The Bull Hunters Guide

Welcome back, don’t forget to check out last weeks edition of stock market investing mistakes part 3 if you happened to miss it.

Today, we’re going to continue on our discussion of the worst possible mistakes that you can make in the stock market. These aren’t the obvious errors that you might have heard about, but rather simple blunders that people tend to make over and over again. It pays to know as much as you can!

What Is Stock Dilution?

Let’s talk about dilution. Stock dilution is what happens when a company issues too many shares, and begins to undervalue the Investments held by their original shareholders.

For instance, imagine that you knew of a hot stock, and the company was selling shares left and right. You might want to jump on it, assuming that it was soon going to experience an upward climb. You might well be right.

However, there’s always the need to look out for stock dilution. If the company in question begins to issue too many shares, they’re going to cause dilution, and then the shares held by everyone will see their relative value plummet, even if the actual value of the company continues to climb.

Dilution also brings up the issue of convertible debt. If the company issuing too many shares does eventually begin to go into debt, they would be very likely to convert any Investments you held with them into common stocks with a set value. Clearly, this could interfere with your dreams of making a grand profit.

Look Out For Companies Repurchasing Stock

So, when you’re looking at Investments, always be sure to try to find companies who are actually trying to repurchase stock! It might seem counterintuitive, but the fewer shares there are on the market, the bigger your slice of the pie and the higher your earnings per share will end up being.

Besides, a company interested in buying back shares is a company committed to the impeccable management of its finances, and you can always take that as a sign of good management, and a good future.

See you next week for part 5 of Stock Market Investing mistakes.

Sean Rasmussen
The Bullhunters Guide
Universal Wealth Creation © 2004 - 2009

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Hello again. Last time in this blog, we began a new series on the seven worst stock market investing mistakes that you can make when investing.

Now that you’re sufficiently armed with a great deal of knowledge about the markets and Investing in general, you need to know how to safely employ that knowledge. Knowing about these common blunders should help you to avoid some costly mistakes.

Investing Too Early

The mistake we’re going to talk about today is Investing too early in a falling stock. It’s very often the case that when the price of a stock plummets, you’ll see some intrepid investors buying it up with the rationale that it has nowhere to go but up. Sometimes they’re right. But sometimes, they’re horribly wrong!

Stocks of this type are often called “falling knife” stocks because it’s similar to what happens when you drop a knife. Your reflexes sometimes cause you to reach out and grab the falling knife before your common sense can tell you otherwise, and as a result, you get injured.

The problem here is that when the news of a plummeted stock first breaks, not all the damage is yet done. Many times it will happen that when other investors hear the news, they’ll quickly grow upset and sell off their own stock, resulting in the stock plummeting even further. If you had already bought into it, you’d be quite upset.

Strike When The Time Is Right

Instead, exercise some patience when a stock plummets. If you invest too early, you’re only cutting into your potential to make money, so learn to judge exactly when the stock has truly hit “bottom”. This is done by learning to comprehend something called the “selling pressure” of a stock.

You have to observe not just the activity and price of the stock, but also the rate at which shares are being sold, and how quickly the price is dropping. Don’t jump in while the rate it still high; when it’s truly bottomed out, the rate of sell will taper off, and then is the time to strike with your Investing.

See you next week for part 3 of Stock Market Investing mistakes.

Sean Rasmussen
The Bullhunters Guide
Universal Wealth Creation © 2004 - 2009

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Over the last several installments, this blog has focused on other types of investments such as Life Insurance in last weeks article. This differs to what we usually focus on: stocks. The truth of the matter is simply that stocks, as much press as they get, are only one small type of investment.

There are dozens of other things you can do with your money. In order to help you decide which are best for you, we’ve been examining each type of investment in turn.

Money Market Securities

This time we’re going to be discussing money market securities. Much like bonds, money market securities are based on fixed income. Unlike bonds, however, money market securities are intended as short term investments and typically mature after only a year or so.

The only drawback really to Money Market Securities is that they typically are only available in high denominations. This puts them fairly beyond the reach of the majority of amateur investors. However, there is a way that many people have started investing in money market securities who would not otherwise be able to do so.

