Tag: investing

Ways to Help You Identify Good Investment Opportunities

Ways to Help You Identify Good Investment Opportunities

A lot of investment opportunities are becoming available to potential investors, but not all of them are good investment opportunities. In fact, with the more opportunities that are becoming available, the more likely you are to encounter an investment opportunity that will consume everything you have before you end up finding one that is suitable to your purse.

The following are ways to help you identify good investment opportunities and use them mainly for your financial advantage.

  • Buy Low

Determine the standard value of an investment or purchase, and wait before buying until the purchase price goes below what is acceptable and reasonable. The right time to look for buying opportunities is when the stock market dips and other people are frightened and selling. Ideally you like to purchase an asset after the price significantly declines, with the anticipation that it will upsurge again in the future and produce a good return.

  • Sell High

The best time to decide selling an asset is after the price increases dramatically. This is often a time of stock market growth when many people are so much willing to to buy into a rising market. When a certain investment appears significantly gaining, this means the ideal time to cash out and lock in your return. You could keep the income into a safer investment or find a new under-performing asset to try to repeat your significant success.

  • Learn from mistakes

While trying to execute the first two mention ways above, you are expected to commit some errors or mistakes. If only buying low and selling high is just a piece of cake, everyone would be repeatedly doing it. When you lose money on an investment, try not to lose sleep because of it or simply give up the whole investing. Probably, you want to take a break from active investing for a little while and catch market returns with an index fund, or maybe you will know and understand how to cautiously research an investment before placing more than you can comfortably afford to lose on the line. Never let fear be a reason that can limit and stop your potential from being unleashed. Rather, let the withstanding that storm be the driving force that pushes you to success.

  • Use your fear to self evaluate

Make a  list of the investments you have successfully made in the past, and think about what you can do to yield better results in the future. There is a wonderful insight that can be found by physically writing down the results you would like to evade.  A written plan can help you prevent from thinking and committing emotional investment decisions in the heat of the moment. If you are backed up with a financial planner, tax planner or someone who will monitor your investment ideas, that adds an even greater layer of reliability and accountability.

Investing is mainly about financing the kind of lifestyle you want to live. Making decisions intelligently could bring enough wealth to let you retire sooner or walk away from an unsatisfying job. But you have to use logic and stick to a financial plan or strategy to progressively build wealth.

Characteristics of a Successful Investor

Characteristics of a Successful Investor

Whenever we talk about someone who has successfully paved his way through investing in the stock market, it is never a matter of having a luck, but rather certain personal qualities or characteristics that determine how successful he/she is. Although, the best investors may seem have been born with the appropriate characteristics, it remains possible to discover and acquire them yourself. Believe it or not, most of what you need to know is just stock market investing basics.

Just remember that you can improve your chances of success. Below are some qualities of a successful investor that you need to know.

  1. They carry a well-thought-out investing strategy

Every successful investor has an over-time-developed-and-a-well-thought-out investing strategy that definitely works and they stick to this strategy. Some successful investors incorporate the portfolio diversification strategy and other follow the portfolio focus strategy. However, you are still entitled to have your own investing style. No matter what strategy you use, make sure that you fully know and understand what you are doing.

  1. They are dedicated

Successful investors are dedicated and concentrated on their investment vehicle. They take it one step at a time and one investment at a time.

  1. They make use of the trend to their advantage

Successful investors know how to use trend to their advantage. Average investors tend to panic over market instabilities, but professional investors welcome these instabilities because it is based on these instabilities that they can make their money. They use trends such as market sentiments, political instability and company’s crisis to their benefits.

  1. They are determined

Indeed, adhering to your investing strategy, whether you are winning or losing needs you to have a great determination. Average investors lack persistence and that’s the reason why they will always remain average. They hop from one strategy to another and are always looking for the next hot tip.

  1. They prosper on risk

It is true that investing is a risk, however, not knowing what you are executing is a lot greater risk. Every professional investor, whether experiencing a winning side or losing side still respect and consider the 50-50 chance of success or failure. The big difference between a professional investor and an average investor is that a professional investor will always invest with a strong risk management scheme in place.

  1. They are disciplined

Successful investors are rigorous with themselves when it comes to investing. Aside from their investing rules and principles, they are also guided and driven by a strong self-imposed standard. Professional investors understand that it takes a huge deal of discipline to stand with you investing strategies, in spite of distractions from self-proclaimed specialists or financial experts.

