Your Direct Investment Plans: Buying Stock from Your Company

Many companies allow you to buy or sell shares directly through a direct stock plan (DSP). You can also have the cash dividends you receive from the company automatically reinvested into more shares through a dividend reinvestment plan (DRIP).

Here are descriptions of the two different types of plans:

Direct Stock Plans — Some companies allow you to purchase or sell stock directly through them without your having to use or pay commissions to a broker. But you may have to pay a fee for using the plan’s services. Some companies require that you already own stock in the company or are employed by the company before you may participate in their direct stock plans. You may be able to buy stock by investing a specific dollar amount rather than having to pay for an entire share. In that case, you could have your checking account debited on a regular basis to make investments in the plan. Some plans require a minimum amount of investment or require you to maintain specific minimums in your account.

DSPs usually will not allow you to buy or sell your securities at a specific stock market price or at a specific time. Rather, the company will purchase or sell shares for the plan at established times — for example, on a daily, weekly, or monthly basis — and at an average market price. You can find when the company will buy and sell shares and how it determines the price by reading the company’s disclosure documents. Depending on the plan, you may be able to have your shares transferred to your broker to have them sold, but the plan may charge you a fee to do so.

Dividend Reinvestment Plans — Dividend reinvestment plans let you take advantage of the power of compounding. Instead of receiving cash dividends from the company, you may purchase more of a company’s stock by having the dividends reinvested. You must sign an agreement with the company for this to be done. If you have a brokerage account or mutual fund, your firm may also have a dividend reinvestment plan. You should check with your firm or the company to see whether you will be charged for this service.

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The features and services offered in DSPs vary depending on the kind of plan and the company offering the plan. Before setting up a plan, read the company’s disclosure information to learn how its particular plan works. The plan will tell you how to enroll, the number of shares needed to open an account, any fees or charges that apply, the minimum or maximum you can buy or sell, the dates when you can invest, and how to withdraw, transfer, or sell your shares. Many large companies have Internet sites that can provide you with information about their plans or tell you who to contact for more information.

Stock Market Conditions For Growth of Great Growth Stocks

A smart investor is always on the look out for growth. Share prices are directly proportionate to the respective company’s worth in the market. So, it is always wise to seek companies which are rising in value. When you hold on stocks of companies that manifest relentless growth, handsome stock market returns are achieved.

But in this aspect don’t always focus on the projected growth rates. If all of a sudden the market start to lose faith in the said company’s prospects, the result can be horrific.

The characteristics of the best growth stock are a combination of potential upward growth along with sizable safety margin. They ought to satisfy three conditions:

1. A good growth rate

It is preferable if the company has fast growth instead of a slow one when the rest of the factors are equal. This is because even the minute relative changes in growth rate can make a substantial difference to the investors.

2. Sustainability

Stretch your vision beyond the growth estimates. Not the ‘estimate’ but the ‘sustainability’ of growth is more important in order to achieve great returns. This is a common mistake done by even the clever growth investors. They focus so much on the growth rate that they stand to ignore the logical sustainability of that growth. This myopic vision is the prime reason behind the tech bubble. People get allured by the high growth projections but fail to notice that the company has negligible or few competitive advantages. When the bubble pops, the company disappears and the investors bite the dust.  

3. A good price

Don’t end up paying far too much for growth. It makes sense if occasionally you pay a hiked up price, because you can rely on the sustained growth of the company. But take care not to defy logical calculations that it makes virtually impossible for you to uphold even a marginal profit even in the situation where the growth is not hampered. It is a good idea to select a growth stock which is fairly priced or undervalued. A discounted cash flow (DCF) calculation will aid you to calculate the fair value of a growth company.

These three central ideas shouldn’t lead you to think that value investment strategy is to look for unpopular penny stocks. You need to look for growth stocks from strong companies that possess reasonable positive growth prospects. And when you get growth stocks at a reasonable price offering sustainable growth, you can rest assured about your long term profits. 

Your Path To A Perfect Investment Plan

Great investment is never easy since it involves patience drilled with common sense reasoning. You need to have a proper technique to judge which stock will provide you with the best return in the future.

