Archive for February, 2009

10th Feb 2009

Interpreting Stock Tables: What they Mean and Why you should Care



For the novice investor, stock tables can be intimidating.  You know they hold a lot of valuable information that can help you make a decision about a particular stock, but you may find it difficult to interpret the meaning of each number or why that number may be useful.  Here we hope to shed some light on some of the common types of data listed about a stock.

52-Week High

The 52-week high tells you the highest price a particular stock has sold for in the last 52 weeks.  You might want to look at this to determine where the stock is now in relation to where it was.  If it is at its all time high right now, think twice about sending a buy order.

52-Week Low

In contrast, the 52-week low gives you the lowest price that stock has sold for in the last 52 week period.  You may use this information to determine if the stock is bargain - or if it is tanking.

Name and Symbol

This one is obvious, but important.  The name of the company will be listed along with its ticker symbol.  That symbol will be your code to get information about the stock from numerous sources.  You’ll find it listed in the financial section of your newspaper.  You’ll use it when speaking with your broker.  You’ll type it into your favorite search engine to get last night’s close.  The stock’s symbol is your key.  Memorize it.

Dividend

A dividend is a payment made to owners of a stock.  Not all stocks pay dividends, so this is an important column to pay attention to.  The amount listed is the annual dividend as if you owned one share of that stock.

Volume

The volume number indicates how many shares of the stock in question were traded that day.  If this is your first time to look at a stocks table, the volume will not be very useful to you.  But over time, you will want to watch the volume to determine if the stock is tracking in higher or lower volumes than normal.  If, for instance, it is trading more heavily than normal, that may indicate concern among shareholders or an exciting announcement that may boost the companies profits.

Yield

The yield is simply the dividend divided by the stock price.  It is a percentage and calculated as if you were to buy stock that day.  This is of great importance to income investors.

P/E

The P/E value is an important one.  It is the ration between the stock price and the earnings of the company.  You would use this ratio to determine if the stock is a good value.  In a stock table, the P refers to Price or the cost of a single share of stock, while the E stands for Earnings or the companies reported earnings for the last four quarters.

Day last

Day last is simply the price at which the stock ended the day.  Additionally, there may be high or low values for the day in some publications.

Net Change

The difference between how the stock ended today versus how it ended yesterday is the net change.  You will use this to determine if it went up or down in the last trading session.

There may be other information listed along with these numbers, especially if you are viewing stock tables on the internet.

Stock tables are a vital tool to aid in your overall strategy for buying stocks.  It would benefit you to sit down with your morning newspaper or favorite finance website and go over the terms in this post while looking at the current days stock tables.

Posted by Posted by under Filed under Basics Comments 1 Comment »

03rd Feb 2009

Lessons from the Current Economic Crisis



With all of the media focused on the economy at the moment, it seems impossible not to feel some concern about our investments.  And while concern in some areas might be simply an overreaction, concern with your stock portfolio isn’t.  Just a few months ago, we were debating the virtues of a Roth IRA or how to properly execute a 401K Rollover.  Today, where stock investments are held is the least of our worries.  We are in a very real period of adjustment in the markets globally, and many companies are seeing their stock prices plummet.  Some would argue that we are merely seeing a correction on paper, which will eventually bounce back to previous levels when the markets stabilize.  Though it may be that stock prices will recover, what is your money doing for you in the mean time?  The answer: nothing good.

The period of time from the high value of your portfolio last year to the same value at which point the market does correct itself - that is a period of time when your money is not working for you.  It is not growing your net worth.  It is not paying you dividends (like it was).  It is not safe.  In fact, it is at massive risk.  Therefore, it is prudent that we take this moment, when our passions are engaged, to discover what we can learn from this massive market correction.

Lesson #1:  Stocks are not a replacement for Savings Accounts

When your money is invested in the stock market, it is still “in play” so to speak.  It is at the mercy of the market and the world economy.  If your money is in a FDIC insured bank, it is at least guaranteed safe up to the amount it is insured for, backed by the full faith and credit of the federal government.  Now you may say that faith in the federal government isn’t so great right now, and I wouldn’t disagree.  But the bottom line is that it would take the failure of the central U.S. government to risk your money in the bank, and if it happened that the federal government failed - your savings may be just one of many worries at the time.  Bottom line - if you may need that money to survive, don’t risk it in the stock market.  That’s what savings accounts are for.

Lesson #2:  Nothing lasts forever - Have an exit strategy

Remember the boom in the 90’s?  How ’bout the bust in the early years of this decade?  Everything ebbs and flows, runs in seasons - especially the stock market.  If there is a time of prosperity and recovery, there will inevitably be a period of loss and constriction.  After the losses at the turn of the century, heavily weighted in tech stocks, many investors returned to the market, buying stocks in force, scooping up “good deals” and driving the market back up.  And while there were some good deals, and many of us benefited in our 401Ks from the upsurge in value, it was inevitable that we would see another downturn sooner or later.  And it happened to be sooner than most thought.  Risky moves by investment banks and hedge funds, the real estate bubble bursting, and massive government expenditures on defense, created an unstable environment in all sectors.  Bottom Line:  If your going to get in the stock market, make sure you have a clear strategy for getting out when the time comes.

Lesson #3:  You should never have 100% of your investments in Stocks

You’ve heard it before - diversify, diversify, diversify.  Well, the problem is that many people diversify within just one investment type.  For instance, they may buy a good mix of tech, blue chip, pharmaceutical, and retail stocks.  That’s great - but they’re still all in STOCKS!  They may be protected from downturns in a sector of the economy.  But they aren’t protected if confidence in the economy itself is shaken.  Bottom Line:  Keep a good mix of stocks, bonds, commodities, metals, real estate holdings, etc.  Don’t put all of your eggs in any one basket.

Posted by Posted by under Filed under Lessons Comments No Comments »