A mortgage is a considerable financial responsibility, one which most likely hinges upon a steady income. The payments may become difficult to make without your assistance or, even worse, impossible to meet. Life insurance can help you to protect your home and family.

A life insurance policy can protect your family from the financial obligations of making mortgage payments without your salary. In the event of your death, your family will still be accountable for mortgage payments, which may be unaffordable without your contribution.

For protecting your family from bearing such a burden and possibly losing the house, you should purchase a life insurance policy. Although there are other insurance options available too, for example, mortgage protection insurance, the wisest and most economically sound choice is to buy a life insurance policy.

The death benefit of your life insurance policy should include your mortgage’s amount. On the occurrence of your death, the proceedings of the policy will cover the entire cost of your mortgage, your house will be paid off, and your family will have one less thing to worry about.

If taking out a mortgage has already substantially cut into your finances, life insurance is even more important. Although your mortgage payments may make paying premiums for a whole life insurance policy unimaginable, there are cheaper options.

As an alternative to purchase a permanent life insurance policy or mortgage protection insurance, explore the option of buying a term insurance policy for the same duration as your mortgage. This alternative is much less costly. The premiums will be considerably lower, but the coverage will remain the same.

At the end of the life of the policy, you can decide whether you want to convert or renew the policy or if you would rather discontinue the policy. This approach guarantees mortgage protection at the lowest cost.

In terms of cost, the best choice is decreasing term life insurance. If the main reason for purchasing a life insurance policy is for mortgage protection, investing in this type of term insurance is your best bet.

At the start of your mortgage, you owe the most to your lender and your mortgage protection should reflect that. However, since after a few years of making payments, you will owe significantly less, decreasing your protection is a logical move. A decreasing term life insurance policy allows this.

You can also design your life insurance policy so that your protection is the same amount as your debt. Although the premiums do not decrease over time, your mortgage life insurance quote will be considerably lower than if the quote you would receive and if the coverage of the policy were level throughout its term. Some policies annual premiums are the same as the level coverage, but the payments end earlier than the end of the policy. For e.g., the premiums on a 20 year mortgage protection insurance policy are required to be paid for only 16 years even thought the coverage will last all 20 years.

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If you want to convert your term life insurance into a permanent one, you should consult a financial adviser for their opinion. Bear in mind that you can choose to cancel any life insurance policy that you buy often after a period of ten days if you are dissatisfied with it. A good life insurance should cover all aspects of your life that you want it to.

Picking out the best life insurance for yourself involves investigating the company offering it very well. Life insurance companies are all over the place hence the need to search intensively for the right one. Factors that can guide you in making the right life insurance decision are premium and coverage.

You may be confused at the array of life insurance policies available to you because they are numerous. The first step to choosing the right life insurance policy is to ensure that you know exactly what you want. If you do not define your goals before you go looking for life insurance, you may end up selecting the wrong policy.

A variable life policy is a life insurance policy that is designed to have a fixed monthly premium. You can make profit from a variable life policy if you channel the cash build up to other investments and watch over them closely.

In your desire to obtain an affordable life insurance plan, you may fall victim of scammers online. Never volunteer more information than is necessary online to a so-called life insurance company if they aren't being exactly forthright. Before you entrust any information that may incriminate you to an online insurance
agent, you should first check up the company to ensure that they are legit.

In America, life insurance is hardly common because of the implications associated with it. The feeling or belief that you cannot die young may eventually be the death of you when you don't have life insurance, so to speak. Death is a reality that confronts both old and young so you're never too young to buy life insurance.

More often than not, you may end up paying a higher premium rate for your life insurance because you avoided the medical exams that came with it. A good way of getting cheaper rates for your life insurance is to agree to a medical exam. Most life insurance companies give discounts to people who have excellent health.

For many people, life insurance is a confusing combination of terminologies and figures. Many people only often see the need for life insurance after they have it explained to them in painstaking detail. Life insurance isn't really that hard to understand once you are able to look beyond your hang ups about death and at the bigger picture

What happens now, If your bank fails will the shareholders lose out?
The FDIC took over WaMu due to its failure, Washington Mutual was heavily invested in subprime home mortgages. Declining home values left WaMu seeking more capital to stay afloat. Incurring more debt by borrowing more money, the bank lost its footing when large sums of depositors withdrew money out of their accounts.

