Financial Strategies Today » stock market

Do Your Stock Investments DRIP?

GuestPoster — Wed, 28 Apr 2010 20:35:26 +0000

Many stocks offer a dividend as part of owning the stock. The dividend is nothing more than an amount per share that is paid to the stock holder either quarterly or yearly. Dividends are a great way to earn a little extra cash while holding an investment you’re thinking will grow and are a fundamental tool for anyone’s stock market 101 plan. The problem is for new or small investors it’s hard to figure out what to do with those small dividend checks. If you own $1000 in a stock that pays a 2% annual dividend you will get a check for $20. It can be difficult to reinvest $20 into something meaningful so you have to wait until you get more money in your account or you sell another stock before you have enough money to reinvest into your new stock without having commissions eat your entire dividend.

Thus, the creation of the DRIP or Dividend ReInvestment Plan. Essentially, if you sign up for a DRIP with a company that you would like to own for the long term every time they cut you a dividend they will send you the money in shares of company stock instead of money. These shares are often commission free (if they are not don’t bother with the drip) and they usually round up on the number of shares so you even get a deal on that last share. This is a great way to compound your shares on a company you love being the owner in without keeping track of the nickels and dimes coming into your account.

Any DRIP shouldn’t cost money to sign up for or carry any significant commission per share. The reason is the company is the one saving money by offering you shares and encouraging a higher level of ownership which keeps their price per share higher. If the DRIP is setup that they are the main benefactor from it than you should just hold onto your money and reinvest the traditional way. However, most companies now realize they shouldn’t nickel and dime you and DRIPs can be a great way for those who are just beginning to learn the stock market to buy extra shares now and increase your percent invested.

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Focus On Diversified Stock Appreciation

GuestPoster — Sun, 25 Apr 2010 16:28:26 +0000

Investing rules are a dime a dozen and can be found anywhere from just about anyone. What is clear however that building a true nest egg requires a lot of time and diligence over the course of a lifetime. One widespread rule of thumb is that in your early years you should focus most of your money on growth stocks which have the potential to increase dramatically for many years. Many of these types of sticks will do well however many will fail. An alternative however is focus for a lifetime on stocks that pay dividends as these stocks typically have achieved a levels of security in which they are less in danger of failing down the road.

The trick to buying stocks that pay dividends however is not simply in looking for dividend paying stocks but to look for stocks who have consistently paid increasing levels of dividends for many years. The business strategy of these companies have typically been so successful that they have had the means to both grow and pay dividends which is what you really want in your investments. You want to own successful companies that have grown consistently over the years and have paid dividends in correlation with their success and growth.

The interesting thing to note when it comes to dividend stocks is that historical returns in the market as a whole are almost all of the gains above the level of inflation is due to dividends. This means that on average stocks which haven’t paid dividends have merely slightly outpaced inflation whereas adding in the dividends has taken market returns above inflation and spawned real growth in wealth.

If this is historically accurate then you should know that investing in growth stocks paying dividends should be the most reliable way to realize healthy stock appreciation. Diversification of your portfolio doesn’t only mean buying growth stocks or bonds or commodities but also in buying assets which appreciate on multiple fronts, both in price and in dividend payment. Once you realize the significance of this fact then all that remains is identifying these stocks and analyzing them for your best investments.

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Make Money Slowly in the Stock Market

GuestPoster — Fri, 19 Feb 2010 03:11:29 +0000

We often have mixed opinions when we think about people who invest in stocks. On the one hand, we believe that they are sophisticated and smart because they know enough about finance that they can invest for themselves. On the other hand, they can also be incredibly dumb as well because of the poor choices they make.

For instance, does anything in life ever come easily? For most of us, the answer is no. Therefore, why do people expect to make money easily and quickly with little or no work just based on stock advice? Maybe it is the age of the Internet that makes people believe everything they read. Or is this just wishful thinking or naiveté? And if the advice does turn out to be a good tip, is this type of “investment method sustainable”? Probably not, and this is why one most learn how to invest for themselves, especially in a time when the integrity of investment bankers are in question.

Frankly, there is no better way to guard and grow your money than to make the commitment and research your own stock picks. This is especially true if you give yourself a long term investment horizon. If you invest in value growth stocks, you can afford to wait it out for several years. However, make sure you can evaluate a company that is on the rise with one that is based on hype. You can do so by looking at the company’s financial reports. Does it actually have earnings or is the company just in a hot sector which has inflated its price? Remember that a company needs to have some sort of intrinsic value or else you are just investing in a pipe dream.

