Candlestick Trading Blog

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2)       The transferring of ownership to a living trust with a generic name.

3)       Recording a naked deed of trust

4)       Sale of the residence

Assets that are owned by a debtor through a legal entity are not deemed to be owned by the debtor due to the fact that legal entities have separate juridical existence. Keep in mind however, that if the debtor own assets through a corporation (shareholder), those shares of stock can be seized by the creditor, possibly giving them access to the corporation’s assets and control of the corporation!

Previously in this article there was information explaining the need for many investors to acquire an attorney when planning for asset protection. One reason for this is that there are asset protection scams that are offered to investors, that an attorney will be able to catch. The most widespread scam today is the Pure Trust Scam. This involves a non-existing form of a trust that goes by a variety of aliases some of which include, the Patriot Trust, the Common Law Trust, the Foreign Common Law Trust Organization, to name a few. The purpose of this method is to hide the existence of the trust and has been deemed by the courts to be an illegal purpose of tax evasion, among other things. No matter how good it sounds, talk to your attorney to find out the legal implications and investing advice. This is not a road you want to go down.

To understand the concept of asset protection, read up on the definition of asset allocation, asset classes, and take tutorials for additional help with investing.  Once you have built a strong and diversified portfolio, be sure you protect it!

The first stock picking tip is the need to understand fundamental analysis. This type of stock analysis looks at key ratios of a company to determine its financial health thus providing some idea as to the value of that company’s stock. This stock picking strategy is used in combination with other strategies or can be used alone for evaluation of stock. Another stock picking tip includes choosing stocks with reasonable share prices.  You can do this by utilizing the price to earnings ratio.  The formula used to attain this ratio is the recent share price divided by the last 12 months earnings per share. This technique is useful because it can predict shares with strong earnings growth.

Perhaps the most important and commonly noted stock picking tip is portfolio diversification.  This is by far your best protection again risk.  Investing in multiple investment options instead of choosing to place all of your investments in only one area will serve you very well. Thus you should avoid investing more than 20% of your funds into any one industry.

Human emotion and how to control it is also very important when participating in stock picking.  Stocks do not always do what you anticipate and emotions can change unpredictably and quickly. Fear and greed is what keeps most investors from making profits in the markets and tends to happen once confidence is lost. To prevent this it is imperative that you develop a trading plan and you do your research.  Due diligence is key to stock picking.

Some investors advise that when participating in stock picking, investors should stay away from cheap stocks. Cheap stocks are indicated by a low price to sales ratio. Typically good investors do not jump on cheap stocks, but they take the time to recognize what the fair price for a specific stock is. These investors do not rush into overpaying for stocks either. Good investors look at the company and other factors when determining the price rather than simply jumping on cheap stocks.

Successful stock picking means that you obviously want to pick those stocks that are also profitable. It is stated quite simply that profits drive share prices. How companies drive growth is also important in that you want to choose a company that does not borrow or sell more shares, but rather finances growth from profits.  A company cannot fund growth more than its return on equity, so look for companies that have at least 15% return on equity. Most investors will look for at least a 15% expected earnings growth, and more.  The earnings estimates will assist you with this as well. It is a projected, “educated guess” at the upcoming performance of a particular company. When coupled with a company’s past earnings, earnings estimates can have a certain amount of credibility since barring any unforeseen circumstances, a company will tend to maintain its existing trend.

Successful stock picking also means that your stocks should offer a total return higher than the 10% historical market average. A stock with an 11% earnings growth and a 2% yield could potentially provide a 13% annual total return. (To estimate the potential return you would add the dividend yield to the projected earnings growth rate).  Keep in mind that high growth stocks are typically overpriced and have a harder time meeting investor expectations. Basically, this means that stocks with moderately above average growth rates are the best pick when picking stocks.

There is no one “best” or “right” way to pick stocks. Stock picking can be called a form of art, but has also been referred to as a science. No matter what you call it, the facts remain the same. Understanding the stock market basics, sticking to your strategy and doing your research are imperative to successful trading.  All that you can do is apply what you have learned, theories, strategies, techniques, etc.  You must do this by following the stock trading plan that you have developed and you must stick to it.  Don’t let greed and fear motivate your actions and diversify your stock portfolio.

