DOCX Getting Started in Online Investing



Getting Started in Online InvestingInternet is a major force in investingMakes investing more accessible to more peopleProvides access to sophisticated investment toolsConvenient, relatively simple, inexpensive and fastOnline Investment ToolsInvestment Education WebsitesOffer tutorials, online classes and articles Investments Tools Websitesfinance finance. Planning Tools WebsitesProvides financial calculators Screening Tools WebsitesSort through databases of stocks, bonds and mutual funds to find those with specific characteristicsExamples: and Yahoo!FinanceCharting Tools WebsitesPlot performance of stocks over a specified time period Stock Quotes and Portfolio Tracking WebsitesObtain prices and track stock performanceExamples: Yahoo!Finance and MSN Money Pros and Cons of Using the Internet as an Investment Tool Same cautions as regular investingNo “live” broker to act as a safety netBe skeptical of free adviceKnow what you are buying and from whomWatch your trading frequency Transactions costs Short-term gainsWatch margin and short tradingTypes of Investment InformationDescriptive Information – factual data on past behavior of economy, market, industry company or given investmentAnalytical Information – available current data in conjunction with projections and recommendations about potential investmentsAvoiding Online ScamsBeware of stock manipulators posting false news or overly optimistic opinionsAlways know your sourceWhat is pump and dump?Someone hypes up the “virtues of the stock to get people excitedThen they sell off their share before the stock tanksBeware of “get-rich-quick”—promoters selling worthless investments to na?ve buyersProtect Yourself by Asking Three Key Questions:Is the investment registered?Is the person licensed and law-abiding?Does the investment sound too good to be true?Registered investments have a prospectusAsk for license information of the individual Check with Understanding Market Averages and Indexes Reasons to use market averages and indexesGives an idea of how your investments night be performingWhat is the difference between an average and an index?CalculationValue weight vs mkt weightedSimilar usesDow Jones Industrial Average (DJIA)Dow Jones Transportation AverageDow Jones Utilities AverageStandard & Poor’s 500 Composite IndexStandard & Poor’s provide seven other indexes for tracking specific industry sectorsNYSE Composite IndexIncludes all stocks listed in NYSEAMEX Composite IndexIncludes all stocks listed on the NYSE AmexNasdaq Composite IndexOften used to track technology companies’ behavior due to large technology companies listed with NasdaqWilshire 5000 IndexIncludes 5,000 stocks traded on the major exchangesRussell 1000 IndexIncludes 1,000 largest companiesRussell 2000 IndexIncludes 2,000 small companiesEurope/Australia/Far East (EAFE MSCI)Tracks stocks trade on foreign exchangesWhere can I find information about these indices?Go to finance.Under market data scroll down to hyperlink on the right sideThe Role of StockbrokersSales people / marketingShould try to match an investors investment objectives to investment opportunitiesBrokerage ServicesExecute clients ordersProvide research informationProvide statements per transaction and periodicallyCan hold securities - streetnameTypes of Brokerage FirmsFull-Service BrokerOffers broad range of services and productsProvides research and investment adviceExamples: Merrill Lynch, A.G. EdwardsPremium Discount BrokerLow commissionsLimited research or investment adviceExamples: Charles SchwabBasic Discount BrokersMain focus is executing trades electronically onlineNo research or investment adviceCommissions are at deep-discountSelecting a StockbrokerFind someone who understands your investment goalsConsider the investing style and goals of your stockbrokerBe prepared to pay higher fees for advice and help from full-service brokersAsk for referrals from friends or business associatesBeware of churning: increasing commissions by causing excessive trading of clients’ accountsBasic Types of OrdersOdd-lot Orders <100 shares More expensive to buyRound-lot Orders 100 shares to a lotThis is the way brokers buy the stock for inventorySo if you want 25 shares, and they do not have them, they must buy 100 to get you your 25Market Orders Buy or sell immediately at current priceLimit Orders Set a price for actionFill-or-Kill Orders Fill entire order or kill itDay Orders Keep order open until end of day; if no trade, cancel the orderGood-’til-Canceled (GTC) OrdersStop-Loss (Stop) Orders Typically used to protect investors from stock price declines “Suspended” order is placed to sell a stock if price reaches or falls below a specified levelOrders can be day orders or GTC ordersOnce activated, becomes a market orderCan also use stop orders to buy stocks, such as to limit risk on short salesStop-Limit Orders Orders to sell stock at or better than specified pricePrevents sales at undesirable priceNo sale may occur if prices continues to declineDay TradingDay Trader: an investor who buys and sells stocks quickly throughout the day in hopes of making quick profitsHighly risky, especially if used with margin tradingHigh brokerage commissions due to frequent tradingTips for Successful Online Trades Know how to place and confirm ordersVerify stock ticker symbolsUse limit ordersCheck and recheck orders—you pay for typosDon’t get carried away Follow a strategyDon’t churnAvoid or limit margin ordersOpen accounts with two brokersDouble-check orders for accuracy after completionTrading ConsiderationsTransaction CostsFixed commissions used on small tradesNegotiated commissions may be used on large trades Round trip commissionsSecurities Investor Protection Corporation (SIPC) Insured to 500,000 per SS# Paying an Investment AdvisorTypical professional investment advice fees Small portfolios: annual fees between 2% and 3% of funds under managementLarge portfolios: annual fees between 0.25% and 0.75% of funds under managementExpect lots of questions from good advisor to assess your investing expertiseInvestments Clubs A legal partnership formed by investors to pool their knowledge and moneyMembers make stock recommendations and analyze stock performanceBetter Investing Community assists in organizing clubs and provides educational toolsBetter Investing Community has over 200,000 investors in over 16,000 investment clubsFind Betas for your company and the competitors identified in the Session 1 Web Exercise at HYPERLINK "" and . What does beta describe? Are they the same? Why would they be different? (20 pts)Investors avoid risk and demand a reward for engaging in risky investments. A risk tolerance quiz can help you assess your tolerance for investment risk. (30 pts) Use the risk tolerance sheets in the presentation. End of chapter 1 notes.Go to the following site and take the risk tolerance quiz as well. Go to : Are you a conservative, moderate, or aggressive investor? Do they agree with each other? Do you agree with them?Describe 3 variables that could affect a person’s risk tolerance. How does your understanding of these variables reconcile with your risk tolerance. (15 pts)What does a short ratio tell us? Rank the companies in the Session 1 group and describe what this means. How does your company compare? Find the Short Ratio at under the company’s site under the hyperlink for key statistics. (15 pts)Go to and find the above company in the stock section. (10 pts)Under performance, how has the company compared over the past 10 years? How have they compared to the industry and the market?Under Quote, describe the data and how the company compares to the industry. ................
................

In order to avoid copyright disputes, this page is only a partial summary.

Google Online Preview   Download