by WalletAdvice on May 6, 2009
A couple guys at work need of some stock market practice desperately.
About once an hour, one of them walks into our room and asks the other for an update. Sometimes they are up a couple hundred dollars, sometimes they are down a couple hundred dollars.
They are dabbling and experimenting. They constantly keep up to date with the stock market news and read the reports. But the thing is, they are very new and using very real money to learn the stock market.
There are free alternatives out there that give you virtual money to buy virtual stocks. My favorite is Wall Street Survivor.
They start you with $100,000, charge you $10 commission rate for all transactions and let you virtually buy and sell stocks at their real going rate. The free version has about a 15 minute delay but if you want real-time you can upgrade to a paid account.
While getting my stock market practice for free, I have started learning a few things about which news sources to trust and how to read some of the basic numbers. When I am ready to switch over to using real money, I will be that much more prepared.
by WalletAdvice on April 28, 2009
When our twins were born back in 2003, we opened a 529 college savings plan for them in another state through the advice of our financial planner. For no particular reason, we opened our son’s account under my name and my daughter’s under my wife’s.
The other day, we talked to our financial planner about opening an 529 college savings plan for our kid and in the last few years, their recommendation has changed to opening an account in our home state.
So my wife (who handles all of our non-tax finances), opened accounts for the 3 kids and started the transfer paperwork for the older twins. Our daughter’s plan transfered just fine. Our son’s didn’t because the account was under my control.
Here are the steps we needed to take to get the money transfered into the new 529 college savings account that my wife had opened for him.
- My wife had to open a 529 college savings account at the original company in the other state.
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I had to authorize the transfer of the money in my son’s account into my wife’s new account at the same company. This step required us to go to the bank and get it gold medallion signature guaranteed. Fortunately, our bank doesn’t charge for it if you have an account with them.
- Wait about a month for the money to switch accounts.
- Ask for the money to be transfered from the temporary account my wife had made into the new account she had made.
Yuck. So, word to the wise. When you open up a 529 college savings plan, think carefully about who will sign the paperwork and be in charge of the account.
by WalletAdvice on April 15, 2009
One of the things I have noticed while playing is that commissions add up pretty quickly. Especially for small investors.
Let’s say you are paying $10 per transaction and you buy $10,000 of a stock. When you add the buying and selling commission, you have a total of $20 in commission. To recover that money, the stock only needs to rise 0.2% which is pretty manageable.
If you are buying $100 of stock, however, the stock would have to rise 20% just to cover the commissions.
There are a few ways to lower the impact of commissions.
- Diversify over time - Instead of buying $100 of 10 different stocks each month which would cost $200/month in commissions, you can buy $1000 of one stock this month and another the next month and only pay $20/month but end up with the same amount invested in each company.
- Deduct the commissions - At least in the United States, when you report your earnings and losses, you can factor in the commissions to reduce the earnings or increase the losses. So if you made $1000 by selling a stock and paid $10 in commission to buy and $10 to sell, then you will only be paying taxes on $980. (Make sure you talk to your tax preparer or read the tax forms carefully to make sure you report your expenses properly - I am not a tax expert)
- Buy for the long haul - If you buy stocks you believe in and plan on holding for several months or years, you will greatly reduce the amount you are paying in commissions. Day trading is exciting and lucrative, but there is no arguing that it greatly increases your commission costs.
What other tips do you have for reducing the amount of commissions that you pay when buying stocks?
by WalletAdvice on March 19, 2009
When the price of a company’s shares is very low, they will sometimes do a reverse stock split to help raise the price so that it is more appealing to investors.
For example, Citigroup (NYSE:C) is currently trading at $3.08/share (Mar 18 Close). If you owned 1000 shares, the value would be $3080. If Citigroup did a reverse stock split of 1-for-10, for example, you would end up owning 100 shares. The price per share would adjust to $30.80 to keep the total value still at $3080.
No matter what the ratio of the split is (1-for-2, 1-for-5, etc), your total value after the reverse stock split will always be the same. Sometimes if you only own a few shares of a stock, a reverse stock split will cause you to be cashed out at the market value resulting in you no longer owning any shares.
The split, if approved, is expected to occur before June 30, 2010.
Citigroup appears to be considering the split because they are trying to talk the U.S. government into converting about $25 billion of its preferred securities resulting from the recent bailout into common stock. If that happens, the amount of shares outstanding of Citigroup could increase from around 5.5 billion shares to around 21 billion shares. The reverse stock split would help consolidate those shares and reduce the number of shares outstanding.