What are they doing with your money? Have you ever wondered how well your money is really being managed by the corporations you hand it over to? After all, the media is full of stories about CEO compensation reaching new heights, buy-outs of non-profitable holdings, million dollar birthday parties and other horror stories. Formula for ROE What is ROE used for? Return on Equity (ROE) is … Continue reading ROE: Return on your Equity
A Cash Flow Statement is a financial statement that shows the flow of cash in and out of the business. The Cash Flow Statement is particularly useful for investors and lenders to determine the short-term viability of a company with respect to its ability to pay its debts. In the statement, money coming in to the company is referred to as “cash inflow”, and money … Continue reading Cash Flow: The flow of money in a company
Learning different methods to do your own stock market research will enable you to make a better decision whether to, or not to enter into specific trading and investing positions. Keep the brokers in check In the past, many people relied on investment brokers to provide recommendations and whatever they said, was the way to go, or so they said. As more and more people have seen … Continue reading Introduction to Stock Market Research
Investors that would never think of taking a gamble on a “hot stock tip” overheard on a discussion forum or elevator routinely fall victim to another common fallacy: Believing everything they read as long as it is cloaked in the shroud of an “analyst report”. What is this Analyst Report? Analyst report stock recommendations based upon “Buy”, “Sell” or “Hold” ratings after reviewing the current market conditions, … Continue reading Analyst Report: Stock Market Research
EPS (Earnings-Per-Share) measures how much of a company’s net income actually trickles down to each outstanding share. Any preferred dividends are first taken out of the net income before calculating EPS. Interpreting EPS Earnings Per Share can be used to compare the earnings of two or more companies in a similar industry. Just because one company makes more money than another, it does not mean … Continue reading EPS: Earnings Per Share
PE Ratio (Price-to-Earnings) is a valuation ratio that compares the price per share of a company’s stock to its earnings per share. It basically shows how much investors are willing to pay for a share given the earnings currently generated. It is also used to analyze whether a stock is overvalued or undervalued. Formula How to use the PE Ratio: The PE Ratio by itself … Continue reading PE Ratio: Compare Relative Values
A Sharpe Ratio calculates the extra return of an investment in return for the extra risk taken on. It is used to compare different investments to see which one did better given the different risk of each. It is measured as taking the difference between a risk-free and a risky asset, and then dividing the difference by the Standard Deviation (which is a value of risk) of the stock / portfolio. … Continue reading Sharpe Ratio: Extra Return for Extra Risk
“Learning is not attained by chance; it must be sought for with ardor and attended to with diligence.” – Abigail Adams (1744-1818) Google (NASDAQ: ) You may have heard of technical analysis before or maybe you’re wondering what all the squiggly lines on ’s chart above represent. Those lines are a result of technical analysis. Technical analysis is the process of analyzing market (price) action and using … Continue reading An Introduction to Technical Analysis: Its History, Foundation, Purpose, and Use
Fundamental analysis is the process of looking at the basic or fundamental financial level of a business, especially: sales earnings growth potential assets debt management products competition This type of analysis examines key ratios of a business to determine its financial health and gives you an idea of the value its stock. Many investors use fundamental analysis alone or in combination with other tools to … Continue reading What is Fundamental Analysis
Most investors don’t know the significance of a stock’s daily volume. Learn the four wonders of high volume and the four dangers of low volume. Volume plays a very important role in stock trading especially, when day trading. For those of you who don’t know what volume is, it’s the total amount of shares traded of any individual stock at any given time including the market … Continue reading Why Volume Matters
Options can be extremely lucrative, but also very dangerous if not properly understood. One of the first steps in learning how to trade options is to understand how to read an options table. Below is an example of a basic options table of Google (GOOG) expiring in October 2011: Calls and Puts: There are two types of basic options: calls and puts. Calls are inherently the same … Continue reading How to Read an Options Table
Is Technical Analysis voodoo? Contrary to what some people think, Technical Analysis is not a kind of black magic or sorcery. Also, the use of technical analysis does not increase as we get closer to Halloween. It is important to keep an open mind and realize that things such as trend lines, triangles, and other patterns actually do work. If you analyze past data, you … Continue reading Basic Types of Technical Analysis
When would I use this strategy? A Covered Call Strategy is for investors who feel that the stock price will either remain stable or will grow. This strategy is NOT for investors who think the price of the stock will go down. How do I execute this strategy? The strategy entails two steps: Write a call option Buy the appropriate number of underlying stocks How … Continue reading Covered Call: Making money with Insurance
For each model stock portfolio that is created by Lady Luck, there are thousands that are designed using a valid and well thought-out investment strategy. What is taught about the Model Stock Portfolio? Financial Portfolio Management training all over the world stresses adopting a market game strategy that fits the investor’s: Personality (Who are you? What do you like? Do you take risks?) Goals (What … Continue reading Model Stock Portfolio: A Starter’s Guide
If you have never traded options before, don’t worry; it’s easier than you might think. But before you can even begin trading options, you need to understand what an option is. Definition of an Option An option is the right to buy or sell an asset, not an obligation. In other words, the option does not force you to buy or sell the underlying asset if you don’t … Continue reading Trading Options: An Introduction