How the Stock Market Works

The beginning concept of the stock market dates back to 12^th century France. Since then it has grown into a huge business and created full time jobs for millions of people. The stock market is vital to our economy chiefly because it is the most important way for companies to raise capitol for their business. Investors buy stock in a company which gives this company more money to invest to grow the business. Hopefully, the business will thrive increasing the value of the stock, the investor will sale the stock and make money.

Why should you invest in the stock market?

Many people use the stock market to earn extra income or to invest in their future retirement. Almost everyone could use some extra cash, right? From personal experience it is very difficult for the average investor to actually make a lot of extra income from the stock market. In order to earn huge gains from the stock market you have to have a lot of money to invest. Because of the “per trade” fee that investment companies charge you, investors have to purchase large quantities of a stock in order to offset the costs of investments. Also, any gains from the sale of stock are taxed more than personal income tax. I would recommend waiting to do this type of investment after you learn the basics of investing and have your retirement funded.

So, back to the original question, why should you invest in the stock market? Investing for your future retirement is a great reason to learn the ropes of the stock market. Many people don’t realize the importance of having their retirement funded. The earlier you start investing for retirement to more prepared you will be when the time comes. It may also allow you to retire sooner than your friends and co-workers.

So, Ready to start investing in the Stock Market?

Not so fast, investing in the stock market can be risky, know what you are doing before you sign up.

First, learn the lingo of the business. There are many websites online you can research and learn the basic lingo of the stock market. At least learn the basics before you start. It’s just like the rule of reading the instructions before you try to put together furniture. Sure you can jump right in and try to put it together, but you will probably miss a step or do something out of order and the whole piece of furniture is ruined. Take some time to read the stock market instruction book before throwing away your money.

Second, open a virtual portfolio at an online stock market trading website. There are many websites online that let you play the stock market game without investing a dime. You can choose any real stocks you want and they will track your progress over time. You can buy and sales just like the real market. After several months if you aren’t making virtual money odds are you won’t be very successful at the real game either.

Research, research, research is the key to success. Obviously, no one knows exactly how the market will work but if you know what to look for sometimes you can get a heads up over the competition. Key factors such as the company earnings reports can have an impact on the stocks value. You can also watch trends of stocks, sometimes the values of stocks peak at certain times of the year. There are many theories on stock market fluctuations but knowing the inner workings of a company can help you invest smarter.

Now, you have earned some virtual money and done some research on your favorite stocks you are to try your luck at the real stock market. There are many places that will allow you to invest in the stock market: two that I use and recommend are Zecco and Sharebuilder. These two programs do not require you to keep a minimum balance and their fees are very low for investing. Once you choose a place to start investing you must decide your investment goals. Do you want to invest for retirement or invest to make money right now?

I would always suggest to the beginning investor to invest for retirement. My choice of retirement investment would be a Roth IRA. A Roth IRA allows you to invest funds after taxes and those profits can be withdrawn at retirement tax free. A Roth IRA allows you to invest in stocks, bonds, mutual funds or ETF’s. It allows you to have a diversified portfolio and still have complete flexibility of your choice.

If you plan to invest to make money now, you should be aware of what this entails. Any gains you make from stock sales in a year are taxed at a different rate than income taxes. These gains are taxed harder so take this into consideration when investing.

Profit from investing in the Stock Market

Again, I obviously don’t know all the secrets to the stock market. If I did I probably wouldn’t be taking the time to write this article. However, there are some simple rules to follow in order to profit from the stock market.

First, buy low sale high. It’s an age old rule that investors still struggle with today. If a stock jumps in price to a peak, you may want to consider a sale and keep the profits. If a stock drops to a new low you may want to consider buying.

Remain calm. If a stock drops a considerable amount in one day, don’t panic. Unless the company is in danger of bankruptcy the stock price will rise. The best thing to do would be buy more of the stock at the lower price.

