Stock Terms Every Investor Should Know

Investing has its own terminology that you should know before you make your move. All you have to do is a little bit of research to become a good investor. But you won't understand what you are looking at if you don't understand the terms. Here are a few key terms that will help you as you begin to invest in the stock market.

Revenue is the money that a company makes on the sales of products or services. Sometimes you will see this as "sales" instead of revenue. But the revenue doesn't give you a complete picture of the company. Just like your budget, the expenses are important to your financial health. Companies have to pay for employees, materials, advertising, office space and numerous other expenses. These costs are stated in the company's pre-tax income. After the company pays taxes and other expenses, they are stating their net income.

To determine the company's profitability you can look at the net income. But you should also look at the company's profit margin. The profit margin is the net income divided by the revenues. It is a percentage. This is often helpful when comparing companies.

The earnings per share is calculated by dividing the company's net income with the outstanding shares. The outstanding shares are the stock that has been issued and is currently held by investors. Many large companies give investors a share of their earnings, called a dividend.

The dividend adds to the total return you may get from a certain stock investment. Capital appreciation also adds to the return. Capital appreciation is the increase in the price of the stock. The total return stated is usually calculated on an annualized basis, considering the expected change for the full year.

You can find growth rates for growth companies. These will help you to identify how quickly a company is increasing revenue, profit and earnings per share. These rates are recorded on a quarterly and yearly basis. You can also find growth rates for multiple year periods.

Look at the book value in determining a company's worth. This is the company's total assets minus its liabilities, preferred stocks and intangible assets. This is what the company is worth if everything was liquidated and all debts paid in full. This is often divided by the outstanding shares and is reported as the book value per share.

Many top employees of companies own significant portion of stock in the company. They are referred to as insiders because they have confidential information that the normal investor doesn't gain access to. If they hold a large number of shares in the company, they tend to act in the interest of the shareholder. Check the level of insider ownership when you are looking at a stock. High insider ownership levels are a positive factor when considering a stock.

You should also look at the risk the stock poses to you. This can be seen in the stock's beta. The beta measures the tendency for the stock to move up or down in price compared to the overall market. A beta over one means that the stock is more volatile than the overall market. A beta of less than one means that it is less volatile.

These are just a few of the terms that you will run into as you start to consider stocks for investment. There are many more terms that you will encounter along your investment path. All it takes is a little time and some simple research, and you will easily understand the stock market.

Martin Lukac http://www.MartinLukac.com , represents http://www.RateEmpire.com , an Internet consumer banking marketplace. RateEmpire.com is a destination site of personal finance, investing, taxes and mortgage rates. RateEmpire.com provides mortgage guides and financial rates and information. RateEmpire.com also operates a financial portal #1 American Financial, found at http://www.1AmericanFinancial.com

Stock Exchange and Stock Quotes

s New York Stock Exchange professional speculators know stock quotes are continually in flux. The quality of a stock is changing because it underlies the laws of supply and make a request of. Let's assume that the quality of N.A.S.D.A.Q. online stock trading services accurately reflects the value of the underlying industry in the more or near ultimate and not the current quality, then you will assimilate that the stock value has to turn aside in the upload all time. Stock exchange computer experts belief in effect the upcoming of industry online stock trading software value drives the stock assessment.

Stock quoting are made by the sale makers themselves. It's their goal to sew the threads of the business in a stock and because of that they have to post a current stimulate and ask value at all times all through hot offer hours.

The auction cost is the value where the stock sale maker will make the acquisition from you. The ask quality is the price where he costs to you. A person always acquisition the higher ask and could unique market to the lower stimulate quality. The difference is known the spread and it is the income of the market maker.

That is why investing online quotes are changing also inasmuch as the spread changes. The widespread will enlarge as an instance by the time there is surely low share volume or by the time the investing online moves greatly effective. Both situations inherit higher risk inasmuch as the business maker, hence the higher distributed. On the other side, a slow business will narrow the spread. Likewise when a lot of computer buyers and vendors specification up the risk is reduced and the spread goes down. The dispersed would be assorted points or budget in the worst package however in the well labeled large stocks it's single a few cents.

