September 21, 2011

Difference Between Gambling and Investing and your Financial Guy

There is a fine line between gambling and investing which many people cross sometimes with the help of their financial guy.

A study not too long ago showed that the majority of those buying individual stocks lose money.  I'd be willing to bet that a large percentage of those crossed the line.

Bottom line is that the odds are set against you as a gambler.  That's why casinos have no clocks, pump in oxygen, its all to keep you gambling because eventually, the odds which are stacked against you will take over.

But as an investor, odds are in your favor as long as you are buying quality, not trading, etc.

Problem is that most people who say they are long term investors really aren't.  Its human nature to want instant gratification and a few negative months in a row will test any investors confidence and resolve.  That is exactly when many investors cross the line over to gambling by buying and selling often or trading or purchasing penny stocks or buying into a hot trend - none of which classifies as investing.

This problem is exacerbated by financial professionals who by chance make money when their clients are active rather than non-active.

I can look at a statement and tell you immediately if you have crossed over the line from investor to gambler.  Feel free to email to set up a coaching call.

September 15, 2011

Why Preferred Stock IPO's Are Great For Your Stockbroker, Not You

Preferred Stock is a special equity security that is commonly thought of as a hybrid between an equity and debt.

Dividends are usually higher than the common shares and are senior obligations to the regular shares which means a company would have to pay the preferred shareholders before they pay the common shareholders.

In this environment of low yields on most fixed income investments, investors are flocking to preferreds in search of higher yield.

As a stockbroker, I used to love the preferred stock IPO (initial public offering).  WHY?

Because I could hide the commission, we used to tell the clients that there was no commission.  I guess technically that was true but we got paid a concession, usually 3-4% of the total invested.

And almost always the IPO would fall below the offering price to compensate for the concession.  There was a rule too that you couldn't sell your clients shares for a period of time.

My suggestion now is that if you want to buy preferred stock, go ahead and buy whatever you like in the secondary market, ie. something that has already been issued.  Stay away from preferred stock IPO's.

September 6, 2011

Investing Advice or Education

After you have decided you'd like to invest your hard earned money, next question is what to invest in, what to do.  You could watch CNBC all day and listen to the talking heads discuss trading but not much on investing.

Or you could call a stockbroker who is very eager to help you with your investments. Stockbrokers are only too happy to offer investing advice for a fee!

The problem with investment advice is that you will slowly become dependent.

Investment education is different.  Once you have educated yourself to become financially literate, not at a PhD level, just literate, you will have liberated yourself.

It is hard to take advantage of an educated investor.

Educating yourself is easy too and well worth the very small amount of time it takes. Read this blog and others.  Go to yahoo finance or google finance and just read.

Email me if you have any questions too.