Financial Resource: Beginner Investing to Financial Independence!

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I don’t think there is any clearer perspective as to why the Democrats run Washington, and the Republicans have become the party of loyal resistance than Health Care. With the Health Care debate really starting to heat up for the summer, President Obama is already starting to get the mud from both ends of the isle.

I couldn’t help, but laugh last week when I was watching Sean Hannity interview Rush Limbaugh, and they talked about socialized health care and all the philosophical reasons why it shouldn’t happen. They didn’t even seem to get what their counterparts on the left (who see socialized health care as a moral imperative) can’t get. The USA cannot afford it!

I think President Obama gets it and, it should be the screen saver on his teleprompter. The US dollar has been in a down trend for years because of our massive deficits and we are already spending money like a 20 year old with their first credit card. There really is no philosophical or ethical debate here. Socialized Health Care will lead to a national bankruptcy. We cannot afford our current social programs like Medicare and Social Security. The last thing we need is another one.

As I listened to President Obama speak yesterday in regards to Health Care and tuned into all the Sunday political shows, it is obvious that he wants a public health care option and he is going to get it!

First of all, there are not enough conservatives to stop him and moderate republicans / democrats will see this as something that should help make a better playing field for an industry where costs are just going through the roof. Some people fail to see how this has been a huge weight on the economy since their employer pays for the majority of their care.

Small businesses need this (where the majority of jobs are created) and it may lead to some pay raises which will help create a stronger consumer.

Who are the winners and the losers in all of this?

Health insurance companies are losers here, with government being more of a player in their market, many of these stocks like Aetna (AET) and United Health Care (UNH) have not fared well at all. The sector that used to be defensive has become very vulnerable. This sector may be chock full of good stocks to own in a couple of years after everything shakes itself out.

Pharmaceuticals making generic drugs are winners here. The Obama plan loves generic drugs, and more and more people love the lower costs of generic drugs. The Big Drug makers like GSK (GSK) and Pfizer (PFE) are reacting. GSK has signed a deal with an Indian generic drug maker, and Pfizer is moving in this direction as well. Companies like these have a lot of clout in the medical community, when they start to go generic it can really be a self fulfilling prophecy.

With Hockey and Basketball seasons over, I look forward to seeing how all of this plays out over the summer. Politics and Business are great sports too.

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Lately, I’ve been asked a lot about where I see the U.S. dollar going in 2009. So let address this for a moment.

Specifically, I think the dollar will gain against the Japanese yen (USD/JPY pair will rise) throughout 2009.

While formerly, the yen and dollar rose as the Dow crashed, you will notice that the yen is backing off quite a bit even as the Dow sits on its lows as of this writing. Yet the dollar still rises as the Dow falls.

Therefore, I think for the dollar/yen pair, the bias will be in the favor of the dollar and against the yen overall throughout 2009 no matter what the stock market does from here.

HOWEVER, when it comes to how the dollar does against most other currencies such as the Euro, Australian dollar, etc. it will very much hinge on how stocks hold up.

If the Dow breaks to fresh lows and holds below them, then it is likely that the dollar will continue its strength against these foreign currencies BUT if the Dow and other U.S. indices halt their slide and head higher overall from here, then I think risk aversion dies down and that will hurt the U.S. dollar and cause foreign currencies to rise up against it once again.

So right now, I’m bullish on the USD/JPY pair and even bullish on gold. However, stocks are on the fence right now. They can’t stay there forever. So we’ll have a break one way or the other, sooner rather than later.

Once we get a decisive breakout, then we have our new found direction on the dollar. Therefore, my focus will remain on being long (buying) the USD/JPY pair until stocks get off the fence and make a distinctive move to either side. Once this happens, then the trend will be in place for the dollar for the remainder of the year minimally.  

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Geithner reenacts Jim Carrey’s Fun with Dick & Jane!

Traders and investors alike have been waiting for Geithner’s speech. It got delayed once, so investors just knew that when he stepped up to the mic that he’d really have something to say.

However, what he ended up doing was opening up more questions than answers. The market promptly showed him what it thought about it too. It reminded me of the movie “Fun with Dick and Jane” where Jim Carrey gets on T.V. to talk about Globodyne’s stock as he watches the stock chart plummet from $100 a share to a penny while he’s on T.V.

It seems like Geithner didn’t know any more than Carrey did at that moment too.

Basically, Geithner ducked the tough questions that investors wanted answered like: Will banks laden with toxic debt be forced to fail? How will illiquid assets be removed from the bank balance sheets? What will be done to “arrest” the decline in house prices?

The risk now is that the plan could fail before it even gets off of the ground because the Treasury basically said, they are going to do something in the coming weeks to months. We don’t know what exactly that’s going to be yet. And we’re going to partner with investors to do it. However, investors are the ones they are leaving in the dark. How are they supposed to step up to the plate when they don’t even know if some of these banks will be allowed to fail.

So Geithner really missed a shot at sending a stronger signal which would have been a great time to distinguish himself from Paulson.

The Dow dropped 382 points. Bank of America dropped 19%. Citigroup dropped 15%.

Geithner makes his first “rookie mistake”!

