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Hedge funds often seek out exotic assets to increase their variety of holdings. It works because asset performance is volatile; no asset consistently beats the market.</p>\n<p>The table below shows the top five performance asset classes over five years. Note how much the rankings change.</p>\n<table>\n<tbody>\n<tr>\n<td width=\"106\"><strong>2017</strong></td>\n<td width=\"106\"><strong>2018</strong></td>\n<td width=\"106\"><strong>2019</strong></td>\n<td width=\"106\"><strong>2020</strong></td>\n<td width=\"106\"><strong>2021</strong></td>\n</tr>\n<tr>\n<td width=\"106\">Emerging Markets Equity</td>\n<td width=\"106\">Cash and Equivalents</td>\n<td width=\"106\">Large Cap US Equity</td>\n<td width=\"106\">Small Cap US Equity</td>\n<td width=\"106\">Large Cap US Equity</td>\n</tr>\n<tr>\n<td width=\"106\">Developed Markets (ex US) Equity</td>\n<td width=\"106\">US Fixed Income</td>\n<td width=\"106\">Small Cap US Equity</td>\n<td width=\"106\">Large Cap US Equity</td>\n<td width=\"106\">Real Estate</td>\n</tr>\n<tr>\n<td width=\"106\">Large Cap US Equity</td>\n<td width=\"106\">High Yield Bonds</td>\n<td width=\"106\">Developed Markets (ex US) Equity</td>\n<td width=\"106\">Emerging Markets Equity</td>\n<td width=\"106\">Small Cap US Equity</td>\n</tr>\n<tr>\n<td width=\"106\">Small Cap US Equity</td>\n<td width=\"106\">Global Markets (ex US) Bonds</td>\n<td width=\"106\">Real Estate</td>\n<td width=\"106\">Global Markets (ex US) Bonds</td>\n<td width=\"106\">Developed Markets (ex US) Equity</td>\n</tr>\n<tr>\n<td width=\"106\">Global Markets (ex US) Bonds</td>\n<td width=\"106\">Large Cap US Equity</td>\n<td width=\"106\">Emerging Markets Equity</td>\n<td width=\"106\">Developed Markets (ex US) Equity</td>\n<td width=\"106\">High Yield Bonds</td>\n</tr>\n</tbody>\n</table>\n"},{"title":"Tools for hedging","thumb":null,"image":null,"content":"<p>Hedge fund managers have many techniques to maximize return for a given level of risk. Most fund managers use a combination of the tools I present in the following list,  so keep the list handy when interviewing a potential fund manager:</p>\n<ul>\n<li><strong>Derivatives — </strong>options, futures, and other investments that can help a fund decrease or increase its exposure to certain parts of the economy like interest rates, commodity prices, or stock market index values</li>\n<li><strong>Diversification</strong> <strong>— </strong>investing in a wide range of assets so that if one part of a portfolio isn’t doing well, another part can pick up the slack, and the overall return of the portfolio will be more consistent</li>\n<li><strong>Leverage — </strong>borrowing money to make an investment. This increases the potential return but also boosts the risk. The loan has to be repaid regardless of what happens.</li>\n<li><strong>Macro investing</strong> <strong>— </strong>betting on global trends, usually in interest rates, currencies, and economic changes</li>\n<li><strong>Short-selling — </strong>selling a security (often something that you don’t own)<strong> </strong>because you expect the price to go down. You borrow the security, sell it, and then buy it back (hopefully at a lower price) to repay the loan.</li>\n</ul>\n"},{"title":"Questions to ask a hedge fund manager","thumb":null,"image":null,"content":"<p>Below are a few important questions to ask a hedge fund manager when researching a particular fund to help you understand what it does and how its managers work:</p>\n<ul>\n<li>What’s your investment strategy? How do you plan to achieve alpha?</li>\n<li>Who works on the fund? What is their education and experience? How much money do they have invested in the fund?</li>\n<li>Who’s your prime broker? Your administrative services firm? Your auditor?</li>\n<li>What’s your value at risk? How much of your borrowing is overnight? What are your fund’s sources of risk?</li>\n</ul>\n"},{"title":"Knowing the modern Greeks","thumb":null,"image":null,"content":"<p>Mathematical explanations for the world mark modern finance, and wherever math is, you’re bound to see symbols and variables.</p>\n<p>You don’t need to know all of the equations that shape financial theory, but you’ll have a leg up if you know the Greek letters used to describe different sources of risk and return. Keep this list handy when investigating hedge funds:</p>\n<p><strong>Alpha:</strong> Investment return that’s different than you’d expect, given an investment’s beta, which is its exposure to market risk and return. In the hedge-fund world, alpha is used to describe the value that the fund manager adds and the extra return generated for the amount of risk that the fund takes.</p>\n<p>But remember, alpha can be negative, meaning that the fund manager subtracts value from the fund. Some researchers aren’t sure that alpha exists at all.</p>\n<p><strong>Beta:</strong> The amount of risk in the overall market portfolio. The market beta is 1, so an investment with a beta of more than 1 is riskier than the market as a whole. You’d expect the investment to return more than the market in an up year and less than the market in a down year.</p>\n<p>If beta is less than 1, the investment is less risky than the market, and if beta is negative, the investment moves in the opposite direction.</p>\n<p><strong>Delta: </strong>The percentage change in an investment. Delta is often used to describe how much an option changes in price when its underlying security changes in price.</p>\n<p><strong>Gamma: </strong>The rate of change in delta. Gamma is exposure to any change in price, positive or negative.</p>\n<p><strong>Sigma: </strong>Represents standard deviation, or the likelihood that any one number in a series — like a series of investment returns — will be different from the return that you expect. The higher the standard deviation, the greater the investment risk.</p>\n"}],"videoInfo":{"videoId":null,"name":null,"accountId":null,"playerId":null,"thumbnailUrl":null,"description":null,"uploadDate":null}},"sponsorship":{"sponsorshipPage":false,"backgroundImage":{"src":null,"width":0,"height":0},"brandingLine":"","brandingLink":"","brandingLogo":{"src":null,"width":0,"height":0},"sponsorAd":"","sponsorEbookTitle":"","sponsorEbookLink":"","sponsorEbookImage":{"src":null,"width":0,"height":0}},"primaryLearningPath":"Advance","lifeExpectancy":"Five years","lifeExpectancySetFrom":"2023-01-06T00:00:00+00:00","dummiesForKids":"no","sponsoredContent":"no","adInfo":"","adPairKey":[]},"status":"publish","visibility":"public","articleId":296619},{"headers":{"creationTime":"2016-03-27T16:50:17+00:00","modifiedTime":"2022-11-08T17:38:04+00:00","timestamp":"2022-11-08T18:01:03+00:00"},"data":{"breadcrumbs":[{"name":"Business, Careers, & Money","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34224"},"slug":"business-careers-money","categoryId":34224},{"name":"Personal Finance","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34273"},"slug":"personal-finance","categoryId":34273},{"name":"Investing","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34288"},"slug":"investing","categoryId":34288},{"name":"Investment Vehicles","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34290"},"slug":"investment-vehicles","categoryId":34290},{"name":"Stocks","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34298"},"slug":"stocks","categoryId":34298}],"title":"Stock Investing For Dummies Cheat Sheet","strippedTitle":"stock investing for dummies cheat sheet","slug":"stock-investing-for-dummies-cheat-sheet","canonicalUrl":"","seo":{"metaDescription":"Make confident stock investments, familiarize yourself with online resources to help evaluate stocks, and find ways to protect your money.","noIndex":0,"noFollow":0},"content":"<figure style=\"margin: 0;\"><figcaption style=\"margin-bottom: 10px;\">Listen to the article:</figcaption><audio src=\"/wp-content/uploads/stock-investing-for-dummies-cheat-sheet.mp3\" controls=\"controls\"><a href=\"/wp-content/uploads/stock-investing-for-dummies-cheat-sheet.mp3\">Download audio</a></audio></figure>\r\n\r\n\r\nYou're investing in stocks — good for you! To make the most of your money and your choices, educate yourself on how to make stock investments confidently and intelligently, familiarize yourself with the online resources available to help you evaluate stocks, and find ways to protect the money you earn. Also, be sure to do your homework before you invest in any <a href=\"https://www.dummies.com/personal-finance/investing/stocks-trading/company-data-every-stock-investor-should-examine/\" target=\"_blank\" rel=\"noopener\">company's stock</a>.\r\n\r\n[caption id=\"attachment_270029\" align=\"alignnone\" width=\"556\"]<img class=\"size-full wp-image-270029\" src=\"https://www.dummies.com/wp-content/uploads/stock-investing.jpg\" alt=\"stock investing\" width=\"556\" height=\"418\" /> © shutter_o/Shutterstock.com[/caption]","description":"<figure style=\"margin: 0;\"><figcaption style=\"margin-bottom: 10px;\">Listen to the article:</figcaption><audio src=\"/wp-content/uploads/stock-investing-for-dummies-cheat-sheet.mp3\" controls=\"controls\"><a href=\"/wp-content/uploads/stock-investing-for-dummies-cheat-sheet.mp3\">Download audio</a></audio></figure>\r\n\r\n\r\nYou're investing in stocks — good for you! To make the most of your money and your choices, educate yourself on how to make stock investments confidently and intelligently, familiarize yourself with the online resources available to help you evaluate stocks, and find ways to protect the money you earn. Also, be sure to do your homework before you invest in any <a href=\"https://www.dummies.com/personal-finance/investing/stocks-trading/company-data-every-stock-investor-should-examine/\" target=\"_blank\" rel=\"noopener\">company's stock</a>.\r\n\r\n[caption id=\"attachment_270029\" align=\"alignnone\" width=\"556\"]<img class=\"size-full wp-image-270029\" src=\"https://www.dummies.com/wp-content/uploads/stock-investing.jpg\" alt=\"stock investing\" width=\"556\" height=\"418\" /> © shutter_o/Shutterstock.com[/caption]","blurb":"","authors":[{"authorId":9001,"name":"Paul Mladjenovic","slug":"paul-mladjenovic","description":" <p><b>James Maendel, BFA, AAMS, AIF, DACFP, </b>founded Maendel Wealth, an investment advisory firm. He has won the Five Star Wealth Management award for multiple years. <b>Paul Mladjenovic</b> is a national speaker, educator, author of <i>Stock Investing For Dummies, Currency Trading For Dummies</i> and other Dummies titles and runs RavingCapitalist.com. ","hasArticle":false,"_links":{"self":"https://dummies-api.dummies.com/v2/authors/9001"}}],"primaryCategoryTaxonomy":{"categoryId":34298,"title":"Stocks","slug":"stocks","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34298"}},"secondaryCategoryTaxonomy":{"categoryId":0,"title":null,"slug":null,"_links":null},"tertiaryCategoryTaxonomy":{"categoryId":0,"title":null,"slug":null,"_links":null},"trendingArticles":null,"inThisArticle":[],"relatedArticles":{"fromBook":[{"articleId":270748,"title":"The Tax Treatment of Different Investments","slug":"the-tax-treatment-of-different-investments","categoryList":["business-careers-money","personal-finance","investing","investment-vehicles","stocks"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/270748"}},{"articleId":270740,"title":"10 Investing Pitfalls and Challenges for 2020–2030","slug":"10-investing-pitfalls-and-challenges-for-2020-2030","categoryList":["business-careers-money","personal-finance","investing","investment-vehicles","stocks"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/270740"}},{"articleId":270718,"title":"The Yahoo! Finance Stock Screening Tool","slug":"the-yahoo-finance-stock-screening-tool","categoryList":["business-careers-money","personal-finance","investing","investment-vehicles","stocks"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/270718"}},{"articleId":221015,"title":"10 Ways to Profit in a Bear Market","slug":"10-ways-profit-bear-market","categoryList":["business-careers-money","personal-finance","investing","investment-vehicles","stocks"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/221015"}},{"articleId":220996,"title":"How to Use an ETF Screening Tool","slug":"use-etf-screening-tool","categoryList":["business-careers-money","personal-finance","investing","investment-vehicles","stocks"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/220996"}}],"fromCategory":[{"articleId":283116,"title":"10 Reasons Not to Invest in Marijuana Stocks","slug":"10-reasons-not-to-invest-in-marijuana-stocks","categoryList":["business-careers-money","personal-finance","investing","investment-vehicles","stocks"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/283116"}},{"articleId":283111,"title":"11 Criteria for Choosing a Cannabis Investment","slug":"11-criteria-for-choosing-a-cannabis-investment","categoryList":["business-careers-money","personal-finance","investing","investment-vehicles","stocks"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/283111"}},{"articleId":283105,"title":"Cannabis Investments: Risks Inherent in Momentum Investing","slug":"cannabis-investments-risks-inherent-in-momentum-investing","categoryList":["business-careers-money","personal-finance","investing","investment-vehicles","stocks"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/283105"}},{"articleId":283098,"title":"Investing in Cannabis: Spotting Opportunities to Buy or Sell","slug":"investing-in-cannabis-spotting-opportunities-to-buy-or-sell","categoryList":["business-careers-money","personal-finance","investing","investment-vehicles","stocks"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/283098"}},{"articleId":283089,"title":"Investing in Cannabis: The Bid-Ask Spread","slug":"investing-in-cannabis-the-bid-ask-spread","categoryList":["business-careers-money","personal-finance","investing","investment-vehicles","stocks"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/283089"}}]},"hasRelatedBookFromSearch":false,"relatedBook":{"bookId":282608,"slug":"stock-investing-for-dummies-6th-edition","isbn":"9781119660767","categoryList":["business-careers-money","personal-finance","investing","investment-vehicles","stocks"],"amazon":{"default":"https://www.amazon.com/gp/product/1119660769/ref=as_li_tl?ie=UTF8&tag=wiley01-20","ca":"https://www.amazon.ca/gp/product/1119660769/ref=as_li_tl?ie=UTF8&tag=wiley01-20","indigo_ca":"http://www.tkqlhce.com/click-9208661-13710633?url=https://www.chapters.indigo.ca/en-ca/books/product/1119660769-item.html&cjsku=978111945484","gb":"https://www.amazon.co.uk/gp/product/1119660769/ref=as_li_tl?ie=UTF8&tag=wiley01-20","de":"https://www.amazon.de/gp/product/1119660769/ref=as_li_tl?ie=UTF8&tag=wiley01-20"},"image":{"src":"https://www.dummies.com/wp-content/uploads/stock-investing-for-dummies-6th-edition-cover-9781119660767-203x255.jpg","width":203,"height":255},"title":"Stock Investing For Dummies","testBankPinActivationLink":"","bookOutOfPrint":true,"authorsInfo":"<p><p><b>James Maendel, BFA, AAMS, AIF, DACFP, </b>founded Maendel Wealth, an investment advisory firm. He has won the Five Star Wealth Management award for multiple years. <b><b data-author-id=\"9001\">Paul Mladjenovic</b></b> is a national speaker, educator, author of <i>Stock Investing For Dummies, Currency Trading For Dummies</i> and other Dummies titles and runs RavingCapitalist.com.</p>","authors":[{"authorId":9001,"name":"Paul Mladjenovic","slug":"paul-mladjenovic","description":" <p><b>James Maendel, BFA, AAMS, AIF, DACFP, </b>founded Maendel Wealth, an investment advisory firm. He has won the Five Star Wealth Management award for multiple years. <b>Paul Mladjenovic</b> is a national speaker, educator, author of <i>Stock Investing For Dummies, Currency Trading For Dummies</i> and other Dummies titles and runs RavingCapitalist.com. ","hasArticle":false,"_links":{"self":"https://dummies-api.dummies.com/v2/authors/9001"}}],"_links":{"self":"https://dummies-api.dummies.com/v2/books/"}},"collections":[],"articleAds":{"footerAd":"<div class=\"du-ad-region row\" id=\"article_page_adhesion_ad\"><div class=\"du-ad-unit col-md-12\" data-slot-id=\"article_page_adhesion_ad\" data-refreshed=\"false\" \r\n data-target = \"[{&quot;key&quot;:&quot;cat&quot;,&quot;values&quot;:[&quot;business-careers-money&quot;,&quot;personal-finance&quot;,&quot;investing&quot;,&quot;investment-vehicles&quot;,&quot;stocks&quot;]},{&quot;key&quot;:&quot;isbn&quot;,&quot;values&quot;:[&quot;9781119660767&quot;]}]\" id=\"du-slot-636a995f179e9\"></div></div>","rightAd":"<div class=\"du-ad-region row\" id=\"article_page_right_ad\"><div class=\"du-ad-unit col-md-12\" data-slot-id=\"article_page_right_ad\" data-refreshed=\"false\" \r\n data-target = \"[{&quot;key&quot;:&quot;cat&quot;,&quot;values&quot;:[&quot;business-careers-money&quot;,&quot;personal-finance&quot;,&quot;investing&quot;,&quot;investment-vehicles&quot;,&quot;stocks&quot;]},{&quot;key&quot;:&quot;isbn&quot;,&quot;values&quot;:[&quot;9781119660767&quot;]}]\" id=\"du-slot-636a995f1818d\"></div></div>"},"articleType":{"articleType":"Cheat Sheet","articleList":[{"articleId":170841,"title":"The 10 Most Important Points about Stock Investing","slug":"the-10-most-important-points-about-stock-investing","categoryList":["business-careers-money","personal-finance","investing","investment-vehicles","stocks"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/170841"}},{"articleId":170852,"title":"Checking Important Company Fundamentals before Investing in a Stock","slug":"checking-important-company-fundamentals-before-investing-in-a-stock","categoryList":["business-careers-money","personal-finance","investing","investment-vehicles","stocks"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/170852"}},{"articleId":170851,"title":"Financial Measures to Consider before Investing in a Stock","slug":"financial-measures-to-consider-before-investing-in-a-stock","categoryList":[],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/170851"}},{"articleId":170850,"title":"A Mandatory Reading List for Stock Investors","slug":"a-mandatory-reading-list-for-stock-investors","categoryList":[],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/170850"}},{"articleId":170845,"title":"Internet Resources for Stock Investing","slug":"internet-resources-for-stock-investing","categoryList":[],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/170845"}},{"articleId":170842,"title":"Reassuring Points for Nervous Stock Investors","slug":"reassuring-points-for-nervous-stock-investors","categoryList":[],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/170842"}}],"content":[{"title":"The 10 most important points about stock investing","thumb":null,"image":null,"content":"<p>If you&#8217;re committed to investing in stocks, keep the following points in mind as you make your choices and reap your rewards. After all, stock investing is fun and frightening, sane and crazy-making, complicated and simple — and you may need reminders to stay focused.</p>\n<ol class=\"level-one\">\n<li>\n<p class=\"first-para\">You&#8217;re not buying a stock; you&#8217;re buying a company.</p>\n</li>\n<li>\n<p class=\"first-para\">The primary reason you invest in a stock is because the company is making a profit and you want to participate in its long-term success.</p>\n</li>\n<li>\n<p class=\"first-para\">If you buy a stock when the company isn&#8217;t making a profit, you&#8217;re not investing — you&#8217;re <a href=\"https://www.dummies.com/article/business-careers-money/personal-finance/investing/investment-vehicles/stocks/the-differences-between-investing-trading-and-speculating-in-stock-168303/\" target=\"_blank\" rel=\"noopener\">speculating</a>.</p>\n</li>\n<li>\n<p class=\"first-para\">A stock (or stocks in general) should never be 100 percent of your assets.</p>\n</li>\n<li>\n<p class=\"first-para\">In some cases (such as a severe bear market, also known as a market with prolonged price declines), stocks aren&#8217;t a good investment at all. A bear market, however, may offer buying opportunities for profitable companies.</p>\n</li>\n<li>\n<p class=\"first-para\">A stock&#8217;s price is dependent on the company, which in turn is dependent on its environment, which includes its customer base, its industry, the general economy, and the political climate.