My quest for financial freedom

Electronic Trading: Conclusion

2010-03-03T06:42:00.000-08:00

If you are a long-term investor, you can take this tutorial with a grain of salt. At least now you have some insight into how electronic systems give direct access to the market. We hope this has enlightened your outlook and helped you achieve a greater understanding of how the execution of stock orders is done. For those who are looking to become a trader, this is the tip of the iceberg and we'd advise you to do a lot more research in this area before jumping in.

Let's recap what we have learned:

•The NYSE is an auction market and uses specialists to trade securities.
•The Nasdaq is an OTC market where trading is facilitated through market makers.
•Each stock listed on the NYSE is allocated to a specialist who matches up buyers and sellers, provides liquidity and finds the fair price at the beginning of each trading day.
•A market maker provides continuous bid and offer prices within a prescribed percentage spread for shares in which they are designated to make a market.
•SuperDOT system is an electronic system used to place orders for stocks on the NYSE.
•ECNs network major brokerages and traders, so that they can trade between themselves without involving a middleman.
•SOES is an automatic order execution for individual traders with orders less than or equal to 1,000 shares.
•There are three levels on the Nasdaq that vary on the amount of information and access they provide to investors.

Electronic Trading: Level I, II and III Access

2010-03-02T06:40:00.000-08:00

There are a variety of ways in which Nasdaq quotes security prices to the public. These levels vary on the amount of information and access they provide to investors.

Level I
This type of quote is most often published on the net as a "real-time quote." Level I consists of real-time bid/ask quotes for securities trading on the Nasdaq stock market. This type of access does not disclose who is bidding or asking for the stock, and it does not show how many shares the market maker is looking for. Real-time quotes show the current quote, but it may be from a different lot than what you are trading. Market makers love clients with this type of access because it doesn't show you the order sizes, and therefore your order may be passed around or held until market makers can profit from your order.

Level II
This type of quotation system is a step up from the Level I. Level II access provides real-time access to the quotations of individual market makers registered in every Nasdaq-listed security as well as the offering or bidding lots that they are looking for. This level of access also gives the name of the market maker looking to trade the stock. It allows traders to see what market makers are showing the most interest in a stock and to identify the patterns for each market maker. Level II access is available over the internet - but at a cost. This can range in the hundreds of dollars per month depending on the company. For clients placing a large number of trades, the firm may waive the access fee because they will make up the costs on your commissions.

Level III
This is a trading service consisting of everything in Level II plus the ability to enter quotes, execute orders and send information. This service is restricted to NASD member firms that function as registered market makers. Level III allows you to enter bid/ask quotes as the trades are being executed right in front of you. It is the fastest way to execute a trade and is typically found only on the trading floors of brokerage firms and market makers.

Electronic Trading: Small Order Execution System (SOES)

2010-03-01T06:38:00.000-08:00

The lack of liquidity after the 1987 market crash lead the Nasdaq to implement a mandatory system to provide automatic order execution for individual traders with orders less than or equal to 1,000 shares. (For stocks with low volume, it may be less than 200 shares). Market makers must accept small order execution system (SOES) orders and so this provides excellent liquidity for smaller investors and traders.

There are several restrictions for those who are using SOES, rather than a traditional ECN, to place their orders.

1) Trades may not be in excess of 1,000 shares for a particular stock.

2) SOES doesn't not allow trades in stocks that are trading at prices greater than $250 per share.

3) Once a trader places an order through SOES, he or she must wait at least five minutes to place a trade through SOES on the same stock.

4) Short selling through SOES must comply with SEC rules and be on a zero plus tick basis only.

5) Institutions and brokers are not allowed to place orders for their own accounts through SOES, but they can for a client's account.

6) Market makers must honor their advertised bid/ask prices to SOES orders, provided that they are for the amount that the market maker is looking for.

Initially, when SOES was mandatory, it was met with heavy pessimism from Nasdaq member firms because it forced them to execute all SOES trades that met the market maker's advertised price. There were significant limitations implemented to prevent day traders from exploiting the system and taking advantage of old prices quoted by market makers.

SOES has revamped the trading market for individual investors. It has given small investors and traders the opportunity to compete on a level playing field for access to orders and execution.

Electronic Trading: Electronic Communications Networks (ECNs)

2010-02-28T06:30:00.000-08:00

An electronic communication network (ECN) is an electronic system that attempts to facilitate (for market makers) or eliminate (for individual investors) third party orders entered by a client's brokerage to be executed in whole or in part. ECNs network major brokerages and traders so that they can trade between themselves without having to go through a middleman. The advantage of an ECN is that it displays orders in real time, whereas on the NYSE, most investors are limited to only viewing the best bid and ask prices. (For related reading, see Direct Access Trading Systems and Introduction To Level II Quotes.)

There are several variations of ECNs in the market, each of which are slightly different. Here are some of the more popular ones and a summary of their basic characteristics:

Instinet
Instinet was the first ever ECN, founded in 1969. It was originally a way for brokerages to display bid and ask prices for practically every stock in North America and abroad and was first used by institutions to transact with each other. Today it also includes a select group of smaller brokerages. Instinet is used to execute a large proportion of orders on Nasdaq and is primarily entered by market makers. Because of this exclusive access many of the large block orders on Nasdaq stocks are traded through Instinet. More recently, Instinet has tried to level the playing field by lowering access fees and allowing individual investors and small firms to access its orders.

SelectNet
This electronic system is primarily used for trading between market makers. SelectNet is known as a negotiable system, which means that market makers may or may not execute your order immediately, as on other ECNs, although they are required to execute immediately if the order is at the advertised price and it appears on the market maker's screen. SelectNet is popular among traders because orders can be preferenced, which allows a trader to isolate and trade with a particular market maker. This is advantageous because traders can target market makers who are active in the stock he/she wants to trade. This way the trader will get immediate attention, which usually results in a faster execution.

There are a few networks that are used to facilitate trading on Nasdaq stocks. One, the small order execution system (SOES), we will discuss next, but there are also other ECNs offered by Bloomberg, Terra Nova and others.

Electronic Trading: SuperDOT

2010-02-27T06:28:00.000-08:00

Initially introduced as DOT, the SuperDOT system (Super Designated Order Turnaround System) is an electronic system used to place orders for stocks that are listed, which usually refers to those trading on the New York Stock Exchange (NYSE). Keep in mind that SuperDOT is not to be confused with an electronic communication network (ECN), which we will discuss next.

The SuperDOT order-routing system facilitates the transmission of both market and limit orders directly to the trading post (and specialist) where the particular security is traded. This allows for a more efficient transaction because the order can be delivered directly to the specialist rather than phoned down to a floor trader and done manually. SuperDOT can be used for trades under 100,000 shares with priority given to orders of 2,100 shares or less. More than three-quarters of the orders executed through the NYSE are done through the assistance of the SuperDOT system.

After the order has been executed, the report of the transaction is sent back to the broker through the SuperDOT system. This means faster execution of the order and faster reporting of the trade. While most individual investors cannot have access to SuperDOT directly, there are complimentary systems offered by many brokers that replicate similar order executions provided by SuperDOT.

Originally, the SuperDOT system was designed for small order entry, but increasingly, SuperDOT has played a big role in portfolio or basket trading.

Electronic Trading: The Role of a Market Maker

2010-02-26T06:27:00.000-08:00

Market makers compete for customer order flows by displaying buy and sell quotations for a guaranteed number of shares. The difference between the price at which a market maker is willing to buy a security and the price at which the firm is willing to sell it is called the market maker spread. Because each market maker can either buy or sell a stock at any given time, the spread represents the market maker's profit on each trade. Once an order is received, the market maker immediately sells from its own inventory or seeks an offsetting order. There can be anywhere from four to 40 (or more) market makers for a particular stock depending on the average daily volume. The market makers play an important role in the secondary market as catalysts, particularly for enhancing stock liquidity and, therefore, for promoting long-term growth in the market.

Market makers must maintain continuous two-sided quotes (bid and ask) within a predefined spread. A market is created when the designated market maker quotes bids and offers over a period of time. They ensure there is a buyer for every sell order and a seller for every buy order at any time.

Once the market maker has entered a price, he or she is obligated to either buy or sell at least 1,000 securities at that advertised price. Once the market maker has either bought or sold these shares, he or she may then "leave the market" and enter a new bid or ask price to make a profit on the previous trade.

For example, let's say that a market maker has entered a sell order for Microsoft (MSFT) and the bid/ask is $65.25/$65.30. The market maker can try to sell shares of MSFT at $65.30. If this is what the market maker chooses to do, he or she can then turn around and enter a bid order to buy shares in MSFT. The market maker can bid higher or lower than the current bid of $65.25. If he or she enters a bid at $65.26 then a new market is created (referred to as making a market) because that bid price is now the best bid. If the market maker attracts a seller at the new bid price of $65.26 then he or she has successfully "made the spread." The market maker sold 1,000 shares at $65.30 and bought these shares back at $65.26. As a result, the market maker made $40 (1,000 shares x $0.04) on the difference between the two transactions. This might not seem like much, but doing this repeatedly with larger order sizes can provide lucrative profits. All day long market makers do this, providing liquidity to individual and institutional investors. The major risk for the market maker is the time lapse between the two transactions; the faster he or she can make the spread the more money the market maker has the potential to make.

However, making money from the differences in bid and ask prices is not the only function of market makers. Their first priority is to provide liquidity to their own firm's clients, for which they will receive a commission. They may also facilitate trading for other brokerage firms, which is very similar to the duties of a specialist.

It should also be noted that market makers are required by law to give customers the best bid or ask price for each market order transaction. This ensures a fair and reasonable two-sided market. If these regulations were not in place, customers' profits would be gouged and share prices would be much more volatile than they already are.

Electronic Trading: The Role of a Specialist

2010-02-25T06:21:00.000-08:00

The NYSE facilitates trading through a human being who is known as the specialist. Each stock listed on the NYSE is allocated to a specialist and all the buying and selling of a stock occurs at the location of this person, known as "the trading post." Buyers and sellers represented by a floor trader will meet at the trading post to learn about the best current bid and ask price for a security. These bid and ask offers are called out loud and indicate the current prices to any interested party. A trade will be executed when the bid and ask orders meet. (For more insight, see Why The Bid-Ask Spread Is So Important.)

The specialist doesn't only match up buyers and sellers. Many specialists are forced to hold an inventory of shares themselves to minimize the imbalance of buy and sell orders. The specialist does this until an equilibrium price is reached, which is when demand and supply are very close. Buying an inventory of stocks is not a common occurrence. In fact, it is estimated that a specialist will be in on only one out of every 10-15 trades.

Another duty that a specialist attends to occurs if a customer's order is priced at a level higher than the lowest ask, or lower than the best bid price (known as a stop order). The specialist will then hold the order and execute it if and when the price of the stock reaches the level specified by the customer. (For related reading, check out Understanding Order Execution and The Basics Of Order Entry.)

A final responsibility of the specialist is to find a fair price for each of the stocks that he or she is responsible for at the beginning of every trading day. This fair price is based on the current supply and demand of the stock. The NYSE opens for trading at 9:30am, but if the specialist can't find a fair price, he or she may delay the opening of trading on a stock until that fair price is found.

It is the specialist's job to act in a way that benefits the public. Because specialists are responsible for keeping the market in equilibrium, they are required to execute all customer orders ahead of their own.

Electronic Trading: The Nasdaq Vs. The NYSE

2010-02-24T06:19:00.000-08:00

From a glance, the difference between the New York Stock Exchange (NYSE) and Nasdaq may not be marked. The NYSE lists household names like Coca-Cola, Wal-Mart, Citicorp, and General Electric, whereas the Nasdaq is home to many of the tech giants such as Microsoft, Cisco, Intel, Oracle and Sun Microsystems. Besides the heavy tech weighting, the fundamental difference between the two exchanges is in the way securities are traded.

NYSE

The NYSE is an auction market that uses floor traders to make most of its trades. Each stock on the NYSE has a specialist; this is a person who oversees and facilitates all of the trades for a particular stock. If you wish to buy a stock that trades on the NYSE, your broker will either call your order to a floor broker, or enter it into the DOT system (which we will discuss later on). (For more insight, see Markets Demystified and The Tale Of Two Exchanges: NYSE and Nasdaq.)

Nasdaq

The Nasdaq, on the other hand, is not a physical entity. The Nasdaq might be known for its fancy MarketSite Tower and broadcast studio in Times Square, but very little is done there. The Nasdaq is an over-the-counter (OTC) market and it relies on market makers rather than specialists to facilitate trading and liquidity in stocks. For each stock, there is at least one market maker, (large stocks such as Microsoft have several), whose duties we will discuss later on. (Want to learn more? Read What's the difference between a Nasdaq market maker and a NYSE specialist?)

Rather than being an auction market, the Nasdaq is a communications network between thousands of computers. Instead of brokers calling out orders, market makers place their names on a list of buyers and sellers, which is then distributed by the Nasdaq in a split second to thousands of other computers. If you wish to buy a stock that trades on the Nasdaq, your broker will either call up a market maker with the information of your trade or enter your order into a Nasdaq-sponsored online execution system.

Roth Or Traditional IRA ... Which Is The Better Choice?

2010-02-23T18:48:00.000-08:00

As U.S. taxpayers contemplate funding IRAs, they may wonder which type of IRA - Roth or Traditional - is the better choice. If you are one of these individuals, here is an outline of some of the differences between the two retirement accounts, their eligibility requirements and other factors to consider when choosing the account that's right for you.

Contribution Limits
The contribution limits for the Roth and Traditional IRAs are the same. For tax year 2010, for example, you could contribute up to $5,000 to your IRA, plus an additional $1,000 catch-up contribution if you reached age 50 or older by the end of the tax year.

Deductibility
One of the major factors for deciding between a Roth and Traditional IRA is your eligibility to deduct Traditional IRA contributions and in turn get a tax break for the year you make the contribution. Your eligibility to deduct Traditional IRA contributions, however, depends on whether you meet certain requirements. Contributions to Roth IRAs are never deductible (see the chapter "Contributions" in the tutorial Roth IRAs).

Contribution Age Limitations
If you want to be able to contribute to your IRA for as long as you like, you need to consider the age limits placed on IRA contributions. You may not make a participant contribution to a Traditional IRA after and for the year you reach age 70.5. For Roth IRAs, there is no age limit.

Income Limitations
One factor that determines whether a Roth or Traditional IRA is better for you is your income, which dictates your eligibility to contribute to a Roth IRA. If your income exceeds the limit, you may not contribute to a Roth IRA. In addition, your Roth IRA contribution limit may be lowered if your income falls within certain ranges (between a certain amount and the income limits listed above). Consult with your tax advisor to determine the maximum amount you may contribution to a Roth IRA.(For more on this subject, see our tutorial on Roth IRAs.)

Income caps do not apply to Traditional IRA contributions.

Required Minimum Distributions
If you don't ever want to be required to start distributing your retirement assets at any time, you need to consider the IRA rules for required minimum distributions (RMD). With a Traditional IRA, you must begin to take RMDs by April 1 of the year following the year you reach age 70.5. This means you must gradually reduce your IRA balance and add the distributed amount to your income, even if you are not in need of the funds.
Roth IRA owners are not subjected to RMD rules.

Tax Treatment of Distributions
The tax treatment of distributions is a big factor that determines whether the Roth or Traditional IRA is better for you. Generally, distributions from a Traditional IRA are treated as ordinary income and may be subject to income taxes; furthermore, the distributed amount may be subjected to early-distribution penalties if the amount is withdrawn while the taxpayer is under the age of 59.5.

On the other hand, qualified Roth IRA distributions are tax and penalty free. Roth IRA distributions are qualified if they meet the following two requirements:

The distributions are taken no earlier than five years after the taxpayer funds his or her first Roth IRA. This five-year period begins with the tax year for which the first contribution is made.
The distribution is taken as a result of any one of the following:
•You have reached age 59.5.
•You are disabled.
•Your beneficiary receives the distribution upon your death.
•You purchase a first home (subject to a lifetime limit of $10,000).
From a general tax perspective, the Roth IRA is the better choice if your tax rate during retirement will not be lower than your current tax rate, as the Roth IRA allows you to pay the taxes now, and receive tax-free distributions when your income tax rate is higher. If your tax rate will be lower during retirement, then the Traditional IRA may be the better choice if you are eligible to receive a tax deduction now when your tax rate is higher.

Your financial planner will help you determine whether there are other factors to consider that would make either IRA more suitable for your tax-related financial planning needs.

Splitting Your Contribution
If you are eligible to contribute to both types of IRAs, you might want to divide your contributions between your Roth and Traditional IRA; however, your total contribution to both IRAs still must not exceed the limit for that tax year (plus the catch-up contribution).

If you decide to split your contributions between both types of IRAs, you may choose to contribute the deductible amount to your Traditional IRA (see Traditional IRA Deductibility Limits) and the balance to your Roth IRA.

Before splitting your IRAs, however, consider additional fees, such as maintenance fees charged by your IRA custodian/trustee for maintaining two separate IRAs. Note also that placing bulk trades into one IRA instead of placing separate trades in separate IRAs could help you save on trade-related fees. Finally, consider the short-term benefits as well as the long-term benefits and decide which outweighs the other.

Deciding Which Is Better
For some taxpayers, their eligibility to deduct Traditional IRA contributions is the main deciding factor in choosing between a Roth and Traditional IRA. However, being eligible to deduct your contribution does not mean that the Traditional IRA is your better choice. Consider whether the benefits of the Roth IRA - such as freedom from the RMD rules and taxes, and penalty-free distributions - outweigh the benefits of a deduction.

You may contribute to a Traditional IRA and elect not to claim the tax deduction even though you are eligible to do so. The benefit of not taking a deduction is that the distribution of the equivalent amount is tax and penalty free - like the distributions of the Roth IRA. The earnings distributed from the Traditional IRA, however, will be treated as taxable income, whereas qualified distributions of earnings from a Roth IRA are tax free.

Finally, you may split your contribution between both types of IRAs and enjoy the benefits of both.

Be sure to consult with your tax professional, as there are usually other factors that could determine which options are most suitable to meet your financial needs.

Electronic Trading: Introduction

2010-02-23T18:17:00.000-08:00

When it comes to electronic trading, for most individual investors, taking a long-term buy-and-hold approach is probably the best strategy. Most of us simply don't have the time or the expertise to trade for a living. But for some investors, trading can be an extremely lucrative profession.

There have always been professionals who made their living off of trading. It wasn't until recently, however, that technology enabled individuals who weren't working for a brokerage to directly access the markets. This tutorial will delve into the workings of the electronic systems that allow this direct access. We'll also talk about the differences between the New York Stock Exchange (NYSE) and the Nasdaq and learn how market trades are executed, both by market makers and by specialists.

Whether you are an aspiring trader or a seasoned investor looking to find out how it all works, this tutorial explains all the nitty-gritty electronic trading systems in layman's terms. Is electronic trading a new way for you to build you own portfolio?

