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Your Ultimate Guide to Trading Stocks Read Article
Company spotlight Ally Invest Built for investors who want to manage their own portfolios, Ally’s self-directed trading gives you all the tools you need to buy and trade stocks, optimize your portfolio and stay on top of the market, all without the need for... Read Reviews
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Investors generally think of options as a tool to boost profits by speculating on whether a stock will move higher or lower. And while options can be used in that manner, they can also be used to hedge a portfolio and actually reduce risk. Options come in two forms: calls and puts. A call gives investors the right, but not the obligation to purchase 100 shares of stock, while a put gives investors the right, but not the obligation to sell 100 shares of stock. You can also sell calls and puts, which mean you have the obligation to sell or buy at a specific price, should the option be exercised, while keeping any profits from the upfront sale. Used separately or in combination, these four option types can keep your portfolio's returns as high as possible, while keeping risk as low as possible. Simple option strategies you can employ to reduce risk One of the most commonly used option strategies is also one of the best risk-reduction tools available to everyday investors – the covered call. A covered call… Read more

Investing when inflation is a concern usually leads to a more volatile marketplace. Not only is inflation a pernicious profit-erasing force, it's also highly misunderstood by investors. Inflation and uncertainty seem to go hand-in-hand, but investors who understand what inflation's real impact is could find themselves taking advantage of big opportunities. On the surface, inflation is a relatively easy concept to understand. It dilutes the value of the dollar over time, so purchasing power goes down as a result. The only real way to combat inflation is to earn a return in excess of the rate of inflation. There are several ways to accomplish this, and it all depends on how high the inflation is and how fast it's rising. Inflationary investing Inflation's impact on the stock market is somewhat mixed. One of the first things inflation does is cause interest rates to rise, which in turn negatively impacts bond prices. Normally bond prices and stock prices are positively correlated, so one might think that when bond prices go down, stocks should as well. But in practice, this relationship doesn't… Read more

There's no worse feeling than checking your portfolio and discovering the market is in the midst of a panicked sell-off. Watching a stock (or many stocks) you own drop further and further with no discernible end in sight can be a heart-wrenching experience. But, like all things, sell-offs are only temporary. While broad market selling can be disconcerting for any investor, successful investors understand how to navigate the rapids and avoid making costly mistakes. Your first reaction might be to sell your holdings as soon as possible to avoid taking even greater losses, but history has demonstrated that that might be the worst possible decision you can make at that time. While selling a stock might be necessary, there are better methods for dealing with turbulent markets. Don't panic Noted CNBC personality Jim Cramer has a saying about volatile markets, “No one ever made a dime by panicking.” Other investors have a similar take on the subject, like Warren Buffett, who says when everyone else is selling, that's when you want to be buying. But you don't have to be… Read more

If you've been paying any attention to the markets lately, you'll have noticed that volatility is back. The major indexes saw record single day drops only to recover just days later. While computerized trading was part of the problem, there was still a building volatility caused by an rapid rise in bond yields that sent the markets plummeting lower. Most investors understand the inverse relationship bonds and yields have, but the relationship between stocks and yields is less clear. The mixed data has some investors confused about how the two actually interact, but after last week, it's clear that investors will need to pay attention to rates when making investment decisions. The relationship between yields and stock prices When bond prices go down, yields go up and vice versa. The same relationship can be said of stocks and yields too, although the correlation isn't as strong. Historically, stocks trend upwards, albeit with short term corrections and bear markets thrown in the mix. The question of when and how yields play a role requires closer examination to get an answer. It's… Read more

The stock market has been anything but predictable over the past week, with large drops and gains in a single trading day. Volatility is rising and investors are scrambling for solid ground. Safe haven assets are usually one of the first things investors flock to, along with dividend-paying stocks. But while most stocks tend to be positively correlated with the broader indexes, others are inversely correlated with the markets. When the markets go down, these stocks will actually go up and vice versa. While holding a portfolio of these types of stocks isn't recommended, having one in the mix when volatility spikes could be a good way of hedging your bets and avoiding huge losses should the markets turn bearish. It's all about the beta One of the most common figures investors look at when picking stocks is the beta. This important piece of data is a measurement of volatility compared to the broader market portfolio. In other words, it tells investors how volatile a stock is compared to an index such as the S&P 500. Beta is calculated using regression… Read more