</p>\n</li>\n<li>\n<p class=\"first-para\">Your common sense and logic can be just as important in choosing a good stock as the advice of any investment expert.</p>\n</li>\n<li>\n<p class=\"first-para\">Always have well-reasoned answers to questions such as &#8220;Why are you investing in stocks?&#8221; and &#8220;Why are you investing in a particular stock?&#8221;</p>\n</li>\n<li>\n<p class=\"first-para\">If you have no idea about the prospects of a company (and sometimes even if you think you do), use stop-loss orders or <a href=\"https://www.dummies.com/article/business-careers-money/personal-finance/investing/investment-vehicles/stocks/when-to-use-trailing-stops-for-your-investments-in-the-stock-market-168715/\" target=\"_blank\" rel=\"noopener\">trailing stops</a>.</p>\n</li>\n<li>\n<p class=\"first-para\">Even if your philosophy is to buy and hold stocks for the long term, continue to monitor your stocks and consider selling them if they&#8217;re not appreciating or if general economic conditions have changed.</p>\n</li>\n</ol>\n"},{"title":"Checking important company fundamentals before investing in a stock","thumb":null,"image":null,"content":"<p>Don&#8217;t underestimate the importance of a little detective work! Before you buy stocks, do some research on the companies you&#8217;re thinking of investing in. Pay attention to the following key components when you look at a company&#8217;s main financial statements (the <a href=\"https://www.dummies.com/article/business-careers-money/personal-finance/investing/investment-vehicles/stocks/introduction-to-income-statements-for-stock-investors-168795/\" target=\"_blank\" rel=\"noopener\">income statement</a> and the <a href=\"https://www.dummies.com/article/business-careers-money/personal-finance/investing/investment-vehicles/stocks/introduction-to-balance-sheets-for-stock-investors-168754/\" target=\"_blank\" rel=\"noopener\">balance sheet</a>):</p>\n<ul class=\"level-one\">\n<li>\n<p class=\"first-para\"><b>Earnings:</b> This number should be at least 10 percent higher than the year before.</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Sales:</b> This number should be higher than the year before.</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Debt: </b>This number should be lower than or about the same as the year before. It should also be lower than the company&#8217;s assets.</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Equity:</b> This number should be higher than the year before.</p>\n</li>\n</ul>\n"},{"title":"Financial measures to consider before investing in a stock","thumb":null,"image":null,"content":"<p>You&#8217;re thinking of buying stock in a company, but before you invest your hard-earned money in hopes of a profitable return, check out some financial ratios that can help indicate whether the company is on sound financial footing. Here are key measures to consider:</p>\n<ul class=\"level-one\">\n<li>\n<p class=\"first-para\"><b>Price-to-earnings ratio (P/E):</b> For large cap stocks, the ratio should be under 20. For all stocks (including growth, small cap, and speculative issues), it shouldn&#8217;t exceed 40.</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Price-to-sales ratio (PSR):</b> The PSR should be as close to 1 as possible.</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Return on equity (ROE):</b> ROE should be going up by at least 10 percent per year.</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Earnings growth:</b> Earnings should be at least 10 percent higher than the year before. This rate should be maintained over several years.</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Debt-to-asset ratio:</b> Debt should be half of assets or less.</p>\n</li>\n</ul>\n"},{"title":"A mandatory reading list for stock investors","thumb":null,"image":null,"content":"<p>Before buying stock in a company, you need to do a little light — or not-so-light — reading. Investing in stock without checking out the company beforehand is a recipe for disaster. So before you plunk down your money, be sure to read the following:</p>\n<ul class=\"level-one\">\n<li>\n<p class=\"first-para\">The company&#8217;s annual report</p>\n</li>\n<li>\n<p class=\"first-para\">The 10K and 10Q reports that the company files with the SEC</p>\n</li>\n<li>\n<p class=\"first-para\"><i>Standard &amp; Poor&#8217;</i><i>s Stock Reports</i></p>\n</li>\n<li>\n<p class=\"first-para\"><i>Value Line Investment Survey</i></p>\n</li>\n<li>\n<p class=\"first-para\"><i>The Wall Street Journal</i> and/or <i>Investor&#8217;</i><i>s Business Daily</i></p>\n</li>\n<li>\n<p class=\"first-para\">Reputable stock investing websites</p>\n</li>\n</ul>\n"},{"title":"Internet resources for stock investing","thumb":null,"image":null,"content":"<p>With the tools available on the internet, you have no excuse for not researching any and every potential stock investment. The following list of resources links you to some of the best financial websites around. Look at what they have to say about a company or an investment before you take the plunge.</p>\n<ul class=\"level-one\">\n<li>\n<p class=\"first-para\"><a href=\"http://www.bloomberg.com\" target=\"_blank\" rel=\"noopener\">Bloomberg</a></p>\n</li>\n<li>\n<p class=\"first-para\"><a href=\"http://www.financialsense.com\" target=\"_blank\" rel=\"noopener\">Financial Sense</a></p>\n</li>\n<li>\n<p class=\"first-para\"><a href=\"http://www.forbes.com\" target=\"_blank\" rel=\"noopener\">Forbes</a></p>\n</li>\n<li>\n<p class=\"first-para\"><a href=\"http://www.kingworldnews.com\" target=\"_blank\" rel=\"noopener\">King World News</a></p>\n</li>\n<li>\n<p class=\"first-para\"><a href=\"http://www.marketwatch.com\" target=\"_blank\" rel=\"noopener\">MarketWatch</a></p>\n</li>\n<li>\n<p class=\"first-para\"><a href=\"http://www.mises.org\" target=\"_blank\" rel=\"noopener\">The Ludwig von Mises Institute</a></p>\n</li>\n<li>\n<p class=\"first-para\"><a href=\"http://www.nasdaq.com\" target=\"_blank\" rel=\"noopener\">Nasdaq</a></p>\n</li>\n<li>\n<p class=\"first-para\"><a href=\"http://www.sec.gov\" target=\"_blank\" rel=\"noopener\">The U.S. Securities and Exchange Commission</a></p>\n</li>\n<li>\n<p class=\"first-para\"><a href=\"http://www.finance.yahoo.com\" target=\"_blank\" rel=\"noopener\">Yahoo! Finance</a></p>\n</li>\n</ul>\n"},{"title":"Reassuring points for nervous stock investors","thumb":null,"image":null,"content":"<p>With how crazy and volatile the world looks sometimes, it&#8217;s important to note that prudent investing isn&#8217;t just about what you invest <em>in</em> but also <em>how</em> you invest. If you want to build long-term wealth through stock investing and still be able to sleep at night, consider these points:</p>\n<ul class=\"level-one\">\n<li>\n<p class=\"first-para\">Invest in stocks of profitable companies that sell goods and services that a growing number of people want. Your stocks will zigzag upward.</p>\n</li>\n<li>\n<p class=\"first-para\">As long as you invest in stocks and exchange-traded funds (ETFs) with human &#8220;needs&#8221; (rather than &#8220;wants&#8221;) in mind, your long-term investing success will be more assured.</p>\n</li>\n<li>\n<p class=\"first-para\">If you keep your money diversified broadly across stocks, ETFs, mutual funds, and hard assets (such as real estate and precious metals) and keep adequate cash in the bank, you&#8217;ll be much safer in the long run.</p>\n</li>\n<li>\n<p class=\"first-para\">Keeping informed every day about your portfolio, the financial markets, and the general economy will keep you from the fear and anxiety that come from the unknown and the surprises that are inevitable.</p>\n</li>\n<li>\n<p class=\"first-para\">Being aware of investing tools and using them regularly (such as stop-loss orders and put options) gives you more control against the downside and more peace of mind.</p>\n</li>\n<li>\n<p class=\"first-para\">Keep a tight control on your debt and finances. In turn, this practice will ease the pressure to invest aggressively with a short-term focus and help you focus more on the longer term instead.</p>\n</li>\n</ul>\n"}],"videoInfo":{"videoId":null,"name":null,"accountId":null,"playerId":null,"thumbnailUrl":null,"description":null,"uploadDate":null}},"sponsorship":{"sponsorshipPage":false,"backgroundImage":{"src":null,"width":0,"height":0},"brandingLine":"","brandingLink":"","brandingLogo":{"src":null,"width":0,"height":0},"sponsorAd":"","sponsorEbookTitle":"","sponsorEbookLink":"","sponsorEbookImage":{"src":null,"width":0,"height":0}},"primaryLearningPath":"Advance","lifeExpectancy":"Six months","lifeExpectancySetFrom":"2021-06-29T00:00:00+00:00","dummiesForKids":"no","sponsoredContent":"no","adInfo":"","adPairKey":[]},"status":"publish","visibility":"public","articleId":208092},{"headers":{"creationTime":"2016-03-26T07:23:52+00:00","modifiedTime":"2022-10-06T15:48:23+00:00","timestamp":"2022-10-06T18:01:03+00:00"},"data":{"breadcrumbs":[{"name":"Business, Careers, & Money","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34224"},"slug":"business-careers-money","categoryId":34224},{"name":"Personal Finance","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34273"},"slug":"personal-finance","categoryId":34273},{"name":"Investing","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34288"},"slug":"investing","categoryId":34288},{"name":"Investment Vehicles","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34290"},"slug":"investment-vehicles","categoryId":34290},{"name":"Commodities","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34292"},"slug":"commodities","categoryId":34292}],"title":"A Brief History of the Chicago Mercantile Exchange","strippedTitle":"a brief history of the chicago mercantile exchange","slug":"introducing-two-major-commodities-exchanges-chicago-board-of-trade-and-chicago-mercantile-exchange","canonicalUrl":"","seo":{"metaDescription":"Learn about the history of the Chicago Mercantile Exchange, including its merger with the Chicago Board of Trade in 2007.","noIndex":0,"noFollow":0},"content":"Established in 1848, the Chicago Board of Trade (CBOT) used to be the oldest commodity exchange in the world. The CBOT was the go-to exchange for grains and other agricultural products, such as oats, ethanol, and rice. The exchange also offered several metals contracts targeted at individual investors, including the mini gold and mini silver contracts.\r\n\r\nIn 2007, the Chicago Mercantile Exchange (CME) merged with the CBOT as part of a great consolidation wave. CME rolled up the CBOT's popular grain contracts and now offers them on its electronic platform. Many traders still refer to some of these contracts as CBOT grains.\r\n\r\nCME is the largest and most liquid futures exchange in the world. The CME has the heaviest trading activity — and open interest — of any exchange, partly because of the depth of its products offerings. Besides agricultural commodities, it trades economic derivatives (contracts that track economic data such as U.S. quarterly GDP and nonfarm payrolls), foreign currencies (it offers a broad currency selection, ranging from the Hungarian forint to the South Korean won), interest rates (including the London Inter Bank Offered Rate, the LIBOR), and even weather derivatives (contracts that track weather patterns in various regions of the world).\r\n<p class=\"Remember\">Because of its broad products listing, the CME is perhaps the most versatile of the commodity exchanges. In addition, the CME was one of the first exchanges to launch an electronic trading platform, the CME Globex, which became an instant hit with traders. It now accounts for more than 60 percent of the exchange's total volume. In 2006, the New York Mercantile Exchange (NYMEX) entered into an agreement with the CME to trade its marquee energy and metals contracts on <a href=\"https://www.cmegroup.com/globex.html\" target=\"_blank\" rel=\"noopener\">Globex</a>, an electronic trading system.</p>\r\nIn 2008, the CME went on a series of acquisitions and purchased the NYMEX and COMEX. The CME is also the first exchange to go public. Investors greeted the initial public offering with enthusiasm, raising the stock from $40 in 2003 to more than $500 in 2006. For more on the CME, check out its <a href=\"https://www.cmegroup.com/\" target=\"_blank\" rel=\"noopener\">website</a>, which also includes helpful tutorials on all its products.","description":"Established in 1848, the Chicago Board of Trade (CBOT) used to be the oldest commodity exchange in the world. The CBOT was the go-to exchange for grains and other agricultural products, such as oats, ethanol, and rice. The exchange also offered several metals contracts targeted at individual investors, including the mini gold and mini silver contracts.\r\n\r\nIn 2007, the Chicago Mercantile Exchange (CME) merged with the CBOT as part of a great consolidation wave. CME rolled up the CBOT's popular grain contracts and now offers them on its electronic platform. Many traders still refer to some of these contracts as CBOT grains.\r\n\r\nCME is the largest and most liquid futures exchange in the world. The CME has the heaviest trading activity — and open interest — of any exchange, partly because of the depth of its products offerings. Besides agricultural commodities, it trades economic derivatives (contracts that track economic data such as U.S. quarterly GDP and nonfarm payrolls), foreign currencies (it offers a broad currency selection, ranging from the Hungarian forint to the South Korean won), interest rates (including the London Inter Bank Offered Rate, the LIBOR), and even weather derivatives (contracts that track weather patterns in various regions of the world).\r\n<p class=\"Remember\">Because of its broad products listing, the CME is perhaps the most versatile of the commodity exchanges. In addition, the CME was one of the first exchanges to launch an electronic trading platform, the CME Globex, which became an instant hit with traders. It now accounts for more than 60 percent of the exchange's total volume. In 2006, the New York Mercantile Exchange (NYMEX) entered into an agreement with the CME to trade its marquee energy and metals contracts on <a href=\"https://www.cmegroup.com/globex.html\" target=\"_blank\" rel=\"noopener\">Globex</a>, an electronic trading system.</p>\r\nIn 2008, the CME went on a series of acquisitions and purchased the NYMEX and COMEX. The CME is also the first exchange to go public. Investors greeted the initial public offering with enthusiasm, raising the stock from $40 in 2003 to more than $500 in 2006. For more on the CME, check out its <a href=\"https://www.cmegroup.com/\" target=\"_blank\" rel=\"noopener\">website</a>, which also includes helpful tutorials on all its products.","blurb":"","authors":[{"authorId":9022,"name":"Amine Bouchentouf","slug":"amine-bouchentouf","description":" <p><b>Amine Bouchentouf</b> is a native Arabic speaker from Morocco. He helped launch a year&#45;round Arabic department at Middlebury College in Vermont, expanding upon the pre&#45;existing, well&#45;regarded Arabic Summer Program. He also designs, structures, and teaches beginner, intermediate, and advanced courses through the ABC Language Exchange Program in New York. ","hasArticle":false,"_links":{"self":"https://dummies-api.dummies.com/v2/authors/9022"}}],"primaryCategoryTaxonomy":{"categoryId":34292,"title":"Commodities","slug":"commodities","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34292"}},"secondaryCategoryTaxonomy":{"categoryId":0,"title":null,"slug":null,"_links":null},"tertiaryCategoryTaxonomy":{"categoryId":0,"title":null,"slug":null,"_links":null},"trendingArticles":null,"inThisArticle":[],"relatedArticles":{"fromBook":[{"articleId":207438,"title":"<b>Investing in Commodities For Dummies</b><b> Cheat Sheet</b>","slug":"investing-in-commodities-for-dummies-cheat-sheet","categoryList":["business-careers-money","personal-finance","investing","investment-vehicles","commodities"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/207438"}},{"articleId":140502,"title":"Top 6 Things in an Oil Company's Fleet","slug":"top-6-things-in-an-oil-companys-fleet","categoryList":["business-careers-money","personal-finance","investing","investment-vehicles","commodities"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/140502"}},{"articleId":140503,"title":"Introducing the New York Board of Trade","slug":"introducing-the-new-york-board-of-trade","categoryList":["business-careers-money","personal-finance","investing","investment-vehicles","commodities"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/140503"}},{"articleId":140501,"title":"What's the Deal with Peak Oil?","slug":"whats-the-deal-with-peak-oil","categoryList":["business-careers-money","personal-finance","investing","investment-vehicles","commodities"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/140501"}},{"articleId":140499,"title":"Making Money Using an Index","slug":"making-money-using-an-index","categoryList":["business-careers-money","personal-finance","investing","investment-vehicles","commodities"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/140499"}}],"fromCategory":[{"articleId":208627,"title":"Commodities For Dummies Cheat Sheet","slug":"commodities-for-dummies-cheat-sheet","categoryList":["business-careers-money","personal-finance","investing","investment-vehicles","commodities"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/208627"}},{"articleId":207438,"title":"<b>Investing in Commodities For Dummies</b><b> Cheat Sheet</b>","slug":"investing-in-commodities-for-dummies-cheat-sheet","categoryList":["business-careers-money","personal-finance","investing","investment-vehicles","commodities"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/207438"}},{"articleId":198903,"title":"Understanding the Real Risks behind Commodities","slug":"understanding-the-real-risks-behind-commodities","categoryList":["business-careers-money","personal-finance","investing","investment-vehicles","commodities"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/198903"}},{"articleId":198342,"title":"Risks with Investing in Commodities","slug":"risks-with-investing-in-commodities","categoryList":["business-careers-money","personal-finance","investing","investment-vehicles","commodities"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/198342"}},{"articleId":198341,"title":"The Role of Commodity Exchanges in Investment Trading","slug":"the-role-of-commodity-exchanges-in-investment-trading","categoryList":["business-careers-money","personal-finance","investing","investment-vehicles","commodities"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/198341"}}]},"hasRelatedBookFromSearch":false,"relatedBook":{"bookId":282308,"slug":"investing-in-commodities-for-dummies","isbn":"9781119122012","categoryList":["business-careers-money","personal-finance","investing","investment-vehicles","commodities"],"amazon":{"default":"https://www.amazon.com/gp/product/1119122015/ref=as_li_tl?ie=UTF8&tag=wiley01-20","ca":"https://www.amazon.ca/gp/product/1119122015/ref=as_li_tl?ie=UTF8&tag=wiley01-20","indigo_ca":"http://www.tkqlhce.com/click-9208661-13710633?url=https://www.chapters.indigo.ca/en-ca/books/product/1119122015-item.html&cjsku=978111945484","gb":"https://www.amazon.co.uk/gp/product/1119122015/ref=as_li_tl?ie=UTF8&tag=wiley01-20","de":"https://www.amazon.de/gp/product/1119122015/ref=as_li_tl?ie=UTF8&tag=wiley01-20"},"image":{"src":"https://www.dummies.com/wp-content/uploads/investing-in-commodities-for-dummies-cover-9781119122012-165x255.jpg","width":165,"height":255},"title":"Investing in Commodities For Dummies","testBankPinActivationLink":"","bookOutOfPrint":false,"authorsInfo":"<p><b data-author-id=\"9022\">Amine Bouchentouf</b> is a registered investment advisor, a member of the National Association of Securities Dealers, and a partner at Commodities Investors, LLC. A world-renowned market commentator, he has appeared on media in the US, the UK, France, the United Arab Emirates, and Brazil. </p>","authors":[{"authorId":9022,"name":"Amine Bouchentouf","slug":"amine-bouchentouf","description":" <p><b>Amine Bouchentouf</b> is a native Arabic speaker from Morocco. He helped launch a year&#45;round Arabic department at Middlebury College in Vermont, expanding upon the pre&#45;existing, well&#45;regarded Arabic Summer Program. He also designs, structures, and teaches