Choosing a Stockbroker

It is true that even though you can choose your own investments you must still use a stockbroker to execute the orders. 

You do not have to rely in their advice though it may be helpful. You can make your own selections but you will still require their services to invest. There was a time when you had no choice about the type of stockbroker to utilize. 

There was only one type of broker, the full service brokers, and they controlled the market. The commissions that they demanded for their services were very high but this was the industry standard. 

This contributed to the notion that the stock market and stock market investment were beyond the means of the average person and only for the very affluent.

The initial loss of control of the market by these full service brokerages occurred in 1975 and discount brokers emerged. 

They charged a fraction of the fees the full service brokers did and as such were a big hit on the market. 

They offered the same great services but were affordable to the average individual as the cost were significantly lower. Another great innovation was the introduction of the internet. This was a great innovation as there was greater trading efficiency as a result.

The overall effect of all the changes on the stock market was that individuals now had access to a ton of information that was never accessible to them previously. 

It is a debate however whether these avenues have in fact enhanced investments and made better investors. In the case of persons that do their homework and seek out the truth behind the hype the answer is a definitive yes. The investors out their can now choose the type of broker they require from the range available.

There are four categories of brokers. 

These are the discount/online broker, the discount broker that provides advice, the full service broker and the money manager. The discount/online broker is basically an order taker. They do not offer advice and will not tell you when to buy or sell a stock. There may be research available and other account management tools but the choice of investment in the stock market is entirely up to you.

The variation of the discount/online broker that assists customers is the nest type. They do not offer full consultation services but will have more research than order taking sites.  They will offer newsletters and investing tips but most likely not recommend particular stocks. You are not totally on your own with this option but you will still need to do a lot in terms of deciding on the best stock investment.

The full service broker will provide recommendations on specific stocks and the broker will also access your financial situation to determine your needs and investment options. This service is suitable for the investor that does not have the interest or time in making their investment decisions.

The money manager is made for the investor with a hefty investment sum. This broker will handle only significant portfolios and will invest and manage the entire account for a percentage of the assets under investment. This option can be expensive but very worthwhile in the long run.

Whichever option that you choose make sure it suits your purpose and that you are covered by the Securities Investor Protection Corporation. Ask about backups and other options in case of technical problems and ensure that your broker has your best interest at heart.

Learn more about the Ten Steps To Profitable Trading, the best trading strategy at http://besttradingstrategy.com

Choosing Stocks from a Consumer Perspective

Investing in the stock market sometimes boils down to one essential element, namely good choices. No matter how well we do our research, how often we buy and sell, or how much we pay experts for their tips and advice, without choosing stocks that represent value, we won’t succeed. Although some are good at predicting the direction of the market and timing the ups and downs, if they don’t purchase the right stocks, they will still meet with difficulties when trying to reap profits.

For that reason, some of the best paid people on Wall Street known primarily for their talent at picking stocks. Financial advisors give talks and write books and newsletters about how to choose stocks that will outperform the market, and most experts echo the same sentiment and agree that one of the best ways to judge a stock is from the point of view of a consumer. 

By using instincts we have already honed as ordinary shoppers, we can often ferret out information that even the most skilled and software-savvy market watchers miss. While they study analytical charts, earnings reports, and the stock exchange ticker tape, folks just like yourself actually do business with the companies they invest in, because their experience as a customer speaks volumes about the value of the company and its products and services.

Here are the kinds of things to look for as indicators of a company’s worth:

1) How popular is their product or service?

If everyone you know uses it, and is satisfied with such things as price, customer service, and reliability, the company is probably well situated among the competition.

2) Are the employees satisfied?

One of the best ways to judge a company is by talking to employees. Many companies put on a good façade, but underneath the fancy marketing is plenty of discontent. But if employees like a company – especially if they like it enough to buy stock in it – that’s a very good sign.

3) How well known are they? 

You may find a great startup company with all the trappings of success, but discover that it is lesser known. Many small or regional companies are popular in their own back yards, but the rest of the world may not yet know about them. Buying such unknowns can be a great way to invest in the next hot stock. If the fundamentals look good, sometimes being lesser known is a good thing for investors getting in on the ground floor.

4) If they went out of business, where would you go for similar products and services? 

If you can’t think of a convenient alternative, the company is probably in a niche market that enjoys customer loyalty and repeat business.

Shop around, and notice what you see and how each business makes you feel. Then trust your intuition. Make a list of companies that get your attention, and then call their shareholder relations department and ask for more details. By starting your list with companies you already have a first hand experience of, you raise the chances considerably that you will make smart choices.

