of MoneyPros at Money Cone
Fin. Carn. for Young Adults at 20′s Finances
Carnival of Financial Planning at Card Wisdom
Totally Money Blog Carnival at Debt Blackhole
Festival of Frugality at See Debt Run
Carnival of Financial Planning at Financial Excellence
Totally Money Blog Carnival at Balance Junkie
Carnival of Retirement at Simple Finance Blog
Yakezie Carnival at One Cent At A Time
Carnival of MoneyPros at Financial Success for Young Adults
Carnival of Financial Planning at Nerd Wallet
Totally Money Blog Carnival at Don’t Quit Your Day Job…
Festival of Frugality Funny About Money
Yakezie Carnival at Financial Success for Young Adults
Fin. Carn. for Young Adults at 20s Finances
Carnival of Retirement at Money and Risk
Carnival of MoneyPros at Miss Wallstreet
Yakezie Carnival at Daily Money Shot
Fin. Carn. for Young Adults at 20s Finances
Carnival of Financial Planning at Planting Money Seeds

5 Types of Common Stocks

If you’re even slightly new to investing, then it’s imperative to know the basics before you get too deep in the process. One of the most basic things you should learn about the stock market is the types of common stocks that exist. When people talk about stocks in general, they’re most likely referring to commons stocks.

The vast majority of stocks are issued in the form of common stocks. When you buy “common shares”, each share that you purchase represents your partial ownership, or stake, in a company. It’s essentially staking your claim for a portion of the dividends (read: profits) that the company generates. They may go up or down depending upon how the company performs.

In addition, when you buy common stocks, you become an investor in a company, meaning that you get a vote for each share you own. This vote can help elect board members depending upon the amount of stock you own. Let’s take a look at five of the types of common stocks that are out there.

1.       Penny Stocks

Don’t invest too heavily in penny stocks unless you’re feeling risky. They’re the most speculative form of stocks around. The rule of thumb for a stock to be considered a true “penny stock” is whether it’s priced at $5 or less per share. If it is, then you have yourself a penny stock. Companies that sell penny stocks are not quite established yet – and most are still deep in the development phase of their growth. A second kind of penny stock company is the kind that is offered by a company that is flailing financially. Penny stocks for either type are highly risky because there’s a huge chance that the companies you invest in may fail.

2.       Blue Chip Stocks

The biggest companies in the world – think Wal-Mart, Google, and the like, only offer blue chip stocks. These companies have higher-priced shares with little room for growth, but who cares? Adding a healthy mix of blue chip stocks to your portfolio will lend a great amount of stability to it because the likelihood of these companies failing is extremely low, and returns are as close to guaranteed as you’ll get in the stock market.

3.       Utility Stocks

Utility stocks are simply stocks issued by companies that offer public works services such as power and water. There’s limited competition since most of these companies almost have monopolies in the areas they service. That’s why utility stocks are low-risk, because their returns are almost guaranteed. However, the amount you’ll profit is marginal.

4.       Emerging Growth Stocks

Emerging growth stocks are offered by up-and-coming companies that are still in the growth stage and figuring out the best tactics for management and company structuring. Investing in these kinds of stocks may not yield anything at first. There is a chance for huge rewards down the road, but there’s also the chance that you’ll have a bankrupt company on your hands. Companies that offer emerging growth stocks tend to be volatile while in development, plain and simple.

5.       Established Growth Stocks

Companies that offer established growth stock have a proven track record, and they’re established enough not to be a high risk for bankruptcy. At the same time, the rewards are minimal compared to other types of stocks. There’s room for massive growth down the line, however.

Is it Too Late to Make Any Smart Investments for Your Future?

It’s often said that if you want to invest in a pension plan for your old age, you need to get one up and running as quickly as you possibly can. This means you have more years to save the amount you’ll need to get the results you want when you’re older.

But does this apply to all investments? For the most part it does. Take stocks and shares for example. We’ve seen many shares take a tumble in value over the past few months and years, owing to the recession most of the world has been experiencing. But if you were to look at the performance of shares in general over a much longer time period, you’d see they were actually performing quite well in the long run.

Time really is in your favor in many cases. So what does that mean if you are in, say, your forties and you’re thinking of making some investments for your retirement? You’d have been better off making those same plans in your twenties, sure, but does that mean there is no point making them now?

Planning for the future

The main thing to remember here is that you must make the most of the time you have left before the target for your investments arrives. So if you are saving for your retirement and you are currently in your forties, you still have a good few years before you actually retire.