Once the FDIC stepped in they sold the bank to JP Morgan Chase for 1.9 Billion dollars, since for JP Morgan this is an asset only acquisition. Shareholders will lose all the money they had invested in the Nasdaq (WM).

Where does this leave private equity investors?

According to Welt News Online the deal leaves private equity investors including the firm TPG Capital, empty handed without anything to show for the purchase of equity securities they bought totaling $7 billion invested in WaMu.

JPMorgan Chase is now the second largest bank with rising shares for investors, According to the Wall Street Journal Online, JPMorgan is now the nation's largest deposit-gatherer with $911 billion of deposits, outranking Citigroup Inc.'s $804 billion and B of A Corp.'s $785 billion. J.P. Morgan previously ranked as the third-largest with $723 billion, before buying WaMu.

The deal also pushes J.P. Morgan to the second spot as measured by its 5,410 branches, ranking behind Bank of America and leaping over both Wells Fargo & Co. and Wachovia Corp.

J.P. Morgan infused its business by selling $10 billion of common stock, investors bid up the JPMorgan's shares by 11%. When JP Morgan sold its stock in conjuction with the WaMu deal shares rose $4.78, to $48.24 in New York Stock Exchange composite trading

Find out how to protect your money from bank failure

Having options on how best to protect your money will help with future decisions when it comes to your investment portfolio. The seizure by the government means shareholders' equity in WaMu was wiped out. The deal leaves private equity investors on the sidelines empty handed.

When it comes to asset protection for your basic bank accounts, including checking and savings they are insured and protected by The Federal Deposit Insurance Corporation up to $100,000 at all banks, for sums lost due to theft, bank closings or failures. Brokerage accounts carry their own protections in case of failure.

Brokerage accounts have protections in place in case of bank failure, with up to $500,000 in coverage (SIPC)The Securities Investor Protection Corporation insures brokerage accounts.

What do we learn? That it is important to diversify your investment strategy, this can help to protect you from shifts in the market.

One of the best aspects of mutual funds is that with each investment, there is instant diversification. Diversification is important for all investors because it reduces risk. It is important to take risks when investing because without risk, you won’t make very much money.


For example, putting your money in a traditional bank account has little to no risk (as long as it is within the $100,000 FDIC insured), but at 1% or less, you will make next to nothing. You do need to take risks when investing. The younger you are, the more risk you should take.


Diversifying your investments eliminates a lot of the unnecessary risk that comes with investing. If you invest $100,000 in one company and it loses 5% for the year, you just lost $5,000. If instead you invest $20,000 in 5 different companies and they earned -5%, 2%, 16%, 8%, and 9%, you would have made an average return of 6% and made $6,000. It wouldn’t be as big of a deal that you lost 5% because you gained in the others.


Mutual Funds Work through Diversification


Mutual funds are able to include hundreds of investments in stocks, bonds, currency, and other securities. How are they able to include such a wide array? Essentially, you are buying tiny pieces of each investment. You would not normally be able to do this with a brokerage firm, but the unique aspect of a mutual fund allows you to do just that.


A mutual fund takes a large group of investors. Each investor is interested in investing in a certain type of investments. The mutual fund collects to money from the investors and uses it to purchase many shares of whichever stocks they choose. They then turn around and issue a share of the mutual fund to the investor containing many pieces of other stocks.


If you were wealthy, you would easily be able to invest in many different companies and have someone manage your portfolio for you. Unfortunately, most of us aren’t very wealthy, and we must start small. Mutual funds are the perfect solution because they protect your investment by instantly diversifying your portfolio.


If you want to start investing money now, but you don’t know much about investing, you should try mutual funds. Even if you start learning and studying up on how to invest, you can invest in your own stocks later, but still start investing now so you start earning money as soon as possible.

How are mutual funds different from stocks and bonds?


If you buy a share of stock, you own part of that company. For every share you buy, your ownership increases. Stocks are equity investments because you have equity in the company. In order to make money with stocks, you have to sell your stock at a higher price than you purchased it for a capital gain.


