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======================== THE MOTLEY FOOL ======================== INVESTING BASICS Thursday, May 15, 2001 benjamin.rogers@enron.com ================================================================= IN THIS ISSUE --------------------- - Q&A: WHAT'S AN ORDER IMBALANCE? - Q&A: WHY NOT SELL HIGH? - LESSON: COMMON FINANCIAL MISTAKES ================================================================= SPONSORED BY: Kaplan College Become a Financial Planner! Kaplan College's online Cert. in Financial Planning program prepares you for success in the #1 ranked profession. Invest in your future career today! http://www.lnksrv.com/m.asp?i=409219 ================================================================= YOUR QUESTIONS ANSWERED Q. What's an order imbalance? A. Order imbalances happen on stock exchanges such as the New York Stock Exchange (NYSE) when there are too many buy orders and not enough sell orders -- or vice versa. When they occur, the exchange might halt trading temporarily, to allow more of the other kind of order to come in. This permits better matching of buyers and sellers, and makes prices less volatile. You might see order imbalances happen whenever there's very good or bad news related to a company and suddenly many people want in or out of it. The Nasdaq stock market, meanwhile, operates on more of a supply-and-demand basis, with its trading conducted between many market participants. It doesn't halt trading for order imbalances. Q. Don't you think that anyone who doesn't sell a stock near its all-time high is a fool? A. A Fool with a capital "F," maybe, but not an idiot. It's true that many stocks are now down considerably from their all-time highs. But few stocks ever go up in a straight line. And any stock that continually rises will continually set all-time highs. It's not consistently possible to know what a stock will do in the short term, so we avoid trying to carefully time purchases or sales. If you're ever holding onto stock in a company whose future doesn't look too bright or stock that seems grossly overvalued, you might do well to sell But those of us who have long-term faith in a company and expect its price to be significantly higher in the decades ahead, we'll often do well just happily hanging on. Many volatile but solid stocks have often been halved, only to double and quadruple again. P.S. GOT AN INVESTING QUESTION FOR US? Post it on our Ask a Foolish Question message board. http://www.fool.com/m.asp?i=409220 ----------------------------------------------------------------- THIS WEEK'S LESSON COMMON FINANCIAL MISTAKES Be smart about managing your money. Here are some common financial mistakes, and a few resources to help you avoid them: - Racking up credit card debt. It feels like free money, but it isn't. High interest rates increase your debt, making it harder and harder to pay off. That's reverse investing! Remedy: Find our nine ways to pay it back. http://www.fool.com/m.asp?i=409221 - Not investing soon enough. You're rarely too young or too old to invest. Kids have the most to gain from many decades of stock appreciation. But even retirees can benefit from leaving in stocks whatever money they won't need for five or ten years. Remedy: See how you can start investing with only $20 a month. http://www.fool.com/m.asp?i=409222 - Investing too conservatively. Any long-term investment is likely to grow most rapidly in stocks. - Over- or under-diversifying. If all your eggs are in two or three baskets, you're exposed to too much risk. If you have too many baskets to count, then you probably aren't able to keep up with each company. Between five and 15 stocks is a manageable number for most people. . Remedy: Index funds are a great place to start. http://www.fool.com/m.asp?i=409223 - Focusing inordinately on a stock's price. Contrary to popular opinion, a "cheap" stock isn't a bargain. Penny stocks, those trading for less than $5 each, are risky and dangerous. A $150 stock can actually be a bargain, and if your funds are limited, you can always just buy a few shares. - Investing in what you don't understand. The more familiar you are with how your company works and how well it's performing, the fewer unpleasant surprises you're likely to encounter. - Relying on the advice of others. It's great to learn from others, but ultimately you should make your own decisions. You're the one who cares the most about your finances. - Not tracking your returns. Shrug off this duty at your own peril. You always want to be (in the long run) beating a benchmark such as the S&P 500. If you're not beating it, you might as well meet it, by investing in an index fund. Remedy: Track your portfolio for free on our website. http://www.fool.com/m.asp?i=409224 - Impatience. Building great wealth takes time. Perhaps the worst mistake is never taking the time to learn about investing. You're not making that one, though, if you're reading and thinking about this article! ================================================================= SPONSORED BY: Kaplan College Become a Financial Planner! Kaplan College's online Cert. in Financial Planning program prepares you for success in the #1 ranked profession. Invest in your future career today! http://www.lnksrv.com/m.asp?i=409225 ================================================================= My Portfolio: http://www.fool.com/m.asp?i=409226 My Discussion Boards: http://www.fool.com/m.asp?i=409227 My Fool: http://www.fool.com/m.asp?i=409228 Fool.com Home: http://www.fool.com/m.asp?i=409229 My Email Settings: http://www.fool.com/m.asp?i=409230 FAST AND FREE Grab your new Member Benefits and check out what's new for you this week. http://www.fool.com/m.asp?i=409231 ENROLL IN INVESTING 101 BY FRIDAY! Sign up before May 11 to join this month's class in the Beginning Investing online seminar. http://www.lnksrv.com/m.asp?i=409232 FOOL DIRECT EMAIL SERVICES Unsubscribe, change your settings, temporarily suspend mail delivery: http://www.fool.com/community/freemail/freemaillogin.asp?email=benjamin.rogers@enron.com EMAIL DISCUSSION BOARD Let us know what you think of our email products: http://www.fool.com/m.asp?i=409233 _________________________________________________________________ © Copyright 2001, The Motley Fool. All rights reserved. This material is for personal use only. Republication and redissemination, including posting to news groups, is expressly prohibited without the prior written consent of The Motley Fool. MsgId: msg-19546-2001-05-15_11-23-06-4098649_5_Plain_MessageAddress.msg-11:44:37(5-15-2001) X-Version: mailer-sender-master,v 1.84 X-Version: mailer-sender-daemon,v 1.84 Message-Recipient: benjamin.rogers@enron.com
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