Many financial research analysts make their predictions every year about what they think the economy will do. As a word of warning, it is nearly IMPOSSIBLE to nail these things, and any advice that you read here should be taken with a grain of salt. My portfolio has now outpaced the market (S&P 500 is my benchmark) by a considerable amount 3 years running, and I’d like to hope the success continues.

Jimvesting.com’s Year-Opening Trades

This year, I am betting on a solid market that favors late-cyclical companies… meaning stocks that benefit once a recovery is in place and businesses start outlaying capital with increased confidence. We’re talking certain industrials, materials and energy stocks for the most part.

My biggest bet so far is one of the biggest basic materials companies, specializing in aluminum and other metals. Naturally, I’m talking about the bellwether Alcoa (AA), which I purchased at $15.20 on December 31st, 2010. I love this company going forward as their product is heavily involved in late-cycle industries like construction and automotives, and management has just begun to turn bullish after having big negative numbers throughout the recession. They still trade very cheap at 15 times forward earnings, and I’m up almost 9% on the trade in a matter of two days.

My second trade was into an oil services company called Weatherford International (WFT). I think the oil services space is ready to roar in 2011 after being held back too long from the BHP oil spill many months ago. Weatherford is healthier than a Baker Hughes or a Schlumberger and have seen a lesser stock price appreciation over the past few months. I bought in also on December 31st at a price just north of $22/share… flat on the trade thus far but I am optimistic with oil expected to tear up toward $100 by year end.

Five Contrarian Market Predictions for 2011

A “contrarian” pick is one that the market isn’t expecting. This means if you happen to bet big, you win big… but if you are wrong, you probably won’t lose that much because nobody thought it’d happen anyway, eh? I like to bet against the market when I think that there is an opportunity to see reversion, and if I had to take a few shots… I’d go with the following:

1. The S&P 500 Index Will Climb More Than 15% on the Year
Businesses are flush with cash and ready to expand. Many of the economic indicators like ISM Manufacturing are headed in the right direction. Investors are (finally) hopping out of the bond market and the global environment is slowly stabilizing. Commodities are moving higher as the dollar stays suppressed which encourages exports. Finally, the Standard and Poor’s Price/Earnings (P/E) ratio is still on the lower end of historical averages and is well below recession-recovery levels we’ve learned to trust in the past. THERE ARE STILL HEADWINDS… but I think the positives are going ignored and investors nowadays love to be bearish. The average expectation right now is around 10% appreciation on the markets, and I love a better than expected result.

2. Chinese Inflation Stays Under Control
Yes, China has a booming economy and has had to raise interest rates two times over the past few months to fight it. Many investors assume that with commodity growth getting out of hand, and a housing oversupply potentially creating a bubble, they are doomed to see hyperinflation. I believe differently, and think that the decentralized command economy may actually be better suited to handle the rush of inflation than a capitalist regime. They are certainly being aggressive so far as they try to control drastic price movements, I think it could be just what the doctor ordered.

3. U.S. Federal Reserve Raises Rates Before Year End
Yep, I said it. I haven’t seen anyone talking about the United States Federal Reserve actually (*gasp*) RAISING the federal funds borrowing rate this year. If we learned anything from the post-IT bubble crash, it is that you simply have to take the punch bowl away when people are clamoring for cheaper borrowing rates. The makeup of the Federal Open Market Committee should change in favor of those more hawkish (a.k.a. aggressive against inflation) in January, and I believe this along with a good stock market will create an environment where we might see a rate hike later on this year.

4. Gold Ends the Year Flat
Gold, gold, gold… everybody wants to buy the stuff. I say the metal is finally at a point where it is fairly valued, and investors will start to shift out of the protective portfolio stance of owning gold once gains begin to be realized in the equity markets on lower volatility. I don’t think gold will close lower, but all the big managers are recommending to stock up on the good stuff and I think it’s gone too far. The GLD has been the best performing ETF for a long time running, but I say you need to own something with intrinsic value. Can gold really go 20% higher without rampant hyperinflation or another depression? There’s not much left in the tank in my mind.

5. Unemployment Breaks Back Above 10%
Sorry to say, but I think the problems in the municipal market will blow up in our faces in 2011. I do not think that this will come in the form of utter bankruptcy, rather… I see a soft landing as states are forced to drastically cut costs and end up surviving. However, you know what happens when we cut costs — layoffs. Government jobs were a big part of the recovery, and I think they lead us in the opposite direction in 2011.

