In the early 1900s Wall Street and the New York stock market were very visible icons of burgeoning American power and influence. Although the average working family was not directly involved in the stock market as it is today, Wall Street was still news, and its often colorful characters, known as "Wall Street operators" at the time, were the main fodder for the nation’s gossip columns and notorious weekly magazines.

W.D. Gann was such a character, and one of the few whose name remains part of the Wall Street legend even today. Gann became a public figure after giving an interview in 1909 to the then leading Wall Street publication, Ticker and Investment Digest. As an historical aside the interviewer was Richard D. Wyckoff who in the following years became himself a famous Wall Street operator and stock market author.

Perhaps the reason the legend of W.D. Gann has endured was revealed in that 1909 interview. As Wyckoff said in his reporting "It appears to be a fact Mr. W, D. Gann has developed an entirely new idea as to the principles governing stock market movements. He bases his operations upon certain natural laws which, though existing since the world began, have only in recent years been subjected to the will of man and added to the list of so-called modern discoveries."

In that interview W.D. Gann spoke of natural laws and something he called the law vibration although he never specifically defined what he was referring to. W.D. Gann was a prolific researcher and writer. He published many stock market and commodities trading courses in his 40 year career on Wall Street. Obtuse prose is the hallmark of all Gann’s writing. He alludes to many things without ever defining a single thing. Perhaps that is the reason he remains as enigmatic a character today as the day he gave his interview to Wyckoff almost 100 years ago.

At least one of W.D. Gann’s ideas is easily understandable in the making even if not in its application. The Gann Wheel, what most people think of as the Square of Nine, is sometimes called a "Square Root Calculator" or a device that "Squares the Circle." This simple illustration may explain how and why these terms came about. You probably recognize that the illustration is just the first two rings of a Gann Wheel with the numeral "1" at the center.

3 4 5
2 1 6
9 8 7

Formatting limitations prevent going any further but you can see the pattern that could continue the progression to infinity. In Square of Nine parlance we say things like 4 is 90 degrees from 2. That makes sense only if you can visualize that this rectangular table of numbers is enclosed in a circle (or series of circles) of 360 degrees. In this case, the number 4 is 1/4 the way around the circle from the number 2, or 90 degrees in circumference from 2. In the same sense that we can say that 4 is 90 degrees from 2, we can say that 6 is 180 degrees from 2, or half way around the circle.

You will have to continue the progression for at least two more cycles on a separate piece of paper to follow this next example, but this is where it gets fun. The square root of 15 is 3.87. Add two to the square root of 15 and we get 5.87. Square 5.87 and we get 34.49 which rounds to 34. Now we know that adding two to the square root of a number and squaring that sum is the same thing as a 360 degree rotation up on the Gann Wheel. If "2" represents a 360 degree rotation then "1" represents a 180 degree rotation, "0.5" a 90 degree rotation, and so on. W.D. Gann tells us that 90 degrees in very important in the stock market. What he’s really saying is that adding and subtracting .5 (and exact multiples or proportions of .5) to the square root of a stock price and then squaring the result is very important!

If you spend even a little time experimenting with Gann Wheel math on some stock or commodities charts you will discover some interesting relationships. If it seems a bit confusing, do not fret. W.D. Gann spent 10 solid years developing his law of vibration and the next 40 devising ways to keep the last details his mystery.

(C) Peter Amaral. Read more about the enigmatic W.D. Gann and the fascinating Square of Nine.

Moving into the year 2007, many Americans soon realized the impact and new importance videos have become on the Internet. With the craze surrounding WebPages such as youtube, where new videos and ideas can be diffused throughout the Internet, it is apparent that video technology is going to become even more important in 2007. While such may be exemplified as a rudimentary analysis, because of such advancement in entertainment, there will be tremendous need for more storage for desktops, laptops, and even more mobile devices such as MP3 players who incorporate video technology. As a result, there will be remarkable opportunities for data storage devices such as produced by Western Digital Corporation (WDC) which will ultimately benefit its shareholders.