beginner, intermediate, and advanced courses through the ABC Language Exchange Program in New York. ","hasArticle":false,"_links":{"self":"https://dummies-api.dummies.com/v2/authors/9022"}}],"_links":{"self":"https://dummies-api.dummies.com/v2/books/"}},"collections":[],"articleAds":{"footerAd":"<div class=\"du-ad-region row\" id=\"article_page_adhesion_ad\"><div class=\"du-ad-unit col-md-12\" data-slot-id=\"article_page_adhesion_ad\" data-refreshed=\"false\" \r\n data-target = \"[{&quot;key&quot;:&quot;cat&quot;,&quot;values&quot;:[&quot;business-careers-money&quot;,&quot;personal-finance&quot;,&quot;investing&quot;,&quot;investment-vehicles&quot;,&quot;commodities&quot;]},{&quot;key&quot;:&quot;isbn&quot;,&quot;values&quot;:[&quot;9781119122012&quot;]}]\" id=\"du-slot-633f17df4fe0a\"></div></div>","rightAd":"<div class=\"du-ad-region row\" id=\"article_page_right_ad\"><div class=\"du-ad-unit col-md-12\" data-slot-id=\"article_page_right_ad\" data-refreshed=\"false\" \r\n data-target = \"[{&quot;key&quot;:&quot;cat&quot;,&quot;values&quot;:[&quot;business-careers-money&quot;,&quot;personal-finance&quot;,&quot;investing&quot;,&quot;investment-vehicles&quot;,&quot;commodities&quot;]},{&quot;key&quot;:&quot;isbn&quot;,&quot;values&quot;:[&quot;9781119122012&quot;]}]\" id=\"du-slot-633f17df50585\"></div></div>"},"articleType":{"articleType":"Articles","articleList":null,"content":null,"videoInfo":{"videoId":null,"name":null,"accountId":null,"playerId":null,"thumbnailUrl":null,"description":null,"uploadDate":null}},"sponsorship":{"sponsorshipPage":false,"backgroundImage":{"src":null,"width":0,"height":0},"brandingLine":"","brandingLink":"","brandingLogo":{"src":null,"width":0,"height":0},"sponsorAd":"","sponsorEbookTitle":"","sponsorEbookLink":"","sponsorEbookImage":{"src":null,"width":0,"height":0}},"primaryLearningPath":"Explore","lifeExpectancy":"Five years","lifeExpectancySetFrom":"2022-10-06T00:00:00+00:00","dummiesForKids":"no","sponsoredContent":"no","adInfo":"","adPairKey":[]},"status":"publish","visibility":"public","articleId":140505},{"headers":{"creationTime":"2016-03-26T07:13:33+00:00","modifiedTime":"2022-09-29T19:07:08+00:00","timestamp":"2022-09-29T21:01:03+00:00"},"data":{"breadcrumbs":[{"name":"Business, Careers, & Money","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34224"},"slug":"business-careers-money","categoryId":34224},{"name":"Personal Finance","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34273"},"slug":"personal-finance","categoryId":34273},{"name":"Investing","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34288"},"slug":"investing","categoryId":34288},{"name":"Investment Vehicles","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34290"},"slug":"investment-vehicles","categoryId":34290},{"name":"Stocks","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34298"},"slug":"stocks","categoryId":34298}],"title":"How Capital Gains Are Taxed","strippedTitle":"how capital gains are taxed","slug":"how-capital-gains-are-taxed","canonicalUrl":"","seo":{"metaDescription":"When you sell a stock held in a taxable account that has appreciated in value you usually have taxes to pay. Learn about these capital gains.","noIndex":0,"noFollow":0},"content":"People who invest online are usually do-it-yourself investors. This means they're probably working without a tax consultant. But this can make it hard to understand how the money they earn while investing is taxed. That's where understanding capital gains taxes enters the picture.\r\n\r\nWhen you sell a stock held in a taxable account that has appreciated in value, you usually have taxes to pay. Generally, such capital gains taxes are calculated based on the holding period. There are two holding periods:\r\n<ul class=\"level-one\">\r\n \t<li>\r\n<p class=\"first-para\"><b>Short-term:</b> That's the type of capital gain you have if you sell a stock after owning it for one year or less. You want to avoid these gains if you can because you're taxed at the ordinary income tax rate, which, as I explain shortly, is one of the highest tax percentages.</p>\r\n</li>\r\n \t<li>\r\n<p class=\"first-para\"><b>Long-term:</b> That's the type of capital gain result you get if you sell a stock after holding it for more than one year. These gains qualify for a special discount on taxes.</p>\r\n</li>\r\n</ul>\r\n<p class=\"Warning\">You must own a stock for over one year for it to be considered a long-term capital gain. If you buy a stock on March 3, 2019, and sell it on March 3, 2020 for a profit, that is considered a short-term capital gain. Also, an important thing to remember is that the holding-period clock starts the day after you buy the stock and stops the day you sell it. Selling even one day too soon can be a costly mistake.</p>\r\nIf you're interested in cutting your tax bill in a taxable account, you want to reduce, as much as possible, the number of stocks you sell that you've owned for only a year or less because they're taxed at your ordinary income tax levels. You can look up your ordinary income tax bracket at this <a href=\"http://www.irs.gov/pub/irs-pdf/i1040tt.pdf?portlet=3\" target=\"_blank\" rel=\"noopener\">Internal Revenue Service website</a>.\r\n\r\nNeed an example? Say a stock rose from $10 to $100 a share (for a $90 per share gain). Say that you had $50,000 in taxable income that year and sold the stock after owning it for just three months. Your gain would fall from $90 to $67.50 after paying $22.50 in taxes.\r\n\r\nBy owning stocks for more than a year, gains are taxed at the maximum capital gain rate. The rate you pay on long-term capital gains varies based on your normal tax bracket, but such rates are almost always much lower than your ordinary income tax rate, if not zero.\r\n\r\nYes, zero — some investors' long-term capital gains are tax free! Long-term capital gains rates, though, can change dramatically due to political pressure. The following table shows the maximum capital gain rates for 2009 and 2010 for typical investments such as stocks and bonds.\r\n<table><caption>Maximum Capital Gain Rate</caption>\r\n<tbody>\r\n<tr>\r\n<th>If Your Regular Tax Rate Is</th>\r\n<th>Your Maximum Capital Gain Rate Is</th>\r\n</tr>\r\n<tr>\r\n<td>Greater than 35%</td>\r\n<td>20%</td>\r\n</tr>\r\n<tr>\r\n<td>25% or higher</td>\r\n<td>15%</td>\r\n</tr>\r\n<tr>\r\n<td>Lower than 25%</td>\r\n<td>0%</td>\r\n</tr>\r\n</tbody>\r\n</table>\r\n<i>Source: </i><a href=\"http://www.irs.gov/publications/p17/ch16.html\" target=\"_blank\" rel=\"noopener\"><i>Internal Revenue Service</i></a>","description":"People who invest online are usually do-it-yourself investors. This means they're probably working without a tax consultant. But this can make it hard to understand how the money they earn while investing is taxed. That's where understanding capital gains taxes enters the picture.\r\n\r\nWhen you sell a stock held in a taxable account that has appreciated in value, you usually have taxes to pay. Generally, such capital gains taxes are calculated based on the holding period. There are two holding periods:\r\n<ul class=\"level-one\">\r\n \t<li>\r\n<p class=\"first-para\"><b>Short-term:</b> That's the type of capital gain you have if you sell a stock after owning it for one year or less. You want to avoid these gains if you can because you're taxed at the ordinary income tax rate, which, as I explain shortly, is one of the highest tax percentages.</p>\r\n</li>\r\n \t<li>\r\n<p class=\"first-para\"><b>Long-term:</b> That's the type of capital gain result you get if you sell a stock after holding it for more than one year. These gains qualify for a special discount on taxes.</p>\r\n</li>\r\n</ul>\r\n<p class=\"Warning\">You must own a stock for over one year for it to be considered a long-term capital gain. If you buy a stock on March 3, 2019, and sell it on March 3, 2020 for a profit, that is considered a short-term capital gain. Also, an important thing to remember is that the holding-period clock starts the day after you buy the stock and stops the day you sell it. Selling even one day too soon can be a costly mistake.</p>\r\nIf you're interested in cutting your tax bill in a taxable account, you want to reduce, as much as possible, the number of stocks you sell that you've owned for only a year or less because they're taxed at your ordinary income tax levels. You can look up your ordinary income tax bracket at this <a href=\"http://www.irs.gov/pub/irs-pdf/i1040tt.pdf?portlet=3\" target=\"_blank\" rel=\"noopener\">Internal Revenue Service website</a>.\r\n\r\nNeed an example? Say a stock rose from $10 to $100 a share (for a $90 per share gain). Say that you had $50,000 in taxable income that year and sold the stock after owning it for just three months. Your gain would fall from $90 to $67.50 after paying $22.50 in taxes.\r\n\r\nBy owning stocks for more than a year, gains are taxed at the maximum capital gain rate. The rate you pay on long-term capital gains varies based on your normal tax bracket, but such rates are almost always much lower than your ordinary income tax rate, if not zero.\r\n\r\nYes, zero — some investors' long-term capital gains are tax free! Long-term capital gains rates, though, can change dramatically due to political pressure. The following table shows the maximum capital gain rates for 2009 and 2010 for typical investments such as stocks and bonds.\r\n<table><caption>Maximum Capital Gain Rate</caption>\r\n<tbody>\r\n<tr>\r\n<th>If Your Regular Tax Rate Is</th>\r\n<th>Your Maximum Capital Gain Rate Is</th>\r\n</tr>\r\n<tr>\r\n<td>Greater than 35%</td>\r\n<td>20%</td>\r\n</tr>\r\n<tr>\r\n<td>25% or higher</td>\r\n<td>15%</td>\r\n</tr>\r\n<tr>\r\n<td>Lower than 25%</td>\r\n<td>0%</td>\r\n</tr>\r\n</tbody>\r\n</table>\r\n<i>Source: </i><a href=\"http://www.irs.gov/publications/p17/ch16.html\" target=\"_blank\" rel=\"noopener\"><i>Internal Revenue Service</i></a>","blurb":"","authors":[{"authorId":8949,"name":"Matt Krantz","slug":"matt-krantz","description":"","hasArticle":false,"_links":{"self":"https://dummies-api.dummies.com/v2/authors/8949"}}],"primaryCategoryTaxonomy":{"categoryId":34298,"title":"Stocks","slug":"stocks","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34298"}},"secondaryCategoryTaxonomy":{"categoryId":34300,"title":"General Investing","slug":"general-investing","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34300"}},"tertiaryCategoryTaxonomy":{"categoryId":0,"title":null,"slug":null,"_links":null},"trendingArticles":null,"inThisArticle":[],"relatedArticles":{"fromBook":[{"articleId":265694,"title":"Online Investing: Get More with a Discount Broker","slug":"online-investing-get-more-with-a-discount-broker","categoryList":["business-careers-money","personal-finance","investing","general-investing"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/265694"}},{"articleId":265687,"title":"Online Brokerage Firms: Deep Discounters","slug":"online-brokerage-firms-deep-discounters","categoryList":["business-careers-money","personal-finance","investing","general-investing"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/265687"}},{"articleId":265681,"title":"How to Find the Best Online Investment Broker for You","slug":"how-to-find-the-best-online-investment-broker-for-you","categoryList":["business-careers-money","personal-finance","investing","general-investing"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/265681"}},{"articleId":207413,"title":"Online Investing For Dummies Cheat Sheet","slug":"online-investing-for-dummies-cheat-sheet","categoryList":["business-careers-money","personal-finance","investing","general-investing"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/207413"}},{"articleId":191948,"title":"How to Trade in Stocks Online","slug":"how-to-trade-in-stocks-online-2","categoryList":["business-careers-money","personal-finance","investing","investment-vehicles","stocks"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/191948"}}],"fromCategory":[{"articleId":283116,"title":"10 Reasons Not to Invest in Marijuana Stocks","slug":"10-reasons-not-to-invest-in-marijuana-stocks","categoryList":["business-careers-money","personal-finance","investing","investment-vehicles","stocks"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/283116"}},{"articleId":283111,"title":"11 Criteria for Choosing a Cannabis Investment","slug":"11-criteria-for-choosing-a-cannabis-investment","categoryList":["business-careers-money","personal-finance","investing","investment-vehicles","stocks"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/283111"}},{"articleId":283105,"title":"Cannabis Investments: Risks Inherent in Momentum Investing","slug":"cannabis-investments-risks-inherent-in-momentum-investing","categoryList":["business-careers-money","personal-finance","investing","investment-vehicles","stocks"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/283105"}},{"articleId":283098,"title":"Investing in Cannabis: Spotting Opportunities to Buy or Sell","slug":"investing-in-cannabis-spotting-opportunities-to-buy-or-sell","categoryList":["business-careers-money","personal-finance","investing","investment-vehicles","stocks"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/283098"}},{"articleId":283089,"title":"Investing in Cannabis: The Bid-Ask Spread","slug":"investing-in-cannabis-the-bid-ask-spread","categoryList":["business-careers-money","personal-finance","investing","investment-vehicles","stocks"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/283089"}}]},"hasRelatedBookFromSearch":false,"relatedBook":{"bookId":281806,"slug":"online-investing-for-dummies-10th-edition","isbn":"9781119601487","categoryList":["business-careers-money","personal-finance","investing","general-investing"],"amazon":{"default":"https://www.amazon.com/gp/product/1119601487/ref=as_li_tl?ie=UTF8&tag=wiley01-20","ca":"https://www.amazon.ca/gp/product/1119601487/ref=as_li_tl?ie=UTF8&tag=wiley01-20","indigo_ca":"http://www.tkqlhce.com/click-9208661-13710633?url=https://www.chapters.indigo.ca/en-ca/books/product/1119601487-item.html&cjsku=978111945484","gb":"https://www.amazon.co.uk/gp/product/1119601487/ref=as_li_tl?ie=UTF8&tag=wiley01-20","de":"https://www.amazon.de/gp/product/1119601487/ref=as_li_tl?ie=UTF8&tag=wiley01-20"},"image":{"src":"https://www.dummies.com/wp-content/uploads/online-investing-for-dummies-10th-edition-cover-9781119601487-203x255.jpg","width":203,"height":255},"title":"Online Investing For Dummies","testBankPinActivationLink":"","bookOutOfPrint":true,"authorsInfo":"<p><p><b>Matt Krantz</b> is a nationally known financial journalist who specializes in investing topics. He&#39;s personal finance and management editor at <i>Investor&#39;s Business Daily.</i> He&#39;s also worked in the financial industry and covered markets and investing for <i>USA TODAY.</i> His writing on financial topics has also appeared in <i>Money</i> magazine, <i> Kiplinger&#39;s</i>, and <i>Men&#39;s Health</i>. Krantz is the author of <i>Fundamental Analysis For Dummies</i> and co&#45;author of <i>Investment Banking For Dummies.</i></p>","authors":[{"authorId":33279,"name":"Matthew Krantz","slug":"matthew-krantz","description":" <p><b>Matt Krantz</b> is a nationally known financial journalist who specializes in investing topics. He&#39;s personal finance and management editor at <i>Investor&#39;s Business Daily.</i> He&#39;s also worked in the financial industry and covered markets and investing for <i>USA TODAY.</i> His writing on financial topics has also appeared in <i>Money</i> magazine, <i> Kiplinger&#39;s</i>, and <i>Men&#39;s Health</i>. Krantz is the author of <i>Fundamental Analysis For Dummies</i> and co&#45;author of <i>Investment Banking For Dummies.</i> ","hasArticle":false,"_links":{"self":"https://dummies-api.dummies.com/v2/authors/33279"}}],"_links":{"self":"https://dummies-api.dummies.com/v2/books/"}},"collections":[],"articleAds":{"footerAd":"<div class=\"du-ad-region row\" id=\"article_page_adhesion_ad\"><div class=\"du-ad-unit col-md-12\" data-slot-id=\"article_page_adhesion_ad\" data-refreshed=\"false\" \r\n data-target = \"[{&quot;key&quot;:&quot;cat&quot;,&quot;values&quot;:[&quot;business-careers-money&quot;,&quot;personal-finance&quot;,&quot;investing&quot;,&quot;investment-vehicles&quot;,&quot;stocks&quot;]},{&quot;key&quot;:&quot;isbn&quot;,&quot;values&quot;:[&quot;9781119601487&quot;]}]\" id=\"du-slot-6336078f4b571\"></div></div>","rightAd":"<div class=\"du-ad-region row\" id=\"article_page_right_ad\"><div class=\"du-ad-unit col-md-12\" data-slot-id=\"article_page_right_ad\" data-refreshed=\"false\" \r\n data-target = \"[{&quot;key&quot;:&quot;cat&quot;,&quot;values&quot;:[&quot;business-careers-money&quot;,&quot;personal-finance&quot;,&quot;investing&quot;,&quot;investment-vehicles&quot;,&quot;stocks&quot;]},{&quot;key&quot;:&quot;isbn&quot;,&quot;values&quot;:[&quot;9781119601487&quot;]}]\" id=\"du-slot-6336078f4bcfb\"></div></div>"},"articleType":{"articleType":"Articles","articleList":null,"content":null,"videoInfo":{"videoId":null,"name":null,"accountId":null,"playerId":null,"thumbnailUrl":null,"description":null,"uploadDate":null}},"sponsorship":{"sponsorshipPage":false,"backgroundImage":{"src":null,"width":0,"height":0},"brandingLine":"","brandingLink":"","brandingLogo":{"src":null,"width":0,"height":0},"sponsorAd":"","sponsorEbookTitle":"","sponsorEbookLink":"","sponsorEbookImage":{"src":null,"width":0,"height":0}},"primaryLearningPath":"Advance","lifeExpectancy":"One year","lifeExpectancySetFrom":"2021-06-30T00:00:00+00:00","dummiesForKids":"no","sponsoredContent":"no","adInfo":"","adPairKey":[]},"status":"publish","visibility":"public","articleId":139171},{"headers":{"creationTime":"2016-03-26T15:29:31+00:00","modifiedTime":"2022-09-29T18:43:49+00:00","timestamp":"2022-09-29T21:01:03+00:00"},"data":{"breadcrumbs":[{"name":"Business, Careers, & Money","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34224"},"slug":"business-careers-money","categoryId":34224},{"name":"Personal Finance","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34273"},"slug":"personal-finance","categoryId":34273},{"name":"Investing","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34288"},"slug":"investing","categoryId":34288},{"name":"Investment Vehicles","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34290"},"slug":"investment-vehicles","categoryId":34290},{"name":"Stocks","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34298"},"slug":"stocks","categoryId":34298}],"title":"Stop-Loss Orders for Your Stock Investments","strippedTitle":"stop-loss orders for your stock investments","slug":"stop-loss-orders-for-your-stock-investments","canonicalUrl":"","seo":{"metaDescription":"A stop-loss order (also called a stop order ) is a condition-related order that instructs the broker to sell a particular stock in your investment portfolio onl","noIndex":0,"noFollow":0},"content":"<p>A <i>stop-loss</i> <i>order</i> (also called a <i>stop order</i>) is a condition-related order that instructs the broker to sell a particular stock in your investment portfolio only when the stock reaches a particular price. It acts like a trigger, and the stop order converts to a market order to sell the stock immediately.</p>\r\n<p class=\"Remember\">The stop-loss order isn’t designed to take advantage of small, short-term moves in the stock’s price. It’s meant to help you protect the bulk of your money when the market turns against your stock investment in a sudden manner.</p>\r\n<p>Say that your Kowalski, Inc., stock rises from $10 to $20 per share and you seek to protect your investment against a possible future market decline. A stop-loss order at $18 triggers your broker to sell the stock immediately if it falls to the $18 mark. If the stock suddenly drops to $17, it still triggers the stop-loss order, but the finalized sale price is $17.</p>\r\n<p>In a volatile market, you may not be able to sell at your precise stop-loss price. However, because the order automatically gets converted into a market order, the sale will be done, and you’ll be spared further declines in the stock.</p>\r\n<p>The main benefit of a stop-loss order is that it prevents a major loss in a stock that you own. It’s a form of discipline that’s important in investing in order to minimize potential losses. Investors can find it agonizing to sell a stock that has fallen. If they don’t sell, however, the stock often continues to plummet as investors hope for a rebound in the price.