Should You Invest in Facebook Stocks?

The news has been full of reports about the initial public offering (IPO) that has been filed by social networking site Facebook in recent days. Many people are now considering buying shares in the company to try and make a quick buck on the back of its success. But is it such a good idea?

Last year Facebook earned $3.7 billion in revenue

This is an impressive statistic on its own. But it also represents a massive increase of 88% compared to the previous year. The question is whether these figures should inspire people to invest in shares issued by the company or not.

Are IPOs worth investing in?

In truth there won’t be an opportunity for you to even consider investing in Facebook shares for some considerable time to come. Just under a third of the shares are owned by people working for Facebook, all of whom will benefit hugely in a financial sense by the IPO. But the rest are all spoken for as well, so there is little chance of buying Facebook shares in the immediate future.

Furthermore history tells us that there is an approximate fifty-fifty split between those IPOs that produce good returns and the ones that don’t produce any appreciative returns at all.

Do your homework

You can see then that there is never a sure thing when it comes to shares or IPOs. The mistake many people make is to jump straight on the bandwagon when shares like these become available. Facebook is a huge company to be sure; it is the biggest and most successful social networking company in the world.

But the landscape can change very quickly in this area. We only need to think back to the fate of MySpace to realize this. It was once a very successful social networking site but is now a shadow of its former self. It seems unlikely that the same fate could ever happen to Facebook, but then we may well have said the same thing about MySpace just a few short years ago.

No such thing as a sure thing

In truth if you are considering investing in Facebook shares at some point in the future, you should do your homework just as you would with any other investment. Consider all the facts and figures and make an informed choice about whether the share value (whatever it might be) is likely to appreciate still further during the time you will hold them for.

We would all like to have a slice of the Facebook pie. But in reality the only people who are almost certain to become millionaires or even billionaires off the back of the IPO are those who work for the company. The people who are most likely to lose out are those who invest in the hope that they will make a ‘guaranteed’ fortune – only to realize there is no such thing. There may well be those who buy Facebook shares in the future and make a profit – but they won’t have done it on a whim.

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Mutual Fund or ETF?

You may fully understand what a mutual fund is, and what an ETF is, but do you know which is better for your portfolio?  They are both very similar products, but differ in specific ways you should be aware of.

What is a Mutual Fund?

A mutual fund is a fund that invests in a basket of stocks or other investments.  They start with your cash, and managers use that cash to buy stocks.  They can be actively managed, or they can mirror an index (in which case the stocks in the fund are the stocks in the index).  Index mutual funds usually have fewer expenses, because you are generally not paying someone to make decisions.

When you own a mutual fund, you buy the NAV (net asset value), which is calculated at the end of the day.  So, you can only buy at one price once per day.  Mutual funds also have minimum investments, and sometimes fees to buy the funds.

What is an ETF?

An ETF is also a basket of stocks or other investments, but they usually only focus on an index.  There are several actively managed ETFs, but these are pretty rare.  Unlike mutual funds, ETFs prices are calculated every second, and investors can buy or sell just as often.

ETFs are made up of share baskets called creation units, which the ETF shareholders actually own shares of.  As a result, these baskets are what provide liquidity on the market every day, and as such, trade like stocks.

ETFs also don’t have minimum investment limits, which are usually in place on mutual funds.

Which Should You Choose?

For many investors, picking an ETF usually makes the most sense.  You usually want to have index funds anyway, and ETFs allow you to do this inexpensively.

ETFs also offer the advantage of trading as needed, so if you want to sell during market hours, you can, and your transaction will settle.

The main reason to choose a mutual fund is if you want a manager that is doing something outside of tracking an index.  Then it could make sense for you.

Think Smart with Penny Stocks


Are you considering investing in penny stocks with the hope of making lots of money? If you are you’re certainly not alone. But you should be aware that penny stocks – while being extremely cheap to buy per share – are far riskier than other more established and more expensive stocks.

Think smart when you consider investing

If you have money to invest and you want to invest it in the stock market, it makes sense to invest it in more than one company. This means you will be spreading the risk. If you pour everything into one company and the value of the stocks goes down, you’ll lose money. However if you spread your investment between, say, three or four companies, you stand a better chance of making more money.

This is a worthwhile point to note if you are going to invest in penny stocks. While spreading the risk is important in all investment situations, it is even more important when dealing in penny stocks.

What are the odds of making money with penny stocks?

Bear in mind that there is no such thing as a sure thing. While penny stocks are cheap and thus more appealing to those with lower investment budgets, they also represent a much higher area of risk.

Yes, you could make a lot of money if you pick the right penny stocks. But you could also lose a lot. We all want to find a company that is going to be a successful household name in the future. But the odds aren’t good.

Create a separate investment fund for penny stocks

If you understand the risks that come with investing in these particular stocks and you still want to go ahead with it, make sure you set aside a separate pool of money to devote to penny stocks. This should be cash that isn’t required for anything else. If you would be in financial trouble if you lost it, avoid investing in penny stocks.

Do your research – and don’t rely solely on the advice of others

If you take a look online you will find a wealth of websites and information regarding penny stocks. It seems that everyone has their own idea about which companies are the best ones to invest in.

