Stock Syndrome

As the name suggests, penny stocks are stocks that are extremely cheap, usually priced less than $5 a share. These are most commonly all from small companies. These stocks are traded on the Over-The-Counter-Bulletin-Board (OTCBB) and the Pink Sheets. Both these trading venues do not have the same kind of minimum requirements of exchanges such as NASDAQ or the NYSE set by the Securities and Exchange Commission.

Companies that issue penny stocks may be new businesses or close to bankruptcy. So beware when you are investing in such stocks - keep in mind that some of these companies are startups and others are near bankruptcy.

1. A Bad Investment

In fact, the low price may be the only thing that penny stocks have going for them. A lack of standards and stability make penny stocks one of the riskiest investments around. It is true that if a company succeeds the payoff will be great, but the vast majority of penny stocks end in utter failure.

2. Lack Of Company Information

Companies listed in the Pink Sheets or the OTCBB do not have to issue financial statements. Most companies also have little reportable history that is known. You certainly will never have heard about any of these companies, nor will they be likely to have ever been featured on the news.

3. Low Liquidity

Very infrequently traded, finding a buyer once you invest can be a real hair puller. You may have to lower your price a lot in order to get people interested enough to take the stock off your hands.

4. Fraud

Because they are completely unregulated, penny stocks are commonly used by con artists who sell them through spam emails or off-shore brokerages that don't have to adhere to laws because they operate in international waters.

5. Why On Earth Choose Penny Stocks?

All of this doom and gloom might have you wondering why you should consider penny stocks at all! Well, first of all, not all penny stocks are frauds or companies facing bankruptcy. Some represent hard-working businesses that are struggling to meet the requirements to get listed on Nasdaq or the NYSE. Investing in these companies offers real growth potential, you have the opportunity to get in at the ground floor and ride all the way to the top. The difficulty is finding that companies have this growth potential. Getting this information requires a lot of research and unless you are willing to take the time to personally investigate a company, you may as well throw in the towel.

Still living from pay to pay? Or envying those great wealth accumulators and wondering how they did it? Every month you make a resolution of saving some dollars from your paycheck, but only end up breaking it. Looking for some magic formula for saving money?

Well, there's no magic formula-only some simple rules to be followed with determination and persistence.

Have you ever taken consumer credit-the credit used for personal finance? If not, then that's where you're lacking. Those wealth grabbers, who are the subject of your envy, have smartly used the borrowed money and became rich. They didn't hesitate in taking credit, and considered it as a valuable financial asset.

Credit is not something bad. On the contrary, it makes your life convenient and prevents you from falling in a tight spot. Yes, I know that your goal is to be a financially secure individual. We all have the same goal, don't we? Despite harboring such strong goals, many of us are scraping every month, with no money left to fall back up on at the end.

I don't intend to entangle you in the intricacies of finance, but want to present before you, some simple rules that would help in saving some dough. But promise me that you'll put them to practice regularly. Though it takes some time-years maybe-to get the full results, yet the trick lies in perseverance.

Spruce your knowledge-get smart! I'm not telling you to glue your eyes to the television watching the stock market or enrolling for a finance degree. What I want you to do is arm yourself with the basics of the market so that you don't make wrong decisions that cost you money. Intelligent decisions are the key towards a flourishing business.

Patience pays! Unless you win a lottery, don't think of getting rich overnight. But with time you can certainly think of owning bundles of those crispy dollars. So start saving your money as soon as possible. Let compounding interest bestow you with its benefits. I hope you know about compound interest-it is the reinvestment of your already invested earnings. However, don't lose heart when you find your first reinvested earnings to be a petty amount. Initially, they are small, but over the years you'll watch them magnify.

Set a flexible goal Don't be a ship without anchor. Set some financial goals in life so that you know your target. This will boost your confidence and you'll be able to visualize yourself better in the future years. I would suggest having flexibility in your goals. This is because situations are never the same, they keep on changing and you'll have to change with them too. Hence, you can't be rigid in your ways. Keep reviewing your goals and-better still-select a good financial advisor that would assist you in achieving your goals.

Get rid of large debts Want to know a wise way? Start paying off all your debts that have double-digit interest rates. If you don't do so, you'll remain chained to these hefty debts for years and end up paying a lofty amount on interest rates.

Once you get habitualized about keeping aside a small chunk of your income every month and updating yourself with the business happenings, you'll lay a strong foundation to build the castle of wealth. The most important thing is to keep on marching towards your goal persistently.

Now that you're loaded with the money-saving tips, I hope to see you going around in a sparkling new car after some years!

The main difference between a stock and a bond is that stock gives you part ownership in a company whereas bonds are loans made by an investor. Rather than benefiting from company profits the way that stock holders do, bond holders receive a fixed rate of return - a percentage of the bond's original offering price. The return is called the 'coupon rate'. Bonds have a maturity date at which time the principal amount is returned. This makes bonds a more reliable investment, but they provide less potential reward.

1. Risk vs Reward

Although bonds typically have less risk than their stock counterparts, that doesn't mean they can't flop - bonds can still end up giving you no money at all. Companies with higher credit worthiness are more likely to be safe investments but their coupon rate will be lower than companies with lower credit ratings. Credit ratings are provided by firms such as Standard and Poor and Moody's Investor Service. Credit ratings range from a high AAA to a low D.