As stated by Yahoo! Finance, Western Digital Corporation is responsible for the “development, manufacture, and sale of hard disk drives worldwide.” In addition, its hard disk drives extends not only to computers in the form of both desktops and laptops but to more unconventional devices such as MP3 players, servers, USB drives, gaming systems, and even karaoke systems. With such a wide selection of available markets, during such a time of prosperity and innovation relative to the video playing field, there is a tremendous opportunity for Western Digital to continue and expand upon production to supply the growing demand of moving film entertainment. What is also intriguing about Western Digital’s operating means is its global presence around the world. Because Western Digital is a worldwide corporation, with liquidity spreading throughout the world, there is tremendous opportunity, with growing markets in China and India and a strong economic presence in already developed nations such as found in Europe, for the continued expansion of internet capabilities throughout these markets. Consequently, there will be continued high demand, especially with such prosperity, for margins and profits to increase dramatically relative to Western Digital’s production means. Both the worldwide independent affluence and a depreciating dollar will have strong, but positive, consequences relative to Western Digital’s financial analysis, and regardless of where the American economy descends or ascends to, Western Digital, if more innovation and expansion is played into its operations, will be a successful company because of its fundamentals.

Nevertheless, as I mention the potential for strong fundamentals, it is already apparent that Western Digital, relative to its competitors, provides figures which are extraordinary without future implications. With a 19% revenue growth margin (and a 22 dollar revenue per share ratio) in both of the last two years coupled with a 90% margin growth relative to earnings (EBIT) in 2006 after an already strong 30% earnings growth from 2004 to 2005, it is evident that Western Digital is not only producing at strong numbers as indicated by sales but finding new sources of income at the same time with lower costs of revenue as income from continued operations as found in the income statement had increased nearly 350% in the last fiscal year. Continuing, the strong revenue which has grown at dramatic rates for Western Digital has continued to add a stronger case to label this company as a value stock as unfortunately its share price has not done as well as could have hoped. With an enterprise value to revenue level of 0.84 over the last twelve months and a price to sales ratio of 0.99 over the same period, compared to industry competitor’s EMC’s respective numbers of 2.75 and 2.80 or Network Appliance’s even worse 5.65 and 6.14, it is clear, at least relative to revenue numbers, that Western Digital is undervalued in its industry. While arguments may be made that earnings and income should play more of a significant factor, it is evident that by comparing Western Digital’s forward P/E ratio of 9.41 and its 5 year PEG ratio of 0.94 to EMC’s respective 21.96 and 1.69 or Network Appliance’s 28.16 and 1.23 numbers, Western Digital proves to contest any argument illustrating that this company is not undervalued. In addition, Western Digital has a strong asset to liability percentage as illustrated by the current ratio of 1.7 and an enterprise value lower than its market value.

While such may not look that appealing when utilizing the adjusted price value model when the DTS is added in for M&A deals, for the common shareholder, it is much better for a company to have the luxury of being able to cover its liabilities with its assets if liquidation was required which cannot be argued the same for its competitors. In addition, as stated with the growing demand of larger storage capacities to hold the new video requirements, it is clear after looking at Western Digital’s EBITDA, a proxy of cash flow, over the past year that it has the capabilities to fund new capital expenditures to accommodate the growing changes illustrated by the technology sector. Thus, after examining the fundamentals and growing numbers as illustrated by Western Digital, compared to its rivals, it is completely evident that Western Digital, for one reason or another, is undervalued making it an excellent choice of purchase.

After looking at the fundamentals, one may wonder why Western Digital, with a beta of about 3 has only grown about 5.5% over the past 52 weeks while the S&P has grown nearly 10% during the same time. Others may also wonder why Deutsche Bank recently downgraded the stock from a buy to a hold. Truth be told, with a slowing economy in the United States, many are wondering if the percentage of revenue and sales accrued from America will hamper corporate earnings in the next year. However, after stating how the video explosion will continue to grow on the Internet and how foreign markets are eager to purchase hard disk drives for the growing demand in their respective countries, coupled with the fact that Western Digital has phenomenal fundamentals relative to its peers and its share price, I cannot find a reason to solidify the purpose of not purchasing shares of this stock.

