Stock Market Investing For Dummies

From: Stock Market Investing For Dummies

All too often, stock market investing is made to seem more complicated than it is. We have called this site Stock Market Investing for Dummies because when we first set out on a journey we have so much learning and understanding to do. Please don’t feel slighted by the term; it is intended to inject a little light-heartedness into the proceedings.

The basic concept of investing in the stock market revolves around the stock itself. A share of stock is a part of ownership in a particular company. When a company “Goes Public” they are making part of their shares of stock available on a major stock exchange, where you can purchase and sell those shares of stock.

Everyone has heard of the concept of buying low and selling high, and in reality the fundamentals behind the principal are not all that hard to understand either. A stock’s value is dependant upon its demand. When the value is low, there is very little demand for the stock. If the company then releases a dividend, or unveils new business plans, this can get other investor’s attention and increases its demand or value.

To make the most amount of money, you have to know when a particular share will be more in demand before the other investors do and that in itself is an advanced technique you will begin to understand as you gain more experience. Buy low and sell high, but in order to make the best profit, you need to buy low before the other investors do and sell high right before the demand fades away. Too late and you lose money, to early and you also lose money. Give it time and practice and soon you will be trading like a professional.

When it comes to stock market investing for dummies, all that you really need to know is that you want to purchase a share of stock when there is little or no demand. However this is tricky because you want to make the purchase with an anticipation of the increase in demand for a stock.

Stock Market For Dummies – Update

In today’s economic climate it is even more important that your research is as thorough as it possibly can be. Scout around this site before you invest in any equity related instruments – click on links and read as much as you possibly can. Don’t get caught out through lack of knowledge.

Many people see all the stock market investment software that is available on the internet and are wondering if it actually works. The answer to this one is a bit difficult to explain because there are some pros and cons that must be taken into account.

For starters, these programs analyze the ticker for the data. With the thousands of stocks out there to choose from, the ability to monitor them all on a continuous basis is difficult for a human, but not for a computer program. When they see certain patterns occur to a particular stock, they let alert you to the fact.

The goal is to purchase when the program tells you to because the value is increasing. However, this can also be misleading because if a share of stock jumps abruptly and tops out, you may be purchasing the stock at too high a level.

Furthermore, these programs also attempt to determine when you should sell; however sometimes this alert can come too early or even too late causing you to lose money.

Using your own common sense is very important. You need to keep an eye on business news while at the same time pay attention to what the program is telling you. If the program is telling you to buy, and your common sense is telling you not to based on the actual news you are hearing, then simply do not buy.

The only way for you to truly make money is through the development of your very own trading strategy which focuses on your strengths. When you first start to invest, a stock market investing software package can help you to build up the experience needed to start developing your own investment strategy, to the point that you will no longer need the Stock Market Investing For Dummies Guide.

Update

Given the turbulent times we have experienced of late, it is the opinion of The Stock Market For Dummies Guide that automated stock investment software is too volatile in today’s market to be of any benefit to the beginner investor. These times will present some fantastic opportunities for the shrewd investor, but any decisions should be made without the aid of automated software.

The Stock Market For Beginners: 7 Starter Tips

From: Stock Exchange Secrets

Other pages in this 'Stock Market For Beginners' section of the site look at the kinds of things that a new investor should do to help themselves. However, these were written in essay format and so for some time it has been on the 'to do list' to make a list and simplify the stock market for beginners tips.

Here we go...

1. Investing is not a hobby. To big merchant banks, it is a very competitive business. Therefore, you should also treat it as a business. That means understanding your own profit and loss as well as the companies in which investments are made.

Once this thought pattern is established, it makes the whole process so much easier. Simply ask, "Will this investment / trade / software / subscription make or lose me money?" Once an answer has been established, a clear course of action will present itself. 

2. Get some great investment management software. These days, a speedy internet connection and good money management and investment software costs virtually nothing. Why spend the time and effort trying to figure out the best ways to do things when solutions already exist.

