The Mad Money Analyst

Financial Review - August 7, 2007

noreply@blogger.com (Money Analyst) — Tue, 07 Aug 2007 14:09:00 +0000

Below is the bi-monthly financial review covering topics from credit to investing- Many different writers with many opinions. Read. Learn. Succeed.

Tracy Coenen presents Dateline NBC investigates identity theft posted at FRAUDfiles.

Jimmy Atkinson presents How Many Times Has Your Personal Data Been Stolen This Year? posted at Ask the Advisor.

Jason Elder presents Offshore Options For Bankrupts And Those With Poor Credit posted at A Bankruptcy Lawyer's Blog, saying, "This is a great option for people with bad credit. It might be something you never thought about before."

Charles H. Green presents IQ, EQ and the Next Billion Banking Consumers posted at Trust Matters, saying, "Can the western banking model be maid to work, be profitable and do more good than ill for the poorest of the poor in the world? A vast market awaits... maybe."

Aaron Wakling presents Credit Cards - A Necessary Evil posted at The Credit & Credit Card Blog, saying, "Well you probabaly already know the answer to this one. I cover good uses for credit cards and bad ones. Its a good article for anyone concerned about if they should use their credit cards to make purchases."

Eric Hudin presents My Estate Planning Career Blog » Blog Archive » Selecting a Good Trustee - Factors to Consider When Choosing a Trustee posted at My Estate Planning Career Blog, saying, "Wills and Trusts are an important financial vehicle for transferring wealth. But who should manage your trust? I'll tell you how to pick the best person."

Tim Ramsey presents How to Pay Off Credit Card Bills posted at My Debt Relief Blog, saying, "Trapped in credit card debt? You can get out of the credit card trap with my sure-fire way to pay off those pesky bills."

Eric Stanley presents Two Investment Mistakes posted at Personal Finance Blog Articles, saying, "Are you finding good investments for you new money? Or are you doing the right thing and also finding better investments for your OLD money?"

Michael K. Dawson presents Stocks Pummeled Again at Breaking the Shackles of the 9 to 5 | by The Time & Money Group posted at The Time and Money Group.

Credit

Logan Flatt, CFA presents Change the Game: Replace Your Credit Score with Your PowerWealth Debit Score™ posted at PowerWealth.com.

Silicon Valley Blogger presents How Credit Scores Affect Your Loan Rates Or Why All Spending Is Not Equal » Money and Personal Finance Blog In Silicon Valley posted at The Digerati Life, saying, "Thank You!"

Debt

Save Money presents Step one to getting rid of debt posted at How I Save Money.net.

Terry Dean presents From Debt to Financial Freedom posted at Christianity With Purpose.

Mark Kimsey presents Identifying A Debt Problem posted at PrsnlFinance.com.

Finance

James presents Best Free Legal Resources Online posted at ZooLaw, saying, "Here is a list of some of the best free available resources that can help you save on legal fees and costs."

edithyeung presents Immigrant Success Interview Series: Yobie Benjamin (Socially Conscious Entrepreneur) - Part 1 posted at Edith Yeung.Com: Dream. Think. Act..

David presents Make the First Million and the Rest is Easy posted at Worldwide Success, saying, "One million dollars is a magic number. Not so much for what it can buy these days, as anyone trying to purchase a home can tell you. But the label millionaire still has a nice sound to it, and most important, one million dollars is a significant milestone that can serve a springboard to achieving real wealth."

Millionaire Mommy Next Door presents Where Does Your Money Go? Tips and Tricks for Tracking the Flow posted at Millionaire Mommy Next Door, saying, "Money flows like water. It can gush like a raging river or drip like an annoying leaky faucet at midnight. If we use this precious resource mindlessly, we face drought. However, if we first observe the ebbs and flows, effective management becomes a simple matter of design. Here's how."

Logan Flatt, CFA presents A Simple, 3-Step Program posted at PowerWealth.com, saying, "How would you like to live in crushing, abject poverty? Does the idea of living and sleeping on the streets of a major American city sound appealing to you? Would you like to grow old and penniless, spending your final days on this Earth barely getting by on the meager checks sent to you by some large government bureaucracy? Well, my friend, do I have the program for you."

Millionaire Mommy Next Door presents Frugal Millionaires? The Key To Wealth Accumulation posted at Millionaire Mommy Next Door, saying, "Before we reached our million dollar milestone, I thought millionaires lived an extraordinary lifestyle replete with fancy sports cars, mansions, and plenty of bling. I thought one could name a millionaire just by looking at her. I was wrong."

Investments

Steve Faber presents - More Alternative Energy Investing News posted at DebtBlog.

Warren Wong presents The Gap Concept posted at Personal Development for INTJs, saying, "Why is it so important to be the first or the best in a market? Here's the why you should be the first AND the best."

KCLau presents When is the Perfect Time to Rebalance our Investment Portfolio? posted at KCLau's Money Tips, saying, "Rebalancing should be a standard operating procedure for every investor since it is relatively easy to restore a portfolio to its original allocation mix. Regardless of your objectives and risk tolerance, the major benefit of periodic risk management is significant reduction in portfolio volatility."

Gavin R. Putland presents Getting sustainably high returns on real estate posted at Gavonomics.

Roshawn Watson presents NEXT WEEK: WATSON INC EXCLUSIVE Interview with Van... posted at Watson Inc, saying, "In the long run, the price differences generally save individual investors tens to hundreds of thousands of dollars. ETFs are often tax-efficient as well. Also, consider the fact that one would need between 20-50 individual stocks to be adequately diversified compared to just 1 ETF (i.e. VTI)...Everyone's investment plan must be tailored to his or her's own financial goals. However, one generally starts investing in pretax vehicles, such as (401K, 403b, Thrift Savings Plans, or Traditional IRA). If your company matches your contribution (for 401K, 403b, or TSP), I would contribute up until the match. Do not throw away free money!"

Retirement

Larry Russell presents Summary Table of Traditional IRA and Roth IRA Tax Rules posted at THE SKILLED INVESTOR Blog, saying, "For your convenience, the table provided summarizes 2007 rules for traditional IRAs and Roth IRAs. The table has a left-hand column of questions and 12 columns of information. Read the first four questions in the first four rows to determine which of the twelve columns would apply to you. Be careful to distinguish between the rules about whether you can make a contribution and whether an allowable contribution is tax deductible."

Stocks

George Courtney jr presents Despite Volatility, Stocks Are a Good Deal posted at The Authentic Bartender Blog.

Dax Desai presents Fundamental Rule of Day Trading: Preservation of Capital posted at Dax Desai, saying, "1st in a Series: Rules of Day Trading - Preserve Capital"

Charles H. Green presents Does Trust Drive the Dow? posted at Trust Matters, saying, "When you look at the markets, eras of high trust in business correspond to high returns. What, after all, is buying a stock but trust that the future will be better than the present - which requires trust that the present is running things properly."

Accept Responsibility for Your Financial Future

noreply@blogger.com (Money Analyst) — Fri, 03 Aug 2007 19:48:00 +0000

Before you start or continue on your way to your financial future, keep one thing in mind- investing is for the long term. The ups and downs of the market are considerably less risky than not investing at all and sitting on your cash, letting inflation dwindle away at your "nest egg." Simply doing nothing about your retirement now is in many ways more dangerous- whether you're planning for a child's college education, saving for a first home, or starting to save for retirement, do it now!

Long ago it used to be that there was a clearly defined role of both husband and wife. Times have changed and those responsibilities have been divided. Over the past 30 years, the financial responsibilities have been increasingly split between husband and wife. There is definitely a reason for all of this as investing for a financially secure future requires more commitment of both parties. Lives of both parties in a relationship are increasingly getting busier, so usually the more experienced, financial minded individual ends up taking on the saving / investing responsibility. But there are many reasons why both people in a relationship should do the investing work.

This is definitely an area of responsibility where both of you should share equally. If you're the individual who knows a bit more about investing, I'd really recommend that you include your spouse or partner in the planning. If you're not one of those people that knows a bit about saving for retirement, I strongly recommend that you explore more within this site and learn all that you can. Your future and your family's future depends on it. Teach yourself and your partner or spouse to survive in the event of an emergency such as a death in the family. It may seem a bit morbid to speak about, but things happen- prepare while you can. Everyone in your family should be completely aware of the family's finances to be fully prepared for an emergency.

If you're the type of person to get frustrated and a bit reluctant about learning about retirement, I encourage you to push yourself and get involved- you'll be glad you did. Simply ignoring the financial impact on your life is a huge mistake. Often times, many of the tools you need to successfully plan for your future are intuitive and can be built by continuing to learn financial tactics. It's not as hard as you'd think. Do not let yourself become dependent on another individual. Learn for yourself what it takes to achieve financial independence, and teach others.

Author Gail Sheeshy of Passages and New Passages wrote about "Why Women Fear They Will End Up Living in a Box Outside Bergorf's." Sheeshy writes that many women feel that they will end up to be broke, and for many women, the fear is living in a box outside of a major department store. She once felt this way herself. This is when she noticed that she needed to take control of her life and learn. Sheeshy learned that an IRA and a few other investments simply wouldn't provide the financial security that she needed.

