query: What approaches are there for pricing a small business?

positive: I don't have any experience in this, but this is my academic understanding of business pricing.  The LOWEST amount a seller would accept is the liquidation value. For a B&B, what would the value of the land, the house, the furnishings, accounts payable, etc. be if it had to be sold today, minus any liabilities.  The amount the seller would like to pay for is going to be a multiple of its annual earnings. One example of this is the discounted cash flow analysis. You determine the EBITDA, the earnings a company generated, before interest,  depreciation, taxation and amortization.  Once you have this amount, you can project it out in perpetuity, or you use an industry multiplier.  Perpetuity:  You project this value out in perpituity, discounted by the going interest rate. In other words, if you project the business will earn $100,000/year, the business should grow at a 5% rate, and the going interest rate is 8%. Using a growing perpetuity formula, one value of a business would be: 100,000 / (.08 - .03) = $2,000,000.  This is a very high number, and the seller would love to get it.  It's more common to do a multiple of the EBIDTA. You can do some research into the valuation of the particular industry to figure out the EBIDTA multiplier for the industry. For example, this article suggests that the 2011 EBITDA multiplier for hospitality industries is 13.8. (It's valuing large hotel chains, but it's a start). So the value of this B&B would be around $1,380,000. Here is an online SME valuation tool to help with the EBIDTA multiple based valuation. Also, from my research, it looks like many small business use Seller Discretionary Earnings  (SDE) instead of EBITDA. I don't know much about it, but it seems to serve a similar purpose as EBITDA.  A potential buyer should request the financial statements of the business for the last few years to determine the value of the business, and then can negotiate with the owner a price. You would probably want to enlist a broker to help you with the transaction.

negative: How about a third approach: Figure the buyout as above. Figure what percentage of the value of the house the buyout constitutes. When the house sells the other party gets that percentage of the sales price.

negative: Stocks, Bonds, Bills, and Lottery Tickets notes the work of Fama and French who researched the idea of a small-cap premium along with a value premium that may be useful to note in terms of what has outperformed if one looks from 1926 to present. Slice and dice would also be another article about an approach that over weights the small-cap and value sides of things if you want another resource here.

negative: "The effect of making a single purchase, of size and timing described, would not cause market disequilibrium, it would only hurt you (and your P&L). As @littleadv said, you would be unlikely to get your order filled.  You asked about making a ""sudden"" purchase. Let's say you placed the order and were willing to accept a series of partial fills e.g. in 5,000 or 10,000 share increments at a time, over a period of hours. This would be a more moderate approach. Even spread out over the span of a day, this remains unwise.  A better approach would be to buy small lots over the course of a week or month. But your transaction fees would increase. Investors make money in pink sheets and penny stocks due to increases in share price of 100% (on the low end), with a relatively small number of shares. It isn't feasible to earn speculator profits by purchasing huge blocks (relative to number of shares outstanding) of stock priced < $1.00 USD and profit from merely 25%  price increases on large volume."

negative: "This isn't as rigorous as it should be, but may offer some useful insight into how big and small companies differ operationally. Putting Apple aside, larger companies tend to sell larger volumes of products (even if they're MRI devices, or turbines) relative to what smaller companies can sell (obviously, in absolute terms as well).  They are also able to negotiate volume discounts as well as payment terms.  This allows them to finance sales through their supply chain.  However, their large direct competitors are able to do the same thing as well.  Competitive forces then drive prices down. Smaller businesses, without these advantages of scale, tend to have to charge higher margins since they have to pay directly (and, if their clients are large businesses, finance the sale). Small businesses still have higher proportional costs of operation.  Sadly, my reference here is a study I performed for the South African Revenue Service about ten years ago, and not available online. However, the time taken by a small business to manage admin, tax, HR is a greater proportion of revenue than for larger companies. If the small business is a start-up with big investment from venture finance, then they could subsidise their selling price, run at a loss and try and gain scale.  Funnily enough, there is a fantastic article on this by Joel Spolsky (Ben and Jerry's vs. Amazon) For the average highly-competitive smaller company, the best choice is to chase design/quality/premium markets in order to justify the higher margins they have to charge.   And that's what makes Apple interesting as a case study.  They were a small company in the presence of giants (Intel, Microsoft, IBM).  They were ""forced"" to concentrate on design and premium markets in order to justify their need for higher margins.  It almost didn't work but then they broke through.  Now they're in the unique position of having gained scale but are still small enough relative to other electronics manufacturers to continue charging that premium (by volume their sales are still relatively small but their margins make them a giant). This type of variation from market to market makes developing some sort of generalised solution very unlikely but the general requirement holds: that smaller companies must charge higher margins in order to create equivalent profits to larger companies which must gain scale through volume."

negative: Probably means cutting the travel short. A small business owner employing specialist staff needs to identify and plan for this risk.   The plan might be to personally cover for the staff until a replacement is found.   Ideally in this situation the business will be able to support the salary of two staff in the role, even if one is part time or an apprentice/trainee. This is the approach our business takes with key staff.

negative: That's not really the point.  A small percentage of the 70% of the US population living within 150 miles will have disposable income to throw at marked up groceries.  Until someone can explain how this reduces overhead and lowers prices I'm just real skeptical.  Whole thing reeks of Webvan 2.0.  Walmart and Marc Lore are at least bringing creative ideas to the table.  The associate delivery for last leg is an interesting approach.

negative: The problem is that once there's no competition, the quality of product will generally go down and/or prices will be raised.  What are you gonna do, go somewhere else?  No small business can match the prices of a place that ~~can~~* buys product in bulk.  Competition is necessary for the free market to not be predatory.  Monopolies pretty much always work out to the detriment of the consumer.

negative: [] As you can see from the graphs above, as absolute distance from ATM (At The Money) increases, the ratio represented by Delta begins to approach 0:1 or 1:1. Meaning, as Delta approaches 1 the option price moves up 1 dollar for every 1 dollar the stock price moves up. As Delta approaches 0 the option price does not move as the stock price moves. As the absolute distance from ATM increases Gamma approaches zero (0). Meaning, as the price of the option increases or decrease the change in delta is at its highest as the option price is nearest the money. As the price of the option moves away from the money, in either direction, it changes less drastically. Interestingly, Delta is the first derivative of the value of the option price with respect to the underlying asset price. And Gamma is the first derivative of Delta. Definition of Delta Definition of Gamma

negative: If the items you sold are items you previously bought for a higher price, the money you get selling them is not income, as you are taking a loss. However, you cannot deduct such losses. If you sell anything for more than what you paid for, the difference is a gain and is taxable. See this IRS web site for the explanation: https://www.irs.gov/businesses/small-businesses-self-employed/tax-tips-for-online-auction-sellers

negative: "Small businesses are often governed by local regulations and state law. In a low liability small quantity arena, you should be able to get away with a DBA (doing business as) arrangement, such as DBA ""Jay's Gem's"". A small business license may come with a state Tax ID and satisfy your supplier, but a Federal EIN can be obtained from the IRS, and may be necessary to apply for the business license. It wouldn't hurt to talk to the local chamber of commerce or state small business agencies if you have questions about local requirements."

negative: ISO-14001  Environmental Management Systems.  ISO 14001 is a universal standard suitable for large and small businesses in any sector. In many sectors certification to ISO 14001 has become a requirement for trade, as organisations seek to mitigate environmental risk whilst managing sustainable growth.  ISO 14001 is an Environment Management System (EMS), which is a tool for managing the impact of an organisations activities on the environment. It takes a pro-active approach, and allows business to consider environmental issues before they become a problem, rather than reacting to them afterwards.  If your company invests in ISO 14001 accreditation, you are showing your staff, customers and the wider business community that you are not only committed to protecting the environment in the short term, but you are also willing to work within the guidelines of international environmental law in future.  Our consultant will be happy to discuss this with you any time This System is suitable for all small to medium size enterprises   CALL NOW For Free Consultation +971 50 3483821 !!!.

negative: Value investing is an investment approach that relies on buying securities below their intrinsic values. There are two main concepts; one is the Intrinsic Value and the other is Margin of Safety.  Intrinsic value is the value of the underlying business - if we are talking about stocks - that can be calculated through carefully analyzing the business looking at all aspects of it. If there is an intrinsic value exists for a company then there is a price tag we can put on its shares as well. Value investing is looking to buy shares well below its intrinsic value.  It is important to know that there is no correct intrinsic value exists for a company and two people can come up with different figures, if they were presented the same data. Calculating the intrinsic value for a business is the hardest part of value investing.  Margin of Safety is the difference between the buying price of a stock and its intrinsic value. Value investors are insisting on buying stocks well below their intrinsic value, where the margin of safety is 20%-30% or even more. This concepts is protecting them from poor decisions and market downturns. It is also providing a room for error, when calculating the intrinsic value.  The approach was introduced by Benjamin Graham and David Dodd in a book called Security Analysis in 1934. Other famous investor using this approach is Warren Buffet Books to read:  I would start to read the first two book first.