However if you delay your plans because you are worried about whether you have enough time to save for them, you will automatically give yourself a lot less time to save. You should know the difference between delaying because you are gathering information about various options and delaying because you are hesitant about whether it is worth it or not.

To be truthful any amount of time you have to make investments in is worth using. The trick is to find the right investment for the amount of time you have available. Some are naturally time limited so you have to find a vehicle you can use that will get you the best return without posing too much of a risk to your cash. We all have different levels of acceptance when it comes to risk of course, so it makes sense to consider where you sit on that subject.

Another option to consider is whether to spread your money around. This can help to negate the risk of any one single investment you are considering putting your money into. But some investments will spread the risk for you, meaning that one vehicle can put your money into several places.

Clearly you have a lot to think about here. However old you are or whatever goals you have in mind, it is never too late to make an investment choice. The nature of the investment you make could differ depending on your age, but there are always opportunities to consider.

What Are Some Company Names and Stock Symbols?

Company names and stock symbols are commonly confused. To make a long story short, a stock symbol (which can sometimes be called a “ticker symbol”) is simply a short abbreviation that investors use to uniquely identify all of the shares that are publically traded within a particular stock market. There are many different formats for stock symbols, and they may consist of numbers, letters, or even a combination.

The reason that stock symbols are occasionally known as “ticker symbols” is because the symbols were originally printed on the tape that ran from a ticker tape machine.

History of U.S. Stock Symbols

Standard & Poor (S&P) had the desire to add uniformity to the investment process, so the stock exchange implemented stock ticker symbols that were more modern and boasted only letters. Before that time, one company may have had dozens of different ticker symbols floating around depending on the stock exchange in question. Needless to say, that way of doing things became mighty inefficient in a hurry. The S&P changed all that, and then years down the line, the securities industry as a whole standardized the method to make it official – it had finally become the industry standard. However, to this day, for preferred stocks, stock symbols have yet to be standardized.

Examples of Stock Symbols in the United States

Let’s take a look at the standardized stock symbols for some of the biggest companies in the United States to get a better feel for the way companies are tagged in the marketplace. Some of the larger company stock symbols are as follows:

AAPL – Apple Inc.

BAC – Bank of America

C – Citigroup Inc.

GOOG – Google

HNZ – H.J. Heinz Company

HPQ – Hewlett-Packard

INTC – Intel

KO – Coca-Cola Company

MSFT – Microsoft

TGT – Target Corporation

WMT – Wal-Mart

WAG – Walgreens

For the beginning investor, understanding these symbols makes it easier to get into trading without feeling like you’re in a completely foreign world. You will be able to read stock tickers more easily and gain a better grasp on the process more quickly.

The SEC Changes the Rules

In the past, all an investor would need to do was look at a symbol in conjunction with its appended codes in order to figure out where a company’s stock was trading. But a move by the SEC in 2007 changed all that.

The SEC approved a rule that changed how companies that moved between the New York Stock Exchange and the Nasdaq were known. The rule allowed them to keep their three-letter symbols even though they moved between exchanges. At the beginning, the law excluded companies that only had one- or two-letter stock symbols, then after 2008, companies slowly began keeping their shorter symbols intact when making the switch. This trend started with CA, Inc., which traded using the symbol CA.

Knowing stock symbols is a great way to get your feet wet in the world of stocks. It will help you get accustomed to the companies that are trading and read the tickers more prudently.

What Should You Do When an Investment Dives in Value?

When you look for investments that stand a chance of paying back more than just a meager rate of interest, you will automatically put your cash at a higher level of risk. For example if you buy into stocks and shares you may end up seeing your investment appreciate considerably – or it may take a nosedive, leaving you with less than you had originally invested.

Some investments are designed to run for specific lengths of time, while others give you more freedom over when you can withdraw your money. If your investment happens to be losing money now, what should you do?

Number one – don’t panic

We’ve seen many instances in the past where people have immediately withdrawn all their money – the classic ‘take your cash and run’ reaction. In many cases the people who hung on and sat back to see what happened found their investments returned to near normal soon afterwards. Those who cashed in early lost money, while those who waited didn’t.

Of course this is not guaranteed to happen. But it is definitely worth finding out more about the situation and the likely outcome before you decide what else to do.

Research how the situation could play out

The most important thing to do is not to rely on one single source of information concerning your investment. Before opting to withdraw your cash, make sure you find out the potential consequences of doing so. Remember that reading any news reports concerning the state of any investment are likely to be overly dramatic in many cases. Find out the real truth and base your decision on that.

Consider how long you were going to hold the investment for in the first place

It has long been the case that when it comes to stocks and shares, it is the overall performance that matters. Even in the case of a recession, when the value of shares can drop remarkably, the share value can eventually bounce back again.