If you buy a bond, you have lent money to the company for a specified period of time. You do not own any of the company. In order to make money with bonds, you lend money to the company, and every year or six months, they pay you interest. When the time is up and your bond has reached maturity, the company repays the money you lent them. You also have the option of selling the bond before maturity.


A mutual fund is simply a mix of stocks, bonds, or both. They often include other investments as well such as derivatives. A large amount of people pool their money together and purchase a wide variety of securities. This allows those with little to invest to be able to diversify their portfolio.


Instead of buying shares of stock in one company or a handful of companies that you choose, or buying bonds of different companies, you buy shares of a mutual fund. A fund manager assigned to that mutual fund manages the portfolio and chooses the investments. You make money similarly to stocks by selling your mutual fund shares for a gain.


Which should you invest in?


You may be wondering why you would invest in a mutual fund if you could just buy the stock or why you would buy the stock or bonds if you could just invest in the mutual fund. Basically, you are wondering why you would choose one over the other when they include the same things.


One benefit of a mutual fund is that if you have a small amount of money, you will be able to diversify your portfolio. For example, if you want to invest $1,000, you may only be able to invest in a few different companies because you can only buy whole shares of stock. Similarly, if you want to buy a bonds, you would probably only be able to buy one, which would be risky in that you’d either get a very low rate of return, or lose all your money if the bond turned bad.


A mutual fund is foolproof diversification. You don’t have to choose the right stocks or bonds, which leads us to the next point. If you are the average person and don’t have a college degree in finance, it’s likely you don’t know much about investing. If you don’t know how to research and pick stocks, you are probably wary of your own choices, worried that you might lose money.


With mutual funds, a fund manager makes the choices, so you can feel a little more confident in the chosen stocks. Also, you can see a funds past performance when choosing a mutual fund. This helps give you a little more piece of mind.


Ultimately, mutual funds are great for the average person who doesn’t have a lot of money to invest, a lot of knowledge about investing, or the time to spend choosing investments and managing a portfolio.

What is a no load-fund mutual fund?


A load is essentially a commission you pay on the mutual fund. With a no-load mutual fund, you don’t have to pay a commission for your mutual fund because it is distributed to you directly from the investment company.


Load mutual funds usually charge you a percentage of your return. For example, they might charge you a 3% commission. If you make a 6% return, you only get 3%. This is an example of a back-ended fund because the commission is taken out of the proceeds. This is slightly better than a front-end fund because the fee you pay has had time to earn money. With a front-end fund, you pay the 3% up front and that money has no chance to earn any money.


From first impressions, you assume a no-load fund is superior because you don’t have to pay a fee, and most often, this is true. Think about it; if you invest in a load fund that’s making a 12% return, that’s great. It’s also more than 8% that maybe another no-load fund is making, but if the load commission is 5%, you’d still be making more with the no-load fund.


Just because it’s a load fund, doesn’t mean it will earn you more money.


With many things in life, we often think that the more it costs, the better it is. This is often not the case. In fact, some colleges raise their tuition just to get more people to enroll because they think that with a higher price, they have increased the value of their education. In actuality, they’ve changed nothing about their teaching.


Also, even with the experience and knowledge fund managers have, it is impossible for them to always find the perfect stocks that will make the most money. The stock market, or any market for that matter, is impossible to predict. While they can make predictions of what a stock will do based on the past and technical information, it’s still possible that you could choose stocks randomly from the paper and have a better return.


Financial knowledge and research will help in investing, but over the long haul, it’s very possible you will probably earn at least the same amount with no-load funds or even more, than with load funds after commissions.


What should you choose?


Unless you are very confident in a load fund, I suggest going with a no-load fund. You will at least save some money up front.

The mutual funds in India were buffeted from the meltdown in the Wall Street and its impact on the Indian stock market. The foreign Asset Management Companies, or AMCs, had to deal with another factor. Many mutual fund investors in India were anxious whether their investments in the foreign AMCs were safe, particularly when Lehman went for bankruptcy and AIG's fate was also not decided. There are worries on more Wall Street firms going under.