The first requirement is related to garnering all the relevant information. The internet has made finding information ever so easy. There are countless websites which offer loads of information on industry performance, stock market news and trends and also tips. If you sit down to gather information from all these sites, it will be confusing as well as useless. Don’t follow anyone of them randomly. You will often find contradictory information in many of them. So, select and follow a few websites closely and you will know which one offers authentic information. Once you have found your reliable source of information bank on them in order to determine your stock market strategies.

Devise a specific plan for stock investment. Set your focus on a specific industrial sector and concentrate your investment plans around that particular area. This will allow you to gather and understand comprehensive information of stocks belonging to that specific industrial sector. Monitoring the individual stocks and companies will become easier. The result will be wise and strategic investment planning. You could also anticipate the probable position of the sector in the near future and you are going to be affected by it.

Keeping the volatile nature of the stock market in mind, wise distribution of your investment becomes very important. You must be aware that even the leading blue chip companies have had major down falls at the stock market. So, select a few good growth stocks instead of one particular one. This will extensively and considerably lower the risk factor arising due to market volatility. Not only that you could also stand to receive profits that are beyond your anticipation.

Taking the opinion of the market researchers is always a good idea. Their advice will work positively for your investments, but may be once or twice. These advices actually do not have an impressive and continuous success rate because, there is sure fire technique to predict healthy, multiple returns in stock investments. Therefore, you are required to do your own research diligently. Follow the basic methods which help to ascertain the value of a stock. The point is to take all the relevant diverse factors into consideration in order to devise a perfect plan. Blindly following the market buzz seldom yields positive results. 

Stock Market Trading Myths

It is not a brilliant idea to think that conventional investment strategies are risk-free. But in order to make them so, suggestions are provided below to give rise to alternative and more resourceful trading strategies. In today’s financial circumstances you need to have unconventional trading options if you want to exploit the market inefficiencies to the fullest. What is required is free thinking and inventiveness.

The inherent risks in regular stock trading beliefs

Losing expectancies are promoted by crowd mentality. The historical finance details are evidence to it. When a particular financial structure or a scheme becomes conventional, it loses its statistical edge and thereby competitiveness. It is a common belief that ‘trend following’ is a safe option. You follow it hoping to get a smooth ride and persistent results. But this does not always offer most favorable performance. It has been observed that the stock price movements normally exhibit quasi mean-reverting behavior.

But you need top be aware that trends sometimes change violently. For example, if you look at the low winning rates. There exists a common belief that these losing entries just serve as liquidity. The shrewd winning traders are the ones who take the most advantage from it.

It is a common adage, ‘Cut the losses, and let the winners run’. If you base your investment position simply on arbitrary paper losses and fail to strategize a proper profit extraction plan, then you are sure to face devastation. All this because you have closed your investment positions.

Novelties and innovation in trading required

It is a common conventional marketing concept that the existing stock prices will inevitably change. It may so happen that the large holders to dump massive quantities to result in a forceful break on a perhaps persistent up swing of that particular growth stock. But if you develop a newer and broader perspective to gauge the financed market, you could well anticipate the probable changes in the current price movement. And this might give rise to brand new findings and concepts.

The exit strategy method does not always constitute a stop order for loss cutting. You need to be innovative and flexible in your approach while you do your research. There are signals which have an oscillator, a sentiment indicator, volume, or volatility measurement. They can prove to be potent tools while you plan for profit generation and loss limitation.

Financial institutions always perform better than the general crowd. So, the opinion of the institutional traders could provide important guidance information. In this period of information technology, the stock market neutral trading schemes are available to retail traders too.

Develop insight in order to learn

Market behavior is always hoarded with information. In order to devise a successful trading plan, you require intense understanding. This can be achieved when you have the fundamental knowledge of the statistics. When you are equipped with this quality, innovations come easily. 

Stock Investment Guide Before You Start Trading

Although the decade began with a substantially down market, the leading stock market indexes have risen significantly. For investors, this is a good time to take stock of where we are and where we want to be, and plan how best to get there. What follows are a list of practical steps that can help all of us get our fiscal act together.

1. Assess

Periodically, it is a good idea to sit down and really figure out where you are with your finances. Pull out your banking and brokerage account statements, check your balances, and gather in one place all your fiscal information. Then take a good, hard look at what you see. If you have questions about the information presented on your brokerage or mutual fund statements, don’t ignore those questions. Speak up, ask questions, and get answers.

