The World's Billionaires #1 Warren Buffett

Age: 77
Fortune: self made
Source: Berkshire Hathaway
Net Worth: $62.0 bil
Country Of Citizenship: United States
Residence: Omaha, Nebraska , United States, North America
Industry: Investments
Marital Status: widowed, remarried, 3 children
Education: University of Nebraska Lincoln, Bachelor of Arts / Science
Columbia University, Master of Science

America's most beloved investor is now the world's richest man. Soared past friend and bridge partner Bill Gates as shares of Berkshire Hathaway climbed 25% since the middle of last July. Son of Nebraska politician delivered newspapers as a boy. Filed first tax return at age 13, claiming $35 deduction for bicycle. Studied under value investing guru Benjamin Graham at Columbia. Took over textile firm Berkshire Hathaway 1965. Today holding company invested in insurance (Geico, General Re), jewelry (Borsheim's), utilities (MidAmerican Energy), food (Dairy Queen, See's Candies). Also has noncontrolling stakes in Anheuser-Busch, Coca-Cola, Wells Fargo. Insurance operations flourished in 2007. "That party is over. It's a certainty that insurance-industry profit margins, including ours, will fall significantly in 2008." The Oracle of Omaha issued a challenge to members of The Forbes 400 in October; said he would donate $1 million to charity if the collective group of richest Americans would admit they pay less taxes, as a percentage of income, than their secretaries. Had long promised to give away his fortune posthumously. Irrevocably earmarked the majority of his Berkshire shares to charity in 2006, mostly to the Bill & Melinda Gates Foundation. Gift was valued at $31 billion on day of announcement; donation will far exceed that sum so long as Berkshire shares continue to rise.

http://www.forbes.com/

Stock Investing Basics

Stock Investing vs. Saving
Whereas investing represents a proactive activity the opposite is true for saving. Saving incorporates compounding, in which it is similar to investing.

Mutual Funds vs Individual Stocks
Many investors face the dilemma of whether to select mutual funds or stocks as their investment tool. In order to decide which tactic best fits your needs, you should be well grounded in the pros and cons of each of them.

Classes of Assets - Asset Class Definition
Basically there are four major classes of assets. When constructing your investment portfolio you may select any of them and make combinations out of them.

Investment Goals Planning
The first step before you embark on any investment activities is the setting of investment goals. You may find it difficult to harmonize your goals since some of them may conflict each other or may not coincide with your way of life.

Stock Investing Basics
Before you start investing on the stock market you should be well familiar with the general stock market terms and definitions like stocks, types of stocks, class A and class B stocks, investment risk, etc.

Bond Definition and Concepts
Many financial experts recommend the combination of stocks and bonds in investment portfolios. Bondholders are classified as creditors, whereas stockholders are referred to as company owners.

Zero Coupon Bonds Basics
Zero coupon bonds (also known as zeros) don’t give their holders interest rate payments on regular basis. However, the interest rate is accumulated and paid at maturity.

Convertible Bonds Basics
In order to decide whether you should own convertible bonds or not you should make a careful consideration of both the negative and positive sides and see whether they represent the tool that coincides with your financial goals.

US Treasury I Bonds Basics
If you want your principal to be guaranteed and to exempt yourself from taxes on the generated income, I Bonds may be the investment solution you need.

Discount Stock Brokers vs Full Service Brokers
In the past it was easy to divide stock brokers into either full service or discount ones. Now it is difficult to categorize brokers into separate classes, but still, you should be able to distinguish them according to the types of services they provide.

Financial Advisor Job Description
Many investors lack the time and sometimes the knowledge encompassing the stock picking activities or the setting of a successful investment portfolio. In such a case the services of a financial advisor can be extremely valuable.

Certified Financial Planner Designations
You may find it difficult to qualify a certain individual as a financial advisor or a financial planner, since most states don’t have specific regulations directed toward such identification. Nevertheless, there are several criteria in order to designate someone as a certified financial planner.

