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If you are interested in penny stocks you are sure to hear about the Pink Sheets. It is an electronic quotation system for many Over-The-Counter (OTC) securities. The name comes from the colour of the paper the quotes were originally printed on. Today the Pink Sheets publishes quotations on the Internet, and most of its listings are so-called penny stocks.

Penny shares are securities that are less than $5 in value. Although they can be traded on regular stock exchanges, companies that are listed in the Pink Sheets usually do so because they cannot meet the requirements of other exchanges like the NYSE and Nasdaq. The Pink Sheets has no listing requirements - even companies with no financial history can be listed.

The Pink Sheets is not a registered share exchange. As such, it can list companies that would otherwise be unable to raise capital through stock offerings. Although it is not regulated by the Securities and Exchange Commission (SEC) its trading system is only accessible by brokers licensed by the National Association of Security Dealers (NASD) and these brokers are required to follow NASD regulations. Companies which issue share listed in the Pink Sheets must follow Federal and State security laws.

As an unregulated exchange, stocks listed in the Pink Sheets carry more risk than stocks on the big exchanges like AMEX.  The lack of financial data means that companies may be facing bankruptcy and are issuing stock in a last ditch effort to stay afloat. Not all companies are in dire straights, however. Some may be in the process of becoming listed on the regular exchanges and use the Pink Sheets as an intermediate step to raise capital.

To get listed in the Pink Sheets a company needs a broker dealer to quote the share. The only requirement is that the broker is a member of the National Association of Securities Dealers (NASD). Once listed, the company remains in the Pink Sheets as long as the stock is quoted. It can happen that a stock that no longer exists still is quoted in the Pink Sheets - a situation that highlights the need for researching any company that lists here.

The main advantage of buying Pink Sheet securities is their low cost. Investors who hope to get in on a new company right at the beginning can pick up stock for literally pennies. In the event that the company does well and grows the small initial investment will pay large dividends.

There is a very real risk, though, that the company will simply vanish, leaving behind valueless stock issues. The investor interested in penny stock in the Pink Sheets should be prepared to lose all. For this reason, Pink Sheet investments should represent only a small portion of an overall investment portfolio.

Another risk to the investor is the lack of liquidity of Pink Sheet listings. Volume is generally quite low and finding a buyer for stock may be difficult. The seller may have to settle for a much lower price than anticipated in order to unload his shares.

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A mutual fund is a diverse holding of stocks that are managed on behalf of the investors that buy into the fund. A mutual fund allows an investor to take advantage of a diversified portfolio without having to invest a large sum of money.

What is the advantage of a diversified portfolio? It offers protection against rapid market losses of any one particular stock. If a portfolio is spread across 20 shares, if any one of those shares quickly loses value the effect is less than if the portfolio consisted of that one stock by itself.

When investing it is always a good idea to diversify. The problem for small investors is that they often don’t have the funds to buy a variety of stocks. Mutual funds allow small investors to benefit from diversification with a small amount of money.

Besides shares, mutual funds can be made up of a variety of holdings including bonds and money market instruments. A mutual fund is actually a company and investors that buy into a fund are buying shares of that company. Shares in a mutual fund are bought directly from the fund itself or brokers acting on behalf of the fund. Shares can be redeemed by selling them back to the fund.

Some funds are managed by investment professionals who decide which securities to include in the fund. Non-managed funds are also available. They are usually based on an index such as the Dow Jones Industrial Average. The fund simply duplicates the holdings of the index it is based on so that if the Dow Jones (for example) rises by 5% the mutual fund based on that index also rises by the same amount. Non-managed funds often perform very well - sometimes better than managed funds.

There are downsides to mutual funds. There are usually fees that must be paid no matter how the fund performs, and the individual investor has no say in which securities can be included in the fund. Also, the actual value of a mutual fund share is not known with the same precision as stocks on the stock market. 

Mutual funds are often a better choice for the small investor than either stocks or bonds. They offer the diversity that provides cushion against sudden stock market movements and usually provide a greater return than bonds. Of course, mutual funds can also lose value, especially in the short term, so short term investors may be better off with bonds which offer a set rate of return.

There are three main types of mutual funds: money market funds, bond funds and stock funds. Money market funds offer the lowest risk - they consist solely of high quality investments such as those issued by the US government and blue chip corporations. Money market funds have rarely lost money, but they pay a low rate of return.