Stock-Picking Strategies: Conclusion

2010-02-19T07:26:00.000-08:00

Let's run through a quick recap of the foundational concepts that we covered in our look at the most well-known stock-picking strategies and techniques:

•Most of the strategies discussed in this tutorial use the tools and techniques of fundamental analysis, whose main objective is to find the worth of a company, or its intrinsic value.
•In quantitative analysis, a company is worth the sum of its discounted cash flows. In other words, it is worth all of its future profits added together.
•Some qualitative factors affecting the value of a company are its management, business model, industry and brand name.
•Value investors, concerned with the present, look for stocks selling at a price that is lower than the estimated worth of the company, as reflected by its fundamentals. Growth investors are concerned with the future, buying companies that may be trading higher than their intrinsic worth but show the potential to grow and one day exceed their current valuations.
•The GARP strategy is a combination of both growth and value: investors concerned with 'growth at a reasonable price' look for companies that are somewhat undervalued given their growth potential.
•Income investors, seeking a steady stream of income from their stocks, look for solid companies that pay a high but sustainable dividend yield.
•CAN SLIM analyzes these factors of companies: current earnings, annual earnings, new changes, supply and demand, leadership in industry, institutional sponsorship, and market direction.
•Dogs of the Dow are the 10 of the 30 companies in the Dow Jones Industrial Average (DJIA) with the highest dividend yield.
•Technical analysis, the polar opposite of fundamental analysis, is not concerned with a stock's intrinsic value, but instead looks at past market activity to determine future price movements.

Stock-Picking Strategies: Technical Analysis

2010-02-18T07:20:00.000-08:00

Technical analysis is the polar opposite of fundamental analysis, which is the basis of every method explored so far in this tutorial. Technical analysts, or technicians, select stocks by analyzing statistics generated by past market activity, prices and volumes. Sometimes also known as chartists, technical analysts look at the past charts of prices and different indicators to make inferences about the future movement of a stock's price.

Philosophy of Technical Analysis
In his book, "Charting Made Easy", technical analysis guru John Murphy introduces readers to the study of technical analysis, explaining its basic premises and tools. Here he explains the underlying theories of technical analysis:

"Chart analysis (also called technical analysis) is the study of market action, using price charts, to forecast future price direction. The cornerstone of the technical philosophy is the belief that all factors that influence market price - fundamental information, political events, natural disasters, and psychological factors - are quickly discounted in market activity. In other words, the impact of these external factors will quickly show up in some form of price movement, either up or down."
The most important assumptions that all technical analysis techniques are based upon can be summarized as follows:

Prices already reflect, or discount, relevant information. In other words, markets are efficient.
Prices move in trends.
History repeats itself.
(For a more detailed explanation of this concept, see our Technical Analysis tutorial.)

What Technical Analysts Don't Care About
Pure technical analysts couldn't care less about the elusive intrinsic value of a company or any other factors that preoccupy fundamental analysts, such as management, business models or competition. Technicians are concerned with the trends implied by past data, charts and indicators, and they often make a lot of money trading companies they know almost nothing about.

Is Technical Analysis a Long-Term Strategy?
The answer to the question above is no. Definitely not. Technical analysts are usually very active in their trades, holding positions for short periods in order to capitalize on fluctuations in price, whether up or down. A technical analyst may go short or long on a stock, depending on what direction the data is saying the price will move. (For further reading on active trading and why technical analysis is appropriate for a short-term strategy, see Defining Active Trading.)

If a stock does not perform the way a technician thought it would, he or she wastes little time deciding whether to exit his or her position, using stop-loss orders to mitigate losses. Whereas a value investor must exercise a lot of patience and wait for the market to correct its undervaluation of a company, the technician must possess a great deal of trading agility and know how to get in and out of positions with speed.

Support and Resistance
Among the most important concepts in technical analysis are support and resistance. These are the levels at which technicians expect a stock to start increasing after a decline (support), or to begin decreasing after an increase (resistance). Trades are generally entered around these important levels because they indicate the way in which a stock will bounce. They will enter into a long position if they feel a support level has been hit, or enter into a short position if they feel a resistance level has been struck.

Here is an illustration of where technicians might set support and resistance levels:

Picking Stocks with Technical Analysis
Technicians have a very full toolbox. They literally have hundreds of indicators and chart patterns to use for picking stocks. However, it is important to note that no one indicator or chart pattern is infallible or absolute; the technician must interpret indicators and patterns, and this process is more subjective than formulaic. Let's briefly examine a couple of the most popular chart patterns (of price) that technicians analyze.

Cup and Handle
This is a bullish pattern that looks like a pot with a handle. The stock price is expected to break out at the end of the handle, so by buying here, investors are able to make a lot of money. Another reason for this pattern's popularity is how easy it is to spot. Here is an example of a great cup and handle pattern:

Head and Shoulders
This pattern resembles, well, a head with two shoulders. Technicians usually consider this a bearish pattern. Below is a great example of this particular chart pattern:

Remember, these two examples are mere glimpses into the vast world of technical analysis and its techniques. We couldn't have a complete stock picking tutorial without mentioning technical analysis, but this brief intro barely scratches the surface.
Conclusion
Technical analysis is unlike any other stock-picking strategy - it has its own set of concepts, and it relies on a completely different set of criteria than any strategy employing fundamental analysis. However, regardless of its analytical approach, mastering technical analysis requires discipline and savvy, just like any other strategy.

Stock-Picking Strategies: Dogs of the Dow

2010-02-17T07:16:00.000-08:00

The investing strategy which focuses on Dogs of the Dow was popularized by Michael Higgins in his book, "Beating the Dow". The strategy's simplicity is one of its most attractive attributes. The Dogs of the Dow are the 10 of the 30 companies in the Dow Jones Industrial Average (DJIA) with the highest dividend yield. In the Dogs of the Dow strategy, the investor shuffles around his or her portfolio, adjusting it so that it is always equally allocated in each of these 10 stocks.

Typically, such an investor would need to completely rid his or her portfolio of about three to four stocks every year and replace them with different ones. The stocks are usually replaced because their dividend yields have fallen out of the top 10, or occasionally, because they have been removed from the DJIA altogether.

Is it Really that Simple?
Yes, this strategy really is as simple as it sounds. At the end of every year, you reassess the 30 components of the DJIA, determine which ones have the highest dividend yield, and ask your broker to make your portfolio as equally weighted in each of these 10 stocks as possible. Hold onto these 10 stocks for one calendar year, until the following Jan 1, and repeat the process. This is a long-term strategy, requiring a long period to see results. There have been a few years in which the Dow has outperformed the Dogs, so it is the long-term averages that proponents of the strategy rely on.

The Premise
The premise of this investment style is that the Dow laggards, which are temporarily out-of-favor stocks, are still good companies because they are still included in the DJIA; therefore, holding on to them is a smart idea, in theory. Once these companies rebound and the market has revalued them properly (or so you hope), you can sell them and replenish your portfolio with other good companies that are temporarily out of favor. Companies in the Dow have historically been very stable companies that can weather any market decline with their solid balance sheets and strong fundamentals. Furthermore, because there is a committee perpetually tinkering with the DJIA's components, you can rest assured that the DJIA is made up of good, solid companies.

By the Numbers
As mentioned earlier, one of the big attractions of the Dogs of the Dow strategy is its simplicity; the other is its performance. From 1957 to 2003, the Dogs outperformed the Dow by about 3%, averaging a return rate of 14.3% annually whereas the Dows averaged 11%. The performance between 1973 and 1996 was even more impressive, as the Dogs returned 20.3% annually, whereas the Dows averaged 15.8%.

Variations of the Dogs
Because of this strategy's simplicity and its returns, many have tried to alter it in an attempt to refine it, making it both simpler and higher yielding. There is the Dow 5, which includes the five Dogs of the Dow that have the lowest per share price. Then there is the Dow 4, which includes the 4 highest priced stocks of the Dow 5. Finally, there is the Foolish 4, made famous by the Motley Fool, which chooses the same stocks as the Dow 4, but allocates 40% of the portfolio to the lowest priced of these four stocks and 20% to the other three stocks.

These variations of the Dogs of the Dow were all developed using backtesting, or testing strategies on old data. The likelihood of these strategies outperforming the Dogs of the Dow or the DJIA in the future is very uncertain; however, the results of the backtesting are interesting. The table below is based on data from 1973-1996.

Before you go out and start applying one of these strategies, consider this: picking the highest yielding stocks makes some intuitive sense, but picking stocks based strictly on price seems odd. Share price is a fairly relative thing; a company could split its shares but still be worth the same, simply having twice as many shares with half the share price. When it comes to the variations on the Dogs of the Dow, there are many more questions than there are answers.

Dogs Not Fool Proof
As is the case with the other strategies we've looked at, the Dogs of the Dow strategy is not fool-proof. The theory puts a lot of faith in the assumption that the time period from the mid-20th century to the turn of the 21st century will repeat itself over the long run. If this assumption is accurate, the Dogs will provide about a 3% greater return than the Dow, but this is by no means guaranteed.

Conclusion
The Dogs of the Dow is a simple and effective strategy based on the results of the last 50 years. Pick the 10 highest yielding stocks of the 30 Dow stocks, and weigh your portfolio equally among them, adjusting the portfolio annually, and you can expect about a 3% outperformance of the Dow. That is, if history repeats itself.

Stock-Picking Strategies: CAN SLIM

2010-02-16T07:30:00.000-08:00

CAN SLIM is a philosophy of screening, purchasing and selling common stock. Developed by William O'Neil, the co-founder of Investor's Business Daily, it is described in his highly recommended book "How to Make Money in Stocks".

The name may suggest some boring government agency, but this acronym actually stands for a very successful investment strategy. What makes CAN SLIM different is its attention to tangibles such as earnings, as well as intangibles like a company's overall strength and ideas. The best thing about this strategy is that there's evidence that it works: there are countless examples of companies that, over the last half of the 20th century, met CAN SLIM criteria before increasing enormously in price. In this section we explore each of the seven components of the CAN SLIM system.

C = Current Earnings
O'Neil emphasizes the importance of choosing stocks whose earnings per share (EPS) in the most recent quarter have grown on a yearly basis. For example, a company's EPS figures reported in this year's April-June quarter should have grown relative to the EPS figures for that same three-month period one year ago. (If you're unfamiliar with EPS, see Types of EPS.)

How Much Growth?
The percentage of growth a company's EPS should show is somewhat debatable, but the CAN SLIM system suggests no less than 18-20%. O'Neil found that in the period from 1953 to 1993, three-quarters of the 500 top-performing equity securities in the U.S. showed quarterly earnings gains of at least 70% prior to a major price increase. The other one quarter of these securities showed price increases in two quarters after the earnings increases. This suggests that basically all of the high performance stocks showed outstanding quarter-on-quarter growth. Although 18-20% growth is a rule of thumb, the truly spectacular earners usually demonstrate growth of 50% or more.

Earnings Must Be Examined Carefully
The system strongly asserts that investors should know how to recognize low-quality earnings figures - that is, figures that are not accurate representations of company performance. Because companies may attempt to manipulate earnings, the CAN SLIM system maintains that investors must dig deep and look past the superficial numbers companies often put forth as earnings figures (see How to Evaluate the Quality of EPS).

O'Neil says that, once you confirm that a company's earnings are of fairly good quality, it's a good idea to check others in the same industry. Solid earnings growth in the industry confirms the industry is thriving and the company is ready to break out.

A = Annual Earnings
CAN SLIM also acknowledges the importance of annual earnings growth. The system indicates that a company should have shown good annual growth (annual EPS) in each of the last five years.

How Much Annual Earnings Growth?
It's important that the CAN SLIM investor, like the value investor, adopt the mindset that investing is the act of buying a piece of a business, becoming an owner of it. This mindset is the logic behind choosing companies with annual earnings growth within the 25-50% range. As O'Neil puts it, "who wants to own part of an establishment showing no growth"?

Wal-Mart?
O'Neil points to Wal-Mart as an example of a company whose strong annual growth preceded a large run-up in share price. Between 1977 and 1990, Wal-Mart displayed an average annual earnings growth of 43%. The graph below demonstrates how successful Wal-Mart was after its remarkable annual growth.

A Quick Re-Cap
The first two parts of the CAN SLIM system are fairly logical steps employing quantitative analysis. By identifying a company that has demonstrated strong earnings both quarterly and annually, you have a good basis for a solid stock-pick. However, the beauty of the system is that it applies five more criteria to stocks before they are selected.

N = New
O'Neil's third criterion for a good company is that it has recently undergone a change, which is often necessary for a company to become successful. Whether it is a new management team, a new product, a new market, or a new high in stock price, O'Neil found that 95% of the companies he studied had experienced something new.

McDonald's
A perfect example of how newness spawns success can be seen in McDonald's past. With the introduction of its new fast food franchises, it grew over 1100% in four years from 1967 to 1971! And this is just one of many compelling examples of companies that, through doing or acquiring something new, achieved great things and rewarded their shareholders along the way.

New Stock Price Highs
O'Neil discusses how it is human nature to steer away from stocks with new price highs - people often fear that a company at new highs will have to trade down from this level. But O'Neil uses compelling historical data to show that stocks that have just reached new highs often continue on an upward trend to even higher levels.

S = Supply and Demand
The S in CAN SLIM stands for supply and demand, which refers to the laws that govern all market activities. (For further reading on how supply and demand determine price, see our Economics Basics tutorial.)

The analysis of supply and demand in the CAN SLIM method maintains that, all other things being equal, it is easier for a smaller firm, with a smaller number of shares outstanding, to show outstanding gains. The reasoning behind this is that a large cap company requires much more demand than a smaller cap company to demonstrate the same gains.

O'Neil explores this further and explains how the lack of liquidity of large institutional investors restricts them to buying only large-cap, blue chip companies, leaving these large investors at a serious disadvantage that small individual investors can capitalize on. Because of supply and demand, the large transactions that institutional investors make can inadvertently affect share price, especially if the stock's market capitalization is smaller. Because individual investors invest a relatively small amount, they can get in or out of a smaller company without pushing share price in an unfavorable direction.

In his study, O'Neil found that 95% of the companies displaying the largest gains in share price had fewer than 25 million shares outstanding when the gains were realized.

L = Leader or Laggard
In this part of CAN SLIM analysis, distinguishing between market leaders and market laggards is of key importance. In each industry, there are always those that lead, providing great gains to shareholders, and those that lag behind, providing returns that are mediocre at best. The idea is to separate the contenders from the pretenders.

Relative Price Strength
The relative price strength of a stock can range from 1 to 99, where a rank of 75 means the company, over a given period of time, has outperformed 75% of the stocks in its market group. CAN SLIM requires a stock to have a relative price strength of at least 70. However, O'Neil states that stocks with relative price strength in the 80–90 range are more likely to be the major gainers.

Sympathy and Laggards
Do not let your emotions pick stocks. A company may seem to have the same product and business model as others in its industry, but do not invest in that company simply because it appears cheap or evokes your sympathy. Cheap stocks are cheap for a reason, usually because they are market laggards. You may pay more now for a market leader, but it will be worth it in the end.
I = Institutional Sponsorship
CAN SLIM recognizes the importance of companies having some institutional sponsorship. Basically, this criterion is based on the idea that if a company has no institutional sponsorship, all of the thousands of institutional money managers have passed over the company. CAN SLIM suggests that a stock worth investing in has at least three to 10 institutional owners.

However, be wary if a very large portion of the company's stock is owned by institutions. CAN SLIM acknowledges that a company can be institutionally over-owned and, when this happens, it is too late to buy into the company. If a stock has too much institutional ownership, any kind of bad news could spark a spiraling sell-off.

O'Neil also explores all the factors that should be considered when determining whether a company's institutional ownership is of high quality. Even though institutions are labeled "smart money", some are a lot smarter than others.

M = Market Direction
The final CAN SLIM criterion is market direction. When picking stocks, it is important to recognize what kind of a market you are in, whether it is a bear or a bull. Although O'Neil is not a market timer, he argues that if investors don't understand market direction, they may end up investing against the trend and thus compromise gains or even lose significantly.

Daily Prices and Volumes
CAN SLIM maintains that the best way to keep track of market conditions is to watch the daily volumes and movements of the markets. This component of CAN SLIM may require the use of some technical analysis tools, which are designed to help investors/traders discern trends.

Conclusion
Here's a recap of the seven CAN SLIM criteria:

C = Current quarterly earnings per share - Earnings must be up at least 18-20%.
A = Annual earnings per share – These figures should show meaningful growth for the last five years.
N = New things - Buy companies with new products, new management, or significant new changes in industry conditions. Most importantly, buy stocks when they start to hit new price highs. Forget cheap stocks; they are that way for a reason.
S = Shares outstanding - This should be a small and reasonable number. CAN SLIM investors are not looking for older companies with a large capitalization.
L = Leaders - Buy market leaders, avoid laggards.
I = Institutional sponsorship - Buy stocks with at least a few institutional sponsors who have better-than-average recent performance records.
M = General market - The market will determine whether you win or lose, so learn how to discern the market's overall current direction, and interpret the general market indexes (price and volume changes) and action of the individual market leaders.
CAN SLIM is great because it provides solid guidelines, keeping subjectivity to a minimum. Best of all, it incorporates tactics from virtually all major investment strategies. Think of it as a combination of value, growth, fundamental, and even a little technical analysis.

Remember, this is only a brief introduction to the CAN SLIM strategy; this overview covers only a fraction of the valuable information in O'Neil's book, "How to Make Money in Stocks". We recommend you read the book to fully understand the underlying concepts of CAN SLIM.

Stock-Picking Strategies: Income Investing

2010-02-15T07:30:00.000-08:00

Income investing, which aims to pick companies that provide a steady stream of income, is perhaps one of the most straightforward stock-picking strategies. When investors think of steady income they commonly think of fixed-income securities such as bonds. However, stocks can also provide a steady income by paying a solid dividend. Here we look at the strategy that focuses on finding these kinds of stocks.

Who Pays Dividends?
Income investors usually end up focusing on older, more established firms, which have reached a certain size and are no longer able to sustain higher levels of growth. These companies generally no longer are in rapidly expanding industries and so instead of reinvesting retained earnings into themselves (as many high-flying growth companies do), mature firms tend to pay out retained earnings as dividends as a way to provide a return to their shareholders.

Thus, dividends are more prominent in certain industries. Utility companies, for example, have historically paid a fairly decent dividend, and this trend should continue in the future. (For more on the resurgence of dividends following the tech boom, see How Dividends Work For Investors.)

Dividend Yield
Income investing is not simply about investing in companies with the highest dividends (in dollar figures). The more important gauge is the dividend yield, calculated by dividing the annual dividend per share by share price. This measures the actual return that a dividend gives the owner of the stock. For example, a company with a share price of $100 and a dividend of $6 per share has a 6% dividend yield, or 6% return from dividends. The average dividend yield for companies in the S&P 500 is 2-3%.

But income investors demand a much higher yield than 2-3%. Most are looking for a minimum 5-6% yield, which on a $1-million investment would produce an income (before taxes) of $50,000-$60,000. The driving principle behind this strategy is probably becoming pretty clear: find good companies with sustainable high dividend yields to receive a steady and predictable stream of money over the long term.

Another factor to consider with the dividend yield is a company's past dividend policy. Income investors must determine whether a prospective company can continue with its dividends. If a company has recently increased its dividend, be sure to analyze that decision. A large increase, say from 1.5% to 6%, over a short period such as a year or two, may turn out to be over-optimistic and unsustainable into the future. The longer the company has been paying a good dividend, the more likely it will continue to do so in the future. Companies that have had steady dividends over the past five, 10, 15, or even 50 years are likely to continue the trend.

