Stocks And The Trinity Of Risk

Stocks And The Trinity Of Risk
Avoiding permanent capital loss from your stock market investments is possible. Before you improve your investment strategy, you need to understand the factors that can result in these losses. Here’s the “trinity of risks” associated with buying and holding stocks:

Risk of Valuation

If your stock’s earnings are at a high for the cycle, the existing P/E may hide stock that is overvalued. You can use an adjusted ratio for P/E, which works by replacing current per-share earnings or EPS with an EPS that covers an average of ten years. This method helps smooth out the effects of income volatility. If you’re screening out stocks that can threaten your overall portfolio, look for those that have adjusted ratios lower than 16.

Financial Risk

Excess leverage can bring a company to its knees and into bankruptcy, which can be unavoidable even if the business is essentially sound. As an investor, you need to be especially sensitive to monetary risks in a sluggish economic environment where credit is tight. You can steer clear of stocks from these companies by using the Z-score, which was formulated by NYU’s Edward Altman. Screening using this score, avoid businesses that have a score lower than 1.8 – this is a good indicator of a business or company’s risk towards going bankrupt.

Profit Risk

If your stock earns much higher today compared to the historical average, this might be due to investors calculating future income from an overstated base, giving the stock valuation it shouldn’t have. This type of risk can be aggravated towards the end of a stock market bubble. Pick stocks form companies that have an EPS that’s double the ten-year average or more.

You can avoid permanent capital loss on your investment portfolio by carefully choosing the stocks you want to purchase and hold. A good rule of thumb to follow to avoid these losses is to evaluate companies, not just by today’s valuations or current factors, but also by merits such as growth potential. Consult with your investment planner as to how you can use the “trinity of risks” and apply it to your stock market investment strategy.

Puritan Financial Group has years of experience in dealing important financial decisions. Puritan Financial Group will listen to you and your loved ones and craft a custom financial solution that supports your life goals.

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How To Learn Stocks And Shares – Understanding the Basics of Trading the Markets

How To Learn Stocks And Shares – Understanding the Basics of Trading the Markets

How To Learn Stocks And Shares

If you’ve ever wanted to learn about shares and how the stock market works, you’ve probably been overwhelmed with information. There is a load of information out there and it can be very confusing, especially if you are just starting to learn the markets. Trying to find a starting point can be very discouraging. So let’s have a look at a few basics to get you pointed in the right direction.

Do I need to trade every day?

The answer to this is no. A lot of people think that you have to spend a lot of time trading everyday but that’s not true at all. However, I do recommend that you’re not a passive investor. In other words, don’t buy a stock and hold on to it just for the sake of buying stock. To start off, look at making 3-6 good trades per year. I know that may surprise you but that’s all you need to do it you’re making smart trades. The other thing to remember here is to get out at the right time. Too many people are greedy and want to hold on to the stock longer in case it will go up higher. If it’s time to get out, then get out. It’s better to make a few percent profit then to be greedy and end up losing money. How To Learn Stocks And Shares

Do I have to be super educated to be successful?

This is a common misconception. A lot of people think you have to be great at math or have some finance degree but that’s just not true. If you want to learn about shares, all you need to do is learn a structured strategy, get good advice from a broker, and be smart. On the flip side to this, you do need to begin to educate yourself on the basics and grow from there. Only invest what you feel comfortable with to start off. You have to learn how to take emotion out of it so that you make strategic decisions and not emotional ones.

As a matter of fact, a lot of trading just comes down to common sense. Think about a company that sells snow skiing gear and you want to invest in their stock. When in the year do you think their stock might increase in value? Well, they are not selling much gear in the summer time which means their revenue is down and makes the company less attractive to invest in. However, their revenues will increase greatly during the winter time. So, all things being equal, it probably would be good to buy just before winter and sell towards the end of the winter. I know that may sound overly simplistic but investing can be as practical as that. How To Learn Stocks And Shares

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Stocks – Investing in the Market is a Winning Proposition

Stocks – Investing in the Market is a Winning Proposition

Looking back over history, it’s safe to say that if you had been a diligent investor in the stock market over the past 25 years and invested in some decent companies it would have fared pretty well.

Everybody of course, would like to find the big blockbusters that go up 300, 400 or even 1000%, over time. You might be one that bought Microsoft or Nike or some other leading companies stock in its early stage and then sold it off after it went up five or ten dollars. If only you could have gone back and just made a simple investment of $ 5,000 and let it ride for 10 years, you’d be set very nice right now.

The fact of the matter is stocks have proven to be a better investment than many real estate deals or any other type of investment.

So what about when the stock market starts crashing in prices are dropping drastically than what you do? Well, the key to this is how you’ve originally set your portfolio up in the first place.

Every portfolio should hold at least five to ten nice dividend paying stocks. A dividend is simply a small percentage paid back to the stock owner. Some dividends are paid on quarterly basis, some semiannually and some annually.

The smart way to do this is to reinvest your dividend payments back into buying more stocks of that company. It’s basically like playing with House money. The company pays you a small percentage usually around two to ten percent. With the average been around four to five percent paid out in average.