So there we go, five out-of-favor predictions for the market in 2011. We will revisit this at the end of the year to see what hit and what missed. Please remember that nothing in this article should be thought of as investment advice, as I am not a licensed financial advisor. If you are looking to invest on your own and aren’t set up, I use ThinkOrSwim as my stock brokerage.

Stay bullish my friends.
-Jimvesting

Back in April of 2010, popular MMO blogger John Chow and myself got into a debate over where you should trade Apple (NYSE: AAPL) on the markets. This was the Monday following the initial release of the infamous Apple iPad, which reportedly sold a few hundred thousand units. I bet that the direction of Apple would actually be LOWER on Monday, despite a great headline number — John disagreed, citing a good response to the new product launch. The result? Apple traded higher on Monday, April 5th by 1.07%.

Why John Chow was the winner

As soon as the day closed, John and I got to talking:

Now, while the stock of Apple was up on the day, my verdict was that I was in fact the winner because they underperformed the market. Perhaps John and I come from two different schools of thought, but I really don’t care how awesome my stocks are doing if they are underperforming the market. On the day, Apple underperformed the technology benchmark slightly… so I took this as to say if there was zero news, Apple would have been up more. Why do I put more weight on relative performance versus nominal performance? Any investor can just dump their money in a large index fund and do fine… there is no point in owning Apple and trying to pick stocks if you are underperforming the broader basket of stocks.

Regardless, I read what I said… and because I didn’t mention relative performance I am writing this review as payment for a lost bet. As it happens, John was absolutely correct about Apple’s stock! Looking over the past few months, Apple has actually outperformed the S&P 500 Index by roughly 15% and has been one of the best performing companies in the markets. Was this due to strong iPad sales? That is too much for me to extrapolate — but the news now is that Apple valued higher than Microsoft!

Is Apple Overvalued Here? Was John Chow Just “Lucky?”

It remains my contention that John was the fortunate benefactor of random upward momentum in Apple’s stock. The reason that he expected the stock to trade up was that the iPad sold a lot of units. Despite how many units they sold (which was actually in-line with expectations), it is important to look at how the stock market actually works. Naturally, everyone and their grandmother knows that Apple is “sexy” and that people like their products. The problem here is that investors aren’t dumb — positive sentiment is already factored in.

Apple is a great growth company, but I absolutely hate putting cash to work in stocks that are positively viewed by the market. Why? Think about upside and downside. Assuming that market movements are relatively unpredictable, which I think most of us would agree to, stocks that are “good” will not move up on positive news (they are already assumed to be good) but will get slaughtered on bad news (nobody expects a company like Apple to issue a product recall). On the other hand, stocks that are frowned upon now will do awesome on any piece of good news, while bad news is largely ignored because the company is already seen as being of lower quality so they won’t do too bad.

Looking at the performance of Apple, it is common for stocks to trade up on the expectation and sell on the news — in fact, so popular it is an axiom. This is why Apple always gets killed the day after they release good earnings: they might have been good but everyone saw it coming. The market sees forward 6 months, so trying to profit off of news like the iPad is insane difficult. Did John Chow get lucky? I don’t think so — he knows a lot more about the tech space than me and probably has additional insight into Apple’s products. However, I would think that over the short term my track record would be better. John won this round.

A Smarter Investment Strategy That Makes Sense:
At the very least, I think that it is psychotic that Apple is valued higher than Microsoft… and would embark on a long-term “short Apple, long Microsoft” strategy for investing. This will capture any outperformance of Microsoft in a market-neutral way. My prediction is that growth in Apple will inevitably slow down, no matter how good you think they are. People are currently willing to pay more than 22 times the amount of Apple’s current earnings to own shares (what we call a “P/E ratio”), whereas Microsoft is getting less than 14 times. However, Microsoft generates cash like nobody’s business ($21B last year), and Apple isn’t even close to that good ($12B last year). Stock value is all about cash flow that the business is experiencing. Despite the fact that Apple might gain more cash flow per year over time, they would have to surpass Microsoft’s $21B number in around 6-7 years in order to end up more profitable into perpetuity. To this, I say “fat chance.” In fact, if both companies held their current cash generation rates, Microsoft is worth twice as much as Apple.

