There are three important differences between investing and trading. Overlooking them can lead to confusion. A beginning trader, for example, may use the terms interchangeably and misapply their rules with mixed and unrepeatable results. Investing and trading become more effective when their differences are clearly recognized. An investor’s goal is to take long term ownership of an instrument with a high level of confidence that it will continually increase in value. A trader buys and sells to capitalize on short term relative changes in value with a somewhat lower level of confidence. Goals, time frame and levels of confidence can be used to outline two completely different sets of rules. This will not be an exhaustive discussion of those rules but is intended to highlight some important practical implications of their differences. Long term investing is discussed first followed by short term trading.

My mentor, Dr. Stephen Cooper, defines long term investing as buying and holding an instrument for 5 years or more. The reason for this seemingly narrow definition is that when one invests long term, the idea is to “buy and hold” or “buy and forget”. In order to do this, it is necessary to take the emotions of greed and fear out of the equation. Mutual funds are favored because of they are professionally managed and they naturally diversify your investment over dozens or even hundreds of stocks. This does not mean just any mutual fund and it does not mean that one has to stay with the same mutual fund for the entire time. But it does imply that one stays within the investment class.

First, the fund in question should have at least a 5 or 10 year track record of proven annual gains. You should feel confident that the investment is reasonably safe. You are not continually watching the markets to take advantage of or to avoid short term ups and downs. You have a plan.

Second, performance of the instrument in question should be measured in terms of a well defined benchmark. One such benchmark is the S&P 500 Index that is an average of the performance of 500 of the largest and best performing stocks in the US markets. Looking back as far as the 1930’s, over any 5 year period the S&P 500 Index has gained in price about 96% of the time. This is quite remarkable. If one widens the window to 10 years, he finds that over any 10 year period the Index has gained in price 100% of the time. The S&P500 Index has gained an average of 10.9% a year for the past 10 years. So the S&P500 Index is the benchmark.

If one just invests in the S&P500 index, he can expect to earn, on average, about 10.9% a year. There are many ways to enter this kind of investment. One way is to buy the trading symbol SPY, which is an Exchange Traded Fund that tracks the S&P500 and trades just like a stock. Or, one can buy a mutual fund that tracks the S&P500, such as the Vanguard S&P 500 Index Fund with a trading symbol VFINX. There are others, as well. Yahoo.com has a mutual fund screener that lists scores of mutual funds having annualized returns in excess of 20% over the past 5 years. However, one should try to find a screener that gives performance for the past 10 years or more, if possible. To put this into perspective, 90% of the 10,000 or so mutual funds that exist do not perform as well as the S&P500 each year.

The fact that 10.9% is average market performance for the past 10 years is all the more remarkable when one considers that the average bank deposit yield is less than 2%, 10 year Treasury yields are about 4.2% and 30 year Treasury yields are only 4.8%. Corporate bond yields approximate those of the S&P500. There is a reason for this disparity, though. Treasuries are considered the safest of all paper investments, being backed by the United States Government. FDIC regulated savings accounts are probably the next safest while stocks and corporate bonds are considered a bit more risky. Savings accounts are possibly the most liquid, followed by stocks and bonds.

To help you calibrate the safety and liquidity question, the long bond holders are comparing bond yields they now receive with next year’s anticipated stock yields. Consider that next year’s anticipated S&P500 yield is around 4.7% based on the reciprocal of its average price to earnings ratio (P/E) of 21.2. Yet the 10 year annualized return of the index has been 10.9%. Bond holders are prepared to accept half the historical yield of stocks for added safety and stability. In any given year, stocks may go either up or down. Bond yields are not expected to fluctuate widely from one year to the next, although they have been know to do so. It is as if bond holders want to be free to invest short term, as well as, long term. Many bond holders are thereby traders and not investors and accept a lower yield for this flexibility. But if one has decided once and for all that an investment is for the long term, high yield stock mutual funds or the S&P500 Index, itself, seem the best way to go. Using the simple compound interest formula, $10,000 invested in the S&P500 index at 10.9% a year becomes $132,827.70 after25 years. At 21%, the amount after 25 years is more than $1 million. If in addition to averaging 21%, one adds just $100 a month, the total amount after 25 years exceeds $1.8 million. Dr. C. rightly believes that 90% of one’s capital should be allocated over a several such investments.