Picking a good mix of stocks and bonds is the most basic forms of investing however, it is very difficult. The purpose of investing in bonds is to provide a steady stream of income.  The purpose behind investing in stock is to have the potential for long-term growth.  When investing in stocks and bonds it is important to develop and implement an investing strategy so that you can build a strong portfolio.

What are stocks?
To understand the difference between stocks and bonds, it is important to first understand the definition of stock. Shares of stock are the smallest unit of ownership that you can have in a company.  Owning shares in a company’s stock makes you part owner of the company.  This means that you have the right to vote regarding matters within the company such as who will be on the board of directors and other matters of similar significance. The value of that corporation’s stock will typically reflect the earnings experience of that particular firm, going up during periods of profitability and down during periods of loss. The higher the risk, the greater the potential for return. When considering investing in stocks and bonds it is important to understand that there is also limited liability that comes with stock ownership. This is because creditors only work directly with the company so they cannot come after shareholders. The worst that can happen is the company’s stock loses its value.

When investing in stocks and bonds, you must know that there are two types of stocks. These include common stocks and preferred stocks.

Common Stocks – As the name implies, common stocks are the typical investment asset in any company. While they don’t possess dividend rights or voting privileges, common stocks make up for it with profit potential. The fortunes that are made, and lost, in the stock market are usually made on the backs of common stocks.
Preferred Stocks – This form of shares offers some limited benefits to its holders. Holders of preferred stocks usually receive dividends; dividends are paid as a form of returning a portion of the company’s profits to the shareholders. Preferred stocks tend to be slow, stable investments that likely won’t net the holder great sums of many but will likely be a steady performer in a stock portfolio.

When studying the difference between stocks and bonds one must also understand the difference between blue chip stock and small cap stocks.

Blue Chip Stocks: Issues of companies who are well establish in their industry and who also have a reputation of producing earnings and paying stock dividends over a long period of time.
Small Cap Stocks: Issues of companies that are not as established, but have the potential for enormous growth for those successful companies. For those that do not perform well, however, means the potential for a decrease in the value of the stock producing a low return on investment.

What are bonds?

Now that you know the definition of stock, it will now be easier to understand the difference between stocks and bonds as explained here. When you purchase a bond, you are lending money to an issuer, and in return for that loan, the issuer promises to pay you a specific rate of interest during the life of the bond.  This is paid out by the issuer when the bond matures in order to repay the face value of the bond, otherwise known as the principal. When investing is stocks and bonds, it is important to note that bonds tend to be predictable in nature enabling you to count on a nice stream of payments and repayment of principal.  Issuers of bonds can include corporations, the government, municipalities, federal agencies or other entities.  Types of bonds can include municipal bonds, corporate bonds, U.S. government securities, federal agency securities, foreign government bonds, and mortgage and asset bonds. Now that you understand the difference between stocks and bonds, it is important to understand why investing in both leads to better investing.

Stocks and Bonds, why both?
Financial advisors will tend to recommend that investors maintain a portfolio consisting of stock and bonds, and cash in varying percentages in order to establish good portfolio diversification. Before you begin investing in stocks and bonds, be sure to understand the types of stocks and bonds available to you, as well as the risks associated.

Retained earnings are the sum of a company’s profits after stock dividends payments have been made to shareholders. When a company generates a profit, management has the option of doing one of two things:  They can pay the profit out as a cash dividend to shareholders or they can retain the earnings and reinvest them into the business.  The purpose of retained earnings is to either maintain existing operations or to increase profits by growing a business. This will depend on the money management of the company in that some may be forced to spend this type of earnings on maintenance of the company or equipment, or some may be able to use the capital to grow.

The total retained earnings must be accounted for on the balance sheet under Shareholder Equity for every company and is reported during the earnings season. The goal of executives is to create one dollar in market value for every one dollar in retained earnings.  The balance sheet reporting this information is what investors will use to track how much money has been invested back into the company over a period of time. This will tell you how wisely executives of that company are investing the shareholders’ money.  You can also look at the retained earnings statement that summarizes changes in earnings for a fiscal period, as well as the projected earnings estimates.

It is very important to understand this type of earnings as either asset purchases made by a company or liability reductions.  It is important to understand as well that these earnings are not surplus cash or cash left over from payment of dividends. When you invest in a company, you will want to understand how you will get the highest return on your shares or rather the highest return on investment. Retained earnings demonstrate what a company’s dividend stocks policy is in that the company will either reinvest profits or pay them out to shareholders.  If the company has any chance of growing, however, it must be able to retain earnings and invest them in business ventures that will generate more earnings.

