Investment Articles

Making financial investments is one of the many things that you can do to take steps in ensuring a solid financial future. By creating a diverse portfolio, you can stand to reap the rewards of money well spent. The return on your investments can possibly change your financial situations. Yet, investments for beginners can be a little scary.

When you are just getting into the game of investing, there are a lot of things that you need to know. Most people do consult professionals but there are things you should research on your own. Investing money is not something that should be entered into wearing a blindfold. The more knowledge you are armed with, the better.

Investments for beginners can be tricky. You may be weary of the risks involved yet you must be comfortable with the fact that with some investments, loss is a risk. There are some low risk and risk free investments that can be made. You should learn in the beginning what your options are.

Stock and Bonds

Two of the most common investments for beginners are stocks and bonds. Stocks are equity investments and are relatively riskier than bonds. Bonds are debt investments. They are less risky but also yield a lower return. This rule isn’t always applicable since there are some bonds that are high risk and yield a large return.

Mutual Funds

When it comes to investments for beginners, one of the best ideas may be to create an investment portfolio. If you can’t afford to create your own, you can buy into an already existing one buy investing in mutual funds. There are many advantages to mutual funds. They offer diversification, they are extremely flexible and funds are managed by a professional. By purchasing small parts of stocks, bonds and various securities; you can work your way up to building your own portfolio.

CD’s

Certificates of Deposit, commonly known as “Cd’s” are also a top choice for beginners. With these, you invest a certain amount of money and you are guaranteed a return in a specific amount of time. The interest rates for Cd’s are higher because you cannot access the money until the CD has full matured. The maturity time can be anywhere from a few months to a few years. There is a high minimum investment required to purchase.

Stocks and bonds, mutual funds and Cd’s are not the only investment options for beginners. There are other securities that may interest you depending on how much money you can put into your initial investment. You should research all of your options and seek counsel before you make any choices. The final decision is yours and should be made wisely.

Think about if you are looking to see a return in the near future or if you are willing to wait some time to reap larger rewards. Investments for beginners are relatively the same as investments for everyone else. There is money that has to be spent and risk that will most definitely be taken.

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There are many different philosophies about how to find good investments. Most people in the past have only invested in Mutual Funds or individual stocks. But now, there is a much better alternative than Mutual Funds called Exchange Traded Funds (ETFs) or ETF funds. ETFs will work much better for most retirement investing and investors. The ETFs provide simplicity, trading ease, low entry fees, no penalties or required holding times, better tax advantages, deeper and more targeted selection offerings, and smaller money entry requirements (i.e, ETF funds don’t have minimum buy-entries like $2,500 or much higher). I recommend beginners or self-investors take a serious look at using ETFs for investing because they are simply very good investments.

If you are anxious to start growing your nest egg again or for the first time, then get started the right way by purchasing a list of diversified ETF funds. Make sure to be steady with your monthly contributions to as many positions as you can in order to minimize market downturns and economic recessions over time through cost averaging. Hopefully, the markets and world economies are on the mend and will start their slow climb back up from here. This European debt crisis will pass and scaling in with buys during times of fear and uncertainty will always be rewarding for the patient investor.

It is very important to have balance and diversification in your investment portfolio. Dividing your positions between domestic and world stock market equities with dividends; a variety of bonds; alternative investments; targeted growth equities and sectors; precious metals, commodities, and natural resources; high-yield income; and some real estate should be a good starting point.

A big advantage of using ETF funds for most investors is that very small amounts of money can be used to get started. The important thing is to get back into the market and to be consistent no matter how much money you use or how long it takes for you to build out the entire portfolio.

Start by putting some money into a variety of fairly safe and diversified dividend paying equity ETFs (Exchange Traded Funds). The ones I think are the top ETFs to buy for growth and income are:

1) DVY – IShares Dow Jones Select Dividend Index – invests in select safe and diversified dividend paying companies with a dividend yield around 3.5%. Top 5 Holdings: Lorillard, Inc (LO).; Entergy Corporation (ETR); V.F. Corporation (MCY); CenturyLink, Inc. (CTL).; Chevron Corporation (CVX)

2) SDY – SPDR S&P Dividend – invests in S&P 500 dividend paying companies with a dividend yield around 3.4%. Top 5 Holdings: Pitney Bowes Inc. (PBI); CenturyLink, Inc. (CTL); HCP Inc. (HCP); Consolidated Edison, Inc. (ED); Eli Lilly and Company Common (LLY)

3) VIG – Vanguard Dividend Appreciation – invests in dividend paying companies based on the Mergent Dividend Achievers Select Index with a dividend yield around 2.2%. Top 5 Holdings: Wells Fargo (WFC); Chevron Corp (CVX); McDonald’s Corp (MCD); Pepsico (PEP); Conoco Phillips (COP)

4) DWX – SPDR International Dividend – invests in worldwide list of dividend paying companies with a dividend yield around 6.0%. Top 5 Holdings: Tele2 Ab; Telesp Tel Sao Paulo; ASX Ltd; RWE Ag; OrientO/Seas Intl

5) PID – Powershares Intl Dividend Achievers – invests primarily in international ADRS with a dividend yield around 3.5%. Top 5 Holdings: Partner Comm Co (PTNR); Philippine Long Distance (PHI); Telefonica SA (TEF); Teekay LNG Partners LP (TGP); National Grid PLC (NGG)

ETF funds trade just like stocks so they can be easily bought and sold with any discount broker online and the fees are very small. Start with a small initial investment into each of them and then add money every month or on market weakness while also using the accumulated dividends to buy more over time. It has been shown throughout stock market history that dividends account for over 40% of the total market’s return, that index type funds outperform most money managers, and that reinvesting your dividend proceeds are a sound way to grow your returns.

