High Level Investing For Dummies book cover

High Level Investing For Dummies

By: Paul Mladjenovic Published: 11-23-2015

Enhance your investment portfolio and take your investments to the next level!

Do you have an investment portfolio set up, but want to take your knowledge of investing a step further? High-Level Investing For Dummies is the resource you need to achieve a more advanced understanding of investment strategies—and to maximize your portfolio's profits. Build upon your current knowledge of investment, particularly with regard to the stock market, in order to reach a higher level of understanding and ability when manipulating your assets on the market. This approachable resource pinpoints key pitfalls to avoid and explains how to time your investments in a way that maximizes your profits.

Investing can be intimidating—but it can also be fun! By building upon your basic understanding of investment strategies you can take your portfolio to the next level, both in terms of the diversity of your investments and the profits that they bring in.  Who doesn't want that?

  • Up your investment game with proven strategies that help increase profits and minimize risks
  • Avoid common pitfalls of stock speculating to make your investment strategy more impactful
  • Understand how to time the market to maximize returns and improve your portfolio's performance
  • Uncover hidden opportunities in niche markets that can bring welcome diversity to your portfolio

High-Level Investing For Dummies is the perfect follow-up to Stock Investing For Dummies, and is a wonderful resource that guides you through the process of beefing up your portfolio and bringing home a higher level of profits!

Articles From High Level Investing For Dummies

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39 results
39 results
High-Level Investing For Dummies Cheat Sheet

Cheat Sheet / Updated 04-06-2022

In high-level investing, investors and speculators track the major markets and critical global issues that affect stocks and other securities, both in the United States and other major markets. Check out the following sites, tools, and pointers to stay informed.

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10 Ways to Minimize Losses in High-Level Investing

