Every investment model in the stock market starts with owning shares of companies or funds. Value-based investing models provide a strategy you can use to determine which shares to buy, when to hold them and when to sell them. Generally, value investors look to buy shares of companies that they think are selling for less than their actual worth.
Thousands of different common stocks trade on major exchanges such as the New York Stock Exchange and NASDAQ. Many others trade on regional exchanges. Exchange-traded stock sells through an auction process that favors the lowest asking price. While exchanges make buying and selling convenient, alternatives to these markets provide other ways to sell stocks.
Many investors own stocks, making them part owners of the underlying companies. If a company increases in value, its stock value increases as well. At any point, investors can cash in their stocks by selling them to other investors. Futures are a different sort of investment. They don’t grant ownership. Instead, futures essentially are agreements to buy or sell some entity on a specific date.
When deciding between a certificate of deposit and a bond fund, interest rates should be your guide. Short and long maturities are available in both CDs and bond funds, but the differences can affect your ability to access your money without penalty depending on whether your money is invested in a risk-free instrument or carries the possibility of loss of principal. Either investment is available at most banks and brokerage houses.
Individual investors seldom buy or sell enough shares of a stock to cause it to rise or fall. Institutions such as mutual funds and pension funds buy millions of shares, and this high volume creates momentum in a stock. Momentum investors who see millions of shares being traded jump on the trend and buy or sell along with institutions. That's why it's important to know how much institutions are interested in a stock you're considering.
You can consider three types of bonds if you seek a safe, income producing investment. Municipal bonds are issued by states, counties and cities to fund infrastructure and operations and they usually carry tax advantages. U.S. Treasury bonds are issued to fund the operations of the federal government and are considered taxable but are free from state and local income taxes. Corporate bonds are issued by corporations. Interest income is fully taxable, but corporate bonds generally pay the highest interest rates.
The stock market is a double auction market where buyers and sellers haggle over the price of a stock. Once an agreement on price is reached, the trade takes place. With the advent of the digital age, the haggling is typically reduced to electronic blips, and trades might be made in nanoseconds, but the principle remains the same. Since share prices can fluctuate constantly, you might risk paying more than you want. Therein lies the value of the limit order.
"Volatility" refers to the rise and fall of an investment's value. High volatility means the value fluctuates a lot, and low volatility means the value remains fairly constant. These are not exact terms, so you have to judge volatility as "high" or "low" based on your own perceptions. You can look at volatility for your entire portfolio. Using some special investment skills, you can control the volatility of your portfolio.
The two largest categories in which to invest money are stocks and bonds. Stocks are shares of ownership in public companies, many of which pay periodic dividends to their shareholders out of the profits they earn. Bonds are debt instruments that typically pay a fixed interest rate over a set period and then return the original amount of the loan to the debt holder. Both play important roles in balancing the risk of an investor's portfolio and the potential return on investment over time.
Corporate dividends are distributions of cash or additional shares to stockholders. In some cases, a cash dividend from a stock is a return of capital -- for instance, from the liquidation of a portion of the company. Mutual funds also shell out cash distributions, which come from interest, dividends, capital gains or a return of capital from portfolios of investments. Tax reporting rules for dividends depend on their source.
A loss on the sale of real or financial property can be deducted under normal circumstances. However, the Internal Revenue Service disallows a deduction on losses from certain transactions, including wash sales and those involving a sale to a related party. You report disallowed losses on IRS Form 8949 and summarize the results on Schedule D of Form 1040.
The ownership of a company is called equity, the difference between what a company owns and what it owes -- assets minus liabilities. You’ll find different types of equity on a corporate balance sheet, including retained earnings, common stock, preferred stock and stock warrants. Warrants are similar to call options, but they're not identical.
Bonds are traditionally income-producing investments. After the credit crisis of 2008, however, the Federal Reserve lowered interest rates so dramatically that many investors sold their bonds at considerable capital profits. Capital gains have long been considered the reason for investing in stocks, but with bond interest rates declining and Fed monetary policy encouraging corporate profits, dividend-paying stocks became popular investments for the income produced. The real difference between bonds and equities as investments relies on economic conditions and your investing goals.
