People like Bill Gates and Paul Allen at Microsoft have so many shares that they usually sell the same amount every month or two months or whatever schedule they decide on. That way the same number of shares are being sold throughout the year and it doesn’t look to investors like they are bailing out on the company or that anything unusual is happening.

Insiders are thought to have inside information and it makes a lot of sense to keep an eye on what they are doing. Many investors like to closely monitor insider buying and selling as they think it is a good indication of whether a company is doing well or poorly.

For instance, if you suddenly see an insider at Intel (or any company) buy a large amount of shares, it must be because they think the company is doing well and they think the stock price will be going up. Why else would they be buying, right? Conversely, if you find out that an insider at another company is suddenly selling shares in numbers that are uncharacteristic, perhaps that is an indication that things aren’t going too well at that company?

Company insiders often have so many shares of stock that they have a problem trying to get the most money they can for them. If they sell a lot of shares at once, they have enough shares to actually move the price of the stock. Additionally, selling large numbers of their stock could lead to a panic. That is why most of them sell reasonable amounts of stock at predetermined times.

Many stock market investors and analysts look for instances where sales or buys are made by insiders that are not on a regular schedule. This is especially true of insider buying because these people have key information that we don’t. If their inside information is so good that these company insiders want to buy more shares, that is often a strong indication that they think the stock is undervalued.

To learn more about stock insider buying and selling, I suggest you go to your bookstore and buy one of the Stock Market For Dummies books or any one of the other ones that covers the basics of stock investing.

Not all stocks pay dividends and in fact, most don’t. Those that do usually have ones that are very small (under 1%) and that doesn’t amount to much. But some stocks pay dividends that are 2% or higher and it all depends on the company and how much they want to give back to shareholders. Some companies like to keep all the cash themselves for research and development, expansion, legal costs, and any other emergencies that might develop.

Microsoft was a good example of a company that had absolutely tons of cash but refused to pay out any of it to investors for years. The stockholders complained and complained and finally Microsoft relinquished and decided to pay a small amount back quarterly. Today the dividend amount is around 2%.

Some investors only buy stocks that pay dividends as they feel they have better value. When given the chance, why not pick stocks that pay you back a little every quarter rather than ones that don’t? Other investors would rather focus strictly on picking stocks they feel have the best chance to go up and they ignore whether a stock pays a dividend or not.

No dividend is safe and often times it will be the first thing to be cut when a companies profits are down. So, even if you buy a stock with a healthy dividend today, it is not something you should count on. During this very difficult economic stretch over the last 3 to 4 years that saw the market go way down, many companies stopped paying their dividend.

For a list of the highest paying dividend stocks you can go here. Remember though, while those stocks may pay that dividend today, there is absolutely no guarantee that they will pay it tomorrow. You should not be buying stocks just because they pay a nice dividend. If they go down, it will most likely wipe out any money you made with the dividend and probably a whole lot more too! If you want more information about stocks with dividends, you might pick up one of the books called Stock Market For Dummies that you can find in almost any bookstore.

Right now there is a lot of bad news about the economy. I mean a REAL LOT OF BAD NEWS. Unemployment has gone up to 10% under Obama and stayed there. The government is spending money at rates like we have never seen before. This country is deeper in debt in every way than it ever has been before. In short, there is a lot to worry about.

Yet stocks aren’t going down and it seems like they even want to go up. All the bad economic news I just described is the wall of worry and it is a very big wall right now. But if stocks end up today (9/3/2010) like it looks like they will, it will be the third straight day that they have gone up. Any bit of good news about the economy or jobs seems like it is enough to send the market up.

When stock investors ignore bad news or general pessimism about the market or economy and bid stocks higher, that is when it is said that the market is climbing the wall of worry. Its like there is bad news and the market should be going down and yet it defies gravity and goes up.

You can go out and buy the Stock Market For Dummies book and learn all the basics and fundamentals there are. But no common sense principle or any set of fundamentals can explain why, in the face of so much economic bad news, people are still willing to bid the market up and part with their money.

This is what makes the stock market very interesting for many people. A good investor is in tune with not only what stocks are doing well but also with what people are thinking about those stocks. Often time what people are thinking is even more important than the nuts and bolts of a companies inner workings.

If people like a stock or what a company makes (like Apple for instance), sometimes that alone is enough to keep it going higher. If people want to buy they sometimes will buy, no matter what is happening to the economy. The wall of worry is when there is seemingly enough bad news and a lot of experts predicting bearishness to push the market down. And yet it stealthily keeps going up, usually slowly. Is that what we are seeing here? It sure looks like people want to buy stocks and are just waiting for any little bit of good news as an excuse to buy.

Right now, the Dow Jones is in a trading range which can be seen clearly in the graph below. For more than a month there has been little to no change and it is at about the same point now as it was on May 18th.

It is during times like these that it is confusing what to do with your money that you have sitting on the sidelines. At some point in the future, the market will breakout of this trading pattern and either go down or start to head up. But for now, it is unclear when a change will start to happen and which way it will go when it does start to move.

