Stock Market Trading Tip - Personal Balanced Stock Portfolios Guard Against Recession

Creating an evenly balanced investment portfolio by dividing assets among such diverse classes as stocks both foreign and domestic, bonds, mutual funds, real estate, cash equivalents, and private equity can help guard against recessions. Determining how much to invest in each asset group depends upon the investor’s individual situation and future needs.

Throughout most of American history it has been more profitable to invest in stocks rather than bonds. However, there have been times when stocks are unattractive compared to other assets. For example, right before the tech bubble burst in late 1999 these stocks had prices so high earnings yields were non-existent. The wary investor could have weathered this situation by diversifying stock investments into real estate investments or other types proven to be less risky.

Making major changes in one’s portfolio should be done at various stages in the investor’s life. A young investor is less risk-averse, that is, he is less susceptible to market corrections for the simple fact that he has a lot of years left to make up for the losses. This investor is looking more to the long-term and wealth accumulation in the distant future. This investor’s portfolio would be mostly invested in the riskier assets such as carefully researched foreign and domestic stocks. Still, the young investor needs to have some balance to guard against market setbacks.

As retirement approaches, perhaps 10 years before, the investor should start diversifying holdings into income-oriented assets. These include government and corporate bonds that pay a fixed return rate on the investment. Certain blue chip stocks with long, proven track records of dividend payments can also be included as an income-oriented asset. Yearly, as retirement approaches, a larger percentage of the investor’s portfolio should be income-oriented until that total is 100% at retirement. After all, as an investor, the ultimate goal should be a comfortable retirement. Once at retirement the time to take risks is over and income must be guaranteed.

Things to Know Before Investing In Stock Market

Stock market can be a great source of income if you can trade wisely. Wise trading means that the investors are guided by wit and knowledge. The trade can be a real hell for the ones who take it as a gambling and go on staking their money randomly on the stocks. If you are making investments randomly, there is a very small chance that you will gain. Frequently, the little that you gain would be consumed in paying fee to the stock broker. Now the question arises, what do you need to know before you trade stocks?

There are lots of books available in the market that tells you about the shares, the share market and about other related topics. Before stepping into the share market you should read at least a few of them. The Internet also provides you a vast amount of information on every aspect of the stock trade. Such huge amount of the information available can sometimes be confusing to you. But use your brain to judge what, from the information provided, is required for you and rule out the confusing part as undesired. If you want to escape from the pain of acquiring knowledge, investing in the stock market would be just as good as throwing your money into the dustbin.

You should also know about yourself, i.e. what kind of an investor you are. Some people study the market more subtly whereas some others merely take an overall knowledge of the various aspects. Also see how much money you have to trade with and what is your source that gives you money for investing. If you are taking the stock trade as a full-time income and it is your only source of income, you will have to modulate your investment and trading strategy, so you can support yourself. If the stock trade is your part-time income, you must know exactly how much your source of income allows you to invest. It is often better to invest amounts you can manage to lose, comfortably, so that you do not come under pressure. For, the higher pressure you are under, the greater is your chance to lose.

The common term related to the stock exchange is yet another thing you need to know before investing. The terms such as bull, bear, pig etc. are the commonly used ones in the stock market. For example, the bull represents the investors that always expect the stocks to rise in their value and the bear represents the group that expects the opposite. This means that the bulls in the market have a positive attitude whereas the bears are always negative. Knowing these terms would be a great help for you when you go out to trade. After this, you want to know about the stock brokers. Do you want a full-service broker or a discount broker? Do you want an online stock broker or a traditional one? Analyze your trading strategy and decide finally, take some trading tips from the successful traders known to you.

Pros And Cons Of Stock Trading

Whenever a company issues stocks, it is an attempt to raise capital in order to invest in some endeavor. All over the world the stock market works on this basic premise. When a company needs money, it will simply offer the stock and the options thus purchased will entitle the stock holders to a percentage of the profits, once the entire concern gets going.

The Internet has made things much faster and removed all geographical restrictions. Trading now takes place 24/7 because some part of the world is always busy with business. The Internet also makes it easier for anyone to take part in stock trading. Leading stock market firms also send daily emails with tips to their customers on how the market is expected to move today.

