Before March 2000, in the bull market, whisper numbers were all the rage. In fact, these estimates became so popular for the outlandish pre-”tech bubble” gainers that Wall Street often notched real estimates lower than actual expectations just to be able to “beat the consensus.” Today, earnings whispers are still used, but not as confidently as before. Let’s talk about how you can find and use these numbers to your advantage to rake in some insane profits!

What Is an Earnings Whisper?
Let’s start off by addressing what this term actually means. Earnings whispers, also called whisper numbers, are essentially modified earnings estimates from what investors think will happen in a company’s quarterly earnings call. We all know how important earnings calls are for publicly traded companies, as they can drive a stock up or down by huge amounts if they come in above or below previous forecasts.

Most companies will announce two things in their earnings report, their earnings per share from the previous quarter, and their anticipated earnings for the next quarter and year in focus. Admitedly, future guidance has become more important than anything else in these economic times, but if earnings miss for the quarter by even a penny, you shouldn’t be surprised to see a stock’s value fall double-digit percentages.

So basically, an earnings whisper is a collective sentiment, coming anywhere from an investment firm water cooler to a stock market bulletin board, that judges how a company is expected to report in that all important earnings call. If you can successfully predict a “beat” or a “miss,” and buy/short accordingly… you can potentially lock in an immediate 10%+ gain. Granted, sometimes this upside or downside expectation is literally built in to the share price already, but I find that there is a good chance that you’ll see movement regardless.

So Where Can I Get a Whisper Number?
You’ll hear debates about which website is the best, but there are essentially two competitors in the whisper number arena, WhisperNumber.com and EarningsWhispers.com. So what exactly is different about these two websites? Essentially,  the numbers you will get are often going to be different by a cent or two, which can make a world of difference in the stock market. With both claiming an almost “insider knowledge” of the results, it can be tough grabbing an accurate estimation.

Starting with Whisper Number, they grab estimates from over 50,000 subscribers. One of the site’s leaders, John Scherr, says that he gets expectations “from individual investors, his software trolls message boards, press coverage, chat rooms, and takes into account the opinions of visitors coming to the site who can add their voice to data.”

From Earnings Whispers, editor Shannon Puls says that her site pulls information from over 150,000 subscribers. What’s more, Puls notes that the site “cold calls analysts, reads every earnings preview and published research reports, regularly checks in with regular traders, quoting analyst names and companies when possible ‘for transparency.’”

So basically, both websites do essentialy the same thing, but pull from different sources with each telling you they are the more reliable resource. What you can do is simply take both numbers into account throughout your research. There are as many examples of Earnings Whispers being more reliable after the call as there are of Whisper Number getting the green light, so you will need to judge for yourself.

A Quick Example
While you shouldn’t be relying on whispers as a one-stop solution for trading stocks, it is often a reliable measure of future trading action on a stock, and a powerful tool that all traders look toward. Just yesterday, May 08, NVidia (NYSE: NVDA) reported earnings after the market closed. The consensus earnings estimate from NVidia management called for $0.38 per share for the first quarter 2008, excluding stock-option expenses. However, the earnings whisper was for just $0.35 per share due to a supposed weakness in the tech environment.

Long story short, earnings came in below NVidia’s expectations… so the shares immediately slipped almost 9% in after hours trading. But when guidance was in line, it was understood that they had actually beaten the whisper number by a cent after reporting first quarter results at $0.36 a share… and stocks traded back to about even (and were positive the next day). This is just one example of how an earnings whisper can sometimes be more important than a company’s quarterly guidance.

Bottom Line: I am not recommending in the least that you turn to earnings whispers as your only source of information. It is important to keep a grasp on what a company does, how they are doing it, and what kind of growth is at hand. However, if you are not up to par on these all-important whisper numbers… you are going to be at a loss, and could potentially see your holdings move drastically one way or the other unexpectedly. So do your homework, and stay bullish on the net!

-The Net Fool

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This is a guest post by Kevin from The Red Stapler Chronicles - an up and coming personal finance blog about making money and get paid to websites.