While technical analysis is not favored to many Wall Street analysts, the share price of Western Digital has grown over five percent over the past year, over 100% over the past two years, and nearly 300% over the past five years. It’s true that 2006 has not been favorable to Western Digital as it has to other industry leaders and companies, but such should only solidify the argument that Western Digital is cheap compared to all other corporations. With most other industries peaking at their 52 week highs, ready for a negative correction if the economy falters, Western Digital, relative to its earnings, still has not met such status, but has the required fundamentals to due so. Looking more closely at the simple moving average (SMA) of 100 days of a one year chart, it seems that over the past few months, Western Digital has hit a support level of about 17 and is on a small upward climb on relatively high volume. Such should be a good indicator of how this company will perform, with all the other positive factors associated, in 2007.

Thus, after examining what this company does and its global presence, its fundamentals, and its technical upside, all the factors lead me to believe that this company is incredibly undervalued to both its industry and the rest of the market. It’s true that 2006 was not the greatest year for this company, despite having positive returns of equity over 52 weeks, but 2007, with the continued growing demand of its products around the world, will lead the argument of having Western Digital, because of its cheap price, producing numbers that will not only amaze its shareholders but bump this company to possible historical highs.

Dennis Biray presents advice on all kinds of topics ranging from finance and investing to fitness to sports. For more information email him at dbiray@gmail.com, or to view other articles written by him visit http://www.biraynetworks.co.nr

The debate between what a luxury good or service is relative to a normal good or service may seem at first glance to be a rudimentary one. However, such assessment is vital for a consumer related industry where economic conditions will affect how the certain good or service will perform and how corporate profits will shape out quarter after quarter. When examining the production of Royal Caribbean Cruises (RCL), an apparent claim is made that this company provides the service notable for affluent individuals. While such is a seemingly obvious deduction, because of such understanding, and because of such affluence in the global market coupled with a lag factor, companies like Royal Caribbean flourish under these economic conditions.

As obviously understood by its title, Royal Caribbean specializes in the service of providing entertainment to individuals in the form of cruises. In addition, since many of these cruises tend to be high in overall price, business will tend to do its best during times when consumers feel rich and optimistic. Usually such sentiment as provided occurs during times of strong economic growth, low unemployment, and rising wages which, luckily enough, is what the United State’s economy is observing right now. While there is some speculation that the economy is slowing because of problems relative to the housing and automobile industry, other economic data, such as the recent monthly jobs posting, indicates that the economy is still incredibly strong and still has strong momentum going into 2007. Such analysis coupled with a lower dollar, strong worldwide economic growth, and increases in imports and money flowing into the US economy absolutely illustrates that a company such as Royal Caribbean, for at least the short term should flourish earnings wise. Furthermore, because Royal Caribbean is a multinational corporation, and currencies in Europe and other developed nations continue to gain strength relative to the dollar, there is a strong potential for tourist activity to increase over the next year, and because of an unusually warm winter, much of such tourist activity will diffuse into services such as provided by Royal Caribbean. To make the situation even more appealing for investors still reluctant to purchase shares of this company, because Royal Caribbean is fairly dependent on the price of oil, with crude oil trading at its lowest levels in years, now, with the strong economic background, depreciating dollar, and global involvement, is the absolute best time to get involved with this company.