Bond funds aim to produce higher yields than money market funds and therefore carry a correspondingly higher risk. All the risks that are associated with bonds - company bankruptcy, falling interest rates - also apply to bond funds.

stock funds usually have the greatest potential for profitable investment but also carry the greatest risk. The risk is more for short-term holders of mutual funds - shares have traditionally outperformed other investment instruments in the long run.

There are different types of stock funds including ‘growth funds’ that attempt to maximize capital gain and ‘income funds’ that concentrate on shares that pay regular dividends.

Mutual funds are an ideal investment for those with limited funds or investment experience. Choosing the right fund is a decision on how much risk you are willing to take against your expected return on your investment.

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The stock market is a reliable indicator of the actual value of companies which issue share. Values of shares are based on verifiable financial data such as sales figures, assets and growth. This reliability makes the stock market a good choice for long term investing - well-run companies should continue to grow and provide dividends for their stockholders.

The stock market also provides opportunities for short-term investors. Market skittishness can cause prices to fluctuate quite rapidly and investor psychology can cause prices to fall or rise - even if there is no financial basis for these variations.

How does this happen? News reports, government announcements about the economy, and even rumors can cause investors to become nervous or to suspect that a company will increase in value. When the price starts to fall or rise, other investors will jump on the bandwagon, causing an even faster acceleration in price. Eventually the market will correct itself, but for savvy short-term investors who watch the market closely, these price changes can offer opportunities for profitable trading. 

Short term traders are divided into 3 categories: Position Traders, Swing Traders, and Day Traders.

Position Traders

Position trading is the longest term trading style of the three. shares could be held for a relatively long period of time compared with the other trading styles. Position traders expect to hold on to their stocks for anywhere from 5 days to 3 or 6 months. Position traders are watching for fundamental changes in value of a stock. This information can be gleaned from financial reports and industry analyses. Position trading does not require a great deal of time. An examination of daily reports is enough to plan trading strategies. This type of trading is ideal for those who invest in the stock market to supplement their income. The time needed to study the stock market can be as little as 30 minutes a day and can be done after regular work hours.

Swing Traders

Swing traders hold stocks for shorter periods than position traders - generally from one to five days. The swing trader is looking for changes in the market that are driven more by emotion than fundamental value. This type of trading requires more time than position trading but the payback is often greater. Swing traders usually spend about 2 hours a day researching shares and executing orders. They need to be able to identify trends and pick out trading opportunities. They usually rely on daily and intraday charts to plot stock movements.

Day Traders

Day trading is commonly thought of as the most risky way to play the share market. This may be true if the trader is uneducated, but those who know what they are doing know how to limit their risk and maximize their profit potential. Day trading refers to buying and selling stock in very short periods of time - less than a day but often as short as a few minutes. Day traders rely on information that can influence price moves and have to plot when to get in and out of a position. Day traders need to be rational and analytical. Emotional buyers will quickly lose money in this type of trading. Because of the close attention needed to market conditions, day trading is a full-time profession.

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Stock options are contracts to buy (or sell) a stock at a certain price before a certain time in the future. Buyers of options have the right to buy the share at the specified price, but they are not obligated to exercise their option.  Sellers of options have the obligation to sell the underlying stock if the buyer of the option wishes to exercise it.

A contract to buy is called a ‘call option’. The buyer of a call option hopes the price of the underlying stock will rise, allowing him to buy it at less than market value. The seller of the call option expects that the price of the share will not rise, or at least is willing to accept a partial loss of profits made from selling the call option.

For example: An investor buys a call option on IBM with a ’strike price’ (the price the share can be bought) of $50. The current price of IBM stocks is $40 and the cost of the call is $5. If the price rises above $55 (strike price + cost of call) the buyer could exercise his right to buy and make a profit by reselling on the open market. The seller would still gain from the increase in price from $40 to $55 plus the $5 he made by selling the call. If the price remains below $55 the call would not be exercised and the seller would profit by $5 per share and the buyer would lose his $5 per share.

Options are traded on specific shares. They detail the name of the stock, the strike price (the price the stock can be bought or sold at), the expiration date and the premium (the price of the option itself). After the expiration the option cannot be exercised and is worthless. Options have a value and are actively traded. An option to buy Microsoft, for example, is listed like this:

MSFT Jan10 22.50 Call at $2.00

This tells us that an option to buy 1 share of Microsoft at $22.50 before the third Friday in January 2010 can be bought for $2.00. Options usually expire on the third Friday of the specified month, and they are usually traded in lots of 100. To buy this particular option you would have to pay $200 (plus brokerage fees).