If preparing for your retirement means retaining the services of a financial adviser, then fully understand that you must do what it takes to gain a "foot hold." You can start preparing for your financial future easily with a few basics: Save at minimum 6 months of your annual salary as an emergency fund. Contribute the full maximum to your current investment portfolios such as a 401k or IRA. Assure that you and your family are fully insured. These basic essential tasks will get your started to financial freedom, but you must do more. There is an abundance of information out there- this website alone discusses many topics relating to financials on all levels, so explore and learn.

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Analyzing a Company's Coverage Capability

noreply@blogger.com (Money Analyst) — Fri, 03 Aug 2007 17:17:00 +0000

Corporate coverage is essentially a company’s ability to meet the obligations of its preferred stock and bonds. This will greatly influence the company’s ability to obtain credit in the future. So when the coverage ratio is more attractive, loan terms are going to be more attractive, bond ratings will be higher, and bond rates will tend to be lower. An important coverage measurement is bond interest coverage which is the ratio of earnings before interest and taxes (EBIT) to the annual interest owed on bonds. This ratio will depict the company’s ability to fulfill its outstanding bond payments. To analyze this further, a ratio of 1:1 will show that the company had just enough earnings to cover its bond obligations. This could be viewed negatively in that if the company’s earnings were to fall, the company may find itself in default.

Bond Interest Coverage = EBIT / Bond Interest Expense

The preferred dividend ratio will measure a company’s ability to fulfill fixed dividend payments to preferred stock holders. This ratio is computed from net income, not EBIT, because preferred dividend payments are made after taxes are paid; bond payments are made before taxes are paid. Preferred dividends are fixed because this type of security pays a fixed dividend based on a percentage of the security’s par value. Preferred stock holders give up their voting rights in an exchange for this fixed dividend payment which are fulfilled before dividends paid to holders of common stock.

Preferred Dividend Coverage = Net Income / Preferred Dividends

One last important coverage ratio is net tangible asset value per bond which will provide an inside view at the likelihood that, in the event of a bankruptcy, bond holders will be able to recover their principal investment. In the event of a bankruptcy or failure, companies are forced to sell assets, fulfill its current liabilities, and pay bond holders. This ratio describes the amount of tangible assets to each bond, or the amount of tangible assets backing each bond.

Net Tangible Asset Value per Bond = (Tangible Assets – Current Liabilities) / Number of Outstanding Bonds

An example may help to explain these concepts:

All of the figures used to compute the above ratios can be found on XYZ’s income statement (XYZ is our test company for this example). With the figures that are found on the income statement we can compute XYZ’s Bond Interest Coverage.

Earnings Before Interest & Taxes / Bond Interest Expense = Bond Interest Coverage

$211,000(EBIT) / $13,000 (Bond Interest Expense) = 16.23

From this ratio we can conclude that XYZ has $16.23 for every dollar owed to bond holders as interest payments. It is safe to assume that this company may not be near default on its bond payments. Now we can figure out if the company has enough to fulfill its preferred stock payments. From the income statement we can find that XYZ’s preferred stock dividends total $4,960 ($62,000 par value x 0.08 interest = $4,960). You will also need net income, which can also be found in the income statement.

$246,504 (Net Income) / $4,960 (Preferred Dividends) = 49.69

This tells us that XYZ has $49.69 for every dollar owed to preferred stock holders in the form of dividends, and there is almost no chance of default on these obligations. But to gain a more clear view of all obligations, the Net Tangible Asset Value per Bond will need to be computed. First you must find the amount of tangible assets. Again from the income statement:

Tangible Assets=
$942,000 (Total Assets) – $46,000 (Intangible Assets) = $896,000

XYZ has issued 260 bonds at face a value of $1,000. Net Tangible Assets Value per Bond can be found:

Net Tangible Asset Value per Bond =
$896,000 (Tangible Assets) - $362,000 (Current Liabilities) / 260 bonds = 2053.85

From this we found that XYZ has $2,053.85 backing each $1,000 par value bond that was issued. Bond holders in this case are fairly pleased because XYZ has a high credit rating due to its ability to meet its bond obligations.

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The Curious Investor

noreply@blogger.com (Money Analyst) — Fri, 03 Aug 2007 11:13:00 +0000

This just in from the department of shameless self promotion. There are a few sites out in the wonderful world of websites and blogs that haven't quite made it to the front page of the Daily Journal. They may have even been so bold as to contacting the front desk reporter pleading for just a wee bit of exposure. But no luck. Well here's their lucky day.

There are a few sites out there that are incredibly interesting in terms of financial know how. Namely, The Curious Investor has a few great tips for success. Making tci a routine read could bring the riches, roll out the red carpet, and..... well, it'll make you smart.

Tip of the day
Read The Curious Investor. It'll feed your need for financial curiosity- that was a bit cheesy.

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Option Premium Valuation: Time and Intrinsic Value

noreply@blogger.com (Money Analyst) — Thu, 02 Aug 2007 17:29:00 +0000

An option premium is the amount that a holder of an option contract pays for the right to buy or sell a number of shares of a security at the strike price up until a predefined date. The premium can fluctuate in value much like a typical stock price. Premium prices also share in the same volatility that a stock price does and in many ways will react to the same information flowing in the market such as fundamental variables, rumors, etc. For example, if a call option providing the right to purchase the underlying stock at the strike price seems like a better deal, then investors will pay a higher premium for that option thereby increasing the premium price. So from this we can conclude that premium prices can fluctuate from one trading day to the next.

The premium is composed two components: the option’s time value and intrinsic value. Unexpired options will always have a time value which is the time remaining until the option contract expires. An option expiring in 6 months has a greater time value than an option expiring in 4 months because there is a greater amount of “time” for the price of the underlying security to fluctuate.

Intrinsic value can be defined as the amount the holder of the option contract stands to gain by exercising the option. This value will vary depending on the price of the underlying security. For example, a call option with the right to purchase HD stock at $30 (Buy 1 HD May 30 Call @ 2) will become more attractive when the stock price rises from $28 to $41 because the holder of the contract can purchase the stock at the strike price of $30 and immediately sell it at $41 yielding a $11 per share gain. The intrinsic value in this case is $11 (41-30 = 11). If, however, HD were to fall in price below the $30 strike price, the option contract would not acquire an intrinsic value.

An example:
Josh is pretty happy now that 2 weeks ago he bought 5 HD May 40 Calls @ 3. Because of market factors, the stock’s price has increased to $45 which would be a gain of $5 per share if Josh were to exercise the contract now. But he thinks prices are only going to improve, so he buys another option for another 500 shares of HD. However because the stock price has risen, the premium price has also gone up. Josh will now purchase 5 HD May 40 Calls @ 5.25. To practice the concept of intrinsic value, what part of the $5.25 premium is the intrinsic value? When HD is trading at $45, the intrinsic value is $5 per share. The remaining $.25 is the option’s time value.

Investments of all kinds have a similar trait in common- market factors. Behind the scenes of time and intrinsic values, many market factors such as fundamental variables, investor expectations, etc. all affect option prices. Options investors need to have an increased awareness of quality of an option’s underlying security and volatility in the market and must routinely investigate stability in price and health of the companies represented by an options contract.

Now that you have an understanding of an option’s premium, you may be asking yourself at what point you make a profit. This is what investors refer to as “in the money”, “at the money”, and “out of the money”. To determine whether an option is in the money or out of the money, you must always look at it from the buyer’s point of view. A call option would be in the money when the current market price is above the strike price. Example: If you owned 1 HD May 50 Call, it would be in the money when the current market price for HD is above $50 per share.

Inversely, a put option is in the money when the current market price is below the strike price. Example: If you owned 1 HD May 50 Put, it would be in the money when HD’s stock price is trading below $50 per share. Out of the money is exactly the opposite of in the money. For example if you own 1 HD May 50 put, it would be out of the money when HD’s stock price is trading above the $50 strike price. An option is at the money when the strike price equals the current market price.

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The World of International Investing

noreply@blogger.com (Money Analyst) — Mon, 30 Jul 2007 17:36:00 +0000

International investing is and should be considered an integral part of any asset allocation strategy. With that said, all investors, regardless of asset allocation model (from aggressive to conservative) must at a minimum consider investing internationally. Every professional money manager or financial advisor is an advocate of investing internationally to some degree. In my personal experience, investing internationally has offered another method of diversification and can be very easily done through mutual funds.

Simply put, the world is getting smaller. By this I mean our society is becoming more interdependent with an increasing exposure to global markets in both business and trading arenas. International investing is no longer left to the professionals or considered an exotic investing strategy as it once was. It has become a common part of all asset allocations, and with clear reason. If you are an investor simply investing in domestic equities, you are literally bypassing half the world's market opportunities. For example, some of the biggest and most profitable auto-manufacturers, banks, pharmaceutical companies and technology companies are not located in the U.S..

