Primer for People Who Want to Invest in Stocks

My parents jumped on the Mutual Fund bandwagon and lost their shirt. Why? Because they didn't take the time to learn how to do it the right way. Instead, they bought into small stocks that were not viable, but were cheap.

They should have purchased shares of high dividend paying companies. In today's market, the investor can make an extra 5%, 10% or more over a one year time period. But companies out there that never pay dividends.

The reality is that certain companies may never pay dividends. Like my dad, these investors don't want to sell their stock? Hundreds of shares of stock, sit in investors' portfolios insted of earning money. This is similar to buying a farm for several hundred thousands of dollars, but never planting a crop or raising livestock. You just sit on your farm and brag that you own it.

Here is a better idea. Most stocks offer publicly traded stock options. You make these transactions with your broker, similar to buying and selling stocks. A call option gives another investor the right to buy shares from you at a price you set anytime before a certain date. You collect a premium by selling the call and you get the premium, in cash, on the day you sell the option. Just like a dividend. One strategy is to sell "at-the-money" or "out-of-the-money" calls on your stocks (Covered Calls).

Widely held, heavily-traded stocks like Microsoft (MSFT), Google (GOOG), and Ebay (EBAY). You can sell options each month, up to 12 times a year, after they expire. Of course there is more that you need to know. I learned this tidbit at PowerOptions. Their patented SmartSearchXL® technology is the best way to Find, Compare, Analyze, and Make Money On Stock Option Trading.