Now that you’ve allocated 90% of your funds to long term investing, that leaves you about 10% for trading. Short to intermediate term trading is an area that most of us are more familiar with, probably due to its popularity. Yet it is significantly more complex and only about 12% of traders are successful. The time frame for trading is less than 5 years and is more typically from a couple of minutes to a couple of years. The typical probability of being right on the direction of a trade approaches an average high of about 70% when an appropriate trading system is used to less than about 30% without a trading system.

Even at the low end of the spectrum, you can avoid getting wiped out by managing the size of your trades to less than about 4% of your trading portfolio and limiting each loss to no more than 25% of any given trade while letting your winners run until they decrease by no more than 25% from their peak. These percentages can be increased after there is evidence that the probability of choosing the correct direction of a trade has improved.

Intermediate term trading is based more on fundamental analysis which attempts to assign a value to a company’s stock based on its history of earnings, assets, cash flow, sales and any number of objective measures in relation to its current stock price. It may also include projections of future earnings based on news of business agreements and changing market conditions. Some refer to this as value investing. In any case, the objective is to buy a company’s stock at bargain prices and wait for the market to realize its value and bid up the price before selling. When the stock is fairly priced, the instrument is sold unless one sees continuing growth in the value of the stock, in which case he moves it over into the investment category.

Since trading depends on the changing perceived value of a stock, your trading time frame should be chosen based on how well you are able detach yourself from the emotions of greed and fear. The better one can remove emotions from trading, the shorter the time frame he can successfully trade. On the other hand, when you feel surges of emotion before, during or immediately after a trade, it’s time to step back and consider choosing your trades more carefully and trading less frequently. One’s ability to remove emotions from trading takes a great deal of practice.

This is not just a moral statement. An entire universe of what’s called technical analysis is based on the aggregate emotional behavior of traders and forms the basis of short term trading. Technical analysis is a study of price and volume patterns of a stock over time. Pure technicians, as they are called, claim that all pertinent news and valuations are imbedded into a stock’s technical behavior. A long list of technical indicators has evolved to describe the emotional behavior of the stock market. Most technical indicators are based on moving averages over a predefined time period. Indicator time periods should be adjusted to fit the trading time frame. The subject is far too large to do it justice in less than several volumes of print. The lower level of confidence involved in trading is the reason for the large number of indicators used.

While long term investors may use only a single long term moving average with confidence to track steadily increasing value, traders use multiple indicators to deal with shorter time frames of oscillating value and higher risk. To improve your results and make them more repeatable, consider your expectations of changing value, your time frame and your level of confidence in predicting the outcome. Then you will know which set of rules to apply.

James Andrews publishes the Wiser Trader Stocks and Options Newsletter. Information on selected stock market trading systems, including those of Dr Stephen Cooper, can be found at http://www.wisertrader.com.

© 2004 Permission is granted to reproduce this article, as long as, this paragraph is included intact.

Posted by admin as Better Investment at 2:26 PM CST

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El adelanto en las comunicaciones que tenemos hoy en da, como el Internet, peridicos financieros y canales de la televisin enfocados a la inversin, como CNBC, son medios de informacin de alta velocidad llenos de habladuras absurdas. Todas estas fuentes de informacin son indicadores de que no hay escasez de personas en los medios que intentan contestar nuestras preguntas acerca del mercado de valores y en especial sobre acciones. Usted tiene que recordar que los medios de noticias compiten constantemente para sobrevivir contra otros canales, el cual usted puede o no ver. Si ellos no se escuchan como si supieran exactamente lo que sucede o de lo que esta en moda, entonces usted deja de ver sus presentaciones. Si usted no sintoniza sus exposiciones entonces sus ndices de programacin bajan. Si sus ndices bajan ellos son despedidos y su presentacin es cancelada.

