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Investing online for dummies 5th edition - Sindell K.

Sindell K. Investing online for dummies 5th edition - Wiley publishing , 2005. - 409 p.
ISBN-10: 0-7645-8456-1
Download (direct link): investingonlinefordu2005.pdf
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Market experts call the company "steady” or dividend increases are behind the general market
Some investors seek earnings growth (net income for a company during a specific period, usually after-tax income) of at least 10 percent per year. Determine the amount of returns you can expect over the next five-year period. Make your best estimate of earnings and discount them heavily if you expect the market to be depressed. (See Chapter 8 for details.) Keep in mind that, because of market volatility, your estimates may be subject to big errors. Compare your results with your own required rate of return (which is different for each investor). Is the stock worth holding if that’s your potential gain? If not, it’s time to sell.
Company insiders are selling in the public marketplace
Insiders are individuals who own 10 percent or more of the company and are required to report all their company stock trades. If insiders are selling their shares in the company or if the company is purchasing its own shares — both activities that may indicate future financial problems — you might want to sell.
Chapter 19: Ten Important Selling Points 357
Rebalancing Your Portfolio: Which Winners Should You Sell?
Over time, your portfolio will go out of alignment if it’s not actively managed. Rebalancing and allocating your assets can assist you in reaching your financial goals. Selling securities to rebalance your portfolio can be difficult because you have to “prune” some of your winners. In other words, to keep your portfolio in balance, you might have to replace some of the investments you have grown to count on. You can use online portfolio trackers to unemotionally determine which investments need to be pruned. Most online brokerages include portfolio tracking; however, what’s offered by your brokerage may not meet your specific needs. Here are a few examples of what you can find online:
GainsKeeper (www.gainskeeper.com) provides accurate cost basis, capital gains tax data, and trade decision tools that can maximize aftertax returns. GainsKeeper allows you to import your portfolio from your broker, MS Money, Quicken, or Excel files. You can export results to Excel files, TurboTax, TaxCut, and other tax software programs. Expect to pay $49 to track 100 stocks and $140 to track 1,000 stocks.
Morningstar.com (www.morningstar.com) offers Premium Membership, which includes analyzers that can help you understand the tax and cost consequences of replacing a security within your portfolio. Additionally, you can discover a plethora of online asset allocation tools that can help balance your holdings, determine your optimum asset allocation, and uncover the risk in your portfolio. A free 14-day trial is available, and subscriptions are $12.95 per month, $115 per year, or $199 for two years.
Reuters (www.reuters.com/finance.jhtml) requires your free registration to take advantage of the portfolio tracker. The Reuters portfolio tracker is easy to use and allows you to set up multiple portfolios with on-demand research for domestic and international stocks, U.S. funds, and cash. You can edit your portfolios by adding or deleting companies and changing investment amounts or shares. You can view your portfolios by performance (How is the portfolio doing?), fundamentals (How do my investments compare?), valuation (Am I making any gains or losses?), and daily action (Do I need to make a trade?). Help icons provide additional information about portfolio functionality.
Risk Grades(www.riskgrades.com) is based on a complicated scientific formula for calculating the risk of your investments. With your free registration, you receive five portfolios, graphing features, risk versus return analyses, risk alerts, “what-if” analyses, and historical event simulations. Using these tools, you can determine which investments are beyond your risk-tolerance level. Additionally, you can determine whether you’re being properly compensated for the investment risk you’re taking.
358 Part IV: The Part of Tens_____________
Setting Profit-Taking Goals
Realizing your profit is what investing is all about. Paper profits may look good, but money in the bank is what pays for your child’s education or enables you to retire early. If your stock is selling for a high price and is now a large part of your portfolio, you might want to sell.
What’s more, if you’re contemplating selling the stock, you don’t want to sell before the stock reaches its peak. In other words, you want to sell at the best price, before the stock starts to decline. What should you do? The following list gives you some ideas:
Suppose that you purchased your shares in 1996 and, despite market downturns, your stock is currently selling for 50 percent more than your purchase price. If the stock isn’t likely to go any higher, you may want to take the money and run.
Set a target price that might not be your sell price but will be a benchmark. If your stock reaches the benchmark price, reevaluate your investment plan. Make certain that you check similar companies to see whether they’re selling at the same level or higher. If so, you might want to raise your target price.
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