Investment Guide to Investing For Beginners By James Leitz

You need the best investment guide you can find in this messed up economy and tough investment environment. You'll also need a good guide to investing for beginners to navigate the rough waters ahead. Investing has never been more difficult or confusing. It's time to learn how to invest, and here's how to go about it.

First, you'll need to get a handle on the investment universe including any investments you might already own. This is not that difficult if you have a good investment guide, since there are only 4 basic investment alternatives out there. Second, you'll need to learn how to invest and put together a sound investment strategy that will work for you in both good times and bad. That's what a good guide to investing for beginners can do for you.

In other words, learning how to invest successfully over the long term is a two step process. Skip step number one and you won't understand step two. Without step two you won't be able to put the investment knowledge you learned in step one into action. Up front I stated that now is a tough time to invest. Now I'll back that up with my 35 years of investing experience, in terms of the 4 basic investment alternatives available to all investors. Consider this a mini investment guide and a wake up call. Investing for beginners is no picnic today.

Your 4 basic investment alternatives in order of safest to riskiest: safe investments, bonds, stocks, and alternative investments. Safe investments like bank accounts and money funds pay interest, and these days they don't pay much. The score in late summer 2010: 1-yr. CDs at less than 1% and money funds at less than.05%, or one-twentieth of 1%. This is not normal, and is in fact downright scary. The government can hardly push rates lower to stimulate the economy as they've done in past years. We are already looking at zero interest rates in the money markets.

In order to earn higher interest income of 3% or more, average investors are moving money into bonds in the form of bond funds, which are not really safe investments. Simply put, when interest rates go UP, the value of bonds go DOWN. That's a basic investment fact you can count on - interest rate risk. If you believe that interest rates will fluctuate as they always have and will go up in the not-too-distant future, bonds are not exactly great investment alternatives at this time. With two down and two to go, we move into the riskier choices that involve assuming the risk of ownership in order to earn higher returns.

Any guide to investing for beginners can point out that on average, over the long term, stocks have returned about 10% a year. The problem is that over the past 10 years the average investor would have done better with his or her money in safe investments in the bank. And over the past 3 years, a loss of about 10% a year was common for the stock funds that invest money for millions of average investors. Investor confidence in the economy and the stock market is not high, as billions of dollars are being pulled out of stock funds and moved someplace else (like to bond and money funds) in search of greater safety.

In the past when uncertainty was high and confidence in the stock market was low, smart investors turned to other (alternative) investments like real estate to find opportunity. That's been a problem this time around, because the financial system seems unable to get the traction needed get things moving again. High unemployment won't go away and millions of mortgages are "under water", as people decide to just walk away from their financial obligations. Gold and silver have done well compared to other investment alternatives. If history is any guide to investing, that's not exactly a cheerful note. People buy and hoard gold in times of fear and desperation.

Out of our 4 basic choices, none looks like a screaming BUY opportunity. Some of the best minds in the investment world are suggesting that investors need to start viewing the investing game differently and lower their expectations. I suggest that you start with the basics and curl up with a good investment guide on a rainy day. Then, you'll want to follow up and learn how to invest with a guide to investing written for beginners. Once you start to get up to speed you might even begin to enjoy the challenge. And make no mistake about it... investing today is a challenge.

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Hot Stock

The Best Way to Find Hot Stocks

hot stock picks
The Best Way to Find Hot Stocks is to do some research. The Best Place to research stocks for initial discovery is through Research Reports, Newsletters, Magazines, and investment blogs.
There are many good sources to discover stocks: Investors Digest, the Money Letter, The Money Reporter, the Zweig Forecast, The Economist, Wall Street Journal, etc.

The newest method to find great stocks to invest in is to search blogs. Google Search: Investment Advice Blogs — and you will find a number of great blogs listing hot stocks and good opinions about the stock market in general.

Another place to look for stocks to invest in is through Annual Reports and Broker’s Packages.
Hot Stock Buys

Picking stocks can be a daunting experience. How do you know which ones are the hot stock buys and which ones are the poor performers? There now exists computer software programs that can literally analyze a broad spectrum of the stock market for you and make “hot stock buy” recommendations. Capable of processing millions of computations per second along millions of data points for several thousands of stocks, these computer programs can analyze trends and patterns, and make extrapolations on future performance of each stock with unparalleled mathematical precision.

Can you blindly trust a computer to issue you “hot stock buy” alerts? Nobody, not a human nor a computer, can predict the future. Any financial advisor will advisor will ask you to “do your homework” before investing stocks.

Find Your Own Hot Stock Picks – Without Cramer!
Jim Cramer’s stock picks have become world-renowned and world-reviled-depending upon who you talk to-as CNBC’s “Mad Money” TV show has grown in popularity.
IBD ranks its top 100 stocks according to a variety of criteria, the most important of which are earnings and relative price strength readings.