negative: The doing of it, the actual floral design part, is a small part of what that business is going to need. The needs of a small business are huge and varied.  For instance,  somebody will need to do the Quickbooks, handle the register and cash,  handle clients and follow-up.   Do payroll even if it is just the two of you. Handle insurance.  Place orders for inventory, develop relationships with suppliers to keep costs down. Do marketing. Calculate profitability and use that to determine pricing,  specials,  and discounting on bulk orders. Clean the shop and enable your flower arranger to work effeciently.  Need employees?  Then get ready for applications, interviews,  onboarding, reviews,  coaching,  and firing. Create checklists and best practices.  The Small Business Association is your friend. It's a government program that is already paid for by you,  and the employees are generally successful entrepreneurs that just don't feel like doing the 80 hours a week anymore. They will be so happy to mentor you and can really assist if you are looking for a loan to start up.   Small business isn't for everybody.  I think most people would rather work 40 hours a week for somebody else. If none of this scares you off, you might have what it takes. Starting and running a business is incredibly rewarding for me emotionally and financially and I wouldn't trade it for any job on the planet.

negative: "Here's what you need to know about Tinder, Facebook, Twitter, all of it.  If it's free... *you're* the product.  They are selling your info. You might think ""well what could Tinder have on me worth selling?"" and the answer is a metric fuck ton.  https://www.google.de/amp/s/amp.theguardian.com/technology/2017/sep/26/tinder-personal-data-dating-app-messages-hacked-sold  They approach companies. Companies approach them. It's business, and the product is your preferences and data."

negative: Nate Nanzer, Commissioner of Activision Blizzard's Overwatch League, a global city-based esports franchise, outlines a pragmatic approach to development of the League, and speaks frankly on inclusion of small endemics, driving fan engagement and other concerns.  Please read and let me know what you think.  (Funny use of hyphens & capitalisation (SEO nonsense) not my own)

negative: "There are basically two approaches, based on how detailed you want to be in your own personal accounting: Obviously the more like a business or like ""real"" accounting you want to be, the more complex you can make it, but in general I find that the purpose of personal accounting is (1) to track what I own, and (2) to ensure I have documented anything I need to for tax purposes, and as long as you're meeting those goals any reasonable approach is workable."

negative: You appear to be thinking of option writers as if they were individuals with small, nondiversified, holdings and a particular view on what the underlying is going to do.  This is not the best way to think about them. Option writers are typically large institutions with large portfolios and that provide services in all sorts of different areas. At the same time as they are writing calls on a particular stock, they are writing puts on it and options on other stocks.  They are buying and selling the underlying and all kinds of different derivatives.  They are not necessarily writing the option because they are expecting or hoping to benefit from a price move.  It's just small part of their business.  They write the option if the option price is good enough that they think they are selling it for very slightly more than it's worth.   Asking why an option writer creates a call is like asking why a grocery store keeps buying groceries from their distributors.  Don't they know the price of food may not always rise?  Sure, but their business is selling the food for slightly more than they pay for it, not speculating on what will happen to its price.  Most option writers are doing the same thing, except what they are buying and selling is sets of cash flows and risk.   As a general rule, the business model of option writers is to profit from the few cents of spread or mispricing, not from aggregate changes in the price of the underlying.  They should and often do maintain balanced portfolios so their option writing activities don't expose them to a lot of risk. Also note that there could be lots of reasons for writing options, even if you do have a particular view.  For example, perhaps the option writer thinks volatility of the underlying will decrease.  Writing a call could be part of an overall strategy that profits from this view.

negative: You are smart to read books to better inform yourself of the investment process.  I recommend reading some of the passive investment classics before focusing on active investment books: If you still feel like you can generate after-tax / after-expenses alpha (returns in excess of the market returns), take a shot at some active investing.  If you actively invest, I recommend the Core & Satellite approach: invest most of your money in a well diversified basket of stocks via index funds and actively manage a small portion of your account.  Carefully track the expenses and returns of the active portion of your account and see if you are one of the lucky few that can generate excess returns. To truly understand a text like The Intelligent Investor, you need to understand finance and accounting.  For example, the price to earnings ratio is the equity value of an enterprise (total shares outstanding times price per share) divided by the earnings of the business.  At a high level, earnings are just revenue, less COGS, less operating expenses, less taxes and interest.  Earnings depend on a company's revenue recognition, inventory accounting methods (FIFO, LIFO), purchase price allocations from acquisitions, etc.  If you don't have a business degree / business background, I don't think books are going to provide you with the requisite knowledge (unless you have the discipline to read textbooks).  I learned these concepts by completing the Chartered Financial Analyst program.

negative: From a quick google, apparently 5% of government contracts need to go to women- or minority-owned small businesses, with another 18% going to small businesses more generally.   If your company was bumped, it was b/c they were on the bubble in terms of quality/price, and inevitably the only reason were able to contract in years prior was b/c of the rules discriminating against large businesses over small businesses.  The more concerning take away in all of this, is how on earth is it a struggle to hit the 5% target without any sort of affirmative action intervention.  A bit of an eye-opener on the extent of systemic racism / inequality of opportunity that exists today.  We really should be doing more to support minority owned businesses, and more importantly addressing the apparently inequity in opportunity in our business culture.

negative: You said the decision will be made by EOD. If you've made the decision prior to the market close, I'd execute on the closing price.  If you are trading stocks with any decent volume, I'd not worry about the liquidity.  If your strategy's profits are so small that your gains are significantly impacted by say, the bid/ask spread (a penny or less for liquid stocks) I'd rethink the approach. You'll find the difference between the market open and prior night close is far greater than the normal bid/ask.

negative: What a great idea! A small business owner helping other small business owners. It's true -- to be a relevant small business in this day and age, you have to be visible on the world wide web. I use the world wide web multiple times a day to get information about businesses that I am interested in doing business with or to comparative shop. I don't think I am alone in this.

negative: "Each individual situation merits a fresh approach.  Working in venture capital, I've learned that the weights are always shifting and taking a ""one size fits all"" approach to business is probably the most foolish thing one can do."

negative: I'm being realistic. They're dumping tens of millions of dollars into an operation that shows no real signs of earning any kind of profit in anything that approaches the short or medium term. They're making expensive cars at Ferrari volumes for BMW prices in limited markets while the major automakers introduce more and more electric and hybrid cars. Once Mercedes and Ford and Honda have full electric cars on the road, serviced and backed by their huge network of dealerships, what does Tesla offer anyone? Toyota is happy, they pumped a relatively small amount of money into Tesla and have all but locked up rights to their IP should the company go bust.  Tesla is trying to capitalize on being first to market, but they're in a kind of catch 22: there isn't huge demand for electric cars right now, which means they won't be able to sell the volumes they need to grow their business and return a profit. As soon as the market is large enough for them to make a profit, the big guys are going to catch up and run them over. Who'd buy a Model S when they could get an electric 5 series for the same money? Who'd buy a Tesla Roadster if they could get an electric Boxster or 911?

negative: You may be able to choose.  As a small business, you can expense certain depreciable assets (section 179).  But by choosing to depreciate the asset, you are also increasing the cost-basis of the property.  Are you planning to sell the property in the next couple of years?  Do you need a higher basis? Section 179 - Election to expense certain depreciable business assets

negative: There are a few standard ways: One thing to keep in mind is that you'll usually be charged a wire and/or service fee for the tranfer.

negative: (At least in the UK) a company named Card Factory has been very successful in undercutting the competition using the classic pile 'em high and sell 'em cheap strategy with less glamorous high-street locations than 'traditional' stores. Interestingly it doesn't seem to have spawned either competition at their price point or lowered the general prices for greetings cards even in low-margin businesses like supermarkets. A quick glance at their annual report suggests they're doing reasonably well with this approach.

negative: We don't really have much to work with. I'm not going to recommend some advanced marketing strategies for you. Hell none for that matter. I think a very simple, doable, and effective strategy for you is to make yourself stand out.  Remember people do business with people, not corporations. Kind of lol. But interact with your customers as if they're more than customers. Be genuine, try and see things from their point of view. All of that goes a long way.  I don't know how similar your industry is, but when I look for somewhere to get a haircut I look at 3 things in order: Quality -> Friendliness -> Price. If you're a good barber, and you're easy and fun to talk to, I won't mind paying however much you charge.

