Please respond to The Motley Fool 
======================== THE MOTLEY FOOL ========================
                        INVESTING  BASICS
                      Tuesday, May 8, 2001
benjamin.rogers@enron.com
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IN THIS ISSUE
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- Q&A: WHAT'S A "RUN RATE"?

- Q&A: ACTUAL STOCK SALE PRICES

- LESSON: WHEN TO PANIC

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YOUR QUESTIONS ANSWERED

Q. What's a "run rate"?

A. Imagine that you're studying the financial statements of
Digital Diapers Inc. (ticker: EPOOP) It's growing very rapidly
from quarter to quarter. Perhaps, for some calculation, you need
to estimate its current annual rate of sales. You could add up
the last four quarters' worth, but that would clearly understate
sales, as each quarter's numbers have been rising.

Enter the run rate. Take the most recent quarter's sales of $30
million (up from $25 million the quarter before and $21 million
before that). Multiply that by four and you'll have the
company's current run rate for sales: $120 million. This is not
a forecast or a measure of past sales -- it's a reflection of
the current level of annual sales.

Q. When you decide to sell a stock at a price listed in the
newspaper on a particular day, do you get that particular
amount, or the price listed when the shares are actually sold?

A. First, know that the stock prices listed in newspapers and
online simply reflect the price at which the stock last traded.
The next trade could occur at a higher or lower price, depending
on supply and demand.

You're not out of luck, though. You have a choice when placing
orders with your broker. You can sell "at the market," which
means whatever the current price happens to be, or you can place
a "limit order," specifying a minimum price that you require.
Selling at the market means your shares will probably be sold
quickly. With a limit order, though, you risk not getting any
takers at your price. When we're not worried about the price
jumping, we generally prefer trading at the market.

And speaking of brokers, make sure you're not overpaying for
trades by visiting our online discount broker center. You can
compare fees and services, plus get our guidance on finding the
right broker for you.
http://www.fool.com/m.asp?i=405185

P.S. GOT AN INVESTING QUESTION FOR US? Post it on our Ask a
Foolish Question message board.
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THIS WEEK'S LESSON

WHEN TO PANIC
The stock market has been down in recent months. (For some
perspective, read our recent article on keeping your head during
downturns.) Many investors are anxious, wondering whether they
should follow the crowd and bail out on some of their
investments. But, market drops are often the worst time to sell.
Here are some pointers on the fine art of panicking.
http://www.fool.com/m.asp?i=405187

People tend to panic:
- When the market tanks.
- When a stock they own tanks.
- When people around them are panicking.

None of these are particularly good reasons for panicking.

Here's when you might have cause for concern, though:

- When you don't know why you own the stocks you own. If you
  have no clue why you ever bought shares of Bedmobile Inc.
  (ticker: VROOM), you'll have a lot of trouble determining when
  it's the right time to sell. Did VROOM's shares just take a
  nosedive? It might be due to some fleeting market
  misunderstanding, in which case you should hang on. Or it might
  be due to some serious trouble at the firm. An informed investor
  should have a good handle on her investments.

- When you don't understand the long-term upward trend of the
  market. From decade to decade, stocks in great companies and the
  market as a whole both tend to rise in value. To keep your blood
  pressure down during market slumps, remind yourself of this.

- When you have a short time horizon. If your moolah is invested
  in stocks for just a few months, then go ahead and begin
  hyperventilating right now. Anything can happen in the short
  term. Even stock in wonderful companies can temporarily
  freefall. Any money you expect to need within the next five (if
  not ten or more) years should be out of stocks and perhaps in
  CDs or money market funds.

- When you haven't learned that it's the percentage of the
  market drop that counts, not the points. A 100-point drop was a
  big deal when the Dow was at 1,000. But when it's at 10,000, 100
  points is just 1 percent.

Well-informed Fools should rarely panic. Expect occasional
market slumps and surges. Read up on investing by checking out
our 13 Steps. The more you learn, the less you'll panic.
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