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Stock Investing Mistakes That Make A Difference

By: Bill Dufrane

The process of investing is a great way for you to earn potential income. Hardly any people have the knowledge to be able to suceed, however, so many people rely upon brokerages to manage their portfolio for them. There are, however, some common investing mistakes that people make that can result in huge losses and missed opportunities. Here are a list of the absolute worst mistakes to avoid when investing in the stock market.

Mistake #1 - Invest When You Are Old

You are never too young to start investing in the stock market - in fact, it’s recommended to get started sooner. The perception of investing is that it is reserved for older, financially established people who can invest large sums of money. This is a misconception that is limiting people from tapping into the power of investing. Waiting just ten years can make a huge difference in the total gains that one can make over their lifetime. For example, investing just $2000 a year (thats just $170 a month) starting at the age of 26 can yield $2,114,379 by the time you are 75. This is with an Annual Return Rate (ARR) of 10% per year steady through the life of the investment. The same investment, with the same ARR, made ten years later at the age of 36 will result in a return of only $802,895 at the age of 75. That is a 1. 3 million dollar difference. If you are not able to invest as much as $160 a month, set aside $25 per month. Even this small amount can have a large impact over time.

Mistake #2 - Not Understanding The Company

It is shocking that many people will put more time and research into choosing an MP3 player or home theater system than they will researching the stocks they will invest in. It is imperative that you take the time to understand the financial history of the companies you wish to have shares with. Make sure that you understand what you are buying and how it will benefit you in the long run. It is also important to keep in mind that you must remain objective when choosing stocks. Stocks that you have researched well and carefully selected are more likely to increase than ones you choose based on a feeling. Put your emotions aside and consider your options carefully. Taking time to research and investigate is also important when choosing your financial advisor. Consider meeting with a few candidates and evaluating their approach to investing. If you are meeting with someone on a recommendation, make sure that the person who recommended the advisor is someone who is qualified to do so.

Mistake #3 - Gambling On Stocks

Another common mistake is confusing gambling or speculating with investing. Investing in stocks is part of a long- range financial picture and not a get- rich- quick scheme. While there certainly are high yield quick return programs out there, it is wise to limit your participation in those programs. Day trading is one of these types of programs. When someone is involved in day trading they trade very rapidly in and out of stocks in order to profit daily from marginal changes in the market.

This practice may seem easy to profit from but it actually results in more losses for investors than gains. Similarly, some try investing over a short period of time in very risky stocks. A short- term investment of six months to a year in a hot stock does not belong in a well- thought out financial plan. True investing should be done in quality companies over a period of several years. Finally, listening to someone who has a hot tip is a quick way to lose a lot of your investment. Research any tips you get carefully and only invest if the numbers pan out, no matter how much others insist that this is the stock to have.

Mistake #4 - Putting All Your Eggs In One Basket

Don’t underestimate this old addage. In any portfolio, you will want to diversify your holdings. Additionally, having too much stock in one specific industry can also be a recipe for disaster when the market changes. Spread your money over several different companies and different industries. That way there would have to be some catastropic disaster in order for you to lose all your money.

Article Source: http://www.noviceinvesting.com/Article

For more great stocks related articles and resources check out mutualfundadvice.info

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The Complete Lowdown On Savings Bonds.

By: Nick P. Bentley

With a financial plan in place you can start to invest in your childs future! These days, saving for your childs education is harder than ever. The price of an education has sky rocketed over the past two decades. So what are your options when considering how to save for you childrens education? Savings bonds might be your answer.

United States Savings Bonds can rightly add to your childs education savings. There are various other investment opportunities and a lot of of them may promise higher rates but as of late seen in the market you have to be doubly careful when investing in anything let alone your childs future. Savings bonds offer diversification to your savings plan and tend to be safer than several of the other options.