An option to sell a stock is called a ‘put option’. This gives the holder the right (but not the obligation) to sell a particular stock within a certain time period at a certain price. In this situation the buyer is expecting the price of the stock to fall but does not want to sell outright in case the price rebounds. The seller feels that the price is stable or is willing to acquire the share at the low price. 

For example: An investor buys a put option on Microsoft with a ’strike price’ (the price the share can be sold) of $35.  The current price of Microsoft is $40 and the cost of the put is $5. If the price falls below $30 (strike price + cost of put) the buyer could exercise his right to sell at a higher price than market. The seller would have to buy the share at the higher-than-market price but any losses are offset by the $5 he made by selling the put. If the price remains above $30 the put would not be exercised and the seller would profit by $5 per share and the buyer would lose his $5 per share.

As can be seen, stock options can be used to protect against loss or as an investment opportunity in their own right.  They are generally used as part of a trading strategy which combines the purchase of stock with the purchase of options.

For example, in a bull (rising) market you could buy stocks and call options and sell put options. This allows you to take full advantage of rising stock prices - the shares you buy will rise in value, the call options will allow you to buy stock at less than market prices, and if the market dips and the buyer of your put option exercises it, you can pick up additional shares at low prices. If the buyer does not exercise the option, you make money from the sale of the option.

Conversely, in a bear market, you can sell stocks, sell calls, and buy puts to limit losses and generate profits.  Unstable markets can use a mixture of puts and calls to maximize profit potential.

Options are traded on Futures and Options Exchanges. There are 6 such exchanges in the United States including the American stock Exchange (AMEX) and the Chicago Board Options Exchange (CBOE). In Europe the main options exchanges are Euronext.liffe and Eurex.

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Understanding the stock market starts with understanding stocks. A share represents partial ownership of a company - the smallest share possible. Company’s issues stocks to raise capital and investors who buy stock are actually buying a portion of the company. Ownership, even a small share, gives investors rights to a say in how the company is run and a share in the profits (if any). While stocks give owners certain rights, they do not carry obligation in case the company defaults or faces a lawsuit. In a worst-case scenario the stock will become worthless but that is the limit to the investor’s liability.

Companies issue stocks to raise capital. They may need a cash injection to expand or to acquire new properties. Each stock issue is limited to a certain number of shares, and when they are issued they are given a par value. The market quickly adjusts that par value according the perceived health of the company and its potential for growth.  

Investors usually buy shares because they believe the company will continue to grow and the value of their shares will rise accordingly. Investors who acquire stock in a new company are taking more of a risk than buying shares of well-established companies but the potential gain is much greater. Those who bought Microsoft shares early in the game (and did not sell them) saw an exponential rise in their value.

stock trading is done on stock exchanges like the New York Stock Exchange (NYSE) or NASDAQ (National Association of Securities Dealers Automated Quotation System). This means that only companies listed on a public exchange have shares that can be bought and sold on the open market. Of course, you could also buy partial ownership in a smaller company that is not listed on a stock exchange but that is a very different type of investment than buying stocks.

Because stocks must be bought and sold on a stock exchange, an individual investor needs a broker to make transactions for him. Brokers take orders to buy or sell a certain share. The order may include instructions to trade at a certain price or simply what the market will bear. Once the broker receives the order he attempts to execute it by finding a buyer or seller as the case may be. The buyer or seller is also represented by a broker and each broker receives a commission on the sale.

shares have several advantages over savings investments. Because they represent ownership in a company they give the holder rights to participate in major decisions the company faces. Every share represents one vote and shareholders are regularly asked to vote on important matters. Ownership also allows stockholders to benefit from any profits the company makes. Profits are distributed in the form of dividends, and may be issued once or twice a year at the discretion of the company directors.

If the company prospers the value of the stock will rise and distribution of profits also increases. The downside of this is that if the company does poorly the value of the stocks may fall.  

When compared with savings investments (like bonds or bank certificates of deposit) stocks have the potential to earn more money — but they also carry the risk of loss. Learning about the stock market and the various investment strategies can help to minimize loss, and most investors find they do much better on the stock market than is possible with any kind of savings investment.

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The term ’stock Market’ is commonly used to encompass both the physical location for buying and selling stocks as well as the overall activity of the market within a certain country. When we hear an expression such as ‘The stock market was down today’ it refers to the combined activity of many share exchanges i.e. the New York stock Exchange (NYSE), Nasdaq etc. in the United States.

