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Who Owns The Stock Exchanges?
Stock exchanges are not like other businesses. The performance of national stock exchanges is often taken as a proxy for the health of a nations economy, or at least investor enthusiasm for the countrys prospects. National exchanges also play an under-appreciated policy role in deciding the listing and compliance standards for companies that wish to go public. On top of all that, there is a nebulous but real sense that national pride is often somehow tied to stock exchanges. (Learn how British coffeehouses helped give rise to the juggernaut that is the NYSE.
With that in mind, recent moves in the stock exchange sector have garnered quite a bit of attention. The Deutsche Borse wishes to merge with NYSE-Euronext (NYSE:NYX) in a transaction that will have NYSE shareholders holding 40% of the combined company and ownership of the first (to say nothing of arguably most famous) U.S. exchange moving into foreign hands. At the same time, the London Stock Exchange (or rather, its partner London Stock Exchange Group) has reached an agreement to acquire TMX Group (owner of the Toronto Stock Exchange) in a $3.2 billion deal.
As these deals seem certain to shake up the structure of several of the worlds largest exchanges, it is a good opportunity to examine the ownership structure of several other major exchanges.
NYSE Euronext
NYSE Euronext is far and away the largest exchange in terms of both exchange market capitalization and exchange traded value, having gone public in 2006 after acquiring Archipelago and acquiring Euronext in 2007. NYSE Euronext is a public company, and Deutsche Borse has offered a merger proposal to the company.
Nasdaq OMX Group (Nasdaq:NDAQ)
The second largest public stock exchange by value, Nasdaq is also number two in terms of traded value. Nasdaq acquired seven Nordic and Baltic exchanges in 2008 (the OMX Group), after being rebuffed in its attempts to acquire the parent company of the London Stock Exchange.
Tokyo Stock Exchange
The third-largest stock exchange in the world is also the largest to not be publicly-traded. Though the Tokyo Stock Exchange is organized as a joint stock corporation, those shares are closely held by member firms like banks and brokerages. By contrast, the smaller Osaka Stock Exchange is publicly-traded, which perhaps befits long-held Japanese stereotypes about Osaka being more entrepreneurial and less hidebound than Tokyo.
London Stock Exchange
The worlds fourth-largest exchange is owned by the London Stock Exchange Group, which is itself a publicly-traded company. As previously discussed, the parent companies of the LSE and Toronto Stock Exchange are merging in a deal that will make the combined entity the second-largest exchange group in terms of the market cap of listed companies.
Hong Kong Stock Exchange
Asias third-largest exchange is a subsidiary of Hong Kong Exchanges and Clearing Ltd, a publicly-traded company that also owns the Hong Kong Futures Exchange and the Hong Kong Securities Clearing Company.
Shanghai Stock Exchange
This is the largest stock exchange in the world still owned and controlled by a government. The Shanghai exchange is operated as a non-profit entity by the China Securities Regulatory Commission and is arguably one of the most restrictive of the major exchanges in terms of listing and trading criteria.
Bombay Stock Exchange and National Stock Exchange of India
Along with the Tokyo Stock Exchange, these exchanges are throwbacks to how most exchanges used to organize themselves. While the NSE is demutualized, it is still largely owned by banks and insurance companies. Likewise, the BSE is about 40% owned by brokers, with other outside investors and domestic financial institutions owning the rest.
Other Exchanges
Of course, the trading and investment world is not just all about stocks. Derivatives are very lucrative to exchanges. In the United States, the Chicago Mercantile Exchange demutualized in 2000, went public, and eventually acquired the Chicago Board of Trade and NYMEX. CME Group (NYSE:CME) is a major player in the futures and derivatives world. On the options side, the Chicago Board Options Exchange (CBOE) also trades publicly as CBOE Holdings (Nasdaq:CBOE).
Eurex is a significant derivatives exchange owned by Deutsche Borse and SIX Swiss Exchange, while the London Metal Exchange is privately owned by its members through LME Holdings Ltd.
Last and not least, the Tokyo Commodity Exchange is structured in a fashion similar to the TSE and is owned principally by the banks, brokerage, and commodity trading firms that transact their business through it.
Shuffling Likely To Continue
Running an exchange is a great business; it is effectively a monopoly. Those who own exchanges can require companies to pay listing fees, traders to pay for market access and investors to pay transaction fees. It is not altogether surprising, then, that there is so much activity in this space. In addition to the aforementioned major mergers, the Singapore Exchange is trying to acquire the Australian Stock Exchange, while Brazils BM
Who is the current leader and how will changes within the sector affect the current balance of power? What are the barriers to entry? Success depends on an edge, be it marketing, technology, market share or innovation.
$CLKTF BarChart Technical Analysis NITE-LYNX
http://www.barchart.com/technicals/stocks/CLKTF
Market Order – a market order does not have a set price and is therefore executed immediately at the current ‘market’ price. Markets, especially OTC markets, can be highly volatile and therefore the price of execution may differ dramatically from the price at time of order entry. Those who use market orders are more concerned about the speed of the execution as opposed to the price.
How To Double Your Money Every 6 Years
Double your money, fast! Do those words sound like the tagline of a get-rich-quick scam? If you want to analyze offers like these or establish investment goals for your portfolio, theres a quick-and-dirty method that will show you how long it will really take you to double your money. Its called the rule of 72, and it can be applied to any type of investment. (For more ideas on how you can double your money, check out 5 Ways To Double Your Investment.)
TUTORIAL: Investing 101
How the Rule Works
To use the rule of 72, divide the number 72 by an investments expected annual return. The result is the number of years it will take, roughly, to double your money. For example, if the expected annual return of about 2.35% (the current rate on Ally Banks 5-year high-yield CD) and you have $1,000 to invest, it will take 72/2.35 = 30.64 years for you to accumulate $2,000.
Depressing, right? CDs are great for safety and liquidity, but lets look at a more uplifting example: stocks. Its impossible to actually know in advance what will happen to stock prices. We know that past performance does not guarantee future returns. But by examining historical data, we can make an educated guess. According to Standard and Poors, the average annualized return of the S
The time frame can be based on intraday (1-minute, 5-minutes, 10-minutes, 15-minutes, 30-minutes or hourly), daily, weekly or monthly price data and last a few hours or many years.
NITE-LYNX $APPA BarChart Technical Analysis
http://www.barchart.com/technicals/stocks/APPA
Broker-Dealers – FINRA registered broker-dealers may participate in the OTC market by executing client orders and principal orders. Broker-dealers earn revenues from commissions charged on orders, the bid (buy) and ask (sell) spread (the difference between what an investor is willing to buy and sell a security), and principal trading (investing the firm’s capital in an investment/trading strategy).
Furthermore, the future price cannot be determined using past or current prices (sorry technical analysts).