The purpose of these earnings should be to enhance the company’s value thus increasing the amount of shares in a shareholders stock portfolio.  Unfortunately, most companies use these earnings to maintain the company, rather than grow the company. There are a couple of methods used to analyze the retained earnings of a company. You can compare the amount of capital retained during a period of time to the change in share price during that time, or you can compare the retained earnings per share to profit per share over a specific period of time. You also need to evaluate the effectiveness of the company’s management team by understanding how it uses retained capital which will show you how much market value has been added to the company’s retention of capital.  When you have inspiring market value gain it means that the investors will trust management to uncover value from capital retained by the business.

It is important to note that if a company accumulates earnings beyond reasonable needs of the business, it may be subject to an accumulated earnings tax.  This tax is in addition to the income tax of a corporation.  Some examples of accumulated retained earnings considered “reasonable” includes business needs such as expansion, product liability loss reserves, debt, working capital supplier or customer needs. Some examples of “unreasonable” business needs include the company providing funds for investments unrelated to the activities of the business, expenses for personal benefit of the shareholders, and to avoid tax on dividend distributions. In fact, the existence of a tax avoidance purpose will immediately trigger the accumulated earnings tax. Companies must be careful to avoid investing errors that would be deemed as “unreasonable.”

In conclusion, measuring the ability of management (with companies with a long history) to retain capital profitably is imperative to value stock investing. Investors must also look at how much capital is kept from shareholders in addition to how much profit is seen by shareholders. Retained earnings information is reported on the balance sheet. Once you understand how to read the balance sheet you will be steps closer to investing in stock!

Trading stock online has become the most attractive way to trade stocks.  It is no longer necessary to call on a stock broker to sell or buy stock now that most households in America potentially have a computer.  The information age has granted us knowledge immediately by the click of a button, that at one time was not so readily available.  Trading stock online is a commodity that the average Joe (or Jane) can now entertain if he or she devotes the time and discipline required.

In order to be successful at trading stock online, it is imperative that you are extremely disciplined in your approach, have sufficient time (and money of course) and are very, very, patient.  Anyone can open a trading account, but the best traders are able to trade in the stock market successfully without fear.  Once you have obtained the ability to trade without fear, the sky is the limit!  Obviously, first, you must understand the stock market basics when trading stock online.

Once you have invested in your stock market investing education and chosen your stock trading system, keep a few things in mind when trading stock online. No trading system will provide wins all of the time. Understand that you will lose, but don’t let that instill the fear.  Timing combined with discipline is crucial so that you do not attempt to overtrade in hopes of winning even bigger.  You want to balance by minimizing any potential loss by knowing and watching the signals so that you “get out” when it is time. Trading stock online successfully takes time and it is important to maintain a positive attitude while being clear in your goals and the investing strategy that you choose to follow.  Trading stock online is a very slow process that one must pursue in order to be successful. It is will not be a quick get rich process but will take money and education combined with mental preparation.

When you are ready to being trading stock online, it is very important to decide how much you will invest and you must be able to manage your overall finances successfully.  Funding is a vital piece in that your capital base will decide the outcome of your trading venture.  Your money management should accommodate potential (inevitable) loss and your funding base need to be large. Trading stock online also requires that you select an online brokerage firm that matches your trading style.  If you are a day trader, this will be the most expensive when it comes to broker fees and additional costs.  Day trading also requires high speed internet access. Long-term traders can use less costly discount brokers.

It is important to match your lifestyle and your trading style when trading stock online. Day trading means that you will be on your computers for hours at a time, while longer term online stock trading, means that that you will be on your computer much less (for purposed of trading). Try to find a stock trading method that provides you will high-reward, with what you consider low-risk.  Try paper trading for one year to learn how you can win consistently for one year.  Risk management is vital to successfully trading stock online and must be done in order to not avoid, but rather control that inevitable stock market risk.

There are many online sources available to you for education in trading stock online, such as stock market for dummies sources, and stock market investing 101 resources.  Be sure to also do your research regarding the mental preparation needed on all facets of trading stock online.  Some of these we mentioned above such as patience, timing, discipline and most importantly dealing with greed and fear.  Greed and fear have an overwhelming power over all participants involved in the trading in the stock market.  Harnessing the emotions and qualities above will put you well on your way to trading stock online successfully.