Learn more about the Ten Steps To Profitable Trading, the best trading strategy at http://besttradingstrategy.com

Competition Between Online Brokers Reduces Commissions

There's much to learn about the online brokerage industry. Unfortunately, many investors learn this the hard way.

With so many options available, choosing the right broker is as crucial as making the right investment.

For years, investors were accustomed to paying $9.95 or higher per trade based on their account equity or trade activity. However, those days have come to an end.

When evaluating brokers, keep these factors in mind:

* How fast can the broker execute my trade?

* What type of technology does the broker use?

* What level of customer service does the broker provide?

* How much will the broker charge me per trade?

The competitive nature of the new online trading industry has led to lower commission rates for all investors. While well-known brokers such as Ameritrade or ETrade are still charging around $10 per trade, smaller firms can charge less than $3.

Investors willing to look beyond the industry leaders also may find that smaller brokers, such as RushTrade, have more to offer in other areas, including customer service, order routing and trading technology.

RushTrade has made a name for itself as a leader among online brokers when it comes to fast, reliable trading and customer service. With the increase in competition among online brokers, RushTrade has structured its commissions to attract every type of investor.

Learn more about the Ten Steps To Profitable Trading, the best trading strategy at http://besttradingstrategy.com

Constant Access with Stock Trading Online

In a world built on capital, we humans are forever vying for that next big money-maker. It seems that everybody forever desires more cash. Some strive for a senior education; others compete for that big promotion. No worry what the method, we all find a way of increasing our income. Investing is a customary form of making an added buck. With the obsession of the stock market in gorged affect, many of us chance on that up-and-coming business, or upright product that has the latent to fuel in value. We know that shares can sky-rocket in appraise if purchased at the right time. A blessing to many investment junkies is stock trading online. The stock market is now at your fingertips.

If you've never played the stock market, it may be time to inhibit it out. Many people make millions in selling and selling. Haven't you heard about the UPS shares? Those people got rich. It's amazing where a little chance can take you. With stock trading online somebody can have constant access to the market. Hop on your computer and inhibit out the websites that can help you with this process. It doesn't worry if you're looking to squander a little or invest a lot, there is something just waiting for you. The great thing about the Internet is the information. You can find an abundance of trading tips and truth about the stock market for free. This way when you commence stock trading online, you won't be in the dark.

We hope that the first part of this article as brought you a lot of much needed information on the subject at hand.

A few living back, my best friend hopped on the stock market bandwagon, and purchased some shares. When he began this little venture, he purchased on the recommendation of a partner who had been trading for years. After selling a number of shares at 10 bucks a pop, he was keen to go. It wasn't long before the shares had amplified to 60 bucks a pop. He took the innocent road and sold immediately. I think that this was a astute decision. He made the currency and puzzled nothing. With stock trading online, shrewd when to fold is key. 

Just like with gambling, you have to know when to currency out. Make some money, but don't get greedy. Before you know it, the shares have dropped below your purchase price. Stock trading online is a amazing way to veer a profit and make that added cash. Before you skip online and flinch investing, inhibit out some websites for figures and pointers on the contest of stock trading. A better understanding of the affair will pay off in the end.

Learn more about the Ten Steps To Profitable Trading, the best trading strategy at http://besttradingstrategy.com

Crush the Stock Market Without Trading Stocks

Do you look at the stock market and wish you'd bought some Google stock back when it was first offered for $104?  You'd have gained nearly 300% on that investment in the first year - that's roughly 9.2% each month!  That's a Wall Street level of success!

Imagine if I could show you an investment opportunity that could easily give you over 14% monthly?  What if 21.5% per month was within reach?  These yearly returns of anywhere from 500% to 1000% are possible for anyone who has the initiative to go out and get them.  That's 2-4X MORE than GOOGLE, one of the fastest growing stocks IN HISTORY!  We're talking about an investment opportunity where your returns will crush even the top gainers of the stock market.  Are you starting to get curious about how these numbers are attainable?

You can beat the stock game by playing a different game, the Foreign Exchange trading game.  Also referred to as Forex, the Foreign Exchange market is where one country's currency is traded for another's.  You can buy €1100 Euros for $1000 US Dollars while the exchange rate is at 1.1 Euros/Dollar.  Then you can sell the Euros back to dollars for $1100 (and a nice $100 profit) if the exchange rate moves to 1 Euro/Dollar.