  1. They know their strengths

Everyone possesses their own strengths and weaknesses. Successful investors understand that it is essential to invest inside their circle of competence. There is no quick way to lose money than investing in something you don’t completely understand. If you couldn’t determine what a company does or how it makes money, then it is often suggested to just stay away, no matter how profitable the opportunity might be.

Risk Management Tips for Stock Traders

Risk Management Tips for Stock Traders

Risk management is very important, but often ranks very low on the priority list of most traders. They often overlook the importance of managing risk in their positions or trades. It is normally way behind finding a better indicator, more accurate signals or worrying about stop hunting and unfair algo-trading practices.

As a trader or investor, this is the only thing that can be managed or controlled. Traders can never control or dictate the directions of the markets. They can also never manipulate whether they will win or lose in any position they take. Indeed, the only thing they can take control of is the amount of loss they might incur.

A trader who has produced great profits over his or her lifetime can lose it all in just a single or two ruthless trade, if proper risk management is not applied. Many people can trade, but not all are capable of analyzing the risk and manage the risk in a way that secures and ensures their financial survival in the markets when things go bad.

Without proper knowledge about risk management, profitable trading is never possible. A trader needs to know how to manage his risk, size his positions, create a positive outlook for his performance, and set his orders correctly, if he wishes to have a profitable trading journey.

This article will suggest some tips for risk management in stock trading.

  1. Recognize your risk

Some of the factors that might cause a risk to your trading are: politics, interest rates, liquidity and even the prices of other assets. Know, recognize and learn all the probable risks connected with the asset you are about to trade, and you can begin to go on your way reducing them early.

  1. Prepare your risk limits

Prior setting the line of the profit you are aiming for, think and decide how much you can afford to lose. Your trading plan should composed of how much loss you can take in the whole, and on each individual trade.

  1. Know how to acquire losses

You can actually set stop losses accordingly, if you know your risk limits for each trade. Moving a stop loss on a losing trade, because you expect it might swing back into profit is rarely a nice idea. Leaving losses run on bad trades will make them even worse, never better.

  1. Evade emotional trading

According to a study in 2011, the negative impact of emotional trading can end up costing you 20% in returns over ten years. And it is not just responding badly to losses, as the complete happiness that comes with a progressive trade can be just as risky as the disappointment with a failed one.

  1. Don’t go along with the mob

Every individual trader has their own risk tolerance, and just because other traders are suggesting a trade doesn’t necessarily mean that it is a good fit or appropriate for you. This is actually right for stop losses and strategies as well. Just remember that you should know your own risk, and plan accordingly.

Good trading isn’t always referred to having the right stocks or the right prices. It is much connected to your ability and knowledge of managing your risk, and assimilating a strong risk management philosophy into your trading strategy.

Some Disadvantages of Portfolio Diversification

Some Disadvantages of Portfolio Diversification

Making your portfolio diversified across a number of various investment categories, such as stocks, bonds, and cash equivalents, and within categories, such as stocks from different kinds of companies and a mix of corporate and government bonds can help decrease your risk. But there can be some disadvantages to diversification.

Indeed, diversification is universally recommended to lessen the risks of losing money, volatility and emotional stress. However, just as it can limit downside by reducing the possible risk and volatility across a group of investments, it can also limit your upside. It is actually possible for diversification to increase your risk if it leads you to buy investments that are too risky or that you don’t even understand very well.

A more-diversified portfolio can also be more time-consuming to handle than a less-diversified one, because you need to follow and trade in more investments, adding more layers of diversification just to make sure you are following to them. If maintaining your diversification requires you to micromanage and trade more frequently, transaction costs could be higher.

Below are some disadvantages of diversification that you might encounter eventually in your investment journey.

  1. Incomplete Return

Diversification can help you from striking out,  but it also keeps you from hitting a home run. For instance, if you invest your money in five various stocks, and one takes off, the other four stocks hold back your total return.

  1. Cost

Typically, you have the option of investing through a full-service broker, a discount broker or an online broker. Each category of broker has a unique commission format, and they all actually charge commissions or transaction fees. Placing all your money into a single investment normally can end up to a lower total fee than investing the similar amount of cash to a number various investments.

  1. Missed Fortune

You are neither to make a huge profit from a single sector nor to suffer a huge loss, if your portfolio is widely diversified. If 5 percent of your holding unexpectedly spike, you will make far lesser profit than if 100 percent of your holdings were in that place. It is very difficult to forecast or predict where and when this will occur to an asset class or market sector. The more firmly your investments are focused, the greater risk you are actually taking, and this can lead to bigger losses or to bigger gains.

