Electronic Trading: SuperDOT

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: Introduction

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: Technical Analysis

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

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: Fundamental Analysis

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.

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

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

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!

More about Growth Investing

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.

Value investing

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

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

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.

Investing clubs

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

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 Stocks

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/

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/

Real investing and finance information

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/

Companies for financial products

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

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/