Investors buy stocks in hopes of making money from capital gains, dividend payments or both. The tax treatment of capital gains is different than for ordinary income like interest and your salary. You have no taxes to pay when you buy stock, but you might have to pay income taxes on capital gains when you sell the shares.
Liquidity measures how well a company can use its readily available assets to meet its upcoming liabilities, rather than simply looking at the net worth of the company. Liquidity matters because even a profitable company could have trouble staying in business if it doesn't have enough cash on hand to pay its bills. For example, if a company has $10 million in assets and only $2 million in debt, it sounds like the company's doing well. However, if that debt is requiring $400,000 of payments, and the company has $9.9 million of the assets tied up in capital equipment, that…
The amount of tax you are required to pay on your stock trades depends on how much you paid for stock and how much you sell it for. If you've bought shares of the same company at different times, you probably have different costs for the shares. Therefore, knowing which shares you're selling can affect how much you owe in taxes.
SIPC stands for Security Investors Protection Corporation. Find out what SIPC insurance actually is with help from a certified financial planner in this free video clip.
Reading the sector summary in Google Finance is a great, easy way to find out basic information that updates daily. Read the sector summary in Google Finance with help from a certified financial planner in this free video clip.
Random walk is based on a book of the same name that came out in 1973. Find out what a "random walk" is in finance with help from a certified financial planner in this free video clip.
Financial ratio fluctuations tend to indicate a number of things, including performance. Find out about what financial ratio fluctuations indicate with help from a certified financial planner in this free video clip.
Calculating present value and future value is very important for things like retirement. Find out when it is important to determine present value versus future value with help from a certified financial planner in this free video clip.
Calculating economic impact probabilities is very important for knowing where to properly invest your money. Calculate economic impact probabilities with help from a certified financial planner in this free video clip.
Calculating risk probability is something you have to do by taking a variety of different factors into consideration. Calculate risk probability with help from a certified financial planner in this free video clip.
If you hold a mutual fund under twelve months that is considered a short-term hold. Get a definition of a mutual fund's short and long-term holding periods with help from a certified financial planner in this free video clip.
Re-balancing funds is something you do after the initial allocation period at the beginning of the year. Learn about funds re-balancing with help from a certified financial planner in this free video clip.
Diversification is essentially a way to try to minimize risk. Calculate diversification with help from a certified financial planner in this free video clip.
Compound interest can be your best friend or your worst enemy when it comes to your financial portfolio. When it comes to debts, compound interest increases the money you owe each month. When it comes to savings, compound interest is the secret to building significant wealth for your nest egg. Without compound interest, you must save a large amount of money. With compound interest, your money works and grows without your intervention.
Increasing the market share for channel modification will help you focus on specialization for certain narrowly defined markets. Find out about effective reasons to increase the market share for channel modification with help from a registered investment adviser in this free video clip.
Buying puts against a large gain is a tax-driven strategy that could potential reduce or defer certain tax consequences. Find out about tax exposure for buying puts against a large gain with help from a registered investment adviser in this free video clip.
Picasa is a company that is owned by Google that focuses on innovative new technologies. Find out how to invest in Picasa with help from a registered investment adviser in this free video clip.
It's always important to analyze stocks for long-term holdings in a very particular way to make sure that you have all the information necessary for your investment strategy. Analyze stocks for long-term holdings with help from a registered investment adviser in this free video clip.
Calculating and interpreting the margin and turnover is something you can do using the Dupont model very carefully. Find out how to calculate and interpret margin and turnover using the Dupont model with help from a registered investment adviser in this free video clip.
Hedge funds use algorithms to determine picks for portfolios. Find out about stock-picking strategies for long and short hedge funds with help from a registered investment adviser in this free video clip.
Physical copper makes a great investment for a couple of very important and very interesting reasons. Buy physical copper as an investment with help from a registered investment adviser in this free video clip.
Issuing convertible bonds for the purposes of dilution and financial restructuring has some very clear consequences that you're going to need to be aware of. Find out about the consequences of issuing convertible bonds for dilution and financial restructuring with help from a registered investment adviser in this free video clip.
Unusual buying volume typically portends to the long-term price increase of a stock for a very specific period of time. Find out about how often unusual buying volume portends to the long-term price increase in a stock with help from a registered investment adviser in this free video clip.