Daily investing online trading is just a portion of the business and therefore have to bear in mind the value of the company and nothing else. In the somewhat long term, this is maybe true, though short and mid term there are as well numerous items that persuade the perceived cost. The stock quotes might change umpteen points or percent within hours although nothing unexpected had happened to the company itself however immediate factors were interpreted to use effect at present or later.

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Stocks versus Mutual Funds

The major part of a mutual fund is a portfolio of a wide range of stocks that are managed on behalf of the investors that buy into the fund. Mutual funds were created to give small investors to take advantage of a large, diversified portfolio without the need of large investments. The major advantage of a diversified portfolio is the increased protection against rapid market fluctuations of any one particular stock.

As mutual funds' portfolios are spread across 20 or more stocks, even if one of those stocks falls, the effect is much less than if the portfolio consisted of that one stock only. The main rule of investing is “diversify whenever it is possible”. Of course, it is a problem for small investors - they often lack the funds to buy a wide variety of stocks. And that's where mutual funds comes in, letting small investors to benefit from diversification only after investing a small amount of money.

Mutual funds can be made up of a variety of holdings, not only the stocks. Their portfolios might include also bonds or other money market instruments. Technically speaking, a mutual fund is a company and those who buy into it are in fact purchasing shares of that company. They can be bought either directly from the fund itself or from brokers acting on behalf of the fund. How do we redeem shares? That's simple – we sell them back to the fund (they have to buy them).

Most funds are run by investment professionals and analysts who decide which securities to include in the fund. However, there are also some non-managed funds, usually based on an index such as the S&P 500 or Dow Jones. Such funds simply duplicate the holdings of the index, so there is no need for analyses.

How do they work? For example, if the Dow Jones goes up by 5%, the mutual fund based on that index will also rise by 5%. Surprisingly, non-managed funds usually perform better than their managed counterparts.

So far so good, but there are also a few downsides. First, there are fees that must be paid regardless of how the fund performs. Then, the individual investor has nothing to say about which securities should be included in the fund. Lastly, the current value of a mutual fund remains unknown until it publishes its financial statement (twice a year).

Mutual funds are a good choice for the smaller or part-time investors, better than either stocks or bonds. For one, they provide investors with the diversity that lessen the shock caused by sudden stock market movements while usually outperforming bonds. Of course, it is possible for a mutual funds to lose value, though mainly in the short term. Investors interested in short-term transactions should rather turn their attention to bonds which offer a set rate of return.

Money market funds, bond funds and stock funds are three main types of mutual funds currently on market. Money market funds offer the lowest risk, but also the lowest return rate. Their portfolios consist only of high quality investments – for example, bonds issued by the US government and blue chip corporations.

Bond funds usually produce higher profit than money market funds, but they are also a little more risky. The reason is simple: all the risks associated with bonds – bankruptcy or falling interest rates – can also damage bond funds.

Stock funds are mutual funds with the greatest potential, but also carry the most risk. However, they are dangerous mostly for the short-term holders – stocks usually outperform other investments in the long run. There are two main types of stock funds - 'growth funds' that aim to maximize the gain and 'income funds' that concentrate on stocks that pay regular dividends.

Mutual funds are ideal investment instruments for everyone with limited funds or none investment experience. The choice between the funds is a decision on how much risk you want to take against the expected return rate.

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What Is Index Option Trading

Option trading is not restricted to individual stocks. The large commodity market is an option market that deals in all manner of commodities such as grain or cattle. There is also another type of investment known as index option trading.

An index is a listing of a number of different stocks that share something in common, and it represents the composite value of all of them. An example is the Dow Jones Industrial Average which represents the value of the 30 largest and most widely held industrial stocks on the New York Stock Exchange. The Standard and Poor's 500 is another index that represents 500 different stocks. These two well known indices are used frequently to gauge the progress of the economy and the general health of the stock market. They are familiar to most people, even those with little or no interest in the market, as they are widely quoted on news broadcasts.