</p>\r\n<p class=\"Tip\">Most investors set a stop-loss amount at about 10 percent below the market value of the stock. This percentage gives the stock some room to fluctuate, which most stocks tend to do from day to day. If you’re extra nervous, consider a tighter stop-loss, such as 5 percent or less.</p>\r\n<p>Please keep in mind that this order is a trigger and a particular price is not guaranteed to be captured because the actual buy or sell occurs immediately after the trigger is activated. If the market at the time of the actual transaction is particularly volatile, then the price realized may be significantly different.</p>","description":"<p>A <i>stop-loss</i> <i>order</i> (also called a <i>stop order</i>) is a condition-related order that instructs the broker to sell a particular stock in your investment portfolio only when the stock reaches a particular price. It acts like a trigger, and the stop order converts to a market order to sell the stock immediately.</p>\r\n<p class=\"Remember\">The stop-loss order isn’t designed to take advantage of small, short-term moves in the stock’s price. It’s meant to help you protect the bulk of your money when the market turns against your stock investment in a sudden manner.</p>\r\n<p>Say that your Kowalski, Inc., stock rises from $10 to $20 per share and you seek to protect your investment against a possible future market decline. A stop-loss order at $18 triggers your broker to sell the stock immediately if it falls to the $18 mark. If the stock suddenly drops to $17, it still triggers the stop-loss order, but the finalized sale price is $17.</p>\r\n<p>In a volatile market, you may not be able to sell at your precise stop-loss price. However, because the order automatically gets converted into a market order, the sale will be done, and you’ll be spared further declines in the stock.</p>\r\n<p>The main benefit of a stop-loss order is that it prevents a major loss in a stock that you own. It’s a form of discipline that’s important in investing in order to minimize potential losses. Investors can find it agonizing to sell a stock that has fallen. If they don’t sell, however, the stock often continues to plummet as investors hope for a rebound in the price.</p>\r\n<p class=\"Tip\">Most investors set a stop-loss amount at about 10 percent below the market value of the stock. This percentage gives the stock some room to fluctuate, which most stocks tend to do from day to day. If you’re extra nervous, consider a tighter stop-loss, such as 5 percent or less.</p>\r\n<p>Please keep in mind that this order is a trigger and a particular price is not guaranteed to be captured because the actual buy or sell occurs immediately after the trigger is activated. If the market at the time of the actual transaction is particularly volatile, then the price realized may be significantly different.</p>","blurb":"","authors":[{"authorId":9001,"name":"Paul Mladjenovic","slug":"paul-mladjenovic","description":" <p><b>Ted Sudol </b>is a longtime affiliate marketer who has developed and sold several affiliate marketing websites over the years. His current sites focus on affiliate marketing and precious metals investing.</p><p><b>Paul Mladjenovic</b> is the bestselling author of <i>Stock</i> <i>Investing For Dummies</i>. He&#8217;s a Certified Financial Planner as well as a national speaker and home business specialist.</p> ","hasArticle":false,"_links":{"self":"https://dummies-api.dummies.com/v2/authors/9001"}}],"primaryCategoryTaxonomy":{"categoryId":34298,"title":"Stocks","slug":"stocks","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34298"}},"secondaryCategoryTaxonomy":{"categoryId":0,"title":null,"slug":null,"_links":null},"tertiaryCategoryTaxonomy":{"categoryId":0,"title":null,"slug":null,"_links":null},"trendingArticles":null,"inThisArticle":[],"relatedArticles":{"fromBook":[{"articleId":270748,"title":"The Tax Treatment of Different Investments","slug":"the-tax-treatment-of-different-investments","categoryList":["business-careers-money","personal-finance","investing","investment-vehicles","stocks"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/270748"}},{"articleId":270740,"title":"10 Investing Pitfalls and Challenges for 2020–2030","slug":"10-investing-pitfalls-and-challenges-for-2020-2030","categoryList":["business-careers-money","personal-finance","investing","investment-vehicles","stocks"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/270740"}},{"articleId":270718,"title":"The Yahoo! Finance Stock Screening Tool","slug":"the-yahoo-finance-stock-screening-tool","categoryList":["business-careers-money","personal-finance","investing","investment-vehicles","stocks"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/270718"}},{"articleId":221015,"title":"10 Ways to Profit in a Bear Market","slug":"10-ways-profit-bear-market","categoryList":["business-careers-money","personal-finance","investing","investment-vehicles","stocks"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/221015"}},{"articleId":220996,"title":"How to Use an ETF Screening Tool","slug":"use-etf-screening-tool","categoryList":["business-careers-money","personal-finance","investing","investment-vehicles","stocks"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/220996"}}],"fromCategory":[{"articleId":283116,"title":"10 Reasons Not to Invest in Marijuana Stocks","slug":"10-reasons-not-to-invest-in-marijuana-stocks","categoryList":["business-careers-money","personal-finance","investing","investment-vehicles","stocks"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/283116"}},{"articleId":283111,"title":"11 Criteria for Choosing a Cannabis Investment","slug":"11-criteria-for-choosing-a-cannabis-investment","categoryList":["business-careers-money","personal-finance","investing","investment-vehicles","stocks"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/283111"}},{"articleId":283105,"title":"Cannabis Investments: Risks Inherent in Momentum Investing","slug":"cannabis-investments-risks-inherent-in-momentum-investing","categoryList":["business-careers-money","personal-finance","investing","investment-vehicles","stocks"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/283105"}},{"articleId":283098,"title":"Investing in Cannabis: Spotting Opportunities to Buy or Sell","slug":"investing-in-cannabis-spotting-opportunities-to-buy-or-sell","categoryList":["business-careers-money","personal-finance","investing","investment-vehicles","stocks"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/283098"}},{"articleId":283089,"title":"Investing in Cannabis: The Bid-Ask Spread","slug":"investing-in-cannabis-the-bid-ask-spread","categoryList":["business-careers-money","personal-finance","investing","investment-vehicles","stocks"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/283089"}}]},"hasRelatedBookFromSearch":false,"relatedBook":{"bookId":282608,"slug":"stock-investing-for-dummies-6th-edition","isbn":"9781119660767","categoryList":["business-careers-money","personal-finance","investing","investment-vehicles","stocks"],"amazon":{"default":"https://www.amazon.com/gp/product/1119660769/ref=as_li_tl?ie=UTF8&tag=wiley01-20","ca":"https://www.amazon.ca/gp/product/1119660769/ref=as_li_tl?ie=UTF8&tag=wiley01-20","indigo_ca":"http://www.tkqlhce.com/click-9208661-13710633?url=https://www.chapters.indigo.ca/en-ca/books/product/1119660769-item.html&cjsku=978111945484","gb":"https://www.amazon.co.uk/gp/product/1119660769/ref=as_li_tl?ie=UTF8&tag=wiley01-20","de":"https://www.amazon.de/gp/product/1119660769/ref=as_li_tl?ie=UTF8&tag=wiley01-20"},"image":{"src":"https://www.dummies.com/wp-content/uploads/stock-investing-for-dummies-6th-edition-cover-9781119660767-203x255.jpg","width":203,"height":255},"title":"Stock Investing For Dummies","testBankPinActivationLink":"","bookOutOfPrint":true,"authorsInfo":"<p><b>Ted Sudol </b>is a longtime affiliate marketer who has developed and sold several affiliate marketing websites over the years. His current sites focus on affiliate marketing and precious metals investing.</p><p><b><b data-author-id=\"9001\">Paul Mladjenovic</b></b> is the bestselling author of <i>Stock</i> <i>Investing For Dummies</i>. He&#8217;s a Certified Financial Planner as well as a national speaker and home business specialist.</p>","authors":[{"authorId":9001,"name":"Paul Mladjenovic","slug":"paul-mladjenovic","description":" <p><b>Ted Sudol </b>is a longtime affiliate marketer who has developed and sold several affiliate marketing websites over the years. His current sites focus on affiliate marketing and precious metals investing.</p><p><b>Paul Mladjenovic</b> is the bestselling author of <i>Stock</i> <i>Investing For Dummies</i>. He&#8217;s a Certified Financial Planner as well as a national speaker and home business specialist.</p> ","hasArticle":false,"_links":{"self":"https://dummies-api.dummies.com/v2/authors/9001"}}],"_links":{"self":"https://dummies-api.dummies.com/v2/books/"}},"collections":[],"articleAds":{"footerAd":"<div class=\"du-ad-region row\" id=\"article_page_adhesion_ad\"><div class=\"du-ad-unit col-md-12\" data-slot-id=\"article_page_adhesion_ad\" data-refreshed=\"false\" \r\n data-target = \"[{&quot;key&quot;:&quot;cat&quot;,&quot;values&quot;:[&quot;business-careers-money&quot;,&quot;personal-finance&quot;,&quot;investing&quot;,&quot;investment-vehicles&quot;,&quot;stocks&quot;]},{&quot;key&quot;:&quot;isbn&quot;,&quot;values&quot;:[&quot;9781119660767&quot;]}]\" id=\"du-slot-6336078f35068\"></div></div>","rightAd":"<div class=\"du-ad-region row\" id=\"article_page_right_ad\"><div class=\"du-ad-unit col-md-12\" data-slot-id=\"article_page_right_ad\" data-refreshed=\"false\" \r\n data-target = \"[{&quot;key&quot;:&quot;cat&quot;,&quot;values&quot;:[&quot;business-careers-money&quot;,&quot;personal-finance&quot;,&quot;investing&quot;,&quot;investment-vehicles&quot;,&quot;stocks&quot;]},{&quot;key&quot;:&quot;isbn&quot;,&quot;values&quot;:[&quot;9781119660767&quot;]}]\" id=\"du-slot-6336078f357cc\"></div></div>"},"articleType":{"articleType":"Articles","articleList":null,"content":null,"videoInfo":{"videoId":null,"name":null,"accountId":null,"playerId":null,"thumbnailUrl":null,"description":null,"uploadDate":null}},"sponsorship":{"sponsorshipPage":false,"backgroundImage":{"src":null,"width":0,"height":0},"brandingLine":"","brandingLink":"","brandingLogo":{"src":null,"width":0,"height":0},"sponsorAd":"","sponsorEbookTitle":"","sponsorEbookLink":"","sponsorEbookImage":{"src":null,"width":0,"height":0}},"primaryLearningPath":"Advance","lifeExpectancy":"One year","lifeExpectancySetFrom":"2022-09-29T00:00:00+00:00","dummiesForKids":"no","sponsoredContent":"no","adInfo":"","adPairKey":[]},"status":"publish","visibility":"public","articleId":168718},{"headers":{"creationTime":"2016-03-26T16:03:46+00:00","modifiedTime":"2022-09-15T15:16:58+00:00","timestamp":"2022-09-15T18:01:20+00:00"},"data":{"breadcrumbs":[{"name":"Business, Careers, & Money","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34224"},"slug":"business-careers-money","categoryId":34224},{"name":"Personal Finance","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34273"},"slug":"personal-finance","categoryId":34273},{"name":"Investing","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34288"},"slug":"investing","categoryId":34288},{"name":"Investment Vehicles","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34290"},"slug":"investment-vehicles","categoryId":34290},{"name":"Bonds","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34291"},"slug":"bonds","categoryId":34291}],"title":"The Tax Risk in Bond Investing","strippedTitle":"the tax risk in bond investing","slug":"the-tax-risk-in-bond-investing","canonicalUrl":"","seo":{"metaDescription":"When comparing taxable bonds to other investments, it's important to consider the potentially high cost of taxation.","noIndex":0,"noFollow":0},"content":"Bond investing has a reputation for safety, not only because bonds provide steady and predictable streams of income, but also because as a bondholder you have first dibs on the issuer’s money. A corporation is legally bound to pay you your interest before it doles out any dividends to people who own company stock.\r\n\r\nIf a company starts to go through hard times, any proceeds from the business or (in the case of an actual bankruptcy) from the sale of assets go to you before they go to shareholders.\r\n\r\nHowever, bonds offer no ironclad guarantees. All investments carry some risk, such as tax risk. When comparing taxable bonds to other investments, such as stocks, some investors forget to factor in the potentially high cost of taxation.\r\n\r\nExcept for municipal bonds and bonds kept in tax-advantaged accounts, such as an IRA, the interest payments on bonds are generally taxable at your income-tax rate, which for most people is in the 25 to 28 percent range but could be as high as 35 percent . . . and, depending on the whims of Congress, may rise higher.\r\n\r\nIn contrast, stocks may pay dividends, most of which (thanks to favorable tax treatment enacted into law just a few years back) are taxable at 15 percent. If the price of the stock appreciates, that appreciation isn’t taxable at all unless the stock is actually sold, at which point, it’s usually taxed at 15 percent.\r\n\r\nSo would you rather have a stock that returns 5 percent a year or a bond that returns 5 percent a year? From strictly a tax vantage point, bonds lose. Paying even 25 percent tax represents a 67 percent bigger tax bite than paying 15 percent. (Of course — getting back to the whims of Congress — these special rates are also subject to change.)\r\n<p class=\"Warning\">Tax risk on bonds is most pronounced during times of high interest rates and high inflation. If, for example, the inflation rate is 3 percent, and your bonds are paying 3 percent, you are just about breaking even on your investment. You have to pay taxes on the 3 percent interest, so you actually fall a bit behind.</p>\r\nBut suppose that the inflation rate were 6 percent and your bonds were paying 6 percent. You have to pay twice as much tax as if your interest rate were 3 percent (and possibly even more than twice the tax, if your interest payments bump you into a higher tax bracket), which means you fall even further behind.\r\n\r\nInflation is not likely to go to 6 percent. But if it does, holders of conventional (non-inflation-adjusted) bonds may not be happy campers, especially after April 15 rolls around.","description":"Bond investing has a reputation for safety, not only because bonds provide steady and predictable streams of income, but also because as a bondholder you have first dibs on the issuer’s money. A corporation is legally bound to pay you your interest before it doles out any dividends to people who own company stock.\r\n\r\nIf a company starts to go through hard times, any proceeds from the business or (in the case of an actual bankruptcy) from the sale of assets go to you before they go to shareholders.\r\n\r\nHowever, bonds offer no ironclad guarantees. All investments carry some risk, such as tax risk. When comparing taxable bonds to other investments, such as stocks, some investors forget to factor in the potentially high cost of taxation.\r\n\r\nExcept for municipal bonds and bonds kept in tax-advantaged accounts, such as an IRA, the interest payments on bonds are generally taxable at your income-tax rate, which for most people is in the 25 to 28 percent range but could be as high as 35 percent . . . and, depending on the whims of Congress, may rise higher.\r\n\r\nIn contrast, stocks may pay dividends, most of which (thanks to favorable tax treatment enacted into law just a few years back) are taxable at 15 percent. If the price of the stock appreciates, that appreciation isn’t taxable at all unless the stock is actually sold, at which point, it’s usually taxed at 15 percent.\r\n\r\nSo would you rather have a stock that returns 5 percent a year or a bond that returns 5 percent a year? From strictly a tax vantage point, bonds lose. Paying even 25 percent tax represents a 67 percent bigger tax bite than paying 15 percent. (Of course — getting back to the whims of Congress — these special rates are also subject to change.)\r\n<p class=\"Warning\">Tax risk on bonds is most pronounced during times of high interest rates and high inflation. If, for example, the inflation rate is 3 percent, and your bonds are paying 3 percent, you are just about breaking even on your investment. You have to pay taxes on the 3 percent interest, so you actually fall a bit behind.</p>\r\nBut suppose that the inflation rate were 6 percent and your bonds were paying 6 percent. You have to pay twice as much tax as if your interest rate were 3 percent (and possibly even more than twice the tax, if your interest payments bump you into a higher tax bracket), which means you fall even further behind.\r\n\r\nInflation is not likely to go to 6 percent. But if it does, holders of conventional (non-inflation-adjusted) bonds may not be happy campers, especially after April 15 rolls around.","blurb":"","authors":[{"authorId":9023,"name":"Russell Wild","slug":"russell-wild","description":" <b>Russell Wild,</b> MBA, an expert on index investing, is a fee-only financial planner and investment advisor and the principal of Global Portfolios. He is the author or coauthor of nearly two dozen nonfiction books.","hasArticle":false,"_links":{"self":"https://dummies-api.dummies.com/v2/authors/9023"}}],"primaryCategoryTaxonomy":{"categoryId":34291,"title":"Bonds","slug":"bonds","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34291"}},"secondaryCategoryTaxonomy":{"categoryId":0,"title":null,"slug":null,"_links":null},"tertiaryCategoryTaxonomy":{"categoryId":0,"title":null,"slug":null,"_links":null},"trendingArticles":null,"inThisArticle":[],"relatedArticles":{"fromBook":[{"articleId":208279,"title":"Bond Investing For Dummies Cheat Sheet","slug":"bond-investing-for-dummies-cheat-sheet","categoryList":["business-careers-money","personal-finance","investing","investment-vehicles","bonds"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/208279"}},{"articleId":175087,"title":"Questions to Ask a Bond Broker about a Bond","slug":"questions-to-ask-a-bond-broker-about-a-bond","categoryList":["business-careers-money","personal-finance","investing","investment-vehicles","bonds"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/175087"}},{"articleId":175085,"title":"How to Read Bond Ratings","slug":"how-to-read-bond-ratings","categoryList":["business-careers-money","personal-finance","investing","investment-vehicles","bonds"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/175085"}},{"articleId":175062,"title":"Important Websites for Bond Investors","slug":"important-websites-for-bond-investors","categoryList":["business-careers-money","personal-finance","investing","investment-vehicles","bonds"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/175062"}},{"articleId":175054,"title":"How to Choose between a Taxable and a Tax-Free Municipal Bond","slug":"how-to-choose-between-a-taxable-and-a-tax-free-municipal-bond","categoryList":["business-careers-money","personal-finance","investing","investment-vehicles","bonds"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/175054"}}],"fromCategory":[{"articleId":275083,"title":"How to Invest in Bonds","slug":"how-to-invest-in-bonds","categoryList":["business-careers-money","personal-finance","investing","investment-vehicles","bonds"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/275083"}},{"articleId":208279,"title":"Bond Investing For Dummies Cheat Sheet","slug":"bond-investing-for-dummies-cheat-sheet","categoryList":["business-careers-money","personal-finance","investing","investment-vehicles","bonds"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/208279"}},{"articleId":207444,"title":"<b>Investing in Bonds For Dummies Cheat Sheet</b>","slug":"investing-in-bonds-for-dummies-cheat-sheet","categoryList":["business-careers-money","personal-finance","investing","investment-vehicles","bonds"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/207444"}},{"articleId":202959,"title":"Buying U.S. Savings Bonds in an Uncertain Economy","slug":"buying-u-s-savings-bonds-in-an-uncertain-economy","categoryList":["business-careers-money","personal-finance","investing","investment-vehicles","bonds"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/202959"}},{"articleId":202861,"title":"Savings Bonds Pros and Cons","slug":"savings-bonds-pros-and-cons","categoryList":["business-careers-money","personal-finance","investing","investment-vehicles","bonds"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/202861"}}]},"hasRelatedBookFromSearch":false,"relatedBook":{"bookId":282006,"slug":"bond-investing-for-dummies-2nd-edition","isbn":"9781119894780","categoryList":["business-careers-money","personal-finance","investing","investment-vehicles","bonds"],"amazon":{"default":"https://www.amazon.com/gp/product/1119894786/ref=as_li_tl?ie=UTF8&tag=wiley01-20","ca":"https://www.amazon.ca/gp/product/1119894786/ref=as_li_tl?ie=UTF8&tag=wiley01-20","indigo_ca":"http://www.tkqlhce.com/click-9208661-13710633?url=https://www.chapters.indigo.ca/en-ca/books/product/1119894786-item.html&cjsku=978111945484","gb":"https://www.amazon.co.uk/gp/product/1119894786/ref=as_li_tl?ie=UTF8&tag=wiley01-20","de":"https://www.amazon.de/gp/product/1119894786/ref=as_li_tl?ie=UTF8&tag=wiley01-20"},"image":{"src":"https://www.dummies.com/wp-content/uploads/bond-investing-for-dummies-3rd-edition-cover-9781119894780-203x255.jpg","width":203,"height":255},"title":"Bond Investing For Dummies","testBankPinActivationLink":"","bookOutOfPrint":true,"authorsInfo":"<p><b><b data-author-id=\"9023\">Russell Wild</b>,</b> MBA, an expert on index investing, is a fee-only financial planner and investment advisor and the principal of Global Portfolios. He is the author or coauthor of nearly two dozen nonfiction books.