Investing in times of uncertainty and fear present good buying opportunities if you scale in on market pullbacks. Be patient and invest consistently over time and you will be rewarded with big returns. You will discover that ETFs are very good investments for growing your retirement.

You can get plenty more great stock ideas from our very popular subscription services. We help make trading and investing easy and extremely profitable. Let us do all of the work for you with our model portfolios and hot list swing trading and investing ideas. Our seven year track record using proven fundamental and technical analysis techniques at http://www.momentumrider.com is unmatched for market beating results.

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Here I am today, to tell you about what I believe to be the single most lucrative, unique, exciting and little known investment on the planet. Let me introduce you to tax liens investing.

Quite a unique idea, and most likely very different to anything you’ve ever done before. By investing in tax liens, you can expect returns on your money like 16%, 24%, even up to 36%. That’s partly why it’s described as very lucrative. But the best thing about it, is that it has virtually no risk! The reason this is described as no risk, is because it is backed up and mandated by the U.S. state government.

Now to me, safety is really high on my priority list, and given what’s going on with the economy lately, I’d be really surprised if safety wasn’t towards the top of everyone’s priority list right now.

Now the great thing about investing in tax liens, is regardless of what happens in the economy, as soon as you make that investment, you are locked in – into the 16% 18% 25%, and nothing can affect your principal investment, allowing you to sleep soundly at night

First of all, let me tell you what a tax lien certificate is… it’s a first position lien on a property, due to delinquent property taxes. In over 2000 jurisdictions across the United States, once a property owner becomes one year delinquent on property taxes, the county government holds a sale. Now just to be clear – you are not buying somebody’s house. You are only dealing with the county. And in actual fact, the county’s going to do most of the work for you.

Now in return for you putting up the money for delinquent taxes at the county, the county will give you in return, a tax lien certificate, and that then goes on file down at the county courthouse. It is a legal document, and it’s going to attract an interest rate. The interest rate you get is different across the various states and counties, but it ranges between about 8% and 50% (that isn’t a typo – it says 50%). So that’s what a tax lien certificate is.

Here is an example…
Imagine a hypothetical scenario involving 3 individual parties. Firstly there is the county – that’s fairly straight forward. Then there is a property owner – let’s call him Jim. Jim is an owner of a property with a “fmv” of $200,000. Fmv is short for fair market value – so in this hypothetical scenario, the deemed fair market value of Jim’s property is $200 000. Jim has a $100,000 mortgage, and he also has $1,000 worth of delinquent taxes on his property, and we will assume an interest rate of 24%.

Jim has become 1 year delinquent on his property taxes, so the county is going to hold a sale. At that sale, people like you and I, can go down there and put up the money for those delinquent taxes. So let’s assume I go along and pay the $1000 to the county, and remember I’m only dealing with the county – never directly with the property owner, and they will give me a certificate, which goes on file down at the county courthouse.

When Jim eventually goes down to the county courthouse to pay off his delinquent taxes, he is going to be charged a penalty for being late (in this case, 24%). That is the law, and no matter who you are – if you are late to pay your taxes – you get assessed a penalty. It is the law. In fact, the United States is the only country on the planet that has rules like this allowing people to invest in tax liens.

Jim is only allowed to pay the whole amount that he owes, including the interest component. In other words, he can’t pay half now and half later – it’s all or nothing. So Jim goes along and pays the $1000 plus the 24% interest, which then means, by law, the county has to send me a cheque for the $1000 plus the 24% interest. I know that depending on where you live, some governments can drag their feet, and slow things down with red tape etc, but this is the law in the U,S. They have to send me my cheque immediately – and in my experience, it’s always been within a few days depending on the county. So at this point, I’m happy since I’ve just made 24% on my money, and I’m now looking for my next tax lien investment opportunity.

However should Jim not go and pay his delinquent taxes, the county will give Jim a grace period – the legal term for it is redemption period. This grace period or redemption period can be anywhere from 6 months to 3 years, again depending on the state and county, but for the purpose of this example, we will assume 1 year. That means that Jim has 1 year to come in and pay off his delinquent taxes

Many people get a little concerned at this point, thinking that it’s taking advantage of property owners etc, however in reality, I have actually done Jim a favour, by buying him some time. The county is charging Jim the interest rate – not me, and I am the one that’s bought him the time he needs to pay his taxes. If people like you and I didn’t go down to the county and put up the money for Jim’s taxes, the county would be forced to take Jim’s house. As for the county, I am helping the county by paying the taxes, because county’s rely on the money for things like schools, roads, the fire department, police, bridges etc, especially at the moment in the current economic situation.

The big advantages in tax lien investing, are that you know where your money is going, you are helping the property owner, you are helping the county, plus you are getting a great interest rate.

In the scenario where Jim doesn’t come in during the one year period and pay his property taxes, I would pick up my phone, call the county, and say “I’m the lien holder on record, and I’d like to execute my right to foreclose”. Everything so far is documented, and this is the law. The law states that the tax lien takes priority over the claim of any person whose property is encumbered by the tax lien and over the claim of any holder of a lien on the property whether or not the lien existed before the attachment of the tax lien.

To put it simply, if I foreclose on this property, I will wipe out and extinguish all liens on that property, and that includes a mortgage (that isn’t a typo – it does in fact includes a mortgage – and I’m not kidding).

Banks spend a lot of money making sure they have a first position lien. To have a first position lien means they have to have been the first to record. Many people wonder at this point, how can a tax lien jump ahead of something that’s already filed? One way to think about it, is that they have been collecting property taxes for a very long time, certainly longer than the mortgage on the property. The property taxes have been due on the property for longer than the mortgage.

