Consistent with the approach taken over the past seven years, we’ll use the techniques of value investing described elsewhere on this website to identify five good stocks to buy in 2019. Last year was a poor one for investors in the stock market, with broader measures of the market’s performance declining significantly in December.
It turned out to be a poor year for the Dow Jones Industrial Average, with the index remaining relatively flat by late December. As we've done for the past thirteen years, the close of one year signals the time to announce the Dogs of the Dow for 2019.
Our approach in putting this stocks category together is to help teach the reader about the stock exchanges themselves, and at the same time learn a bit from history. Our goal is to give you enough information so that you feel comfortable and confident in taking your first step towards investing in stocks.
Individuals researching the history of the stock market often focus on the events leading up to the stock market crash of 1929. Admittedly, this event had a huge impact on the market as well as the world's economy. But the real history of the stock market goes back to the formation of the modern stock exchanges.
Nearly every investor has heard of the Stock Market Crash of 1929. For market historians, it's important to understand the circumstances that existed in 1929. A deeper understanding of what happened in the past can possibly prevent this type of event from occurring in the future.
Learning about the Stock Market Crash of 1987 is just as important as understanding what happened during the Stock Market Crash of 1929. Many historians argue there were similarities between the two crashes, and that appears to be true. There also seem to be several distinct differences between these historic events.
Only time will tell the full story of the stock market crash of 2008, but on Monday October 6, the stock market would start a weeklong decline in which the Dow Jones Industrial Average would fall 1,874 points or 18.1%. While the exact cause of this crash may differ from those of 1929 and 1987, they share one common element - they all began in October.
Investors that trade stocks will understand the concept of a stock exchange, but novice investors may not understand the subtle differences between the major exchanges. For example, why is it that some companies choose to be listed on the New York Stock Exchange while others are traded on the NASDAQ?
At one time, the American Stock Exchange, or Amex, was the third largest exchange in the United States, positioned behind the New York Stock Exchange and the NASDAQ. Prior to the merger with NYSE Euronext, over 570 companies were listed on the Amex, with a market value in excess of $565 billion.
The Australian Stock Exchange Limited (ASX) operates Australia's national exchange for equities, derivatives, and fixed interest securities such as bonds. The exchange also provides comprehensive market information and data to a wide range of traders, brokers, and commissions.
The Bombay Stock Exchange (BSE), also known as the Stock Exchange Mumbai, is one of the oldest exchanges in all of Asia, dating back to 1875 when it was known as the Native Share and Stock Brokers Association.
The London Stock Exchange, or LSE, is one of the world's oldest stock markets, with a rich history dating back to 1698. The exchange began its life in the coffee houses of 17th century London, when John Castaing began issuing "at this Office in Jonathan's Coffee-house" a list of stock and commodity prices called "The Course of the Exchange and other things."
Everything is relative, and from the standpoint of stock exchanges, the NASDAQ is a newcomer. When trading began in February 1971, the NASDAQ became the world's first completely electronic stock exchange. Today, it is arguably the largest of the U.S. stock markets.
For many years, more securities were exchanged on the New York Stock Exchange than any other trading floor in the world. This made the NYSE not only the busiest exchange, but also the most prestigious. While the NYSE may no longer be leagues ahead of its rivals, the pictures of its chaotic trading floor will forever be the image of what happens every trading day on Wall Street.
The Tokyo Stock Exchange, or TSE, is one of the largest stock markets in all of Asia, with over 3.3 billion shares exchanging hands each trading day. The exchange supports the trading of bonds and derivatives in addition to equities.
The Toronto Stock Exchange is just one of two national stock exchanges operating in Canada, the other being TSX Venture Exchange. Both of these companies are held by TMX Group, Inc., which is considered the cornerstone of the Canadian financial markets and the center of Canada's equity market.
We live in a global economy; however, some of the largest stock markets in the world are located in the United States, and they do follow an American holiday schedule. There are currently nine holidays on which these stock markets are closed, as well as special rules that often indicate the early close of these exchanges.
The history of the stock ticker and ticker symbols begins with the ticker tape machine invented by Thomas Edison. The original need for symbols no longer exists, but stock tickers are still alive today.
Individuals new to the concept of investing often want to start trading stocks, but don't understand where to begin. This article is structured to be a simple introduction to stock trading basics. We'll explain what takes place when trading a stock, and what to look out for when calculating the return on investment.