Stock Broker Categories
Internet provides vast amounts of information to which most individual investors have a free access. As a result not only the amount of information available to investors has increased, but also the range of brokers from which investors can choose.

Types of Brokerage Accounts
Now that you have decided to use the services of a broker, it is time to make your mind about the type of brokerage account you will open.

Stock Buyback Reasons
Companies issue stock in order to obtain resources for the financing of particular projects and they have the right to buy them back under specific conditions. This action is known as stock buyback.

Stock Basics
In order to get a clear view of how the stock market operates you should become familiar with the essence of stocks themselves.

Stock Dividends Basics
Dividends represent the profits that a company distributes to its owners. Many investors consider stock dividends as a good way to meet their financial goals.

Stock Market Cycles
Many investors get panicked when they hear that the market has dropped significantly. However, experienced stock investors are well aware that such falls are absolutely normal being part of the stock market cycle.

Federal Reserve Board (Fed) Functions and Importance
The Fed can be defined as the driver of the markets since it regulates its speeds. So, keep a close eye on the meetings of the Fed and the announcements they make after the meetings, since a view on the interest rate direction can be made.

Stock Market Sectors Classification
There are many ways in which stocks can be classified. One of the most preferred ones is by the sector in which the particular business that issues the stocks falls.

Stock Split Basics
There are times when a company may decide to split its stocks. However stock split is not an enough indicator that the company is worth of investing in and further research should be done to see whether it is really reasonable to invest there.

Stock Market Indexes and Fair Value Indications
Stock market indexes and their relationship to “fair value” give investors a hint on how the market will open.

Stock Share Types
Stock investing includes many terms with which every investor should become familiar in order to make educated decisions. Additionally, the different shares, such as authorized, treasury, outstanding and etc. have different characteristics.

Bid and Ask Prices
As an educated investor you should be acquainted with the meaning of bid and ask prices and the difference between ask and bid prices, referred to as the spread.

Stock Trading Basics and Order Types
Trading is facilitated by many additional tools that minimize the possibility of disparities. There are different types of orders through which you can avoid losses due to too much time between your intentions of selling and the actual execution of the sale.

Market Makers Role and Responsibilities
The role of the market maker is clearly identified in the NASDAQ. Market makers at NASDAQ are responsible for the provision of a market for the listed securities and the provided prices (both ask and bid prices).

NYSE and Market Specialists
The New York Stock Exchange (NYSE) is the oldest stock exchange in the US. The key role in NASDAQ is played by a market maker, whereas in the NYSE it is allocated for a specialist, who is a market professional part of a specialist firm.

Company Market Capitalization
When you decide on the investment in a particular stock you should consider the size of the company that issues it. This is required since companies of different sizes react in a different way to market conditions and changes.

Stock Order Types
Using the services on online brokers includes familiarization with the different types of orders that are in use for the execution of the various trades by investors.

Setting Stock Prices
The setting of stock prices depends on many factors. It is not a simple process, but instead a complex one which, however, is easy to understand.

Newspaper and Online Stock Quotes
Your successful participation on the stock market depends on many factors one of which is the clear understanding of the numbers that are daily quoted by the different sources.

Stop Loss Order Fundamentals
Stop loss orders are used to alleviate the losses that may be incurred if the price of your stocks falls under the desired level. Under this type of order the broker is required to sell the stock when a certain level is hit.

Trailing Stop Order Basics
Trailing stop orders are a form of stop loss orders. Their major purpose is to protect the profit from a stock. If used appropriately, trailing stops can follow an increasing price of a stock.

Book Value Explanation
When deciding on the investment in a particular company through the purchase of stocks of the company, many investors refer to its book value as one of the components that guide their decision regarding the investment.

Dividend Yield Explanation
Dividend investors, searching for a stock that will return them stable current income, should use Dividend Yield in their comparison of the different stocks available on the market, which fall under the investor’s consideration.