$100 may be nice, but that 1% return on the $1000 doesn't sound like the path to your 500% returns, does it?  Here's how that 1% gets its power:  Leverage.  With Forex, if you have $300 in your account, you can control a $10,000 trade.  That makes your money a lot more powerful than the $1-$1 control you get in the stock market!  If you're thinking that you can lose more money this way too, just read on, you'll learn why that won't happen.

Consider this:  The Foreign Exchange market has a DAILY trading volume of around $1.5 trillion dollars.  That's 30 times larger than the combined volume of all U.S. equity markets (that includes the NASDAQ and NYSE).  This is an untapped resource, and you're about to learn five simple steps towards taking your share out of that market and into your pocket.

1. Get Educated!

As with all things, the more you know about trading, the more likely you are to success.  A little effort spent learning up front can save you hundreds and thousands of dollars of mistakes later.

2. Have a Strategy!

A simple repeatable system can turn trading into a low-risk mechanical system.  Know when you should trade, how often you should trade, how much money to spend per trade, when to cut your losses, and when to take your profits.  Push the right buttons at the right times, and you'll make money.

3. Practice Makes Perfect!

Most Forex brokers will allow you to sign up for a practice account, where you can trade imaginary money until you've solidified your winning strategy.  Don't risk your hard-earned cash until you've proven that you'll succeed

4. Scrape Together $300

That's 2 months of brown-bagging lunch instead of buying it; or a few months of cutting down on the daily coffee-shop visits.  If you start now, by the time you've learned a strategy and perfected it on your practice account, you'll be ready with your $300 to start earning real money.  More money is always better, but $300 is the minimum you'll need to get started.

5. Go Out and Succeed!

By the time you get to Step 5, you KNOW you will succeed, and you'll spring out of bed every day ready to make your profit.  Some days you'll lose a little money, but you won't worry.  Your strategy allows you to lose a little money from time to time; you proved that losing money periodically wasn't the end of the world when you practiced; you'll get up tomorrow and make it back by following your proven strategy.

Starting with your $300, if you made "Google Gains", you'd have $862 in a year.  That's not bad.  With Forex gains, though, you could easily turn your $300 into $1500-$3000 in a year!  Who need the stock market?!?

Saving the best for last, here's the shocking truth:  The 500-1000% yearly returns are possible, but with a smarter strategy you could turn your $300 into over $10,000 in less than a year without increasing your risks!  Best of all, you can do all of this over the Internet without leaving home.  That's 3000% while wearing pajamas.  With these kinds of returns, you could realistically quit your job and trade full-time!

If you could use more money if your life (and lets face it, we all can), you owe it to yourself to learn more about Foreign Exchange trading.

Learn more about the Ten Steps To Profitable Trading, the best trading strategy at http://besttradingstrategy.com

Day Trading Online in the UK

It is one of the strongest currencies in the world, but the whole economy is not as powerful. It fluctuates up and down, along with trends in privately and publicly-owned companies. England's economy has experienced some very high points, but has also experienced some low points as well.

No matter where you live, you must carefully consider your options before you try to earn a return on your investment; and England is no exception to that rule. But some people in the UK still like to take a risk with their money and one of these risks is day trading online.

Day trading online involves the process of buying and selling shares over the Internet at short notice. Day trading online has been seen by many as a way to get rich quick, but that isn't the half of it. Statistics show that online day traders are having a rough ride, with 70% of online day traders losing money. So if you are looking at getting into the world of online day trading, then you should know the risks that are attached to the service.

But when you are in the world of online day trading then you will get some excellent services given to you. One of these services is a chat room, where you can talk to other buyers and sellers. This is a good way to find out what the next big time company might be, but you have to know if this person is "share ramping," which is the process of talking up the shares artificially. So you have to take the risk of guessing if this person is correct or not and if the information hasn't been authorized.

These days, online trading websites are somewhat risky and can be dangerous. But if you are a professional when it comes to buying and selling shares, then you will know all about the risks and you can make yourself a tidy profit. Day trading online should not be used by beginners, but more used by people that are heavily experienced in the stock market world.

Learn more about the Ten Steps To Profitable Trading, the best trading strategy at http://besttradingstrategy.com

Day Trading Online in the United States

Day trading online in the United States has become a powerful trend in recent years. And while growth rates in the US have been sluggish in recent years, the US has still maintained a strong dollar, which is still used as the unquestioned international standard.

Unemployment rates have been better than where they are now, but consumer spending is at a normal pace.