GAP-basis and income tax basis investment funds are each associated with their own particular disclosure practices. Learn about the disclosure differences between GAP basis and income tax basis investment funds with help from a registered investment adviser in this free video clip.
White gold jewelry can be properly identified by looking for a few key characteristics. Identify white gold jewelry with help from a jewelry buyer in this free video clip.
Getting paid by the gram and getting paid by the pennyweight are two different aspects of selling gold that you need to be aware of. Learn the difference between getting paid by the gram and getting paid by the pennyweight with help from a jewelry buyer in this free video clip.
In order to properly price gold karats, you need to know the current price of gold. Price gold karats the proper way with help from a jewelry buyer in this free video clip.
An LLC buyout and a redemption are two different things that affect the shares of a particular company. Learn about an LLC buyout versus redemption with help from a real estate expert in this free video clip.
The least expensive share class to invest in requires you to be able to identify a few key things. Find out about the least expensive share class to invest in with help from a professional financial planner in this free video clip.
Paid up capital is money that is received by a corporation from stock. Learn about paid up capital with help from an investment and finance professional in this free video clip.
The IRS defines gross income as all income from whatever source derived. Learn about tax on a 1099-MISC form with help from an investment and finance professional in this free video clip.
If you're running a small business, there are some very important insurance requirements that you're going to want to know about. Get insurance requirements for small businesses with help from an investment and finance professional in this free video clip.
Gains are achieved when you buy something at a lower value and sell it at an increase price later on. Get an accounting definition for recognized gain with help from an investment and finance professional in this free video clip.
The acronym REITs is short for "real estate investment trusts." Learn about restricted cash for REITs with help from an investment and finance professional in this free video clip.
A partial assignee is any assignee of record having less than the entire right, title and interest in a particular contract or entity. Find out about the rights of a partial assignee with help from an investment and finance professional in this free video clip.
Larger depreciation expenses have a wide variety of advantages that you're going to want to be aware of. Find out about the advantages of larger depreciation expenses with help from an investment and finance professional in this free video clip.
The acronym MACRS stands for the "Modified Accelerated Cost Recovery System." Learn about MACRS depreciation versus a straight line with help from an investment and finance professional in this free video clip.
A tax anticipation note is related to a municipal bond. Find out about tax anticipation notes with help from an investment and finance professional in this free video clip.
A demand curve is a line on a graph that shows the relationship between the price of goods and the number of consumers willing to pay that price. Learn about the height of a demand curve with help from an investment and finance professional in this free video clip.
The government typically provides a very specific type of insurance for money market funds. Get an explanation of government insurance for money market funds with help from a financial planner in this free video clip.
Finding out how to increase a return on your investment requires you to evaluate your existing sources of capital allocation. Find out how a company that has a profit can increase its return on its investment with help from a certified financial analyst in this free video clip.
In order to have a successful business, you need to look at it like its an investment in your future. Run your business like an investment with help from a certified financial analyst in this free video clip.
A covered call strategy increases your taxes in a few different ways. Learn about how a covered call strategy increases your taxes with help from a certified financial planner in this free video clip.
Diluted earnings per share and basic earnings per share are two concepts with some very important differences. Learn the differences between diluted earnings per share and basic earnings per share with help from a certified financial planner in this free video clip.
The numbers of ESPP shares are typically calculated in a very specific way. Find out about how the numbers of ESPP shares are calculated with help from a certified financial planner in this free video clip.
Bond anticipation notes are commonly defined in a very specific way. Learn the definition of bond anticipation notes with help from a certified financial planner in this free video clip.
Offset bond is something that you would put up to cover something else you're doing. Learn about the ins and outs of offset bonds with help from a certified financial planner in this free video clip.
Federal bonds have different classes depending on exactly what type of bond they are. Learn about the different classes of federal bonds with help from a certified financial planner in this free video clip.
eCurrency exchangers can make money in a variety of different ways depending on the situation. Learn about how eCurrency exchangers make money with help from a certified financial planner in this free video clip.
Hedge funds typically have an honesty policy that you need to be aware of. Learn about hedge fund honesty policies with help from a certified financial planner in this free video clip.
Reset bonds are commonly defined in a very particular and detailed way. Learn about reset bonds with help from a certified financial planner in this free video clip.