An Example
There are many good companies that pay great dividends and also grow at a respectable rate. Perhaps the best example of this is Johnson & Johnson. From 1963 to 2004, Johnson & Johnson has increased its dividend every year. In fact, if you bought the stock in 1963 the dividend yield on your initial shares would have grown approximately 12% annually. Thirty years later, your earnings from dividends alone would have rendered a 48% annual return on your initial shares!

Here is a chart of Johnson & Johnson's share price (adjusted for splits and dividend payments), which demonstrates the power of the combination of dividend yield and company appreciation:

This chart should address the concerns of those who simply dismiss income investing as an extremely defensive and conservative investment style. When an initial investment appreciates over 225 times - including dividends - in about 20 years, that may be about as "sexy" as it gets.

Dividends Are Not Everything
You should never invest solely on the basis of dividends. Keep in mind that high dividends don't automatically indicate a good company. Because they are paid out of a company's net income, higher dividends will result in a lower retained earnings. Problems arise when the income that would have been better re-invested into the company goes to high dividends instead.

The income investing strategy is about more than using a stock screener to find the companies with the highest dividend yield. Because these yields are only worth something if they are sustainable, income investors must be sure to analyze their companies carefully, buying only ones that have good fundamentals. Like all other strategies discussed in this tutorial, the income investing strategy has no set formula for finding a good company. To determine the sustainability of dividends by means of fundamental analysis, each individual investor must use his or her own interpretive skills and personal judgment - for this reason, we won't get into what defines a "good company".

Stock Picking, not Fixed Income
Something to remember is that dividends do not equal lower risk. The risk associated with any equity security still applies to those with high dividend yields, although the risk can be minimized by picking solid companies.

Taxes Taxes Taxes
One final important note: in most countries and states/provinces, dividend payments are taxed at the same rate as your wages. As such, these payments tend to be taxed higher than capital gains, which is a factor that reduces your overall return.

Stock-Picking Strategies: GARP Investing

2010-02-14T07:30:00.000-08:00

Do you feel that you now have a firm grasp of the principles of both value and growth investing? If you're comfortable with these two stock-picking methodologies, then you're ready to learn about a newer, hybrid system of stock selection. Here we take a look at growth at a reasonable price, or GARP.

What Is GARP?
The GARP strategy is a combination of both value and growth investing: it looks for companies that are somewhat undervalued and have solid sustainable growth potential. The criteria which GARPers look for in a company fall right in between those sought by the value and growth investors. Below is a diagram illustrating how the GARP-preferred levels of price and growth compare to the levels sought by value and growth investors:

What GARP Is NOT
Because GARP borrows principles from both value and growth investing, some misconceptions about the style persist. Critics of GARP claim it is a wishy-washy, fence-sitting method that fails to establish meaningful standards for distinguishing good stock picks. However, GARP doesn't deem just any stock a worthy investment. Like most respectable methodologies, it aims to identify companies that display very specific characteristics.

Another misconception is that GARP investors simply hold a portfolio with equal amounts of both value and growth stocks. Again, this is not the case: because each of their stock picks must meet a set of strict criteria, GARPers identify stocks on an individual basis, selecting stocks that have neither purely value nor purely growth characteristics, but a combination of the two.

Who Uses GARP?
One of the biggest supporters of GARP is Peter Lynch, whose philosophies we have already touched on in the section on qualitative analysis. Lynch has written several popular books, including "One Up on Wall Street" and "Learn to Earn", and in the late 1990s and early 2000 he starred in the Fidelity Investment commercials. Many consider Lynch the world's best fund manager, partly due to his 29% average annual return over a 13-year stretch from 1977-1990. (To learn more about Peter Lynch, check out Greatest Investors feature.)

The Hybrid Characteristics
Like growth investors, GARP investors are concerned with the growth prospects of a company: they like to see positive earnings numbers for the past few years, coupled with positive earnings projections for upcoming years. But unlike their growth-investing cousins, GARP investors are skeptical of extremely high growth estimations, such as those in the 25-50% range. Companies within this range carry too much risk and unpredictability for GARPers. To them, a safer and more realistic earnings growth rate lies somewhere between 10-20%.

Something else that GARPers and growth investors share is their attention to the ROE figure. For both investing types, a high and increasing ROE relative to the industry average is an indication of a superior company.

GARPers and growth investors share other metrics to determine growth potential. They do, however, have different ideas about what the ideal levels exhibited by the different metrics should be, and both types of investors have varying tastes in what they like to see in a company. An example of what many GARPers like to see is positive cash flow or, in some cases, positive earnings momentum.

Because a variety of additional criteria can be used to evaluate growth, GARP investors can customize their stock-picking system to their personal style. Exercising subjectivity is an inherent part of using GARP. So if you use this strategy, you must analyze companies in relation to their unique contexts (just as you would with growth investing). Since there is no magic formula for confirming growth prospects, investors must rely on their own interpretation of company performance and operating conditions.

It would be hard to discuss any stock-picking strategy without mentioning its use of the P/E ratio. Although they look for higher P/E ratios than value investors do, GARPers are wary of the high P/E ratios favored by growth investors. A growth investor may invest in a company trading at 50 or 60 times earnings, but the GARP investor sees this type of investing as paying too much money for too much uncertainty. The GARPer is more likely to pick companies with P/E ratios in the 15-25 range - however, this is a rough estimate, not an inflexible rule GARPers follow without any regard for a company's context.

In addition to a preference for a lower P/E ratio, the GARP investor shares the value investor's attraction to a low price-to-book ratio (P/B) ratio, specifically a P/B of below industry average. A low P/E and P/B are the two more prominent criteria with which GARPers in part mirror value investing. They may use other similar or differing criteria, but the main idea is that a GARP investor is concerned about present valuations.

By the Numbers
Now that we know what GARP investing is, let's delve into some of the numbers that GARPers look for in potential companies.

The PEG Ratio
The PEG ratio may very well be the most important metric to any GARP investor, as it basically gauges the balance between a stock's growth potential and its value. (If you're unfamiliar with the PEG ratio, see: How the PEG Ratio Can Help Investors.)

GARP investors require a PEG no higher than 1 and, in most cases, closer to 0.5. A PEG of less than 1 implies that, at present, the stock's price is lower than it should be given its earnings growth. To the GARP investor, a PEG below 1 indicates that a stock is undervalued and warrants further analysis.

PEG at Work
Say the TSJ Sports Conglomerate, a fictional company, is trading at 19 times earnings (P/E = 19) and has earnings growing at 30%. From this you can calculate that the TSJ has a PEG of 0.63 (19/30=0.63), which is pretty good by GARP standards.

Now let's compare the TSJ to Cory's Tequila Co (CTC), which is trading at 11 times earnings (P/E = 11) and has earnings growth of 20%. Its PEG equals 0.55. The GARPer's interest would be aroused by the TSJ, but CTC would look even more attractive. Although it has slower growth compared to TSJ, CTC currently has a better price given its growth potential. In other words, CTC has slower growth, but TSJ's faster growth is more overpriced. As you can see, the GARP investor seeks solid growth, but also demands that this growth be valued at a reasonable price. Hey, the name does make sense!

GARP at Work
Because a GARP strategy employs principles from both value and growth investing, the returns that GARPers see during certain market phases are often different than the returns strictly value or growth investors would see at those times. For instance, in a raging bull market the returns from a growth strategy are often unbeatable: in the dotcom boom of the mid- to late-1990s, for example, neither the value investor nor the GARPer could compete. However, when the market does turn, a GARPer is less likely to suffer than the growth investor.

Therefore, the GARP strategy not only fuses growth and value stock-picking criteria, but also experiences a combination of their types of returns: a value investor will do better in bearish conditions; a growth investor will do exceptionally well in a raging bull market; and a GARPer will be rewarded with more consistent and predictable returns.

Conclusion
GARP might sound like the perfect strategy, but combining growth and value investing isn't as easy as it sounds. If you don't master both strategies, you could find yourself buying mediocre rather than good GARP stocks. But as many great investors such as Peter Lynch himself have proven, the returns are definitely worth the time it takes to learn the GARP techniques.

Stock-Picking Strategies: Growth Investing

2010-02-13T07:00:00.000-08:00

In the late 1990s, when technology companies were flourishing, growth investing techniques yielded unprecedented returns for investors. But before any investor jumps onto the growth investing bandwagon, s/he should realize that this strategy comes with substantial risks and is not for everyone.

Value versus Growth
The best way to define growth investing is to contrast it to value investing. Value investors are strictly concerned with the here and now; they look for stocks that, at this moment, are trading for less than their apparent worth. Growth investors, on the other hand, focus on the future potential of a company, with much less emphasis on its present price. Unlike value investors, growth investors buy companies that are trading higher than their current intrinsic worth - but this is done with the belief that the companies' intrinsic worth will grow and therefore exceed their current valuations.

As the name suggests, growth stocks are companies that grow substantially faster than others. Growth investors are therefore primarily concerned with young companies. The theory is that growth in earnings and/or revenues will directly translate into an increase in the stock price. Typically a growth investor looks for investments in rapidly expanding industries especially those related to new technology. Profits are realized through capital gains and not dividends as nearly all growth companies reinvest their earnings and do not pay a dividend.

No Automatic Formula
Growth investors are concerned with a company's future growth potential, but there is no absolute formula for evaluating this potential. Every method of picking growth stocks (or any other type of stock) requires some individual interpretation and judgment. Growth investors use certain methods - or sets of guidelines or criteria - as a framework for their analysis, but these methods must be applied with a company's particular situation in mind. More specifically, the investor must consider the company in relation to its past performance and its industry's performance. The application of any one guideline or criterion may therefore change from company to company and from industry to industry.

The NAIC
The National Association of Investors Corporation (NAIC) is one of the best known organizations using and teaching the growth investing strategy. It is, as it says on its website, "one big investment club" whose goal is to teach investors how to invest wisely. The NAIC has developed some basic "universal" guidelines for finding possible growth companies - here's a look at some of the questions the NAIC suggests you should ask when considering stocks.

1. Strong Historical Earnings Growth?
According to the NAIC, the first question a growth investor should ask is whether the company, based on annual revenue, has been growing in the past. Below are rough guidelines for the rate of EPS growth an investor should look for in companies of differing sizes, which would indicate their growth investing potential:

Although the NAIC suggests that companies display this type of EPS growth in at least the last five years, a 10-year period of this growth is even more attractive. The basic idea is that if a company has displayed good growth (as defined by the above chart) over the last five- or 10-year period, it is likely to continue doing so in the next five to 10 years.

2. Strong Forward Earnings Growth?
The second criterion set out by the NAIC is a projected five-year growth rate of at least 10-12%, although 15% or more is ideal. These projections are made by analysts, the company or other credible sources.

The big problem with forward estimates is that they are estimates. When a growth investor sees an ideal growth projection, he or she, before trusting this projection, must evaluate its credibility. This requires knowledge of the typical growth rates for different sizes of companies. For example, an established large cap will not be able to grow as quickly as a younger small-cap tech company. Also, when evaluating analyst consensus estimates, an investor should learn about the company's industry - specifically, what its prospects are and what stage of growth it is at. (See The Stages of Industry Growth.)

3. Is Management Controlling Costs and Revenues?
The third guideline set out by the NAIC focuses specifically on pre-tax profit margins. There are many examples of companies with astounding growth in sales but less than outstanding gains in earnings. High annual revenue growth is good, but if EPS has not increased proportionately, it's likely due to a decrease in profit margin.

By comparing a company's present profit margins to its past margins and its competition's profit margins, a growth investor is able to gauge fairly accurately whether or not management is controlling costs and revenues and maintaining margins. A good rule of thumb is that if company exceeds its previous five-year average of pre-tax profit margins as well as those of its industry, the company may be a good growth candidate.

4. Can Management Operate the Business Efficiently?
Efficiency can be quantified by using return on equity (ROE). Efficient use of assets should be reflected in a stable or increasing ROE. Again, analysis of this metric should be relative: a company's present ROE is best compared to the five-year average ROE of the company and the industry.

5. Can the Stock Price Double in Five Years?
If a stock cannot realistically double in five years, it's probably not a growth stock. That's the general consensus. This may seem like an overly high, unrealistic standard, but remember that with a growth rate of 10%, a stock's price would double in seven years. So the rate growth investors are seeking is 15% per annum, which yields a doubling in price in five years.

An Example
Now that we've outlined the NAIC's basic criteria for evaluating growth stocks, let's demonstrate how these criteria are used to analyze a company, using Microsoft's 2003 figures. For the sake of this demonstration, we'll discuss these numbers as though they were Microsoft's most current figures (that is, "today's figures").

1. Five-Year Earnings Figures

• Five-year average annual sales growth is 15.94%.
• Five-year average annual EPS growth is 10.91%.

Both of these are strong figures. The annual EPS growth is well above the 5% standard the NAIC sets out for firms of Microsoft's size.

2. Strong Projected Earnings Growth

• Five-year projected average annual earnings growth is 11.03%.

The projected growth figures are strong, but not exceptional.

3. Costs and Revenue Control

• Pre-tax margin in most recent fiscal year is 45.80%.
• Five-year average fiscal pre-tax margin is 50.88%.
• Industry's five-year average pre-tax margin is 26.7%.

There are two ways to look at this. The trend is down 5.08% (50.88% - 45.80%) from the five-year average, which is negative. But notice that the industry's average margin is only 26.7%. So even though Microsoft's margins have dropped, they're still a great deal higher than those of its industry.

4. ROE

• Most recent fiscal year-end is ROE 16.40%.
• Five-year average ROE is 19.80%.
• Industry average five-year ROE is 13.60%.

Again, it's a point of concern that the ROE figure is a little lower than the five-year average. However, like Microsoft's profit margin, the ROE is not drastically reduced - it's only down a few points and still well above the industry average.

5. Potential to Double in Five Years

• Stock is projected to appreciate by 254.7%.

The average analyst projections for Microsoft suggest that in five years the stock will not merely double in value, but it'll be worth 254.7% its current value.

Is Microsoft a Growth Stock?
On paper, Microsoft meets many NAIC's criteria for a growth stock. But it also falls short of others. If, for instance, we were to dismiss Microsoft because of its decreased margins and not compare them to the industry's margins, we would be ignoring the industry conditions within which Microsoft functions. On the other hand, when comparing Microsoft to its industry, we must still decide how telling it is that Microsoft has higher-than-average margins. Is Microsoft a good growth stock even though its industry may be maturing and facing declining margins? Can a company of its size find enough new markets to keep expanding?

Clearly there are arguments on both sides and there is no "right" answer. What these criteria do, however, is open up doorways of analysis through which we can dig deeper into a company's condition. Because no single set of criteria is infallible, the growth investor may want to adjust a set of guidelines by adding (or omitting) criteria. So, although we've provided five basic questions, it's important to note that the purpose of the example is to provide a starting point from which you can build your own growth screens.

Conclusion
It's not too complicated: growth investors are concerned with growth. The guiding principle of growth investing is to look for companies that keep reinvesting into themselves to produce new products and technology. Even though the stocks might be expensive in the present, growth investors believe that expanding top and bottom lines will ensure an investment pays off in the long run.

Stock-Picking Strategies: Value Investing

2010-02-12T07:54:00.000-08:00

Value investing is one of the best known stock-picking methods. In the 1930s, Benjamin Graham and David Dodd, finance professors at Columbia University, laid out what many consider to be the framework for value investing. The concept is actually very simple: find companies trading below their inherent worth.

The value investor looks for stocks with strong fundamentals - including earnings, dividends, book value, and cash flow - that are selling at a bargain price, given their quality. The value investor seeks companies that seem to be incorrectly valued (undervalued) by the market and therefore have the potential to increase in share price when the market corrects its error in valuation.

Value, Not Junk!
Before we get too far into the discussion of value investing, let's get one thing straight. Value investing doesn't mean just buying any stock that declines and therefore seems "cheap" in price. Value investors have to do their homework and be confident that they are picking a company that is cheap given its high quality.

It's important to distinguish the difference between a value company and a company that simply has a declining price. Say for the past year Company A has been trading at about $25 per share but suddenly drops to $10 per share. This does not automatically mean that the company is selling at a bargain. All we know is that the company is less expensive now than it was last year. The drop in price could be a result of the market responding to a fundamental problem in the company. To be a real bargain, this company must have fundamentals healthy enough to imply it is worth more than $10 - value investing always compares current share price to intrinsic value not to historic share prices.

Value Investing at Work
One of the greatest investors of all time, Warren Buffett, has proven that value investing can work: his value strategy took the stock of Berkshire Hathaway, his holding company, from $12 a share in 1967 to $70,900 in 2002. The company beat the S&P 500's performance by about 13.02% on average annually! Although Buffett does not strictly categorize himself as a value investor, many of his most successful investments were made on the basis of value investing principles. (See Warren Buffett: How He Does It.)

Buying a Business, not a Stock
We should emphasize that the value investing mentality sees a stock as the vehicle by which a person becomes an owner of a company - to a value investor profits are made by investing in quality companies, not by trading. Because their method is about determining the worth of the underlying asset, value investors pay no mind to the external factors affecting a company, such as market volatility or day-to-day price fluctuations. These factors are not inherent to the company, and therefore are not seen to have any effect on the value of the business in the long run.

Contradictions
While the efficient market hypothesis (EMH) claims that prices are always reflecting all relevant information, and therefore are already showing the intrinsic worth of companies, value investing relies on a premise that opposes that theory. Value investors bank on the EMH being true only in some academic wonderland. They look for times of inefficiency, when the market assigns an incorrect price to a stock.

Value investors also disagree with the principle that high beta (also known as volatility, or standard deviation) necessarily translates into a risky investment. A company with an intrinsic value of $20 per share but is trading at $15 would be, as we know, an attractive investment to value investors. If the share price dropped to $10 per share, the company would experience an increase in beta, which conventionally represents an increase in risk. If, however, the value investor still maintained that the intrinsic value was $20 per share, s/he would see this declining price as an even better bargain. And the better the bargain, the lesser the risk. A high beta does not scare off value investors. As long as they are confident in their intrinsic valuation, an increase in downside volatility may be a good thing.

Screening for Value Stocks
Now that we have a solid understanding of what value investing is and what it is not, let's get into some of the qualities of value stocks.

Qualitative aspects of value stocks:

Where are value stocks found? - Everywhere. Value stocks can be found trading on the NYSE, Nasdaq, AMEX, over the counter, on the FTSE, Nikkei and so on.
a) In what industries are value stocks located? - Value stocks can be located in any industry, including energy, finance and even technology (contrary to popular belief).
b) In what industries are value stocks most often located? - Although value stocks can be located anywhere, they are often located in industries that have recently fallen on hard times, or are currently facing market overreaction to a piece of news affecting the industry in the short term. For example, the auto industry's cyclical nature allows for periods of undervaluation of companies such as Ford or GM.
Can value companies be those that have just reached new lows? - Definitely, although we must re-emphasize that the "cheapness" of a company is relative to intrinsic value. A company that has just hit a new 12-month low or is at half of a 12-month high may warrant further investigation.
Here is a breakdown of some of the numbers value investors use as rough guides for picking stocks. Keep in mind that these are guidelines, not hard-and-fast rules:

Share price should be no more than two-thirds of intrinsic worth.
Look at companies with P/E ratios at the lowest 10% of all equity securities.
PEG should be less than one.
Stock price should be no more than tangible book value.
There should be no more debt than equity (i.e. D/E ratio < 1).
Current assets should be two times current liabilities.
Dividend yield should be at least two-thirds of the long-term AAA bond yield.
Earnings growth should be at least 7% per annum compounded over the last 10 years.