Esto significa que los periodistas financieros estn en el negocio en bsqueda de noticias o grandes historias para as proyectarse como la autoridad en la materia, no importa que se hable. El mercado de valores es un gran lugar para ellos buscar noticias sensacionalistas que alimenten al pblico. No verifican muy bien los hechos y algunas veces ni lo hacen. Esto significa que algn ejecutivo con informacin privilegiada (”insider”) que quiera provocar una expectacin falsa todo lo que tiene que hacer es mantener buenas conexiones con los periodistas financieros, patrocinadores y programas de inversin, o abiertamente comprar un canal de televisin como hizo Jack Welsh, director general de GE cuando ©l creo CNBC. Que gran manera para los ejecutivos manipuladores de controlar el flujo de informacin que el pblico recibe a trav©s de poseer uno de los pocos canales de televisin de noticias financieras!… pero esto no es tan bueno para usted. Estos periodistas tambi©n avivan el fuego al traer a grandes “expertos” para hablar de los diferentes puntos de vista de un tema que los verdaderos expertos no consideran importante.

Esto solo hace ms confuso para el pblico poder entender que es importante a la hora de comprar o vender valores. Los programas en CNBC como “Closing Bell”, “Kudlow & Company” y “Mad Money” no hacen ms que confundir y dar una direccin errnea a la mayora de los inversiones que estn en el pblico. Peor aun, esto significa que las noticias financieras que salen a la luz pblica permiten a las acciones sobrevaluadas ser recomendadas va anlisis en el Intenet, cuando los ejecutivos manipuladores tratan de salirse del mercado. Esto hecho ocurri en el tope del alza del mercado del ao 1999. Para una gran descripcin histrica de lo que ocurri lea el libro de Maggie Mahar titulado “Bull”.

El famoso economista de la Universidad de Yale, el Prof. Bob Shiller , Ph.D. es particularmente duro con los medios en su libro “Irrational Exuberance” (Exhuberancia Iraccional). El Dr. Shiller es uno de los economistas ms respetados por Alan Greenspan (presidente ejecutivo de la Reserva Federal de Estados Unidos) y de quien obtuvo el t©rmino Exuberancia Irracional. El Dr. Shiller describe a los medios como un lugar en donde las opiniones superficiales son preferidas sobre el anlisis profundo. Estoy completamente de acuerdo con ©l y entiendo que tambi©n se hace solo porque la industria prefiere tener al inversionista individual confundido y emocionalmente vulnerable para que venda o compre cuando ellos quieran con total indiferencia de los mejores intereses del inversionista.

Las personas que haban invertido los ahorros de sus vidas en el mercado de valores fueron saqueadas porque las noticias financieras en los medios y los analistas exageraban lo que era una gran compra de acciones en el mismo tope del alza del mercado en 1999 y el 2000. Al mismo tiempo los ejecutivos corporativos manipuladores vendan todo lo que ellos tenan. Lo que es asombroso es que nuestro Gobierno Federal en la forma del “Security Exchange Commission” nunca hizo nada al respecto. Nunca hubo ningn caso o protesta en contra de estos ejecutivos, los cuales de alguna manera mgica, vendieron todas sus acciones seis meses antes de que el mercado colapsara.

He aqu un valioso consejo a considerar por parte suya: Si usted es un inversionista principiante es importante que NO VEA LAS NOTICIAS O LEA LOS PERIODICOS FINACIEROS! No permita que el mercado de acciones lo lleve a la bancarrota. No escuche lo que ellos quieren que usted escuche. Debe enfocarse en aprender lo que es importante del mercado de acciones antes de actuar. La prensa solo le va a confundir hasta que se haya educado.