Whisper Numbers: Should You Listen?
During earnings season - the time when companies publicly report their results from the last quarter - many whisper numbers can be heard floating around Wall Street and on the Internet. It can be a period of extreme stock market volatility; the companies that dont meet earnings estimates are usually hammered hard, and experience a decline in share price. However, even companies that meet earnings estimates can suffer if they dont match the seemingly mysterious whisper number. What are whisper numbers? Where do they come from? Well attempt to demystify the whisper number, and evaluate its importance to you as an individual investor. (To learn more, see 5 Tricks Companies Use During Earnings Season.)
Earnings Estimates
When a company releases its earnings, any increase or decrease in its profitability is secondary to how well the company fared compared to investor expectations. This is because a stocks price almost always takes into account all future information. In other words, how well (or poorly) a company is expected to do is already built into a stocks price. For example, the market will punish a company that is expected to grow earnings by 20% if actual earnings only increase by 15%. Conversely, a company thats expected to grow 10% but expands 12% will be rewarded. This phenomenon occurs because future earnings are the driving force behind share price valuations. An unexpected earnings surprise for a companys current quarter will very likely have far-reaching effects on earnings forecasts for many years to come, and can significantly change how investors calculate the present value of the companys shares. (For further reading, see Getting The Real Earnings and How To Evaluate The Quality Of EPS.)
It is not surprising, then, that most analysts spend the majority of their time trying to make an exact prediction of a companys future earnings, called forward earnings. Surprising or disappointing Wall Street estimates by even a few cents can have a dramatic effect on a stock. If a large brokerage firm can make a prediction that is even one cent more accurate than that of its competitors, it stands to earn a lot of extra money.
Taking things one step farther, there are companies out there that do nothing but sell earnings estimates to institutional investors. Their job is to contact as many brokerage firms as possible and get quarterly earnings predictions from each firms analysts. The estimates that you see in the newspaper, online or on TV are usually compiled by these firms, and are often reported as an average, or what is called a consensus estimate. Often, when you read the consensus estimate you will see that the highest and lowest estimate values are also reported - this can give you a sense of the variance of analysts estimations. Large proportional differences between the high and low estimates generally indicate greater uncertainty about a given earnings report. (To read more about earnings estimates, see Earnings Guidance: The Good, The Bad And Good Riddance?)
The Whisper Number
Even after plenty of research, however, consensus earnings estimates often still arent that accurate. An explanation might be that there just arent that many analysts covering the entire market. Large caps often have dozens of analysts, but there are plenty of mid-caps and small-caps who dont have any analyst coverage! On top of that, as news of the earnings estimate spreads, the game then turns to trying to predict what the discrepancy will be between the actual earnings and the estimates. (To learn more, see What Mutual Fund Market Cap Suits Your Style?)
This is where the whisper number comes into play. While the consensus estimate tends to be widely available, whispers are the unofficial and unpublished earnings per share (EPS) forecasts. In the past, these came from professionals on Wall Street and were meant for the wealthy clients of top brokerages. However, post Sarbanes-Oxley, the definition of whisper numbers has changed. You see, with all the regulations on Wall Street, you wont find analysts providing favorite clients with insider earnings data - the risk of getting in trouble with the SEC is just too great. (To learn more about the SEC, read Policing The Securities Market: An Overview Of The SEC.)
While over the past few years it has become more difficult (if not impossible) to get whispers from insiders on the street, a new type of whisper has emerged in which the expectations of investors as a whole (based on shared information, fundamental research and past earnings performance) create a sense of what to expect from a company, which spreads much like insider information.
In other words, the whisper now is the expectation from individual investors. The whisper is still unofficial, if you consider the consensus estimate to be the official number, but the difference is that it comes from individuals, not from professionals. The source has also changed from your broker, to websites that put the whisper together.
The most obvious concerns here are manipulation of this consensus by investors who have a vested interest in promoting (or trashing) a stock.
Should You Follow the Whisper?
While the quality of the source of a whisper number is certainly important, whether or not you should take heed of a whisper mostly depends on what type of investor you are. For a long-term (buy-and-hold) investor, the price action around earnings season will, over time, be merely a small blip, making the whisper number a relatively trivial statistic.
However if you are a more active investor who is looking to profit from share price changes during earnings season, a whisper can be a much more valuable tool. Differences between actual earnings results and consensus estimates can have a significant effect on a stocks price. Whisper numbers can be useful when they differ (and of course, are more accurate) than the consensus forecast. For example, a lower whisper can provide a signal to get out of a stock you own before earnings come out. Also, whisper numbers certainly have a use when it comes to the large number of stocks that arent covered by any analysts. If you are analyzing a stock with little coverage, a whisper number at least provides some insight into the upcoming financials.
There certainly is an ethical issue with what we referred to as the older type of whisper number. Lets assume that there are analysts breaking federal laws and providing you (or a website) with non-public information. Do you really want to take the chance with illegal data? While all investors are continually looking for a leg-up on the competition, insider trading laws are serious business - just ask Martha Stewart. (To learn more, see Should Insider Trading Be Legal?)
Conclusion
Whisper numbers used to be the unpublished EPS forecasts circulating around Wall Street, now they are more likely to represent the collective expectations of individual investors. For more active investors, an accurate whisper number can be extremely valuable over the short term. The extent to which this is important to you depends on your investing style. While whisper numbers arent a guaranteed way to make money (nothing is), they are another tool that serious investors should consider.
BarChart Technical Analysis NITE-LYNX $MJNA
http://www.barchart.com/technicals/stocks/MJNA
In the OTC market, trading occurs via a network of middlemen, called dealers, who carry inventories of securities to facilitate the buy and sell orders of investors, rather than providing the order matchmaking service seen in specialist exchanges such as the NYSE.
5 Ways To Invest $5,000
In this economy, $5,000 may feel like a lot more money than it did just a few years ago. There are numerous ways that you may find yourself with an extra $5,000: a bonus at work, inheritance, an extra contract job that you werent expecting or a tax refund. Maybe you have it now or youre expecting it soon, but regardless of the time frame, what are you expecting to do with the money? Here are a few ideas that may help.
Pay off Credit Cards
If your household has credit card debt, you have, on average, $15,956 worth. Almost one third of that debt could be wiped out with that $5,000. If your credit card interest rate is average, you are paying 13% ,or $650 each year, to hold that balance. That $5,000 could reduce the interest youre building up by $54 a month. How long was it going to take you to save $5,000 for the sole purpose of paying your credit card debt? If it was two years, you just saved $1,300 making the return on your $5,000 - 26% over two years or 13% per year. Any investor would be very happy with that figure. Although its not necessarily fun, the best return youll get on your money is to service your debt.