But what does all of this have to do with the stock market?-

Surprisingly a lot. Macroeconomic trends are quite simply the sum of microeconomic decisions and realities. If the economy overall is suffering, there's a good chance that most firms are also experiencing slow growth rates, which will be reflected in share prices on the NASDAQ.

This also means that day traders will feel the strain; some may even avoid trading altogether out of a sense of despair, which may further lag growth rates.

Most of stock trading websites are actually based in America. So that means that you will always have a huge selection of companies to choose between for your stock trading services.

Day trading online in the USA is a big business and a lot of people setting up online companies are making a lot of money, often through sign-up and service fees. But the real winner can be the consumer--the one who signs up for the website: these people get into the online stock trading world and can make a real killing when they are buying and selling all the right kinds of stock.

But you do need to have some kind of knowledge about buying and selling stocks when you are taking part in online stock trading. Brokers are available to give you any advice when you need it; and if you are always failing to earn, then you should really give a broker a call, just to see if they can help you out of your losing streak.

USA is recognized by many as the home of the strongest and largest stock market. This is why foreign investors from around the world choose to invest a good amount of their money in US-based business. For you to make the most out of the US stock market, you need to be able to know when to buy and sell. 

If you do not know when to say that enough is enough for that share, then you should not be trading at all. A lot of people have exact strategies-technical or fundamental-to determine exactly when to buy and to trade and exactly how much to diversify to manage risk appropriately; and these are the people who are usually earning a steady income.

Learn more about the Ten Steps To Profitable Trading, the best trading strategy at http://besttradingstrategy.com

Dealing With Market Corrections: Ten Do’s and Don'ts

A correction is a beautiful thing, simply the flip side of a rally, big or small. Theoretically, even technically I'm told, corrections adjust equity prices to their actual value or “support levels”. In reality, it’s much easier than that. Prices go down because of speculator reactions to expectations of news, speculator reactions to actual news, and investor profit taking. The two former "becauses" are more potent than ever before because there is more "self directed" money out there than ever before. And therein lies the core of correctional beauty!  Mutual Fund unit holders rarely take profits but often take losses. Opportunities abound!

Here’s a list of ten things to do and/or to think about doing during corrections of any magnitude:

1. Your present Asset Allocation should have been tuned in to your goals and objectives. 

Resist the urge to decrease your Equity allocation because you expect a further fall in stock prices. That would be an attempt to time the market, which is (rather obviously) impossible. Proper Asset Allocation has nothing to do with market expectations.

2. Take a look at the past. 

There has never been a correction that has not proven to be a buying opportunity, so start collecting a diverse group of high quality, dividend paying, NYSE companies as they move lower in price. I start shopping at 20% below the 52-week high water mark, and the shelves are full.

3. Don’t hoard that “smart cash” you accumulated during the last rally, and don’t look back and get yourself agitated because you might buy some issues too soon. 

There are no crystal balls, and no place for hindsight in an investment strategy.

4. Take a look at the future. Nope, you can’t tell when the rally will come or how long it will last. 

If you are buying quality equities now (as you certainly could be) you will be able to love the rally even more than you did the last time… as you take yet another round of profits. Smiles broaden with each new realized gain, especially when most folk are still head scratchin’.

5. As (or if) the correction continues, buy more slowly as opposed to more quickly, and establish new positions incompletely. 

Hope for a short and steep decline, but prepare for a long one. There’s more to Shop at The Gap than meets the eye.

6. Your understanding and use of the Smart Cash concept has proven the wisdom of The Investor’s Creed. 

You should be out of cash while the market is still correcting. [It gets less and less scary each time.] As long your cash flow continues unabated, the change in market value is merely a perceptual issue.

7. Note that your Working Capital is still growing, in spite of falling prices, and examine your holdings for opportunities to average down on cost per share or to increase yield (on fixed income securities). 

Examine both fundamentals and price, lean hard on your experience, and don’t force the issue.

8. Identify new buying opportunities using a consistent set of rules, rally or correction. 

That way you will always know which of the two you are dealing with in spite of what the Wall Street propaganda mill spits out. Focus on value stocks; it’s just easier, as well as being less risky, and better for your peace of mind. Just think where you would be today had you heeded this advice years ago…

9. Examine your portfolio’s performance: with your asset allocation and investment objectives clearly in focus; in terms of market and interest rate cycles as opposed to calendar Quarters (never do that) and Years; and only with the use of the Working Capital Model, because it allows for your personal asset allocation. 

Remember, there is really no single index number to use for comparison purposes with a properly designed value portfolio.