After learning where you are, figure out where you want to be. What are your savings goals? Are they long-term (retirement, college education for your babies) or short-term (down payment on a house, college education for your high-school age kids)? Your goals determine your own personal tolerance for risk. If you’ll need your money in the short term, more conservative investments are appropriate. If you’re saving for the long haul, you might decide to take more risks. Just remember – your risk tolerance is a very personal matter, based on your age and your personal savings goals. Your neighbor or your Uncle Fred may be much more conservative or aggressive than you are. But that doesn’t mean their investing strategy is right for you!

2. Invest for the long term

Before you invest, make sure you have enough money to eat and put a roof over your head. Pay yourself first – get rid of high-cost credit card debt. But the earlier you get a start on your savings goals, the less you’ll have to put away monthly to reach them. Historically, the investment that has provided the highest average rate of return over the long term has been stocks. But there are no guarantees of profits when you buy stock. Markets go up and markets go down in the short-term. That’s why it is best to think long-term when considering stock market investments.

3. Diversify.

There is no better way — over the long term — to distribute risk than to diversify your investments. It is true that in some years, single stocks or individual sectors will outperform a diversified investment strategy, at least in the short term. But don’t forget that investors who hope to gain fantastic returns by investing in a single stock or one sector have also assumed the higher risks of a more narrow investing strategy. While diversifying your investments won’t bring you sky-high returns in boom times, it also means that you won’t lose everything when the boom times bust.

One way to diversify is to consider growth stocks . And here is where a little work can pay off handsomely – be sure to pay attention to the company’s income and expenses. Over time, expenses and fees can really make a difference. On an investment held for 20 years, a 1 percent annual fee will reduce the ending account balance by 18 percent.

Another way to diversify is to make sure that your retirement funds aren’t all invested in your employer’s stock. Even if that stock is a good long-term prospect, it is risky to have your retirement security depend in whole or in large part upon the fate of any one company.

4. Know yourself

Be honest. Do you really have the time and energy to adequately research individual stock investments? Most of us don’t have the experience and expertise of Wall Street traders who read financial statements for a living. It is important to be realistic about your own time commitments. Talking to co-workers and watching TV is not good investment research! That’s why many Americans begin investing not with individual stock picks, but with a broad based, low cost index fund. That way you’re broadly diversified from the beginning. As you find more time and gain confidence, you’ll know whether you’ve got the desire or interest to select individual stocks.

5. Do your homework

You owe it to yourself to check out any investment and investment professional with whom you do business. A few simple steps can save a great deal of heartache.

Before doing business with any investment professional, take full advantage of the power of the internet to check computerized databases for disciplinary information. Then contact your state securities regulator to find out if they have any additional information.

Before buying any stock, check out the company’s financial statements on the SEC’s website. All but the smallest public companies have to file financial statements with us. If the company doesn’t file with us, you’ll have to do a great deal of work on your own to make sure the company is legitimate and the investment appropriate for you. That’s because the lack of reliable, readily available information about company finances can open the door to fraud.

Before purchasing any investment, make sure you read and understand all the disclosures you’re given. The federal securities laws require that you be given lots of helpful information, such as a prospectus for a mutual fund, but you’ll have to take the initiative to understand what you’re given.

It’s up to you to educate yourself to make sure that all of your investments match your goals and tolerance for risk. Don’t be afraid to ask questions – it is your money!

6. Protect yourself

Always remember that people who sell investment products make money by doing so. Which doesn’t mean that they’ll give you bad advice, but it does mean that you’ve got to take responsibility for evaluating any recommendations you get. We advise people to never rely solely on an analyst’s recommendation when deciding whether to buy, hold, or sell a stock. Instead, do your own research-such as reading the prospectus for new companies or for public companies, the quarterly and annual reports filed with the SEC-to confirm whether a particular investment is appropriate for you in light of your individual financial circumstances. Don’t buy any investment product you don’t understand. And remember, any investment promising high returns necessarily carries a high risk that you’ll lose your money.