If property taxes don’t get paid, the county takes first position so they can always ensure they get their money. So if I go in and pay the money to the county, and they give me the tax lien certificate, I have the same power as the county. It is not diminished in any way just because it’s in my name.

So in the example, if Jim fails to pay the $1000 plus the 24% interest during the 1 year period, I’m going to end up with a $200,000 house, free and clear of all existing encumbrances, for $1,000. However in reality, it is more likely that Jim is going to find a way to get the money together and pay his property taxes. But when he does, he also has to pay the 24% interest on top of it at the same time.

So the bottom line is, either get my initial investment of $1,000 back, together with the 24% interest, or worst case, I get the property free and clear, and that is really all there is to tax lien investing.

If your initial reaction to this is “you can’t just get rid of mortgage like that” – and it is a very normal reaction, my response is “yes you can”. I’ve done it, seen it, and read about lots of people who have done it. There is lots of documentation about it if your mind needs to see proof. The reason is simply because it’s the law. How amazing is that for you and I as investors?

Really the only down side, is that some people freak out a little at the thought of owning the property, and they just want the interest. Others don’t want the interest, they want the property. But there are ways of making sure you don’t get the property, and there are also ways of making sure you get the property every time.

As a final note, if you don’t live in the US, there are a couple of housekeeping things you’ll need to tidy up first to allow you to invest in tax liens. I live in Australia, I’ve never been to America, and I get by quite nicely. I do it all online.

Because tax lien investing is such a little known investment strategy, there is limited information on the subject. Should you wish to learn more about it, you can find some good information at http://cashflowbusinessideas.com/tax-liens, or you can find more information here. Happy investing.

Companies are not all alike. For example, what Starbucks sells is very different from what Exxon sells – and we’re not referring to the fact that we don’t drink gasoline! People need gasoline to drive to work and get around – even if the price reaches $4.00 per gallon – but people don’t need to spend $4.00 for a cup of coffee if they can’t afford it. Heck, some people don’t need to drink coffee at all, while others cannot function without at least that first morning cup of coffee, and there are those who need a pick me up cup of coffee all through the day. When it comes to investing your hard earned money, you should keep this in mind. Generally, buying stocks in companies that sell things we need reduces risk. The following types of companies are worth exploring for consideration:

1. Defensive Companies

Defensive companies sell things we need. Food companies, such as Kellogg’s and Campbell’s are examples. We also need fuel, prescription drugs, and consumer “staples” like toothpaste, soap and laundry detergent. We even need the services of funeral homes to bury our dead!

The name “defensive” comes from the fact that if the economy is showing signs of faltering, you can defend your wealth by buying the shares of these companies. While companies that sell premium coffee and other luxuries will likely see declines in sales and profits that will lead to falling stock prices, defensive companies will continue to chug along. We’ll keep eating and a certain portion of the population will continue to pass away. Have you known a person who skipped showers and tooth brushing because the economy wasn’t doing well? Didn’t think so!

2. Income Companies

Imagine that a company provides natural gas for heating and cooking to homes on a populated island through a network of pipes laid under the island’s streets. The company is in an interesting situation. On the down side, it doesn’t have opportunities to grow. On the up side, it doesn’t have much competition. For a would-be competitor to tear up all the streets on the island to lay gas pipes next to the company’s existing ones would be nuts!

So, what’s the company to do with the profits it consistently earns? The decision most of these companies make is to pay out a significant percentage of their profits to their shareholders who, after all, are the owners of the company!

These payouts to shareholders are known as dividends. Holders of these companies’ stocks go to their mailboxes four times (the number of times dividends are paid) each year and retrieve checks that represent significant income!

3. Growth Companies

Ever been in a situation where something – maybe the last piece of amazing chocolate triple-layer cake at a crowded party- was there for the taking? You knew that if you didn’t grab it, and soon, someone else would.

Some companies find themselves operating in markets that have so much potential for new products, they know if they don’t get these new products out soon, a competitor will. A great example of a market with tremendous potential is the cell phone market.

Growth companies have made it their priority to grow their sales and profits rapidly. When those profits are made, they’re “plowed back” into new product development. As a result, growth companies pay little or no dividends, making them a less attractive investment for retired people who need their investments to pay them regular income. However, if they can gain leadership in growing markets, their stock prices can rise significantly. This attracts younger investors to who want to build wealth.

Finally, how can we tell if a company is growing rapidly? Generally, if its profits and sales are growing 15% per year or more, we can definitely consider it a growth company.

4. Blue Chip Companies

Back in the day, the most valuable poker chip was blue. Investors began giving the name “blue chip” to large, well-known, stable companies that had what it takes to remain leaders in their industries year-in and year-out for decades!

Blue chips may not stand out in any one regard. They may not be growing as fast as growth companies or paying dividends as high as income companies. Their stock prices may not be rising as fast as the latest darling of investors. All they do is continue to grow steadily and dominate their markets!

5. Cyclical Companies

The economy alternates between periods, or cycles, of growth and contraction (aka recession). When the economy moves from contraction to expansion, businesses and governments that had been holding off on construction projects give the go-ahead and buildings, bridges and roads are built. Basic materials such as cement and steel will be in great demand. Companies that provide them do well at these times and not so well when the economy slows down. As a result, they are known as cyclical companies.

Perceptive investors can “rotate” out of these companies when the economy is slowing down and transition their investment dollars into defensive companies.

