What is it that causes a major or even a minor crash in the stock market? Or even anything else? Daily there are events that move the market slightly either up or down. By slightly I mean one or 2%. These fluctuations occur naturally within major and minor trends again either up or down. Currently the price of crude oil has an important role. Housing/interest rates another and consumer purchases a third. These are the big three forces today. They change with the times.

So far none of them has influenced the overall major upward trend of the past 3 years. From a place almost no one can fathom comes a completely strange event that causes a change in the major trend.

The assassination of a minor Arch Duke set the flames of war for World War One. Certainly this individual act was not the reason for that terrible conflagration. Big events such as Hitler’s invasion of France and Japan’s bombing of Pearl Harbor had many tiny acts of aggression not seen to have caused such flagrant behavior.

What might seem to be the major overt act has fingers of instability reaching into areas we cannot even imagine. An important event may not trigger anything and yet an insignificant one may reach deeply into the fabric of our economy starting ripples that become a tidal wave. The failure of a small bank in North Dakota might start a series of defaults that feeds upon itself ultimately tearing into the structure of the world banking community.

Suddenly, very suddenly, a financial crisis of dramatic proportions occurs with defaults in trillions of derivatives. All other phases of world economies are sucked into it and become part of the tumbling mass. It becomes a self-feeding event that is now an avalanche that none of the world’s great financial geniuses can stop. Markets collapse world wide.

Today we look to the 3 important avalanche potentials (oil, housing and the consumer) and wonder what is holding up the market. Yet it continues its upward bias. Some far off event may occur that lights the fuse of the next recession. And don’t think there will not be one. The markets of New York, Tokyo, London, Moscow and Beijing are all connected at the hip. Recessions are as sure as the sun in the morning and the moon at night.

An investor must guard his savings during these downward periods. A zero return on investment is better than a negative return. Do not think to be able to recognize the event that will turn the market down. That is almost impossible.

Learn to recognize the major market trend and be in cash or bonds when it turns.

Al Thomas’ book, "If It Doesn’t Go Up, Don’t Buy It!" has helped thousands of people make money and keep their profits with his simple 2-step method. Read the first chapter at http://www.mutualfundmagic.com and discover why he’s the man that Wall Street does not want you to know.

Copyright 2006 All rights reserved.

Have you been considering investing money in mutual funds but you don’t know where to start? With several thousand mutual funds to choose from it can be a daunting task. Do not let this discourage you from investing in mutual funds. Over time, the stock market and mutual funds have proven to be a good long term investment. Sure they can go down, but the longer your time frame, the more likely it is you can succeed with mutual funds.

First, you should know exactly what a mutual fund is. A mutual fund is a professionally managed portfolio of investments such as stocks and bonds. When you buy a mutual fund share you own a little piece of every investment in the mutual fund’s portfolio. If the value of these investments go up, the value of your mutual fund’s share price will go up. The opposite holds true as well. If the investments go down, the mutual fund’s price per share or NAV (Net Asset Value) will go down. The type of investments each mutual fund can invest in is specifically stated in the fund’s prospectus. For example, an equity fund will usually invest in stocks while a bond fund will invest in bonds. Of course, there are mixed funds that can invest in both stocks and bonds. The type of mutual fund that is best for you depends on factors such as your age, risk tolerance, and investment goals.

Next, you should learn the main two advantages of investing in mutual funds. The first one is diversification. If you are just getting started in investing, a mutual fund allows you to spread your risk over many companies. By doing this you are effectively decreasing the likelihood of making poor investment choices. For example, if you were to only pick one or two stocks and either of them performed poorly your portfolio would almost certainly decrease. However, in a mutual fund, you own a lot of different companies so it doesn’t matter that much if a few of the companies perform poorly. The other big advantage of a mutual fund is professional management. If you are unsure of what investments to buy yourself or simply don’t have the time to do the research it is very helpful to have a professional do that for you. Of course, this professional service is not free. Each year a management fee is charged to the mutual fund. The percentage of the fee charged can vary from fund to fund so make sure the fee charged is "in line" with other mutual funds.

