What Pips Represent In Forex Trading

By Arthur Robertson

 

With the commitment to learn Forex trading, you will be ensuring that you make any future financial investment decisions based on the best information possible. Educating yourself about the currency exchange markets, and by learning about pips and other issues, can give you the chance to make wiser investments. Ensuring a financial future that you have always dreamed about will be easier to do with the right information.

Making full use of any tools available in your efforts to educate yourself is the key to making more effective use of any opportunities that come your way. Ensuring that you have the chance to seize new investment opportunities in order to secure a greater return could be a wise use of your time and your efforts. Exploring such resources would be the best way to get started.

Online information can offer you fast and easy access to basic information, allowing you to construct a more accurate outline of the market and what investment opportunities may be found with it. Using such a tool brings with it the additional benefit of allowing you to find information on other resources and tools that can answer your remaining questions. Web searches give you the best way to get started.

Contacting a professional, firm or investment adviser in the hopes of learning even more may be a smart move as well. With the risks of placing your money in a poor investment being so costly, it would be wise to do all that you can to reduce them. With the right education, you may be able to do just that.

With further information, you will be able to develop a clearer picture of the process, markets and resources needed to ensure that your investments are well made. Doing otherwise may end up being more costly for you than you may have imagined. Protecting yourself, and your investments, by taking this opportunity to educate yourself would be only prudent.

Savvy investors have long known of the advantages that can be had with greater insight. Making use of the printed materials, web sites and professional services that will be able to offer you a greater understanding of the currency exchange market can really pay off. Smarter investment decisions will be possible as a result.

By using what you need to learn Forex trading skills, tips and strategies you can ensure that your investment decisions are superior ones. Giving yourself access to such information can make all the difference. You may be glad to have done so.

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Article Source: http://EzineArticles.com/?expert=Arthur_Robertson

The Truth About Diversification

By Anthony C Caruso

 

Diversification is a method that reduces risk by allocating money in a portfolio among various types of investment categories. Those categories are known as "asset classes", and deciding how much to put in to each asset class is known as "asset allocation". The rationale behind diversification is that a portfolio of different kinds of investments will generate higher returns with lower risk than one with only a few investments.

 

Why You Should Diversify

 

Let's say you have a portfolio of only one investment, all in a large insurance company. It grows nicely and pays a handsome dividend for years, but then, a series of tornadoes in the Midwest devastate thousands of homes. A short time later, two major hurricanes hit Florida then the gulf region. Potential claims are so substantial that the insurance company could go bankrupt, and its stock plummets. Your portfolio is crushed. But now let's say that instead of putting all of your money in to owning one insurance company, you had split your money equally putting half in to the insurance company and the other half in to a home improvement and building materials company. In this instance, while the storm damages would cause your insurance stock to lose value, at the same time, homes would have to be rebuilt or repaired and the demand for building materials would skyrocket, as would your investment in the building materials company. A statistician would say that because these two stocks seem to counterbalance each other, they do not have a strong "correlation", meaning that they do not act the same way. In building a diversified portfolio then, we want to have asset classes that not only do not act the same way, but actually have some degree of "inverse correlation", meaning that if some investments go down, others will go up to offset losses (stocks and bonds often move in opposite directions). This is why diversification keeps your risk of losses in check. Now as you might imagine, the more you diversify your portfolio with inversely correlated asset classes, the better chance you have to lower risk.

 

Diversification or Diworsification?

 

Diworsification is a play on the word diversification, coined by the famed fund manager Peter Lynch. While diversification involves a selection of assets with inverse correlations, which reduces risk and can increase potential returns, "diworsification" occurs by investing in too many assets that may appear to be different, but in fact act the same way. A common mistake for example, would be for an investor to split his money over the top five performing U.S. large company mutual funds, with the assumption that five different mutual funds would be five totally different "diversified" investments. On closer inspection however, by drilling down and looking at the top 25 stocks that each of these different mutual funds owned, one would be surprised to see that they all owned almost the exact same individual stocks.

 

Two Kinds of Risk

 

When we talk about managing risk in the investing process, it's important to note that there are actually several types of risk we need to be concerned with.

 

Systematic Risk - These are risks that affect the entire market and cannot be completely diversified away. Interest rate increases, recessions, political instability, exchange rates and wars are examples of systematic risks.

 

Unsystematic Risk - These are risks that are specific to individual stocks or investments, and can be diversified away as you increase the number of stocks or investments in your portfolio.

 

Diversification strives to smooth out unsystematic risk events in a portfolio so that the positive performance of some investments will neutralize the negative performance of others. Therefore, the advantages of diversification will exist only if the securities in the portfolio are not perfectly correlated

 

What is Asset Allocation?

 

Asset allocation is the strategy of dividing your total investment portfolio among various asset classes (that are not perfectly correlated), such as equities (stocks), fixed income (bonds), real estate, commodities, precious metals, etc. Asset allocation is the method we use to achieve effective diversification.

 

Some common asset classes are as follows:

Large-cap stock - These are shares issued by large companies with a market capitalization generally greater than $10 billion.

 

Mid-cap stock - These are issued by mid-sized companies with a market cap generally between $2 billion and $10 billion.

 

Small-cap stocks - These represent smaller-sized companies with a market cap of less than $2 billion. These types of equities tend to have the highest risk due to lower liquidity.

 

International securities - These types of assets are issued by foreign companies in developed nations, and are listed on a foreign exchange. International securities allow an investor to diversify outside of his or her country, but they also have exposure to country specific economic or political risk.

 

Emerging markets - This category represents securities from the financial markets of a developing country. While investments in emerging markets can offer a higher potential return, there is also higher risk, often due to political instability, country risk and lower liquidity.

 

Fixed income securities - The fixed-income asset class comprises bonds or other debt obligations that pay the owner a set amount of interest, periodically or at maturity, as well as the return of principal when the security matures. Maturities can range from short term to intermediate or long term. These securities are intended to have lower risk because of the steady income they provide. In reality, bonds can fluctuate in value and be worth more or less than the price you originally paid, if you seek to sell them before maturity. In addition, there is always a risk of default if the issuer cannot repay the principal when due. Fixed-income securities include corporate and government bonds.

 

Money market - Money market securities are debt securities that are extremely liquid investments with maturities of less than one year. Treasury bills (T-bills) and short term commercial paper make up the majority of these types of securities.

 

Real-estate investment trusts (REITs) - Real estate investment trusts (REITs) trade similarly to equities, except the underlying asset is a share of a pool of mortgages or properties, rather than ownership of a company.

 

There is no standard formula that can find the right asset allocation for every person. A customized asset allocation plan should only come after a professional assessment of an investor's age, level of risk tolerance (how much can he lose in the short term and still sleep at night), anticipated future additions to the portfolio during working years, investment objectives (such as how big does the portfolio need to be at retirement age to meet expected living expenses) and other pertinent financial planning issues. Only then can his specific investment goals be properly understood, and a roadmap to get there be designed.