They represent just two of a large number. There are broad based ones that reflect a wide range of widely different stocks, and there are ones that are very specific to a certain group. As the Dow Jones tracks industrial stocks, another index called The Morgan Stanley Biotech Index tracks 36 different stocks of companies engaged in biotech research. An index can list companies with similar products, and even similar management styles. There are also a wide variety of foreign indices that reflect the composite value of foreign stocks.

An index may also be classified as to how it is weighted. Some regard every stock equally, and a price fluctuation in any stock in the index will have an impact of the index price no matter how large that individual stock's share of the index might be. Other indices "weight" the index based on the size of the company. In other words, small companies that experience even a large price change will not have as much impact on the index as a small change in one of the largest companies.

Index option trading is popular in part because the risk is considered to be lower than with individual stock. This is partly because the index, representing a variety of stocks, is less likely to be subjected to the same adverse pressures that may cause an individual company to experience a very rapid decline in its value. The index is seen as much easier to subject to trend analysis, and this makes it a popular part of most Mutual Fund portfolios.

There is another classification of indices that might be of interest to investors with certain social and environmental sensitivities. They are known generally as Ethical Indices as list stocks that satisfy certain criteria in their business operation. An example of one such index is the Wilderhill Clean Energy Index. Sadly, in the current market there is no direct connection between environmental sensitivity and profit, but with an Ethical Index, you can at least feel good about yourself while you make money, or even feel somewhat good if your investment turns out the opposite way.

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Determining if a Stock is Expensive

When it comes to the price of a stock, the number one question is whether or not it is a good deal. The price/sales ratio is vital in determining if the market has undervalued or overvalued the price of a stock.

You need to know various things about a stock before you invest in it. Does the stock have room to grow? Is it moderately priced when compared to its industry associates? Are there solid growth prospects, not just gut-feelings?

A stock may have these factors, but still be overpriced. That doesn't mean you should completely rule it out. Just keep it in mind for when the price goes down to a more attractive level.

You can use the price/sales ratio of a stock to make an informed investment decision. The price of the stock actually tells you very little. You can't just look at a price and know whether or not it is a good buy. You have to have background on the stocks you are considering. Only then can you accurately compare different stocks for purchase.

This ratio allows you to evenly compare companies. You simply divide the market capitalization, or outstanding shares times the price per share, of the company by its revenue. For example, a company may have 100 million outstanding shares. The price per share is $55, making the market cap $5.5 million. You then divide the $5.5 million by the company's revenue.

When you divide the market cap by the revenue, the ratio that results will help you compare different companies. The lower the ratio number, the better the investment is. However, the ratio is only truly effective when comparing companies in the same industry.

Say you are looking at two tech companies. One has a ratio of 1.8 and the other has a ratio of 3.2. The entire industry group has a ratio of 3.3. Both stocks have a better ratio than the industry average. But the first stock is a better value.

Keep in mind that there are other factors to consider as well. The price/sales ratio and the price/earnings ratios could contradict each other -- this isn't a good sign. You should also be wary of one-time events that affect the company temporarily. Most reports will include the price/sales ratio and the price/earnings ratio for you.

Remember, you have to pick the right companies and then compare their price/sales ratios. This will help you in determining whether or not a stock is a good deal.

Martin Lukac http://www.MartinLukac.com , represents http://www.RateEmpire.com , an Internet consumer banking marketplace. RateEmpire.com is a destination site of personal finance, investing, taxes and mortgage rates. RateEmpire.com provides mortgage guides and financial rates and information. RateEmpire.com also operates a financial portal #1 American Financial, found at http://www.1AmericanFinancial.com

Investing in the Stock Market

Most people want to take steps early on to ensure that their personal finance status will be secure when they retire, however few really understand what it takes to create a stock market portfolio that will be able to meet their financial needs when they retire. To create the best portfolio possible it is important that you educate yourself on how the economy impacts stocks, how to research a stock, and how to buy a stock.

