Stock Market Today
Stock Market Today
The stock market today is different in many ways from previous years, yet in the most basic ways, it is the same as it’s been for many decades.
The exciting part is that with the advent of the internet, it is now very easy to access critical data to help you make hopefully smart, efficient, and profitable decisions with regard to your stock investments.
You can do your own research on public companies right online, anytime, day or night. You have access to all of a company’s data, to help you perform fundamental analysis, as well as technical analysis.
Fundamental analysis includes evaluating a company’s financial information, such as earnings, debt, profits, revenues, and the like.
Technical analysis is the study of price charts.
Technical analysis is a perspective of a company based on charts. Most charts are based on the stock price, and can be as specific as minute by minute charts, and as general as a chart showing the last 20 years or more of stock prices.
There are literally hundreds of different criteria on companies that is analyzed by both professionals in the business, as well as private investors looking to make money in the market.
There is software that combines much of this criteria, and shows signals for buying, and selling when this combination of predetermined, specific criteria is met.
Also, you have the ability to purchase stock much more quickly, and for greatly discounted commissions compared to what was available even a few decades ago.
No longer is it necessary to hold paper stock certificates, or is it needed to bother with excruciatingly slow snail mail to fill out forms, and transmit payments to buy stock, and provide other paperwork.
There are some exceptions to this rule, but if so, it is usually only for the initial paperwork, and transactions, and then the subsequent communications can be done over the internet.
The Basics
A company must offer a portion of it’s company to the public in order to be traded, or have stock bought or sold on it. This is called going public. It is initiated by an Initial Public Offering, otherwise known as an IPO.
An Initial Public Offering is also known as an IPO.
Why would a company want to do this? Companies go public in order to raise capital or funds. They use these funds for various purposes, such as to pay down debt, to make capital improvements, buy equipment, or to expand operations.
Going public is also another avenue for making money for the principals or management of the company. By owning stock in their own company, they can participate in it’s success when the price of the stock goes up. They are also, of course, subject to losing money if the stock price dips.
Other reasons to offer stock might include, to increase research and development, to hire employees, to start or increase an online presence, or any of many different reasons that are determined to improve the firm in one way or another.
The stock buyer, as a result, gets to participate in the goings on of the company. The more stock a person holds in a given company, the more influence that stock holder has in the company decisions.
Stock holder meetings are held about once a year.
Stock holder meetings are held annually by most companies, and stock holders can attend and become involved in various changes, and proposals of the company’s business by voting on the various proposals.
It is also possible for stock holders to participate by proxy without being present at the stock holder meetings.
Stock Prices
How is a company’s stock price determined? There are many factors that make up a company’s stock price. Initially, for the IPO or Initial Public Offering, the price will be set by the public’s opinion of the business prospects or business outlook of the company.
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What business is this company in? Does it have in demand products? Do they fill a need? What is it’s business plan? Who are the competitors?
Are the owners/management of the company known to be competent in their field? Are they well financed? Is the legal landscape smooth, or are there potential liability issues with the company’s business?
Many factors determine stock prices.
Is this IPO well advertised? Does the public know about it? Will the demand for it push the stock price up, or lack of it force it to a low level? All of these factors, and many more will set the beginning price of a stock.
Once the first price is set, and the stock takes it’s place on one of the various stock exchanges, more factors come into play that will affect the price of the stock.
Some of these factors are: What business sector is this company in? How is the sector performing? What is the state of the economy that the company is in? Is it a healthy economy, or is it less healthy, or is it in a status quo economic range?
What are the company’s prospects for growth? Can it or does it benefit from it’s website, and online business? Does it have potential to reach other country’s markets?
Will it be profitable enough to declare a dividend? If so, how much of a dividend will it pay out? How quickly will it have strong earnings? Will the earnings exceed the price of the stock?
What is the Federal Reserve Bank doing? Are they raising interest rates? Are they easing interest rates? Are they making it more difficult for banks to borrow money from them? Are they adding money to the supply?
The political climate of the country can affect stock prices.
What is the political climate of the country that the company is headquartered in? Is there unrest? Is it war time or peace time? Are the leaders of the country respected? How is the country perceived by the rest of the world?
How much market share does the company enjoy? What are it’s prospects to gain market share? What is the opinion of stock brokers, and other market pros about the company, it’s financial outlook, and it’s stock?
Are they recommending it, and fueling it’s growth, or are they telling their customers, and the public to stay away from it, or do they taking a neutral stance towards it?
Dividend Stocks
Dividend stocks allow for growth, and profit.