High Quality Stocks
Investing in high quality, dividend paying stocks for a long period of time has shown to be a very safe investment. Because its nearly impossible to pick the few correct stocks that will perform better than the overall market, look at an index mutual fund or exchange traded fund (ETF) that tracks the total stock market.
Historic returns for the stock market over the past 50 years have averaged around 10%, making this a good investment, but not nearly as good as paying down debt.
Education
The cost of a college education has risen 130% in the last 20 years, according to USA Today. If you have a two-year old child now, the cost to send your child to college in 16 years will be $95,000, if he or she chooses a college in the state where you are a resident. If your child chooses a private university, the cost rises to as high $340,000, if college inflation rates stay as they are for another 16 years.
The best way to save for college is to use a 529 plan. These tax advantaged college savings accounts are similar to 401(k) plans where you contribute a certain amount into the plan, the money is invested into funds of your choice and you withdraw those funds when the child reaches college age.
Some 529 plans allow you to purchase years of college at todays rates for use when the child reaches college age, but most plans now invest the money without guaranteeing future results. That same $5,000 is a great start to put in a plan like this, and although the returns will average less than the overall stock market , the plan is one of the best ways to save for future college expenses.
Bond ETFs
An ETF is a basket of investment products packaged into one fund. They often come with low fees, yet offer the safety of a diverse portfolio. Some of these ETFs hold bonds, which are historically safer than stocks. Some bond ETFs have dividends of 7% or more and, barring any large investment market event, those dividends are quite safe, because of the hundreds or even thousands of bonds held in these funds. If you choose to invest in Bond ETFs, you may need to ask for help from a trust financial adviser.
Start a Small Business
If your debts are paid, you dont have children or youre well on your way to having your kids college education paid for, consider starting a small business. To get your business off of the ground, $5,000 may not go very far, but some service-type businesses have very little startup costs. Before committing the money to a small business , make sure to carefully weigh the time and financial commitment that will come with this type of endeavor.
Forecasting the annual return is nearly impossible due to the many variables that come with starting a business, but even more important, this might jump-start your dream of becoming an entrepreneur.
The Bottom Line
Even if it isnt $5,000, before deciding how to utilize a larger sum of money that found its way into your bank account, think more long term. Sure, you could purchase the big TV that youve wanted for a long time but is that the best decision to make for years to come?
After all, the data is the same and price action is price action. When all is said and done, it is the analysis of the price action that separates successful technicians from not-so-successful technicians.
For thou convenience $GRBG BarChart Technical Analysis NITE-LYNX
http://www.barchart.com/technicals/stocks/GRBG
Quotes for all OTC securities are available on OTCMarkets.com by entering a symbol in the quote search area at the top left of any page. All OTCQX securities display real-time level 2 quotes while all OTCQB and OTC Pink securities display real-time inside (best bid and ask) quotations. Quotes are updated from 6:00 AM to 4:00 PM on all trading days.
What Is A Pyramid Scheme?
A pyramid scheme is a fraudulent investing plan that has unfortunately cost many people worldwide their hard-earned savings. The concept behind the pyramid scheme is simple and should be easy to identify; however, it is often presented to potential investors in a disguised or slightly altered form. For this reason, it is important to not only understand how pyramid schemes work, but also to be familiar with the many different shapes and sizes they can take. (Many investors do not understand how to determine the level of risk their individual portfolios should bear. Find out for yourself in Determining Risk And The Risk Pyramid.)
The Scheme
As its name indicates, the pyramid scheme is structured like a pyramid. It starts with one person - the initial recruiter - who is on top, at the apex of the pyramid. This person recruits a second person, who is required to invest $100 which is paid to the initial recruiter. In order to make his or her money back, the new recruit must recruit more people under him or her, each of whom will also have to invest $100. If the recruit gets 10 more people to invest, this person will make $900 with just a $100 investment.
The 10 new people become recruiters and each one is in turn required to enlist an additional 10 people, resulting in a total of 100 more people. Each of those 100 new recruits is also obligated to pay $100 to the person who recruited him or her; recruiters get a profit of all of the money received minus the initial $100 paid to the person who recruited them. The process continues until the base of the pyramid is no longer strong enough to support the upper structure (meaning there are no more recruits). (From pyramid schemes to envelope stuffing, there are a lot of scams masquerading as legitimate part-time work.
The Fraud
The problem is that the scheme cannot go on forever because there is a finite number of people who can join the scheme (even if all the people in the world join). People are deceived into believing that by giving money they will make more money (with an investment of just $100, you will receive $900 in return). But no wealth has been created; no product has been sold; no investment has been made; and no service has been provided.
The fraud lies in the fact that it is impossible for the cycle to sustain itself, so people will lose their money somewhere down the line. Those who are most vulnerable are those towards the bottom of the pyramid, where it becomes impossible to recruit the number of people required to pay off the previous layer of recruiters. This kind of fraud is illegal in the Unites States and most countries throughout the world. It is estimated that 90% of people who get involved in a pyramid scheme will lose their money. (Lower levels of liquidity in exchange-traded funds make it harder to trade them profitably.
Fraud Disguised
Because people are attracted to the idea of making a quick buck with very little effort, many different forms of disguised pyramid schemes have succeeded in fooling people. Despite the illusion of legality presented by these revamped schemes, they are still illegal. It is thus important to recognize the characteristics of such so-called investment plans .
Many schemes will adopt the guise of gift-giving or loans that take place in investment clubs because none of these activities are technically illegal. However, the practice of donating a gift (tax free up to $10,000 in the U.S.) to someone (the recruiter), then having to recruit people into the club in order to receive a return on your investment (or your gift, rather) is essentially a pyramid scheme in disguise. (Joining an investment club isnt a get-rich-quick scheme, but it can help you learn the ropes or sharpen your investing skills. Learn more in Benefit From A Winning Investment Club.)
Multi-Level Marketing (MLM)
Legal multi-level marketing (MLM) involves being recruited in order to sell a product or service that actually has some inherent value. As a recruit, you can make a profit from the sales of the product or service, so you dont necessarily have to recruit more salespeople below you. And while you may be encouraged to recruit other salespeople whose sales would give you more profit, you can stick to just selling the product directly to the consumer if you choose.
A pyramid scheme MLM, however, will most likely sell a product with no independent value. The product could take the form of reports of some kind, for example, or mailing lists. In this kind of pyramid scheme, you would be required to recruit new members into the MLM in order to make a profit and keep the MLM alive. Joining the MLM is the only reason anyone would buy the products sold by this pyramid scheme.