Article / Updated 12-22-2021

Even the legendary investing and speculating pros have failures and losses. The key is that all these people learned from what they did and modified their approaches going forward. Here are ten aspects of losses, either helping you minimize them or suggesting what to do if you have them. Use stop-loss orders "Have your profits run, but limit your losses." This age-old advice may be a cliché, but it's the quintessential grand strategy. In today's marketplace, limiting your losses is easy to do thanks to technology. Considering how crazy and volatile the world is, the stop-loss order should be a ready weapon in your investing and speculating arsenal. The trick is knowing when to place a stop-loss order, how long it should be in effect, and how far to place the stop loss-order from the stock's (or exchange-traded fund's) market price. You put a stop-loss order on a holding in your portfolio (such as a stock or ETF) to limit the downside risk of the holding without limiting the upside potential. Employ trailing stops The trailing stop is a stop-loss order that essentially trails the stock price like a giant tail as the stock price zigzags upward. The moment the stock reverses and falls, the trailing stop-loss order stays put at the most recent level it reached. When and if the stock does hit that stop-loss price level, the trailing stop turns into a market order and the stock will be sold. At that point, you've avoided further losses. Go against the grain When everybody and their uncle are ebullient about the stock market and the bulls-to-bears ratio is similar to the ratio of Red Sox fans to Yankees fans at Fenway Park, then it's time to be a contrarian — a cautious one. Starting to step away from a party that is overdue to end is a good way to avoid losses. Sure, you might miss a little more upside, but no one gets hurt taking a profit by selling or by using other loss-limiting strategies. Have a hedging strategy Having a hedging strategy after the crash is like closing the barn door after the horses escaped. The best time to consider a hedging strategy is before a major market reversal. A hedging strategy is basically knowing (and doing) what is necessary to preserve gains or simply to limit the downside. A hedging strategy differs depending on the duration of the expected fall. For corrections, you consider hedging by buying put options, for example. For bear markets, you look to sell and be in cash. Hold cash reserves Opportunities happen constantly — risks show up to derail or delay the best plans — but the prepared investor always has cash on the sidelines. Some extra cash is like a secret weapon; it's also a saving grace when your positions are down, and you need money for some unforeseen expense. Sell and switch When your stock is down, can you do a fancy two-step that can save you on taxes and set you up for a profitable rebound? Keep track of your unrealized gains and losses and see whether there are opportunities for tax benefits, given what is happening in your portfolio. Maybe you have an opportunity to sell a losing position in your portfolio to book a capital loss. Realized capital losses are generally tax-deductible (check with your tax advisor to be sure). You can play the rebound in a variety of ways, but make sure that the tax loss makes sense in your situation and that you did your due diligence regarding the potential rebound of the stock or the sector it's in. Discuss your personal tax situation with your tax advisor. Diversify with alternatives Keep in mind that as an investor, even if you have limited capital, you live in a time where there are many strategies and investment alternatives. When you have a stock in mind that you'll be investing in, you should list or research the alternatives that could accompany or augment your investment choice and help you limit or even reverse a potential loss. Using leveraged ETFs is a good example of this approach. A leveraged ETF is a speculative vehicle that seeks to emulate double or even triple the move of the underlying asset. Leveraged ETFs are a form of speculating. They may magnify gains when you're right, but they can magnify losses if you're wrong. Consider the zero-cost collar You have a stock that has done well, but you're worried. The stock may have some upside, but the downside risk seems to be growing. You don't want to sell the stock because the gain is sizable (and taxable!), but the short term worries you. Can you protect your stock from a potential correction without needing to sell it? Consider doing the zero-cost collar, a combination of writing a covered call and buying a put on the same stock (or ETF). When you write a covered call, you receive income (from the premium you receive when you "write" or sell it); you can then use this income to buy the put. This combination is called a collar because it effectively boxes in, or collars, the stock price. Here's how events may play out: If the stock goes down: The put that you bought comes into play. The put will increase in value the more the stock falls. If the stock goes up: You make a small profit on the stock when it's sold at the strike price of the call option you wrote. But that's it, because the covered call limits your upside; you can't realize any gains above the strike price. If the stock moves in a flat or sideways manner: Both the call you wrote and the put you bought would expire. No worries, though. Your stock is okay, and because both positions were acquired as a zero-cost collar, no harm is done when they expire. The collar didn't cost you, so there's no real loss. Try selling puts Say you have a stock with a loss. You review the wreckage and see that the stock price may be down (negative!), but everything else about the underlying stock and its company are positive. Suppose you have a stock that went from $50 per share and is wallowing in pain at, say, $25. Do you sell and take the loss, even though the company is really hunky-dory? Measure twice on this — is the stock price down only because investors left the sector entirely due to factors that are temporary and not fundamental to real value in the sector? Say that the company is fine but you could use the loss for tax purposes (capital losses in your portfolio are generally deductible). So consider selling the stock and then writing a put option on the same stock. Why? When you sell the losing stock, you pick up the loss on your taxes. Also, because the stock is down sharply, the puts on it are probably "fat" (meaning they picked up lots of value due to the stock's price drop). Given that, write a put option on that stock; it will give you good income and you can lock in a good price because the put will require you to buy the stock at the lower price (the strike price in the put option). The bottom line is that you took a bad event (the stock's fall) and turned it into something more positive. Prepare your exit strategy Stocks are meant to be a means to an end. You get stocks either for income or gains, maybe both. If you have a great stock and you've been getting great (and growing) dividends, year after year, then an exit strategy is either not a consideration or not a major concern. You develop an exit strategy for that type of holding in case you really need the money for a concern outside the realm of investing, such as funding college for your grandchild or buying that retirement home with all cash, no mortgage. When will you exit your position with stock X? And why? What type of scenarios would make you sell that particular stock? Give exit strategy some thought before the need to sell materializes. Many investors think about an exit strategy even before they make the initial purchase.

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How to Read an Options Table

