These companies are the best when it comes to the their respective industry segments

Let us begin by talking about the list of blue chip companies and there are a huge number of companies but I will stick to the well known which the Dow Jones blue chip stocks are and the list is the 30 stocks that comprise that index and these are

3M (MMM)

Alcoa (AA)

American Express (AXP)

AT&T (T)

Bank of America (BAC)

Boeing (BA)

Caterpillar (CAT)

Chevron Corporation (CVX)

Cisco Systems (CSCO)

Coca-Cola (KO)

DuPont (DD)

ExxonMobil (XOM)

General Electric (GE)

Hewlett-Packard (HPQ)

The Home Depot (HD)

Intel (INTC)

IBM (IBM)

Johnson & Johnson (JNJ)

JPMorgan Chase(JPM)

Kraft Foods (KFT)

McDonald’s (MCD)

Merck (MRK)

Microsoft (MSFT)

Pfizer (PFE)

Procter & Gamble (PG)

Travelers (TRV)

United Technologies Corporation (UTX)

Verizon Communications (VZ)

Wal-Mart (WMT)

Walt Disney (DIS)

Have they delivered blue chip returns?

I would say that if you look at the recent past with the sub prime mortgage crisis and all other recessionary trends then these stocks have weathered the storm better than the others.

IBM is still strong as ever.

Mcdonald’s is also strong

Bank of America gobbled up Merrill Lynch and has emerged stronger and with less competitors. That is not to say that these have not failed as you can see from the earlier blue chip companies which were like Citigroup(C).  The major characteristics of what is a blue chip stock I have given in my earlier post.

That is why it is always better to diversify and not invest all your money only in blue chip stocks and you can also invest in the best mid cap stocks as well as the best micro cap stocks

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The technical analysis of stock trends can be done by combining the three main tools which can give a larger picture to the investors. These indicators can give the investors the edge over non informed investors to make profitable trades. Let us look at all the tree tools and see how to make use of them together.

Volume – Volume of a stock says a lot about the current situation of a stock. Volume is defined by the number of shares of a particular stock which are being traded within a period like an hour, week or a month. The volume of a stock is generally low when the share price is not moving much and it moves in a near straight line. The stock volume is generally much higher when the stock moves upwards or downwards. Usually, sudden high volume indicates a new trend which may be upwards or downwards. By using volume in conjunction with movements in the stock you can spot the right areas to get into a trade.

Aroon Indicator – Aroon indicator was developed by Tushar Chande in 1995 to determine the trend direction and the strength of the stock. This indicator tells the investors when a long term trend is ending. Aroon indicator is calculated as below:

Bullish – [(# of periods) - (# of periods since highest high)] / (# of periods)] x 100

Bearish – [(# of periods) - (# of periods since lowest low)] / (# of periods)] x 100

The investors look for a move below or above the zero level mark to see the trend of the stock.

Fibonacci Analysis – Fibonacci numbers are the numbers in a series in which the following number is the sum of previous two numbers. The series start with 1, 1 2, 5, 8, 13, 21 and so on. Fibonacci series as a trading tool has been used by traders for a long time and it is still hugely popular. There are five types of trading tools that are based on Fibonacci’s discovery: arcs, fans, retracements, extensions and time zones. The lines created by these Fibonacci studies are believed to signal changes in trends as the prices draw near them. This theory assumes that a stock will usually retrace to a certain percentage after moving up or down to a level of a support or resistance.

Putting volume, Aroon and Fibonacci together – When investors put these three indicators together, they can pinpoint the trend of a stock. The volume will denote the fear or enthusiasm of investors in that stock, Aroon will denote whether the stock is beginning to move from an existing trend and Fibonacci will tell whether the stock has hit its level of resistance or support. Technical analysis of stock trends make much more sense if the investors put these indicators together to get the direction of the stock movement.

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Go online and type in the search for the discount stock broker. We will worry about the stock research as that is the whole area of separate interest.

If you do not want the discount stock broker and want the stock broker who should do all the hand holding and also give you advice as to what kind of shares you should buy and also will call you three times a day telling to you to either sell a stock or buy a stock then go for the full service broker. These full service brokers will give of course charge a good amount as brokerage for his services offered.

Once selected then fill in the application form and the account will be opened for you.

How will you buy the stocks without the money and that is why it is necessary that you have the account funded and the way you do is by electronic transfer or the check. For electronic funds transfer you will have to set up the account accordingly and get the necessary checks done before setting up the account.

It is always better to go for the margin account also along with cash rather the discretionary one. The reason being that it is would be easier later for you to trade.

A lot of people ask the question about how do I buy the stocks myself and the answer is that if you want to select the stocks yourself and buy the stocks yourself then open a brokerage account with the discount stock broker.Another method which is less discussed nowadays is that you can invest in the stocks of the company directly by doing what I think is relatively less easy and that is buying the stock from the company directly. There are a lot of companies which offer stock sale program which is more like a monthly scheme and you will end up with the said company stock without going to a broker.

Then the indirect way of investing a stock and the share market is that you buy the mutual funds from the mutual fund companies. But for that you still have to open a brokerage account of an account with the mutual fund company whose mutual fund you are going to buy. Every time you buy the mutual finds you will have to pay some amount as the fees to company. This is applicable when you are selling too. To avoid that you should be able to buy no load mutual funds but that is a whole different set of ball game.

Before I go further I must tell you that the procedure that I am told you above is more of the where to buy the stocks. In fact how to buy stocks should actually mean how to select the stocks. That will mean that you need to know all about stock market investing.The first thing that you should know about is the stock market exchanges and the definition of NASDAQ and the Dow Jones index. Then you should know all about the stock market analysis and the types of research which is the fundamental research and the technical analysis.