Ideally, look to purchase two types of software. One will be for personal money management. This can be used for profit and loss and keeping track of the costs of subscriptions, stockbrokers and the like. The other will be used for tracking stock and fund prices, storing company news, technical and fundamental analysis and more.

Click Here To Watch Free Trading Videos

3. Get an education. Warren Buffett has suggested in the past that every investor should be able to understand basic accountancy principles, an annual report and stock market history. You probably do not need to become an accountant, but being able to understand the scoring system of the game can only help.

4. Learn about money management. Every investor will have the occassional (at best) loser and it is vital that no individual holding can wipe out a portfolio. Understanding asset allocation is vital.

Years of talking to people about investments has taught me that there are fundamental differences between the way investors behave. New investors ask for 'a tip' and want to know, "What should I buy?".

In contrast, professionals do not want tips. They have dozens of good ideas of their own. They won't be sharing those ideas with you and they will not be expecting you to share yours. Instead, they ask about how you allocate money. "Which sectors and markets do you like and why?" The difference between these approaches is like night and day.

5. Read widely. Getting a wide ranging education in personal finance, corporate finance, taxation, economics and investment theories will help. However, finding areas of the world or business in which you can become relatively expert can help in the process of finding investments.

The reality is that in the modern world - especially with the power of the internet - there is very little information that is not in the public domain somewhere. However, the world now has information overload. Whilst the information might be available, few people now have the time to find or understand it. The people who know these things and can 'join the dots' have regular opportunities for stock market investment.

Once the basics have been covered and understood, it may be that just one or two hours of reading each week will be enough to keep knowledge up to date. But keeping up to date is vital.

6. Find a good investment service to subscribe to. Many of the suggestions above can now be covered by joining just one stock market service. These services now aim to pick stocks, offer trading and portfolio management software and educational services too. If things go well, then by investing in the stock market picks, the service can be paid for with profits.

Though these services are often not 'cheap' they are generally very valuable and can help to make an investor or trader profitable whilst learning the ropes. This is a great way to learn or experience the stock market for beginners.

Watch Free Stock Trading Video Tutorials Here

7. Practice makes perfect. In the investment business, paper trading is how we all start. Pick a couple of companies, make a note of their price, the date, the reason why you want to buy them and then start following the stock.

As time passes, the hunch or assessment which made the stock such a great prospect will play out. Was it a good or bad decision? Would buying the stock 'for real' have made a profit or a loss?

Click here to read our stock market blog

This is an excellent learning experience and one that is vital to the long-term profitability of anyone in the stock market. To get the real experience, purchase some graph paper and chart the stock price movements each day by hand. Learn to compare this with the overall movements of the market and a whole new world of investment and money will begin to open up to you!

For an even broader look at this topic, please also read the following article about the Stock Market For Beginners

Will The Dow Jones Crash?

Managing Your Money

From: Bankers Australia

No matter what your financial situation, being good with money is a core life skill. Whether you have a little or a lot, there are some basic practices that can help you manage your money.

Bank account basics

Banks offer all sorts of financial products and services to customers. When you are shopping around for a banking account, sometimes the range and complexity of choices can be overwhelming. Maybe you've just got you first full-time job and need an account to help you manage you pay. Maybe you’re juggling work and study and need to keep a close eye on your money if you’re saving for that car. Whatever your circumstances, it’s time to get smart about your banking.

Making the right choice about your bank account is the first step towards smart banking. The information below can assist you choose a bank account which best suits your needs and to help you cut down on fees in order to get the most from your account.

To read more information there are some resources below which may be of assistance.

