Posts Tagged ‘stocks’
There are numerous ways to determine the value of a company. When you can determine it’s value, you can then determine the value of its traded shares. The most basic way to do it is to look at the company’s market value, which is also referred to as its market capitalization, or market cap.
So how do you calculate a company’s market capitalization? It’s not as diffuclut as you might think. It’s simply the number of shares a company has outstanding multiplied by the current share price. So as an example, if a company has a million shares outstanding and its current share price is $15, the company’s market cap is $15 million…Simple eh?
How large a company is can be measured by its market cap. Here’s a list of the the five basic stock categories of market capitalization:
1) Micro cap – These are companies that are under $250 million. These stocks are the smallest available and tend to be the most risky.
2) Small cap – These companies are worth $250 million to $1 billion dollars. The stocks of these companies are less risky than micro caps, but still have a lot of growth potential. However, the key word in this description is “potential”, so still make sure you do your homework!
3) Mid cap – Mid cap companies have a value of $1 billion to $5 billion. This kind of company gives investors a good compromise between the small and large cap companies. This gives the investor the chance to invest in a company that have have a degree of safetly found in large cap companies while still having some of the growth potential of a small cap company
4) Large cap – these companies are referred to as “blue chips” and have a worth of $5 billion to $25 billion. These companies are more for conservative investors as they appreciate on a steady rate and are relatively safe.
5) Ultra cap – These caps can also be referred to as “mega caps” and are the real “big boys” of the share market. Companies such as General Electric and Microsoft are good examples. Investing in these companies can be very expensive, but you can be assured the company won’t go bankrupt (and have ther share values drop to zero) over night.
So which ones should you go for? It all depends on what your goals are. Large caps tend to do better than small caps, but remember that even a company like Microsoft was once a small cap and therefore small caps have a lot greater growth potential.
An easy way to think of this is to compare stocks with trees. Think of a small cap stock as an oak tree that is a year old, and think of a large cap stock as a giant redwood that is over 200 years old. In a storm (ie turmoil in the stock market as we tend to see every few years), the oak tree is going to have rough time and may even die, while the redwood will be very sturdy and highly unlikely to suffer much damage after the storm is over. However, the oak tree still has a lot of potential for future growth whereas the giant redwood may not grow very much more over its lifetime.
Even though market capitalization is an important consideration, it shouldn’t be the only way to decide. It’s just one measure of value. If you are going to become a serious investor, you will need to look at numerous other factors to determine if a company’s shares are worth investing in.
Futures – In finance, a futures contract is a standardized contract between two parties to buy or sell a specified asset of standardized quantity and quality at a specified date at a price agreed today (the speculated price). The contracts are traded on a speculated exchange. These contracts are not “direct” securities like stocks, bonds, rights or warrants. They are still securities, however, though they are a type of derivative contract. The party agreeing to buy the underlying asset in the coming time assumes a long position, and the party agreeing to sell the asset in the coming time assumes a short position.
One advantage of trading in futures is that investor trade on “margins”. To purchase a contract (an agreement to buy or sell a commodity on or before a specified date) an investor need only risk a fraction of the contract value as his investment covers the “margin”. If the margin is set at 10%, a $2000 deposit will allow the trader to acquire a $20,000 contract which will give a far greater profit if the investor predicted the commodity movement correctly. Potential losses are typically protected by a “stop-loss order” which will limit the deficit to the original deposit amount. If an investor thinks the value of a commodity will rise he will “go long” and raise a futures contract to purchase a quantity of the commodity, in order to re-sell it once the price rise has taken place. If an investor thinks a commodity will fall, the will raise a contract to sell a quantity of the commodity, wait for the market to drop then “buy back” the commodity to settle the contract & release the profit.
Spread betting – is any of various types of wagering on the outcome of an event, where the pay-off is based on the accuracy of the wager, rather than a simple “win or lose” outcome, such as fixed-odds (or money-line) betting or pari-mutuel betting. A spread is a range of outcomes, and the bet is whether the outcome will be above or below the spread. Spread betting has been a major growth market in the UK in recent years, with the number of gamblers heading towards one million. This carries a high level of risk, with potential losses or gains far in excess of the original money wagered. In the UK, these bets are regulated by the Financial Services Authority rather than the Gambling Commission.
The general purpose of spread betting is to create an active market for both sides of a binary wager, even if the outcome of an event may appear a priori to be biased towards one side or the other. In a sporting event (e.g. a basketball game) a strong team may be matched up against a historically weaker team; almost every game will have a favorite and an underdog. If the wager is simply “Will the favorite win?” more bets are likely to be made for the favorite, possibly to such an extent that there would be very few bettors willing to take the underdog.
Have you heard of the lone wolf syndrome? Lone wolf syndrome is where you try to do everything yourself. It is an effective way to accelerate your wealth. How do you stop being a lone wolf? Tap on your actual experiences of family and friends, the expertise, or nets. Take a piece of paper and make a vector with 4 columns. The first column title is “activity of building wealth.” What do you want to achieve this year? 3.6 Record building activities in abundance. These may include items you have in process, incomplete, or has not begun yet. For example, you can list develops a process of generating the terminal component “,” buy a rental property on two sides “,” investing in the stock market strategies “,” the tax scheme for my business “or “put together my personal financial statements (balance sheet, cash flow statement, statement of income).
It entitles the second column, “who can help” people on the list you already know who have skills to help you start or end the activities of building wealth. These people he knows and is well prepared to give advice. In some cases, these people may be unable to help directly but it can be great sources for referrals to others who can help you achieve your goals and accelerate your wealth. Examples of people who you know and can be your family (mother, father, sister, brother), friends (college, parents of friends of their children, health club), neighbors or people at work. Go through your calendar for additional people to help. Does the title for the third column is’ calls or calls? When? “Determine ahead of time if you request a meeting face to face or ask for help via a call or email from your phone. Responsible to stop, identify the date you call or meet with the person. It is critical that you follow through in making contact with people you have identified to help you out.
The last column heading is, “When can we start?” Take your family and friends say yes to your request for help. You need to find a time for the parties to resolve and review the items with which you need the most help. When meeting these people, make sure you prepare ahead of time to discuss your goals and desires. Be direct and honest and ask these people suggestions or advice on how she can help you reach your goals. Ask them “what they would do to accomplish the task of building wealth?” Take notes, ask questions and discuss what actions will move you closer to achieving their activities in building wealth. In their discussions, make sure you are clear about next steps. Do you feel confident you know the next step of action? If not, then continue asking questions until you feel confident and have clear direction. This is also a perfect opportunity to ask your family or friend if you can request additional information or help them in the future.
You will be amazed at how quickly you can begin to build wealth you lost once lone wolf syndrome. Tap into resources that you already have and build your team of plenty. You will achieve its goals of building wealth faster, more efficiently, and with more confidence once you have the people around you that uses it and its goals.