Investing 101

A dividend reinvestment plan (DRIP) allows shareholders to reinvest their dividends in additional stock rather than receiving them in cash. These plans are offered directly by companies or through agents acting on behalf of the corporation. In the former case, a company issues new shares in lieu of a cash dividend. You also have the option of purchasing additional shares from the company. The advantage is that you pay no brokerage fees, although some companies charge fees for this service. The other type of plan is offered by agents, such as banks, that collect the dividends and offer additional shares to shareholders who sign up for the plan. The bank pools the cash from dividends and purchases the stock in the secondary market. Investors ... [read full story]

Making mistakes is part of the learning process for all investors, but all too often, it's plain old common sense that separates a successful investor from a poor one. At the same time, nearly all investors, new or experienced, have fallen astray from common sense and made a mistake or two. Being perfect may be impossible, but knowing some of common investing errors can help deter you from going down the well-traveled, yet rocky path of losses. One of the best ways to become a better investor is to learn from other people's mistakes. Based on this experience, the most important advice anyone can offer to investors is to: Have an investment plan. Know why you are buying a stock, and know what ... [read full story]

Ready to take the leap into the World of Investing? Before doing so, here is a ten-item investor checklist that will help you in the planning stages before simply jumping right into stock market trading or investing. Consider these points carefully within the framework of who you are and what you want to accomplish as an investor.      Are You Willing to Make the Commitment? This is the single most important point on the list. If you can’t make the commitment to begin your plan and, most important, to stay with it for at least several years, then you may as well take your money and gamble with it (see Investment Gambling). Odds are that you won’t be successful as ... [read full story]

Saving and investing are two unique concepts, and it's important to understand the difference between them and the need for each. In simple economies, there is little distinction between savings vs investments. One saves by reducing present consumption, while he invests in the hope of increasing future consumption. Therefore, a fisherman who spares a fish for the next catch reduces his present consumption in the hope of increasing it in the future. Most of the people probably have savings accounts with ATMs to access their hard-earned cash and be able to store away any extra cash in a place a little safer than a mattress. A few of you may even have some stocks or bonds. Let me explain why while a savings account ... [read full story]

You need to know some unforgettable investment basics before you enter the world of investing in stocks. The stock market is a field dominated by savvy stock market investors who know the ins-and-outs of the market. For people who are not 'on the inside', the stock market can be a very intimidating and dangerous place. Don't even consider "tips" that tell you about "hot stocks". Instead, consider the source. There are many people in the market who put in all their time and effort in promoting certain stocks. They do this because they have their money invested in those stocks. If they can get enough people to buy the stock and they can get the stock price to ... [read full story]

Investment objectives are like a rudder on a ship. The choice of which investments to hold is determined by your objectives. In other words, know what you want to accomplish from your investments allows you to manage your portfolio more effectively. In addition, your objectives determine the purpose and time period for the investments. For instance, you may be saving for retirement in five years, while your neighbor may be saving for retirement in 30 years. Although the objectives are the same, the time period, level of risk tolerance, and types of investments held will be very different. The first step in any plan is to determine short-range, medium-range, and long-range objectives. For example, a young family with small children may ... [read full story]

Wealth Warning - It has been determined that listening to the news may be bad for your wealth! From a very early age we are bombarded with news from television, radio and newspapers. We live in the 'Information Age' and are presented with a mass of information any time of the day or night. Most of the news appears to be correct and entertaining, and usually you see no reason to challenge it. It may be biased, or not even correct, but usually you see no reason why you should be bothered to challenge it. Printed news is basically collected to sell newspapers and ultimately newspaper advertising. The human mind tends to be open to suggestion. You want to believe all the news, ... [read full story]

6 Quick Rules for Successful Stock Investing Successful investing depends on personal discipline, not on whether the crowd agrees or disagrees with you. That's why it's crucial to have a solid well-grounded investing philosophy. Don't buy a stock unless you understand the business inside and out. Taking the time to investigate a company before you buy the shares will help you avoid the biggest mistakes. Focus on companies with wide economic moats that can help them fend off competitors. If you can identify why a company keeps competitors at bay and consistently generates above-average profits, you've identified the source of its economic moat. ... [read full story]

How Does Investing Differ from Saving? Investing is the proactive use of your money to make more money or, to say it another way, it is your money working for you. Investing is different from saving. Saving is a passive activity, even though it uses the same principle of compounding. Saving is more focused on safety of principal (the amount you start out with) and less concerned with return. Your focus in investing is on return and can run the spectrum from conservative to very aggressive in terms of risk. One way you measure results is by the expected return weighed against the anticipated risks. It is easy to slip into an unnecessarily complex discussion about whether a particular financial transaction ... [read full story]