Stock Price Influences
Stock prices are vulnerable to many market changes. You should become familiar with these influences in order to be able to identify whether the change in the price gives you a signal to sell, buy or do nothing with a particular stock.

Advance Decline Ratio Basics
One of the indicators that give you an idea on what has happened during the trading day is advance/decline ratio. Use advance/decline numbers whenever you need to make a judgment on the performance of the market.

Value Investing Basics
Value investing refers to the purchase of stocks that have been overlooked by the market and as a result their price is below their real value.

Rising Interest Rates and their Effects
Changes in interest rates may have influence over the performance of companies. This in turn may reflect on the movement of your stocks.

Foreign Stocks Basics
As part of your investment portfolio you should not overlook foreign stocks. Depending on your conservativeness regarding investing include the appropriate percentage of foreign stocks in your portfolio.

Asset Allocation Basics
In order to protect your assets from sustaining losses when a sector suffers a decline you should practice asset allocation, meaning you spread your resources among different categories of investments.

Stock Market Movements
The stock market is characterized by its volatility. What exactly causes its rises and falls has several explanations. Some of them are obvious whereas others are not so easily determined.

Earnings Season Basics
Earnings season represents the time when many companies give a report on their quarterly profits or losses. Thus, this term is often mentioned during the year.

CPI Basics
The most well known and widely quoted economic indicator is the CPI (Consumer Price Index). It represents an estimation of the change in prices of consumer goods and services.

Inverted Yield Curve Implications
An inverted yield curve results when short-term interest rates are higher than long-term interest rates.

IPO Basics and Strategies
Initial Public Offerings (IPOs) represent the transition point of companies from a private status to a publicly held status. Thus, IPOs represent a new trading opportunity.

Option Basics and Types
Some investors tend to sign option contracts, which include the right to buy or sell securities when a certain price is reached. There are two major types of options.

Consumer Price Index Basics
CPI stands for Consumer Price Index. It is commonly referred to as a measure of the rate of inflation.

Stock Market Investing Basics
Learn the basics in investing in the stock market in order to understand how the stock market works.

Why Do Companies Go Public
To go public means that you have to list the company on a stock exchange and offer stock to the public. The money you get from the stock sale is known as initial public offering.

Introduction to Stocks
Stock represents a piece of ownership of a particular company. Though stock investing carries a certain degree of risk, it can be very profitable for an educated investor.

Stock Price Volatility
Stock prices are characterized by volatility. When significant changes occur, investors tend to panic.

Large Cap Stock Characteristics
The biggest players in the stock market are companies that have large market capitalization. Due to their large market capitalizations, such companies tend to have a major influence over the economic activities.

Small Cap Stocks Characteristics
In order to classify a stock as of small cap character its market value should be below $1 billion. Small cap stocks are generally considered to be highly volatile and if market conditions are not stable, they can carry a high level of risk.

Foreign Stock Characteristics
In today’s global economy investors are given the opportunity to purchase stocks of foreign companies. Foreign stocks provide an additional piece of diversification to your portfolio.

Technology Stock Characteristics
Technology stocks represent one of the most attractive investment solutions. However, technology stocks are not deprived of their drawbacks.

Fundamental Analysis Technique Basics
In order to make an analysis of target stocks, you can choose from a number of tools. One of them is the fundamental analysis technique.

Technical Analysis Basics
Technical analysts tend to use different mathematical techniques in order to predict future trends in the prices of a target stock.

Importance of Current Assets and Current Liabilities
When you study the figures of a target company it is worth examining its current assets and current liabilities.

Price/Book Value Advantages and Disadvantages
Price/book value is best applicable to companies that have many tangible assets, banks and insurance companies.

Understanding Return on Equity and Return on Assets
Two ratios that are usually used in order to measure management efficiency are return on equity (ROE) and return on assets (ROA).