Article / Updated 07-06-2021

Whether you're currently in an option or you're looking at getting into an option, you need to be able to read an options table like the one in shown here. Options tables are actually easier to read than the stock tables. A Sample Options Table Column 1 2 3 4 5 6 7 Option Symbol/Option Type Last Net Change Bid Ask Vol. Open Interest MMC160318C5000 2.5 0.25 2.75 3 454 2156 Here's how to make sense of the table: Option Symbol/Option Type: Column 1 usually identifies the option: what type, the company, or the security. Here, you see the option symbol for a call option of MMC with a strike price of $50 expiring March 18, 2016. Here is a breakdown of the symbol MMC: MMC: Stock symbol 16 03 18: Expiration date (Year-Month-Day) C: Type of option (C = call, P = put) 5000: Strike price without decimal point (5000 is $50.00) Last: Column 2 shows the price of the most recent trade that went through (in this case, $2.50). Net Change: Column 3 is how much the last price changed since the closing price of the previous day (here, 25 cents). Bid and Ask: Columns 4 and 5 are Bid and Ask. When you're buying an option, you usually pay the ask price. When you're selling, or writing, an option, you usually receive the bid amount. When you're buying an option (looking at the ask price), make sure that the spread (or difference) between bid and ask is not great; otherwise, you'll overpay for the option. The difference should be no more than 5 to 10 percent, and some options pros think even that is too great. High bid/ask spreads tend to happen with low-volume activity. Vol. (Volume): Column 6 tells you how many contracts have traded during that market day's trading session. Open Interest: Column 7 is the total number of outstanding option contracts that are still open. You can find options quotes at the CBOE site. CBOE also offers a key so you can follow and understand every element in the table, along with tutorials on how to read the options table.

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Tactics and Principles for Small-Cap Investment Success

Article / Updated 08-11-2016

Micro-cap and small-cap stocks are tailor-made for speculators. Whether you're doing short-term speculating (such as trading) or long-term speculating (hoping your choice eventually becomes a major investment), you're gambling. You may not be putting a fortune on the line, but it is your hard-earned money. Here are some small-cap guidelines to keep you sane — and hopefully profitable: Know your goals. You should know as much about yourself as you know about the company and its small-cap stock potential. What is your approach? What do you aim to do with small-cap stocks? Short-term speculating: There's nothing wrong with seeking quick gains if you don't mind the potential risks. With speculating, the fundamentals of the company aren't that great of a concern, because you don't plan on holding the stock for very long. As a speculator, you would use technical analysis to evaluate the stock. Long-term investing: Here you approach the stock as a value investor. Think growing sales and increasing earnings. Use fundamental analysis. Designate risk capital. You allocate your funds for a variety of purposes — emergency funds in the bank, investment funds in your IRA and/or 401(k) plan, and so on. For small-cap stocks, allocate a sum of money that you are comfortable losing in a worst-case scenario; this money is called risk capital. This sum has to be high enough for you to diversify your small-cap holdings but small enough that losing the money won't alter your life or general prosperity. Unless you're more experienced with small-cap stocks, consider limiting your exposure to less than 10 percent (or less than 5 percent for novice investors). Become proficient in the industry. When an industry does well, many of the stocks in that industry tend to do well, and the small-cap stocks tend to do very well. The more you know about an industry and the major factors that influence it, the better you'll be as a stock picker. Diversify. Yes, if you have 100,000 shares of one small-cap stock, you'll have a fortune if you're right. But the odds are definitely against you. Losing all or most of your money is too strong of a possibility to ignore. You're better off having, say, 20,000 shares in each of five companies. In the world of small-cap stocks, you could have a situation where you end up with four losers and one winner and still come out ahead in total market value. Buy some, sell some. If you bought 1,000 shares of a stock and it's up a few hundred percent, take some money off the table and cash out enough to have (at the very least) your original investment back. Then hold the remaining stock for the long term if you're an investor. Get to know the company through a phone call (or visit). Usually, company executives like to discuss the business with investors and other interested parties, and a call or visit gives you the opportunity to pick up some valuable information. Ask about their short-term and long-term objectives. Check for news and insider disclosure. Many financial websites give you the ability to receive alerts when major events happen with your stock. Many financial websites let you see what the insiders are doing. Take advantage of that. Use limit orders. Choose brokerage orders that minimize risk and potential losses and maximize gains. Use limit orders rather than market orders with small-cap stocks so you can control the prices you pay or receive when you enter or exit positions. Choose a batch of potential winners. When you're investing in micro caps and/or small caps, get five to ten in your chosen industry or sector. This strategy enhances your chances of a winning total portfolio, especially if you choose a hot industry or sector. Reading up on what history’s great investors have done is always a good idea, and one great example is John Templeton. He started his legendary multimillion-dollar fortunes investing in micro cap stocks during the Great Depression. Templeton made sure that the companies he invested in had true value (profitability, valuable assets, and so on), where the stock price was significantly below the company’s value. Consider reading up on small caps and micro caps. A good book on the topic is Penny Stocks For Dummies by Peter Leeds (published by Wiley). The term “penny stocks” is frequently synonymous with micro cap stocks.