Now that you know what a mutual fund is and the top reasons to buy a mutual fund, you need to decide what type of mutual fund to buy. Do you want to achieve growth, income, or both? Do you want to invest in U.S. markets, foreign markets, or both? Do you want to buy a no-load fund, class A shares, or class B shares? All of these questions should be considered before making your final decision.

For more free help with mutual funds and other financial products visit http://www.1stock1.com. Alan Reisch has worked as a licensed investment representative and has many years of personal investment experience.

Let’s say you want to buy some General Motors stock because you think it is going to go up. Your friend says don’t buy it because he thinks it is going to go down. Thinking about the same subject is contrary, but both can be wrong. It might only go sideways. To be contrary in the stock market is a good way to make money. Almost all brokers think alike. That is what they have been taught. My experience having hired many brokers when I owned a brokerage company I know this is a fact. Few know what they are doing or why they do it.

To be a successful investor you must learn to be contrary. You must learn to think outside the box.

When I was an exchange member and floor trader I was known as a contrarian. I always wanted to know where the majority of traders had their money. Not just 50% or 60% of them, but 80% or 90%. Then I would wait for a special technical indicator I used to tell me when the mass of traders started to change their minds so I could either sell or buy opposite to the crowd. Once that happens it was like an avalanche as the equity started down or climbed out of a big hole like a geyser.

I was not always right, but when I was wrong the loss was very small. That is another contrarian “secret” of professional traders. The pros run quickly to keep losses small whereas the average trader and most brokers will watch and wait for it to come back so they can get out “even”. That’s a loser’s philosophy.

How many investors you know have an exit strategy? All the contrarians do. They have gotten out of the box and know exactly when to run to protect their capital when they first buy or later as profits accumulate. They have a plan to keep the biggest part if the equity changes course to an opposite direction.

When everyone gets bullish it is time to examine your positions to think about your exit. When the market gets so bad and folks are cursing their brokers more than usual it is time to think about buying.

Wall Street has taught Joe Sixpack that he has to be invested all the time. They will never tell that cash is a position. If Joe had sold out the end of 2000 and been in a money market account for the next 2 years he would not have lost 40% to 60% or more of his money.

Today everyone is bullish on oil. It has dropped more than 20% yet the talking heads continue to tell you this is only a correction and it is going much higher, maybe $100. There are many trapped with losses mounting each day. Without an exit strategy it can only get worse.

Learn to think outside the box. Get away from crowd mentality. Be contrary.

Al Thomas’ book, "If It Doesn’t Go Up, Don’t Buy It!" has helped thousands of people make money and keep their profits with his simple 2-step method. Read the first chapter at http://www.mutualfundmagic.com and discover why he’s the man that Wall Street does not want you to know. Copyright 2006 All rights reserved.

Know the Company

Recently, a trader friend said to me, "You know, I look at all the different stocks I own, and sometimes it fun to find out what these companies actually do". What!! I almost fell off my chair. I said, "Are you kidding me? You just randomly bought stock in a company and you don’t even know how it makes money!? You are using your own money, right?" Of course, this attitude would still be irresponsible with another person’s money, but I was trying to give this guy an excuse.

He went on to tell me about this software he bought that just tells him what to buy. He admitted that he had marginal success with the software but he figured that he spent so much money on it that he might as well use it. The whole concept of blindly listening to other people is why many investors lose money in the market and never go back. You need to do the research.

The problem is not just trading software. The same problem exists for people who buy a stock because it happens to be in the news. The company looks interesting and the talking head on CNBC said they liked the company. That makes it a good investment, right? Not really. Actually, if the company is on CNBC and someone is telling me they like it, I become more skeptical. Being on CNBC doesn’t make a stock a bad investment, but it will definitely make me take a second look before pulling the trigger.

Don’t Invest Backwards

Many people invest backwards. They buy a stock and try to fit it into their investing strategy. This makes the investing world much more confusing than it has to be. You need to focus on your ultimate investment goals first and build your portfolios around them. This way, you can cut through some of the "noise" in the market. In the next lesson, I will teach you about keeping focus in your portfolios. When you have focus and goals you are trying to accomplish, the rest comes easy.

Sit down and think about your investing goals. Only then can you do the research. If you have your goals in mind, your investing research comes more into focus. You waste less time searching for investing ideas. Companies can then be identified more quickly as a buy or something to put on your watch list.

