What Is A Dividend Yield In Stock Trading?

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A dividend yield in stock trading is the annual dividend payments by a company divided by the market cap of the company, which is the dividend per share divided by the price per share of stock for that company. This number is often expressed as a percentage. There are two types of dividend yield, those on preferred stock and those on common stock.

Preferred share dividend yields are given to owners of preferred stock, or shares. Dividend payments are stipulated by the prospectus. Preferred share owners calculate multiple yields which reflect the possible outcomes over the security life. The yield that is stated by the company may be different than the yields calculated by the investor.

Common stock dividend yields are different. With common stock, there is no stated dividend. Management of a company sets the dividends that are paid to owners of common shares, and these are usually in relation to the earnings of the company for that time period. Dividends are not guaranteed at a set rate, or even at all. Some dividend payments may be large, and others may be nonexistent. To calculate the dividend yield for common shares, the current yield is a better figure to use than future yield, which are not completely accurate. The current divident yield is gotten by taking the most recent full year dividend and dividing it by the current share price for that stock.

Dividend yields in stock trading refer to the amount of dividends for the past year divided by the price per share of the stock. Preferred stock offers better dividend yields and a guarantee that dividends will be paid. Common stock has no such guarantee. With common stocks, the dividends paid may vary if they are paid at all. Some companies and traders may try to accurately predict future dividends and the future dividend yield. This is not a smart move for most investors, as the stock market is basically unpredictable. By trying to predict future dividends, you could be setting yourself up for a loss if the market conditions change from what you thought they were going to be. Dividend yields are important financial tools that are used by investors in the stock market to help them invest in stocks that have a big potential for gains. Dividend yields are just one of the many analysis tools used by traders to minimize the risks when trading on the stock market.

Copyright ? 2007 Joel Teo. All rights reserved.

How To Go Public Without Reverse Mergers

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How To Go Public Without Reverse Mergers Or Public Shell Corporations
?Going Public? is the procedure of selling shares that were once held by a private company to the general investing public for the very first time; many times it has been called an IPO.

Numerous knowledgeable business owners have the grand vision of taking their private business public. The economic incentives and rewards of becoming a publicly traded company provide opportunities seldom offered to private companies. Of course, the prestige and glamour are indicators of success when a private business goes public. Nevertheless, the many ways of going public and, financial responsibilities of a public business, can create a challenging proposition. Taking your company public is a involved method requiring more than a few skills and business acumen; it can also be mystifying and baffling, even for trained professionals.

As companies contemplate going public, the biggest reason is to raise capital.
A necessary outlook of the many ways private companies can join the public markets, and what is the relevant securities law, is in order. The need to consider options with a sober mind is a must.

These are many of the benefits of entering the public markets:

? The available sources of capital will multiply, since your company will be able to approach many more prospective investors.
? All investors ? as well as company principals ? can take advantage of an exit strategy to sell their participation and regain their initial investment.
? Attracting capital is easier, and if the investment outlook about your business increases, it could uphold a secondary trading market for your stock issue.
? By providing stock options your public company can attract and keep key personnel.

In the past many companies used a procedure called a ?reverse merger with a public shell? as a way to go public.

In the above case, the publicly traded company is referred to as a "shell," since all that remains of the originating business is the organizational constitution.

A reverse merger involves this scenario:

In a public shell reverse merger ? also called a reverse take over ? the shareholders of a privately held company purchase control of the corporate shell company, and then merge it with the private business.

The private company's shareholders receive the biggest part of the shares of the public shell corporation, thereby keeping control of its board of directors.

Of course, the risks concerned with a reverse merger are numerous, and possibly a overview of the harmful aspects of a public shell reverse merger is needed.

The following are many of the hidden pitfalls of a reverse merger:

Most existing companies have a background, a history, and shareholders. The background and history can be bad, and can take many turns: sloppy paperwork and record keeping, lawsuits, and many other skeletons in the closet. Besides, public shells may have their share of dissatisfied investors very willing to "dump" at the first occasion, sinking the market for the company?s stock.

The best going public advice should be sought before contemplating a reverse merger, since many private company officers are lacking in experience and not aware of the perils of going public via a public shell reverse merger.

