Pay Attention to The “High Yields” and Hot Air

We’ve all seen investment offers that promise to pay sky-high returns for what are at best extremely risky propositions — and at worst are pure frauds. Here’s a list of red flags that we often find in many of the frauds we see.

• If it sounds too good to be true, it is. Mom was right! Compare promised yields with current returns on well-known stock indexes. Any investment opportunity that claims you’ll get substantially more could be highly risky. And that means you might lose money.
   
• “Guaranteed returns” aren’t. Every investment carries some degree of risk, and the level of risk typically correlates with the return you can expect to receive. Low risk generally means low yields, and high yields typically involve high risk. If your money is perfectly safe, you’ll most likely get a low return. High returns represent potential rewards for folks who are willing to take big risks. Most fraudsters spend a lot of time trying to convince investors that extremely high returns are “guaranteed” or “can’t miss.” Don’t believe it.
   
• Check out the company before you invest. If you’ve never heard of a company, broker, or adviser, spend some time checking them out before you invest. Most public companies make electronic filings with the SEC. There are computerized databases to check out brokers and advisers. Your state securities regulator may have additional information. And by the way — if a supposedly upright firm only lists a P.O. box, you’ll want to do a lot of work before sending your money!
   
• If it is that good, it will wait. Scam artists usually try to create a sense of urgency — implying that if you don’t act now, you’ll miss out on a fabulous opportunity. But savvy investors take time to do their homework before investing. If you’re being pressured to invest, especially if it is a once-in-a-lifetime, too-good-to-be-true opportunity that “just can’t miss,” just say “no.” Your wallet will thank you.
   
• Understand your investments. Fraudsters frequently use a lot of big words and technical-sounding phrases to impress you. But have faith in yourself! If you don’t understand an investment, don’t buy it. If a salesman isn’t able to explain a concept clearly enough for you to understand, it isn’t your fault. Don’t make it your problem by buying!
   
• Beauty isn’t everything. Don’t be fooled by a pretty website — they are remarkably easy to create.

Remember — an educated investor is our best defense against fraud! For more information on how to invest wisely and avoid fraud, please visit the Best Growth Stock Market Report .

Make a Financial Plan Towards Financial Freedom

Sit down and take an honest look at your entire financial situation. You can never take a journey without knowing where you’re starting from, and a journey to financial security is no different.

You’ll need to figure out on paper your current situation— what you own and what you owe. You’ll be creating a “net worth statement.” On one side of the page, list what you own. These are your “assets.” And on the other side list what you owe other people, your “liabilities” or debts.

Subtract your liabilities from your assets. If your assets are larger than your liabilities, you have a “positive” net worth. If your liabilities are greater than your assets, you have a “negative” net worth. You’ll want to update your “net worth statement” every year to keep track of how you are doing. Don’t be discouraged if you have a negative net worth. If you follow a plan to get into a positive position, you’re doing the right thing.

KNOW YOUR INCOME AND EXPENSES

The next step is to keep track of your income and your expenses for every month. Write down what you and others in your family earn, and then your monthly expenses. Include a category for savings and investing. What are you paying yourself every month? Many people get into the habit of saving and investing by following this advice: always pay yourself or your family first. Many people find it easier to pay themselves first if they allow their bank to automatically remove money from their paycheck and deposit it into a savings or investment account. Likely even better, for tax purposes, is to participate in an employer sponsored retirement plan such as a 401(k), 403(b), or 457(b). These plans will typically not only automatically deduct money from your paycheck, but will immediately reduce the taxes you are paying. Additionally, in many plans the employer matches some or all of your contribution. When your employer does that, it’s offering “free money.” Any time you have automatic deductions made from your paycheck or bank account, you’ll increase the chances of being able to stick to your plan and to realize your goals.

“But I Spend Everything I Make.”

If you are spending all your income, and never have money to save or invest, you’ll need to look for ways to cut back on your expenses. When you watch where you spend your money, you will be surprised how small everyday expenses that you can do without add up over a year.