Handy booklet:

“Smarter Banking – Make the Most of Your Money”

Fact Sheets:

Affordability of banking

Fee free and low cost banking

Bank service fees

New ways of banking

Credit basics

Borrowed money or credit is used by most bank customers because it’s convenient and it helps us achieve our financial goals, when it’s carefully managed. The information below is for anyone who is thinking about borrowing money, or already has some form of credit, such as a personal loan, an overdraft or a credit card. It provides the basic facts about credit – from the potential benefits and pitfalls of different types of credit, including the cost of credit, through to helpful tips on keeping credit under control and what to do when credit becomes a problem.

To read more information there are some resources below which may be of assistance.

Handy booklets:

“Smarter Banking - Make Credit Work for You”

“Smarter Money - Take Control and Stay on Top of Your Finances”

Fact sheets:

Another day, another bill to pay

Borrowing Money - Managing and Obtaining Credit

Bank fees

Banks charge fees for the service they provide to the customer and this is predominantly based on a user pays principle. That is, customers pay a reasonable fee for the cost of the services they use.

Although it might not be obvious, a bank incurs a cost for every service a customer uses, even if it is only checking an account balance. Most customers agree it is fair to pay fees, but only if they receive value in return. In return for service fees, customers know their money is safe and secure and that their bank will provide and maintain facilities which give them convenient access to that money, 24 hours a day, seven days week, from almost anywhere in the world.

To read more information there are some resources below which may be of assistance.

Handy Booklets:

“Smarter Banking – Make the Most of Your Money”

“Smarter Money - Take Control and Stay on Top of Your Finances”

Fact sheets:

Affordability of banking

Fee free and low cost banking

Bank service fees

New ways of banking

Budgeting basics

Budgeting is the process of balancing income and expenses so that you can manage your finances for a defined period. Doing a budget is simply a matter of noting down all of your income and all of your expenses, then subtracting your expenses from your income to see what you have left. This is your ‘disposable income’.

Budgets are often thought of as something necessary for individuals or families on modest incomes or for those paying off debt. However, everyone can benefit from a budget, even the most affluent. A budget can show if you are living beyond your means or spending more than you are earning. You can use a budget as a tool to help you save for a financial goal like a car or an overseas trip.

Some people think doing a budget is daunting … the ABA has a number of fact sheets, including Budgeting Made Easy and our Handy Budget Planner to assist you take the first step, and the second step to being a better money manager.

To read more information there are some resources below which may be of assistance.

Handy Booklet:

“Smarter Money - Take Control and Stay on Top of Your Finances”

Fact sheets:

Budgeting Made Easy

Handy Budget Planner

Single trader sparked Wall Street's flash crash

From: The Sydney Morning Herald

October 2, 2010

 

A computer-driven sale worth $US4.1 billion ($4.24 billion) by a single trader helped trigger the May flash crash, which sent the Dow Jones Industrial Average dropping nearly 1000 points in less than a half-hour and set off liquidity crises that ricocheted between US futures and stock markets.

A report issued on Friday by the US Securities and Exchange Commission and the Commodity Futures Trading Commission determined the plunge was caused when the trading firm executed a computerised selling program in an already stressed market.

The report did not identify the trader by name, but internal documents obtained from futures exchange operator CME Group identified that trader as money manager Waddell & Reed Financial.

The long-awaited report focused on the relationship between two hugely popular securities - E-Mini Standard & Poor's 500 futures and S&P 500 "SPDR" exchange-traded funds - and detailed how high-frequency algorithmic trading can sap liquidity and rock the marketplace.

"The interaction between automated execution programs and algorithmic trading strategies can quickly erode liquidity and result in disorderly markets," the report said.

The "flash crash" sent the Dow Jones Andustrial Average plunging within minutes, exposing flaws in the electronic marketplace dominated by high-speed trading.

The report lays the foundation for a commission to recommend new rules to avoid a repeat. At least one lawmaker threatened congressional action if regulators did not address the disparity in the markets.

Trading was turbulent that afternoon because of concerns over the European debt crisis. Against that backdrop, a "large fundamental trader" initiated a sell program to sell 75,000 E-Mini contracts as a hedge to an existing equity position, according to the 104-page report.