With some of the fastest growing economies outside of the United States, the investment opportunities among both developed and emerging markets present an attractive investing opportunity. So for those prudent investors, I think it is a desirable investing tactic to consider an overseas portfolio addition. There are many reason to consider international investing other than simply following the crowd; where a whole new world of opportunities presents itself. By diversifying your portfolio internationally, you will have an increased opportunity to experience the growth potential of the world markets. You already know how much diversification can impact a portfolio; diversifying across international economies offers diversification on a greater, global level.

With an international stock component added to a portfolio, volatility of that portfolio is reduced overall which also can increase performance. Intuitively we know that different markets are driven by differing forces and can often move without relation with each other. By this we can conclude that increases in international markets can then offset decreases in domestic markets.

Further, U.S. economies will not exactly mimic foreign economies- when U.S. markets might be down, international markets can be up. Surprisingly, there is somewhat of a opposite correlation between our U.S markets and international markets. Interestingly enough, it appears that historically when international markets have done well, U.S. markets have performed less satisfactorily. There have been periods of global recession, however internationally investing still presents great opportunity if you can remember that all markets, foreign and domestic all have one thing in common- volatility.

Another, mostly overlooked up-side to international investing is the possibility of experiencing the potential growth of foreign companies. Many investors are often surprised when they hear that foreign companies can often grow much quicker than U.S. counterparts. Surprisingly, as most U.S. markets have performed well in recent years, most foreign markets have performed much better. As you can now see, investing in these foreign markets can greatly improve the performance of any portfolio.

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Way of the Turtle: The Secret Methods that Turned Ordinary People into Legendary Traders

noreply@blogger.com (Money Analyst) — Thu, 26 Jul 2007 21:15:00 +0000

The concept of this book is raising traders just like turtles are raised in Singapore. If that sounds a bit "off-the-rocker" as well as interesting, keep reading. Richard Dennis apparently said this to his long-time friend William Eckhardt nearly 25 years ago when what was started as a bet turned out to be a long-time experiment that hasn't really been talked about in its entirety.

The book, Way of the Turtle reviews what it takes to be an incredibly successful trader that some call "Turtles". Top trading mogul Curtis Faith talks about the entire experiment as he explains how it was possible for Dennis and Eckardt to recruit 23 normal, "every-day joes" from many diverse backgrounds and train them to become top traders in as little as two weeks. Sounds a bit hokey, I know, but it is apparently not a phenomenon.

At nineteen years old Top Turtle Curtis Faith traded his largest account and made more than $30 million in slightly over four years. I can't quite justify the validity of his story, however, the numbers certainly catch the eye. In this book, Way of the Turtle explains:

How the Turtles made money and the methods the principles taught them
Why some Turtles were more successful than others
Ways to limit risk exposure
Application rules of the "Turtle way" for your portfolio

One reader wrote:

This is a good book (not great). That said, you should know that many of the big "trend following" capital management companies in the United States have gone belly up this year (2006 & 2007). Even Richard Dennis (Curtis Faith's teacher) stopped trading some years back because of massive losses. Of course, he made a mint first. (If Curtis Faith's system is traded without stops, you will lose your shirt!!) Always do an Internet search on an author's background and possible problems before adopting a system. (<-- hint) With "trend following," just take your time... diversify broadly (especially into assets that move differently than stocks... all world stock indices, but two, move in unison) ... trade small amounts... keep 50% of your money in "untraded," safe "cash" investments)... if trading stocks, realize that they go up 75% of the time... trade on paper for one year first... and then realize that it may not be just the account drawdowns, but the psychological turmoil that will get to you.

Tips for Selling Short Against the Box

noreply@blogger.com (Money Analyst) — Thu, 26 Jul 2007 20:28:00 +0000

Selling short against the box is a very tempting yet a very tricky, and involving investing method. Often times, only the most experienced investors will be successful with a short sale. This technique is where an investor sells a security before they own it. Here's how it works: an investor borrows shares from their broker then immediately sells the stock. The investor is hoping that everyone will catch on to what seems to be a flaw in the market for that stock, then sells the stock which in turn sends the stock price downward. When the stock price has dropped far enough, the investor that borrowed the stock initially will buy enough shares to repay the broker back, keeping the difference between the price at which the investor borrowed the stock from the broker and the price at which the investor bought shares in the open market.

An Example:
Boeing stock is selling for $38, and you think this price is going to fall drastically; you do not own any Boeing stock at this point. You decide to borrow 100 shares of Boeing stock from another client of your broker's who does own the stock. Then you sell the shares at the current price of $38. Unfortunately for other shareholders, Boeing's stock price falls to $20 and you decide to buy 100 shares at the current market price then give the borrowed shares back to your broker's client. Now you've made $18 per share of Boeing stock. You're probably familiar with the phrase buy low sell high...well in this case the idea is to sell high first, then buy low.

This sounds, initially, like a perfect plan, however, it often has the exact reverse effect than is initially intended. Many investors seem to "zero in on" the up side potential or the profit of this plan and seem to forget the possible horrific implications that could result. If you bet in the wrong direction and prices end up rising drastically, you could possibly end up owing more than your initial investment. The worst part is that there is not clear definition for how high the stock prices could go (it's unlimited).

When you buy a stock and own part of the company, in traditional sense, you are going to share in the growth of that company. The most you could possibly lose is your initial investment and no more. The most you could gain is virtually limitless. But when you sell short against the box the most you could lose is limitless. Your potential loss is limitless because there is no limit to how high a stock price can rise. Many investors find themselves losing 200, even 300% of their initial investment- they end up owing a debt.

With all of the possibly negative implications of selling short against the box, there is absolutely nothing wrong with it. Barron's actually considers selling short to be a legitimate investing technique and they also include in their money manager interviews a short sale recommendations section. However, a word of caution is due: it's extremely high risk. This is by far, an investment technique only meant for the professional traders with many years of wisdom and market "pizzaz", and often times not even meant for them.

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Inside The World of Call Options

noreply@blogger.com (Money Analyst) — Thu, 26 Jul 2007 16:09:00 +0000

A call option gives the holder of the option the right to purchase a defined number of shares of the underlying stock/security at a fixed price. This type of option is labeled as "call" because a holder of a call option can call the stock from the writer. At this point the writer of the option is legally bound to selling the stock to the holder at the pre-defined price termed the strike price. When a holder of an option uses his/her right granted by the option contract, it is termed as exercising the option.

For example a call option gives a holder the right to buy 200 shares of XYZ stock for $70, where the holder can exercise this right by paying the writer of the option $14,000 ($70*200). A holder of this option can exercise this right at any time before the option expires or can simply not exercise this right thereby letting the option expire. Only the holder of this option has the right to exercise the option- the writer simply waits until either the option expires or is exercised.

In effect a call option to buy signifies that the holder is betting the writer that prices are going to rise- in other words, the holder is bullish. If prices do rise, the holder will exercise the right to buy at the lower strike price. Then the holder will sell the underlying security at the higher market price yielding a profit. However, the writer of the call option is betting that price of the underlying security is going to fall- this writer is bearish. If prices fall, the option would not be exercised and the seller (writer) would keep the premium money earned by the bet. Transfer of the security very rarely occurs in practice, rather the writer and holder simply settle any difference between the security's strike price and current market price.

Example Option: Buy 1 NKE April 60 calls @ 2

Buy or Sell	# of Contracts	Underlying Security	Expiration Date	Strike Price	Option Type	Premium
Buy	1	NKE	April	60	Call	2

Buy or sell: This is defined whether a investor wants to be a holder(buyer) or a writer(seller).
Number of contracts: In the above example there is 1 contract in the option. One contract equals 100 shares of stock. Option contracts are usually sold in round lot numbers meaning in 100 share increments.
Security: This is the ticker symbol of the underlying security.
Expiration date: This is the month that the option contracts expire.
Strike price: This is the price in which the holder has the right to purchase the underlying security.
Option Type: Call or Put (general option strategies are defined below)
Premium: This is the premium that the holder would pay for the right to exercise the option if they so desire.

General Option Strategies:

Bullish	Buy Call Sell Put	Above Market Price
Bearish	Buy Put Sell Call	Below Market Price

How are options traded?
Options are unlike traditional investments such as stock, although the two have close ties. Stocks are issued by the underlying company and sold in the open market. Options are issued by the Options Clearing Corporation, which is regulated by the SEC. The OCC will set the terms of the options contract- the strike price, expiration date, premium, etc. The OCC tracks sellers and buyers while also guaranteeing the obligations of both parties in the contract.

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When is The Right Time to Sell an Investment?

noreply@blogger.com (Money Analyst) — Wed, 25 Jul 2007 02:32:00 +0000

Deciding when to sell individual stocks
If you've done the research that it takes to weed out the good stocks from the out-performers, then you know that simply a drop in price is not a sufficient reason to sell. A short term drop in price does not reflect a downward trend. Investments such as stocks should be considered long-term investments, so drops in prices or mediocre performance over several months is not a reason to worry. If you've followed what most Wall Street advocates recommend and diversified your portfolio of stocks as well as other investment types, you can rest assured that your portfolio has a high probability for appreciating in value over time.