1. “Get busy living or get busy dying”
—Andy Dufresne, Shawshank Redemption

The millions of Americans that are currently overwhelmed with debt and are on the road to financial ruin, really only have two choices.  They can immediately start taking measures to reduce their debt and spending.  Even if they are able to eliminate one monthly bill or pay an extra $25 on a credit card, they are “getting busy living” toward of debtless future.   Yes, sometimes the path to recovery can be a long and difficult one (probably not as bad as Andy’s path to freedom in the movie).  However, the second option, ignoring the problem, will quickly cause your financial life to end via drowning in a vast debt pool.

2. “Mama always said life was like a box of chocolates, you never know what you’re gonna get.” — Forrest Gump, Forrest Gump

If you can predict the future, you don’t need to be wasting your time reading any personal finance blog.  But, if you can’t, you need to prepare for unexpected events.  Sometimes these events will be tragedies (a layoff or illness), while sometimes they will be blessings (a pregnancy or wedding).  Regardless, a nicely funded emergency fund is a necessity.  Experts say a great fund would cover 6 months of living expenses.  Nevertheless, a thousand dollar emergency fund would surely be a good start.

3. “It’s not always the popular person who gets the job done.” — Gordon Gekko, Wall Street

Of course, I had to include a quote from Wall Street in this list.  Often, difficult decisions have to be made in order to eliminate debt.  These decisions are more than likely to affect others.  For instance, try explaining to your teenage daughter why you are getting rid of HBO, Showtime, and Starz to save some extra money.  Imagine how your co-workers might react if you start putting in extra hours in order to earn a promotion.  Regardless, if you are really determined to eradicate your debt, you will sometimes have to play the role of the bad girl/guy.

4. “You’re not your job.  You’re not how much money you have in the bank.  You’re not the car you drive.  You’re not the contents of your wallet.  You’re not your f**king khakis.” — Tyler Durden, Fight Club

Too frequently, Americans get caught up in a destructive possession contest (usually with a family member, neighbor, or in-law).  It really must be engrained in our DNA somehow.  For example, your brother buys a new self-propelled lawn mower—you get a sit down mower.    Perhaps, your brother-in-law boasts at Christmas table about his recent success in the stock market, you create an E-Trade account the second he leaves.   Would you take a job as a garbage man even if it had a higher salary and better benefits than your current job?  These types of decisions are rarely based on anything remotely close to real financial data.  Even though you probably will get a temporary high of being able to “one up” a family member or spare yourself the humiliation of telling someone you are a garbage man, these decisions are unlikely to provide any lasting happiness in your life.

5. “Life goes by pretty fast.  If you don’t stop and look around once in a while, you could miss it.” — Ferris Bueller, Ferris Bueller’s Day Off

I think everyone would agree that reducing and eventually eliminating debt is an extremely worthwhile goal.  Too many Americans are forced to live under extreme levels of stress because of their financial difficulties.  Still, life is too short to make EVERY decision in your life based on saving money.  You can still enjoy a trip to the movies to see the newest blockbuster (maybe sneak in your own snacks though J).  You can still go to your parent’s house across the country for the holidays (maybe you forgo the non-stop flight to save money).  The road to a healthier financial situation is not short and will not be a straight line.  Just keep your financial compass in the right direction and you will eventually reach your goal.

Even movies can help you live a better, more economical lifestyle. Remember to plan for the worst, and keep your finances in order if you really want to live the dream!

-The Net Fool

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This is a guest post by Robert from Flimjo.com - a blog containing some great ideas about money, and how to make more of it!. You don’t have to be employed on salary forever, get off the paycheck!

Many people think that investing in mutual funds is the way to go and the best method for getting rich. I think mutual funds are horrible investments. Here are 8 reasons why you should not invest in mutual funds.