Short Bio:
SOBRE EL AUTOR: El Dr. Brown, doctor y profesor de finanzas, puede ensearle cmo invertir por medio de su compaa El Instituto de Riqueza Delano Max (The Delano Max Wealth Institute www.caminoalaabundancia.com ). Suscrbase gratis a nuestra revista electrnica de consejos financieros en www.abundanciafinanciera.com

Posted by admin as Better Investment at 12:52 PM CST

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Investment may be counted on the gross or the net basis. Net investment is gross investment minus depreciation. Investment may be ex-ante or planned or anticipated or intended investment; or it may be ex-post, i.e., actually realized investment, or when investment is not merely planned or intended, but which has actually been invested or implemented. This is so true when Buying Investment Properties.

Another classification of investment may be private investment or public investment. Private investment is on private account, i.e., by private individuals, and public investment is by the government. Private investment is influenced by marginal efficiency of capital i.e., profit expectations and the rate of interest. It is profit-elastic. Public investment is by the state or local authorities, such as building of roads, public parks etc. In public investment, profit motive does not enter into consideration. It is undertaken for social good and not for private gain.

Investment which is independent of the level of income, is called autonomous investment. Such investment does not vary with the level of income. In other words, it is income-inelastic. Autonomous investment depends more on population growth and technical progress than on anything else. The influence of change in income is not altogether ruled out, because higher income would probably result in more investment. But the influence of income is negligible as compared with the influence of population growth and progress of technical knowledge.

Examples of autonomous investment are long-range investments in houses, roads, public buildings and other forms of public investment. Most of the investment is undertaken to promote planned economic development. It also includes long-range investment to bring about technical progress or innovations. Public investment means investment which occurs in direct response to invention, and much of the long-range investment, which is only expected to pay for itself over a long period, can be regarded as autonomous investments.

Investment Properties provides detailed information about investment properties, investment property loans, investment property mortgages, buying investment properties and more. Investment Properties is the sister site of Loan Factoring.

Posted by admin as Better Investment at 4:21 PM CDT

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For many investors, and even some tax professionals, sorting through the complex IRS rules on investment taxes can be a nightmare. Pitfalls abound, and the penalties for even simple mistakes can be severe. As April 15 rolls around, keep the following five common tax mistakes in mind - and help keep a little more money in your own pocket.

1. Failing To Offset Gains

Normally, when you sell an investment for a profit, you owe a tax on the gain. One way to lower that tax burden is to also sell some of your losing investments. You can then use those losses to offset your gains.

Say you own two stocks. You have a gain of $1,000 on the first stock, and a loss of $1,000 on the second. If you sell your winning stock, you will owe tax on the $1,000 gain. But if you sell both stocks, your $1,000 gain will be offset by your $1,000 loss. That’s good news from a tax standpoint, since it means you don’t have to pay any taxes on either position.

Sounds like a good plan, right? Well, it is, but be aware it can get a bit complicated. Under what is commonly called the “wash sale rule,” if you repurchase the losing stock within 30 days of selling it, you can’t deduct your loss. In fact, not only are you precluded from repurchasing the same stock, you are precluded from purchasing stock that is “substantially identical” to it - a vague phrase that is a constant source of confusion to investors and tax professionals alike. Finally, the IRS mandates that you must match long-term and short-term gains and losses against each other first.

2. Miscalculating The Basis Of Mutual Funds

Calculating gains or losses from the sale of an individual stock is fairly straightforward. Your basis is simply the price you paid for the shares (including commissions), and the gain or loss is the difference between your basis and the net proceeds from the sale. However, it gets much more complicated when dealing with mutual funds.

When calculating your basis after selling a mutual fund, it’s easy to forget to factor in the dividends and capital gains distributions you reinvested in the fund. The IRS considers these distributions as taxable earnings in the year they are made. As a result, you have already paid taxes on them. By failing to add these distributions to your basis, you will end up reporting a larger gain than you received from the sale, and ultimately paying more in taxes than necessary.