The greater returns associated with the stock market are directly related to the market's risk. Given the choice between investing in common stock or placing money in a savings account at a local banking institution, the investor should expect higher returns if they choose stocks.
Investing in the stock market is both a rewarding as well as risky proposition. Many investors are quite comfortable knowing their mutual funds are professionally managed, and the diversification of those portfolios has kept risk to a minimum. For other investors, selecting individual stocks provides both a sense of control and satisfaction.
The sheer number of tasks everyone completes each day is astounding. With such busy and complex lives, it helps when a topic can be broken down and simplified. That's what this article, stocks for dummies, tries to do.
In addition to buying and holding securities, investors can also purchase stock options to either protect an investment or leverage price volatility. Puts and calls are the most basic forms of these contracts, and provide the foundation for more complex contracts.
When the stock market is bullish, investors seem to take more risk. At least that's the experience with stock accumulators. These financial derivatives provide buyers with a lot of upside potential when prices are on the rise. Unfortunately, when stock prices fall, the losses can be devastating.
In the world of options trading, there is a word that is used to describe the relationship between the current trading price of the security and the strike price of the option: moneyness. Whether an option is in-the-money or out-of-the money tells the holder of the option if the security they own has value.
The term short-selling stock refers to the practice of selling securities that are not owned. Investors will short-stocks when they believe a stock's market price is going to decline.
When it comes to buying and selling stocks, investors have several options, including using techniques involving stop loss orders. It's important to understand how this type of order works; because they can limit a loss in a volatile stock market.
When buying and selling stocks, the investor generally has three types of orders they can place: market orders, limit orders, and stop orders. When working with a broker, it's important to understand both the trades that are possible as well as the firm's policies and procedures.
In this article, we're going to explain two terms: stock splits and reverse stock splits. That explanation will include a brief definition of each term, their advantages and disadvantages, impact on dividends, as well as an example.
This is the first in a four-part series of articles that will cover the topic of stock research. In this article, we're going to discuss the fundamentals of investing, how to find excellent stocks, and the types of companies to avoid.
The first article in this series explained how to identify the types of companies that are worth owning. This included companies that were in businesses that are understood as well as owning "excellent" companies with expanding value.
Previously, we learned how to calculate two important financial measures: intrinsic value relative to a risk-free investment, and return on equity. In this article, we'll be examining both earnings stability and earnings growth.
This is the last in a four part series aimed at explaining a fundamental approach to selecting stocks. In this article, we'll summarize what was learned; then use an example to review the information appearing in each of the earlier articles in this series.
Generally, investors buy common stocks for two reasons: they offer a cash dividend, and they also have the potential to provide a capital gain. In this article, we will present a method for calculating stock prices based on a constant growth model, leveraging a discounted cash flows approach which considers both dividends and capital gains.
One of the models that can be used to project the expected return from a common stock, or any type of asset, is the capital asset pricing model or CAPM. In general, the capital asset pricing model describes the relationship between the risk of a particular asset or stock, its market price, and the expected return to the investor.
As its name implies, the Arbitrage Pricing Theory, or APT, describes a mechanism used by investors to identify an asset, such as a share of common stock, which is incorrectly priced. Investors can subsequently bring the price of the security back into alignment with its actual value.
Perhaps the single most important measure of stock risk or volatility is a stock's beta. It's one of those at-a-glance measures that can provide serious stock analysts with insights into the movements of a particular stock relative to the overall market.
One of the most respected names in the investment community is Value Line. Their research is an outstanding resource to both new and seasoned investors. While a subscription might seem expensive, publications are often available for free at local libraries.
Today's stock market is more than just a place to buy and hold securities. Many investors prefer to move quickly in and out of the market. That's just one reason technical strategies, such as price momentum, have grown in popularity.
Economists, scholars, and market analysts have been searching for ways to predict the movement of individual stocks for many years. Chartists and technical theorists believe historical patterns can be used to project future prices. While the random walk hypothesis claims that such movements cannot be accurately predicted.
The history of the Dow Jones Industrial Average, or DJIA, goes back to May 26, 1896. Charles Dow, Wall Street Journal editor and founder of Dow Jones and Company, first compiled and published the average as an indicator of stock market performance.