Use Consistent Research Methods

When it comes to the mechanics of stock research, you need to have one research method. Even if you use the SafelyWealthy.com strategy of two portfolios, you need to keep your research consistent. You can then separate your decisions based on your trading or investing goals.

Using the same method of research for each decision will make your investing and trading more consistent. If you have consistent investment decisions, you will not be forced to look back on a bad trade or a bad investment and sell. You will never wonder, "What was I thinking?". It will all be there in front of you.

I suggest you have a binder with all of the stocks you research. Each page should have your research on a particular stock. Even if it is not a buy when you look into it, you should keep your notes. You never know when it will be a buy and you don’t want to be caught doing research while others are making money. Even worse, you don’t want to buy without doing the research

Christopher T Yeager is an investment and banking industry professional. He has almost a decade of experience in the market as a representative and an individual investor. He is also the President and CEO of www.safelywealthy.com, a comprehensive investing and personal finance webiste. He also publishes the SafelyWealthy.com Stock Tip of the Week. In this Free weekly newsletter, Yeager recommends stocks that will move higher in the coming weeks for his subscribers.

As both Sony’s PS3 and Nintendo’s Wii will be released this month (November 2006), you might be interested in purchasing shares of this relatively new company, GameStop (GME) on the basis of increasing sales and revenue from selling these systems. While such a deduction may make sense for a fruitful appetite of purchasing shares, there may be some limitations to the success you may enjoy.

As GameStop will be releasing earnings in about two weeks, there is much questioning in terms of how earnings will perform with these new systems coming out in a relatively short time. While these factors will not be directly observed in this quarter’s report, there is a high chance that an increase in consumer consumption on products GameStop sells will rise dramatically over the next few months. Already selling out of pre-orders for these revolutionary gaming consoles, with the strong support of games available for these systems, along with a high price retailed, for at least the PS3, loyal gamers, whether they can truthfully afford the system or not, will not be hesitant to immediately purchase their respective console as soon as they can. What that means is that a company like GameStop will seem a tremendous boost in fundamentals because of large sales and purchases. Already looking at margin increases over the past year after Microsoft’s Xbox 360 released, GameStop has produced over a 70% increase in revenue which includes doubling its operating income. If such fundamentals grew at such high levels just based on one system release, imagine how both Nintendo’s Wii and Sony’s PS3 will be beneficial to this company.

While such may be a valid argument, other investors may say that since GameStop does not support the same P/E ratio that competitors such as Best Buy have and is trading at a record high, such may lead to an overvalued equity ready for a drop. Looking at this data, if no new video gaming consoles or gaming revolutions were to be instated during this time, I would completely agree with the notion of taking some profit off the board. However, because of the amazing hype for these consoles and tremendous opportunity for a growing gaming demographic, such an upgrade will only have positive effects on the share price. To provide proof for this statement, when looking at how GameStop shares were affected by the launch of the Xbox 360, GameStop’s share price rose almost 40% during that time period which includes Christmas numbers, sparking a tremendous rise. Now that we have two consoles to be released, targeting two different demographics, investors should see the share price rise even further, creating new record highs.

In addition to this, I would arguable say that GameStop is not only a buy in the short term but a buy in the long run as well. As video games continue to gain popularity over the television and movie industries, companies like GameStop will flourish to consecutive record highs for possibly decades. While such growth may not be a yearly 40% increase such as the one previously examined, with the continued growth of this gaming sector, and the inevitable release of new gaming systems, even with a cautiously high price, I would absolutely label GameStop as a strong buy.

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

There comes a time in almost every stock trader’s life when they entertain the idea of stock trading for a living.

Many of us look upon the life of a stock trader as one of great flexibility and freedom. We may see ourselves trading from some remote location or even our own private yacht.

Before we embrace the fantasy too much let’s embrace the facts. Stock trading for a living is a business and it should be run like one to be successful. Many of the same rules and levels of preparation which will make you successful in other types of businesses.

When you plan to trade stocks for a living this means that you must make enough profit over and above expenses to cover all of your day-to-day living expenses in everyday life.