Ponzi Schemes
Named after Charles Ponzi, who ran such a plot from 1919-1920, the Ponzi scheme is a fraudulent investment plan. It is not necessarily a pyramid, which is hierarchical. In a Ponzi scheme, there is one person who takes peoples money as an investment and does not necessarily tell them how their returns will be generated. As such, the peoples return on investment could be generated by anything; it could come from money taken from new investors - which means new investors essentially pay off the old investors - or even from money made by gambling in Las Vegas.
Chain Letters
Chain letters can be received electronically or through snail mail and are not illegal on their own. However, they take on the form of a pyramid scheme when the letter asks you to donate a certain amount of money (even just 5 cents) to the people on a list, then delete the name of the first person on the list, add your name, and forward the letter to a certain number of other people. The next people receiving the letter are then asked to do the same thing, so that you can receive your money as well. By forwarding the letter, you are asking people to give money with the promise of making money.
Conclusion
It is easy to see how a pyramid scheme can work, but participating in it (regardless of the form in which it is presented) involves deception and fraud because not everyone will receive the money that is promised in return.
As with any other investment plan you consider entering, it is important to ask the right questions. How will this money be invested? What is the rate of return? Who will be investing it? Talk to professionals and do your research before placing your money anywhere. And always remember that if a plan promises youll get rich quick with no risk or doesnt tell you how your money will be invested, you should raise a red flag and exercise caution before getting on board.
A decline below support indicates a new willingness to sell and/or a lack of incentive to buy.
NITE-LYNX $STKO BarChart Technical Analysis
http://www.barchart.com/technicals/stocks/STKO
The margin account agreement generally provides that the securities in your margin account may be lent out by the brokerage firm at any time without notice or compensation to you. The firm's lending of securities does not affect the value of your account.
Is Your Broker Ripping You Off?
Despite the over-hyped stories on the news, most financial professionals are honest, hard-working people. After all, cheating clients isnt a good way to build a strong business and generate referrals; as a result, it isnt a common practice.
That said, the world of financial services can be complicated and confusing at the best of times and when you feel like you have a problem with your broker, it can seem even worse. Fortunately, with a little organization and a bit of elbow grease, most problems can be resolved.
The Process
The first step in the process is to contact your broker or financial advisor. Put your concerns in a letter and deliver it in a way that enables you to confirm receipt. Keep a copy for yourself. Many times, simple misunderstandings or miscommunication can be resolved quickly and easily. If the issue is not resolved, your copy of the letter serves as proof of your efforts to address the situation. (For related reading, see Evaluating Your Broker.)
If sending a letter does not resolve the issue to your satisfaction, the next step is to contact your brokers boss, generally referred to as a branch manager. Once again, do it in writing. If your complaint is legitimate, the branch manager has every incentive in the world to help you resolve it. Successful firms dont want unhappy clients.
If you still arent satisfied with the response you get, you can contact the firms compliance office. In todays heightened regulatory environment, compliance is something that most firms take very seriously. Send your complaint in writing, along with copies of your earlier letters. Provide details about the issue and the steps that you have taken to resolve it. Give the compliance officer 30 days to respond. Should the issue remain unresolved, the fourth step is to contact the regulators.
U.S. Securities and Exchange Commission
The U.S. Securities and Exchange Commission (SEC) oversees the securities market with a mandate to protect investors. If you file a complaint, the SECs Division of Enforcement will investigate by contacting the parties involved in the issue. In some cases, contact by the SEC leads to dispute resolution. In others, the SEC may take further action, such as filing a lawsuit and/or imposing sanctions. In cases where the company under investigation denies the allegations and no proof exists to contradict the denial, the SEC cannot act in place of a judge. Arbitration or legal action may be required. (To learn more about the SEC, read Policing The Securities Market: An Overview Of The SEC.)
The Financial Industry Regulatory Authority
Previously the National Association of Securities Dealers (NASD), FINRA is responsible for regulating all securities firms doing business in the United States, including registration of securities professionals, writing and enforcing securities laws, keeping the public informed and administering a dispute resolution platform. FINRAs compliance program is designed to address disputes with brokerage firms and their employees. Federal law gives FINRA the authority to discipline firms and individuals that violate the rules. However, disciplinary action is no guarantee that investors will be compensated for losses. The issues that FINRA addresses include the recommendation of unsuitable investments, unauthorized trading, failure to disclose material facts regarding an investment and unauthorized withdrawals from an investors account. FINRA also provides an investor complaint application that allows individual investors to submit a complaint regarding a brokerage firm or broker who has conducted business improperly.
State Securities Regulator
In the United States, each state has its own securities regulator. Contacting your states regulator is another avenue to explore when a dispute arises.
Understand the System
A significant number of investors set themselves up for disappointment because they dont understand their investments and they dont understand the regulatory system. Losing money on an investment is not always a reason to call for help. You need to read the fine print and make sure you understand everything your advisor has proposed for your portfolio - including the potential for a decline in value - before you agree to make the investment. Buying something that you dont understand and then trying to get your money back if the investment loses money is often a recipe for disaster.
The other important issue to remember is that regulators investigate breaches of industry rules and regulations. They do not assist with the recovery of lost money. Even if you have been the victim of an unscrupulous individual, litigation may be required to recover assets.
Mediation and Arbitration
Mediation is an informal, voluntary process whereby an independent third party facilitates a settlement between the parties involved in a dispute. Mediation is a voluntary process, and the outcome is non-binding.
Arbitration is another option. Some types of securities accounts include an agreement in which both parties agree to settle their differences in arbitration should a dispute arise. If you made such an agreement when you opened your account, the arbitrators will apply the applicable laws to your case. In some instances, the entire dispute is handled through written correspondence and records, so be sure to keep copies of all documents that will be relevant to your case. Arbitration decisions are final and binding.
Litigation - The Last Resort
If you have a legitimate compliant and it remains unresolved after you have followed all of the steps in the process in an effort to address it, contact an attorney. Litigation is often a slow and expensive process, and there is no guarantee that you will get the solution that you are seeking.
A far better choice than litigation is to make every effort to avoid this path altogether. Before you invest, learn about the various types of financial services professionals that are available to assist you. Some upfront research can save you a great deal of heartache, and money, later on.
Bar Chart
Perhaps the most popular charting method is the bar chart. The high, low and close are required to form the price plot for each period of a bar chart.
NITE-LYNX $GELV BarChart Technical Analysis
http://www.barchart.com/technicals/stocks/GELV
It used to be that free cash flow or earnings were used with a multiplier to arrive at a fair value. In 1999, the S
Volatility makes it possible for market makers to lose money providing liquidity to both sides of the market. Security purchases at the bid price can become unprofitable if the price quickly or significantly moves lower. Therefore, spreads tend to be wider (larger) in very volatile or illiquid (not easily tradable) securities.
