Financial Freedom Classroom

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Stock Market

Where are your eggs? Asset Allocation Webinar

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Just in case you missed it, here is a copy of our webinar from Thursday, January 15, 2015, “Where are your eggs?  Asset Allocation”.

Join us this coming Thursday at 7:30pm EST on January 22, 2015 for a very informative webinar entitled “Taxes; The Good, The Bad and The Ugly” with our friend Kim Landry, CPA!  If you have tax questions you would like answered, please send them in to questions@financialfreedomclassroom.com and we will do our best to include them.

If you haven’t already, sign up to get an invite to the webinars on our website.  We hope you can join us!

 

Ice cream or hot chocolate? Or both?

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Image courtesy of criminalatt at freedigitalphotos.net
Image courtesy of criminalatt at freedigitalphotos.net

Here in NH it can get very cold in the winter; in fact it was in the negative digits last week. An outdoor vendor here would sell much more hot chocolate than ice cream. In fact, we have a friend who owns a food truck that targets product for sale during the warm summer months. They quickly realized that only selling ice cream limits their season drastically, so they added cold weather products like hot chocolate to sell year round. This vendor knows the importance of diversification!

Diversification is also very important in stock market investments. An example of this would be if you have $100k to invest and you invested it all in one stock. If that stock lost 90% of it’s value you would have only $10k left. Oh, I shutter at the thought! But if you invested $100k in 10 different stocks at $10k each and ONE of those stocks lost 90% you would still have $91k in your portfolio. Visit the SEC website for more on this topic and tune in this Thursday at 7:30pm EST to our FREE webinar entitled “Where are your eggs?; Asset Allocation” for more information.

What is your diversification ratio mix?  Please share…

Stocks; forming a foundation

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“Stocks Chart Graph Shows Increase Investment Earnings” by Stuart Miles from freedigitalphotos.net
“Stocks Chart Graph Shows Increase Investment Earnings” by Stuart Miles from freedigitalphotos.net

In order to form a good understanding of stocks, we need to start from the beginning.

What are stocks?  Companies raise money by issuing shares of stock.  By purchasing and holding the stock, you are part owner in the company.  As a company earns more, the stock increases in value and investors are willing to pay more for the stock.

A stock you may have purchased for $1 per share over time may eventually be worth $11. If you sell the stock at that time for $11 you have recognized a 1000% gain.  However, if you hold the stock and it rises, but then falls to $.10 per share, you now recognize a big loss.  The value of the stock can be unstable and fluctuate, which can risk your capital.

How much risk are you willing to take?  Please comment.