While the analysis provided above may seem lucrative and perfect for a company like Royal Caribbean to operate in, without a strong management team who will provide excellent fundamentals, such situation is meaningless. Fortunately for shareholders, the chairman and CEO, Richard Fain, operates a company which has performed extremely well over the past few years. Supporting revenue growth from the previous two fiscal years of 20% and 7% respectively in a chronological sequence coupled with earnings growth of 67% and 50% over the same years, Royal Caribbean continues to grow at a relatively strong rate and should provide reluctant investors with some assurance. Such strong top and bottom line fundamentals have also transcended to the equity side, relative to share price, in a process which illustrates how Royal Caribbean is a value company. With a trailing P/E ratio of about 16, which should decline to near 14 when looking at the next twelve months, relative to the industry’s (General Entertainment) P/E ratio of about 26, there is evidence to support such a claim. Even when compared to similar companies who provide the same services, both the trailing and forward P/E ratio of Royal Caribbean are lower to competitor’s Carnival Corporation which stands with respective numbers of 18 and 17. In addition, Royal Caribbean has a P/S, Enterprise Value/Revenue, and Enterprise Value/EBIDTA ratio of about 1.8, 2.7, and 10.9 over the past twelve months which are all significantly lower when compared to rival Carnival’s respective numbers of 3.5, 4.1, and 13.6. These figures indicate, relative to share price, that Royal Caribbean has performed tremendously well and is undervalued when compared to the rest of the industry. It is true that the PEG is of Royal Caribbean is slightly higher at a five year level when compared to Carnival, but such is only marginal and subjective since the growth of a company has the strong potential to fluctuate during such a large period of time. Nevertheless, the one area that does concern me with Royal Caribbean’s fundamentals is its beta and 52 week share price change relative to the S&P. With a beta of about 1.75 and a gain of near 10% for the S&P in one year, a share price drop of 3.4% during that duration is not too encouraging. However, with a ROE of above 10%, which is higher than the industry’s figure, along with the undervalued share price given the strong fundamentals, there should be no problem in 2007, with the strong economic background, for Royal Caribbean to rally and surprise its shareholders with historic highs.

Therefore, because of the strong fundamentals and a perfect economic situation, investors should heed the given indicators and start investing in this company. To provide some simple technical analysis to add some extra cushion, while it’s true that Royal Caribbean did not have a stellar year in 2006, it is also true that in late August, on high volume, the share price of this company grew almost 9%. Ever since that day the share price has grown at a steady level with fundamentals that are still too high to what the share price should be now. Thus, on account of all the favorable indicators provided for this company, now would be an excellent time to revisit your portfolio and make the intelligent gesture of purchasing a few shares of this company.

Dennis Biray presents advice on all kinds of topics ranging from finance and investing to fitness to sports. For more information email him at dbiray@gmail.com, or to view other articles written by him visit http://www.biraynetworks.co.nr

When investing and dealing with the market, losses are inevitable on occasion. It may be a bitter pill for many to swallow but for those who are pros to the game it is a pill that should be expected along the way.

Many people point to Warren Buffett as an example of how well the ‘buy and hold’ method of investing works over the long term. So while it is easy to hear those words and accept them as a reasonable investment strategy, its another thing all together to actually act on when your stock has dropped 20% during a single trading session.

If you have experienced a bear market, you know how difficult it is to stick with your original investment strategy. Should you sell now and protect your capital? Should you wait? Will it bounce? If you sell now will it bounce? Should I sell half now? Your emotions will often try and get the best of you. A good trader will control their emotions, and assess the current situation. What was the reason for the drop? Was there news released? Has the environment in which you are now trading in changed?

The buy and hold strategy requires discipline. Nerves of steel are also helpful. Most investors who risked more than they should will often head for the hills, and often make bad investment decisions along the way. Often, they will sell when they should have held, or held when they should have sold. Gain control of your emotions, and react accordingly.

If you have done your due diligence on your investment before you bought, then you should be able to weather the storm over the long term. As a matter of fact, the drop may provide the perfect opportunity to add to your position. Its important to remember that the buy and hold strategy works best with large cap stocks.

