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======================== THE MOTLEY FOOL ======================== INVESTING BASICS Tuesday, May 8, 2001 benjamin.rogers@enron.com ================================================================= IN THIS ISSUE --------------------- - Q&A: WHAT'S A "RUN RATE"? - Q&A: ACTUAL STOCK SALE PRICES - LESSON: WHEN TO PANIC ================================================================= SPONSORED BY: Ameritrade Open an Ameritrade account now and get commission-free trades for 1 month. Learn more at ameritrade.com http://www.lnksrv.com/m.asp?i=405184 ================================================================= YOUR QUESTIONS ANSWERED Q. What's a "run rate"? A. Imagine that you're studying the financial statements of Digital Diapers Inc. (ticker: EPOOP) It's growing very rapidly from quarter to quarter. Perhaps, for some calculation, you need to estimate its current annual rate of sales. You could add up the last four quarters' worth, but that would clearly understate sales, as each quarter's numbers have been rising. Enter the run rate. Take the most recent quarter's sales of $30 million (up from $25 million the quarter before and $21 million before that). Multiply that by four and you'll have the company's current run rate for sales: $120 million. This is not a forecast or a measure of past sales -- it's a reflection of the current level of annual sales. Q. When you decide to sell a stock at a price listed in the newspaper on a particular day, do you get that particular amount, or the price listed when the shares are actually sold? A. First, know that the stock prices listed in newspapers and online simply reflect the price at which the stock last traded. The next trade could occur at a higher or lower price, depending on supply and demand. You're not out of luck, though. You have a choice when placing orders with your broker. You can sell "at the market," which means whatever the current price happens to be, or you can place a "limit order," specifying a minimum price that you require. Selling at the market means your shares will probably be sold quickly. With a limit order, though, you risk not getting any takers at your price. When we're not worried about the price jumping, we generally prefer trading at the market. And speaking of brokers, make sure you're not overpaying for trades by visiting our online discount broker center. You can compare fees and services, plus get our guidance on finding the right broker for you. http://www.fool.com/m.asp?i=405185 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=405186 ----------------------------------------------------------------- THIS WEEK'S LESSON WHEN TO PANIC The stock market has been down in recent months. (For some perspective, read our recent article on keeping your head during downturns.) Many investors are anxious, wondering whether they should follow the crowd and bail out on some of their investments. But, market drops are often the worst time to sell. Here are some pointers on the fine art of panicking. http://www.fool.com/m.asp?i=405187 People tend to panic: - When the market tanks. - When a stock they own tanks. - When people around them are panicking. None of these are particularly good reasons for panicking. Here's when you might have cause for concern, though: - When you don't know why you own the stocks you own. If you have no clue why you ever bought shares of Bedmobile Inc. (ticker: VROOM), you'll have a lot of trouble determining when it's the right time to sell. Did VROOM's shares just take a nosedive? It might be due to some fleeting market misunderstanding, in which case you should hang on. Or it might be due to some serious trouble at the firm. An informed investor should have a good handle on her investments. - When you don't understand the long-term upward trend of the market. From decade to decade, stocks in great companies and the market as a whole both tend to rise in value. To keep your blood pressure down during market slumps, remind yourself of this. - When you have a short time horizon. If your moolah is invested in stocks for just a few months, then go ahead and begin hyperventilating right now. Anything can happen in the short term. Even stock in wonderful companies can temporarily freefall. Any money you expect to need within the next five (if not ten or more) years should be out of stocks and perhaps in CDs or money market funds. - When you haven't learned that it's the percentage of the market drop that counts, not the points. A 100-point drop was a big deal when the Dow was at 1,000. But when it's at 10,000, 100 points is just 1 percent. Well-informed Fools should rarely panic. Expect occasional market slumps and surges. Read up on investing by checking out our 13 Steps. The more you learn, the less you'll panic. http://www.fool.com/m.asp?i=405188 ================================================================= SPONSORED BY: Ameritrade Open an Ameritrade account now and get commission-free trades for 1 month. Learn more at ameritrade.com http://www.lnksrv.com/m.asp?i=405189 ================================================================= My Portfolio: http://www.fool.com/m.asp?i=405190 My Discussion Boards: http://www.fool.com/m.asp?i=405191 My Fool: http://www.fool.com/m.asp?i=405192 Fool.com Home: http://www.fool.com/m.asp?i=405193 My Email Settings: http://www.fool.com/m.asp?i=405194 TIRED OF WORKING? SET YOUR RETIREMENT DATE We'll help you set your retirement date and do the planning you need to retire comfortably. Join our Roadmap to Retirement online seminar today. http://www.lnksrv.com/m.asp?i=405195 GET WHAT YOU'VE BEEN MISSING! Check out our Member Benefits Center for our latest special offers, just for you. http://www.fool.com/m.asp?i=405196 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=405197 _________________________________________________________________ © 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-32700-2001-05-08_15-01-00-5406003_5_Plain_MessageAddress.msg-19:32:18(5-08-2001) 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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