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For those of us who have tried investing in individual stocks, here is a great image to capture what many have gone through.

The phenomenon known as authorized user piggybacking has returned. If you are unfamiliar with the term, it is when a person with a good credit score allows a person with either no credit or bad credit to be an authorized user on his credit card. The authorized users with little or bad credit receive the benefit of the main account holder’s high credit score. The Fair Issac Corporation had stopped using this methodology as a component of its FICO credit scores back in 2006 after discovering many abuses to the system.

Head on over to creditcards.com to read more.

My mother has recently won a lawsuit against the state, and she is set to receive about $35-40k after lawyer/court fees.  Problem is, she has no clue how she should manage it.  She says that she doesn’t want to blow the money, but on the other hand she doesn’t want to stash it away for years. She is looking for something that will allow her to maximize the growth over a short period (approximately 2 years) while having the convenience of being able to touch the money in times of emergency. Would you suggest placing the money into a Money Market Account or a high yield savings account? – Dosh, Delaware

Dosh,
Thanks for asking another question. If your mother is looking to safely maximize her return over the next two years, she should avoid equities. Unfortunately, many high yield savings accounts are also not offering the same 5% interest rates they were last summer. Does your mother need access to all $35-40k at once? If she has some flexibility with this, I would recommend taking a look at CDs. In the current financial landscape, certificates of deposit offer relatively attractive rates with the bonus of being FDIC insured. One caveat to CDs is that your mother will pay an early withdrawal penalty if she needs to access the money before the maturity dates of the CDs.

If your mother wants immediate access in case of emergency for all of her money, I would recommend creating an online savings account with a provider like Emigrant Direct or ING Direct. Right now those two banks offer annual percentage yields of 2.75% and 3.00% respectively. A note of caution: your mother should not keep more than $100,000 in a single bank account, as the FDIC only insures amounts up to $100,000. If a bank were to have liquidity problems and your mother had $150,000 in her account, she could potentially lose $50,000.

I was thinking about signing up for an account on E-Trade.com but I really don’t have any experience in stock market investing. Basically, do you just purchase a certain amount of shares, wait for them to go up in value, and then sell? Also, how long does it take you to sell the stock and who buys it? Do you get the amount of money the stock is worth or will people try to offer you a lower price then the market value? Please fill me in on this because I’d really like to learn. – Greg, Clearwater, FL
Once you have money in a brokerage account, you can immediately begin to buy and sell stocks. There is no limit to how many shares you can buy of each company. If you decide to sell a stock, a market order is executed immediately, as long as the market is still open. A market order means that you sell your shares for whatever the asking price is at that moment in time. The other type of sell order is a limit order. This varies from a market order because you set a price in advance for what you will sell each of your shares for. The order is not executed until another party is willing to pay your specified price for the shares. Sometimes a party is willing to pay what you are asking for right away, however there are times when nobody will want to buy your shares for the price you selected, meaning it is too high. The benefit of a brokerage house is that it will find a buyer for your shares without you having to do any additional work.

Be aware that shares do not always go up in value and sometimes you will need to sell after their value has declined. In this scenario you are selling because the fundamentals of the business you invested in have changed, and you are trying to sell before the stock price declines further. Many investors believe that knowing when to sell shares is a lot more complicated to figure out than when to buy shares.

After you sell your shares, you get the full amount the stock is worth minus the commission you pay the brokerage for selling it for you. However, it is important to keep in mind that you will be paying taxes on any capital gains you may have. A capital gain is defined as the difference between what you bought the shares at and what you sold them at. For example, if you bought 100 shares of Disney at $10 a share and sold them at $15 a share, you would have $500 worth of capital gains ($5 a share * 100 shares = $500). Not to bore you, but you should also be aware of the current tax implications if you sell your shares within a year. If you do this, and have recorded a capital gain, your profit will be taxed at your ordinary income tax level. However, if you hold the shares for at least a year, you will be taxed at a lower set rate. Thus, it is more tax friendly to hold your shares for at least a year. Good luck investing.