People who have stocks that pay dividends are in the best position when the market gets stuck in a trading range. Dividend stocks pay you money no matter what the market is doing and regardless of whether the stock price is going up or down. This is why many professional stock analysts recommend you have at least some dividend producing stocks in your portfolio. Especially now with interestrates so low, stocks with dividends are especially attractive.

As to the question of whether it is better to buy funds or stocks though, there is no right or wrong answer. Some of it will depend on how much you have to invest. If you only have a couple thousand dollars, it will be difficult for you to buy 5 or 6 stocks and properly diversify your holdings. In that case, it might be better to to buy a mutual fund that invests in a basket of stocks.

There are stock funds (or equity funds) and mutual funds that are now available for seemingly every investment strategy you might have. Stock funds invest just in stocks and mutual funds can invest in stocks, bond, money markets, and other investment vehicles.

If you want big short terms gains, you will be able to find a fund with that goal. If you are more conservative and want long terms growth with stocks that pay dividends, you should be able to find something for that. If you want to only invest in stocks that comprise a certain industry, that is available as well.

An advantage of stock funds, some people believe, is that your money is being managed by a “professional”. Of course some professionals are better than others and there are never any guarantees. When you put your money in a mutual fund, you have to keep your fingers crossed that the fund manager knows what he is doing and is a good stock picker.

The cost for having the “professional” manage the fund and your money is not free. There will be a fee which is part of the price you pay to get into the fund. The amount of the fee is different for every fund and the way you are charged can be different as well. Before you invest in funds you should do some research and understand the real costs you are going to be paying for the privilege of having your money managed by someone else.

Some people hate putting their money/investment decisions in the hands of another person. They would rather buy their own stocks and make their own decisions. If they do well, they can take all the credit. If they fail, they at least know that they can’t blame it on someone else. Whether you decide to invest in mutual funds or individual stocks that you buy yourself depends a lot on the person. 

If you are one of those people who are interested in keeping up with individual stocks and constantly looking for the best stocks to buy right now at any point in time, you will not be able to do that through stock or mutual funds. Buying and selling stocks yourself will be the route you have to take so you should keep that in mind.  

However, somewhere around the time the Internet started to become a factor in investing, things become much more volatile and unpredictable. You can see the chart below that shows a very steady increase in the Dow from 1981 all the way up to about 2000. Then things start to get a lot more choppy and the ups and downs are much bigger.

Buying and holding stocks in those early years on the graph was a winning play. You could confidently buy most any solid company, forget about it for 10 or 15 years, and come back to see how much you made. But from the 2000′s onward, things seem to have changed and I attribute much of that to the Internet.

Online trading is now the way most people buy and sell stocks. It is quick, easy, and cheap which at one point led to the proliferation of day traders. Guys (and gals) trading in and out of stocks every day made for a lot of volatility and you can see a big difference in the chart from 2000 to the present. Day traders weren’t investors and they weren’t interested in picking good stocks that had value. They just wanted to find the best stocks to buy right now, get a quick up tick, and then they were happy with their small gain and sold. You can see how much things have fluctuated since 2000 in the graph below:

The Internet has also made information on companies and the business news of the day accessible to everyone almost instantly. This has helped to somewhat even the playing field between the professionals and the everyday average investors. Things happen fast now and when news breaks, everyone knows about it and reacts. This is a big departure from the way news traveled in the 1980′s.

Technology now is progressing at a quicker pace than it used to. There are new industries popping up all the time (like sun power, wind power, recycling, and others) that take the place or add onto the way we do things. New companies are formed and old ones have to adapt to survive. This makes buying and holding stocks for long periods of time no longer a profitable way of investing. Now, when you buy a stock, you need to keep a close eye on it more than ever before.

There are many sources of information including the “Stock Market For Dummies” types of books that are geared toward beginning investors. Online and offline, you can now find more stock market material than ever before. People who might have never before gotten interested in stocks are now pulled in because of the ease of it all. This all contributes to more investors who are unsure of what they are doing and more likely to panic and sell when things look bad or buy too high when the market is flourishing.

The stock market is indeed more of a crap shoot than it was 20 years ago. It doesn’t mean you can’t make money in it: it just means you have to keep tabs on all your investment choices and watch them carefully all the time. Long gone are the days when you could buy a stock and sit back and hold it for a long period of time.

Between the time when the stock market closes  and then reopens again the next morning, the world still turns and there are lots of economic things happening. While it may be night in America, it is daytime somewhere else most notably in Europe and Japan. Good news, bad news, any kind of news is coming out while are markets are closed and that news may affect how the Dow opens.

If there is good news in Europe, it may help raise the futures and give the NYSE a bump in the morning. Bad news from Japan may hurt the futures and mean a down opening. Additionally there can be any and all news overnight from America and American based companies that might affect the futures. Economic reports from the government involving GDP, unemployment and anything else also often come out when the market here is closed and they all have an impact on the futures.

So when you hear the talking heads discussing the futures before the market opens each morning, all you really need to know is that if the futures are down, the market will most likely open down. If the futures are up, the stock market will probably open with a gain. Of course, the more down or up the futures are means the bigger the plus or minus the open will be.

