Net Invest

The Foreign Exchange market (Forex) is truly the largest exchange in the world. The amount of dollars traded on the Forex market on a daily basis is in the trillions. Most of this currency trading takes place between between large banks, central banks, currency speculators, multinational corporations, governments, and other financial markets and institutions. However, individual traders are starting to get in the mix, using internet discount brokers such as Etrade to participate in the currency exchange market.

There is no central exchange or meeting place for the Forex. All trading is done over computer networks between traders in different parts of the world. Also, unlike the stock market, the foreign exchange market is open 24 hours per day, because it is a global market. A trader in Hong Kong may be exchanging currency with a trader in Australia while an American trader is sleeping.

There are several different markets within the Forex exchange system. First, there is the spot market. The spot market deals with trades that are based on the current values of currencies. One person trades a certain amount of currency with another trader in exchange for an equivalent amount of a different foreign currency. Spot trades take two days for settlement.

The other two types of foreign exchange markets are the forward and futures markets. In the forward market, the buyer and seller agree on an exchange rate and a transaction date is set for a specific time in the future, at which point the trade is executed regardless of what the rates are at that time. On the futures market, futures contracts are bought and sold based upon a standard contract size and maturity date. Futures trades take place on public commodities markets.

A currency quote is listed differently from a stock quote. Stocks are quoted in terms of price per share. Currency exchange prices are listed as either a direct quote or an indirect quote. A direct quote uses the domestic currency as the base and the foreign currency as the quote. An indirect quote works the exact opposite way.

So, if you were to view a quote in an American newspaper that said USD/JPY = 75, that would be a direct quote and would mean that $1 of U.S. currency is equal to 75 Japanese yen. If that same quote appeared in that same American newspaper and was listed as JPY/USD = 0.013, that would be an example of an indirect quote.

As with stock prices, currency exchange prices have a bid and ask spread. The current bid is the amount of foreign currency that someone is willing to spend in order to buy $1 U.S. base currency. The ask is the amount of foreign currency that someone is demanding in order to be willing to sell $1 U.S. base currency.

The Forex markets are generally considered to be less volatile than then stock market because within the course of a trading day, it is highly unlikely for the value of a single currency to move all that much. With equities, it is not uncommon for a trader to buy a stock, and then a negative press release causes the stock to lose considerable value within a day or even a couple of hours. Sometimes, however, the Forex can be volatile. If there is a significant economic or political development with a certain country, the currency of that country can lose value quickly.

There is a higher degree of liquidity on the currency exchange then there is on the stock exchange because the currency exchange is open 24 hours per day and because the very nature of currency exchange is to bet on when certain currencies will go up or down; so, it is easy to sell your position in a certain currency even when the value of that money is going down. A plummeting stock is more difficult to unload, but not impossible.

If you want to begin currency tranding, try to set aside some money and open an account with an online broker. Start slowly, then as you get the hang of it, work your way up to larger trades and higher volume. However, do not gamble your nest egg on currency trading because inexperienced traders can lose everything they have rather quickly in spite of the relative safety of the Forex market.

Jim Pretin is the owner of http://www.forms4free.com, a service that helps programmers make a free HTML form and download formmail

One of the hardest things about stock trading is self-discipline. You have a set of rules you use for trading, whether you realize it or not. The hard part is sticking to those rules. For example, you may tell yourself that you will never buy a penny stock. Then one day you get a spam email that is boasting about “the next big thing” in the stock market and you go ahead and buy that penny stock. One day later, you have lost 50% of your investment and you are mad at yourself for violating your own rules!

A good solution to the self-discipline problem is to write out your rules on a piece of paper. Better yet, make many copies of this paper with checkboxes next to each rule. Before you place a trade, make sure the stock fits within each of your rules and put a check next to them. That will help you stay on track! It may sound silly, but it is actually quite helpful. After all, we are human, and humans like to break rules!

In fact, one of your rules might even say, “There are no rules.” There will be times when it’s okay to break one or two of your rules because of a special scenario. You may find a stock that is a “sure thing” and you just have to ignore those couple rules that it violates. Of course if you get burned on the trade you will know why! Remember, there are no sure things in the stock market! There are no stocks that can guarantee a profit or a dividend. They can always drop in price or go bankrupt. So stick to those rules as much as you can!

Here are my rules:

1. Never put more than 1/3 of your money into one stock.
2. If no opportunities are found, stay out!
3. Avoid trading on Mondays. They have big drops sometimes.
4. Look at charts of the Dow to see how the market is doing.
5. Keep track of economic news schedules, such as Fed meetings.
6. After a huge loss, take a week off.
7. Research your holdings once a week.
8. Never short-sell more than 50% of your account.

Here are some stock-picking rules used by other people:

1. Predictable growth in free cash flow
2. Rich in assets, with little or no debt
3. Low multiple of price to free cash flow
4. Generous returns on equity, coupled with a reasonable cash flow multiple
5. Insider ownership and shareholder-friendly management
6. Insider buying, especially by executive officers
7. Leadership of an important niche

Feel free to use these rules or modify them to suit your trading style. There should also be different rules for day trading, short-term trading, long-term trading, and so on. Also, getting an accountability partner will help you stay on track. Show them your trades, when you bought them, why you bought them, and when you plan to sell.