Thoroughness and seasoned guidance can assist your company to conquer all the pitfalls and take your company public in as little as 4 months.

Here are some more benefits of going public through an alternative program to a reverse merger or public shell:

? No reporting requirements
? No mandatory minimum revenue
? No Sarbanes-Oxley
? No asset requirements

All You Need To Know About The Penny Stocks

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The penny stocks are the ones that are traded below $5 per share. Most of the financial advisors and long term investment makers avoid them due to the high risk involved in their trading. Sometimes they bring a huge return on investment to the investor and sometimes they do not. So they have to be bought with sufficient care. They are not traded in volumes. They are not found in the stock exchanges and are sold over the counter through quotation services. They belong generally to newer companies. When they do not bring enough returns, then it implies that the company is in bad financial shape. But if the right penny stock can be got hold of then they can prove lucrative too.

However, the penny stocks have certain regulations about them. If these are not followed a red flag will go up. Firstly, your penny stock in order to be sold by a broker should have a written approval from you. The broker should also provide you with a detailed document that tells you about the risk associated with such trading.

The assessment of the risks includes the price for each share that the company will receive from the trading. A percentage of it will be committed to the broker involved. Once your account is in place, the company will give an estimate of the value of each share on a monthly basis. If everything runs in track then you will have lucrative deal.

The penny stocks bring a huge return for little investment. As a result it is a pet stock with seasoned traders. It also draws those who are quite a novice to the stock market. But remember that all stocks will not bring you good returns. There are lots of scams that exit in this arena. Lots of such stocks are fraudulent which are just placed there to gull the new traders. They are made to buy a wad of such stocks and given to believe that they have done a square deal.

There is a public opinion that it is difficult to select the right stocks. Well, this is not so. Even if you are a greenhorn, you can do it well by taking some careful steps. To begin with, visit a penny stock site. There you will come across dozens of resources that will give you a clue as to which stock to pick.

However, most of these sites are paid sites. Some of them need a registration at the minimum. Incase a contribution is to be made to get the information, it is very minimal. Moreover it is worth the dollars you shell out as it will help you take an informed decision about buying penny stocks. However, besides gathering information from the Internet, you should also consult an expert, who is veteran at the stock market. The information that will be present in the websites may not be true always. Sometime a website could be a fake one, so you should take sufficient care before banking on one of those. However if you follow these simple steps carefully, you are here to get a profitable return.

Stock Market Strategy for Beginners

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First of all you need to obtain a basic knowledge of shares and the stock market. It goes without saying that without knowing the aspects of a Stock Tips or the concept of how the Equity market works it's impossible to know what your doing. You can gain all the basic knowledge of the Equity market in the basics section of the website. These are the key concepts that need to be learnt before moving onto learning to trade; Learn the aspects a share has e.g. dividends, bid/ask price, its chart what information is required to buy shares.Learn how the Equity market works know of the risk involved with trading shares Its important to have this knowledge before paying money for a trading course to enable you to fully understand the concepts being taught. By not knowing any basic Equity market information, parts of courses could easily fly by you, meaning that you will struggle to understand the information that you will have paid for! The New investors taking their first steps towards learning the basics of stock trading should have access to multiple sources of quality education.

there is so much written on the topic of investing for new investor. when you are investing money in Equity market keep it simple. keep your investment strategies such as examining data point making predictions and trading real simple to help insure you don't take on too many risk on company or stock without having market security. Understanding stocks and bonds Stocks and bonds are the staples of many investment portfolios. Equity represents a share of ownership in a corporation. A bond is a security that represents a debt owed by the corporation to the bondholder. A share of Equity is issued in a number of different ways - following are descriptions of the most common forms: Common stock Common stock - also called common shares, capital shares, or capital stock - represents units of ownership in a corporation. Purchasers of it is granted specific rights that may include the following: Voting at stockholder meetings.Selling or otherwise disposing of Equity.