Understanding Inventory Turnover Ratio
You should compare the turnover ratios of companies in order to determine their efficiency of inventory management.

Price to Earnings Growth Ratio (PEG) Explanation
High growth rates are one of the factors that greatly attract investors to a particular stock. As a result of the increased attention, the price of the stock may hit the skies. A ratio that manages to explain this attention is the price/earnings growth ratio (PEG).

Price to Earnings (P/E) Ratio Basics
One of the most widely used ratios is the P/E ratio (price/earnings). Despite some of its disadvantages, it is favored by most investors for its easy of understanding and calculating.

Price to Sales Ratio (PSR) Explanation
There are many tools you can use in order to valuate a stock. One of them is the price/sales ratio (PSR).


source: http://www.stock-market-investors.com/

Stock Market Risk Premium

Risk and returns go hand in hand when speaking about stock investing. In order to achieve better results with your stocks you should harmonize the level of risk with the rewards you expect to get from the particular stock.

What is certain in stock investing is the existence of risk. On the other hand, rewards are almost ever preceded by the word "potential".

Nevertheless, for every stock investor it is important to evaluate the potential returns s/he will gain from the particular investment. This should be done in order for the investor to be sure that the rewards s/he will eventually get are in accordance with the risk levels s/he is comfortable with.

In order to do this, you should first identify "risk-free" returns offered in the market. A risk-free investment can be qualified as the type of investment which possession doesn't expose your money to any risk. Additionally, risk-free investment provides you with the basis for making your measurements.

For instance, you can use US Treasury Bonds for a yardstick against which to make measurements. Many investors use this type of bonds since they are guaranteed by the US government. As a result investors that use US Treasury Bonds as a benchmark should invest in stocks that give as a return more than the five percent offered by the bonds.

If there are investment returns above the five-percent level, this amount is referred to as risk premium. Therefore, if the potential return of a stock you have purchased is 10%, the risk premium is calculated by subtracting five percents from 10%, which results in 5% risk premium.

Next, you should determine whether the risk premium is enough in case the stock doesn't achieve the expected return. This depends on the type of stock you have purchased. For instance, a 5% risk premium is enough for a well-established large-cap stock, whereas for a small-cap stock, which is not so well-established, the risk premium may not be enough.

Risk premiums are a suitable yardstick for judging the worthiness of investing your money in particular stocks. However, when calculating the potential returns and their justification regarding the levels of risk you take, you should take into consideration many other factors.

To be a successful investor you need two main things - the knowledge and the right trading platform. For knowledge we can highly recommend you Get The Wall Street Journal for 75% off!. For a trading platform we can recommend you Zecco. It offers free stock trades, no account minimum, real time quotes, trading community, and is also insured and protected against loss by SIPC. Opening a Zecco account to benefit from $0 Stock/ETF trading is a smart idea. Free stock trades allow you to preserve more of your wealth and save money, which you can invest instead of paying brokerage commissions.

High Risk, High Return

Many investors purchase a particular stock with the intention of making a big profit over a short period of time. However, this action is not investing, but a pure gambling. The reason for this is that you are never guaranteed that you will get the high returns you hope for over such a short period of time.

There may be times in which stocks have put a record on short-term growth, but these occurrences are very rare. On average stocks have returned from 10% to 12%. However, this doesn't mean that all stocks return at these rates.

The stock market is characterized by the trade-off between risk and return. The higher the risk the investor is willing and able to take, the higher the potential rewards from the investment. Therefore, if a particular investment offers you high returns, it is an indication that it will come with a high risk burden.

As part of the selection process, you should determine the risk level of the stock as well as your risk tolerance. If you are looking for high returns you should be able to meet high potential losses as well.

Many investors prefer young technology-oriented companies over blue chip companies, because the first provide higher returns than the latter. However, the latter provides its shareholders with regular dividends to compensate for the modest growth.