Diversify your portfolio. As the ole saying goes, don’t put all your eggs in one basket. If you put all your money into a single stock you are living very dangerous. If anything happens to this company your entire portfolio could disappear. It is a good idea to invest in different types of funds including, stocks, bonds, mutual funds and ETF’s. Spread your money around and even if something happens to a single company you will still make money in the long run.

Watch your portfolio. If you are going to make money you want to keep an eye on your investments. Track their progress over time and make necessary changes to your portfolio. You may need to sale some of your investments that have reached highs and maybe buy more of investments that are at all-time lows.

Change your investments with your lifestyle. As you grow older you should move more of your investments to safer areas of the stock market. Individual stocks are considered extremely risky and should be avoided the closer you get to retirement. Instead consider safer investments such as bonds and CD’s.

Conclusion

There is a lot of money to be made in the stock market and there is a lot of money to be lost. If you are going to play the game be sure you understand the rules. Know exactly where you are putting your money and why. Staying on top of your portfolio will increases your changes of winning with the stock market

The DOW was at it’s peak in October of 2007, topping the 14,000 mark. From that point it started to take a slow downward pace and then took a nose dive in September of 2008 reaching levels in the mid 6,000′s.

With just a little research you can notice it’s slowly climbed back up to almost 9,000 now. Do a little more research and you’ll discover the market has took a couple more dives in the past, but it’s always climbed back up.

The government is currently taking many steps to help ensure the success of the U.S. economy, and the past few months have proved this. Stocks have slowly climbed back up, but not to their peak levels. Now is the time to invest!

I wouldn’t recommend investing in individual stocks, especially if you aren’t an experienced investor. Financial advisors, and investors are paid to do in dept research into companies. Most of them know what they are doing. Find a reputable financial investor and let them help you make some money. They will have a large list of mutual funds, index funds, and other investment opportunities to suite your individual investment style.

The market is definitely warm and moving toward HOT, don’t miss a great opportunity to secure your financial future!

As many of you know just about every retirement portfolio in America has taking a beating the past 12 or more months. My personal 401k has lost over 40% of it’s value in the past 12 months. However, if you take a look at the last two years of McDonald’s stock it has actually increased in value. January 30, 2007 McDonald’s stock was trading at about $43.00 per share and yesterday it closed at $58.83! Even in the worst market McDonald’s has managed to stay strong and increase in value.

Want another reason to invest in McDonald’s? They also pay a dividend over 3% per year. In today’s down market and financial disasters many companies are no longer paying dividends. Companies that have paid dividends for years are ending this prized bonus to it’s investors. McDonald’s however has no reason to end the dividend because of their continued success.

Just for you information I do not own McDonalds stock, yet. I do however plan to purchase McDonalds over the next few months to add a solid company to my portfolio.

I’m not writing this article to tell you I regret purchasing the home, I’m writing to tell you I could have made an even better financial move than purchasing the home. We lived in the home for just over 2 years and sold it for a profit of about $8,000, not great but not bad for newly weds just out of college.

If you are ready to purchase your first house or home then you are entering the market at a great time. Right now home prices are down all across the nation, bad for those of us who already own a home, but great for those just entering the market. Also interest rates are still pretty low even for a fixed rate loan. Getting a great deal on real estate is pretty easy right now and it could be one of the most important moves you can make financially.

If I could make a suggestion to those of you looking to purchase that starter home, don’t. Think about purchasing a duplex instead of the traditional home. We could have purchased a nice duplex for about $175,000 instead of our home for $112,000. It might sound like a lot more money but you live in one side fo the duplex and rent out the other side. Remember I told you our rent would be about the same for a nice apartment as a new home? Same deal here, that duplex was being rented for $1,000 per month I know because that’s where my wife was living before we got married. The payment, tax and insurance on $175,000 loan would have been about $1,200 per month, you can do the math here.

Now, of course there are many risks associated with renting especially if you depend on that income to make your payment so consider this before jumping to purchase the duplex. I’ll write another article soon about all the risks and rewards associated with renting.