Small Savings Add Up to Big Money

How much does a cup of coffee cost you?

Would you believe $465.84? Or more?

If you buy a cup of coffee every day for $1.00 (an awfully good price for a decent cup of coffee, nowadays), that adds up to $365.00 a year. If you saved that $365.00 for just one year, and put it into a savings account or investment that earns 5% a year, it would grow to $465.84 by the end of 5 years, and by the end of 30 years, to $1,577.50.

That’s the power of “compounding.” With compound interest, you earn interest on the money you save and on the interest that money earns. Over time, even a small amount saved can add up to big money.

If you are willing to watch what you spend and look for little ways to save on a regular schedule, you can make money grow. You just did it with one cup of coffee.

If a small cup of coffee can make such a huge difference, start looking at how you could make your money grow if you decided to spend less on other things and save those extra dollars.

If you buy on impulse, make a rule that you’ll always wait 24 hours to buy anything. You may lose your desire to buy it after a day. And try emptying your pockets and wallet of spare change at the end of each day. You’ll be surprised how quickly those nickels and dimes add up!

Pay Off Credit Card or Other High Interest Debt

Speaking of things adding up, there is no investment strategy anywhere that pays off as well as, or with less risk than, merely paying off all high interest debt you may have. Many people have wallets filled with credit cards, some of which they’ve “maxed out” (meaning they’ve spent up to their credit limit). Credit cards can make it seem easy to buy expensive things when you don’t have the cash in your pocket—or in the bank. But credit cards aren’t free money.

Most credit cards charge high interest rates—as much as 18 percent or more—if you don’t pay off your balance in full each month. If you owe money on your credit cards, the wisest thing you can do is pay off the balance in full as quickly as possible. Virtually no investment will give you the high returns you’ll need to keep pace with an 18 percent interest charge. That’s why you’re better off eliminating all credit card debt before investing savings. Once you’ve paid off your credit cards, you can budget your money and begin to save and invest. Here are some tips for avoiding credit card debt:

• Put Away the Plastic

Don’t use a credit card unless your debt is at a manageable level and you know you’ll have the money to pay the bill when it arrives.

• Know What You Owe

It’s easy to forget how much you’ve charged on your credit card. Every time you use a credit card, write down how much you have spent and figure out how much you’ll have to pay that month. If you know you won’t be able to pay your balance in full, try to figure out how much you can pay each month and how long it’ll take to pay the balance in full.

• Pay Off the Card with the Highest Rate

If you’ve got unpaid balances on several credit cards, you should first pay down the card that charges the highest rate. Pay as much as you can toward that debt each month until your balance is once again zero, while still paying the minimum on your other cards.

The same advice goes for any other high interest debt (about 8% or above) which does not offer the tax advantages of, for example, a mortgage.

Once you have paid off those credit cards and begun to set aside some money to save and invest, you’re in the savings habit! Now that you are freeing up some money to save and invest, it’s time to move ahead to the next stop in your journey.

Factors for good investment

You need to identify the best stocks when you plan investment. The motto is to make certain greater profit and reduce the losses. You will find people getting bankrupt and still others making fortunes through investment in stock market. Well, contrary to a still popular belief, success in stock investment has nothing to do with luck and neither there is any magic formula for success. It is all about sound reasoning and calculation. In order to identify the best growth stocks for investment, you require information through research and are able to analyze that information so that you could use them.

 Here are a few factors which can prove instrumental in determining the potential of the company and its stock.

Sales Revenue – The sales revenue is an important stricture which will aid you to judge the financial condition of the respective company. It refers to the amount of money that the company makes in that fiscal year. Sales revenue also includes scraps of information regarding the cost and the loss of the company as well.

Earnings – This also refers to the net income of the company. It reveals the business condition that whether the company is garnering profit or running losses. The earning of the company not only describes its current fiscal condition but also is of great help to ascertain the future prospect of the company. If the company is found to harbor profits year after year, it becomes naturally obvious that it has a promising future ahead.