I guess we’ll get ready for round two as Geithner testifies before the Senate to see if he has anything noteworthy, but don’t count on it. This guy is already making rookie mistakes.

While we don’t know the first detail, at least he painted some broad brush strokes though. The government will be injecting fresh capital into some of the country’s biggest financial institutions. They will establish a public/private fund to buy up to $1 trillion of bad bank assets. They will also start up a credit facility of up to $1 trillion to promote lending to consumers and businesses.

So unfortunately, we know some basics but no details. He should have kept his mouth shut until he really had something concrete to say. The market wants details – a defined plan of action…and the market didn’t get that yesterday.

This “rookie mistake” is about as bad as Maria Bartiromo getting information out of Ben Bernanke. I think she must have gotten him sauced and batted her eyelashes at him or something because he lost his mind just long enough for her to get the information she needed.

Well, just as he had his “rookie mistake”, we’re now seeing it in Geithner.

In the mean time, it could end up being months before a final program is in place. However, right now each day is like “dog years” to the market. Every passing day means so much right now. The market has been in a holding pattern while Obama and Geithner “get it together”. However, if they wait too long, the market may sell off to new levels.

However, if some “rays of hope” could come soon enough, the market could break out of its range into new highs.

Until we get some “light” as to which way this will all go, the markets will continue to be choppy and erratic.

At least, we may know if the stimulus package gets “truly” passed by the end of the week or middle of next week. If so, that might “buy the market some time” while Geithner gets his head out of his butt.

Interested in learning more about the stock market? Check out our $25 online course that comes with live instructors there to answer your personalized questions. http://www.mywealth.com/investing.html

Sean Hyman

Head Course Instructor

http://www.mywealth.com

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Could Chinalead the way out of this mundane sideways range that we’re seeing in stocks? Sofar it has been perking up and showing signs of life far quicker than mostother world indices.  The Shanghaicomposite Index appears to have broken its downtrend and is close to pushingthrough the upper end of its sideways range.Morgan Stanley’sChina A Shares Fund (CAF) seems to track this index fairly closely. See thechart below. The upper chart is the Shanghai Composite Index and the MorganStanley ETF is below it. It looks like the Chinese New Year is off to a goodstart so far.So what could be perking these stocks up? Let’s take a look.  Chinese Government to the Rescue! Chinese stocks ran up to a four month high after thegovernment said that it would aid the equipment manufacturing industry. Alsothe run up came on expectations that the demand for domestic products willrebound.This is really helping the sentiment out there right now asinvestors are turning more optimistic than before. Investors are beginning tosee that corporate profits may start to pick up amidst the entire governmentstimulus that is going on.The government also said that they will increase the use ofdomestic made parts in major construction projects.What’s really important to know,is that their government has pledged 4 trillion yuan (approx. $584billion) worth of spending to revive economic growth. The central bank has alsocut the key lending rate five times since September to support industries andto stem job losses.The government will also increase their spending on technological upgrades alongwith boosting support for credit to assisttheir exporters.It looks like their government is also going to help theirshipbuilders and encourage domestic shipping lines to use “made-in-China”vessels.The government will also be cutting taxes and offeringsubsidies for the auto and steel industries.On top of this, the latest Purchasing Manager’s Index in Chinarose to 45.3 in January, up from 41.2 the previous month. So some are sayingthat the worst is behind Chinawith the coupling of the improved PMI numbers and the government spending, taxcuts and subsidies that are happening now.There also appears to be a bottom put in place in steelprices (showing an increasing demand).So, all in all, it looks like the story could be changingfor China.Formerly, they were getting sucked downward along with the rest of the world.However, a new day may be dawning for China. Keep an eye on their shares.The strength could lie with them and they may be the first country to turn upward as they come out of the slumpthe “least beaten up”.Therefore, if China’s stocks do break higher, theMorgan Stanley China A Shares Fund (CAF) may be the one to watch.Sean Hyman

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As a beginner investor, there is always one thought at the forefront of our minds, “what if I lose all that money”. This thought can sometimes paralyze us and hold us back from moving forward with educated decisions and opportunities to make those rewards.

Most beginner investors first start with the stock market. Considering this investment vehicle, lets look at the risks that you face as an investor. What most people don’t realize is that there are two forms of risk that reside in the stock market:
1. Market Risk
2. Company Risk.

Market Risk
Market risk is first of all something that none of us control and all investors, whether they are novices or experienced, are exposed to this risk. There are all sorts of conditions that influence the market, such as political, economical, cyclical, and day to day financial news. It is a general risk that the entire market faces and as a result stock prices go up and down. Of course there are exceptions but it is very rare to find a stock that is NOT affected by market risk every now and then. There is very little an individual investor can do about market risk so don’t waste your time analyzing it.

On the other hand, market risk can be narrowed down to sectors and industries and therefore the beginner investor can have some control over the choices they make. For instance the financial stocks have been hard hit the last 12 months, real estate and mortgage stocks are also likely to have gone down, whereas certain technology sectors have experienced gains. Factors such as interest rates and economical conditions can give you an indication of which sectors will suffer and those that may prosper.  Within each sector and industry, there are many companies to choose from. Even if a sector is doing well, you then have the company risk to deal with.