Taking this a step further, imagine if there were companies we could invest in that would do better than normal when the economy is headed into a recession. Such companies exist. For example, as consumers begin watching their spending closely, they visit “dollar stores” more frequently. People who are really down on their luck may have to pawn some of their belongings, so pawn shops may experience increased business in downturns.

Another type of business that benefits from bad times is the collection agency, a company that specializes in getting people who are behind on their bills to pay up! Perhaps we should name companies that do better as we’re heading into a recession “anti-cyclicals!

6. Value Companies

Dexter and his friends are walking down the street. A group ahead sees something lying in the street. It’s a genuine Frisbee brand flying disc. Dexter watches as they take a quick look and walk past.

When Dexter comes to it, he sees it has some dirt on it but otherwise looks to be in good shape. Yet, he walks past as well. Why did Dexter walk by the Frisbee?

This is the story of value stocks – companies that are being ignored by investors. Dexter probably walked by the Frisbee because he saw his buddies walk by it as well. No one wanted to be the person to pick it up.

Similarly, companies sometimes wind up being thrown in the street. For example, the United States’ auto industry has experienced a tremendous amount of trouble. General Motors went bankrupt. Ford, to its credit, didn’t need government assistance, but its share price dropped after sales plunged. As these big names cratered, what do you think happened to other companies that offer auto-related products? They fell as well. Did they all deserve it? No. Let’s say that one company has advanced technology that enables it to project a vehicle’s information onto the windshield. This means the driver no longer has to take his or her eyes off the road to see important information such as the vehicle’s speed and fuel level. Let’s also say that this company’s technology can be transferred to other industries.

Does this company deserve to have its stock beaten up? No. Its sales and profits are strong. But, the black cloud of auto industry trouble looms large and investors are too scared to buy its stock.

Eventually, an insightful group of investors takes a look at the company with new eyes. They realize that if they put aside perceptions and bias, what they see is a company with great technology and solid sales and profits, with a stock price that’s downright cheap! In short, the stock is on sale, and like any good sale, it represents a great value!

7. Penny Stocks

If there’s a Wild West in the investing world, it would have to be penny stocks. These stocks get their name because their prices per share are usually in the pennies (i.e.: less than a dollar) and are often less than one cent! A penny stock may have a price of $.0033, representing a third of a cent.

What makes a company a penny stock is the owners’ decision to “go public” by selling new shares to the broad investment community before the company has established a track record of substantial and rising sales and profits. Investors who buy its shares at this point are taking a big chance because they’re buying into an idea that may or may not pan out. For example, a company may claim that it is developing a part that when installed in a car doubles the gas mileage. It needs $1 million to finish the product and market it to the automakers. If it works, you could get rich. If it doesn’t, well, your entire investment will probably be lost. These companies need every penny (no pun intended) people invest in them, so they do not pay dividends!

There are other concerns with penny stocks. The stock price can swing wildly, doubling or losing half its value in a single day. It is often difficult to research them. If you bring up the symbol of a penny stock on a popular financial web site, many of the usual links will be dim because they are not available.

In addition, the shares of these tiny companies don’t change hands between buyers and sellers all day long as with larger companies. If you want to buy shares, you may have to pay a stubborn seller a high price to get his or her shares. If you want to sell, you may find little interest among buyers and have to drop the price you are willing to accept to motivate a buyer to step up and take them. The ability to sell quickly without having to drop the price significantly is called liquidity, and penny stocks lack it! Penny stocks are extremely risky and should be avoided!

Conclusion

While the ability to distinguish between the different types of companies is important, there are other important guidelines to keep in mind when investing.

For one, you should think about your own risk personality or “profile”. You may be young and yet naturally cautious, relying on the “slow and steady wins the race” philosophy in life. If you are risk-averse, then you may never own growth stocks because they can rocket higher and fall just as rapidly.

Still, most young investors try to grow their wealth rapidly by putting more of their money into growth stocks. The thinking is that if these volatile stocks fall, young investors have plenty of years for them to recover. The older an investor gets, the more attractive blue chips and income stocks begin to look. Older investors have fewer years to make up a drop in the value of their investments and these types of companies are less likely to fall significantly! This discussion shows why it is important to examine the stage of life you are in.

Studies show it’s nearly impossible to be successful “timing the market” (i.e.: jumping in an out of stocks to lock in profits and wait to buy later at a lower price). Still, it’s worth examining the state of the US and global economies before you begin investing. If economies and industries are growing you stand a better chance of having your initial investments earn money than if economies are falling into recession. Investing is a life-long process, yet there’s no reason to begin on a down trend.

Think as well about how active you are likely to be managing your investments. If you don’t have the aptitude or energy, be honest with yourself about it. You can invest in mutual funds, allowing professional fund managers to choose investments for you. Or, you may purchase index funds which allow you to invest in the market as a whole. If you want to become an expert at investing and are ready to make the commitment to do so, your increasing expertise may lead you to add cyclical and value stocks to your investing radar.

Another important investing basic is to diversify your investments among not only different stocks but different types of investments (called asset “classes”). For example, real estate, bond, and commodity investments will move up and down based on different factors than your stocks will! Mutual funds can help you achieve this diversification.

Tom Barrella is a leading teen investing educator who teaches his Investment Decision Making course to several sections of students each year and advises another 50 students as members of the Investment Club at Syosset High School on New York’s Long Island. Mr. Barrella also teaches a college-level course in corporate finance at Syosset and is founder of http://www.investeens.com.