So, the next time you are offered a stock that is expected to triple in value over a short time period, think carefully whether to invest in it, because the chances of it failing to reach this level of return is extremely high.

Final Piece of Advice
Remember that there is no safe investment that will provide you with high returns over a short period of time. Therefore, you should direct your resources toward long-term investments that are more likely to reward you for the patience with high returns.

To be a successful investor you need two main things - the knowledge and the right trading platform. For knowledge we can highly recommend you Get The Wall Street Journal for 75% off!. For a trading platform we can recommend you Zecco. It offers free stock trades, no account minimum, real time quotes, trading community, and is also insured and protected against loss by SIPC. Opening a Zecco account to benefit from $0 Stock/ETF trading is a smart idea. Free stock trades allow you to preserve more of your wealth and save money, which you can invest instead of paying brokerage commissions.

Currency Futures

Currency futures are futures markets where the underlying commodity is a currency exchange rate, such as the Euro to US Dollar exchange rate, or the British Pound to US Dollar exchange rate. Currency futures are essentially the same as all other futures markets (index and commodity futures markets), and are traded in exactly the same way.

Futures based upon currencies are similar to the actual currency markets (often known as Forex), but there are some significant differences. For example, currency futures are traded via exchanges, such as the CME (Chicago Mercantile Exchange), but the currency markets are traded via currency brokers, and are therefore not as controlled as the currency futures. Some day traders prefer the currency markets, and some day traders prefer the currency futures. I recommend the currency futures as they do not suffer from some of the problems that currency markets suffer from, such as currency brokers trading against their clients, and non centralized pricing.

Settlement and Delivery
As currency futures are based upon the exchange rates of two currencies, they are settled in cash, in the underlying currency. For example, the EUR futures market is based upon the Euro to US Dollar exchange rate, and has the Euro as its underlying currency. When a EUR futures contract expires, the holder receives delivery of $125,000 worth of Euros in cash. Note that this only happens when the contract expires, and as day traders do not usually hold futures contracts until they expire, they should not be involved in the settlement, and will not receive delivery of the underlying currency.

Popular Currency Futures
Many of the most popular futures markets that are based upon currencies are offered by the CME (Chicago Mercantile Exchange), including the following :


EUR - The Euro to US Dollar currency future
GBP - The British Pound to US Dollar currency future
CHF - The Swiss Franc to US Dollar currency future
AUD - The Australian Dollar to US Dollar currency future
CAD - The Canadian Dollar to US Dollar currency future
RP - The Euro to British Pound currency future
RF - The Euro to Swiss Franc currency future

Market Profiles
Complete descriptions of many of the above currency futures, including the exchange rate that they are based upon, the futures contract specifications, and the market holidays, are available in their Market Profiles.


source: http://daytrading.about.com/

Limited Power of Attorney

This agreement allows someone other than the customer to place buy and sell orders in the account. However, the third party may not withdraw funds or securities from the account. This is commonly set up when an investment advisor or money manager is trading on the customer's behalf.

source: http://www.stockboulevard.com/

Options Agreement

This agreement is required before options may be traded in a cash or margin account. The options agreement includes a statement of the client's net worth, liquid assets and investment experience. Brokerage firms require varying amounts of income and net worth depending on the types of option strategies a client intends to use. (Since our entire trading system uses specific option strategies, we will get into more detail later regarding these limits and how to get accounts open without necessarily proving any such figures). All customers opening an option account must receive the ?full disclosure? document approved by the options exchanges and the Options Clearing Corporation (OCC) at or prior to the account being approved.

Margin and Loan agreements

The margin agreements must be signed by the customer and returned to the firm prior to placing an order to buy on margin or sell short for the customer's account. When purchasing and maintaining securities on margin, the customer must agree to abide by exchange and Federal Reserve requirements. (again, margin will be handled in detail later).