The first step in making the stock market work for you is to understand how the economy impacts the performance of a stock. One thing that usually impacts the stock market is the federal interest rate. When federal interest rates go up spending tends to go down. On the other hand, if the federal prime rates go down spending tends to go up. By identifying items that impact the health and performance of the stock market, like interest rates, and by knowing how they will impact stock performance, you will be better able to judge when it is a good idea to sell a stock, and when it is a good idea to buy a stock.

The next step in making the stock market work for you is to learn how to research a stock. There are a lot of free research tools that you can use to learn about stocks. For example you can get stock quotes from a number of financial websites, as well as company information, financial reports, and stock reviews. Another way that you can learn about the stock market is to talk with a professional financial planner or stock broker. They will be able to provide you with information about the stock market and information about how to invest your money wisely.

The last step in making the stock market work for you is to learn how to buy and sell stocks. To make a stock investment you will need to first find a stock that you are interested in, set up an investment account with a stock broker or with an online stock broker, fund your account, and enter your stock order. When you are ready to sell a stock you either tell your stock broker to sell or you enter your sell request through your account with an online stock broker site.

Richard Surber - News, press releases, investment information and updates for Richard Surber - Nexia Holdings, Landis Salon, Black Chandelier
Nexia Holdings - (OTCBB: NEXH), headquartered in Salt Lake City, Utah, is a diversified holdings company with operations in real estate, health & beauty, and fashion retail.

Learning to Select Top Stocks

When it comes to choosing companies to invest in, you need to ask a few questions. What you are looking for is the strengths and weaknesses in these companies and a better understanding of the market positioning of the business.

1. Where is the cash flowing from?

The value of any asset is the net present value of its discounted cash flows. Before you can even see the true value of a business, you need to know where the cash is coming from. Don't make assumptions -- such as, from sales -- be more specific.

For example, look at Coca-Cola. You may assume that the sale of soda pop is what pushes the company forward. However, almost all of its revenue is from the sale of beverage concentrates and syrups to bottlers, canners, distributors, fountain wholesalers and retailers. They aren't the ones bottling the product and stocking it on the shelves. They just sell the flavor and the name.

This tells you that the cash flow is dependent upon the relationship between Coca-Cola and its bottlers.

2. How much cash and when?

How much cash is the business generating and when? Once you know where the money is coming from, you must look for the timing of the cash flow. For example, is it generating a steady flow of money over time, or a large lump sum every decade or so?

3. Is it sustainable?

Industry isn't always solid. Changes happen over time. The history of a company doesn't always predict future cash flows. The business landscape can change, affecting the company drastically.

4. How much money does the company need to operate?

Some businesses have higher operational costs than others. Many need more capital to generate one dollar of profit than others do. Companies that make products must purchase property, plants and equipment. This cuts into the profit. Companies that offer ideas, such as advertising firms, often have a much smaller capital expenditure. The less capital a business needs, the better it looks.

5. How's the price?

The price is the one determinant of return for an investor. You may find a stock that looks great at $10, but not at $14. Look at what type of profit is being generated. For example, a company generating $5 in profit per year is a good purchase at $20 per share. The earnings yield on this stock is 25%. But if you buy it at $200 per share, your earnings dip to 2.5%. You might as well invested in a savings account.

There are many factors to consider when choosing a stock. Take the time to research the company and its management thoroughly. You don't want to buy into a volitile situation that is almost ready to collapse. Know what is going on in the company, its industry and the market in general.

Martin Lukac www.MartinLukac.com , represents www.RateEmpire.com , an Internet consumer banking marketplace. RateEmpire.com is a destination site of personal finance, investing, taxes and mortgage rates. RateEmpire.com provides mortgage guides and financial rates and information. RateEmpire.com also operates a financial portal #1 American Financial, found at www.1AmericanFinancial.com