If you were intending to cash in your shares or other investments anyway then it may be prudent to cut your losses now before things worsen. But if you were holding onto them for the long haul it may be better to hang onto them even through tougher times.

Remember there is no single solution for all circumstances

It is wise to remember that there is no ‘one size fits all’ solution to handling a weakening investment. You must consider a range of options before deciding which one would be best for you. But the most important thing to remember is never to react to the event without first looking at it from every angle. This will help you to determine whether you are better off cashing in your investment now, or waiting things out to see if or when they may improve.

There is always an element of risk in whatever decision you make. But in reality you could fare better by acting rather than reacting.

How Much to Invest in Inflation-Protected Securities

If you are thinking about investing money, then you need to know upfront what amount you’ll be looking at getting back, right? Many people who invest casually or just invest to take care of things such as retirement fail to take the all-important issue of inflation into account when doing the math. This can be detrimental to an investment portfolio, however, and understanding how inflation will affect your bottom line decades down the road is imperative to maximizing how hard your money will work for you.

Understanding Inflation-Protected Securities

Inflation-protected securities (IPS) are a great way to keep your money growth outpacing inflation, but to use them correctly, you fist need to grasp what they are. A standard-issue nominal bond has a principal, interest, and a guaranteed payout that you can calculate at maturity. The problem with investing in these over the long haul is you will have no idea what the rate of inflation will be on the date your bond matures, so you run a serious risk.

On the other hand, an inflation-protected security works in a similar manner as a bond, but the IPS accrues interest in two separate parts. First, the principal amount accrues along with inflation, and then the entire amount is paid when the IPS hits its maturity date. The actual coupon payment is made based on a real rate of return, so even though the IPS coupon is initially lower than a nominal bond, it’s paid out on both the principal and the interest that has accrued since it was originally purchased.

Should You Invest Heavily in IPS?

Quite a few different financial advisors think that investing in IPS qualifies as fixed income, but it’s not the case. In truth, these investment vehicles are their very own class of securities. You can’t really compare IPS investments to regular fixed income or equities because it just doesn’t make sense.

That’s precisely the reason that IPS make great additions to a portfolio for the sake of diversification. Of course, no one would want to invest in IPSs as a major chuck of their investment holdings because of the unpredictable nature of the possible returns, so investing in IPSs sparingly is the best way to diversify.

The reason that these are a fantastic way to round out your portfolio is that the rate of inflation is unpredictable, but when IPSs fluctuate in tandem with the rate of inflation, you won’t lose money as you would with a fixed investment of a similar nature. Fixed investments will earn the same rate of return, so the potential for real profits is not as secure as it is with their IPS counterparts. Moreover, since sovereign governments issue these bonds, there’s very little risk, so you can invest your money with confidence. Overall, it’s a good idea to add IPS coupons to your holdings to spread your money as far as possible to maximize your returns.

The Best Places Worldwide to Invest Your Money

We are truly living in a global economy. Multinational corporations aren’t even “multinational” per say, because they do not have many nationalities – most have one gigantic global presence. Think Google, Microsoft, Apple – these are companies that set up shop from pole to pole, and they’re all reaping the rewards of casting their nets so wide.

Regular investors like you and me should take a page from this playbook and diversify our portfolios too, if we can. First, of course, you should take care of the biggest investments – you retirement, education for your kids, your emergency fund. Then, once you’ve locked down those things, it’s time to start looking at ways to up your returns by any means possible.

Think as the corporations do – take your money global and reap the rewards. Some places in the world are better to invest in than others; just look at the disastrous effects of the European Union’s Greek euro fiasco. The currency is expected to tank, and these are the kinds of minefields you’ll want to avoid when planning your overseas investment strategy. You should make sure to do your homework and scout out the best places worldwide to invest your money. Here are a few resources to get you started.

A Core Foreign Fund Could be Just the Ticket

Don’t try this at home, folks: If you want to start investing in foreign markets, then you need to have a qualified financial advisor by your side to hold your hand through the process. Ask about opening something simple to get yourself started, such as a core foreign fund.

You need to sink the majority of your dough into holdings with a fund that has the ability to track a very broad index of stocks in developed markets. If you’re looking for one particular index, consider the dependable option of the Fidelity Spartan International Index (FSIIX). When you pick this stock index, you will be investing most of your money in Australia, Western Europe, and Japan. This move got the kiss of approval from Money magazine, so it’s worth a look.