There’s a popular saying on Wall Street that goes, “Plan Your Trade and Trade Your Plan.” That simply means, decide when you’re going to buy and under what conditions you will sell, and then stick to your plans!

Best of luck to you in your trading endeavors!

Nicholas Swezey is the creator of the website: http://www.HowTheMarketWorks.com

Most people have a broker that makes all of their investment decisions for them. They rarely even look at their portfolio to see what it contains, and they review their account statements only once per year, because their goal is for their account to grow in the long run.

However, you should not rely on your broker to do everything for you, because most stockbrokers have many clients, and do not pay close enough attention to your account to make the small trades here or there that can really help you maximize your return, or get out of a stock that is weighing down your portfolio so that money can be transferred into something else that would be more remunerative.

Simply put, your broker or financial advisor does not make the necessary short-term investment decisions to maximize the performance of your account. You need to become familiar with each stock you have in your portfolio so that you can make decisions on your own in the short-term, while still relying upon your financial advisor to structure your portfolio with a mix of the right instruments (stocks, bonds, money market, etc.) to help you make money in the long run.

To make your own investment decisions, you need to review the most recent balance sheet and income statement for the company, as well as some other important statistics. You can access these reports online on any stock quoting website. Simply enter the ticker symbol for the company you want to evaluate, and then there should be a link to their income statement and balance sheet on that page.

When looking at the balance sheet, compare the assets for the current reporting period to the previous period. Did the assets, such as revenue from sales, increase or decrease? Check the liabilities from the previous period as well. And, you should check whether shareholder equity has increased or decreased. This is important to you as an investor because shareholder equity is the true worth of a company to its shareholders. If the balance sheet does not have shareholder equity listed, simply subtract the total liabilities from the total assets to arrive at the number.

When looking at the income statement, you should look at the earnings figures. The earnings figures are listed at the bottom of the income statement. Have earnings increased or decreased since the previous income statement was issued? If there is a decrease, what is the reason? Is it because the company is struggling, or is it because of some non-recurring expense they had to pay that will not affect their earnings in the future? Earnings are important to you as an investor because a portion of this money is paid out to the shareholders in the form of a dividend.

Next, there are a few statistics that you should evaluate which are also listed on the profile for the company when you look them up online. The two most important statistics to look at are the P/E ratio and the PEG ratio. Typically, you can find these numbers under the statistics section for the company.

The P/E ratio is the price-to-earnings ratio. It is calculated by dividing the price for one share of stock by the earnings per share. Most companies have a P/E ratio between 15 to 25. Some companies trade at P/E ratios as high as 70 or higher, such as Google. If a P/E ratio is very high, the stock might be overvalued, meaning it could come down in price in the future.

But, a high P/E ratio often means that the company is expected to grow its sales and earnings significantly in the future, so investors are willing to pay more than the stock is currently worth because the price will be justified in the long run, and the company will be able to pay larger dividends when its earnings increase.

A low P/E ratio could mean that a company is undervalued, meaning that the stock price will likely go up in the future. However, a low P/E ratio could mean that investors are abandoning the stock because future sales and earnings are expected to decrease. When evaluating the P/E ratio, you need to assess the overall situation and future sales expectations in order to properly interpret what the P/E means for you as an investor.

The other important statistic, perhaps more important than the P/E ratio, is the PEG ratio. The PEG is the price-to-earnings growth ratio. It is calculated by dividing the P/E ratio by the annual earnings growth per share. This ratio helps you to ascertain whether the company is growing its earnings enough each year to justify the current price of the stock. If a company is not growing its earnings at all, then the stock will not go up. If the earnings are growing significantly each year, then the price of the stock will rise accordingly.

Since earnings growth is the real impetus behind an increase in the price of a stock, the PEG is probably the best tool for evaluating whether the stock has hit the wall or will continue to increase. If the PEG is less than 1, the stock will likely continue to go up. If the PEG is much higher than 1, then the stock might go down. However, a high PEG could mean that a company is expected to grow tremendously in the months and years ahead.

I hope this information will help you make your own investment decisions. Try to set aside some time to review each stock that you have in your portfolio, and then use the procedures outlined in this article to examine the value of the stock. This will help you grow your investments much more in the long run than if you rely solely on your broker or financial advisor to do all the work for you.

Jim Pretin is the owner of http://www.forms4free.com, a service that helps programmers make an HTML form

Penny stocks can be a tempting investment. The share prices are so low that most people have the tendency to believe that they make for an excellent investment because with the price being so low, it would seem that the stock can not go anywhere but up. This is sometimes the case, but if you are a neophyte investor, there are some things that you need to be aware of before investing in penny stocks.

Penny stocks are defined differently depending on who you talk to. Stockbrokers define them as any stock that trades below $5 per share. Regulatory agencies sometimes classify them as a stock with a price below $2. But, generally speaking, a penny stock is any low-priced security that trades on one of two exchanges; the Pink Sheets or the OTC Bulletin Board.