No stock market report is complete without a mention of the Dow Jones Industrials. It's an average that most investors like to talk about; and an index that many use to get a feel for the direction the market is moving. Not everyone thinks it is as important as it once was, but everyone will agree that it has a rich history, and can be exciting to watch.
While the Dow Jones Industrial Average might be the most well known, it's not the oldest index assembled by Charles Dow. That title goes to the Dow Jones Transportation Index, which also plays an important role in something called the "Dow Theory."
In this article, we're going to discuss the final of the three famous Dow Jones Indexes: the Dow Jones Utilities Average. With its humble beginnings back in January of 1929, the Utilities Index is the youngest of the three averages.
The Dow Diamonds offer investors a unique opportunity to "own" the Dow Jones Industrial Average. In this article, we'll discuss the structure of this fund, its advantages, how it's traded, as well as recent performance statistics in terms of annual returns.
As investors, we're used to hearing about the Dow setting a new record high. But in November 2014, we encountered a rare record-setting day. This was a Dow trifecta or hat trick of sorts, when all three of the Dow averages hit a high on the same day.
If you're a fan of the Dow Jones Industrial Average, then you know that it's been awhile since it crossed a major milestone. In fact, on May 6, 2006, it had been seven years since the Dow first passed the 11,000 mark.
As investors, it's important to know how to go about finding the best stocks to buy. Before it's possible to successfully choose these stocks; however, it's essential to understand some of the fundamentals of evaluating securities.
A stock market downturn is often the best time to identify potential takeover targets. Fortunately, investors can use the same valuation techniques as corporate raiders when searching for stocks that are undervalued.
Companies issue shares of stock when they want, or need, to raise money; so why would companies buy back stock? The answer seems like it should be obvious; they have too much money. For some companies, this might be true; but there are other reasons companies repurchase shares.
One of the ways a company can protect itself from a hostile takeover bid is by adopting a poison pill defense. Generally, this term is used to describe several approaches the target company can employ to make the potential acquisition less desirable.
When interest rates are low, retirees and other investors turn to dividend paying stocks to provide them with a reliable source of income. In fact, investing in companies paying high dividend yields is often viewed as the "sensible" or "rainy day" approach to creating an investment portfolio.
Stocks can provide an individual with two returns on their investment. The stock's price can increase over time, and selling shares results in a capital gain. Companies can also pay shareholders dividends, which are usually received periodically throughout the year.
One of the most common measures of a company's size is its market capitalization. Unlike revenues, market capitalization is not reported in one of the company's financial statements. It's calculated based on the number of common shares outstanding and their market price per share.
When investors talk about buying stocks, they're typically referring to shares of common stock. But preferred stock offers the investor the advantages of both common stock and bonds, and is oftentimes a compromise worth pursuing.
Investors are constantly faced with the decision between risk and return. The same logic applies to growth versus value stocks. Rationale investors will agree that picking a quality stock is important; but not everyone agrees that value is more important than growth.
There is no doubt the stock market presents individuals with a variety of investment opportunities every trading day. One of the opportunities investor should be familiar with is cyclical stocks.
When investors talk about quality stocks, they'll often use the phrase "blue chip." Unfortunately, even seasoned market analysts can't agree on a definition of this term. But they do agree that blue chip stocks have some very desirable attributes.
With stock ownership, it's certainly possible to have too much of a good thing. Diversity of stock holdings is important, just ask any former employee of Enron. When that company filed for bankruptcy, thousands of employees lost nearly all their savings.
During economic recessions, or market downturns, investors typically add defensive stocks to their portfolios. These stocks can be expected to perform relatively well during all phases of a business cycle, even during difficult economic conditions.
Dogs of the Dow theory, used as an investment strategy, was first popularized by Michael O'Higgins in his book Beating the Dow, which was published back in 1992. The theory is based on the purchase of high dividend yield stocks that are members of the Dow Jones Industrial Average.
The term small cap stock is used to categorize common stocks issued by companies that are considered "small" as measured by their total market capitalization. There is a great deal of investor interest in these securities, because they offer some noteworthy advantages.
In this article, we're going to talk about a class of stocks that are frequently mentioned in the news, but not always completely understood. In the United States, investors often associate penny stocks with issues that are not traded on one of the more prestigious stock exchanges; but that's not the complete story.
Playing a stock market game is a great way to gain a better understanding of the inner workings of the stock market without the risk of losing real money. We did some research, and found several online games that are very good. We also took a look at several board games that might help with the learning process too.