My Gift to John Chow

For John’s birthday, and for winning our little bet, I compiled a completely customized portfolio strategy report for him and sent him it in the mail, along with a copy of one of the best investing books out there — “One Up On Wall Street” by Peter Lynch, one of the greatest investors in history. I put some effort into developing this report, and it recommended a portfolio allocation to John based on two things: 1) his personal investment profile (as a technology lover); 2) the market conditions. I recommended weighting his stock portfolio in a certain manner that I feel will outperform the markets, and recommended stocks that I felt are underpriced and worth investing in. I don’t want to reveal the actual report, which was around 5 pages and professionally printed, but here is a screenshot:

The Proof Is In The Pudding

I issue an unofficial email newsletter to friends and family that want stock picks and pans when I see the opportunity. I run what I call “Jim’s Value-Growth Portfolio” privately through ThinkOrSwim.com (my broker). My portfolio to date is actually up a considerable amount — despite the fact that the market is down. I do not short stocks in it, so anyone can get invested and feel comfortable.

The last date I updated my performance was May 2th: My portfolio is up 9.31% and the S&P500 is down 2.64%, an outperformance of about 12%. Here is a chart of my investments versus the market:

To me, it’s all about timing the market and investing in the right industries when it is most prudent — this is why John Chow’s strategy of investing in companies that have a new product that he thinks is cool, is basically heresy to me. And hey, when John wrote “ Oh crap! That was wild market ride! I hoped you picked up some nice stock bargains! I did!” on May 6th, I recommended staying on the sidelines and the broad market is down over 6% since then.

Bottom Line: John Chow won this round of stock picking in the tech space, but I’d still give myself the edge on the broad market. At any rate, I figured this would be a chance to get a few good jabs in on the man. Congratulations John, you’ve proven your mettle in IT stocks.

-Jimvesting Dot Com

I think that it is fair game to say that most of you reading this post either own a blog now, or would like to own a blog sometime in the near future. It comes as no surprise that many of us, myself included, like to monetize what we have with some advertisements to get some extra cash in our pockets. The average blogger will earn around $200 a month from private ad sales. But no matter how you decide to monetize your blog, it’s important to understand how pricing SHOULD work, so you can maximize your profits!

The most typical forms of blog monetization are through text ads and banner ads, both of which can be located pretty much anywhere on your website. Regardless of the format, what I am going to be talking about will apply as long as you offer your ads paid on some kind of periodic system. For example, maybe you charge your advertisers every month to put a banner up on your site; maybe you instead go by the week, or even semi-annually. Whatever the case, chances are that an ad today, is worth less than an ad tomorrow if you are running a successful blog. This is what we call in economics the “time value of money.”

The Time Value Of Money: So why is a dollar today worth less than a dollar tomorrow? Holding inflation aside, which will naturally cause the value of money to appreciate over time, we assume that you could always invest anything that you own today and make more money into the future! The less time you have to invest, the less money you will have in the long run.

So what am I going to talk to you about today? I’m going to talk about properly valuing your ad real estate using compounding interest rates. This is an important lesson, as you could be losing hundreds of dollars if you don’t keep this in mind when you negotiate.

Don’t Rip Yourself Off!

Just a few days ago I received an order for a text link ad, only the advertiser wanted to buy a text link for an entire year… that’s 12 months worth! While this was great news, ordinarily I would have just asked him to pay for one month at a time. Not wanting to lose such a massive sale, I decided to use a compounded interest chart to map out what the fair cost would be.

A typical blog owner would say that if my current rate per month is $20.00, then 12 months would be $20.00 x 12, or $240. This sounds fair, right? WRONG! If this was your answer, you need to seriously rethink the way you do business. Assuming that you are running a decent blog, your rates will go up over time, correct? Therefore, we need to adjust for this when we work the rates into a 12 month period.

What I have done is create a compounded rate excel file that will take a starting rate (e.g. $20.00) and adjust it up x% for each month, depending on how quickly you predict you will develop your website and increase the value of the advertisement. A small note, this is not the same as adding 60% for 12 months of 5% growth… this is wrong. The way that this works is that we would start at our base price, $20.00, then add 5% for the second month, or a new cost of $21.00. After that, it is a third month at the second month cost plus 5%, or $22.05. This process continues all the way to the 12th month, when each ad spot would cost $34.21 adjusting for that 5% growth we expect.

