Cast B2007

Archive for the ‘Investment’ Category

The list below highlights the five most important points or stages that every successful trader or investor needs to go through. I came up with this list after several years of failure and varying degrees of success in the markets. The list is also, in a way, a distillation of the numerous discussions and conversations I have had with fellow traders and market practitioners over the years.

What makes this list unique (if even I say so myself!), is the fact that the principles or steps outlined below, are “market agnostic” – in that the same steps are necessary, regardless of whether one wishes to specialize in equities (stocks/shares), Forex (currencies), fixed income (bonds), commodities etc.

For people new to the financial markets, they invariably need to start at point 1 (or stage1). However, it never seems to surprise me the number of people who I have come across, who have been “trading” for years, yet have no consistent or methodological approach to the business of trading. Hopefully, the list presented below, will help crystallize the salient points required to trade or invest successfully in one’s chosen market.

1. STUDY THE MARKETS

Make sure you know what you are doing, BEFORE entering the markets. Start from the very fundamentals. Ask yourself questions like: Why does this particular market exist exist?, what is its purpose?, who are the key market participants in this market? etc. By asking yourself these basic questions (and answering them), you will gain a deep understanding of why markets behave the way they do. A comprehensive grasp/understanding of this basic knowledge is required before moving to the next stage.

2. CREATE YOUR OWN “THEORIES”

You need to decide whether you want to primarily be a trader or investor. By “primarily”, I mean whether the majority of your transactions will be classified as ‘trades’ (typically held for a few seconds to a week or so), or whether they will be held for for a much longer duration. Although the terms ‘trader’ and ‘investor’ are used interchangeably, traders and investors operate within different investment horizons, and consequently the stimuli (i.e. market events) that trigger their market operations are different. Perhaps unsurprisingly therefore, their research methods also tend to be quite different. You need to decide quite early on, whether you are a trader or an investor. How to determine whether you are ‘naturally’ a trader or investor would be the subject matter for an entire article in itself.

If you wish to be a successful trader, build on the basic knowledge in step1, and add your own observations about price movements and behaviour. If on the other hand, you want to be an investor, build on the basic knowledge in step1 and learn how to read (and interpret) company and industry reports and form a market opinion based on your analysis.

Use whatever tools you deem necessary, to carry out your trading/investment research – be they existing tools, or your own (proprietary) tools/methodology.

As a result of your research, you will come up with “theories” (technically hypotheses) for determining what the market (or a particular tradeable instrument e.g. stock or currency pair) is most likely to do next. These “theories” will form the core of your TRADING STRATEGIES.

3. PAPER TRADE

This is where you get to test the “theories” you created in step/stage 2. Paper trading is a bit like shadow boxing. It certainly makes you fit and strong, but it does not prepare you for the adrenalin rush (fear?) of someone standing in the opposite corner of the ring, waiting to “punch your lights out”. Paper trading has its uses, but it is only the first step along the path in becoming a successful trader or investor. You should only move to the next stage if you have managed to paper trade successfully. Under no circumstances should you enter the markets with a trading strategy that is not profitable (after transaction costs).

4. START SMALL

Once you have managed to get a good system going – (steps 1,2 & 3). You need to open a broker account. You would typically need a few thousand dollars (or local currency equivalent) to open a broker account. Spread betting may be the way to go (if legal in your country of residence), but there are other risks associated with spread betting that I won’t go into here.

Forex broker accounts can typically be opened with much smaller capital than I indicated above. However, there is a rather large element of leverage involved, and there is the small (but non-zero), probability of unlimited losses – if the market gaps through your stops for example. So generally, leveraged accounts are best avoided when you are only just starting out. As I covered in an earlier blogpost on share market trading for beginners, the “safest” instrument for beginners would be to stock indices.

Starting small is the equivalent of “sparring” in a gym. You may take a few knocks, but at least, your sparring partner is not solely bent on knocking you out. So you take a few knocks, live to tell the tale, and hopefully, learn from your mistakes to become a better trader/investor.

5. LEARN AND ADJUST

Learn from your mistakes, constantly see what is working and what is not working, and adjust your strategies and/or trading mentality/psychology accordingly. No one EVER goes beyond this stage. Even the most accomplished traders and investors are at this stage (and will remain at this stage for the rest of their lives).

This is because of the psychological/emotional aspects of trading. Becoming a truly successful trader or investor has an almost spiritual or “Zen” like side to it, as it involves overcoming oneself, and learning to control/manage fear/greed without getting overly attached to a particular outcome.

There is always room for improvement – and the market WILL “put on notice” – anyone who chooses to ignore this rule. As the old saying goes, there are bold new traders and there are old traders, but there are no old bold traders!

There are investors who prefer to invest money in the long-term vehicles that yield returns in the long term (5 years or more). However, some investors are looking for quicker returns. Short-term investments allow investors to gain access to returns sooner. However, one must invest smartly to gain high returns out of such investment options. Although short-term investments yield returns in very short term, it is challenging to find good short-term investments. The biggest advantage of good short-term investments is that it has a high rate of interest for those investors having a need of money in the near future. For some investors, short-term investments act as their retirement income.

