Bollinger bands are an integral part of just about every charting system I have ever seen but many traders are unfamiliar with how to use them. In this lesson we will cover the basics of Bollinger bands and one particular technique which I have found to be very reliable.

Bollinger Bands were invented by John Bollinger as a means of determining what could be considered as high or low around a give price.

The bands are plotted at a standard deviation (statistical term for measuring volatility) around a moving average. Typically the standard deviation used is 2.

The bands appear on charts as 3 bands.

A simple moving average in the middle. Most charting software defaults to a 20 period moving average.

An upper band calculated around a simple moving average plus 2 standard deviations.

A lower band calculated around a simple moving average minus 2 standard deviations.

For our examples we will use the most common setting of a 20 period simple moving average. This will give us 3 bands, the middle band of a 20 period simple moving average and the upper and lower bands calculated around the middle band with standard deviation of 2. The closing price is most commonly used to calculate the moving average.

Bollinger bands can be used to generate buy and sell signals but that is not their primary use. The main purpose of the bands are to:

To identify areas of high and low volatility.

To identify periods when prices are at an extreme and possibly ready for a reversal.

To identify a trending market.

The Squeeze:
The squeeze (tightening) is a period of low volatility and often happens before a big move. It can also help identify potential breakout areas.

Reversal:
In conjunction with other indicators you can identify potential reversal points.

Trending Following:

Although Bollinger bands will not tell you when the trend has started if you combine it with certain indicators they will confirm the trend. It is also easily identifiable visually.

As I mentioned earlier Bollinger bands are not really meant to be used as a signal generating indicator but in conjunction with another indictors can be very useful.

I like to use Bollinger bands and RSI together to generate possible buy and sell signals or to confirm overbought or oversold areas.

I normally set the RSI at 14 and when it reads over 70 and price is at or pushing through the upper band then I know we are overbought and ready for a reversal. I will either start thinking about shorting the market or if I am already in a long position will start to cover.

When the RSI reads below 30 and price is touching or pushing through the lower band then I know we are oversold and I will either consider buying the market or close existing short positions.

Experiment with the settings until you find the right parameters for the market you are trading. I have found the bands to be effective on all time frames from 5 minutes to monthly bars.

For a FREE report on HOW TO TRADE FAST, enter your email address at:

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It’s Thursday June 8, 2006, and the downward trend continues, as we are over the hump of the trading week and the Dow and Nasdaq are still seeing red. But before we head into the world of stocks lets stop on the political front.

President Bush said on Wednesday that all immigrants must learn English, this is a new proposal that he is pushing and looks to gain passage during this midterm election year, but he will have a long road ahead of him as he not only has to win over the Democrats but also members of his own party.

There was a surprise guest on Capitol Hill and that was the founder of Google (NASDAQ: GOOG) Sergey Brin. This trip was an important one as for the first time the company has admitted to compromising their principles when they agreed to censor the Chinese version of Google. He stated that they reluctantly agreed to the censorship once the Chinese Government blocked Google’s Chinese version site.

As we are in the heat of midterm elections the topic of gay marriage has popped up again, but is it just at the wrong time. The Senate rejected a gay marriage ban stating that both President Bush and the GOP’s lobbying for this passage was out of line. But because this is midterm election time you can expect this to topic to come back to life next month with more fuel on the fire than before.

Now, I’m going to say it again, as an investor you should not, better yet cannot get emotional. Stocks trade up, stocks trade down, and that is the nature of the stock market. It’s your job to do the homework that will put you on the right side of the movement. We will continue to lay out some ideas and our outlook, we’ll give you some insight into the company and its current situation but you still need to do your homework to insure that it is right for you. We want our readers/listeners to be well informed so that you can make informed decisions and not foolish trading mistakes.

So do not trade with emotion, use your head and focus on the game plan, now lets move on to some stocks that you will want to keep an eye on.

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Movers and Shakers

Some major movers in yesterdays trading session include Intuitive Surgical (NASDAQ: ISRG) which was knocked down from $116.35 to $107.70 on Tuesday but regained those loses to trade up $4.95 to close at $113.01 on Wednesday. This is the exact reason why it is crucial that you seek out companies that are being dragged down by the market , those companies that have not changed fundamentally.

U.S. Xpress Enterprises (NASDAQ: XPRSA), one of our “Furious Five” features, traded up $1.34 to close at $23.34. As we mentioned recently trucking, rail and transport in general will continue to grow, especially those companies that transport construction material. We mentioned TMM SPA (NYSE: TMM) a Mexico play yesterday and U.S. Xpress is one that will benefit here in the USA.