 

Strategic and Tactical Asset Allocation

 

After an assessment is made and a suitable asset allocation plan is determined, a portfolio is divided in to various percentages of each asset class. Over time, some classes will grow in value, and others will lose in value. Using a strategic asset allocation method, those asset classes are periodically "rebalanced" back to their original starting percentages to keep risk management and diversification on track. For example, an investor with a $200,000 portfolio may start with an asset allocation of 50% in stocks and 50% in fixed income. After a year, when stocks have outperformed bonds, the portfolio now holds $130,000 in stocks and $110,000 in bonds. Rebalancing would result in the sale of $10,000 worth of stocks from the portfolio, and the proceeds would be used to buy bonds, to get back to the original 50%/50% allocation.

 

On the other hand, if a tactical asset allocation method is used, a portfolio manager seeks to create extra value by modifying the percentages in each asset class to take advantage of certain economic or market conditions. This is a more active strategy where a portfolio manager only returns to the portfolio's original strategic asset mix after desired short-term profits are achieved.

 

Conclusion

 

Diversification via asset allocation is a fundamental investing principle, because it helps investors maximize profits while minimizing risk. Choosing an appropriate asset allocation strategy and conducting periodic reviews will ensure you maintain your long-term investment goals and reach your desired return at the lowest amount of risk possible.

 

For more information please visit http://www.carusoandcompany.com

 

Article Source: http://EzineArticles.com/?expert=Anthony_C_Caruso

Investment Types and Techniques

 

 

Investing is the process through which money and diverse forms of capital are put in an enterprise in order to produce a profit. In brief, investment is the purchasing of an item of value or a financial product in the hope of making profits. Investment involves the use of money for profit generation.

Savings differ from investment as they involve setting aside a portion of one's income. In contrast, investing is a long-term strategy that aims at accumulating more money. There are many advantages that are associated with investing. Investing tends to beat out inflation, helping financial goals to be reached.

Investments come in diverse forms. They are also known as investment vehicles. The risks and benefits depend on the particular type. To invest effectively, investors have to evaluate their objectives and resources. However, no matter what investment vehicle is chosen, the rule is that instruments are chosen for the purpose of creating more profits.

Stocks are among the most preferred investment tools. Stocks are a form of investment in publicly traded corporations. Corporate entities issue stakes of ownership or shares that are traded to the general public. The purchase and sale of stocks is carried out on the global stock exchanges.
Individuals who trade stocks with success have good knowledge of market tendencies and the various factors that determine stock prices. Stock prices go up and down depending on company's operations, profits, and other factors.

Bonds are investment tools and a form of loans made to governments and corporate entities by investors. In return, governments and corporations pay fixed interest rate to the investors over an agreed period or term. At the end of the term, the lender recovers the principal amount.

The bond investment carries medium risk to the investor. It is more secure relative to other types of investment in that the returns are almost always guaranteed. However, bonds don't yield returns that are as high as those of individual stocks. The value of bonds is assessed by third parties. Investors purchase bonds based on the reputation and trustworthiness of the authorities or corporation that issues the bonds.

Another common investment class is the mutual fund, which pools together a specific set of stocks and bonds. Mutual funds are further categorized into different subtypes, allowing investors to specialize in a sector of their choice.

Investing is preferred alternative by those who lack time or expertise to perform daily research and assess the stocks on the market. It gives access to professionals who trade stocks for investors. Mutual funds can range from low to high-risk types of investments depending on the sector the investor commits the resources to.

Real estate investment commits funds to a property to generate income through lease or rental. It always involves immovable property such as land and permanent assets such as buildings. The value of a real estate investment is determined by the acquisition of real estate which involves the bestowment of rights such as possession and control.

The financial institutions that assist corporations and authorities in fund raising are called investment banks. They act as agents in the issuance of securities. Investment banks also assist businesses that are involved in derivatives, mergers and acquisitions, etc. Ancillary services represent trading of derivatives, market making, equity security, and fixed income instruments. In contrast to commercial banking institutions, investment banks do not take deposits from their customers.

 

About the Author

 

Vera JohnesI like to write about finance, investment, debt, credit, banking, loans.

6 Common Misconceptions about Dividends

by Jason Whitby,CFP, CFA, MBA, AIF

During periods of low yields and market volatity, more than a few experts recommend dividend stocks and funds. This may sound like good advice, but unfortunately, it is often based on misconceptions and anecdotal evidence.

                 

It is time to take a closer look at the six most common reasons why advisors and other experts recommend dividends and why, based on these reasons, such recommendations are often unsound advice.

Misconception No. 1: Dividends are a good income-producing alternative when money market yields are low.

Taking cash and buying dividend stocks isn't consistent with being a conservative investor, regardless of what money markets are yielding. Additionally, there is no evidence that money market yields signal the right time to invest in dividend-focused mutual funds. In fact, money market yields were anemic throughout 2009, a year that is also one of the worst periods for dividend-focused funds in history.

Many advisors also call dividends a good complement to other investments during times of high volatility and low bank yields. In an October 22, 2009 article, financial guru Suze Orman recommended the following dividend funds: iShares Dow Jones Select Dividend Index (NYSE: DVY), WisdomTree Total Dividend (NYSE:DTD) & Vanguard High Dividend Yield Index (NYSE:VYM).

Reality Check: The 12-month performance after Orman's recommendation was DVY (+7.86%), DTD (+21.91%), VYM (+17.72%). These returns seem pretty good - until you realize you could have just held on to the S&P 500, which was up +26.36% over the same period.

Misconception No.2: Dividend companies are more stable and better managed.

It is generally believed that companies that raise their dividends over a long period have solid market positions and strong cash flow. As a result, the stocks' total return is likely to outpace other stocks.

It's also common to hear the argument that dividends tend to hold companies to a certain standard of financial discipline and that, as a result, these companies budget more carefully and avoid wasteful projects out of fear that shareholders will punish the stock if it fails to return profits to its investors.

Reality Check: It's easy to pick a "solid" stock in retrospect but it is impossible to pick a company today that will meet this statement moving forward. Sure, if you had purchased Coke in 1962…but what about today? In 2007 we would have said that General Electric (NYSE:GE) and AIG (NYSE:AIG) were stable and well-managed dividend companies. Would we say the same in 2009? What about in the future?

The notion that dividend-paying companies are held to higher standards does not bear out. Look no further than the financial industry. In September 2008, AIG had a $4.40 dividend - almost a 4% dividend yield. By 2009, it was clear that AIG and others such as Freddie Mac, Fannie Mae, Bank of America, Bear Stearns and Citigroup were far from being financially disciplined companies, despite that fact that they were all long-time dividend-paying companies. As it turns out, dividends aren't much of an indicator of the financial discipline or the quality of a company's management.

Misconception No.3: You can count on dividends from solid companies.
Many people believe that it's rare for a solid company to suddenly reduce or rescind its dividend payment.

Reality Check: "Solid" companies like Bank of America (NYSE: BAC), General Motors, Pfizer (NYSE:PFE) and GE, have either suspended or cut their dividends. Unfortunately, it is a lot easier to identify companies that had a solid record than to identify companies that will have a solid record going forward. It is impossible to predict which "solid" companies today are going to be on shaky ground tomorrow. There is no certainty or stability in future dividends.