During bear markets, its perfectly normal for normally stable stocks to start to sell off. There are plenty of legitimate reasons, including, those who need to liquidate their positions (to buy a house, pay off some bills, go on vacation etc), to those who are looking to take some profits off the table. If your investment is up 50%, you too may be tempted to take some money off the table and invest it in something else. Since we don’t know the motivation of the sellers, its something that we shouldn’t spend too much time trying to figure out. Unless there has been news out that changes the direction of the company, its a safe presumption that the share price should continue to move higher.

We’ve put together 3 fundamental truths that should help you to weather the storm.

First: what you hold in your portfolio is more than a piece of paper; it is a part of a business. You own a share in that business and as a result have a stake in the prosperity of that particular business. You will find that along the way many people simply invest in stocks simply because they are going up and hope to sell before they go down below the price at which they were purchased. These types of investors are more like ‘gamblers’ than investors because they invest nothing solid into their holdings. What goes up must come down and these types of investors run a very real risk of loosing money on these types of ventures.

In order to be truly successful as in investor you must do two things. First, you must not let emotion rule reason. Business and emotions are never a good combination. This is no different when it comes to investments in the stock market. Second, you must be able to evaluate the business and the potential of that business completely separately from the price of the stock. Remember that even the best company in the world is a lousy investment if you pay too much for the privilege.

Second: If you are trading with the big picture or the long haul in mind then you should look at a bear market and falling prices as a blessing rather than a curse. The only times these should profoundly effect you as a long term investor is when you have an immediate need for access to your money. If you look at it from this point of view, then declining prices only really indicate a good time to purchase more stock at a discounted price (more stock for the same money).

Whether your are trading for the short term or long term, the following tips should help to improve your returns:

If you have made a tidy profit, take it. Many investors get greedy and leave money on the table for much longer than they should, resulting in a lower profit, or sometimes, a loss. You may sell too early, but its better than selling late. Just like you can never predict a bottom, you cannot predict the top. Sometimes its better to be mostly right, than completely wrong. We got into this market to do better than the average stock market. If you get a gain of 35% or more in a short time, take the money and run. If you feel the need to stay in longer, consider selling at least half.

Do not trade with less than 500 - 1000 shares of a security. If your trading capital is thin, you’ll lose more money in commission than gain in successful trades.

Always focus on risk than return. This puts a limit on the amount of return you can expect. However this also allows you to sleep at night. This produces a comfort level. Never invest outside of your comfort level. If your portfolio drops 10%, are you still going to be able to sleep at night? No amount of return is worth sleepless night and friction caused by irritability just because you’re nervous about losing your shirt (or 10% of it) in a sudden drop. Don’t confuse this with a bad investment. A bad investment is a bad investment and should be sold immediately. However, if a 10% correction bothers you, invest in something less risky.

The biggest mistake stock market investor make is to make the current situation fit the one they bought the stock in. I’ve seen countless swing traders buy a stock based on the movements of the 15 minute charts, only to say well, the daily chart looks good. If the share price of your company is down, you need to reassess what is happening now. Based on the current due diligence, is this just a temporary move down, or is this part of a larger change in the trend of the share price.

There is plenty of money to be made investing in the stock market, however you will make more money if you invest without emotion, and assess the current situation to identify if the party is over, or if you have been presented with an amazing opportunity. Buy and hold does not mean buy now and look at your positions in 10 years. It means investing in solid companies, and assessing along the way. Sometimes, things change, and you have to be willing to accept the change. The successful investor can easily identify if the share price is down for a bad reason, or is down to present them with a perfect opportunity to add more shares.

Become a better investor today and learn more about stock market basics, the Alberta Oil Sands and stock market trading at 1source4stocks.com

Inflation is something that every investor should know about. The wise investor understands how inflation erodes their purchasing power and he or she takes steps to mitigate the damage.

Inflation is when the price of goods and services rises at a rapid rate. This destroys your purchasing power. Ever heard that a dime doesn’t go as far as it used to? That is due to inflation.