1. Mutual funds don’t beat the market.
72% of actively-managed large-cap mutual funds failed to beat the stock market over the past five years. Trying to beat the market is difficult, and you’re better off putting your money in an index fund. An index fund attempts to mirror a particular index (such as the S&P 500 index). It mirrors that index as closely as it can by buying each of that index’s stocks in amounts equal to the proportions within the index itself. For example, a fund that tracks the S&P 500 index buys each of the 500 stocks in that index in amounts proportional to the S&P 500 index. Thus, because an index fund matches the stock market (instead of trying to exceed it), it performs better than the average mutual fund that attempts (and often fails) to beat the market.

2. Mutual funds have high expenses.
The stocks in a particular index are not a mystery. They are a known quantity. A company that runs an index fund does not need to pay analysts to pick the stocks to be held in the fund. This process results in a lower expense ratio for index funds. Thus, if a mutual fund and an index fund both post a 10% return for the next year, once you deduct The expense ratio for the average large cap actively-managed mutual fund is 1.3% to 1.4% (and can be as high as 2.5%). By contrast, the expense ratio of an index fund can be as low as 0.15% for large company indexes. Index funds have smaller expenses than mutual funds because it costs less to run an index fund. expenses (1.3% for the mutual fund and 0.15% for the index fund), you are left with an after-expense return of 8.7% for the mutual fund and 9.85% for the index fund. Over a period of time (5 years, 10 years), that difference translates into thousands of dollars in savings for the investor.

3. Mutual funds have high turnover.
Turnover is a fund’s selling and buying of stocks. When you sell stocks, you have to pay a tax on capital gains. This constant buying and selling produces a tax bill that someone has to pay. Mutual funds don’t write off this cost. Instead, they pass it off to you, the investor. There is no escaping Uncle Sam. Contrast this problem with index funds, which have lower turnover. Because the stocks in a particular index are known, they are easy to identify. An index fund does not need to buy and sell different stocks constantly; rather, it holds its stocks for a longer period of time, which results in lower turnover costs.

4. The longer you invest, the richer they get.
According to a popular study by John Bogle (of The Vanguard Group), over a 15- or 16-year period, an investor gets to keep only 47% of a cumulative return from an average actively-managed mutual fund, but he or she gets to keep 87% of the returns in an index fund. This is due to the higher fees associated with a mutual fund. So, if you invest $10,000 in an index fund, that money would grow to $90,000 over that period of time. In an average mutual fund, however, that figure would only be $49,000. That is a 40% disadvantage by investing in a mutual fund. In dollars, that’s $41,000 you lose by putting your money in a mutual fund. Why do you think these financial institutions tell you to invest for the “long term”? It means more money in their pocket, not yours.

5. Mutual funds put all the risk on the investor.
If a mutual fund makes money, both you and the mutual fund company make money. But if a mutual fund loses money, you lose money and the mutual fund company still makes money. What?? That’s not fair!! Remember: the mutual fund company takes a bite out of your returns with that 1.3% expense ratio. But it takes that bite whether you make money or lose money. Think about that. The mutual fund company puts up 0% of the money to invest and assumes 0% of the risk. You put up 100% of the money and assume 100% of the risk. The mutual fund company makes a guaranteed return (from the fees it charges). You, the investor, not only are not guaranteed a return, but you can lose a lot of money. And you have to pay the mutual fund company for those losses. (Remember also that, even if you do make a return, over time the mutual fund company takes about half of that money from you.)

6. Mutual Funds are unpredictable.
The holdings of a mutual fund do not track the stock market exactly. If the market goes up, you might make a lot of money, or you might not. If the market goes down (the way it is now), you might lose a little bit of money . . . or you might lose A LOT. Because a mutual fund’s benchmark isn’t a particular market index, its performance can be rather unpredictable. Index funds, on the other hand, are more predictable because they TRACK the market. Thus, if the market goes up or down, you know where your money is going and how much you might make or lose. This transparency gives you more peace of mind instead of holding your breath with a mutual fund.