</p>","authors":[{"authorId":9023,"name":"Russell Wild","slug":"russell-wild","description":" <b>Russell Wild,</b> MBA, an expert on index investing, is a fee-only financial planner and investment advisor and the principal of Global Portfolios. He is the author or coauthor of nearly two dozen nonfiction books.","hasArticle":false,"_links":{"self":"https://dummies-api.dummies.com/v2/authors/9023"}}],"_links":{"self":"https://dummies-api.dummies.com/v2/books/"}},"collections":[],"articleAds":{"footerAd":"<div class=\"du-ad-region row\" id=\"article_page_adhesion_ad\"><div class=\"du-ad-unit col-md-12\" data-slot-id=\"article_page_adhesion_ad\" data-refreshed=\"false\" \r\n data-target = \"[{&quot;key&quot;:&quot;cat&quot;,&quot;values&quot;:[&quot;business-careers-money&quot;,&quot;personal-finance&quot;,&quot;investing&quot;,&quot;investment-vehicles&quot;,&quot;bonds&quot;]},{&quot;key&quot;:&quot;isbn&quot;,&quot;values&quot;:[&quot;9781119894780&quot;]}]\" id=\"du-slot-63236870e50b0\"></div></div>","rightAd":"<div class=\"du-ad-region row\" id=\"article_page_right_ad\"><div class=\"du-ad-unit col-md-12\" data-slot-id=\"article_page_right_ad\" data-refreshed=\"false\" \r\n data-target = \"[{&quot;key&quot;:&quot;cat&quot;,&quot;values&quot;:[&quot;business-careers-money&quot;,&quot;personal-finance&quot;,&quot;investing&quot;,&quot;investment-vehicles&quot;,&quot;bonds&quot;]},{&quot;key&quot;:&quot;isbn&quot;,&quot;values&quot;:[&quot;9781119894780&quot;]}]\" id=\"du-slot-63236870e60dd\"></div></div>"},"articleType":{"articleType":"Articles","articleList":null,"content":null,"videoInfo":{"videoId":null,"name":null,"accountId":null,"playerId":null,"thumbnailUrl":null,"description":null,"uploadDate":null}},"sponsorship":{"sponsorshipPage":false,"backgroundImage":{"src":null,"width":0,"height":0},"brandingLine":"","brandingLink":"","brandingLogo":{"src":null,"width":0,"height":0},"sponsorAd":"","sponsorEbookTitle":"","sponsorEbookLink":"","sponsorEbookImage":{"src":null,"width":0,"height":0}},"primaryLearningPath":"Advance","lifeExpectancy":"Five years","lifeExpectancySetFrom":"2022-09-15T00:00:00+00:00","dummiesForKids":"no","sponsoredContent":"no","adInfo":"","adPairKey":[]},"status":"publish","visibility":"public","articleId":172188},{"headers":{"creationTime":"2016-03-26T16:03:48+00:00","modifiedTime":"2022-09-14T20:54:05+00:00","timestamp":"2022-09-15T00:01:03+00:00"},"data":{"breadcrumbs":[{"name":"Business, Careers, & Money","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34224"},"slug":"business-careers-money","categoryId":34224},{"name":"Personal Finance","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34273"},"slug":"personal-finance","categoryId":34273},{"name":"Investing","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34288"},"slug":"investing","categoryId":34288},{"name":"Investment Vehicles","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34290"},"slug":"investment-vehicles","categoryId":34290},{"name":"Bonds","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34291"},"slug":"bonds","categoryId":34291}],"title":"The Downgrade Risk in Bond Investing","strippedTitle":"the downgrade risk in bond investing","slug":"the-downgrade-risk-in-bond-investing","canonicalUrl":"","seo":{"metaDescription":"Learn what a downgrade risk is in bond investing, how it can happen, and how the levels of downgrade affect a bond's price.","noIndex":0,"noFollow":0},"content":"Bond investing has a reputation for safety not only because bonds provide steady and predictable streams of income, but also because as a bondholder you have first dibs on the issuer’s money. A corporation is legally bound to pay you your interest before it doles out any dividends to people who own company stock.\r\n\r\nIf a company starts to go through hard times, any proceeds from the business or (in the case of an actual bankruptcy) from the sale of assets go to you before they go to shareholders.\r\n\r\nHowever, bonds offer no ironclad guarantees. All investments carry some risk, such as downgrade risk.\r\n\r\nEven if a bond doesn’t go into default, rumors of a potential default can send a bond’s price into a spiral. When a major rating agency, such as Moody’s, Standard & Poor’s, or Fitch, changes the rating on a bond (moving it from, say, investment-grade to below investment-grade), fewer investors want that bond.\r\n\r\nThis situation is the equivalent of <i>Consumer Reports</i> magazine pointing out that a particular brand of toaster oven is prone to explode. Not good.\r\n\r\nBonds that are downgraded may be downgraded a notch, or two notches, or three. The price of the bond drops accordingly. Typically, a downgrade from investment-grade to junk results in a rather large price drop because many institutions aren’t allowed to own anything below investment-grade. The market therefore deflates faster than a speared blowfish, and the beating to bondholders can be brutal.\r\n\r\nOn occasion, downgraded bonds, even those downgraded to junk (sometimes referred to as <i>fallen angels</i>), are upgraded again. If and when that happens (it usually doesn’t), prices zoom right back up again. Holding tight, therefore, sometimes makes good sense.\r\n\r\nBut bond ratings and bond prices don’t always march in synch. Consider, for example, that when U.S. Treasuries were downgraded by Standard & Poor’s in 2011 from an AAA to an AA rating, the bonds did not drop in price but actually rose, and rose nicely.\r\n\r\nWhy? In large part, it was because of the credit crisis in Europe and the realization of Japan’s rising debt. In other words, although the United States appeared to be a slightly riskier place to invest vis-à-vis other nations, it actually started to look safer.","description":"Bond investing has a reputation for safety not only because bonds provide steady and predictable streams of income, but also because as a bondholder you have first dibs on the issuer’s money. A corporation is legally bound to pay you your interest before it doles out any dividends to people who own company stock.\r\n\r\nIf a company starts to go through hard times, any proceeds from the business or (in the case of an actual bankruptcy) from the sale of assets go to you before they go to shareholders.\r\n\r\nHowever, bonds offer no ironclad guarantees. All investments carry some risk, such as downgrade risk.\r\n\r\nEven if a bond doesn’t go into default, rumors of a potential default can send a bond’s price into a spiral. When a major rating agency, such as Moody’s, Standard & Poor’s, or Fitch, changes the rating on a bond (moving it from, say, investment-grade to below investment-grade), fewer investors want that bond.\r\n\r\nThis situation is the equivalent of <i>Consumer Reports</i> magazine pointing out that a particular brand of toaster oven is prone to explode. Not good.\r\n\r\nBonds that are downgraded may be downgraded a notch, or two notches, or three. The price of the bond drops accordingly. Typically, a downgrade from investment-grade to junk results in a rather large price drop because many institutions aren’t allowed to own anything below investment-grade. The market therefore deflates faster than a speared blowfish, and the beating to bondholders can be brutal.\r\n\r\nOn occasion, downgraded bonds, even those downgraded to junk (sometimes referred to as <i>fallen angels</i>), are upgraded again. If and when that happens (it usually doesn’t), prices zoom right back up again. Holding tight, therefore, sometimes makes good sense.\r\n\r\nBut bond ratings and bond prices don’t always march in synch. Consider, for example, that when U.S. Treasuries were downgraded by Standard & Poor’s in 2011 from an AAA to an AA rating, the bonds did not drop in price but actually rose, and rose nicely.\r\n\r\nWhy? In large part, it was because of the credit crisis in Europe and the realization of Japan’s rising debt. In other words, although the United States appeared to be a slightly riskier place to invest vis-à-vis other nations, it actually started to look safer.","blurb":"","authors":[{"authorId":9023,"name":"Russell Wild","slug":"russell-wild","description":" <b>Russell Wild,</b> MBA, an expert on index investing, is a fee-only financial planner and investment advisor and the principal of Global Portfolios. He is the author or coauthor of nearly two dozen nonfiction books.","hasArticle":false,"_links":{"self":"https://dummies-api.dummies.com/v2/authors/9023"}}],"primaryCategoryTaxonomy":{"categoryId":34291,"title":"Bonds","slug":"bonds","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34291"}},"secondaryCategoryTaxonomy":{"categoryId":0,"title":null,"slug":null,"_links":null},"tertiaryCategoryTaxonomy":{"categoryId":0,"title":null,"slug":null,"_links":null},"trendingArticles":null,"inThisArticle":[],"relatedArticles":{"fromBook":[{"articleId":208279,"title":"Bond Investing For Dummies Cheat Sheet","slug":"bond-investing-for-dummies-cheat-sheet","categoryList":["business-careers-money","personal-finance","investing","investment-vehicles","bonds"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/208279"}},{"articleId":175087,"title":"Questions to Ask a Bond Broker about a Bond","slug":"questions-to-ask-a-bond-broker-about-a-bond","categoryList":["business-careers-money","personal-finance","investing","investment-vehicles","bonds"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/175087"}},{"articleId":175085,"title":"How to Read Bond Ratings","slug":"how-to-read-bond-ratings","categoryList":["business-careers-money","personal-finance","investing","investment-vehicles","bonds"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/175085"}},{"articleId":175062,"title":"Important Websites for Bond Investors","slug":"important-websites-for-bond-investors","categoryList":["business-careers-money","personal-finance","investing","investment-vehicles","bonds"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/175062"}},{"articleId":175054,"title":"How to Choose between a Taxable and a Tax-Free Municipal Bond","slug":"how-to-choose-between-a-taxable-and-a-tax-free-municipal-bond","categoryList":["business-careers-money","personal-finance","investing","investment-vehicles","bonds"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/175054"}}],"fromCategory":[{"articleId":275083,"title":"How to Invest in Bonds","slug":"how-to-invest-in-bonds","categoryList":["business-careers-money","personal-finance","investing","investment-vehicles","bonds"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/275083"}},{"articleId":208279,"title":"Bond Investing For Dummies Cheat Sheet","slug":"bond-investing-for-dummies-cheat-sheet","categoryList":["business-careers-money","personal-finance","investing","investment-vehicles","bonds"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/208279"}},{"articleId":207444,"title":"<b>Investing in Bonds For Dummies Cheat Sheet</b>","slug":"investing-in-bonds-for-dummies-cheat-sheet","categoryList":["business-careers-money","personal-finance","investing","investment-vehicles","bonds"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/207444"}},{"articleId":202959,"title":"Buying U.S. Savings Bonds in an Uncertain Economy","slug":"buying-u-s-savings-bonds-in-an-uncertain-economy","categoryList":["business-careers-money","personal-finance","investing","investment-vehicles","bonds"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/202959"}},{"articleId":202861,"title":"Savings Bonds Pros and Cons","slug":"savings-bonds-pros-and-cons","categoryList":["business-careers-money","personal-finance","investing","investment-vehicles","bonds"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/202861"}}]},"hasRelatedBookFromSearch":false,"relatedBook":{"bookId":282006,"slug":"bond-investing-for-dummies-2nd-edition","isbn":"9781119894780","categoryList":["business-careers-money","personal-finance","investing","investment-vehicles","bonds"],"amazon":{"default":"https://www.amazon.com/gp/product/1119894786/ref=as_li_tl?ie=UTF8&tag=wiley01-20","ca":"https://www.amazon.ca/gp/product/1119894786/ref=as_li_tl?ie=UTF8&tag=wiley01-20","indigo_ca":"http://www.tkqlhce.com/click-9208661-13710633?url=https://www.chapters.indigo.ca/en-ca/books/product/1119894786-item.html&cjsku=978111945484","gb":"https://www.amazon.co.uk/gp/product/1119894786/ref=as_li_tl?ie=UTF8&tag=wiley01-20","de":"https://www.amazon.de/gp/product/1119894786/ref=as_li_tl?ie=UTF8&tag=wiley01-20"},"image":{"src":"https://www.dummies.com/wp-content/uploads/bond-investing-for-dummies-3rd-edition-cover-9781119894780-203x255.jpg","width":203,"height":255},"title":"Bond Investing For Dummies","testBankPinActivationLink":"","bookOutOfPrint":true,"authorsInfo":"<p><b><b data-author-id=\"9023\">Russell Wild</b>,</b> MBA, an expert on index investing, is a fee-only financial planner and investment advisor and the principal of Global Portfolios. He is the author or coauthor of nearly two dozen nonfiction books.</p>","authors":[{"authorId":9023,"name":"Russell Wild","slug":"russell-wild","description":" <b>Russell Wild,</b> MBA, an expert on index investing, is a fee-only financial planner and investment advisor and the principal of Global Portfolios. He is the author or coauthor of nearly two dozen nonfiction books.","hasArticle":false,"_links":{"self":"https://dummies-api.dummies.com/v2/authors/9023"}}],"_links":{"self":"https://dummies-api.dummies.com/v2/books/"}},"collections":[],"articleAds":{"footerAd":"<div class=\"du-ad-region row\" id=\"article_page_adhesion_ad\"><div class=\"du-ad-unit col-md-12\" data-slot-id=\"article_page_adhesion_ad\" data-refreshed=\"false\" \r\n data-target = \"[{&quot;key&quot;:&quot;cat&quot;,&quot;values&quot;:[&quot;business-careers-money&quot;,&quot;personal-finance&quot;,&quot;investing&quot;,&quot;investment-vehicles&quot;,&quot;bonds&quot;]},{&quot;key&quot;:&quot;isbn&quot;,&quot;values&quot;:[&quot;9781119894780&quot;]}]\" id=\"du-slot-63226b3fb6189\"></div></div>","rightAd":"<div class=\"du-ad-region row\" id=\"article_page_right_ad\"><div class=\"du-ad-unit col-md-12\" data-slot-id=\"article_page_right_ad\" data-refreshed=\"false\" \r\n data-target = \"[{&quot;key&quot;:&quot;cat&quot;,&quot;values&quot;:[&quot;business-careers-money&quot;,&quot;personal-finance&quot;,&quot;investing&quot;,&quot;investment-vehicles&quot;,&quot;bonds&quot;]},{&quot;key&quot;:&quot;isbn&quot;,&quot;values&quot;:[&quot;9781119894780&quot;]}]\" id=\"du-slot-63226b3fb671e\"></div></div>"},"articleType":{"articleType":"Articles","articleList":null,"content":null,"videoInfo":{"videoId":null,"name":null,"accountId":null,"playerId":null,"thumbnailUrl":null,"description":null,"uploadDate":null}},"sponsorship":{"sponsorshipPage":false,"backgroundImage":{"src":null,"width":0,"height":0},"brandingLine":"","brandingLink":"","brandingLogo":{"src":null,"width":0,"height":0},"sponsorAd":"","sponsorEbookTitle":"","sponsorEbookLink":"","sponsorEbookImage":{"src":null,"width":0,"height":0}},"primaryLearningPath":"Advance","lifeExpectancy":"Five years","lifeExpectancySetFrom":"2022-09-14T00:00:00+00:00","dummiesForKids":"no","sponsoredContent":"no","adInfo":"","adPairKey":[]},"status":"publish","visibility":"public","articleId":172194},{"headers":{"creationTime":"2016-03-27T16:51:54+00:00","modifiedTime":"2022-09-01T20:28:44+00:00","timestamp":"2022-09-14T18:20:00+00:00"},"data":{"breadcrumbs":[{"name":"Business, Careers, & Money","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34224"},"slug":"business-careers-money","categoryId":34224},{"name":"Personal Finance","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34273"},"slug":"personal-finance","categoryId":34273},{"name":"Investing","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34288"},"slug":"investing","categoryId":34288},{"name":"Investment Vehicles","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34290"},"slug":"investment-vehicles","categoryId":34290},{"name":"Bonds","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34291"},"slug":"bonds","categoryId":34291}],"title":"Bond Investing For Dummies Cheat Sheet","strippedTitle":"bond investing for dummies cheat sheet","slug":"bond-investing-for-dummies-cheat-sheet","canonicalUrl":"","seo":{"metaDescription":"Know the right questions to ask about a bond to save money, and learn other ways to make the best investment possible.","noIndex":0,"noFollow":0},"content":"If you want to invest in bonds, you need to know how to read the bond ratings that the big three rating companies use and how to figure whether a taxable or tax-free municipal bond is the better investment. Knowing the right questions to ask about a bond can save you money, and you can find answers to many of those questions on the Internet.","description":"If you want to invest in bonds, you need to know how to read the bond ratings that the big three rating companies use and how to figure whether a taxable or tax-free municipal bond is the better investment. Knowing the right questions to ask about a bond can save you money, and you can find answers to many of those questions on the Internet.","blurb":"","authors":[{"authorId":9023,"name":"Russell Wild","slug":"russell-wild","description":" <b>Russell Wild,</b> MBA, an expert on index investing, is a fee-only financial planner and investment advisor and the principal of Global Portfolios. He is the author or coauthor of nearly two dozen nonfiction books.","hasArticle":false,"_links":{"self":"https://dummies-api.dummies.com/v2/authors/9023"}}],"primaryCategoryTaxonomy":{"categoryId":34291,"title":"Bonds","slug":"bonds","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34291"}},"secondaryCategoryTaxonomy":{"categoryId":0,"title":null,"slug":null,"_links":null},"tertiaryCategoryTaxonomy":{"categoryId":0,"title":null,"slug":null,"_links":null},"trendingArticles":null,"inThisArticle":[],"relatedArticles":{"fromBook":[{"articleId":175087,"title":"Questions to Ask a Bond Broker about a Bond","slug":"questions-to-ask-a-bond-broker-about-a-bond","categoryList":["business-careers-money","personal-finance","investing","investment-vehicles","bonds"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/175087"}},{"articleId":175085,"title":"How to Read Bond Ratings","slug":"how-to-read-bond-ratings","categoryList":["business-careers-money","personal-finance","investing","investment-vehicles","bonds"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/175085"}},{"articleId":175062,"title":"Important Websites for Bond Investors","slug":"important-websites-for-bond-investors","categoryList":["business-careers-money","personal-finance","investing","investment-vehicles","bonds"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/175062"}},{"articleId":175054,"title":"How to Choose