Target (NYSE: TGT) made some noise on Wednesday after an upgrade by Lazard Capital Markets. The company expects high gross margins in 2006 and basically the quality retail companies are beginning to shine, just look at Sears Holdings (NASDAQ: SHLD).

Other stocks that made moves on the upside include L-3 Communications (NYSE: LLL) which traded up $3.44 to close at $76.93, Apollo Group (NASDAQ: APOL) which traded up $2.55 to close at $55.47, DSW, Inc (NYSE: DSW) traded up $2.50 to close at $31.65, Life Time Fitness (NYSE: LTM) traded up $2.39 to close at $44.38, Four Seasons Hotels (NYSE: FS) traded up $1.46 to close at $62.58, Las Vegas Sands, (NYSE: LVS) traded up $1.37 to close at $68.00 and Harley Davidson (NYSE: HDI) which traded up $1.34 to close at $49.30.

Under Ten

Now lets take a look at movers in the market under ten bucks, Home Solutions America (AMEX: HOM) traded up $1.14 to close at $7.94 after a rough day on Tuesday but the pressure will still be on the stock in today’s trading session.

Peru Copper (AMEX: CUP), this was a pick by our very own Larry Oakley from Wall Street Corner a few weeks back when it was in the low $4 range, so this was a good call, the stock traded up 56 cents to close at $6.72 but it gets better it was halted with news pending at 2.37pm yesterday. Well after the close Peru Copper stated that they requested the trading halt on both the Toronto and AMEX due to a “frivolous” bid that it received from Southern Copper (NYSE: PCU). They were concerned about the stocks unusually trading activity and wanted to stop this in its tracks, but you know what they say where there is smoke there is fire, so keep your eyes on Peru Copper.

American Italian Pasta Company (NYSE: PLB) , if the name doesn’t give it away let me tell you , they are a producer and marketer of dry pasta in North America, some brands include Mueller’s, Mrs. Grass, Pennsylvania Dutch and Anthony’s pasta . Everything from linguini to rigatoni, they do it all, some of their competitors include Barilla Holdings, which is by far the largest pasta maker in the world, yes surpassing the Ronzoni brand.

This has weighed on the company for some time. At one point this was a $51 stock and went as low as $3, it closed down in the $8 range yesterday, so for all intents and purposes this one fell out of bed. They currently have a 52 week low of $3 and a 52 week high of $23.64. Now I need to let you know that they company is losing money, they just reported that revenues dropped 7% in 2005, this is the first time in 12 months that they have given full disclosure of sales figures. But the stock had movement on Wednesday as it traded up 43 cents to close at $8.44, go figure.

Other stocks under ten bucks that made nice moves yesterday include Nitromed (NASDAQ: NTMD) which traded up 40 cents to close at $4.64, Cardica (NASDAQ: CRDC) traded up 37 cents to close at $7.26, DUSA Pharmaceuticals (NASDAQ: DUSA) traded up 36 cents to close at $4.90 and Lattice Semiconductor (NASDAQ: LSCC) which traded up 32 cents to close at $6.05.

Downers

Some Downers in yesterdays trading session include USG Corp (NYSE: USG) , they are being dragged down with the building materials sector as the stock traded down $8.09 to close at $76.20 on heavy volume.

Veritas DGC (NYSE: VTS) traded down $6.25 to close at $45.37, this is a company that is involved in the information end of the oil business as they supply integrated geophysical information and services to the petroleum industry. Now the stock ran up during the final week of May from $44.81 to close as high as $51.62 on Tuesday. So this pullback could be attributed to market conditions as nothing has really changed with the company. Actually it should be in better shape now as increased drilling in the U.S. is about to ramp up. So use this downturn as an opportunity to find a good entry point.

Diamond Offshore Drilling (NYSE: DO) traded down $4.09 to close at $78.16. Now nothing dramatic has happened with the stock, it is being dragged down by market conditions just like Veritas. Now the stock broke the $79.23 mark and could slip to high $75 to the low $76 range, but you need to keep an eye on the trading on this as it could drop to the mid $77 range and pop back up. Now keep in mind that the stock traded as high as $95.65 in May 2006, so the potential is there. Keep this one on your stock watch.

Other stocks that traded down but shouldn’t be down there include U.S. Steel (NYSE: X) which traded down $3.30 to close at $60.61, Schlumberger Ltd (NYSE: SLB) traded down $3.45 to close at $60.51,
Steel Dynamics (NASDAQ: STLD), which traded down $3.26 to close at $53.74, Petroleo Brasileiro (NYSE: PBR) traded down $3.53 to close at $81.80 and Occidental Petroleum (NYSE: OXY) which traded down $3.07 to close at $94.72.