7. Mutual Funds are sales items.
Why don’t all these money and financial magazines tell you about index funds? Why don’t the covers of these magazines read “Index Funds: The Most Obvious And Rational Investment!” It’s simple. That’s a boring heading. Who would want to buy something that isn’t exciting or that doesn’t tickle one’s imagination of immense riches? A magazine with that headline won’t sell as many copies as a magazine that boasts “Our 100 Best Mutual Funds For 2008!” Remember: a magazine company is in the business of selling . . . magazines. It can’t put a boring headline about index funds on its front cover, even if that headline is true. They need to put something on the cover that will attract buyers. Not surprisingly, a list of mutual funds that analysts predict will skyrocket will sell loads of magazines.

8. Warren Buffett does not recommend mutual funds.
If the above seven reasons for not investing in mutual funds don’t convince you, then why not listen to the wisdom of the richest investor in the world? In several annual letters to the shareholders of Berkshire Hathaway, Warren Buffett has commented on the value of index funds. Here are a few quotes from those letters:

1997 Letter: “Most investors, both institutional and individual, will find that the best way to own common stocks is through an index fund that charges minimal fees. Those following this path are sure to beat the net results (after fees and expenses) delivered by the great majority of investment professionals.”
2004 Letter: “American business has delivered terrific results. It should therefore have been easy for investors to earn juicy returns: All they had to do was piggyback corporate America in a diversified, low-expense way. An index fund that they never touched would have done the job. Instead many investors have had experiences ranging from mediocre to disastrous.”

Bottom Line: If you want to make money, you need to copy what rich people do. So if Buffett doesn’t like mutual funds, why would you? So, if not mutual funds, what should passive investors invest in? The answer by now is clear. Invest in index funds. Index funds have lower fees, and you keep more of your returns in the long term. They are also more predictable, and they give you peace of mind.

-The Net Fool

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Are you scared away from reading this article? Don’t be. Everyone (18 and over mind you ) can invest in the stock market, regardless of job, education and location… and its easy! Whether you are a work at home mom, a blogger, entrepreneur, student or what have you, investing in the stock market is as simple as finding a product you use and predicting the company will turn out something newer and better.

I am 18 years old and I hold $1,500 worth of stocks in a brokerage account. I’m sure you are considering all of the bad economic news that is out, and really the height of the crash came in early January. I started my trading account on January 1st, and I have positive gains thus far. If you haven’t put serious thought into buying stocks, now is the time.

Here are five clear-cut reasons you shouldn’t be scared to invest in stocks:

1. The “Big Dogs” Don’t Want You To
Its a fact. Plain and simple, the big market players (mutual funds, investment banks, stock advisers, etc.) don’t want you messing around in their rich-man’s game because it is a market that they used to control. Slowly, but steadily, more and more people are owning stocks… and for good reasons! The stock market is the best way to make money ever created, and it is totally open to the public. If you think you are too inexperienced to own stocks, think again! One thing that really benefits small investors is that they don’t move the market. When you trade, nobody is going to see that impact… so you can basically sneak in and out of companies taking profits off the table left and right.

I want to see the age when everyone plays the stock market. I think that it is coming sooner than we expect. Not only is it a fun, gambling experience, owning stock will educate you in the ways businesses work! If an 18 year old student can figure this game out, you can too!

2. The Stock Market Typically Goes Up
Don’t always believe the recession-doomsday hype. It is a fact, in fact, that throughout the history of the stock market, the average recession has seen S&P Index returns of +3.14% during the actual recession, and of +28.20% three years forward from the first warning signs of recession. The stock market has the ability to weather a storm, and it seems like the most brutal hit has already been served up…although we could fall a bit further. The point of the matter is that as long as you are investing in the right areas, you should be recession-proofed enough to make money regardless of the macroeconomic conditions at play.

3. It’s Cheap and Affordable to Invest Now!
Over the past decade, tons of discount brokers have been cutting their rates to encourage you to use their services and invest. Equity trading has gotten faster, cheaper and easier than ever in the 21st century! There are services like Zecco.com that offer $0 commission fees, and more reputable and established brokers that charge a meager $7.99/trade. When considering you are probably going to be buying stocks that cost a total of $250-1000 per purchase, the commission fees are a blip on the radar.