  1. Wider Exposure

You could experience some amount loss whenever some part of your portfolio declines in value, if your holdings are widely diversified. If the overall market is decreasing, it is more likely that your holdings will perform the same thing. When you diversify your investments, you safeguard yourself from extreme financial exposure, but at the cost of missing out on probable major profits.

  1. No remedy

If you invest in a number of different stocks that all end up to be problems, your portfolio will still lose money, even if it is diversified. That’s it, diversification neither guarantees a profit, nor completely secure you against a loss.

SOME RULES TO CONSIDER IN PICKING A MUTUAL FUND

SOME RULES TO CONSIDER IN PICKING A MUTUAL FUND

One of the biggest struggles that many investors face is picking a right mutual fund structure that would suit their needs. Looking for a scheme from thousands of mutual fund schemes available in the market is not a piece of cake. However, you would be comfortable if you are prepared to obey some broad rules.

Now, if you are thinking of investing in mutual funds, but aren’t sure how to go about it or which one is the most suitable for your needs, you need not to worry because someone out there shares the same sentiment. You are simply not alone. Below are some rules you may want to consider in picking the right mutual fund that will help you achieve your ultimate goal of success in investing.

  1. Pay full attention to expenses

Over extended periods, funds with lower cost beat funds with higher cost. Costs can be the best indicator of future returns. By simply picking funds with low cost almost doubles your chances of beating an index.

  1. Taking importance of the company’s culture

The fund’s expense ratio often shows you what kind of company you are investing with. Are you investing with an avaricious financial-services firm, ready to tout you whatever is in trend this season? Or are you buying from a company that sees you as a long-term client? The second variety tends to charge less.

The way a company treats you as an investor normally reflects how it treats its employees. Be reminded that even halfway experienced money managers can find high-paying work elsewhere if the company they are working for maltreats them.

  1. Find the consistency of style

It is so important hat a manager stick to a certain investing style, for a fund to fall perfectly into a diversified portfolio. Let’s say if you purchased a fund because you want your portfolio to include small value stocks, then you don’t opt for a fund manager jumping into a large growth issue.

  1. Be mindful of the risks

Make sure that you check out the direction the fund took to rack up past gains and decide whether it would be convenient for you to take the ride. Compare to returns that may vary, funds that have been risky tend to stay risky.

  1. Seek for the background performance

You should seek for the fund’s long-term performance record, at least three to five years, versus that of its peers, as well as how it has fared over shorter stretches. Match the results to the category averages, you cannot really fault a small-cap fund manager for worthless year if a small-cap funds performed poorly.

  1. Look for low taxes

You can never forget about taxes simply because you do not want to sell your fund shares. As a fund owner, you also possess all the stocks in the fund’s portfolio. If the fund manager sells a stock for a large capital gain, you should report that gain on your tax return.

In picking a mutual fund, always make sure that its strategy is aligned with your investment goals. Selecting a mutual fund may appear like an intimidating task to do, but knowing your investment goals and risk tolerance can take you to the halfway of the battle. If you take the above-mentioned rules into considerations in picking a mutual fund, you will accelerate your chances of success.

 

HOW TO START TRADING WITH SMALL AMOUNT OF MONEY?

HOW TO START TRADING WITH SMALL AMOUNT OF MONEY?

To start investing, you don’t necessarily have to be the world’s richest person living. Many people refuse investing because they think they need to have a great amount of money, as in thousands of dollars, to begin investing. This is totally untrue. In fact you can invest in stocks regularly by saving loose change. Interestingly, you can start investing with an amount at hand as little as $50 per month.

There are several ways to begin investing with a small amount of money, with many online and application-based platforms making it faster and easier than ever. All you need to do is to begin somewhere. The moment you do, it will get convenient eventually.

The key to growing wealth is building good habits, like placing your money away monthly. If you let investing as part of your habit, you will be in a much more robust financial situation down on your way.

Below are some simple ways to start investing with a small amount of cash.

  1. Try the piggy bank method

Investing money and saving money are relatively connected. Basically, you have to save some cash up, for you to invest money. And you can actually do that in very small steps. If you are not used to saving money, you can begin by keeping at least $10 per week. Over the course of the year, it can get to over $500.

You may find piggy bank some silly method, but to tell you, it is often an important first move. Practice the habit of spending a little bit less than you earn and put your saving away in a safe place. Piggy bank’s electronic counterpart is an online savings account. You can withdraw money if you need  it.