The idea that dividends allow you to get paid to wait doesn't make sense. It is the total return of your portfolio that matters, not the current yield. Throughout 2008 and 2009, companies were cutting or suspending their dividend payments at record levels, proving that there is no guarantee for those who buy in to these companies. Just ask anyone holding Freddie Mac since June 12, 2008, which was when Freddie Mac last distributed a dividend and traded at $23.01 a share. At that time, Freddie Mac had a dividend yield of 4.34%. By October of 2009, the stock was down over 90% and hope for future dividends had all but evaporated.

Misconception No.4: Dividend stocks provide upside potential and downside protection.
A 2009 SPDR University brochure states that "Dividends provide a stable source of income that can help partially offset market price depreciation that occurs in turbulent markets."

Reality Check: Dividends provide very little - if any - downside protection during market corrections. The S&P 500 was down -41.82% during the September 2008 to March 2009 crash. During the same time, the SPDR S&P 500 Dividend ETF was down -35.87%, which doesn't seem like much downside protection. Additionally, some well-known, dividend-focused funds provided no downside protection and performed worse than the S&P 500 over this period. For example, the Fidelity Dividend Growth Fund was down -46.94% and the iShares Dow Jones Select Dividend Index was down -43.07%.

Since 1926, dividends have provided about one-third of the total return for the S&P 500, while capital appreciation has provided the other two-thirds. Focusing on dividends, which provided less returns than capital appreciation, makes little sense, especially since the dividend focus is just as risky.

Misconception No.5: Preferential tax treatment makes dividend stocks more attractive.
This misconception seems to imply that dividend stocks are more attractive investments since they are taxed at a preferential rate. Obviously, the lower rate is better than the normal income rates but what does it really mean? Does it mean you should avoid dividends in tax-deferred accounts since they are less attractive?

Reality Check: Of course it doesn't. Then why should the tax treatment warrant dividend investments more attractive than capital gains? It doesn't, which is shown by the lack of any noticeable bounce in 2003 when the preferential tax law was implemented. We need to remember that the tail should not be wagging the dog. After-tax returns are important, but taxes should not drive your investment decisions.

Misconception No.6: Dividend-focused investing is ideal for retirees and conservative investors.
An October 5, 2009, article in the Wall Street Journal stated that "Most types of fixed-rate bonds don't provide any protection against inflation and can lose value when investors are worried inflation will flare. Rising dividends, along with any appreciation in the share price of the company paying them, offer a measure of insurance against inflation."

Reality Check: This statement is incredibly misleading. First, if you want a bond that protects against inflation, you can buy an I-Bond instead of taking equity risk. Secondly, all equity investments provide a measure of protection against inflation, not just dividend stocks.

No one ever said you could only have one investment. If you are a conservative investor, you can simply create a portfolio of bond funds and a little bit in a stock fund. The idea is to create an investment portfolio, not an investment collection. Each investment in the portfolio should work with the others to achieve a goal. This works much like the ingredients in a recipe, which come together to create a great dish.

Why are dividends a better way to generate income than capital gains? Capital gains are not a sure thing, but neither are dividends. And there is simply no way to know which stocks will continue to be "solid" in the future.

Conclusion
Dividends are absolutely an important part of the investment equation. Yet there is no empirical evidence that focusing on dividends is a wise decision. Actually, Miller and Modigliani received the Nobel Memorial Prize in large part for their paper, "Dividend Policy, Growth, and Valuation of Shares," in which they found that dividends are irrelevant to a company's value ("irrelevant" is their word, not mine).

On one side the media is dishing out long-lived misconceptions about dividends. On the other side, the Nobel winners are saying dividends are "irrelevant" to stock values. I'm not sure about you, but I know which one of these two groups I'm going with.

by Jason Whitby,CFP, CFA, MBA, AIF
www.investorsolutions.com

 

About the Author

 

Jason Whitby

Jason Whitby, MBA, CFA, CFP®, AIF® is a Senior Financial Advisor at Investor Solutions, a fee-only investment management firm for high net worth clients and institutions.
www.investorsolutions.com

Can Investing in Dividend Companies Make One Rich?

By Shawn Seah

 

 

This article is going to examine the issue of dividend-paying stocks: can investing in dividend paying firms make us rich, in comparison with investment in growth stocks? The literature on this topic of dividend stocks versus growth stocks is divided, with some arguing yes and some no, so let's look at the logic.

If dividends were 20% a year, and an investor reinvested dividends year after year in companies that paid the same percentage return, this would be a great idea. It's definitely workable. Just put money in regularly and reinvest, reinvest, reinvest - and Bob's your uncle!

But this assumes inflation is low, taxes on dividends are low or nonexistent, and also assumes that you can always find companies that pay 20% dividend, which is difficult if not impossible.
Some investors say, you can find companies that have paid dividends over the years consistently. Some call them "dividend kings", others call them "aristocrats of the stock market".But the issue is that if they are reliable and always pay, then the stock price would most likely reflect this in terms of higher prices and that means that their payout rate has to be low, i.e. less than 5%? In other words, their prices would reflect this dividend.

So, dividends can make you have a regular income, and can discipline savings. Yet it is highly unlikely that a pure dividend strategy would work. Perhaps one can try a growth strategy that pays minimal dividends. A mixed strategy would payoff better rather than a fixation on dividends.
Let's also look at a few more reasons why a pure dividend strategy won't work in practice. It is highly unlikely that the stock in question will rise much further since it is a consistent dividend giver and not a growth company. Therefore, a pure dividend strategy is highly unlikely to work if one thinks one can make money on capital gains.

Next, dividends in many countries worldwide are - at most - given out four times a year or once a year. And this can be cut at any point on time a recession or crisis hits. Thus, a pure dividend strategy can help you only when you're already rich.

Some astute investors note that a capital gains strategy is not necessarily at odds with a dividend play. That's because sometimes you can find a stock that delivers quite a good gain over time in capital appreciation, while also giving out a good and reliable dividend. However, that kind of stock is quite rare.

In fact, the problem is that usually the stocks that are needed for a capital gains strategy are those that are riskier and usually give no dividends whatsoever.

This brings me to the end of our short discussion on stock strategy. Dividend stocks or growth stocks? It seems that in conclusion it would seem that to make money in stocks, you might wish to build up a capital base first using a capital appreciation strategy on growth stocks and then later on in life go for the dividends - that should be the way to square the circle.

Shawn Seah is a blogger who writes on many diverse topics, primarily investment, finance and education. He has a website on Ideas on how to become rich as well as many other blogs on many diverse topics such as "How to Learn German Fast, "Get Your University Degree Online, and "English Language Resources Online". In the " Dividends Issue, Shawn discusses a dividend investment strategy.

Article Source: http://EzineArticles.com/?expert=Shawn_Seah

Insuring Your Investment by Hedging Option

By Satyes Mukherjee

 

What is Hedging?