The P/E and PEG Ratios
Contrary to popular belief, value investing is not simply about investing in low P/E stocks. It's just that stocks which are undervalued will often reflect this undervaluation through a low P/E ratio, which should simply provide a way to compare companies within the same industry. For example, if the average P/E of the technology consulting industry is 20, a company trading in that industry at 15 times earnings should sound some bells in the heads of value investors.

Another popular metric for valuing a company's intrinsic value is the PEG ratio, calculated as a stock's P/E ratio divided by its projected year-over-year earnings growth rate. In other words, the ratio measures how cheap the stock is while taking into account its earnings growth. If the company's PEG ratio is less than one, it is considered to be undervalued.

Narrowing It Down Even Further
One well-known and accepted method of picking value stocks is the net-net method. This method states that if a company is trading at two-thirds of its current assets, no other gauge of worth is necessary. The reasoning behind this is simple: if a company is trading at this level, the buyer is essentially getting all the permanent assets of the company (including property, equipment, etc) and the company's intangible assets (mainly goodwill, in most cases) for free! Unfortunately, companies trading this low are few and far between.

The Margin of Safety
A discussion of value investing would not be complete without mentioning the use of a margin of safety, a technique which is simple yet very effective. Consider a real-life example of a margin of safety. Say you're planning a pyrotechnics show, which will include flames and explosions. You have concluded with a high degree of certainty that it's perfectly safe to stand 100 feet from the center of the explosions. But to be absolutely sure no one gets hurt, you implement a margin of safety by setting up barriers 125 feet from the explosions.

This use of a margin of safety works similarly in value investing. It's simply the practice of leaving room for error in your calculations of intrinsic value. A value investor may be fairly confident that a company has an intrinsic value of $30 per share. But in case his or her calculations are a little too optimistic, he or she creates a margin of safety/error by using the $26 per share in their scenario analysis. The investor may find that at $15 the company is still an attractive investment, or he or she may find that at $24, the company is not attractive enough. If the stock's intrinsic value is lower than the investor estimated, the margin of safety would help prevent this investor from paying too much for the stock.

Conclusion
Value investing is not as sexy as some other styles of investing; it relies on a strict screening process. But just remember, there's nothing boring about outperforming the S&P by 13% over a 40-year span!

Stock-Picking Strategies: Qualitative Analysis

2010-02-11T07:41:00.000-08:00

Fundamental analysis has a very wide scope. Valuing a company involves not only crunching numbers and predicting cash flows but also looking at the general, more subjective qualities of a company. Here we will look at how the analysis of qualitative factors is used for picking a stock.

Management
The backbone of any successful company is strong management. The people at the top ultimately make the strategic decisions and therefore serve as a crucial factor determining the fate of the company. To assess the strength of management, investors can simply ask the standard five Ws: who, where, what, when and why?

Who?
Do some research, and find out who is running the company. Among other things, you should know who its CEO, CFO, COO and CIO are. Then you can move onto the next question.

Where?
You need to find out where these people come from, specifically, their educational and employment backgrounds. Ask yourself if these backgrounds make the people suitable for directing the company in its industry. A management team consisting of people who come from completely unrelated industries should raise questions. If the CEO of a newly-formed mining company previously worked in the industry, ask yourself whether he or she has the necessary qualities to lead a mining company to success.

What and When?
What is the management philosophy? In other words, in what style do these people intend to manage the company? Some managers are more personable, promoting an open, transparent and flexible way of running the business. Other management philosophies are more rigid and less adaptable, valuing policy and established logic above all in the decision-making process. You can discern the style of management by looking at its past actions or by reading the annual report's management, discussion & analysis (MD&A) section. Ask yourself if you agree with this philosophy, and if it works for the company, given its size and the nature of its business.

Once you know the style of the managers, find out when this team took over the company. Jack Welch, for example, was CEO of General Electric for over 20 years. His long tenure is a good indication that he was a successful and profitable manager; otherwise, the shareholders and the board of directors wouldn't have kept him around. If a company is doing poorly, one of the first actions taken is management restructuring, which is a nice way of saying "a change in management due to poor results". If you see a company continually changing managers, it may be a sign to invest elsewhere.

At the same time, although restructuring is often brought on by poor management, it doesn't automatically mean the company is doomed. For example, Chrysler Corp was on the brink of bankruptcy when Lee Iacocca, the new CEO, came in and installed a new management team that renewed Chrysler's status as a major player in the auto industry. So, management restructuring may be a positive sign, showing that a struggling company is making efforts to improve its outlook and is about to see a change for the better.

Why?
A final factor to investigate is why these people have become managers. Look at the manager's employment history, and try to see if these reasons are clear. Does this person have the qualities you believe are needed to make someone a good manager for this company? Has s/he been hired because of past successes and achievements, or has s/he acquired the position through questionable means, such as self-appointment after inheriting the company? (For further reading, see: Get Tough on Management Puff and Evaluating a Company's Management.)

Know What a Company Does and How it Makes Money
A second important factor to consider when analyzing a company's qualitative factors is its product(s) or service(s). How does this company make money? In fancy MBA parlance, the question would be "What is the company's business model?"

Knowing how a company's activities will be profitable is fundamental to determining the worth of an investment. Often, people will boast about how profitable they think their new stock will be, but when you ask them what the company does, it seems their vision for the future is a little blurry: "Well, they have this high-tech thingamabob that does something with fiber-optic cables… ." If you aren't sure how your company will make money, you can't really be sure that its stock will bring you a return.

One of the biggest lessons taught by the dotcom bust of the late '90s is that not understanding a business model can have dire consequences. Many people had no idea how the dotcom companies were making money, or why they were trading so high. In fact, these companies weren't making any money; it's just that their growth potential was thought to be enormous. This led to overzealous buying based on a herd mentality, which in turn led to a market crash. But not everyone lost money when the bubble burst: Warren Buffett didn't invest in high-tech primarily because he didn't understand it. Although he was ostracized for this during the bubble, it saved him billions of dollars in the ensuing dotcom fallout. You need a solid understanding of how a company actually generates revenue in order to evaluate whether management is making the right decisions. (For more on this, see Getting to Know Business Models.)

Industry/Competition
Aside from having a general understanding of what a company does, you should analyze the characteristics of its industry, such as its growth potential. A mediocre company in a great industry can provide a solid return, while a mediocre company in a poor industry will likely take a bite out of your portfolio. Of course, discerning a company's stage of growth will involve approximation, but common sense can go a long way: it's not hard to see that the growth prospects of a high-tech industry are greater than those of the railway industry. It's just a matter of asking yourself if the demand for the industry is growing.

Market share is another important factor. Look at how Microsoft thoroughly dominates the market for operating systems. Anyone trying to enter this market faces huge obstacles because Microsoft can take advantage of economies of scale. This does not mean that a company in a near monopoly situation is guaranteed to remain on top, but investing in a company that tries to take on the "500-pound gorilla" is a risky venture.

Barriers against entry into a market can also give a company a significant qualitative advantage. Compare, for instance, the restaurant industry to the automobile or pharmaceuticals industries. Anybody can open up a restaurant because the skill level and capital required are very low. The automobile and pharmaceuticals industries, on the other hand, have massive barriers to entry: large capital expenditures, exclusive distribution channels, government regulation, patents and so on. The harder it is for competition to enter an industry, the greater the advantage for existing firms.

Brand Name
A valuable brand reflects years of product development and marketing. Take for example the most popular brand name in the world: Coca-Cola. Many estimate that the intangible value of Coke's brand name is in the billions of dollars! Massive corporations such as Procter & Gamble rely on hundreds of popular brand names like Tide, Pampers and Head & Shoulders. Having a portfolio of brands diversifies risk because the good performance of one brand can compensate for the underperformers.

Keep in mind that some stock-pickers steer clear of any company that is branded around one individual. They do so because, if a company is tied too closely to one person, any bad news regarding that person may hinder the company's share performance even if the news has nothing to do with company operations. A perfect example of this is the troubles faced by Martha Stewart Omnimedia as a result of Stewart's legal problems in 2004.

Don't Overcomplicate
You don't need a PhD in finance to recognize a good company. In his book "One Up on Wall Street", Peter Lynch discusses a time when his wife drew his attention to a great product with phenomenal marketing. Hanes was test marketing a product called L'eggs: women's pantyhose packaged in colorful plastic egg shells. Instead of selling these in department or specialty stores, Hanes put the product next to the candy bars, soda and gum at the checkouts of supermarkets - a brilliant idea since research showed that women frequented the supermarket about 12 times more often than the traditional outlets for pantyhose. The product was a huge success and became the second highest-selling consumer product of the 1970s.

Most women at the time would have easily seen the popularity of this product, and Lynch's wife was one of them. Thanks to her advice, he researched the company a little deeper and turned his investment in Hanes into a solid earner for Fidelity, while most of the male managers on Wall Street missed out. The point is that it's not only Wall Street analysts who are privy to information about companies; average everyday people can see such wonders too. If you see a local company expanding and doing well, dig a little deeper, ask around. Who knows, it may be the next Hanes.

Conclusion
Assessing a company from a qualitative standpoint and determining whether you should invest in it are as important as looking at sales and earnings. This strategy may be one of the simplest, but it is also one of the most effective ways to evaluate a potential investment.

Stock-Picking Strategies: Fundamental Analysis

2010-02-10T07:35:00.000-08:00

Ever hear someone say that a company has "strong fundamentals"? The phrase is so overused that it's become somewhat of a cliché. Any analyst can refer to a company's fundamentals without actually saying anything meaningful. So here we define exactly what fundamentals are, how and why they are analyzed, and why fundamental analysis is often a great starting point to picking good companies.

The Theory
Doing basic fundamental valuation is quite straightforward; all it takes is a little time and energy. The goal of analyzing a company's fundamentals is to find a stock's intrinsic value, a fancy term for what you believe a stock is really worth - as opposed to the value at which it is being traded in the marketplace. If the intrinsic value is more than the current share price, your analysis is showing that the stock is worth more than its price and that it makes sense to buy the stock.

Although there are many different methods of finding the intrinsic value, the premise behind all the strategies is the same: a company is worth the sum of its discounted cash flows. In plain English, this means that a company is worth all of its future profits added together. And these future profits must be discounted to account for the time value of money, that is, the force by which the $1 you receive in a year's time is worth less than $1 you receive today. (For further reading, see Understanding the Time Value of Money).

The idea behind intrinsic value equaling future profits makes sense if you think about how a business provides value for its owner(s). If you have a small business, its worth is the money you can take from the company year after year (not the growth of the stock). And you can take something out of the company only if you have something left over after you pay for supplies and salaries, reinvest in new equipment, and so on. A business is all about profits, plain old revenue minus expenses - the basis of intrinsic value.

Greater Fool Theory
One of the assumptions of the discounted cash flow theory is that people are rational, that nobody would buy a business for more than its future discounted cash flows. Since a stock represents ownership in a company, this assumption applies to the stock market. But why, then, do stocks exhibit such volatile movements? It doesn't make sense for a stock's price to fluctuate so much when the intrinsic value isn't changing by the minute.

The fact is that many people do not view stocks as a representation of discounted cash flows, but as trading vehicles. Who cares what the cash flows are if you can sell the stock to somebody else for more than what you paid for it? Cynics of this approach have labeled it the greater fool theory, since the profit on a trade is not determined by a company's value, but about speculating whether you can sell to some other investor (the fool). On the other hand, a trader would say that investors relying solely on fundamentals are leaving themselves at the mercy of the market instead of observing its trends and tendencies.

This debate demonstrates the general difference between a technical and fundamental investor. A follower of technical analysis is guided not by value, but by the trends in the market often represented in charts. So, which is better: fundamental or technical? The answer is neither. As we mentioned in the introduction, every strategy has its own merits. In general, fundamental is thought of as a long-term strategy, while technical is used more for short-term strategies. (We'll talk more about technical analysis and how it works in a later section.)

Putting Theory into Practice
The idea of discounting cash flows seems okay in theory, but implementing it in real life is difficult. One of the most obvious challenges is determining how far into the future we should forecast cash flows. It's hard enough to predict next year's profits, so how can we predict the course of the next 10 years? What if a company goes out of business? What if a company survives for hundreds of years? All of these uncertainties and possibilities explain why there are many different models devised for discounting cash flows, but none completely escapes the complications posed by the uncertainty of the future.

Let's look at a sample of a model used to value a company. Because this is a generalized example, don't worry if some details aren't clear. The purpose is to demonstrate the bridging between theory and application. Take a look at how valuation based on fundamentals would look:

The problem with projecting far into the future is that we have to account for the different rates at which a company will grow as it enters different phases. To get around this problem, this model has two parts: (1) determining the sum of the discounted future cash flows from each of the next five years (years one to five), and (2) determining 'residual value', which is the sum of the future cash flows from the years starting six years from now.

In this particular example, the company is assumed to grow at 15% a year for the first five years and then 5% every year after that (year six and beyond). First, we add together all the first five yearly cash flows - each of which are discounted to year zero, the present - in order to determine the present value (PV). So once the present value of the company for the first five years is calculated, we must, in the second stage of the model, determine the value of the cash flows coming from the sixth year and all the following years, when the company's growth rate is assumed to be 5%. The cash flows from all these years are discounted back to year five and added together, then discounted to year zero, and finally combined with the PV of the cash flows from years one to five (which we calculated in the first part of the model). And voilà! We have an estimate (given our assumptions) of the intrinsic value of the company. An estimate that is higher than the current market capitalization indicates that it may be a good buy. Below, we have gone through each component of the model with specific notes:

Prior-year cash flow - The theoretical amount, or total profits, that the shareholders could take from the company the previous year.
Growth rate - The rate at which owner's earnings are expected to grow for the next five years.
Cash flow - The theoretical amount that shareholders would get if all the company's earnings, or profits, were distributed to them.
Discount factor - The number that brings the future cash flows back to year zero. In other words, the factor used to determine the cash flows' present value (PV).
Discount per year - The cash flow multiplied by the discount factor.
Cash flow in year five - The amount the company could distribute to shareholders in year five.
Growth rate - The growth rate from year six into perpetuity.
Cash flow in year six - The amount available in year six to distribute to shareholders.
Capitalization Rate - The discount rate (the denominator) in the formula for a constantly growing perpetuity.
Value at the end of year five - The value of the company in five years.
Discount factor at the end of year five - The discount factor that converts the value of the firm in year five into the present value.
PV of residual value - The present value of the firm in year five.
So far, we've been very general on what a cash flow comprises, and unfortunately, there is no easy way to measure it. The only natural cash flow from a public company to its shareholders is a dividend, and the dividend discount model (DDM) values a company based on its future dividends (see Digging Into The DDM.). However, a company doesn't pay out all of its profits in dividends, and many profitable companies don't pay dividends at all.

What happens in these situations? Other valuation options include analyzing net income, free cash flow, EBITDA and a series of other financial measures. There are advantages and disadvantages to using any of these metrics to get a glimpse into a company's intrinsic value. The point is that what represents cash flow depends on the situation. Regardless of what model is used, the theory behind all of them is the same.

Stock-Picking Strategies: Introduction

2010-02-09T07:30:00.000-08:00

When it comes to personal finance and the accumulation of wealth, few subjects are more talked about than stocks. It's easy to understand why: playing the stock market is thrilling. But on this financial roller-coaster ride, we all want to experience the ups without the downs.

In this tutorial, we examine some of the most popular strategies for finding good stocks (or at least avoiding bad ones). In other words, we'll explore the art of stock-picking - selecting stocks based on a certain set of criteria, with the aim of achieving a rate of return that is greater than the market's overall average.

Before exploring the vast world of stock-picking methodologies, we should address a few misconceptions. Many investors new to the stock-picking scene believe that there is some infallible strategy that, once followed, will guarantee success. There is no foolproof system for picking stocks! If you are reading this tutorial in search of a magic key to unlock instant wealth, we're sorry, but we know of no such key.

This doesn't mean you can't expand your wealth through the stock market. It's just better to think of stock-picking as an art rather than a science. There are a few reasons for this:

So many factors affect a company's health that it is nearly impossible to construct a formula that will predict success. It is one thing to assemble data that you can work with, but quite another to determine which numbers are relevant.

A lot of information is intangible and cannot be measured. The quantifiable aspects of a company, such as profits, are easy enough to find. But how do you measure the qualitative factors, such as the company's staff, its competitive advantages, its reputation and so on? This combination of tangible and intangible aspects makes picking stocks a highly subjective, even intuitive process.

Because of the human (often irrational) element inherent in the forces that move the stock market, stocks do not always do what you anticipate they'll do. Emotions can change quickly and unpredictably. And unfortunately, when confidence turns into fear, the stock market can be a dangerous place.

The bottom line is that there is no one way to pick stocks. Better to think of every stock strategy as nothing more than an application of a theory - a "best guess" of how to invest. And sometimes two seemingly opposed theories can be successful at the same time. Perhaps just as important as considering theory, is determining how well an investment strategy fits your personal outlook, time frame, risk tolerance and the amount of time you want to devote to investing and picking stocks.

At this point, you may be asking yourself why stock-picking is so important. Why worry so much about it? Why spend hours doing it? The answer is simple: wealth. If you become a good stock-picker, you can increase your personal wealth exponentially. Take Microsoft, for example. Had you invested in Bill Gates' brainchild at its IPO back in 1986 and simply held that investment, your return would have been somewhere in the neighborhood of 35,000% by spring of 2004. In other words, over an 18-year period, a $10,000 investment would have turned itself into a cool $3.5 million! (In fact, had you had this foresight in the bull market of the late '90s, your return could have been even greater.) With returns like this, it's no wonder that investors continue to hunt for "the next Microsoft".

Without further ado, let's start by delving into one of the most basic and crucial aspects of stock-picking: fundamental analysis, whose theory underlies all of the strategies we explore in this tutorial (with the exception of the last section on technical analysis). Although there are many differences between each strategy, they all come down to finding the worth of a company. Keep this in mind as we move forward.

What's the difference between "top-down" and "bottom-up" investing?

2010-02-08T07:27:00.000-08:00

Before we look at the differences between top-down and bottom-up investing, we should make it clear that both of these approaches have the same goal - to ferret out great stocks. Now, let's look at the different strategies used by top-down vs. bottom-up investors to select companies in which to invest.

Top-down investing involves analyzing the "big picture". Investors using this approach look at the economy and try to forecast which industry will generate the best returns. These investors then look for individual companies within the chosen industry and add the stock to their portfolios. For example, suppose you believe there will be a drop in interest rates. Using the top-down approach, you might determine that the home-building industry would benefit the most from the macroeconomic changes and then limit your search to the top companies in that industry.

Conversely, a bottom-up investor overlooks broad sector and economic conditions and instead focuses on selecting a stock based on the individual attributes of a company. Advocates of the bottom-up approach simply seek strong companies with good prospects, regardless of industry or macroeconomic factors. What constitutes "good prospects", however, is a matter of opinion. Some investors look for earnings growth while others find companies with low P/E ratios attractive. A bottom-up investor will compare companies based on these fundamentals; as long as the companies are strong, the business cycle or broader industry conditions are of no concern.