Most education savings plans contain a combination of stocks, mutual funds, certificates of deposit, education IRAs, as well as cash. The reasoning for this is that the more places you have the money spread out the higher your return should be. This diversified approach is one that most financial advisors recommend. Savings bonds can provide a reliable, steady-growth option with significant tax advantages if they are invested correctly.

They are considered a safe, secure investment because the United States government backs them, however with a growing national deficient there has been some debate on this front. It is vital to sit down with a good financial advisor and talk about what investing in U.S. Savings Bonds means.

Another benefit to this type of investment is that they are designed never to reduce in value. Unlike other investments, savings bonds appear to be a solid investment. The other advantage touted by several is that savings bonds also have tax advantages. Interest on savings bonds is always exempt from state and local income taxes and allows some or all interest to be excluded from federal income tax, this in an incentive for many as opposed to interest bearing savings accounts and other investments.

Income limitations such as age and other restrictions apply to the person claiming the tax exclusion and eligible education expenses that are considered are tuition and fees paid to colleges, universities and vocational. A parent who doesnt meet the income limits for this tax exclusion can and should consider buying savings bonds in the name of the child.

Consider that they can be a wonderful addition to your education fund for your child. For more information on how to invest in savings bonds and what is involved in making such an investment contact your local IRS office or seek out a skilled financial advisor.

Article Source: http://www.noviceinvesting.com/Article

Nick P. Bentley provides readers with up-to-date commentaries, articles, and reviews for investment, business as well as other related information.

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Making Your Money Grow In The Stock Market

By: Joe Goertz

One way of making your money grow is investing in the stock market. Stocks are how companies grow without securing bank loans. The investor buys the company stock (shares) and receives interest in the form of stock dividends. Share holders can affect the operation of a company. Each year, there is a share holders meeting and different issues are presented for the share holders to vote on. The greater the number of shares that an investor has, the greater the number of votes the stock holder can exercise.

There are several categories of stocks. Income stocks provide revenue to the stock holders in the form of dividends. Growth stocks are shares sold by companies that reinvest their profits to increase the size of the company. You can invest in stocks online, through stock market investors or directly, as in the case of Coca Cola and a number of other companies. Some companies provide their employees with stock options allowing them to purchase stocks at a given price for a particular period of time. There are also Over the Counter Stocks. These are not listed on any exchange and are sold by smaller, riskier companies that do not meet the requirements of the exchanges.

There are a number of reasons why stocks rise and fall in value. If a company is doing well, the value of a stock will increase. Conversely, if a company is not doing well, its stock prices may fall. Other factors affect the market value of shares. The price of crude oil will affect the market value. Disasters or wars will force prices downward. The introduction of new federal regulations for an industry will have an impact, depending on how the legislation affects production. Changes in company management also have an affect on stock prices.

Stock brokers buy and sell stocks on behalf of investors. They also provide information to their clients regarding the best times to buy and sell based on the market value of the stocks and whether they are rising or falling in value. Today anyone can be a stock broker thanks to the internet. Investment companies permit their clients to use their services to research a stock or give advice on buying and selling. The investor is then able to purchase or sell stocks online at a cost of so much per trade.

Everyday the stock averages are compiled and made public. The Dow Jones Industrial Average provides details on 30 large industrial stocks, including General Motors, Goodyear, IBM and Exxon. The Standard and Poor 500 Index provides averages for 500 large companies. There are three major stock exchanges in the United States. These include NASDAQ (National Association of Securities Dealers Automated Quotations), Amex (American Stock Exchange) and the New York Stock Exchange.

The Securities and Exchange Commission (SEC) protect investors; maintains fair, orderly, and efficient markets; and facilitates capital formation. It mandates that companies provide financial information to individuals before they buy stock and to continue providing relevant financial information as long as the investor holds the stock. The SEC also oversees securities exchanges, securities brokers and dealers, investment advisors and mutual funds. The SEC has an obligation to enforce the nations securities laws. Each year hundreds of actions are taken against individuals and companies for insider trading, accounting fraud, and providing false or misleading information about securities and the companies that issue them.