between a Taxable and a Tax-Free Municipal Bond","slug":"how-to-choose-between-a-taxable-and-a-tax-free-municipal-bond","categoryList":["business-careers-money","personal-finance","investing","investment-vehicles","bonds"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/175054"}},{"articleId":173193,"title":"The Four Major Types of Investment Bonds","slug":"the-four-major-types-of-investment-bonds","categoryList":["business-careers-money","personal-finance","investing","investment-vehicles","bonds"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/173193"}}],"fromCategory":[{"articleId":275083,"title":"How to Invest in Bonds","slug":"how-to-invest-in-bonds","categoryList":["business-careers-money","personal-finance","investing","investment-vehicles","bonds"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/275083"}},{"articleId":207444,"title":"<b>Investing in Bonds For Dummies Cheat Sheet</b>","slug":"investing-in-bonds-for-dummies-cheat-sheet","categoryList":["business-careers-money","personal-finance","investing","investment-vehicles","bonds"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/207444"}},{"articleId":202959,"title":"Buying U.S. Savings Bonds in an Uncertain Economy","slug":"buying-u-s-savings-bonds-in-an-uncertain-economy","categoryList":["business-careers-money","personal-finance","investing","investment-vehicles","bonds"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/202959"}},{"articleId":202861,"title":"Savings Bonds Pros and Cons","slug":"savings-bonds-pros-and-cons","categoryList":["business-careers-money","personal-finance","investing","investment-vehicles","bonds"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/202861"}},{"articleId":201130,"title":"Investing in Global Bonds","slug":"investing-in-global-bonds","categoryList":["business-careers-money","personal-finance","investing","investment-vehicles","bonds"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/201130"}}]},"hasRelatedBookFromSearch":false,"relatedBook":{"bookId":282006,"slug":"bond-investing-for-dummies-2nd-edition","isbn":"9781119894780","categoryList":["business-careers-money","personal-finance","investing","investment-vehicles","bonds"],"amazon":{"default":"https://www.amazon.com/gp/product/1119894786/ref=as_li_tl?ie=UTF8&tag=wiley01-20","ca":"https://www.amazon.ca/gp/product/1119894786/ref=as_li_tl?ie=UTF8&tag=wiley01-20","indigo_ca":"http://www.tkqlhce.com/click-9208661-13710633?url=https://www.chapters.indigo.ca/en-ca/books/product/1119894786-item.html&cjsku=978111945484","gb":"https://www.amazon.co.uk/gp/product/1119894786/ref=as_li_tl?ie=UTF8&tag=wiley01-20","de":"https://www.amazon.de/gp/product/1119894786/ref=as_li_tl?ie=UTF8&tag=wiley01-20"},"image":{"src":"https://www.dummies.com/wp-content/uploads/bond-investing-for-dummies-3rd-edition-cover-9781119894780-203x255.jpg","width":203,"height":255},"title":"Bond Investing For Dummies","testBankPinActivationLink":"","bookOutOfPrint":true,"authorsInfo":"<p><b><b data-author-id=\"9023\">Russell Wild</b>,</b> MBA, an expert on index investing, is a fee-only financial planner and investment advisor and the principal of Global Portfolios. He is the author or coauthor of nearly two dozen nonfiction books.</p>","authors":[{"authorId":9023,"name":"Russell Wild","slug":"russell-wild","description":" <b>Russell Wild,</b> MBA, an expert on index investing, is a fee-only financial planner and investment advisor and the principal of Global Portfolios. He is the author or coauthor of nearly two dozen nonfiction books.","hasArticle":false,"_links":{"self":"https://dummies-api.dummies.com/v2/authors/9023"}}],"_links":{"self":"https://dummies-api.dummies.com/v2/books/"}},"collections":[],"articleAds":{"footerAd":"<div class=\"du-ad-region row\" id=\"article_page_adhesion_ad\"><div class=\"du-ad-unit col-md-12\" data-slot-id=\"article_page_adhesion_ad\" data-refreshed=\"false\" \r\n data-target = \"[{&quot;key&quot;:&quot;cat&quot;,&quot;values&quot;:[&quot;business-careers-money&quot;,&quot;personal-finance&quot;,&quot;investing&quot;,&quot;investment-vehicles&quot;,&quot;bonds&quot;]},{&quot;key&quot;:&quot;isbn&quot;,&quot;values&quot;:[&quot;9781119894780&quot;]}]\" id=\"du-slot-63221b50db298\"></div></div>","rightAd":"<div class=\"du-ad-region row\" id=\"article_page_right_ad\"><div class=\"du-ad-unit col-md-12\" data-slot-id=\"article_page_right_ad\" data-refreshed=\"false\" \r\n data-target = \"[{&quot;key&quot;:&quot;cat&quot;,&quot;values&quot;:[&quot;business-careers-money&quot;,&quot;personal-finance&quot;,&quot;investing&quot;,&quot;investment-vehicles&quot;,&quot;bonds&quot;]},{&quot;key&quot;:&quot;isbn&quot;,&quot;values&quot;:[&quot;9781119894780&quot;]}]\" id=\"du-slot-63221b50db7b7\"></div></div>"},"articleType":{"articleType":"Cheat Sheet","articleList":[{"articleId":175085,"title":"How to Read Bond Ratings","slug":"how-to-read-bond-ratings","categoryList":["business-careers-money","personal-finance","investing","investment-vehicles","bonds"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/175085"}},{"articleId":175087,"title":"Questions to Ask a Bond Broker about a Bond","slug":"questions-to-ask-a-bond-broker-about-a-bond","categoryList":["business-careers-money","personal-finance","investing","investment-vehicles","bonds"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/175087"}},{"articleId":175062,"title":"Important Websites for Bond Investors","slug":"important-websites-for-bond-investors","categoryList":["business-careers-money","personal-finance","investing","investment-vehicles","bonds"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/175062"}},{"articleId":175054,"title":"How to Choose between a Taxable and a Tax-Free Municipal Bond","slug":"how-to-choose-between-a-taxable-and-a-tax-free-municipal-bond","categoryList":["business-careers-money","personal-finance","investing","investment-vehicles","bonds"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/175054"}}],"content":[{"title":"How to read bond ratings","thumb":null,"image":null,"content":"<p>Before you buy a bond, get an idea of how much financial muscle the issuer has. Bond ratings are available through any brokerage house. Three of the most popular rating services are Moody’s, Standard &amp; Poor’s, and Fitch. The following table shows the system each uses to rate bonds.</p>\n<table>\n<caption><strong>Bond Credit Quality Ratings</strong></caption>\n<tbody>\n<tr>\n<th>Credit risk ratings</th>\n<th>Moody’s</th>\n<th>Standard &amp; Poor’s</th>\n<th>Fitch</th>\n</tr>\n<tr>\n<td><b>Investment grade</b></td>\n<td></td>\n<td></td>\n<td></td>\n</tr>\n<tr>\n<td>Tip-top quality</td>\n<td>Aaa</td>\n<td>AAA</td>\n<td>AAA</td>\n</tr>\n<tr>\n<td>Premium quality</td>\n<td>Aa</td>\n<td>AA</td>\n<td>AA</td>\n</tr>\n<tr>\n<td>Near-premium quality</td>\n<td>A</td>\n<td>A</td>\n<td>A</td>\n</tr>\n<tr>\n<td>Take-home-to-Mom quality</td>\n<td>Baa</td>\n<td>BBB</td>\n<td>BBB</td>\n</tr>\n<tr>\n<td><b>Not investment grade</b></td>\n<td></td>\n<td></td>\n<td></td>\n</tr>\n<tr>\n<td>Borderline ugly</td>\n<td>Ba</td>\n<td>BB</td>\n<td>BB</td>\n</tr>\n<tr>\n<td>Ugly</td>\n<td>B</td>\n<td>B</td>\n<td>B</td>\n</tr>\n<tr>\n<td>Definitely don’t-take-home-to-Mom quality</td>\n<td>Caa</td>\n<td>CCC</td>\n<td>CCC</td>\n</tr>\n<tr>\n<td>You’ll be extremely lucky to get your money back</td>\n<td>Ca</td>\n<td>CC</td>\n<td>CC</td>\n</tr>\n<tr>\n<td>Interest payments have halted or bankruptcy is in process</td>\n<td>C</td>\n<td>D</td>\n<td>C</td>\n</tr>\n<tr>\n<td>Already in default</td>\n<td>C</td>\n<td>D</td>\n<td>D</td>\n</tr>\n</tbody>\n</table>\n<p>Bond ratings are available through any brokerage house.</p>\n"},{"title":"Questions to ask a bond broker about a bond","thumb":null,"image":null,"content":"<p>As you enter the world of bond investing, you may choose to work with a broker. But use some caution. Ask the questions in the following list — and get acceptable answers — before parting with your cash.</p>\n<ul class=\"level-one\">\n<li>\n<p class=\"first-para\"><b>Who is the bond issuer?</b></p>\n<p class=\"child-para\"><b></b>Is it the U.S. Treasury? General Electric? Dade County, Florida? The Russian Federation? Moe’s Hardware Store? A bond is an IOU, and an IOU is only as good as the entity that owes U. In addition, different kinds of bonds have different characteristics, such as taxability, callability, and volatility.</p>\n</li>\n<li>\n<p class=\"first-para\"><b>How is the bond rated?</b></p>\n<p class=\"child-para\"><b></b>Especially among corporate bonds (more likely to default than municipal or agency bonds), you want to know whether the company issuing the bond is financially stable. Ratings are readily available through any brokerage house.</p>\n</li>\n<li>\n<p class=\"first-para\"><b>What is the maturity date?</b></p>\n<p class=\"child-para\"><b></b>Long-term bonds tend to pay higher rates of interest, but your money is tied for longer and the price of the bond, should you wish to sell it before maturity, tends to be more volatile.</p>\n</li>\n<li>\n<p class=\"first-para\"><b>What is the yield-to-maturity?</b></p>\n<p class=\"child-para\"><b></b>There are many ways of measuring a bond’s return. Yield-to-maturity is perhaps the most important measure. (Bond funds, which have no maturity, can be more difficult to compare.)</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Is the bond callable?</b></p>\n<p class=\"child-para\"><b></b>Can the issuer of the bond hand you back your money at any time? All things being equal, a callable bond is not desirable, and you should get more interest in compensation for the call feature.</p>\n</li>\n<li>\n<p class=\"first-para\"><b>What’s the worst-case yield?</b></p>\n<p class=\"child-para\"><b></b>Suppose the bond does get called. What would be your yield on the bond at that point? When comparing callable bonds, this figure is very important.</p>\n</li>\n<li>\n<p class=\"first-para\"><b>May I please have the CUSIP?</b></p>\n<p class=\"child-para\"><b></b>The CUSIP (Committee on Uniform Security Identification Procedures) identification allows you to go to <a href=\"http://www.finra.org\" target=\"_blank\" rel=\"noopener\">www.finra.org</a> to see what recent trades have been made on any particular bond. Doing so gives you a good idea of the fair price for the bond you’re being offered.</p>\n</li>\n</ul>\n"},{"title":"Important websites for bond investors","thumb":null,"image":null,"content":"<p>Successful bond investing isn’t about luck. It’s about researching markets and comparing offers. (And luck.) These six websites serve as your navigation guide through the vast universe of bonds and bond funds.</p>\n<p><a href=\"https://www.finra.org/#/\" target=\"_blank\" rel=\"noopener\">FINRA</a>: Find scores of information on bond yields, prices, and trends at the Financial Industry Regulatory Authority site.</p>\n<p><a href=\"https://www.treasurydirect.gov/\" target=\"_blank\" rel=\"noopener\">TreasuryDirect</a>: Find out what your savings bonds are worth. Buy and sell U.S. Treasury bills and bonds at no cost.</p>\n<p><a href=\"https://www.bloomberg.com/\" target=\"_blank\" rel=\"noopener\">Bloomberg</a>: At the Bloomberg site, go to Markets, Market Data, Rates &amp; Bonds for up-to-date information on multiple bond markets.</p>\n<p><a href=\"https://finance.yahoo.com/\" target=\"_blank\" rel=\"noopener\">Yahoo! Finance</a>: This site offers scads of information on individual bonds and bond funds. Be aware that you’re looking at both news and advertisements, and they get easily jumbled on the screen.</p>\n<p><a href=\"http://www.moneychimp.com/calculator/compound_interest_calculator.htm\" target=\"_blank\" rel=\"noopener\">Moneychimp calculator</a>: Here, you can put in the price of the bond, the coupon rate, and the maturity date, and out comes the all-important yield-to-maturity.</p>\n"},{"title":"How to choose between a taxable and a tax-free municipal bond","thumb":null,"image":null,"content":"<p>As a bond investor, you’re probably most interested in the bonds that will leave you with more money at the end of the day. If it comes to a choice between taxable and tax-free municipal bonds, grab your calculator and apply the following rather simple formula to determine the potentially more profitable bond:</p>\n<ol class=\"level-one\">\n<li>\n<p class=\"first-para\">Start with 100.</p>\n</li>\n<li>\n<p class=\"first-para\">Subtract your tax bracket to find your reciprocal.</p>\n<p class=\"child-para\"><b></b>If you are in the 28 percent bracket, for example, subtract 28 from 100. That number — 72 — is called the <i>reciprocal</i> of your tax bracket.</p>\n</li>\n<li>\n<p class=\"first-para\">Divide the municipal yield by the reciprocal.</p>\n<p class=\"child-para\"><b></b>The result tells you what you would have to earn on the taxable bond to equal the amount you would get on the tax-exempt municipal bond.</p>\n</li>\n</ol>\n<p>Using these numbers, consider a muni (a short, and rather endearing, abbreviation of <i>municipal bond</i>) paying 5 percent:</p>\n<p>5 / 72 = 6.94 percent</p>\n<p>That number, 6.94, represents your <i>tax-equivalent yield</i><i>,</i> or your break-even between taxable and tax-exempt bond investing. If you can get 5 percent on a muni versus 6.94 percent on a taxable bond, it won’t matter which you choose, as far as take-home pay. (Of course, other factors may matter, such as the quality or the maturity of the bond.) If the taxable bond is yielding greater than 6.94 percent, it will likely be your best bet. If the taxable bond is yielding less than 6.94 percent, you’re likely better off with the tax-free bond.</p>\n"}],"videoInfo":{"videoId":null,"name":null,"accountId":null,"playerId":null,"thumbnailUrl":null,"description":null,"uploadDate":null}},"sponsorship":{"sponsorshipPage":false,"backgroundImage":{"src":null,"width":0,"height":0},"brandingLine":"","brandingLink":"","brandingLogo":{"src":null,"width":0,"height":0},"sponsorAd":"","sponsorEbookTitle":"","sponsorEbookLink":"","sponsorEbookImage":{"src":null,"width":0,"height":0}},"primaryLearningPath":"Advance","lifeExpectancy":"One year","lifeExpectancySetFrom":"2022-02-25T00:00:00+00:00","dummiesForKids":"no","sponsoredContent":"no","adInfo":"","adPairKey":[]},"status":"publish","visibility":"public","articleId":208279},{"headers":{"creationTime":"2016-03-26T18:18:00+00:00","modifiedTime":"2022-08-17T15:47:37+00:00","timestamp":"2022-09-14T18:19:56+00:00"},"data":{"breadcrumbs":[{"name":"Business, Careers, & Money","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34224"},"slug":"business-careers-money","categoryId":34224},{"name":"Personal Finance","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34273"},"slug":"personal-finance","categoryId":34273},{"name":"Investing","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34288"},"slug":"investing","categoryId":34288},{"name":"Investment Vehicles","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34290"},"slug":"investment-vehicles","categoryId":34290},{"name":"Funds","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34296"},"slug":"funds","categoryId":34296}],"title":"Basic Trade Choices for Exchange-Traded Funds","strippedTitle":"basic trade choices for exchange-traded funds","slug":"basic-trade-choices-for-exchange-traded-funds","canonicalUrl":"","seo":{"metaDescription":"Learn the various ways you can trade ETFs, including market orders, limit orders, stop-loss orders, and short sales.","noIndex":0,"noFollow":0},"content":"Buying and selling an exchange-traded fund (ETF) is just like buying and selling a stock; there really is no difference. Although you can trade in all sorts of ways, the vast majority of trades fall into these categories:\r\n<ul class=\"level-one\">\r\n \t<li>\r\n<p class=\"first-para\"><b>Market order:</b> This is as simple as it gets. You place an order with your broker or online to buy, say, 100 shares of a certain ETF. Your order goes to the stock exchange, and you get the best available price.</p>\r\n</li>\r\n \t<li>\r\n<p class=\"first-para\"><b>Limit order:</b> More exact than a market order, you place an order to buy, say, 100 shares of an ETF at $23 a share. That is the maximum price you will pay. If no sellers are willing to sell at $23 a share, your order will not go through.</p>\r\n<p class=\"child-para\">If you place a limit order to sell at $23, you’ll get your sale if someone is willing to pay that price. If not, there will be no sale. You can specify whether an order is good for the day or until canceled (if you don’t mind waiting to see if the market moves in your favor).</p>\r\n</li>\r\n \t<li>\r\n<p class=\"first-para\"><b>Stop-loss (or stop) order:</b> Designed to protect you should the price of your ETF or stock take a tumble, a stop-loss order automatically becomes a market order if and when the price falls below a certain point (say, 10 percent below the current price).</p>\r\n<p class=\"child-para\">Stop-loss orders are used to limit investors’ exposure to a falling market, but they can (and often do) backfire, especially in very turbulent markets. Proceed with caution.</p>\r\n</li>\r\n \t<li>\r\n<p class=\"first-para\"><b>Short sale:</b> You sell shares of an ETF that you have borrowed from the broker. If the price of the ETF then falls, you can buy replacement shares at a lower price and pocket the difference. If, however, the price rises, you are stuck holding a security that is worth less than its market price, so you pay the difference, which can sometimes be huge.</p>\r\n</li>\r\n</ul>\r\nFor more information on different kinds of trading options, see the <a href=\"http://www.sec.gov/investor/alerts/trading101basics.pdf\" target=\"_blank\" rel=\"noopener\">U.S. Securities and Exchange Commission discussion</a>.","description":"Buying and selling an exchange-traded fund (ETF) is just like buying and selling a stock; there really is no difference. Although you can trade in all sorts of ways, the vast majority of trades fall into these categories:\r\n<ul class=\"level-one\">\r\n \t<li>\r\n<p class=\"first-para\"><b>Market order:</b> This is as simple as it gets. You place an order with your broker or online to buy, say, 100 shares of a certain ETF. Your order goes to the stock exchange, and you get the best available price.</p>\r\n</li>\r\n \t<li>\r\n<p class=\"first-para\"><b>Limit order:</b> More exact than a market order, you place an order to buy, say, 100 shares of an ETF at $23 a share. That is the maximum price you will pay. If no sellers are willing to sell at $23 a share, your order will not go through.</p>\r\n<p class=\"child-para\">If you place a limit order to sell at $23, you’ll get your sale if someone is willing to pay that price. If not, there will be no sale. You can specify whether an order is good for the day or until canceled (if you don’t mind waiting to see if the market moves in your favor).</p>\r\n</li>\r\n \t<li>\r\n<p class=\"first-para\"><b>Stop-loss (or stop) order:</b> Designed to protect you should the price of your ETF or stock take a tumble, a stop-loss order automatically becomes a market order if and when the price falls below a certain point (say, 10 percent below the current price).</p>\r\n<p class=\"child-para\">Stop-loss orders are used to limit investors’ exposure to a falling market, but they can (and often do) backfire, especially in very turbulent markets. Proceed with caution.</p>\r\n</li>\r\n \t<li>\r\n<p class=\"first-para\"><b>Short sale:</b> You sell shares of an ETF that you have borrowed from the broker. If the price of the ETF then falls, you can buy replacement shares at a lower price and pocket the difference. If, however, the price rises, you are stuck holding a security that is worth less than its market price, so you pay the difference, which can sometimes be huge.