Citing documents from CME Group, Reuters reported on May 14 that Waddell sold a large order of E-Minis during the market plunge, identifying the firm to which the chairman of the Commodity Futures Trading Commission, Gary Gensler, had alluded in congressional testimony.

The CFTC had resisted naming Waddell in Friday's report because of laws that allow it to withhold such information from the public, sources have said.

Waddell's selling algorithm had "no regard to price or time," the report said. That, coupled with the "aggressive" reaction by high-frequency traders hedging their positions, led to two separate "liquidity crises" -- one in the E-minis, the other among individual stocks.

Waddell's algo "responded to the increased volume by increasing the rate at which it was feeding the orders into the market, even though orders that it already had sent to the market were arguably not yet fully absorbed by fundamental buyers or cross-market arbitrageurs," the report said.

These arbitrageurs transferred the selling pressure to the stock market, sparking a "hot-potato" effect among high-frequency traders that rapidly passed the same positions back and forth.

Meanwhile, the report continued, the stock market began plunging as trading pauses kicked in at individual firms, as high-frequency traders became net sellers, and as market makers began routing "most, if not all," retail orders to the public markets -- a flood of unusual selling pressure that sucked up more dwindling liquidity.

Shares of Waddell edged higher on Friday. They fell sharply on the day of the initial Reuters report.

The unprecedented flash crash called into question many of the regulatory and technological changes over the last decade, which ushered in an era of lightning-quick trading on dozens of mostly electronic exchanges and alternative venues.

Data to the beginning of this month show that funds have exited mutual funds in every week since early May. Meanwhile, the 20-day moving average of the S&P 500's daily volume shows a slow decline since late May, according to Reuters data.

"I do not expect today's report to restore the confidence that was lost as a result of the flash crash," said David Joy, Minneapolis-based chief market strategist at Columbia Management, a large money manager.

"Most individual investors do not fully understand how high-frequency trading works, only that it can create volatility and seems to put them at a disadvantage. Only time, and higher stock prices, will restore that lost confidence."

The SEC, under enormous political and public pressure to act, in the last few months adopted new trading curbs known as circuit breakers and proposed establishing a consolidated audit trail of all stock trading.

Lawmakers seized on the latest report as a reason for the SEC to do more to fix the fragmented markets.

"The SEC should seriously consider ways to slow things down when markets get volatile," said Democratic Senator Charles Schumer.

Democratic Representative Paul Kanjorski said regulators must act quickly to revise market rules.

If necessary, Congress must "put in place new rules of the road to ensure the fair, orderly and efficient functioning of the US capital markets," Kanjorski said.

The flash crash report comes just as the SEC and the CFTC have begun drafting nearly 200 rules required by the landmark Wall Street reform legislation, which includes a revamp of the opaque over-the-counter derivatives market.

Latest Merket News

From: News - From All Angles

SKYPE announced an agreement on Wednesday with US corporate telephone provider Avaya to bring the internet communications service to US business customers.

A technology blog, the Dow Jones-owned AllThingsDigital, reported meanwhile that Luxembourg-based Skype was also set to announce a partnership with Facebook that would integrate Skype services into the social network.

Skype and Avaya, a provider of enterprise communications systems, software and services based in Basking Ridge, New Jersey said their agreement calls for the delivery of low-cost communications to business clients.

Avaya customers in the United States will have access to Skype Connect, allowing them to save on international calls.

Skype, which was founded in 2003, bypasses the standard telephone network by channelling voice, video and text conversations over the internet.

Avaya and Skype said that in the second half of 2011, they will deliver integrated solutions that will allow instant messaging, voice and video communications between their respective users.

"Our relationship with Avaya is expected to expand the footprint for Skype Connect into more enterprises in the US market, while allowing us to help Avaya's customers benefit from Skype's cost savings and access to Skype's global user base," Skype vice president David Gurle said.

