Many people determine what is true, and then forget about it, rather than let it nourish their lives, Maritain said.

So it is with investing.

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The hardest challenge of investing isn’t learning all the probability-based rules discussed in “How to Make Money in Stocks.”

With time and effort, you can learn the rules. The big challenge comes after you learn the rules.

The challenge? You must follow the rules!

It’s human nature to look for loopholes, exceptions, excuses — any reason to ignore a rule. But that’s the road to investor hell — a portfolio filled with “exceptions” that turn out to be exceptionally efficient at losing your money.

One rule some investors have trouble following is the rule against buying extended stocks.

A fundamentally strong stock that breaks out of a base in big volume shouldn’t be bought after it rises 5% past the ideal buy point.

Eventually an investor will encounter a situation where this rule seems like a real party pooper.

You miss the breakout and then watch the stock rise day after day.

“Surely, IBD doesn’t believe I should follow this rule all the time,” you say. (We do, except for certain gap-ups that skip the 5% range.)

There’s a simple reality that makes violating this rule risky. Most winners will rise 20%-25% and then begin consolidating. That’s why investors should take most profits at 20%-25%.

If an investor buys a stock that is extended 10%, 15% or 20% past the buy point, the investor often will be buying just in time for a downturn.

And remember, not all breakouts make it to 20%. So you might be buying extended shares from the investor who bought properly and is now cashing in. Does that sound like a winning strategy?

Southwestern Energy (SWN) broke out of a double-bottom base on Feb. 1, 2005 with a 53.19 buy point 1 . Seven sessions later, the oil and gas developer closed at 57.71, up 8% and extended 2.

After a 19% gain, the stock began to form a base on base 3. Investors who bought at the peak faced the 8% sell rule two days later 4. Those who bought only 10% extended saw a fleeting 8% gain and faced the sell rule four weeks later.

source form: investors

Of course, understanding a company’s story, its products, management strategy and markets, are crucial pieces of fundamental research. But the most important data point in determining a potential leading stock is quarterly earnings growth.

That’s why the CAN SLIM acronym starts with current, or quarterly, earnings and sales growth.

 

In fact, sales and earnings growth are important enough factors in winning stocks to rate two mentions in the CAN SLIM acronym: C, for current quarterly sales and earnings growth of at least 25%, and A, for annual earnings gains of at least 25% for the past three years.

Earnings growth is not some static, isolated indicator. Accelerating growth generally says the market is strongly attracted to something the company is doing, a new technology or a need created by a shift in the market itself.

Some analysts argue that earnings reports are easily manipulated and that other factors, like cash flow or valuation, are more vital.

But IBD research consistently shows stocks that post winning runs see pronounced accelerations of earnings growth prior to and alongside their breakouts. A study of the 600 best stocks from 1952 to 2001 showed three out of four saw EPS growth of at least 70% in the quarter just before their breakout. That’s right: three of four.

The record-setting stocks that fit this mold are legion: Microsoft (MSFT) in 1986, eBay(EBAY) in 2002, Dell (DELL) in 1996, F5 Networks (FFIV) in 2010.

Measure growth by gauging the current quarter vs. the year-ago quarter, not from Q2 to Q3, for example. If the third quarter’s year-over-year growth rate is higher than the second quarter’s year-over-year change, that shows accelerating growth. Three straight quarters of such gains, in a stock that is basing and near a buy point, is a very good starting point for a potential leading stock.

But remember, it is a starting point. Be sure to fulfill the other CAN SLIM requirements and keep a steady eye on the market’s status.

Also, keep an eye on discrepancies in sales and earnings growth. Slowing sales growth and rising earnings may show a company maintaining profitability by cutting employees and closing down capacity.

Such temporary fixes tend not to last, and often set a company up for steep earnings declines.

A sharp reversal in earnings growth can send a warning: If earnings growth slows by two-thirds or more from the growth rate of prior quarters, it can be a red flag.

A slowdown from 80% to 55% is still within a healthy range. But a slowdown from, say, 180% to 15%, however, should put you on your guard.

source from: investors

Over the years, we’ve heard all about the so-called great wealth building systems. ISAs, savings, shares and endowments were all touted as a safe and sure way to build wealth for our retirement. And all without exception have crashed to the ground leaving people’s savings and retirement plans scattered around in the wreckage.