Every one has heard about stock trading but very few people actually know of the advantages of getting involved. Like any business venture, stock trading is not all advantageous and it is important to know both the pros and cons of stock trading.

Pros

Instant Returns

Active stock trading means you get almost immediate return on investment. You get better returns in a short time as opposed to buying and holding your investment for years at a stretch.

Choice

Through the Internet you can trade in any part of the world. You have no restrictions on the type of stock you trade in or what currency you trade in. You can browse the Internet looking for constantly moving stocks.

Familiarity

You already know most of the companies offering stocks so you are not on strange ground. With a little time you can understand the micro dynamics to trade effectively.

Cons

Leverage

Stock trading leverage is very low when compared to Forex trading or futures trading.

Short selling

There is a rule against short selling that entails waiting before the price picks up again. This essentially limits the amount of profit a trader can make. There is no such constraint in Forex trading.

Costs

There is a substantial cost associated with stock trading that is unique to this market. This can quite often make stock trading impossible for almost everyone. You will need some amount of money before you can start investing in the stock market.

All trading – stock, Forex, futures, involves some amount of risk with their own sets of pros and cons. It is up to you as a trader to evaluate all these issues before you begin trading.

Stock Trading Terminology

For the uninitiated, reading the business section in a newspaper or reading business magazines can often be a bit mystifying. On one hand, everyone knows about stock trading in a very basic way and all the talk about bulls and bears can be confusing, even in light of the fact that a bullish market means share values are up while a bearish market indicates sluggishness or lower share values. The end result is that a simple and straightforward exercise of investing in the stock market appears to be complicated and full of strange notions that seem to make no sense.

Stock

The "stock" in stock market is basically a representation of the assets of a company. When you own stock you basically own the equivalent share in the company. Buying stock is equivalent to buying part-ownership of the company. The whole point of buying stock is that when the company makes a profit then you, as a stock holder, receive a percentage of the profits equivalent to your share in the company. The downside is that when a company goes into loss the stock value goes down.

Stock Option

Buying stock option gets you the right to buy or sell the stocks of the company within the time allocated to that option. Stock options are considered a lot safer by investors as you require much lower capital. You can make money real quick using stock options but there are still some risks of losing money equally fast if not faster.

Call

The process of buying stock options is known as "Call". Here is an example of the Call operation. Assume that a certain stock is selling for $90.00 per share. Your research informs you that after a period of one year, this stock will have appreciated by a significant amount. You will then purchase a 1-year contract for 100 stock options at $1.00 per share and the contract includes your estimated price of $100.00 per share. This gives you the right, without any obligation, to buy that many number of shares when the price hits $100.00 After 10 months, you discover that the price of the stock is at $120.00 per share. You can now purchase those stock options at the agreed price of $100.00 and immediately sell them off at $120.00. The extra $20 per share nets you the profit as per the number of options you included in the contract. Call makes a profit when share values go up.

Put

Following the above example, assume that your researches tell you the price is going to fall significantly after one year. This time, when you enter the contract, you get the right, but are not obliged to, sell your stock options within 1 year at the agreed price of $100.00. If, after 10-11 months the price is around $80.00, then you can sell your options at the contractual price of $100.00 and the $20.00 per share is the profit you make. Put makes a profit when share values fall.

There are many strategies to trading itself but all trading comes down to Put and Call.

Making Good Stock Picks

Every investor wonders from time to time about their investment strategy, and what changes they might want to make. The most frightening part of becoming a stock market investor can be choosing what stocks are good investments. There are any number of different ways to evaluate stocks, and many different methods of investing in the market. This article is designed to give you some basic fundamentals that will allow you to examine a stock and the company that offers it when you are doing market research, and hopefully make the key and smart moves that will allow you to profit from the strong investments that the stock market can offer.

Fundamental analysis is one of the most important investing tools to learn and is a simple principle to pick up, though it can be a tough one to master. At heart, fundamental analysis is nothing more than looking at a company from the most basic and fundamental financial levels. The goal of any method by which you look at and examine stocks is to figure out how much the stock is actually worth, and compare it to how much the market is currently valuing the stock at. On the most simplistic level, if the stock is worth more than the market says it is then you will want to buy it, believing that its value will go up. However if the stock is worth less or much less than the market says it is, then you will want to avoid buying it or even sell, because its price is sure to go down. People who believe in fundamental analysis believe that you can choose what stocks are good investments by trusting the market to correct itself and eventually value stocks at their true value.