Finding an honest financial adviser is the most important part of preparing for retirement. It doesn’t matter if you make $10,000 or $1,000,000 per year you should use a financial adviser. You may think you are the best person to manage your money, but let’s face it, you are always busy, usually lazy and are the world’s worst procrastinator. Before finding a financial adviser you need to understand their function and how they are compensated for their hard earned work.

A financial adviser is a professional who is trained in the art of financial planning services. They are a skilled investor that understands all levels of risk and can explain those risks to their clients. Their main goal in their job is to help their clients achieve their personal finance goals for the future.

Financial advisers are usually paid through two different types of methods: commission based and fee based.  Commission-based advisers receive a percentage of the sales amount on the financial products they recommend such as mutual funds, stocks, bonds and insurance. Fee-based advisers are paid a flat fee. Their fees can be billed by the hour or project, as a flat annual amount, or as an annual percentage of assets under management. Before choosing a type of adviser do some research as to which type will benefit you more.

So How do you find an honest financial adviser? Here are some quick tips to test the honesty of your potential financial adviser:

1. Look at the fees and expenses associated with his financial suggestions. If he recommends any mutual funds with “load fees” then he may be thinking more about his own financial situation.
2. Is he going to overcharge you in fees? If he is going to charge you more than 1% of your assets then he probably is overcharging you.
3. Make sure you are comfortable talking to your adviser and that he is knowledgeable of all the products he is trying to sell you. I like how Dave Ramsey says it… If you can’t explain something you are investing your money into to a child then you shouldn’t be investing in that particular item. That’s a financial advisers job to teach you about investments.
4. Make sure they can actually use financial calculators and explain how they work to you. Sometimes financial advisers are simply sales people dressed in disguise. They don’t really know what they are selling themselves.
5. Don’t take the advice of friends and family. Just because they tell you a financial adviser is good doesn’t make them a great financial planner. Do the research yourself and ask the right questions. After all it’s your money not theirs

Keep these simple thoughts in mind when searching for an honest financial adviser. Your future is very important, don’t trust it to just anyone!

First, have a clear plan of what you want to do with the real estate. Do you want to purchase a run down house that needs a lot of work and flip the house for a quick profit? Do you want to purchase the real estate as a rental property? Or do you want to purchase the home as your main residence with intentions of reselling it in a few years for a profit?

Real estate is a great investment, but make sure that your plans will be profitable. Do some research about the surrounding areas. Is the city/town growing or are people actually leaving the area? If you are planning on flipping the house you need to find the average time that houses sit on the market for sale. If you are planning to use the real estate as rental income find out how much you can rent the house for each month. Finally, if you are using it as your primary residence think about improvements you will want to make to the house to live in, will it cost a fortune to make you happy?

Make sure you can actually afford this investment. Real estate is just like any other investment, don’t spend more than you can afford to lose. However, with real estate it’s much easier to lose because it’s a payment that you have to make. If you invest in a 401k plan or similar retirement account you can always stop the investments if you get in a bind, but once you close on a house you are stuck with that payment until it’s paid for.

Get an expert opinion about the structure of the home. Most states require a home inspection before a home can be bought or sold, but always use an outside source. Make sure the home is structurally sound before you sign on the line. Talk to neighbors in the area, maybe they can give you information about the home that an outsider wouldn’t know.

If you think you have good real estate investment ideas, just remember always do research. A little time now can save you thousands of dollars in the future.

Ok, thought I would give it a try. Made my first $100 deposit on Friday and funds should be available this week. Prosper is basically a lending club that either gives you access to loans that are a little better rates than you could get from banks and credit card companies or gives you the opportunity to loan your money to other consumers that need the money, giving you a better return on your investment than any savings account, CD, or money market account.

As with any investment that yeilds a larger rate of return, there is also risk involved. The risk you have is the person you loaned the money to not paying back the loan. Prosper has in place methods to prevent this such as reporting to credit agencies and debt collection agency’s, however there is still risk. Just like investing in stocks you should diversify your portfolio. Don’t loan all your money to the same person, spread your money around in different risk categories.

