What is an IPO and Should I Care?

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Facebook’s recent IPO and resulting stock price flop have been all the talk in both financial and general news media as of late.  Billions have been made and lost on that single stock alone.

But what exactly is an IPO?  And does it really matter to the average investor?

What is an IPO?

IPO stands for “Initial Public Offering”.

When a private company wants to sell a share of the company to the public in order to raise capital to continue expanding operations it is done through an initial public offering.  It is called this because up to this point the private company hasn’t sold a share of the company publicly on the stock market.

In short, an IPO is when a privately held company owned by a few individuals or handful of investors, sells a chunk of the company on the publicly traded stock markets.

Why Do Private Companies Go Public?

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What is the Most Efficient Way to Use Dollar Cost Averaging?

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Equity and Long Term Bond Fund Performance Over Past 20 Years

Previously on Free from Broke, Glen has touched on the subject of dollar cost averaging as an effective way to buy new shares of mutual funds for retirement accounts (401ks and IRAs) several times.

Indeed, from an emotions and mathematical standpoint, dollar cost averaging makes sense.

Because of the simplicity and sensibility of the method, it is safe to say that there is a large amount of people who believe in and employ dollar cost averaging on a frequent basis to invest for retirement. So, after being convinced of the merits of this investing strategy, the important question then becomes…

What is the Most Efficient Way to Employ Dollar Cost Averaging?

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The Different Stock Market Sectors – Are You Taking Advantage?

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When we speak of the stock market we describe it with the term “The Stock Market”, as if it’s a single, unified market.

The reality is nothing close.

The stock market is really a group of sub-markets, many of them very different from the rest.  These sub-markets are commonly described as “sectors” and there are quite literally dozens of them.

Since sectors perform differently in various market conditions, it’s worth using them to your advantage in building your portfolio.

Common Market Sectors

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ShareBuilder $50 New Account Bonus Code

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You know I love ING Direct products.

I have both the Orange savings account for online savings and their Electric Orange checking account.  What I also have is a brokerage account with ShareBuilder (owned by ING Direct).  This is where I buy stocks outside of my IRA accounts.

ShareBuilder is offering a promotion where new customers get a $50 bonus code for opening a new ShareBuilder account. 

The offer is in effect until 9/30/12.  In order to receive the bonus you need to fund your account with $2,000.  And most important – make sure to enter the code 50LSQ3 when you sign up to make sure your account gets credited with the $50 bonus!

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What is Passive Investing?

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For some, the idea of investing conjures up images of crazed traders on the floor of an exchange.

Others think of someone in a home, sitting in front of a computer screen, desperately trying to time the exact best time to buy — and then to sell.

These images, and the idea that you have to be on top of all the market movements and news, discourage many from investing.

Not all investing is a short-term attempt to profit, though.

Indeed, many investors are passive investors, doing very little to actively manage their portfolios.  Think investing in a tax-advantaged retirement account like a 401(k) or an IRA.

A passive investment doesn’t have to be all about your retirement account, though.  Anyone can be a passive investor and come out just fine in the end.

Definition of Passive Investing

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Good High Yield Dividend Stocks Are Better Alternatives to Bonds Today

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The markets continue to be volatile.

With the European countries still struggling to figure their way out of the debt mess, and even the well regarded bank like JP Morgan taking large losses on their hedging activities, it is understandable that some investors may decide move their assets to the relative safety of the bonds.

However, this safety is illusory.

The Inverse Relationship Between Bonds and Interest Rates

This is one of the fundamental principle of bond investing.  It is well understood but still bears repeating.

The value of a bond goes up when the interest rates are low and it goes down when the interest rates are high.
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Tradeking and Zecco to Merge – More Capabilities, Same Great Pricing

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Like so many other industries, there are small players and big players.

Little fish in a very large pond may be another applicable cliché to describe this story.  The pond is the brokerage business and that pond is big.

Companies like Fidelity, the world’s largest retirement account holder has 13.5 million accounts, E*Trade, one of the most well known of the brokers for retail investors has 3.9 million accounts and TD Ameritrade has 5.7 million.

In the past, there were plenty of smaller discount brokers but most were bought by the larger firms.

Schwab acquired OptionsXpress for $1 billion and TD Ameritrade acquired Thinkorswim for an undisclosed amount.

As the big brokers keep getting bigger, there was little room to compete if you were still holding on as one of the smaller firms in the highly competitive field of discount brokerage.

[Related: Best Online Brokers for Inexpensive Trades]

This was true for two small firms, Zecco and Tradeking.
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How to Avoid Investment Scams

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We all want to make more money.

And, for many, the dream is to make money quickly and with a minimal amount of work.  This is why investing is such a popular method of making money.

If you take a measured approach, you should be able to regularly invest in carefully chosen stocks, index funds or some other boring investment, and, over time, amass a reasonable amount of wealth as you receive returns on your investment.

Many people, though, don’t want to take the measured approach.

There are stories of people making money fast by choosing the right investment, at the right time.

How many of us regular folks harbor the dream of, perhaps, taking $10,000 in capital and turning it quickly and painlessly into ten times that amount?

The unfortunate truth is that investments that promise such riches, fast and easy, are usually scams.

Does that Investment Send Up Red Flags?

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Is Gold a Good Investment Right Now?

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Since reaching a high price of $1,913 back on August 23rd of 2011, gold seems to have fallen off the investment radar screen.

In fact it seems the only time gold is ever on that screen is when it’s on its way to establishing new record prices.

Now that gold has settled comfortably in the mid-$1,600 range no one seems to be paying much attention.

But how should we take that?

Will gold slowly drift its way back down below the $1,000 mark, or will it—as some claim—continue to rise to ever higher prices punctuated by periods of price stability? And should we even consider gold as an investment?

Why invest in gold at all?

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What is FOREX Trading and is it Right for My Portfolio?

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Sometimes sticking to stocks and bonds just isn’t enough for the investor that wants to make his portfolio a little more exotic.

For the aspiring speculator, a wide range of options are available: trading options, trading on margin, owning precious metals, and FOREX trading.

Be forewarned: you should never dedicate more than 5-10% of your nest egg to any kind of speculative trade opportunity whether it be picking individual stocks on your own or doing currency trading.  You can survive losing that small chunk of your portfolio, but not a significant portion of your assets.

What is FOREX Trading?

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