Of course we've all cut a few corners and followed a hot tip or the "squawk" on the street and bought a stock with little or no research. Unfortunately most of the time, as luck would have it, these hot tips won't pay off, so you have cut your losses and sell. This is of course different than letting nature run its course by unfolding, over time, the growth of a company.

Before you decide to sell, stop and breath. Most investors simply get too emotional when a short term drop in price unfolds. A bit of market fluff spread by the media can have negative effects on a stock's price sending it way down, but this is merely temporary; also minor economic negatives can have a temporary affect. For example, imagine you've invested in a company closely related to the automotive industry, and interest rates suddenly rise. This industry may find a few bumps in the road ahead, but not to worry as it is most likely temporary. Often times a company's competitive business approach isn't going to be significantly affected, and the minor downturn will turn out to be just a small smudge on the radar screen.

One of the more serious trouble indicators is market share. If a company's market share begins to slip away, it's a bit of a different story with a longer-lasting affect. This may be the time to decide to abandon ship. If the company's, market driven, competitive edge is deteriorating, or if the industry is slowly dwindling away, the situation at hand is a bit more troubling. If stock prices of other companies in the same and similar industries are on the rise, and your company's price is falling, you now have a reason to shake in your boots (in other words, start to worry).

The best, and most informative resource to find information on almost any investment is Google Fiance. With Google Finance you can quickly compare price movements and market comparison all from one page. This is an incredible investment tool! There are, however, many newspapers and magazines with hard working analysts and publishers working to provide the latest market trends and information on many different industries. With all of these resources at your finger tips, you'll find plenty of objective information.

Deciding when to sell mutual funds
Mutual funds are really a center point of your portfolio and are a core investment. Day trading, or even trading mutual funds often doesn't make sense. I tend to buy a mutual fund, after careful consideration, and hold on to them longer than 4 years (4 years being a minimum). In my mind, 4 years seems like a decent period to measure the fund managers responsive actions to a down market, because a 4 year cycle will generally include an up and a down market. This is really the last stages of the test to see how the fund managers perform.

Measuring a fund's performance is actually very simple: You monitor the fund's performance with your analysis tools (the Internet). If the fund is performing at par with other funds and the general market, you hold. If your fund isn't performing with this general benchmark over a decent period of time, sell it and research other fund's for a replacement. Just remember to leave emotions out of the equation and take your time.

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Choosing a Stock That Beats the Street

noreply@blogger.com (Money Analyst) — Sun, 22 Jul 2007 20:52:00 +0000

Many investors use many different approaches to pin pointing the stock that will out perform analysts expectations- of course that's the goal anyway. How do you choose the winning stock? Generally I look for companies that are thriving financially with consistent earnings and a reasonable amount of debt. Then I look at a company's portfolio of products and services. Is the company generating sustainable revenue? Does the company seek to understand its customers by listening to the good and the bad? Are the company's products routinely used by its customers and marketed in a fashion that appeals to more and more consumers? Who are the competitors? Then, of course, look at earnings trends. Is there a noticeable trend of the stock price? All of these questions will help you identify growth potential of both the company and your investment dollars.

Observe our cultures needs and how they could possibly change over time. Changing tastes and preferences translates into new goods and services provided. For example, in the late 1940's and early 50's Americans began to demand more industrial goods like automobiles, homes, and other consumer goods. This resulted in out performing industrial stocks such as auto manufactures and home builders.

One particular transition that the world population is in is increased life expectancy. This may sound odd, but if you connect a few dots it is quite intuitive. More people are living longer, healthier lives due to advancing medical technology. This could imply a potential increase in demand for senior homes, medical services, medical technology, and pharmaceuticals. Increased demand translates into increased profits. Greater profits turns into higher stock prices.

Another popular trend is that of a "green" company. In this case, green doesn't imply planting a tree in the companies employee lounge. The term "green" means environmental awareness and taking proper action to build a better, healthier planet. Corporate America has been part of the pollution issue plaguing this planet- consumers are becoming more and more aware of it. The "green" corporate movement is mostly a reaction to the demands of consumers, but it also means a potential profit center.

Companies going "green" contract with other companies that restore "run-down" ecologies, clean up dump sites, and recycle waste products. Companies providing green type services and products are sure to surge in growth in the coming years.

The key is to look for shifts in personal preferences, then find a way to cash in on the trend. By simply observing news or magazine headlines, subtle trends can be found. Find out what the new hot product is; who's selling it; then investigate. Many stocks have been propelled to new highs by a single product. The issue is, can the company producing the product or service sustain profits. Most product stocks will find it difficult to maintain demand because personal preferences can change so rapidly. For example, the cell phone was a huge break though. Earlier cell phones were incredibly expensive and bulky. Consumers voiced their opinion and preferences changed. Those companies like Motorola who have, to some degree, ignored their customers found it difficult to keep up with competitors like LG and now Apple.

Finding a winning stock is merely a matter of finding a trend. The trend may be a change in personal preferences, changes in how we live our lives, or changes in our culture. Whatever the trend is, there is a way to cash in on it.

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7 Steps to Starting an Investment Portfolio

noreply@blogger.com (Money Analyst) — Sun, 22 Jul 2007 19:02:00 +0000

So you've finally made the decision to start saving for retirement and you want to experience the extraordinary growth of the world financial markets. Great decision! You may feel anxious as well as a bit of anxiety along the way, but it's perfectly normal for beginners. Just remember, all you have to do is get it started. From there it is simply a matter of reading up on investment opportunities and depositing money into your brokerage account.

You've already decided how much you will routinely invest each month or quarter. Now you're going to create an investment shopping list of stocks, bonds, and mutual funds to buy. Before you can start buying investments, however, you need to open a brokerage account for purchasing your investments and building your portfolio.

Step 1. Make a plan
Decide how much of your portfolio should be in income and in growth. Generally, if you're younger than 40 you should consider a portfolio with a higher concentration of stocks or growth investments. Those a bit older than 45 will tend to be a bit more conservative and veer to income investments like muni-bonds as they tend to be a bit safer. Older folks are generally more conservative because it can take a while to recover from a down market, and that isn't a risk some individuals are willing to take. It is perfectly normal. Remember that you are the referee here, and you make the decisions of what level of risk you're ready to take. While deciding what your asset allocation should be, make a commitment up front to systematically investing. Investing isn't a set-it and forget-it type of task. You need to continually make investment decisions and purchases. Whether it be $100 a month or $500 a quarter, decide now how much and how often you will invest and stick with your plan.

Step 2. Pick your first investments
When you've decided what your investment approach is going to be, you're ready to begin choosing your investments. This is the step where you decide how much to invest in stocks, bonds or cash type investments like CD's or T-bills. Before you you begin opening your account, you'll want to think about the general composition of your portfolio.

Step 3. Pick a brokerage firm
You've made an asset allocation plan and picked your first investments. Now is the time to pick a brokerage firm that you have confidence in. When choosing a brokerage firm, be sure not to base your decision on any one person. Picking a brokerage firm is no different than picking a bank; you wouldn't base your banking choice on a tellers good humor. You're going to be working with this brokerage firm for a long time, so choose wisley.

First decide whether or not you need a broker or if you can make your own investment choices. After you've thought about this, you now know if you need a full service brokerage or a simple discount broker. There are services that full service brokerages offer like life insurance or annuities that discount brokerages may not offer, but these are provided by your local bank if you need them. Discount brokerages provide more economically priced services because you pay for what you need. If you're leaning towards a discount brokerage firm, I'd recommend Scottrade. Scottrade has a different set of beliefs regarding their customers, and their business decisions are not based on shareholder expectations because it is a privately held company.

Step 4. Open your account
When you've chosen the right brokerage firm that meets your needs, you'll need to set up an account. Most discount brokerage firms will have online applications, however it will take a few days to complete the process. Brokerage applications are required by the Securities and Exchange Commission and are used to inform the brokerage of their customers. Personal information such as your Social Security number are needed as well as an opening deposit in most cases. Most brokerage firms require a minimum opening amount of $500, for example. Be sure to review the full list of services provided before you open your account, this may be the deal breaker.

Step 5. Reinvest your dividends
This is very important. If you seriously want to experience the tremendous growth of the financial markets, you'll want to keep your investments and your investment income working for you at all times. The power of compounding will prove over a period of time that reinvesting dividends and investment income is the right choice. Dividends may seem like a trivial amount at the beginning, but before you use those earnings to put in a pool in the back yard, think twice about your future.

Step 6. Open a Money Market for short-term reserves
Keeping your money working for you is important. The more it is earning at all times, the better off you will be. So when you make a plan to make an investment, first deposit those investment dollars into your brokered money market account until you're ready to make your trade.

Step 7. Make your first trade
Fortunately this step is incredibly easy to do, but it also can be incredibly difficult at the same time. If you're hesitant at all about making your initial investment, take two deep breaths and tell yourself "this is for my future". You've already decided in step 2 what your initial investment will be as well as how much you'll invest in step 1, so now all you have to do is make the trade.

By now you'll have gathered that saving for retirement is not as simple as letting your employer know how much to scrape off your monthly earnings and pour into your 401k. A 401k just won't cut it alone! Social security may also be "on the outs" in the coming years as well. Prepare yourself for your retirement, and make the easy decision to start investing now.