Examining and analyzing stocks is all about the company earnings. The most important thing that investors will ask themselves about a stock is how much money and profit the company makes Of course, an equally important concern is how much money the company is likely to make in the future and how long it will keep making those profits. By comparing the earnings of a company to things like its share price, its potential growth, and the dividends, you can begin to make an informed decision on the true value of the stock.

There are many more considerations to make when conducting research into a stock but to cover them all would the scope of an article much longer than this one. The important thing to remember is that the individual investor has many tools at their disposal in the form of websites and brokerage firms that can make the process of learning about these things much quicker and easier. Through proper research and education, there is no reason that someone can't profit off of the stock market, and hopefully this will only be the beginning in learning just what stocks are good investments.

Learn Stock Trading - 3 Crucial Basics

The buying, holding, and selling of stocks is how investors make money in the stock market. If you are interested in learning stock trading, there are three crucial basics you should learn as soon as possible.

Broker Commissions Vary

Brokers have access to electronic markets; individual investors do not. For this reason, most investors have a broker or brokerage firm to handle trades on their behalf. The fee or commission for this service varies depending on the broker and the services being offered. Some brokers (discount brokers) handle the transaction and nothing else. Other brokers (full service or traditional brokers) offer investment advice and other services in addition to taking care of the trade. It is a good idea to compare services and commission fees prior to choosing a broker. Large commissions can cut your profits severely.

You Must Pay Income Tax

When you sell (trade) stocks, you have to pay capital gain tax on your profits. This is important to keep in mind while you are watching your investment and making the decision to sell. If the money you spend in brokerage commissions and taxes eats up all of your profits, trading the stock may not be the best idea. On the other hand, if your gain will be exceptionally large, you may want to consider making a quarterly estimated payment to the IRS to cover the tax.

Long Term Investments are Safest

Short term stock trading, also known as day trading, is a lot like gambling. It can be a very risky venture for the amateur investor. This method of stock trading should not be attempted by beginners. It is much safer to look to the long term. This means investing and leaving the money sit until a sizable profit has been made

How Information Technology Has Transformed the Operations of the Nigerian Stock Exchange

The Nigerian stock exchange NSE, also known as the Nigerian capital market has experienced a very robust growth in the last decade, in terms of activities, transaction types, volume and value of trade, number of listed companies and number of capital market operators. It has also witnessed a growing governmental presence in the area of bond issuance to finance development projects. The stock exchange is one of the most profitable ventures for wealth creation in Nigeria today. However, this was not the case in the previous decades when it was a case of delayed transactions coupled with bureaucratic modes of operations that had to be tolerated by Nigerian investors.

Information technology can be said to be the Messiah of the NSE because it has helped to curb a lot of fraudulent schemes from dubious stock brokerages and issuing houses as well as providing a transparent and more efficient mode of operation for this gold mining sector. This Messianic effect can be seen from the changes that have occurred in the recent past.

First, it was the introduction of the Central Securities Clearing System (CSCS). This is a subsidiary of the NSE that monitors the activities of the exchange in a computer based environment by serving as an intermediary to all transactions thereby providing a fair trading system for all investors. However, the NSE invested heavily in launching the Automatic Trading System (ATS). This system allows for automation of the capital market operations. As a result of this initiative, the transaction period was drastically reduced from an average of three months or more to a trading day plus three other working days.

After the automation of the stock exchange floor, the Securities Exchange Commission launched the implementation of the e-bonus, e-dividend, e-allotment and e-IPO.

The emergence of GSM operators did not only ease communication and provided job opportunities, it also had a great effect on the markets credibility, in the year 2006, a phone based alert program was introduced. This in turn increased the investors trust in the Nigerian capital market transactions.

The impact of Information Technology on the capital market would not be complete without a mention of the internet boom as communication with stockbrokers and shareholders have improved so also information like market capitalization, all share index, value and volume of stock traded, bulls and bears, are all available.