Having the first opportunity to purchase additional shares of common stock issued by the corporation. Sharing dividends with other holders. Receiving annual reports and inspecting the corporation's books and records.Sharing in assets if the corporation is liquidated. A corporation may be authorized to issue more than one class of Equity. For example, a class of common stock might have enhanced voting rights. This Equity may be more expensive than regular shares. Preferred stock Preferred stock gets its name from the preferences granted its owners, which may include dividends or sharing assets should company liquidation occur. it generally doesn't carry voting rights. It is issued by a company to raise capital without jeopardizing the controlling interests of the common stockholders. Preferred stock is sometimes convertible to common stock.

Investor makes a good impact on the Equity market and with the brokers the market gives a very good results which in turn benefits investor as well as the market. Investor understanding gives a amount of options in the market. Analysis and regular watch brings a best and accurate results from the market which is a best tools, which can be provided by the advisors and brokers who trade in the market.

Bet Your Bottom Dollar? ? No Way, Unless You?ve Read The Daily Stock Report

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In as much as you would like the stock market to be the hen that lays the golden egg for you, much of the success from stock trading does not happen overnight. You have to go through your fair share of stock trading days. So you before you call it a night, why not read your Daily Stock Report?

You can?t bury your head like an ostrich after you?ve made an investment, and neither can you count your chicks before they are hatched. If you read between the lines, you have to be as patient and diligent as a spider weaving its web of tools and techniques that lure the profit in, day in and day out.

Speaking of webs, it is much cheaper to invest your resources in a stock trading website. You get instant results on your transactions with a minimal investment of time and money. When you?re down to your bottom dollar, you bet you?d better keep posted on your daily stock reports and keep updated with online stock market analyses. With the help of stock market visuals like charts and graphs, you do have a way of placing a good bet by determining what could happen to your stocks tomorrow. Stock prices have a way of trending up or trending down based on their past performance, and this is what assists you in predicting stock market results for the future.

Much closer to home, your very future lies in tomorrow. In stock market terms, that means your next trading day. It only takes your favorite news channel to get a hold of information a few minutes of every day. When it becomes a habit to watch the evening news and view your closing prices, you?re a few hours ahead in deciding your next move and you?re a step ahead of the rest of the day traders in your league. Even the most-seasoned practitioners in the stock market admit to reading daily stock reports as part of their discipline. From a practice which starts out as an occasional thing, it becomes purely habitual and it ends up as being ultimately beneficial to your stock trading days.

With your trading days far from over, you can always invest in some training days ahead. There are certain privileges to being associated with a stock trading and training website. Aside from rubbing elbows with other active day traders and retail stock traders worldwide, you could have easy access to a free Stock Trading Course. Educating yourself as an investor at your own time and in a manner free of charge reduces your gamble with fate. It adds to your credentials as a trader, and it widens your knowledge on the tricks of the trade. As a result, you become more successful in your money-making ventures. The true idea of stock trading should be less of a gamble you carelessly play and more of a wise investment you carefully work at. Every dollar counts down to the last piece in your pocket. If you want to make a sure bet, you simply can?t afford to ignore the information you could gain from this report.

Stock Market Trading: Learn Options Trading Now

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Being engaged in stock market trading is a tricky job. Stock market trading requires a lot of guts on the trader's part as well a dose of wits. The stock market is very unpredictable like the weather sometimes. You will never be sure of winning in stock market trading but you can definitely make your performance better by making a sound decision and calculated risks.
Going into stock market trading is too risky of a task especially for a new trader. It is best recommended that new traders must first be educated of the pros and cons of stock market trading. A careful evaluation of the market's status and your capability as an investor must be first made before going into the stock market trading. A novice trader must also possess the right strategy that can help him in being a better player in stock market trading.
One of the more popular strategies in stock market trading is option trading. Option trading involves an agreement between a buyer and a seller that gives the buyer the right, but not as an obligation, to buy or to sell a particular asset on or before the option's expiration time, at an agreed price. Option trading is a better bargain than holding a stock because it allows for more option trading a trader can choose to either be a call option or put option. Call options give the buyer the right to purchase the underlying asset while put options gives the buyer of the option the right to sell the underlying assets.
Although it seems that option trading looms as an ideal strategy in stock market trading, it also poses a lot of risks to the trader. Again, the efficacy of option trading is in proportion with how the market would go. Again, the success of option trading is in proportion with how the market would market might move easily towards your favor or the other way around causing you to lose a lot of money in bad investments. The dangers and other circumstance involved in trading options make it apparent that there is a need for an effective way to learn option trading.
Option trading is complicated and risky in nature, and to learn option trading is a great way to deal with it. An effective way to learn option trading is through option tutorial services. Option tutorial provides an in depth study and expert recommendations which can help you learn option trading to a full option tutorials, not only you can learn option trading but they can also help you become better with your decisions.
In many ways, option trading can impose serious threats as well as other unimaginable risks to a trader financially.Option tutorial provides the needed help in preparing you before going into the uncertain world of stock market trading.Option trading provides a better grasp of the downside and the risks involved with entering into trade options and must have an equally balanced options strategy to counter any of this downside and risks.Option tutorial can also help you in devising an equally balanced options strategy to counter any of this downside and risks.

