Your Questions About Advantages And Disadvantages Of Investing In Stocks

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Richard asks…

What website should I go with to invest in stocks? (Points, credit, best answer, etc..)?

What website should I go with to invest in stocks?
I have heard of AmeriTrade, ShareBuilder, etc…

What companies do you all recommend? what is the average fee per stock? what are some advantages and disadvantages to each company and likes and dislies?

will give points

financi4 answers:

I use sharebuilder. I like it, i just use the basic free service. Trades seem to be pretty fast and real time, the site is easy to figure out. Plus i have an savings account that used to get 3% interest (they dropped it down to 1.5% now) thats linked and i can instantly transfer money back and forth for free where it takes a couple days to clear with other banks that arent affiliated. Its $10 a basic trade, but if you devote a certain % of your pay check and invest at monthly intervals its $4 (i havent tried that yet). If you want a lot of their tools and stuff you have to pay a monthly subscription for the more advanced services, you get a 30 day trial with them and honestly i wasnt that impressed you can find just as good of research stuff for free elsewhere. I think scottrade is the cheapest at $7 a trade but ive never used it, though ive mostly heard good things about it so they might be worth looking into. If you decide to go with sharebuilder send me your email in private message and ill put you in as a referred friend, itd get me 5 free trades and you $25 more to lose in this crappy economy 🙂 i would probably stay away from ameritrade since they seem to be having a lot of financial woos, though maybe theyre fine i havent really paid any attention to them lately

Robert asks…

Which one is better ? having a high salary job or investing and making profits in real state, stocks,…what?

are advantages and disadvantages of each method ? can you make a living just by investing or you need a fixed job beside that ?
Please explain and also mention your own experiences.

financi4 answers:

High Salary Job:
Pros – Job security, insurance, retirement plan, pension
Cons – College degree needed in most cases, 40 hour work week, have to answer to somebody, limited vacation

Pros – Work when you want, where you want, take vacations whenever you want, don’t have to answer to anybody, do not need a degree, shorter work weeks
Cons – No job security, a bad decision can cost you greatly, initial capital needed for investment, no insurance, no retirement, no pension

Some people make money solely on investing. But where do you get the money to initially invest? A job. (Or inheritance)

George asks…

How to start investing?

I am 16 years and I am thinking in investing. I know you need money in order to make money, I have about 400 dollars. And I want make it bigger. So what is the advantages and disadvantages of independent stocks and funds. I know the basic concept of independent stocks and funds, but I want to know in detail. And what are they. And what good company should I use to invest in stocks. I know that if you are underage you can get a co-operation from your parents account, that is what I am going to do. (Oh and can someone suggest a good book in which you can use in order to learn about investing). THANK YOU!!
omg sarah I wanted to learn about investing since it would be a correct move towards my future and becuase it is a good way to earn extra cash. I DID NOT ask for online jobs, okay? Sorry if I am being hateful but whatever you said had nothing to do with what I asked.

financi4 answers:

Ok, you need to keep with the times, im 17 and have made quite alot, because of this recession. You need to look for gaps in the market? Answer me this, if the world is in a recession, where are they going to shop? Pound land! I wish i had invested more, however, im only 17, and didnt want to loose my money. I have now £14,000 saved up 🙂
basically, you need to look for gaps. Another one was BP, they were obvioulsy going to get back up, cus they make millions a day, however i chose not to invest. The shares rose by 5% one night!
Yes you do need to look around. I wouldnt buy books, because times change real quick.
Visit the link, and it shows, that you should invest in houses, it says that house prices should go up 5% a year 🙂
good luck, and remmeber its a gamble 🙂

Daniel asks…

Accounting help, please. A company is currently seeking additional capital to expand its operations. ?

Company #1 is interested in investing in the organization and, therefore, would like to have part ownership through the sale of new stock.

Company #2 is interested in providing a loan to the company

Companies have two ways to finance their growth: equity financing or debt financing, right? In equity financing the company is selling stock to generate cash. What are the advantages and disadvantages of selling stock? Debt financing is borrowing money. Is there a difference in the information that a lender and an investor would want? Which would be of interest to the lender and which would be of interest to the investor. What about the statement of cash flows, would this be useful? Explain any differences in the information that you have chosen to highlight and offer reasons why lenders and investors need specific information.

financi4 answers:

Well, if they sell stocks, they lose control of the company. In exchange, they can expand and make more money. But, by selling stocks, they also have a no risk opportunity to expand. If they fail, they do not need to pay back the money generated from the sale of the stocks.
In a loan, the company has to pay back with interest, regardless if they are successful or not. If this loan is large enough, it couple push the company down.
The interest to the lender is to have a strong business plan, which already has a successful track record, and a high interest rate that is back with collateral.
The interest to the investor would be a strong business plan, a successful track record, and a low risk plan that shows reasonable evidence of future profits. Statement of cash flows would be useful to the lender and investor. The investor doesnt want to wait to see their profits. They dont want to wait 40 years to see profits. They want to see it within 3 years. The lender doesnt really care. But, does want to see that the company is definately capable of making their minimum monthly payments.
Each need different specific information because each has different needs as explain earlier.

