Hedging is a way of reducing some of the risk involved in holding an investment. There are many different risks against which one can hedge and many different methods of hedging. When someone mentions hedging, think of insurance. A hedge is just a way of insuring an investment against risk. Consider a simple (perhaps the
Dollar Cost Averaging vs Value Averaging Investment Strategies
Dollar-cost averaging is a strategy in which a person invests a fixed dollar amount on a regular basis, usually monthly purchase of shares in a mutual fund. When the fund’s price declines, the investor receives slightly more shares for the fixed investment amount, and slightly fewer when the share price is up. It turns out
Dogs of the Dow
This article discusses an investment strategy commonly called “Dogs of the Dow.” The Dow Jones Industrials represent an elite club of thirty titans of industry such as Exxon, IBM, ATT, DuPont, Philip Morris, and Proctor & Gamble. From time to time, some companies are dropped from the Dow as new ones are added. By investing
Stock Warrants
There are many meanings to the word warrant. The marshal can show up on your doorstep with a warrant for your arrest. Many army helicopter pilots are warrant officers, who have received a warrant from the president of the US to serve in the Army of the United States. The State of California ran out
Tracking Stock
A tracking stock is a special type of stock issued by a publicly held company to track the value of one segment of that company. By issuing a tracking stock, the different segments of the company can be valued differently by investors. For example, if an old-economy company trading at a P/E of about 10
Stock Split
Ordinary splits occur when a publicly held company distributes more stock to holders of existing stock. A stock split, say 2-for-1, is when a company simply issues one additional share for every one outstanding. After the split, there will be two shares for every one pre-split share. (So it is called a “2-for-1 split.”) If
Shareholder Rights Plan
A shareholder rights plan basically states the rights of a shareholder in a corporation. These plans are generally proposed by management and approved by the shareholders. Shareholder rights are acquired when the shares are purchased, and transferred when the shares are sold. All this is pretty straightforward. The interesting question is why such plans are
Reverse Merger
A reverse merger is a simplified, fast-track method by which a private company can become a public company. A reverse merger occurs when a public company that has no business and usually limited assets acquires a private company with a viable business. The private company “reverse merges” into the already public company, which now becomes
Old Certificate Value
If you’ve found some old stock certificates in your attic, and the company is no longer traded on any exchange, you will need to get help in determining the value of the shares and/or redeeming the shares. The basic information you need is the name of the company, the date the shares were issued, and
Treasury Stock
Treasury stock is shares of a company that are repurchased by the company on the open market. In theory, the buyback should not be a short term fix to the stock price but a rational use of cash, implying that a company’s best investment alternative is to buy back its stock. Normally these purchases are