Company Risk
The good news is that there is a way to minimize the risk to your stock investments. Instead of putting all your money into one stock, reduce the risk by diversifying your portfolio - select five or more companies. This way you have an average return from all the companies in your portfolio. Some will overperform and some may underperform from your expectations.

Picking the stocks and making a portfolio may be easy for some and relatively difficult for others. Depending on your experience and comfort level, you can either create your own portfolio or pick from portfolios that are already created for you by your investment broker.

Hopefully this was helpful to the beginner investors in our community. Let us know if you have any questions or comments to this post.

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Do you think your character has any relationship with your finances?

Are you Purposeful (goals & objectives)? Are you Patient (saving)? Are you Responsible (borrowing)? Are you Moderate (balance & budgeting)? Are you Selfless (retirement)? Are you Reliable (credit)? Are you Courageous (business & investing)? Are you Punctual? (35% of U.S. FICO is based on this character) and the list goes on.

True Wealth & Prosperity can only be achieved by discovering and developing one’s hidden treasures:

“Regard man as a mine rich in gems of inestimable value. Education can, alone, cause it to reveal its treasures, and enable mankind to benefit therefrom.”

Of course development of hidden potentials (virtues) must be complemented with learning and implementing various elements of local economy in daily financial activities.

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Call me a true novice… I am ashamed to admit that I have let retirement money sit unattended and unmonitored for far too long!  WELL NO LONGER!  I just read this great book by Phil Town (Rule #1) who makes investing in the stock market seem much more approachable and real for a novice like myself. 

Honestly, I have fears of the stock market.  Investing in real estate and businesses comes pretty easily to me now, but, when I look at those numbers that seem to go up and down so radically, I truly get scared to invest. 

This book, Rule #1, has put my mind to rest.  I am sitting in front of my computer with poster paper tacked up all around me with tips and elements to investing that are helping me move toward competence in the stock market. 

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Are you looking to open an online stock broker account and overwhelmed with the number of choices out there? Well, thank your lucky stars! Below is a summary of online stock brokers that I put together to help our Financial Resource community.

Most likely many of you already have an online stock brokerage account, but if you are like me, you may have started an account a while back and continued using the same company and account all these years even though we know there are a lot more options and possibly better ones now. For example, I started an Ameritrade account a little over 10 years ago (the company is now called TD Ameritrade after a merger) and I still have the same account. At that time, my priority was to get the lowest stock trade fee (or lowest commissions). I didn’t care too much for stock analysis and company research, as I used other sites like Yahoo Finance to do most of my research. However, over the last 10 years many things have changed and there are a lot more options out there. Maybe I have been missing out on a lot of new features that could save time and money!

The first point I need to make is that there are many online brokers out there. No one solution fits all, and each of us may have a different need, so I will not be recommending a particular broker to work with. My goal is to summarize my research with the most relevant information to share with our Financial Resource community. This summary can serve as a base to work from or help you to decipher which online broker offers what you need. From there, I highly advise you to research their website, their product and offering, and contact and speak with them, if needed, to get a better feel for what you will get when you open a stock trading account.

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Couple weeks back, I wrote about stock investing tips and one of my final tips discussed using an online stock brokerage account once you get familiar with stock trading and have some experience behind you. To continue that topic, it would be helpful to know what features to look for in an online broker, as there are many options out there.

Whether you are a novice or seasoned veteran to online stock trading, here are some important features and points to keep in mind when you open an online stock trading account.

What trading tools do you need to conduct your research? Company historicals, independent market research, real time quotes, SEC reports, etc. Check to see what trading tools are provided by the broker, both free and premium tools, which may cost you.

What types of online trading are you planning to do, stocks, mutual funds, bonds, ETFs, retirement accounts, IRAs, etc.? Are these investments offered by the broker? What are the respective fees for each of these investments?

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With the real estate market down and the economy falling into recession, there is a lot of attention on the stock market. Many people are looking at the stock market and hoping to make short term and long term gains. There is no doubt opportunities to make money in the stock market and we should consider these options as well for our investment portfolio. Here are 10 stock investing tips to keep in mind. 

1. Long-term investment
Typically stock prices will go up and down and fluctuate even more in the short term. Don’t pay attention to the daily fluctuations in your stock. Always invest with the long term in mind.

2. Diversify!
Diversiy your investments with low, medium and high risk stocks. Pick some fixed income securities especially in fluctuating markets. As they say “don’t put all your eggs in one basket” applies here.

3. Online trading is quick and easy, online investing takes time
These days the internet has made trading so easy. With one click, you can buy and sell stocks from more than 100 online brokers with low commissions. However, this does not take the homework out of researching and making investment decisions.

4. Don’t gamble!
If you can’t afford to lose the money, then don’t gamble it on a stock purchase. Choose more conservative investments with low risk if you are worried about your money.

5. Don’t expect miracles!
If you come across some recommendations from a friend or broker that a stock is going to double in value in a few months - beware! Don’t go into the investment expecting this. If you are lucky and the stock does go up 50% or more, then consider selling and get your returns immediately.

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