Archive for Stock Trading

Teaching Children How to Invest in the Stock Market

One of the ways through which we can teach our children about the value of money is helping them to invest in the stock market (on a small scale of course). Some of the ideas that would definitely help parents are the following:

1- Keep talking to your children about companies. To make it more interesting, take the Walt Disney or Pixar as your model: what happens after they release a new movie and how does it affect the stock price?

2- Help your children to create their favorite portfolio out of the companies they know and like (Ford, Coca-Cola, Nike, Microsoft, McDonald, Mattel … etc). Teach them how they can check the stock prices of each company on a regular basis.

3- Another way (which also helps with their Math skills) is documenting all the hypothetical gains and losses in a spreadsheet.

4- When your child starts grows up and becomes mature enough to get really involved in taking investment decisions, he/she can start with the following accounts:

· DRPS (DRIPS - Dividend Reinvestment Accounts)

· 529 Plans - Education savings accounts

· Custodial Accounts (UGMA/UTMA)

· Joint Tenant Accounts (A joint account between child and parent but the parent would control it until the child becomes an adult)

Stock Market Trading - The Reason Behind Our Investment in Stocks

Investing in a company’s stock means getting a share or buying a part of that entity. In other words, and no matter how small your share is, you will become a partner. Thus, your investment is in your owning a piece of the organization.

Although you will probably not receive stock certificates for your share, you will get a document stating your stock transactions from your brokerage firm. Such an opportunity will present itself to you when companies decide to “go public”-an act known as the IPO, or “initial public offering”- in order to expand.

Your newly owned stocks in a company will give you the right to get involved in certain issues regarding the company, for example, the selection of the board of directors. On the other hand, you will also have the chance to get “dividends”, or regular payments, which vary according to the profits of the company and its type.

You may even end up having more stocks than you have originally bought through what is known as “stock split”. This happens when the company you have chosen for investment changes the number of shares it has and consequently, adjusts the price of each share, the most common system in that situation is the “two-for-one” stock splits.

[youtube]http://www.youtube.com/watch?v=9AFWThC2mn4[/youtube]

Personal Balanced Portfolios Guard Against Recession

Creating an evenly balanced investment portfolio by dividing assets among such diverse classes as stocks both foreign and domestic, bonds, mutual funds, real estate, cash equivalents, and private equity can help guard against recessions. Determining how much to invest in each asset group depends upon the investor’s individual situation and future needs.

Throughout most of American history it has been more profitable to invest in stocks rather than bonds. However, there have been times when stocks are unattractive compared to other assets. For example, right before the tech bubble burst in late 1999 these stocks had prices so high earnings yields were non-existent. The wary investor could have weathered this situation by diversifying stock investments into real estate investments or other types proven to be less risky.

Making major changes in one’s portfolio should be done at various stages in the investor’s life. A young investor is less risk-averse, that is, he is less susceptible to market corrections for the simple fact that he has a lot of years left to make up for the losses. This investor is looking more to the long-term and wealth accumulation in the distant future. This investor’s portfolio would be mostly invested in the riskier assets such as carefully researched foreign and domestic stocks. Still, the young investor needs to have some balance to guard against market setbacks.

As retirement approaches, perhaps 10 years before, the investor should start diversifying holdings into income-oriented assets. These include government and corporate bonds that pay a fixed return rate on the investment. Certain blue chip stocks with long, proven track records of dividend payments can also be included as an income-oriented asset. Yearly, as retirement approaches, a larger percentage of the investor’s portfolio should be income-oriented until that total is 100% at retirement. After all, as an investor, the ultimate goal should be a comfortable retirement. Once at retirement the time to take risks is over and income must be guaranteed.