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10 Respected Authorities on Stocks and Related Investments

Article / Updated 03-26-2016

Here are ten respectable investing pros whose work you can take very seriously, no matter what your skill level. Remember, no one knows everything, and every expert or authority is an avid reader of many others who are great in their singular pursuits. Doug Casey: Casey has been a successful investor and analyst for nearly 50 years, and he's made a fortune for his readers in the resource markets. He provides alerts on currency crises. Gerald Celente: The director of the Trends Research Institute, he gained much respect and notoriety for predicting many major market and economic events, including the 2008 financial crisis. He and his team relentlessly analyze trends and help investors predict trends that will affect their money and their lives. James Dines: Dines is a long-time analyst and editor of The Dines Letter. Among other prescient calls, he forecasted the Internet boom in 1996 and the bull market that started in 2009. Marc Faber: Author of the Gloom, Boom and Doom Report, Marc Faber is a frequent commentator and contributor to many prestigious sites, ranging from CNBC to Barron's. All should consider his insights because he has been one of the most consistently successful market forecasters in Barron's prestigious Roundtable. Stephen Leeb: Stephen Leeb, one of the leading portfolio managers in the country, is frequently on target with his market views and expectations. Michael Pento: One the market's premier economists and portfolio managers, Pento is a proponent of the Austrian school of economics. (The Austrian school has been a successful school of economic thought for more than a century, and it correctly diagnosed and forecast major economic events such as the Great Depression.) He's a savvy observer of debt and equity markets. Robert Prechter: Prechter is the world's leading practitioner of the Elliott Wave cycles theory (a leading school of technical analysis as it relates to major market and economic trends). He successfully forecasted the stock boom of the 1980s and the crash of 2008. James Rickards: As one of the most well-connected economists (he consults with the CIA, the Federal Reserve, and other major institutions), Rickards knows the currency markets better than most. Richard Russell: "The godfather of financial newsletter publishers," Russell has been publishing and commenting on the stock market for more than 60 years. His Dow Theory Letters is still going strong. James Turk: James Turk is one of the world's top experts on precious metals and is an insightful observer of currencies and the banking system.

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Is the Market Overvalued? Using the Buffett Indicator

Article / Updated 03-26-2016

Many times, the great investors look at indicators of what's happening in the overall stock market. The Warren Buffett Indicator is one indicator, named that because most likely because no one else is looking at it. Buffett compares the GDP (gross domestic product, as calculated by the Bureau of Labor Statistics) with the total market value of stocks in the S&P 500, the major market index. A variant of the Buffet Indicator is based on the Wilshire 5000. You can call this indicator the market-cap-to-GDP ratio. As a ratio expressed as a fraction, the numerator is the market cap, and the denominator is the GDP. You can derive both the GDP number and the market cap from the Federal Reserve's economic data. The Fed refers to the market cap as "Market Value of Equities Outstanding." If the market cap figure is greater than the GDP, then you should be less aggressive in your stock investing approach. If the market cap is much higher, then reduce your exposure to the stock market. If the GDP number is greater than the market cap, then consider "shopping" for some good value stocks to add to your portfolio. For example, if the market cap for the S&P 500 is $9 trillion and the GDP is $10 trillion, then the ratio is 90 percent (or $9 trillion divided by $10 trillion). In that case, the stock market isn't considered overvalued, so the indicator won't be a concern (at least not according to the Buffett Indicator). The indicator starts to be a concern when the numerator (the market cap) exceeds the denominator (the GDP number). If this persists for more than one quarter, then it indicates that the stock market has entered overvalued territory. Even if the market is slightly overvalued, that isn't a reason to panic. It's just a reason to cut back on additional investments. During the first half of 2015, this indicator surpassed 128 percent. The last time the indicator was at that high of a level was during the Internet/tech bubble period of 1999 through 2000, when it reached 153 percent. Remember, a high Buffett Indicator suggests it's time to be cautious. Don't rush into stocks at this level; hold off or reduce your potential investment.