In theory, stocks are able to take handle the effects of inflation. This is because revenue and earnings usually increase at the same pace. However, for this to happen prices have to rise. Many companies face global competitors that offer different inflationary pressures, which prohibits the increase in prices at a rate to keep up with domestic inflation. In other words, not every company can afford to increase the prices for their goods and services.

When the economy is looking at inflation, the Fed usually increases interest rates to slow growth. This cools off the economy, but isn’t the best news for companies. Higher interest rates entice consumers to reduce spending, which takes money away from many sectors.

Stocks are often toted as good protection against inflation. In broadly diversified portfolios, stocks do help mitigate against inflation. If you invest everything you have in stocks, you are probably fairly protected against inflation. However, most diversified portfolios have cash and fixed income securities. These are vulnerable to inflation.

Let’s look at some numbers. Whenever you are thinking about your percentage of return, think about inflation as well. For example, if your stock investments give you an average annual return of 10% and the annual average inflation is 3%, the actual return you have from your money is really 7%. Think of it this way — what you are making now will actually buy less in the future — so you may need a little more than you anticipate. That is why you should factor in inflation.

But if you have a 6% bond and inflation is 8%, you have a negative return on your money.

I’m not saying don’t invest — but if you are nearing or already in retirement, inflation is something you should take seriously. While many people assume that all of your portfolio should be switched to fixed income securities, that might not be the right way to mitigate inflationary pressures on your portfolio. Even in a low inflation environment, it is often wise to keep a portion of your portfolio in stocks to counteract the loss of purchasing power.

Remember, there are stocks out there that are pretty good bets. Large, existing companies that have excellent and solid histories are good options. Think your blue chips here.

Don’t go out and change your portfolio right away. If you don’t see a problem, keep doing what you are already doing. But keep an eye on your portfolio. When planning your investment goals, keep inflation in mind. Keep an eye on your fixed-income securities. Plan ahead.

RateEmpire.com, http://www.RateEmpire.com, an internet consumer banking marketplace is a destination site of personal finance, investing, taxes and mortgage rates. RateEmpire.com provides mortgage guides and financial rates and information. RateEmpire.com also operates a financial portal #1 American Financial, found at http://www.1AmericanFinancial.com an online shopping portal #1 Shopping Online http://www.1ShoppingOnline.com

Nothing can seem quite so intimidating as the stock exchange; a hotbed of wealth and commerce all converging in one place; fortunes won and lost; businesses built; and the economic viability of a nation awaiting the results.

The stock exchange can mean a variety of things for a variety of people. To understand the stock exchange you must understand its role in today’s economy.

To begin with, the stock exchange offers corporations the opportunity to fund their operations and grow their business. The money made from investors who believe in the products and services offered by the business is used to finance growth; profits are passed onto the stock holders in the form of increased stock prices which they can use to realize a profit upon the sale of the stock. This opportunity – to be traded on the public stock market - is only offered to businesses of a certain size. It can mean the difference between viability and failure for a business.

Of course, the bigger picture of all this buying, selling, and growth of corporations is the impact it has on the greater economy. A strong economy is dependent upon a viable and thriving stock exchange and the same can be said for the other way around.

It can be enormously exciting to be involved in a process of this magnitude; to witness first-hand a nation’s financial axis. The stock exchange does not have to be a place of intimidation; rather it should be what it was intended to be – a place of opportunity.

To learn all you need to know about the stock exchange, go online. You’ll find tremendous resources at your disposal that will explain the complexities of the stock exchange while laying the groundwork for your possible participation.

If you decide to become a part of trading on the stock exchange you can either begin with online trading – a safe and minimally risky venture for novices – or see a professional stock broker who can guide you through the stock exchange with ease.

Either way, the stock exchange offers a bevy of opportunities for those looking to do something else with their money than having it sit in a bank account. Explore all your options and you’re sure to find that you’ll be comfortable in no time.

For easy to understand, in depth information about stocks visit our ezGuide 2 Stocks.