Keep in mind that the money you make from stock trading will most likely not come in as regularly as the paycheck you are used to getting every other week. In fact, a successful stock trader may not make a profit for many months. This means the successful stock trader understands the more sporadic nature of profits from his stock trading business and has made the necessary adjustments in lifestyle to adjust to them.

This brings us to our next point…cash reserves. Cash reserves are important for those months when the business does not turn a profit even though the business may be very profitable overall. If you plan on stock trading for a living then having cash reserves is very important.

First you need sufficient working capital for your stock trading business. Second you need money to live on while you are growing your stock trading business.

Even before you concern yourself with working capital and living expenses you should have a proven method for generating a profit in the stock market. If you don’t have this none of the other factors will matter.

By honing your stock trading skills while you have the certain cash flow of your day job you will be able to think and act more objectively. Stock trading while under financial stress rarely if ever leads to anything but a disastrous conclusion.

Take your time, make your plan, and prepare yourself to be successful in stock trading.

To Your Stock Trading Success!

Whether you’re a beginner or a seasoned pro you’ll discover the best Stock Trading Strategy tips, tricks, and techniques as well as valuable tools, resources, and information at http://www.stock-trading.tradingknowhow.com

There was dancing in the streets, well, at least on the floor of the New York Stock Exchange last week when the Dow Jones Industrial Index closed at an all time high. The many cheerleaders on CNBC-TV were ecstatic screaming, “I told you so”. But what did it really tell us.

The DJIA or DOW as it is also called is composed of 30 stocks that actually represent about 25% of the value of the NYSE. That is very impressive and one of the main reasons this index is watched by so many the world over.

Caterpillar Tractor Company was $16 in the year 2000 and closed on October 2, 2006 at $65. The worst was Intel that dropped from $72 to $20. Many fell 50%. So what really happened? Only 9 of the 30 stocks made new highs that day – only 30%. No one on CNBC bothered to mention 21 stocks, 70%, failed to participate.

New highs were entered by American Express +3 points, Boeing +12, Caterpillar +49, Johnson & Johnson +30, Minnesota Mining & Manufacturing (MMM) + 33, Altria +55, Proctor & Gamble + 4, United Technology + 39 and Exxon + 25.

There is no point in listing all the losers. Three lost more than 50% from the 2000 high. How can this make a new meaningful high when the index shows 70% of the stockholders lost money?

Way back when before you were a gleam in Daddy’s eye (1896) when the original average created by Mr. Dow and Mr. Jones first appeared in the Wall Street Journal all you did was add up the price of all the stocks and divide to get the Index.

Stocks went up and dividends were issued and those darn stock splits played havoc with computing what the average was each day. There is no point in going into the complex details, but let’s look at how they get to the final index number.

Each stock in 1990 was added and multiplied by 2. Today each stock is added and multiplied by 8 to get the DOW number. If you add the closing prices of the DJIA stocks on October 3 it came to 1465.91. With the current multiplier of 8 makes a closing DOW Index of 11,727. A new high. Not really.

Every investor is encouraged to go on the Internet to www.bigcharts.com to look at a 10-year history of each of the 30 stocks. A comparison to the DJIA may be superimposed. It will shock most investors.

Don’t buy stock based on what the DOW is doing. You must do your own research for each issue before parting with your money.

Al Thomas’ book, "If It Doesn’t Go Up, Don’t Buy It!" has helped thousands of people make money and keep their profits with his simple 2-step method. Read the first chapter at http://www.mutualfundmagic.com and discover why he’s the man that Wall Street does not want you to know. Copyright 2006 All rights reserved.

So you have decided to buy a mutual fund but you are not sure what type of mutual fund to invest in. Well, let’s take a look at the different types of mutual funds you have to choose from. The three main categories of mutual funds are: Equity, Bond, and Mixed. Equity funds invest in stocks, bond fund invest in bonds, and mixed funds invest in both stocks and bonds.

While bond mutual funds can fill a specific need, the majority of funds are equity funds. Equity funds can be further classified into many different categories. I will explain the most common categories. A very popular type of mutual fund is an index fund. An index fund tries to closely match the holdings of a particular index such as the S&P 500, the Dow Jones, or the NASDAQ 100. The value of an index fund will move up and down with the index. For example, if you own a S&P 500 index fund and the S&P 500 goes up, your index mutual fund will increase in value. Conversely, if the index goes down, the value of your mutual fund shares go down.

