------------------------------------------------------------
Investing Basics - September 17th, 2004
http://www.investopedia.com
------------------------------------------------------------
------------------------------------------------------------
Table of Contents:
------------------------------------------------------------
1. Term of the Week: Active Management
2. Feature Article: Get Active, Join a Club!
3. Q&A: If I own a stock in a company, do I get a say in the
company's operations?
4. Q&A: If the stock market is so volatile, why would I want
to put my money into it?
5. Test Your Financial Knowledge
------------------------------------------------------------
Sponsor: FREE Options Investing Starter Kit
------------------------------------------------------------
Are you interested in investing in exciting and high potential
investments?
Receive a FREE investing package and your choice of a CD-ROM,
Video, or Audiocassette on options investing.
Get your Free options investing package mailed Now!
http://click.investopedia.com/?RC=11028&AI=559
------------------------------------------------------------
Term of the Week: Active Management
------------------------------------------------------------
An investing strategy that seeks returns in excess of a
specified benchmark.
Investopedia Says:
Investors who believe in active management do not follow the
efficient market hypothesis. They believe it is possible to
profit from the stock market through any number of strategies
to identify mispriced securities. This is the opposite of
passive management.
For related terms and articles, go to:
http://www.investopedia.com/terms/a/activemanagement.asp
------------------------------------------------------------
Feature Article: Get Active, Join a Club!
------------------------------------------------------------
By their nature, mutual funds are a passive form of investment:
we trust that the mutual fund manager has the expertise to
choose the "right" investments that will provide the best
returns in our portfolios.
As individual investors, we rarely have a large enough portfolio
to make individual equity or bond selections on our own. As a
result, the average retail portfolio is usually insufficiently
diversified with individual stock picks, and we mutual fund
holders are subjected to undue risk from one or two bad choices
forming a large percentage of our total holdings. For these
reasons, retail investors who are dissatisfied with the passive
approach of mutual funds and want to take a more active role in
choosing equities would do well to join an investment club.
Read this article at:
http://www.investopedia.com/articles/basics/04/091704.asp
------------------------------------------------------------
Sponsor: FREE Options Investing Starter Kit
------------------------------------------------------------
Are you interested in investing in exciting and high potential
investments?
Receive a FREE investing package and your choice of a CD-ROM,
Video, or Audiocassette on options investing.
Get your Free options investing package mailed Now!
http://click.investopedia.com/?RC=11028&AI=559
------------------------------------------------------------
If I own a stock in a company, do I get a say in the company's
operations?
------------------------------------------------------------
You don't get a direct say in a company's day-to-day operations,
but, depending on whether you own voting or non-voting stock,
you may have a hand in shaping its board of directors and
deciding on special issues.
Voting Stock - If the stock that you own is a voting stock
and you're a shareholder on record when a decision must be
made through a vote, you have a right to vote on the issue.
The right to vote for a member on the board of directors or
on a specific business decision is similar to the right to vote
for a U.S. senator or on a political issue in a plebiscite:
you don't have to vote if you don't want to, and you don't
really get a direct say in daily government operations (although
you do vote on the people that do). The one main difference
between voting as a citizen and voting as a shareholder is
that if, as a shareholder, you choose not to submit your vote,
there is the possibility that a default choice will be made
regardless of your true desires. Be sure carefully to read the
fine print on the proxy form sent to you.
Non-Voting Stock - As its name denotes, a non-voting stock
doesn't allow you to participate in votes affecting shareholders
and the company. These types of shares are created so that
investors who forfeit the right to have a say in the direction
of the company are able to participate in the company's profitability
and success.
Not all companies offer these two different types of stock,
and not all types of voting stock have the same voting rights.
If you are interested in playing a part (albeit a very small one)
in the decision making processes of a company, make sure you buy
the right type of stock.
Warren Buffett's Berkshire Hathaway presents a real life example
of a voting vs. non-voting share situation. The company has two
classes of stock, Class A (denoted by the ticker symbol: BRKA)
and Class B (denoted by the ticker symbol: BRKB). A Class B stock
trades at 1/30th the price of a Class A stock; however, it only
carries 1/200th of the voting rights.
If you would like to learn more about stocks and the stock market,
check out the Stock Basics tutorial:
http://www.investopedia.com/university/stocks/
For more on the issue of shareholder rights, check out the article
"Shareholder Rights, Are There Any?":
http://www.investopedia.com/articles/01/050201.asp
Also check out this Ask Us:
http://www.investopedia.com/ask/answers/04/061804.asp
------------------------------------------------------------
If the stock market is so volatile, why would I want to put
my money into it?
------------------------------------------------------------
In this question, volatility refers to the upward and downward
movement of price. The more prices fluctuate, the more volatile
the market is, and vice versa. Now, to answer this question,
we must ask another one: is the stock market really volatile?
The answer is, "Yes, it is . sometimes." The market is volatile,
but the degree of its volatility adjusts over time. Over the
short term, stock prices tend not to climb in nice straight
lines. A chart of day-to-day stock prices looks like a mountain
range with plenty of peaks and valleys, formed by the daily
highs and lows. However, over months and years, the mountain
range flattens into more of a gradual slope. What this implies
is that if you are planning to hold a stock for the long term
(more than a few years), the market instantly becomes less
volatile for you than for someone who is trading stocks on a
daily basis.
Obviously, there is a chance that a person actively trading
will make a quick gain in the short term by buying in a valley
(low price) and selling at a peak (high price); however, there
is also the possibility that the opposite will happen. A long-
term investor, on the other hand, doesn't have to worry about
this day-to-day volatility of the market. As long as the market
continues to climb over time, as it has historically, your good
investments will appreciate and you'll have nothing to worry
about. Because of this long-term appreciation, many choose to
invest in the stock market.
For more details about what stocks are, how to buy them, and
why their prices change, please read this stock basics tutorial:
http://www.investopedia.com/university/stocks/
To learn more about volatility, check out this article:
http://www.investopedia.com/articles/02/051502.asp
------------------------------------------------------------
Test Your Financial Knowledge
------------------------------------------------------------
Q. Which ratio indicates if a firm has enough short-term assets
(without selling inventory) to cover its immediate liabilities?
a) Acid Test (Quick Ratio)
b) Asset Turnover
c) Cash Flow to Asset Ratio
d) Collection Ratio
e) Price to Earnings Ratio
To answer this question, please visit the homepage:
http://www.investopedia.com/
Have a great week!
The Investopedia Staff
http://www.investopedia.com
---
You are currently subscribed to basics as: [EMAIL PROTECTED]
To unsubscribe or change your email settings go to:
http://www.investopedia.com/email/[EMAIL PROTECTED]
------------------------ Yahoo! Groups Sponsor --------------------~-->
Make a clean sweep of pop-up ads. Yahoo! Companion Toolbar.
Now with Pop-Up Blocker. Get it for free!
http://us.click.yahoo.com/L5YrjA/eSIIAA/yQLSAA/BCfwlB/TM
--------------------------------------------------------------------~->
<a href=http://English-12948197573.SpamPoison.com>Fight Spam! Click Here!</a>
Yahoo! Groups Links
<*> To visit your group on the web, go to:
http://groups.yahoo.com/group/kumpulan/
<*> To unsubscribe from this group, send an email to:
[EMAIL PROTECTED]
<*> Your use of Yahoo! Groups is subject to:
http://docs.yahoo.com/info/terms/