Now some stocks under ten bucks that received the royal smack down on Wednesday include International coal Group (NYSE: ICO) which traded down $1.40 to close at $7.10 on heavy volume, Polyone Corp (NYSE: POL) traded down 54 cents to close at $9.09, Movie Gallery (NASDAQ: MOVI) the stock that shot up on rumors traded down 49 cents to close at $7.01 on over 5.3 million shares traded, Input/Output Inc (NYSE: IO) traded down 46 cents to close at $8.74 on heavy volume and Grey Wolf (AMEX: GW) which traded down 40 cents to close at $7.28 on over 3 million shares traded.

Analyst Upgrades/Downgrades

Recent Analyst upgrades include American Woodmark (NASDAQ: AMWD) which was upgraded to a Buy from a Neutral by Sidoti & Co, Aeroflex Inc (NASDAQ: ARXX) was upgraded to an Above Average from an Average by Caris & Co, Broadcom Corp (NASDAQ: BRCM), a company that we just spoke about on Wall Street to Main Street, was upgraded to a Buy from an Above Average by Caris & Co, Boeing (NYSE: BA) was upgraded to a Buy from a Neutral by Banc of America and Target Corp (NYSE: TGT) was upgraded to a Buy from a Hold by Lazard Capital Markets.

Recent Analyst downgrades include Prosperity Bancshares (NASDAQ: PRSP) which was downgraded to a Hold from a Buy by Sanders, Morris and Harris, Lamar Advertising (NASDAQ: LAMR) was downgraded to an Inline by Goldman Sachs, Herley Industries (NASDAQ: HRLY) was downgraded to an Underperform from a Market Perform by Raymond James, Northrop Grumman (NYSE: NOC) was downgraded to a Neutral from a Buy by Banc of America and Johnson Controls (NYSE: JCI) was downgraded to a Neutral from an Outperform by Robert W. Baird.

Recent analyst coverage initiations include Regis Corp (NYSE: RGS) which was initiated with a Peer Perform by Bear Stearns, Ethan Allen Interiors (NYSE: ETH) was initiated with an Outperform by Raymond James, Bancshares Florida (NASDAQ: BOFL) was initiated with an Outperform ratings and a $26 price target by Raymond James, RCN Corp (NASDAQ: RCNI), which by the way I’ve been seeing a lot of those RCN Vans in New York City lately, but the company was initiated with a Hold rating by Morgan, Joseph & Co, and Ingersoll-Rand (NYSE: IR) was initiated with a Neutral rating and a price target of $45 by Banc of America Securities.

Investors Commentary

And the Readers/Listeners Speak:

Don from New Jersey said: “I’ve just started to listening to Wall Street to Main Street” and was surprised on how informative it was. A friend of mine turned me on to it and I think that its great, keep up the good work.”

Don, thanks for the kind words, its always good to hear that our listeners and readers are finding “Wall Street to Main Street” beneficial. Word of mouth advertising is the best way to go and hopefully all of our listeners and readers will follow your lead and spread the WSMS word.

Daisy from New York asked: “I know that the metals have been coming down lately including copper, do you think that it’s a good time to start looking at Southern Copper (NYSE: PCU) as a potential rebound stock?”

Daisy, Southern Copper in 2006 went from a low of $69.36 and closed as high as $105.85 on May 10, 2006. The stock traded down $3.03 on Wednesday to close at $80.72, I’d like to see if it breaks $78 on the downside because at that point it could freefall to the low $70 range before it bounces back. Their mining and smelting activities are primarily in Peru and Mexico, so as you watch this trade you may want to consider Peru Copper (AMEX: CUP).

Andy in Maine said: ” I caught your show while I was looking for financial shows on Monday for my iPod and I have to say that I’m glad that I found it, is this show going on national radio and how about television?, hey I’ll help produce it”

Andy, I’m glad that you found us, so we welcome you to the growing “Wall Street to Main Street” family, as far as national radio syndication, we’re working on that and any assistance that we can get on that end from our listeners is appreciated. As far as a TV show, well that is something that is being kicked around, if we need production help we’ll shoot you out an email.

Marie in North Dakota asked: “I came across a new issue by the name of Luna Innovations, and I wanted to know if you thought it was a good play or not.”