When looking at a full-service broker, you will need to decide between a commission-based or a fee-based. Which is right for you?

What type of stockbroker you should choose depends entirely on how you invest and your needs for service. There are two broad categories of brokers: full-service and discount brokers. There are also many types of brokers that fall in-between the two distinctions.

Discount brokers usually process your order at a low cost. They don’t do anything but process your orders. If you don’t need advice, research or other services, this is a good option for your trading needs.

However, if you do want all the extras — and will use them — a full-service broker may be the better choice. There are two types of full-service brokers: commission-based and fee-based. And as with everything else, there are some brokers that combine the two types of services into a hybrid arrangement.

The difference in cost between a discount broker and a commission-based, full-service broker can be significant. In fact, the prices can quite different even between two firms of the same kind. For example, one discount brokerage may charge $30 per trade, while another charges $5. Remember, you usually get what you pay for. The higher price usually means faster execution and better service. Shop around wisely and compare many different brokerage firms before you open an account.

Fee-based brokers charge their customers a flat fee for most services, including: research, recommendations, trades and other financial services. The fee and the services will vary from firm to firm.

Usually, the client is charged a percentage of his or her assets under management. This percentage is on a sliding scale depending on the size of the account. The more assets you have, the lower the percentage you are charged. Most brokers bill client accounts on a quarterly basis.

Investors that will use the research and recommendations of the brokerage often benefit from the full-service broker. Those that trade quite frequently and use the services regularly may benefit from a fee-based broker. One flat-fee will cover everything. The investor doesn’t have to worry about the cost of each individual trade or the use of each service.

Keep in mind that different brokers do not offer the same tools, research and perks to their customers. Some feature great Internet perks — allowing you to log on and print out an analysis of your portfolio, view your account balances and check your gains. Others won’t offer all the online features, but have excellent research that isn’t found elsewhere. Make sure you check out the execution time on trades.

Before you open an account, look at all of your options. If you are a heavy trader who likes all the extras, a fee-based trader may be right for you. Shop around and consider all of your options before you decide.

RateEmpire.com, http://www.RateEmpire.com, an internet consumer banking marketplace is a destination site of personal finance, investing, taxes and mortgage rates. RateEmpire.com provides mortgage guides and financial rates and information. RateEmpire.com also operates a financial portal #1 American Financial, found at http://www.1AmericanFinancial.com an online shopping portal #1 Shopping Online http://www.1ShoppingOnline.com

What exactly are dividends? You’ve heard that you can make money by investing in companies that pay dividends, but how does that work?

When companies make profits, they often distribute a portion of the profits to the shareholders. The company will retain a portion of the profits for future use. Some companies hold a large portion back while others are generous in their dividend payments — it depends on where the company is and how well it is doing financially.

Dividends are often in the form of cash, yet some companies issue stock instead. Stocks that have a good history of paying dividends are attractive to investors. These companies are solid and profitable, but often offer little growth potential in their stock. The dividend actually gives an investor a reason to purchase the stock.

The company is under no obligation to pay a dividend. There isn’t a preset amount that they must pay stockholders. The company board of directors determines the dividend amount. If the company is in financial trouble or facing an overhaul, the board has every option to forego the dividend. One of the warning signs that a company is in trouble is the elimination of dividend payments.

The dividend is set at a per share basis. For example, the board may decide on a $0.30 dividend per share. If you own 1,000 shares of stock, you will get a check for $500. If you own 100 shares of stock, you can expect a check for $50.

The board sets the dividend and announces when stockholders can expect checks at the declaration date. The ex-dividend date will also be announced at this time. The list of shareholders to receive the dividend will be set on the record date. If you want to get the dividend, you must own the stock before this date.

The ex-dividend date falls a couple of days before the record date. This date allows for the completion of pending transactions. If you want to own the stock and receive the dividend, you need to have your transaction through by this date. After the ex-dividend date, the market will discount the stock’s price because the dividend will no longer be available to buyers.