Another popular type of mutual fund is a sector fund. This is similar to an index fund except it has a narrower focus. Specific types of sector mutual funds are utilities, natural resources, technology, biotech, pharmaceuticals, and energy. Basically, a sector mutual fund is a group of stocks from a specific industry. If your sector does well your mutual fund will do well. If your sector performs poorly, your mutual fund will suffer.

Equity mutual funds can also be broken into investment objective. The two most common classifications are growth funds and value funds. Growth mutual funds look to invest in companies that have shown consistent growth and are likely to continue to produce steady growth. Value mutual funds try to find bargain stocks or companies that are currently out of favor with investors but are very sound fundamentally and undervalued.

Yet another classification of mutual funds is based on stock size such as small cap, mid-cap, or large cap. While the exact classifications can differ, a small cap stock generally has less than 1 billion in market cap (the stock price x the number of shares outstanding) and a large cap stock has over 5 billion in market cap. A mid-cap stock is somewhere in between. Most large cap companies are well known companies such as GE, Exxon, or Microsoft. Small cap companies offer higher returns but they are also more risky.

Finally, mutual funds can be domestic, foreign, or international. An international fund is generally a combination of U.S. companies and foreign companies. Foreign mutual funds can be further classified into regions (Latin America, Asia) or country. While this isn’t a complete list of mutual fund types it should help explain many of the types and choices available to the mutual fund investor.

Alan Resich has a degree in finance, has worked as a licensed investment representative, and has several years of investment experience. He also operates http://www.1stock1.com, an investment information website.

First let’s understand what a fund of funds is as I seriously doubt your broker has ever told you about them. Why? Because it will take away from his commissions. A regular mutual fund is composed of stocks or bonds. An index funds such as the S&P500 is composed of 500 stocks while a sector fund might have only 20 or 30 stocks. Almost all mutual fund prices are figured at the close of the market which is the price the investor pays. Plus commission unless it is a no load fund. All smart investors only buy funds that do charge commission.

No load funds are as good as funds that charge commission. Do not believe anything a broker might tell you otherwise. All funds have expenses that include commissions the fund must pay when they buy or sell stock. There are management fees. They have overhead as does any business such as rent, heat, light, salaries and etcetera. Be careful of the etc.

Many mutual funds have recently added redemption fees. A redemption fee has a charge of as much as 2% if the investor sells before a certain time period such as 90 days to a year or more. This is one of the great rip-offs. They give you nonsense reasons for this charge, but the real reason is to keep you from selling their fund.

Mutual fund expenses usually run about 1.5% of the total amount of the fund each year. As a fund gets larger the expense ratio should become smaller, but it rarely does. Fund managers just increase expenses most of which goes into their pockets.

A fund of funds is a mutual fund that buys other mutual funds. Almost always they have a special arrangement so there is no commission or a reduced fee. Fund managers want all the money in their fund they can get as they are paid on the amount of money in the fund and not on performance. The average money manager makes about $300,000 whether he makes the investor money or not.

The type of fund an investor wants to buy is one that goes up. Unfortunately many funds do not. A smart investor sells the weak fund and switches to the strong funds. He never gets married to any fund because there is no such thing as a “good” fund. Even those with a good reputation have loss periods when the investor should either be in another fund or in a money market to protect his capital.

Brokers will tell their customers that funds of funds are no good because there are extra expenses the customer is paying for in each fund. They also talk about the extra hidden fees. Of course they are not going to tell the good points.

The fund of funds gives immediate diversification and it makes it simple for the investor. It is especially attractive for those who do not know which funds to buy or someone who does not have time to do research. It allows the small investor to diversify among hundreds of stocks and many sectors.

There are very few good fund of funds. Many investors like the concept of FUNDX which switches from poor performing funds to those going up. It is also a no loads fund which makes it doubly attractive so the investor won’t have to make changes from poor performing sectors to those becoming stronger. This is the only fund I know of that does this.

Any smart investor will investigate the fund of funds before committing to a regular mutual fund.