As you can see, it takes a lot of effort in research to make money in the stock markets. While you can make money quickly, you can lose money quickly too. It is best to reduce the risk and get rich slowly.

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Stock Market Investing Guide

GuestPoster — Fri, 05 Feb 2010 05:13:18 +0000

As an investor, you always search for ways to convert your funds into an amount that can secure a wealthy and comfortable life in the years to come in the soonest time possible. In reality, there are only very few investment options that can give you what you aim. Stock market investing is one of the investment vehicles where this is highly possible. Some even deem this as a platform where you can achieve maximum rates of return in the shortest time frame.

While you find it difficult to learn how to invest and about all the important details of the stock market, you can always get the services of a stock broker or even an experienced or skilled stock trader to walk you through the entire investing procedure.

You might be thinking why huge companies and corporations perceive small investors like you as a significant component of their business model. You should understand that companies always desire to raise their capital for expansion or development purposes to obtain more profit for the enterprise. Due to this, they target minor or small investors who are interested in stock market investing, and the best place to search for them is in the stock market.

You should invest in the stock market or perform day trading based on transactions like buying or selling stocks that you are most comfortable with. The procedure of purchasing or selling stocks can be accomplished through online stock market, real-time day trading, etc.

By getting knowledge of how to analyze stocks and how the stock market works, it is almost easy to carry out the basic tasks involved in investing or trading. However, if you desire to gain the maximum profits possible, you should be able to acquire more and more knowledge, news, as well as analysis on the subject of “stock market”.

Once you become familiar with the working and proceedings of stock market investing, success is definitely within your reach.

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Stop Loss – A Stock Trading Tutorial

fstoday — Fri, 25 Dec 2009 04:51:56 +0000

Perhaps the single most important risk management order type is the stop loss order. Also known simply as a stop order. When you enter a position in the stock market you should always have a plan on how you are going to exit that position. A stop loss order is the perfect fit for this purpose. In this stock market tutorial we will explain how to effectively use these orders.

Stop orders are designed to do just what the name implies… limit your possible losses. The basic premise of the order is to sell a stock (assuming your opening position was a purchase) if the price of the stock drops to a certain level. Using this order type will allow you to set a maximum loss for any trade you make right after you have purchased the stock. Let’s look at an example.

Let’s say you were keen on the prospects of XYZ stock and purchased 100 shares at a price of $38.25. You predict that the price will rise above $40 in the near future. Of course not every trade goes according to plan so you want to limit your losses if this one goes against you. Let’s say you were willing to lose up to $200 on the trade as a worst case scenario. You would enter your stop loss order at $36.25 immediately after you purchased the shares. Make sure you write the order as a “good until cancel” order (this allows the order to stay active until you cancel it). If the worst happens and the stock plunges down under your stop price, you would exit the position. You would be out $200 plus commissions, but you would be moving on to your next trade.

One of the most common reasons people lose money in the stock market is holding onto bad trades for way too long. Using stop orders is a great way to prevent that from happening. If things don’t go the way you were expecting, get out of the trade and move on. Be sure to read other stock tutorials about all of the different order types that are available to traders.

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When is the best time of day to practice stock trading?

fstoday — Fri, 04 Dec 2009 22:18:43 +0000

If you are anything like me you start to notice patterns in the stock market. I’ve noticed that as far as technical trading goes the first thirty minutes to an hour of each trading day is the most important. If you are going to be trading stocks on a consistent basis you will want to practice stock trading from the market open for an hour or so. There are many reasons that I prefer trading at this time of day, but the biggest reason is the violent corrections the market makes early in the day. I’m not going to get into any of the specific indicators here, but there are plenty of long tested technical signals that appear in the first hour of the trading day. Often the stocks will move in after market and pre-market trading causing a jump or drop in the stock price compared to the previous day’s closing price. This change in price is one of the main reasons that stock trading is so volatile in the first hour or so. The market will correct the new price or it could be a sign of a stock on the move.

The last hour of trading is also wildly active. Many traders are exiting positions for the day to settle accounts, especially the big money traders and managed money funds. While there is quite a bit of movement in the late part of the day, it is not my preferred time to trade simply because I haven’t had nearly the success trading at this time. If you haven’t opened a practice stock account, I recommend opening one before depositing your money into an account. Get used to the software and how to place different trades. Give the early morning trading hours a try and I’m sure you will not be disappointed.

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