There is no easy solution to this problem, other than keeping good records and being diligent in organizing your dividend and distribution information. The extra paperwork may be a headache, but it could mean extra cash in your wallet at tax time.

3. Failing To Use Tax-managed Funds

Most investors hold their mutual funds for the long term. That’s why they’re often surprised when they get hit with a tax bill for short term gains realized by their funds. These gains result from sales of stock held by a fund for less than a year, and are passed on to shareholders to report on their own returns — even if they never sold their mutual fund shares.

Recently, more mutual funds have been focusing on effective tax-management. These funds try to not only buy shares in good companies, but also minimize the tax burden on shareholders by holding those shares for extended periods of time. By investing in funds geared towards “tax-managed” returns, you can increase your net gains and save yourself some tax-related headaches. To be worthwhile, though, a tax-efficient fund must have both ingredients: good investment performance and low taxable distributions to shareholders.

4. Missing Deadlines

Keogh plans, traditional IRAs, and Roth IRAs are great ways to stretch your investing dollars and provide for your future retirement. Sadly, millions of investors let these gems slip through their fingers by failing to make contributions before the applicable IRS deadlines. For Keogh plans, the deadline is December 31. For traditional and Roth IRA’s, you have until April 15 to make contributions. Mark these dates in your calendar and make those deposits on time.

5. Putting Investments In The Wrong Accounts

Most investors have two types of investment accounts: tax-advantaged, such as an IRA or 401(k), and traditional. What many people don’t realize is that holding the right type of assets in each account can save them thousands of dollars each year in unnecessary taxes.

Generally, investments that produce lots of taxable income or short-term capital gains should be held in tax advantaged accounts, while investments that pay dividends or produce long-term capital gains should be held in traditional accounts.
For example, let’s say you own 200 shares of Duke Power, and intend to hold the shares for several years. This investment will generate a quarterly stream of dividend payments, which will be taxed at 15% or less, and a long-term capital gain or loss once it is finally sold, which will also be taxed at 15% or less. Consequently, since these shares already have a favorable tax treatment, there is no need to shelter them in a tax-advantaged account.

In contrast, most treasury and corporate bond funds produce a steady stream of interest income. Since, this income does not qualify for special tax treatment like dividends, you will have to pay taxes on it at your marginal rate. Unless you are in a very low tax bracket, holding these funds in a tax-advantaged account makes sense because it allows you to defer these tax payments far into the future, or possibly avoid them altogether.

David Twibell is President and Chief Investment Officer of Flagship Capital Management, LLC, an investment advisory firm in Colorado Springs, Colorado. Flagship provides portfolio management services to high-net-worth individuals, corporations, and non-profit entities. For more information, please visit www.flagship-capital.com.

Posted by admin as Better Investment at 12:14 AM CDT

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When life is OK, there won’t be a need to do anything. There is a saying that goes “If it ain’t broke, don’t fix it.” When things don’t go our way, however, then it is time to start acting for a change. As investors, the question we need to ask ourselves is what should we do if an investment does not go our way? What should we do when a stock price moves south?

Take A Deep Breath
One of the first thing investors need to do is to calm down and take a deep breath. Do not panic. The news are already out and stock price has been adjusted accordingly. Panicking over yesterday’s news will not do you any good.

Read The News. Keep Reading
There must be news available on the internet concerning the company’s stocks. Does management just announce a massive layoff, a product recall or an earning miss? As you read these kind of news, please keep in mind about the long-term implication it might had on your investment. For example a company announcing earning shortfall due to widespread flooding might not be as consequential as if competitors release a new type of products rendering your company’s product useless.

Assess The Financial Damage
Once you know the full scope of the news, you can then assess the potential damage caused by the news. Oftentimes, stock price will move due to extraordinary events which might not occur for another ten years! This has no impact whatsoever to the earning power of your investment. If the recent news had an impact on your company’s earning potential, you should then adjust your fair value of your common stock accordingly.