Think it doesn’t make much of a difference? Think again!

If you had used simple straight-line growth at a constant rate, you would have billed a total of $240 for the ads. However, if you used a 5% growth per month, you would have billed a total of $318.34… that’s a difference of $78.34! This is revenue that you are just giving away if you are going to give an advertiser the same rate into the future.

Jimvesting’s Advertising Cost Model – A FREE Gift to You!

I have developed in Microsoft excel a model that will take two inputs, a base ad price and a rate (specified by you), and generate a 12-month pricing plan… showing you the difference between constant rates and compounded rates. It’s very easy to use, but if you need some help, follow along in the video so that you can see just how to use this powerful model.

DOWNLOAD THE NET FOOL’S ADVERTISING COST MODEL

Remember, you can really use any growth rate that you want, and my 5% is only a sample. Suppose you are a newer blog and you are going to grow tremendously in the first few months… maybe you would like a rate closer to 20% growth? Or suppose you are an old timer who doesn’t increase traffic as much as you should… perhaps you use 2.5% growth? My model can pump out valuations 12 periods into advance, and you can look anywhere in the middle and pick out, let’s say, 8-months of payment if you’d like.

Bottom Line: If you are going to sell ad space to your users, you better make sure that you aren’t ripping yourself off! If somebody asks if they can pay for a year of service… don’t tell them “no!”, tell them that you need to account for 5% growth and show them my model in work… they should easily agree to the terms. Heck, it works for me!

- Jimvesting

Great turnout for the second question and answer session hosted here at theNetFool.com. I saw a great response from you guys (as always) and have a whopping 19 questions to answer for you today. I know that some of you had massive multi-part questions, but to be fair and conserve space… you are going to need to wait till next round (or email me!) to get all of your burning questions answered publicly.

This time around, questions ranged from personal blogging issues to my opinion on investing techniques. I’m answering everything that came my way, and giving each of you a 100% free backlink as a reward for your participation. The two winners of a 30-day text link ad will be announced at the tail end of this post, so I encourage you to read through all of the questions asked.

Ralph from ForTheLose.org asked:

“Being a PR 4 blog and having so many subscribers/visitors a day, I was wondering what strategies you use to get the word out about your website here.”

Initially, it was a big struggle getting my blog noticed in public areas. I feel that the best way to increase your subscriber base initially is to comment frequently on 15-25 other blogs in your niche, be an active member on some niche forums (webmaster forums like DigitalPoint and Bloggeries in my case) and link often to other websites. People often sleep on the fact that you can get the word out without actually marketing, but just by writing posts and linking out to other blogs/sites in your niche. People notice incoming links, and traffic is generated organically from the inside out!

Hugo from BloggerVenue.com asked:

“Based on your knowledge and experience what do you thing it would work best for making money purpose. Using usfreeads or Squidoo|Hubpages?”

As far as “bum marketing” goes, I really have never used USFreeAds (an online classifieds service) to promote my blog. So this is biased, but I would have to go with Squidoo/Hubpages on this one. I actually would prefer submitting articles to a free resource like EZineArticles as a start to getting solid Google page ranks. By submitting articles, you get targeted keyword traffic coming into multiple pages of your website through Google, so it’s a lot better than just making one Hubpage or Squidoo.

John from AffiliateObsession.com asked:

“Do you find that you have more visitors interested in the STOCK topics or the BLOGGING topics?”

I have been shying away from stock market topics (making a new blog for that purpose) because I feel that my visitors are primarily interested in blogging and making money online. The whole “entrepreneur” look is really what I am going for, and I feel like people like the stock-twist to go along with it, just not as a primary focus. I try to keep a solid balance, but I am definitely starting to favor the MMO crew here.

Movva from ContestWinner asked:

“What is affiliate marketing exactly: Is it driving traffic or selling products. I am a newbie to affiliate marketing, which program should I join?”

Affiliate Marketing can be either driving traffic or selling products, as leads alone can make you money. Essentially affiliate marketing is any time you are doing something to market someone else’s service or product. They will give you a commission to drive traffic to their site, or sell their product, which you can use to make a good amount of money. I would recommend Market Leverage or Never Blue Ads as a good start.