Hedging is an option widely practiced by various companies, producer of commodities and many investors trading in the stock market. It is like insuring your assets against all possible loss. Suppose, you have a home which present market value is $1,00,000 and you would like protect it from any natural calamity or by human made activity like burglary, theft etc by paying a nominal annual insurance premium of $100. Thus by paying $100 only you can secure your asset worth of $100,000.

More on Hedging

Hedging is very popular to the experts and professionals. Hedging originates from the term 'Hedge'. Any method of strategy considered for reducing the possible loss comes within the term hedging. Hedging is not confined to monetary risks. Hedging activity presence in all activity of our live, like medical insurance for unforeseen medical expenses, farmer to protect his crops, an exporter to protect his material cost and so on. So hedging is a tool to attenuation risks.

Why do traders prefers hedging?

A trader prefers in hedging to protect his existing stock of a particular sector for possible loss in the market. For example trader A have 100 stocks in XYZ company whose present market price is $10, he purchased another stock of ABC company with same quantity for $8 each. If the stock price of XYZ company falls by $1 and stock price of XYZ company increase by $1, trader will incur no loss, although his investment to ABC is lesser than XYZ company.

Advice on how to handle stock future option

If you are new in the stock market and don't have sound knowledge on the stock market, hedging is risky to you. Keep in mind, it doesn't set off your option concurrently for all the time. Stock market is a game of mind. As an example - once you cut an extended option in money, if you narrow the futures option as well, except brokerage you do not lose any money. You are still in the market to pay only the brokerage. So, once you cut the money option, you have a tendency to carry the futures option, assuming that market will fall further, and you can make some profit. Therefore you keep it say for another day. If the market rebound on the next day, one rumor and you cut your short futures option. As a result you finally end up with overall loss.

Whether you earn profit or not relies upon whether you are there for the long period and at what level you get into. These need regular study of the stock market activity.

If you are a day trader only, settle your account daily, when you have earned a profit and avoid stop-loss. To act on that you shouldn't have a dual thoughts. just cut it when your stop-loss has broken or pre-FEED the stop-loss into the practice (which is possible with modern terminal or on the internet trading). On the contrary you will expose yourself a sad guy at the end of the day when stock market closes.

If you visit stockmarketsreport.com you will have more knowledgeable topics on stock market. Here you will have resourceful articles to master your knowledge on the stock market.

Article Source: http://EzineArticles.com/?expert=Satyes_Mukherjee

3 Ways to Protect Your Investment Portfolio

By Parker Theodore

 

Volatility is a funny thing; it makes people re-evaluate their interest in investing altogether. The reason for the doubts and second-guessing surely has more to do with a poor or non-existent asset allocation model, in which case investors are wise to adopt an asset protection program. This makes sense when you think about it: just as we insure our lives against the risk of death, we must also insure our portfolios or at least take the right actions to protect them against severe market shifts.

Here are three things investors can do to protect their investment portfolios:

1. Buy protective put option to minimize potential losses. Although it will typically make little sense for an investor to purchase at the money puts to protect one's portfolio, purchasing at prices that are 10-20% below their current values (assuming current values are at a decent gain) will ensure the underlying securities will not impact the overall portfolio in the even of a market correction. This is arguably one of the cheapest ways that an investor can protect a portfolio since out of the money put options are always cheaper than current-price put options.

2. Use bear Exchange Traded Funds to help offset risks. Depending on where the investor sees risks to their portfolio, an appropriate bear-based exchange traded fund (ETF) can actually help mitigate risks and stabilize a portfolio's total value. Using an ETF to achieve this type of stability is one of the simplest ways that an investor can neutralize potential risks. However, it is also a strategy that, if too broad, can neutralize returns as well (e.g. as the portfolio increases, the ETF decreases, and vice versa; therefore, the investor must still take a position as to the overall value of the portfolio and decide which risks warrant offsetting).

3. Proper Asset Allocation. Unlike the two active strategies above, using a proper asset allocation allows an investor to offset non-systemic risks, but asset-specific risks instead. This is a more conservative approach in that the investor essentially believes that while one asset class corrects, another will neutralize the impact of such a correction by either sheltering some of the assets from broad selloffs or by actually increasing in value. This strategy can also include options or bear-ETFs.
However, it is still possible that all asset classes can depreciate in value, thereby potentially exposing an entire portfolio to the risks an investor wants to avoid altogether.

Ultimately, investors will still need to take a position when it comes to their portfolio. How they take the position is important as it can either completely wipe out gains or can cause deeper exposure that one may not want. Using any of the three strategies outline above to protect your investment assets will reduce risks, sometimes at a cost (as in the case of options) and sometimes not.

Parker has more than 17 years of financial services experience. He currently manages a website about Gym Exercise Machines at GymExerciseMachines.com and another about Outdoor Pool Furniture [http://www.outdoorpoolfurniture.net] at OutdoorPoolFurniture.net.

Article Source: http://EzineArticles.com/?expert=Parker_Theodore

Explaining Share Dealing to Beginners

By Jeremy Black

 

Beginners have a lot of things to understand about share dealing when he or she decides to enter this form of financial investment. If you are going to ask me, I highly recommend that you start in the four (4) most important aspects first. These are related to understanding what is the share or stock, the basics of share dealing, platforms where they can be trader as well as both of its pros and cons. These will be explained in the following sections hereunder.

Overview of the Stock Market

On the one hand, one of the first things that any trader-wannabe needs to know when it comes to share dealing is an overview of the stock market. In this regard and in a general sense, the stock market is like a platform where people, brokers and institutions can buy or sell stocks, which refer to an ownership of a company. However, market in this instance does not actually represent a physical place where trading takes place. Instead, what this refers is the market for securities in the sense that there is a demand for a specific security and indices.

The Basics of Share dealing

The basic principle of share dealing is similar to the ordinary trade or the "buy and sell" type of transaction. What this means is that a buyer will buy a security with an expectation that its value will increase in the future so that his or her dividend would be higher or it can be sold for a higher value. However, the rules and regulations governing this type of financial transaction are more complex than the ordinary trading. There are some specific rules that need to be followed within the whole process of share dealing.

Platforms to Trade Shares

With the developments and innovations in this field as well as in World Wide Web, there are already many ways that people can use in order to trade. Nevertheless, shares and stocks are primarily traded in the stock exchanges. However, you do not have to personally go there to be able to trade and make positions. You can hire a broker and you will just give instructions to them. Instructions can also be given through the internet and even in mobile devices.

Advantages and Disadvantages of Share dealing

Any trade needs to know both the advantage and disadvantages of this type of financial transaction. This is because this is the only way that anyone can assess if it is indeed beneficial for him or her. In this regard, among the advantages of trading shares include its rate of return, acquisition of assets as well as the dividend yield. On the other hand, its setbacks are the risks as well as the aspect of having enough knowledge to the market and its unpredictability.

Visit IndependentInvestor.co.uk to learn more about share dealing and the basics of share dealing for beginners.