Mark asks…

Is it better to pay off house with funds or invest for retirement?

I am planning to retire in about 10-12 years and have a windfall from a stock spilt. What are the advantages and disadvantages from paying down my house loan with the funds from the stock spilt or would it be better to invest the money until retirement to take advantage of writing off interest from my mortgage on my income tax? Would buying an investment property be a better solution?

financi4 answers:

Excellent Question! Most people are faced with this.

Let me explain how I think and you should then be able to decide for your self.

When you take a mortgage, the interest paid is tax deductible. Hence even if you have a 6% Mortgage, your effective interest paid is just 3.7%. Where else will you get money at such ridiculously low rates?

I have been with a financial planner and he is pitching me post tax 9.2% which is pre-tax 14%.

So if you don’t repay your mortgage and invest it, you will stand to gain atleast 5%. This implies atleast $5000 more each year for every 100K in Mortgage.

I am myself a realtor, so I understand a bit more in real estate. The way it works in Real estate is very different. Say you invest in a financial instrument, you get a return of 9.2% after tax on the 100K. But if you invest the same 100K in Real Estate, you would be buying a property worth atleast 500K, or 1 Million. If this property appreciates at just 4%, much higher in places like California / Florida etc. If you consider that you are buying a 500K property with 20% down, the return on your investment will be 4% X 5 (Leveraging) = 20% per year. You can manage this investment pretty well using 1031 exchange etc. To be able to defer payment of taxes till retirement.

If you buy a property with a 10% down at 1 Million, your return will be over a 40%.

You need to seek a right reward to risk ratio. If you plan your investments well using a Estate Planner, Financial Planner and a Realtor, you will be able to reap good returns and save money from taxes.

Disclosure: I am a Realtor in San Jose, California working with Century 21.

Thomas asks…

Can someone please tell me about the benefits that CFD has to offer?

People have told me a lot about the disadvantages of “Contract For Difference”. I got to know that it is expensive to run for a long period and it makes taking up of stock difficult unless it is pre- arranged. I was just wondering, there must be some advantages too why people actually still invest in CFD. Can someone please tell me about the benefits that CFD has to offer?

financi4 answers:

Basically it comes down to gearing. You don’t have to put down the full value of the shares, only a percentage of the full value.

Larger gains for smaller initial capital outlay but larger losses also.

Paul asks…

33% Company Stock: Real Significance?

Hi there!

I have been offered a job in a growing company beginning a start-up operation in a new country. I have been offered a basic starting salary and the option to enter a partnership with them after a year. After two years I would be transferred 11% of their stock, after three years, 22%, and after four years, 33%. There are currently two owners. I would be an “equal” partner with them after four years.

I understand that stock values rise if the company is doing well, meaning that you can then sell them for a good price and profit. But does it mean anything for me in terms of cash in hand BEFORE I sell them?

Question one: is it a guarantee that a company will pay out dividends (cash in hand, right?) and use only SOME money to re-invest, or is that something very important to ask? Is there any other way, if dividends are not paid out and I do not sell, that owning stock gets me cash in hand?

Question two. When the offer says that stock will be “transferred” to me, does that mean as a gift? Or am I “paying” for it by accepting an ongoing basic salary without a rise? Or do I pay in real cash, and the term is misleading?

Question three: is there anything else I should know re: advantages and disadvantages of being a company owner like this?

Many thanks!

financi4 answers:

1st… Having stock in a small company doesn’t mean that you can trade it. There’s no market for a stock with 3 owners. Secondly as a insider and large shareholder your shares would most likely be restricted anyway, even if there was a market. You would only be able to sell your shares under certain circumstances after a period of time. Of course I’m basing this on US Secs Law. Look up Rule 144a

You would have a direct participation in profits as a large shareholder but small companies do not usually pay dividends, there is no guaranty of dividends. You will not get cash in hand unless you sell or dispose of your stock in some way.

You would be receiving equity in lieu of cash as part of your compensation package. You will have to claim it as income. If the equity has value, you will have to pay taxes on that value, whether you sell the stock or not.

An offer like this can be a great thing if the company takes off, or it can be a bust. One thing for sure is that you should have an atty look over any employment contract you recieve, as I’m not sure you really understand what you are getting into here, They might say something, but the contract can say somethign completely different. And the contract would stand up in court, should you ever find yourself there.

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