- Stock Market Terms – The Top 10 Terms You Need to Know (Part 2)
Welcome to part 2 of Stock Market Terms. Here are the next 5 terms you need to know to navigate the stock market. The other 5 definitions are in my previous post on stock market terms here.Stock Market Term 5 -
Market Order – A market order is an order to buy or sell a stock that will be executed on a stock exchange. When you place an order with your broker that includes no other conditions, that's an example of a market order. You agree to buy or sell a stock at what ever the market price is when the trade is executed. Due to the time difference between when the trade is requested and when it's executed, there can be substantial difference in the price you buy or sell a stock at compared to where you wanted to buy or sell at.
For example, if you're looking at a stock on your computer screen and it's sitting at $20.00 a share, it may have moved to $21.75 from the time you place the order to the time a trader actually buys the stock for you on the exchange. Remember that stock exchanges are just markets filled with buyers and sellers. The price offered and the price that sellers are willing to sell for changes constantly as the trading day progresses.
Stock Market Term 4 -
Limit Order – As the name suggests a limit order is an order to buy or sell some stock that's limited by price. There are buy limit orders and sell limit orders. When you place a limit order, the transaction can only occur when the stock's price reaches, but doesn't exceed a certain price. This can occur either on the high or low side.
For example, you want to buy some shares of XYZ Corp. (You just love that company) and it's currently trading at $10.00 per share. You can place a limit order that will not be executed if the stock is trading at greater than $12.00 at the time the order is executed. That prevents you from paying more than you wanted to for the stock, which can easily occur with a fast moving stock due to the lag between the time your order is placed and when the trade is actually executed on the stock exchange.
You can also use a limit order when selling. Say you're holding XYZ Corp at $10.00 per share. You can place a limit order to sell your shares but set a limit at some amount, say $8.50, below which you don't want the trade to be executed. If XYZ falls below $8.50 before the trade can be executed, the transaction won't be made.
Stock Market Term 3 -
Stop Order – The stop order is basically the flip side of the limit order. With a stop order, you set what's called a “stop price”. When the stock reaches your selected stop price the trade will be turned into a market order, not before. As with the limit order, there are sell stop orders and buy stop orders. These are great for locking in profits or limiting losses.
For example if an investor is holding XYZ at $10.00 per share, they can set a sell stop order at $9.00/share. That way if the stock drops to $9.00 it will trigger a market order to sell. If the investor (you?) bought the stock at $7.00 they are locking in the $2.00 per share appreciation as profit. Keep in mind that they may not receive the entire $2.00 due to the time difference between when the market order is placed and when the trade is executed.
Stock Market Term 2 -
Stop–Limit Order – If you really aren't comfortable with the market fluctuations that can cause your trade to be executed at a price above or below your stop or limit order, you need to use what's called, appropriately enough, a “stop–limit order”. The stop-limit order is a marriage of both types of orders. As with the stop order you set a stop price. The difference is that the when the stop price is reached the order converts to a limit order, rather than a standard market order.
Why wouldn't you always use a stop-limit order? Well sometimes you can't, because your broker prohibits it with certain classes of stocks, such as over the counter bulletin board (OTC-BB) stocks. When they allow you to place these orders should be clearly spelled out in their service terms. The other reason you may not want to use a stop-limit order is that, as with a standard stop order, if the price of the stock never reaches the limit, your trade will not be executed.
Stock Market Term 1a -
Ask – You'll see the term “ask” on your computer screen when looking at different stocks and their activity. The Ask amount is what the seller of the stock is willing to sell it for.
Stock Market Term 1b -
Bid – Bid is the flip side of Ask. It's what the buyer is offering to pay for a specific stock.
That wraps up the top 10 stock market terms you need to know. There are hundreds more terms that are used by investors, brokers, and traders. Like lawyers, they have a language that is all their own. I'll post the definition of more stock market terms in the near future.
If you're investing in the stock market there are stock market terms you have to know in order to understand what the heck you're doing. With that in mind, here is a list of the top 10 stock market every investor should know. I hope everyone had a great 4th of July Independence Day holiday and came through it all relatively unscathed.
