The Investor’s Christmas Wish List

What do you want for Christmas? This is a common question we likely all hear from friends and family this time of year. While I doubt any of us will be creating a Christmas list to send to Santa, we all have secret wishes or cravings that would put a smile on our face Christmas morning.

Everyone likes to hate the market

People truly hate the stock market. Don’t believe me? Take a quick glance at a yahoo finance comment chain. You’ll undoubtedly see that current investor sentiment is filled with distrust, skepticism, and outright hatred of the entire capital market system. The common belief seems to be the fat cats of Wall Street are out to make a quick buck with no regard to how their decisions will impact the little guy on Main Street.

Investment Tax Basics

Americans have been paying taxes on their earnings for almost 100 years. During that period of time, tax laws have continually changed and have certainly increased in their level of complexity. Although no one enjoys paying taxes, at Snider Advisors, we like to remind our clients that taxes are an inevitable part of making money – and you should never let the tax tail wag the investment dog.

How the Stock Market Works Part I: Exchanges

The Snider Investment Method utilizes purchasing stocks and selling options like many other investment strategies. The moment an investor buys shares at market price, like magic, the shares usually appear in the account almost instantaneously. Many people accept the magic behind the process and move on. However, behind the scenes there is a lot more going on than a sprinkle of magic dust and whispers of abracadabra. There are many parts on the back end, from the exchanges, brokers, specialists, and market makers. This article will focus on the exchanges.

The Process of the Tender Offer

The stock market is a place where buyers and sellers congregate to trade. Usually, when you sell shares, you can just click sell and the broker will match a buyer on the other side and vice versa when you buy shares. However, there may be a special occasion where a buyer will contact you directly with a proposal in the mail, stating that you can sell your shares through a tender offer.

Emotional Risk?

You will often hear that investors are worried about the risks associated with investments. They are concerned about inflation risk, market risk, and liquidity risk. There is one type of risk that should be a major concern for you, but it is often ignored. Are you concerned about emotional risk? The risk that you make investment decisions based on fear, greed, or worse, doing what everyone else is doing.

Emotions: The Enemy of Logic

When investing in the stock market, most people will say that the goal is to “buy low and sell high.” In a perfect world, everyone would stay true to this and the stock market would only go up. However, this is not always the case. Equal probability states that stocks have a 50-50% chance of increasing or decreasing in value. As a result, the stock market will often not move in a desirable direction, decreasing the value of the portfolio. Investors may ditch the “buy low and sell high” mantra, panicking because of the loss in value and dump the stock. Their emotions caused them to do the exact opposite, “buy high and sell low.”

The Market Recovered. Did You?

As I write this article, the Dow Jones Industrial Average sits at 13,000 – almost exactly double what it was during the market lows of March 2009. Good news, right? Not if you’re one of the many investors who chose to get out of the market over the last three years.

Bid-Ask Spread

What is the difference between the bid price and the ask price? On Trade Day, I frequently receive this question from our clients. When we teach you the Snider Method, we always tell you to look at the bid price when deciding which options to sell, but I commonly run into people asking what the difference between the two is. Hopefully, I can clear up any confusion.

Bad News Bears: Reacting to Bad News

In the Information Age, nearly everyone has access to boundless amounts of information at their fingertips thanks to the Internet. When researching stocks, investors can access statements and news within seconds of opening a web browser. This allows information to reach your hands much quicker than receiving financial statements in the mail or waiting for the newspaper or televised news program in the evening. Since news travels faster, this also allows investors to rapidly react the moment they read good or bad news about a company. If an investor reads news about one of their stocks underperforming earnings, they may want to sell their stock, thinking this news will cause their stock to decrease in price. However, this course of action may not accomplish what the investor is looking to do.