India has a sizable presence of global AMCs including Fidelity, HSBC, and Morgan Stanley. There are also foreign partners in AMCs, including Merrill in DSP Merrill Lynch, and Sun Life in Birla Sun Life.

But the investors can be assured of their investments in foreign AMCs. Of course, their investment in mutual funds in India has the market risk per se from the fortunes of the stock market or debt markets.

The structure of the mutual funds safeguards the investors in case an AMC falls. The AMCs just manage the money. The creditors of the AMC do not have any right over the investors' money. The AMC just acts as an investment manager of the mutual fund and gets fee-based income on it. The AMC takes investment decisions according to the scheme objectives.

Another entity, the Custodian, has the role of safekeeping of securities and it has no role in asset management. The Custodian is appointed by the Trustees, who are group of persons that have supervisory authority over fund managers. The Trustees of mutual funds in India also ensure that the fund managers stick to the trust deed and the assets of the funds are held safely. The Trustees also perform other supervisory role.

The mutual fund is set up by a sponsor who works closely associated with the AMC. The regulations of the mutual fund regulator, SEBI, require that the Sponsor has to contribute a minimum percentage to the net worth of the AMC.

The Board of Directors of an AMC are normally elected each year at the annual meeting and act on behalf of the shareholders.

So the different levels of supervision in a mutual fund delink your investment from that of the bankruptcy of the AMC. Still, we wish all the foreign AMCs a good luck as they battle the Wall Street storm.

Of course, the creditors have the AMC have rights over the assets of the AMC like its offices. But not over the investors' money.

Are all your worries over from investment in mutual funds? Not exactly, says French bank BNP Paribas. The global markets, including those in India, have not bottomed out yet, it says. But on the positives it says that it expects the Reserve Bank of India to hold rates for the next six months on concern over growth rates. Hopefully, some respite for realty, banking and other interest-rate sensitive counters. BNP Paribas sees Asian banks untouched from the global credit crisis.

As of now, the bank remains underweight on commodities. But still the French bank is worried over how he rescue plans of US Treasury Secretary Henry Paulson and Fed chief Ben Bernanke's will hold off another crisis.

If you understand how to invest in mutual funds you can easily find a way to improve your finances. Everyone wants easy money. If you have money sitting around and are not using it, it is natural to turn to the stock market as an investment option.

Unfortunately the stock market is fickle and it is far too easy to loose money if you don't know what you are doing. Most people have no idea where to start, let alone how to actually make money.

The amount of research needed to make good investment choices is overwhelming. Fortunately small investors no longer need to do this research. Mutual fund providers do the research for you and present a range of options you can understand.

With managers and brokers who understand the current markets and who understand how to take advantage of it, mutual funds give investors an upper edge in investment. Those who choose the stocks that make up the funds keep up-to-date with all the information and make choices to make their mutual fund the most profitable to all involved.

Some mutual funds wind up costing investors a lot of money. Managers and brokers take fees to pay for their expertise. When investing, it is smart to look for a no penalty mutual fund to minimize extra fees.

No load funds are in fact just as good as mutual funds where you can expect to pay fees. Sometimes they are even better. Having extra fees does not make your investment any more secure or productive.

There is an amazing amount of information available for those who are looking to invest. You can find information in books and articles from magazines and financial journals. Newspapers often discuss investment information in their financial pages. There are many websites and other internet sources with lots of investment information. Many mutual funds also offer pamphlets to read at no cost. By researching you can learn all about your investment possibilities.

It is very important to read up as much as you can before investing. It is your knowledge that will help you find a mutual fund that suits your needs.

Tips on hidden fees and unseen risks will help you understand what goes on behind the scenes in the mutual fund world. You can avoid many pitfalls by researching carefully. There is also a lot of information on the history of individual companies and funds and you can track their performance to see their track record.

It is easy to buy into a mutual fund once you find one that suits your needs. With lots of information available you can be in charge of your investment choices and know how to invest in mutual funds effectively.