Checking Out Stockbrokers

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As the bull market roars on more and more individual investors are reconsidering the stock market after swearing it off forever just a few years ago when their stocks nosedived 30% and more.But now the opposite is happening and they're understandably reluctant to stand idly by and watch others rake in bull-market profits.So lots of people are looking for a good stockbroker, with emphasis on "good." The worst case scenario, of course, is to get involved with a broker who's deceived or cheated clients in the past or has other serious complaints against him/her.Your first question, then is, How can you check out a broker?Basically, you're looking for red flags that might warn you away from a person or brokerage, such as a history of disciplinary actions or some sort of licensing problem or employment problem (e.g., the broker was fired from a previous job).The source of this type of background information is the Central Registration Depository System (CRD). This computerized database, maintained by the North American Securities Administrators Association (NASAA), contains licensing and registration information on virtually all stockbrokers and brokerage firms in the U.S. You can access the database for free or for a nominal fee through your state securities regulator. You can obtain a report on a broker and/or brokerage firm by calling the appropriate state securities regulator. The broker will not be advised or this request. (Alternatively, you can visit and click on "Find Regulator.") Yet another way to access this type is info is FINRA's Broker Check Program.Incidentally, if you should ever need to file a complaint regarding a broker, you can usually do so through your state regulator's website.CRD Data AvailableWhat background information can you get from a CRD report obtained from NASAA? Available information varies somewhat by state but usually you can get the following--Brokers:-- Employment history for the past 10 years-- Securities examination scores-- Licensing or registration status-- Disciplinary history (if any)Brokerages:-- Final disciplinary actions relating to securities or commodities businesses that have been taken by federal, state, and foreign regulators as well as self-regulatory organizations.-- Civil judgments and arbitration decisions in securities and commodities disputes involving public customers.-- Criminal convictions or indictments against registered or licensed brokerage firms and their associated persons.-- Settlements of $10,000 or more among the parties to arbitrations, civil suits, and customer complaints involving securities or commodities transactions.-- Employment terminations after allegations involving violations of investment-related statutes or rules, fraud, theft, or failure to supervise investment-related activities.-- Bankruptcies filed within the last 10 years and outstanding liens and judgments-- Pending disciplinary actions taken by industry regulators that relate to securities or commodities business.-- Pending arbitrations and civil proceedings involving securities or commodities transactions.-- Pending written complaints alleging sales practice violations and compensatory damages of $5,000 or more.FINRA's Broker Check ProgramThe Financial Industry Regulatory Authority (FINRA) is the U.S. security industry's self-regulatory body. It was created in July 2008 through the consolidation of the National Association of Securities Dealers (NASD) and the regulatory/enforcement division of the NY Stock Exchange. FINRA has 15 offices throughout the country and employs over 3,000 people.As an alternative to the CRD report discussed above, you may wish to consult FINRA's offers a BrokerCheck report, which is essentially the same as the CRD report discussed above. It contains almost as much information and some feel it is a bit easier to access. To obtain the BrokerCheck report go to and click on "Investors," then on "FINRA BrokerCheck" on far right of screen.