10. Finally, ask your broker/advisor why your portfolio has not yet surpassed the levels it boasted five years ago.

If it has, say thank you and continue with what you’ve been doing. This one is like golf, if you claim a better score than the reality, you’ll eventually lose money.

11. One more thought to consider. So long as everything is down, there is nothing to worry about.

Corrections (of all types) will vary in depth and duration, and both characteristics are clearly visible only in institutional grade rear view mirrors. 

The short and deep ones are most lovable (kind of like men, I'm told); the long and slow ones are more difficult to deal with. 

Most corrections are "45s" (August and September, '05), and difficult to take advantage of with Mutual Funds. But amid all of this uncertainty, there is one indisputable fact: there has never been a correction that has not succumbed to the next rally... its more popular flip side. 

So smile through the hum drum Everydays of the correction, you just might meet Peggy Sue tomorrow.

Learn more about the Ten Steps To Profitable Trading, the best trading strategy at http://besttradingstrategy.com

Desperately Seeking Diversity, Simplicity

If you think choosing the right investments is complicated, you're not alone. Investors looking for simplicity and portfolio diversification are driving demand for all-in-one investment options.

According to Strategic Insights, a market research firm serving the mutual fund industry, more than two-thirds of the $150 billion that investors added to mutual funds in 2004 landed in asset allocation products.

So what exactly are these all-in-one investments? In a nutshell, they are broadly diversified, professionally managed funds that can serve as a complete portfolio. They come in primarily two flavors.

* Lifestyle or life-cycle funds focus on a particular level of risk. These can be an appropriate choice for investors who want a diversified core investment solution that offers a specific level of risk and potential reward.

* Age- or target-year-based funds target a specific investment time frame or goal. As each fund's target year approaches, its exposure to stocks (and corresponding risk) will decrease and its exposure to bonds and money market investments will increase to reduce risk and preserve capital. These funds can be suitable choices for investors seeking a core investment strategy for retirement planning or who have a set number of years to invest.

American Century currently offers both types. My Retirement Portfolios is a series of five age- or target-year-based funds, while One Choice Portfolios is a separate series of five risk-based funds.

Both portfolios are made up of American Century stock funds, bond funds and money market funds. The portfolios' managers adjust asset classes and weightings to emphasize investments they believe provide the most favorable outlook for achieving results.

Doug Lockwood is a certified financial planner for American Century Investments.

Ask for a prospectus that contains investment objectives, risks, charges and expenses, and other information that should be carefully read and considered before investing.

Learn more about the Ten Steps To Profitable Trading, the best trading strategy at http://besttradingstrategy.com

Do Any Companies Offer Free Online Stock Trading?

While some companies offer what they claim is "free online stock trading," no company can ever realistically offer a product for free, unless they are a non-profit organization with a stated goal to help bad stock traders learn how to trade better. And because no such organizations exist, you will have to trade with a company that charges you fees, whether it is explicitly or implicitly.

Companies that offer "free online stock trading" are generally offering free access to a members-only online stock trading site, which will allow you to use a range of stock trading analysis tools; it will also usually give you access to dozens of free stock tips from different sources, often including relevant newspaper clippings about publicly-owned companies.

If you opt for a "free online stock trading" company that gives you a free membership, that site will likely generate revenue by selling ad space or by charging commissions on trades. This means that your stock trading experience may be significantly inhibited by pop-ups, flashy ads, and biased information; or it may mean that you will have to pay excessive fees every time you make a trade.

On the other hand, some "free online stock trading" companies charge membership fees, but do not charge for trades. If you plan to make a lot of small stock trades each month, then you should consider opting for one of these companies, which will charge you each month, but wont require you to pay fees when you trade. However, on the other hand, if you plan to make few large trades, then you should consider selecting one of the online stock trading companies that will charge you per trade, rather than per month.

Keep in mind that there is no best solution to this problem for every person. The best solution for one trader may be completely different for you. This is why is it is crucial to inspect each deal in terms of what it will offer you personally as a trader.

Learn more about the Ten Steps To Profitable Trading, the best trading strategy at http://besttradingstrategy.com

Entities in the trading system in Indian Stock Markets

There are four entities in the trading system. Trading members, clearing members, professional clearing members and participants.

1. Trading members: Trading members are members of NSE. 

They can trade either on their own account or on behalf of their clients including participants. The exchange assigns a Trading member ID to each trading member. Each trading member can have more than one user. 