"We believe our integrated solution in the second half of 2011 is expected to offer the benefits of Skype to a growing number of businesses and open up new ways for people to communicate and collaborate."

AllThingsDigital said the Facebook and Skype partnership would see the integration of Skype SMS messaging and voice chat into the social network, which has more than 500 million members worldwide.

Contacted by AFP, a Facebook spokesman said: "We work with a lot of companies on Facebook integrations, but have nothing to announce with regards to Skype at this time."

Skype also declined to comment on any potential agreement with Facebook.

In August, the communications firm announced plans to raise up to $US100 million in shares by listing on the NASDAQ stock exchange.

The Stock Market For Beginners: 7 Starter Tips

Other pages in this 'Stock Market For Beginners' section of the site look at the kinds of things that a new investor should do to help themselves. However, these were written in essay format and so for some time it has been on the 'to do list' to make a list and simplify the stock market for beginners tips. 

Here we go...

1. Investing is not a hobby. To big merchant banks, it is a very competitive business. Therefore, you should also treat it as a business. That means understanding your own profit and loss as well as the companies in which investments are made.

Once this thought pattern is established, it makes the whole process so much easier. Simply ask, "Will this investment / trade / software / subscription make or lose me money?" Once an answer has been established, a clear course of action will present itself.

2. Get some great investment management software. These days, a speedy internet connection and good money management and investment software costs virtually nothing. Why spend the time and effort trying to figure out the best ways to do things when solutions already exist.

Ideally, look to purchase two types of software. One will be for personal money management. This can be used for profit and loss and keeping track of the costs of subscriptions, stockbrokers and the like. The other will be used for tracking stock and fund prices, storing company news, technical and fundamental analysis and more.

Click Here To Watch Free Trading Videos

3. Get an education. Warren Buffett has suggested in the past that every investor should be able to understand basic accountancy principles, an annual report and stock market history. You probably do not need to become an accountant, but being able to understand the scoring system of the game can only help.

4. Learn about money management. Every investor will have the occassional (at best) loser and it is vital that no individual holding can wipe out a portfolio. Understanding asset allocation is vital.

Years of talking to people about investments has taught me that there are fundamental differences between the way investors behave. New investors ask for 'a tip' and want to know, "What should I buy?".

In contrast, professionals do not want tips. They have dozens of good ideas of their own. They won't be sharing those ideas with you and they will not be expecting you to share yours. Instead, they ask about how you allocate money. "Which sectors and markets do you like and why?" The difference between these approaches is like night and day.

5. Read widely. Getting a wide ranging education in personal finance, corporate finance, taxation, economics and investment theories will help. However, finding areas of the world or business in which you can become relatively expert can help in the process of finding investments.

The reality is that in the modern world - especially with the power of the internet - there is very little information that is not in the public domain somewhere. However, the world now has information overload. Whilst the information might be available, few people now have the time to find or understand it. The people who know these things and can 'join the dots' have regular opportunities for stock market investment.

Once the basics have been covered and understood, it may be that just one or two hours of reading each week will be enough to keep knowledge up to date. But keeping up to date is vital.

6. Find a good investment service to subscribe to. Many of the suggestions above can now be covered by joining just one stock market service. These services now aim to pick stocks, offer trading and portfolio management software and educational services too. If things go well, then by investing in the stock market picks, the service can be paid for with profits.

Though these services are often not 'cheap' they are generally very valuable and can help to make an investor or trader profitable whilst learning the ropes. This is a great way to learn or experience the stock market for beginners.

Watch Free Stock Trading Video Tutorials Here

7. Practice makes perfect. In the investment business, paper trading is how we all start. Pick a couple of companies, make a note of their price, the date, the reason why you want to buy them and then start following the stock.

As time passes, the hunch or assessment which made the stock such a great prospect will play out. Was it a good or bad decision? Would buying the stock 'for real' have made a profit or a loss?

From: Stock Exchange Secrets