The Pink Sheets are an exchange where most startup companies first get listed. There are no listing requirements to be traded on this exchange. A company does not have to have any sales, nor does it have to reveal how many shares outstanding it has to qualify for the Pink Sheets.

The reason why a company tries to get listed on the Pink Sheets, even though their stock will not go up in price because they have no sales to speak of, is because it gives their company more substance and credibility; it is typically easier to attract additional capital, obtain financing, and execute contracts and agreements if a company is publicly traded, even if it is on the Pink Sheets. Also, it is easier to get transferred from the Pink Sheets to one of the larger exchanges than it is to go from being a private company to hopping directly on to one of the major exchanges, such as the NASDAQ or NYSE. Companies listed on the Pink Sheets trade as ridiculously low as $0.00001 per share, all the way up to $500 per share and sometimes beyond. Foreign companies often have some of their shares sold in the United States by listing them on the Pink Sheets.

The OTC (Over-The-Counter) Bulletin Board is similar to the Pink Sheets. This exchange consists of relatively young companies either with no sales or a small amount of sales. Companies listed on it are sometimes fully reporting (meaning that they reveal how many shares they have outstanding and what their balance sheet looks like). Often, companies go from the Pink Sheets to the Bulletin Board once they are ready to become fully or semi-reporting.

Most publicly traded companies that are now listed on one of the major exchanges (NASADAQ, AMEX, NYSE), at one time or another, were penny stocks listed on the Pink Sheets or Bulletin Board. Rarely does a company go from being private directly to one of the 3 major exchanges. Google is a rare example of a company that was able to do that, because they were so successful so quickly. But, most companies have to pay their dues and edge their way up from the penny stock exchanges to the bigger ones.

So, investing in penny stocks can be an excellent investment because some of these young companies will one day be worth a fortune. The hard part is finding the right company to invest in, because for every successful startup company, there is also one that fails within the first year or two.

To find the right company, there are a few things you need to look for. Number one, you need to do some research and try to find out how many shares the company has in its float. The float is the number of shares that are currently being traded. Companies listed on the Pink Sheets usually do not officially report this number to the public, but with a little research, you can usually find out. It is usually contained in articles written about the company, or in TV or radio interviews with company officials that are sometimes archived on certain websites. You can also look for the information on message boards or forums where stock traders chat with each other. Simply do a search on Google and read every article ever written about the company, and you will likely find out about their float. This is important because you do not want to invest in a company that already has something like 500 million shares in its float. Companies with this kind of share count are likely having problems moving forward, so they have issued more and more shares to raise money just to stay alive. You want to look for companies that have approximately 5 to 100 million shares in their float.

Other things that you should look for in a new company are barriers to entry, patents, and consumer demand. Here are the questions you need to ask yourself when analyzing the probability that a company will be successful:

1) Barriers to Entry: Are there are obstacles that will make it difficult for the company to sell its products or services?

2) Patents: Is the product that the company is going to sell patented? A patent will prevent other companies from producing the exact same product.

3) Consumer Demand: Will there be a demand for what the company is selling? Sometimes a company has a great new invention or an exciting technology, but if it is not something practical that consumers are going to want or need, then it does not matter how great it is.

I hope this information has helped you to get acquainted with penny stocks. Try to set aside some money for investing and start while you are still young. The earlier you begin, the more money you can potentially make down the road. Do your homework on the companies you are going to invest in and you will do fine.

Jim Pretin is the owner of http://www.forms4free.com, a service that helps programmers make email forms.

Ideally, investors try to buy a stock when the price has reached a support level (a level at which the price is as low as it will go) and sell the stock when it hits a resistance level (a level at which the price is as high as it will go). This is easier said than done. Most investors end up missing out on a continual rise by waiting for a stock to plummet first, or sell way to early by underestimating how high the price will go. In this article, we will focus on the two most popular strategies that you can use to invest without having to worry about market timing.

Dollar cost averaging (DCA) is an investing technique intended to reduce exposure to risk associated with making a single large purchase. According to this technique, shares of stock are purchased in a specific amount on a specified periodic basis (often monthly), regardless of current performance. The theory is that this will lead to greater returns overall, since smaller numbers of shares will be bought when the cost is high, while larger number of shares will be bought while the cost is low.

An example of DCA would be as follows: If I want to buy 1,200 shares of IBM stock using DCA, then I might decide to purchase 400 shares of IBM per month over the course of the next three months. Hypothetically, during month one, the price of IBM may be $105 per share, and then it might drop to $95 per share during month two, and then rise to $100 during month three. If I bought all 1,200 shares during month one, I would have cost me $105 per share. But, by spreading the purchase over a three month period, I managed to buy IBM at an average price of $100 per share.

The primary drawback of using DCA is that you may not be maximizing your overall return. If there is an indication that a certain stock is currently undervalued and might shoot up in price, you would actually make less money using DCA than if you had bought all the shares in the beginning before the price skyrocketed. So, it is not always a winning strategy to spread your purchases over a period of time.