Marie, Luna Innovations (NASDAQ: LUNA) is a new IPO that went public on June 2, 2006. The stock is relatively new and came public at a time that Vonage (NYSE: VG) created a massive IPO debacle, but Luna stood strong at $6 where they went public. The company researches, develops and commercializes innovative technologies in molecular technology and sensing solutions. I haven’t had the time to get my hands dirty and research it, and I am not going to give you an on the fly outlook on whether you should buy the stock or not, it would not be fair to you. So what I’m going to do is try to get the CEO of Luna Innovations on “Wall Street to Main Street” so they can tell you exactly what the company is about and then we can evaluate its value to you.

Thanks for the emails and keep them coming, this is the interactivity that we need to really make “Wall Street to Main Street” work for you.

FURIOUS FIVE

The latest addition to our “Furious Five” companies that we see excelling in their industry in 2006 is Omega Healthcare (NYSE: OHI).

For our outlook, and other vital information on the companies that we feature as the “FURIOUS FIVE” on Wall Street to Main Street just subscribe for FREE at www.namcnewswire.com

Omega Healthcare Investors trades on the NYSE under the symbol OHI.

We cannot stress enough that investors need to do their due diligence, call the companies, get the information, consult with your investment advisor and if you do not have one consider getting one. Put the same time into investigating these companies as you do when you go to purchase a new television, it’s only for your protection. When it comes to thinly traded securities stagger your orders or put a limit order in to avoid a run up.

NAMC Newswire Note

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Disclaimer:
None of the information contained on the NAMC Newswire constitutes a recommendation by the NAMC Newswire, its journalist, nor its parent company that any particular security, portfolio of securities, transaction, or investment strategy is suitable for any specific investors or person. Each individual investor must make their own independent decisions regarding any security, portfolio of securities, transaction, or investment strategy featured on the NAMC Newswire or NAMC Radio Any past results are not necessarily indicative of future performance. The NAMC Newswire, its journalist nor its parent company does not guarantee any specific outcome or profit, and all investors should be aware of the real risk of loss in following any strategy or investments featured on the NAMC Newswire or the NAMC Radio. The strategy or investments discussed may fluctuate in price or value and investors may get back less than you invested. Before acting on any information featured on the NAMC Newswire website or the NAMC Radio segment, investors should consider whether it is suitable for their particular circumstances and strongly consider seeking advice from their own financial or investment adviser. Investors are also urged to do their own due diligence before investing in any security.

All opinions featured on the NAMC Newswire or NAMC Radio are based upon information that is considered to be reliable, but neither the NAMC Newswire, its journalist, its parent company, affiliates nor assigns warrant its completeness or accuracy, and it should not be relied upon as such. The statements and opinions featured on the NAMC Newswire by its journalist are based on their outlook at the time of the statement or opinion, and are subject to change without notice. NAMC may at times hold a position in the companies that it features, in these cases appropriate disclosure is made.

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Many people don’t realize how much money they spend on convenience and boy does it add up. I am going to share some of my frugal and practical tips of how to save money for the vacation you always wanted. Before we get started make sure you setup a vacation savings account, if you don’t have a savings account setup look into an ING Direct savings account. (Find out how to get $25.00 just for opening an account in our forums)

Now that you have an account to put all of your saved money in, you will have to determine what is important to you. Is that cup of Star Bucks coffee worth having to drive to Gulf Shores for your vacation? Doesn’t a trip to Hawaii sound better? Now cutting out your Star Bucks won’t pay for your vacation to Hawaii, but it will pay for the plane ticket. If you are getting a cup of star bucks 5 days a week at $4 dollars a day that equals $20 a week. Which turns into a savings of $1040 dollars a year. Is that cup of coffee that good? Remember you don’t have to cut back completely you could only get Star Bucks two days a week and over a year you would save $624.

If you go out every weekend to see a movie, you can save a bundle by cutting back. Instead of going to the movie, rent the movie at the video store. If you rent a movie instead of spending $8.00 on a ticket and spending $10.00 on popcorn and drink, you spend only $6.00 on a movie at video store. If you have to see a movie in the theatre, choose to go once a month. Whether you cut back or rent you will save $12 dollars a week or $624 dollars a year.

Shop around for home and car insurance. Many people assume since they have been with X insurance company for so long that they have the best rate. WRONG! Shop around every 6 months or year when your policy runs out. This can save you a bundle. I have two vehicles, a 2001 Ford F150 and 2002 Mazda Protégé. We were paying around $2000 a year for full coverage insurance with $500 dollar deductible. When my policy ran out I did some calling around for the exact same coverage through a different insurance company my yearly premium went to $1400 that’s a savings or $600 a year.