Equity funds, if selected in the right manner and in the right proportion, have the ability to play an important role in achieving most long-term objectives of investors in different segments. While the selection process becomes much easier if you get advice from professionals, it is equally important to know certain aspects of equity investing yourself to do justice to your hard earned money.

Knowing them and by using them in the selection process can make a big difference to the end result. Here are some important investment guidelines:

1. Know your risk profile

Before you take a decision to invest in equity funds, it is important to assess your risk tolerance. Risk tolerance depends on certain factors like emotional temperament, attitude and investment experience. Remember, while ascertaining the risk tolerance, it is crucial to consider one's desire to assume risk as the capacity to assume the risk.

It helps to understand different categories of overall risk tolerance, i.e. conservative, moderate or aggressive. While a conservative investor will accept lower returns to minimise price volatility, a moderate investor would be all right with greater price volatility than conservative risk tolerances to pursue higher returns.

An aggressive investor wouldn't mind large swings in the NAVs to seek the highest returns.

Though identifying the desire for risk is a tough job, it can be made easy by defining one's comfort zone.

2. Don't have too many schemes in your portfolio

While it is true that diversification helps in earning better returns with a lower level of fluctuations, it becomes counter productive when one has too many funds in the portfolio.

For example, if you have 15 funds in your portfolio, it does not necessarily mean that your portfolio is adequately diversified. To determine the right level of diversification, one has to consider factors like size of the portfolio, type of funds and allocation to different asset classes. Therefore, it is possible that a portfolio having 5 schemes may be adequately diversified whereas another one with 10 schemes may have very little diversification.

Remember, to have a well-balanced equity portfolio, it is important to have the right level of exposure to different segments of the equity market like large cap, mid-cap and small cap. In addition, for a decent portfolio size, it is all right to have some exposure in the sector and specialty funds.

3. Longer time horizon provides protection from volatility

As an equity fund investor, you need to understand that volatility is an integral part of the stock market. However, if you remain focused on the long-term objectives and follow a disciplined approach to investing, you can not only handle volatility properly but also turn it to your advantage.

4. Understand and analyse 'Good Performance'

'Good performance' is a subjective thing. Ideally, to analyse performance, one should consider returns as well as the risk taken to achieve those returns. Besides, consistency in terms of performance as well as portfolio selection is another factor that should play an important part while analysing the performance.

Therefore, if an investment in a mutual fund scheme takes you past your risk tolerance while providing you decent returns, it cannot always be termed as good performance. In fact, at times to ensure that your investment remains within the parameters defined in the investment plan, you may to be forced to exit from that scheme.

In other words, you need to assess as to how much risk did the fund manger subject you to, and did he give you an adequate reward for taking that risk. Besides, you also need to consider whether own risk profile allows you to accept the revised level of risk

5. Sell your fund, if you need to

There is no standard formula to determine the right time to sell an investment in mutual fund or for that matter any investment. However, you can definitely benefit by following certain guidelines while deciding to sell an investment in a mutual fund scheme. Here are some of them:

You may consider selling a fund when your investment plan calls for a sale rather than doing so for emotional reasons.
You need to hold a fund long enough to evaluate its performance over a complete market cycle, i.e. around three years or so. Many of us make the mistake of either holding on to funds for too long or exit in a hurry. It is important to do a thorough analysis before taking a decision to sell. In other words, if you take a wrong decision, there is always a risk of missing out on good rallies in the market or getting out too early thus missing out on potential gains.
You should consider coming out of a fund if its performance has consistently lagged its peers for a period of one year or so.
It doesn't make sense to hold a fund when it no longer meets your needs. If you have made a proper selection, you would generally be required to make changes only if the fund changes its objective or investment style, or if your needs change.
6. Diversified vs. Concentrated Portfolio

The choice between funds that have a diversified and a concentrated portfolio largely depends upon your risk profile. As discussed earlier, a well-diversified portfolio helps in spreading the investments across different sectors and segments of the market. The idea is that if one or more stocks do badly, the portfolio won't be affected as much.

At the same time, if one stock does very well, the portfolio won't reap all the benefits. A diversified fund, therefore, is an ideal choice for someone who is looking for steady returns over the longer term.