But remember that this is your money you are investing. Do your own research and find all the information you can on the companies you are interested in buying penny shares for. You may do better to choose companies in a particular area of interest, such as green energy or manufacturing for example. If you know a lot about a particular area already you can use this knowledge to make sure you stand a better chance of picking shares that might be more successful.

Are penny shares right for you?

A lot of people randomly pick penny shares because they are cheap to buy and they hold the potential to soar in value. But for every one that does there are many more that fail, so bear this in mind.

How To Invest in Commodities

Investing in commodities like oil or gold has been popular for the last several years, because these assets have been rising in price.  Also, commodities are traditionally seen as a hedge against inflation (which many believe is coming), as well as serving a purpose in industrial uses.

However, investing in commodities has usually been tricky because it has usually been done contractually, or through the use of futures contracts.  The futures market is tough, as it involves margin and leverage, and has many seasoned players.

However, there are other ways to invest in commodities that may suit the regular investor.

Commodity ETFs

Over the past few years, many commodity ETFs have been created to help investors enter this market.  These ETFs are designed to track the underlying asset price, and do so through contracts behind the scenes.

As a result, they don’t perfectly follow the underlying price, but they come very close.  They also offer investors the relative safety of not having to directly invest in contracts themselves, but rather the ETF product.

If you want even more leverage, there are also leveraged ETFs that track the underlying commodity in multiples, such as 2x or 3x funds.  These funds ramp up returns, but also multiple losses significantly.

Commodity Producer Stocks

Instead of investing directly in the commodity itself, many investors choose to invest in the company that makes or extracts the commodity.  This can be a good play because these companies usually benefit as well from rising commodity prices.

However, since you’re not invested in the actual commodity, but a company, you usually gain more liquidity and safety.

Investing in the company can also be a better play if the company pays a dividend.  As such, you can receive a payment for ownership, where owning the commodity directly or through and ETF, you won’t receive one.

Investing in a producer that produces multiple commodities can also be a way to diversify across the sector, and help smooth any bumps in the road.

Getting Started With Options Trading

Trading options is an advanced market strategy, as it involves derivative investment products, semi-complicated math, and leverage.  However, because of the leverage, it can also provide lucrative returns.

If you are considering options trading, here are a few things you should know.


Getting Started

To start, remember that options can be both calls and puts.  If you are purchasing a call option, you are purchasing the right to buy a stock at a specific price.  If you are purchasing a put option, you are purchasing the right to sell a stock at a specific price.

Many people purchase call options because of the leverage.  For the same cost in dollars, you can purchase a lot more shares using options than buying the shares directly.  Take, for example, RY.  It currently trades around $50.00.  For $50, you can buy one share.  However, for the same $50, you can buy about 10 “in-the-money” options contracts, which would be equal to 1,000 shares if you exercised the options.  Furthermore, if the stock price is higher than the strike price plus the premium paid, the trade will be profitable.

On the opposite side, you can buy a put.  A put guarantees you the option to sell a security at a specific price.  People purchase put options when they believe that the stock’s price will decrease.  If the stock price is below the strike price by more than the option premium, the trade will be profitable.


More Advanced Options

As you become more comfortable with the basics of options trading, you can start with advanced trades.  These are known as spreads, and there are many different versions, each with its own purpose.  Spreads are trades that involve two or more options and are designed to limit risk or be used in certain market conditions.

Given their nature, they are more advanced, but as you become comfortable with trading options, these will prove to be very useful.

When to Choose a Secured Loan

A secured loan might seem like a scary option because you can lose your property if you don’t pay, but there are some circumstances when a secured loan is the appropriate choice. With a secured loan, you pledge your property to the lender to ensure your repayment. Unlike an unsecured loan or a credit card, the lender can take your property if you don’t pay.

You Need a Large Amount

Unsecured loans and credit cards usually don’t offer extremely high loan or credit limits. Since there’s nothing securing the debt, the lender is taking a higher risk and the risk is reflected in your borrowing limits.

You’ll notice on many financial information websites, such as that the limits for secured loans are much higher than the limits for unsecured credit products.

If you need a large loan, you might not have any other option than a secured loan. Make sure you comparison shop first so you lock in the best rate available to you and get the loan amount you need to cover the expenses you’re planning for.

You Want Lower Payments

You’ll pay more in interest with a longer repayment schedule, but secured loans usually have repayment schedules spanning ten years or more. Your monthly payments will be smaller than you would have if you got a short-term, unsecured loan instead.

With credit cards, repayment schedules and amounts vary, depending on the issuer and how much credit you used. You might have an indefinite repayment length on a credit card, as long as your account remains open and in good standing, but you’ll pay for it in interest.

If your credit card issuer decides to close your account, you may be faced with an accelerated repayment of the debt. You need to consider this possibility if you were planning on using a credit card to cover a large expense.

You Need Quick Approval

Since you’re putting up your property on a secured loan, you’ll often have an easier time finding a lender. Unsecured loans and credit cards represent a larger risk for the lender, so lenders often have stricter criteria.

If you don’t have a great credit score or history, you’re more likely to get approval for a secured loan than an unsecured loan or a credit card with a decent limit. You represent less risk to the lender if you’re pledging your property, so the lender applies less stringent credit requirements.

Getting a secured loan will take some time, as the lender will evaluate your property and still require documentation of your income and other items necessary for most credit products. Have all your paperwork in order before you apply to speed up the process.