helpmycreditreport.com

Direct stocks have always been an extremely attractive investment option for numerous reasons. However, with numerous market down turns through history, individuals have always questioned the so-called great investment vessel that is direct stocks. We have listed below some of the advantages and disadvantages of investing in direct stocks.

Invest In Stocks – Advantages

Some of the advantages of investing in stocks are:

1. Capital Appreciation: One major reason for holding direct shares is “Capital Growth / Appreciation”. Over the years shares have know to exhibit great capital growth with the increase in share prices. In addition to this corporations and companies and also sometimes issue their share holders with what is known as a “Bonus Issue” In this case, instead of paying individuals dividends, the company issues them with additional shares at no extra cost. This leads to increase in share holding of investors. Another way in which shares show capital appreciation is by a “rights issue”. In this case the company gives their existing share holders the right to purchase shares in accordance with their existing holdings. This offer is made to existing share holder directly and they do not need to go through a broker thus saving on transaction and brokerage costs.
2. Dividends: This is a major plus for direct shares. A regular income stream though dividends for shareholders is what makes investing in shares very attractive. Shareholders also have the option to chose whether they want their dividends paid directly to them or whether they want to re-invest those dividends into the buying of additional stocks.
3. Transaction Ease: Owing to the fact that there is an extremely developed secondary market for shares, it is very easy to buy and sell shares. Individuals do not have to wait to for a company to issue new shares. They cam readily buy or sell these shares in various financial markets. In addition it is very easy to liquidate shares and convert them back into cash should you wish to do so.
4. Diversification: Shares are a great way to diversify your existing portfolio. For instance if you are a growth investor you would like to have as much as 33 percent of your portfolio invested in direct shares. Shares provide the steady growth element and diversification aspect to a portfolio.

Disadvantages On Investment In Stocks

While the advantages of investing in shares outweigh the disadvantages, there are certain disadvantages none-the-less. For starters, the prices of shares can b extremely volatile. For one, if the management of a company makes one bad business decision, it could mean that the value of the stock would fall. In some horrible situations this could lead to a company becoming bankrupt and the shares of that company becoming worthless. In addition to this stocks are susceptible to various market and geo-political risks which could also lead to the devaluing of a company’s shares.

While markets risks and company risks are some of the major disadvantages of investing in stocks another disadvantage is transaction cots associated with shares. Brokerage and transactions costs could sometimes be so high that they actually eat into any profits made by you on the buying or selling of shares.

These are some of the major advantages and disadvantages on investing in stocks.

References:

1. Advantages and Disadvantages of Investing in Stocks – OTC NYSE stock tips

Continue Reading

Some of the biggest names in the Fortune 500 list such as Dow Chemical, Pfizer and GE cut their dividend payouts this year. To give you an idea, the market has seen about a $48 billion cut in dividend payouts. Does this mean that consumers should start panicking? We think not. Historically it has been noticed that companies which have paid dividend through market down turns have returned on average about 9% plus in comparison to the 6.8 percent of the S&P 500. The question that remains about buying stocks is how do you find high yield dividend stock and how do you identify them. Listed below are few features you may want to look out for.

Identifying Dividend Yielding Stock

When it comes down identifying high yield stock it may be beneficial to look at, what is known as the “Coverage” ratio. This is calculated by taking the earnings per share dividend and dividing it by the dividend per share. Usually with regard to the coverage ratio, a figure higher than two is considered good. A lot of fund manager and industry analysts swear by this philosophy. In addition to this is the usual judging of a stock by taking into consideration its dividend yield to it’s share price. When calculating this take the dividends paid by the share over the last 12 months and divide it by the current share price.