Many people who just a year ago  were looking forward to retiring with a good pension having invested and saved all their lives, now find themselves having to continue working. Their retirement dreams shattered.

The answer of world governments is to try to get this financial plane wreck back into the air at any cost. They are pumping billions of taxpayer’s money into trying to make it flight worthy. It won’t work. At best, it may get back into the air for a few more miles before crashing back to earth.

With every misfortune comes opportunity. With this disaster, we can now see that we can’t trust these institutions to look after our money. If they do manage to get this plane flying, again don’t get on. The old ways we tried to build wealth with are fraught with danger, run by corrupt people many of whom haven’t a clue what they are doing and have no respect for your money.

We can now say with certainty that we can’t trust our money with these institutions. Depend on them to build your retirement fund and you might as well give your money to a gambler for safekeeping. So how can we build some wealth for our retirement?

The best way is to invest in you. It’s your money; you know how hard you have had to work for it. You will not risk it wantonly. Invest the money in yourself and make it work for you. The best way to do this is to start a small business.  If you’re currently working full time then you have the perfect opportunity to begin wealth building by starting a small business.

Let’s say you have £500.00 to invest. If you put it in a bank at the end of the year, you might have made a fiver. Put it in shares and you’ll be lucky to have any of it left by the end of the year. Alternatively, you could take the money, invest it in some stock and sell it on eBay. The return should be about 30%. That’s 30% every 4 to 6 weeks. By the end of a 12-month period, your £500.00 should be£3000, £4000 or more. How much you make obviously depends on how well you invest it. What stock you buy and how you sell it.

The beauty of building wealth this way is that you have full control. If you lose money, at least you have the consolation of knowing you lost it. This kind of wealth building will fully engage you. It will be your own portfolio, managed by you, controlled by you with all the decisions made by you. Once you start wealth building this way you will soon become addicted. You will grow in knowledge, self-esteem and confidence. You will look at the world from an entrepreneurial mindset.

After a year, with your wealth accumulating monthly, you will wonder why you didn’t take this route earlier. Why trust your money to corrupt and bankrupt institutions when you can invest it in someone you can trust totally to look after it and increase it. You are the only person you can trust to do this. Unhitch yourself from the financial scams that the banks keep dreaming up to steal your money and set off on your own wealth-building journey.

Source:ezinearticles.com

How to Invest in Stock – The Four Major Ways to Invest

There are typically four major ways to invest:

1. Through a 401k plan or, if you work for a non-profit, a 403b plan
2. Through a Traditional IRA, Roth IRA, or SEP-IRA account
3. Through a brokerage account
4. Through a direct stock purchase plan or dividend reinvestment plan (DRIP)

How to Invest in Stock – The Five Types of Assets You Might Own

Generally, there are five types of assets the average investor is likely to own in their lifetime:

1. Common stocks – ownership of businesses
2. Preferred stocks – special types of stock that often pay high dividends but have limited upside
3. Bonds – corporate bonds, municipal bonds, savings bonds, U.S. government treasuries, etc.
4. Money markets – highly liquid funds that are designed to protect your purchasing power; considered to be a cash equivalent
5. Real estate investment trusts or REITs – a special type of company designation that allows no taxation at the company level provided more than 90% of earnings are paid out to the shareholders. The assets are often invested in a variety of real estate projects and properties.
6. Mutual funds including exchange-traded funds, index funds, and actively managed funds.

How to Invest in Stock – Doing the Research

When researching an investment there are typically five documents you want to get your hands on to research the relative merit of a potential stock:

1. The 10K – this is the annual filing with the Securities and Exchange Commission (SEC)
2. The most recent 10Q – this is the quarterly filing with the SEC
3. Proxy statement – includes information on the Board of Directors as well as management pay and shareholder proposals
4. The most recent annual report – read the report from the Chairman, CEO, and sometimes CFO or other high-ranking officers to see how they view the business. Not all annual reports are created equally. Generally, the best in the business is considered to be the one written by Warren Buffett at Berkshire Hathaway, which you can download from free on their corporate site.
5. A statistical showing going back five or ten years. Several firms prepare this type of information, mostly for a subscription, such as a Morningstar, Value Line, S&P, and Moody’s.

How to Invest in Stock – The Three Financial Statements

There are three financial statements you’ll want to examine closely:

1. The income statement
2. The balance sheet
3. The cash flow statement

Source:Beginnersinvest