How To Be A Stock Trader In 2012
If one of your New Years resolutions is to take control of your finances and put some of your savings to work, you might be considering using the stock market to do that. 2011 proved to be a tough year for even the bestinstitutional investor and individual traders had an equally tough time navigating markets that saw a large amount of violent swings, both to the upside and the downside.
If youre planning to enter the markets as a new trader this year, here are a few tips to consider as you put your money to work. (For related reading, see 4 Common Active Trading Strategies.)
Dont Trade for Real … Yet
Before you put your hard-earned money to work, spend some time trading fake money. Many brokerages and sites like Yahoo! Finance offer virtual or paper trading accounts that allow you to get a hands-on feel for how the markets work. Just like any new skill, you probably wont do very well with your first attempts. Use virtual funds to see if your investing decisions could potentially earn you money. Once you see that youre having success, put a small amount of real money to work. Continue to use your virtual account to test new strategies. Even the pros use virtual accounts to test the waters. (Use the Investopedia Stock Simulator to trade a virtual account, risk free!)
Learn How to Research
Its easy to make the mistake of relying on somebody elses research for investing decisions. There are two problems with this. First, somebody elses risk tolerance, investment objective and account size arent the same as yours. The trade may be right for them, but not for you. Second, they may tell you when to get into the trade but they likely wont tell you when to get out.
There are plenty of good resources that teach you how to research before you buy. Read books, talk to other traders and read company balance sheets, listen to conference calls and work to gain a real understanding of the markets. You can learn to excel at any endeavor through experience and study. Becoming a great money manager requires the same commitment. (To learn more, see Investing Books It Pays To Read.)
Say No to the Seminars
Every big city has an endless supply of weekend-long thousand dollar or more seminars that guarantee to make you the next great trader. Dont be fooled. They may have some good information, but if becoming a high-performing, profitable trader could happen over a weekend, everybody would do it. There are better ways to spend your money.
Dont Try to Win
Weve learned that in order to get ahead in this world, we have to be better than our competition. That isnt true in investing. If youre new to the markets, you arent going to beat the professionals. Even the professionals dont always beat other professionals. There are an exceedingly small amount of professional investors who have a consistent track record of beating others in the market. Aim to invest your money in products that tend to perform in line or slightly better than the market. Later, as you gain more investing experience, you can try your hand at some of the riskier trades.(For more information, read Measuring And Managing Investment Risk.)
Dont Make Money, Manage Risk
The professionals know that if you manage risk correctly, making money will naturally follow. Having a portfolio that includes a good supply of companies with a track record of success and that pay a healthy dividend, is good risk management. Only investing in products you truly understand, without looking to get rich quick, is the mark of a mature investor. You arent going to strike it rich by capturing short-term gains, so dont take the unnecessary risk of trying.
The Bottom Line
2012 promises to be another year of tough-to-navigate markets for even the best traders. Dont try to score the big win. Instead, use 2012 to be conservative with your money as you learn the complicated art of trading stocks.
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Plain speak: In most cases, FINRA approval of Form 211 is required for new quotation on OTC Link or the OTC Bulletin Board.
Both will be able to come up with logical support and resistance levels as well as key breaks to justify their position.
The Pitfalls Of Diversification
Diversification is a prominent investment tenet known by average and sophisticated investors alike. Diversification means putting your proverbial eggs into more than one basket. Proponents of this method recommend diversification within a portfolio or across various types of investments. The assumption is that diversification helps mitigate the risk of multiple investments decreasing all at once, or that relatively better performing assets will at least offset the losses. There is some truth to this approach, but there is another side to this coin. Investors should also be asking how diversification affects their portfolios performance. In other words, is diversification all that its cracked up to be? This article will examine some of the pitfalls of over-diversifying your portfolio and possibly debunk some misconceptions along the way.
SEE: Top 4 Signs Of Over-Diversification
Expenses
Having and maintaining a truly diversified portfolio can be more expensive than a more concentrated one. Regardless of whether an investor is diversified across various assets, such as real estate, stocks , bonds or alternative investments (such as art), expenses will likely rise simply based on the actual number of investments. Every asset class will probably require some expense that will be incurred on a transactional basis. Real estate brokers, art dealers and stockbrokers all will take a portion of your diversified portfolio. An average investor may have a mix of 20 or so stock and bond funds. It is likely that your financial advisor is recommending certain fund families across investable sectors.
In many cases, these funds are expensive and may carry a sales and/or redemption charge. These expenses cut into your returns and you will not get a refund based on relative underperformance. If diversification is a must-have strategy for your investable assets, then consider minimizing maintenance and transaction costs. Doing this is critical to preserving your return performance. For example, pick mutual funds or exchange traded funds (ETFs) with expense ratios less than 1% and pay a load for investing your hard-earned dollars. Also, negotiate commissions on large purchases, such as real estate.
Balancing
Many investors may incorrectly assume that having a diversified portfolio means they can be less active with their investments. The idea here is that having a basket of funds or assets enables a more laissez-faire approach, since risk is being managed through diversification. This can be true, but isnt always the case. Having a diversified portfolio may mean that you have to be more involved in and/or knowledgeable about, your investment choices. Most portfolios across or within an asset class will likely require rebalancing. In laymans terms, you have to decide how to reallocate your already invested dollars. Rebalancing may be required due to many reasons, including, but not limited to, changing economic conditions (recession), relative outperformance of one investment versus another or because of your financial advisors recommendation.
Many investors with over 20 funds or multiple asset classes now will likely face a choice of picking a sector or asset class and funds that they are simply unfamiliar with. Investors may be advised to delve into commodities or real estate without real knowledge of either. Investors now face decisions on how to rebalance and what investments are most appropriate. This can quickly become quite a daunting task unless you are armed with the right information to make an intelligent decision. One of the assumed benefits of being diversified may actually become one of its biggest hassles.
Underperformance
Perhaps the greatest risk of having a truly diversified portfolio is the underperformance that may occur. Great investment returns require choosing the right investments at the correct time and having the courage to put a large portion of your investable funds toward them. If you think about it, how many people do you know have talked about their annual return on their 20 stock and bond mutual funds ? However, many people can recall what they bought and sold Cisco Systems for in the late 1990s. Some people can also remember how they invested heavily in bonds during the real estate collapse and ensuing Great Recession in the mid to late 2000s.
There have been several investing themes over the last few decades that have returned tremendous profits: real estate, bonds, technology stocks, oil and gold are just some examples. Investors with a diverse mix of these assets did reap some of the rewards, but those returns were limited by diversification. The point is that a concentrated portfolio can generate outsized investing returns. Some of these returns can be life changing. Of course, you have to be willing to work diligently to find the best assets and the best investments within those assets. Investors can leverage Investopedia.com and other financial sites to help in their research to find the best of the best.
