Sat, Feb. 22

Knowledge is out there<br>Get the right direction <br>on your investments

"I spend most of my time trying to help you sort out what you want to accomplish."

When considering whether or not to use a financial broker service, consider the options: A full-service offers financial planning advice, a discount service does not and offers lower commission fees and doing it yourself, or direct investing, requires a careful study and understanding of the market.

While direct investing omits the brokerage fees one should be familiar with the process of buying and selling shares.

With investing online, be aware of some common misconceptions. According to a speech given by Arthur Levitt, chairman for the U.S. Securities and Exchange Commission, more than seven million Americans trade on-line and 25 percent of those are individual investors.

Levitt states that an investor holds a duty to "understand and control the level of risk he or she is assuming."

* You do not have direct connection with the securities market from your computer. Once you push the enter key, the order is sent to the broker, who sends it to the chosen market. Be aware of lines clogging, systems breaking and orders backing up.

* Price quotes are only for a limited number of shares. If an investor is at the "end of the line," the price could change before an investor moves to the head of the line. Investors should protect themselves by using a limit order. This buys or sells a security at a specific price.

* An order is not cancelled once you push "cancel" on the keyboard. In reality, it’s only cancelled when the market receives the cancellation. An electronic confirmation only means your request was received, not that the order was actually cancelled.

* If an investor plans to borrow money for purchasing stock, understand the broker’s terms of the loan – called the margin. When buying on margin, the purchased stock becomes collateral for that loan. Sometimes, if an investor doesn’t meet the margin call, the brokerage firm may sell those securities without notification, resulting in a possible loss for the investor.

The SEC has about 125 attorneys, accountants and analysts tasked with policing against Internet fraud. If you suspect a trade was unsuccessful and did not go through properly, notify the local branch of the Securities and Exchange Commission.

Investment Terms

* Stocks – when a company wants to raise money, it issues stock. This action raises capital without creating debt and if a company’s earnings go up, the price goes up. Investors should look for companies with rising earnings.

* Bonds - an organization’s promise to repay a sum of money at a certain interest rate within a certain amount of time – also called notes.

If a company or corporation needs to purchase equipment, for example, the corporation can issue bonds. Thereby, the company receives their money and agrees to pay the interest rate set on the bonds and redeem the bonds at some future date.

o Mutual Fund – a pool of money from investors used to pursue a specific objective. Investment professionals manage these accounts. The most common mutual funds invest in stocks or bonds of U.S. companies.

An open-end fund is the most common of the mutual fund family. Both existing and new investors may add any amount of money they want into this type of fund.

A load fund is when a fee is charged for purchasing shares. An open-end fund that doesn’t charge this fee is a no-load fund.

* Growth funds – a less aggressive fund that strives for high returns through capital appreciation rather than dividend income. These funds have a mixture of small, mid and large cap stocks along with conservative stocks and bonds. These fare well over a long- term investment period.

* Money Market Funds – used for setting aside emergency money. These are safe but do no yield much higher than a savings account.

* Prospectus – the written statement disclosing the terms of a mutual fund.

These can be obtained from the broker or online brokerage services - simply download the information.

According to a 1999 Investment FAQ article, when reading the prospectus, pay careful attention to the performance of that fund. Note that funds doing well one year may not perform well the next and vice versa.

If a fund repeatedly under-performs the index (represents market fluctuation) by five percent or more, this might not be a wise choice for a long-term investment and the difference in dollars could be substantial.

Understand what fees you’ll be paying and that all funds charge a management fee. Also, carefully read the guidelines for purchasing and redeeming shares.

Some helpful websites:

To determine the response and success ratings of your online brokerage firm, visit the Keynote Web Broker Trading Index.

Success Online Seminars recently announced their new stock market educational subscription website at

Test your investment knowledge skills at

Take a crash course in investing from this comprehensive site at

Click on the Young Investor fund geared for children at

Visit the Wall Street Wizard online. This site sends an e-mail newsletter directly to all teen investors

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