P/E ratios explained

2010-02-05T12:54:00.000-08:00

What Does Price-Earnings Ratio - P/E Ratio Mean?

A valuation ratio of a company's current share price compared to its per-share earnings.

Calculated as:

For example, if a company is currently trading at $43 a share and earnings over the last 12 months were $1.95 per share, the P/E ratio for the stock would be 22.05 ($43/$1.95).

EPS is usually from the last four quarters (trailing P/E), but sometimes it can be taken from the estimates of earnings expected in the next four quarters (projected or forward P/E). A third variation uses the sum of the last two actual quarters and the estimates of the next two quarters.

Also sometimes known as "price multiple" or "earnings multiple".

Price-Earnings Ratio - P/E Ratio

In general, a high P/E suggests that investors are expecting higher earnings growth in the future compared to companies with a lower P/E. However, the P/E ratio doesn't tell us the whole story by itself. It's usually more useful to compare the P/E ratios of one company to other companies in the same industry, to the market in general or against the company's own historical P/E. It would not be useful for investors using the P/E ratio as a basis for their investment to compare the P/E of a technology company (high P/E) to a utility company (low P/E) as each industry has much different growth prospects.

The P/E is sometimes referred to as the "multiple", because it shows how much investors are willing to pay per dollar of earnings. If a company were currently trading at a multiple (P/E) of 20, the interpretation is that an investor is willing to pay $20 for $1 of current earnings.

It is important that investors note an important problem that arises with the P/E measure, and to avoid basing a decision on this measure alone. The denominator (earnings) is based on an accounting measure of earnings that is susceptible to forms of manipulation, making the quality of the P/E only as good as the quality of the underlying earnings number.

The Ins And Outs Of Selling Options

2010-02-02T07:14:00.000-08:00

I wanted to learn more about options and I figure you might too, so I did a search and came up with this really good article from Investopedia.

In the world of buying and selling stock options, choices are made in regards to which strategy is best when considering a trade. If an investor is bullish, she can buy a call or sell a put, whereas if she is bearish, she can buy a put or sell a call. There are many reasons to choose each of the various strategies, but it is often said that "options are made to be sold." This article will explain why options tend to favor the options seller, how to get a sense of the probability of success in selling an option and what risks accompany selling options.

Time Is on My Side

The phrase "time is on my side" is not just popular because of The Rolling Stones, but also because selling options is a positive theta trade. Positive theta means that the time value in stocks will actually melt in your favor. You may know that an option is made up of intrinsic and extrinsic value. The intrinsic value relies on the stock's movement and acts almost like home equity. If the option is deeper in the money (ITM), then it has more intrinsic value. If the stock moves out of the money (OTM), then the extrinsic value will grow. Extrinsic value is also commonly known as time value.

During an option transaction, the buyer expects the stock to move in one direction and hopes to profit from it. However, this person pays both intrinsic and extrinsic value and must make up the extrinsic value to profit. Because theta is negative, the option buyer can lose money if the stock stays still or, perhaps even more frustratingly, if the stock moves slowly in the correct direction but the move is offset by time decay. Time decay works so well in the favor of the option seller because not only will it decay a little each day but it also works weekends and holidays. It's a slow-moving money maker for patient investors.

Volatility Risks and Rewards

Obviously having the stock price stay in the same area or having it move in your favor will be an important part of your success as an option seller, but paying attention to implied volatility changes is also vital to your success. Implied volatility, also known as vega, moves up and down depending on the supply and demand for option contracts. An influx of option buying will inflate the contract premium to entice option sellers to take the opposite side of each trade. Vega is part of the extrinsic value and can inflate or deflate the premium quickly.

An option seller may be short on a contract and then experience a rise in demand for contracts, which, in turn, inflates the price of the premium and may cause a loss, even if the stock hasn't moved. In most cases, on a single stock, the inflation will occur in anticipation of an earnings announcement. Monitoring implied volatility provides an option seller with an edge by selling when it's high because it will likely revert to the mean.

At the same time, time decay will work in favor of the seller too. It's important to remember that the closer the strike price is to the stock price, the more sensitive the option will be to changes in implied volatility. Therefore, the further out of the money a contract is or the deeper in the money, the less sensitive it will be to implied volatility changes.

Probability of Success

Option buyers use a contract's delta to determine how much the option contract will increase in value if the underlying stock moves in favor of the contract. However, option sellers use delta to determine the probability of success. You may remember that a delta of 1.0 means that an option will likely move dollar-per-dollar with the underlying stock, whereas a delta of .50 means the option will move 50 cents on the dollar with the underlying stock. An option seller would say that a delta of 1.0 means you have a 100% probability of success that the option will be at least 1 cent in the money by expiration and a .50 delta has a 50% chance that the option will be 1 cent in the money by expiration. The further out of the money an option is, the higher the probability of success is when selling the option without the threat of being assigned if the contract is exercised.

At some point, option sellers have to determine how important a probability of success is compared to how much premium they are going to get from selling the option. Figure 2 shows the bid and ask prices for some option contracts. Notice the lower the delta that accompanies the strike prices, the lower the premium payouts. This means that an edge of some kind needs to be determined. Various calculators are used other than delta, but this particular calculator is based on implied volatility and may give investors a much-needed edge. However, using fundamental evaluation or technical analysis can also help option sellers.

Worst-Case Scenarios

Many investors refuse to sell options because they fear worst-case scenarios. The likelihood of these types of events taking place may be very small, but it is still important to know they exist. First off, selling a call option has the theoretical risk of the stock climbing to the moon. While this may be unlikely, there isn't an upside protection to stop the loss if the stock rallies higher. Therefore, call sellers need to determine a point at which they will choose to buy back an option contract if the stock rallies, or they may implement any number of multi-leg option spread strategies designed to hedge against loss.

Selling puts, however, is basically the equivalent of a covered call. When selling a put, remember the risk comes with the stock falling, but a stock can only hit zero and you get to keep the premium as a consolation prize. It is the same in owning a covered call - the stock could drop to zero and you lose all the money in the stock with only the call premium remaining. Similar to the selling of calls, selling puts can be protected by determining a price in which you may choose to buy back the put if the stock falls or hedge the position with a multi-leg option spread.

Selling options may not have the kind of excitement as buying options, nor will it likely be a "home run" strategy. In fact, it's more akin to hitting single after single. Just remember that enough singles will still get you around the bases and the score counts the same.

by Ryan Campbell,

Ryan Campbell, CMT has worked in the financial industry for approximately a decade. He has worked as a full-service broker, a banker and is currently a content producer for Investools.com. He writes a daily market commentary and develops courses on trading equities, options, futures and currencies. He has contributed as a columnist to other financial publications. Ryan is also an active member of the Market Technicians Association and was the recipient of its prestigious Chartered Market Technician designation.

What's the difference between a stop and a limit order?

2010-02-01T07:06:00.000-08:00

Different types of orders allow you to be more specific about how you'd like your broker to fulfill your trades. When you place a stop or limit order, you are telling your broker that you don't want the market price (the current price at which a stock is trading), but that you want the stock price to move in a certain direction before your order is executed.

With a stop order, your trade will be executed only when the security you want to buy or sell reaches a particular price (the stop price). Once the stock has reached this price, a stop order essentially becomes a market order and is filled.

For instance, if you own stock ABC, which currently trades at $20, and you place a stop order to sell it at $15, your order will only be filled once stock ABC drops below $15. Also known as a "stop-loss order", this allows you to limit your losses. However, this type of order can also be used to guarantee profits.

For example, assume that you bought stock XYZ at $10 per share and now the stock is trading at $20 per share. Placing a stop order at $15 will guarantee profits of approximately $5 per share, depending on how quickly the market order can be filled.

Stop orders are particularly advantageous to investors who are unable to monitor their stocks for a period of time, and brokerages may even set these stop orders for no charge.

One disadvantage of the stop order is that the order is not guaranteed to be filled at the preferred price the investor states. Once the stop order has been triggered, it turns into a market order, which is filled at the best possible price. This price may be lower than the price specified by the stop order.

Moreover, investors must be conscientious about where they set a stop order. It may be unfavorable if it is activated by a short-term fluctuation in the stock's price. For example, if stock ABC is relatively volatile and fluctuates by 15% on a weekly basis, a stop loss set at 10% below the current price may result in the order being triggered at an inopportune or premature time.

A limit order is an order that sets the maximum or minimum at which you are willing to buy or sell a particular stock. For instance, if you want to buy stock ABC, which is trading at $12, you can set a limit order for $10. This guarantees that you will pay no more than $10 to buy this stock. Once the stock reaches $10 or less, you will automatically buy a predetermined amount of shares.

On the other hand, if you own stock ABC and it is trading at $12, you could place a limit order to sell it at $15. This guarantees that the stock will be sold at $15 or more.

The primary advantage of a limit order is that it guarantees that the trade will be made at a particular price; however, your brokerage will probably charge a higher a commission for the limit order, and it's possible that your order will not be executed at all if the limit price is not reached.

How to avoid taxes with an IRA

2010-01-30T18:17:00.000-08:00

I just learned something AWESOME, maybe you already know this, but I had a question about taxes and trading profits in a Roth IRA.

My question was if you trade stocks in a Roth IRA and do not withdraw the profits but re-invest them are they taxed? Well here is the answer:

One of the most common and 100% IRS-approved ways for the active trader to avoid taxes is to trade within an IRA. Please note, I am not a CPA or Tax Advisor. These are simply a few observations from one trader to another (or would-be trader). Consult directly with your tax advisor prior to taking any action in regards to the following. All the same, this should serve as an introduction into how traders can trade tax free within an IRA structure.

Short term gains which are what are produced by active trading are taxed at your regular tax rate. Long term gains on investments held for one year or more are taxed at 20%. However, if you actively trade within your IRA, not only are ALL taxes deferred, you don't have to report any gains or losses. The reason being there is no tax effect on the gains/losses so the IRS doesn't care what happens.

A Roth IRA is an even better vehicle for active traders to trade within. Profits made within the Roth IRA structure are never required by the IRS to be reported. Besides, gains are never taxed if the rules are followed. Basically, you need to hold the Roth for a minimum of 5 years and be over 59 1/2 to withdrawal 100% tax free.

Many traders believe that one can only trade on the long side within an IRA. This isn't true. Short selling is permitted under certain guidelines. In addition your IRA can be traded on margin to magnify the gains.

The IRS may be the trader's nemesis, but knowledge of the beast will mitigate the harm in a completely legal and ethical manner.

Dave Goodboy is Vice President of Marketing for a New York City based multi-strategy fund.
That is great news, now I know that I can trade in my Roth IRA and not worry about taxes WOOHOO!

2010-01-30T14:52:00.001-08:00

Technorati needs to verify that I am an author of this blog by looking for a unique code. So I am posting this so the following code 7VY9837RE53X can be checked by them and the blog can be added to their system. I will remove this post as soon as the verify it.

More about Growth Investing

2010-01-30T12:38:00.000-08:00

Here is some more information about Growth Companies:

What Does Growth Company Mean?

Any firm whose business generates significant positive cash flows or earnings, which increase at significantly faster rates than the overall economy. A growth company tends to have very profitable reinvestment opportunities for its own retained earnings. Thus, it typically pays little to no dividends to stockholders, opting instead to plow most or all of its profits back into its expanding business.

Growth Company

Growth companies are most often seen in the technology industries. The quintessential example of a growth company is Google, which has grown revenues, cash flows and earnings by leaps and bounds since its initial public offering. Growth companies such as Google are expected to increase profits markedly in the future, and thus the market bids up their share prices to high valuations. This contrasts with mature companies, such as diversified utility companies, which see very stable earnings with little to no growth.

Growth Investing

2010-01-29T12:31:00.000-08:00

I thought some of my readers might also like to know a little more about Growth Investing, so here it is:

What Does Growth Investing Mean?

A strategy whereby an investor seeks out stocks with what they deem good growth potential. In most cases a growth stock is defined as a company whose earnings are expected to grow at an above-average rate compared to its industry or the overall market.

Growth Investing

Growth investors often call growth investing a capital growth strategy, since investors seek to maximize their capital gains.Although it is often said that growth investing and value investing are diametrically opposed, a better way to view these two strategies is to consider a quote by Warren Buffett: "growth and value investing are joined at the hip". Another very famous investor, Peter Lynch, pioneered a hybrid of growth and value investing with what is now commonly referred to as a "growth at a reasonable price (GARP)" strategy.

What Does Growth At A Reasonable Price - GARP Mean?

An equity investment strategy that seeks to combine tenets of both growth investing and value investing to find individual stocks. GARP investors look for companies that are showing consistent earnings growth above broad market levels (a tenet of growth investing ) while excluding companies that have very high valuations (value investing). The overarching goal is to avoid the extremes of either growth or value investing; this typically leads GARP investors to growth-oriented stocks with relatively low price/earnings (P/E) multiples in normal market conditions.

Growth At A Reasonable Price - GARP

GARP investing was popularized by legendary Fidelity manager Peter Lynch. While the style may not have rigid boundaries for including or excluding stocks, a fundamental metric that serves as a solid benchmark is the price/earnings growth (PEG) ratio. The PEG shows the ratio between a company's P/E ratio (valuation) and its expected earnings growth rate over the next several years. A GARP investor would seek out stocks that have a PEG of 1 or less, which shows that P/E ratios are in line with expected earnings growth. This helps to uncover stocks that are trading at reasonable prices.

In a bear market or other downturn in stocks, one could expect the returns of GARP investors to be higher than those of pure growth investors, but subpar to strict value investors who generally purchase shares at P/Es under broad market multiples.

Value investing

2010-01-28T07:51:00.000-08:00

I definitely fall under the category of value investor. I like the idea of buying stocks for less than they are worth. Who wants to pay full price, don't we all like a sale?
Well here is some information on what value investing is.

Value investing is an investment that derives from the ideas on investment and that Ben Graham began teaching at Columbia Business School in 1928 and subsequently developed in their 1934 text Security Analysis. Although value investing has taken many forms since its inception, it generally involves buying a stock whose shares appear under priced by some form(s) of fundamental analysis. As examples, such securities may be stock in public companies that trade at discounts to book value or tangible book value, have high dividend yields, have low price-to-earning multiples or have low price-to-book ratios.

High-profile proponents of value investing, including Berkshire Hathaway chairman Warren Buffett, have argued that the essence of value investing is buying stocks at less than their intrinsic value. The discount of the market price to the intrinsic value is what Benjamin Graham called the "margin of safety". The intrinsic value is the discounted value of all future distributions.

However, the future distributions and the appropriate discount rate can only be assumptions. Warren Buffett has taken the value investing concept even further as his thinking has evolved to where for the last 25 years or so his focus has been on "finding an outstanding company at a sensible price" rather than generic companies at a bargain price.

Benjamin Graham

Benjamin Graham Value investing was established by Benjamin Graham and David Dodd, both professors at Columbia Business School and teachers of many famous investors. In Graham's book The Intelligent Investor, he advocated the important concept of margin of safety — first introduced in Security Analysis, a 1934 book he coauthored with David Dodd — which calls for a cautious approach to investing. In terms of picking stocks, he recommended defensive investment in stocks trading below their tangible book value as a safeguard to adverse future developments often encountered in the stock market.

Further evolution

However, the concept of value (as well as "book value") has evolved significantly since the 1970s. Book value is most useful in industries where most assets are tangible. Intangible assets such as patents, software, brands, or goodwill are difficult to quantify, and may not survive the break-up of a company. When an industry is going through fast technological advancements, the value of its assets is not easily estimated. Sometimes, the production power of an asset can be significantly reduced due to competitive disruptive innovation and therefore its value can suffer permanent impairment. One good example of decreasing asset value is a personal computer. An example of where book value does not mean much is the service and retail sectors. One modern model of calculating value is the discounted cash flow model (DCF). The value of an asset is the sum of its future cash flows, discounted back to the present.

Performance, value strategies

Value investing has proven to be a successful investment strategy. There are several ways to evaluate its success. One way is to examine the performance of simple value strategies, such as buying low PE ratio stocks, low price-to-cash-flow ratio stocks, or low price-to-book ratio stocks. Numerous academics have published studies investigating the effects of buying value stocks. These studies have consistently found that value stocks outperform growth stocks and the market as a whole.

Performance, value investors

Another way to examine the performance of value investing strategies is to examine the investing performance of well-known value investors. Simply examining the performance of the best known value investors would not be instructive, because investors do not become well known unless they are successful. This introduces a selection bias. A better way to investigate the performance of a group of value investors was suggested by Warren Buffett, in his May 17, 1984 speech that was published as The Superinvestors of Graham-and-Doddsville. In this speech, Buffett examined the performance of those investors who worked at Graham-Newman Corporation and were thus most influenced by Benjamin Graham. Buffett's conclusion is identical to that of the academic research on simple value investing strategies--value investing is, on average, successful in the long run.

During about a 25-year period (1965-90), published research and articles in leading journals of the value ilk were few. Warren Buffett once commented, "You couldn't advance in a finance department in this country unless you taught that the world was flat."

Fannie Mae

2010-01-25T19:59:00.000-08:00

So this stock has dropped again...
I am still good overall since I bought most of my shares under $0.70 per share. I like the fact that it has dropped again. Now I can buy more shares for cheaper. Our fearful, I mean fearless, I mean, famous, I mean infamous.... Whatever our Leader Mr. President has now promised unlimited funds for Fannie Mae and Freddy Mac.
This is BAD for us tax payers, but good for me as an investor since I know the US government will not let them fail.
Now that is the kind of stock I want... One that the US Government says will not fail.

Rule # 1 Investing

2009-06-23T10:14:00.000-07:00

I am reading a new book called "Rule #1" by: Phil Town.

The Rule is to Not loose money!

I love this book so far. It has helped teach me how to break down a companies financials to make a better informed decision when it comes to a stock purchase. I recommend this book to anyone that wants to make over 15% returns from the stock market. It follows the Value Investing principals.

I have researched many companies recently and have come up with a top 10 stocks to invest in. I am not going to share that information until I make the purchase which I will post on here, because I only invest in companies I can understand and that fit in my moral values, which may or may not be yours.

The system teaches you to figure out 6 main numbers for a company.

They are:

Return on Investment Capital (ROIC)
Sales Growth Rate
Earnings per share growth rate
Equity growth rate
Cash flow growth rate
Value per share (actual value per share based on what the company is worth)

When you figure them you figure the 10 year, 5 year and 1 year numbers. They all need to be over 10% with an increasing value over time.

Also the Value per share needs to be 50% of the actual share price to have a built in margin of safety.

Once you have narrowed down the list of stocks by doing this you can then look at P/E ratios, Dividends, Insider Trading, Earnings per share, Book price, etc.... To figure out if the company is one you want to own.

One thing I have learned is to look at myself as owning the company, not just a shareholder. Only by companies that you would own for 100 years and that you agree with their work ethic, their morals, etc... Also only buy businesses that you have some knowledge of, or feel close to.

Here is a quick and easy link to the book at Amazon. I have found that it is very hard to find a place that can beat their prices. So here it is, hope this helps and gets you into this form of investing, I think you will enjoy it, especially when the money starts rolling in from your investments.

Web Hosting

2009-06-09T11:22:00.001-07:00

I will be starting up some new websites soon and have decided on my hosting service. They have so many options and things included and great prices. I am sure I will love their services. The service is Lunarpages, check them out by following this link.

