I have been following stockmarkets and shares now for a while, mostly USA and worldwide trends, however to date i have not put any money where my mouth is.. I have been working overseas for a few years so between having no time and most of my money in property i have now moved back to Ireland and with some more available time I want to start getting involved in trading and investing in shares.. And before i do and i'm in no rush to put my money into something until i'm sure i know how it works and i can manage it properly i'm looking for some advise on the best way to start and am looking for some advice on the following;
Any recommendations on good start up book / literature for getting involved - beginners guide ??
I have heard of online trading games ?? that you can use and follow actual market conditions without using your $$$ until you are ready ? does anybody know of these or could recommend ??
Who are the best/cheapest stock broker for making investments ? In ireland and overseas, Asia & USA ?? Are you able to access these agents on line ??
Any further recommendations for getting started would be greatly appreciated..
Thanks in advance for your help and i'll start my homework ASAP and hopefully get started in the near future..
I am new to this fourm and cannot attach files so I had to put this in full in the reply.
Just copy and paste to word and print.
In hope you find this of use in your quest ?
Introduction to Stocks
Basic Stock Information to Get You Started
The first step for you to understand the stock market is to understand stocks. A share of stock is the smallest unit of ownership in a company. If you own a share of a company’s stock, you are a part owner of the company. You have the right to vote on members of the board of directors and other important matters before the company. If the company distributes profits to shareholders, you will likely receive a proportionate share. One of the unique features of stock ownership is the notion of limited liability. If the company loses a lawsuit and must pay a huge judgment, the worse that can happen is your stock becomes worthless. The creditors can’t come after your personal assets. That’s not necessarily true in private-held companies. There are two types of stock: · Common stock · Preferred stock Most of the stock held by individuals is common stock.
Common Stock
Common stock represents the majority of stock held by the public. It has voting rights, along with the right to share in dividends. When you hear or read about “stocks” being up or down, it always refers to common stock. Preferred Stock
Despite its name, preferred stock has fewer rights than common stock, except in one important area – dividends. Companies that issue preferred stocks usually pay consistent dividends and preferred stock has first call on dividends over common stock. Investors buy preferred stock for its current income from dividends, so look for companies that make big profits to use preferred stock to return some of those profits via dividends. Liquidity
Another benefit of common stocks is that they are highly liquid for the most part. Small and/or obscure companies may not trade frequently, but most of the larger companies trade daily creating an opportunity to buy or sell shares. Thanks to the stock markets, you can buy or sell shares of most publicly traded companies almost any day the markets are open.
Getting Started in Stocks: Growth or Value Investor?
Understanding Value and Growth Stock Investing is Smart Move
How is the best way to get started investing in individual stocks? Maybe you already own some individual stocks, but don’t have any organized way to approach buying more or perhaps you’re just getting started. If you are ready to start investing in individual stocks in an organized and thoughtful manner, you’ll want to develop your own system and strategy. Growth or Value Stocks?
This article is about your first step, which is deciding if you want to be a “value” or “growth” investor. There’s no rule that says you can’t be both, although it may be easier to pick one as your primary focus and most investors usually end up more in one camp than the other does. It is important to note that growth and value investing are not opposites, just different approaches to the same problem. Overview
Here is an overview of each so you can begin deciding which strategy makes the most sense to you. The basic characteristics of growth investing: · Companies exhibit higher than average growth rates in revenues and earnings · Companies are in expanding industries that are riding an economic and/or demographic cycle · Companies don’t pay dividends · High growth companies often beat earnings estimates · Holding period determined by continued growth of company The basic characteristics of value investing: · Companies have higher than average earnings per share · Companies that pay high dividends · Companies in solid, but not necessarily glamorous industry · Companies are industry leaders · Holding period typically longer than growth stocks These are not exhaustive lists, but they’ll get you started. For those who are concerned about risk, and everyone should be, of the two strategies value investing is less risky than growth investing. Not Risk Free
That doesn’t mean value investing is risk free, but value stocks tend to be less volatile than growth stocks. If you lean towards growth investing, you will want to pay attention to current stock and economic news – not to chase hot stocks, but to see where growth in occurring in the market. If you are a value investor, you’ll be paying more attention to the financials using a stock screen to help you find candidates. Either value or growth is a good place to start, but don’t dismiss the other, there are good opportunities in both strategies.