Mom always told us there aren’t any quick and easy ways to get rich. But it is hard to remember Mom’s advice when your neighbor, cousin or friend passes along a great tip, especially when it involves a hot new company. So from all of us, just to you, here is a link to our best investment tip on an up-and-coming company. If you click to invest, we just know you’ll be enriched.

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.

Pick & Find Your Best Growth Stocks

For over a century growth stocks have been a part of the financial concept. The defining characteristics of the growth stocks have changed with time, like, the 70s were signified by the tough and bearish stocks while the 80s happened to be the bullish boom period. Apart from the basic logical analyzing, one can always refer to the financial history to obtain the formula of successful stock investing. 

Zeroing down on a company with strong fundamentals, which include rising sales and earnings and low debt. This apart, one needs to take notice of a few points. They are:

·      The company should belong to a growing industry.

·      As an investor, you should be completely investing in growth stocks both during the bullish period when there is massive price rise in the stock market and also in the general economy.

·      You should switch most of its funds out of the growth stocks, like the technology field and pour them into defensive stocks during the bear market.

·      You must regularly monitor your stocks. Immediately sell off those stocks that are declining and hold on to the stocks which continue to grow.  

Evaluate the management of the company

Management of the company is the fundamental criteria for its success. Before investing one need to ensure that the company management is functioning well. There is a certain way in which you can check this out. They are given below but the ultimate evidence on this aspect is the rising stock price.

1. Return on equity

A quick shot to gauge the company’s competence is to check the company’s return on equity (ROE). ROE is calculated by dividing the earning by equity. The resultant percentage will give you a clear idea as to whether it is utilizing its equity or net assets resourcefully and advantageously. More the percentage is higher, the better it is. The company’s earnings can be obtained from its ‘income statement’. This financial statement reveals the equation – sales less expenses equal net earnings (or net income or net profit). The company’s balance sheet will reveal its equity. It is the total assets minus total liabilities which is equal to the net equity.

1. Insider buying

It is also advisable to check out whether the company management too is buying the company stock. After all, it is the management who best knows whether the company is really balanced for growth. If they are found buying the company stock en masse then you can rest assure regarding the stock’s potential.

Best Growth Stock Market Report provides you with the best stock picks and market advices 

Growth Stocks: Tips for proper investment

The term ‘growth stock’ has been a victim of occasional misunderstandings. Some apprehends growth stock as a name stock that has a lot of demand. There are others who think growth stocks are those stocks which sell at high earning multiples. But belonging to a popular company or having a name does not form a necessary synonym for true growth. More often than not it can be a stock which has gone past its period of growth. It is a natural tendency for investors to go too far with their preference for popular stocks. During the period of market excesses, there happens to be a popular misconception that growth stocks are always beyond the reasonable or acceptable price-earning ratio. This P/E ratio is considered to be the basic criteria to evaluate the stock prices.

Growth stocks and the ‘emerging growth stocks’ are actually well-managed companies which operate in industries whose earnings and dividends grow at a faster rate than the expected estimates. It does not get buoyed down by the inflation and the shaky condition of the over-all economy. Their extraordinary and positive growth momentum ought to be equally maintained both during economic affluence and economic poverty. Contrary to popular belief, growth stocks are not to be found in the traditional popular sectors. They rather belong to newer upcoming sectors like the telecommunications, health care, computers and bio-technology.

Major characteristic features of growth stocks include:

·      They have a higher price/earning ratio compared to the market average

·      They possess a substantial potential for long term price appreciation and its ability to remain above-average.

·      Their price levels are volatile

·      They conserve their capital for future growth. So, there is no dividend payout.

How do you ascertain that it is an emerging growth stock? For this:

·      You need to shun those companies which are two down in the earning years during the past five years

·      The company should have a minimum average of 20% revenue and a constant earning growth

·      You are required to stay clear of those firms which have a return of average equity that is below 13%.

·      Those companies whose debt is more than 30% of its total capital should be avoided.

An expert growth stock hunter will naturally know that he will not gain any excess return from investment truly and will try ‘blue chip’ stock representative of a main stream stock market index like, the Dow Jones Industrial Average and the S & P 500. He will rather explore the market to get hold of the next growth stock, that which may well become the next Google. 

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.