No strong earnings, no stock pick. Earnings and especially a track record for earnings growth is what powers stocks higher. A ranking of 80 in either of these categories means a stock is performing better than 80% of all other listed stocks. A stock pick’s “Accumulation” ranking tells you whether the institutions that drive stocks higher are onboard your stock or passing it by.

Want to get really good at picking stocks? Start finding those stocks that are forming one of a small handful of stock charts that a stock forms just before making an explosive more.

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Invest in Stocks

How To Invest In Stocks

So you are looking and past performance and expected future performance. The past performance will not always reflect the future performance of a stock.

Past Performance
The past performance of a stock is based on the price to earnings ratio or commonly known as the PE ratio of a stock. Some companies have no dividend and hence only rely on capitol growth for their investors. The dividend is the money per stock held that is released as profit to the owners of the stock. The dividend is the share of profits that the company made in the time frame allocated to the financial year. For example, if the company has made an $8.00 profit per share in one financial year, it may release $2.00 of that profit each quarter. Different companies will release profits in different ways. Examine each company for the methods of profit share.

What Effects Future Performance
Economic issues can affect a company’s performance because they influence the returns through monitory exchange rates, borrowing power, labor and capitol input considerations. These influences do not have an immediate impact on the company’s performance, but should be evaluated over the longer term, for future performance expectations.
Internal factors such as leadership issues, policy direction and financial planning for future growth will all indicate to the investor the likely future performance of a company. Changes in policy direction can have a major influence on future performance in a company. With higher debt levels come reduced returns.

Invest in Stocks – Strategy
Before investing your money in stocks, you must plan out your investment strategy based on the amount of money you want to invest. Keep the following points in mind before actually making your investments in stocks.

Maintain a diversified portfolio
Most stocks can be classified as high-risk, medium-risk and low-risk investments. The rate of returns is the highest on the high-risk stocks and the lowest on the low-risk ones.
When to buy and sell Stocks
Study the market and analyze whether it is the ideal time to buy or sell a stock. Study the stock price movement charts to time your buying or selling and then decide if it is wise to change your investment strategy.

Decide the time period for your investments
If you are a medium risk-taker, you should invest in growth stocks and aim at a medium term period ranging from one year to three years. To reap maximum profits, invest in turnaround stocks and aim at short-term periods of about one year. These stocks involve a very aggressive investment strategy. Before buying the stock, go bargain hunting for the best price.

Select the right company
Keep in mind that all companies listed in the stock market may not be uniformly good. Chances are that undervalued stock will result in maximum growth in your portfolio. Also study the out of favor companies in the market for they may be selling their stock at a deep discount.

Decide on the right price of the stock
If the returns are attractive and growing, then the high price of the stock may be justified.


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Growth Stocks

Major Stock Picking Strategies

growth stock
Efficient stock picking strategies are important for an investor in order to grow his/her personal wealth significantly. An investors stock picking strategies depend upon several factors including the performance of companies, market and industry trends, and share prices.

Growth Investing
Through growth investing strategy, investors focus on rapidly growing companies, which are witnessing significant increase in revenues and profits. Normally, returns from growth stocks are substantially higher than that of other type of stocks. Growth investors pick young and fast-growing companies, despite the expensiveness of these stocks, as the investors bet on the future growth potential of the companies.

Value Investing
Value investing is opposed to growth investing. Value investors focus on stocks, which are trading below their intrinsic values. Value investors look into the fundamentals of the companies carefully and they believe that the market undervalues these stocks. Value investing does not mean that choosing a cheap stock, rather investing in undervalued stocks that have good growth potential.

GARP Investing
GARP (Growth At Reasonable Price) is a combination of value investing and growth investing strategies. Through GARP investing strategy, investors focus on stocks that are reasonably priced, at the same time possess robust growth potential.

Fundamental Analysis
Fundamental analysis is a stock picking strategy through which an investor or analyst tries to estimate the intrinsic value of a stock based on fundamentals.
Technical Analysis
Technical analysis, also called chart analysis, is an investing strategy through which investors gauge the future price movement of a stock through past performance.

Value Stocks Vs Growth Stocks – Which Are Better For Your Portfolio?
Its a very common question among individual investors, which is the better bet: value stocks, or growth stocks?

If you are 25 years old and looking for 15% returns annually for a number of years, you will need to go heavier on growth stocks. If you are 65 years old and looking for a little extra income for when you are 75 years old, you will likely be looking to deep value stocks.

Ideally, you really should have some amount of growth stocks and some amount of value stocks in your portfolio to diversify. Diversify means like about 60% in growth names, and 40% in value names. If you are in too many growth names that are too volatile for you, maybe you need to add a classic value stock.