Article Source: http://EzineArticles.com/?expert=Jeremy_Black

Benefits of Forming a Company

 

You may be one of those people who are running a successful private business but are afraid of taking it to the next level, to a bigger level only because you are not sure about the legalities involved in forming a company of your own. It is rather not advisable to not go ahead and form a company of your own when you possibly can because once you successfully establish a company, you are able to reap many of the benefits which are associated with it. Some of those benefits are explained as follows:-

                 
• The company will have a separate name that shall be duly registered. This would mean that your company works as a different entity, thus it decreases its liability on just one person.

• A different company would also mean a different company identity of its own. This means that you need not worry about mixing your personal and professional life any longer. Both spheres of your life can have the privilege of independent decision making.

• In case your company suffers a loss, the private assets of all the shareholders remain intact. Whatever the loss would be, it would have to be borne by the company as a whole. And thus one single person shall no longer be responsible for it.      

• As a different company, it shall have a higher standing in the market than any individual-run business. Thus, in case you wish to expand the business, because of your high credibility you can easily raise the money from the market in the form of people investing in your company's shares.

• A company shall also help you in taxation. Whatever taxes shall be imposed on the company shall be based on the earnings of your company as a whole. Private wealth shall not be taken into account in this regard. Thus, one can easily also adopt many tax evasion measures which are only applicable to a company only. Moreover, the rate of corporation tax is less than individual income tax rates in many countries.

• Companies also secure the future of the employees with many pension schemes unlike private businesses.

 

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Balanced Investment Strategy for Portfolio Management

 

Balanced investment strategy is perhaps the most followed and successful investment strategy for portfolio management. Its primary aim is to keep a balance between investment risk and return. A balanced investment strategy combines the merit of aggressive and defensive investing strategies.

                 
Aggressive investment strategy involves investing in high return high risk investments with the sole purpose of maximizing return from investments. It involves allocating major portion of portfolio capital to invest in equities, equity based funds and highly volatile markets. Investors following aggressive investment strategy often look for comparatively short-term profiting and wish to invest more in growth stocks, and small caps and mid cap stocks. Advantages of aggressive investing include quick profit, high return over investment and no need of large portfolio capital. It can work really well for experienced investors and investors who are very strict in their money management. Disadvantages include high risk, high volatility in total portfolio value and no surety of profit. It less supports novice investors and investor looking for monthly earnings or living costs.

Defensive investment strategy is just opposite of aggressive investment; it’s purpose is to preserve the capital and ensure some return from investments. It involves investing in low profit low risk investments like bonds, money market funds, treasury notes, and equities with minimum price volatility and good dividends. Defensive investors look for long-term profits and/or monthly earnings. Advantages of defensive investment strategy include reduced risk, predictable income, better investment planning and diversification of portfolio. This strategy mainly suits beginners. Disadvantages include low return from investments and requirement of high capital investments.

In balanced investment strategy, the investor tries to keep a balance between his aggressive and defensive behaviors. It involves balancing of both return and risk by diversifying investments in both high return high risk and low return low risk investments. Balanced investors often follow a portfolio capital allocation rule telling how much to invest in equities and bonds and how much to invest in treasury notes, precious metals and funds. Usually one portion of portfolio is actively managed and other portion is left to grow automatically. Balanced investment strategy can be slightly aggressive or slightly defensive with respect to investments made.

The greatest advantage of balanced investment strategy is the diversification of portfolio and hedging against high total portfolio value volatility. It is good for investors looking for medium-term (3 to 5 years) profits. Other advantages include flexibility in portfolio management, better results with better capital investments, (almost) predictable income and manageable portfolio risk. Balanced investment strategy support both beginners and experienced investors and can be an option for monthly earnings for living.

 

 

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What are Hedge Funds and Starting Your Own Hedge Fund

WHAT ARE HEDGE FUNDS?
www.turnkeyhedgefunds.com

                 

In the securities world, the term "Hedge Fund" does not necessarily imply any use of "hedging" as commonly understood; for example where commodity traders use options to "hedge" a commodity position. Presently, in the securities world the term "hedge fund" refers to any type of Private Investment Company operating under certain exemptions from registration under the Securities Act of 1933 and the Investment Company Act of 1940. "Hedge Funds" are often referred to as "alternate investment vehicles" and are tailored to the needs of sophisticated, high net worth private investors. A Hedge Fund is generally structured as a limited partnership having a general partner responsible for the investment activities and day-to-day operation of the fund, and limited partners who are the investors supplying capital but not participating in trading or operations of the fund. The limited partners have limited liability. That is, their exposure to loss is limited to their investment. The General Partner has unlimited liability and is liable for the activities of the partnership. The General Partners principals limit their liability through the use of a corporation or limited liability company as the General Partner. (Of course, the principals cannot limit their liability from the application of the anti fraud provisions of the Federal Securities Laws.) All of the investors' capital is pooled and is utilized by the General Partner or Investment Manager to implement its trading or investment strategy.

Hedge Funds are "Non-Public Offerings." The private offering exemption prohibits Hedge Funds from making any public offering. Therefore, Hedge Funds are prohibited from general advertising and generally secure investors through word of mouth, consultants, registered representatives, brokers or investment advisors. Hedge Funds have investors that are either "accredited investors" or "qualified purchasers." In general, the Federal Securities Laws define the terms "accredited investor" and "qualified purchaser" in terms of minimum asset and income threshold that must be met before they qualify to be investors in the Hedge Fund. Since the Hedge Fund generally limits investment to "accredited investors" or "qualified purchasers" both of whom are required to meet certain minimal asset and/or income thresholds, the Fund Manager or administrator must gather background information on potential investors to determine whether they meet the minimum requirements to be "accredited investors" or "qualified purchasers." By making a non-public offering to certain kinds of investors, (accredited investors or qualified purchasers) the investment vehicle will be exempt from registration requirements of The Securities Act of 1933 pursuant to the safe harbour provisions of Rule 506 of Regulation D. Where the investment vehicle is limited to no more than 100 investors, and otherwise complies with the safe harbour provisions of Regulation D, such an investment entity is exempt from the extensive regulation pursuant to Section 3(c)1 of The Investment Company Act. Section 3(c)7 of The Investment Company Act offers a similar exemption to private investment companies with "qualified purchasers" as investors.

As an unregulated entity, the Hedge Fund Investment Manager is free to undertake greater risk on more volatile positions thereby exposing investors to potential substantial profit as well as substantial losses.

Typically, Hedge Funds provide for the payment of an Incentive Allocation or Performance Fee to the hedge Fund Manager/General Partner. Performance Fees range from 20% to 40% depending on the strategy employed by the Hedge Fund Manager. Typically, the Performance Fee provides for a "high water mark" structure which provides that incentive fees are paid only to the extent that the fund continues to meet or exceed the "high water mark." Additionally, typical Hedge Funds include Management Fee of 1% to 2% of all assets under management.

