Apparently rapper 50 Cent owns about 30 million shares of H&H Imports which is a penny stock. Right away warning signals should be going up for any knowledgable investor because penny stocks are very risky, especially ones that sell for between 5 and 10 cents.

Over the weekend the rapper started pumping the stock on Twitter to his 3.8 million followers. He was telling everyone they would double their money and that he owned the stock and they should too. In response to this, the stock at one point was up more than 240% all the way up to 39 cents. That equated to a gain very nice gain in the millions of dollars for 50 Cent.

The stock is down today more than 25% and he has now backed off his recommending it. Now he is telling everyone to do their homework before they buy but for those foolish folks who didn’t, it’s too late and many of them have gotten burned.

I’ve always said that penny stocks are for dummies but a story like this one is better than I ever thought I would find to illustrate it. It goes to show how gullible people are and how much influence celebrities have over their fans. It is really sad that so many people would buy a worthless stock just because a music rapper told them to. In reality, it is hard to feel sorry for those folks that have lost money on this bad penny stock.

You can read more about this story here on MSN.

The author of the article speculates that the reason for this is because the first two years, a new President is trying to get his agenda enacted and is not concentrating as much on the economy. After the midterm elections he is then more focused on getting reelected which means he will do more things to boost his approval ratings and to boost the economy. A good economy going into an election means a greater chance of getting elected.

While the new Obama tax package was just passed one might argue that things are already happening along those lines. With investors and companies knowing that their taxes are not going to be raised for the next two years, things are already looking good for the business environment.

But wait a minute.

Didn’t Obama already throw everything he had against the wall trying to stimulate the economy in his first two years? What about a little thing called the Obama stimulus bill in the amount of 787 BILLION! How much more can he do to try to stimulate the economy? Seems to me like he’s got very little left and that new Republican House is not going to let him get away with other reckless spending like that.

No, Obama was trying his hardest to stimulate the economy in the first two years and he clearly failed. He gave away our tax dollars and flushed them down the toilet like all Democrats seem to do. Whatever happens from this point will be more of a result of the Republicans who are there to put a stop to all his shenanigans.

If there is an Obama stock rally in 2011, it shouldn’t be called that. It should be called the return to sanity rally.

Earlier today, there apparently was a rumor that Apple might be looking to by Sony (SNE). That “news” even sent Sony stock up 3% in Japan on Tuesday and it probably was the reason the stock went up right at the open here in America as you can see in the chart below.

Apple has over 50 billion dollars of cash and there has long been speculation about what they are going to do with it. Many shareholders want them to start distributing dividends but so far Apple hasn’t done that. They have bought some smaller companies that were competitors of theirs or that had technology they needed but so far no major purchase.

The rumor was based on nothing more than an article in Barrons that perhaps Apple is setting up to buy a bigger company with all it’s excess cash. Sony might have been mentioned in the article and that was enough to start the rumor.

Stay away from rumors as that is a sure way to lose money. If you bought Sony stock early this morning you still have a good stock but you probably paid more than you should just because of all the unfounded speculation. Additionally, you now own stock in a company that you likely had no interest in until you heard the rumor. You can always sell it back but that is not a good way to invest. Always invest in things you know, not on what you think you know.

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.

When it comes to individual stocks and how they relate to the mutual fund investor, the explanation is anything but simple and a quick read through a Stock Market For Dummies book might be advised. The dilemma that many investors become enthralled with has to do with the advantages of purchasing shares of individual stocks or buying mutual fund shares.

One of the primary reasons that mutual funds have dramatically increased in popularity is directly related to the underlying investments of 401(k) participants. Anyone investing in their employers 401(k) plans generally have a few investments options to choose from. During that annual company meeting where the retirement benefits are explained, the historical performance data of the investments found within the 401(k) are highlighted. Generally, mutual funds fare much better than the other investment choices found within the plan. Many employers also provide a match to any employee participating in the 401(k), which makes many employees feel compelled to join up. Thus, a mutual fund investor is created.

Mutual funds are open ended investments that invest in individual stocks, bonds, certificates of deposit, real estate and money markets. These funds are usually managed a team of professionals that are employed by the mutual fund company. Individual stocks within a mutual fund are purchased to match the focus of the fund itself.

There are lots of different fund you can buy that have different goals or criteria. Growth funds purchase large amounts of individual stocks that have a high potential for growth. Whereas, growth and income funds contain various issues of stocks that have dividends that provide income as well as growth. There are funds that focus in on geographic or specific business and technological sectors. Some mutual funds may have over 100 different individual stock issues contained within it’s portfolio.