Link to the 1st post in this series that has links to all the other posts:

My quest for financial freedom: Back ground for this quest

Main link to this blog:

http://quest-for-financial-freedom.blogspot.com/

Scottrade

2009-06-08T10:36:00.000-07:00

Sorry I have not been here in a while. I will not let it happen again.

I have been busy getting some stuff done. I have recently set up a Scottrade account due to the lower trading fees than the company I was with prior.

I also have been doing a bunch of research on different stocks. More to come...

Link to the 1st post in this series that has links to all the other posts:

My quest for financial freedom: Back ground for this quest

Main link to this blog:

http://quest-for-financial-freedom.blogspot.com/

Investing clubs

2009-05-21T10:11:00.000-07:00

I have been researching recently about investment clubs, what they are and how they operate. I have come to realize that they are a really good idea for novice investors. I am currently locating a club to join in my area.

One thing nice about them is that you can get started investing for a very low monthly investment of between $25-$100 per month depending on the club.

They offer you a chance to learn about investing from other club members and to own a nice portfolio of stocks that you could not afford to own on your own.

The NAIC (National Association of Investors Corporation) is the governing body for investing clubs in the US. They are a non-profit organization dedicated to increasing investors knowledge and to help people become better investors. Their system of picking stocks has beat the market over the 55 years of their existence.

Their website is http://www.betterinvesting.org/ They have so much stuff on the site it is unreal. It is really worth the $6.95 per month to become a member. I joined today and have started to look through all they offer on the site.

Here are some of the top companies that investment clubs across the country invest in:

General Electric
Stryker
Walgreens
Cisco
Johnson and Johnson
Microsoft
Aflac
Lowes
Pepsi
Starbucks

Those are the top 10 stocks held by investment clubs in the US.

Please check out my Internet Income Streams blog here:

http://internet-incomestreams.blogspot.com/

Looking for someone?

Then follow this link and find them!

I have used this service for a while now and have found many of my old friends that I have lost contact with over the years. Click on the link type in the name and reconnect!

http://Acme-People-Search.com/1243108874LCOL

My Stocks

2009-05-04T09:44:00.000-07:00

My stocks

So far I have purchased shares of Zions Bank (ZION), shares of Fannie Mae (FNM) and shares of Pfizer (PFE).

The Pfizer shares I just purchased this morning at $13.80 per share.
The Zions Bank shares I purchased at $6.91 per share.
The Fannie Mae shares I purchased at $0.81 per share.

So far the Pfizer and the Zions Bank are up. The Zions Bank shares are doing pretty good, almost 100% growth.

Zions Bank and Pfizer are also dividend stocks, so they earn me money even if the share price does not go up. Actually if the share price does not go up I get a higher percentage dividend.

Zions Bank pays a $0.16 dividend.
Pfizer pays a $0.64 dividend.

Fannie Mae has a P/E ratio of: -.03 and a Forward P/E of: -0.24
Pfizer has a P/E ratio of: 12.43 and a Forward P/E of: 6.21
Zions Bank has a P/E ratio of: -2.95 and a Forward P/E of 13.80! How is that for potential!

Also in other news Pfizer (NYSE:PFE) just acquired Wyeth (NYSE:WYE).
With Pfizer posting annual earnings of $43 Billion last year and Wyeth posting earnings of $22 Billion I think Pfizer just grabbed a company that they may have underestimated the size of. Could this be a good or bad thing? I do not know, I think it will end up being a good thing, I just think that it will take a quarter or two before it really takes effect on the stock prices and earnings.

Pfizer (NYSE: PFE) opened at $13.36. So far today, the stock has hit a low of $13.21 and a high of $13.56. PFE is now trading at $13.52, up $0.35 (2.66%). Over the last 52 weeks the stock has ranged from a low of $11.62 to a high of $20.65. PFE shares are rising today after a Standpoint Research analyst initiated the stock at Buy with a $20 price target.

Fannie Mae and Freddy Mac have been in the news a lot recently of course and here is one of the reasons why:
Freddie and Fannie play a more vital role than ever in the U.S. housing market. The Federal Housing Administration now guarantees about a third of new U.S. loans, up from 3% at the height of the housing bubble. Most of the remaining new mortgages are still backed by one of these two. Furthermore, GSE bonds are held in huge numbers by large companies and formidable countries. In other words, allowing Fannie and Freddie to fail on their obligations could cause more losses at major institutions and possibly a foreign relations nightmare. So I do not think that the Government will let them fail, there is too much at stake here.

Please check out my Internet Income Streams blog here:

http://internet-incomestreams.blogspot.com/

Thrill of CD Auctions Lures Investors

2009-04-28T09:09:00.000-07:00

Thrill of CD Auctions Lures Investors

(I did not write nor claim any of this article as my own. It was written by the below mentioned person)

By DONNA KARDOS

(The Wall Street Journal)

As the stock market continues to be roiled by volatility, investors are turning to a surefire way to make their money grow, but with a modern twist: certificates of deposit that are auctioned off online.

The yield rates from the auctions aren't always better than the average retail CD rates. Still, investors have been turning to CD auctions for the thrill of the game, the comfort of a fixed rate and the chance that the rate they get might be above average.

MoneyAisle.com and Zions Direct offer two of the most well-known CD auction services. Both only offer CDs from banks insured by the Federal Deposit Insurance Corp., and have seen monthly hits to their sites and auction activity accelerate as the recession continues to affect consumers' investment decisions.

The FDIC currently insures deposits up to $250,000 per depositor per bank, but that coverage is scheduled to drop back to $100,000 in most cases at year's end.

Zions Direct, run by Utah-based regional bank Zions Bancorp, puts the bidding in customers' hands, giving them the chance to bid on CDs offered by multiple banks for terms such as one month, two months, three months, six months and one year. There are no sign-up charges and no broker fees, but investors need to deposit at least $1,000.

MoneyAisle.com asks investors what they want to deposit and for how long, prompting 112 banks to vie for the deposit. The site—which charges banks a fee to participate—chooses the bank that offers the best rate for the investor. It then presents the offer to the investor, who can back out if unsatisfied with the rate.

MoneyAisle Chief Executive Mukesh Chatter says he developed MoneyAisle to counter the idea that consumers have to find the best deals for things they want to buy on their own. "We're removing that burden," he says. Monthly hits to the site have jumped fivefold to more than 75,000 visitors in February from 14,586 visitors in July, its first full month in operation.

David Hemingway, executive vice president of Zions Direct, touts the fact that the Zions auction process—a modified Dutch auction similar to the way the Treasury Department auctions off its Treasury bills— gives investors the chance to control the auction. He says investors can secure CDs at yields higher than those they bid for because the auction gives all winning bidders in each auction the same yield.

In March, the auctions site on Zions Direct received 18,500 visits, more than triple the 5,600 hits it got in March 2008. Auction accounts soared 71% to just under 8,000 bidders in February from a year earlier.

Most banks auctioning CDs via Zions Direct are Zions affiliates, but those that aren't are charged a flat fee to participate. "What we are really interested in is the deposits that come with the new bidders' brokerage accounts," Mr. Hemingway says, though he noted the auctions currently contribute just a small fraction of the parent company's deposit base.

The Zions and MoneyAisle sites also are attracting users seeking entertainment value, says Motley Fool senior analyst Dan Caplinger. "Auctions are kind of fun," he says. "You feel like you're participating in things and getting a bargain you wouldn't otherwise get."

That's not necessarily always the case for CD auctions, though. While some result in better-than-average CD yields, others don't. Still, Zions' Mr. Hemingway points out, "they may not be excited about the yield, but people are happy just not to lose their money."

© 2009 Dow Jones & Company. All Rights Reserved.

Looking for someone?
Then follow this link and find them!
I have used this service for a while now and have found many of my old friends that I have lost contact with over the years. Click on the link type in the name and reconnect!
http://Acme-People-Search.com/1243108874LCOL

Please check out my Internet Income Streams blog here:

http://internet-incomestreams.blogspot.com/

Pfizer information

2009-04-27T09:54:00.000-07:00

I have been thinking about and researching Pfizer for a while now. I really like this stock and want to purchase some shares. I wanted to post up some information about the company that I have come across that leads me to really like this stock.

First off they are paying a 9.64% dividend! That is like a 9.64% savings account! Here is some information about the stock.

Beta -- 0.66
Dividend & Yield -- 1.28 (9.64%)
Earnings/Share -- 1.20
Forward P/E -- 5.98
Market Cap. -- 91.12 Bil
P/E -- 11.35
Return on Equity -- 13.11
Total Shares Out. -- 6.74 Bil

Here is some information about the company that I found on MSN Money:

Pfizer Inc. (Pfizer) is a research-based, global pharmaceutical company. The Company discovers, develops, manufactures and markets prescription medicines for humans and animals. It operates in two business segments: Pharmaceutical and Animal Health. Pfizer also operates several other businesses, including the manufacture of gelatin capsules, contract manufacturing and bulk pharmaceutical chemicals. In June 2008, Pfizer completed the acquisition of all remaining outstanding shares of common stock of Encysive Pharmaceuticals, Inc. through a merger of Pfizer's wholly owned subsidiary, Explorer Acquisition Corp., with and into Encysive. In June 2008, it also completed the acquisition of Serenex, Inc., a biotechnology company with a Heat Shock Protein 90 development portfolio. In January 2008, the Company completed the acquisition of Coley Pharmaceutical Group, Inc., a company whose area of capability is immunotherapy with emphasis on Toll-like receptor research and development.

Here is their contact information:

235 East 42nd StreetNew York NY 10017
http://www.pfizer.com/
Phone: 212-5732323
Fax: 212-5737851
Industry : Drug Manufacturers - Major
Employees : 81,800
Exchange : NYSE

Pfizer Declares Q2 2009 Dividend
April 23, 2009
The Board of Directors of Pfizer declared $0.16 second-quarter 2009 dividend on the Company's common stock, payable June 2, 2009, to shareholders of record at the close of business on May 8, 2009.
So if you buy before May 8th 2009 you will receive $0.16 per share on June 2nd 2009.

Please check out my Internet Income Streams blog here:

http://internet-incomestreams.blogspot.com/

Real investing and finance information

2009-04-27T09:15:00.000-07:00

I apologize to the readers of this blog that came here for investment information. I have been side tracked by these Pay Per Click, Pay to Post, and paid survey sites. I am going to get this blog back to talking about real investing, finance, and money making.

I have been talking to a person I met recently at work and his ideas for some stock purchases are Marvel and Hasbro due to the upcoming motion pictures that will hit theaters soon. I have done some checking and they might be a good option to invest in.

He also mentioned that Fannie Mae may not be that good. One thing he told me that I did not know was that the Government mandated them to come up with 5 Million in liquid assets. They did not know why because they are doing fine as a company. They only have a 2% default rate on their loans, and they own 70% of the home mortgages in the US. So the other 38% of defaulted loans come from the other 30% of all companies that loan money. That means that those companies are in big trouble.

The Government also issued themselves 10,000 shares of Preferred stock in Fannie Mae when they had come up with the 5 million in liquid assets. So what that says is that when and if anyone makes money from Fannie Mae the Government will get paid first due to the preferred shares vs the common shares that most of us own.

I still think that Fannie Mae is a viable option for investors. I am confident that they will recover and bring in nice profits to common and preferred share holders.

Link to the 1st post in this series that has links to all the other posts:

My quest for financial freedom: Back ground for this quest

Main link to this blog:

http://quest-for-financial-freedom.blogspot.com/

Earnings report 4/23/09

2009-04-23T07:34:00.000-07:00

Check out this site, I have earned $43.00 for clicking on 10 second ads in the last 2 days on it!

http://www.richptc.com/index.php?ref=Skypher

My earnings to date 4/23/09:

ClixSense-$8.20 http://www.clixsense.com/?2746864
Your2Cents online surveys-$15.00
Quans-$9.90 (They just started a new revenue sharing program that looks very promising, I have already received a $2.00 payout) http://www.javaist.com/quans/register.php?r=Skypher
Bidvertizer-$2.13
myLot-$1.01 http://www.mylot.com/?ref=Mykdiver
Performance Bux-Just joined at $0.005 per add clicked I don't see much worth in this site. http://www.performancebux.com/index.php?ref=Skypher
NoMinCashout-$0.52 http://nomincashout.com/index.php/Skypher.html
FastClix- $0.35 Just joined. http://fastclix.biz/?r=skypher
SmithBux-$0.48 Just joined. https://www.smithbux.com/index.php?r/Skypher
AW Surveys-$27.00 for only 6 surveys that took me 30 minutes to complete. (I will post when and if I get paid, they have a $75 payout threshold)http://www.AWSurveys.com/HomeMain.cfm?RefID=Skypher
NeoBux- $0.42 This is another PTC site that will not earn very much money, but I am willing to try it.
PostParker-$0.36 This is a PTP site that I am trying out to see if it is worth my time. http://www.postparker.com//index.php?ref=Skypher
Rich PTC-$4.00 This is a PTC site that I am trying out. You make $1.00 per click, but payout is $1000.00 so I do not know if this will ever be achievable. http://www.richptc.com/index.php?ref=Skypher
Valuebux-$0.05 This is another PTC site that I am trying out also. http://www.valuebux.com/?ref=Skypher
Kontera-I need to check my balance for an update on earnings. Site I use for the in text ads for this site (The blue double underlined words in the text of the posts)
Infolinks- I need to check my balance for an update on earnings. Site I use for the in text ads for this site (The green double underlined words in the text of the posts)

Total from all investments and online stuff: $112.42

Please pick the sites that I am doing the best on and click on my referral links to join and partake in the profits!

Sqip.com

2009-04-15T07:32:00.000-07:00

Check out this opportunity to get in on the ground floor of a site that will put myspace, facebook, twitter, etc... to shame! This will be the next BIG thing on the Internet!

http://affiliate.sqipcom.com/?user=Skypher

This site has it all! I know for a fact that you will not find a more comprehensive site on the web today!

Sqip.com is a "Networking Entertainment Communication Collaboration" that I just learned about and became a "Stakeholder" in. You receive 100 PEPs which at this time are worth 0.40 (UPDATE: they are worth 0.44 Euros now) Euros (44 Euros) for joining, which is your share.

Here are some of the features:

Networking
Communities
Groups
Videos
Photos
Music
Web search
Video search
MP3 play lists
Auctions
Blogging
Bookmarking
File sharing
B2B
Biz Networking
Market Place
B2C
Web/pop3 email
Spam Shield
Auto Responder
Chat rooms
Forums
Dating
Radio
Video chat
Conferencing
Collaboration
Multi Media
Micro blogging
Flat rate calls
Flat rate mobile
Shopping
Hot deals
Green Lotto
Affiliates
Stakeholders
Partners
Instant account
Weekly payouts

Check it out now! Do not loose your chance to get in on the ground floor of this incredible opportunity to make a lot of money!

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Here is more information about some of the pages that will be part of this cutting edge site:

Homepage Portal:

The portal is packed with sites & features that are always free to use. There is so much to discover The affiliate and Stakeholder programs offer you a real business opportunity as Sqip grows & expands in over 30 languages!

MP3 Search:

Finding all the music you want is easy. Listen instantly & create multiple play lists. Another great free service you will discover in the Sqip portal.

Search the World Wide Web:

Search the web for whatever you want. Sites, videos, images, products, local info & more. Sqip search is fast with some great little features like 'quick look'

Social Networking & More:

Just one of several community sites you will discover in the portal. This one offers cool video sharing and much more.

The Market Place:

The market place lets you buy and sell. Whether you are selling B2B or direct to customers this site has what you need. Free listings, catalogues, image uploads & more.

Any questions? Find answers!:

Got a question? Want to share your knowledge? Sqip Answers lets you do that with text, audio and web cam video. Unlimited categories, best answers & quick find features.

Sqip Bids:

Unlimited FREE auctions. Bids tracking. Buy it now. FREE store. Ranking & rating. Sqip Bids has it all.

yournameATsqipmailDOTcom:

Your Free email account with advanced webmail, POP3. Contacts, File management,Spam Shield & Auto Responderyourname@sqipmail.com

Sqip Ads:

Pay per Click Contextual ads. Works exactly like Google...just much more cost effective. Advertise in our search engines or across the Net. Instant set up & Advanced tracking. Webmasters earn high % commissions

Dating:

Free dating offering Profiling, In depth search, Photos, Web cam, Messaging, Live chat, Favourites, Fans, Privacy protection.

Social Bookmarking:

Social Bookmarking with Multi media, favourites, tracking, sharing, rating & feedback

Sqip Messenger....simply broadcast:

Think Skype on steroids and you'll get the idea! IM,Voice//Video chat & multi user conference with collaboration/ broadcast desktop, flat rate land line/mobile and much more

Biz Space:

Create your Professional profile. Find new biz contacts. Get answers from professionals. Find jobs, projects, opportunities, partners & deals. This is the best biz Networking site out there...and it's yours to use for free within the Sqip portal.

Your Sqip Back office:

Whether you are referring new members or just following your Sqip PEP shares price your private, automated & secure back office is where you can manage your account. View real time reports, buy PEPs & Access your commissions.

So what are you waiting for sign up now before you loose out on this opportunity!

http://affiliate.sqipcom.com/?user=Skypher

Here are some more thoughts and information about this great opportunity!

SQIP - Could this be the next mega Internet success story? Now, I have no idea if this company will be a huge success or a big fat flop, I just have a really good feeling about this, and especially looking at all the features it will have. How can it fail?

If it is the next big success story, then many people will stand to profit in a big way and you’ll be glad you signed up. So do not hesitate! Sign up NOW, it does not cost you a cent to find out if this will be the next BIG thing on the internet!

http://affiliate.sqipcom.com/?user=Skypher

In a recent interview the CEO, Christian Fortune said he feels confident that this could be the next Internet business success story, similar to EBay and Google. He said that he had assembled a team of top notch professionals to pull this off.

I thought you may want to know about this too and at the least, check them out. They are giving 100 FREE shares in SQIP if you join "now until February 28, 2009" with apparently no catches. With each share equaling 0.40 Euros. So, if that's all you did was collect the 100 shares, without having to give any personal or banking info, or ss# to the company, my thoughts are, what have you got to lose?

NOTHING! That is right, NOTHING TO LOOSE!

http://affiliate.sqipcom.com/?user=Skypher

Possibly a LOT to gain for a small amount of time.

SO, WHAT IS SQIP??

Remember Yahoo in 1996?

Remember EBay in 1997?

Remember Google in 1998?

Imagine if you had grabbed some shares in the beginning!!! Well...SQIP is a new and very powerful social networking portal...at its beginning.

Again, for a limited time you get 100 shares free when you open your zero cost SQIP account by February 28, 2009.

The sqip portal is “jam packed” with sites and features that are always no charge to use. Sqip has developed some great partnerships to bring you the best in Web 2.0 and beyond. For example, Sqip Messenger has the same technology used by Skype, Yahoo, Google, AOL and many others, technology developed & licensed to them by a company who took one look at Sqip & partnered with them.

SQIP has some of the best designers, engineers, developers and creative thinkers working to bring us all something that will grow exponentially, simply because it delivers the features, tools and possibilities that we want & need.

Currently we are accessing all these types of sites individually, having to remember numerous log in names and passwords.

With Sqip its one-stop shopping baby!

