Stock Trade

Stock Split

When you hear the word stock split some people immediately think about the worst possible scenario that could arise. While your stock splitting is bad news, you need to be informed of exactly what is happening to your stock. The first thing to realize is that when a stock is split, the amount that you had invested in the company does not change.

It simply means that you are now the holder of two stocks which has been split from one. A company can cut a stock down to as low as a penny but they cannot force you to get rid of your stock because of the split. The value of your stock always has to be positive for the split to occur.  

The reason behind doing this is to create more shares of the same company so that more people are able to invest. Basically the company wants more money. A company is only able to have a set amount of itself, namely 100%. If the company wants to make more money, it needs to sell itself. Some people will be willing to buy a stock in a company for $100. They see no problem with doing this if they know that the company is doing or going to do well. Let's say that half of the amount of stocks available for buying are bought for that amount of money then no one else wants to take the risk of $100. So the stock is then split into two (or more) shares. Each share can now be bought for $50. Other investors who were wary about the company before will now think that that is reasonable to be bought. So they will buy a share in the company for $50 now.

The previous investors will now have two $50 shares instead of one $100 share. The stock can then be further split if need be into even smaller shares. You could wind up having one hundred $1 shares in a company.

The amount of money that you will get back from the company profits does not change. 10% of $100 is the same as 10% of a hundred $1 shares. The advantage to having a stock split is actually helpful if you are thinking of releasing some of your money being held in the stock. More people are now going to want to buy the stock and you can sell it to them making a profit. It is easier to sell stocks worth less than it is to sell one stock which is worth more than some people are willing to pay.

If all of your money was tied into one stock, you can now sell the half of the stock that you want and still retain ownership of another. That will cut in half the amount you would receive from the company but it also cuts in half the amount of chance you are taking. Now if the company does bad, you will not have to worry about losing all of your money.  

Beware of buying stocks just because it has split. Some companies split their stock so that they are able to lure people into investing in their company because they believe that the company is doing well. When these expectations are not met, the company can then begin to plummet and make the stock you thought you were buying at a great deal become worthless and impossible to get rid of.

The opposite of a stock split could also happen to you with the stock rejoining. This is called a reverse split. This is rare to happen and is not always seen as a good sign. A stock rejoining could mean that the stocks were being sold at too low of a price. When a stock is too low, people are unwilling to take the change on the company because they believe that if a stock is almost worthless than the company is probably close to being worthless as well.

This could also be done to keep a company from becoming delisted from the marketplace. Too many unsold stocks can prevent a company from being listed on a major marketplace because of the lack of impact that they have on the financial world . No one will be interested in seeing how these stocks do because no one is invested in them.

A company can also reverse split its stock so that it is able to push out minority shareholders or to go private. These companies just want to consolidate itself back to almost one entity so that it is able to restructure and then it will probably go back out onto the market.

Overall, a stock split is seen as a good thing. It means the market is rising and people are interested in buying stocks . You should check out the company to see if you believe that it is rising as well and invest.

How to pick stocks

When you begin to get into the stock market game you are going to need to find a way for you to choose which stocks are best for you to buy. Some people claim to have all sorts of way of finding the right stock so that you are able to buy for low and then to sell for high. While it is important to know that the stock you want to buy is going to increase in value, you need to be aware that there are a variety of other factors which could make even the best stock fall in value.The first thing you need to do is look at the trending market. For example, the stock for companies who do electronic music is doing better than the stock for companies who are only selling traditional venues for music. One way to keep ahead of this is to constantly check the news and see what new trends people are doing. You can also go to industry fairs to see what is going to be coming out in the next few years. This will let you know what you should invest in because it is going to be the next great thing. The more people you see trying to push a new idea or product at people during these fairs increases the chance of this being the next thing that people are going to buy.

You can also watch the change that certain stocks do during seasons. If you are able to buy a stock for cheap before it is its peak time, you will be able to sell it for much more when it comes time to get rid of it. Certain things such as gases used for heating are much cheaper during the summer. Buying some of that stock can help you to sell it later on for more money during the winter when people are more likely to require heating. Then during that time you can invest in things for the warmer months. You will have to hold these stocks for a while so that you can see a significant increase.

Watch other countries to see how their economy and markets are doing. If there is a war in a certain region that mainly exports one commodity that people tend to buy a lot of, you can investigate to find out where else in the world people are going to be buying their goods from. That way you can invest in that region’s goods which are going to be worth more because of supply and demand.