Here are a few additional tips to help save money. Disconnect or reduce your cable or satellite TV channels and you will save $10 to $80 dollars a month. Bring your lunch to work 4 out of the 5 workdays will save you $20 a week. Cut back on dry cleaning can save you $10 dollars a week. Send your kids on the bus instead of driving them to school you can save $5 to $10 dollars a week.

If you do the just a few of things I mentioned above you will have over $2000 dollars in the bank for that vacation you have always wanted. Maybe you have additional ideas of how to save for that vacation, tell us your money saving ideas in our forum.

By: David Adams
Investing Money Forum Investingpub.com

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Running out of time?

Did you miss the bounce-back of the stock market in recent years?

It is now almost where it was 5 years ago. Whoopee!

What are the odds of it continuing to go up in the face of 15 consecutive interest rate hikes with more on the way? Remember the old bromide:

When rates are low, stocks will grow
When rates are high, stocks will die!

Can you count on the mercurial market to deliver the kinds of consistent gains you are going to need in the next 5-10 years to salvage the retirement lifestyle you want?

Why not stuff your retirement account with tax free real estate profits!

You did not know you could do that?

Actually, according to the IRS, there are only two things you cannot invest your retirement funds in, collectibles and life insurance!

The trick is to have your IRA or 401(k) transferred to a truly self directed IRA custodian. Your broker may say theirs is self directed.

Ask him how you go about buying a house with it and see what he says. I would advise you to take a step or two back when you pose this question. He may turn violent!

You may object that the bubble has burst for real estate and fortunately, you would be right! Finally properties are being sold for prices where they produce positive cash flow.

The property market is going to head lower, we believe in the coming years. With the cash available in your retirement account, you will be able to drive some good bargains.

If you can get a couple of 2-4 family properties in good locations, they will spew tax free cash right back into your IRA like water hose.

It will not matter if they don’t appreciate or even if the value goes down a bit, like prices did in the late 80’s, early 90’s. They will come back and you will not get hurt if you do not have to sell, and the market value has little to do with the rents.

If you are knowledgeable about real estate, you can buy run down or abandoned property, fix it up and resell it, stuffing the tax free profits into your IRA.

If you are averse to dealing with tenants, and are not into fixers, you can become the bank and finance rehabbers or even retail buyers with first or second mortgages.

What if you do not have that much in your retirement account? You can still get into the real estate game.

You can locate distressed owners of real estate of which there will soon be a bumper crop, and buy their equity in the property at a big discount, taking over their mortgage.

There are many, many sellers that have little equity in their homes due to the spate of cash out refinancings and purchases with little or no money down in recent years.

You can then sell the property for a quick profit.

If you want to keep the property as a rental, you can do so with the help of a land trust. (Ask your real estate broker)

Another, often overlooked real estate play for your IRA is to buy tax liens.

When someone does not pay their real estate taxes, in some states the counties place a lien against the property for the amount of the unpaid taxes.

In other states, the counties foreclose on the property and sell it at auction.

Although you could certainly bid at auction for the seized property with IRA funds, buying the liens of the delinquent home owners is a passive way to enjoy high profits with great security.

You buy the lien from the government, it is secured by the property and it pays from 8-16% interest. Your repayment with interest is assured by the police powers of the government.

If the recalcitrant home owner does not pay off the lien with interest in the requisite amount of time, the government will allow you to seize the house; in effect buying it for the amount of the back taxes! Between 95 and 98% of liens are paid off.

Tax liens are also a great way to amplify the anemic returns available to those already retired and living on fixed incomes.

So if you are looking to catch the last train out to Happy Retirementville, you need to get your retirement funds out of the selfish, sweaty little hands of your stock broker and into some real estate, fast!

Copyright, 2006 Bill Young. Bill is a former mortgage broker and licensed financial planner. He writes and lectures on real estate investment, land trusts, tax liens and using your IRA to invest in real estate. You can learn more at: http://ARealEstateIRA.Com or at http://MotivatedSellersOnline.com

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People are always asking me when should I sell my stock or mutual funds?

There are some relatively easy answers to this. In fact, so simple that you won’t believe them, but they are things I have learned over the past 30 years as a professional trader on the floor of the commodity exchange in Chicago. These ideas apply equally well to stocks and mutual funds and to just about any kind of investment.

First let’s examine what the Wall Street mavens tell you about mutual funds. Ever heard this one? Buy a good fund and stick with it even when it is going down. WRONG! Go with a good fund manager and follow him from fund to fund. WRONG! Don’t buy the current “hot” fund, as it will go down when this fad is over and you will lose your money. WRONG!