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Options Basics

noreply@blogger.com (Money Analyst) — Sat, 21 Jul 2007 23:48:00 +0000

As well as trading bonds, stocks, an other investment types, more knowledgeable investors choose to buy or sell the option to trade securities at a specified date and at a specific price. Options are becoming more well known to independent investors, specifically due to increased understandings of market trends and the the general drive to make more money in less time.

In general, an option is the right to buy or sell a specific number of shares of a particular security at a fixed price up until a specified date. Options are legal and binding agreements between a buyer (holder) and a seller (writer) where the buyer agrees to pay a specified premium to the seller to take control of the underlying securities for a specified period of time. Because the buyer doesn't own shares of a stock and does not want to at current prices, they purchase the option to trade the stock.

There are two types of options: call and put. A call option gives the holder (buyer) the right to buy the underlying security at a specified price and requires the writer (seller) to sell at the specified price. A put option gives the holder the right to sell the underlying securities at a specified price and requires the writer to buy at that price.

Whether you are a buyer or a seller (holder or a writer), you have one of two thoughts about the market or the stock of interest: is it going to go up or is it going to go down? You may hear top traders use the terms bull and bear market. Generally, if you believe that the market or a securities price is headed upwards, you are bullish- you believe there is a bull market. However, if you believe that the market is headed down, you are bearish- you believe there is a bear market. This can be tricky, so read carefully.

The terms bull and bear are not quite intuitive applications at first thought. Way back when, "bear skin jobbers" were known to sell bear skins they did not own (p.s. the bears hadn't been caught yet). The term was eventually used to describe short sellers or speculators who sold shares they did not own- They would buy shares after a price dropped and then sell the shares back. Bulls are seen as the opposite of bears as the bear describes the opposite stock market climate. Bullish investors buy stocks in the expectation that stocks will rise, not fall.

General Option Strategies:

Bullish	Buy Call Sell Put	Above Market Price
Bearish	Buy Put Sell Call	Below Market Price

Investors betting that market prices are going to rise would either buy calls or sell puts. Just the opposite- those betting that market prices are too high and will come down will either buy puts or sell calls.

Options are by far an interesting and confusing investment type. Rather than simply buying a part of a company (stock) or lending money to a company (bonds), options are legal contracts defining possible future transactions involving an underlying security.

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Investing Tax Tips

noreply@blogger.com (Money Analyst) — Sat, 21 Jul 2007 22:42:00 +0000

When considering tax consequences of investing, tears start to roll. This is precisely why you should be completely aware of tax consequences your investments might be subject to. Tax laws and regulations are always changing and are quite complex, so be sure to check with a tax consultant for your particular situation. Below are a few suggestions and general considerations regarding investment income and gift taxes.

Since 1986 the Tax Reform Act has laid the ground work for rules such as the "kiddie tax" for kids under age 14. Even though a particular account may be for a child's benefit and is in an adults name, there is no special tax benefit or leniency. Investment income, A.K.A. capital gains, is still taxed at the adults tax rate.

Here's the breakdown: If you manage a custodial account for a minor that is under the age of 14, the first $700 of the child's annual unearned income (interest and dividends) is free from taxation. The following unearned $700 is taxed at the child's rate (minimum of 15%). Income after these earnings increments are taxable to the child, however, at the parents highest marginal rate (this is the tax rate on the last dollar of income paid).

In most cases, when planning for a child's future, one can safely assume that growth investments are going to be the key ingredient, so income investments will more than likely not be a factor. This is a great strategy for parents planning for a college education because taxes will not be due simply because a stock doubles, for example. Seek growth stocks if you're planning for a college education or simply for the benefit of your children.

Children over the age of 14 have it a bit easier as the tax rules and regulations tend to be a bit more lenient. The first $700 in unearned annual income is tax free just as it is with children younger than age 14. All income earned above $700 is taxed at the child's tax rate, which can be advantageous. Don't begin to think of creative accounting tactics here, however.

Another particularly favorable approach is establishing a Roth IRA for a child, but the child must have earned income. This is a great option because investment earnings are never going to be taxed, even when the time comes to withdraw. It might seem a bit prude, but think of the life lessons that can be taught from saving small amounts at young ages and ending up with a substantial amount of money later in life. Earnings from the child's Roth IRA might be usable for higher education as well (see the Eight IRA Penalty Exemptions for details).

If you're one of those parents eager to help your kids meet their financial goals, then you will want to do so in the most tax efficient way. Currently a single individual can gift up to $12,000 per year per person without paying one penny in taxes on the transaction. Married individuals may gift $24,000 per year per individual. This is a great method of transferring wealth tax free.

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The Secret to Timing the Market

noreply@blogger.com (Money Analyst) — Fri, 20 Jul 2007 21:08:00 +0000

Investment decisions aren't always the best and there are definitely times when cutting your losses and selling is the best decision to make. However, don't act too quickly; make sure you don't simply sell after a few weeks or months because an investment is under performing. The markets have a somewhat emotional tendency as the ups and downs are perfectly normal given certain historic relevance.

Many investors define investing as the constant buying and selling of stocks, and they will be the ones to find themselves sitting in front of the ticker tape keeping a close eye on their investments. But remember, it's not market timing that is the key; it's time in the market. Never the less, you will find some investors attempting to decode market movements and trying to find the best time to buy and sell. Two reasons to avoid this type of captive trading tendency are market efficiency and taxes.

Despite its incredibly unpredictable nature and sudden drastic movements, the stock market is very efficient. Roughly every 6 years the markets have doubled. Markets have been through many down periods always followed by record highs. However, if you're one of those investors that believes in day trading, it takes a balanced mix of wisdom and luck to produce the same profit results as an investor that is in the market continuously. With this we can safely conclude that instead of buying and selling with the markets ups and downs, a more profitable approach is to stay in the market and make investment decisions based on the composition of your portfolio. If it makes sense, buy it; whatever that may be.

Taxes on the other hand, have a negative affect on your profit margin. Again, if you're one of those day traders, you're going to find that more of your profits are going to Uncle Sam. But if you buy quality investments and hold for the long term, you will pay significantly less in taxes. Keep reminding yourself that the longer you're in the market, the greater exposure you will have to its rewards.

Now your asking yourself "to buy or not to buy". Deciding when the right time to buy or the right time to sell is is difficult and often leaves investors second guessing their decisions. If you simply remember that the market will go up and down, you will understand that there really is no one particular great time to buy. Remember time in the market is the key. Whether you buy today, 3 months from now, or 6 months from now is really useless. Invest now! The longer you're in the market the longer your investment dollars are exposed to the possible upward movements of the market. So there really isn't a secret to timing the market, however there is an investment rule; it's time in the market that matters!

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The Monthly Financial Review

noreply@blogger.com (Money Analyst) — Fri, 20 Jul 2007 18:42:00 +0000

Jimmy Atkinson presents 13 Socially Responsible Careers in Finance posted at Forex Blog.

Aaron Wakling presents Don?t Allow A Low Credit Score To Cost You Thousands Per Year posted at The Credit & Credit Card Blog, saying, "Did you know that a low credit score could be costing you hundreds and even thousands of dollars per year, and perhaps even more? What’s more, were you aware that there is something you can do about that?"

Eric Hudin presents Estate - Don?t Be Left Holding The Bag posted at My Estate Planning Career Blog, saying, "Ned almost lost the farm that had been in his family for 8 generations! Make sure you dont make the same mistake Ned did."

Allen Taylor presents What Are Your Wealth-Building Goals? posted at Investing World Today, saying, "The money is out there. No matter how many people tell you that we are in the midst of a starvation economy, that the market is doing this or that, and that it’s too risky to play the game, so to speak, people are getting rich every day. That is the reality."

Tim Ramsey presents Debt Consolidation Loan To Deliver You From Debt posted at My Debt Relief Blog, saying, "High amount of debt needs a drastic solution and a debt consolidation loan is the best solution that can unburden your load of debt."

Sam presents ETF Exchange Traded Funds Are a Great Investment Strategy. Buy and Sell easily. posted at Surfer Sam and Friends, saying, "Exchange Traded Funds, ETFs, Are a Great Investment Strategy

How Long Before They Replace Mutual Funds?
ETFs give the investor a way to "own" all the stocks in a broad group, like the Dow Jones Industrials or all the stocks in the Standard & Poors 500 Index. Better yet, ETFs are easy to buy and sell because they trade on the stock exchange just like stocks."

Warren Wong presents

The Life Pursuit Of Money posted at Personal Development for INTJs, saying, "Why should making money be a life pursuit? Because making money actually helps people! Here's why."
Just Do It posted at Personal Development for INTJs, saying, "Are you pondering over a task? Are you not sure if you should do it? Here's why you should just do it!"

Eric Stanley presents Need a Money Making Idea? posted at Personal Finance Blog Articles, saying, "There are so many money making ideas you can choose from online that anyone, no matter what skill level, can find something."