The payment date is when the company actually mails the checks. This usually occurs two weeks after the record date.

There are two types of dividends: fixed and variable. Fixed rate dividends go to the owners of preferred stock. Common stock holders receive variable dividends.

Dividends are a great way to make money and often offer a fairly steady income if the stocks are chosen wisely. Many investors find that buying stocks with a good history of dividend payments is good for the growth of their portfolios.

RateEmpire.com, http://www.RateEmpire.com, an internet consumer banking marketplace is a destination site of personal finance, investing, taxes and mortgage rates. RateEmpire.com provides mortgage guides and financial rates and information. RateEmpire.com also operates a financial portal #1 American Financial, found at http://www.1AmericanFinancial.com an online shopping portal #1 Shopping Online http://www.1ShoppingOnline.com

Investing is a complicated process that involves both skill and luck. Picking the best stock investments is difficult to do even if you have years of experience and training. However, if you educate yourself on your investing options as well as seek out professional advice you can take calculated risks that will hopefully pay off.

The first step in selecting the best stock investments for you is to learn what your options are. Your first option is to invest in the stock market. You can research and buy stocks online or your can trade stocks via a stock broker. Your second option is to invest in mutual funds. Mutual funds are a great way to diversify your investment portfolio without having to conduct a lot of research on several different investment products. Your third investment option is OTCBB investing.

OTCBB investments are equity securities that are not traded on the typical stock markets like the NASDAQ. Instead they are listed on special OTC bulletin boards. OTCBBs include a number of different types of investment products including: equity warrants, issues, DPPs, ADRs and units.

Your second step in selecting the best stock investments for you is to develop a stock investment strategy. There are several ways to do this. However, the most commons ways of developing a stock investment strategy is to solicit the help and advice of financial planners, family members, and close friends and colleagues. Some people also utilize investment texts and software to help them develop an investment strategy that will meet their investment and capital accumulation needs.

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When it comes to investing your money, you need to understand the relationship between risk and reward. When you assume the risk of investing in a stock, you anticipate a reward. The reward should be appropriate given the level of risk you are assuming.

However, the reward is just a potential. Due to the risk, there is no certainty.

You should still figure out what your reward should be on an investment. The good news is that it isn’t difficult to see if the reward and risk are in line with each other.

Start by determining the "risk-free" return that is currently available on the market. This is the baseline for your reward measurement. Most investors use US Treasury Bonds as their benchmark — partly because governments aren’t expected to default. For example, a risk-free return from a Treasury bond of 5% could be your baseline. Any investment that has risk must give you a better return than 5%.

The amount of return that you receive over your baseline of 5% is your risk premium. If you are looking at a stock with an expected return of 10%, you have a risk premium of 5% on that return.

Then you must decide if the premium is large enough for the risk associated with the particular stock. Keep in mind that the stock may not achieve the return you expect. It depends on the type of stock. Large-cap, well-established stocks are fairly solid bets. New small-cap stocks may have too much risk for the premium to justify them.

When it comes to the analysis you should perform on a stock before purchasing it, there are many tests that you should put the stock through. However, it is important to know whether or not the investment risk premium is worth the risk that the stock places on your portfolio.

You should also keep in mind that your rate of return on a stock is affected by inflation and taxes. When you calculate your rate of return, you must make sure that you are thorough in your calculation. What you are looking for is the real interest rate, not the nominal rate.

The nominal interest rate tells you the growth rate of your money. The real interest rate tells you how much your purchasing power is growing. Your money could increase without seeing an increase in your purchasing power.

For example, if your investment grows by 6% in one year and the rate of inflation for the year is 3%, your real rate of return is only 3% (6-3). If you are depending on dividend income or interest from bonds, you will be affected by the costs of inflations.

If you hold onto a stock, the gains can build. An $1,000 investment with a nominal rate of 8% can easily turn into a real rate of 2.6% after inflation and taxes. This is something to consider when planning your portfolio and investments.

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