The number of users allowed for each trading member is notifi ed by the exchange from time to time. Each user of a trading member must be registered with the exchange and is assigned an unique user ID. The unique trading member ID functions as a reference for all orders/trades of different users. This ID is common for all users of a particular trading member. It is the responsibility of the trading member to maintain adequate control over persons having access to the firm’s User IDs.

2. Clearing members: Clearing members are members of NSCCL. 

They carry out risk management activities and confi rmation/inquiry of trades through the trading system.

3. Professional clearing members: A professional clearing members is a clearing member who is not a trading member. 

Typically, banks and custodians become professional clearing members and clear and settle for their trading members.

4. Participants: A participant is a client of trading members like financial institutions. 

These clientsmay trade through multiple trading members but settle through a single clearing member

Learn more about the Ten Steps To Profitable Trading, the best trading strategy at http://besttradingstrategy.com

Fair Value of A Common Stock

A lot of discussions have been devoted towards finding fair value of an investment. The goal of every investors is to find undervalued investment and sell it when it reaches fair value. Admittedly, this is the hardest part of investing. So, what is fair value? Fair value is a point where the price of an investment reflect its earning power.

Fair value is relative and it depends on other factors beyond the investors' control. In here, we will discuss on calculating fair value within our own boundary of control. In short, calculating fair value of an investment depends on the rate of return expected and the risk taken to achieve that return. Higher risk needs higher reward. It is quite simple.

So, what asset constitute lower risk investments? We can only compare. First thing that comes out of my mind is Certificate of Deposit (CD). You are guaranteed certain return (interest rate), if you can hold for a certain pre-determined time frame. You would never lose your principal at the end of the time frame.

The next low risk investment is Treasury Bond. This is the bond issued by the United States government, which is deemed to be safest in the world. There are certain risks associated with the small fluctuation in the bond price. However, if you held the bond until maturity, you are guaranteed certain rate of return. Your rate of return depends to certain extent on the price that you bought the bond at.

The next higher risk investment is buying common stock. This is what we are going to focus more here. It is considered higher risk than the two types of investments mentioned previously because you have a higher chance of losing money on your investments. Earlier, we established that higher risk needs higher reward. Therefore, stock investing requires a higher reward.

So, what does this have anything to do with fair value? Quite simply, the price of a common stock that we buy must gives us a higher annual return than bonds or CD. For example if a CD gives you a 3% return, treasury bonds give you a 4% return, then you would want your stock gives you a higher return of perhaps 6%.

What does it means for a stock to give investor a return of 6%? It never really say it, doesn't it? You are partly right. While it is not explicitly shown, you can do a little digging and find out how much the return of your stock investment would be. For example, if your Certificate of Deposit (CD) gives you a 2% annual return, for $ 100 of investment, you would earn $ 2 every year. Let's assume that you want your stock to give you a return of 6%, which is higher than CD or treasury bond. This implies for every $ 100 invested in common stock, it needs to give us a return of $ 6 annually.

Where can we get this information? You can get it on Yahoo! Finance or other financial publications. All we need to do is find the share price of a common stock and the profit per share (also known as earning per share) of that particular stock. Let's use an example to illustrate my point. Magna International Inc. (MGA) is expected to post a profit of $ 6.95 per share for fiscal year 2005. Recently, the share is trading at $ 73.00. The annual return of buying Magna stock is therefore $6.95 divided by its share price $ 73.00. This gives us a return of 9.5%.

Will Magna continue to give investors a 9.5 % return year after year? It depends. If the stock price rises, Magna will return less than 9.5 % annually. What else? Well, Magna might not constantly produce the same amount of profit year after year. It might even produce a loss! So, you see, stock investing is inherently risky because there are two moving part in the equation. Price of the common stock and the profits produced by the company itself. That is the reason why investor need to aim for higher return when choosing their stock investment.

All right. So, let's move on to the crucial thing in investing in common stock. What is the fair value of Magna stock assuming a constant profit of $ 6.95 per share? Personally, I assign fair value of a common stock to be at least 2% above the rate of Treasury bond. Please note that I am using the 10 year bond here. Recently, treasury bond can give us a 4 % return. Therefore, the fair value of Magna common stock is when it can give me a return of 6%

So, what is the fair value of Magna common stock in this case? For a profit of $ 6.95 per share, the fair value of Magna common stock is $115.80 per share. That's right. At $ 115.80 per share, Magna common stock will return investors 6% annually. Having said that, we should never buy a common stock at fair value. Why? Because our investing purpose is to make money. If we buy stocks at fair value, then when do we profit from it? Do we expect to sell it when it is overvalued? Sure, it would be nice if we can do that all the time. But to be conservative, let's not bank on our stocks reaching overvalued level.

