Introduction
Everything is now working in favor of individual investors to learn about stocks and trade them. The Internet has opened up a new world to everyone.
Online trading has changed the average investors' involvement in trading their own stocks. The availability of company information has become so widespread and easily attainable that researching and finding stocks to buy and sell is as easy as logging onto your computer.
Buying a stock for the long term means that you want to own part of a company and you think that in the future the company will be profitable. If you buy stock in a company and the company performs well, the stock's price should rise. If the company fails, then the stock should fail you, too and go down.
Companies list their stocks on the various stock exchanges located throughout the U.S. The stock exchanges actually compete with each other for these listings, since companies that attract more trading make more money for the stock exchange that listed it.
Company stocks are assigned a "ticker", or trading symbol by the listing exchange. You may notice some well-chosen tickers that are easy to remember, like "DNA" for the company Genentech, a biotechnology firm. Or some companies' ticker is the same as its name, Nike for example.
You need to know the ticker of a stock in order to access information about the stock and eventually trade it.
The various stock exchanges are a very good place to start getting information on stock trading and general investing. We suggest you visit the following web sites:
- The American Stock Exchange (www.amex.com)
- The Nasdaq Stock Market (www.nasdaq.com)
- The New York Stock Exchange (www.nyse.com)
- The Pacific Exchange (www.pacificex.com)
- The Philadelphia Exchange (www.phlx.com)
Besides being a great online source, some of the exchanges listed above give free seminars about investing.
The Securities and Exchange Commission, which is the watch dog and regulator of the securities industry, also has an investor education program and you can get more information at it's web site at www.sec.gov/oiea1.htm.
Bulls and Bears
All this talk about bull and bear markets means that it’s a zoo out there, when it comes to investing. And, like any zoo, there are quite a few species to be found down on Wall Street.
Most investors’ favorite animal is clearly the bull. The term is used in several ways. Referring to the stock market, it describes a period in which prices rise for a lengthy period of time. When it comes to people, bullish describes one who is optimistic.
How this usage came about is not entirely clear. A bullish investor is one who buys a stock in the expectation that its price will rise. This could be compared with bulls charging ahead, stampeding prices higher. Or it could simply reflect the fact that bulls habitually toss their heads upward.
To be considered a bull market, prices need not rise continuously. There can be days, weeks and even months in which prices fall. What matters is the long-term trend.
Bears
The Street’s least favorite animal is the bear. This term is used to describe downers — both stock prices and individuals. It originated from the old days, when traders used to sell bearskins before the bears were actually caught. In the stock market, it applies to people who expect prices to decline.
As for how much of a price decline constitutes a bear market, the rule of thumb seems to be at least 20 percent. However, a lot depends on how long the drop lasts. The quicker the rebound, the less likely that investor psychology will turn from optimism to the pessimism that usually accompanies a bear market.
You can find other animals down on Wall Street. For example, there are dogs, as in Dogs of the Dow. This is an investment strategy that calls for buying the 10 stocks with the highest yield among the Dow, altering the portfolio annually as needed.
In the feline family, remember CATS (Certificates of Accrual on Treasury Securities), LYONS (Liquid Yield Option Notes) and TIGRS (Treasury Interest Growth Receipts)?
Arachnids
A recent addition to the Street’s menagerie is SPDRS (pronounced spiders), which enable investors to participate in the price performance and dividend yield of the Standard & Poor's 500 Index by purchasing shares at a price equal to roughly 10 percent of the value of this index.
While buying and selling stock, investors must be on the lookout for donkeys and elephants, representing, of course, the two major political parties. The government certainly plays a big role in Wall Streeters’ lives. Sometimes Washington even makes monkeys out of traders by changing the rules in the middle of the game.
There are two other animals to keep watch for. Ostriches are investors who stick to their old strategies, oblivious to changes in the world around them. And then there are the hogs — as in the expression, bulls can make money, bears can make money, but hogs, investors who are too greedy, usually get slaughtered.
--Contributed by Dr. Irwin Kellner