Debt – This value refers to the financial liability of the company. When in debt, the major share of the company’s earnings slips away in repaying those debts. And the natural result happens to be a substantial decrease in the net profit margins. Therefore, for good investment, you need to look for stocks that have a negligible or no debt.

Liquidity – The cash holding position of the company is revealed by the liquidity amount. It is a natural inference that a company which has a better or higher liquidity will automatically grow in the near future and promote expansion in business. Thus, liquidity happens to be an important determinant in ensuring a positive investment option.

Valuation – Valuation determines the worth of the company. The most popular and the easiest method to calculate the valuation of the company is the Profit – Earning ratio. Financial experts suggests that investment in growth stocks which have a P/E Ratio between 5 and 50 will always offer positive returns.

All the above points will enable a stock investor to make good investment decision based on the growth stock market report . There are other important factors that are worth considering, they are: the direction of the stock market, the average stock market trend, the prevailing trend in the concerned industry sector and so on.  

Tips for proper investment

The concept of investment actually constitutes loads of common sense along with an attentive focus on the established primary factors which drive stock growth.

The two main reasons for the unsuccessful identification of good stocks are: Lack of knowledge and beating ourselves. Lack of knowledge springs up when the investors don’t know in proper consequence neither what they own nor the reason for their owning them. Beating ourselves entails being drowned in too many emotions; it can be either excessive fear or excessive greed.

There are basically four factors which can be used to identify the traits of great companies with great growth stocks. They are:

The Business model – it refers to the structural plan on how the company is planning to grow and develop, come out profitable and at the same time protect itself from its competitors. A good company usually describes their business models with the Securities and Exchange Commission, the moment they go public with their stock offerings and produce their annul reports. The elements of a business model are: a description on how they are make good profits. Then how they plan growth and retain the enhanced profit margins. Next, their strategies to prevent their competitors from getting a piece of their markets or profits.

The Assumptions – check out the key assumptions made by the company with regard to the stock market where they plan to develop their business model. It is a projection for the company and its product. It is based on anticipated competition and product demand. Standards are set and plans made to achieve early denominations according to the company core strategy.

The Strategy – this refers to the plan which the company has structured in order to implement their business model. This involves company –specific concepts like, operational differentiation and excellence.

The Management – they constitute the all important set of important people who actually gave birth to those business models, assumption, execution and everything else. A great management is a pre-requisite for the company to alter and regulate its business models for competitive circumstances. A great future is envisioned with the articulation of a unified and logical strategy for reaching the desired goal. The strategy needs to be based on the human, financial and technological resources that invariably are within the clutch of the company.

When you want to make a great investment, thoughtful focus is the key factor. A lot of investors are found to waste their time and energy chasing all the wrong set of information.  

Cheap But Great Stocks: Are They In Todays Stock Market?

The combination of those words: cheap and good, may make the average stock investor’s mouth water.  After all, this describes the place to go to start seeing returns on your investment.  The problem with cheap stocks is that they are often not good stocks.  These stocks have very low prices because, in most cases, the companies are facing problems such as a shrinking market share, slow earnings or they may be seeing problems with growth.  If you purchase a penny stock with these traits, you risk losing money.

On the other hand, if you are an investor such as Warren Buffett, then you also know that there are some key investments to be made when buying cheap stocks.  Mr. Buffett is a prime example of a person that has made a fortune for himself buying cheap stocks.  The key question for you to be asking right now is how to make the right decisions on these stocks.  Where should you be going with your investments?

First, be sure you are buying into a business, not just purchasing stock.  You should understand the business and be able to have faith in it.  What are the challenges that this company faces into the future and is there room for it to grow?  You definitely need to do your homework, but making these investments could be one of the best routes to take.