There are virtually as many different ways of investing money as there are investors. That's great because it means that there is the perfect investment for just about everybody. One of the keys to investing success is to match the investment to the individual investor. There are so many ways of investing money that it would take a book to describe them all, and in fact many such books have been written.
Investing in oil; is it a good idea as the price of oil is hitting an historical high of $135 per barrel? How about that black staple of American energy production; coal? What about investing in energy sources for the future, such as alternative energy funds? As oil prices continue to rise, investing in alternatives may make sense. Oil could price itself out of a job somewhat if it keeps going up. Maybe some of these new technologies will step in to fill the gap. The problem is that oil provides little of our electrical energy. In addition, oil is still pretty cheap, relatively speaking, and there are few alternatives for many of the non-energy uses for oil. You can't pave a road or build consumer products from the sun, but you sure can with petrochemicals.



What is a trailing stop limit? How can it generate explosive investment returns? Read on. A trailing stop limit is simply a stop loss order, but one with a very important difference compared to a traditional stop loss order. A traditional stop loss order is a command to your broker to sell a stock holding when it drops below a preset price.
Investing for kids can mean two things; investing for your kid's future, such as a college funding investment, or kids actually doing the investing themselves. It's great if your kids are actually investing as a way to spend their time doing something more socially responsible than whiling away their time playing GTA4.
Is silver investing an avenue you should be pursuing in an effort to diversify your portfolio? Why does it seem like silver is gold's poor bastard stepchild when it comes to investing? Every radio talk show host seems to be pushing this or that gold investing fund, guru or scheme, but silver rarely gets so much as whisper. Why is that?
For the beginner stock investing can be kind of daunting. There are, after all, over 2,800 different stocks and funds actively traded on the New York Stock Exchange alone. That is a healthy number of choices and if you are new to the stock investing game it can easily seem a bit overwhelming.
What is short selling a stock? Basically it is betting that the stock will do what you usually would rather it wouldn’t; go down. Typically investors want to see their stock picks rise in value. With short selling, however, you make money when the stock falls. It’s great for companies or sectors that are experiencing trouble. You could have made a mint short selling Bear Stearns for example. The same would have been true for some of the mortgage industry stocks that collapsed in the last 6 months. When there’s a bear market, short selling is one of the ways savvy investors make their money.
For many Americans their 401k plan is the most powerful vehicle in their retirement garage. According to recent estimates, only about 5% of people max out their 401k contributions, but according to the Federal Bureau of Labor Statistics, only 21% of workers in America are covered by traditional employer sponsored pension plans. I'll bet that among younger employees, the percentage covered by such pension plans is far lower. The new employer sponsored retirement vehicle of choice is the 401k, which be employer sponsored. If so few are maxing out their 401k contributions, what are they thinking will provide for them in their retirement years?
Yesterday I talked about the Ferrari effect, where the top end of the consumer market is unaffected by economic conditions that conspire to slow down consumers with less wealth. There is another effect that can be noticed when the economy is not as robust as it has been for prior years. I call it the “Starbucks effect”. When consumer confidence is lower and consumers are looking at the economy with some trepidation. One of the first things to get cut from their budget are the inexpensive luxuries, to wit, the $4.50 latte.
For the average investor, one of the great things about the Internet is the proliferation of online stock brokers. Most of these are also discount brokers, so an investor can get both accessibility and low prices on their stock trades. It’s a stark contrast to the days when your father had to make a call to his broker and pay huge fees to make a trade. One of the results of this whole situation is that there are far more investors in the stock market than ever before. It makes perfect sense. Any time the price of a product or service or service is lowered and the access to it is facilitated, the number of users will increase, providing there is a demand for the item in question.
It's been the subject of more speculation that yesterday's Superbowl between the Giants and the Pats. Being a stone's throw from the Redmond stronghold as I write this, I've sure heard a thing or two myself about the whole thing. That's not quite true. I don't have that good of an arm. It would actually take about 3 minutes to drive there, providing all the lights went my way.
