Investment Basics » How To

Importance of Financial Statement Analysis

GuestPoster — Wed, 18 Aug 2010 00:59:05 +0000

It is really important that every investor understands the investment basics of how to analyze corporate financial statements. You shouldn’t be investing in a stock if you don’t know how to read their underlying financials. It’s really fundamental in understanding the stock market and how it works.

Financial statement analysis is the backbone of understanding how a company functions and how it performs. The numbers tell the true story of what is really going on in a company. If you don’t know how to read a company’s financial statement, then you really don’t understand how to evaluate a company and it’s stock.

For example, a fundamental way to invest in stocks is to do value investing. This is a method that starts out with analyzing a company’s financial statements. You look at their numbers and first determine how much that company is worth. It may be worth $100 million, $1 billion or $2 billion. Without understanding their financials, you can’t determine how much they are worth.

Next you look at their market cap, which is the measure of what the stock market thinks it is worth. If you think the company is worth $1 billion and the stock market thinks it is worth $800 million, i.e. the market cap, then you have a winner. But you can’t come to that conclusion if you don’t know what the numbers say in the beginning.

If your stock investment strategy does not look at how much a company is worth based on financial statement analysis, you are missing a big piece of the puzzle. Even traders have a sense of how much a company is worth when they are trading them.

Understanding financial statements is a huge step to understanding stocks and the companies that are attached to them. The numbers tell a story of how they are really doing, in spite of press releases, CEO speeches or analysts’ comments.

Determining How Much Money You Should Invest in Stocks

GuestPoster — Wed, 21 Jul 2010 16:11:03 +0000

You have probably heard about the ups and downs that the stock market has had in recent years if you have been listening to the news. Before you jump into buying stocks online, it is important therefore for you to determine not only how much of your money you should use for other types of investments, but also how much is safe to have in the stock market.

Your age and investment strategy are two factors that determine the amount of money you are going to invest in stocks. You should be willing to make adjustments as time goes by which means there will be different strategies you should use as you move up in years.

Because you will run out of the years that you will need to recoup any losses that you may suffer, you will want to take fewer risks the older you get. If you are an older investor, it would be wise to put your money in safer investments such as T-bills, mutual funds, and other investments that carry a minimum risk; on the other hand, if you are a young, you might want to invest most of your money in stocks that you have taken the time to research.

Two additional factors that you will need to determine about yourself are whether or not you will be able to deal with the daily fluctuations of the stock market and how risk-averse you are. If you don’t like seeing your hard earned money go down the drain, then stock investing might not be the right kind of investment for you. Even if you are good at identifying the best stocks to buy right now, you will always have your money at risk which is uncomfortable for many people.

Your investment strategies should match the different stages of life that you will go through. In order to determine how much of your money you want to invest during the different stages of your life, it’s a good idea to take some time to research the various investment strategies that are out there.

How Are Stocks Traded?

GuestPoster — Mon, 19 Jul 2010 22:41:05 +0000

Investing in stocks is not that hard. If you are trying to imagine yourself collecting pieces of certificates that confirm your percentage of ownership in a certain company then you can breathe easy now. Selling and buying of stocks do not work like that. You don’t have to shout on a trading floor to get the stocks you want.

Before we start on explaining the trading of stocks and how you can purchase them, first we need to know what stocks are. Stocks are one’s ownership in a company. If one buys stock in a company, he will have a piece of the whole. The more stocks you have, the bigger the ownership. Stocks can also be called in different names such as share or equity. It can also be of different types such as preferred and common stocks. Being an owner of a stock entitles you to the earnings of the company based on your ownership percentage. Usually these are just small amounts but if they are invested as long term stocks then the returns are usually higher because the company has time to mature.

Now, due to the upgrading of technology, people don’t go around handing their certificates to be able to sell them. These are now in the form of electronic stocks called holding shares. This will make the transactions easier by just clicking the mouse or phoning the company that you are selling your shares. They are placed on sophisticated exchange markets and it facilitates the passing of the stocks from one hand to another. There are many exchange markets all over the world but the biggest and famous ones are the American markets like the New York Stock Exchange and NASDAQ.

We get to the purchasing phase. Stocks can be bought in two ways. First is the use of a brokerage. These are firms that you could run to in case you need help on the investing aspect. Some can be expensive because they give you a full service by giving personal advice and assisting you in terms of managing your portfolios. There are cheaper ones that are called discount brokers. You’re basically on your own however. No one is going to tell you which are the undervalued stock picks.

Other ways to buy them are by dividend reinvestment plans (DRIPs) and direct investment plans (DIPs). These are individual plans by the companies allowing the stockholder to buy the stocks directly in the company. It is advisable to purchase to them at steady intervals if you are into investing small amounts. These plans cost minimally compared to the brokerage.

There many ways you can put your money in and we are sure that there are many open markets that will take you no matter what your portfolios may be. Learn to balance your stocks and see where all it goes.

Learning How To Invest

admin — Wed, 02 Sep 2009 17:46:06 +0000

Indeed, learning how to invest in stock market is as bewildering as studying space science. A lot of considerations should be factored in by the new investor. By way of preliminary discussion, in learning how to invest, consider where people generally have money when they retire.

Where I should not put my money?

There are a hundred horrible ways in investing your money. We will not further into that in greater detail here however I will give you with a short enumeration that has financially injured a lot of people. The most horrible culprits that investing for beginners fall into are businesses that engage in life insurance and annuities. Do not buy these. Life insurance is not medical insurance. The next worst place to invest is savings accounts with financial institutions such as banks, bank brokerages, middle class brokerages and small cap stocks.