Early assignment is something that happens during the process of buying an option. Find out about early assignment with help from a certified financial planner in this free video clip.
Candlestick patterns are a very important part of stock analysis. Learn about candlestick patterns of stock analysis with help from a certified financial planner in this free video clip.
As businesses grow, they sometimes need to raise enough money to finance large-scale expansions. One way businesses can raise money to finance growth is by selling shares of stock to the public. An initial public offering describes the first sale of stock that a company makes to the public. A web IPO is an IPO carried out by a web-based company.
A fiscal analyst has a very important job. Find out about the purpose of a fiscal analyst with help from an employee recruiter and trainer in this free video clip.
Finance and acturial science are two different things and should be looked at as such. Find out about the difference between finance and actuarial science with help from an employee recruiter and trainer in this free video clip.
Portfolio diversification theory traces its roots in a 1952 paper by Pr. Harry Markowitz entitled "Portfolio Selection." In his paper, Markowitz described how to combine assets in a portfolio to mitigate risk, leading him to conclude that a portfolio's overall risk could be reduced while increasing the expected rate of return by holding a variety of inversely correlated assets -- in other words, by holding assets in a mix of classes that are likely to move in opposite directions, no matter what the condition of the overall market. Investors and money managers alike use portfolio diversification to manage their investment…
Every investor has his own strategy when it comes to investing his money. For some, carry trades offer a relatively simple means for increasing profitability. The term "carry trade" refers to the act of signing up for low-interest loans -- or selling low-interest investments -- to use the money to invest in something else with a high rate of return. If you are worried about the risk involved, however, hedging your carry trades is always an option.
Both forward and futures contracts are classified as derivatives, meaning that these financial instruments' prices are dependent on the prices of other assets or financial instruments. Forward and futures contracts are similar in that both obligate the participants to either purchase or sell specific assets at specific times at specific prices agreed upon at the times of the creation of the contracts. Forward contracts are different from futures contracts in that forward contracts are traded over-the-counter rather than on an exchange and can be tailored to suit the participants' particular needs and desires.
A perpetuity is a fundamental concept in financial theory. Perpetuities represent annuities with cash flow that could be constant or growing. Three factors influence their valuation: the amount of the cash flow, the discount rate and the growth rate, if applicable.
A fee-based advisor such as a financial planner has a fiduciary responsibility to his client to recommend financial instruments that fit his client's risk profile and investment horizon. Annuities, which offer a fixed payment stream over their life, may work for a financial planner's client, but you must sell him on the idea and merits of including an annuity in his client's portfolio. The information that you provide to the advisor must be clear and concise.
Fraudsters frequently use a blocked or reserved funds letter to quell investor worries, but the presence of this term should alert consumers to a possible scam. A blocked funds letter has some legitimate uses, but not in the banking sector. Investors should look for other signs of a scam, such as unusual terms or promises, to identify a fraudulent opportunity.
When an investor owns a security, he may worry about losing his money if the price of the investment falls. To protect himself from a loss, he can place a short hedge. This strategy allows him to earn a profit if the price of his primary investment declines.
A futures contract is an agreement that binds one person to purchase a set amount of a commodity or financial product -- such as corn, oil or stocks -- at a specified point in the future. The other person agrees to sell the product for the specified price when the time comes. The agreement takes place in a futures market, where many buyers and sellers compete to secure the best deal.
When a company first issues its stocks for public purchase, it must register its initial public offering with the U.S. Securities and Exchange Commission. Most businesses obtain professional assistance in valuating, or pricing, their initial stock prices from brokerage underwriters. After an initial "quiet period," which is a small period of time where investors and insiders are unable to discuss their initial offerings, the SEC reviews a company's initial SEC Form S-1 filing and registration pursuant to the Securities Act of 1933. Once the initial quiet period ends, a company issues its stock and locks in its IPO share price.
When bond yields are low and the stock market is looking bearish, it's wise to consider investing in shares that pay a consistent dividend. Dividends are paid to shareholders when a company has a cash surplus that it doesn't need to reinvest for expansion or use to pay down debt. Investing in companies that have a history of paying out dividends is a sensible way of ensuring a steady return on your capital.