negative: "Strategy would be my top factor.  While this may be implied, I do think it helps to have an idea of what is causing the buy and sell signals in speculating as I'd rather follow a strategy than try to figure things out completely from scratch that doesn't quite make sense to me. There are generally a couple of different schools of analysis that may be worth passing along: Fundamental Analysis:Fundamental analysis of a business involves analyzing its financial statements and health, its management and competitive advantages, and its competitors and markets. When applied to futures and forex, it focuses on the overall state of the economy, interest rates, production, earnings, and management. When analyzing a stock, futures contract, or currency using fundamental analysis there are two basic approaches one can use; bottom up analysis and top down analysis. The term is used to distinguish such analysis from other types of investment analysis, such as quantitative analysis and technical analysis. Technical Analysis:In finance, technical analysis is a security analysis methodology for forecasting the direction of prices through the study of past market data, primarily price and volume. Behavioral economics and quantitative analysis use many of the same tools of technical analysis, which, being an aspect of active management, stands in contradiction to much of modern portfolio theory. The efficacy of both technical and fundamental analysis is disputed by the efficient-market hypothesis which states that stock market prices are essentially unpredictable. There are tools like ""Stock Screeners"" that will let you filter based on various criteria to use each analysis in a mix.  There are various strategies one could use.  Wikipedia under Stock Speculator lists: ""Several different types of stock trading strategies or approaches exist including day trading, trend following, market making, scalping (trading), momentum trading, trading the news, and arbitrage.""  Thus, I'd advise research what approach are you wanting to use as the ""Make it up as we go along losing real money all the way"" wouldn't be my suggested approach. There is something to be said for there being numerous columnists and newsletter peddlers if you want other ideas but I would suggest having a strategy before putting one's toe in the water."

negative: "> He did not say small businesses are outliers. He said there are outliers among small businesses.  No, what he's talking about are forums and other social sites that are too small to police all of the content their users post. He's saying that they are as guilty as the criminals you're speaking of.  At _best_, the man doesn't understand the areas of commerce that he's presuming to legislate over with his support for SESTA, and I dare say you don't understand them either. I, however, am an expert on the subject, and I know exactly what he's talking about. He's saying that Google and Facebook and similar large corporations are legitimate, and all ""independent"" or small business competitors to them are criminals.  This is black and white. You're either one of the good guys or you aren't. Small business and equal opportunity are what America has always been about. If you are an enemy to those ideals then you are an enemy of America."

negative: Pay attention to nickel-and-dime charges (atm fees, low balance fees, limit on atm transactions per month, charge for human teller transaction, charge for paper statements or tax records).  Consider that a financial company will spend on the order of $100-500 to sign up a good customer.  Are you getting this in a cash bonus, competitive high interest rate, reasonable other gift, or advertising directed at your eyeballs?  A variation in rates less than 1% easily fits into a marketing cost and there doesn't have to be any other magic to it.

negative: What I know about small companies and companies who are not listed on the stock markets is this: If a small company has shares issued to different people either within an organization or outside the value of the shares is generally decided by the individual who wants to sell the share and the buyer who wants to buy it. Suppose my company issued 10 shares to you for your help in the organization. Now you need money and you want to sell it. You can offer it at any price you want to to the buyer. If the buyer accepts your offer thats the price you get. So the price of the share is determined by the price a buyer is willing to buy it at from you. Remember the Face value of the shares remains the same no matter what price you sell it for. Now annual profit distribution is again something called dividends. Suppose my company has 100 shares in total out of which I have given you 10. This means you are a 10% owner of the company and you will be entitled to 10% of the net profit the company makes. Now at the end of the year suppose my company makes a 12,000 USD net profit. Now a panel called board of directors which is appointed by share holders will decide on how much profit to keep within the company for future business and how much to distribute about share holders. Suppose they decide to keep 2000 and distribute 10,000 out of total profit. Since you own 10% shares of the company you get 1000. The softwares you are talking are accounting softwares. You can do everything with those softwares. After-all a company is only about profit and loss statements.

negative: "Since you have no sales, I'd likely question how well could you determine the value of the company's assets in a reasonable fashion. You may be better to estimate sales and discount that back to a current valuation. For example, insurance companies could determine that if you wanted to be paid $x/month for the rest of your life, the present day value of that is $y. There are similar mechanisms for businesses but this does get tricky as the estimates have to be somewhat conservative and you have to be prepared for some other scenarios. For example, if you got the $200,000 then would you really never have to ask for more external equity financing in the future or is it quite likely that you'd want another infusion down the road? While you can mark it at $1,000,000 there will be questions about why that value that you'd have to answer and saying, ""Cause I like big round numbers,"" may not go over well. My suggestion is to consider what kind of sales will the company have over the next 5 years that you could work back to determine a current price. If you believe the company can have $5,000,000 in sales over the 5 years then it may make sense to place the current valuation of $1,000,000 on it. I wouldn't look too much into the money and time you've invested as that isn't likely to go over well with investors that just because you've put in what is worth $x, the business may or may not be worth that. The challenge is that without sales, it is quite difficult to get an idea of what is the company worth. If it makes billions, then it is worth a lot more than a company that never turns a profit. Another way to consider this is the question of what kind of economic output do you think you could do working here for the next 5 years? Could you do thousands of dollars of work, millions of dollars or just a few bucks? Consider how you want this to be seen where if you want some help look up episodes of TV shows like ""Dragon's Den"" or ""Shark Tank"" as these give valuations often as part of the pitch which is what you are doing."


query: If I believe a stock is going to fall, what options do I have to invest on this?

positive: "Aganju has mentioned put options, which are one good possibility. I would suggest considering an even easier strategy: short selling.  Technically you are borrowing the stock from someone and selling it.  At some point you repurchase the stock to return to the lender (""covering your short"").  If the stock price has fallen, then when you repurchase it, it will be cheaper and you keep the profit. Short selling sounds complicated but it's actually very easy--your broker takes care of all the details.  Just go to your brokerage and click ""sell"" or ""sell short.""  You can use a market or limit order just like you were selling something you own.  When it sells, you are done.  The money gets credited to your account.  At some point (after the price falls) you should repurchase it so you don't have a negative position any more, but your brokerage isn't going to hassle you for this unless you bought a lot and the stock price starts rising.  There will be limits on how much you can short, depending on how much money is in your account.  Some stocks (distressed and small stocks) may sometimes be hard to short, meaning your broker will charge you a kind of interest and/or may not be able to complete your transaction. You will need a margin account (a type of brokerage account) to either use options or short sell.  They are easy to come by, though. Note that for a given amount of starting money in your account, puts can give you a much more dramatic gain if the stock price falls.  But they can (and often do) expire worthless, causing you to lose all money you have spent on them.  If you want to maximize how much you make, use puts.  Otherwise I'd short sell. About IPOs, it depends on what you mean.  If the IPO has just completed and you want to bet that the share price will fall, either puts or short selling will work.  Before an IPO you can't short sell and I doubt you would be able to buy an option either. Foreign stocks?  Depends on whether there is an ADR for them that trades on the domestic market and on the details of your brokerage account.  Let me put it this way, if you can buy it, you can short sell it."

positive: "There are three ways to do this. So far the answers posted have only mentioned two.  The three ways are: Selling short means that you borrow stock from your broker and sell it with the intent of buying it back later to repay the loan.  As others have noted, this has unlimited potential losses and limited potential gains.  Your profit or loss will go $1:$1 with the movement of the price of the stock. Buying a put option gives you the right to sell the stock at a later date on a price that you choose now.  You pay a premium to have this right, and if the stock moves against you, you won't exercise your option and will lose the premium.  Options move non-linearly with the price of the stock, especially when the expiration is far in the future.  They probably are not for a beginner, although they can be powerful if used properly. The third option is a synthetic short position.  You form this by simultaneously buying a put option and selling short a call option, both at the same strike price.  This has a risk profile that is very much like the selling the stock short, but you can accomplish it entirely with stock options.  Because you're both buying an selling, in theory you might even collect a small net premium when you open. You might ask why you'd do this given that you could just sell the stock short, which certainly seems simpler.  One reason is that it is not always possible to sell the stock short.  Recall that you have to borrow shares from your broker to sell short.  When many people want to short the stock, brokers will run out of shares to loan.  The stock is then said to be ""hard to borrow,"" which effectively prevents further short selling of the stock.  In this case the synthetic short is still potentially possible."

positive: What financial instruments are there that are profitable when an underlying assets falls? The instrument you are looking for is called an Option, specifically a Put Option. It allows you, within the validity date, to sell ('Put') the respective shares to the option giver, at the predefined Strike Price. For example, let's assume APPL trades currently at 100 $ per share, and you think they will go down a lot. You buy one Put Option for 100 shares (they always come for larger amounts like 100s) for a Strike Price of 90 $, and pay 5 $ for it (it would be cheap if nobody believes they will fall that much). Note the last sentence under 2. - it is rather easy and very common when trading options to make complete losses. You have been warned. Are they available for IPOs? They could be available for IPOs, even before the IPO. However, someone has to put them out (some large bank, typically), which is some effort, and they would only do that if they expect enough interest and volume in the trade. most of the time, there will be no such options on the market. Are they available for foreign stocks?Yes, but again only selectively - only if the stock is well known and interesting enough for a broad audience.