A concentrated portfolio works exactly in the opposite manner. While a fund with a concentrated portfolio has a better chance of providing higher returns, it also increases your chances of under performing or losing a large portion of your portfolio in a market downturn. Thus, a concentrated portfolio is ideally suited for those investors who have the capacity to shoulder higher risk in order to improve the chances of getting better returns.

7. Review your portfolio periodically

It is always a good idea to review your portfolio periodically. For example, you may begin reviewing your portfolio on a half-yearly basis. Besides, you may be required to review your portfolio in greater detail when your investments goals or financial circumstances change.

While reviewing the portfolio, you must consider the following:

How is your portfolio performing from the viewpoint of your personal goals? Are you comfortable with the price fluctuations that may have occurred keeping in view your short term, medium term and long-term goals?
How are your investments performing compared with others in the same category? It is important as for example, a 15% growth in your fund may look great, but not if the average returns given by other funds in the same category is 25 per cent. However, too much emphasis shouldn't be put on the short-term performance.

What are money market accounts?:
A money market is more or less a mutual fund that attempts to keep its share price at $1. Professional money managers will take your cash and invest it in government t-bills (aka "treasuries"), savings bonds, certificates of deposit, and other safe and conservative short term commercial paper. They then turn around and pay you, the owner of the money market, your portion of the interest earned on those investments.
Most banks offer money market accounts to their customers, although the amount of interest paid will vary by account size. Generally, the highest interest rates are paid to those who invest $100,000 or more.
Money market accounts are frequently used to park cash between investments.

What are commodities?:
Commodities are objects that come out of the earth such as orange juice, wheat, cattle, gold and oil. People buy and sell commodities based on speculation. For instance, if you thought hurricanes over Latin America were going to destroy much of the coffee crop, you would call your commodity broker and have them purchase as much coffee as possible. If you were correct, the price of coffee would be driven up drastically because the crop had been destroyed by weather, making the surviving harvest worth more.
Almost all commodity speculators trade on margin which results in substantial risk to the invested principal. The odds are heavily against anyone hoping to build permanent wealth in the commodity markets.

What is a bond?:
"A Bond is simply an 'IOU' in which an investor agrees to loan money to a company or government in exchange for a predetermined interest rate." If a business wants to expand, one of its options is to borrow money from individual investors. The company issues bonds at various interest rates and sells them to the public. Investors purchase them with the understanding that the company will pay back their original principal plus any interest that is due by a set date [this is called the "maturity"].
A bondholder is mailed a check from the company at set intervals [for example, every month] until the "loan" is paid off.
The interest a bondholder earns depends on the strength of the corporation. For example, a blue chip is more stable and has a lower risk of defaulting on its debt. When companies such as Exxon Mobile, General Electric, etc., issue bonds, they may only pay 7% interest, while a much less stable start-up pays 10%. A general rule of thumb when investing in bonds is "the higher the interest rate, the riskier the bond." Who can issue bonds? Governments, municipalities, a variety of institutions, and corporations. "Commercial Paper" is simply referring to bonds issued by companies.
There are many types of bonds, each having different features and characteristics. A few of the most notable are zero coupon and convertible.

What is a broker and why do I need one?:
The first step to building your portfolio is to open a brokerage account. These accounts allow you to purchase stocks, bonds, mutual funds, and other investments by paying professionals to buy or sell the items you tell them to. The fee you pay them is called a "commission", and can range from as low as $5 to $10 dollars, to upwards of several hundred dollars. The price difference arises when you choose between either a discount or traditional broker. Traditional brokerages provide a wider range of services, and have the price tag to match. They serve along the lines of professional money managers and can offer advice as to what investments might be right for you. Discount brokers are companies that tailor to the more self-directed investor; they don't offer advice as to what to put your money into, leaving you to make your own financial decisions and charging you much less than their traditional counterparts.
Some firms, such as Charles Schwab and Merrill Lynch, offer both services to their customers, allowing them to choose between the traditional and discount formats. In opening a new account, the minimum investment can vary, usually ranging from $500-$1,000 (and even lower for IRA's and other retirement and education accounts). Most offer the option of either having an application form sent to you, or allowing you to fill them out online, print them, and mail them in with a check. The process is easy and can be done fairly quickly at almost all financial institutions.
Once you have opened an account, you have the ability to start investing your money. All brokerages give you the option of setting up automatic monthly withdrawals, which will transfer an amount you specify each month from your savings or checking account to your brokerage account. This can be an easy way to start building up your equity; if you don't see it, you won't spend it. Since you won't notice the money that is missing each month, saving will be relatively painless.