Annuities and IRAs are similar retirement investment accounts. Although the accounts serve the same purpose, each has different requirements and tax laws. Taxpayers can also opt to save for their future by investing in a Health Savings Account (HSA). The Tax Relief and Health Care Act of 2006 made changes to HSA rules. One of the changes was allowing IRAs to be rolled into an HSA without facing taxes or penalties.
For centuries, people used gold as money. Gold is difficult to counterfeit, is durable and has a high weight-to-value ratio. Historically, this made it useful as a medium of exchange. Today, gold retains its usefulness as a repository of value, even though the metal no longer is used as money. For investors seeking to buy gold as a safe haven or to make a profit, understanding how interest rates and other factors affect gold is essential to making informed decisions.
An investment’s realized holding-period return, or realized return, is the total profit or loss you earn during the investment’s holding period. The holding period is the time between when you buy an investment and when you sell or are considering selling the investment. “Realized” means that the holding period for which you calculate the return has already passed, and the profit or loss has already been earned, or realized. You express a realized holding-period return as a percentage. A higher percentage represents a higher profit.
Passive investing can work well if you prefer a hands-off investment approach. Active investing typically involves frequent buying and selling of stocks. These investors are constantly alert to market trends and generally hope to make money in a short amount of time. Passive investors are the opposite, and their focus is in long-term investment strategies. Rather than buy and sell their own stocks or handle their own investments, passive investors use financial planners and brokers.
Common stock and retained, or treasury stock, are two forms of the same thing: representations of company ownership. While on paper the two types of stock function in the same manner, rules and usage for both do differ, and it's important to understand not only what treasury stock is, but what it does.
If you're unhappy with your current investment service, it may be time to break up. As with any breakup, the amount of effort involved can seem intimidating. You have to break the news to your current investment service or adviser, do paperwork and figure out what to do next. The best way to change investment services is to find a new investment service or adviser and let your new adviser walk you through the process of moving your investments. Though it may be tempting to just cash out your investments and run, you may end up paying fees or taxes…
Scottrade offers a number of features on its trading platform for customers. If you're just getting started with Scottrade, all of the tools can be a bit intimidating. There are tools for performing research on stocks you are interested in, monitoring your account, customizing your home page and more.
Making money is one thing - saving that money for a rainy day can be quite another altogether. Get tips on how to save money with help from host Alexis Guerreros in this free video clip.
REO stands for "Real Estate Owned." Get REO assent management tips with help from host Alexis Guerreros in this free video clip.
Just because you're a student doesn't mean you should run out and sign up for every credit card offer that is thrown at you. Get credit card tips for students with help from host Alexis Guerreros in this free video clip.
Credit card balance transfers and consolidations require you to keep a few very important things in mind. Get tips on credit card balance transfers and consolidations with help from host Alexis Guerreros in this free video clip.
A high-yield interest savings account can yield positive benefits down the road. Get high-yield interest savings account tips with help from host Alexis Guerreros in this free video clip.
The federal government through the treasury charges banks when they borrow. Get prime rate interest tips with help from host Alexis Guerreros in this free video clip.
Getting a better return on your assets is always something you should keep in mind. Learn tips for better returns on assets with help from host Alexis Guerreros in this free video clip.
When hunting for a job you may be eligible for some very interesting tax deductions. Get job hunting tax tips with help from host Alexis Guerreros in this free video clip.
Its always important that you don't forget to pay any miscellaneous taxes come tax season. Get tips on paying all your taxes with help from host Alexis Guerreros in this free video clip.
Donating a car or other vehicle you no longer have use for can get you money back come tax time. Get tax tips for donated vehicles with help from host Alexis Guerreros in this free video clip.
You shouldn't just buy the first stock that you see when you start looking around. Get tips on buying stocks with help from host Alexis Guerreros in this free video clip.
You should always take precautions to make sure that any investments you make are safe investments. Get high-yield save investment tips with help from host Alexis Guerreros in this free video clip.
High-yield dividend stocks are typically associated with an interest rate. Get high-yield dividend stock tips with help from host Alexis Guerreros in this free video clip.
When you decide to purchase a share of a company there are a few things you should keep in mind. Get company investing tips and advice with help from host Alexis Guerreros in this free video clip.