Throw a Little into Emerging Markets

Let’s take a case study as an example. One fabulous performer, Yum Brands (YUM), is the parent company of American favorites such as Pizza Hut, Taco Bell, and KFC. It’s likely you have all three of these not even a few miles from your house, right?

Well, believe it or not, they’re not just in the United States – In fact, Yum rakes in more than half of its annual revenue from its stake in emerging markets, and it’s actually one of a very limited number of companies in the S&P 500 to pull this off so successfully. A rep from Morgan Stanley even noted recently that for anyone who may be interested in parking their bucks in global growth, Yum is a no-brainer. If you’re going for individual overseas investments in emerging markets, try to choose companies with a similar track record to round out your portfolio.

What to Do When an Investment Pays Out

Many investments are created with a specific time frame in mind. For example you might start investing in a particular financial product so you have some cash to spend on the vacation of a lifetime when you hit a certain age in life. You might have an investment come to fruition when your child reaches the age of eighteen, or when you reach a certain age in your working life. There are as many deadlines and goals for investments as there are people saving for them.

But sometimes you may not have any specific goal at all. You may just see the potential of saving a certain amount every month for, say, ten to fifteen years, in a particular savings plan. These plans tend to offer more potential for earnings than a standard savings account because they are often tied into the stock market. They’re one of the easiest ways to save for those people who dislike a lot of risk.

So what do you do when your investment pays out? There are several options worth considering.

#1: reinvest the money somewhere else

This is a good idea as you will have a lump sum to put into any new investment pool. Look around for potential opportunities and decide what level of risk you are content with.

Consider also whether you will continue adding money to your investment in future, rather than leaving the capital to hopefully appreciate over time.

#2: spend the profits but reinvest the capital

This is another option you could consider that will give you the best of both worlds. Let’s say you invested $5,000 over a period of time and you’ve earned $300 on that investment. You could use the $300 to spend on something while reinvesting the capital into something else.

Of course a lot depends on the plans you have for the future. Take your time – ideally in the run up to the investment reaching fruition you should think about your options. Even if the bank or organization you have your investment with offers you something else you should always look around and see what other options there are for you.

#3: spend the lot – after all we all have to splurge once in a while

Investing is important. But so is enjoying life and if you’ve been saving consistently for a long period of time it would be fair enough to feel as if you’ve earned a reward.

The important thing is to make sure you don’t just fritter the cash away. Think about how you could use it to improve your life. Maybe a new car is a good idea. Perhaps you’d like to renovate your home. There are lots of options here.

As you can see it is worth spending some time considering these three courses of action. This will enable you to figure out which one is best for you given your current situation – which may be very different from when you originally entered into the original investment.

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Good Investments for the Conservative Trader

If you consider yourself a nervous stock trader, then go ahead and get in line. The market is not great right now – it doesn’t take a seasoned analyst to figure that out. That’s why now more than ever, protecting your hard-earned money by opting for only the most secure of investments is the best way to reduce your risk and grow your returns regardless of swings in the global economy.

You can choose from many different conservative investments in order to shelter your money from today’s economic fallout; you simply need to commit yourself to the fact that growth will take longer for these kinds of investments than it would for their riskier counterparts. Here are some tips for the choosing good investments for conservative trading.

Finding Safe Investments Means doing Your Homework

If you want to trade but you feel that you don’t really know the ins and outs of the industry, then you may want to call in some reinforcements. Meaning, you may want to consider an outside company or trading service so that you can place your money in hands that are more knowledgeable than yours.

A stockbroker can help guide you to conservative investments that will weather unsteady markets better than risky ones. You could also opt for a service such as E-Trader to help you along the way. You would not be as safe as you would with a traditional stockbroker, but you would be much safer than simply shooting blind and picking investments like you’re playing Russian roulette. That’s because sites like these have thorough online tutorials, help sections, and guides to help you every step of the way (if you actually read them).

If you plan on going it alone, then it’s risky, yes, but less so if you do your homework. For example, look at long-term trends for key indicators. You can also keep abreast of all the most current news and website updates about your companies of choice, and check out their annual statements before you decide whether to invest. And never invest based on a tip –that’s a surefire way to shoot yourself in the foot.

Diversify

Should be an understood, but you’d be surprised. If you’re a trader and you have a good feeling about a company or two, don’t be tempted to sink all your money into stock with only a couple of entities. Instead, spread the love over a handful of large-cap, safe, growing companies with a good record of outperforming inflation and keeping the books in the black during recessionary periods.

Play the Market for the Long Term

If you’re planning on trading stocks, but you want to do it in the safest way possible, then keep in mind you need to keep your money in stocks for six months to a year at a minimum in order to shield your money from short-term ups and downs. Any shorter of a period, and you’re dangerously close to day trader territory.