positive: Shorting Stocks: Borrowing the shares to sell now. Then buying them back when the price drops.  Risk: If you are wrong the stock can go up. And if there are a lot of people shorting the stock you can get stuck in a short squeeze.  That means that so many people need to buy the stock to return the ones they borrowed that the price goes up even further and faster.  Also whoever you borrowed the stock from will often make the decision to sell for you. Put options. Risk: Put values don't always drop when the underlying price of the stock drops. This is because when the stock drops volatility goes up. And volatility can raise the value of an option. And you need to check each stock for whether or not these options are available. finviz lists whether a stock is optional & shortable or not. And for shorting you also need to find a broker that owns shares that they are willing to lend out.

negative: Stock prices aren't constant; they rise and fall.   The overall return on a share is the combination of the dividends paid plus the change in value of the share.  Some companies pay no dividend at all yet investors still buy their shares because they believe the share price will rise. People invest in stocks because they believe that the overall return will exceed what they can get from cash in the bank.   As to options they do offer higher potential profits but they also offer higher potential losses.  Different investors have different appetites for risk.  Many are comfortable with the risk of mainstream stock investing but not with that of options trading.

negative: "The response to this question will be different depending which of the investment philosophies you are using.  Value investors look at the situation the company is in and try to determine what the company is worth and what it will be worth in the future. Then they look at the current stock price and decide whether or not the stock is priced at a good deal or not. If the stock price is priced lower than they believe the company is worth, they would want to buy stock, and if the price rises above what they believe to be the true value, they would sell. These types of investors are not looking at the history or trend of what the price has done in the past, only what the current price is and where they believe the price should be in the future.  Technical analysis investors do something different. It is their belief that as stock prices go up and down, they generally follow patterns. By looking at a chart of what a stock price has been in the past, they try to predict where it is headed, and buy or sell based on that prediction.  In general, value investors are longer-term investors, and technical analysis investors are short-term investors.  The advice you are considering makes a lot of sense if you are using technical analysis. If you have a stock that is trending down, your strategy probably tells you to sell; buying more in the hopes of turning things around would be seen as a mistake. It is like the gambler in Vegas who keeps playing a game he is losing, hoping that his luck changes.  However, for the value investor, the historical price of a stock, and even the amount you currently have gained or lost in the stock, are essentially ignored. All that matters is whether or not the stock price is above or below the true value determined by the investor. For him, if the stock price falls and he believes the company still has a high value, it could be a signal to buy more. The above advice doesn't really apply for them.  Many investors don't follow either of these strategies. They believe that it is too difficult and risky to try to predict the future price of an individual stock. Instead, they invest in many companies all at once using index mutual funds, believing that the stock market as a whole always heads up over a long time frame. Those investors don't care at all if the prices of stock are going up or down. They simply keep investing each month, and hold until they have another use for the money. The above advice isn't useful for them at all.  No matter which kind of investing you are doing, the most important thing is to pick a strategy you believe in and follow the plan without emotion. Emotions can cause investors to make mistakes and start buying when their strategy tells them to sell.  Instead of trying to follow fortune cookie advice like ""Don't throw good money after bad,"" choose an investment strategy, make a plan, test it, and follow it, cautiously (after all, it may be a bad plan). For what it is worth, I am the third type of investor listed above. I don't buy individual stocks, and I don't look at the stock prices when investing more each month. Your description of your own strategy as ""buy and hold"" suggests you might prefer the same approach."

negative: What is your investing goal? And what do you mean by investing? Do you necessarily mean investing in the stock market or are you just looking to grow your money? Also, will you be able to add to that amount on a regular basis going forward? If you are just looking for a way to get $100 into the stock market, your best option may be DRIP investing. (DRIP stands for Dividend Re-Investment Plan.) The idea is that you buy shares in a company (typically directly from the company) and then the money from the dividends are automatically used to buy additional fractional shares. Most DRIP plans also allow you to invest additional on a monthly basis (even fractional shares). The advantages of this approach for you is that many DRIP plans have small upfront requirements. I just looked up Coca-cola's and they have a $500 minimum, but they will reduce the requirement to $50 if you continue investing $50/month. The fees for DRIP plans also generally fairly small which is going to be important to you as if you take a traditional broker approach too large a percentage of your money will be going to commissions. Other stock DRIP plans may have lower monthly requirements, but don't make your decision on which stock to buy based on who has the lowest minimum: you only want a stock that is going to grow in value. They primary disadvantages of this approach is that you will be investing in a only a single stock (I don't believe that can get started with a mutual fund or ETF with $100), you will be fairly committed to that stock, and you will be taking a long term investing approach. The Motley Fool investing website also has some information on DRIP plans : http://www.fool.com/DRIPPort/HowToInvestDRIPs.htm . It's a fairly old article, but I imagine that many of the links still work and the principles still apply If you are looking for a more medium term or balanced investment, I would advise just opening an online savings account. If you can grow that to $500 or $1,000 you will have more options available to you. Even though savings accounts don't pay significant interest right now, they can still help you grow your money by helping you segregate your money and make regular deposits into savings.

negative: long deep ITM calls is equivalent to owning the equity.  You're going to pay alot and hence will start off in a hole already, and you aren't getting too much leverage there at all depending how deep ITM you go.  Covariance scales, but assuming B-S in order to get nice scaling and ignoring the risks you are actually taking with options (unlimited down-size ie you can lose your entire investment in the option, people forget this) will screw you unless you really know what you are dong.  Leverage means increasing your risk.  long dep ITM is not obtaining much leverage and therefore not risking too much.  but you aren't going ot get 3-4x leverage this way.  you get leverage by saying: oh, i have 100, i could invest in 1 share of stock OR I could buy 100 worth of some option.  If I pick a deep ITM (think strike = 0) it's identical to owing the stock.  If i pick ATM, i have a ~50/50 chance of wining, so i should be able to double my upside.  If I go OTM, i can increase my exposure to the upside while increasing hte chance that my options expire worthless.  So really, i have no idea why deep ITM do what you are trying to do.  and If you don't either, you probably shouldn't do it.

negative: This decision depends upon a few things. I will list a couple:- 1.) What is your perception about financial markets in your time span of investments? 2.) What kind of returns are you expecting? 3.) How much liquidity do you have to take care of your daily/monthly expenses? 1.)If your perception about financial markets is weak for the near future, do not invest all your money in a mutual fund at 1 time. Because, if the market falls drastically, chances are that your fund will also lose a lot of money and the NAV will go down. On the other hand, if you think it is strong, go ahead and invest all at one time. 2.) If you are expecting very high returns in a short time frame, then SIP might not be a very good option as you are only investing a portion of your money. So, if the market goes higher, then you will make money only on what you have invested till date and also buy into the fund in the upcoming month at a higher rate( So you will get less units).  3.) If you put all your money into a mutual fund, will you have enough money to take care of your daily needs and emergencies? The worst thing about an investment is putting in all what you have and then being forced to sell in a bear market at a lower rate because you really require the money. Other option is taking a personal loan(15-16%) and taking care of your daily needs, but that would not make sense either as the average return that you can expect from a mutual fund in India is 12-13%. To summarize:- 1.) If you have money to spare and think the market is going to go higher, a mutual fund is a better option. 2.) If you have the money to spare and think that the market is going to fall, DON'T DO ANYTHING!.(It is always better to be even than lose). 3.) If you don't have the money and don't know about markets, but want to be part of it, then you can invest in an SIP because the advantages of this are if the market goes high, you make money on what you've put it, and if the market falls, you get to buy more units of the fund for a cheaper price. Eventually, you can expect to make a return of 14-15% on these, but again, INVESTMENTS ARE SUBJECT TO MARKET RISK! Please watch the funds average return over the last 10 years and their portfolio holdings. All the best!:) PS:- I am assuming you are talking about equity funds.

negative: I don't think it makes sense to invest in an FD since. 1.) A 30 day FD is not very likely to give you 8-9% 2.) Inflation is so high in India that your losing money even though you think that you are doing well enough.  I would suggest you to expect a larger return and try hedging your portfolio correctly.  For example you can buy a stock which is likely to go higher, and to limit your risks, you can buy a put option on the same stock, so even if the price falls drastically, you can exercise your option and not lose anything except for the premium you paid. Good luck:)

negative: What decision are you trying to make?  Are you interested day trading stocks to make it rich? Or are you looking at your investment options and trying to decide between an actively managed mutual fund and an ETF? If the former, then precise statistics are hard to come by, but I believe that 99% of day traders would do better investing in an ETF. If the latter, then there are lots of studies that show that most actively managed funds do worse than index funds, so with most actively managed funds you are paying higher fees for worse performance.  Here is a quote from the Bogleheads Guide to Investing: Index funds outperform approximately 80 percent of all actively   managed funds over long periods of time. They do so for one simple   reason: rock-bottom costs. In a random market, we don't know what   future returns will be. However, we do know that an investor who keeps   his or her costs low will earn a higher return than one who does not.   That's the indexer's edge. Many people believe that your best option for investing is a diverse portfolio of ETFs, like this.  This is what I do.