Value averaging, also known as dollar value averaging (DVA), is a technique of adding to an investment portfolio to provide greater return than similar methods such as dollar cost averaging and random investment. With the method, investors contribute to their portfolios in such a way that the portfolio balance increases by a set amount, regardless of market fluctuations. As a result, in periods of market declines, the investor contributes more money, while in periods of market climbs, the investor contributes less.

Here is an example of DVA: I want to invest in Yahoo using DVA. For the sake of argument, we will say that Yahoo is currently $10 per share. I determine that the value of the amount I am going to invest over the course of 1 year will rise, on average, $1,000 each quarter as I make additional investments. If I use DVA, I invest $1,000 to start. If, at the end of the first quarter, the share price has risen to $15 per share, that means that the value of my investment is now $1,500, which means I will only have to invest $500 at the start of the second quarter in order to bring the total amount of my investment for the first and second quarter to $2,000. So, I am investing less as the stock price increases.

Dollar value averaging usually works better than cost averaging because value averaging results in less money being invested as the stock price goes up, whereas with cost averaging you continue to invest the same number of dollars regardless of the share price. But, neither of these strategies are necessarily full-proof. Make sure you know something about the company you are going to invest in before you go forward.

Jim Pretin is the owner of http://www.forms4free.com, a service that helps programmers make an HTML form

Most people have a broker that makes all of their investment decisions for them. They rarely even look at their portfolio to see what it contains, and they review their account statements only once per year, because their goal is for their account to grow in the long run.

However, you should not rely on your broker to do everything for you, because most stockbrokers have many clients, and do not pay close enough attention to your account to make the small trades here or there that can really help you maximize your return, or get out of a stock that is weighing down your portfolio so that money can be transferred into something else that would be more remunerative.

Simply put, your broker or financial advisor does not make the necessary short-term investment decisions to maximize the performance of your account. You need to become familiar with each stock you have in your portfolio so that you can make decisions on your own in the short-term, while still relying upon your financial advisor to structure your portfolio with a mix of the right instruments (stocks, bonds, money market, etc.) to help you make money in the long run.

To make your own investment decisions, you need to review the most recent balance sheet and income statement for the company, as well as some other important statistics. You can access these reports online on any stock quoting website. Simply enter the ticker symbol for the company you want to evaluate, and then there should be a link to their income statement and balance sheet on that page.

When looking at the balance sheet, compare the assets for the current reporting period to the previous period. Did the assets, such as revenue from sales, increase or decrease? Check the liabilities from the previous period as well. And, you should check whether shareholder equity has increased or decreased. This is important to you as an investor because shareholder equity is the true worth of a company to its shareholders. If the balance sheet does not have shareholder equity listed, simply subtract the total liabilities from the total assets to arrive at the number.

When looking at the income statement, you should look at the earnings figures. The earnings figures are listed at the bottom of the income statement. Have earnings increased or decreased since the previous income statement was issued? If there is a decrease, what is the reason? Is it because the company is struggling, or is it because of some non-recurring expense they had to pay that will not affect their earnings in the future? Earnings are important to you as an investor because a portion of this money is paid out to the shareholders in the form of a dividend.

Next, there are a few statistics that you should evaluate which are also listed on the profile for the company when you look them up online. The two most important statistics to look at are the P/E ratio and the PEG ratio. Typically, you can find these numbers under the statistics section for the company.

The P/E ratio is the price-to-earnings ratio. It is calculated by dividing the price for one share of stock by the earnings per share. Most companies have a P/E ratio between 15 to 25. Some companies trade at P/E ratios as high as 70 or higher, such as Google. If a P/E ratio is very high, the stock might be overvalued, meaning it could come down in price in the future. But, a high P/E ratio often means that the company is expected to grow its sales and earnings significantly in the future, so investors are willing to pay more than the stock is currently worth because the price will be justified in the long run, and the company will be able to pay larger dividends when its earnings increase.

A low P/E ratio could mean that a company is undervalued, meaning that the stock price will likely go up in the future. However, a low P/E ratio could mean that investors are abandoning the stock because future sales and earnings are expected to decrease. When evaluating the P/E ratio, you need to assess the overall situation and future sales expectations in order to properly interpret what the P/E means for you as an investor.

The other important statistic, perhaps more important than the P/E ratio, is the PEG ratio. The PEG is the price-to-earnings growth ratio. It is calculated by dividing the P/E ratio by the annual earnings growth per share. This ratio helps you to ascertain whether the company is growing its earnings enough each year to justify the current price of the stock. If a company is not growing its earnings at all, then the stock will not go up. If the earnings are growing significantly each year, then the price of the stock will rise accordingly.

Since earnings growth is the real impetus behind an increase in the price of a stock, the PEG is probably the best tool for evaluating whether the stock has hit the wall or will continue to increase. If the PEG is less than 1, the stock will likely continue to go up. If the PEG is much higher than 1, then the stock might go down. However, a high PEG could mean that a company is expected to grow tremendously in the months and years ahead.