We’d all like to hit that massive, 585 footer into the bay. The reality is that, although that does happen, you’ve got far weaker odds of hitting the investing equivalent of a home run as you do striking out repeatedly. Hey, it’s just like in the majors. Those that live by the long ball often die by it as well.
How can you find out how long it will take to double your money when you invest it at a certain interest rate? It's simple, really, thanks to what investment types call the 72 rule. The 72 rule simply states that, to find out how long in years it takes to double a nest egg, just divide the interest rate by 72. For instance, if you have money invested at 10% it will double in 7.2 years (10/72). If it was earning 8%, it would take 9 years to double.
There are many rules to help you pick stocks or other investments out form the crowd. There are probably nearly as many of them as there investors doing the picking. Here are three that you can use to help give your investment portfolio some added zing as you head into the New Year.
If you are a beginning investor you'll have many choices; stocks, bonds, real estate, commodities, etc. Within those broad investment categories, there are many sub-categories. For example, if you choose to invest heavily in stocks, also known as equities, you'll want to find good stocks to invest in. Be advised that many great minds have tried and failed to both pick stocks and time the market. Others, however, have had great success in doing so, typically the former more than the latter.
Your 401k is one of the most powerful tools in your investing and retirement toolbox. Do you want to live well after you've left the world of the gainfully employed, but before you've left this world altogether? Make sure you max out your 401k. If you made some good employment choices along the way, your employer kicked in some matching funds and you took full advantage of their generosity.
If you have and IRA or other investment accounts there's a great chance you'll count among your holdings a mutual fund or two. That being the case, you'll probably want to find the best performing mutual funds to maximize the power of your retirement savings. A mutual fund is basically a group of different investments run by a fund manager, who ostensibly knows more than you do about investing, especially in one or more particular areas.
Many of you may have heard of the Pinchot Plan. Then again, many of you may not have any idea what I’m talking about. Like many other investment ideas floating round on the Internet these days, it’s someone’s catchy name for a class of investments. This particular group of investments has been deemed the “Pinchot Plan” Did the former head (actually the first) chief of the U.S. Forest Service, Gifford Pinchot, have anything to do with setting these investments up? Not really anything at all. In fact, Pinchot’s been dead since 1946. He does have a national forest named after him in Washington State, however. That’s important for one reason only in the context of this group of investments.
As many an investor can attest to, the way to make consistently large returns with your investments is to jump onto a trend at the beginning, and then ride it all the way to the top. The trouble for many investors is finding these highly profitable trends. The next step in this profit plan is no easier for many; determining the best way to capitalize on the trends.
Taxes are one thing every investor, and just about everyone else, would much rather avoid. There are a plethora of vehicles that will allow you to legally avoid or defer taxes you would otherwise have to pay. Many investors employ a mix of them to create their tax avoidance strategy. Some less astute investors don’t have much of a tax avoidance strategy at all, while others are perhaps a bit too aggressive when it comes to minimizing their tax burden.
The only question you need to ask yourself when considering a potential investment is “Will it make me any money, and if so, how much, and how risky will it be to generate that return?” Yes, it’s kind of big, complicated question, but if you can’t answer it, you should just buy shares in a good no or low load mutual fund and call it a day. Even then you should have some inkling as to weather you’ll generate enough to retire, buy that Prevost you’ve always wanted, and drive around Arizona.
In the latest fallout from the mortgage industry calamity (of its’ own making), Home Depot, agreed to a buyout offer for its commercial supply unit (HD Supply) by a consortium that includes private equity partner firm, Bain Capital (Bain was co-founded, incidentally, by Republican presidential candidate Mitt Romney, who left the firm in 2001.). The price is $8.5 billion. That’s down from the $10.3 billion price agreed to on June 19th by the parties. The price drop was, of course, partially attributed to the recent mortgage industry problems and to recent difficulties faced by the nation’s home builders.
