Investing online for dummies tips

Investing is a sophisticated business. But investing online for dummies is easy - provided we mean by "dummy," someone who has never traded before, but who is willing to do a little research and critical thinking about stocks. There are plenty of sources of information concerning stock investing for dummies.

The stock market

The stock market is a place where people can buy and sell shares in companies which are registered to trade publicly on the exchanges. Liquidity The stock exchange guarantees that stock trading is liquid: there's always a buyer for every seller. Online investing for beginners Anyone can trade online. Just choose a broker, deposit some money in your account, log on to the broker's site and enter a trade. A click of the mouse and you own some stock.

Gathering information

There are a lot of sources of investing information online: Finance.yahoo.com is one of the best.
Price/earnings ratio (p/e) The p/e tells you what your return is likely to be in terms of the price you pay. The average over all companies over a long period of time is about 15. This amounts to about a 6% return. Historically, bonds which are safer return about 4%. P/e can fluctuate wildly for a number of reasons: the company can take on debt to finance expansion or an acquisition; a weak market can hit the company and a catastrophic event can occur. As a general rule, large, stable companies will trade at a p/e near the long term average or below. Fast-growing companies may trade at a multiple (p/e) much higher. Dividend A company with a solid dividend is a very safe investment for dummies. For example, ConocoPhillips (CPC) is one of the safer stocks for dummies. It now has a 2.4% dividend. Though it grows slowly, Conoco will probably outperform bonds. A dividend in the 2-3% range is considered good these days. A very high dividend is a danger sign: the company is probably doing poorly, the stock price has fallen, so the dividend as a percentage of price has risen. Revenue growth Of all the metrics followed by professional stock traders, this is probably the most important. If revenues are growing, the company is expanding. Earnings in most cases will rise commensurate with revenues, though maybe not right away. Cyclical stocks The economy tends to go through cycles, characterized by better business conditions coupled with rising interest rates and vice versa. The dummy should read up on the Federal Reserve and how they control interest rates to get a feel for cycles. Many stocks tend to trade with the cycle, including manufacturing companies and retail companies.