I hope this information will help you make your own investment decisions. Try to set aside some time to review each stock that you have in your portfolio, and then use the procedures outlined in this article to examine the value of the stock. This will help you grow your investments much more in the long run than if you rely solely on your broker or financial advisor to do all the work for you.

Jim Pretin is the owner of http://www.forms4free.com, a service that helps programmers make an HTML form

Most people consider penny stocks to be a poor investment. I, on the other hand, think that investing in a penny stock before that company becomes profitable company is the best way to invest, because you can make a lot more money with penny stocks than would ever be possible with blue-chip stocks. I will now outline for you what you need to know about penny stocks and how to find the best one in which to invest.

Penny stocks are defined differently depending on who you talk to. Stockbrokers define them as any stock that trades below $5 per share. Regulatory agencies sometimes classify them as a stock with a price below $2. But, generally speaking, a penny stock is any low-priced security that trades on one of two exchanges; the Pink Sheets or the OTC Bulletin Board.

The Pink Sheets are an exchange where most startup companies first get listed. There are no listing requirements to be traded on this exchange. A company does not have to have any sales, nor does it have to reveal how many shares outstanding it has to qualify for the Pink Sheets.

The reason why a company tries to get listed on the Pink Sheets, even though their stock will not go up in price because they have no sales to speak of, is because it gives their company more substance and credibility; it is typically easier to attract additional capital, obtain financing, and execute contracts and agreements if a company is publicly traded, even if it is on the Pink Sheets.

Also, it is easier to get transferred from the Pink Sheets to one of the larger exchanges than it is to go from being a private company to hopping directly on to one of the major exchanges, such as the NASDAQ or NYSE. Companies listed on the Pink Sheets trade as ridiculously low as $0.00001 per share, all the way up to $500 per share and sometimes beyond. Foreign companies often have some of their shares sold in the United States by listing them on the Pink Sheets.

The OTC (Over-The-Counter) Bulletin Board is similar to the Pink Sheets. This exchange consists of relatively young companies either with no sales or a small amount of sales. Companies listed on it are sometimes fully reporting (meaning that they reveal how many shares they have outstanding and what their balance sheet looks like). Often, companies go from the Pink Sheets to the Bulletin Board once they are ready to become fully or semi-reporting.

Most publicly traded companies that are now listed on one of the major exchanges (NASADAQ, AMEX, NYSE), at one time or another, were penny stocks listed on the Pink Sheets or Bulletin Board. Rarely does a company go from being private directly to one of the 3 major exchanges. Google is a rare example of a company that was able to do that, because they were so successful so quickly. But, most companies have to pay their dues and edge their way up from the penny stock exchanges to the bigger ones.

So, investing in penny stocks can be an excellent investment because some of these young companies will one day be worth a fortune. The hard part is finding the right company to invest in, because for every successful startup company, there is also one that fails within the first year or two.

To find the right company, there are a few things you need to look for. Number one, you need to do some research and try to find out how many shares the company has in its float. The float is the number of shares that are currently being traded. Companies listed on the Pink Sheets usually do not officially report this number to the public, but with a little research, you can usually find out. It is usually contained in articles written about the company, or in TV or radio interviews with company officials that are sometimes archived on certain websites.

You can also look for the information on message boards or forums where stock traders chat with each other. Simply do a search on Google and read every article ever written about the company, and you will likely find out about their float. This is important because you do not want to invest in a company that already has something like 500 million shares in its float. Companies with this kind of share count are likely having problems moving forward, so they have issued more and more shares to raise money just to stay alive. You want to look for companies that have approximately 5 to 100 million shares in their float.

Other things that you should look for in a new company are barriers to entry, patents, and consumer demand. Here are the questions you need to ask yourself when analyzing the probability that a company will be successful:

1) Barriers to Entry: Are there are obstacles that will make it difficult for the company to sell its products or services?

2) Patents: Is the product that the company is going to sell patented? A patent will prevent other companies from producing the exact same product.

3) Consumer Demand: Will there be a demand for what the company is selling? Sometimes a company has a great new invention or an exciting technology, but if it is not something practical that consumers are going to want or need, then it does not matter how great it is.

Try to set aside some money for investing in penny stocks and start while you are still young. The earlier you get started, the more money you can make in the long run. Just make sure you do your homework before you invest and you should do extremely well.
.

Jim Pretin is the owner of http://www.forms4free.com, a service that helps programmers make a free HTML form and download formmail

If you are new to investing perhaps you are not familiar with bonds. Before you get started, you need to understand some of the risks associated with bond investing. Most people assume that all interest-bearing securities are completely risk free, but this is not the case. Even if you know a lot about investing, you may not be aware of some of the risk characteristics associated with bonds.

The most important thing to take into account is the interest rate. The Federal Reserve (also known as the Fed) meets every 6-8 weeks to evaluate the health of the economy. At each meeting, the Fed renders a decision regarding interest rates.

If inflation is rising, the Fed will need to raise interest rates to tighten the money supply. If inflation is moderate or contained, the Fed will likely leave rates unchanged. However, if the economy is slowing down and there is very little inflation or maybe even deflation, then the Fed might decide to reduce interest rates to create a stimulus for economic growth.

