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About.com is an information website. You can get expert information on nearly any subject! Ken Little is a stock and investing guru over at about.com. He's written 8 books on the subject of stocks and investing. His many years of experience in the field equal invaluable knowledge for the new or experience investor. You can sign up for a free newsletter from Ken Little. You'll revieve updated articles every week in your inbox. He'll explain the basics of stocks. It's like have a tutor for money managing! Click here to sign up for Mr. Little's free weekly newsletter!

Homage To Jim Cramer

BOO-YA citizens of Cramerica! Yes, thank you. I'm feeling many studdering BOO-YA's in return. If you're a fan of Jim Cramer's mad money, or any of his books then check out the latest homage to Cramer. You can find informative blogs, Cramer's books, and let everyone know how your portfolio is treating you. Visit Make Mad Money!

Dollar Cost Averaging; So Much Simpler Than It Sounds

Dollar cost averaging is an investment strategy where regular investments are made into your account or portfolio. Dollar cost averaging can be an ideal plan for the young online investor. It lowers risk, cost and doesn’t require big lump sums to be invested all at once. Despite the fact, that, generally speaking young online investors can afford a bit more risk than those closer to retirement, many of us just don’t want to put the work into it. That’s okay!

1) Determine exactly how much you can afford to invest on a weekly or monthly basis. Sharebuilder.com has an automatic investment plan exactly for this purpose. By developing a dollar cost averaging investment plan and setting that plan in motion through a free, basic account at Sharebuilder.com you’ll only pay $4 each time you invest! Real time trades via Sharebuilder.com can cost you up to $15.95 per trade! You can see how much money you’ll save.

I know that a few posts ago I talked about how I made the switch from Sharebuilder.com to Scottrade.com. That’s because I am an active trader. Sharebuilder.com is an excellent site for online investors, but it’s a special value to those wanting to implement a dollar cost averaging strategy.

2) Dollar cost averaging is a long term investment plan; it’s not a good way to make a quick buck. It is a good way to secure your financial future. That leads us to the type of investments you want to make. Like all good investment strategies, a key goal is to diversify your portfolio. You do not want to pour $50 a week into one stock for years, goodness only knows the risk you’d face. However, with $50 a week it’d take some pretty rigid and careful planning to create a diversified stock portfolio on your own.

What are your other options?

Index funds; like the S&P 500, the Wilshire 5000, or the FTSE 100. If we take a closer look at the S&P 500, you’ll see large capitol corporations and a ready made diversified investment. The idea behind an index fund is that you are investing your money along with others; this enables you to take part in a number of investments that would not be plausible for most individual investors, must less the young, newbie, online investor.


Mutual funds; you must purchase shares straight from the fund itself. If you own a mutual fund you can sell your share back to the fund. Some of the nice things about mutual funds are the professional management, their affordability, they are redeemable and like index funds are diversified. However, there is a down side to mutual funds such as the cost, lack of control and price uncertainty. Before you consider involving yourself in a mutual fund, use the mutual fund cost calculator to compare costs.

If you’re new to the world of investing, but dying to get in on the action, dollar cost averaging is a great place for you to start. The most important thing is to have a plan in place before you make your first move. That means, you have to either do the research or pay someone else to. Either way, knowing what you’re putting your money into today is an investment you’ll be glad you made in the future. Get it? investment- now wasn't that a witty pun?

Evaluate Value Stock

We’ve been through growth stocks, now lets look at their counterpart “value stocks.” Unlike growth stocks, value stocks are usually inexpensive. Based on price to earnings and price to book value ratios these stocks have been undervalued. Value stocks trade at low prices, compared to their earnings. Value stocks considered to be low risk stocks.

Halliburton Company was Jim Cramer’s #3 value stock pick of 2007, but why? In order to be a successful individual online investor you have to understand how to pick a value stock. What’s in store for HAL? You, the online investor, can measure how well a stock will do in the future by reading company reports and watching out for it in the news. With value stocks were looking for stocks that were undervalued, but are expected to go up in price in the future. That’s how you make money. Buy it a stock, like Halliburton Company (HAL) at a low price and then wait for it to shoot up.

So, I’m going to do the research and see what makes Halliburton a good value stock to have in your portfolio. I’ll listen to their latest conference call, request the online investors kit, and you’ll find much more information, like press releases just by browsing their website.

Growth Stocks For The Online Investor

Growth stocks or growth investing is the practice of focusing on a stock that is growing and has high potential for continued growth. So, how do you spot a growth stock? There are a few key indicators, however there’s no such thing as an exact measurement.
Naturally one of the first things to look for is a high growth rate. Look at the company’s growth rate over the past 5 years, for smaller companies it should fall around 10% or more. You can expect to see a slightly less growth rate with larger companies, 5% or more.

Return on Equity, or how efficiently a company uses it’s assets to produce earnings. This is calculated by dividing the Net Income by Book Value.

Study the company’s pre-tax profit margins. If sales do not translate into earnings, this is a good sign of a bad growth stock. Also, read this article on evaluating stocks to understand how to use “earnings per share” as a comparative tool when investigating stocks. http://stocks.about.com/od/evaluatingstocks/a/eps1.htm

A good portfolio is a diversified portfolio. Online investors should have a good balance of growth stocks, value stocks, and perhaps even a speculative stock if you’re feeling lucky. I’ll get into value stocks and speculative stocks in my next posts.

Research Stocks

Investing is a risky business, if you don’t do your homework. Somehow online investing can seem a bit surreal to us at times. It's something about the power of playing the market right from our own homes or offices. Keep that in mind before you start investing online, there is risk and you could loose money. Before thinking of investing in a company you must do the research. Finding the information is relatively easy. You can find company reports, what analysts are rating the stock and even get transcripts from company conference calls. The following are two free resources for online stock research.

MSN Money Central

Seeking Apha

Scottrade.com

I’ve set up my account over at scottrade, and I must say that I’m already impressed. Since I’m a night owl, I created the account online last night. This morning around 10am, I got a call from scottrade, they wanted to see if I had any questions or needed help with anything. I think that’s pretty good customer service so far!

I’ll start trading and investing there as soon as I transfer money into the scottrade account. It may take a week or so, all of my money is tied up in my sharebuilder account. I will say that I do prefer the look of the sharebuilder site, but aesthetics are a small sacrifice to make for saving money and great customer service.

Jim Cramer's Mad Money

Over the months I’ve become an avid follower of Jim Cramer’s “Mad Money.” It’s a show on CNBC dedicated to informing the individual investor. By informing, I do not mean Cramer spends an hour dishing out his hot stock picks. No, the aim on this hour of primetime is to teach you how to invest; I also might add that it’s very entertaining! If you're in debt you have to make the most of what you're saving. Investing is a great way to do that.

Cramer is constantly stressing the need to do your homework; research the stock, research the company. If there’s anything I’ve learned in my mere months of investing is that you won’t get far on luck! I know a lot of people are wondering where to do research and what they need to look at?

I find it difficult to stomach too much new information at once. That’s why, I’m offering you a little bit of information at a time. Tonight, I’d like to share some tips about what to look at when buying stock in certain sectors. The data and reports that matter in one sector do not necessarily matter in another.
If you’re trading or investing in the Hotel business: “Average Revenue Per Room”
If you’re trading or investing in Retail and Restaurants: “Same Store Sales”
If you’re trading or investing in Banks: “Net Interest Margin”
If you’re trading or investing in Tech: “Best Gross Margins”

BOO YA! JIM CRAMER! Catch his show on cnbc at 6pm, 9pm or midnight.