negative: "Have the stock certificate in with a letter from the previous owner of the company from what I can tell in the letter these stocks were distributed from the owner himself stating ""after evaluation we have determined that your investment in this company is worth 10,000 shares at $1.00 a piece"" as well as I believe these shares were also acquired when the company was going through name changes or their company was bought"

negative: "The price at which a stock was purchased is a sunk cost--that is, you cannot go back in time and reverse the decision you made to purchase that stock.  Another example of a sunk cost would be purchasing a non-refundable, non-transferable movie ticket.  Sunk costs have the tendency to create a cognitive bias in which we feel that the amount we paid at some point in the past should have some sort of bearing on the decision we make now--the purchaser of the ticket feels he must go see the movie even if he no longer wishes too, lest the ticket ""go to waste""... the investor hopelessly clings to a battered stock for that tiny chance that just maybe some day it will return to its former glory.  This is referred to as the ""sunk cost fallacy"" and is considered to be irrational behavior by economists. Keeping this in mind, your hopes and dreams for the stock at the time you purchased it should have no bearing on the decision you make now.  Similarly, whether the stock has risen or fallen in price since your purchase date should have no bearing.  Instead, you must consider what you expect the stock to do from this very moment on into the future--that is, you must act at the margin. You've indicated that you are faced with two choices--sell the stock now, incur the loss, but benefit from the tax break (Option A).  This benefit is quite easily quantifiable--it is your marginal tax rate multiplied by the additive inverse of the loss (assuming you have/will have other gains to offset).  Let's just assume that you incurred a $1000 loss, at a marginal tax rate of 20%, which means your tax benefit for the loss is $200. The second choice--to hold the stock in hopes of it rising in price (Option B)--is a bit harder to quantify.  You must assume that today is day zero, and that every cent in price the stock rises is a gain to you, and every cent in price the stock looses is a loss to you.  If you believe that the stock will rise to a price that will net your more than your tax benefit from option A, then holding the stock is more favorable than selling it at a loss today.  Conversely, if you believe this stock will fall even further in the future, or not rise enough to net you $200 (per the example), then Option A is preferable. Granted, there are some additional complications that play into your decision.  By selling the stock today, you not only get a tax benefit from the loss, but you've also freed up the funds previously used to purchase that stock to be invested elsewhere (in hopefully a better performing asset).  If you choose to stick with your current stock, then the gains you may have netted elsewhere must be considered as an opportunity cost associated with Option B.  Finally, the tax benefit is essentially guaranteed (so in our example, a $200 risk free return), while sticking with the stock in Option B still comes with some risk."

negative: It seems that you're interested in an asset which you can hold that would go up when the gold price went down. It seems like a good place to start would be an index fund, which invests in the general stock market. When the gold market falls, this would mainly affect gold mining companies. These do not make up a sizable portion of any index fund, which is invested broadly in the market. Unfortunately, in order to act on this, you would also have to believe that the stock market was a good investment.   To test this theory, I looked at an ETF index fund which tracks the S&P 500, and compared it to an ETF which invests in gold.  I found that the daily price movements of the stock market were positively correlated with the price of gold. This result was statistically significant.  The weekly price movements of the stock market were also correlated with the price of gold. This result was also statistically significant.  When the holding period was stretched to one month, there was still a positive relationship between the stock market's price moves and the price of gold. This result was not statistically significant.  When the holding period was stretched to one year, there was a negative relationship between the price changes in the stock market and the price of gold.  This result was not statistically significant, either.

negative: The short answer: it depends. The long answer.. Off the top of my head, there are quite a number of factors that an analyst may look at when analyzing a stock, to come up with a recommendation.  Some example factors to look at include: The list goes on.  Quite literally, any and all factors are fair game for a recommendation.  So, the question isn't really what analysts do with financial data, it is what do analysts do with financial data that meets your investment needs? As an example, if you have two analysts, one who is focused on growth stocks, and one who is focused on dividend growth, they may have completely different views on a company.  If both analysts were to analyze Apple (AAPL) 5 years ago, the dividend analyst would likely say SELL or at the most HOLD, because back then Apple did not have a dividend.  However, an analyst focused on growth would likely have said BUY, because Apple appeared to be on a clear upward trend in terms of growth.  Likewise, if you have analysts who are focused on shorting stocks, and ones who are focused on deep value investing, the sell analyst may be selling SELL because they are confident the stock will go down in price, so you can make money on the short position.  Conversely, the deep value investor may be saying BUY, because they believe that based on the companies strong balance sheet, and recent shake-ups in management the stock will eventually turn around.  Two completely different views for the same company: the analyst focused on shorting is looking to make money by capitalizing on falling share price, while the analyst focused on deep value is looking for unloved companies in a tailspin whom s/he believe will turn around, the thesis being that if you dollar-cost-average as the price drops, when it corrects, you'll reap the rewards. That all said, to answer the question about what analysts look for: So really, you should be looking for analysts who align with your investment style, and use those recommendations as a starting point for your own purchases.  Personally, I am a dividend investor, so I have passed many BUY recommendations from analysts and my former broker because those were based on growth stories.  That does not mean that the analysts, my former broker, or myself, are wrong.  But we were all incorrect given the context of how I invest, and what they recommend.

negative: "There are a few reason why the stock price decreases after a dividend is paid:  What's the point of paying a dividend if the stock price automatically decreases? Don't the shareholders just break even? Companies have to do something with their profits. They beholden to their shareholders to make them money either by increasing the share value or paying dividends. So they have the choice between reinvesting their profits into the company to grow the business or just handing the profits directly to the owners of the business (the shareholders). Some companies are as big as they want to be and investing their profits into more capital offers them diminishing returns. These companies are more likely to pay dividends to their shareholders. I assume the price of the stock ""naturally"" increases over the year to reflect the amount of the dividend payment. This is kind of a vague question but then doesn't it make it difficult to evaluate the fluctuations in stock price (in the way that you would a company that doesn't pay a dividend)? It depends on the company. The price may recover the dividend drop... could take a few days to a week. And that dependings on the company's performance and the overall market performance.  With respect to options, I assume nothing special happens? So say I bought $9 call options yesterday that were in the money, all of a sudden they're just not? Is this typically priced into the option price? Is there anything else I need to know about buying options in companies that pay dividends? What if I had an in-the-money option, and all of a sudden out of nowhere a company decides to pay a dividend for the first time. Am I just screwed? One key is that dividends are announced in advance (typically at least, if not always; not sure if it's required by law but I wouldn't be surprised). This is one reason people will sometimes exercise a call option early, because they want to get the actual stock in order to earn the dividend. For ""out of the ordinary"" large cash dividends (over 10% is the guideline), stock splits, or other situations an option can be adjusted: http://www.888options.com/help/faq/splits.jsp#3 If you have an options account, they probably sent you a ""Characteristics and Risks of Standardized Options"" booklet. It has a section discussing this topic and the details of what kinds of situations trigger an adjustment. A regular pre-announced <10% dividend does not, while a special large dividend would, is what I roughly get from it. That ""Characteristics and Risks of Standardized Options"" is worth reading by the way; it's long and complicated, but well, options are complicated. Finally, do all companies reduce their stock price when they pay a dividend? Are they required to? I'm just shocked I've never heard of this before. The company doesn't directly control the stock price, but I do believe this is automatic. I think the market does this automatically because if they didn't, there would be enough people trying to do dividend capture arbitrage that it would ultimately drive down the price."

negative: Options are an indication what a particular segment of the market (those who deal a lot in options) think will happen. (and just because people think that, doesn't mean it will)  Bearing in mind however that people writing covered-calls may due so simply as part of a strategy to mitigate downside risk at the expense of limiting upside potential.  The presence of more people offering up options is to a degree an indication they are thinking the price will fall or hold steady, since that is in effect the 'bet' they are making.  OTOH the people buying those options are making the opposite bet.. so who is to say which will be right.  The balance between the two and how it affects the price of the options could be taken as an indication of market sentiment (within the options market) as to the future direction the stock is likely to take. (I just noticed that Blackjack posted the forumula that can be used to model all of this)  To address the last part of your question 'does that mean it will go lower' I would say this.  The degree to which any of this puts actual pressure on the stock of the underlying instrument is highly debatable, since many (likely most) people trading in a stock never look at what the options for that stock are doing, but base their decision on other factors such as price history, momentum, fundamentals and recent news about the company.  To presume that actions in the options market would put pressure on a stock price, you would need to believe that a signficant fraction of the buyers and sellers were paying attention to the options market.  Which might be the case for some Quants, but likely not for a lot of other buyers.   And it could be argued even then that both groups, those trading options, and those trading stocks, are both looking at the same information to make their predictions of the likely future for the stock, and thus even if there is a correlation between what the stock price does in relation to options, there is no real causality that can be established.  We would in fact predict that given access to the same information, both groups would by and large be taking similar parallel actions due to coming to similar conclusions regarding the future price of the stock.  What is far MORE likely to pressure the price would be just the shear number of buyers or sellers, and also (especially since repeal of the uptick rule) someone who is trying to actively drive down the price via a lot of shorting at progressively lower prices.  (something that is alleged to have been carried out by some hedge fund managers in the course of 'bear raids' on particular companies)

negative: Studying times will vary greatly, but personally I believe 200+ would be a safer bet, if you are going to invest the time you would hate to fall just short. A great resource for anything CFA related is   www.analystforum.com   Plenty of threads/stories on study techniques and hours studied etc.