Sqip is built on partnerships, collaboration and win/win deals with companies around the world getting involved in making it happen. GET THIS… SQIP’s advertising stakeholders share all the earnings and benefits.

SOME OF THE FREE PERKS OF SQIP…

~ Unlimited no charge auctions and stores.

~ Biz networking- profile and find new business contacts.

~ Social Bookmarking with: tracking, multimedia, favorites, sharing, feedback, etc.

~ Zero cost Dating: profile, in depth search, pictures, webcam, messaging, live chat, favorites, fans, privacy protection.

~ Zero cost email accounts.

~ Selling B2B or B2C: no charge listings, catalogs, uploads, & more.

~ Sqip messenger will blow away the competition: IM, voice/video, etc.

~ Sqip Answers.

~ Back office: your referrals, stakeholder shares, & commissions.

~ Earn commissions on referral purchases 5 levels deep.

~ Sqip’s Towah Master Card.

Think of SQIP as kind of like combining: Yahoo, Twitter, Google, MySpace, Linkedin, Ebay, YouTube and Facebook combined. Then throw in some "Red Bull" to the mix.

MY PERSONAL THOUGHTS ON THIS ARE…

I have nothing to lose by signing up, telling some friends, and waiting to see how things go with Sqip.

If you agree with my way of thinking, then you NEED to join free and tell some friends.
For a very short time get 100 shares at NO CHARGE when you open your Zero cost SQIP account today.

Visit Sqip and see what this is all about. It isn’t even launched yet, but you can see screen shots of what’s to come and what can make you money by joining for free and sharing the information just like I have. I'm still learning this too, but VERY excited to get in on the ground floor of what could be the next big internet success, far and above what anyone else has seen before.

To jump on this train before it picks up speed click on the link below and join for free.

http://affiliate.sqipcom.com/?user=Skypher

Pay to click adds

2009-04-14T12:22:00.001-07:00

I just joined 2 new "In text" ad services.
They are Kontera (the blue double underlined words), and Infolinks (The green double underline words).

I will be reporting on this blog how well they work or do not work. They are just 2 more streams of income for the site.

The way they work is when someone clicks on the ads I get paid a set amount depending on how much the advertisers are paying.

If you want to click on the ads to help me out, or you are interested in the product, please do so, but do NOT click on them too much, or click on things you are not interested in. If this happens my account will be deleted.

Link to the 1st post in this series that has links to all the other posts:

My quest for financial freedom: Back ground for this quest

Main link to this blog:

http://quest-for-financial-freedom.blogspot.com/

Earnings report 4/13/09

2009-04-13T08:39:00.000-07:00

My earnings to date 4/13/09:

ClixSense-$6.66 http://www.clixsense.com/?2746864
Your2Cents online surveys-$13.00
Quans-$2.00 (They just started a new revenue sharing program that looks very promising, I have already received a $2.00 payout) http://www.javaist.com/quans/register.php?r=Skypher
Bidvertizer-$1.13
myLot-$0.97 http://www.mylot.com/?ref=Mykdiver
Performance Bux-Just joined at $0.005 per add clicked I don't see much worth in this site. http://www.performancebux.com/index.php?ref=Skypher
NoMinCashout-$0.25 http://nomincashout.com/index.php/Skypher.html
FastClix- $0.09 Just joined. http://fastclix.biz/?r=skypher
SmithBux-$0.06 Just joined. https://www.smithbux.com/index.php?r/Skypher
AW Surveys-$27.00 for only 6 surveys that took me 30 minutes to complete. (I will post when and if I get paid, they have a $75 payout threshold) http://www.AWSurveys.com/HomeMain.cfm?RefID=Skypher
NeoBux- $0.08 This is another PTC site that will not earn very much money, but I am willing to try it.
PostParker-$0.25 This is a PTP site that I am trying out to see if it is worth my time. http://www.postparker.com//index.php?ref=Skypher

Total from all investments and online stuff: $51.74

Please pick the sites that I am doing the best on and click on my referral links to join and partake in the profits!

Companies for financial products

2009-04-12T05:22:00.000-07:00

Here are the companies I currently use to do my investing through. They consist of a Bank (Zions Bank), a Brokerage firm (Zions Direct) and a Mutual fund company (Vanguard).

Zions Bank

https://www.zionsbank.com/

I use Zions bank because it has been in business since 1873, it is a very stable bank with good rates and a very good business ethic.

A brief history of Zions First National Bank On July 10, 1873, Zion's Savings Bank and Trust Company was incorporated under the laws of the Utah Territory under the direction of Brigham Young, becoming Utah's first chartered savings bank and trust company. During its first day of business on October 1, 1873, the bank's cashier and tellers recorded deposits of $5,876.20. The bank prospered and grew, surviving its only major threat – the depression caused by the stock market crash of 1929.

A major event happened on December 31, 1957. Zion's Savings Bank and Trust Company (1873), Utah Savings and Trust Company (1889) and First National Bank of Salt Lake City (1890) merged to form Zions First National Bank. The newly enlarged institution had a total of $109.5 million in deposits. At this time, the long-familiar apostrophe in Zion's was dropped.

In early 1960, authorities of the Church of Jesus Christ of Latter-day Saints decided to divest itself of its banking interests, and on April 22, 1960, the Church sold majority control of Zions First National Bank to Keystone Insurance and Investment Company. Keystone was owned by a group of businessmen headed by Leland B. Flint, Roy W. Simmons and Judson S. Sayre. At the time of the sale, the Bank had total deposits of just under $120 million.

On February 17, 1961, Zions First National Investment Company was incorporated in Nevada and became the majority owner of the bank stock controlled by the Keystone group. In 1965, the name of the investment company was changed to Zions Bancorporation.

Today, Zions Bancorporation operates full-service banking offices in ten Western states – Arizona, California, Colorado, Idaho, Nevada, New Mexico, Oregon, Texas, Utah and Washington. Zions Bank operates 114 full-service branches throughout Utah, 24 full-service branches in Idaho, and nearly 200 ATMs in the two states. In addition to a wide range of traditional banking services, Zions offers a comprehensive array of investment and mortgage services, and has a network of loan origination offices for small businesses nationwide. The company is also a leader in providing electronic banking services, including electronic municipal bond trading. Founded in 1873, Zions has been serving the communities of the Intermountain West for more than 130 years.

From the vision of founder Brigham Young to the reality of one of the nation's most impressive banking organizations, Zions continues to be a pioneer in banking.

Zions Direct

https://zd.zionsdirect.com/

This is the company I chose to use as my online brokerage account. They charge $10.95 per trade which is competitive, and offer a really good range of products.

Why Zions Direct?

Everyday great value guaranteed! Trade stock and bonds online for $10.95 regardless of the size of trade or how many trades you place per month, quarter, or year. Compare Zions Direct to online brokers.

You are in control! Trade stock, bonds, and mutual funds at everyday low prices and get up to the minute news, research, and planning tools to help you make intelligent investment decisions. They provide the tools - you call the shots.

Convenience - Access your account anywhere - tools to plan and invest! They provide the online access and the tools for you to manage your portfolio; however, if you ever need assistance with handling a trade or customer service on your account, you can always contact an experienced Zions Direct Service Representative between 6:00 a.m. and 10:00 p.m. MST at 1-800-524-8875.

Opening an account is easy! Click here to view account types and ways to apply. Consolidate your accounts - transfer your online brokerage account to Zions Direct.

BRIEF HISTORY

Zions Bancorporation originated as Keystone Insurance and Investment Co., a Utah corporation, on April 25, 1955. In April 1960, Keystone, together with several other individuals, acquired a 57.5 percent interest in Zions First National Bank from the LDS Church.

On April 23, 1965, the name of the company was changed to Zions Bancorporation. However, later that year the name was changed to Zions Utah Bancorporation. The first public offering of shares in Zions Bancorporation was made in January 1966. There continued to be some minority shareholders in Zions First National Bank until April 7, 1972 when the company exchanged the remaining minority shares for common shares. In April 1987, Zions Utah Bancorporation again changed its name to Zions Bancorporation.

TOTAL ASSETS

$52.9 billion (as of December 31, 2007)

OWNERSHIP

Zions Bancorporation is a publicly traded company. The company's common shares are traded on the Nasdaq Stock Market under the symbol "ZION." The Company had 106,720,884 shares of common stock outstanding at the close of business on December 31, 2007.

Vanguard

https://personal.vanguard.com/us/home?fromPage=portal

I use Vanguard Mutual Fund company for their selection of funds available, and for their very low fees. They offer some of the lowest fees of any mutual fund company.

For a complete list of their funds visit their home page.

Our mission statement
Vanguard's mission is to help clients reach their financial goals by being the world's highest-value provider of investment products and services.

Corporate headquarters-Valley Forge, Pennsylvania

Founded-May 1, 1975

First fund-Wellington Fund (inception date: July 1, 1929)

U.S. offices-Charlotte, North Carolina,Scottsdale, Arizona and Valley Forge, Pennsylvania.

International offices-Amsterdam, the Netherlands, Brussels, Belgium, London, England, Melbourne, Australia, Paris, France, Seoul, South Korea, Singapore, Sydney, Australia,
Tokyo, Japan and Zurich, Switzerland

Total assets-Approximately $1 trillion in U.S. mutual funds (as of December 31, 2008)

Number of funds-150 domestic funds (including variable annuity portfolios); plus additional funds in international markets

Number of employees-12,500 in United States

Average expense ratio-0.20% (expenses as a percentage of 2008 average net assets)

Mailing address-P.O. Box 2600, Valley Forge, PA 19482

Link to the 1st post in this series that has links to all the other posts:

My quest for financial freedom: Back ground for this quest

Main link to this blog:

http://quest-for-financial-freedom.blogspot.com/

Financial information and links

2009-04-12T05:02:00.000-07:00

I just wanted to post some links to my favorite financial and money management sites. I have learned a lot from these sites. They are a really good source of knowledge for when you start investing, or if you already invest they will help you find out what are some good investments.

MSN Money-http://moneycentral.msn.com/

This site has a lot of good features. I use it to look up stock prices, and to do research on companies I am interested in.

Fool.com- http://www.fool.com/

This site is really good for research on companies and for gaining insight into different investment options. They have several paid services also, but they offer enough information for free that I do not see the point in paying for their services.

Investopedia- http://www.investopedia.com/?viewed=1

They have a lot of financial advice available on their site as well. It is another good source for financial information. They have simulators that you can use to see how well you would do at different kinds of investing as well as many articles and tutorials to help you learn about investing.

Wealth Intelligence Academy- http://wiacademy.com/

They offer classes on many different topics and investment opportunities.

The Street.com- http://www.thestreet.com/

They offer their stock picks, videos, investing A-Z, a personal finance section, business news and portfolio tools.

Google Finance- http://www.google.com/finance

They offer real time stock prices as well as many different kinds of investment information.

CNN Money- http://money.cnn.com/

They offer Business news, Market information, Information on personal finance, Retirement information, Technology, Luxury and Small business.

Of course there are many others, but these are where I spend most of my time when I am doing research for my investments.

Link to the 1st post in this series that has links to all the other posts:

My quest for financial freedom: Back ground for this quest

Main link to this blog:

http://quest-for-financial-freedom.blogspot.com/

New financial earnings update

2009-04-11T12:11:00.000-07:00

Check out these books on Business and Finance! The more knowledge you have the better investor/business person you will be. Knowledge is power! I highly recomend reading every book about business and finance you can get your hands on. Follow this link to some really good books at great prices!

Business & Investing Books

My earnings to date 4/11/09:

ClixSense-$6.46 http://www.clixsense.com/?2746864
Your2Cents online surveys-$13.00
Quans-$2.00 (They just started a new revenue sharing program that looks very promising, I have already received a $2.00 payout) http://www.javaist.com/quans/register.php?r=Skypher
Bidvertizer-$0.79
myLot-$0.97 http://www.mylot.com/?ref=Mykdiver
Performance Bux-Just joined at $0.005 per add clicked I don't see much worth in this site. http://www.performancebux.com/index.php?ref=Skypher
NoMinCashout-$0.25 http://nomincashout.com/index.php/Skypher.html
FastClix- $0.09 Just joined. http://fastclix.biz/?r=skypher
SmithBux-$0.06 Just joined. https://www.smithbux.com/index.php?r/Skypher
AW Surveys-$27.00 for only 6 surveys that took me 30 minutes to complete. (I will post when and if I get paid, they have a $75 payout threshold) http://www.AWSurveys.com/HomeMain.cfm?RefID=Skypher
NeoBux- $0.08 This is another PTC site that will not earn very much money, but I am willing to try it.
PostParker-$0.13 This is a PTP site that I am trying out to see if it is worth my time. http://www.postparker.com//index.php?ref=Skypher

Total from all investments and online stuff: $50.83

Please pick the sites that I am doing the best on and click on my referral links to join and partake in the profits!

Financial Freedom forging ahead

2009-04-10T08:56:00.000-07:00

My earnings to date 4/10/09:

ClixSense-$6.25 http://www.clixsense.com/?2746864
Your2Cents online surveys-$13.00
Quans-$1.78 (They just reduced their payout from $0.02 per post to $0.01 per post so I just lost 1/2 of my money) http://www.javaist.com/quans/register.php?r=Skypher
Destroy Debt-DO NOT PAY ANY MORE
Bidvertizer-$0.79
myLot-$0.97 http://www.mylot.com/?ref=Mykdiver
Performance Bux-Just joined at $0.005 per add clicked I don't see much worth in this site. http://www.performancebux.com/index.php?ref=Skypher
NoMinCashout-$0.18 http://nomincashout.com/index.php/Skypher.html
FastClix- $0.05 Just joined. http://fastclix.biz/?r=skypher
SmithBux-$0.06 Just joined. https://www.smithbux.com/index.php?r/Skypher

Total: $23.08

Making money online

2009-04-08T07:48:00.000-07:00

It is possible to make a lot of money online. You need to establish multiple streams of income for it to be effective.

Actually you need multiple streams of residual income, that means income that comes in even when you are off doing something else.

Getting paid to do things on the Internet are ok, but the best way to make money online is to have a website, or a blog that earns you money around the clock.

I participate in paid online surveys, paid to post sites, pay to click sites, as well as run 2 blogs and am working on 3 more websites.
I also invest online. Online stock brokers have made the process of investing so much more user friendly, I love it.

As you can see from my earnings that I post I do not make much money doing this yet, but I am learning, and improving and building up my residual streams of income so that someday I will pretty much be able to sit back and enjoy the money rolling in.

Link to the 1st post in this series that has links to all the other posts:

My quest for financial freedom: Back ground for this quest

Main link to this blog:

http://quest-for-financial-freedom.blogspot.com/

Post Parker Site

2009-04-08T07:40:00.000-07:00

I just joined another paid to post site, I will let you know how it goes. It pays between $0.01 and $0.07 per post depending on the quality of the post. It also has a refferal system that pays $0.005 per post of your refferals.

Here is the link to the site: http://www.postparker.com//index.php?ref=Skypher

Link to the 1st post in this series that has links to all the other posts:

My quest for financial freedom: Back ground for this quest

Main link to this blog:

http://quest-for-financial-freedom.blogspot.com/

My earnings update

2009-04-07T07:19:00.000-07:00

My earnings so far:

ClixSense-$5.29 http://www.clixsense.com/?2746864
Your2Cents online surveys-$12.00
Quans-$1.33 http://www.javaist.com/quans/register.php?r=Skypher
Destroy Debt-$1.08 http://www.destroydebt.com/cp/affiliate.aspx?trk=3101
Bidvertizer-$0.27
myLot-$0.97 http://www.mylot.com/?ref=Mykdiver

Total: $20.94

PTP site

2009-04-07T07:13:00.000-07:00

Yesterday I also joined: http://www.javaist.com/quans/register.php?r=Skypher

It is a pay per post a question, or answer a question. I have earned $0.63 so far there in only about a half an hour.

Like the other programs it has a refferal program that will help you earn more, but do not expect this to make you rich. It is just another tool in your money making toolbox.

Link to the 1st post in this series that has links to all the other posts:

My quest for financial freedom: Back ground for this quest

Main link to this blog:

http://quest-for-financial-freedom.blogspot.com/

Pay to post

2009-04-07T06:55:00.000-07:00

Update: This site no longer pays you to post!

Yesterday I joined a new site that pays you to post on forums and blogs. It is not a get rich site, but can supplement your income.

I recommend this site as a way to add a little more money to your pockets. You can also earn money from your refferals for one year after they join.

So far I have spent about 30 min on the site and have earned $0.76.

Here is some info about it from their website:

http://www.destroydebt.com/cp/affiliate.aspx?trk=3101

Destroy Debt Affiliate ProgramAt Destroy Debt, our primary goal is to provide you with the advice to get out of debt, but we also want to reward participation by providing a little extra cash to help you get out of debt. To facilitate this, we offer a revenue share program that allows you to earn money every time you contribute to the discussions at Destroy Debt.

The rates are:
$0.02 per forum post - (Excludes "General Discussion" section)
$0.02 per blog or article comment We also want to make sure we are rewarding you for the quality of content, not just the quantity. To help with this we also offer:
$5 per 1000 impressions on any blog post you create. Since we also want to grow our community, we have extended our affiliate program to also pay you for every contribution your friend makes for the first year (your friend gets paid too).

How Much Will I Make?Probably not enough to retire off of, but it can provide extra cash, especially if you refer a handful of active members. You'll receive $0.50 just for a member signing up through your affiliate link and participating in any way (forum post, blog post, comment), plus you'll also receive credit for all their participation for the next year.

When Will I Be Paid?All payments will be sent via PayPal on the first of each month as long as the amount owed is at least $10. If the amount owed is less than $10 that balance will cary over to the next month.

Do I Get Credit For My Own Posts?
Yes!

Do I Get Credit For Every Post?For the most part yes. If the post are blatant spam, reposted content from other sites or junk posts they will be moderated or deleted. You will not receive credit for any posts that we have to delete but all others you will receive credit for.

Do I Get Credit For Every Page View?You get credit for each unique page view. If one person views two different pages, you'll get credit for 2 page views. If two people view the same page, you'll get credit for 2 page views. If one person views the same page twice, you'll get credit for one page view. All traffic must be from visitors who willingly came to your content. Any traffic where the visitor did not make a decision to view the page such as from popup windows or auto-surfing software will not be counted.

Link to the 1st post in this series that has links to all the other posts:

My quest for financial freedom: Back ground for this quest

Main link to this blog:

http://quest-for-financial-freedom.blogspot.com/

Financial Freedom comming along slowly

2009-04-06T07:43:00.000-07:00

At this rate I do not know if I will ever be able to become financially free.
I know I will make it happen, but it is just a very slow start.

I have made $4.10 from ClixSense so far now. It is not a lot, but you can do it while doing other things on you computer. Check it out here, join and start getting paid. It also pays affiliates 5 level deep commissions: http://www.clixsense.com/?2746864

I also made another $2.00 from online surveys from Your 2 Cents.

My new total earnings are $17.24

Only $982.76 left to earn prior to 4/20/09!

Link to the 1st post in this series that has links to all the other posts:

My quest for financial freedom: Back ground for this quest

Main link to this blog:

http://quest-for-financial-freedom.blogspot.com/

Affiliate programs

2009-04-03T07:39:00.000-07:00

I have recently added ClixSense to my Multiple Streams of Income.
Check it out here:
http://www.clixsense.com/?2746864

So far from what I have seen on ClixSense is that you get paid $0.01 (some are $0.04 and some are $0.02) per 30 second add you have to watch. I will post more about it the more I learn about it.