The ’share Exchange’ is the correct term for the physical location for trading stocks. Each country may have many different stock exchanges and usually a particular company’s stocks are traded on only one exchange, although large corporations may be listed in several different locations.

stock exchanges exist throughout the world and it is possible to buy or sell stocks on any of them. The only restriction is the opening hours of each exchange. Both the NYSE and Nasdaq for example operate from 9:30 a.m. to 4:00 p.m. Eastern Time from Monday to Friday. Other exchanges have similar opening hours based on their local time. If you want to trade on the Hong Kong stock Exchange your order will be executed sometime between 9:30 p.m. and 4:00 a.m. New York time.

The major stock exchanges of the world are located in Japan (Tokyo share Exchange), India (Bombay stock Exchange), Europe (London share Exchange, Frankfurt stock Exchange, SWX Swiss Exchange), the People’s Republic of China (Shanghai stock Exchange) and the United States.  The major exchanges in the US are the NYSE, Nasdaq, and Amex.

stock markets closely follow the economic health of a country. When the economy is doing well the market is bullish.  Bull markets occur during times of high economic production, low unemployment and low inflation. Bear markets, on the other hand, follow downtrends in the economy. Inflation and unemployment are rising and stock prices are falling.

Fluctuations in stock prices are also driven by supply and demand, which in turn are determined to a large extent on investor psychology. Seeing a stock rise in price may cause investors to jump on the bandwagon and this rush to buy drives the price even faster. A falling price can have the same effect. These are short term fluctuations. stock prices tend to normalize after such runs.

The share exchange is only one of many opportunities to invest. Other popular markets include the Foreign Exchange Market (FOREX), the Futures Market, and the Options Market.

The FOREX is the biggest (in terms of value of trades) investment market in the world. FOREX traders buy one currency against another and can profit from small changes in value. Most FOREX trades are entered and exited in one 24 hour span, and traders have to keep a close watch on the market in order to make profitable trades.

The Futures Market is a market of contracts to buy and sell goods at specified prices and times. It exists because buyers and sellers of goods wish to lock in prices for future delivery, but market conditions can make the actual futures contract fluctuate considerably in value. Most investors in the futures market are not interested in the actual goods - only in the profit that can be realized in trading the contracts.

The Options Market is similar to the Futures Market in that an option is a contract that gives you the right (but not the obligation) to trade a stock at a certain price before a specified date. They can be traded on their own or purchased as a form of insurance against price fluctuations within a certain time frame.

All three of these markets are quite risky and require considerable knowledge and experience to prevent substantial losses. They also require close attention to market movements. stocks, on the other hand, are less risky because movements of the market are usually gradual. Although short term investment strategies are possible, most view shares as long term investments.

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Stock indexes are a statistical average of a particular stock exchange or sector. Indexes are composed of stocks which have something in common - they are all part of the same exchange; they are part of the same industry; or they represent companies of a certain size or location.

There are many different stock indexes, the most common in the United States being the Dow Jones Industrial Average, the NYSE Composite index, and the S&P 500 Composite share Price Index. stock indexes give an overall perspective about the economic health of a particular industry or stock exchange.

There are several different ways to calculate indexes. An index based solely on the price of stocks is called a ‘price weighted index’. This type of index does not take into consideration the importance of any particular stock or the size of the company. An index which is ‘market value weighted’, on the other hand, takes into account the size of the companies. That way, price shifts of small companies have less influence than those of larger companies. Another type of index is the ‘market-share weighted’ index.  This type of index is based on the number of shares rather than their total value.

Index Funds

As well as giving an overall grade to a particular economy, indexes can also be an investment instrument. Mutual funds based on indexes are known as ‘passively managed mutual funds’ and have been shown to consistently outperform managed funds. Mutual funds based on an index simply duplicate the holdings where the index is based on. Thus if the Dow Jones rises by 1% the fund based on the Dow Jones also rises by the same amount. This has the advantage of lower costs for research and transactions - savings that can be passed on to the investor who participates in these funds.

The Big Indexes

The Dow Jones Industrial Average is one of the best-known indexes in the United States. It follows the share movements of 30 of the most influential companies in America including General Electric, Coca Cola and General Motors. It is a ‘price-weighted average’ index - thus giving more influence to more expensive stocks. Some analysts feel that the price-weighting does not give an accurate picture of share market movements and that 30 companies are not enough to form an accurate assessment.

The S&P 500 Index is based on 500 United States corporations. These companies are carefully chosen to represent a broad slice of economic activity. It is second in influence after the Dow Jones and is felt to be an accurate predictor of the state of the United States economy.