Yield Stock Bargains In The Market

A lot of investors often ask the question can dividend yield stocks be used to identify a stock market bargain, and the answer is an unequivocated “YES”. Let us put his in perspective, assume that a share has a total paid dividend of $2 in the last 12 months and it’s current price is $80, therefore the yield is 2/80 or 2.5%. However if the price rises to $82 the yield will fall to 2/82 or 2.43%. Of course the opposite will happen if the price falls. Come to think of the reason why dividend yield stocks can help you identify a bargain is owing to the simple reason that the yield is usually high if the price of the share is low. This reflect the outlook of management who feel that they do not need to alter their payout policy as their outlook to the future is positive.

High Yield Stocks & Dogs Of The Dow

This theory was popularized by Michael O’Higgins in the year 1991, represents a theory that the highest yielding stocks in the Dow are representative of the best bargains available in the market. This is owing to the above stated facts that the management of these companies feel that they are in a good position and do not need to alter their dividend payouts as their outlooks remain positive. In regards to “Dogs of the Dow”, there is an entire investment strategy dedicated to this theory. In this strategy you buy the top 10 dividen yielding stocks for a financial years and then after holding them for one year sell them and replace them with the top 10 stocks for that year. This has been a very popular investment model with active investors and asset-allocators.

As with any investment process it is essential to consider your risk tolerance and do ample research to ensure that you are comfortable with any investment decisions you might be making. While there are a lot of stocks in the market which appear to be yield stocks it might be beneficial to conduct both fundamental and technical analysis prior to settling on the investments you feel would work for you.

Reference:

1. Dividends for the long run – CNN Money

Continue Reading

With the financial markets starting to show signs of recovery, stocks are still relatively cheaper than what they were when the markets went in to free-fall. Owning and investing in stocks is quite the same as being a business owner, only without the fuss and hassle of having to show up to work. With a bit of financial prowess and research you could make your money work for your while your sit back and enjoy the rewards in the form of dividend checks. While this might sound a little far-fetched, it is in fact a closer reality than you might think.

Investment in Stocks: Creating Savings

First and foremost never start stocks investments on borrowed money. The golden rule to investing in stocks is start small, but start with your own funds. Try to ensure that you have got yourself a property first. Following this, make sure that you have sufficient savings and sufficient investable funds. The reason we recommend this is owing to the fact that as with any investment, there is a certain risk factor involved. You would not want to jeopardize your savings by using them or by using money you have saved up for buying a property. When you have crossed the first two milestones, then it is time to enter investment markets.

Stock Market Investments: Gather Information

One thing that separates a successful investor from a not-so-successful investor is the level of information or knowledge each possess. There are numerous websites, online publications, research houses, blogs and forums online that could arm you with formidable ammunition as far as investing knowledge and market news goes. You need to look out for what stocks are performing well and which stocks have been constantly declining. You need to know which stocks investments are bargains based on their yield to price or which stocks are currently overpriced etc.

Investment in Stocks: Start With A Small Yet Solid Portfolio

If it is your first time investing in stocks then we recommend staring small. It is always better to find your feet first prior to taking a big leap. Star by buying blue chip stocks. They are often fairly priced and are pretty consistent with returns. This is a good way to start. Having found a little comfort in investing in stocks you  could progress to investing in international shares and the on to small company shares and so on and so forth.

Budgeting For Your Stock Market Investments

Just as with any expense, if you are serious about your investment portfolio, make sure that you budget for your stock investment expenditure. In addition to this try and keep your investing activities systematic and goal oriented. If your investing becomes haphazard or irregular, it is possible for you to lose out on market information or lose out on price bargain of stocks and shares.

Investment in Stocks: Getting Professional Help

As your stocks investments portfolio starts to grow and get larger, it is more susceptible to market risk and it might need to be re-weighted or re-balanced. This in simple terms means that you may be over-exposed to domestic equity or international stocks and the balance of your portfolio may need to be adjusted, this is where the advice of a professional stock broker or financial planner could be invaluable.

These are some of the basics steps an individual should while getting started on investing in stocks.

References:

1. Stock Basics – Investopedia

Continue Reading