Another avenue that you can work on is purchasing growth stocks from companies with a record of accomplishment.  You may not have realized it, but many of the most established companies do go through periods of difficulties, and getting in at a down level most certainly brings you to the top again.  Look for companies that have a long history of providing a good return on investment and a free cash flow growth rate. 

Also, look for a company that has strength it in and some level of protection.  A good brand name for example is something that is going to be around for some time.  Does the company has a trademark or patent that is in demand that they will hold for some time?  These are protections the company has, which can push it into the future. 

These stocks are often good stocks, but you will have to monitor them to find good entry points.  Get to know those stocks that offer a cheap way in and find out what about them you can get behind.

Guide To Financial Statements: Read The MD&A

You can find a narrative explanation of a company’s financial performance in a section of the quarterly or annual report entitled, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” MD&A is management’s opportunity to provide investors with its view of the financial performance and condition of the company. It’s management’s opportunity to tell investors what the financial statements show and do not show, as well as important trends and risks that have shaped the past or are reasonably likely to shape the company’s stock future.

The SEC’s rules governing MD&A require disclosure about trends, events or uncertainties known to management that would have a material impact on reported financial information. The purpose of MD&A is to provide investors with information that the company’s management believes to be necessary to an understanding of its financial condition, changes in financial condition and results of operations. It is intended to help investors to see the company through the eyes of management. It is also intended to provide context for the financial statements and information about the company’s earnings and cash flows.

Cash Flow Statements

Cash flow statements report a company’s inflows and outflows of cash. This is important because a company needs to have enough cash on hand to pay its expenses and purchase assets. While an income statement can tell you whether a company made a profit, a cash flow statement can tell you whether the company generated cash.

A cash flow statement shows changes over time rather than absolute dollar amounts at a point in time. It uses and reorders the information from a company’s balance sheet and income statement.

The bottom line of the cash flow statement shows the net increase or decrease in cash for the period. Generally, cash flow statements are divided into three main parts. Each part reviews the cash flow from one of three types of activities: (1) operating activities; (2) investing activities; and (3) financing activities.

Operating Activities

The first part of a cash flow statement analyzes a company’s cash flow from net income or losses. For most companies, this section of the cash flow statement reconciles the net income (as shown on the income statement) to the actual cash the company received from or used in its operating activities. To do this, it adjusts net income for any non-cash items (such as adding back depreciation expenses) and adjusts for any cash that was used or provided by other operating assets and liabilities.

Investing Activities

The second part of a cash flow statement shows the cash flow from all investing activities, which generally include purchases or sales of long-term assets, such as property, plant and equipment, as well as investment securities. If a company buys a piece of machinery, the cash flow statement would reflect this activity as a cash outflow from investing activities because it used cash. If the company decided to sell off some investments from an investment portfolio, the proceeds from the sales would show up as a cash inflow from investing activities because it provided cash.

Financing Activities

The third part of a cash flow statement shows the cash flow from all financing activities. Typical sources of cash flow include cash raised by selling growth stocks and bonds or borrowing from banks. Likewise, paying back a bank loan would show up as a use of cash flow.

Get The Value of Your Stocks

As an investor, you have a few options on how you choose stock to invest into.  You could go with your gut, a particular favorite of those who have deep pockets and like taking risks.  You could go with the information that other investors and forecasters are providing you, after all, they should know what they are talking about.  Alternatively, you could do your own homework to be sure that you fully understand what you are putting your money into and what it is likely to bring to you in the long term.  This last method may take you a bit more time, but it also makes you an informed investor. And, being informed can lead to better growth stock picks and further stock returns.  The value of stocks is one of the many things every investor should know how to determine.

Stock prices will move up or down based on the company’s earnings as well as the forecast for that company which is based on other facts.  Stock prices and knowing where they are heading is the one key tools you must have if you want to make money.  Stock picks should be made based on the company’s earnings as well as their ability either to keep this level or to increase it.  What key information do you need to know?

Companies release their earnings quarterly, which generally happens in January, April, July and October.  These reports give you an inside view into the company’s movements and allow you to see what is likely to happen during the months ahead.  Statistics you need to take into consideration include the company’s earnings per share as well as the net income reports.