Let’s look at the one basic reason all these ideas are promoted. The mutual fund industry which is the biggest owner of individual stocks in the world doesn’t want you to take your money out of their particular fund so they all band together to promote the above ideas even when you are losing money. Fund managers are not paid for performance. They are paid by the amount of your money the fund keeps.

Do you want to stick with anything that is going down in value week after week? The great cry of stockbrokers is, “The market always comes back”. But when? In your lifetime?

I don’t know of any individual fund manager that has made money for the investors every single year. They all run hot and cold, even the best of them. You can put the best jockey on a slow horse and he is not going to win the race.

The Wall Street gurus talk about “hot money” flowing from one fund to another and want you to feel guilty just because you want to make more profit. Hey, what is your money in there for - cold pizza?

There is one basic rule that will keep you outperforming the pack. If your mutual fund is not currently (meaning in the past 12 months) outperforming the S&P500 Index you should sell it immediately and buy a different no-load fund. Don’t buy any fund that charges commission. You can buy directly from the fund itself (phone numbers listed in IBD very day) or through a discount broker such as Waterhouse, Datek, E-Trade and many others. The maximum commission charge should not be more than $25 no matter the size of the buy or sell with no restrictions on how long you must hold it.

Where do you find the best performing funds? Each day Investor’s Business Daily publishes a list of these funds. Look for the day they publish the top performers for the past 12 months.

Don’t pay any attention to the longer-term statistics. Each week you should look to see if your fund is still listed in the top 25. If it isn’t, sell it and buy the one at the top. Simple. Forget the 3-year, 5-year and 10-year records. My philosophy is ‘What have you done for me lately?’.

As far as selling stock this is what I do. I keep at 10% trailing stop which I change every Monday morning with my discount broker. The open stop is 10% of the previous Friday’s close. This may or may not be the top of the move but I don’t care. I’m either stopped out with a small loss or a profit, but my money is always protected. When I have doubled my money I will sell half my position and let the rest ride with the following stop. Protection of your capital is the most important thing you can do.

Al Thomas’ book, “If It Doesn’t Go Up, Don’t Buy
It!” has helped thousands of people make money
and keep their profits with his simple 2-step
method. Read the first chapter at
http://www.mutualfundmagic.com
and discover why he’s the man that Wall Street
does not want you to know.

1-888-345-7870; al@mutualfundstrategy.com

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Planning for retirement is not an easy task. You have to meet a number of challenges before you can set up a comfortable retirement. People who plan for their retirement for many years before it happens, generally do the best, and the reason why is obvious. The more years that you systematically plan for and save for your retirement, the more money you’ll have when you need it most.

The trouble with retirement planning is simple: when your retirement is very far off, you don’t tend to give much thought to the subject. When your retirement date nears, you give the subject a ton of thought, but you have a lot less money and time to prepare yourself. For many people, the subject can be unpleasant, and no matter how important it is, they will tend to “blow it off” in favor of more enjoyable past-times. This is quite understandable, but not always in your best interests.

The more time you have to plan for retirement, the smaller your systematic savings amounts need to be. The shorter the time period, the higher. As you trend towards retirement, it’s an excellent idea to remove expensive payments (perhaps a boat or an RV) and put that money into your retirement account. If you’re 55 or over, you will have to make hay while the proverbial sun is shining, and place a greater percentage amount into savings than ever before.

Chances are, your expenses will be lower when you’re retired than before, so you will probably be able to make do with less total dollars. If you’re fortunate, you’ll have decent incomes in the form of your employer’s retirement plan and social security. If less fortunate, you’ll have to make do on what you’ve managed to save. When you’re retired, you are forced to be much more conservative with your investments, so this can limit the types of returns you get. You will likely be forced to settle for lower returns if you want guaranteed results, which is almost always the case for a retiree.

One advantage of being retired is you can often downsize your home and car, to make up for any loss in income. Chances are you’ll be able to take a great deal of cash from the sale of your home, and this money can also be used to invest for retirement. You can also still earn an income as a retiree, although very strict rules apply. You can also consider starting a small business if you find the lack of employment boring, or just if you want more challenges. Life begins at retirement for most people, so carefully planning for this fateful event many years in advance of the event is bound to serve you well.

Darren McLaughlin is the webmaster of My-Goldenyears.com at http://www.my-goldenyears.com which is a website dedicated to the education of consumers on the subject of retirement.

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If you’re like many investors who squander those small dividend checks from your stock portfolio, a Dividend Reinvestment Plan (DRP) might be just what you need. Just as its name implies, a Dividend Reinvestment Plan allows you to reinvest some or all of those dividends into more stock of the issuing company. Unlike purchases made through traditional means, partial or fractional shares, as well as whole shares, are available.