Final thing to remember when joining Prosper is it’s not a get rich quick program. It should be viewed more as an investment opportunity. Most loans on Prosper are paid back over a three year period, so when you loan your $50 to someone you won’t see the money until the loan is paid back in full, which could take up to three years. If you are planning to use Prosper as a savings account you might want to think twice.

If you are interested in joining prosper click below. If you use my link we both get $25 when you fund your first loan.

I’ll keep you updated on my progress at Prosper!

A four year college or university is an important step in a successful career oriented life. It’s obvious that college graduates earn higher salaries than those who only graduate high school. College also stimulates the mind and leads the brain down creative avenues. College also gives you the opportunity to meet many unique people from different cultures and provide you with the opportunity to make job connections for the future. With this said, it’s obvious there are advantages related to attending college, but can everyone afford the rising costs of a four year degree? The average cost to attend a public university might be lower than you think, about $6,000, but this is still almost $25,000 over the course of four years. So just how cheap can you send your children to a four year post secondary school?

I’m here to tell you that you can pay for your childs four year college education for a one time payment of $1,000 and about $1 per day. This might not sound like a lot of money to pay for college and it’s not. That’s right for $1,000 and the cost of a cup of coffee you can send your child to college. How did I arrive at these numbers?

You’ve heard it all before from about every financial advisor and money guru around but I’m going to tell you again. The key is compounding interest. With your $1,000 deposit into a mutual fund and another $30 per month your money will grow to over $24,000 in about 18 years.

What an awsome gift to give your child, a completely paid for college education to get their life started. So don’t wait another day find a trusted financial institution and get that mutual fund started today!

It may sound like a strange idea, especially when a very small percentage of us have our own retirement secured, but just imagine how you could change your family tree forever! The only problem with the concept is that most people are too greedy or selfish to actually follow through with the plan.

If you are a numbers junkie like myself it doesn’t take too much calculating to figure out the small investment needed to make $1,000,000 when you have 60 years of compounding interest on your side. That’s about the amount of time a newborn child will have until they can retire.

By doing some quick calculations I get the following results for your newborn. If you put an initial deposit of $5,000 into a good mutual fund earning an average of 10% per year (not too hard to find) and let it sit in the fund for 60 years (the age your newborn can retire) then you investment will be worth just over 1.5 million dollars. It’s hard to believe that $5,000 can turn into that much value, but with time on your side money can do some amazing things.

Just imagine the life that your child could have knowing that a good portion of their retirement is already funded. It would give them the opportunity to do so many things in life and even set up their child’s retirement. I realize most of us don’t have that much money around but even $500 will turn into almost $200,000 with 60 years to grow. Just something for you to think about!

If you haven’t noticed, the US economy is taken a huge turn for the bad. Stocks have tumbled and the over the past three days The Dow Jones industrial average has fell nearly 515 points. It’s a little scary to think that many stocks, especially those in the financial sector may continue to fall even more over the next few months. Why is this good news?

It’s not exactly good news for everyone, but for me and the hundreds of thousands of other investors who are under the age of 30, it’s wonderful news. Throughout history the market has went up and down with steady increases. It may seem that the market is in horrible shape right now, however the Dow closed at 11,740 today and it closed at 11852 on October 11, 2006. Sure, it’s the lowest it’s been in two years, but if you are young that’s great news.

The advice you’ve probably heard before still holds true, buy low and sell high, guess what we are low. We might not be at the lowest point but it’s still a great time to start investing or increase the amount you are investing. Many financial institutions have seen their lowest points in history. I personally have invested in some major banks over the past few months and even though they continue to drop even lower, I’m not extremely worried. I will continue to buy more of the stock because I have confidence they will increase in value.

My advice for everyone is to either start investing for retirement now or increase the amount you are currently investing. I think over the course of the next 5 years or so you could see growth potential of over 20% if you put you money in the right areas. Here’s to the future!