Along with good profitability, short-term investments carry high risk. In order to have less risk, investors may have to forgo the high interest rate. Also, if the investors want to withdraw money before term, these options are associated with penalties. However, it can serve to protect the long-term financial goals of investors. An investor must start investing early on in their age. This leads to greater profitability out of the short-term investments and the profits compound with the increasing age of the investor.

Smart short-term investments comprise various steps: researching the investment options well; gathering information on these options from various sources and being well-versed in financial terms; and understanding the purpose of investment well, keeping the financial goals in mind. It is also wise to diversify the investment portfolio to cushion against the risk of the market. This can help the investor to build the investment based on the risk appetite.

The good short-term options to keep money can be the following:

Checking Account:

Putting money in a checking account gives investor the power to withdraw huge amount without any delay.

High-Yielding Online Savings Account:

Many banks have low minimum deposit requirements that provide good interest rates.

4-week T-bills:

Interests from T-bill investments are exempted from taxes and yield good return for investors.

Brokerage Money Market Account:

Short-term money market accounts yield higher returns. An interest rate of about 4.5%, in some cases, makes it a good investment option.

Penny Stocks:

As penny stocks are the stocks of new companies, they are lower priced. When the company grows, this can lead to high returns in the short term.

Money Market:

A good short-term investment option is the money market. It yields higher rates of interest as compared to the saving accounts. During the short period of investment, the interest grows providing benefits for the investor.

Investing in Gold:

Investing in gold and other precious metals is also a smart investing option for investors. These are the stocks that never go out of demand and can yield high returns in the short term.

Mutual Fund:

Another smart option for short-term investment is in mutual funds. Here, the profit rate depends on the fluctuation in the rates during investing, the term of investment, and the selling rate.

Thus, there are many short-term investment options to choose from. However, a smart investor weighs the options against the tolerance for risks and makes wise investment decisions to gain high returns in the short term.

Starting an investment club can be an easy and fun way to learn about investing in stock. Investments clubs provide education to members who want to undertake stock investing. They also enable members to pool their funds together for joint investment.

Here are 7 tips to starting a stock investment club successfully.

1. Learn about stock investment clubs by visiting or joining existing ones. This will give you first hand knowledge of how a club operates. You can also get acquainted by reading books that offer practical guidelines and advice on starting, joining and running an investment club.

2. Talk to others who have been involved in a stock investment club. Chances are they would have some ideas and opinions on how to start a new club. Look for online advice as well.

3. You can advertise your club through local papers or by posting notices at local shops. Ask friends or family to join but be aware that sometimes money matters can cause stress in personal relationships. So, lay out the ground rules ahead of time. Decide on how large or small you want your club to be. Small clubs are more manageable and fewer members come to an agreement more easily. Larger clubs have more money to invest.

4. All stock investment clubs must have proper plan and rules of operation, including how money will be handled and what happens when someone needs to withdraw their money. Make sure there are policies in place for circumstances such as when members wish to quit or when they fail to pay their subscriptions. Working these issues out ahead of time will save lots of stress later on.

5. Get organized. Determine where and where meetings are to be held. Establish roles (president, vice president, secretary and treasurer) and monthly contribution. Most investment clubs are set up in the form of partnership as this is the easiest way to deal with taxes. Complete relevant paperwork relating to business registration, partnership formation and tax. Open a bank or brokerage account. Choosing a discount broker means paying lower commissions. Full service brokers charge higher commissions but can provide some investment advice and guidance.

6. The main aim of a stock investment club is to educate its members. Find investment experts who are willing to speak at your meetings. Have Q&A and discussion sessions for members to interact with the speaker.

7. Setting up a website for your stock investment club can serve useful purposes. Members are kept informed of news, meetings and activities. A forum on the website allows members to ask and answer questions, and stay connected in between meetings.

An investment club can be a great way to learn about investing in stock. Best of all, you don’t need to have massive capital in order to begin investing.

Throughout history, gold has been a highly valued substance. It’s unique properties and relative scarcity caused almost every world culture to use it as a form of money, as well as a way to “store” value. Although it has lost much of its importance as a form of currency, gold investments still provide a great way to protect your money and diversify a portfolio.

Over the past few years, gold prices have been steadily rising. There is a very good chance this trend will continue over the long-term, making it a good idea to put some money into gold investments now. Also, buying gold is a great way to hedge against other investments. Due to uncertainty in the stock market and the value of the US dollar, it’s a good idea to put 10-20% of your money into a hedge fund in order to protect yourself. Gold and silver have always been considered to be among the best forms of hedge investments because they have relatively stable values (due to very small changes in supply).

How to Invest in Gold

Before you buy gold, it’s a good idea to get the help of an investment consultant. This is especially true if you’ve never invested in gold before. He or she can help you determine the best moves to make based on your own personal financial goals and risk tolerance. If you already have a personal financial adviser, tell him or her that you’d like to use gold to hedge your portfolio. If he or she doesn’t have much experience dealing in gold investments you may want to find someone who does.