Generally there are two kinds of Hedge Funds. On the one hand, there are the huge worldwide funds operated by charismatic managers such as George Soros. On the other hand, there are small boutique-styled Hedge Funds identified with a particular segment or investment strategy. The Fund Manager's expertise, experience and background in recognizing investment opportunity will dictate that fund's particular niche. For example, there are the "Biotech Hedge Funds" which are managed by experienced and highly qualified investment managers who may also hold advanced degrees in science and medicine. There are "Tech Hedge Funds" specializing in the technology sector managed by individuals having specialized experience trading in that sector. With the emergence of day trading and the availability of the trading technology, a number of floor traders and brokers are leaving the traditional brokerage and exchange venue to participate in the computer screen trading phenomena.

The boutique "Hedge Fund" typically relies on the particular skill and expertise of the Investment Manager or Trader. The highly specialized Investment Manager may utilize a "Sector" style of investing focusing on a particular industry or economic sector. Conversely, an Investment Manager utilizing a "Market Neutral" style will maintain a portfolio of securities which are generally ½ short and ½ long. Some Investment Managers utilize a "Value" investment style based upon assets, cash flow and book value; while other Investment Managers follow the "Emerging Markets" style and invest in emerging and foreign market equity and debt. "Trading" funds utilize an opportunistic investment style taking advantage of market trends, events and opportunities for short term profits. Each Fund Manager develops and uses a particular investment style that is unique to the experience, expertise and personality of its manager.

Unlike Hedge Funds, Mutual Funds raise money publicly; are highly regulated by the Securities and Exchange Commission, the Internal Revenue Service and other agencies; and offer investment diversification and are restricted from purchasing many types of derivative instruments, leveraging, short selling and other kinds of transactions.

Unlike the Mutual Fund Managers, the Hedge Fund Manager generally invests in the fund that they manage and participate in profits as well as risks with their investors. Unlike the Mutual Fund fee structure (which is determined on assets under management) the Hedge Fund Manager receives incentive allocations on performance.

www.turnkeyhedgefunds.com

The Anatomy of Dividend Investing

By Jay House

 

Looking for and obtaining a good rate of return on one's money has been the holy grail of investing. With historic low interest rates and a wide range of investment products, it can be a challenge to neutralize risk while receiving a good rate of return. I am still waiting for the ETF (exchange-traded-fund) that slices and dices as well as exceeds the performance of the market.

While not as sexy as a hedge fund or as "exciting" as trading penny stocks, investing in companies that pay increasing dividends provide a solid foundation to anchor your portfolio. We believe that high quality dividend stocks should be the core of your portfolio. Why?

1) Studies have shown that these dividend stocks consistently outperform other stocks over the long-term. Dividend payers account for about 30% of total stock market returns.

2) They provide an increasing stream of income over the years. That's a pay raise every year!

3) They also offer a level of protection verse pure growth stocks in today's volatile markets.

We put together four key points to help you understand the anatomy of the best dividend paying companies. By following these points, you should be able to spot, select and grow your dividend portfolio.

The Heart of the Matter - Dividend Growth
The lifeblood of investing in Dividend stocks is the growth of the dividend. As with your heart rate, inconsistency can be a sign of a problem. The same holds true when investing in dividend stocks. It is the consistency of the growth of the dividend that is the key point. While the same percentage increase year over year would be great, it is more important that it is raised by a consistent amount each year. Our rule of thumb, look for companies that have a 5-7 year average of raising their dividend by 7-10%. Think of it like this, every year the company gives you a pay raise. For most of us, were lucky to get a 2-3% raise from our employer - especially in this economy.

Muscle vs. Fat - The Payout Ratio
Looking like Hanz and Franz may have its advantages (allowing you to show off your "muscled" body, complete with strained facial expressions chanting "Pump [clap} you up") but, remember, fat is important too. Why? The body converts fats to sugars, when needed, to provide energy. A reserve fund if you will. The same holds true for dividend payouts. Yes, you want income, but not at the expense of exhausting earnings. Simply put - the payout ratio is the percentage of income paid out as a dividend. For example, a company has earnings of $2 and a dividend of $1, thus it has a payout ratio of 50%.

By being aware of a company's dividend payout ratio you will avoid purchasing stocks whose yields are too high, and more importantly, unsustainable.

What to avoid?
• Ratios of 75% or higher
• Ratios of 30% or lower
• Inconsistent payout ratios

Owning such stocks usually leads to a lower dividend, followed by a lower stock price and ultimately buyer's remorse.

We like to look for companies that have a payout ratio of between 40% and 60% - the sweet spot. This provides a nice return to shareholders while retaining enough cash to fund operations, grow the business, and grow the dividend (Pumping [clap] your income up).

Strong Bones and Teeth - A Solid Structure (Business)
Ok, as silly as this may sound, it's about dividend growth... not the hot new stock or product. While you want capital appreciation, this strategy is all about the dividend...year in and year out. Having already looked at a company's dividend growth policy and its payout ratio, the third key point is the consistency of the company's business through the economic cycle. Here is where you want to avoid "fad" products or services and "dying" businesses. While innovative and used at their times, buggy whips, CB radios or Pogo sticks did not stand the test of time. This is where boring is a good thing.

We want to own companies that will be able to sell their products 10 years from now at higher prices no matter what the economic cycle.

It's Only Skin Deep - Don't Marry Your Stocks
Just like in a personal relationship sometimes things just don't work out. And yes, breaking up can be hard to do, but usually it usually turns out to be the right thing. The same holds true when owning a stock.

It's OK to "like" your stocks, but don't fall in "love" with them. Emotion combined with money may not break your heart, but it will certainly break your wallet. So be aware of signs that things are changing. For example, earnings are trending down (one missed quarter is ok), but not an overall change in the fundamentals.

Sometimes the market gives you an opportunity to take gains sooner than you had anticipated. While we don't advocate trading, if a stock has increased substantially in a short period of time (say 40% in 6 months) and you hit the upside target, it makes sense to take some of that profit off the table.
The same holds true on the downside. If a stock falls 20% and the fundamentals are still good, it makes sense to add more to your portfolio. However, if things have gotten worse with the company's business, sell your position and look for other opportunities. Like our parents said - there really are plenty of fish in the sea.

The Total Package - Conclusion
While not as thorough as Grey's Anatomy, our anatomical application to dividend investing will certainly allow you make an informed diagnosis when building your portfolio. The key is having a strategy, the tools and discipline to capitalize on it. That's the great thing about the market, it always provides opportunities - to buy or sell.

Here is a tool to help you remember the key points. It goes like this...The growth rate is connected to the payout ratio, the payout ratio is connected a solid business, a solid business is connected to higher income... (it's ok... I am singing it too)!

Jay House is publisher of The Observant Investor, http://www.ObservantInvestor.com, an investment newsletter written in a concise and informative yet colorful style for the individual investor. If you want to find out more about dividend growth investing, then look no further than the Observant Investor.

Article Source: http://EzineArticles.com/?expert=Jay_House

Automatic Savings Plans Use Psychology to Help Investors

David Bach made the term "pay yourself first" very popular after writing about it in his bestselling book, "The Automatic Millionaire". In his book, Bach discussed how people should pay themselves a payment much like they pay their credit card bills or car loan payments, and he stated that people should pay themselves before they pay others. Investors and those looking to save should be number one on their own list of people to pay, and that is where an automatic savings plan can help. Making savings automatic will help people pay themselves first.