With the advent of money market mutual funds and money market bank accounts, investors can put money into these types of investments, which is then combined with the contributions of hundreds or thousands of other investors and used to purchased money market securities straight out. Obviously, the proceeds are then split up.

Low Risk And Short Term

Money market investments are usually considered to be very low risk because they’re such short term, and because they’re founded in secure enterprises such as government institutions.

You can buy and sell money market securities through most regular stock brokers. However, as we mentioned, you’ll most likely need to start out by investing in a money market mutual fund, which can be done for just a few hundred dollars. In addition to being more affordable, it will also give you a taste of the behavior of Money Market Securities to let you know whether or not you’ll be interested in pursuing them in the future.

See you next week for part 9 of Investments.

Sean Rasmussen
The Bullhunters Guide
Universal Wealth Creation © 2004 - 2009

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I hope you enjoyed last weeks post on Corporate Bonds. This week, we’re going to expand our discussion of alternate investment strategies to discuss futures contracts. This is an important topic to discuss because futures is one area where investors are particularly reluctant to tread, feeling that the process is “too advanced” for them, or that futures carry too high a risk.

Futures Can Be Risky

This is largely a misconception. Futures Contracts can indeed be risky, but if they are used wisely, they can also be used to guard against excessive risks! Let’s look at it this way. Suppose that you were to buy a futures contract on a stock for one year from today at $5 a share.

When the day comes, if the stock is valued under $5 a share, then you’re stuck with purchasing them and will have to suffer the loss. However, there’s also a chance that the stock could be valued at more than $5 a share, and you would have the unique opportunity to purchase it at a discount.

Minimizing this risk

In order to minimize risk on a futures contract, you need to understand the difference between hedging a risk and speculating. When you purchase a futures contract, or sell one, with the intention of minimizing a downside risk by locking in the current price on a particular commodity, then you are making a very common and wise use of the futures contract.

On the other hand, if you’re buying on the speculation that the commodity will soon soar and make you rich, then you’re taking quite a gamble. As you can see, futures can be an excellent source of investment, but it does require some thorough knowledge of the market before hand. However, if you possess that experience, you should not be unduly reluctant.

If you take the notion to purchase a futures contract, note that it can be done through most full service brokers. These same stock brokers can get you involved in futures trading, which is essentially the same concept, but applied to the trading that you’re already familiar with.

See you next week for part 7 of Investments.

Sean Rasmussen
The Bullhunters Guide
Universal Wealth Creation © 2004 - 2009

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For the past few weeks, this blog has been focusing on different methods of investment that you can engage in besides just the usual stocks and bonds, for instance our last post covered investing in Common Stock. The idea is that by doing so, we’ll be expanding your concept of investing and making you a better, more well rounded investor in the process.

What Is Convertible Security?

This time, we’re going to talk about something known as the convertible security. Simply put, this is a bond that can be converted into a stock. When you purchase a bond in a company, you’re buying the right to later on, at your discretion, concert the value of that bond into a number of shares of stock. Clearly, there are times when doing this would be advantageous and times when it would be better to simply keep the bond itself. This is the purpose of the convertible security: it allows you to make that decision for yourself.

Of course, this option doesn’t come without a cost. Typically speaking, convertible securities offer a lower initial yield than other types of investments, because of their modular nature. At the same time, however, if you’re holding a bond and a company goes bankrupt, you’re among the first in line to be repaid, ahead of those who simply are holding stock.

Buying And Selling Is Easy

One other major risk of convertible securities is that most companies withhold the right to “call” these bonds, which means that they can theoretically at any time convert them all into stock at their discretion. While this is rare, it’s something that everyone investing in convertible securities very much needs to be aware of.

Buying and selling convertible securities is fortunately a very easy matter. Most all brokers deal with them just as they would stocks and bonds, so you should be able to dabble in this type of investment fairly easily. Once you get a taste for it, you can decide whether or not it’s really for you.

See you next week for part 5 of Investments.

Sean Rasmussen
The Bullhunters Guide
Universal Wealth Creation © 2004 - 2009

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