These discount brokers (or premium if you are interested) offer fast, reliable services that basically do it all for you. I am with Scottrade currently, and they have programs they give you for free to research stocks, see what experts are saying, and they even track all of your taxable gains for you. It is easier than ever to sign up for an account and deposit as little as $500 to get on your way! Check out my “getting started” post for more information.

4. Potential Upside Outweighs Downside Risk
A lot of my friends at Penn State are hesitant to get into the stock market game. They claim they are “just not ready” or “too scared to make a first move”… I call this a load of garbage. Investing is not about letting it all ride on lucky seven. When you buy a stock, you own a piece of that company, if the stock price goes down, it goes down… but you shouldn’t be losing any more than 20% of your initial investment at any rate. Your money is generally safe in stocks, so stop worrying and focus on the upside!

At this point, I want to bring up my portfolio’s performance in 2008. At first, I was off to a horrendous start with everything trading down on poor news. As of late, everything has just about balanced out and I am actually sitting on a gain! I have stocks like Yamana Gold I have profited more than 26% on in a month, and stocks like NVidia where I am down 15.5%. The point is, you have your winners and your losers. Take the bad with the good and you have a favorable amount of upside compared to downside. If you play your cards right, you will see more money than surfing the internet could ever bring you.

5. It’s Easy and People Want to Help You
I’ve mentioned just how easy it is to get started in the stock market. Stock brokers like TD Ameritrade, Scottrade and Charles Schwaub are practically throwing themselves at your feet. People want to help you nowadays, and it is so easy to get started you won’t believe your eyes. If you don’t know where to invest, turn on CNBC for an hour. Seriously. Jim Cramer? Fast Money? These programs are chock-full of investment ideas that are well researched. It simply becomes your job to look into these stocks a bit more to make sure they are right for you.

The internet can be your best investment friend. I suggest the Motley Fool for reading up on terrific stock opportunities. There are even bloggers looking to help you like the Intelligent Speculator and some guy named the Net Fool .

The Bottom Line: There is NO better way to get high returns on your investment than with the stock market. Whether it is high-growth risky plays you are gunning for, or established conglomerate powerhouses… almost any sound trading should make you money. Consider an initial $100 deposit gaining just 10% (you can do better ) for five years… BAM! That’s about $1,650. What if you added $100 every year to that one grand deposit? SHAZAM! That’s a whopping $2,300. The magic is in the fact that when your stock value increases, you basically own more of that company, nominally speaking. Instead of making money on your $1000, you are making money on your $2,300! The possibilities are endless, and it is easier than ever to get in on the action.

-The Net Fool

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One of our readers, Jesse, asked:

“Hey, I just wanted to know, say I wanted to just jump into stocks. Can I directly buy stocks or do I need to go to a site like Charles Schaubb in order to get started?”

Buying a share of stock, whether it be common or preferred, seems like a daunting task to those who have never owned stock before. But to put it quite simply, stock is nothing more than a piece of paper resembling a portion of ownership in a company. Most big-time firms will issue stock in order to raise cash, so if they have cut up 100 shares and you buy one… you essentially have 1% ownership in that company! Cool huh?

Rather than buying the paperwork directly, most investors nowadays turn to stock brokers. What is a stock broker? Think about a broker as somebody who orders the shares you want, does all the paperwork for you, and keeps track of your money, your earnings and your losses.

Picking a Broker: Discount Brokers
The most popular option for investing today is through a discount broker. These typically have a low minimum deposit and low trading commission fees. Here are my favorite three:

1. Scottrade - This is the broker I use to make my trades. They are known for having the best customer service in the business, and very favorable pricing for beginning/intermediate buyers. Trades are all just $7, including stock options. The minimum deposit is just $500, so anyone can put money in. Plus, they are the only major broker that hasn’t been hacked in the recent wave of phishing attempts. I trust them more than anyone else because they offer a sense of security. Customer service is very helpful and their trade execution time is apparently the best of all discount brokers. If you want to sign up, let me know so we can both get 3 free trades! Read the rest of this entry »

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