Rule #1

A lot of people, when they retire, have most of their resources tied up in their own home. The primordial rule of thumb in learning how to invest your money is to buy your own home. If you already have a home, purchase a rental property. It is very probable that lots of individuals can own several houses by observing a lifetime of studied effort and fiscal discipline.

Rule #2

When individuals retire, their next most salient source of funds is either a 401k loans, 403b, Roth IRAs, and even annuities The idea is to set aside at least ten percent of your gross salary into a 401k, 403b, or IRA. Go over at the taxes since it is not always to your advantage to optimize the 401k. Maybe it is ideal to have a combination of IRA and 401k. You can also look into a self directed IRA which will give you full control of what you are investing into.

Rule #3

Procure a good health insurance. Or if you can, stay healthy. Health care fees are insanely high. A lot of people spend a huge chunk of their savings, in retirement and on health care. Medical expenses nowadays has reached unimaginable proportions. Therefore, getting a good health insurance can spare you from further draining of your resources.

Rule #4

Set up an account with a reputable discount brokerage firm. They have brokers that will assist you with a range of financial products. Some of these discount brokerages are accessible twenty four hours a day. They do not really provide some recommendations however they can explain the products very well. The professional fees exacted are a lot less than full service brokers. It is in this firm that you will have access to a host of investment tools such retirement calculators, investment research, IRAs, mutual funds, and lot of other things.

Indeed, these professional people can help new investors learn the stock market investing basics and how to invest properly. You just have to scout for reputable discount brokerage firms with tested credibility and integrity. Beware of those falsely representing dubious qualifications.

How to Make Money in the Stock Market

admin — Mon, 20 Apr 2009 04:43:21 +0000

To achieve success and lots of money in stock market, you either have to become a financial guru yourself or to get professional help from a stock market mentor or a real successful financial expert. They will teach you good stock market principles on how to make money in the stock market. Stock market is such an unpredictable and roller coaster place that there is no place for half-expert or financial pretenders.

The naked reality is that only a small portion of trained and savvy investors rake in disproportionate big amount of return, many times at the expense of the other investors. But these few people know how to make money in the stock market. Is it not a disparagement to “Wall Street expert” professional title when a number of these so called “expert pretenders did not make a killing nor even achieved a breakeven in the investment.

You Need an Investment Strategy

A lot of investment strategies like the growth stocks investing are reputed to be risky. Momentum investing or day trading strategies are typically recognized to be very risky endeavors that can dissipate life long savings over night.

Indeed there is no such thing as free lunch. While those riskier strategies can yield high gains in relative short term, however in the long run, a risky method is in all likelihood to make a lot of individuals poorer rather than richer. Gigantic short term gain is not the way on how to make money in the stock market. It is simply a dangerous stock market bait to entice the inexperienced investor into the market. Desiring for that quick satisfaction of big short term gain overnight via speculation is just an ideal ingredient for a disaster ahead.

Value mutual funds are generally reputed to have lesser unpredictability as opposed to growth mutual funds. A lot of industry and academic research have revealed that value stocks as a group did so much better in fact far better as compared to growth stocks in bear market. A lot of technology and internet now tagged as “growth stocks” lost 90% to 99% of value in just a short period of time after 2000 while a host of value stocks soar during the same period of time. Indeed, investment in value mutual funds is the way on how to make money in the stock market.

Truth to tell, the single most significant element to achieve high investment performance in the long run is to keep margin of safety of an investment portfolio. No less than the financial guru Warren Buffet once quote

Rule No.1: Never lose money.

Rule No.2: Never forget rule No.1.

This financial dictum should guide investors so they can rake in more profit.

How To Become A Business Success

admin — Thu, 29 Jan 2009 04:02:03 +0000

Through observing business people who have been successful, and how they achieved their success, there are a number of factors that must be present for business success to occur. These success factors can be condensed into a simple formula:

Success = Startup Business Person + Product / Service + Market

To truely understand this formula, you must first ask yourself what is success? The definition of success depends on what you want to get out of the venture, that is, what your goals are. True success usually means creating a viable entity ( business ) that returns its investment also earns your a nice profit.

Appropriate and realistic goals include to be challenged, to achieve, again to build something good. For example, your idea of success could be to earn $100, 000 a year from your home business so that you can replace your full ticks job income. Ultimately, a successful startup business person is someone who opens, manages also runs a successful startup business and can repeat the process. This is someone who has accepted the responsibility and learned how the job is done and knows truely how to become a business success.

Successful Startup Businesses

Successful startup business people usually always start small but luxuriate in business. They try repeatedly until they achieve the success they are looking for. Moreover, most of all, they possess a positive mental attitude.

They have learned to emulate success. Do you know what emulate means? To emulate means to attempt to equal or surpass. In discrepant words, if you were to attempt to emulate someone else’s success, you would imitate them and as you gained further knowledge and strength, you would attempt to do better than them. Remember that emulation takes things apart step supplementary than imitate.

The next part of the formula is “Product / Service”. Without something to sell, there can be no business. Generally, the elbow grease or service needs to be of a high quality.

The last component of the formula is “Market”. A successful business person knows who their market is and how to reach it string the most cost effective manner. The actual product market is defined as the persons who want again are prepared to pay thanks to the product or service.

I would now like to run through with you what I study are the basic principles of home, small or online business success.

You need to have a product or service that will generate enough income to cover all your business expenses and give you a satisfactory wage. A friend of mine once spoke that employment is only about two things: satisfying customers and making a profit. A effortless statement but very true.