Al Thomas’ book, "If It Doesn’t Go Up, Don’t Buy It!" has helped thousands of people make money and keep their profits with his simple 2-step method. Read the first chapter at http://www.mutualfundmagic.com and discover why he’s the man that Wall Street does not want you to know. Copyright 2006 All rights reserved.

Due diligence, what is it? According to a definition on investorwords.com due diligence is the process of investigation, performed by investors, into the details of a potential investment, such as an examination of operations and management and the verification of material facts.

Sounds easy enough right? Then why don’t more of us actually employ due diligence prior to investing our hard earned money (or for the lucky ones, pocket change) into stocks. I mean, it must be a rather large issue if the BC Securities Commission is launching a whole public awareness campaign based on fraud and how to help investors avoid getting scammed, to read the press release click here http://www.bcsc.bc.ca/release.aspx?id=4398.

Investing on emotions….

It is so easy to get caught up in the hype, you see a stock rising and think, I must get in that and before you know it, you are along for the ride. What we seem to forget is that, what goes up, must (almost always) come down. The ride isn’t all that fun when you ride it both up and then right back down to where you bought it from. The important thing to remember is to try and find the reason behind the spike in price. Investing in a company simply because you like the name of it or the stock symbol reminds you of something special, isn’t really investing for the right reasons.

Now, how to execute that fancy due diligence stuff? Well, it really doesn’t take too much time out of your busy day and should make you feel better about your investments or maybe even scare you off from investing all together. Some easy steps to take to decide whether a company is worthy of your dollars may include:

Website – see if the company has a website and visit it. Do you like what you see, does it make you want to rush to your brokerage account and purchase shares or do you shudder at how ugly and outdated it is? Is it easy to navigate and find the information you are seeking? Is the contact information easy to find and accurate? Does it contain any information on the company’s management? In this day and age, not having a website may raise a red flag as this is the easiest way for any organization to communicate with its shareholders, both current and potential ones.

Contact the company – what does it hurt to drop them an email or if they have a toll free number, pick up the phone and give them a call. Does a human ever answer your call? Or do you just float around in the computer que wondering if anyone actually works there? Talking to the president of a company (or, more likely, somebody in investor relations) should give you a better idea of what the company is all about, what direction they are headed in and so on. One thing to keep in mind when communicating with a company though is beware of empty sales pitches and grand things coming out of someone’s mouth that may never come to fruition. Go with your gut feeling here, if something is saying this sounds too good to be true, odds are, it probably is.

Research the company – if there isn’t any information on the company’s financial statements or news releases on their website, visit Sedar to obtain this information. Take a look at the company’s most recent financial statements and those for even the last year perhaps and read their news releases. Doing this research should give you some sort of idea of where the company stands financially, any future plans they may have that will benefit (or hurt) the organization, what they’ve done over the past year or more, etc. Do you feel there is any potential or is the company headed down a road you don’t want to journey down?

Word of mouth – do you know of anyone who currently holds shares, or who has held shares in the company? Talking to them doesn’t hurt, but don’t forget to do your own research, don’t invest simply based on what someone else has to say, it’s very easy to get caught up in someone else’s enthusiasm, so it’s always good to take some time to do your own research.

Forums – there are a multitude of investor related forums/discussion boards on the Internet. Visiting these and asking questions of other forum members may be helpful to you, just remember the old adage, don’t believe everything you hear and only half of what you read.

Watch and learn – maybe track the stock for a while prior to investing, see if you notice any trends that you could capitalize on and how news tends to affect/not affect the stock price.

These are a few of the techniques that fall under the umbrella of due diligence, in my world anyways. Everyone has their own tactics they employ for investigating a potential investment opportunity. The important thing is to actually employ them, if you don’t you may be left holding the bag…the empty bag.

One must always remember there are no guarantees when it comes to investing in the stock market, no sure winners all the time, risk is there and always will be. Perhaps if you do your own due diligence, you will be able to avoid some of the losers, heck, you may even make some money on your investments and you can take all the credit.

*Any information contained in this article should not be construed as investment advice, simply the thoughts and opinions of the author.*

Jennifer Mycock & Branden Moskwa of Tradeopolis.com

Tradeopolis.com, your stock market trading and stock investing resource, with access to articles on Stock market trading and stock investing. Penny stocks to mutual fund investing, tips and secrets and all the latest hot press releases.

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