Outside of the United States the most influential index is the FTSE 100 Index.  This is based on 100 of the largest companies listed on the London stock Exchange. It is an indicator of the British economy and is one of the biggest indexes in Europe. Other important non-US indexes are the CAC 40 from France and the Nikkei 225 from Japan.

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A mutual fund is a collection of money, pooled together by all of its investors, used to purchase specific types of securities. These investments in the mutual funds are decided by investment professionals who run the mutual fund. A professional will pick from a wide variety of stocks, bonds, money market instruments, or other financial instruments.

Green Mutual Funds are funds that invest in companies that are good for the environment. These companies either are engaged directly in helping the environment,like innovative recycling, waste management, or asbestos removal companies. Or, they have clean, sustainable, Green business models, meaning that their processes are not environmentally harmful

These Green funds have been gaining popularity recently as more and more investors are starting to think about the environment. Probabilities of global warming and increasing rates of natural disasters are pretty murky, and many believe that if we don’t start taking care of the environment, the Earth may not be a very nice place in the future.

Green Energy mutual funds have interesting possibilities. Today, alternative Energy is everybody’s green choice. The only thing is, it’s not quite the time yet to go Green with alternatives. Most of these things like wind energy, solar energy, and fuel cells. are still in their developmental stage. That will mean that stuff is expensive and are not very profitable.

If you decide to dabble in a mutual fund investing, you will be faced with a slight challenge, which mutual fund do I choose? A good to start is by researching different funds’ past performance records and future expectations. Along with this you can also consider what fees the mutual fund charges, it is usually a good idea to go with a fund that offers a lower expense ratio and to avoid funds with additional sales charges.

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The accurate pricing of a corporation’s stock is exceedingly important. A well appraisal allows us to secure share that has a lot of higher mobility. Acquiring a stock without that many future prospects will hurt the chances of your portfolio to grow.

The value of a corporations’ stock reveals how it is expected to do in future. For example, If Boeing traded at $50.50, that means investors believe that the stock price reflects corporation’s future potential. Owners are more concerned with company’s future performance rather than it’s past performance. On Paper, the price of a company’s stocks reflect all variables, also known as EMH - Efficient Market Hypothesis.

When someone invests stocks of a firm, he or she becomes an owner of that corporation. When, people but a firm’s share, their overall ownership in the firm is very low. When people procure a firm’s stocks, they have an equity in that firm, thereby a small ownership of the company.

The historical share price information of a firm can help shareholders finding out how the firm’s shareholders reacted when the firm met or exceeded its quarterly expectations. Share price history can help you in making decisions like how the stock of the company will respond to a trademark lawsuit or acquisition of an another firm. Even though each situation is different, knowledge of a corporation’s historical performance in the stock market will help in making better investing conclusions.

You can services that can provide company’s share movements and historical stock quotes movements along with news events that caused it to trend that particular direction. The later service is a better option as it gives material that directly affects the stock price.

Countless sites provide useful financial content that can be exercised to identify top-notch financial knowledge.Yahoo Finance is a valuable source in finding financial web site about different firms, along with stock quotes of the company.

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Did you know that you can explore historical Stock Market along with Yahoo? It’s true!

If you’re interested in several examples of stocks, it’s somewhat likely that you’ve explored the finance website that is sponsored by Yahoo called “Yahoo! Finance”.

Once it comes to the features on this website, you’re likely to be quite pleased at all that they must offer. There’s even a page which is offered to researching stock prices.

All you have to do, simply go directly to the Yahoo! Finance web site at: http://finance.yahoo.com. There you can get the newest stock prices of any company.

The great thing about this specific web site is that you can search for info connected to latest stocks, as well as stock prices which are considered to be important.

The basic thing that you shall have to do to learn stock prices at Yahoo! Finance is to go to the page above that assists in the process of analyzing various types of stocks. As soon as you get there, you shall need to take a simple “search”. For example, type the company name into the Yahoo! Finance text box - it will then show you a list of all possible company matches!

You will notice that there’s a section that says “Set Date Range”. You need to determine the dates of the historical stock prices that you intend to examine, and then set this info in.

You can then choose to watch the prices for “Daily”, “Weekly”, “Monthly” and even have the choice of “Dividends Only”. It is really easy to look for historical stock prices with Yahoo! Finance! It’s really is the easiest way to obtain stock quotes for anyone, as long as they have internet access!

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