The reason why you need to consider present and future interest rate levels is because as interest rates increase, bond prices go down, and vice versa. If you are able to hold your bond until maturity, then interest rate movements do not really matter, because you will redeem the principal upon redemption. But often, investors have to cash out their bonds well before the maturity date. If interest rates have moved up since you purchased the bond, and you sell it prior to maturity, then the bond will be worth less than your initial investment.

You should also be aware of the claim status of the bond you are buying. Claim status refers to your ability to liquidate your investment in the event the bond issuer goes bankrupt. If you are buying a government bond, such as a Treasury Bill, claim status is irrelevant, because the odds of the Federal Government going bankrupt are slim and none.

If you are buying a corporate bond, however, there is always a chance that the issuer could go out of business. In the event of liquidation, bondholders are given priority over stockholders. However, there are often different classes of bondholders. Senior note holders can often claim against certain kinds of physical collateral in the event of bankruptcy, such as equipment (computers, machines, etc.). Regular bondholders can not always claim against physically collateral, and are next in line after the senior note holders.

Next, you should always check the three main features of the bond you are buying; the coupon rate, the maturity date, and the call provisions. The coupon rate is the interest rate. Most bonds pay an interest rate semiannually or annually.

The maturity date is the date that the bond will be redeemed by the issuer; simply put, the maturity date is when the company must pay back to you the principal you loaned to them. The call provisions are the rights of the issuer to buy back your bond prior to maturity. Some bonds are non-callable, while others are callable, meaning that the company can buy your bond back before maturity, usually at a higher price than what you paid.

Finally, you should also understand that if economic conditions become more favorable after you a buy a bond, and interest rates start to go down again, the issuer will likely issue a lot more bonds to take advantage of the low interest rates, and will use the proceeds to try to buy back any callable bonds it issued previously. So, when interest rates go down, there is an increasing likelihood that your bond will be redeemed prior to maturity, if in fact the bond is callable.

You should invest in bonds. However, you should also take into account the risk factors we have covered. Your portfolio should contain a mix of corporate, federal, municipal, and even junk bonds (there is always a default risk associated with junk bonds, but they pay a huge interest rate). Talk to your broker about diversifying the kinds of bonds in your portfolio and you will reduce your overall risk and maximize your return.

Jim Pretin is the owner of http://www.forms4free.com, a service that helps programmers make an HTML form

If you are a neophyte investor, perhaps you have never invested in bonds before. Before you invest, you need to understand some of the risks associated with investing in bonds. Most people assume that all fixed-income investment instruments are completely risk free, but this is not the case. Even if you are an experienced investor, you may not be aware of all the potential shortcomings of bonds. For the purposes of this discussion, we are going to carefully examine the pitfalls and risks associated with bonds.

The most important risk factor you need to take into account is the interest rate. Even if you are new to investing, you are probably aware that every 6-8 weeks, the Federal Reserve (also known as the Fed) meets to evaluate the current condition of the economy. At each meeting, the Fed renders a decision regarding interest rates. If inflation has been increasing, the Fed will need to raise interest rates. If inflation is moderate or contained, the Fed will likely maintain the current interest rate level. However, if the economy is slowing down and there is very little inflation or maybe even deflation, then the Fed might decrease interest rates to stimulate the economy by making it easier for businesses to borrow money.

The reason why the current and future level of interest rates are important for bonds is because as interest rates go up, bond prices go down, and vice versa. If you are able to hold a bond until maturity, then interest rate movements do not really matter, because you will redeem the principal upon maturity. But often, investors have to sell their bonds well before the maturity date. If interest rates have moved up since you bought the bond, and you sell it prior to maturity, then the bond will be worth less that what you paid for it.

It is also important to understand the claim status of the bond you are buying. Claim status refers to your ability to recover your investment in the event the bond issuer goes bankrupt. If you are buying a government bond, such as a Treasury Bill, claim status is irrelevant, because the odds of the Federal Government going bankrupt are slim and none.

If you are buying a corporate bond, however, there is always a chance that the issuer could go out of business. In the event of liquidation, bondholders are given priority over stockholders. However, there are often several classes of bondholders. Senior note holders can often claim against certain kinds of physical collateral in the event of bankruptcy, such as equipment (computers, machines, etc.). Regular bondholders claim after senior note holders. You should check your bond portfolio to determine what class your bonds are in. If you can not determine the class of your bonds, call your broker.

Next, you should always check the three most basic features of a bond; the coupon rate, the maturity date, and the call provisions. The coupon rate is the interest rate. Most bonds pay an interest rate semiannually or annually. The maturity date is the date that the bond will be redeemed by the issuer; simply put, the maturity date is when the company must pay back to you the principal you loaned to them. The call provisions refer to the rights of the issuer to buy back your bond prior to maturity. Some bonds are non-callable, while others are callable, meaning that the company can buy your bond back before maturity, usually at a premium.