Compare With Current Price
The news had been revealed and I am sure stock price had been adjusted accordingly. If stock price plunged significantly while the longer term picture remains intact, you can then hold on to your investment. If fair value of the common stock change dramatically, then you should consider selling your holdings.

In all these steps however, it always pay to remain calm while making your investment decisions. You will never help yourself by making rash decisions at this point. The sudden turn in your stock price would not surprise you if you have done careful due diligence when you determine the fair value of your investment. As a precautionary move, investors can invest in stock that is valued 50 % below its fair value. That way, when a stock price unexpectedly turns south, we are well prepared for it.

Get Your Free Investing Idea at http://www.noviceinvesting.com . You can also browse financial news and other insightful commentaries.

Posted by admin as Better Investment at 12:23 PM CDT

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So, you have decided that you are interested in the world of forex trading. Now, all you need to do is find which is the best forex trading software possible. My advice to you is to give yourself enough time to do some research to find the best forex method.

If you have determined that you want to step into the forex trading market, then there are some things you will unquestionably wish to weigh first. If you are thoughtful about your decision and you actually wish to learn forex, then you need to take a few steps.

During my youth, my father had this saying, “You know, there’s many ways to skin a cat.” What he intended would take me a while to figure out. But now I understand; especially since I live on doing forex online. So what is this forex you speak of? Well, in short, online forex is the system of controlling your foreign exchange currency, or forex, account on automatic pilot.

There are many different ways that you can educate yourself about forex trading. One way is to have a tutor of sorts. If you happen to know someone who is practiced in automated forex, then you may want to ask them if they would be inclined to assist you in learning forex trading. If having a coach is not an option for you, then you will want to either buy or download a tutorial, or open a practice account and start practicing trading in a simulated forex trading market.

Posted by admin as Better Investment, Biz Stuff, Money + Finance at 12:08 AM CDT

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Would you like to receive 15% to 50% return on investment (ROI) guaranteed by the government? Tax lien certificates (TLC) offered in many states and counties in the U.S., U.S Virgin Islands and Puerto Rico offer returns that high. While most states offer less than 50% your investment may be safe because it is secured with real property. A TLC is a note issued by the county or municipality on properties that are in arrears with their property tax. Some states allow these notes to be senior to all other mortgages and liens, including federal tax liens. These notes are sold at auction by the individual counties, municipalities and/or states that issue them. Investors receive a fixed amount of interest monthly written on the note for a specific time period. This amount is state mandated. If the outstanding debt is paid before the term of the loan ends, the government will send the investor a check for the initial investment and all outstanding interest due. These note terms typically run for one to three years. If the property owner does not pay, you may have foreclosure rights; the government may send you the deed to the property. This means you may realize a huge ROI.

There is some risk involved with the purchase of TLC’s. The purchase of tax sale liens of properties under the control of Federal Deposit Insurance Corporation (FDIC) and those affected by the Drug Enforcement Administration (DEA), or if the owner files bankruptcy could possibly result in the loss of your investment. With due diligence, this risk can be reduced. Remember, not all TLC’s are equal, some are better than others. Sometimes you will have to fight it out in court with other lien holders if it gets to the foreclosure stage. Proper title and bankruptcy research should be done or your tax lien may end up worthless. Inspect the property to insure you are getting some value. I heard of a man in Texas who found the property the lien was written on flooded twice a year. His research saved his investment. Don’t trust the description of the property, have a look for yourself. TLC’s can be lucrative, but it may take quite some time to realize and you are sometimes responsible for the tax payments during the foreclosure. Again, do your research on the property, legalities and taxes.

Anyone who can legally own property in the U.S. may purchase a tax lien. These sales are conducted by lot for cash, either on the spot or within a time frame of within 48 hours. There may be a pre-registration requirement before the sale. There are also rules of sale to be studied. Online sales are available. This is a time, labor and money intensive investment that is best done locally. The sales and auctions vary widely state to state. More information is available from the county offices. A list of unsold TLC’s may be available from the county as well. Research of public records is to be expected for due diligence.