One of the greatest considerations within managed mutual funds is called turnover. This is the frequency in which the fund’s underlying portfolio is bought and sold within any given year. High turnover with profit can create a higher tax liability. This is a huge consideration when buying shares of mutual funds because it can undercut the net profit of the investor.

The most frequently questioned consideration of most mutual funds is their often excessive expense ratios. This along with turnover can make investing in aggressively managed growth funds unattractive, especially in a down market.

Individual stocks are often considered during both bull markets and bear markets. When the bulls are running and the market is high, new issues of stock also known as “hot issues” are created with impunity. Many individual stock investors jump on these risky bandwagons with religious fervor. The end result can be huge losses in the blink of an eye.

However, purchasing individual stocks during down markets can be profitable over the longer term. This is known as value investing, which is something that has grown in popularity since the peak of the recession. However, investing in any individual stock limits the diversity found within the mutual fund world. The risk of buying individual issues over the potential to purchase many may be a concern to the average investor.

For the 401(k) investor, individual stocks are usually not available within the plan itself. Therefore, exposure to individual stocks would likely come outside of the retirement world. However, IRAs and Roth IRAs are easily set up to accommodate the purchase of individual stocks. The biggest problem with buying individual stocks is that the average investor must actively manage his or her own portfolio. Though there are brokers who will gladly perform this task for a commission, it is still up to the investor to express their own personal goals for profit and success. Buying individual stocks means that the investor must make the correct choices twice. Buying low and selling high is definitely not as easy as it may seem.

If you had bought when the market was down 800 or more points, you could have made some quick easy money. From that point stocks went back up and although it was a bad day with the Dow losing around 350 points, it was no where near what it was at it’s worst.

Whenever people panic like this it makes one wonder whether it is a buying opportunity? It was if you timed it just right today but few people have the ability to do that. Other than that, it might be too risky to buy now and hope things get better. This was the third day in a row that the market went down and there is definitely a lot of bad news and uncertainty on the horizon. This could be just the start of more bad things to come so buying here could be foolish. At least one thing seems to be for sure: stock trading will driven by a lot of fear in the near future. 

If you are a stock market beginner just wanting to find out what it is all about, you might use this opportunity to sign up for free to Stock Market Survivor where you can be in control of your very own portfolio. You are given $100,000 in virtual play money to get started and you can trade stocks exactly like in real life. There are also monthly prizes to win and it is all free. Most of all though, Stock Market Survivor is a great place to get your feet wet in stock trading and find out what it is like to have your own portfolio of stocks. It should be a lot of fun to watch your stocks go up and down in the coming months and not have any of the risk. 

When it comes to investing, there is one thing that you can always count on: a wide range of views. This MSN Money article shows that you can find analysts who totally disagree on whether now is a good time to put money in the market or whether now is the time to pull out. The more you search for opinions, whether it be online or anywhere else, the more you will find that there never is much of a consensus.

In fact, the most scary time is when everyone seems to agree. That is when the opposite often happens. Sometimes for instance, stock analysts will be really negative on the market and it’s immediate future warning anyone who will listen that bad times are here and just ahead. They cite all the political and economic problems saying that the market can’t go higher. It is during those times of pessimism that the market will keep climbing the “wall of worry” and keep going up even though people think it won’t.

So, is now the right time to buy stocks or should you hold off and wait to see what happens? No one knows the answer even if they pretend they do. These experts you see on television look and sound very convincing but so does the knife salesman on late night TV trying to sell you the latest Ginsu knife.

The fact is that know one knows for sure and if you wait to buy, the market may go to 12,000 or 13,000 and you will have missed your chance. Just as likely, if you jump right in, the market may go straight down and you will feel like you are in a stocks for dummies scenario. Rather than time the market, it is best to try to pick the best stocks that are in a good position in relation to their competitors or industry. Picking strong and undervalued companies is usually the best way to build a portfolio that will perform well under any circumstances.

If you are interested in finding out what it would be like to have a portfolio and do your own stock investing, you might want to sign up for the free stock simulation game called WallStreet Survivor. Not only can you use it to learn how to trade (with virtual money), but there are also a lot of tools and resources that will aid you in gaining a greater understanding of how to get started trading stocks.

Stock investing is something you should only do with money that you can afford to lose. There is risk in stocks no matter how safe your choice(s) seem to be. If you invest money that you know you need or will need, that is truly stock investing for dummies and you should not complain if you lose money. Not all investing is risk free and betting on stocks is one of those that carries various amounts of risk.