What Is an Automatic Savings Plan
An automatic savings plan is a way to save that sets up deposits from a person's checking account and deposits them into his or her savings account and makes that savings automatic. After a person receives his or her paycheck into their checking account, an automatic savings account will transfer that money automatically to a savings account. Many people set this automatic savings plan up using money market accounts and take advantage of the highly competitive money market rates that are available now. People typically set the transfers of an automatic savings plan to happen on a set day of the month or on certain weeks. Many make this coincide with when they are paid.

How to Set an Automatic Savings Plan Up
An automatic savings plan can help people earmark money for a particular savings goal or to boost their emergency fund. Many banks, an automatic withdraw from a checking account to a money market account can take place with as little as $25 per month. A lot of people think that they cannot spare a single penny from their monthly budget to set up an automatic savings plan, but there are very few people who cannot find an extra $25 per month or that amount each paycheck.

Automatic Savings Plan and Psychology
For many savers, it is the getting over the initial hump of starting an automatic savings plan that can be the toughest step. Once a banking customer sets up an automatic savings plan and make transferring funds from a checking account to a money market account, they end up fooling themselves into forgetting about that money. Money grows at competitive money market rates without the saver even realizing it because the funds are transferred and deposited in the money market accounts automatically. By taking the cognitive thought out of the equation, people forget that they are saving money with an automatic savings plan.

Using an automatic savings plan helps people pay themselves first even when they feel like they cannot find another dollar from their monthly budget. Eventually, a person will actually forget that he or she is saving consistently every month through money market funds with an automatic savings plan. Savings becomes second nature when a person pays himself or herself first.

 

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Hank Coleman - About the Author:

Hank Coleman is the founder of several financial blogs, focusing on topics such as how to find competitive money market rates and other investment opportunities. He is an entrepreneur and professional in the government sector. Hank holds a Bachelor's degree in Business Administration, a Master's in Finance, and is currently studying for his Certified Financial Planning (CFP) credentials. Always looking for a trusted financial institution for advice and tips he tends to look up information at http://www.discoverbank.com more often than not.

Learning Stock Market Basics

By Jeff C Daniels

Learning stock market basics is very important if a person wants to be successful with his or her investing or trading activity. Learning stock market basics is more required for a person who is a new comer and has just entered the capital market scene. There are lots of tutorials and guides that are available both in shops and the internet which could be made use of before starting the investment activity. Learning stock market basics would generally contain the stock market terms, the jargon, the stock exchanges and indices around the world and also the number of companies which are active participants in these share investing activities. We would, in this article, look at the reasons why one would require going through these learning stock market basics guide.

There are lots of people who are very interested in investing in shares and stocks of the company. One of the major reasons for their interest in these investing activities is the amount of money that they can make within a short span of time and secondly the pride in becoming an owner of a particular esteemed company. The ownership might be very little but it is still ownership. Earning huge amounts of money is something possible with share market but it is not probable as there are lots of other factors involved and the investor is continuously exposed to different risks too. Learning stock market basics can actually help the investor in this regard and make him understand as to how should he go about tackling these problems and turning them into his favor.

The amount of capital required for starting the trading activity is not fixed and can vary depending upon the interest and capacity of the person. There are people who just start from a dollar and there are people who start with thousands. The amount of money a person earns with these investments is not entirely dependent on the investment made by the person and it is dependent on the tactics and strategies implemented for the investment. There are people who earn thousands with investments in hundred and there are also people who earn only in hundreds despite their huge investments.

Learning stock market basics guide will come in very handy in this regard and it will advice the person as to when and on which share the person must be putting his money. One can even make use of advice and suggestions given by experts and professionals to reap higher profits.

One can do these investing activities on a part time basis and can do their day jobs at the same time as well. There are lots of housewives, students and working professionals who invest in these stock markets and are still able to concentrate on their primary job. This means that the person need not be hooked on to the television screen or the computer screen for becoming an active participant in the share market. Just investing a couple of hours per day is more than enough to see really good results.

For information about finding and comparing the best online Stock Brokers, visit http://www.yourbrokerguide.com.

Article Source: http://EzineArticles.com/?expert=Jeff_C_Daniels

High Return Investments Stocks,Bonds Savings

  

High Return Investments-Stocks,Bonds and High Return Savings

High return investments, as the name itself suggests that such an investment will allow you swings in your returns, if you go for it. High yield investments or the high return investment boosts up the principal as it gives high rates of income. An investor always looks for a decent and one shot profit, when he goes for any investment.

One should not overlook the risk which is involved in high return investments. But if you study the market closely then you will find that there are some smart high return investment plans that yield higher profit but low involve lesser risk. What an investor has to do is to study the market and wait for the golden chance. Market survey is a daunting task. Logical and sensible areas for high return investments are as follows:

Dividend involving Stock investments: among the stock market investments, we can actually invest in stock that offer high yield dividend. They are also very safe because quality companies that raise such stock,always have high dividend value, each year. High return investment in stocks can also bring investors in spotlight to gain as much as dividend. Slightest movement of stocks can hike the dividend rate. From here on you can look forward to invest double in the stock market. Stocks can be easily bought and sold. Stocks are considered as high return investments and safe because an investor can easily control the stock and all of the invested money is not at risk.

Convertible bond investments: investment in convertible bonds is also one of the options of high return investments. They give interest payment on regular basis. An investor can also convert these bonds into underlying stocks, when the value of the stocks is smartly high. They are very smart decision for investor when the coming is in growing stage. With the increase in the stock price the value of the convertible bonds increases, that gives high return to the investor. The Convertible bonds are also very easily sold directly sold in the market without getting converted into stocks.

High return Savings Account: Best and secure place for high return investments for your money is to go for online savings accounts. Most of the times, when the rates of interest rates is comparatively low, the returns on savings accounts is not satisfactory, High return Savings accounts are safer at that time. Low operating expenses are involved in case of High Return savings accounts.
To get high returns investments cannot be done anywhere. In tough economic times it is wise to stay cool and do smart and logical survey to explore new high return investments opportunities.For Full Information Visit to - http://investment-uk.co.uk

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Jakobtomas - About the Author:

Top UK Investments Offers Guide and Tips. Advice and guide on investing in stocks and share, gold, ISAs, and property in the U.K.

Stock Options - The Basics

By Russ O Brown


My last article touched on the volatility and some basics of volatility's influence on options. Now I would like to start with the basics and give our readers an overview of how options function. This and the following articles in this options series will not be a complete options education. However it should provide a foundation on which you can build a solid understanding on how to properly use options. Some of the references used, assume that you have an understanding of trading stocks.