Once you have found out about the stock that you need to buy then you need to thing about a trading strategy and that can be day trading or the long term trading strategy.Coming to type of shares there are so many different type of stocks that are out there that is virtually impossible to list out here but then you can buy the simple stocks or the index stocks or the penny stocks or the blue chip stocks.

Then the classification is also based on the market capitalization and you can buy the large cap stocks or the small cap stocks or even the junior gold stocks.

Before starting to invest in the stock market you should make sure that you read the best books for the stock market investors and these are from the stock market gurus like Benjamin Graham, Warren Buffet and Peter Lynch.

Always have the trends watched on and that will mean reading the best stock and financial newspaper like the WSJ and the Motley Fool guide. There are some good trends like the momentum stock investing or the pump and dump stock market investing in penny stocks or even the trend towards socially responsible investing in green stocks. Then a lot of people work towards building a dividend stock portfolio or the defensive stock portfolio.Learn everything about building a stock portfolio and that will mean that you will need to what is diversification and what are a beta and an alpha. That brings to my next point about the stock market terminology and you will need to know everything about stock market terms.

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There are two types of risks involved while investing in stock market. One is called undiversifiable risk which cannot be avoided. It is also called systematic risk or a market risk. Examples of this risk types are inflation, political unrest, economical instability, war, exchange rates etc. There is no control on these risks therefore they are called undiversifiable risks. Other type of risk is called diversifiable risk. This risk is associated with a particular stock, sector, economy or even a country. This risk is also known as unsystematic risk and can be mitigated using technique called diversification. The way it can be mitigated is by diversifying your portfolio by investing in different stocks, sectors and economies.

Let us take an example to prove that diversification works. Let’s say that you buy stock only from auto sector and they have been giving you nice results. But suddenly there is news that labor union of major auto companies have called for a strike. This would definitely bring down the share prices of auto companies since it would affect their bottom line. And you will see drop in your portfolio. Therefore, it is important to put some money is other unrelated sectors which would not get affected by same news. The more unrelated companies are the better diversification is. Most investors who are beginners in stock investing prefer to diversify by buying bonds.

How many stocks should I have?

This is a common question which investors ask when they are told to diversify. Obviously 5 stocks are better than one to reduce risk. While there is no rule around that, experts say that having a portfolio of around 15 to 20 stocks in varying sectors can make a good portfolio. Depending upon the risk appetite, these stocks can be blue chips, mid caps or even penny stock investments.

While diversification doesn’t guarantee that there would be no losses, it has proved to reduce the losses. Most people would use an asset allocation toll which would help them allocate their stock market investments. This toll is pretty useful for beginners who are new to stock market. It would generally ask a few questions which would help it know your age, risk appetite, investment horizons and a few more parameters. After that, it would suggest you how you should allocate your investments. What percentage should go to stocks, bonds, real estate, fixed deposits etc? It is a very handy tool especially for beginners in stock market and young investors.

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Some investors use the fundamental analysis to analyze a particular stock and some use the technical analysis to write about a stock and then there are various folks who just go by their gut feel about the stock market high and make a decision based on that. Just to give you an example the stock market was at an all time high and when I say the stock market then by that I mean the Dow Jones Industrial Average or simple Dow the stock market high was in Oct of 2007 when it reached the high of 14000 something.

Some folks thinking that there is money to be made would have bought the stocks at point in time and some would have sold at that point in time thinking that the market was at an all time high. That is the whole dilemma of the normal investing crowd and that is that they want to time the market which is usually not the case and you can never time the market .

In fact those who bought the stocks at a market high would have gained some money for a while but since after that the market crashed and now in 2008 the market has fallen back to it spre rally levels those folks who sold the stocks at that level would now be waiting for the right time to enter the market as that is opportune time plus they are sitting on a pile of cash when they sold the stocks at the peak of the market.

For example going by the inflation adjusted numbers the all time low of Dow Jones was 28.48 in 1896. Well that may not be a good indicator but yes there is nothing to suggest that market lows cannot be there. As a stock market for beginners lesson the important thing to note is that you should keep changing your strategy and look for returns wherever possible and if you do not have the time and the money to invest in stocks then you should actually try use the theory of averaging and put your money in two things and those are mutual funds of good firms and or the money in safe things money market mutual funds or CD’s

But beware in todays gloomy scenario where banks are actually at the receiving edge of a lot of massive outflows you also need to tread cautiously. In gist the stock market high or stock market low is just a psychological thing and it really depends on what kind of stock market investing would you do.

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To get relevant stock market information from the stock market data you need to have proper analysis tools which can help you get the data based on various time line scales or for each share or even for the nay number for years.

All this data being captured and analyzed is used by the business analysts and stock research professionals at big mutual fund houses and brokerages to come out with their analysis for stocks. They also give recommendations on a quarterly basis with regards to buying and selling of stock.

Stock market charts and the stock market ticker is what the traders remain glued to for getting all the current information.

Explained in simple terms the stock market ticker is the strip of stock information which keeps on running off at the bottom of the screen on your television screens as you watch a business channel. This is a simple example but traders who use stock trading information get stock market ticker which has a lot more details than the television stock ticker.

As a beginner you need not worry about the stock market content provider as these providers will be very costly. The dynamic stock market content providers are usually used by stock traders at big companies and this stock market content providers charge hug amounts of money on a monthly basis which can go in the range of thousands of dollars.

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