Too many people had all the money in their 401K plans invested in stocks and that is why so many Baby Boomers are having trouble retiring right now. You see, that was retirement money they need right now or very shortly from now and the market downturn took a lot of it away. That is why it is smart to invest less and less in stocks the older you get. Had they switched their 401K investments from stock mutual funds into something safer, they would have lost less and been much better off than they are now. 

Learning how to buy and sell stocks is actually quite easy. Most people do it all online now by signing up to one of the many stock broker sites. Anyone who has any familiarity with the Internet and computers can learn to trade and manage their account. It is the actual stock picking and figuring out what to invest in that is the hard part.

Picking the right stocks and knowing when to sell them is something that people struggle with every day. It is sort of like predicting the future and no one has a 100% success rate. Even if you somehow had insider information it wouldn’t guarantee you that you would make money. You see, there are a lot of factors that go into determining a stock’s price and the one that plays the biggest role is that of perception. Stocks are bought and sold everyday and their price is based purely on what people are willing to pay for them.

The free market as well as supply and demand determine stock prices. Of course, a lot of that demand (or lack of it) is based on how well a company is doing. For instance, if a company is having troubles like Toyota is right now, people know what is happening are are less inclined to buy the stock. Less demand means a dropping share price. Conversely, if a company is on fire and releasing products that everyone loves, it is perceived that they will be making money and people will bid up the price of the stock due to high demand.

People use a variety of methods to choose their stocks. A lot of stock picks are in financial magazines and newsletters that can be subscribed to. There are radio talk shows that discuss stock picks as well as a good number of investing shows on television where you can get all sorts of information. Those are the places that most people probably get information on stocks and where they base their decisions off of. A lesser number of people actually know enough to do their own stock analysis and find stocks they are interested in on their own.

A good number of people don’t invest in individual stocks but instead put their money in something known as funds. Mutual funds are investment vehicles that are comprised of a group of stocks and they are managed by a professional. There are fees associated with putting your money in a fund but it is often thought that a professional stock fund manager has a better chance of making money for you than you do yourself. You can put your money in thousands of different funds that each have their own investment objectives and you can choose a fund based on what types of stocks you would like to put money into.

Stock investing has always been thought to give a person the highest return over a long period of time. Because of the risk involved, buying stocks for short term investments is never recommended in case the market goes down. If you have money that is only available for a short time, it should be put in bonds, CD’s, treasury bills, or some other safer investment that is guaranteed through FDIC insurance.

However, if you have money that you don’t need for 5 or more years (and that number is arbitrary), any long term investment plan that involves stocks should be able to overcome periodic market dips and will most likely provide a nice return many years later. The more years you have to invest your money, the safer you should be in the stock market because you have time to make up the losses during the down periods and the up periods can be quite profitable.

People who are new to stock investing and just learning how to buy stocks are the ones that most often are interested in penny stocks. Others might be because of the perceived opportunity to turn a small investment into something huge. After all, a stock that goes from 35 cents to 70 cents has just doubled your money and that is an exciting prospect.

One thing that some investors believe is that all stocks start out small and as “penny stocks”. This is just not true as most stocks are offered initially at much higher amounts. When stocks come on the open market, they just don’t start out costing pennies.

There is usually a very good reason that a stock is classified as a penny stock which typically means that it costs less than five dollars and it is traded on the Over The Counter market instead of the Dow, NASDAQ or AMEX. You need to fully understand these reasons and the risks involved in investing in them.

The most common reason is that it may be or have been going through some troubled times. If a stock gets that low in price, the reason is never good. Stocks of companies that are doing well just don’t get that low. It may be a combination of the companies fundamentals and the industry it is in, but penny stocks are not as solid as the stocks that are in the major indexes.

Adding to the risk of buying penny stocks is the lack of strong regulatory requirements on the OTCBB. Companies that want to be traded on the Dow need to satisfy all sorts of requirements and meet an array of minimum standards. Penny stocks do not have those same regulations and in fact many of the stocks that get kicked out of the major indexes end up over the counter.

Because of the lack of regulations, there is typically more fraud in penny stocks and easier manipulation of the prices. So, although you can get in at such a lower cost, the risks are substantially higher than investing in stocks that are on the three major markets.

Only you can decide if you want to buy penny stocks and obviously you should do it with “fun money” or money that you can stand to lose. My preferred choice is to stick with the bigger stocks and be an ’investor” rather than a “trader”.