The internet is full of good and bad websites. However, just as with anything in life there's probably more good than bad on the internet and it's up to each and every user to make GOOD choices when you are surfing. In this week's lesson, we will be concentrating on one of the best sources of information to come along since a man or woman took their first step on this planet. A place we all know and probably use named Google.
Because most individuals I know had a horrible year with their investments in 2008, my concentration in this lesson will focus on Google Finance. A day doesn't seem to go by without someone telling me their portfolio lost 20 to 50 percent last year. I never ask them to tell me. But they need someone to share their pain with. I'm a good listener and rarely give an opinion on how or what I invest in. However thanks to the knowledge available on Google, and the fact that I manage my own financial affairs, I was fortunate enough not to be a victim in 2008 like so many others.
Let me begin by saying when you or your broker buys a stock, you must understand that you are now a part owner in that company. Common sense should dictate that if an individual who was running a small or large company that was burdened in debt and was losing money like a surgery patient loses blood on the operating table, you would not feel comfortable taking out your wallet and peeling out some cash to invest in that failing company. Yet this is what goes on every day in the stock market. Sensible mature adults, who worked for decades accumulating their savings, turn over these savings to their "financial adviser" who purchases stocks in companies that these sensible mature adults know nothing about. I am not trying to knock all financial advisers in this lesson. I'm sure there are many honest, smart ones out there. However, it's not very smart when these advisers make bad decisions with YOUR hard earned savings.
Anyone really interested in learning about the companies either they invest in personally or through a broker, have vital information at their fingertips at Google Finance. Just type in the name or symbol of the stock you would like to investigate and like magic up pops a wealth of knowledge about that company. For the purpose of this lesson, we will take a look at General Motors or GM since they have been in the news for over a month looking for loans from you and me via the TARP fund. The first bit of information that stares at you is a summary of the company including a real-time stock price when the market is open and all the simple stats you may want to know. Below you will see a basic chart of the closing prices of GM going back to 1978. To the right you will see the latest news about GM. Below the charts you will see links to the latest news about GM's competitors and related companies. There's a lot more on this first page that stares at you including links to analysts, major shareholders, officers and research reports. But the most important information lies in the section named FINANCIALS.
Now this section regarding their financials will make or break an investors decision as to whether or not they want to own a piece of this company. We don't have to be accountants to understand the word EQUITY. For those of us who own a home, we know that the equity in our home is equal to the value of our asset (our home's market value) less the liabilities (or mortgage). Thus if "today's" value of our home is worth $300k and our mortgage is $200k, our equity is $100k. That's as straight and simple as it gets to explain equity. According to Google, in the case of GM, their equity as of Sept 2008 was minus $59 billion. That's right, their liabilities exceed their assets by $59 billion dollars. Is there any surprise that they are having a problem raising capital from any lender to operate their company? And as a tax payer and now lender to GM via the Tarp, how do you feel that YOU just gave them a huge loan?
Well, enough about GM. My point for this lesson is to begin using the valuable information that resides at Google Finance to help you make decisions about whether or not you should be investing in a particular company. There are three main components to study any company listed on a stock exchange. Their Income Statement; Balance Sheet; and Cash Flow Statement which are all found on this same page for free! If you don't understand these three components of a company's health, then Google these phrases and you'll find lots of explanations at Wikipedia and other sites. Start reading and learning about companies before you dare and take your hard earned money and invest in them.
The household names we all grew up on and trusted means very little today when it comes to owning these stocks. Dividends have always been a large part of the return we enjoyed over the years, but unfortunately they are getting slashed or suspended on a daily basis. It's UP TO YOU to become as knowledgeable as humanly possible about your investments. And Google Finance is a great place to start your learning process. There are a plethora of free and fee investment sites to visit or subscribe to, if you really want to dig deeper. However, you may never have to leave Google Finance to find all you need to know to make better investment decisions. Don't leave investing to chance. Start LEARNING TODAY at Google Finance and make 2009 a much better year!