This does not mean that every stock will be up or down. In fact, bad or good news from one really big stock company can make the difference in the futures. When stocks like Apple or Google come out with really big news, it can be big enough to sway the futures either to the positive or negative. Penny stocks can never do anything to move the futures because they are irrelevant but some of the really influential companies can have quite an effect on how the markets open every day.

As an example, you can look at the prices of health care stocks before and after the vote in the Senate to mandate health insurance. There is lots of speculation from both sides on what this bill will do to our country and to the health care industry. Some people say it is the beginning of the end and others think it is the best thing ever and of course there are a million opinions in between.

With the passage of the bill one might have thought that health care stocks would go down as the government is going to be more involved and private companies might be on the short end of that. But on Monday March 24th the day after the vote, health care stocks went up and the market as a whole went up as well.

One of the biggest reasons for that is that finally something had been decided and some of the uncertainty was removed. People hate not knowing what the future holds when it comes to their money. The whole stock market is based on people’s opinions of what is going to happen in the future. Uncertainty about that future leads people to sell and/or sit on the sideline because they just don’t want to commit any of their money until they feel like they know what is ahead.

People are constantly searching for the hottest stocks to buy right now and those would be the ones that have the brightest future prospects. What is happening to a company right now is less important than what might happen to it in the future. For instance, Apple has a lot of great products out there that help and have helped the stock climb to it’s very high price. But right now, people are specifically interested in the Ipad which hasn’t even come out yet. Investors are continuing to bet that the Ipad will be a hit as they drive up the price.

Uncertainty was also very evident on 9/11 and the beginning of a big sell off. When people feel uncertain about the future, they tend to sell. They just don’t want to have their money out there and vulnerable when they are unsure of what is happening or going to happen. 9/11 was one of the most hazy and unsure times our country has ever seen. In those instances, the phrase “cash is king” comes to mind because most people are content to sit on their cash and wait things out.

Stocks usually go down when a company announces bad news but sometimes even that isn’t the case. If a cloud has been hanging over a company and driving the price of the stock down, sometimes news from the company achnowledging the problem will stablize the stock and maybe even send it up. Likewise, bad news and numbers from a specific quarter can be offset by good news about the future. In cases like that, a companies stock may actually go up the day they announce poor sales but give a rosy picture of the future.

The Wall Street Survivor website is a comprehensive stock market simulation game and learning center where you can get your feet wet in buying and selling stocks that comes complete with $20,000 in monthly prizes that anyone can win just for participating.

After you go through the quick FREE sign up process, your account will be credited with $100,000 in virtual dollars that will be your portfolio to do with as you wish. Just like on any real online stock broker site, you can then use that money to invest in any stock you can find on the real market.

You will be buying and selling stock in no time on Wall Street Survivor and any type of trade you can do in the real wold you can do here. That means you can learn how to short a stock and then cover it and you can even set up a second portfolio (with virtual money of course) just to trade options. My portfolio looks like this at the time of this post so I actually have a gain after several months of trading:

Anyone who wants to get their feet wet trading stocks without risking their own money will love this stock market simulation game and there is such a wealth of information there as well. Stock quotes, stock tips, up to date stock analysis, forums, contests, tutorials, and business news are just some of the things that are all there for you to use. Some of the features cost money (such as real time stock quotes) but you can learn so much for free that it will keep you occupied for months.

Wall Street Survivor is the place where any beginner can have fun and learn about stocks at the same time, all for FREE. If you want to try out your stock picking skills and see what would happen with your picks had you bought them for real, this is the place to do it. Your portfolio will look just like it would if you were trading for real and you can watch it go up and down daily. The more involved you are the more chances you have to win and you can even earn free gift cards for trading in the activity points you get just for being active. Give it a try!

Generally though, when economic times are tough, so are the fates of most companies and stocks. After a solid 2009 for the market that saw it head steadily higher after about February, how can things continue on with the state of the economy looking so awful?

Right now the Dow is treading water and today it has pulled back above 10,000 which is a number that really has no significance at all. 2010 has been an up and down ride so far and it looks to me like there have to be more uncertain times ahead which will cause the market to go down.

President Obama keeps spending our tax money like there is an endless supply of it. He keeps promising better things ahead and yet things don’t get better. The new Obama jobs bill he just announced is probably just going to drain more of our taxpayer’s money and give us little in return. Companies continue to lay off workers and with unemployment remaining around 10%, is there really any reason to be optimistic about the near future?

When the economy is doing poorly, the stock market has to follow eventually. When company profits are down and there is uncertainty everywhere, investors will stop putting in new money sooner or later. While this has only happened a little this year, it seems like the bad data coming out every week will eventually spook investors.

The Dow has had a good run up for the last year and investors who benefitted will decide to take profits if things continue to look scary. With Obama and the Democrats in charge throwing our money around like drunken sailors, how can anything get better anytime soon? Here at Stock Market For Dummies, we want to invest in new stocks but are just too scared right now. How do you feel about the economy and the stock market?