Personal Finance Blog by Debit versus Credit

Stock Market Basics: Investing For Beginners

September 30, 2008 | Filed in: Investing | 3 comments

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This is the first of a multi-part series entitled “Investing for Beginners”.  Over the next several parts of this series I’ll be covering basic skills needed for investing such as Accounting, Economics and Stock Market Basics.  Today I’ll begin with “Stock Market Basics”.

An accounting professor of mine once told me that if anyone wants to be successful with investing they can be.  “Stock Market Basics” truly are not a difficult thing to learn.  At its core the Stock Market is essentially a free market system, meaning that it’s based on forces pulling against each other; these forces are supply and demand.  As a beginning investor it’s important to remember that these pulling forces are based on several things, such as a companies fundamentals (revenue, profit, assets, liabilities), technical evaluation and even “acts of god.”  To be able to interpret these market forces and company profiles requires some knowledge in accounting and economics and also a desire to keep up on stock market and company news.  Thus “Stock Market Basics” can be learned by education, which is the foundation for success as an investor.

What Is The Stock Market?

I’ll liken the stock market to an auction.  If an auctioneer has 50 thingymajigs for sale he or she is likely to start the bidding out at a price that’s much lower than if he or she had only 1 thingymajig to sell.  The more the auctioneer has to sell (supply) the less they are probably going to sell for because buyers (or demand in this case) are limited (based on price, supply, etc).  The stock market is similar to this.  However instead of buying a product or service the buyer actually buys ownership in a company.

The way that the market works is actually strikingly similar to an auction.  Brokerage companies (companies through which you can purchase stock of other firms) often have representatives on the floor of all the major stock exchanges, such as the New York Stock Exchange (NYSE).  These representatives could be thought of as auctioneers.  They take orders from those who want to buy stock and they take orders from stockholders who want to sell their stock.  They then match up orders and, voila!  A stock trade has taken place.

So What Do I Do First?

In order to start trading stocks you’ll need to open an account with a brokerage firm such as Scottrade, Charles Schwab, Sharebuilder or Zecco.  I personally recommend Zecco as they offer 10 free trades a month with a balance of $2,500 or more in your brokerage account.  If you want to open an account at either Scottrade or Sharebuilder shoot me an e-mail.  I think they offer incentives for referring friends - both to the referrer and the refereed.  Joseph [at] DebitversusCredit [dot] com is my e-mail address.  If you’re interested in Zecco (my personal recommendation) then you can follow the affiliate link below to sign up.

Next you’ll want to think of a company that you want to invest in.  Ideally it should be something that you know a little bit about, or support as a company.  Then you would do some research on them.  For example (and we’ll use AAPL because it’s a favorite of mine) if I wanted to buy shares in Apple I would first do some research on the company to discover for myself if I think they will continue to be profitable in the future.  A good (but very general) rule of thumb is that as long as a company continues to increase their earnings they will continue to grow and so will the value of their stock.

Prices Fluctuate, So Don’t Panic!

It’s important to remember that even though over the long-run (we’re talking years, not months) the value of a stock is based almost entirely on fundamentals, the share price of a stock is still subject to irrationality and bubbles.  In other words if I were to buy 100 shares in AAPL today, expecting to hold it for 5 years before I sell it, I can expect that the share price will, over the days and the months, have its ups and its downs.  I should be confident, however, that my decision to purchase an ownership (through 100 shares of stock) in Apple will pay off in the long-run.

Investing is not something that should be taken lightly.  If a friend of yours gives you a tip that they think a certain stock is going to go way up, you probably shouldn’t listen to them.  For example, I had a friend who recommended I pick up some SIRI (Sirius Satellite Radio) years ago when they first signed on Howard Stern.  Back then the stock price was somewhere in the teens… today it’s a penny stock.  His “hunch” wasn’t right, and your friends’ hunches probably won’t be right either.  Don’t trust anyone except yourself, your gut and your wallet when it comes to investing.  This way if you make a stupid investment (and we all do at some point) you’ll have no one to blame but yourself AND you’ll be able to learn from your mistake.

This concludes part 1 of the Investing for Beginners series, Stock Market Basics.  Stay tuned for the rest over the next several weeks.  Make sure you don’t miss anything by subscribing to Debit versus Credit.

Tags: Investing for Beginners, Stock Market Basics

The Economy’s In Shambles, So What Do You Want To Know?

September 29, 2008 | Filed in: Personal Finance | No comment

There’s been a lot of crazy stuff going on out in the world lately.  We’re facing wars and economic issues and even weather phenomena.  Sometimes it’s hard to focus on what’s important when you are bombarded with different forces in every waking aspect of life.  It may be difficult to concentrate on your financial situation and your future with so much going on in the present, but it’s important now more than ever to make sure that your house is in order, so to speak.

With that being said, today is my wife’s birthday so I’ll be taking the day off in order to treat her to her every desire.  I’d like to make productive use of the time that I’m away from my computer, so I thought it might be a good idea to have a question and answer session.  You ask the questions - anything related to finance, investing, business, the economy, etc - and I will supply the answers.  And if I don’t know the answer right away I will try to research it and find it.  So hit me with your best shot.  I’m looking forward to answering your questions, whatever they may be.

Tags: Economy, Investing, Personal Finance, your personal finance questions

Essential Money Saving Tips For Students

September 24, 2008 | Filed in: Personal Finance | 4 comments

Today we’ll be featuring a guest post from hopeark who will be sharing some money saving tips for students.  Enjoy!

It is easy to get caught in the rush of things when you are in college. In the midst of studying, part-time jobs, socializing and extracurricular activities that you have, you are most likely to forget one of the most important things, which is straightening out your finances.

Money Saving Tips for Students
Here are some tips on how you can save money as a student:

1. Plan ahead.

If possible, do this even before you move into your dorm room.

Check if you are eligible for scholarships and other grants before signing up for any form of student loan.

Construct a cash flow. First, where do you expect to get money from? Make a list of your income , be it from your parents, your student loan or your part-time job.

Then forecast your expected monthly or weekly expenses for food, books, etc. Once you have set aside a budget, be strict with yourself and stick to it.

You will never know what unexpected expenses would come your way so it is better to have a downfall for financial emergencies.

2. Save on food.

One of the major expenses that you have as a student which you might have ignored when you were still living with your parents is your food allowance. Avoid eating at fast food outlets, as this is most likely to ruin your budget. Pack your lunch and plan your meals as much as you can.

3. Take full advantage of student discounts.

Those IDs in your wallet are not just for show. Student ID s and memberships in organizations are honored in several establishments which offer discounts.

Also, patronize a certain establishment regularly and you are bound to get bonus cards for being a loyal customer.

4. Use your cash as much as you can.

Since you already have a draft of the items where you will spend your money, it is easier to monitor your cash flow. Avoid using your debit card when you have cash with you. Use your credit cards or write checks only in emergencies. Having debit cards, credit cards and checks handy might lead you to overspend.

5. Keep yourself busy.

Join clubs according to your field of interest.

Keeping busy will let your mind wander and help you stay away from things that you are likely to spend money on when you get bored. Examples of these are snacks, movie tickets or game rentals. More on Money Saving and Money Saving Tips.

Tags: Guest Post, Money Saving Tips for Students

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