Mr. Barrella holds a bachelors degree in Management Systems from Rensselaer Polytechnic Institute, a Master’s degree in Secondary Education from Hofstra University, and a Masters Degree in Educational Leadership. Additionally, Tom has passed the New York Life, Accident & Health Insurance exam and national Series 7 exam but does not practice in the insurance or financial planning fields. In a prior life, Mr. Barrella co-founded the technology company Radiant Systems (NASDAQ: RADS).

It’s amazing and scary… the number of people I have come across who very actively plunge close to their entire savings into stock market portfolios and have the hubris of managing it on their own with little or no professional advice. I know folks with zero training in investment management, finance or accounting, who manage well over $100,000 of their own wealth, including money they have in 401(k) and IRAs that they will depend on in retirement… It’s completely crazy, putting so much of their hard earned money at risk without taking the proper precautions!

Anyone who plans to manage or be actively involved in managing his own investments should know how to read financial statements and accounting footnotes (which, by the way, is often where the real nuggets of material information lie).

In addition, here are a few handy tips to help you succeed with investments you plan to make on your own.

Risk Capital

Only invest money you can afford to lose. This excludes your 401(k), IRA, and the bulk of your savings. If investing is a hobby, start with anywhere between $500 and $5,000 but no more (unless you have millions in the bank already). Indulge your passion, but only to the extent of winnings on this portfolio. And do not rush to bet the bank if you run across some beginner’s luck. Give your initial investment at least 3 years before managing more of your own money.

Written Plan

Think of your $500 or $5,000 as a business investment. Before you plow it into the market, develop a written investment plan – what are your goals, what are your benchmarks to measure success and failure, how long do you plan to keep at it before throwing in the towel, what would your expenses be (such as investing newsletter subscriptions, which really is not such a bad idea if you can find a good one), how much could you afford to lose without sinking the ship (remember, a business cannot lose all its working capital if it hopes to survive over the long run), and so on. Again, ask your friends and colleagues who manage their own money, and I’ll bet you a dollar that not one of them has a written investment plan.

Track Your Investments

Well, the IRS wants you to… unless you’re playing with fire and managing your own IRA and 401(k). Develop a simple spreadsheet with the trade date, number of shares, purchase and selling prices, commissions, profit (loss), original investment thesis, and reason for selling. It’s pretty easy once your start. Then review this weekly or monthly to see which of your ideas worked, which didn’t, and how far off you were on some (as you inevitably will be). A tracker helps develop your investing gut over time.

Focus On What Works

Too many people bounce from stock to stock, and especially abandon their losers. Your losers could turn into real winners because dips may well present excellent buying opportunities if your initial investment thesis was well developed. Additionally, your investment tracker will tell you what works best for you, so focus on what works… it’s a pretty simple idea.

Sleep Well

Don’t let daily news bites upset you or your portfolio. Track your investments daily or weekly, but not minute to minute. Diversify your portfolio and include stop losses so the % loss on your entire portfolio is small enough that you don’t lose your peace of mind. I am amazed at how many lose sleep and get stressed when they actively manage their own money. Losing sleep over investments is JUST NOT WORTH IT!

Accept Responsibility

Good investors do not get influenced by strong personalities. Good investors also manage to keep their portfolios afloat in even the worst of times. They listen to investing ideas from everyone but do their own research before pulling the trigger. And take full responsibility for their investing actions, particularly their losses.

See… all I’ve said above is really just common sense, but we all know the saying…

Act on these ideas and you could enjoy a lifetime of investing as a hobby with just a small initial investment, with the added upside of generating good returns. Good luck!

Visit http://onthemoneyradio.org for weekly commentary and money advice that covers the entire financial spectrum which also airs on my weekly radio show, “On The Money!”

Steven L. Pomeranz, CFP is a 29 year investment management veteran and host of “On The Money!” which airs on NPR station, WXEL in South Florida. He concentrates on serving high net-worth individuals and has been named one of the Top 100 Wealth Advisors 2007, by Worth magazine (October 2007 Issue), honoring America’s premier financial and wealth strategists.

Penny stocks are very much like normal stocks apart from the fact that they are not traded on the main stock exchanges. Penny stocks are, by definition, stocks that are trading at or below $5 a share. The purpose of trading penny stocks is the same as regular stocks: Try to buy low and then sell higher.

Penny stocks are much more volatile than normal stocks and herein lies their main advantage AND their important disadvantage. Penny stocks can and do double their price in only one day where it could take weeks, months or even years for a regular stock to do the same. For some reason, it is far easier for a stock priced at one cent per share to boost its price to two cents a share than it is for a stock worth thirty dollars per share to double its worth to $60 a share.

What all of this means to the investor is a good news/bad news kind of thing. Bad news first: These stocks can be so volatile that you are able to lose your full investment in less than a single day. It’s nothing for a stock worth one cent a share to go to nothing quickly. Regular stocks can also go to nothing but they will take a much longer period doing it, giving the investor an opportunity to cut his or her losses and keep a part of his or her capital.

You can easily be taken out by these stocks if you are not paying close attention with your finger ready on the sell trigger. Penny stocks do not habitually act as you might expect after studying up on the fundamentals of a company. In the world of penny stocks, one frequently sees good corporations going down and bad corporations going up.

The good news? You are able make a sizable percentage increase fast with only a little amount of cash at risk. And, although you can lose the majority or all of your capital quickly, you will not be damaged that much if you have only risked a tiny part of your whole net worth. Admittedly, investing a penny and having two pennies the next day is not going to alter your life that much and so you may be tempted to try to double a much bigger initial investment. Because of the volatility of penny stocks, you should never put in more than you can afford to lose.

How, then, can you shift the odds to your favor? It’s all about picking the correct penny stock and you may require some assistance there. Use professional stock picks from an honest stock-picking service as a starting place. Make a listing of the ten top penny stocks from the stock picker and then do your own due diligence. List these ten stocks on a spreadsheet and generate columns for company earnings, book value and the like.