negative: "Being ""Long"" something means you own it.  Being ""Short"" something means you have created an obligation that you have sold to someone else.  If I am long 100 shares of MSFT, that means that I possess 100 shares of MSFT.  If I am short 100 shares of MSFT, that means that my broker let me borrow 100 shares of MSFT, and I chose to sell them.  While I am short 100 shares of MSFT, I owe 100 shares of MSFT to my broker whenever he demands them back.  Until he demands them back, I owe interest on the value of those 100 shares.  You short a stock when you feel it is about to drop in price.  The idea there is that if MSFT is at $50 and I short it, I borrow 100 shares from my broker and sell for $5000.  If MSFT falls to $48 the next day, I buy back the 100 shares and give them back to my broker.  I pocket the difference ($50 - $48 = $2/share x 100 shares = $200), minus interest owed.  Call and Put options.  People manage the risk of owning a stock or speculate on the future move of a stock by buying and selling calls and puts.  Call and Put options have 3 important components.  The stock symbol they are actionable against (MSFT in this case), the ""strike price"" - $52 in this case, and an expiration, June.  If you buy a MSFT June $52 Call, you are buying the right to purchase MSFT stock before June options expiration (3rd Saturday of the month).  They are priced per share (let's say this one cost $0.10/share), and sold in 100 share blocks called a ""contract"".  If you buy 1 MSFT June $52 call in this scenario, it would cost you 100 shares x $0.10/share = $10.  If you own this call and the stock spikes to $56 before June, you may exercise your right to purchase this stock (for $52), then immediately sell the stock (at the current price of $56) for a profit of $4 / share ($400 in this case), minus commissions.  This is an overly simplified view of this transaction, as this rarely happens, but I have explained it so you understand the value of the option.  Typically the exercise of the option is not used, but the option is sold to another party for an equivalent value.  You can also sell a Call.  Let's say you own 100 shares of MSFT and you would like to make an extra $0.10 a share because you DON'T think the stock price will be up to $52/share by the end of June.  So you go to your online brokerage and sell one contract, and receive the $0.10 premium per share, being $10.  If the end of June comes and nobody exercises the option you sold, you get to keep the $10 as pure profit (minus commission)!  If they do exercise their option, your broker makes you sell your 100 shares of MSFT to that party for the $52 price.  If the stock shot up to $56, you don't get to gain from that price move, as you have already committed to selling it to somebody at the $52 price.  Again, this exercise scenario is overly simplified, but you should understand the process.  A Put is the opposite of a Call.  If you own 100 shares of MSFT, and you fear a fall in price, you may buy a PUT with a strike price at your threshold of pain.  You might buy a $48 June MSFT Put because you fear the stock falling before June.  If the stock does fall below the $48, you are guaranteed that somebody will buy yours at $48, limiting your loss.  You will have paid a premium for this right (maybe $0.52/share for example).  If the stock never gets down to $48 at the end of June, your option to sell is then worthless, as who would sell their stock at $48 when the market will pay you more?  Owning a Put can be treated like owning insurance on the stock from a loss in stock price.  Alternatively, if you think there is no way possible it will get down to $48 before the end of June, you may SELL a $48 MSFT June Put.  HOWEVER, if the stock does dip down below $48, somebody will exercise their option and force you to buy their stock for $48.  Imagine a scenario that MSFT drops to $30 on some drastically terrible news.  While everybody else may buy the stock at $30, you are obligated to buy shares for $48.  Not good!  When you sold the option, somebody paid you a premium for buying that right from you.  Often times you will always keep this premium.  Sometimes though, you will have to buy a stock at a steep price compared to market.  Now options strategies are combinations of buying and selling calls and puts on the same stock.  Example -- I could buy a $52 MSFT June Call, and sell a $55 MSFT June Call.  I would pay money for the $52 Call that I am long, and receive money for the $55 Call that I am short.  The money I receive from the short $55 Call helps offset the cost of buying the $52 Call.  If the stock were to go up, I would enjoy the profit within in $52-$55 range, essentially, maxing out my profit at $3/share - what the long/short call spread cost me.  There are dozens of strategies of mixing and matching long and short calls and puts depending on what you expect the stock to do, and what you want to profit or protect yourself from.  A derivative is any financial device that is derived from some other factor.  Options are one of the most simple types of derivatives.  The value of the option is derived from the real stock price.  Bingo?  That's a derivative.  Lotto?  That is also a derivative.  Power companies buy weather derivatives to hedge their energy requirements.  There are people selling derivatives based on the number of sunny days in Omaha.  Remember those calls and puts on stock prices?  There are people that sell calls and puts based on the number of sunny days in Omaha.  Sounds kind of ridiculous -- but now imagine that you are a solar power company that gets ""free"" electricity from the sun and they sell that to their customers.  On cloudy days, the solar power company is still on the hook to provide energy to their customers, but they must buy it from a more expensive source.  If they own the ""Sunny Days in Omaha"" derivative, they can make money for every cloudy day over the annual average, thus, hedging their obligation for providing more expensive electricity on cloudy days.  For that derivative to work, somebody in the derivative market puts a price on what he believes the odds are of too many cloudy days happening, and somebody who wants to protect his interests from an over abundance of cloudy days purchases this derivative.  The energy company buying this derivative has a known cost for the cost of the derivative and works this into their business model.  Knowing that they will be compensated for any excessive cloudy days allows them to stabilize their pricing and reduce their risk.  The person selling the derivative profits if the number of sunny days is higher than average.  The people selling these types of derivatives study the weather in order to make their offers appropriately.  This particular example is a fictitious one (I don't believe there is a derivative called ""Sunny days in Omaha""), but the concept is real, and the derivatives are based on anything from sunny days, to BLS unemployment statistics, to the apartment vacancy rate of NYC, to the cost of a gallon of milk in Maine.  For every situation, somebody is looking to protect themselves from something, and somebody else believes they can profit from it.  Now these examples are highly simplified, many derivatives are highly technical, comprised of multiple indicators as a part of its risk profile, and extremely difficult to explain.  These things might sound ridiculous, but if you ran a lemonade stand in Omaha, that sunny days derivative just might be your best friend..."

negative: You're talking about ESPP? For ESPP it makes sense to utilize the most the company allows, i.e.: in your case - 15% of the paycheck (if you can afford deferring that much, I assume you can). When the stocks are purchased, I would sell them immediately, not hold. This way you have ~10% premium as your income (pretty much guaranteed, unless the stock falls significantly on the very same day), and almost no exposure. This sums up to be a nice 1.5% yearly guaranteed bonus, on top of any other compensation. As to keeping the stocks, this depends on how much you believe in your company and expect the stocks to appreciate. Being employed and dependent on the company with your salary, I'd avoid investing in your company, as you're invested in it deeply as it is.

negative: I'll mirror what the others have said in that your expectations for returns are wildly out of line with reality. If you could achieve that with only moderate risk hopefully you can see that you could ladder those returns by re-investing them and become a billionaire in short order. You may have noticed that there are a lot of really financially savvy people who are not billionaires. So the math for your plan falls apart somewhere, obviously. However, in the spirit of being helpful, and with the caveat that super high returns involve super high risk I'll try and point you in the direction where this is theoretically possible, even if the odds would be better buying lottery tickets. One way to get more leverage from your money than just buying stocks is to buy options. With an options strategy your return/loss will be magnified greatly compared to buying stocks. That is, you can lose or gain a much higher multiplier of your original investment. That said, I don't advise doing that with any money that you can't afford to lose every penny of, because you likely will.