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An Option Strategy for a Turbulent Market: The Zero-Cost Collar

Article / Updated 03-26-2016

A collar is an option combination that involves buying a put option and writing a covered call on a stock or ETF that you own in your portfolio and that you're concerned may decline in the near future. The zero-cost collar is another option strategy. When the market is looking dicey in the short-term, what do you do with your investment portfolio? Of course, you analyze each individual stock or exchange-traded fund (ETF) and ask whether it should be sold or continue being held. If the purpose of that stock is income (dividends) and you've held that stock a long time, consider holding onto it, especially if the underlying company is strong (it has stable or growing sales, net income, and so on). But if you're still worried in spite of all that and you don't want to sell the stock for whatever reason, consider doing a variation of a particular option combination: the collar — namely, the zero-cost collar. Say that you have 100 shares of XYZ stock (a perennial favorite among stock investing authors!), and it's at $40 per share. You want this protection for the next, say, three months. Here are the components of the zero-cost collar: Write a covered call option at a strike price of $45 (expiring in three months). Buy a put option at a strike price of $35 (also expiring in three months). A zero-cost collar is so named because it pays for itself; there's no out-of-pocket cost for the trade. If you structure the trade right, the money you receive from writing the call pays for the put option you're buying. You've then effectively bought insurance against downside risk, and it didn't cost you anything. Here's what can happen, depending on the stock's movement: Staying steady: If the stock's price moves sideways and stays lower than $45 and above $35, the options expire worthless in three months. But you don't mind, because you got protection for three months at essentially no cost. Soaring: If the stock soars to $45 or higher, then you'll be required to sell the stock at $45. But no worries: You're selling the stock at a higher price, so you still realize a nice gain. Crashing: If the stock crashes to some point below $35, then the collar gives you a double profit that could offset most or possibly all of the stock's downside move. The call loses value, but because you sold it, you don't mind; you keep the premium you received when you wrote the call. This is your first profit. In addition, the put option you bought goes up in value, giving you a gain when you cash out the put. This is your second gain. The next time the market looks troubling to you, don't panic. You can deploy many great strategies, and one of them is the zero-cost collar.

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7 Practices of Successful Options Speculators

Article / Updated 03-26-2016

Option strategies augment any high-level investor's or speculator's overall approach. If you do option strategies of any kind, the following practices will help you get ahead: Discipline: Successful options speculators make sure they aren't susceptible to emotions such as fear or greed, and they try to avoid a bias. Money allocation: They speculate only with money allocated for options —and they don't spend a penny more. Patience for opportunities: They don't trade every day. They wait for the right trades. Planning: They have plans for entering and exiting a trade. Ongoing education: They don't assume they've learned all they need to know about options and the underlying assets. Hedging: They aren't totally directional. They know that the market can sometimes go against them. Back testing: They use data from past or historical trades to see how trades would have or could have resulted.

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4 Great Simulated Stock-Trading Sites for High-Level Investors

Article / Updated 03-26-2016

Before you bet real money, it's often a good idea to test your trading, investing, or speculating approach. Here are five great (free!) sites to help high-level investors learn through simulated trading: Wall Street Survivor: This site provides great courses on investing for beginners and experienced investors. Stock-Trak: This is a very active site for simulated trading. Investopedia Stock Simulator: This is a great simulated stock investing program from a premier financial education site. Virtual Stock Exchange: This is a very active simulated trading site and discussion forum with the trader community.

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Intermarket Sites That Are Useful for High-Level Investing

Article / Updated 03-26-2016

Stocks can go up or down based on major movements in related markets. These sites track other major markets that can (or will) have a major impact on today's stock market (and possibly your high-level investing pursuits): PensionTsunami: Pensions are massively underfunded across the corporate and government world; this site gives you all the news and analysis on this critical topic. Economic Collapse Blog: Michael Snyder's site provides thorough research on major financial and economic issues that could be problematic for the U.S. economy. The Bubble Bubble: This site follows all of the potential bubbles that could burst in the next few years. The Korelin Economics Report: This site provides news, commentary, and interviews with analysts on precious metals, stocks, and related topics. Dollar Collapse: John Rubino's site tracks the U.S. dollar, currencies, and related markets.

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