Technically, there are two types of DRPs. The first type involves buying shares at the market through an outside trustee. Although the company may subsidize the transaction costs, buying shares at a discount is not allowed.

The second type allows you to purchase directly from the issuing company, which may provide a discount from the market price. This is a distinct advantage over buying from an outside trustee.

Besides giving dividends a better purpose than sitting in your pocket or in a brokerage cash account, a DRP may offer other advantages as well. By buying on a regular basis, you are “dollar cost averaging” your purchases, an investment strategy designed to reduce volatility. Dollar cost averaging involves continuous investment in securities regardless of fluctuation in the price. Of course you should consider your ability to continue purchasing through periods of low price levels. This type of plan does not ensure a profit or protect against loss.

Secondly, many companies offer added options with their DRPs, including purchasing stock at low minimums and sometimes even offering shares at a discount (often 3-5%) off current market prices.

From a tax standpoint, you are subject to income taxes on the value of the dividends whether you reinvest them or not. Your tax basis for all your shares including the reinvested dividends is the amount paid for the original shares plus the dividends, minus any costs deducted from your dividends as a service charge as part of the DRP.

Keeping good records is a necessity, especially if you plan to continue participating in a DRP over a number of years. Without the records, it may become very difficult to track all your purchases. A little bit of effort now can save you big headaches later on.

Usually, you will receive a quarterly statement outlining your DRP account. Among other things, these quarterly statements will detail your on-going investments, how many shares are held by the program, how many shares are held be you, and the value of all your shares.

Not all companies offer DRP’s but, for a list of one’s that do, there are many web sites dedicated to these plans. These internet sites not only have a full list of companies with DRPs, they also offers online enrollment services. For securities held in a brokerage or wrap account, check with your brokerage firm to determine if they have the means to enroll you. If all else fails, try either the company itself or its transfer agent.

Although it is easy to see the advantages of DRP programs to the investor, we should not overlook the benefits to the issuing company. Besides helping to stabilize market prices, a DRP is a relatively efficient way to raise capital and, because companies only “promise” to continue these programs in the future, the issuing company controls when and how much capital will be raised.

Over 1,000 companies currently offer some type of Dividend Reinvestment Plan and, with a little research, you should be able to get on the path of “automatic pilot” investing for the future.

Glenn (”Chip”) Dahlke, a senior contributor to the Living Trust Network, has 28 years in the investment business. He is a Registered Representative of Linsco/Private Ledger and a principal with Dahlke Financial Group. He is licensed to transact securities with persons who are residents of the following states: CA. CT, FL, GA, IL. MA, MD. ME, MI. NC, NH, NJ, NY.OR, PA, RI, VA, VT, WY.

If you have any questions or comments, Chip would love to hear from you. You may contact him at dahlkefinancial@sbcglobal.net. You may also contact him by going directly to the Living Trust Network web site located at http://www.livingtrustnetwork.com

Copyright 2005. LivingTrustNetwork, LLC. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed without the written consent of the Living Trust Network, LLC.

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Financial statements are a useful tool for judging the health of
a company, and for comparing it to its competitors. They show
what the company owes and owns, the profits or loses it has made
over a given period, and how their position has changed since
their last statement. Generally if you can tell which direction
a company is heading in, you can also forecast future stock
prices with some accuracy.

Gaining a basic knowledge of financial statements, and applying
this knowledge when choosing or assessing investments can help
you pick tomorrow’s winning stocks, while avoiding tomorrow’s
losers. Of course, financial statement analysis will not always
factor in significant news events, unexpected incidents, changes
in management, and other factors which may influence share
prices, but it provides a starting point from which to gauge the
present value of shares, independent of future occurrences.

The following report details some simple financial statement
explanation and analysis methods. Although the topic can get
much deeper and more complex, this article is designed to give
investors the ability to understand the numbers and simpler of
financial ratios, and be able to use that knowledge to assist
them to make better decisions when doing their due diligence.

Balance Sheet

The balance sheet shows a company’s financial position at a
specific date, usually the last day of the company’s fiscal year
for annual reports. One side of the balance sheet shows what the
company owns and has owing to it, called assets. The other side
represents liabilities, which are what the company owes, and
also has shareholders’ equity, which represents the excess of
the company’s assets over its liabilities. Shareholder’s equity
is often referred to as book value. Total assets are equal to
the sum of the company’s liabilities plus the shareholders’
equity. In other words, take away liabilities from assets and
the remainder is what value is owned by the shareholders. The
Balance Sheet can be used to uncover the value of the company,
the debt load, and cash position.