</p>\r\n</li>\r\n</ul>\r\nFor more information on different kinds of trading options, see the <a href=\"http://www.sec.gov/investor/alerts/trading101basics.pdf\" target=\"_blank\" rel=\"noopener\">U.S. Securities and Exchange Commission discussion</a>.","blurb":"","authors":[{"authorId":9023,"name":"Russell Wild","slug":"russell-wild","description":" <b>Russell Wild,</b> MBA, an expert on index investing, is a fee-only financial planner and investment advisor and the principal of Global Portfolios. He is the author or coauthor of nearly two dozen nonfiction books.","hasArticle":false,"_links":{"self":"https://dummies-api.dummies.com/v2/authors/9023"}}],"primaryCategoryTaxonomy":{"categoryId":34296,"title":"Funds","slug":"funds","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34296"}},"secondaryCategoryTaxonomy":{"categoryId":0,"title":null,"slug":null,"_links":null},"tertiaryCategoryTaxonomy":{"categoryId":0,"title":null,"slug":null,"_links":null},"trendingArticles":null,"inThisArticle":[],"relatedArticles":{"fromBook":[{"articleId":208448,"title":"Exchange-Traded Funds For Dummies Cheat Sheet","slug":"exchange-traded-funds-for-dummies-cheat-sheet","categoryList":["business-careers-money","personal-finance","investing","investment-vehicles","funds"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/208448"}},{"articleId":183699,"title":"Choosing the Best ETFs","slug":"choosing-the-best-etfs","categoryList":["business-careers-money","personal-finance","investing","investment-vehicles","funds"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/183699"}},{"articleId":183698,"title":"How ETFs Differ from Mutual Funds","slug":"how-etfs-differ-from-mutual-funds","categoryList":["business-careers-money","personal-finance","investing","investment-vehicles","funds"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/183698"}},{"articleId":183697,"title":"Websites for Up-to-Date ETF Information","slug":"websites-for-up-to-date-etf-information","categoryList":["business-careers-money","personal-finance","investing","investment-vehicles","funds"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/183697"}},{"articleId":183683,"title":"Asking a Financial Professional about Working ETFs into Your Portfolio","slug":"asking-a-financial-professional-about-working-etfs-into-your-portfolio","categoryList":["business-careers-money","personal-finance","investing","investment-vehicles","funds"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/183683"}}],"fromCategory":[{"articleId":209064,"title":"Mutual Funds For Dummies Cheat Sheet","slug":"mutual-funds-for-dummies-cheat-sheet","categoryList":["business-careers-money","personal-finance","investing","investment-vehicles","funds"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/209064"}},{"articleId":208448,"title":"Exchange-Traded Funds For Dummies Cheat Sheet","slug":"exchange-traded-funds-for-dummies-cheat-sheet","categoryList":["business-careers-money","personal-finance","investing","investment-vehicles","funds"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/208448"}},{"articleId":199934,"title":"Introducing Basic Types of Hedge Funds","slug":"introducing-basic-types-of-hedge-funds","categoryList":["business-careers-money","personal-finance","investing","investment-vehicles","funds"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/199934"}},{"articleId":198378,"title":"Hedge Fund Fees to Expect with Your Investment","slug":"hedge-fund-fees-to-expect-with-your-investment","categoryList":["business-careers-money","personal-finance","investing","investment-vehicles","funds"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/198378"}},{"articleId":198372,"title":"How Does Standard & Poor’s 500 Index Work?","slug":"how-does-standard-poors-500-index-work","categoryList":["business-careers-money","personal-finance","investing","investment-vehicles","funds"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/198372"}}]},"hasRelatedBookFromSearch":false,"relatedBook":{"bookId":282184,"slug":"exchange-traded-funds-for-dummies","isbn":"9781119828839","categoryList":["business-careers-money","personal-finance","investing","investment-vehicles","funds"],"amazon":{"default":"https://www.amazon.com/gp/product/111982883X/ref=as_li_tl?ie=UTF8&tag=wiley01-20","ca":"https://www.amazon.ca/gp/product/111982883X/ref=as_li_tl?ie=UTF8&tag=wiley01-20","indigo_ca":"http://www.tkqlhce.com/click-9208661-13710633?url=https://www.chapters.indigo.ca/en-ca/books/product/111982883X-item.html&cjsku=978111945484","gb":"https://www.amazon.co.uk/gp/product/111982883X/ref=as_li_tl?ie=UTF8&tag=wiley01-20","de":"https://www.amazon.de/gp/product/111982883X/ref=as_li_tl?ie=UTF8&tag=wiley01-20"},"image":{"src":"https://www.dummies.com/wp-content/uploads/exchange-traded-funds-for-dummies-3rd-edition-cover-9781119828839-203x255.jpg","width":203,"height":255},"title":"Exchange-Traded Funds For Dummies","testBankPinActivationLink":"","bookOutOfPrint":true,"authorsInfo":"<p><b><b data-author-id=\"9023\">Russell Wild</b>,</b> MBA, an expert on index investing, is a fee-only financial planner and investment advisor and the principal of Global Portfolios. He is the author or coauthor of nearly two dozen nonfiction books.</p>","authors":[{"authorId":9023,"name":"Russell Wild","slug":"russell-wild","description":" <b>Russell Wild,</b> MBA, an expert on index investing, is a fee-only financial planner and investment advisor and the principal of Global Portfolios. He is the author or coauthor of nearly two dozen nonfiction books.","hasArticle":false,"_links":{"self":"https://dummies-api.dummies.com/v2/authors/9023"}}],"_links":{"self":"https://dummies-api.dummies.com/v2/books/"}},"collections":[],"articleAds":{"footerAd":"<div class=\"du-ad-region row\" id=\"article_page_adhesion_ad\"><div class=\"du-ad-unit col-md-12\" data-slot-id=\"article_page_adhesion_ad\" data-refreshed=\"false\" \r\n data-target = \"[{&quot;key&quot;:&quot;cat&quot;,&quot;values&quot;:[&quot;business-careers-money&quot;,&quot;personal-finance&quot;,&quot;investing&quot;,&quot;investment-vehicles&quot;,&quot;funds&quot;]},{&quot;key&quot;:&quot;isbn&quot;,&quot;values&quot;:[&quot;9781119828839&quot;]}]\" id=\"du-slot-63221b4c78b26\"></div></div>","rightAd":"<div class=\"du-ad-region row\" id=\"article_page_right_ad\"><div class=\"du-ad-unit col-md-12\" data-slot-id=\"article_page_right_ad\" data-refreshed=\"false\" \r\n data-target = \"[{&quot;key&quot;:&quot;cat&quot;,&quot;values&quot;:[&quot;business-careers-money&quot;,&quot;personal-finance&quot;,&quot;investing&quot;,&quot;investment-vehicles&quot;,&quot;funds&quot;]},{&quot;key&quot;:&quot;isbn&quot;,&quot;values&quot;:[&quot;9781119828839&quot;]}]\" id=\"du-slot-63221b4c793a6\"></div></div>"},"articleType":{"articleType":"Articles","articleList":null,"content":null,"videoInfo":{"videoId":null,"name":null,"accountId":null,"playerId":null,"thumbnailUrl":null,"description":null,"uploadDate":null}},"sponsorship":{"sponsorshipPage":false,"backgroundImage":{"src":null,"width":0,"height":0},"brandingLine":"","brandingLink":"","brandingLogo":{"src":null,"width":0,"height":0},"sponsorAd":"","sponsorEbookTitle":"","sponsorEbookLink":"","sponsorEbookImage":{"src":null,"width":0,"height":0}},"primaryLearningPath":"Advance","lifeExpectancy":"Two years","lifeExpectancySetFrom":"2022-08-17T00:00:00+00:00","dummiesForKids":"no","sponsoredContent":"no","adInfo":"","adPairKey":[]},"status":"publish","visibility":"public","articleId":178462},{"headers":{"creationTime":"2016-03-26T17:47:18+00:00","modifiedTime":"2022-08-16T19:35:09+00:00","timestamp":"2022-09-14T18:19:55+00:00"},"data":{"breadcrumbs":[{"name":"Business, Careers, & Money","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34224"},"slug":"business-careers-money","categoryId":34224},{"name":"Personal Finance","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34273"},"slug":"personal-finance","categoryId":34273},{"name":"Investing","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34288"},"slug":"investing","categoryId":34288},{"name":"Investment Vehicles","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34290"},"slug":"investment-vehicles","categoryId":34290},{"name":"Commodities","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34292"},"slug":"commodities","categoryId":34292}],"title":"Information Resources for the Commodities Investor","strippedTitle":"information resources for the commodities investor","slug":"information-resources-for-the-commodities-investor","canonicalUrl":"","seo":{"metaDescription":"Using these resources will help you keep up to date on major events that move commodities markets. Although not all of these resources deal specifically with co","noIndex":0,"noFollow":0},"content":"Using these resources will help you keep up to date on major events that move commodities markets. Although not all of these resources deal specifically with commodities, they are indispensable sources of information because they help you get a sense of where the financial markets are heading.\r\n<h2 id=\"tab1\" >The Wall Street Journal</h2>\r\nFor daily intakes of financial news, nothing beats <i>The</i> <i>Wall Street Journal</i>. If you want to be a successful trader, you need to keep abreast of all the information that’s worth knowing. <i>The Journal</i> does a good job of presenting solid analysis and in-depth coverage of the day’s main events.\r\n\r\nIts coverage of the commodities markets in its <a href=\"http://www.wsj.com\" target=\"_blank\" rel=\"noopener\">online edition</a> is actually fairly extensive, with interactive charts and graphs for both cash prices and futures markets. Also, keep an eye out for the section “Heard on the Street”. It includes a wealth of information to help you develop winning strategies.\r\n<h2 id=\"tab2\" >Bloomberg</h2>\r\nThe <a href=\"http://www.bloomberg.com\" target=\"_blank\" rel=\"noopener\">Bloomberg website</a> at is one of the best sources of raw information and data available to investors. Visiting this site once a day keeps you up on important developments in the markets. The <a href=\"http://www.bloomberg.com/markets/commodities/cfutures.html\" target=\"_blank\" rel=\"noopener\">website’s commodity section</a> contains comprehensive information on all the major commodities, including regular price updates on the futures markets. If you trade futures, this is an indispensable resource.\r\n<h2 id=\"tab3\" >Nightly Business Report</h2>\r\nTune in every weeknight to your local PBS network to watch NBR’s Paul Kangas, Susie Gharib, and the gang analyze the day’s events. Their special features are insightful, and the market analysts they bring in are usually knowledgeable about the issues at hand. Plus, it’s commercial free! Check your PBS station for local listings.\r\n<h2 id=\"tab4\" >Morningstar</h2>\r\n<a href=\"http://www.morningstar.com/\" target=\"_blank\" rel=\"noopener\">Morningstar</a> has a plethora of information on the latest mutual funds, exchange traded funds, and other investment vehicles popular with investors. If you want to invest in commodities through a managed fund, make sure you consult the Morningstar website.\r\n<h2 id=\"tab5\" >Yahoo! Finance</h2>\r\n<a href=\"http://finance.yahoo.com\" target=\"_blank\" rel=\"noopener\"><i>Yahoo! Finance</i> </a>includes many different sources of information all conveniently located in one site. You have market analysis updated on an hourly basis, regular news alerts, and one of the best chart services on the web. If you’re considering investing in companies that produce commodities, Yahoo! Finance is your one-stop-shop to get information on the stock’s technical performance as well as its fundamental outlook.\r\n<h2 id=\"tab6\" >Commodity Futures Trading Commission</h2>\r\nThe <i>Commodity Futures Trading Commission</i> (CFTC) is the federal regulatory body responsible for monitoring activities in the commodities markets. Before you do anything related to commodities, make sure you look at the <a href=\"http://www.cftc.gov\" target=\"_blank\" rel=\"noopener\">website</a>. Before you invest, you need to know your rights as an investor and the CFTC is the best source of that information. Also make sure to check out their very comprehensive glossary.\r\n<h2 id=\"tab7\" >The Energy Information Administration</h2>\r\nThe <a href=\"http://www.eia.doe.gov\" target=\"_blank\" rel=\"noopener\"><i>Energy Information Administration</i> (EIA)</a> is part of the U.S. Department of Energy and is the official source of energy statistics for the U.S. government and your number one source for information on energy markets. They cover everything from crude oil production and consumption to gasoline inventories and natural gas transportation activity. If you want to invest in energy, make sure you check out their <a href=\"http://www.eia.doe.gov/emeu/cabs/contents.html\" target=\"_blank\" rel=\"noopener\"><i>Country Analysis Briefs</i></a>, which give an overview of the global energy supply chain country by country.\r\n<h2 id=\"tab8\" >Stocks and Commodities Magazine</h2>\r\nIf your desire is to become a serious commodity futures trader, then <a href=\"http://www.traders.com\" target=\"_blank\" rel=\"noopener\"><i>Stocks and Commodities</i></a> magazine is a must read. Its articles include market-tested trading strategies to help you place and execute trades.\r\n<h2 id=\"tab9\" >Oil & Gas Journal</h2>\r\nThe <a href=\"http://ogj.pennnet.com\" target=\"_blank\" rel=\"noopener\"><i>Oil & Gas Journal</i></a> is a subscription-based magazine that features in-depth articles about the energy industry. If you want to trade the energy markets, make sure to read O&G.\r\n<h2 id=\"tab10\" >National Futures Association</h2>\r\nThe <i>National Futures Association</i> (NFA) is the industry’s self-regulatory organization. If you are interested in investing in the futures markets, check out the <a href=\"http://www.nfa.futures.org\" target=\"_blank\" rel=\"noopener\">website </a>before you start trading. Specifically, make sure to check out the database of registered investment advisors if you’re going to go through a manager. NFA has comprehensive information on all managers through its <a href=\"http://www.nfa.futures.org/basicnet\" target=\"_blank\" rel=\"noopener\"><i>Background Affiliation Status Information Center</i> (BASIC)</a> service.","description":"Using these resources will help you keep up to date on major events that move commodities markets. Although not all of these resources deal specifically with commodities, they are indispensable sources of information because they help you get a sense of where the financial markets are heading.\r\n<h2 id=\"tab1\" >The Wall Street Journal</h2>\r\nFor daily intakes of financial news, nothing beats <i>The</i> <i>Wall Street Journal</i>. If you want to be a successful trader, you need to keep abreast of all the information that’s worth knowing. <i>The Journal</i> does a good job of presenting solid analysis and in-depth coverage of the day’s main events.\r\n\r\nIts coverage of the commodities markets in its <a href=\"http://www.wsj.com\" target=\"_blank\" rel=\"noopener\">online edition</a> is actually fairly extensive, with interactive charts and graphs for both cash prices and futures markets. Also, keep an eye out for the section “Heard on the Street”. It includes a wealth of information to help you develop winning strategies.\r\n<h2 id=\"tab2\" >Bloomberg</h2>\r\nThe <a href=\"http://www.bloomberg.com\" target=\"_blank\" rel=\"noopener\">Bloomberg website</a> at is one of the best sources of raw information and data available to investors. Visiting this site once a day keeps you up on important developments in the markets. The <a href=\"http://www.bloomberg.com/markets/commodities/cfutures.html\" target=\"_blank\" rel=\"noopener\">website’s commodity section</a> contains comprehensive information on all the major commodities, including regular price updates on the futures markets. If you trade futures, this is an indispensable resource.\r\n<h2 id=\"tab3\" >Nightly Business Report</h2>\r\nTune in every weeknight to your local PBS network to watch NBR’s Paul Kangas, Susie Gharib, and the gang analyze the day’s events. Their special features are insightful, and the market analysts they bring in are usually knowledgeable about the issues at hand. Plus, it’s commercial free! Check your PBS station for local listings.\r\n<h2 id=\"tab4\" >Morningstar</h2>\r\n<a href=\"http://www.morningstar.com/\" target=\"_blank\" rel=\"noopener\">Morningstar</a> has a plethora of information on the latest mutual funds, exchange traded funds, and other investment vehicles popular with investors. If you want to invest in commodities through a managed fund, make sure you consult the Morningstar website.\r\n<h2 id=\"tab5\" >Yahoo! Finance</h2>\r\n<a href=\"http://finance.yahoo.com\" target=\"_blank\" rel=\"noopener\"><i>Yahoo! Finance</i> </a>includes many different sources of information all conveniently located in one site. You have market analysis updated on an hourly basis, regular news alerts, and one of the best chart services on the web. If you’re considering investing in companies that produce commodities, Yahoo! Finance is your one-stop-shop to get information on the stock’s technical performance as well as its fundamental outlook.\r\n<h2 id=\"tab6\" >Commodity Futures Trading Commission</h2>\r\nThe <i>Commodity Futures Trading Commission</i> (CFTC) is the federal regulatory body responsible for monitoring activities in the commodities markets. Before you do anything related to commodities, make sure you look at the <a href=\"http://www.cftc.gov\" target=\"_blank\" rel=\"noopener\">website</a>. Before you invest, you need to know your rights as an investor and the CFTC is the best source of that information. Also make sure to check out their very comprehensive glossary.\r\n<h2 id=\"tab7\" >The Energy Information Administration</h2>\r\nThe <a href=\"http://www.eia.doe.gov\" target=\"_blank\" rel=\"noopener\"><i>Energy Information Administration</i> (EIA)</a> is part of the U.S. Department of Energy and is the official source of energy statistics for the U.S. government and your number one source for information on energy markets. They cover everything from crude oil production and consumption to gasoline inventories and natural gas transportation activity. If you want to invest in energy, make sure you check out their <a href=\"http://www.eia.doe.gov/emeu/cabs/contents.html\" target=\"_blank\" rel=\"noopener\"><i>Country Analysis Briefs</i></a>, which give an overview of the global energy supply chain country by country.\r\n<h2 id=\"tab8\" >Stocks and Commodities Magazine</h2>\r\nIf your desire is to become a serious commodity futures trader, then <a href=\"http://www.traders.com\" target=\"_blank\" rel=\"noopener\"><i>Stocks and Commodities</i></a> magazine is a must read. Its articles include market-tested trading strategies to help you place and execute trades.\r\n<h2 id=\"tab9\" >Oil & Gas Journal</h2>\r\nThe <a href=\"http://ogj.pennnet.com\" target=\"_blank\" rel=\"noopener\"><i>Oil & Gas Journal</i></a> is a subscription-based magazine that features in-depth articles about the energy industry. If you want to trade the energy markets, make sure to read O&G.\r\n<h2 id=\"tab10\" >National Futures Association</h2>\r\nThe <i>National Futures Association</i> (NFA) is the industry’s self-regulatory organization. If you are interested in investing in the futures markets, check out the <a href=\"http://www.nfa.futures.org\" target=\"_blank\" rel=\"noopener\">website </a>before you start trading. Specifically, make sure to check out the database of registered investment advisors if you’re going to go through a manager. NFA has comprehensive information on all managers through its <a href=\"http://www.nfa.futures.org/basicnet\" target=\"_blank\" rel=\"noopener\"><i>Background Affiliation Status Information Center</i> (BASIC)</a> service.","blurb":"","authors":[{"authorId":9022,"name":"Amine Bouchentouf","slug":"amine-bouchentouf","description":" <b>Amine Bouchentouf</b> is a native Arabic, English, and French speaker born and raised in Casablanca, Morocco. He teaches Arabic and lectures about relations between America and the Arab world.","hasArticle":false,"_links":{"self":"https://dummies-api.dummies.com/v2/authors/9022"}}],"primaryCategoryTaxonomy":{"categoryId":34292,"title":"Commodities","slug":"commodities","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34292"}},"secondaryCategoryTaxonomy":{"categoryId":0,"title":null,"slug":null,"_links":null},"tertiaryCategoryTaxonomy":{"categoryId":0,"title":null,"slug":null,"_links":null},"trendingArticles":null,"inThisArticle":[{"label":"The Wall Street Journal","target":"#tab1"},{"label":"Bloomberg","target":"#tab2"},{"label":"Nightly Business Report","target":"#tab3"},{"label":"Morningstar","target":"#tab4"},{"label":"Yahoo! 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Funds Hedge Funds For Dummies Cheat Sheet

