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I N V E S T I N G B A S I C S Wednesday, October 18, 2000 benjamin.rogers@enron.com _________________________________________________________________ REGISTER TO BECOME A FOOL -- GET FREE STUFF! http://www.fool.com/m.asp?i=3D159941 _________________________________________________________________ Sponsored By: American Express American Express has "some of the deepest financial planning tools of all the online brokerages" -Gomez Advisors, Internet Broker Scorecard. Invest with a brand you know and trust! http://www.lnksrv.com/m.asp?i=3D159942 ASK THE FOOL -- Q. I've just learned that Levi Strauss is a private company, so I can't buy shares of it. What other major companies are privately held? -- A. Take a gander at these biggies: Cargill, Mars, Bertelsmann AG, Bechtel, Publix Supermarkets, IKEA International, Amway, Penske, S.C. Johnson & Sons, Montgomery Ward Holding Co., Packard Bell NEC, Enterprise Rent-A-Car, Hallmark Cards, Borden, McCain Foods, Hyatt, Hechinger and Domino's Pizza. Some of these firms offer shares to employees, but individual investors are out of luck. -- Q. I've noticed that stocks jump in price when they're added to the S&P 500 Index. Why is this, and is there any way to learn which companies will be added in the future? -- A. You've noticed correctly. When it was announced recently that America Online would be added to the S&P 500, its shares quickly rose about 12 percent. Stocks get added to these indexes to replace ones deemed no longer worthy of being included, or ones that have merged with other companies and therefore disappear. The announcements draw the attention of investors, sending share prices up. And once the companies are added, index funds that will have to own these stocks begin snapping up shares. Unfortunately, the stocks begin moving as soon as the announcements are made, before they're even officially added. So there's little time to sneak in and benefit. But if you've invested in high-quality, growing companies, chances are you may eventually see some of them added to important indexes. Got some questions of your own for the Fool? Head to our Help area or post your question on the Ask a Foolish Question discussion board. http://www.fool.com/m.asp?i=3D159943 http://www.fool.com/m.asp?i=3D159944 _________________________________________________________________ INVESTING BASICS - STOCK SPLITS Wondering whether to buy a stock before or after a split is like asking, "Should I eat this peanut-butter-and-jelly sandwich before or after Mom cuts it in half? Stocks don't become more inexpensive when they split. True, you get more shares. But each is worth less. Imagine you own 100 shares of Sisyphus Transport Corp. (ticker: UPDWN). They're trading at $60 each and total $6,000. When Sisyphus splits 2-for-1, you'll own 200 shares, worth about $30 each. Total value: (drum roll, please) $6,000. Yawn. Some people drool over stocks about to split, thinking the price will surge. Stock prices sometimes do pop a little on news of splits. But these are artificial moves, sustainable only if the businesses grow to justify them. The real reason to smile at a split announcement is because it signals that management is bullish. They're not likely to split their stock if they expect the price to go down. Splits come in many varieties, such as 3-for-2 or 4-for-1. There's even a "reverse split," when you end up with fewer shares, with each worth more. Reverse splits are usually employed by companies in trouble, to avoid looking like the penny stocks they are. If a stock is trading at a red-flag-raising $2 per share and it does a reverse 1-for-10 split, the price will rise to $20 and those who held 100 shares will then own 10. Companies often split their stock so that the price will remain psychologically appealing. Sometimes, not splitting would mean that few people could afford even a single share. If Microsoft hadn't split seven times in the last decade, each share would be worth more than $6,500. With stocks, just as with any purchase, examine what you're getting for the price. Study the company and compare the stock price to other numbers, such as earnings. A low price might be inviting, but a $200 stock can be much more of a bargain than a $20 one. If your funds are limited, you can just buy fewer shares. It's always fun to suddenly own more shares, but splits are like getting change for a dollar. They're not cause for celebration. _________________________________________________________________ IN THE SPOTLIGHT -- If you'd like to learn more about various indexes such as the S&P 500 (and what companies are in them), pop over to our collection of index resources. http://www.fool.com/m.asp?i=3D159945 -- Do your friends and relatives (and us) a favor -- introduce them to the Fool. If you take a little time to help someone you care about get on the path toward financial independence, you'll be giving them an enormous gift. Even if you leave Fool.com out of it, do spend some time with people, talking finances. There are few greater gifts you can give someone than a nudge toward financial independence. http://www.fool.com/m.asp?i=3D159946 -- If you've got knowledge to share, you could make a few dollars for it at Soapbox.com. Consider dropping by Soapbox (a Motley Fool company) to see what other authors are offering. http://www.lnksrv.com/m.asp?i=3D159947 _________________________________________________________________ A NOTE FROM THE AUTHOR=01( I hope you're finding this product useful. The content originally appeared as part of our nationally syndicated newspaper feature (which I also prepare). Consider giving your local editor a jingle and suggesting that they think about carrying the Fool. http://www.fool.com/m.asp?i=3D159948 Selena Maranjian http://www.fool.com/m.asp?i=3D159949 _________________________________________________________________ My Portfolio: http://www.fool.com/m.asp?i=3D159950 My Discussion Boards: http://www.fool.com/m.asp?i=3D159951 My Fool: http://www.fool.com/m.asp?i=3D159952 Fool.com Home: http://www.fool.com/m.asp?i=3D159953 My E-Mail Settings: http://www.fool.com/m.asp?i=3D159954 Sponsored By: American Express American Express has "some of the deepest financial planning tools of all the online brokerages" -Gomez Advisors, Internet Broker Scorecard. Invest with a brand you know and trust! http://www.lnksrv.com/m.asp?i=3D159955 THE SECRET TO A COMFORTABLE RETIREMENT... ...is smart planning. Start now with the Motley Fool's Roadmap to Retirement online seminar. http://www.fool.com/m.asp?i=3D159956 BECOME A FOOL! Get a FREE Investing Guide and more... http://www.fool.com/m.asp?i=3D159957 FOOL DIRECT E-MAIL SERVICES Need to change your address or unsubscribe? You can also temporarily suspend mail delivery. Click here: http://www.fool.com/community/freemail/freemaillogin.asp?email=3Dbenjamin.r= ogers @enron.com Have ideas about how we can improve the Fool Direct or new e-mail products you'd like to see? Try our discussion board: http://www.fool.com/m.asp?i=3D159958 ____________________________________________________ © Copyright 2000, 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-18262-B10182547Address.msg-20:34:10(10-18-2000) 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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