One important figure you need to keep in mind is what the earnings per share equal.  As a mathematical formula, the earnings per share are equal to the Net income minus the dividends on preferred stock divided by the average outstanding shares.  Another formula you should know is the P/E Ratio (Price to Earnings Ratio).  This is equal to the current stock price over the annual earnings per share.  Yet another formula to use to help you calculate the forecasted earnings of a company is the Forward Price to Earnings Ratio or F P/E ratio.  This is the current stock price divided by the forecasted annual earnings per share.

Once you know these details in the stock market report , you can clearly see where stock prices are moving and where your potential profit lies.  Do not do all the work yourself, if you do not want to, but have a good idea where the numbers you see are coming from.

Penny Stock Investing Is A Risk Not Worth Your Money

You hear it quite often: penny stocks are the route to go because you do not have to invest much and that means penny stocks are lower in risk.  While they are this inexpensive, they are not, by any means, without risk.  As an investor it is up to you to determine how much money you should put into any investment strategy and when it comes to penny stocks, mind those pennies!  Understanding the risk behind them helps you see whether these stocks are the route for you to take.

What is a Penny Stock?

There are various definitions and determinations out there in regards to what a penny stock is, but in short, it is any type of stock that is traded at less than a dollar.  They come from companies that have a small amount of market capitalization. You may hear them called small cap stocks, micro cap stocks or even nano-cap stocks, too.  There is no doubt that you can trade for these stocks with less of an investment, because the stocks are so lowly priced individually. 

One of the problems with penny stocks is that you have very little information about the investment you are making.  You know very little about the company.  Unlike the standard stocks, the penny stock companies do not provide you with SEC reports to do your homework on the company.  This does not mean you cannot invest in these stocks, but you will need to do more homework to get to the information you need.

The cost to get into penny stocks is relatively low and if you know the company well enough, you may be able to get in on the ground floor and make a considerable investment in the long term.  Yet, the problem with penny stock investing is the increased risk of not knowing who the company is, what their background is, what their past investments have been and therefore you will not know how well the company plays into your investment strategy.

Penny stocks are not an option for smart investors. Growth stocks are a better investment decision you can make.  Additionally, be sure that these stocks fit well into your investment strategy.  They really must be marked as an unknown unless you have carefully done your homework to exam the risk involved with them. While you can make money on these, it really is not the best route for many people.

Your Money, Your Choices: Stocks vs. Bonds

Many companies offer investors the opportunity to buy either stocks or bonds. The following example shows you how stocks and bonds differ.

Let’s say you believe that a company that makes automobiles may be a good investment. Everyone you know is buying one of its cars, and your friends report that the company’s cars rarely break down and run well for years. You either have an investment professional investigate the company and read as much as possible about it, or you do it yourself.

After your research, you’re convinced it’s a solid company that will sell many more cars in the years ahead. The automobile company offers both stocks and bonds. With the bonds, the company agrees to pay you back your initial investment in ten years, plus pay you interest twice a year at the rate of 8% a year.

If you buy the stock, you take on the risk of potentially losing a portion or all of your initial investment if the company does poorly or the stock market drops in value. But you also may see the stock increase in value beyond what you could earn from the bonds. If you buy the stock, you become an “owner” of the company.

You wrestle with the decision. If you buy the bonds, you will get your money back plus the 8% interest a year. And you think the company will be able to honor its promise to you on the bonds because it has been in business for many years and doesn’t look like it could go bankrupt. The company has a long history of making cars and you know that its stock has gone up in price by an average of 9% a year, plus it has typically paid stockholders a dividend of 3% from its profits each year.

You take your time and make a careful decision. Only time will tell if you made the right stock analysis or bond choice. You’ll keep a close eye on the company and keep the stock as long as the company keeps selling a quality car that consumers want to drive, and it can make an acceptable profit from its sales.