SEE: 4 Steps To Building A Profitable Portfolio
The Bottom Line
At the end of the day, having a diversified portfolio, perhaps one managed by a professional, may make sense for many people. However, investor beware, this approach is not without specific risks, such as higher overall costs, more accounting for and tracking of investments, and most importantly, potential risk of significant underperformance. Having a concentrated portfolio may mean more risk, but it also means having the greatest return potential. This may mean owning all stocks when pundits and professionals say owning bonds is preferred (or vice versa). It could mean you stay 100% in cash when everyone else is buying the market hand over fist. Of course, common sense cannot be ignored: no one should blindly go all-in on any investment without understanding its potential risks. Hopefully, one can recognize that having a diversified portfolio is not without risks of its own.
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10 Tips For Choosing An Online Broker
One of the most important investment decisions youll make has nothing to do with stocks, bonds or mutual funds. This crucial decision is picking a broker. There are dozens of companies offering brokerage services on the internet , and many of them are just as good or better than traditional, brick-and-mortar businesses, but how to decide which one is best for you?
Here are 10 critical factors youll want to consider:
1. Discount is not always a good deal. Consider starting out with a full-service broker. They are often best for novice investors who may still need to build confidence and knowledge of the markets. As you become a more sophisticated investor, you can graduate into investing more of your money yourself.
2. Availability is key. Try hitting the companys website at different times throughout the day, especially during peak trading hours. Watch how fast their site loads and check some of the links to ensure there are no technical difficulties.
3. Alternative trading provides flexibility. Although we all love the net, we cant always be at our computers. Check to see what other options the firm offers for placing trades. Other alternatives may include touch-tone telephone trades, fax ordering, or doing it the low-tech way - talking to a broker over the phone. Word to the wise: make sure you take note of the prices for these alternatives; they will often differ from an online trade .
4. The brokers background matters. What are others saying about the brokerage? Just as you should do your research before buying a stock, you should find out as much as possible about your broker . (To learn more, check out Picking Your First Broker.)
5. Price isnt everything. Remember the saying you get what you pay for? As with anything you buy, the price may be indicative of the quality. Dont open an account with a broker simply because it offers the lowest commission cost. Advertised rates for companies vary between zero and $40 per trade, with the average around $20. There may be fine print in the ad specifying which services the advertised rate will actually entitle you to. In most cases, there will be higher fees for limit orders, options and those trades over the phone with your broker. You might find that the advertised commission rate may not apply to the type of trade you want to execute.
6. Minimum deposits may not be minimal. See how much of an initial deposit the firm requires for opening an account. Beware of high minimum balances: some companies require as much as $10,000 to start. This might be fine for some investors, but not others.
7. Product selection is important. When choosing a brokerage, most people are probably thinking primarily about buying stocks . Remember there are also many investment alternatives that arent necessarily offered by every company. This includes CDs, municipal bonds, futures,options and even gold/silver certificates. Many brokerages also offer other financial services , such as checking accounts and credit cards.
8. Customer service counts. There is nothing more exasperating than sitting on hold for 20 minutes waiting to get help. Before you open an account, call the companys help desk with a fake question to test how long it takes to get a response.
9. Return on cash is money in the bank. You are likely to always have some cash in your brokerage account. Some brokerages will offer 3-5% interest on this money, while others wont offer you a dime. Phone or email the brokerage to find out what it offers. In fact, this is a good question to ask while youre testing its customer service!
10. Extras can make a difference. Be on the lookout for extra goodies offered by brokerages to people thinking of opening an account. Dont base your decision entirely on the $100 in free trades, but do keep this in mind.
The Bottom Line
With a click of the mouse, from just about anywhere in the world, you can buy and sell stocks using an online broker. The right tools for the trade are key to every successful venture; finding success in the market begins with choosing the right broker.
To trade OTC securities you must open an account with a brokerage firm that deals in OTC securities. Investors cannot buy or sell securities directly through OTC Markets Group.
Let's start to clarify things by looking at the efficient market hypothesis and see where the fundamentalists, technicians and random walkers stand on the question of market efficiency.
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An Inside Look At ETF Construction
Some people are happy to simply use a range of devices like wrist watches and computers and trust that things will work out. Others want to know the inner workings of the technology they use, and understand how it was built. If you fall into the latter category and as an investor have an interest in the benefits that exchange-traded funds (ETFs) offer, youll definitely be interested in the story behind their construction.
How an ETF Is Created
The creation and redemption process for ETF shares is almost the exact opposite of that of mutual fund shares. When investing in mutual funds, investors send cash to the fund company, which then uses that cash to purchase securities and in turn issue additional shares of the fund. When investors wish to redeem their mutual fund shares, the shares are returned to the mutual fund company in exchange for cash. The creation of an ETF, however, does not involve cash.
The process begins when a prospective ETF manager (known as a sponsor) files a plan with the SEC to create an ETF. Once the plan is approved, the sponsor forms an agreement with an authorized participant, generally a market maker, specialist or large institutional investor, who is empowered to create or redeem ETF shares. (In some cases, the authorized participant and the sponsor are the same).
The authorized participant borrows shares of stock, often from a pension fund, places those shares in a trust, and uses them to form creation units of the ETF. Creation units are bundles of stock varying from 10,000 to 600,000 shares, but 50,000 shares is whats commonly designated as one creation unit of a given ETF. Then, the trust provides shares of the ETF - which are legal claims on the shares held in the trust (the ETFs represent tiny slivers of the creation units) - to the authorized participant. Because this transaction is an in-kind trade - that is, securities are traded for securities - there are no tax implications. Once the authorized participant receives the ETF shares, they are then sold to the public on the open market just like shares of stock.
When ETF shares are bought and sold on the open market, the underlying securities that were borrowed to form the creation units remain in the trust account. The trust generally has little activity beyond paying dividends from the stock held in the trust to the ETF owners and providing administrative oversight because the creation units are not impacted by the transactions that take place on the market when ETF shares are bought and sold.
Redeeming an ETF
When investors want to sell their ETF holdings, they can do so by one of two methods. The first is to sell the shares on the open market. This is generally the option chosen by most individual investors. The second option is to gather enough shares of the ETF to form a creation unit and then exchange the creation unit for the underlying securities. This option is generally only available to institutional investors due to the large number of shares required to form a creation unit. When these investors redeem their shares, the creation unit is destroyed and the securities are turned over to the redeemer. The beauty of this option is in its tax implications for the portfolio.
We can see these tax implications best by comparing the ETF redemption to that of a mutual fund redemption. When mutual fund investors redeem shares from a fund, all shareholders in the fund are affected by the tax burden. This is because to redeem the shares, the mutual fund may have to sell the securities it holds, realizing the capital gain, which is subject to tax. Also, all mutual funds are required to pay out all dividends and capital gains on a yearly basis. Therefore, even if the portfolio has lost value that is unrealized, there is still a tax liability on the capital gains that had to be realized because of the requirement to pay out dividends and capital gains.