Stock Options – The Greatest Wealth Building Tool Ever Invented

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It is a well known fact that serious investors seeking long term growth of capital have as their main objectives the two most basic goals in investing:

? to find an investment vehicle that would effectively preserve capital and minimize risk in the face of a fluctuating and constantly flexing economy
? the investment vehicle must provide better than decent yields in all economic conditions to promote constant growth of capital value.

With the stock market as the premiere choice due to its historical record of outperforming all other investments over time, people are increasingly turning to the stock market as their main investment vehicle for future capital growth. It is here where much higher rates of return can be made with a relatively small increase in risk to capital.

With thousands of books, manuals, internet sites, seminars and courses offering investment strategies and trading systems in the stock market and its derivatives, there are few, if any, that deliver the ideal investment vehicle sought by the long term investor in search of safety and high returns. Not only is there a near total absence of an ideal investment system but there are many that promise eye popping, mind boggling returns and, they are exactly that; mere promises.

Most of the trading systems offered are structured on strategies or activities that work when conditions are ideally suited to the program being peddled. Most of their successes are highly dependent on picking the right stocks at the right time. In other words you must be a good stock picker or use a stock picking service (for a high monthly fee) to select the right ones for you. Market timing is also an important factor in their systems. Again, you must be a good market timer or depend on a service that provides market timing signals (also for a high monthly fee). These supposedly high yield investment programs don't say anything about how bad things can be when conditions go against their predictions. These programs do exactly as promised: great when the going is good but disastrous when the going is bad. Without doubt many have been taken by these so-called services and while an investor/trader may be successful for a while, the end result over a long period of time is always the same - no better than if you had done the selections yourself.

While there is no one investment system or vehicle that can be an answer-all to the various goals of various investors, there are some investment alternatives that can come close to satisfying the two basic needs of safety and decent returns. Diversified mutual funds have been touted as the answer to these basic needs. But over the years these funds have shown that during downturns in the economy they perform just as badly as the whole investment market in general. And, over the long term, many of these diversified funds have failed to even match market performance in general, much less outperform it.

Enter market derivatives with emphasis options.

Trading in stock options has become very popular with institutional investors as well as private individuals as a sound money management system supplementing their investment portfolios. The ability of stock options to give the investor a wide range of choices is what has made the options market grow considerably over the last two decades. To quote one options expert: "Stock options are the greatest wealth producing tool ever invented on this planet. . . . if you know how to use them".

The key element of this statement is: . . . if you know how to use them.

For many people the mere mention of stock options, sends shivers up their spine. They look at options as synonymous with great risk. But isn't driving a car very dangerous for one who doesn't know how to drive? The ability of stock options to give the investor a wide range of choices in stock market investments is what has made the options market grow by leaps and bounds over the last twenty years. Statistics compiled by the Options Industry Council, a group that educates investors about options, show that volume in options trading has risen tremendously in recent years. Further, studies show that individual investors make up 60% of the market.

For the individual who has sufficient funds and is looking for more than a decent return on his capital and with controllable risk, stock options may be the answer.

There are dozens of option trading systems being employed by individual investors and institutions. Each system is designed to accomplish a specific investment goal. A financial institution may use long put options to hedge its winnings in stocks that have appreciated in value. Another investor may buy call options instead of stocks to enter a position in a security that has caught his fancy. Still another may sell calls against his stock holdings to generate income from his stock position, or what is popularly known as covered call writing.

Of the dozens of option trading systems there is one that can be carried out as a long term investment program offering a fair degree of safety and consistent high returns over time, thus satisfying the investor's two basic needs of safety and return.

This is the selling of uncovered or naked options.

But wait! Is it not said that selling naked options carries the risk of unlimited losses? Isn't this a contradiction?

Indeed selling naked options when done carelessly and without a disciplined strategic program is extremely risky!

But by using a carefully planned and disciplined system of trading, the so-called "unlimited risk" factor in selling options can easily be conquered. There is a three-pronged trading strategy being used by one successful options trader that is proving to be a consistent winner in all market conditions. It is a trading technique that couples naked option selling with a modified ratio credit spread and the use of the roll over feature. While naked option selling has acquired a bad rap of being highly risky, this three-pronged trading strategy allows the trader to defeat the risk. Not only is the system able to substantially reduce the risk, it also offers one the ability to become a savvy investor/trader without having to depend on picking the right stocks or timing the market.