In order to fully understand options we must start with the basics, this is our foundation. Understanding terms and definitions is vital to understanding how to properly implement options. Some important terms and definitions follow:
Strike~ The pricing increments of options, usually priced in increments according to equity price. E.g.; equities priced up to $100, options priced in $1 increments. $100 to $150 priced in $5 increments. $150 + priced in $10 increments.
Call~ May be a bullish position. The right to, but not an obligation to purchase a given amount of stock (usually in quantities of 100 shares) for a pre-determined price, at a pre-determined future date.
Put~ May be a bearish position. The right to, but not the obligation to sell a given amount of stock (usually in quantities of 100 shares) for a pre-determined price, at a pre-determined future date.
Trend ~ The direction of stocks or indices over a minimum of five trading periods.
Greeks~ The underlying factors that drive the price of options.
Delta ~ the amount an option's theoretical value will change for a corresponding one-unit (point or dollar) change in the price of the underlying stock (equity option), or value of the underlying index (index option).
Gamma ~ the amount an option's delta will change for a corresponding one-unit (point or dollar) change in the price of the underlying stock (equity option), or value of the underlying index (index option). Also known as the Delta of the Delta.
Rho ~ the amount an option's theoretical value will change for a corresponding one-unit (percentage-point) change in the interest rate used to price the option contract.
Theta ~ the amount an option's theoretical value will change for a corresponding one-unit (one day) change in the number of days to an options expiration. It is a measurement of an option's theoretical time decay.
Vega ~ the amount an option's theoretical value will change for a corresponding one-unit (one percentage-point) change in the contract's implied volatility.
IV ~ a consensus in the marketplace of an underlying stock or index's expected volatility as predicted, or implied, by an option's price. It can be calculated with an option pricing model as the volatility assumption that would be used to generate a theoretical value for a call or put that is equal to its current market price, and is expressed as annualized standard deviation in percentage form.
Bullish~ Believing the price of stocks will trend higher.
Bearish ~ Believing the price of stocks will trend lower.
Neutral ~ When the market trades in a range over an extended time.
Expiration ~ (American style options) Option contracts technically expire the third Saturday of each month, since the stock markets are closed on Saturday it is generally accepted as the third Friday of each month.
Bid ~ The price the brokerage firm will pay per share for an options contract.
Ask ~ The price a brokerage firm will accept per share for an options contract.
Spread ~ The difference of the bid and ask price.
Exercise ~ The decision to purchase the underlying equity at the option contract strike price.
Assignment ~ For an equity option, the writer must sell (for a call) or buy (for a put) 100 shares of underlying stock at the strike price per contract.
Long ~ Holding a position in anticipation of the equity continuing in the present trend.
Short ~ The investor has assumed the obligation to buy 100 underlying shares at the strike price if assigned on the short put.
Time Decay ~ The premium of at- and out-of-the-money options consists only of time value. It is time value that is affected by time decay as well as changing volatility, interest rates and dividends. Also termed extrinsic value.
Leaps ~ Long-term Equity AnticiPation Securities, or LEAPS, are long-term option contracts. Equity LEAPS calls and puts can have expirations up to three years into the future, and expire in January of their expiration years. Index LEAPS may have expirations of up to five years into the future and generally expire in December of their expiration years.
These are the basic options definitions; there are more complex definitions for the varied strategies; which will be covered in later articles. I know terms and definitions are not the adrenaline pumping rush of actually placing a trade. However, I have found over the years that having a good understanding of the basics makes it easier to learn the more complex attributes. Understanding these terms, what they mean, when, and where they are used, is vital before entering a position. Another important aspect prior to entering a position is to have an understanding of the terms used by your broker and how to place the correct limits on your order.

Prior to entering an option position make sure you fully understand all the mechanics of your chosen strategy. Before implementing a strategy that is new to you; trade it on paper until you are comfortable with how it works and how to exit the position correctly. As prior articles have stated, have a plan and trade your plan. When in doubt stay out of the trade, there will always be another opportunity.

Be sure to visit tradingtoolz.com and start your FREE 7 day trial and discover the advantages membership has to offer. You may also be interested in receiving the free eBook "Traders Mindset".

Best of Trades Russ Brown TradingToolz LLC http://tradingtoolz.com

The author and publisher of this Training and the accompanying materials have used their best efforts in preparing this Training. The author and publisher make no representation or warranties with respect to the accuracy, applicability, fitness, or completeness of the contents of this Training. The information contained in this Training is strictly for educational purposes. Therefore, if you wish to apply ideas contained in this Training, you are taking full responsibility for your actions. The author and publisher disclaim any warranties (express or implied), merchantability, or fitness for any particular purpose. The author and publisher shall in no event be held liable to any party for any direct, indirect, punitive, special, incidental or other consequential damages arising directly or indirectly from any use of this material, which is provided "as is", and without warranties. As always, the advice of a competent legal, tax, accounting or other professional should be sought. The author and publisher do not warrant the performance, effectiveness or applicability of any sites listed or linked to in this Training. All links are for information purposes only and are not warranted for content, accuracy or any other implied or explicit purpose.

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How To Invest In The Stock Market With Little Money

By Omar Best






Many people think that you need a lot of money to start investing in the stock market. On the contrary, you can get started investing for as little as $25. Thanks to the internet, stock investing is accessible to individuals of all walks of life. All you really need to get started is an internet connection and a bank account.

One thing that you must understand when you are just getting started investing is that this is not a get rich quick scheme. You should not expect to make $1000 from an initial investment of $25 in a week. You need to recognize that investing in the stock market is a long term process. Of course, there are experienced stock traders out there that make lots of money day trading, but if you are new to this type of investment, then you should take your time and learn.

If you do not know anything about stock market investing, then you should really think about investing time and a few bucks to learn. The money that you spend now to get familiar with stock investing will pay off in the long run. One of the reasons why people lose money investing in stock is because they do not understand the basics. Stock market investing is one of the riskiest investment vehicles out there. Consequently, if you are clueless about how the stock market works, then your risk exposure is magnified.

So here is what you need to do to get started investing with little money:

1. Find a stock broker that does not require a large minimum investment to open an account. You are looking for a broker that requires a minimum of $1000 or less to open an account. Some of the online brokers that fit this criteria are E-trade, Sharebuilder, and Firstrade. You also want to look at how much the broker charges you per trade or transaction. If they are charging over $10 per transaction, then it may not be worth it to open an account with them.
2. Once you have found a broker that you would like to use, then you need to open the account. Be prepared to have to verify your identity and bank account information. Opening an account is simple but it can be tedious. You may also be required to fund your account before it is opened.
3. Once you have opened your brokerage account, then you need to familiarize yourself with the account. Most online brokerages have a suite of tools that you can use for tracking your trades or researching your potential investments.
4. Before you start actually investing in stocks, you need to make sure you understand the basics of stock market investing. There are several resources available to you offline and online. Some of the resources are paid and some of the resources are free. You can even subscribe to some free online investing newsletters to get tips on investing.
5. Once you have an understanding of how the stock market works, then you should be able to make educated investment decisions. Of course, even with the best education, you will still have some bad investments. Nevertheless, with some type of investment knowledge, you will have a better chance of making good investment decisions.

Finally, no matter how much money you are starting off with, you still need to find out how the stock market works before you start investing your actual cash.

Once again if you are just getting started out investing, then you need to make sure that you understand how the stock market works. Find out all about the basics of stock market investing.

Article Source: http://EzineArticles.com/?expert=Omar_Best