Well I got up to $0.46 by clicking on 30 sec adds while doing other things, but at that point I ran out of adds to preview and had to upgrade to Premium to get more adds to preview.
I went ahead and spent the $10.00 for one year Premium Membership. I will tell you how that goes. I hope I did not just waste $10.00.

I am also working on getting AdSense up and working again.

The thing I keep on coming around to is TRAFFIC!!! I need to find ways to get more of it!
So far I have a Twitter account that I mention this blog as well as my Body-for-LIFE blog:
http://mybody4life-michael.blogspot.com/

I am also on myLot which is kind of like mySpace, but you get paid to post. Not much, but if you are into that sort of thing it is better to get paid for it than not. Here is a link to the site:
http://www.mylot.com/?ref=Mykdiver

I have not done much posting at all on myLot and my earnings are $0.87. If I was regular on their it would be a lot higher, it is just not really my thing.

I also have links in my signatures on 3 different forums I post on regularly.

I know I need to open a Facebook account also.

So far on BidVertizer I have earned $0.27 wow impressive I know!

Anyone have any more ideas?

So far that is a grand total of $11.60 earned

Link to the 1st post in this series that has links to all the other posts:

My quest for financial freedom: Back ground for this quest

Main link to this blog:

http://quest-for-financial-freedom.blogspot.com/

Monetizing your blog or website

2009-03-28T22:44:00.000-07:00

Today I joined BidVertiser (http://www.bidvertiser.com/)and added it to the site. I also signed up for Amazons Associate program (https://affiliate-program.amazon.com/gp/associates/network/main.html), and added some book adds to my Body-for-LIFE blog which can be seen here:
http://mybody4life-michael.blogspot.com/

So now I have: Amazon, BidVertiser, Chitika, SBI, Pay-Pal Donate and Clickbank.

So far none of them has earned me any money, but then again I have no traffic on my blogs yet because they are fairly new.

Next I really need to work on getting traffic to this blog and to my Body-for-LIFE blog. Traffic is key to making money from a site. Without traffic you will not have anyone on your site to click on adds, and or join associate/referral programs.

Link to the 1st post in this series that has links to all the other posts:

My quest for financial freedom: Back ground for this quest

Main link to this blog:

http://quest-for-financial-freedom.blogspot.com/

BidVertizer

2009-03-27T11:04:00.000-07:00

Not much to post about recently, I have been very busy at work. Sorry for that, I will get hot over the next couple of days.

Right now I am trying to figure out how to get an AdSense account since mine was disabled and they will not re-enable it. Anyone know of any ideas?

I did open a BidVertiser account as you can see below. It is like AdSense, but not as interactive and I have heard that they have lower payouts.

Link to the 1st post in this series that has links to all the other posts:

My quest for financial freedom: Back ground for this quest

Main link to this blog:

http://quest-for-financial-freedom.blogspot.com/

Paid surveys and Fannie Mae

2009-03-25T09:50:00.000-07:00

Today I reached a cash out point in my Survey Spot account (paid online surveys) of $10.00 so I had them send me a check.

New total since my Google AdSense account was locked is: $10.00

I think that the market and the economy will recover faster than the interest rates will go up really encouraging people to buy homes. I know that the Federal Government will not let Fannie Mae fail as seen buy their support of the company recently.

I have also recently started a Body-for-LIFE Challenge that I am blogging every step of the way here: http://mybody4life-michael.blogspot.com/

Update on the Internet business

2009-03-21T17:39:00.000-07:00

Yesterday I opened a twitter account.
You can find me here: http://twitter.com/Skypher
I do not know anything about twitter, but I will learn as I go. I know it can be a positive add on to my business. It is supposed to be good at building traffic for this blog, and for other things I get into.

I finished reading "How to Make More Money From Your Blog" by Steve Pavlina which you can find for yourself here:

http://www.stevepavlina.com/blog/2006/05/how-to-make-money-from-your-blog/
http://www.stevepavlina.com/blog/2006/01/how-to-build-a-high-traffic-web-site-or-blog/
These were both very informative and I learned a lot. I would highly recommend reading these. There is a lot of good information that you should not pass up, especially for free.

My Google AdSense account is still disabled. I really hope they wake up and re-enable it soon. I really want to use their program, and they need to understand it was an honest mistake by my friends.

Stock questions

2009-03-19T07:11:00.000-07:00

Fannie Mae (FNM) or Freddie Mac (FRE)?

What do you guys think about purchasing some of their stock?

I know the Government took them over, but now that we have seen that the Government will not let them fail they should be fairly safe right?

Well I looked into Fannie Mae when the Government lifted their hold on stock purchases in the company. It was selling at $0.68 per share. They are now up to $1.14, now that may not seem like a lot, but that is a really good gain. If I would have purchased 1000 shares back then like I wanted to I would have invested $688, today that would be worth $1140, for a $452 gain. Not bad!
So should I get into them now?

What about Freddie Mac?

When the Gov released their stock hold they were at $0.48 per share, they are now at $1.19 now that same 1000 shares would have cost me $480 and would be worth $1190 today for a gain of $710!

What do you guys think? Buy or no?

Link to the 1st post in this series that has links to all the other posts:

My quest for financial freedom: Back ground for this quest

Main link to this blog:

http://quest-for-financial-freedom.blogspot.com/

Financial Journey update

2009-03-18T16:24:00.000-07:00

Well I am almost done reading the "Pro Blogger" book. I have learned so much from it.
Here is a list of the things I have learned from that book:

You can find out which sites are linking to yours by going to Google and typing in link:domainname
I learned that Technorati is a site for ranking blogs
Niche blogs are successful due to their ability to have contextual advertising
Chitika is another contextual advertising source
Link to Amazon for products related to your site
Sign up for and use Google AdSense, it works (do not click your own adds, or when you tell your friends to check out your blog tell them not to click on your adds unless they are interested in the product. I have just had my AdSense account disabled due to either my friends clicking too much, or my kids doing it. I still need to find out who did it and correct the issue. I sent in a form to Google explaining that I was not doing it on purpose and that I would correct the problem)
Choose a domain name that is easily branded, or easy to remember/memorable
Use lists like this one to interest readers
Use social bookmarking sites like Digg.com and Delicious.com to help get the word out and send you more readers to your blog
Keep your posts Granular, or one topic per post
Interlink your posts
Invite comments
Ask questions (These involve your readers)
Create your own hosted blog, so you own it so if you ever have to or want to sell it you can

That is a short list of some of the things I have learned while reading the book "Pro Blogger".

Of course there was a lot more information than that, but those are some of the hot points I thought would be important to readers of this blog if they are thinking about, or are starting their own blog.

Please leave a comment if you have something to add. I am still learning here. Actually that is what this blog is about is to learn together about Internet businesses, Investing, Personal Finance, and making Multiple Streams of Income.

Blogging for money

2009-03-17T09:33:00.000-07:00

I have been reading the book "Pro Blogger" Secrets for Blogging Your Way to a Six-Figure Income by, Darren Rowse and Chris Garrett. This book is SO good! I read 160+ pages just yesterday. This book is a must read for anyone wanting to make money online.
Blogging as I have come to understand can make anyone a lot of money. I am defiantly going to us blogging as one of my Multiple Streams of Income.

Update on Google AdSense: I have earned $2.25 so far today, for a total of $20.22 in 7 days. Not really that good, but I am sure you see the potential here as well as I do. So now I have 34 days left to make $979.78. Will I be able to do it? I guess that is the question. We will see won't we! lol

I am going to be switching this blog to a host of my own with a dedicated domain name. I am also going to be creating a "Portal" site, which I will use as my main page. Where links will be to my different blogs, online stores, forums, etc...

I will keep this blog up until the new site is totally ready to go. Then I will email everyone the new sites address. So please sign up for this site via email so you do not miss out on this.

Link to the 1st post in this series that has links to all the other posts:

My quest for financial freedom: Back ground for this quest

Main link to this blog:

http://quest-for-financial-freedom.blogspot.com/

Pro Blogger

2009-03-16T11:52:00.000-07:00

Today I have earned $0.57 from AdSense. Wow, so much! lol.
I am really into reading the book Pro Blogger, it is really good. I highly recommend it for anyone that wants to get into blogging seriously.
Don't have much time to write today, sorry more will follow tomorrow.

Total earnings to date: $17.97

Only $982.03 to go by 4/20/09

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Pro Blogger and AdSense

2009-03-15T23:55:00.001-07:00

Today on advice from my Mother who is also into finance and investing, I picked up the book "Pro Blogger" By Darrn Rowse and Chris Garrett.
I wanted to read a book that will teach me about this blogging thing since I am brand new at it.
I had no AdSense earnings for the past 2 days, so the first day may have been a fluke, we will see won't we?

Update:

Goals met: #3 Be a member of at least 3 affiliate programs by the 20th of March 2009.

Total Earnings: $17.40

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Link to the 1st post in this series that has links to all the other posts:

My quest for financial freedom: Back ground for this quest

Main link to this blog:

http://quest-for-financial-freedom.blogspot.com/

I found the "Secret" to "The Secret"

2009-03-15T23:49:00.000-07:00

If you think what you have seen in "The Secret" DVD or Book was interesting,
wait 'til you see what I have to show you...
"The Secret Behind The Secret".
This is for those who want to Master The Secret.

There are only two types of people:

1) Those who Master The Secret and Apply it (Winners of the game of life!)

2) The rest, including those who think the secret is about just visualizing and

daydreaming

How many people do you know who can honestly say they are living their dreams?

Are you?

Click Here! to learn the "Secret to "The Secret"

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Clickbank

2009-03-14T22:11:00.000-07:00

I just joined Clickbank for my 3rd affiliate program. 1st goal met

Check one of the best products I found from them here:

http://skypher777.salehoo.hop.clickbank.net/

Who Else Wants to Get Instant and Unlimited Access to 5,347 Pre-Screened Legitimate Wholesale Suppliers of High Quality Products that Have Decent Profit Margins... Right Now?

Stop spinning your wheels and join one of the largest, safest wholesale communities on the Internet. Over 50,000 other online sellers, retailers and bargain hunters have discovered the best place to find legitimate, pre-screened wholesalers, drop shippers, liquidators and manufacturers for every type of product imaginable. Best part: You're only minutes away from getting your hands on it too. Click the link below to find out how...

Click Here!

This is one of the programs offered by Clickbank that I think I might join myself.

Internet business update

2009-03-14T09:45:00.000-07:00

Ok, so it is a new day in my quest for financial freedom.
Today I have added a link to this blog on The Finance Forums.com

http://www.thefinanceforums.com/

I also opened a ING Sharebuilder Basic Brokerage account. It is totally free of charge and only charges $4.00 per trade on an automatic investment program.
Which is where you set up a set amount going to your account every month, and the stocks and the amounts you want to purchase. Then Sharebuilder takes care of everything for you. For all other trades it is $9.95 per.

Here is their link: https://www.sharebuilder.com

I am still at $17.40 AdSense earnings. If you would like to assist me in my quest click on the Google ads in my blog. You do not have to do anything else, just click on them. But if you are interested in the offer, then by all means take advantage of it.

Thanks for reading my blog and joining me on my journey.

$982.60 left to go before 4/20/09

Zions Bank Stock

2009-03-13T23:29:00.000-07:00

.

Sorry not much to add today. I have been watching my stocks raise recently, which makes me feel good. I bought into ZION @ $6.91 per share and now it is up to over $9.00. I know it will go even higher I just have to stick with it.

$17.40 and counting from Google AdSense (11:32 pm)

Signature links

2009-03-13T13:23:00.000-07:00

I just added links to my signature on the following sites I go to:

http://www.nagca.com/forum/index.php Which is a forum called the "North American Grand Cherokee Association" there is talk all about the different models of Grand Cherokee. Everything from high performance to 4 Wheeling.

http://www.dodgetalk.com/forums/ Which is a forum for automotive chat and talk about all Dodge vehicles.

I already received 2 visits in the last couple of minutes since I posted the links. So hopefully people are coming here via my links. I hope people join up to watch and read this blog as I progress on this quest to financial freedom.

Link to the 1st post in this series that has links to all the other posts:

My quest for financial freedom: Back ground for this quest

Main link to this blog:

http://quest-for-financial-freedom.blogspot.com/

Google AdSense

2009-03-13T11:21:00.001-07:00

.

I just checked my AdSense account, and it shows a balance of $5.26 (11:22 am) so something is starting to work! WhooHoo!
My first money earned on the Internet other than eBay.
I was not sure how it was going to work, but I am starting to believe that it does. More on this as we go along on this journey.

Wow here I am not even an hour later and my AdSense account shows an earnings of $10.68 (12:13 am)! This is better than I had hoped for this early in the game.

I guess affiliate programs really do work. At least this Google AdSense program works!

Money earned so far: $10.68

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Link to the 1st post in this series that has links to all the other posts:

My quest for financial freedom: Back ground for this quest

Main link to this blog:

http://quest-for-financial-freedom.blogspot.com/

Affiliate programs, and other stuff I have done today

2009-03-13T08:47:00.001-07:00

So far today I have been researching affiliate programs, Internet marketing information and online paid surveys.

I have been to several different sites for paid surveys, I am checking out a couple. Once I learn something of value I will post up information about it. So far what I have learned is that the paid survey sites do not really pay much money, and getting to a pay out point takes a lot of time that I could better spend learning about Internet businesses, increasing my financial knowledge, learning about network marketing, researching affiliate programs, and the such.

I have been looking at affiliate programs, I have found several that I am interested in, but I need to get my website up and running first. Then I will be able to join them and to let you guys in on the information.

I added google AdSence to this site to see if it works or not. I also added a visitor tracker from, http://feedjit.com/join/ you can see it to the right of this page near the top. It is a cool little map that will show where visitors are coming from. Check out their website for other useful tracker type widgets.

Link to the 1st post in this series that has links to all the other posts:

My quest for financial freedom: Back ground for this quest

Main link to this blog:

http://quest-for-financial-freedom.blogspot.com/

Brainstorming

2009-03-12T12:24:00.000-07:00

This is a list of Money making, Investing, Internet Business, and Network Marketing Brainstorming ideas I came up with while sitting on post for 8 hours the other day. These are money making, money saving, and Internet business start up ideas, the disclaimer is that all these ideas are not good, they are what they are. Everything I could come up with over the space of 2 days.

Join affiliate programs for residual income
Open an online store, e-store
Start forums for LS1Racer.com
Start up a Network Marketing business, MLM
Start selling more things/being more active in eBay, goal to be a Power Seller
Learn more about eZines
Find out ways to capture willing clients emails
Take part in online surveys for $, make money at home
Pay per click programs
Setup Cafe Press account for selling LS1 Racer apparel
Sell advertising, and use affiliate programs, and an e-store, on LS1 Racer forums
Visit garage sales to find eBayable items
Sell Military jokes to Readers Digest
Apply for a rewards credit card and use to purchase everything
Setup MySpace/Facebook for Skypher Industries
Go to DRMO website and bid for items to sell on eBay and online store
Setup Pay Pal account for business (DONE)
Form LLC
Form Nevada Corp
Setup Living Trust
Open Brokerage account (DONE)
Clip coupons to save money
Post up my story on MyLot and get paid for getting the word out about my story, and my Internet businesses
Recruit others for affiliate programs and network marketing programs
Start my own affiliate program for my business
Create eBay store
Raffle off something to draw in new members to LS1 Racer.com
Create and sell LS1Racer calender
Open an online book store, or an Amazon.com Associate store
Create Military Surplus store for DRMO items
Create a "Hall of fame" on my site for satisfied customers
Learn to use my Quicken program for personal and business finances

Well those are most of the ideas I came up with. I know some are not that good, but I am headed down the right path.

Update: $0 made so far...

http://affiliates.sitesell.com/Skypher_sales.html

Link to the 1st post in this series that has links to all the other posts:

My quest for financial freedom: Back ground for this quest

Main link to this blog:

http://quest-for-financial-freedom.blogspot.com/

New stuff

2009-03-11T20:46:00.000-07:00

Today I added the Google AdSence to the right of this page to help generate a little revenue.

I also researched other affiliate programs at http://www.affiliatedirectories.com/
I did not find any more that I want to join yet. I plan on doing more research tomorrow.

I also was looking for an online store to set up. I am looking for a free one that has all the items pre stocked, all you have to do is join and select the items you want to sell. Then customize the sit to fit your desires, then post it to the web.

I was reading about Stocks and Bonds today also. I am not interested in Bonds due to the low returns, BOOORING!

Another part of my Investing plan is getting into the Vanguard S&P 500 index fund as soon as I get the $2000 more dollars to put into it.

My main source of investment income will be from my Internet businesses, the affiliate programs and an online store.

I plan on starting a Network Marketing business also, I just need to find the right one.

Link to the 1st post in this series that has links to all the other posts:

My quest for financial freedom: Back ground for this quest

Main link to this blog:

http://quest-for-financial-freedom.blogspot.com/

03/10/09

2009-03-10T13:44:00.000-07:00

So far I have done the following actual investing:

Purchased 12 shares of Zion's Bank stock @ 6.91 per share (symbol ZION)
Purchased 101 shares of Vangaurd Star Mutual Fund @ 12.30 a share (symbol VGSTX)(Holding in this fund until I reach the $3000 it takes to get into their S&P 500 index fund)
Purchased 20 $50 "I" US Savings Bonds

So far I have done the following other items:

Joined this affiliate program: http://affiliates.sitesell.com/Skypher_sales.html
Opened an email account @ skypherindustries@live.com
Started this blog
Started an eBay business (Skypher Industries) http://myworld.ebay.com/skypherindustries
Opened a pay pal account for Skypher Industries, skypherindustries@live.com

Please email me if you would like to receive updates, ideas, or to receive special promotions.

skypherindustries@live.com

My goals

2009-03-10T06:56:00.000-07:00

So since I am starting down the path to financial independence then I guess I had better list my goals so I know where I want to go.

1- To have a portal website up and running by 4/01/09.
2- To have an online store set up and running by 4/01/09.
3- To be a member of at least 3 affiliate programs by 3/20/09. (Completed 3/14/09)
4- To have made at least $1000 profit by 4/20/09.
5- To have made at least $10,000 profit by 12/25/09.
6- To have made at least $50,000 profit by 12/25/10.
7- To have made at least $100,000 by July 1st 2011.(The day I retire from the Navy)
8- To have my LS1Racer.com forums up and running by 6 /01/09.
9- To have donated $10,000 by July 1st 2011.
10- To have an LLC, Nevada Corp, and a Living Trust set up by 12/25/10.

My goals will be updated as I proceed on this journey. Hopefully I will meet most of them well before the dates I have stated.

http://affiliates.sitesell.com/Skypher_sales.html

Link to the 1st post in this series that has links to all the other posts:

My quest for financial freedom: Back ground for this quest

Main link to this blog:

http://quest-for-financial-freedom.blogspot.com/

Back ground for this quest

2009-03-09T11:06:00.000-07:00

My name is Michael and I am here to blog my journey to financial freedom. Follow me as I build my Internet Businesses, and build my portfolio.

I will not accept failure!