Making heads or tails of the stock market can be an extremely difficult thing to do under the best of circumstances. Sometimes it can be flat out impossible to know just what to invest in. Many people turn to investment newsletters in order to get ahead of the pack and find investment ideas that you normally wouldn’t be able to find on your own.

There are several immediate problems with these sorts of newsletters. For one thing, they can be extremely expensive, sometimes hundreds or even thousands of dollars per year. They may be well worth it if the advice they render turns into profitable investments. But how can you know that in advance before you subscribe?

Another problem is that some of these newsletters attempt to do little more than sell you other investment products themselves from investment club memberships, to higher priced newsletters, to training videos etc.

Figuring out a good newsletter to subscribe to, or even several good newsletters to subscribe to can be almost as challenging as investing in the stock market itself! In this article today I want to mention a few things to look out for when choosing an investment newsletter to subscribe to. Hopefully, armed with this information, you can save yourself some serious money and heartache (because of bad investment advice) in the long run.

First off, watch out for newsletters that make seemingly impossible claims. If somebody claims to be able to show you 100% returns on your investment year after year or even a 1000% return on your investment then look somewhere else. The smartest investors in the world don’t make more than 20% a year or so, year after year after year on their investments. I’m talking about billionaires who do this for a living. Some guy selling a newsletter out of his basement is not capable of showing you how to make 100% returns ever.

Next watch out for newsletters that don’t offer a trial subscription. The only way you’re going to know whether these newsletters are worth your money or not is if you can read a month or two of their back issues and see for yourself just how well their advice has performed. A newsletter that doesn’t offer a trial is usually up to no good. If they don’t trust their own efforts enough to give you a peek before hand, then chances are their advice isn’t going to be worth much.

Watch out for newsletters that make lots of suggestions for different stocks. It’s an old trick to suggest many different stocks and then forget about the ones that didn’t work out and then point back at the successes and say “See! We really know are talking about!”. If you see this in a newsletter that you subscribe to, consider dropping that newsletter fast.

Finally watch out for newsletters that don’t make specific recommendations. Some newsletters give very broad recommendations that aren’t actual recommendations so that they can be proven to have not given bad advice in the past. If you’re going to pay hundreds of dollars a year for a subscription to the newsletter, you should be getting solid tangible advice and recommendations that you can immediately implement without having to put any more effort into it on your own part.

Finding the right investment newsletter for you can be an important part of your stock market investing mix. I subscribe to several myself and the ones that I have come to rely on over the years are worth their weight in gold. It may take you some time to find a really good one to suit your style of investing, but once you do it will be well worth your effort.

Jason Markum has been writing articles online for over thirteen years. When not writing about investing, Jason runs a touch lamp web site where he reviews crystal table lamps for your home or office.

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http://EzineArticles.com/?What-to-Look-Out-For-in-an-Investment-Newsletter&id=3701050

When starting on your first foray into the stock market, you should understand what stocks are all about. Stocks of a listed company actually represent the shares or ownership of the company itself. As an example, we shall use a small food stall for our illustration.

Why do company issue stocks?

The food stall is worth $1,000 in all, with the potential of $100 of earnings a year. Now the owner wishes to expand his business, but he does not have the funds to do so. Therefore he divides his food stall into 1000 parts or shares. Based on the par value of his stall, each share is worth $1. Supposedly he issues 500 shares (so that he retains ownership of the stall), and they are all taken up. Now the owner has $500 in funds for expansion and he still has the stall. This is the simplified version of why company issue stocks.

What determines the stock price?

The price of the stock is always determined by the market. There exist buyers and sellers in the market for the particular stock. Buyers want to buy low and sellers want to sell high, when a price agreement is reached between a buyer and seller, the stock price is updated. However, that price may not reflect the actual value of the share.

Remember that our food stall is valued at $1, but the stock may not be traded at $1. Based on its value at $1, there is also the prospect of the business earning $100 a year or $0.10 per share. By holding on to the stock, the shareholder may expect his share to worth $1.10 by the end of the year and therefore decides to buy the share at higher than its value of $1. On the other hand, should shareholders believe that the food stall is not doing well, they would likely want to off load their shares by attracting buyers with a selling price below par value.

Investing in a stock and investing in a company

Despite the fact that holding a share is holding a stake in the company, there is a big difference between investing in a stock and investing in a company. Investing in a stock is based on the belief that the stock will rise due to prevailing market sentiment; there is little regard with respect to the fundamentals of the company. Investing in a company is when you believe that the company is set to grow in the future.

Using our example, someone investing in stock will buy the shares of the food stall at $1 when he believes that the trend is for the stock price to go up. Someone investing in the food stall will buy its shares because he believes that the food stall’s business is good and is likely to make more money or grow bigger in the future.

Investing in stock tend to be short term while investing in company is usually a long term affair.

How does investing grow your money?

Using the $500 from the issue of stocks, the owner expands his food stall’s business such that now the stall is worth $2,000; each stock will then be worth $2. Shares owned by shareholders would have increased in value, thus growing their money.