If you are in all value stocks and believe you aren’t getting the returns you need, go pickup a growth stock.


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Gold Coin Investing

Gold Coin Investing – The Story

Gold coin investing can be one of the brightest investing strategies during times when the economy is in a downturn. Gold coin investing is one way a person can hedge against rising inflation and lower stock prices. Gold coin investing is and excellent barrier from inflation and economic despair and have proven to be a worthwhile investment for people looking to profit.
Gold coin investing typically refers to investments in either bullion coins or certified rare coins.

The major difference between these two products is that bullion coins are more often used by investors who seek a short-term profit tool while certified rare coins are more often used by investors who seek a long-term preservation tool. First things first, bullion gold coin investing is typically used by short-term investors who seek profit from the precious metal market because bullion products hold low premiums above the spot price of gold, thus it’s easier for investors to enter and exit the market in a cinch when looking to maximize profit potential.

Another important factor to consider when looking into gold coin investing is the issue of bullion confiscation. Many precious metal investors fear bullion confiscation because it may be the only way that the United States Dollar could regain its notorious strength as the top fiat currency in the world. Wise investors who want to protect themselves from such a circumstance may want to consider certified rare coins that are deemed non-confiscatable by the United States Government.

You must choose between investing in older coins or the newer bullion coins, but either type of gold coin investing is a solid choice because of the large selection available and the lower premiums when compared to choosing gold bars. Gold coin investing is never highly recommended by investing experts to be the only investing strategy a person should employ.


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Equity Investment

The Role of Equity Investment in the Stock Market

Typically, the trade of purchasing and investing shares of stock in a stock market is called as equity investment. People owning such shares and stocks obtain investment gain as the rate of the stock mounts. Characteristically, the major finance management firms administer the mutual funds.

The cost of equity austerely depends on the supply and demand. The value increases in situations where the number of consumers increases against the suppliers. Ultimately, suppliers involved with the elevated trading price go into the market and attain stability among purchasers and suppliers.
Assessing a Losing Equity Investment and Unit Trust

First, identify the factors that cause the share’s poor performance. Given time, the market and good shares will always recover their value. If the market is healthy but your share’s price is still decline, consider the reasons for selecting the company in the first place. If you had invested in the company for a specific reason, check if that rationale continues to hold.
Hold on to losing shares only if you’re absolutely confident of the company’s potential.
Hanging on and hoping that the share price will return to your original purchase price level can significantly erode your capital.

Dividend Stocks

Why Should You Invest In Dividend Paying Stocks?

Stock dividend
I believe that creating a passive income stream through dividends is an achievable, intriguing and stimulating way to decrease ones dependency on salary income alone. Stocks on the other hand offer you the best possible investment opportunity out there. Over 30-35% of stocks performance over the past 50 years has been attributed to dividends; the rest comes from capital gains. A closer look at the S&P 500 from 1957- 2005 shows that dividends have grown on average of 5.3% per year for the index. With inflation assumed to be averaging around 3 – 4% per year, the investment in dividend paying stocks would have provided the investor with an income that keeps its purchasing power year over year, which unlike fixed income securities, can also provide them with capital gains.

Even during turbulent market conditions when most investors are fixated on their capital losses, incoming dividend payments would definitely soften their losses. During the 1966-1982 period when stock prices returned 1.45% on average per year due to high commodity prices, stagflation and high-unemployment, the average dividend yield in the S&P 500 was 4.2%.

There are amazing dividend paying companies such as Colgate Palmolive (NY:CL) (yield 2.0%) that have paid dividends every year since 1895 or Proctor & Gamble (NY:PG) (yield 1.9%) since 1891. These tremendous dividend histories confirm the companies’ commitment to paying dividends. Are the dividends sustainable ? (Check the dividend payout ratio). Are the dividends growing ? (Check the dividend growth rate). Even better, when dividend paying companies you own increase their dividend payouts, your income increases! How long has the company paid dividends ? (Check the dividend yield and history).

Dividend stocks give you both growth as well as income. Here are a few strong reasons as to why you should consider it:

1. They give out a good return
2. The dividends are lightly taxed. We are talking only 15% here. Compared to other options, that’s pretty significant.
3. You don’t have to do anything to get your dividend, they just send it to you. I like having to do less work.
4. You have a lot more control over them, the funds aren’t “trapped” like many other investments. This gives you a lot more flexibility over your investment.
5. Dividends can increase over time (unlike bonds). This can increase your earnings significantly.
6. Dividend yields can also increase over time. Again, this can compound your earnings significantly.
   

As you can see, the best dividend stocks have some unique features that other investments tend not to have.


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