As mentioned above, penny stocks don’t continually function as you might expect from the fundamentals but much of the time they do, so going through the above exercise is not foolish. Listing the ten stocks on a spreadsheet helps you see readily which one of the ten is most likely to succeed. After making your buy, keep a record of the real performance of all ten stocks, including the ones you didn’t buy. This will be a splendid learning mechanism for you.

Benefit from your past errors. Try to comprehend what went wrong and why. Don’t make the same mistakes again. Watch what other traders are doing and learn from their successes and failures. If the cost of a stock is low, attempt to discover if it is just because it hasn’t yet been noticed or if, instead, the firm is in financial difficulty. Buy the former never the latter.

If you have a sizable win of 100% or more, it’s time to get rid of all or a fraction of your holding in that stock. There are several ways to resolve this. You could sell 50% of your shares and let the other half ride or, instead, you could leave one third in, sell one third for cash in your pocket and sell then invest the proceeds of the final 1/3 in another, different, penny stock. Don’t get greedy and keep a stock past its time. What goes up must come down and penny stocks usually do that quickly.

If the stock keeps climbing after you have sold it, don’t fret. There will be another train leaving the station in five minutes. The main idea is to purchase under-valued stocks and then get rid of them in advance of becoming over-valued. Never purchase or sell for emotional reasons. Continually go by the numbers and stay on your plan.

Finally, beware of hot penny stock tips from promoters. Promoters purchase a penny stock and then attempt to get everyone else on the planet to buy the same penny stock, thus driving the value up. Since they made their purchase before you, they will make a one hundred percent gain or more before you do and will then dump the stock like a hot potato creating an immediate and unexpected decline in share price at your expense.

Bob Gillespie

© 2011 Robert M. Gillespie, Jr.

About the Author:

http://forex-signals.inetwyoming.com

Options Basics

To explain how credit spreads work, we need to understand a little about options.

Options, in their most basic form are the right but not the obligation to do buy or sell something at a specific price for a specific period of time. Options are basically, a paper contract on a real position, and paper is bought and sold in the open market place. Usually the CBOE (Chicago Board of Options Exchange).

Options give us choices in the trading world. Options serve as a contract between two parties: he Buyer and the Seller. The buyer of the options has rights where as the seller has obligations. When an option is purchased, a person is purchasing the right to buy a stock at specific price (Call Option) or sell a stock at a specific price (Put Option).

Let’s break this down a little further. There are two types of options. The first is known as a “call option.” When purchased, it gives the buyer the right to call the stock away from someone else at a specific price and at a specific time in the future.

Let’s demonstrate this using real estate as the example. If you are in the housing market and identify a nice home in a nice area that you think will increase in value in the next year, you can do a couple of things to profit from this movement of perception. Let’s say that you find a home in a rural neighborhood for $250,000 and your analysis predicts that the home is going to go up to $300,000 in the next year. Your first choice open to you would be to just purchase the house outright for the $250,000 and a year later if the house appreciated to $300,000 in value you could sell the house and realize a profit. If you were right on your assessment you would yield a $50,000 profit off of your $250,000 investment, a 20% return.

However, there is also another choice open to in this case. You could approach the homeowner and offer to give him or her 5% of the value of the home or $12,500 to have the right to buy the home for $250,000 sometime in the future. No matter what the market does the homeowner gets to keep the $12,500 and can spend it immediately. Let’s say the home owner gives you one year in which to buy the home for the $250,000. So just like the previous example you have locked in the right to buy the home for $250,000 but in this scenario you only had to put up $12,500 for that right. Should the home appreciate to $300,000 the contract that you have with the homeowner would be worth $50,000. As you can see, by leveraging yourself a little better you allowed yourself to invest $12,500 in order to make $50,000 and gave yourself a 400% return on investment. You bought the right to buy something for an extended period of time and you were willing to give up some money up front to have that right.

However, now let’s imagine a scenario in which that same house depreciated by $50,000 instead of appreciating by $50,000. If you had purchasing the home for the full $250,000 you would have lost $50,000 in the value of the home, definitely not a good day at the office. However if you had only purchased an option, you would have put up only $12,500 to have the right to buy the home for $250,000 within the year. Once you had realized a year later the home was now only worth $200,000 you could simply allow our option to purchase the home to simply expire in which you would lose the entire $12,500. While it is still not a great day at the office you did manage to lose a lot less money through the use of an option than you would have by simply purchasing the home.

This same type of analysis can often be used in the stock market as well. We feel that a stock may appreciate in value and instead of purchasing the stock outright we can often times purchase an option to purchase the stock at fair market value for a later date, for a fraction of the cost.

Let me give you an example: XYZ stock is trading at $140.00 per share. If I thought that XYZ was going to appreciate to $160.00 in the next 2 months I could buy 100 shares for $ 14,000.00 and if it went to $160 I could then sell my shares for $16,000.00 and profit $2,000.00 on the trade for a return of 14% on my initial investment.

My second choice is that I could purchase an option for $600.00 which allows me to purchase 100 shares of XYZ for $140.00 in three months. If XYZ’s stock goes up to $160.00 a share in the next three months then my option will increase to $2,000.00. I could simply sell my option for $2,000.00 leaving me a credit of $1400.00 in the trade or a return on investment of 233%.

By purchasing an option-or to be more specific, a “call option” which gives me the right to call the stock away from the market at $140 per share between now and the next three months-I am allowing myself to profit if the stock appreciates and I have avoided putting up the large sum of money that would have been required for me to purchase the stock initially..