Thomas Humes presents Retirement - The Real Cost of Procrastination posted at Wealth Building World, saying, "If you want to accumulate $1,000,000 when you are 65, how much would you have to save? It all depends on when you get started."

George Courtney jr presents Do You Really Need to Save for Retirement? posted at The Authentic Bartender Blog, saying, "talking retirement planning, you should feel secure in the knowledge that you will be like the little pig who built his house of bricks and withstood the gale force winds and the wolf at the door"

Cade Krueger presents Finding Real Estate Business Opportunities By Establishing Good Credit posted at Write To Right.

Michael K. Dawson presents 100 Stocks to Combat Rising Food Prices posted at The Time and Money Group, saying, "I just heard on the news that the price of popcorn has increased due to higher corn prices as more corn is being used to produce ethanol. It is time to think like an investor and put a hedge in place to offset rising prices at the grocery store as well as the movie theater."

Millionaire Mommy Next Door presents

Create Your Treasure Map To Riches posted at Millionaire Mommy Next Door, saying, "Visualizing what wealth means to you shapes the way your mind thinks about money and your life. Your mind then sets in motion the actions necessary to begin achieving your goals. By taking the time to establish what real wealth looks like to you, you direct your efforts in ways that will make becoming rich, in your own terms, simple. Are you ready to embark on a fun and rewarding journey towards your own riches? Great! We'll start with an exercise that is really fun. In fact your entire family will enjoy this one."
How to Make Money Management a Family Affair posted at Millionaire Mommy Next Door, saying, "Our children learn from our example. If we behave as though money management is painful, secretive, or confusing, we thwart our children's financial future. Is this what we want for our children? Of course not. We all want our children to acquire the tools necessary to power their own future financial independence and freedom.
How can parents raise financially-savvy children ? Here are some suggestions."

Credit

David presents Build Financial Success with a Strong Credit Score posted at Worldwide Success.

Mark Kimsey presents

Always Make More Than The Minimum Repayment On Your Credit Card posted at PrsnlFinance.com.
How Getting Your Credit Report Can Help You posted at PrsnlFinance.com.

Debt

Tushar Mathur presents How much should your Monthly Mortgage Payment be ? posted at Life of a Resident Alien....

Kevin Heath presents What to do if Your Childs Identity is Stolen? posted at More4kids.

Brian Thibault presents 10 Ways to Pay for College with OPM (Other People?s Money) posted at Smart Shopper: Personal Finance Advisor, saying, "10 ways to go to college now and pay later."

Finance

Warren Wong presents

Why You Should Start Saving Money Today posted at Personal Development for INTJs, saying, "Starting Saving Money Today! Why? It's the difference between being broke and being a millionaire!"
How Much Money Is Integrity Worth? posted at Personal Development for INTJs, saying, "How much money is your integrity worth? Here's why integrity is your most valuable commodity."

Scott presents How Cosmo Kramer Would Make Money in College posted at College and Finance.

Empty Spaces presents How Capitalism Really Works posted at Adventures in Money Making, saying, "Here's an amusing anecdote on how capitalism really works."

ISPF presents Make These Small Changes in Everyday Habits to Reduce the Risk of Identity Theft posted at Grad Money Matters.

James presents Best Free Legal Resources Online posted at ZooLaw, saying, "Save time and money on your legal expenses with these online resources."

Colin Robertson presents Citi Mobile Banking on Your Cell Phone posted at The Truth About Credit Cards.com.

Ryan presents 101 Ways to Trim Your Budget posted at Care on Credit.

KCLau presents Money Lessons from Tranformers movie posted at KCLau's Money Tips, saying, "Transformers is an entertaining movie. It also teaches us about personal finance."

Trent presents Several Funds, One Account: How To Manage Them posted at The Simple Dollar.

Investments

David presents Stocks versus Real Estate Investments posted at Worldwide Success.

ChristianPF presents 9 Tips from Warren Buffett posted at Money in the Bible | Christian Personal Finance Blog, saying, "Nine tips about investing, business, and life from the world’s greatest investor."

Larry Russell presents Lifetime investment assets of renters -- with investment cost improvements posted at THE SKILLED INVESTOR Blog, saying, "Fran and Fred expect to pay investment costs that are typical of an average investor. This graphic is one of the reasons why The Skilled Investor keeps harping about reducing investment expenses. Even average investment costs are simply outrageous, and they can be the difference between success and failure of a family's lifetime financial plan."

KCLau presents

Why Invest in Land? posted at KCLau's Money Tips, saying, "Most people think that land investment is only for real estate developers, who buy big parcels of land for commercial, or residential development. But actually, investing in land is one of the sound investment strategies available for common investor, both large and small."
Asset Allocation Application in Unit Trust Investment posted at KCLau's Money Tips, saying, "Asset allocation involves dividing an investment portfolio among different asset categories, such as stocks, bonds, and liquid cash. The right mix for a person is actually very personal."

Leon Gettler presents Private equity, corporate governance and vampires posted at Sox First, saying, "Reports of private equity’s death are exaggerated. Private equity is like a vampire, it stays Undead just waiting for the right time to strike."

George Courtney jr presents Boomer Bust? posted at The Authentic Bartender Blog.

Charles H. Green presents Linking Integrity and Success - CFOs and UBS posted at Trust Matters, saying, "When Peter Wuffli, the CEO of UBS, was it a hit?"

Moneywise presents Stocks as Income Investments posted at The Real Returns, saying, "Considering stocks as income investments makes buying and holding easy."

WBL presents Wealth Building Lessons » Blog Archive » What’s Asset Allocation? posted at Wealth Building Lessons, saying, "Whats all the fuss about Asset Allocation?"

Silicon Valley Blogger presents Stocks Vs Real Estate, Winning Investment Strategies posted at The Digerati Life, saying, "Here's a comparison between investing in stocks versus investing in real estate. See which one wins out in the long run."

Retirement

BrandonL presents Popular amongst the retired crowd posted at FHA Day - Daily Recaps of FHA and HUD Home Loan News, saying, "Reverse mortgages make retirement a possibility for many that haven't invested enough over the years."

Praveen presents My Simple Trading System: Americans Overestimate Retirement Resources posted at My Simple Trading System, saying, "the 17th annual Retirement Confidence Survey shows that Americans overestimate their preparedness for retirement."

Larry Russell presents

Pre-retirement savings rates for renters ? with and without investment cost improvements THE SKILLED INVESTOR Blog, saying, "When Fran and Fred had projected to pay "average" investment costs in their baseline lifetime financial plan, their required annual pre-retirement savings rates were much higher. There is roughly a 6 percentage point difference in their required annual savings rate between the "average" investment cost scenario and the low investment cost scenario. By reducing their investment costs they greatly reduce their savings requirements, yet they could end up at the same goal, which is to have adequate financial assets through age 95."
Roth IRA Contributions versus Traditional IRA Contributions for Renters posted at THE SKILLED INVESTOR Blog, saying, "What if Fran and Fred make 100% of their annual IRA contributions into Roth IRA accounts rather than into traditional IRA accounts? To find out the answer to this question, Fran and Fred modeled their lifetime cash, bond, and stock fund assets in both taxable and tax-deferred IRA accounts. In effect, Fran and Fred are testing whether paying taxes now or later would have a higher or lower lifetime value."

Stocks

Super Saver presents Innovative Companies - Spectacular or Duds posted at My Wealth Builder, saying, "Most Innovative Companies for 2007 by Business Week highlights their 50 top choices for innovative companies. What is interesting to me is that the list contains companies that I consider "spectacular" for innovation and companies I believe are becoming "duds" for innovation. Here's my assessment of a few of these companies and how I am using the information for my stock investments."

Matthew Paulson presents Single Stocks or Mutual Funds? posted at Getting Green.

Tate Dwinnell presents Google (GOOG) Sell Off Offers Opportunity; Strong Technical Support at 500 posted at Trading Stocks - Self Investors, saying, "The recent Google sell off was an overreaction and offers an opportunity."

What to Look For In a Fund Prospectus

noreply@blogger.com (Money Analyst) — Wed, 18 Jul 2007 22:40:00 +0000

There is an abundance of fine print, and odd terminology in a prospectus, so knowing what to look for is essential to being able to weed the good investments out from the great investments. When you find a fund that interests you, contact either the mutual fund company or your financial adviser and request a prospectus for the fund of interest. The prospectus will list a variety of essential items such as: the fund's advisers, restrictions, fees and goals. Along with the prospectus you should receive an annual report representing the mutual fund company. This will provide an insiders view of the fund's assets as well as previous years performance.

Do not simply skim through the prospectus as this could very well define future performance expectations. There are three essential sections of the prospectus that should be reviewed before investing. The first section that should be reviewed is the fund's investment policies and can be found in the section titled "Key Features of the Fund." This section will describe what investment objectives the fund is best equipped for.

Next you should review the types of transactions the funds typically executes as well as the securities typically bought and sold by the fund. This will give a clear picture of the fund's financial direction. Lastly, be sure to carefully read the section regarding fees and costs associated with purchasing and holding shares of the fund, otherwise known as loads. This is found in the section titled "Summary of Expenses" and contains a broken down cost structure by fee type. Sales load and or charges must be clearly explained and detailed in this section.

