What’s A Dumb Financial Question?

Oh good, an easy question! ?

There isn’t one.
Say you came into my office and asked me a question, I explained the answer, and you nodded and went about your business, understanding a little bit of the answer but not really why or well enough even to remember a week later. Would I have done my job? Not really, or at least not yet.

That’s how a lot of information gets “shared” these days though. “Answers” are disseminated across the TV and the Web by people who know what they’re talking about and by people who don’t. Some of them are in official positions and so “should know” and others are not so official, like many bloggers, but could and do really know.

The opposite is also true,but what’s really important to you is, do YOU know? After all, it’s YOUR money.

Here’s my approach: Read More …

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Why Shouldn’t I Use A Discount Brokerage?

This is a really great question, especially since many of the most popular investment books available today say exactly the opposite.

They tell you that you can do it yourself, and for a lot less money, and you know what? They’re right! But as you probably suspect, there’s a hidden catch that they’re not telling you about. The catch is you.

You see, most of us are really skilled at one or more things, but there’s thousands of things we could be skilled at. I could walk down the street and stop any one of you and find out maybe that you’re a top-notch web designer, or a first-rate auto mechanic, or that you run an Alaskan fishing expedition, or any number of other possibilities that I don’t do.

Could I learn Adobe’s Photoshop and InDesign? Sure. Would that make me a web designer? Nope. Could I go to a nearby technical college and learn how to be an auto mechanic? Yes, but that wouldn’t make me a good one. And in the interest of full disclosure, I do my fishing at the local Kroger. I could certainly save some fees on those tasks by doing them myself, and so mathematically the do-it-yourselfers are correct, but that’s not really the issue when it comes down to it.

So can you invest by yourself and save some fees? Read More …

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Financial Ideas About Penny Stocks And Why Everyone’s Talking About Them.

Penny stocks are considered by the financial industry regulators, like the SEC and FINRA, to be securities which trade “over-the-counter”, as opposed to on a major stock exchange like the New York Stock Exchange (NYSE) or NASDAQ.

An example (as of this writing) would be Titan Pharmaceuticals (TTNP).  If you go to Google Finance, you’ll see it listed as Public, OTC:TTNP.

(Important Note: I AM NOT RECOMMENDING THIS STOCK, JUST PROVIDING AN EXAMPLE).  By comparison the well-known Google itself shows up on Google Finance as Public, NASDAQ:GOOG.  (NOT RECOMMENDING THAT EITHER).

The regulators also consider any stock priced at less than $5.00 per share to be a penny stock.  The threshold used to be $1.00 per share, which makes more sense, but inflation has caused the minimum price to be higher, while the name just stuck.

Penny stocks have most often been viewed as having higher than normal risks.  They typically represent ownership in a company which has struggled to make a mark in its business, or which perhaps faces stiff competition without anything protecting it or differentiating it from competitors.  Another possibility might be a company which makes a product which becomes outlawed or infringes on another company’s patents.

These very low-priced stocks are not for the faint of heart, or perhaps even the otherwise normally brave!  They are definitely not something you should Read More …

Technorati Tags: Financial Ideas, How to Invest Stock, Investing strategy, Penny Stocks, Stock investing

Don’t Be Apprehensive About The Market!

“Oh, my gosh! Did you see what happened in the stock market today? It was down almost 120 points!”

Ever heard that before? If you haven’t, you will. The question is: should you listen? The answer is: only if you like being really depressed one day and really excited the next day, because that’s typically what happens? Sometimes we get really good days back-to-back and sometimes really bad days a few times in a row, but that’s still not stepping back far enough.

Let’s say you’re 40 years old, and you started putting money into the stock market 20 years ago. The S&P 500 was trading at approximately 340 points, compared to nearly 10,000 today. Or maybe you’re 50 and your start was 30 years ago. The S&P 500 then was trading for about 100 points. So between 1979 and 1989, the market tripled. Between 1989 and 2009, the market grew by 33 times!

Isn’t that a better concept to stick in your mind than what most of the media is alarming you with lately? Like a market down about 33% in the past two years?

The only reason – at all – to be concerned about the short term in the market is if you plan to retire in the next few years. If you’re younger than that or if you like your job, you should be taking advantage of the magic of compounding returns to get you in a position where you have choices! Having the choice to work or not work is a whole lot better than needing to work to make ends meet. That’s when you might have no choice but to be really aggressive, which can hurt a lot if things don’t go the way you hoped.

And don’t listen to people who say you can’t be too conservative, because you can be! Remember my article (below) about the Rule of 72. If you put all your money into CDs right now, your money will grow at a rate lower than inflation. I don’t know about you, but I’d like my money to double sooner than three to four (or more) decades!

