Initiating Coverage

Q: I often run across announcements that such-and-such company has "initiated coverage" on a particular stock. What does that mean?

- R. Gibbs, Old Hickory, Tenn.

 A: Full-service brokerages and investment banks typically employ analysts to follow and study various companies. The analysts issue recommendations that are passed on to broker clients and others. When a brokerage initiates coverage of a company, it just means that the company is now being followed by the firm and that the brokerage has an opinion on it (perhaps "Buy," "Hold" or "Sell"). There may also be a detailed research report available on the stock, which is typically much more illuminating than a simple "Hold" rating.

Keep in mind that "Sell" ratings are relatively rare - arguably because since these recommendations usually come from organizations with investment banking operations, the analysts probably don't want to burn any bridges with current or potential investment banking clients by being too negative.

Many brokerages offer gobs of research reports on companies. See what yours offers, or look for a better brokerage at www.broker.fool.com.

Q: If a novice had $40,000 to invest now, how would you advise him to invest and still sleep?

- D. Murray, Los Angeles

A: First off, don't put your money anywhere without confidence in what you're doing. Perhaps park it in a CD for a few months, while you take some time to learn more about your options. Later, you might want to move some or all of your long-term money into a low-fee, broadmarket index fund, such as one based on the S&P 500. If you're willing to do some research after that, you might begin investing in carefully selected stocks and mutual funds. Learn more at www.fool. com/investing.htm.

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