The opposite of a call option is a “put option.” If you purchase a put option you are purchasing the right, not the obligation, to “put” the stock to someone else at a specific price and at a specific time in the future. So, when we think something is going to increase in price we want to look at buying call options, and when we think something is going to decrease in price we want to look at put options.

Think of the homeowners insurance you purchase every single month. You buy this insurance to protect you in the case that your house decreases in value due to some catastrophic event. If your home was to burn down then you could simply exercise your insurance policy and “put” your house to your insurance company and they will be obliged to give you the amount that you are insured for. When you purchase homeowners insurance you are buying the right to capture your losses should your home depreciate or go down in value because of some unforeseen catastrophe.

Remember that in the stock market, for every person that thinks something is going up there is someone else with the opposite opinion. It is easy to understand that if you think a stock is going to go up in value you want to buy the stock low and sell it higher. However, let’s talk about what people can do who think that a stock may go down in price and want to profit off of this bearish biased stock. A trader who believes a stock is going to depreciate in value “shorts” the stock at a specific price. This means that they go to their broker and borrow the stock with the promise of repaying it back in the future. They want to sell high and then buy the stock back at a lower price and then give the stock back to the broker allowing them to keep the difference between selling high and buying back at a lower point.

If you were looking at XYZ which is currently trading at $140 a share and your analysis said that it was going to decrease to $120 a share in the next couple of months, then there are a couple of things that you can do.

Firstly, you could go into your brokerage site and short 100 shares of XYZ for $14,000.00. You are borrowing stock that you do not own with the promise to purchase stock in the future and return it to your brokerage firm at a future date. If XYZ goes down to $120.00 a share, you could purchase 100 shares of XYZ a few months later for $12,000.00 and give the shares back to your brokerage firm, thereby closing the trade. Since you sold something for $14,000.00 and purchased it back for $ 12,000.00 you are left with a profit of $2,000.00, a return on investment of 14%.

The second possible scenario is that if you thought XYZ’s stock, currently trading at $160, was going to decrease in value you could purchase a put option for $600.00 which allows you the right to put the stock (or sell the stock) to someone else for $160 a share. If after a few months XYZ goes down to $140.00 your put option would be worth $2000.00 (since you could purchase 100 shares of XYZ at its lower price of $120 a share or 12,000.00 for 100 shares and have the right to sell it for $140 a share or $14,000 for 100 shares). At this time you could sell your put option for the $2,000.00 giving you a profit of $1,400.00, a return on investment of 233%.

As you can see, options lower your cost to get in the trade, thereby lowering your risk. And when the analysis is correct, using options gives you the opportunity to realize a larger return on investment.

Hi. My name is Jim Francis. I would like to create a financial miracle in your life. I have had the good fortune to spend time with 50 plus millionaires and 2 billionaires. Each of these MENTORS, gave 2 wonderful gifts. Number 1: Philosophy. Number 2: Strategy. Each are equally important. After studying with them for over 2 decades, I created the Millionaire Matrix. A vehicle for financial freedom. Specific strategies, in business, real estate, investing and wealth protection that can make a major difference in your life.

http://www.jimfrancis.com – http://www.creditspreadsystem.com

When it comes to bond yields, sometimes less is more. While municipal bonds, or “munis,” usually have a stated yield several percentage points below those on comparable corporate or government bonds, the interest paid on municipal issues is generally exempt from federal and, in some cases, state and local taxes. For that reason, a muni may actually provide a similar or higher yield than those other options after taxes are taken into account.

Are Munis Right for You?

You can easily compare the yield on a muni with a taxable investment to help determine whether tax-exempt investing might benefit you. For example, if your income tax rate is 25%, a $1,000 municipal bond yielding 6% may actually be a better investment than a taxable bond yielding 7.9%. Why? While the taxable bond will provide $79 in interest per year, federal taxes will leave you with $59.25. The muni, on the other hand, may pay $60 a year free of taxes.

To determine whether you might come out ahead with a muni, use this formula to calculate its taxable-equivalent yield:

Municipal bond fund yield / (1 – your marginal tax rate) = taxable-equivalent yield

For example: 6.0% / (1 -.25) = 8.0%. In this instance, if you are in the 25% federal tax bracket, a taxable investment needs to yield 8.0% to equal the lower, but tax-exempt, return offered by a municipal bond that currently yields 6%.

How Should You Invest in Munis?

In addition to the thousands of municipal bond issues that are outstanding at any one time, professionally managed funds offer you additional alternatives for investing in munis. Municipal bond funds generally invest in a diversified mix of high-quality bonds whose interest income may be exempt from federal and state taxes. In addition, with initial investment requirements that are generally lower that those for individual municipal bonds, funds that invest in them may make it easier for more investors to participate in the muni market.

Note that investments in Municipal bonds are subject availability and change in price. Market and interest rate risks exist if sold prior to maturity. Bond values will decline as interest rate rise.

If you’d like help determining whether you might benefit from an investment in a municipal bond or bond fund, be sure to consult a qualified financial professional.

Investors should consider the investment objectives, risks, charges and expenses of the investment company carefully before investing. The prospectus contains this and other information about the investment company. You can obtain a prospectus from your financial representative. Read carefully before investing.

Income from some municipal bonds may be taxable under alternative minimum tax rules. Capital gains are taxable.

Lower maximum tax rates on capital gains, dividends and other income would make the return of the taxable investment more favorable, thereby reducing the difference in performance between the accounts shown. Also, changes in lax rates and tax treatment of investment earrings may impact the comparative results and investors should consider their personal investment horizon and income lax bracket, both current and anticipated before making an investment decision.