Yan from ThouShallBlog.com asked:

“How do you make yourself visible amongst the pros when you are just a new kid on block? What approach should a beginner take when participating in the discussion in a more recognized blog?“

Everyone’s been there. Being fresh on the scene is really a great opportunity to make a splash from the get-go. When I first started, I pretty much tried to establish the notion that I was an authority, regardless of my low subscriber count. You need to act tall to be able to get that authority and reputation on the internet in my opinion. If you are a beginner, it can be especially vital to start some constructive debate, or even poke fun at a more popular blogger. People may not like it at first, but it’s going to get you recognised and will benefit your exposure in the long term.

Trent from SellPornMakeMoney.com asked:

“How do you handle tracking for incentivized promotions?”

Tracking for incentivized promotions, such as affiliate marketing or referral programs, is typically handled automatically by the third-party provider. For example, Market Leverage or NeverBlueAds has a whole system built in so that you can see who is signing up to promotions through your links. Referral programs through websites to gain users typically track people that sign up under you by email. By comparing the emails that sign up under you to your list of feed subscribers (through FeedBurner), you can award people free prizes and digital downloads for their participation!

German from TheGermz.com asked:

“How long did it take you to get the PR you have now?”

Seeing as this blog officially started in late-October, it would have been about 6 months. However, I mark the beginning of Jimvesting as March, since that is when I saw any noticeable traffic, that is when I premiered the new design, and that is when I began actively promoting my site. Using March as a starting point, I believe it was only 2-3 months before I landed on a PR4. Nobody is quite sure how the system works itself out, so I count myself lucky of such a distinction. You can get a nice PageRank by ensuring that you publish quality work, and that people are spreading links and discussion to your blog.

Matthew from BlogAboutYourBlog.com asked:

“How important has commenting been to network and build your blog to what it is today?”

Commenting is, in my opinion, the best networking tool in the shed. There is simply no better way to form a lasting relationship with other bloggers in your niche than by participating in discussion on their blogs. I know that people appreciate the occasional comment, as it boosts the value of both websites. In addition, you get a free link back to your website every time you drop someone a note. Definitely the easiest method in increasing your exposure available. It’s been my most effective method in starting out, and has continued to provide steady traffic to this day.

Mattaw from MoneyBites.com asked:

“What is your view on conferences and you ever plan to attend any?”

Conferences in my opinion are effective for networking purposes, and not much else. I’m honestly not a fan of being dragged to some off-site hotel in order to hear speakers talk about what most people in the room already know; however, there really is no better way to form a relationship than by talking face to face. As far as my plans, I don’t have any pending interest in attending a webmaster/blogging conference. If a following ever develops around my blog, I could definitely see that happening though.

Pete from BibleMoneyMatters.com asked:

“What strategies would you use to monetize a site using affiliate income?”

My site is monetized in a unique way, in that a lot of my income comes from referrals that are strategically placed throughout my articles and website. A lot of people don’t realize that links I post are in fact referral links due to my affiliate ID cloaking method. Because of this, and the sheer placement of ads, I have been able to increase my referral commission steadily month by month on various websites… which really serves as a motivational tool.

AxioBlogger from AxioBlog.com asked:

“Which is easier to write about for you, either stock market or make money articles?”

This is actually a tough question. I really would have to say make money articles, but only because I have saturated a lot of obvious topics that are out there in the industry. Stock market articles are typically more time consuming, as I do a lot of equity research beforehand to make sure that I provide “what you need to know” and no “fluff” material. However, simply coming up with an idea for a blogging or a make money online article is a lot harder the more that you post!

Ben from RevenueReservoir.com asked:

“What is the hardest challenge you will face when starting a new blog?”

The hardest challenge you will face on a new blog is getting the initial 100 subscribers. 100 users is an important mark. I found in my own experience that once I hit around 100 subscribers, people saw Jimvesting as a lot more legitimate and a good amount of my users started coming from the inside out. It’s important that you aggressively market your website by advertising, commenting and networking to get an initial user base. Never be afraid to ask for help during that initial period!

Flimjo from Flimjo.com asked:

“Do you think that the “buy and hold” rationale for investing in stocks is really just a “buy, hold, and PRAY” mentality for the majority of stock investors and, ultimately, a recipe (for making money) that fails due to investors’ lack of knowledge about stocks and the companies in which they’re investing?”

