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Investing 101 Archive

  • The midnight rush to get your taxes filed by April 15th is going to be heavier than usual this year, as up to 25% of taxpayers are estimated to wait until the final two weeks to take care of this annual headache.

    But according to Yahoo!'s Farnoosh Torabi, host of Financially Fit and author of Psych Yourself Rich, taking advantage of a few simple tips and "investing in professional assistance" can more than pay for itself. For this installment of Investing 101, we outline five last minute tax tips that are frequently overlooked but can make the difference between getting a refund and writing a check.

    1) Keep Records for All Charitable Activity

    Writing a check to the Red Cross may be "an obvious deduction" but Torabi says there are lots of quirky costs involved in giving that aren't so clear cut. For example, she says be sure to keep track of things like "the mileage you use driving from charity to charity" or the cost of the "the ingredients you purchased" to make meals for the local soup kitchen. The point is, it's not just about giving money when it comes to making this deduction work for you, it's also about first rate record keeping.

    2) Avoid Obvious Audit Red Flags

    While Torabi says under-reported income is one of the most common traps tax filers fall into, there are others. For example, she says "the IRS actually has an equation to kind of base you against the average charitable deduction in your tax bracket."

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  • NYSE Euronext (NYX) launched mini option contracts on five of the most actively traded stocks and exchange traded funds on March 18th. The move enables NYSE Arca and Amex customers to trade options in smaller blocks than before, thus enabling investors with limited capital to trade options on higher priced issues without taking outsized risks. The first five securities with available mini options are Google (GOOG), SPDR Gold Trust (GLD), Amazon (AMZN), Apple (AAPL) and the SPDR S&P500 ETF (SPY).

    Steve Crutchfield, the head of U.S. Options at NYSE Euronext, joined Breakout from the New York Stock Exchange to explain to what that all means.

    1. Why minis?

    They're less expensive per transaction. The actual price of an option contract is typically $100x the quote. If a customer wanted to get long Apple calls listed at $10, the actual price would be $1,000. If Apple were a $45 stock it wouldn't be a problem. Because Apple is a $450 stock, its options would trade 10x as much.

    Suddenly our $1 Apple call is trading at $100 and the lowest possible cash outlay a trader can pay to by the contract is $100 x 100 or $10,000.

    Minis solve that problem. "A mini option is an option that delivers 10 shares of an underlying stock rather than the standard 100 shares," Crutchfield explains. Using the mini option contracts, investors can hedge their positions for less money.

    2. How should minis be used?

    Continuing with the example of an Apple shareholder, Crutchfield points out that an investor with $25,000 of Apple stock owns just over 50 shares. Previously, buying one lot of options to hedge that position would give the shareholder control of twice as many shares as they actually own.

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  • This weekend marked the four year anniversary of the 2009 market lows, and it comes just days after the Dow Jones Industrials hit new all-time highs. So it seems fitting to assess this historic move and put it into context.

    For this edition of Investing 101, we will grab the bull by the horns, and analyze these most lucrative periods of rising stocks that are typically referred to as bull markets.

    What exactly is a bull market?

    According to Investopedia, "Bull markets are characterized by optimism, investor confidence and expectations that strong results will continue." It's a term that can be applied to any type of securities trading but, the site says, it is most often used to describe the stock market, and is the metaphoric antonym to the term bear market.

    How long do bull markets last?

    That depends. According to the Stock Traders Almanac the longest bull market we've had since 1900 lasted 2,836 days and ran from October 1990 to July 1998, wracking up a whopping 295% gain for the Dow Jones Industrials along the way. The Almanac says that the shortest bull market in the past 100 years lasted just 61 days during the summer of 1932 yet still saw the Dow bounce 94%! Those are of course the extremes, but the average bull market of the past century has lasted 755 days and delivered an 85% gain. The current bull run is now four years old and up about 120%, making it significantly above average by both measures.

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ABOUT INVESTING 101

Breakout’s Investing 101 is a new way to 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.





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