Buying Growth Stocks is all about the Future
Continued Strong Growth Rates Important
What will the stock do tomorrow? Will the company continue to grow at a faster pace than the market in general? These are typical of the questions growth investors ask about stocks they own. What is the companying going to do tomorrow – in earnings, revenue, sales, and so on. In a word, growth investors are all about the future and as such are very concerned with a company’s prospects. Will this industry keep growing and will this company participate in that growth? You don’t have to be an expert on the industry, but it is important to do some reading online and in the financial press to help you identify which industries are growing. How the Stock Fits
It is also important to understand how the industry fits into the economy and what factors could change that would slow growth in the future. It probably is obvious that many growth industries are in or related to technology of some kind. It would also be a good guess that many growth companies are small to mid sized. However, there are a number of large companies that continue to be growth companies. Companies like Microsoft remained a growth company for many years. The problem for large companies is maintaining a growth rate that keeps them in the category. Do the Math
The math of percentage growth begins to work against them. It is one thing for a $100 million company to grow 20 percent – that’s an additional $20 million in sales. For a $10 billion company, that’s an additional $2 billion in sales – a more difficult task if the company is in a competitive market. Do the math: If the company’s average sale is $200 per unit (for software, for example), it will have to sell an additional 10 million units to grow sales 20 percent. Selling 10 million units of anything in a year is not something every company can do consistently and increase it for the next year. A good growth candidate will be well positioned, although not always number one, in its industry with prospects for continued high growth rates. Many growth investors want at least 20 percent year-to-year increase in revenue with a corresponding increase in earnings, but you will need to find your own comfort level. Questions about Growth
Questions growth investors must answer about a potential investment: · The company, its financials, and its management - are they all positioned for sustained growth? · Is the company in an industry likely to benefit from the current economic environment? · How much should you pay for the stock? Determining a good entry price for a strong growth stock can be difficult, but it is the most important factor in determining success. Ideally, you will buy into a growth company early enough to profit from sustained growth. However, if you pay too much of a premium for the growth potential, you may limit future profits.
Understanding Stock Share Terms
What You Should Know about Different Share Types
Not all shares of stock are created equally. Authorized, restricted, float, outstanding and treasury shares all have different attributes. Investors need to know these terms to make informed decisions. You will hear these terms and see some of them used in financial ratios, so it is important to understand how these types of shares differ. First, let’s define the terms, and then I’ll explain why it is important to understand the difference. · Authorized Shares – These shares represent the total number of shares of stock authorized when the company was created. Only a vote by the shareholders can increase this number of shares. However, just because a company authorized a certain number of shares doesn’t mean it must issue all of them to the public. Most companies retain shares for use later called treasury stock or shares. · Treasury Shares – Shares a company retains in its treasury and not issued to the public or to employees are treasury stock. · Restricted Shares – Restricted shares refer to company stock used for employee incentive and compensation plans. Restricted stockowners need permission of the SEC to sell. There is a waiting period after a company first goes public where insiders’ restricted stock is frozen. When insiders want to sell their stock, they must file a form with the SEC declaring their intention. Even insiders of established companies must file with the SEC before selling their restricted stock. · Float Shares – Float refers to the number of shares actually available for trade on the open market. You and I can buy these shares. · Outstanding Shares – Outstanding shares includes all the shares issued by the company, which would be the restricted shares plus the float. Here’s a simple example with numbers to illustrate the relationship of these different shares: · Authorized Shares – 100 · Treasury Shares – 20 · Restricted Shares – 10 · Float – 70 (100 – 20 – 10 = 70) · Outstanding Shares – 80 (10 + 70 = 80) Why is this Important?