The SEC works closely with Congress, other federal departments and agencies, the stock exchanges, state securities regulators, and various private sector organizations.

Article Source: http://www.noviceinvesting.com/Article

Read more Investment related articles at: investing-magazine.com

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Stocks little moved in light trading (AP via Yahoo! News)
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Why are Bonds Losing Value?

By: Thomas Mullooly

We know that bond prices, like anything else with a price, can be tracked on a point and figure chart. We can also monitor the relative strength of bonds, just like we do with stocks. Also, when bonds in general gave a relative strength sell signal over two years ago, we knew that this group would likely perform poorly, when compared with the rest of the overall market.

Its important to know that a large rise in rates can be just as devastating or catastrophic as a stock market crash to many investors. Especially investors who blindly follow computerized asset allocation models. But WHY is this all happening? And why NOW? Lets face it; the Fed has been raising rates for well over a year now! Why didnt bonds start collapsing back then?

Could it be there is no confidence in the new Fed Chairman? Could it be a proxy on the current Presidents administration? Could it be a resurgence of inflation? Could it be the ongoing struggle between the dollar and the other currencies around the world? Could it be the fact we are getting mixed signals about the economywhere the man on the street sees no improvement, but yet, economists see signs things are picking up?
Maybe it is a combination of all of these reasons!

Perhaps it is something so very simple and basic that market pundits just keep missing it! Maybe it is simply the fact that more people are selling bonds than buying bonds, which pushes prices down.

Look, when too many sellers appear, in any market, prices must fall. That is true whether you are selling fruit on the corner, selling all your baseball cards on Ebayor if you are selling bonds.

Butmost importantly, it DOES NOT MATTER why bond prices are falling and interest rates are climbing. Ill say that again, it DOES NOT MATTER what the reason is for these price changes. What matters is what you will need to do about it.

You see, the bond market, compared to the stock market, can sometimes be like the Wild West. The stock market has trading collars and curbs put in place since 1987 to avoid meltdowns like we saw on October 19th, 1987. The bond market has no such limitations. And dont forget, there are no stop orders or limit orders to help dry up the outstanding demand or supply.

Its a lot like that scene at the end of the movie Trading Places when Dan Ackroyd and Eddie Murphy are trading futures on frozen concentrate orange juice. When everyone wants to sell, it becomes frenzywith no end in sight. With little or no stability in prices.

A lot of people just dont understand this! Selling a bond can be like selling your home. When you want to sell a bond, there is rarely a listed market. So you need to contact a broker. They will come up with an offer price to buy your bond from you. This price has to work for you, or you wont sell. But it also has to work for themthey will often turn around quickly and offer it elsewhere, in an effort to make a profitable trade.

There are times when firms will not want to buy a bond that is being offered around by another broker. So they will enter an extremely low offer to buy the bond, not a serious offer. But when a firm really needs to unload a particular bond, it has to take these bids, just to move a bond. So, once the word is out that XYZs bonds just traded at a severe discount, all bonds of that issue will often begin to slide as well. This is how chaos begins in bond markets. The moves can be sudden, and they can be violentboth up and down!

Its been a while since the bond market has experienced some real volatility. Hopefully we will not experience that, but we need to be prepared for the chance that we might.

Article Source: http://www.noviceinvesting.com/Article

Thomas Mullooly, President of Mullooly Asset Management, works one on one with individuals so they can regain control of their investments. Tom’s popular email alerts help folks to reduce the risks in their portfolios. To learn how to stop making simple investing mistakes and to sign up for Tom’s email alerts, visit www.mullooly.net, today!

Stocks decline in late afternoon trading (AP via Yahoo! News)
Stocks pulled back Thursday after economic data pointing to a slowing economy and weakness in regional manufacturing weighed on investor sentiment in light trading ahead of the holiday weekend.

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