Arthur Kaplan invites you to visit http://kappatrade.com to learn more about the stock market and what the financial world is currently undergoing. Feel free to write us directly on our website for any help and/or suggestions.

To Sign-Up for our FREE Weekly Analysis & Stock Picks, go to http://kappatrade.com/newsletter_signup.php.

Even though investing money always involves risk, you need to start investing soon if you want to get ahead. Investing in 2011 and 2012 won’t be a cake walk, but there’s no better time to start putting your money to work then NOW. Money in the bank won’t keep you ahead of inflation and taxes, so here’s how to start investing with less risk and worry.

If you have never ventured into the game of investing money on your own it can be intimidating. It’s tough to take that first step and start investing when people in general view the future with pessimism – think 2011, 2012. It’s better to start with a conservative strategy than not to start at all, so let’s look at the safest way to get started. First, you’ve got to get your feet wet and open an account by depositing money. Here’s how and where to do that, and how to progress from there.

For the vast majority of people mutual fund companies are the best place to start investing money, and the best place to stay. Get on the internet and search “no-load funds” and you’ll see ads by Vanguard, Fidelity and T Rowe price: some of the biggest, best and most affordable fund companies in America. No load means that you pay no sales charges, so this, coupled with the lower total fees and expenses they offer can save you thousands of dollars over the years. Get familiar with what they offer, and then give the company of your choice a toll-free call if you need help opening an account.

Start investing by putting your initial investment into the safest fund they have, which will be called a Money Market Fund. Here you will earn interest in the form of dividends that will be automatically reinvested for you in more shares. You will earn very little interest in 2011 and 2012 because interest rates are near all-time lows (like they are at your bank). But your money is safe and you’ve taken the first step. Now, you’re ready for step number two, which means you will move some of your money and start investing in a fund where you can put your money to work in stocks and bonds. This is easy to do, and you can always call the fund company for help, free of charge.

What you are looking for is a balanced fund – one that invests in stocks, bonds and some safer investments as well. Search for or ask about a fund with a CONSERVATIVE ASSET ALLOCATION, because you are ready to start investing money, but you want to start with relatively low risk. For example, a Target Retirement 2000 or 2010 fund would have you invested in a portfolio consisting mostly of bonds and safer investments with a smaller amount in stocks. Actually, in such a fund you are really investing money in several different funds offered by the fund company, all in one investment package.

Once you’ve got your feet wet and get used to investing money vs. just putting it in the bank, you might want to add a balanced fund with a MODERATE asset allocation to your list of holdings. Here your mix of stocks and bonds should be about equal parts each, and risk as well as profit potential will be higher. If stocks start looking cheap later in 2011, 2012 or beyond, consider investing money in a more aggressive balanced fund like a Target retirement 2030 fund, where most of your money will be invested in a variety of stock funds.

The years 2011 and 2012 might not look like the best time to start investing money, but NOW has never been an easy time to invest (as I’ve learned in the 40 years I’ve been helping people invest money ). Don’t procrastinate like most people do. Start investing conservatively and expand your wings as you gain confidence. Balanced mutual funds are a great place to start and minimize worry.

Author James Leitz teaches investment basics, stocks, bonds, mutual funds and how to invest in his investing guide for beginners called INVEST INFORMED. Put Jim’s 40 years of investing experience to work for you and get up to speed at http://www.investinformed.com. Learn how to invest.

Binary options trading is a very exciting potentially high risk high reward form of trading options. One of the draws to binary option trading is that in the time that it takes most contract options to expire usually one hour, you can make a substantial return on your investment. Exciting for some but may be too risky for others given the different types of personalities of investors. Nevertheless whether you are a conservative or a risk taker binary option trading can be exciting and lucrative.

Before you can understand how to trade binary options you must first have an understanding of exactly what a binary option is and how it works. Simply put a binary option is when a trader purchases a contract on an underlying asset and tries to predict whether the assets value will increase or decrease over the life of the contract. If the value of the asset increases at the end of the contract you will be considered in-the-money and if the value has decreased at the end of the contract you will be considered out-of-the money. And just for the record I’m sure that the phrase in-the-money is much more appealing to you and is fairly self-explanatory.

Here for example is how it may work. Let’s say for the sake of this example that you are an online trader. You would go to one of the many binary options brokers websites and select an asset that you are interested in. You would then find the contract on that particular asset, purchase either a call contract if you believe it will end higher or a put contract if you believe it will end lower. A majority of binary options have an initial starting length of one hour. You can purchase option contracts generally up to 5-15 minutes before they expire but the majority start at one hour in length. Within that one hour time span your asset will most likely fluctuate up and down in value (price) but this has no relevance on whether you end up in the money or out of the money. The only thing that matters is the actual value of the asset at the expiration of the Contract.

When your contract matures or expires if you’ve selected the correct option you will be considered in the money. Most ROI’s (Return on investment) for binary options range between 150% up to 185% of your initial investment. Here’s an example for you. Let’s say you purchased a call contract for $500 on a new hot tech company currently at $85 per share with a one-hour maturity date and a 160% payout. If at the expiration of that contract this new hot company was at $86 you would be in the money and would receive a return of $800. That’s a $300 return on your investment in a one-hour span. Can you see how this can excite your everyday trader? Obviously there is risk to every investment and you could have just as easily finished out of the money with no return on investment and a majority of your initial investment would be lost. You must due your research in order to make educated investment decisions.

Either way you view binary option trading it is a very exciting form of trading. Whether you are a part time recreational trader or a full-time investor, options trading can be very lucrative at any level of experience.

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