The owner may also distribute his earnings of $100 to all the shareholders since he does not intend to use them for expansion, thus each shareholder receives $0.10 per share. In this way, shareholders get return on their investment as well.

The most important thing is that money must be invested in businesses with potential or are at least sustainable so that the investment is being used to grow the business. Money cannot grow more money; it must be used to grow a business that generates more money. This is the reason why shareholders may not always opt for shares that issues them dividends from their earnings since distribution of dividends mean that earnings are not reinvested in growing the business. However, reasons for investment differ, and some investors are simply interested getting returns from their investments as dividends.

This leads to the diversification of stock types as different companies vie for investors by targeting groups with different interests.

Value stocks and growth stocks

Value stocks are stocks whose trading price is considered undervalued relative to its fundamentals. This evaluation of value is somewhat arbitrary and different investors will have their own take on a stock’s value. For example, our food stall share is worth $1 based on par value. Some investor will find it a value stock if it is trading at below $1. Other investors may take into account its earnings of $0.10 per share and valuate the share price as undervalued at $1.

If the stall owner wishes to target value stock investors, he may wish to share up to 80% of the $100 earnings as dividends to attract investors.

Growth stocks are shares of a company that is expected to its business or earnings better than the market average. Since this is about predicting the company’s future, a growth stock to one investor may not be to another. If our food stall is expected to grow its earnings from $100 to $150 (50%) because of the expansion while the market average is expected to grow by only 10%, the food stall’s stock becomes a growth stock.

The earnings or business of a company can only grow if earnings are reinvested into growing them. If the stall owner is now looking to target growth stock investors, he will want to reinvest more of his earnings to demonstrate his stall’s potential for growth. Therefore he may wish to reduce the amount of dividend he distributes to shareholders.

There is no sure way of evaluating a stock’s value or future performance. But it is important to understand how they work and know what choices you are making. Do not run away from the market whenever the crowd is shaken. Re-evaluate the situation and determine for yourself if the reasons for buying the shares in the first place are still relevant. If they are, then why is there a need to leave just because everyone else is? Remember, investment targets differ for every investor; your investments should be based on your own reasons and aims.

Eric is an adventurous guy who loves exploring his own life’s passions. He has recently got himself a new hobby in mini digital cameras. To complement his new hobby, he’s found the need to have portable and high memory capacity which he found in memory cards for digital cameras. Join him in his world of photography.

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http://EzineArticles.com/?Cornerstones-in-Investing-the-Stock-Market&id=3698505

Stock market investing is difficult and dangerous in the best of times. When times turn bad and the stock market begins to tumble, the danger levels increase exponentially. Make the wrong move under these circumstances and your entire net worth could be wiped out in no time at all. Years and years of careful savings and investment can dissolve in moments, leaving you stranded and your retirement unsecured.

Of course, there are things you can do when the market starts to turn downwards to protect yourself and your investment portfolio from being ravished and destroyed. That is exactly what I want to talk about in this article today.

Determining that the stock market has turned is almost an art form in itself. Sometimes it’s hard to tell exactly when the stock market has turned because stock market volatility is perfectly normal. The stock market might go down today but jump right back up tomorrow. In fact the stock market may go down for several days or even several weeks only to rebound to a higher level than it was before. Determining that the stock market is in a new semi-permanent trending downturn or bear market as they call it is difficult to do.

But if you have determined that the stock market is in a bear downturn here are some things that you can do to protect your portfolio.

The first thing you can do is lighten your holdings as soon as you determine that the market is about to turn down. Don’t panic because the market generally won’t crash overnight. The bear markets trend downwards for weeks, even months… so you don’t have to feel like you should go out and sell all your stocks tomorrow. During this time, though, you should be sure to pay off any margin debt that you have and start to hoard cash if at all possible. Maintaining a strong cash position during these times can become essential.

The next thing to do is identify stocks that you own in your portfolio that are no longer rising. Some people suggest that you sell these stocks immediately, but I prefer to place stop-orders on them instead. When you do this, you continue to own the stocks but if the market starts to trend further downward your broker will automatically sell the stocks at prearranged prices spelled out in your stop order. This way if the market turns up unexpectedly and the stock starts to rise again you’ll be able to take advantage of it.

Next if you have excess cash to invest during the beginning of the market downturn be sure to only invest in cash equivalents and highly fungible items such as money market funds and treasury bills… which are short-term treasury bonds. The last thing you want to do is to be investing in stocks as the market is turning downwards.

Finally sell any mutual funds whose net asset value has dropped 5% or more. Many times it’s important to get out of mutual funds that have aggressive growth at their core because these are some of the first to turn down in a bear market.

The most important part of a market downturn is getting liquid, or at least as liquid as possible so that you have a strong cash reserve available. Why is this important? Because eventually the market will bottom out at which time you will be able to find incredibly cheap deals for the same stock you used to own, which is now selling at bargain prices. Having cash handy allows you to swoop in and grab a steal of a deal.

Jason Markum has been writing articles online for over thirteen years. When not writing about investing, Jason runs a portable work bench web site where he reviews the best industrial work bench for your shop.

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