Finally, you should also understand that if economic conditions become more favorable after you a buy a bond, and interest rates start to go down again, the issuer will likely issue a lot more bonds to take advantage of the low interest rates, and will use the proceeds to try to buy back any callable bonds it issued previously. So, when interest rates go down, there is an increasing likelihood that your bond will be redeemed prior to maturity, if in fact the bond is callable.

I hope this information will help you formulate a strategy for making wise decisions when investing in bonds. Even though bonds are normally classified as fixed-income securities, you now understand that there are risks associated with them. So, follow all of the procedures outlined in this article when evaluating the risk characteristics of bonds, and you will do fine.

Jim Pretin is the owner of http://www.forms4free.com, a service that helps programmers make free HTML forms.

Corporations, governments, and municipalities borrow money by issuing bonds for sale to the general public. Companies sometimes need additional monies to expand their business, while governments need money for infrastructure. And just like any other loan, the bondholders are paid an interest rate on their money. And, generally speaking, at the end of a certain term, the borrower has to pay back the face amount of that loan. For our purposes here, we are going to concentrate on municipal bonds, which are highly sought after due to their apparent exemption from some or all taxes.

Interest income received by holders of municipal bonds is often exempt from the federal income tax and from the income tax of the state in which they are issued, although municipal bonds issued for certain purposes may not be tax exempt. However, if you buy a municipal bond from another investor on the secondary market as opposed to buying directly from the issuer on the primary market, at a discount to its face value, you will owe capital gains taxes on the increase in principal you will receive when the bond is redeemed. The capital gains tax on a long-term gain is 15% (selling a security after holding it for at least 1 year is a long-term gain), whereas the tax on a short-term gain is 35% (selling after holding a security for less than 1 year). The interest is usually still expempt from federal or state tax, unless the bond has specific provisions that stipulate otherwise.

So, if you are going to buy a municipal bond, or any bond for that matter, that has already been issued to someone else, you need to look at the price of the bond relative to its face value to ascertain what the yield to maturity will be. The yield to maturity figure that you will find in a newspaper for a certain bond does not take into account the tax consequences that will be generated once the bond is redeemed. So, you need to figure in the taxes on your capital gains when calculating the yield on a bond that has been purchased at a discount. The strangest thing about a bond, as opposed to a stock, is that if you purchase the bond at a premium (more than the face value), upon redemption you can not claim a capital loss. This seems paradoxical, because you lost money on the purchase, but it still does not count as a loss.

A particularly perplexing aspect of municipal bonds is known as the de minimus tax rule. This rule asserts that if you purchase a bond at a discount equal to or greater than a quarter point per year until maturity, then instead of paying a capital gains tax on the increase in principal, you will pay taxes equivalent to your ordinary income tax. For a lot of investors, this can be troublesome, because most often bonds are held for more than a year before they can be redeemed anyway, so any gains received on discounted issues are usually subject to the 15% long-term capital gains tax. But, because of the de minimus rule, even if you have held the bond for more than 1 year, and it matures, if the discount was a quarter point per year until maturity, then you will have to pay income tax, which might be 35% if you fall in the highest income tax bracket.

Sometimes, not only are the gains on the principal taxed, but the interest income can be federally taxable as well, depending upon the situation. If the federal government determines that the money raised from the sale of a certain municipal issue is being used for something that falls outside their definition of municipal use, then they might subject the interest to federal taxes. Also, if the money being raised by the sale of the bond is being used for something that is related to municipal improvements, but is being used to fund the activities of a private corporation to make those improvements, then the interest income might be subject to federal taxes in this instance.

I hope this information will help you to evaluate the tax consequences associated with municipal bonds. Ask your broker about each of the situations outlined in this article before you invest. Even when taxable, municipal issues are an excellent investment because the issuer is a state or local government, and the project for which your funds are being used is basically guaranteed to be successful because it is run by the government and is related to infrastructure improvements. So, you can almost never go wrong with these sorts of bonds as you will almost definitely get your money back with interest.

Jim Pretin is the owner of http://www.forms4free.com, a service that helps programmers make email forms.

If you are new to investing perhaps you are not familiar with bonds. Before you get started, you need to understand some of the risks associated with bond investing. Most people assume that all interest-bearing securities are completely risk free, but this is not the case. Even if you know a lot about investing, you may not be aware of some of the risk characteristics associated with bonds.

The most important thing to take into account is the interest rate. The Federal Reserve (also known as the Fed) meets every 6-8 weeks to evaluate the health of the economy. At each meeting, the Fed renders a decision regarding interest rates.

If inflation is rising, the Fed will need to raise interest rates to tighten the money supply. If inflation is moderate or contained, the Fed will likely leave rates unchanged. However, if the economy is slowing down and there is very little inflation or maybe even deflation, then the Fed might decide to reduce interest rates to create a stimulus for economic growth.

The reason why you need to consider present and future interest rate levels is because as interest rates increase, bond prices go down, and vice versa. If you are able to hold your bond until maturity, then interest rate movements do not really matter, because you will redeem the principal upon redemption. But often, investors have to cash out their bonds well before the maturity date. If interest rates have moved up since you purchased the bond, and you sell it prior to maturity, then the bond will be worth less than your initial investment.