It involves utilizing the system in any market condition using only one or a few stocks, ETFs or indexes (the latter two are more effective). One need not worry about finding the right stocks or timing the trades. The fact remains that stocks behave, more often than not, in crazy and irrational ways so that one can almost say that consistently choosing winning stocks is as good as a random walk down Wall Street. Rather than be proactive and try to predict and time the market, as many try to do, this three-pronged investment system is reactive. The prescribed trades are done in reaction to how the market has moved, not in anticipation of its future behavior.

This three-pronged trading system does not promise quick profits or mind boggling yields but steady annual returns in excess of 30%. Many are averaging returns of 50% to 60%. It would be prudent to say that in times of deep downturns the system may not deliver the promised returns but it will hold its own and will definitely outperform the market.

One options trader that has mastered this three-pronged trading technique has decided to share his knowledge of the system by writing an e-book on its methodology. Borrowing from that quote about options being a great wealth producing tool he has aptly titled his work: STOCK OPTIONS: THE GREATEST WEALTH BUILDING TOOL EVER INVENTED. In it he details the step by step methodology of this trading technique and gives an exhaustive series of sample trades covering several months of transactions. It shows the effectiveness of the system in an up market, down market and horizontal market using only one ETF stock. To this day the writer continues to use only one or two ETFs in all his options trades and he includes a web page that shows his current and actual trading results month by month on an ongoing frequency.

Still Too Early to Cheer Housing Starts

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We recently learned that housing starts "beat" expectations in November, rising 3.9% over the previous month. I am not a housing expert, but I thought increasing supply in an already oversaturated market with depressed demand is a bad thing. However, a recent Bloomberg article discusses why more homebuilding is a positive for the economy as it would add a significant amount of jobs to the economy. While this may be true, I believe improvement would be offset by a continuing decline in home prices.Home prices still falling:- Despite the dubious calls that say housing has bottomed or that real estate is the buy of the decade, the fact of the matter is that home prices are still falling in most areas of the country. The most recent Standard & Poor's Case-Shiller composite home price index showed home prices fell in all 20 cities that the index tracks in October from the previous month. This was even worse than September, when only 18 of 20 metro areas posted declines from the previous reading. In October, the index fell by 1.3% from September, which is good for 0.8% decline year-over-year. That is pretty substantial, folks, especially in the face of the declines that have already occurred.Zillow Real Estate Research estimates that by the end of the year, home prices in the United States might fall by more than $1.7 trillion, which is also significantly higher than the $1 trillion drop last year.Another huge hurdle for the industry is the still-increasing number of foreclosures that add to the housing inventory. In fact, in the third quarter, more than 288,000 homes were foreclosed on a record high that was an increase of 7% over the previous three months and 22% year-over-year increase. The number of foreclosures in the fourth quarter is expected to decline as a result of banks like Bank of America (NYSE: BAC), JP Morgan (NYSE: JPM), and PNC Bank (NYSE: PNC) placing a temporary moratorium on foreclosures because of the Robo-signer fiasco. However, the banks' issues do not change the fact that many homeowners are still underwater and at risk of foreclosure.Conflicting views on housing:- Some turned more bullish on housing and the homebuilders in particular when Toll Brothers (NYSE: TOL) recently reported a profit after 11 straight quarterly losses, even though the profit was primarily because of tax benefits from a reversal of a valuation allowance. Nonetheless, the company's CEO said he expects to see improvement in the market in 2011 and that 2012 will be a "big year."We also recently heard from another good indicator of the housing market: home improvement retailers Home Depot (NYSE: HD) and Lowe's (NYSE: LOW). While both companies posted decent quarters thanks to cost-cutting and operational efficiencies, neither of their CEOs was bullish on the housing market and said consumers have been slow to spend money on their houses.Lowe's CEO Robert Niblock does not yet see any upside in the housing market and believes that home prices will continue to fall next year.No home improvement:- The number of new homes being built does remain at historically low levels, which I believe is a good thing as the data I reference shows a housing market in which stabilization has still not occurred and home prices that on average are not poised to rise in the near future. While opinions may differ, I believe the time is still not right to cheer an increase in housing starts. Perhaps the headline this month should read that housing starts "missed" expectations. At least then I could get more bullish on the housing sector.