I love dividend stocks. If you are in the stock market, and you don’t own dividend stocks, you need to take another look.
What are dividend stocks? These are stocks that whose company has declared a dividend or a periodic payout of profits to stockholders of record.
The payout percentage of the stock price ranges normally from 1% to about 15% yearly. The dividends are usually paid quarterly, and if you own enough shares, can be quite significant.
These dividends can fluctuate, depending on the company. Generally speaking however, the dividends of most companies increase or decrease gradually.
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DRIP Stocks
The best dividend stocks to own for the long term, in my humble opinion, are DRIP stocks. DRIP stands for dividend reinvestment plan.
Many companies allow for the dividends of their stocks to be reinvested automatically. This reinvestment purchases more shares of the companies stock based on the amount of the dividend reinvestment.
You will rest easier with DRIP stocks.
Most companies allow for the entire dividend to be reinvested, or a portion or percentage of it. If you take a partial payout, and leave the rest to be reinvested, you can realize an income stream, and theoretically at least, continue to grow your position in the stock.
And, oh by the way, when you retire, you will need an income stream. As you probably know, Social Security does not typically provide much income for retirement. DRIP stocks give you an opportunity to increase the amount of income for your retirement.
Many companies also allow for very little if any fees to be charged for this dividend reinvestment, leaving a larger amount of money to buy more shares.
A small number of companies also allow for their shares to be purchased at a discount, normally 3%-5% of the current stock price.
I am sure that you know people that own stocks that are constantly agonizing over the wild price swings in their stocks. One day the stock is up, and they are happy. The next day the stock is down, and they are unhappy.
If they have large positions in these stocks, they may not even be able to sleep at night. What a miserable way to invest your money, and live your life!
DRIP stocks can help you get more enjoyment from retirement.
With DRIP stocks, since the dividends are automatically reinvested for you, you will always increase the amount of shares of stock you own in the company, as long as you don’t sell any of the stock.
You won’t need to concern yourself as much with the price of the stock, since you will have more shares regardless of the share price. This compounding effect can greatly increase your wealth over a period of many years.
You can also add additional investments to buy more stock in the DRIP to increase your position further.
The are only a few negatives to the DRIP way of investing in stocks. If, for instance, you want to liquidate your position, that is to sell your stock, it may take many days or weeks before you will see your proceeds.
By the time your order to sell is actually done, the price of the stock may have changed, either up or down.
Some companies or the stock transfer companies they utilize for their DRIP programs, will buy and sell their stock at predetermined dates. Depending on when you place your order, this could be days, or weeks before it is accomplished.
Sometimes also, a company will decrease or eliminate their dividend. If this happens, it is time to consider selling your position, and buying in another position in a different company that offers a DRIP.
It is a good idea to monitor the stock activity, and the company’s financials, just in case. The stress level of owning DRIP stocks is far less than owning shares of most other stocks in almost every case.
You will certainly be able to sleep better at night, knowing that your DRIP stocks will be increasing your position without your having to do anything for it.
The dividends are taxable when they are paid out, regardless of whether you reinvest them, or take them as income.
Time is of the essence when investing for the long term.
The longer time horizon you have for investing, the more attractive the DRIP strategy can be. If, for instance, you are a young person in your 20’s, 30’s, or 40’s, if you start investing in DRIPs, use the full reinvestment option, and don’t take any money out along the way, by the time you are ready to retire, you should have a nice large nest egg built up.
At this point, you can take the entire dividend as an income stream, or part of the dividend as an income stream, and keep some of the dividend buying more stock, and continue to increase your principal.
Even if you are in your 50’s or 60’s, if you start investing in DRIPs, add to them periodically, you can have a nice amount of stock income to draw from when you retire.
If you don’t need the income when you retire, you of course could opt to continue to reinvest the entire dividend, and grow your positions.
I believe DRIP stocks to be the safest, most effective way to invest in the stock market, especially if you have a long term time horizon.
If you are a person that lives for the high blood pressure, exciting world of wild price swings, and quick gains and losses, DRIP investing may not be for you.
Might I suggest commodity/futures investing.
But, if you want a relatively safe and reliable way to grow your retirement nest egg. And, if you want to be able to turn that nest egg into a significant income stream come retirement age, while still maintaining the principal, then I strongly suggest you take a serious look at DRIP investing.
The stock market today offers many opportunities safe, effective investing. It can also be a minefield of disaster, if you attempt to negotiate it without knowledge, and a trustworthy broker.
By concentrating on dividend stocks, and with DRIPs, dividend reinvestment plans, you can greatly increase your odds of success, and, at the same time, minimize your chances of losing money.
