Stock and Options Trading

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Tag: stocks

Stock Index Trading and What It Means

To understand what stock index trading is, we first have to have a brief understanding of what a stock and a stock index is. A Stock is basically the capital or essentially the basic setup money invested in setting up a business or a company.

A stock index or stock market index is a method by which a particular section of the stock market is measured, as opposed to a price of an asset such as Gold. Trading is basically the transaction of shares from one buyer to another or among multiple buyers in the stock market. In this case it needs to be explained that shares are nothing but the original stock which is divided into manageable chunks of capital.

Stock index trading is basically the trading of shares or stocks of different companies in the stock market. Stock indices are of two major types i.e. international stock market indices like S&P which cater to the stock trading of companies regardless of which nation it is domiciled in.
stock trading strategy

The other type of stock index is the national index which is basically the stock index pertaining to an individual nation. This type of index keeps track of all companies based in that particular nation with respect to stock indices.

Trading in stocks take many forms, the most popular of which is day trading, the other types are automated trading, algorithmic trading, delivery trading etc. Without going into the intricacies of each, we will attempt to glimpse at the basic functioning of the most common type of trading .i.e. day trading.

Day trading is basically trading in stocks and shares during the day time functioning hours of the stock exchange, all trading in this method stops along with the closing time of the respective stock market daily. Usually day trading has remained the forte of financial experts and investment gurus, but of late with the advent of online trading, even users at home are at liberty to indulge in day trading with a reasonable amount of success.

Getting Started Buying Stocks – The Basic Guidelines

The stock market is popularly known as a creature in and itself and no one can explain why it acts the way it does. The ride has been thrilling with its fair share of highs and some humbling lows, market keeps teaching new lessons in his own ways. This is why we produced this beginners stock market guide.

For a beginner to know the stock market better should have to learn or study some points like – How the stock market works, how stocks are valued, why the stock market is a good investment in long term, why stock market gets out of whack with reality, recommended ways to invest the stock market etc.

Stock market always been driven by the supply and demand. Investors trade stocks for challenge, retirement, and hobby for a full time job. The supply and demand is involved in the activities of investors.

So what ever may be the reason to take interest in stock market, first check before you invest? So it’s mandatory to know more about the market while investing. Always deal with the market intermediaries registered with Exchanges. Settle down the dues through the normal banking channels with the market intermediaries. Don’t deal based on rumors. Don’t deal with unregistered brokers/ sub-brokers, intermediaries. Don’t fall prey to promises of guaranteed returns.

Getting Started

For the beginners it’s best way to know Trend trading in stock market. Trend trading is one of the most effective and easy to use methods in the market. So beginners always have to look up on the trend after it has started and getting out of trend. So, different tools are there to check out the daily trend or in long term basis for the proper study of the market situation, before investing the funds in the ever unpredictable stock market.

Keep an eye on the market: – you have to keep your eyes open once you start trading. Try to collect information about the companies so that you can work out a plan for future investments. You can watch the news on television, read newspaper register yourself to newsletters of the companies.
chartSome technical analysts decide what to buy and what to sell, the time they decided it’s good to take the consideration part. Stock market guidance using technical analysts suggests markets have memory. They know the past price and current price momentum by experiences. So it’s an advisable part for beginners to listen the words of Technical Analysts and the current trend in stock market before investing doubtfully. There are many ways to get access to the best websites that provide technical analysis for stocks, some are free, some you have to pay for. But in general if they have the ability to use charts, screen the market for various technical set ups and filter down the results (because there are thousands of stocks to choose from) then this is mainly what you are looking for.

At the end of the day use your own judgement. The best analysis of a company is often done by yourself. If you do not understand what it does, and what factors might effect the price, then probably it’s not a worthy investment to get involved in. As a beginner it is best to stick with sectors you understand, maybe technology or banks/finance stocks. This way things will be easier to manage. Good luck!

What Is An Automatic Investing Plan?

An automatic investment plan (AIP) is a way for investors to buy stocks on a recurring basis with small amounts of money. The funds to pay for these investments are automatically deducted from a checking or savings account of the investor.

There are many different types of automated plans that investors can choose from. For example, many direct stock purchase plans offer automatic investment plans as well as some online discount brokers like ING ShareBuilder. There are also brokers that allow investors to setup these types of recurring investments into mutual funds and other products.
Advantages of Automatic Investment Plans

Buying stock through an automatic investment plan has several advantages, especially for the small investor.