What you don't want to do is to pick a stock because you like the initials. You can never be too sure how a company like that is going to behave unless you understand what the company stands for. You may end up losing all of your money because you simply wanted to have a cool initial company.

You should also not blindly pick a stock. Even if you know the company by reputation you will still want to investigate how that company does when it is being sold in the market. You will also be able to find out if you can get the stock for much cheaper during other times during the year so that you can turn around and sell it later for more money than it was bought for. If you do not do your research, you may be buying the stock when it is at its highest and will have no where for you to turn around and sell it.

Beware websites and people who are going to give you "insider" tips on buying certain stocks. Stocks fluctuate so quickly it is hard for people to always be able to tell you which certain ones you should be buying. These tips are not worthwhile because if the tip was so hot these people would have already bought up as many shares of a company as they could. Most of the time people who try this approach are trying to artificially inflate the market so that they are able to get rid of their useless stock by pawning it off on you. It is also worthwhile to mention that insider trading is illegal. Just one more reason why you may not want to listen to them.

So your best bet to find the perfect stock which will do well is to examine the market based upon trends that it has. A vast majority of stocks will have a down period and an up period in which you can find. The trick is to get in while the stocks are down and get out while they are up. You do not want to have to pay more for a stock than you will be able to get rid of it for.

Mutual funds and stocks

When you start playing the investment game, most people get confused over whether it is good to invest in stocks or in mutual funds. Some people are not even sure what the difference is between them. Knowing what either one is will help you when you choose how you are going to invest your money.More than 80 million people in the United States are invested in mutual funds. It is one of the easiest ways for you to begin to "play" in the stock market.

When we talk about mutual funds we are referring to purchasing a large portfolio of stocks in different companies. The advantage to using this technique is you are able to spread your money around to cover all the different angles. You have a better chance of making money with a mutual fund if you do not cover individual stocks every day. The mutual funds can be from many different businesses, most of the time they do not even need to be related to each other.

If you are just starting to learn to play the stock market, mutual funds would be the best way for you to go. You have a greater chance of success if you do not place all of your money into one company. You will also have the ability to see how different stocks are affected by the same economic outside forces.

If you decide to sell your mutual fund, it will cost less than if you were to try to sell your stocks individually. The percentage that would go to taxes when you sell will be smaller because of the volume. It is also easy for you to open a mutual fund account. Most banks have a plan to where you can pay as little as $100 to open one.

The downside to having a mutual fund is that you are only investing a small percentage into a company. If you only invest a small amount, you will only get a small amount of dividend in return. You may also have to pay extra taxes because of having a mutual fund even if you do not see large gains from it.

There are three main types of mutual funds. The first is the most common one and has to deal with buying stocks. This is called an equity fund. The second, a fixed-income fund, deals with buying bonds. The third is money market fund which has to deal with Treasury bills. The last is largely recommended if you want to just place your money somewhere without worrying about it constantly.

You can also choose to purchase mutual funds which come from a specific region or from even a specific country. This is riskier than a normal fund because if that region were to suffer economic hardships, your mutual fund would become worthless. Since you cannot control what happens in other countries or regions, this is probably not something you want to do unless you firmly believe that a specific company or companies in that region are worth investing in.

When you are buying just regular stocks, you first need to do a lot of homework. You need to research how these stocks behave under certain constraints. If for example you notice that the stocks you want peak at a certain time and at other times are barely worth anything, you may want to consider buying them at the lowest and then making a large profit by selling them at a high.

When you are interested in buying a specific company stock, pay careful attention to the initials that are used for that company. Many companies have similar initials and you may end up buying shares that you did not want. The stocks that you own may also split and then you can end up with more shares valued at less than what you bought them for.

The positive about buying a specific stock is that you are able to get a larger amount of profit from the selling of your stock. If the company suddenly makes large profits then you are able to share with them a percentage of that greater than if you had only bought a few shares. You will also get more control over exactly where your money is going.

The downside is that if the company you bought shares in goes down, then you will lose a large majority of your money. The company could also be bought out and you will be left with worthless shares because you were not paying attention to your individual stocks for that day. A large portion of your time will have to go to making sure you stay focused on your stock to see how is behaves from day to day. You will also have to pay greater taxes on the shares that did well. This could end up making most of your profit go to the government .

Whether you are interested in investing with mutual funds or in individual stocks , it is a tricky game to play. You need to explore all of the different options and choose the right option that fits with how involved you want to be with your portfolio.