There you go. I have explained how to calculate fair value in a common stock. Of course, the $ 6.95 per share profit figure is the expectation of profit compiled by Yahoo! Finance. It is not in any way an endorsement to buy Magna common stock. You should do your own calculation to verify that number.

Learn more about the Ten Steps To Profitable Trading, the best trading strategy at http://besttradingstrategy.com

Forex Trading Demystified

Forex involves the trading of currencies. It is the largest financial market in the world and has an estimated daily turnover of 1.9 trillion dollars. This turnover is larger than all the worlds’ stock market on any given day.

The forex market does not have a fixed exchange. The forex market is considered an over-the-counter (OTC) market. The forex market is completely electronic and trades are executed over the phone or on the Internet. Until 10 years ago the forex market was the preserve of large financial institutions. Now an ever-increasing amount of individual traders thanks to the advent of the Internet and an increasing amount of online forex brokers are trading forex.

Currencies are always traded in pairs. A typical pair would be EUR/USD (Euro over US dollars). The first currency is the base. The second currency is the counter currency. The pair can be viewed, as the amount of the secondary currency that is needed to buy 1 unit of the first currency. 

If you were to buy the above pair you would buy Euro and simultaneously selling US dollars. If the pair were sold the reverse would happen you would sell the Euro and buy the US dollar. This might sound confusing but simply think of the pair as one item and you are buying or selling one item. If you think the Euro will go up against the US dollar you buy the EUR/USD pair. If you think the EUR will decrease against the US dollar you sell the EUR/USD pair.

When you see forex quotes you will see two numbers. If we use the EUR/USD as an example you might see 1.2350/1.2355 the first number 1.2350 is the bid price and is the price traders are prepared to buy euros against the US dollar. The second number 1.2355 is the offer price and is the price traders are prepared to sell the EURO against the US dollar. The difference between the bid and the offer price is the called the spread. The spread for the major currencies is usually 3 to 5 pips (explained later).

The most common increment of currencies is the pip. If the EUR/USD moves from 1.2350 to 1.2351 that is one pip. A pip is the last decimal point of quotation. Most currencies quoted to 4 decimal points. The exception is the Yen, which is quoted to 2 decimal points eg 139.41. The term pip is just forex lingo so if a forex trader says the EURO has gone up 20 pips against the US dollar add 20 points to decimal part of EUR/USD pair.

Forex is traditionally traded in lots also referred to as contracts. The standard size for a lot is $100,000. In the last few a mini lot size of 10,000 dollars has been introduced and this has become increasing popular. Forex trading is leveraged with most forex brokers offering 1% margins. This means you can control one standard lot of $100000 with $1000. Typically you would need a minium of $2500 to open a standard size forex account.

A mini account can be opened with $300 with most forex brokers. To trade a one mini lot you need a margin of $100, which in turn controls $10000. If the currency goes up 1% and if you traded one mini lot of $10000 you would make $100 dollars or 100% of your original margin. Forex trading is a very lucrative market to get into and it is suggested that traders new to forex trading trade a mini account for an extended amount of time. Trading a mini account is a low cost entry to the forex market, as only $300 is required to open an account. You can still make money while you become more experienced in forex trading. You can trade one mini lot until you have made your first $100 dollars then start trading 2 mini lots. As you gain more experience you can trade standard sized lots.

Forex trading is becoming increasing popular with traders of other financial products. It can be traded in amounts a lot smaller than other financial products, which makes learning forex trading safer than other markets. Forex trading can be a very lucrative market, which no trader can dismiss.

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Go Stock Trade . com Primer: What is the stock market all about?

Thousands of people who have money in any type of account for their retirement can consider ourselves participating in the Stock market. 

But have you pondered about the functionality of how this interesting market works? Imagine being at a regular auction, where instead of nice bits such as cars and antiques are being bidded away, think of bits of public companies being auctioned away.

To make a less confusing analogy, think about the role of an auctioneer. The auctioneer's role is to get the highest and best price for each product. Well, the stock exchanges around the globe kinda operate in the same fashion. The auctioneer role, is called a Market Maker. In a stock sale, there is no stable, set price for stocks, but instead, setting the price is the role of the Market Maker. 

The price will fluctuate greatly, because the ying and yang of the market, the buyers and sellers, will bid on either the stock going lower, or higher. Usually when you see a stock price go up, it means that the buy price of a stock has increased. This is vice versa when a stock declines in value. 