Most companies would kill for a balance sheet which reflected almost a $ billion in cash on hand, and financials which show greater than a 41% operating margin, a return on assets of over 26%, and an operating cash flow of $705 million. This, coupled with the fact they reside in an expanding market that is projected to experience a 20% annual growth rate according to some wall street analysts, portends well for MEMC Electronic (NYSE: WFR). Solar panels have been the focus of much development of late with resulting increases in manufacturing yield and cell efficiency promising to, along with the increasing price of oil, bring the technology from niche to mainstream.
Well, we all know they can ding you every April for a healthy percentage of your income. Yes, I know the Army, Social Security, keeping up 8 lane ribbons to everywhere, and finding the cure for various infectious diseases cost a bundle. Do they also do something that can help you boost your investment and retirement portfolio? You bet they do. One thing the U.S. government excels at is producing information, and copious quantities of it.
Don't invest in the exploding Chinese market! It's too dangerous. As with any foreign country, you have no control over any aspect of the economy or government. For that matter, a U.S. investor has about the same level of individual control over those factors in the U.S. You can, however, make impressive gains in your investment accounts by profiting from the expansion of overseas economies such as China and India, without actually putting any of your hard earned money there.
Well, not exactly, but what the heck are they talking about? There are several emails floating around that claim some pretty impressive gains with an investment vehicle called an 801(k). Obviously, few have ever heard of such a thing, even in the professional investment community (probably especially in the professional investment community!). If, upon reading the emails, it sounds suspiciously like a DRIP to you, you get the gold star for the day.
There are 2 business related news stories in the headlines today that are counter intuitive. The first, “Economy Growth Best in a Year” is balanced with “Stock Futures Flat After Plunge”. Faced with such contradictory news, how do you go about deciding where to invest your hard earned money?
2 weeks a go, I posted on
It’s been predicted before, and now it’s being predicted again. The International Energy Agency is noting that oil production is down, despite, as you’ve doubtlessly noticed, increased oil prices. Typically when prices rise it precipitates a concurrent rise in production. Oil sources heretofore not economically feasible to extract and/or refine become more attractive, and thus move from the ground to consumer’s vehicles and furnaces.
One big paycheck; it's a dream of many. Let's say you won the lottery or some other contest, and elected to take the bird in the hand instead of 20 year payments. You may have the type of job where you receive irregular payment, but when you get paid, it's a whopper. Commission sales reps and commercial fishermen spring to mind as examples of such jobs. In these jobs you get little money throughout the year, and then receive the lions share of your compensation as one big paycheck . Professional athletes, especially those at the start of their careers, are often in this same boat. Baseball players will get drafted out of high school, receive a handsome signing bonus, and be sent to the major league's farm system. There the prospect may get hurt, or languish in obscurity forever, never making it to the “show”, but still having the initial $100,000, $200,000 or $500,000 signing bonus.
As Tishman Speyer Properties and Lehman Brothers looks to close a deal for one of the largest residential REITs in the world, the Archstone-Smith Trust, you may be thinking “There're probably smarter minds at work there than between my ears. So they know something I don't?” Well you may be right, and they might. As the single family home market continues to cool throughout the U.S. real estate investors might look elsewhere to place their real estate investment dollars.
Microsoft announced record earnings today, courtesy of Windows Vista. For Microsoft, that’s really saying something, as they’ve had a history of great earnings. Their EPS for the quarter was 50 cents / share compared to last years 29 cents for the same quarter. That’s quarterly revenue of 14.4 billion! Pretty hefty, huh? The earnings beat analysts’ expectations by almost 15%.
It’s common financial wisdom that stocks are the best investment over the long term. While true on the face of it; that may not mean that stocks are always the best investment for the bulk of your retirement savings. Stocks have had a historically excellent record; however there have been extended periods where the stock market as a whole has experienced little or no overall growth. If you were unfortunate enough to have the bulk of your investment in stocks that roughly paralleled the market as a whole during this time period, you’d have lost ground when the effects of inflation were considered (and how can you avoid inflation?).
When you’re self employed, you tend to wear a lot of hats; too many sometimes. With the myriad of tasks facing the small business owner, it’s a wonder they find the time for everything. One of the things that tends to get overlooked is retirement planning. It’s too bad too because being self employed affords you some advantages not enjoyed by the average person.