Investing in stocks can be a very risky endeavor. Make sure that you have proper research and can afford to lose the money at your investing. The nice thing about stocks is that your loss is limited to the money you invest. However your profit is unlimited. If you by $ 2000 worth of stock – The worst-case scenario are that you could lose $ 2000. However, it’s highly unlikely you’ll lose all of that money. That same investment could earn you tens of thousands of dollars invested into the right stocks.

For more information on investing online try visiting a website that specializes in providing helpful investing tips, advice and resources to include Stocks and more.

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Is it All Over For Stocks? A Special Report

Is it All Over For Stocks? A Special Report

Anyone who simply channel surfs past any major news network on occasion knows that the stock market is in trouble. While not too many people understand all the intricacies of why it is continually crashing, they know that it is affecting their savings, investments, and retirement and everyone pays attention to their money.

So, for the average American, the question in your mind is probably not is the stock market all over, but how much money is this fiasco going to cost me and are we really headed into a great depression again?

Well, while CNBC may make it look like the stock market is soon to be a thing of the past, there is still light at the end of the tunnel. The stock market is not beyond repair, and there are ways to make your investments grow and at the very least keep them safe. The problem is not actually with the stock market itself, but in the way that the stock is played. Hence, if you learn how to properly invest, instead of following the mistakes that are now catching up with many major corporations, you can safeguard your investments.

So of course, the question now becomes, well how can I invest better than the large corporations? Well, quite simply put, by playing it a little easier than they have. The problem with having a large amount of capital is the increasing desire to double that large amount to an even larger amount. Most of these companies took entirely too many risks with the stock market and are now paying the consequences with the sudden downturn of the economy and subsequent recession. Had they invested more wisely with more caution the stock market would be in a much better condition.

Hence, if you want to make your investment and retirement funds to stay safe, you need to shy away from taking large risks or choosing an investment company that will do so on your behalf, and invest with a company or on your own using moderate guidelines. A wise investment principle with today’s stock market is to always invest a little at the same time that you save a little. Even the current stock market has guaranteed stocks that you can place funds into that will be there for years to come. There is no shame in investing a percent of your money in these safety stocks.

While you will not see an enormous return, you will have the safety and security of knowing that you have a net to catch you at all times and that your money will not disappear. Once you have a safety net, you can take a few more liberties and invest in a few stocks that require a small margin of risk. This is where you will see the most return, but now you do not have to worry about the downside because you are only playing with your profit, which is a much safer way to build for the future.

Marty M. Thompson

The Best Stocks – A Beginner’s Roadmap

The Best Stocks – A Beginner’s Roadmap

If you’re new to stock investing, you’re probably wondering which way to turn for advice on finding the best stocks. With so much information about the stock market out there, how can you possibly sort out the good from the bad, and figure which stocks to buy?

Although it can be a daunting task, there is a reasonably clear path to investing in the best stock for you.

Start by asking yourself questions, in order to determine your investing goals:

Are you in it for the long term, or will you need to create a passive income that you can live on relatively soon?

What’s your attitude toward risk? Do you want to be more aggressive and invest in growth stocks, or do you want to preserve your capital first, and build your portfolio’s value more slowly?

How hands-on do you want to be? There are investors who trade stocks every day, executing their own orders, usually with an online discount broker. There are also many investors who just let their financial advisors choose and make their investments for them.

One thing to remember here is that doing your own online stock trading and stock analysis can be very time consuming, to say the least. So, if you already have serious time commitments, such as a full-time job, or family, (like most people), trading stocks yourself may not be the best way to go.

On the other hand, if you have some time to devote to learning about stocks and investing, it can be a fascinating way to “earn while you learn”.

Some fledgling investors have found success by joining “investment clubs”, where they share investing ideas and knowledge with other club members.

Other investors subscribe to investing newsletters and blogs, where they can become informed about the stock market, and pick up information about specific stocks to buy.

Other investors will buy mutual funds, hoping to benefit from the expertise of professional money managers. There is a vast array of mutual funds available to investors these days; there are growth funds, value funds, large cap, small cap, fixed income, geographically oriented funds, and many, many more.

No matter how you go about investing, there is one simple rule that you should try to follow: Always try to diversify your holdings. Admittedly, this can be hard when you’re just starting out, with a small amount of capital, but, most financial advisors will tell you this same thing – try to “spread it around” if you can.

For example, if you’re thinking of buying a certain stock, maybe try only buying half of the quantity of shares you want, and invest the balance of the money in another stock, or fund that you’ve researched.

Speaking of research, any advisor will tell you that good research is the backbone of successful investing. Before you buy stocks, you should always research them first, and have a valid reason for buying them, just like anything else. Most of the online stock trading discount brokerages now have free professional research available to their customers.

An easy thing to do before you start to buy stocks online, is to do a web search on the company. Most companies have websites, with investor relations sections, that will give you their financial information and latest events.

Robert Hauver publishes the Investor education hub page, “The Best Stock”. Want to learn where to find the best stocks, which online brokers have the best deals, and where to get the best free investing advice? visit:

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