Earnings Statement

Also called the Income Statement or Profit and Loss Statement,
it shows how much revenue a company received during the year
from the sale of its products and services, and the expenses the
company incurred due to wages, taxes, operating costs, etc…
The difference between the two is the company’s profit or loss
for the year. The amount left over after taxes is the net
earnings.

Net earnings are basically saying how much money the company
‘really’ made over the course of the year. Some companies can
have low earnings if they used much of their money for research
and development, to acquire other companies, fuel aggressive
growth, move into new markets, etc, which is much more favorable
than if the company had low earnings because they didn’t
generate many revenues, their expenses were too high, etc…

Statements of Changes in Financial Position

This shows how the company’s financial position changed from one
year to the next. Also called the cash flow statement, this
details how the company generated and spent its cash during the
year. This statement can be used in evaluating the liquidity and
solvency of a company, and to assess the ability of that company
to generate cash internally, to repay debts, to reinvest in
itself, etc…

Sources of Financial Reports

Certainly you can get financials from the companies themselves.
Most will gladly fax them to you, or mail you their latest
quarterly and annual reports.

However, a faster way to access the information can be by
Internet. For example, go to Yahoo.com and choose stock quotes.
Enter the ticker symbol for the company you are interested in,
and Yahoo will provide its most recent press releases, which
will include past quarterly and annual reports with the
financial statements. You can also check the previous reports to
compare which direction the company is moving in and look for
trends (i.e. increasing debt load, unpredictable earnings,
decreasing revenues, erratic revenues, etc…). There are also
many other Internet resources which provide similar information,
such as wsrn.com, bigcharts.com, (canada-stockwatch.com for
Canadian issues), etc…

Comparison Shopping

To familiarize yourself with some of the numbers, try looking up
the financials of three companies you own or are interested in.

(Balance Sheet) Which of the companies has the greatest long
term debt load? Do any of the companies have greater current
liabilities than current assets? Compare the current share price
to the shareholder’s equity (book value): is the share price
much greater or less than the book value?

(Earnings Statement) What were the revenues of the most recent
year (or quarter) and does the number represent an increase or
decrease from the previous period? How much money per share did
the company earn (or lose) in the most recent period?

(Statement of Changes in Financial Position) Has company debt
been increasing or decreasing? What was the greatest expense the
company incurred according to the statement?

Decision Making

Understand that financial statements can provide investors with
a partial fundamental snapshot of a company. They only represent
one piece of the puzzle. Remember that, while financial
statements can help investors compare several companies,
comparison is limited only to the numbers provided.

In other words, you can see that one company made money while
the other lost money, but you don’t know which has the better
technical outlook (based on analysis of the trading chart),
which is a potential takeover target, which will have the best
future earnings, etc…

As well, the impact of financial statements tends to be
long-term as it relates to share prices. Four quarterly reports
showing increasing earnings may push the stock into an upward
trend as the market begins to recognize the fundamental
improvements of the underlying company, but one quarter of
increasing earnings may or may not have a significant impact on
shares.

Therefore, most investors use financial statements as part of a
greater overall decision making process. Certainly, though, an
understanding of and familiarization with the data can benefit
any investor who takes the time to make educated trading
decisions.

Important Points

Many growth companies don’t need nor are expected to have
positive earnings. Instead, they generally accumulate debt as
they focus on research and development of new technologies,
aggressively move into new markets, fight for market share with
competitors, etc… Other companies with minimal growth
prospects on the other hand, have more importance placed on
actual earnings, lowering operational costs, etc…

Be sure to understand what numbers are important and unimportant
to a specific company based on their situation and the position
they are in. This can be done easily by going to wsrn.com and
doing an industry comparison on the company in question. Do
companies in the same industry seem to have positive earnings,
or is the focus on growth, research, etc… Are they a larger or
smaller company than the industry average, and are they growing
faster than the others? Read the fine print to make sure the
numbers you are reading have been audited, rather than being
just company estimates, or unverified results. This generally is
not something you need to worry about with most exchange-listed
companies, but it is important practice.

Many annual statements will begin with positive news about sales
or revenue increases, or other positive comments, but further
reading reveals that the company actually lost more money,
increased debt, or had a poor quarter or year. For most
companies their financial statements are part of their
promotional material and they need to make the information sound
as impressive and positive as possible, even if the overall
results were disappointing. Be wary of one-time earnings or
loses. For example, a company may win a huge lawsuit settlement
and the influx of money gives them positive earnings for the
quarter. However, how would they have done when the one-time
extraordinary is ignored?

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