Joint Account Forms

Joint Tenants Agreement - This form establishes joint tenancy with rights of survivorship (JTWROS) between two parties to an account. Each party owns an undivided and equal interest in the account. In the event of death, his or her portion of the account belongs to the surviving party and bypasses the decedents estate.
Joint Tenants in Common - This agreement states the account is shared by two or more persons and specifies the percentage ownership of each. Upon death of any party, that person's equity in the account belongs to his or her estate.
Community Property Agreement - This establishes that funds and securities held in this account are the community property of a married couple.

Accounts and Margins

A customer may buy securities either in cash, by paying the entire amount of the purchase or on margin by depositing the required amount and borrowing the balance from the brokerage firm. A new account form is required for all types of accounts with the following information from the owner of the account: Name, Address, Age, Marital Status, Occupation, Tax ID Number, Citizenship, Bank Reference, Listing of other brokerage accounts, Investment objectives, Relationship, if any, to the broker, Signature of the customer (s), broker and manager.

Categories of Stock

Blue Chip - High grade, high quality companies, major corporations, usually well established and have a track record of paying dividends and increasing earnings. An example would be General Electric (GE)
Defensive - Businesses which seem resistant to recession for example utility companies.
Income - Pays a higher than average dividend. Investors who seek consistent income that is higher than average would buy income stocks.
Growth - Market share, earnings and sales are expanding at a rate faster than average. Dividends are usually small because earnings are being reinvested back into the company for growth. Many technology companies are growth stocks.
Seasonal -Earnings fluctuate with the calendar and changing seasons. Retail stores are often seasonal.
Cyclical -Businesses such as automobile manufacturing and steel are cyclical. Earnings and stock price tend to fluctuate with the business cycles. Not the same as seasonal because the business cycle is not always in a one year cycle.

Market Value

The market value of a stock is the price listed multiplied with the number of shares that an individual owns. (For example: An investor owns 100 shares of a $50 stock, the market value is $5,000) Market value can fluctuate many times during a single day of trading and is dependent on supply and demand.

Preferred Stock

Companies also issue preferred stock. The advantage of preferred stock is that it usually pays a stated dividend. The par value is normally $100, so that the dividend can be expressed as a percentage of par (IE: 5 ¼% preferred). There is also a market value to the stock and it trades, however, the value normally does not fluctuate as much as common stock. Preferred stock holders have no voting rights.

Common Stock

Stock is issued by a corporation so they can raise funds to either expand or continue business operations. Stock in a privately held corporation is owned by very few investors. Stock in a publicly held corporation can be purchased by the public. Publicly held shares are either traded on an exchange, the most famous being the New York Stock Exchange (NYSE) or the over the counter (OTC) market like NASDAQ. If a stock symbol has three letters or less, it is traded on an exchange. (for example: C-Citigroup, Inc., BA-Boeing & WMT-Walmart) and if the symbol is four or five letters, it is traded OTC (for example: MSFT-Microsoft). Stocks traded by the public are very liquid, which means they are easy to buy and sell. Stock is known as an equity security because it represents ownership or equity in the corporation. Common stock is the most basic type of equity security and gives the buyer the right to participate in the earnings and assets of the company as well as voting rights and any dividends that are paid by the corporation.

Index Investing: Introduction

Stock market talk is everywhere, from TV and radio, to the newspapers and the web. But what does it mean when people say that "the market turned in a great performance today?" What is "the market" anyway?

As it turns out, when most people talk about "the market," they are actually referring to an index. With the growing importance of the stock market in our society, the names of indexes such as the Dow Jones Industrial Average (DJIA), S&P 500 and Nasdaq composite have become part of our everyday vocabulary.

This tutorial will define what an index is, discuss some of the major stock indexes and explain how you can invest in the stock market using index funds.

(If you aren't familiar with the stock market and mutual funds, we suggest that you check out our Stock Basics Tutorial and Mutual Fund Basics Tutorial before reading on.)

source: http://www.investopedia.com/