There has been a lot of bashing of the “buy and hold” model over the past year. This is basically because we are no longer in the bull market environment that we were used to seeing, where most stocks would appreciate in value as a whole. You will be able to apply the “buy and hold” mantra once again in the first quarter of 2009 in my best estimate, sustaining growth for about five years forward. In a recessionary environment, you are literally committing suicide by buying stocks without a good amount of research and understanding. In short, the model fails in a bear market, but can actually work in a bull market. Jim Cramer says “buy and homework,” which I think is the best idea.

Hussein from Niessuh.com asked:

“What did blogging bought you (e.g. mobile phone, laptop, appliances, etc.)?”

Most of the money I make from blogging is either re-invested into Jimvesting or re-appropriated to my various web projects. There really aren’t a lot of luxury items coming in because of blogging other than perks (like the nice care package from Market Leverage). I mean, if you want to blog to afford things… that is definitely possible. I prefer to simply re-invest my earnings to increase my revenue month-over-month.

Prophet from DayTradingProphet.com asked:

“Do you believe its smarter to focus all of your attention on just one or two blogs, or is it better to own a lot of blogs?”

People who try to make 100 blogs just to flip them for $50 a piece are fools. Bottom line. The optimal earnings will come from operating 2-3 blogs, no more and no less. I am in the process of launching my second project, and will be sticking with the two for some time. It take a LOT of work to get a blog to succeed. People often overlook this, and try to do too much at once. Killing yourself with work is never a good thing, and you’ll be better off starting with one blog… before maybe making an additional to increase your earnings potential.

Marko from GnosticDesigns asked:

“How do you actually make money online? Using this blog only?”

It’s funny that you should ask, because saying that I am only using this blog to make money is a bit deceiving. Jimvesting dot com is my primary revenue stream on the internet, but this is not done through advertising and paid postings. Rather, you get a lot of great money from the referrals that sign up through your website into affiliate programs, and people buying products that you are promoting. Because you can essentially leverage a blog’s user base into making money elsewhere, it’s kind of a central hub to making money on the internet that provides for itself!

Ganesh from TeenBlogger.net asked:

“What advice can you give to a 14-Year old to get started with investing? Do you know of any affiliate programs that allow under 18’s to join?”

If you are talking about investing in the stock market, there’s really nothing you can do until you are 18 for legal purposes. In addition, being that young you will be taken advantage of in the markets 98% of the time due to a lack of understanding in my opinion. Anyone under 18 can make loads of money on the internet by fashioning a blog, offering freelancing services, and joining in with affiliate programs to make money. I’m not sure if you are going to be able to access and actual affiliate networks if you are under 18, so you will need to check the terms of service. You can, however, register a PayPal account and sign up with individual sponsors to make money through their affiliate programs.

Pweng from PwengBee.com asked:

“What can you say about the Google-Digg issue?”

Reportedly, Google is in the negotiation process to buy Digg for $200 million. This isn’t much of an issue in my mind, as $200 million isn’t much of an expense for a company the size of Google. With the amount of talk and exposure that Digg fetches on the net, Google is getting their money worth by acquiring the website. The most important issue for them here should be NOT letting Microsoft get the deal. Microsoft would be smart in bidding up the price of the deal, simply because they can afford it and get some great market penetration by making the bid. This is an interesting one.

Sherry from SherryGo asked:

“Here what I like to know if blog having many affiliate programs or links does it affect the blog Page Rank?”

A common misconception about Google’s PageRank service is that you will damage your reputation by linking often to other websites. That you can only have a good PageRank if more people link to you, then the other way around. This is completely false. Link as much as you want, it will only help. I would suggest trying out my affiliate link cloaking method (mentioned above) for ensuring that Google doesn’t look down upon the way you are linking to affiliate programs… but feel free to flood your website with reasonable amounts of link love.

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Well, you guys have successfully gotten my fingers to burn holes through my keyboard on this post! That was a fantastic round of questions, so I want to thank all of you that participated once again. If you have any further questions or want a longer explanation, feel free to use the contact page to get a hold of me and we’ll talk further. Now, on to the winners of the text link ads!

Winner of 1 Month Text-Link: Flimjo from Flimjo.com!
Winner of 1 Month Text-Link: Matthew from BlogAboutYourBlog.com!

I’ll be contacting both of you winners to get set up, but I wanted to thank everyone for the great questions this time around. If nothing else, you got a nice link back just for dropping me a quick comment! Hopefully, I will do this again soon, as I feel it adds a new level to the blog that only a Q&A session can accomplish.