ETFs minimize this scenario by paying large redemptions with shares of stock. When such redemptions are made, the shares with the lowest cost basis in the trust are given to the redeemer. This increases the cost basis of the ETFs overall holdings, minimizing its capital gains. It doesnt matter to the redeemer that the shares it receives have the lowest cost basis because the redeemers tax liability is based on the purchase price it paid for the ETF shares, not the funds cost basis. When the redeemer sells the shares of stock on the open market, any gain or loss incurred has no impact on the ETF. In this manner, investors with smaller portfolios are protected from the tax implications of trades made by investors with large portfolios.
The Role of Arbitrage
Critics of ETFs often cite the potential for ETFs to trade at a share price that is not aligned with the value of the underlying securities. To help us understand this concern, a simple representative example best tells the story.
Assume an ETF is made up of only two underlying securities:
• Security A, which is worth $1 per share
• Security B, which is also worth $1 per share
In this example, most investors would expect one share of the ETF to trade at $2 per share (the equivalent worth of Security A and Security B). While this is a reasonable expectation, it is not always the case. It is possible for the ETF to trade at $2.02 per share or $1.98 per share or some other value.
If the ETF is trading at $2.02, investors buying shares of the ETF are paying more for the shares than the underlying securities are worth. This would seem to be a dangerous scenario for the average investor, but in reality, it isnt a major problem because of arbitrage trading.
Heres how arbitrage sets the ETF back into equilibrium. The trading price of an ETF is established at the close of business each day, just like any other mutual fund. ETF sponsors also announce the value of the underlying shares on a daily basis. When the price of the ETF deviates from the value of the underlying shares, the arbitragers spring into action. If the underlying securities are trading at a lower price than the ETF shares, arbitragers buy the underlying securities, redeem them for creation units, and then sell the ETF shares on the open market for a profit. If underlying securities are trading at higher values than the ETF shares, arbitragers buy ETF shares on the open market, form creations units, redeem the creation units in order to get the underlying securities, and then sell the securities on the open market for a profit. The actions of the arbitrageurs set the supply and demand of the ETFs back into equilibrium to match the value of the underlying shares.
Because ETFs were used by institutional investors long before they were discovered by the investing public, active arbitrage among institutional investors has served to keep ETF shares trading at a range that is close to the value of the underlying securities.
The Bottom Line
In a sense, ETFs have a lot in common with wrist watches. Everybody wants their watch to tell the correct time, but they dont need to know how the watch was built in order to benefit from it. With ETFs, investors can enjoy the benefits associated with this unique and attractive investment product, without even being aware of the complicated series of events that make it work. But, of course, knowing how those events work makes you a more educated investor, which is the key to being a better investor.
Affinity fraud refers to investment scams that prey upon members of identifiable groups, such as religious or ethnic communities, the elderly, or professional groups. The fraudsters who promote affinity scams frequently are - or pretend to be - members of the group.
Technical analysts believe that the current price fully reflects all information. Because all information is already reflected in the price, it represents the fair value, and should form the basis for analysis.
The Lowdown On Index Funds
Index funds have provided investors with a return that is directly linked to individual markets while charging minimal amounts for expenses. Despite their benefits, not everyone seems to know exactly what index funds are and how they compare to the many other funds offered by different companies.
Active and Passive Management
Before we get into the details of index funds, its important to understand the two different styles of mutual-fund management: passive and active.
Most mutual funds fit under the active management category. Active management involves the art of stock picking and market timing. This means the fund manager will put his/her skills to the test trying to pick securities that will perform better than the market. Because actively managed funds require more hands-on research and because they experience a higher volume of trading, their expenses are higher.
Passively managed funds, on the other hand, do not attempt to beat the market. A passive strategy instead seeks to match the risk and return of the stock market or a segment of it. You can think of passive management as the buy-and-hold approach to money management.
What Is an Index Fund?
An index fund is passive management in action: it is a mutual fund that attempts to mimic the performance of a particular index. For instance, a fund that tracks the S
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Companies may issue and sell shares in the OTC market pursuant to the safe-harbor guidelines under SEC Rule 144 and 144A.
Relative Strength:
The price relative is a line formed by dividing the security by a benchmark. For stocks it is usually the price of the stock divided by the S
The Most Profitable Investing Trends Right Now
The stock market has been very volatile the last few years. While volatility brings risk, but it also brings opportunities for large gains if you are able to spot the right trends early. Here are some of the most profitable investing trends right now. (Growing a small sum poses big challenges. Find out why and learn what you can do about it. Check out Start Investing With Only $1000.)
1. Cloud Computing
A big trend in computing is offloading your local computing and data storage needs into the cloud. Ultimately, the cloud computing movement sees individual computers becoming primarily web terminals used to connect to powerful servers hosting our personal and business data, as well as web-based applications.
There are very few good pure-play companies in cloud computing. Amongst publicly-traded names, one of the leaders in cloud computing is Amazon (AMZN) with its EC2 virtual computing environments. Google (GOOG) is also a major player in the field with its web-based Google Docs service, as well as its Google Apps for Business line. Microsoft (MSFT) is also in the game with its Business Productivity Suite and its Office 365 offering.
2. Tablet PCs
Almost every major computer maker is debuting new tablet computers this year. The tablet segment is expected to grow quickly over the next few years, with one research firm projecting a growth from approximately 4 million units sold in 2010 to 57 million units being sold in 2015. A clear leader in the field is Apple (AAPL), with over 75% of the worldwide market share. In addition, Apples Ipad 2 is expected to start shipping soon.
Another perspective is that Googles Android-based systems may be where the real growth is. In the fourth quarter of 2010, Android-based systems went from 2.3% market share to nearly 21.6%. Unfortunately there is not a good pure-play on Android tablets, since major computer makers sell a wide variety of systems. Investors may want to look into the profit-boosting potential of Dells (DELL) new tablet or HPs (HPQ) TouchSmart series of tablets. Another idea would be to look into Intel (INTC) which makes the processors powering most non-Apple tablets.
3. Solar/Alternative Energy
Alternative sources of energy are gaining in popularity, but as an investor, you have to be careful where you put your money. For example, the Market Vectors Global Alternative Energy ETF (GEX) has delivered a negative-50% return since its inception in 2007. The alternative energy sector includes a lot of yet-unproven technologies and small early-stage firms, which presents a high risk for investors. You may want to be more selective and pick out some of the better individual firms. First Solar, Inc. (FSLR) is one of the biggest names, with a $13 billion market cap; it is up nearly 5000% since 2007. (Setting goals is the first step in determining which investment vehicles are right for you.
