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Investing 101 Archive

  • They may not have access to the armed forces but it is often argued that the chairman of the Federal Reserve has a level of global power and influence that rivals that of the U.S. president. While most investors know the name of the current Fed chief, Ben Bernanke, how his decision-making impacts your money is much more elusive. In this installment of Investing 101, we address how the Federal Reserve's policy-making decisions impact your investments in stocks, bonds, and commodities.

    1. Fed Liquidity & Stocks

    The role of the Fed is simple on paper. The entity exists to carry out a dual mandate to use monetary policy to promote maximum employment and stable prices (keep inflation in check). That's it. While many critics believe the 2008 financial crisis caused the Bernanke Fed to stray beyond their traditional mandate, the debate is best left to the scholars.

    What you need to know is whether the Fed is lowering interest rates or adding money or taking other actions that support or nurture economic growth --generally referred to as an "easing cycle."

    "When the Fed is adding liquidity into the system, it's good for stocks," says Doug Roberts, author of Follow the Fed to Investment Success. "If they're not injecting liquidity (which is called ''tightening") and there's a crisis where the economic system is contracting, it's bad for stocks."

    But it's not as simple as higher rates versus lower rates.

    Read More »from 3 Ways the Federal Reserve Is Impacting Your Money
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    One of the most passionate but unresolved debates in the investment world is whether so-called growth stocks or value stocks offer a better return. Even though the ultimate objective is the same --to make money-- the statistics get twisted and opinion is polarized when trying to discern the best route to take.

    In this installment of Investing 101, we outline some differences and shed light on how the voyage of each method might differ along the way.

    "Value investing is the premise that you can buy a dollar's worth of assets for 70 cents," says Scott Schermerhorn, president of Granite Investment Advisors and manager of the Granite Value Fund in the attached video. He says the chance to buy companies on sale typically comes when nobody else likes them or they have been beaten up due to some sort of mishap or controversy.

    On the flip side, Schermerhorn says that "Growth investing is where you believe that you can buy something that will grow faster than the market over a period of time."

    Growth investing is often done before the actual growth shows up or accelerates. This ''crystal ball'' or anticipatory facet is arguably the most difficult aspect of choosing a growth stock, and perhaps the most risky too. As Schermerhorn explains, if you are wrong about the growth, "all you have is a very expensive company."

    Read More »from Value vs. Growth Stocks: Which Is the Better Investment?
  • Like it or not it's time to pay the price for being an American: that's right, the tax deadline is upon us once more.

    There may not be any way to ease the sting but in this edition of Investing 101 Greg Rosica, the co-author of Ernst & Young Tax Guide for 2012 gives investors tips and rules of thumb for minimizing both the pain and maybe even the cost of what you have due this April 17th.

    In the attached video clip, Rosica lays out five key tax tips for every investor.

    1) Types of Taxable Income

    Not all income is created equal when it comes to taxes. Wages, interest, dividends, and capital gains from stocks or mutual funds are all treated differently when it comes to tax rates. Adding up everything that flowed into your accounts over the year and calling it "income" is going to lead into you paying more than your fair share.

    2) Asset Location

    Not only do rates vary but you may not to have to pay taxes on gains at all, provided you're holding assets in a 401(k), IRA or other accounts where you can defer paying taxes on gains for years. Only your taxable accounts --typically vanilla brokerage or accounts that allow you to deposit and remove money at your will-- are subject to annual rates.

    Read More »from It’s Tax Season Again! Tips for Every Investor

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ABOUT INVESTING 101

Breakout’s Investing 101 helps you gain insight on money management and trading. Whether you’re managing your own retirement account, just beginning, or an advanced investor in need of a good refresher, Investing 101 will help you learn, grow, and keep you informed of the basic steps to effectively manage your money. Expect investing tips that focus on trading strategies, asset allocation, and portfolio management.





Investing 101

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