With three startup businesses before he was 21 years old, Matt Fox has the experience to help you create your own businesses for your financial future. See his blog at http://www.bizmaker.blogspot.com.

Posted by admin as Better Investment at 6:53 PM CDT

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If you study securities analysis at an academic institution or on Wall Street, you will study Benjamin Graham. Ben Graham was an economist, a business professor, and an investor. He has been called the father of value investing.

His book, “Securities Analysis,” was published in 1934 and is required text for securities analysis students. And his 1949 book, “The Intelligent Investor,” has been described by Warren Buffett as the best investment book ever written.

In fact, most people today know Graham as Warren Buffett’s mentor. Buffett is the only student to ever earn an A+ from Graham at Columbia University. (As an interesting bit of trivia, Harvard Business School rejected Buffett’s admission application in one of the most boneheaded decisions since the Red Sox sold Babe Ruth to the Yankees.)

Graham used what has become a famous metaphor called “Mr. Market” to explain how the stock market works. It is probably still the best way to understand how stocks are priced and what it means to you as an investor.

Let’s say you own a business and you have a partner. His name is “Mr. Market.” Your business is a good one. It has given you a high return on what you have invested in the business. The only thing is your partner, Mr. Market, is kind of a strange dude. He’s very emotional. Some days he’s on a very euphoric high and other days he’s very depressed. I guess today we would describe his condition as manic-depressive.

Mr. Market has a curious habit. Every day he comes into the office and offers to sell you his share of the business or buy yours. However, because he is so moody, if he happens to be euphoric on a particular day he wants a very high price for his share. On the other hand, if he’s in one of his down moods he’s willing to sell out for a pittance.

The interesting thing about Mr. Market is that he doesn’t seem to care whether or not you choose to buy his interest or sell yours. He doesn’t get his feelings hurt. You can do whatever you want. It’s completely up to you. He just keeps coming in the office every day, offering to buy or sell at wildly different prices. It’s always the same good business it has always been. That doesn’t change. It’s just that, depending on his mood, some days Mr. Market is enthusiastic about the business and other days he’s very pessimistic.

Since you know what the business is worth, you can just listen to Mr. Market’s offer every day and decide if his offer is a good one or one you want to turn down. Even though Mr. Market’s moods might be difficult to get used to, he’s actually a great business partner to have.

That’s exactly the way you should view the stock market. Choose your favorite business that happens to be one of the 10,000 or so publicly traded stocks. Look at the stock tables in the paper and notice the yearly high and low price for that stock. You’ll find that there can be a dramatic difference between the high and the low during a single year. The business hasn’t changed. It’s just the mood of Mr. Market that changes.

So that’s how some great investors like the Ben Graham’s, Warren Buffett’s, and Joel Greenblatt’s of the world have made fortunes. They understand how the stock market works. They look to buy partial interest (shares) in good businesses (a business with a high return on capital) when Mr. Market is willing to sell his interest at a bargain price.

There is no reason why you can’t do the same thing.

(c) Larry Holmes

Larry Holmes invites you to visit http://www.Money-Management-Wisdom.com/.
You will learn how to become debt-free, save and invest money, cut taxes, manage risk, and achieve financial freedom in a much shorter time than you dreamed possible.

Posted by admin as Better Investment at 7:45 AM CDT

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Here’s another term that we heard regularly during the stock market bubble of the 1990s but not much since the millennium. It’s an artificial “circuit breaker” designed to prevent a spark of buying or selling from exploding into a full-blown panic.

The various futures markets set a “limit” price before each session based on the settlement price at the end of the previous day’s trading. If the price of a particular futures contract hits the limit price, trading is suspended for a specific period of time. When trading resumes, the limit price is as far as the action can go. There is a “limit up” for buying sprees and a “limit down” for major sell-offs. If the contract is limit up or limit down for more than one day it is now “lock limit.”

