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Frequently Asked Questions (FAQs) on Stocks

  1. What are penny stocks?

  2. Where are the biggest profits made in penny stocks?

  3. How do people who understand the market decide if a stock is likely to increase in value?

  4. How do I decide when to sell my stock?

  1. What are penny stocks?
    These are stocks that typically sell for less than $5 a share and are typically issued by companies with a short or erratic history of earnings and dividends. Generally, penny stocks are very volatile and are not listed on the New York and American stock exchanges because the companies do not meet capital requirements. In other words, the companies aren't large enough.
     
  2. Where are the biggest profits made in penny stocks?
    Many of the biggest profits made in penny stocks are made in Initial Public Offerings (IPOs), better known as new issues. these are the first-time offerings of any stock of a company. Investors in these situations are usually not trying to buy into a company's long-term growth potential, but rather cashing in on temporary investor euphoria. You can make big profits by investing in penny stocks, but penny stock investing is the most risky of all stock investing. They should be avoided by anyone who can't afford to lose all of his or her investment. Don't forget: When you buy a share of stock worth $2, it doesn't have far to go down before it's worth nothing. A share of stock bought at $30 has a lot more room for error. Invest only money you can afford to lose, and no more than 5 percent of your portfolio.

     
  3. How do people who understand the market decide if a stock is likely to increase in value?
    Likely is the key word. Here are some guidelines for picking stocks that might increase in value:
     
    • dividends: an excellent indication of a company's growth. Steadily rising dividends over a ten-year period are healthy. Look for uninterrupted dividend payments for at least ten years.
       
    • competitive position: The company should be in a growth area of business or in a firmly established niche.
       
    • rating: A Standard & Poor's rating of A or better is most desirable.
       
    • earnings: The company should have shown improvement in at least five of the last ten years.
       
    • shareholders: At least 10 million shares outstanding to ensure your ability to buy/sell shares at will.
  4. How do I decide when to sell my stock?
    Brokerage firms are famous for making lots of buy recommendations buy not nearly as many sells. While it is impossible to generalize when any individual stock should be sold, let's look at some guidelines.
     
    • When a firm's research analyst changes the recommendation from buy to hold, you're being told, "Don't buy this stock." You aren't being told outright to sell, but this is a time to reevaluate the company. You may decide to sell after you do some homework.
       
    • All the news you're hearing about your stock is good. Rumors are running wild. Remember that no stock has all good news to report. Some investors sell on good-news rumors because very often the uninformed investor buys on that good news, which typically strengthens the price of the stock.
       
    • Disappointing earnings growth is a big indicator to consider when selling stock.
       
    • When an anticipated event occurs, you may consider selling. Very often, a stock appreciates on the anticipation that an event (patent approval, earnings report etc.) will occur. After the event or after nothing happens, the stock will very likely weaken in price.
       
    • Watch the price action of a stock. If a stock drops through its 52 week low, you should consider selling.
       
    • If you make a mistake and buy a stock that begins a downward turn soon after, cut your losses. Don't stick with a stock headed down because you are emotionally tied to it.
       
    • Always set a high and low price for your stock when you purchase it. When the stock hits either set price, sell.

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   Always keep in mind to:
  1. Spend less than you earn! People who spend every penny they make usually end up going broke.......
  2. Take enough risk on the money you save! Playing safe by putting your money under the mattress or in a savings account will not make you wealthy..

Remember that..... Fully one-fifth of humanity, some 1.3 billion people, struggles to survive on less than $1 per day. About 40% of humanity survives on less than $2 per day. More than a billion people around the world will go to bed hungry tonight. Life expectancy in some 32 countries is less than 40 years. If you have a few extra dollars in your pocket (you don't have to be a millionaire to make a difference), please share some of your financial good fortune with others who are in great need.


Think About It...  Being in the 'now' brings a freedom, unlike living in the past or in the future, which is a kind of imprisonment. This isn't a kind of a denial where you pretend life doesn't have problems. Life is full of problems, but most of those stresses and failures are reliving old hurts or worrying about future concerns. -- Carl Honore

When you 're diagnosed with cancer, you start to bargain with God: "Let me get through this, and I'll take better care of myself. I'll get my priorities in order. I'll learn to live every day to the fullest." Isn't it sad that you have to get sick before giving yourself permission to live life to the fullest? -- Robert Schimmel Look at Life in different & Positive ways