When you become an investor of the fund you should continually review semiannual reports of each fund you own. If you review what sectors the fund is currently investing in, you will be better prepared to correlate the fund's performance to an industry's performance. For example, if 27% of the fund's portfolio is in chemicals, you will better understand why the fund performed poorly if chemical stocks in general performed poorly. When you understand how the two correlate with each other, you will be less likely to sell in a panic.

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Jim Cramer's Mad Money

noreply@blogger.com (Money Analyst) — Tue, 17 Jul 2007 15:44:00 +0000

Consider this a nuts and bolts guide to investing. If curiosity for understanding risk tolerance, defining investment objectives, and doing the basic homework on a stock strikes you, this is the resource you've been looking for. From understanding how and when to buy or sell investments to building a winning portfolio, Jim Cramer's Mad Money has it all.

As we all know, Mad Money is Jim Cramer's TV program that offers everything from valuable investing information to educational tips that can turn a portfolio from under performing to out performing. Cramer gives tips on what to look for in a stock and reviews some of the top performing suggested stocks given on Mad Money the TV program and some of the losers as well. If you want to get the most out of Cramer's show Mad Money you need this resource to understand really what he's talking about. In this book Cramer will tell you precisely how he can pin-point a stock and he even reveals some of the secrets of the lightning round as well as all the fancy tricks he uses to pull it off night after night.

Resources
Jim Cramer's Mad Money: Watch TV, Get Rich
Jim Cramer's Mad Money

Is Health Care Really on its Way to Reform?

noreply@blogger.com (Money Analyst) — Mon, 16 Jul 2007 19:05:00 +0000

The problem: Simply put, the costs of health care services are on a continuous, seemingly unstoppable, upward spiral. Increasing at a rate more than twice as fast as the rate of inflation, health insurance costs are on the rise as well. What could be the cause of this? What can be done about it? A brief description of what lead up to this horrific, uncontrollable cost is needed to really begin to understand why this is happening and why the people who can control it won't.

Since the beginning of medicine, doctors have been highly regarded because they save lives. They have since been increasing rates slowly but surely to fatten their wallets. But is it just to fatten their wallets? No. If you've walked into a doctors office lately, you may notice recent remodeling of medical facilities; you may notice new top of the line technology. If you paid a bit more attention to the materials that go into these top of the line machines and remodels, you'd notice one common characteristic- they are top of the line and the most expensive. This brings up the question- do they really need Italian tile in their office?

Doctors' are not picking up these costs and writing them off as business expenses. They are passing the costs of office renovations and new technological gadgets to the consumer- their customers. Their customers don't ask to stand on Italian tile or bask in the newly added sun deck off the doctors lounge, but they pay for it. Professionals in the medical industry have noticed that what they provided is seen as a necessity by their customers and they capitalize from it in a big way. They get both large pay check that is almost guaranteed month by month, and they get to live the lavish, luxurious lifestyle both at home and at work all on the consumers dime. Is this morally and ethically right? Absolutely not.

Physicians and other medical professionals are the driving force of the increasing health care costs we all experience today, and also the reason why so many of us cannot afford health insurance. So how does this affect health insurance costs? Lets say 5 years ago the cost of a doctors visit was $100. Your health insurance paid 80% of that $100 doctor visit- $80.00. Now the cost of a doctors visit is most likely around $300. Your insurance now pays $240.00. That is an amazing increase and all because there are zero controls on the medical services industry. Because the medical professionals decide that they need the newest technology that many insurers excluded from their coverage, all insured individuals end up paying the price through increased rates across all services. So next time you're in your doctors office, ask your doctor to justify their costs of doing business- odds are they won't be able to.

Now heres an idea. Why doesn't the government step in to regulate the medical industry? This fantastic idea is brought up time and time again. First off let me remind you that both medical professionals and insurers have become very accustomed to raising rates and benefiting from it(rates on average increase 10-15% per year). Politicians get the bright idea to please voters by attempting to pass legislation that seemingly would aim to reform health care, but isn't it interesting how it NEVER works? Could it be because the very politicians that prepare these legislations are paid off by insurers and medical professionals to encourage their works of legislative art not to succeed? Sure thing! So what can you do if your legislative body won't do their job?

You do what you can. When you shop for auto insurance you shop for the best price, right? If you're an efficient consumer you will. You can do the same thing for medical insurance and medical services. Shop around and do your part to decrease medical costs. If you start to voice your opinion about the outrageous increasing costs of health care and health insurance, medical providers will be forced to listen. So how do you do this?

Step 1: Call your medical provider (your doctor) and ask them for a complete list of prices for the services that you routinely require. Then do the same for other medical providers in your area. Make a choice to save money and chose a different, more competitively priced medical provider. If prices go up again, repeat step one, over and over again. Of course this will place a burden on your medical services consumption, however, over time we can reform the health care industry.

Another thought... The health care industry has named health care plans after the deductible amounts right? (i.e. high deductible plan and low deductible plan). My reason for this is that most people are drawn to the plan that sounds the cheapest up front without fully considering all the costs-- people are drawn to the low deductible plan because it sounds cheap. But the catch is it's not cheap and in fact this is how health care insurance companies make more money than they should.

So lets rename the plans. Lets now call a low deductible plan a high premium payment plan and a high deductible plan a low premium payment plan. I think you can do this because there really is an inverse relationship with the deductible and the premium payment. (i.e. the higher the deductible the lower the premium).

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Stock Investing Basics

noreply@blogger.com (Money Analyst) — Mon, 16 Jul 2007 15:40:00 +0000

These basics of stock investing will provide a quick overview of what it takes to weed out good investments from the great investments.

Investigate the company you're interested in.
If you happen to find a company that interests you, what do you do next? The basic approach before you put your finger on the "buy" button is to get all the information you can about the company. This may sound like an obvious step, but surprisingly many people either stop investigating to early or simply don't investigate at all. Don't rush your analysis- unless you're incredibly experienced, you will be learning and gaining helpful analysis tools as you go.

Don't invest more than 10% of your investment dollars in a single stock.
It might be a good idea to invest some portion of your investment dollars into a less risky investment such as a mutual fund or blue chip stock. But if you concentrate your investment dollars in any one stock, you become too dependent on that company. Diversifying your portfolio may not exactly mean less of a possible return, but it will show less of a dependency on a particular stocks performance. Diversify, diversify, diversify.

Invest in what you know.
The most useful research has already be done. We all know what General Electric does right? They make light bulbs. Wrong. They don't just make light bulbs- they do so much more. From airplane parts to home electronics, GE is in it all. Given that, I know that GE is a company that has taken the advice of diversification to heart and incorporated that concept into it's business model. GE has been around for a very long time, and many people use their products. So, it might be a decent investment if it fits into your portfolio. So keep in mind that the companies you already know and use as a consumer, might also be a viable investment.

Buy for the long term.
If you remember that success can found by time in the market and not timing the market, you will be better off. Attempting to calculate exactly when to buy and when to sell is incredibly difficult, and may seasoned investors will tell you it is impossible unless you have some psychic abilities. But, if you buy what you know for the long term, you will experience the profit highs longer and be less tempted to second guess your decisions.

Only fools rush in.
Don't worry too much about buying round lots of 100 shares when you invest. If you focus on sticking with your plan and investing incrementally (i.e. 500 each month, or $100 a week) you could find better results. If you are interested in a few different stocks and would like to invest in all of them after your careful analysis, invest equally across the board so you can more effectively compare the performance of those stocks with each other. If after a six month period some investments are outperforming others, replace the under performing investments.

Don't act too quickly.
If you find a hot stock that seems fundamentally sound, remember to take your time with your analysis. You don't have to buy before dinner or before the markets close for the day. Decide first if the investment makes sense as a long term investment and if it fits in with your existing portfolio.

Learn from your mistakes.
You will undoubtedly make a mistake here and there, but if you learn from your mistakes, you will gain the "market wisdom" that it takes to become a successful investor.

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Investing in Individual Stocks

noreply@blogger.com (Money Analyst) — Mon, 16 Jul 2007 14:56:00 +0000

Picking the winning stock out of a line-up can be an exciting thrill ride that can yield great profits- two reasons why so many investors opt in to investing in individual stocks. You never know what is going to turn into profit making news next. What the next hot product is? First a company will trigger your profit watching senses. Then you'll do some research to weed out the fluff from the good news, and maybe with some bit of luck you end up saying "That's the one I've been waiting for".

What does it take to pick the next winning stock? It's not a "pin the tail on the donkey" process. It's not some random type of lottery. You have to have some degree of experience and stock analysis tools under your belt. Of course investing in individual stocks can be riskier than investing in a mutual fund, but it can be more rewarding as well. Finding the winner can be done, but do it wisely.

Common stocks, which provide actual ownership in a company, can be classified in three different groups. Growth stocks are shares in a company that expects to experience strong earnings growth over the coming years. Blue chip stocks are shares in a company that is fairly well established like Boeing, or General Electric. Small cap stocks are shares in a company that has a minimum total market share.