You should also be aware of the claim status of the bond you are buying. Claim status refers to your ability to liquidate your investment in the event the bond issuer goes bankrupt. If you are buying a government bond, such as a Treasury Bill, claim status is irrelevant, because the odds of the Federal Government going bankrupt are slim and none.

If you are buying a corporate bond, however, there is always a chance that the issuer could go out of business. In the event of liquidation, bondholders are given priority over stockholders. However, there are often different classes of bondholders. Senior note holders can often claim against certain kinds of physical collateral in the event of bankruptcy, such as equipment (computers, machines, etc.). Regular bondholders can not always claim against physically collateral, and are next in line after the senior note holders.

Next, you should always check the three main features of the bond you are buying; the coupon rate, the maturity date, and the call provisions. The coupon rate is the interest rate. Most bonds pay an interest rate semiannually or annually. The maturity date is the date that the bond will be redeemed by the issuer; simply put, the maturity date is when the company must pay back to you the principal you loaned to them. The call provisions are the rights of the issuer to buy back your bond prior to maturity. Some bonds are non-callable, while others are callable, meaning that the company can buy your bond back before maturity, usually at a higher price than what you paid.

Finally, you should also understand that if economic conditions become more favorable after you a buy a bond, and interest rates start to go down again, the issuer will likely issue a lot more bonds to take advantage of the low interest rates, and will use the proceeds to try to buy back any callable bonds it issued previously. So, when interest rates go down, there is an increasing likelihood that your bond will be redeemed prior to maturity, if in fact the bond is callable.

You should invest in bonds. However, you should also take into account the risk factors we have covered. Your portfolio should contain a mix of corporate, federal, municipal, and even junk bonds (there is always a default risk associated with junk bonds, but they pay a huge interest rate). Talk to your broker about diversifying the kinds of bonds in your portfolio and you will reduce your overall risk and maximize your return.

Jim Pretin is the owner of http://www.forms4free.com, a service that helps programmers make free HTML forms.

If you are new to investing perhaps you are not familiar with bonds. Before you get started, you need to understand some of the risks associated with bond investing. Most people assume that all interest-bearing securities are completely risk free, but this is not the case. Even if you know a lot about investing, you may not be aware of some of the risk characteristics associated with bonds.

The most important thing to take into account is the interest rate. The Federal Reserve (also known as the Fed) meets every 6-8 weeks to evaluate the health of the economy. At each meeting, the Fed renders a decision regarding interest rates.

If inflation is rising, the Fed will need to raise interest rates to tighten the money supply. If inflation is moderate or contained, the Fed will likely leave rates unchanged. However, if the economy is slowing down and there is very little inflation or maybe even deflation, then the Fed might decide to reduce interest rates to create a stimulus for economic growth.

The reason why you need to consider present and future interest rate levels is because as interest rates increase, bond prices go down, and vice versa. If you are able to hold your bond until maturity, then interest rate movements do not really matter, because you will redeem the principal upon redemption. But often, investors have to cash out their bonds well before the maturity date. If interest rates have moved up since you purchased the bond, and you sell it prior to maturity, then the bond will be worth less than your initial investment.

You should also be aware of the claim status of the bond you are buying. Claim status refers to your ability to liquidate your investment in the event the bond issuer goes bankrupt. If you are buying a government bond, such as a Treasury Bill, claim status is irrelevant, because the odds of the Federal Government going bankrupt are slim and none.

If you are buying a corporate bond, however, there is always a chance that the issuer could go out of business. In the event of liquidation, bondholders are given priority over stockholders. However, there are often different classes of bondholders. Senior note holders can often claim against certain kinds of physical collateral in the event of bankruptcy, such as equipment (computers, machines, etc.). Regular bondholders can not always claim against physically collateral, and are next in line after the senior note holders.

Next, you should always check the three main features of the bond you are buying; the coupon rate, the maturity date, and the call provisions. The coupon rate is the interest rate. Most bonds pay an interest rate semiannually or annually. The maturity date is the date that the bond will be redeemed by the issuer; simply put, the maturity date is when the company must pay back to you the principal you loaned to them. The call provisions are the rights of the issuer to buy back your bond prior to maturity. Some bonds are non-callable, while others are callable, meaning that the company can buy your bond back before maturity, usually at a higher price than what you paid.

Finally, you should also understand that if economic conditions become more favorable after you a buy a bond, and interest rates start to go down again, the issuer will likely issue a lot more bonds to take advantage of the low interest rates, and will use the proceeds to try to buy back any callable bonds it issued previously. So, when interest rates go down, there is an increasing likelihood that your bond will be redeemed prior to maturity, if in fact the bond is callable.

You should invest in bonds. However, you should also take into account the risk factors we have covered. Your portfolio should contain a mix of corporate, federal, municipal, and even junk bonds (there is always a default risk associated with junk bonds, but they pay a huge interest rate). Talk to your broker about diversifying the kinds of bonds in your portfolio and you will reduce your overall risk and maximize your return.

Jim Pretin is the owner of http://www.healthpalace.net/penisenlargement, an online directory for herbal products