What are penny stocks?:
Penny Stocks are any stock that trades below $5 per share. Most financial advisors and long-term investors tend to avoid them completely because of the extremely high risk that comes with owning them. They generally tend to fluctuate wildly in price, and although some report spectacular gains in a matter of a few days [or even hours], those who invest in them are generally surprised when they disappear altogether.
Generally, if a stock is trading that low, it is danger of losing its listing with an exchange. When this happens, a company is normally either in very bad financial shape, or on the brink of bankruptcy. Smart investors opt to avoid these.

What is the S&P 500?
The Standard and Poors 500 (S&P 500) is an index made up of five hundred different stocks. Each is selected for liquidity, size, and industry. The index is weighted for market capitalization. The S&P 500 is the benchmark of the overall market, and frequently used as the standard of comparison in terms of investment performance.

What is a stock split?:
A stock split is essentially when a company increases the number of shares. For example, if you owned 25 shares of XYZ at $15 per share, and there was a 2-1 stock split, you would then own 50 shares worth $7.50 each. Why do companies issue splits if you still have the same amount of money?
Liquidity. Some companies believe that their stock should be inexpensive so more people can buy it. This creates a condition where more of the company's stock is bought and sold [this is called "increased liquidity"]. The problem, in theory, is that the increased activity will also leads to bigger gains and drops in the stock, making it more volatile.
Many investors believe splits are a good thing. (Their thinking goes "Well, if the stock was at $15, and now it's at $7.50, it has to go back up to where it was!) This is wrong.

What makes stocks go up and down?:
The stock market is essentially a giant auction - only instead of antiques and heirlooms, it's ownership in businesses that's up for grabs. Stocks are traded at places called exchanges. At these exchanges, traders buy and sell shares of companies. Generally, the price of a stock is determined by supply and demand. For example, if there are more people wanting to buy a stock than to sell it, the price will be driven up because those shares are rarer and people will pay a higher price for them. On the other hand, if there are a lot of shares for sale and no one is interested in buying them, the price will quickly fall.
Because of this, the market can appear to fluctuate widely. Even if there is nothing wrong with a company, a large shareholder who is trying to sell millions of shares at a time can drive the price of the stock down, simply because there are not enough people interested in buying the stock he is trying to sell.
Because there is no real demand for the company he is selling, he is forced to accept a lower price.

What is a blue chip?:
A "blue chip" is the nickname for a stock that is thought to be safe, in excellent financial shape and firmly entrenched as a leader in its field. Blue chips generally pay dividends and are favorably regarded by investors. A few examples of blue chips are Wal-Mart, Coca-Cola, Gillette, Berkshire Hathaway and Exxon-Mobile.
Blue chip stocks are sometimes referred to as bellwether issues.

What is a dividend?:
Some stocks, especially blue chips, pay dividends. This means that for every share you own, you are paid a portion of the company's earnings. For example, for every share of AT&T you own, you will get sent $0.15 every year. Most companies pay dividends quarterly (four times a year), meaning at the end of every business quarter, the company will send a check for 1/4 of $0.15 for each share you own. This may not seem like a lot, but when you have built your portfolio up to thousands of shares, and use those dividends to buy more stock in the company, you can make a lot of money over the years

What Is Stock?
Imagine that you own a business. If you were to divide that business up into small pieces and sell those pieces, you would essentially have issued stock. Quite simply, stock is ownership in a company. The money you raise from selling those "pieces" of your business can be used to build new plants and facilities, pay down debt, or acquire another company. A smart owner will keep at least 51% of the stock, which will allow them to retain control of the day to day activities. Any person or institution that owns over a majority of the stock is called the "controlling shareholder". Essentially, this person can do anything they want - right down to firing the CEO.