negative: "The short answer: zero. dg99's answer gives some good reasons why.  You will basically never be able to achieve diversification with individual stocks that is anywhere close to what you can get with mutual funds.  Owning individual stocks exposes you to much greater risk in that random one-off events that happen to affect one of the companies you own can have a disproportionate effect on your assets.  (For instance, some sort of scandal involving a particular company can cause its stock to tank.) There are only two reasons I can see to invest in individual stocks: a. You have some unique opportunity to acquire stock that other people might not be able to get (or get at that price).  This can be the case if you work for a privately-held company that allows you to buy stock (or options), or allows you to participate in its IPO.  Even then, you should not go too crazy, since having too much stock in the company you work for can double your pain if the company falls on hard times (you may lose your job and your investment). b. For fun.  If you like tracking stocks and trying to beat the market, you may want to test your skills at this by using a small proportion of your investable cash (no more than 10%).  In this case you're not so much hoping to increase your returns as to just enjoy investing more.  This can also have a psychological benefit in that it allows you to ""blow off steam"" and indulge your desire to make decisions, while allowing your passive investments (index funds) to shoulder the load of actually gaining value."

negative: It has got to do with the irrationality of humans.  The so called long term investor is in it for the long term, they are not worried about market fluctuations nor timing the market. But yet they will aim to try to get a bargain when they buy in.  It is contradictory in a way. Think about it; if I buy a stock and it drops by 30% I am not worried because I am in it for the long term, but I am worried about getting 1% off when I buy it.  They usually tend to buy when the stock starts falling. However, what they don’t realise is when a stock starts falling there is no telling when it will stop. So even if they get a bargain for that day, it is usually quickly wiped out a few days later. Instead, of waiting for the price to find support and start recovering, they are eager to buy what they think is a bargain. I think this type of long term investing is very risky, and the main reason is because the investor has no plan. They just try to buy so called bargain stocks and hold them until they need the money (usually in retirement). But what happens if the stock price is lower when they want to retire than when they bought it? I hope no long term investor was trying to retire in 2008. If they simply had a plan to indicate when they would buy and under what conditions they would sell, and have a risk management plan in place, then maybe they could reduce their risk somewhat and conserve their capital. A good article to read on this is What's Wrong With Long-Term Investing.

negative: The Barclay's 20+ Year Treasury Bond inception date was July 21, 2002. You aren't going to find treasury bond information going back to 1900 because Treasury Bills have only been issued since 1929. The U.S. Department of the Treasury will give you data back to 1990. There's a good article in the Globe and Mail which covers why you may want to buy bonds as part of your portfolio. The key is diversification. Historically, stocks have done better than bonds long-term, but when stocks fall, bonds tend to (though do not always) go up. If you are investing for 30 years, the risk of putting money into bonds is that you will not make as much money as if you had put the money into stocks. Historically (in the US or Canada), you'd have seen positive returns, just not as high as investing in the stock market. There are many investment strategies. I live in Canada and personally favour the one described in the Canadian Couch Potato, a passive index investment strategy where I invest my money in Canadian, U.S. and International equity (stock market mutual funds) and also in a Canadian bond fund. There are, of course, plenty of people who will tell you to take a radically different strategy with your investments.

negative: If you want to invest in the stock market, whether over a shorter period of 1 to 2 years or over a longer period of 10 or 20 years or longer you need to take some precautions and have a written investment plan with a risk management strategy incorporated in your plan. Others have said that 1 to 2 years is too short to invest in the stock market as the stock market can have a correction and fall by 50%. But it doesn't matter if you invest for 1 year or if you invest for 50 years, the stock market can still fall by 50% just before you plan to withdraw your funds. What you need to figure out is a way to get out before the market falls by 40% to 50%. A simple way to do this is to use technical indicators to warn you when a market trend is starting to change and that it is time to get out of the market. Two simple indicators you can use on a market index are the Rate of Change (ROC) indicator and the 100 week Moving Average (MA). Below is a 10 year weekly chart of the S&P500 with these two indicators charted. They show good times to get into the market and good times to get out.  If you are using the 100 week MA you would buy in when the price crosses above the MA line and sell when the price crosses below the MA line. If you are using the ROC indicator you would buy in when the ROC indicator crosses above the zero line and sell when the ROC indicator crosses below the zero line. So your investment plan could be to buy an Index ETF representing the S&P500 when the ROC moves above zero and sell when it crosses below zero. You can also place a trailing stop loss of 10% to protect you in case of a sudden fall over a couple of days. You can manage your investments in as little as 10 minutes per week by checking the chart once per week and adjusting your stop loss order.  If you want to progressively add to your investment each month you could check the charts and only add any new funds if both the ROC is above zero and sloping upwards. Another option for adding new funds could be if the price is above the MA and moving further away from the MA. All these rules should be incorporated into your investment plan so that you are not basing your decisions based on emotions. There are many other Technical Analysis Indicators you could also learn about to make better educated decisions about your stock market investments. However, what I have provided here is enough for anyone to test over different indexes and time frames and do their own paper trading on to gain some confidence before placing any real money on the table.

negative: I would pass on their deal if they will only match if you invest in their stock.  Think about when/if the company falls on bad times. What happens to the stock of a company when bad times come? The board of directors will reduce or eliminate the dividend payout.  Current and potential investors will take notice. Current owners of the stock will sell. Potential investors will avoid buying. The price of the stock with go down. And, quite likely, the company will lay off workers.  If/when that happens you would find yourself without a job and holding (almost) worthless stock as your savings. That would be quite a bad situation to be in.

negative: "If I really understood it, you bet that a quote/currency/stock market/anything will rise or fall within a period of time.    So, what is the relationship with trading ? I see no trading at all since I don't buy or sell quotes. You are not betting as in ""betting on the outcome of an horse race"" where the money of the participants is redistributed to the winners of the bet. You are betting on the price movement of a security. To do that you have to buy/sell the option that will give you the profit or the loss. In your case, you would be buying or selling an option, which is a financial contract. That's trading. Then, since anyone should have the same technic (call when a currency rises and put when it falls)[...] How can you know what will be the future rate of exchange of currencies? It's not because the price went up for the last minutes/hours/days/months/years that it will continue like that. Because of that everyone won't have the same strategy. Also, not everyone is using currencies to speculate, there are firms with real needs that affect the market too, like importers and exporters, they will use financial products to protect themselves from Forex rates, not to make profits from them. [...] how the brokers (websites) can make money ? The broker (or bank) will either: I'm really afraid to bet because I think that they can bankrupt at any time! Are my fears correct ? There is always a probability that a company can go bankrupt. But that's can be very low probability. Brokers are usually not taking risks and are just being intermediaries in financial transactions (but sometime their computer systems have troubles.....), thanks to that, they are not likely to go bankrupt you after you buy your option. Also, they are regulated to insure that they are solid. Last thing, if you fear losing money, don't trade. If you do trade, only play with money you can afford to lose as you are likely to lose some (maybe all) money in the process."

negative: Because swing trading isn't the only reason to buy a stock, and it's not the only way to make money on a stock.  I do not have the expertise to make advice one way or the other, but I personally I feel swing trading is one of the worse ways to invest in the stock market. To answer your specific questions: In the previous post, I outlined a naive trade intended to make $1,000 off a $10k buy, but it was shown this would likely fail, even if the stock price would have increased by 10% had I not placed the trade. Another way to state this is that my trade would disrupt the stock price, and not in my favor at all. So, that means I'd have to settle for a smaller trade. If I bought $100 worth of the stock, that size of a buy wouldn't be too disruptive. I might succeed and get $10 out of the trade (10% of $100). But my trade fee was $8 or so... To summarize, you are completely correct that even hoping for gains of 10% on a consistent basis (in other words, after every single trade!) is totally unrealistic.  You already seem to understand that swing trading on low-volume stocks is pointless.  But your last question was... So how do people make any significant money trading low volume stocks--if they even do? I assume money is made, since the stocks are bought and sold. I have some guesses, but I'd like to hear from the experts. ... and in a comment: Then if no one does make significant money trading these stocks...what are they doing there on the market?  The answer is that the buying and selling is mostly likely not by swing traders.  It's by investors that believe in the company.  The company is on the market because the company believes public trading to be an advantageous position for them to receive capital investments, and there are people out there who think that transaction makes sense.  In other words, real investing.