4. Streaming Movies
Watching streaming movies and television shows on demand is quickly catching on as a preferred method of media delivery. The old style physical rental chains, like Blockbuster, are fast disappearing from the competitive landscape.
The leader in streaming movies is Netflix (NFLX), which is up approximately 700% over the past five years. New investors may wish to exercise caution, however, since Netflix is currently trading at relatively high valuation levels, and several major companies seem to be eyeing an entrance into the market. The most interesting new entrant to the space is Amazon. Amazon launched its new streaming video service on February 22, 2011 which makes approximately 5,000 titles available on demand for free to Amazon Prime members.
5. Lithium
Commodities as an asset class have seen a tremendous run-up in price over the last several years. One of the more compelling long-term commodity stories is lithium, where increased demand is expected for the metal for use in batteries. Lithium batteries are used in electric cars, so if plug-in electric vehicles catch on, that may be a very large new source of demand.
If you are looking for a broad exposure to lithium, you may be interested in the Global X Lithium ETF (LIT) which is up 30% since its inception in 2010. One of the major individual names in lithium is the Chemical and Mining Company of Chile (SQM) which is up about 350% over the last five years.
The Bottom Line
These investing trends have been very profitable for investors who got in early. If you are considering investing now, conduct careful research to make sure you arent buying in at overvalued levels. Another approach would be to analyze these trends, identify common themes, and try to spot a new trend in the early stages.
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At such instances, as a matter of policy, when adequate current information is not made available, OTC Markets will label the security as "Caveat Emptor." Promotional activities may include spam email, unsolicited faxes or news releases, whether they are published by the issuer or a third party.
Traders usually concentrate on charts made up of daily and intraday data to forecast short-term price movements.
Portfolio Mismanagement: 7 Common Stock Errors
Ignorance may be bliss, but not knowing why your stocks are failing and money is disappearing from your pockets is a long way from paradise. In this article, well uncover some of the more common investing faux pas, as well as provide you with suggestions on how to avoid them.
1. Ignoring Catalysts
The financial pundits, trade journals and business schools teach that proper valuation is the key to stock selection. This is only half of the picture because calculating P/E ratios and running cash flow spreadsheets can only show where a company is at a given point in time - it cannot tell us where it is heading.
Therefore, in addition to a quantitative evaluation of a company, you must also do a qualitative study so that you can determine which catalysts will drive earnings going forward.
Some good questions to ask yourself include:
• Is the company about to acquire a very profitable enterprise?
• Is a potential blockbuster product about to be launched?
• Are economies of scale being realized at the companys new plant and are margins about to rise dramatically?
• What will drive earnings and the stock price going forward?
2. Catching the Falling Knife
Investors love to buy companies on the cheap, but far too often, investors buy in before all of the bad news is out in the public domain, and/or before the stock stops its free fall. Remember, new lows in a companys share price often beget further new lows as investors see the shares dropping, become disheartened and then sell their shares. Waiting until the selling pressure has subsided is almost always your best bet to avoid getting cut on a falling knife stock. (To learn more, read How Investors Often Cause The Markets Problems.)
3. Failing to Consider Macroeconomic Variables
You have found a company you want to invest in. Its valuation is superior to that of its peers. It has several new products that are about to be launched, and sales could skyrocket. Even the insiders are buying the stock, which bolsters your confidence all the more.
But if you havent considered the current macroeconomic conditions, such as unemployment and inflation, and how they might impact the sector you are invested in, youve made a fatal mistake!
Keep in mind that a retailer or electronics manufacturer is subject to a number of factors beyond its control that could adversely impact the share price. Things to consider are oil prices, labor costs, scarcity of raw materials, strikes, interest rate fluctuations and consumer spending. (For more on these factors, see Macroeconomic Analysis and Where Top Down Meets Bottom Up.)
4. Forgetting About Dilution
Be on the lookout for companies that are continuously issuing millions of shares and causing dilution, or those that have issued convertible debt. Convertible debt may be converted by the holder into common shares at a set price. Conversion will result in a lower value of holdings for existing shareholders.
A better idea is to seek companies that are repurchasing stock and therefore reducing the number of shares outstanding. This process increases earnings per share (EPS) and it tells investors that the company feels that there is no better investment than their own company at the moment. (You can read more about buybacks in A Breakdown Of Stock Buybacks.)
5. Not Recognizing Seasonal Fluctuations
You cant fight the Fed. By that same token, you cant expect that your shares will appreciate even if the companys shares are widely traded in high volumes. The fact is that many companies (such as retailers) go through boom and bust cycles year in and year out. Luckily, these cycles are fairly predictable, so do yourself a favor and look at a five-year chart before buying shares in a company. Does the stock typically wane during a particular part of the year and then pick up during others? If so, consider timing your purchase or sale accordingly. (To learn more, see Capitalizing On Seasonal Effects.)
6. Missing Sector Trends
Some stocks do buck the larger trend; however, this behavior usually occurs because there is some huge catalyst that propels the stock either higher or lower. For the most part, companies trade in relative parity to their peers. This keeps their stock price movements within a trading band or range. Keep this in mind as you consider your entry/exit points in a stock.
Also, if you own stock in a semiconductor company (for example), understand that if other semiconductor companies are experiencing certain problems, your company will too. The same is true if the situation was reversed, and positive news hit the industry.
7. Avoiding Technical Trends
Many people shy away from technical analysis, but you dont have to be a chartist to be able to identify certain technical trends. A simple graph depicting 50-day and 200-day moving averages as well as daily closing prices can give investors a good picture of where a stock is headed. (To learn about this method, read the Basics Of Technical Analysis.)
Be wary of companies that trade and/or close below those averages. It usually means the shares will go lower. The same can be said to the upside. Also remember that as volume trails off, the stock price typically follows suit.
Lastly, look for general trends. Has the stock been under accumulation or distribution over the past year? In other words, is the price gradually moving up, or down? This is simple information that can be gleaned from a chart. It is truly surprising that most investors dont take advantage of these simple and accessible tools.
The Bottom line
There are a myriad of mistakes that investors can and do make. These are simply some of the more common ones. In any case, it pays to think about factors beyond what will propel the stock you own higher. A stocks past and expected performance in comparison to its peers, as well as its performance when subjected to economic conditions that may impact the company, are some other factors to consider.
NITE-LYNX $FRZT BarChart Technical Analysis
http://www.barchart.com/technicals/stocks/FRZT
In a new account agreement, you must specify your overall investment objective in terms of risk. Categories of risk may have labels such as "income," "growth," or "aggressive growth."
Some buying interest began to become evident around 44 in mid- to late-February. Notice the array of candlesticks with long lower shadows, or hammers, as they are known.
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