If you want to be an affluent investor, you have to think like one. Find someone or a group who you want to aspire to, and emulate their behavior. In this case you want to emulate the behavior of the affluent investor in the hopes of becoming such an investor yourself. Sounds good, right? Well, read on.
Don't have a broker? Don't want one? That's okay, because you don't really need one if you're are going around them by using a Direct Stock Plan (DSP). You could end up not only debt free, but with a substantial nest egg to boot. Over one thousand U.S. companies allow you to skip running your stock purchase through a broker. You can just buy the stock directly from the company, hence the word “Direct” in the plan description. How does the whole thing work? Well, it's like this.
Provide a Healthy Retirement
It's every investors dream; getting in on a fantastic company for a song. It's kind of like hitting on the company when it's down, but in a nice way. You can take advantage of a firm's temporary misfortune to give your investment portfolio a substantial shot in the arm. As with any investment you've got to do your homework. There are several keys to make this strategy successful in the long term. In the long term however, this could be one of the most powerful investment strategies in your arsenal. Here's what to look for when selecting these stocks.
Are you a buy and hold type of investor, or are you open to a bit of portfolio rebalancing once in a while? A true buy and hold guy (or gal) will hold tight until the cows come home (hopefully they’re cash cows). On occasion, however, if you're like most investors, your portfolio could do with a bit of readjustment. You need to look at your long term investment goals and make sure you’re still on target to meet them.
Investor update – Look out! Kirk Kerkorian over at Tracindia Corp is looking to add to his already considerable (56+%) stake in MGM. Kaptin Kirk is feels another 15 million shares of MGM would be a worthy way to lighten his cash position for the holidays. The offer, $55/share, is a hefty 15% holiday bonus for MGM stockholders. Merry Happy Holidays!!
Some investments are just plain bad. It’s been said a fool and his money are soon parted. Leaving apart for a minute the question about the likelihood of a fool and his money getting together in the first place, never is that more true than with some of the so-called investments to follow. Keep in mind, an investment is supposed to increase in value, or provide cash flow. In this way you can actually have more money in the future than you’re sitting on now. Sadly, some investments don’t really work that way. Here are a few.
Typically when potential investors evaluate a stock to buy, they look at the usual suspects; stock price history, P/E ratio, total revenue, corporate management, etc. There are however, other places you can look to give you a more complete picture of the company and industry you are examining. You can look to analyst reports, most everyone does, and successful analysts do their homework, so you don't have to. Except that you still do have to.
Of course, everyone wants to retire rich, or at least financially secure, unless you never quite recovered from your stint in that No Cal commune in the ‘60’s. You’ll hear countless methods thrown around that purport to allow just that; a retirement supported by a nice, steady cash flow. There are countless vehicles in which to invest your retirement money. You can invest in residential real estate, commercial real estate, large cap stocks, small cap stocks, bonds, mutual funds (within the mutual fund category, there are countless sub-categories), commodities, commodity funds, REITS, your brother-in-law’s business, your own business; the list is endless.
In a note related to the previous post only in that it pertains to technological innovation and the market, I was sent a prospectus for a startup that is undergoing its initial round of investor financing. The firm was started by some PhDs that have developed some underlying technology to link RFID and GPS. They have impeccable credentials, all. The possibilities for this new technology are endless. You don't often get a chance to get in on the first round offering, but typically I'd take a pass on such things. I've seen countless startups that have gone nowhere, fast. I've even been part of couple. This looks very promising, however, for a few reasons.
AOL, stalwart of the Internet that time seems to have passed by, is going to start it's own video Internet portal. Taking a cue from the success of YouTube, AOL says it will have user produced content in addition to programs from some of it's cable properties. YouTube has been one of this year's most prominent Internet success stories, capitalizing on people's need to publicly embarrass themselves in search of their 15 minutes. Sensing that this sentiment is so strong one Internet site couldn't possibly fill the need by itself, AOL will jump into the fray this week. Having professionally produced content can only bolster the new portal's chances of success.