2. Government Bonds

US government bonds are considered to be the safest type of bonds. Blue chip corporations (those with established performance records that span over many decades) are also very safe bond investments. Smaller corporations have a greater risk of defaulting on their bonds, but bond-holders are preferential creditors and will get compensated before stock holders in the event that the business goes bankrupt.

3. Selling Your Bond

Bonds can be bought and sold on the open market. Their value fluctuates according to the level of interest rates in the general economy. For example, if you hold a $1000 bond that pays 5% per year in interest you can sell the bond at higher than face value as long as interest rates are below 5%. If they rise above 5%, your bond can still be sold but usually at less than face value. This is because investors are able to get a higher interest rate than what your bond pays so in order to offset the difference your bond has to be sold at a lower cost.

4. OTC Markets

The vast majority of bonds can be traded over the counter through banks. Some corporate bonds are also listed on stock exchanges and may be bought through stock brokers. New issues of bonds are usually sold in $5000 increments while bonds bought and sold after the initial issues are quoted in increments of $100. A bond that is listed at 96 is selling for $96 per $100 face value. For this reason, unless you are ready to make a big investment, you should probably stick to stocks.

A stockbroker works under the supervision of the Security and Exchange Commission (SEC) of the United States of America, if they are in the United States. They are regulated on how they can offer stock, how they must treat their client’s transactions, and only by passing the tests of the SEC can they do business.

It is reasonable to say that a stockbroker can be seen as a "financial friend" by a client or a client’s worst enemy. It all depends on the nature of the stockbroker, their honesty, and adherence to the regulations that they must follow.

Almost everyone knows something about the stock market. Some know from activities that reach the major news outlets regarding violations of rules or tenets of the marketplace. Occasionally a stockbroker is disciplined by the SEC, or charged by a court of competent jurisdiction for legal wrongdoing. Some know from major events in the stock market, i.e. the crash of 1929, the dot com bubble, and other events.

What can becoming a stockbroker do for you? You can serve your fellow man. You can learn a living. You can become very wealthy. You can grow and go on to become the principle in your own stock brokerage company.

A career as a stockbroker must start with proper licensing. To become licensed you must pass at least two tests a Series 6, and a Series 7. If you work for a firm and advance you career up the ladder there are other tests that must be passed, i.e. Broker Principle, before you can do that job.

Being a stockbroker offers all the challenges of an important sales position. You must be a specialist before you can begin to do the work that produces your income and provide the vital services your clients expect. Once prepared you job is to provide your clients access to a wide variety of markets such as the New York Stock Exchange, the American Stock Exchange, NASDAQ, several commodity exchanges such as the Chicago Exchange, and specialized insurance and banking products as well.

If one thing can be said about becoming a stockbroker it is that it is not easy. The job changes with the whims and wills of the regulators, volatile conditions in the economy and marketplace, and the idiosyncrasies of individual human beings. Becoming a stockbroker requires dedication and the ability to learn and evolve with the times and the financial environment.

The vast majority of all transactions are done by stock brokers, not your average joe investor. There is a broad range of brokerage services available. There are brokers who offer many services for aiding their clients meet their investment goals. No matter how much you think you can do your own research on what companies to invest in, these professional brokers will have entire departments - teams of highly skilled experts - that do research every day so you don't have to.

1. Perks

Information, it seems, does not come cheap however, as brokers will typically charge high commission rates for every transaction. Whether or not you decide to use a full-service broker depends on your level of self-confidence, your knowledge of the stock market and the number of trades you regularly make.

2. Discount Brokers

Investors who wish to save on commission fees can use a 'discount broker'. These brokers charge much lower commissions but don't offer advice or analysis. Investors who like to make their own trading decisions and those who make many trades often use discount brokers for their transactions. Some traders may use both types - there is no reason why you can't have two brokers.

The least expensive way to trade stocks is usually with an online brokerage. Both full-service and discount brokers usually offer discounts for orders placed online. Some brokers operate exclusively online and offer even better rates.

3. Accounts

No matter what type of broker you choose, you must first open an account. Each broker sets their own requirements for maintaining an account balance but it is usually between $500 and $1000. When choosing a broker look at the fine print and find out about the fees involved. Some brokers charge an annual maintenance fee while other charge fees whenever your account balance falls below the minimum.

There are two basic types of brokerage accounts. A 'cash account' offers no credit - when you buy you pay the full amount of the stock price. A 'margin' account, on the other hand, allows you to buy stock 'on margin' - the brokerage will carry some of the cost of the stock. The amount of margin varies from broker to broker but the margin must be protected by the value of the client's portfolio. If the portfolio falls below a specified amount the investor will have to add more funds or sell some stock. Margin accounts allow investors to buy more stock with less cash thereby realizing greater gains (and losses). Because they involve more risk than cash accounts, margin accounts are not recommended for inexperienced traders.

4. Choosing A Broker

Before choosing a particular broker the investor should carefully consider his needs. Does he wish to receive advice about which stocks to buy? Is he uncomfortable making trades on the Internet? If so, he should go with a full-service broker. Technology savvy investors who have the knowledge and confidence to make their own trading decisions are better off with a discount broker.

5. Shop Around

Be sure your broker is not taking advantage of you - some brokers do a lot of small transactions instead of one big one so they get slightly more commission. There can often be significant differences in costs when all the annual fees and brokerage rates are factored in. Try to gauge how many trades you expect to make in a year, how much cash you can deposit into your account, whether you wish to use margin accounts and which services you need. You can make more money each year just by having the right broker.