  1. Place your money in mutual funds with low initial investment

Mutual funds are investment securities that lets you invest in a portfolio of stocks and bonds with a single transaction, making them the best for beginners.

But the problem is, many mutual fund companies require initial minimum investments ranging between $500 and $5,000. Those minimum amount might be out of your reach, especially if it is your first time to invest with a small amount of money at hand. However, some mutual fund firms will ignore the account minimums if you agree to automatic monthly investments ranging between $50 to $100.

An automatic investment agreement is actually convenient if you can do it through payroll savings. Just ask your human resources department how to set it up.

  1. Paying your debt

There are two reasons for suggesting to pay your debt: firstly, you should not be investing a small amount of money if you have an existing debt, especially debt that is unsecured; secondly, paying your debt is one of the perfect ways to lock in an above average and a definite rate of yield on your money. This is particularly true if the interest charge on your credit card balance is in double digits.

For instance, you have a balance in your credit card of $1,000 with an interest rate of 15.99% every year. By paying your credit card off, you will lock in a nearly 16% amount of return on your money. By surfing the balance to one of the many credit cards with 0% interest, you can make that card go away faster. Through this, each of your payment goes directly to the balance on the card and not to interest, however, this kind of offer may last a limited time so better pay your debt off quickly.

  1. Engage in your employer’s retirement plan

There is a way that you can start investing in an employer-sponsored retirement plan with amounts that are so small you would not even feel them. This is especially a good way, if you are currently experiencing tightening of budgets.

For instance, you plan to invest only 1% of your salary in the employer plan. What makes the investment easier is that the tax deduction that you would get for investing will make the contribution even smaller. The moment you engage to a 1% contribution, you can increase it steadily yearly. If you get a 2% increase in pay, it will effectively be dividing the increase between your retirement plan and your checking account. But, if your employer gives a matching contribution, the arrangement will get even better.

Investing despite the initial small amount of money can grow big rewards. Start with a small amount, afterwards increase as you get more used to the process.

BASIC RULES TO REMEMBER IN INVESTING

BASIC RULES TO REMEMBER IN INVESTING

Investing is like a game, it will require you to understand and master the rules to get into success. This is important especially for beginners in investing. For beginners, investing starts with an understanding that every price is determined by supply and demand.

Hence, we should understand that regardless of how young or old you are, learning the basics in anything is very important. Most people take lessons to master the process of doing a certain thing. Unfortunately, most people never learn the simple basics of investing before investing their hard-earned money.

The following rules are the basics which you have to remember about investing.

Basic rule #1. Understand the kind of income you are working for

Most people think is just to make money out of investing. They don’t come to think that there are different kinds of money to work for. There are three kinds of income, and they are as follows:

Ordinary earned income

            This is basically and generally the money you get from a job via a paycheck or payslip. It is the highest-taxed income, thus, the hardest to earn and build wealth  with.

Portfolio income

            This is derived from paper assets such as stocks, bonds and mutual funds.

Passive income

            This is derived from real estate, royalties and distributions. Compare to ordinary earned income, it is the lowest-taxed income, with many tax benefits, thus, it is the easiest to earn and build wealth with.

Basic rule #2. Transform ordinary income into passive one

Most people begin their life out by working for ordinary earned income as, of course, an employee. The way to establishing wealth, then begins with understanding or knowing that there are other types of income as resourcefully as possible.

Basic rule #3. The investor is the asset or liability

A lot of people think that investing is a dangerous thing. The reality, however, is that it is the investor who’s dangerous. Understand that the investor is the asset or liability. There are investors who lose money while others are making it. That is, in fact, a good investor love to run behind a dangerous investor because that is where the real investment bargains can be found.

Basic rule #4. Always get prepared

Most people try to anticipate what and when things will happen. But a real investor is always prepared for anything that can happen. If you are not prepared enough with everything around you, a great opportunity will pass you by. Always remember that it is now important to anticipate what will happen. Instead, focus on your own, on what you desire, to keep your eyes open to what is happening, most especially, to respond to every opportunity that passes you by. This can be done through continuously educating yourself and applying your knowledge.

Basic rule #5. Great deals attract money

One of the biggest concerns you might have as a beginner in investing is how would you raise money if you found a great deal. The thing goes with the previous rule. Be prepared, educate yourself and gain experience. With that, you can find a great deal, the money will find you or visa-versa, you will find the money.