negative: Basically the first thing you should do before you invest your money is to learn about investing and learn about what you want to invest in. Another thing to think about is that usually low risk can also mean low returns. As you are quite young and have some savings put aside you should generally aim for higher risk higher return investments and then when you start to reach retirement age aim for less risky lower return investments. In saying that, just because an investment is considered high risk does not mean you have to be exposed to the full risk of that investment. You do this by managing your risk to an acceptable level which will allow you to sleep at night. To do this you need to learn about what you are investing in. As an example about managing your risk in an investment, say you want to invest $50,000 in shares. If you put the full $50,000 into one share and that share price drops dramatically you will lose a large portion of your money straight away. If instead you spent a maximum of $10,000 on 5 different shares, even if one of them falls dramatically, you still have another 4 which may be doing a lot better thus minimising your losses. To take it one step further you might say if anyone of the shares you bought falls by 20% then you will sell those shares and limit your losses to $2000 per share. If the worst case scenario occurred and all 5 of your shares fell during a stock market crash you would limit your total losses to $10,000 instead of $50,000. Most successful investors put just as much if not more emphasis on managing the risk on their investments and limiting their losses as they do in selecting the investments. As I am not in the US, I cannot really comment whether it is the right time to buy property over there, especially as the market conditions would be different in different states and in different areas of each state. However, a good indication of when to buy properties is when prices have dropped and are starting to stabilise. As you are renting at the moment one option you might want to look at is buying a place to live in so you don't need to rent any more. You can compare your current rent payment with the mortgage payment if you were to buy a house to live in. If your mortgage payments are lower than your rent payments then this could be a good option. But whatever you do make sure you learn about it first. Make sure you spend the time looking at for sale properties for a few months in the area you want to buy before you do buy. This will give you an indication of how much properties in that area are really worth and if prices are stable, still falling or starting to go up. Good luck, and remember, research, research and more research. Even if you are to take someone elses advice and recommendations, you should learn enough yourself to be able to tell if their advice and recommendations make sense and are right for your current situation.

negative: What is a good resource to learn about options trading strategies? Options are a quite advanced investment form, and you'd do well to learn a lot about them before attempting to dive into this fairly illiquid market. Yale's online course in financial markets covers the Options Market and is a good starting point to make sure you've got all the basics. You may be familiar with most of it, but it's a decent refresher on lingo and Black-Scholes. How can I use options to establish some cash flow from long standing investments while minimizing capital gains expenses? This question seems designed to get people to talk about covered calls. Essentially, you sell call contracts: you let people buy things you already have at a price in the future, at their whim. They pay you for this option, though usually not much if the options aren't in the money. You can think of this as trading any return above the call option for a bit of extra cash.  I don't invest with taxable accounts, but there are significant tax consequences for options. Because they expire, there will be turnover in your portfolio, and up front income when you take the sell side. So if you trade in options with close expiration dates, you'll probably end up with a lot of short-term capital gains, which are treated as normal income. One strategy is to trade in broad-based stock index options, which have favorable tax treatments. Some people have abused this though to disguise normal income as capital gains, so it could go away. Obviously the easy approach is to just use a tax advantaged account for options trading. An ETF might also be able to handle the turnover on your behalf, for example VIX is a series of options on S&P500 options. A second strategy I've heard of is buying calls and puts at a given strike price. For example, if you bought Dec '13 calls and puts on SPX @ 115 today, it would cost you about $35 dollars. If the price moves more than 35 dollars away from 115 by DEC '13 (in either direction), you've made a profit. If you reflect on that for a bit, you'll see why VIX is considered a volatility index. I guess I should mention that shorting a stock and buying a put option at the market price are very similar, with the exception that your loss is limited to the price of the option.  Is there ever an instance where options investing is not speculative? The term 'speculative' is not well defined. For many people, the answer is no. It's very easy to just buy put options and wait for prices to fall, or call options and wait for prices to rise. Moreover, the second strategy above essentially gives you similar performance to a stock without paying full price. These all fall under the headline of increasing a risk portfolio rather than decreasing it, which I figure is a decent definition of speculation. On the other hand, there are ways to use options minimize risk rather than increase it. You can buy underwater options as portfolio insurance, if your portfolio drops below a certain amount, you still have the right to sell it at a higher one. And the Case-Schiller index is run in part, on the hopes that one day there might be a thriving market for real estate options (or futures). When you buy a home or lend money to someone to buy one, you could buy regional Case-Schiller options to protect you if the regional market tanks. But in all of these cases, it's required for someone else to take the opposite trade. Risk isn't reduced, it's traded around. So technically, there is a speculative element to these as well. I think the proper question here is whether speculation is present, but whether speculation can be put to good ends. Without speculators, the already very thin market for options would shrivel faster.

negative: Any thoughts? I would love to hear your feedback. I have been making more on my cryptocurrency investments than I have in trading options. I am falling more and more in love with the cryptocurrency market. There's is nothing like it out there. I tell people, it's like investing in the internet 17 years ago!

negative: Companies do not support their stock. Once the security is out on the wild (market), its price fluctuates according to what investors think they are worth. Support is a whole different concept, financially speaking: Support or support level refers to the price level below which, historically, a stock has had difficulty falling. It is the level at which buyers tend to enter the stock. So it is the lowest assumed price for that stock. Once it reaches its price, buyers will rush to the stock, raising its price. The company wants to keep the stock price at acceptable levels, as it can be seen as the general view of the company's health. Also several employees/executives in the company have stock or stock options, so it is in their interest to keep their stock price up. A bond that goes down in value may indicate a believe the bond issuer (government in this case) won't honor the bond when it matures. As for bonds, there is a wealth of reading in this site: Can someone explain how government bonds work? Who sets the prices on government bonds?  Basic understanding of bonds, values, rates and yields

negative: "Some stocks do fall to zero. I don't have statistics handy, but I'd guess that a majority of all the companies ever started are now bankrupt and worth zero. Even if a company does not go bankrupt, there is no guarantee that it's value will increase forever, even in a general, overall sense. You might buy a stock when it is at or near its peak, and then it loses value and never regains it. Even if a stock will go back up, you can't know for certain that it will. Suppose you bought a stock for $10 and it's now at $5. If you sell, you lose half your money. But if you hold on, it MIGHT go back up and you make a profit. Or it might continue going down and you lose even more, perhaps your entire investment. A rational person might decide to sell now and cut his losses. Of course, I'm sure many investors have had the experience of selling a stock at a loss, and then seeing the price skyrocket. But there have also been plenty of investors who decided to hold on, only to lose more money. (Just a couple of weeks ago a stock I bought for $1.50 was selling for $14. I could have sold for like 900% profit. Instead I decided to hold on and see if it went yet higher. It's now at $2.50. Fortunately I only invested something like $800. If it goes to zero it will be annoying but not ruin me.) On a bigger scale, if you invest in a variety of stocks and hold on to them for a long period of time, the chance that you will lose money is small. The stock market as a whole has consistently gone up in the long term. But the chance is not zero. And a key phrase is ""in the long term"". If you need the money today, the fact that the market will probably go back up within a few months or a year or so may not help."

negative: At the moment the interest rate... implies a variable rate mortgage.  I believe rates are only going to go up from here. So, if I were in your position, I would pay off the mortgage first.  If you don't have 3-6 months in savings for an emergency, I would invest that much money in low risk investments.  Anything remaining I would invest in a balanced portfolio of mutual funds. The biggest benefit to this is the flexibility it gives you.  Not being burdened by a monthly mortgage frees you up to invest.  This may be in your stock portfolio each month or it may be in your community or charitable causes. You have financial margin.

negative: "First off, the answer to your question is something EVERYONE would like to know. There are fund managers at Fidelity who will a pay $100 million fee to someone who can tell them a ""safe"" way to earn interest. The first thing to decide, is do you want to save money, or invest money. If you just want to save your money, you can keep it in cash, certificates of deposit or gold. Each has its advantages and disadvantages. For example, gold tends to hold its value over time and will always have value. Even if Russia invades Switzerland and the Swiss Franc becomes worthless, your gold will still be useful and spendable. As Alan Greenspan famously wrote long ago, ""Gold is always accepted."" If you want to invest money and make it grow, yet still have the money ""fluent"" which I assume means liquid, your main option is a major equity, since those can be readily bought and sold. I know in your question you are reluctant to put your money at the ""mercy"" of one stock, but the criteria you have listed match up with an equity investment, so if you want to meet your goals, you are going to have to come to terms with your fears and buy a stock. Find a good blue chip stock that is in an industry with positive prospects. Stay away from stuff that is sexy or hyped. Focus on just one stock--that way you can research it to death. The better you understand what you are buying, the greater the chance of success. Zurich Financial Services is a very solid company right now in a nice, boring, highly profitable business. Might fit your needs perfectly. They were founded in 1872, one of the safest equities you will find. Nestle is another option. Roche is another. If you want something a little more risky consider Georg Fischer. Anyway, what I can tell you, is that your goals match up with a blue chip equity as the logical type of investment. Note on Diversification Many financial advisors will advise you to ""diversify"", for example, by investing in many stocks instead of just one, or even by buying funds that are invested in hundreds of stocks, or indexes that are invested in the whole market. I disagree with this philosophy. Would you go into a casino and divide your money, putting a small portion on each game? No, it is a bad idea because most of the games have poor returns. Yet, that is exactly what you do when you diversify. It is a false sense of safety. The proper thing to do is exactly what you would do if forced to bet in casino: find the game with the best return, get as good as you can at that game, and play just that one game. That is the proper and smart thing to do."

negative: "Thank you I am obviously pretty new and just starting to learn about it.  As I am declaring finance my major in the fall.  Edit: How do I go about trading options is it a viable route for some ""broke"" college kid?"