3 Easy Ways to Boost Your Stock Market Profits

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People always want to know how they can improve their profits in the stock market. And I keep telling them it's simple. There are three easy things you can do right now to boost your returns. It's so easy.It really is.Here are the 3 steps you can take:1. Only buy the best ETFs - ones that are already going up 2. Avoid high fees 3. Keep a risk balanced portfolio.That's it. Those are pretty easy things you can implement immediately. If you can do this, you can make money in the stock market.

The rules for successful stock market trading aren't hard. But despite that, the average 401k investor in the stock market gets creamed by the stock market.A formal study from the stuffy Journal of Pension Benefits documents the horrible performance of most investors. Here's what it says:"The elephant in the room that no one seems to want to discuss is that individual investors as a whole do a poor job managing their own is, by and large, a recipe for has long been known that individual investors don't typically fare well in their efforts at do-it-yourself investing."This notion has been validated by numerous studies, including one by Dalbar, Inc., which revealed the staggering margin by which the average individual investor trails the returns of the broader market.

Here's what Dalbar, Inc. says:"Wow. Nobody wants to talk about it, it's that bad. When the stock market only makes 8% per year, giving away 6% eats up almost all of the possible returns. In fact, it's possible you'll get a better return from Social Security than you will from the stock market."Fortunately, there is help.Improving Your Returns with True DiversificationThere is more to making money than just blindly hopping on the trends.If you want to really make money, you need to take active control of your can't just sit back and gripe about your lousy returns when you're not doing anything to prevent best way to improve the performance of any trading strategy is to balance the risk taken on each trade.Diversification works wonders for increasing returns. But it only works when you actually diversify.Most people do not get similar exposure to the risk of their investments. They dramatically over-invest in some of their portfolio, and under-invest in others. It's like only watering ?? of your garden but expecting it all to grow.To get great returns, you need to give each and every investment a fighting chance to make money for your portfolio. Each investment needs to be able to provide meaningful returns for you to make real money.

Many people split their portfolio 50-50 or 60-40 between stocks and bonds. This doesn't work. It ends up being only slightly better than burning $100 bills in a fire. Why? Stocks are 3-4 times more volatile than bonds. All of the returns and risk are due to what happens to the stocks in the portfolio.The only way bonds will have equal impact on the portfolio is for the allocation to be 75% bonds, 25% stocks - or even higher.You can balance the dollar amount allocated to an ETF selection by the risk taken by each ETF. You can do this in your other accounts also.You can take into account how much risk each ETF has, and then adjust the amount of shares to trade. That way you know you get equal exposure to each of your investments. This came in extremely helpful this month for me because the month allocated extra dollars to real estate and preferred stocks,which have outperformed the S&P 500. That's how true diversification can help you also.As a result, your system could be up about .5%, while the S&P 500 is down nearly a full percent. Instead of under-performing the stock market by 6% a year, your system can outperform the stock market, in this case by nearly 8% per year.

When you create a system to allocate your funds, your system should tell you exactly how many shares of each ETF to buy so you're not under- or over-investing. Risk balancing works great for really pushing returns upwards. If you want to know the steps - and are a real math geek - here you go:1. Find ATR: Find the Average True Range (ATR) for each of your Stocks/ETFs 2. Find Volatility: Divide the ATR by the Price of the Stock/ETF 3. Invert Volatility: Take 1/(Step 2) for every stock Find Total Vol: Total up Step 3 for your entire portfolio 4. Find Percent Allocation: Divide Step 3 by the total given Step 4Step 5 will give you the percentage of your account that you should allocate to that investment. It's a bit complicated, but you can do it. An easier way would be to have someone else do it for you. Either way, you can outperform the S&P and give your accounts the boost you want.Copyright ?? 2012 Trend Following 101