Generally the greater the risk, the greater the return, and small cap stocks may show greater growth potential; however small cap stocks will generally be more volatile. Blue chips stocks, on the other hand, have been around for a while and generally will show less of a risk as well as a more stable return.

When investing in common stock, you essentially own part of the underlying company and you will share in the ups and downs of the profit that company experiences. Your investments success or failure directly depends on the success or failure of the company you choose to invest in. But the "warm and fuzzy" notion of owning part of the company provides some assurance that if the company does experience a loss, or a down period, you will also share in possible future profits. Keep in mind that generally the greater the risk the greater the return. This could mean that smaller companies could have more of an explosive growth pattern yielding greater returns. Larger companies might show a more stable pattern of returns. So what are the basic ground rules for picking individual stocks?

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Tune Into the Markets and Become a Well Rounded Investor

noreply@blogger.com (Money Analyst) — Fri, 13 Jul 2007 22:09:00 +0000

The minute you purchase an investment, you are going to run out and get the first business magazine or financial newspaper and read all you can about your current investment and/or future investments. You may even subscribe to financial papers like The Wall Street Journal. If you've invested a small chunk of your life savings in a favorite company, a small blurb on the back page of The Wall Street Journal, which you wouldn't have noticed a week ago, is now going to capture your astute attention. This is because you are getting involved, as many do when they first start investing. Of course if you wanted to learn even more, there are many more financial resources out there, and some are reviewed below.

But be careful, and don't over indulge yourself. If you walk past a news stand, or stand inline for your cup of "java" in the morning, you'll understand. There is a plethora of information about the world of investing, and many "newbies" feel like they have to get every ounce of it by the next trading day. Just remember that you don't have to. Learning little by little is much more effective and before long, you'll be amazed at what you have learned.

You'll find below enough to get you started about researching investments and keeping up with the worlds financial times, but remember that Rome wasn't built in a day; your portfolio won't be either. You don't have to run out and start pursuing an MBA. Just becoming aware of the language of investing can give you the extra boost, and you'll find yourself doing this on your own soon.

1. Investor Magazines are a great source

Many investors' magazines are sold, but namely Forbes is most informative. You may soon have a differing opinion, but that is just what the financial markets are full of- opinions. Often a journalist's opinion on a particular company can be incredibly helpful, as this is exactly what you'll find in magazines like Baron's or Smart Money. There is definitely a variety of these resources, and they can be expensive. However, online research is often free such as with Google Finance, so do your homework.

2. Your local financial news paper

When you start to routinely search for information, you'll find yourself getting really interested in figures that once resembled a foreign language. Just don't fall for the media hype- there's a lot of financial fluff out there.

3. National Newspapers- namely the financial section

You will find that you watch the market with a fine tooth comb when you first invest. Keep in mind that you don't have to dissect the paper as a simple review of the highlights will do just fine. From the previous days performance to market trends, you can find it all in The Wall Street Journal.
Another good source is Investor's Business Daily or The Chicago Tribune. You might even try USA today or The Los Angeles Times. Eventually you will learn to weed out the good stuff from the fluff and retain what you need to to stay abreast of the current events. Many of the financial papers also have online outlets for their information as well, so you could also surf the web. The more you start to stay tuned with current events, market rallies, and financial reports, the more of an understanding you will have about the market in general and its cycles.

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Survival of a Down Market

noreply@blogger.com (Money Analyst) — Mon, 09 Jul 2007 22:02:00 +0000

To climb a markets peaks, you must first ride through the valleys. It can be tough to hold back your emotions and urges to sell while you think you can during market downturns. This is just "the nature of the beast." Eventually markets will reach new highs after a few downturns, but it is difficult to manage emotions as many investors find themselves fleeing for safety in fixed income and cash investments. When the market does in fact turn around, these investors find it very difficult to catch up with the market. When you suffer a large loss and bail out, you will need an even larger gain than your loss to both make up for the loss and time. This will not happen if you sell in fear and settle for a loss, but it will leave you cringing once again as you watch the climb to new highs.

Remember this: If you adopt a plan that makes sense for you, you have to believe in the effectiveness of the plan and its logical approach. You will need this plan to keep your portfolio on track to wade through the down times. However, a logical plan will not convince you to stay on track alone because every downward spiral, every logical market voice will be urging you to "cut bait and run." Only your own logical conviction and sense of market soundness will keep you and your portfolio on track and in the market.

The market will fall to dreadful lows and you will start to believe all market nay sayers and convince yourself that the country is headed to a new market turmoil. Keep in mind that when your emotions are high, you must take the extra effort to stay on track and resist the fuzzy temptations. Remind yourself that history has proved itself time and again that all market downturns have close upturns sure to prevail. But when you wake up, and the market does turn around for the better, you will be tempted bet the farm, mortgage yourself to your teeth, and buy even more stocks. Here's hint, don't do this- simply stick with your plan.

Know that this country has been through many bear markets and many bull markets. Over the past century or so, this country has been through upwards of 20 bear markets. Every bear market has been followed by a bull market leading to record highs. Considering this, you should know that you are investing in something that has gone through tough times, only to prevail and come out even stronger. When you buy a stock at a peak, it will fall. But you won't cut bait and run because you now know that it will recover just as it has always has. This understanding is your basis of which you can build your financial independence.

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Systematic Investing Could Yield Greater Returns

noreply@blogger.com (Money Analyst) — Mon, 09 Jul 2007 21:16:00 +0000

Investing isn't a set it-and-forget it process. The first step in the process for you may be setting up an account and making the initial investment, but it certainly does not stop there. What you should do is give some thought into how much you can set aside and still live a comfortable life, but definitely do not simply stop at the initial investment. Consider starting a systematic method of investing your money on a routine basis such as payroll deductions.

There are numerous options to systematically invest money without having the opportunity to use it first. In other words- you will save yourself from temptations of taking your husband or wife for a night on the town with your otherwise intended investment dollars. You could do this with an automatic payroll deduction, for example. Part of each paycheck could be automatically deposited into your brokerage account, whether it be a full-service brokerage or a discount brokerage such as Scottrade, to be used for future investments. You could also set up an automatic EFT (Electronic Funds Transfer) with your banking institution, which will automatically take a predefined amount of money from your checking or savings account and deposit it into your brokerage account.

In both cases you will define the amount of money- you may even start with 5 or 10% of your earnings. By setting a defined percentage, the more you earn, the more you invest. You could also state an amount such as $100 or $500 a month or quarter. Just think of this as a necessity and figure it into your budget- saving for retirement is just as important as going on vacation next summer.

There are many great reasons for systematic investing. One reason is considering the concept of dollar cost averaging. Don't cringe at this term; it simply means investing on a regular basis with a predefined amount of money (i.e. $100 a month, $500 a quarter, etc). The result of dollar cost averaging is that you will buy more shares when prices are lower and fewer when prices are higher. This essentially evens out the highs and lows of an investments price.

Simply by using the concept of dollar cost averaging will not guarantee gains or protection from losses, but it can definitely help by buying more shares at lower prices and fewer shares at higher prices. This is a great way of riding the ups and downs of the market and will help to keep your "down market" emotions in check. This will help to keep your investment plan on track.

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SIPC Broker-Dealer Insurance Coverage

noreply@blogger.com (Money Analyst) — Mon, 09 Jul 2007 21:04:00 +0000

Congress first created the Securities Investor Protection Corporation (SIPC) in 1970 to help protect consumers of member broker-dealers that fail and/or be liquidated. If securities or cash are missing from customer accounts, the corporation will step in and replace the lost securities and/or cash. Protection is limited to $500,000 per customer which includes cash up to $100,000. SIPC does not protect customers against market risk which could be defined as losses resulting from a fall in a security’s value.

How Does SIPC insurance work?
SIPC will generally provide adequate coverage in the event of a liquidation or failure of an insured member broker-dealer. Federal securities laws require that customer accounts be segregated from the firm's own assets. Audits, both internal and external, enforce this segregation of assets as well as regulatory exams and periodic reporting requirements. Member broker-dealers will hold customer assets in book entry form, not in physical possession by the firms themselves. In the event of a brokerage failure, SIPC funds would be used to cover a limited portfolio amount (protected amounts up to $500,000 including a $100,000 limit for cash). Some firms, depending on size of the firm, will provide additional private insurance beyond SIPC limits as an added value to their customers.

How do SIPC and FDIC insurance compare?
The Federal Deposit Insurance Corporation (FDIC) protects customer deposits up to $100,000 in most U.S. banks and savings associations in the event that the institution fails or becomes insolvent. FDIC will not cover loses from any type of investment related product- SIPC insurance will cover a limited amount of investment related items.

SIPC has a limit. What if you have more?
SIPC will limit insured amounts, however, most investment brokerages are increasingly providing private insurance to cover amounts beyond what SIPC insurance covers. To find out the insurance policies of your investment brokerage, as your investment representative for an explanation of the protection they provide. Your investment representatives should be able to explain SIPC and private insurance limits and qualifications. Often times just knowing that you are with a financially stable and well insured brokerage is enough assurance of the safety of your assets.

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