Dollar Cost Averaging – Investing through an AIP will help investors dollar cost average into a stock. This ensures the investor will not overpay to own a stock if they make a onetime purchase. Instead, the investor can spread their investment out over several months or years which ensures they will pay a fair market price.
Small Investments – As a small investor myself, I don’t usually have a couple extra thousand dollars to invest. However, I typically have an extra $50 or $100 around which is perfect for an AIP. Three of my current holdings (CLX, CINF, and LOW) were purchased through an automatic investment plan.
No Commissions – Some automatic investment plans do not charge commissions to invest. For example, I have an AIP through the Clorox direct stock purchase plan and do not pay any commission, which saves me a lot of money. Each month I invest $50 and none of it goes to paying a stock broker.
Hands Off Investing – Setting up an automatic investment plan saves lots of time for the average investor. As long as you have the funds in your checking or savings account, each month you will make an investment without any time spent. Investors should still keep tabs on their holdings, but the automated approach makes investing much easier.

How to Earn Dollars Every Month in Dividend Income

Are you looking to build a portfolio of dividend stocks but don’t know where to start? I like to set small achievable goals for myself and then expand on them as I begin to reach certain thresholds. My first goal in building my income portfolio was to earn $25 per month in dividend income.

Earning $25 per in dividends may not seem like a lot, but it calculates out to an extra $300 per year in income. The nice thing about that extra $300 in income is that an investor does not have to do any work to earn it (once the stock is purchased). Assuming the investor builds a solid portfolio of dividend paying stocks, the annual income earned from dividends will likely increase over time.

As a small investor just starting out, my plan was to set a manageable goal of averaging $25 per month in dividends. This is a small but necessary step in my long range goal to earn $1,000 in dividends. Here is how I accomplished this first goal –
How I Earn $25 in Dividend Income

Since I have reached the threshold of earning $25 per month in dividends, I thought it would be good to show how I have accomplished this goal. As of my last report, my 3-month rolling average for dividend income was $23.48. I estimate that on my next report, I will be averaging well over $25 in dividend income based on my current holdings.

At the time of this writing, I own 12 dividend stocks in my portfolio with an average yield on cost of 4.4%. I have approximately $9,000 invested in these stocks which should translate into $33 per month in dividends. My 3-month rolling average is a lagging calculation which is the reason for the difference between the two monthly income numbers (i.e. $23.48 & $33).

My longer range goal for this current year is to earn $500 in dividends (not $300), which will average out to $41.67. Now that I have reached an average of $25 per month in dividend income, I want to keep the momentum rolling. I want to duplicate my results so that I can earn $50 per month in dividend income. Then I will start pushing for $100, then $200, and on.

As you can probably tell by now, earning dividend income will play a large role in my family’s financial future.
How You Can Earn $25 per Month in Dividend Income

Earning $25 per month in dividend income is not all the difficult to achieve. You can start with an initial investment amount of $8,500 and quickly reach this goal. At an average dividend yield of 3.5%, an $8,500 investment would generate approximately $297.50 in dividends annually.

Initial Investment Amount – $8,500
Average Dividend Yield – 3.50%

If properly managed, a portfolio like this could double the amount of income earned annually in 10 years’ time with no additional investment. Assuming an average 8% dividend growth rate each year, this same portfolio would return $600 after 10 years. There are few other investments that can accomplish these same results.

Even a small goal to earn $25 in dividends is an important step in building a solid portfolio of income stocks.

About ETFs

An ETF (Exchange-Traded Fund) is a type of mutual fund which is traded as a regular stock on the stock exchange.

Index tracking exchange traded funds (commonly called stocks ETFs) are one of the most popular and most traded exchange traded funds. Among them you may find QQQQ (Qubes), SPY (Spider), DIA (Diamonds), XLF, IWM and others.

Index ETFs gives investors an opportunity to invest into a basket of stocks with a purchase of a single ETF. In this way it cost effective type of investment into indexes and market sectors.

There are three main points why exchange traded funds attract so many investors:

Convenience: Investing in ETFs are as easy as investing in stocks. You just need to buy one as you would buy any regular stock.
Low fees. Like index fund, ETFs have low fees.
Tax efficient. There are no unexpected capital gains/losses when you purchase an ETF. Sell when tax-wise it makes the most sense to you.

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