Still confused about the right thing to do? Let’s talk, and create a plan that’s right for you and your family.

Email: John@financialideasblog.com

1.888.379.4352  Extension 1000

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What’s The Difference Between A Stock And A Bond?

This poses an interesting question because it highlights how many people really have no idea about the different type of investment “vehicles”, as they are often called.

*You know what “equity” is, right?

Especially if you own a home, it’s the difference between what you owe and what you own.  If you have a $300,000 house and you owe $200,000, then you have $100,000 in equity, or ownership.

Stocks are much the same thing, except that what you own is (typically) a VERY small piece of a major company.  In most cases, you’ve already paid for it in full, and therefore you own it outright with no debt.  (It is possible to borrow ownership, but that’s a level 200 course).

This is why stocks are often called equities, and vice versa.  Think of yourself as a part owner, you can attend the annual meetings and vote on issues as requested by the board of directors – using what are known as “proxy statements”.

You will probably have a very limited impact on the direction of the company unless you own 5% or more of the outstanding stock, what most people buy stocks for is to Read More …

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Why Did The Stock Market Drop After Last Week’s Unemployment Report?

The stock market dropped after last week’s unemployment report for one reason, and one reason only.  That reason is short-term investors.

We’re not talking about the proverbial day traders here, but ordinary people with ordinary fears and concerns who are not able to distance themselves emotionally far enough from their money to do serious investing.  We’re talking about most people.

We’re not just talking about unemployment reports.  We’re talking about any economic “news”, such as housing starts, manufacturing orders, foreclosures, mortgage rates, trade deficits, and a few dozen other factors which can be interpreted to mean different things by different people.  Primarily though, we’re comparing what actually happens with what “experts” forecast.  Even though we’ve seen a marked decrease in the number of new jobless claims, the unemployment numbers last week were a tiny bit higher than what was forecast.

This is not unlike the famous, or infamous, “guidance” which many companies offer as to how much money they will earn per share of their stock.  For example, Read More …

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USDA Sub-Prime Loans ­ Are They For Real?

Back up...What did you say?!?

As in, United States Department of Agriculture?
We’ve heard of USDA Prime Steaks, but USDA Sub-Prime Loans?
What are you talking about?

We’re talking about a previously almost unknown and little-used program founded in 1949 to encourage the development and sales of homes in mostly rural parts of the country by, see if this sounds familiar, not requiring any down payment on the loan.

Just like the “low-doc” and “no-doc” and “interest only” loans of the mid-2000s, over which we still have a major hangover and which have certainly contributed to the record number of foreclosures we’re seeing, any loan which requires no down payment means nothing at risk for the borrower except the possibility of bankruptcy or having a foreclosure on their record, and lots of people don’t know how bad those can be unless they’ve been through it. Read More …

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I’m Not Convinced, ­ “I Just Don’t Want To Play The Stock Market”

Of course you don’t, I understand that completely.  I don’t “play” the market either.  I don’t even know where the phrase “playing the stock market” even comes from.  Although I have to acknowledge that it is very common terminology, I think it is not only misleading, but a widespread cause of misunderstanding about what an investor is actually doing.

A true investor is actually taking a very calculated, well-researched and probably even mostly safe although not guaranteed position that owning a piece of a company, or piece of a group of companies, or maybe even a piece of the debt that a company or a government owes, will pay that investor enough of a return to warrant the associated risk that comes with making that move.

On the other hand, “Playing The Market” is the same thing as gambling, whether it be on high-risk stocks that could go through the roof, or on horses or at the casino or the lottery, where in order, your chances of profiting go downhill and fast.  (I once had a professor in college tell my class that we each individually had a better chance of being randomly chosen to be a U.S. Senator than we had of winning the Super Lotto Jackpot!).

Read More …

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How Can I Educate Myself About The Stock Market?

Learning the Rule of 72

Before we go there, I think the first question here really is: “Why should I even invest at all?” The underlying answer that most of us have to that question, even if we don’t say it, is: “That’s too risky. I know people who have lost everything doing that.  I’m not that dumb, I’ll just save in a savings account.”

Learning the Rule of 72

So the first answer to educating yourself is to ask yourself: “Do I know what the Rule Of 72 is?” and “How does it affect me, anyway?”

What Is The Rule Of 72?

The Rule Of 72 goes back at least many hundreds of years.  Luca Pacioli, an Italian mathematician, referenced it sometime during the 15th century as a convenient way to determine how long it takes your money to double, assuming you know the interest rate it earns. Luca didn’t explain the rule much, meaning it probably goes back even further than that, but the principle still holds true today.

Here’s an example:  start with any amount of money; let’s say $100.00 to be simple.  Read More …

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Learn From Your Investment Mistakes

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