Here are several key bits of information you can determine from looking at how these different share types stack up in relation to each other: · Look at the relationship of treasury shares and restricted shares to float for where controlling interest of the company will reside. Many companies retain a large percentage of the authorized shares in their treasuries or in the hands of management through restricted shares. Companies do this to make sure no other company can seize control in an unfriendly takeover. They may also want to have stock handy for future issue instead of using debt to buy another company or for another major expenditure. Controlling interest held in treasury stock means outside shareholders will have little influence over the decisions of the company. · If the float of a company is very small and the stock attracts attention of investors it can become volatile because of supply and demand imbalances. More buyers will drive the price up, which is not a bad thing if you own the stock. However, it may make the stock over priced relative to its earnings or other fundamental measures. Likewise, if the stock falls out of favor, sellers may have trouble unloading their shares, which would tend to force the price down further and more rapidly than fundamentals might indicate. · Watch what restricted shareholders do. You can get this information from a variety of online sources. In MSN Money’s insider trading search function. Just enter a stock symbol and it will return the most recent sales or planned sales by insiders or major shareholders. Most of the time, these sales signal nothing of interest to investors. When a large number of insiders, especially in young companies, file plans to sell major blocks of stock it could signal trouble. · Notice when reading financial ratios whether they are using float or outstanding shares in the calculation. It can make a big difference in the outcome. Conclusion
Understanding the terms used to describe various shares will help you get a better handle on analyzing companies.
Q. What are the Two Types of Stock?
A. The two types of stock are: · Common · Preferred Common stock has voting rights (one per share) on important company issues and may receive dividends. Preferred stock usually has no voting rights, but is first in line for dividends and first call on assets if the company is dissolved. Investors buy preferred stock for the dividend income.
Q. What is the Role of Risk in Investing?
A. Risk is part of investing. It is the price you pay for a potential reward. The greater the risk, the greater the potential reward should be. Every investor needs to find the level of risk that is comfortable, but is enough of a reach to achieve their goals. Investors need to correctly identify the risk of a particular stock so they can determine if the potential reward is worth the chance of loss. Without any risk, investments often return very little. So the trade off is safety and low return or risk and potentially higher returns.
Q. How are Daily Stock Prices Set?
A. For actively traded stocks, the price is set by supply and demand. If there are more buyers than sellers for a particular stock, the price will rise. If there are more sellers than buyers, the price will fall. Economic, political, or natural disaster events may influence whether there will be more buyers or sellers for a particular stock. If the events are significant, they may affect the entire market and move it up or down.
Q. What is the Difference Between Class A Stock and Class B Stock?
A. Some companies will issue two classes of stock when the go public. Class A shares go to the public as common stock, which carry one vote per share. The company founders may issue themselve class B stock, which has 10 votes per share, thus guaranteeing that they will retain control of the company.
Stock Sectors - How to Classify Stocks
One of the most common classification breaks the market into 11 different sectors. Investors consider two of there sectors “defensive” and the remaining nine “cyclical.” Let’s look at these two categories and see what they mean for the individual investor. Defensive
Defensive stocks include utilities and consumer staples. These companies usually don’t suffer as much in a market downturn because people don’t stop using energy or eating. They provide a balance to portfolios and offer protection in a falling market.
However, for all their safety, defensive stocks usually fail to climb with a rising market for the opposite reasons they provide protection in a falling market: people don’t use significantly more energy or eat more food. Defensive stocks do exactly what their name implies, assuming they are well run companies. They give you a cushion for a soft landing in a falling market. Cyclical stocks
Cyclical stocks, on the other hand, cover everything else and tend to react to a variety of market conditions that can send them up or down, however when one sector is going up another may be going down. Here is a list of the nine sectors considered cyclical: · Basic Materials · Capital Goods · Communications · Consumer Cyclical · Energy · Financial · Health Care · Technology · Transportation Most of these sectors are self-explanatory. They all involve businesses you can readily identify. Investors call them cyclical because they tend to move up and down in relation to businesses cycles or other influences. Basic materials, for example, include those items used in making other goods – lumber, for instance. When the housing market is active, the stock of lumber companies will tend to rise. However, high interest rates might put a damper on home building and reduce the demand for lumber. How to Use
Stocks sectors are helpful sorting and comparison tools. This is extremely helpful, since one of the ways to use sector information is to compare how your stock or a stock you may want to buy, is doing relative to other companies in the same sector. If all the other stocks are up 11% and your stock is down 8%, you need to find out why. Likewise, if the numbers are reversed, you need to know why your stock is doing so much better than others in the same sector – maybe its business model has changed and it shouldn’t be in that sector any longer. Conclusion
You never want to be making investment decisions in a vacuum. Using sector information, you can see how a stock is doing relative to its peers and that will help you understand whether you have a potential winner or loser.