January 24th, 2008 by admin
Wish to invest in stocks? “Later” is a bad excuse. There is nothing called the perfect time for investment, all you need to follow is some good fundamentals that has been laid down by many experienced traders. The best thing among stock market investment states is “hear to all, do for you”. Listening to every cliché is as important as different traders face different situations and they have their own say in the practical situations. However, no one knows at what time the advice may help in producing favourable returns. Though, it should be made sure that the tips and advice do not grab the individual thought and calculations. Learn to mold the advice to your own benefit is the main criteria.
To be precise with the buying and selling of stocks, buy on bad news and sell on good news is the rule that works most of the time. Wall Street news rules the movement of stocks. They are frequently changing and so make the share prices more fluctuating. But, flicking around depending on such news is not the key for trading in stocks. Make sure that you do not miss on the huge news hitting the stock market. Also, the mergers and introduction of IPO’s and other investment opportunities generally get a price hike in shares. Hence, the shares must be purchased seeking any news of that sort.
For long term investment, stop clinging on to other forecasts and expected market moods. Try and rely on your own analysis and research work that will not only pay you in long run but also, tends to reduce the chances of misses on the stock market. However, knowing your limits is essential. Take the investments as much as you can handle. Excess, that cannot be handled always tend to give the losses to stock investor.
Getting to the technical terms, stock market investment fundamentals include charting, fundamental analysis of the companies to be invested in and technical analysis of stock position. The graphs, calculations and charts of the current position of the companies work in favour of the trader. Getting the inbound market position of the company gets the real picture to the frame. The annual returns and profits of the year get the real value of the share and set its worth for its holding.
While investing in stock market, make sure that you keep a safe for the savings. It is not necessary to invest the entire amount you posses including the profits make. Profits definitely are to be re-invested, but taking a share for further savings is important. It not only balances the investments but also, takes due care of the money and put it at stake. Getting the savings store booms the confidence to have positive returns and forbids losing all the money in the stock market. As such, it is similar to factors that recover the cost of investment, initial invested amount, and here being the cost.
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January 15th, 2008 by admin
An index is a statistical measure that represents the value of a batch of stocks. Investors use this measure like a barometer to track the overall progress of the market (or a segment of it). The oldest stock market index is the Dow Jones Industrial Average (DJIA or simply “The Dow”). In 1896, Charles Dow (of Dow Jones fame) created the Dow Jones Industrial Average; it covered only 12 stocks then (the number increased to 30 stocks in 1928, and it remains the same to this day). Because Dow worked long before the age of computers, he kept calculating a stock market index simple and did it arithmetically by hand. Dow added up the stock prices of the 12 companies and then divided the sum by 12.
Technically, this number is an average and not an index (hence the word “average” in the name). For simplicity sake, we’ll refer to it as an index. Nowadays, the number gets tweaked to also account for things such as stock splits.
However, indexes get calculated differently. The primary difference between an “index” and an “average” is the concept of weighting. Weighting is the relative importance of the items when they are computed within the index.
Several kinds of indexes exist, including:
Price-weighted index - This kind of index tracks changes based on the change in the individual stock’s price per share.
To give you an example, suppose that you own two stocks - Stock A worth $20 per share and Stock B worth $40 per share. A price-weighted index allocates a greater proportion of the index to the stock at $40 than to the one at $20. Therefore, if we had only these two stocks in an index, the index number would reflect the $40 stock as being 67 percent (two-thirds of the number), while the $20 stock would be 33 percent (one-third of the number).
Market-value weighted index - This kind of index tracks the proportion of a stock based on its market capitalization (or market value, also called market cap). Say that in your portfolio, you have 10 million shares of a $20 stock (Stock A) and 1 million shares of a $40 stock (Stock B). Stock A’s market cap is $200 million, while Stock B’s market cap is $40 million. Therefore, in a market-value weighted index, Stock A represents 83 percent of the index’s value because of its much larger market cap.
Broad-based index - The sample portfolios in the preceding bullets show only two stocks obviously not a good representative index. Most investing professionals (especially money managers and mutual fund firms) use a broad-based index as a benchmark to compare their progress. A broad-based index has the purpose to provide a “snapshot” of the entire market, such as the S&P 500 or the Wilshire 5000.
Composite index - This is an index or average that is a combination of several averages or indexes. An example is the New York Stock Exchange (NYSE) Composite, which tracks all the stocks on the NYSE. Checking Out the Indexes Although most people consider the Dow, Nasdaq, and Standard & Poor’s 500 to be the stars of the financial press, you may find other indexes equally important to follow because they cover other significant facets of the market, such as small-cap and mid-cap stocks.
You can check out other less-sexy indexes that cover specific sectors and industries. If you’re investing in an Internet stock, you should also check the Internet Stock Index to compare what your stock is doing when measured against the index. You can find indexes that cover industries such as transportation, brokerage firms, retailers, computer companies, and real estate firms. For a comprehensive list of indexes, go to www.djindexes.com (a Dow Jones & Co. Web site). The most reliable and most widely respected indexes are produced not only by Dow Jones but also Standard & Poor’s and the major exchanges/markets themselves such as the New York Stock Exchange (NYSE), the American Stock Exchange (AMEX), and Nasdaq. There are also indexes issued or provided by smaller exchanges (such as the Philadelphia Exchange).
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