Future contracts cover a large number of commodities. Stock traders in particular watch the DOW futures and the NASDAQ 100 futures. The action in those futures pits, especially before the opening bell for a new session at the NYSE or NASDAQ, helps traders determine whether the open for the cash market will be strong or weak or going nowhere. If the DOW futures are soaring, traders tend to go long; if they’re collapsing, traders tend to go short.

Limits are set in place to prevent the buyers or sellers from taking the index too far, too quickly.

For example, the NASDAQ 100 has an initial limit at 20 points above or below the previous day’s settlement price. The limit is in effect for two minutes. When trading resumes, the next limit is at 30 points, and it is in effect for 15 minutes. Then comes 60 points for 30 minutes and 85 points for one hour. When the change is 100 index points up or down, it is at lock limit.

The limits are tested in most cases by news events. A horrible headline can send the futures to their limit in a flash. The last time we remember that occurring was in the aftermath of the 9-11 attack. The markets were closed from the start of the assault until the following Monday. The futures were at limit down before the start of trading, as we recall.

The goal is to allow people some time to catch their breath and digest the information that initiated the rash of buying or selling. Cooler heads usually prevail. After the limit is lifted, trading may still be frantic but not out of control. This is especially important during a sell-off. The last thing the exchanges want is a panic-induced rush to the exits that sends prices into an irreversible tailspin.

How should you, the individual investor, respond if you flip on CNBC one morning and see the DOW or NASDAQ futures at limit up or limit down? Not much, in most cases. Trying to buy shares in a run-up or dump shares in a major decline will probably result in a poor fill or no fill and a nasty case of whiplash from a whipsawing market.

However, if you have good day trading tools you can attempt to play the inevitable reversals. The market always overreacts; when the DOW drops 100 or 200 points in short order, it will come back before resuming its decline. Buying and then quickly selling an index-tracking Exchange Traded Fund, or ETF, could net some nice profits.

The same goes when the DOW or NASDAQ blast higher. The indexes will likely pause and decline for a spell as individual stock traders take their profits. At that point, short selling an ETF like the DOW “Diamonds” (DIA) or NASDAQ “Qubes” (QQQ) should work. ETFs, unlike stocks, have a special advantage because they don’t require waiting for an “uptick,” or rise in price, before filling a short sale.

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Posted by admin as Better Investment at 5:10 PM CDT

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It use to be said that once a company was de-listed from the NASDAQ it was the kiss of death, not so any more. With Sarbanes Oxley and all the insane reporting requirements it might save your company from incessant lawsuits from investors and the government regulators who are out to destroy free enterprise. Many small NASQAQ companies have spent over $100,000 initially to set up the controls for accounting compliance of Sarbanes Oxley and now the ongoing scrutiny for transparency runs a good 1-3% of gross sales. But that is not the kicker; the real problem is when company executives make decisions for the regulator over sight compliance and what is best to keep the company out of trouble or from receiving a letter from Elliot Spitzer or the SEC. Once that happens the stock price tumbles and once in the sites of a regulator they are going to have to find something to prove self worth, even if they have to lie a little or fudge their investigation to make something up. Which is all to common as any insider will tell you.

A company which is delisted or deregistered stands to have an instant gain on their bottom line and will have the advantage of making decisions based on market advantage and profit goals rather than appeasing brain dead regulators and thousands of pages of new rules with millions of pages of new case law.

Some companies are seriously thinking of going private, not going public. Being de-listed now is no longer the kiss of death but rather it breaths new life blood into a stagnant innovative company that has turned bureaucratic due to Sarbanes Oxley. One CEO we talked with said that he feels the need to call the his lawyer if he wishes to use the restroom to make sure it is legally safe and once in the commode takes a clip board to insure he correctly counts the toilet tissues used. Think on this absurdity.

“Lance Winslow” - Online Think Tank forum board. If you have innovative thoughts and unique perspectives, come think with Lance; www.WorldThinkTank.net/wttbbs/

Posted by admin as Better Investment at 12:36 AM CDT

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