Now I am sure you have seen visuals on the major news networks of how a stock floor looks. You know, the floor where tons of stark raving mad folks, scream numbers and look at monitors and make trades all day. The trading day starts at 9:30 in the morning Eastern Time, and stops at 4:00 in the afternoon Easter Time. Depending on business news, market forecasts, world events, and a few other things thrown in between, can dictate how much volume a market can have in a day.

The last couple of paragraphs have mentioned all of the particulars of two major markets, the New York Stock Exchange(NYSE) and the lesser known American Stock Exchange. But there is a third one too! It is called NASDAQ.

Now what makes NASDAQ quite unique from the other two, is that this market is controlled by computers. Despite the technological advances of this stock market, NASDAQ still has the conventional bidding water of NYSE and American Stock Exchange. The buyers and sellers have their own areas to buy and sell stock, and bid through a quote system called Level II. 

The great thing with stock trading, is that in order to be successful with trading stocks, you do not have to be in the pit, bidding like a madman on the hunt for their lives. Not at all! You can now use the very computer in your house, or go to a trading office if you live in a big city and trade stocks. Many different internet based brokerages are out there, and have plenty of materials to get you started on your way to becoming a great stocktrader!

PROFIT ON!

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An Industry Blueprint To Stocks And Shares

In this day and age, a lot of things have changed from how they used to be, which can be new and exciting for most.

Because of the large size of the stock market, beginner investors appear to feel overwhelmed as to where to even activate investing their money. To most people, the stock market presents a messy web of options but does not reveal the highway map of clarity to guide their way along way in their investment adventure. The key to investing in the stock market is to become as educated as it is possible so that you know exactly what is taking place at all times. This helps people to make plausible and sound decisions about their money, thus, dropping the stress involved with investing.

The usual person, when beginning to entertain the idea of investing in the stock market, falls into one of two categories. 

Class one is the gambler who feels that investing is definitely a form of betting and no question what they do, they are certain that they will drop money slightly than make money. It seems that this opinion of investing in stocks is either formed from friends and family that have been baffled by the stock market or private experience and lost money. 

If someone has personally made losses in the stock market, it is pretty evident that they were not educated enough at the time of their investment in the stock market. Therefore, they must become educated as to what exactly the stock market is as well as how its system works in order to become a successful investor. 

Class two, on the other hand, represents the “go-getter” investor, which is an individual who knows that they should invest into the stock market for the safety of their monetary future, but they have absolutely no idea where to begin. The “go-getters” lean towards avoiding their monetary decisions and leave it up to professionals; therefore, they are powerless to justify why they own a certain stock. A usual “go-getter” operates in blind faith, as one stock goes up in value, they more than likely will hold it. 

The “go-getter” is in poorer shape than the gambler in that they will invest like everyone else and then wonder why they receive an unsatisfactory or devastating outcome. This just proves that the typical person should become thoroughly educated about the stock market as well as stocks before investment takes place.

Essential to every economy is business...businesses that started out as small operations that have grown to become money making giants, raising capital by promoting stock in them to people who want to invest to make their futures financially secure. As small businesses start to grow, one of the supreme obstacles is generating enough money in order to develop into a superior operation. Businesses either scrounge the money in the form of a offer from a bank or venture capitalist, or someone that will invest money into a business in which they feel they will receive a high rate of return, or a reap from their investment into a business, in order to create the currency to expand. 

The most common choice for a business to gain money for the view of expansion is to take out a loan; however, there is no agreement that a bank will offer money to any given business.

What we have explored up to now is the most important information you need to know. Now, let’s dig a little deeper.

In this case, business owners roam to the stock market for help in the form of issuing stocks. Firm owners relinquish a tiny fraction of control over their business and in reciprocation; the stock market provides that business money that does not have to be salaried back, in order to guarantee expansion. 

As an added bonus, the business is permitted to “go public,” a saying that means a brand is selling stocks for itself for the first time, so that business owners no longer are required to borrow money from banks because they can merely use their own stocks for getting monies to use for expansion. Thus, as the business grows and sells their stocks to people, the better chance a sponsor has on gaining a return on their investment as opposed to a loss.

As an investor, it is to your advantage to efficiently study each and every business in which you propose to hold stocks. The more facts you know about any certain business, the easier it is to make a plausible decision as to whether you should hold stocks or want a different business in which to work with.

Try searching for a particular keyword from the title of this article on your search engine and you are sure to find a wealth of knowledge.

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