Cheat Sheet / Updated 01-06-2023

Hedge funds use pooled funds to focus on high-risk, high-return investments, often with a focus on shorting — so you can earn profit even when stocks fall.

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Stocks Stock Investing For Dummies Cheat Sheet

Cheat Sheet / Updated 11-08-2022

Listen to the article:Download audio You're investing in stocks — good for you! To make the most of your money and your choices, educate yourself on how to make stock investments confidently and intelligently, familiarize yourself with the online resources available to help you evaluate stocks, and find ways to protect the money you earn. Also, be sure to do your homework before you invest in any company's stock.

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Commodities A Brief History of the Chicago Mercantile Exchange

Article / Updated 10-06-2022

Established in 1848, the Chicago Board of Trade (CBOT) used to be the oldest commodity exchange in the world. The CBOT was the go-to exchange for grains and other agricultural products, such as oats, ethanol, and rice. The exchange also offered several metals contracts targeted at individual investors, including the mini gold and mini silver contracts. In 2007, the Chicago Mercantile Exchange (CME) merged with the CBOT as part of a great consolidation wave. CME rolled up the CBOT's popular grain contracts and now offers them on its electronic platform. Many traders still refer to some of these contracts as CBOT grains. CME is the largest and most liquid futures exchange in the world. The CME has the heaviest trading activity — and open interest — of any exchange, partly because of the depth of its products offerings. Besides agricultural commodities, it trades economic derivatives (contracts that track economic data such as U.S. quarterly GDP and nonfarm payrolls), foreign currencies (it offers a broad currency selection, ranging from the Hungarian forint to the South Korean won), interest rates (including the London Inter Bank Offered Rate, the LIBOR), and even weather derivatives (contracts that track weather patterns in various regions of the world). Because of its broad products listing, the CME is perhaps the most versatile of the commodity exchanges. In addition, the CME was one of the first exchanges to launch an electronic trading platform, the CME Globex, which became an instant hit with traders. It now accounts for more than 60 percent of the exchange's total volume. In 2006, the New York Mercantile Exchange (NYMEX) entered into an agreement with the CME to trade its marquee energy and metals contracts on Globex, an electronic trading system. In 2008, the CME went on a series of acquisitions and purchased the NYMEX and COMEX. The CME is also the first exchange to go public. Investors greeted the initial public offering with enthusiasm, raising the stock from $40 in 2003 to more than $500 in 2006. For more on the CME, check out its website, which also includes helpful tutorials on all its products.

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Stocks How Capital Gains Are Taxed

Article / Updated 09-29-2022

People who invest online are usually do-it-yourself investors. This means they're probably working without a tax consultant. But this can make it hard to understand how the money they earn while investing is taxed. That's where understanding capital gains taxes enters the picture. When you sell a stock held in a taxable account that has appreciated in value, you usually have taxes to pay. Generally, such capital gains taxes are calculated based on the holding period. There are two holding periods: Short-term: That's the type of capital gain you have if you sell a stock after owning it for one year or less. You want to avoid these gains if you can because you're taxed at the ordinary income tax rate, which, as I explain shortly, is one of the highest tax percentages. Long-term: That's the type of capital gain result you get if you sell a stock after holding it for more than one year. These gains qualify for a special discount on taxes. You must own a stock for over one year for it to be considered a long-term capital gain. If you buy a stock on March 3, 2019, and sell it on March 3, 2020 for a profit, that is considered a short-term capital gain. Also, an important thing to remember is that the holding-period clock starts the day after you buy the stock and stops the day you sell it. Selling even one day too soon can be a costly mistake. If you're interested in cutting your tax bill in a taxable account, you want to reduce, as much as possible, the number of stocks you sell that you've owned for only a year or less because they're taxed at your ordinary income tax levels. You can look up your ordinary income tax bracket at this Internal Revenue Service website. Need an example? Say a stock rose from $10 to $100 a share (for a $90 per share gain). Say that you had $50,000 in taxable income that year and sold the stock after owning it for just three months. Your gain would fall from $90 to $67.50 after paying $22.50 in taxes. By owning stocks for more than a year, gains are taxed at the maximum capital gain rate. The rate you pay on long-term capital gains varies based on your normal tax bracket, but such rates are almost always much lower than your ordinary income tax rate, if not zero. Yes, zero — some investors' long-term capital gains are tax free! Long-term capital gains rates, though, can change dramatically due to political pressure. The following table shows the maximum capital gain rates for 2009 and 2010 for typical investments such as stocks and bonds. Maximum Capital Gain Rate If Your Regular Tax Rate Is Your Maximum Capital Gain Rate Is Greater than 35% 20% 25% or higher 15% Lower than 25% 0% Source: Internal Revenue Service

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Stocks Stop-Loss Orders for Your Stock Investments

Article / Updated 09-29-2022

A stop-loss order (also called a stop order) is a condition-related order that instructs the broker to sell a particular stock in your investment portfolio only when the stock reaches a particular price. It acts like a trigger, and the stop order converts to a market order to sell the stock immediately. The stop-loss order isn’t designed to take advantage of small, short-term moves in the stock’s price. It’s meant to help you protect the bulk of your money when the market turns against your stock investment in a sudden manner. Say that your Kowalski, Inc., stock rises from $10 to $20 per share and you seek to protect your investment against a possible future market decline. A stop-loss order at $18 triggers your broker to sell the stock immediately if it falls to the $18 mark. If the stock suddenly drops to $17, it still triggers the stop-loss order, but the finalized sale price is $17. In a volatile market, you may not be able to sell at your precise stop-loss price. However, because the order automatically gets converted into a market order, the sale will be done, and you’ll be spared further declines in the stock. The main benefit of a stop-loss order is that it prevents a major loss in a stock that you own. It’s a form of discipline that’s important in investing in order to minimize potential losses. Investors can find it agonizing to sell a stock that has fallen. If they don’t sell, however, the stock often continues to plummet as investors hope for a rebound in the price. Most investors set a stop-loss amount at about 10 percent below the market value of the stock. This percentage gives the stock some room to fluctuate, which most stocks tend to do from day to day. If you’re extra nervous, consider a tighter stop-loss, such as 5 percent or less. Please keep in mind that this order is a trigger and a particular price is not guaranteed to be captured because the actual buy or sell occurs immediately after the trigger is activated. If the market at the time of the actual transaction is particularly volatile, then the price realized may be significantly different.

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Bonds The Tax Risk in Bond Investing

Article / Updated 09-15-2022

Bond investing has a reputation for safety, not only because bonds provide steady and predictable streams of income, but also because as a bondholder you have first dibs on the issuer’s money. A corporation is legally bound to pay you your interest before it doles out any dividends to people who own company stock. If a company starts to go through hard times, any proceeds from the business or (in the case of an actual bankruptcy) from the sale of assets go to you before they go to shareholders. However, bonds offer no ironclad guarantees. All investments carry some risk, such as tax risk. When comparing taxable bonds to other investments, such as stocks, some investors forget to factor in the potentially high cost of taxation. Except for municipal bonds and bonds kept in tax-advantaged accounts, such as an IRA, the interest payments on bonds are generally taxable at your income-tax rate, which for most people is in the 25 to 28 percent range but could be as high as 35 percent . . . and, depending on the whims of Congress, may rise higher. In contrast, stocks may pay dividends, most of which (thanks to favorable tax treatment enacted into law just a few years back) are taxable at 15 percent. If the price of the stock appreciates, that appreciation isn’t taxable at all unless the stock is actually sold, at which point, it’s usually taxed at 15 percent. So would you rather have a stock that returns 5 percent a year or a bond that returns 5 percent a year? From strictly a tax vantage point, bonds lose. Paying even 25 percent tax represents a 67 percent bigger tax bite than paying 15 percent. (Of course — getting back to the whims of Congress — these special rates are also subject to change.) Tax risk on bonds is most pronounced during times of high interest rates and high inflation. If, for example, the inflation rate is 3 percent, and your bonds are paying 3 percent, you are just about breaking even on your investment. You have to pay taxes on the 3 percent interest, so you actually fall a bit behind. But suppose that the inflation rate were 6 percent and your bonds were paying 6 percent. You have to pay twice as much tax as if your interest rate were 3 percent (and possibly even more than twice the tax, if your interest payments bump you into a higher tax bracket), which means you fall even further behind. Inflation is not likely to go to 6 percent. But if it does, holders of conventional (non-inflation-adjusted) bonds may not be happy campers, especially after April 15 rolls around.

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Bonds The Downgrade Risk in Bond Investing

Article / Updated 09-14-2022

Bond investing has a reputation for safety not only because bonds provide steady and predictable streams of income, but also because as a bondholder you have first dibs on the issuer’s money. A corporation is legally bound to pay you your interest before it doles out any dividends to people who own company stock. If a company starts to go through hard times, any proceeds from the business or (in the case of an actual bankruptcy) from the sale of assets go to you before they go to shareholders. However, bonds offer no ironclad guarantees. All investments carry some risk, such as downgrade risk. Even if a bond doesn’t go into default, rumors of a potential default can send a bond’s price into a spiral. When a major rating agency, such as Moody’s, Standard & Poor’s, or Fitch, changes the rating on a bond (moving it from, say, investment-grade to below investment-grade), fewer investors want that bond. This situation is the equivalent of Consumer Reports magazine pointing out that a particular brand of toaster oven is prone to explode. Not good. Bonds that are downgraded may be downgraded a notch, or two notches, or three. The price of the bond drops accordingly. Typically, a downgrade from investment-grade to junk results in a rather large price drop because many institutions aren’t allowed to own anything below investment-grade. The market therefore deflates faster than a speared blowfish, and the beating to bondholders can be brutal. On occasion, downgraded bonds, even those downgraded to junk (sometimes referred to as fallen angels), are upgraded again. If and when that happens (it usually doesn’t), prices zoom right back up again. Holding tight, therefore, sometimes makes good sense. But bond ratings and bond prices don’t always march in synch. Consider, for example, that when U.S. Treasuries were downgraded by Standard & Poor’s in 2011 from an AAA to an AA rating, the bonds did not drop in price but actually rose, and rose nicely. Why? In large part, it was because of the credit crisis in Europe and the realization of Japan’s rising debt. In other words, although the United States appeared to be a slightly riskier place to invest vis-à-vis other nations, it actually started to look safer.

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Bonds Bond Investing For Dummies Cheat Sheet

Cheat Sheet / Updated 09-01-2022

If you want to invest in bonds, you need to know how to read the bond ratings that the big three rating companies use and how to figure whether a taxable or tax-free municipal bond is the better investment. Knowing the right questions to ask about a bond can save you money, and you can find answers to many of those questions on the Internet.

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Funds Basic Trade Choices for Exchange-Traded Funds

Article / Updated 08-17-2022

Buying and selling an exchange-traded fund (ETF) is just like buying and selling a stock; there really is no difference. Although you can trade in all sorts of ways, the vast majority of trades fall into these categories: Market order: This is as simple as it gets. You place an order with your broker or online to buy, say, 100 shares of a certain ETF. Your order goes to the stock exchange, and you get the best available price. Limit order: More exact than a market order, you place an order to buy, say, 100 shares of an ETF at $23 a share. That is the maximum price you will pay. If no sellers are willing to sell at $23 a share, your order will not go through. If you place a limit order to sell at $23, you’ll get your sale if someone is willing to pay that price. If not, there will be no sale. You can specify whether an order is good for the day or until canceled (if you don’t mind waiting to see if the market moves in your favor). Stop-loss (or stop) order: Designed to protect you should the price of your ETF or stock take a tumble, a stop-loss order automatically becomes a market order if and when the price falls below a certain point (say, 10 percent below the current price). Stop-loss orders are used to limit investors’ exposure to a falling market, but they can (and often do) backfire, especially in very turbulent markets. Proceed with caution. Short sale: You sell shares of an ETF that you have borrowed from the broker. If the price of the ETF then falls, you can buy replacement shares at a lower price and pocket the difference. If, however, the price rises, you are stuck holding a security that is worth less than its market price, so you pay the difference, which can sometimes be huge. For more information on different kinds of trading options, see the U.S. Securities and Exchange Commission discussion.

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Commodities Information Resources for the Commodities Investor

Article / Updated 08-16-2022

Using these resources will help you keep up to date on major events that move commodities markets. Although not all of these resources deal specifically with commodities, they are indispensable sources of information because they help you get a sense of where the financial markets are heading. The Wall Street Journal For daily intakes of financial news, nothing beats The Wall Street Journal. If you want to be a successful trader, you need to keep abreast of all the information that’s worth knowing. The Journal does a good job of presenting solid analysis and in-depth coverage of the day’s main events. Its coverage of the commodities markets in its online edition is actually fairly extensive, with interactive charts and graphs for both cash prices and futures markets. Also, keep an eye out for the section “Heard on the Street”. It includes a wealth of information to help you develop winning strategies. Bloomberg The Bloomberg website at is one of the best sources of raw information and data available to investors. Visiting this site once a day keeps you up on important developments in the markets. The website’s commodity section contains comprehensive information on all the major commodities, including regular price updates on the futures markets. If you trade futures, this is an indispensable resource. Nightly Business Report Tune in every weeknight to your local PBS network to watch NBR’s Paul Kangas, Susie Gharib, and the gang analyze the day’s events. Their special features are insightful, and the market analysts they bring in are usually knowledgeable about the issues at hand. Plus, it’s commercial free! Check your PBS station for local listings. Morningstar Morningstar has a plethora of information on the latest mutual funds, exchange traded funds, and other investment vehicles popular with investors. If you want to invest in commodities through a managed fund, make sure you consult the Morningstar website. Yahoo! Finance Yahoo! Finance includes many different sources of information all conveniently located in one site. You have market analysis updated on an hourly basis, regular news alerts, and one of the best chart services on the web. If you’re considering investing in companies that produce commodities, Yahoo! Finance is your one-stop-shop to get information on the stock’s technical performance as well as its fundamental outlook. Commodity Futures Trading Commission The Commodity Futures Trading Commission (CFTC) is the federal regulatory body responsible for monitoring activities in the commodities markets. Before you do anything related to commodities, make sure you look at the website. Before you invest, you need to know your rights as an investor and the CFTC is the best source of that information. Also make sure to check out their very comprehensive glossary. The Energy Information Administration The Energy Information Administration (EIA) is part of the U.S. Department of Energy and is the official source of energy statistics for the U.S. government and your number one source for information on energy markets. They cover everything from crude oil production and consumption to gasoline inventories and natural gas transportation activity. If you want to invest in energy, make sure you check out their Country Analysis Briefs, which give an overview of the global energy supply chain country by country. Stocks and Commodities Magazine If your desire is to become a serious commodity futures trader, then Stocks and Commodities magazine is a must read. Its articles include market-tested trading strategies to help you place and execute trades. Oil & Gas Journal The Oil & Gas Journal is a subscription-based magazine that features in-depth articles about the energy industry. If you want to trade the energy markets, make sure to read O&G. National Futures Association The National Futures Association (NFA) is the industry’s self-regulatory organization. If you are interested in investing in the futures markets, check out the website before you start trading. Specifically, make sure to check out the database of registered investment advisors if you’re going to go through a manager. NFA has comprehensive information on all managers through its Background Affiliation Status Information Center (BASIC) service.

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