Ideas to Get Rich Quick When Investing

Everyone always tells you that investing takes time, and if you’re going to “go all in”, then you need to do it for the long haul. Still, many people have that small voice inside their heads that tells them there may be a way to “get rich quick” through investing in the right things. So, is it actually possible to get rich in a hurry through investing?

For some, the answer is yes. But this makes up a very small percentage of the population, and if you choose to try “get rich quick” schemes to make money fast, you may find yourself in over your head. Here are a few ways to make quick money investing without becoming a day trader.

Sock More Money Away

Sounds ridiculously simple, right? Well, believe it or not, setting aside a large chunk of your income (if you can afford it) is the first step to growing investments quickly. Think of it as seed money – sock away 25% of your income as soon as you get your paycheck and watch it pile up. Then, when you pass the $5000 mark, make an investment.

Don’t add it to an investment you already have; try something new instead. Think CD laddering, stocks, gold or silver, or even a mutual fund. Once you’ve done it, repeat the process with a different kind of investment. Before you know it, you’ll have a diverse portfolio of investments.

Try P2P Lending

One lesser-known (and slightly more risky) investment vehicle out there is online Peer-to-Peer (P2P) lending. Websites like Lending Club and Prosper use a bidding system in which multiple lenders (you and others) throw in money to fund loans for people who have created listings on the sites. People use these sites because they may have had trouble in the past qualifying for traditional bank loans like those offered by net loans. If you spread your money over many different loans, you will reduce your risk and still enjoy a high rate of return in a relatively short period of time.

Think About the Foreclosure Market

Don’t try this one cold. If you have a bit of real estate experience under your belt, then this is one way to grow investments fast. You’ll need a good amount of money saved to get into this market, and once you have it, you can attend bank or tax sales to score a property in need of a little TLC.

Before you try this method out, make sure you do your homework. It’s important to know the laws in your state of residence, the true costs of fixing up a property, and the money you’ll need to spend to get it re-sold. This includes any money you may need to spend on the mortgage while you’re waiting for a qualified buyer to come along. You can make more money by adding more space in your investment property and save money by doing it yourself. 

Remember, getting rich quickly is still a process. There are ways to make money faster than traditional long-term investments, but the risk is higher and you’ll need to watch your money like a hawk when you go all in.

 

Investment Tips – An Example Investment Plan

If you want to start putting money aside, but you’re oblivious to the stock market and you have no idea how a mutual fund works, don’t feel embarrassed. Many people throughout the country suffer from the same problem, and unless you’re employed as a financial advisor (or just really love to study money), you’re in good company.

There are simple ways to invest without breaking a sweat, and if you follow a few simple guidelines, you’ll be on your way to a sweet investment portfolio before you know it. Let’s take a look at an example investment plan to get you started.

First, Max Out Retirement

The single best thing you can do for yourself investment-wise is to sink the most money into your retirement plan that’s allowed by law. If you have a 401k and you’re not investing the maximum amount to meet your company match, then you’re leaving a ton of free money on the table.

Conversely, if you don’t have a company plan or you are self-employed, then get a Roth IRA or UTMA accounts and start socking money away. Put in enough each month to meet your annual limit, and do it every year to ensure you get the maximum retirement savings that you can swing.

Next, Beef Up Your Mortgage Payments

Investing in your abode is a great way to add a safety net for your family. Most people consider retirement a tripod – Social Security, your retirement savings, and your home. We all know that Social Security may not be around when we get old, so we’re not holding our breath. That’s why investing in your home and retirement is the most important way to secure your future.

At the time of this writing, mortgage interest rates are the lowest they’ve been since long-term mortgages were first established in the 1950s. This means that now is the perfect time to refinance and lock in a fixed-rate mortgage at a historically low amount. Then, once you’ve adjusted that interest, add just one extra payment to the principal every year. This is a great investment that will save you boatloads of cash as years wear on.

Then, Save for College

If your kids are depending on you to fund their education, investing in their future is a fantastic way to help. Every US state has some form of college savings plan, and most offer tax savings as a perk for contributing to one. Open a plan for your little ones, and invest in their future regularly.

Finally, Invest in Other Stuff

Once you’ve locked down your three primary investment goals for your life, you can sink your leftover money into different investment vehicles. Diversification is still the name of the game, and spreading your eggs over many different baskets is your best bet for maximizing returns. Find out about CD laddering, look into mutual funds, and pad your portfolio with blue-chip stocks and other safe vehicles in which you can park your money.

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