-Jimvesting

Buying stocks is one of the most over-hyped activities in the business world today. Online stock brokers allow you to bridge the gap between Wall Street and Main Street, so you can trade stocks in the blink of an eye with just the click of a button.

I’ve answered questions about “how to buy a stock” before, so let’s explore your options as far as online brokers go. There are many factors that should guide your decision, here are what I feel to be the top factors in deciding which stock broker is right for you:

1. Customer Satisfaction
   • This is probably the most important aspect of any online broker in my opinion. How do people feel about the service they are getting? This includes a sense of security that comes with the larger brokers with hundreds of thousands of customers and local branches you can visit for support. Does your broker assign an individual broker to every account, or are you doing it alone? On top of support features, people will generally report back on how fast transactions are made, which can be important to getting the best price on your trades.
2. Commission Fees
   • For me, this is probably even more important than satisfaction since I have less money at stake than the average investor. In short, brokers charge commissions on every trade you make to handle the transaction costs… how expensive are these? These costs can be anywhere from $1 to $20 per trade, so this can be a huge factor… or a non-factor… all depending on how much money you have in your account.
3. Minimum Deposit
   • Again, to some this is a non-factor, but it is definitely something you should consider if you are an average investor. Do you want that discount broker that has a minimum deposit of just $500… or are you going to look for the full-service kings that require upwards of $10,000 minimum in your account to start off.
4. Research / Features
   • Research is very important for every broker. Some of these fly-by-night brokers offer you nothing in the way of research. Most of the more established guys will give you free reports from Standard & Poor’s, Goldman Sachs, Reuters and other places that can help you make educated trades. On top of research, features like live stock tickers, after-market trading and even technical chart analysis should be important aspects of your broker. If you have the tools to be successful, you are far more likely to make money.
5. The “Catch”
   • What’s the catch? You should do your homework before choosing a broker. One reason I like Scottrade is that they don’t seem to have any, as all trades are just $7 forever. Other services have intro-deals that expire after the first month. For example, E-Trade has a free 100 trades deal, but when you read into it… it only lasts for the first 30 days. Other brokers will hike commission fees periodically, or charge you quarterly account fees for holding your cash. Finding all of the hidden terms is important, and can make or break your financing.

Now that we know about what we are looking for in a broker, it’s time to see what stock brokers are out there for you to use, and how the stack up in these five categories that I have outlined for you to apply when deciding where to house your cash. Introducing the Net Fool’s 2008 Value Rankings for Online Stock Brokers:

	Broker Name	Satisfaction (out of 5)	Commissions	Minimum Deposit	Research/Features (out of 5)
1.	E-Trade	4.4	$6.99	$1,000	4.5
2.	Scottrade	4.6	$7.00	$500	4.0
3.	TradeKing	3.9	$4.95	$0	4.4
4.	Charles Schwab	4.8	$12.95	$2,500	4.1
5.	Interactive Brokers	4.1	Varies	$2,000	4.4
6.	TD Ameritrade	4.0	$9.99	$2,000	4.2
7.	TradeStation Securities	4.2	Varies	$5,000	4.8
8.	OptionsXpress	4.1	$9.95	$0	4.3
9.	Muriel Siebert	4.4	$14.95	$0	4.6
10.	Fidelity	4.8	$19.95-$8.00	$2,500	4.3
11.	Zecco	2.8	$0.00	$2,500	2.3
12.	ShareBuilder	2.7	$4.00	$0	2.1

These rankings are based on my own experience, shared reviews from sources such as Barron’s, Standard & Poor’s, Forbes, Kiplinger and MSN Money. Please take note that the rankings are weighted toward lower-commission / lower-deposit “value” brokers, although all satisfaction and features are accurately represented.

Finding the right stock broker can be a real judgment call, and all of the “top 12″ options are very good services. While I feel that you would be best off with an E-Trade or Scottrade account, holding an account with ShareBuilder or Zecco wouldn’t be your worst option. If you have a lot of investing money, you should focus more on features and satisfaction, so a brokerage like Schwab, Fidelity or Muriel Siebert to fit your needs if commissions really aren’t a factor for you.

I hope that you all found this guide useful. Online discount brokers are a relatively new phenomenon, and have been improving day in and day out… making it easier, cheaper and faster than ever to place trades and make money in the stock market.

Stay bullish on the net!
-Jimvesting