If you’re interested in profiting from the price movements of gold, buying gold bullion coins are an excellent option. The best choices are the American Eagle, the Canadian Maple Leaf, the Britannia, and the Australian Nugget coins. You can buy gold bullion coins from precious metal and coin dealers, both offline and online.

Before making a gold bullion purchase, always shop around for the best prices, as the markup on coins will vary from dealer to dealer. Also, do everything possible to make sure the dealer you’re buying from has been in business for awhile and has a good reputation. If possible preserve your gold coins in the original mint packaging and protect them from scratches to maximize resale value.

Gold bars are another gold investment option you may want to look into. Smaller bars are usually more expensive (per ounce) than large bars but are often easier to sell. In general, bars carry a higher price premium than coins. As with gold bullion coins, only buy and trade with reputable dealers.

Investments in 2007 will be your opportunity to make significant gains in your financial portfolio. Taking control early in your investment planning will maximize your returns and you’ll create groundwork that will allow you to establish investing guidelines for all future investing as well.

Investing is all about placing your best researched intuitions where you feel comfortable about what will take place regardless of the expectations of others or the status of the nation’s economy. Money is made daily and if you place your investments wisely, determines if you are in fact, master of your investments.

There are some misconceptions of what type of investments are the best to follow. If you do not have any real insights on the stock market, don’t jump in with a large percentage of your investing capital. The keys to success are about learning as much as anything and never replaying a bad strategy.

History, self made history, is or should be your best friend for all your future investments. It’s not a perfect world and neither are you, so put aside any thoughts that you can maximize every trade or other investment, make your moves slowly and consistent.

Let’s say you are new to investing, you can take advantage of several courses or mini-trade routes, outlined by someone who’s found consistent patterns that produce successful trades. Investing can be in a totally unexpected direction, such as applying yourself in online sales from an affiliate program. This is a very popular investment since it takes very little money to get started and you have a ready-made product already established. The commission split to you is very appealing. There are a number of programs that pay as much as 75% to you.

Investment Planning is really as simple as, where you think you can actively participate with your money and or time, that will yield you a positive return on your participation.

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1. – Know your talents, what are you good at, then think of ways to make it pay you for your efforts

2. – How much time can you devote to your investment, this is where you don’t want to become sidetracked and lose sight of your goals

3. – Invest your time or money where you understand the risks and won’t become shocked or surprised if it develops a slump or setback

4. – Choose an investment that you enjoy, this makes investing a pleasure and this will give you drive above all other distractions

5. – Make predictions or goals that can be obtained in the short term, don’t set yourself up to finish the year before you’ve made your shorter range goals. Life is about living, not retiring.

6. – Read about the previous years wins and losses, in the field of your investment plans and see where to make small changes that could correct for the losses and avoid pitfalls that history provides

7. – Consider forming a team of investors, family, friends, or co-workers who are serious about taking control of their financial futures.

8. – Put all your financial plans in writing and keep them at arms reach at all times. It’s very wise to make notes as you have certain thoughts from day to day and reflect, then decide if you need to make adjustments. Don’t become overwhelmed with the ” I should have done . . .” thinking process. This will make you miserable and you can loose focus very easily.

9. – Track your progress and determine if you should increase your investment of money, time, or both in order to see a positive return on your investment. This is not always easy to decide, but you are the controls of your investment, don’t let yourself down.

10.- Find a mentor that can advise and encourage you to continue, seldom will you find a success story that didn’t have contributors, regardless of their role in the success story. You may be pleasantly surprised how much others can actually affect your investments in a positive manner. ____________________________________________________________________

Investing for 2007 can be your new-found goldmine to becoming self-sufficient financially. Take the time to decide your personal plan of action and follow through with it. There are so many possibilities, it’s not a question of if, but rather how you will succeed. For more investment tips:

http://wealthsmith.com/investment-tips-insights-2007.htm

As an investment, gold is really great because it is tangible and easily exchanged. Gold is easy to hold, to sell, and to buy. Many people believe that gold shares are actually shares of gold, but you’re actually buying and selling shares in gold mining companies, not selling gold.

Ownership of gold can take multiple forms and can include gold bars, coins, and certificates of ownership. The Gold Fixing of London releases the price of gold twice a day.

You’ll need all the professional help that you can get to invest successfully, because these are dangerous times. Is this the best time to put your gold up for sale? Demand may grow even more. Many people disagree about many aspects of gold investing, as is true of every other form of investment. I highly recommend MasterTrader for advice about investment and stock trading.

Let us now make a beginning. It will be easier to sell your gold if it is easier to determine just how pure your gold is. This is a factor that helps account for the popularity of gold bullion for investors in the gold market. Both the quality and the quantity of pure gold coins is guaranteed, making them much easier to sell. As a result of this guarantee, it’s much easier to sell to gold dealers everywhere. The present value of gold is something that every dealer will be comfortable knowing.

If you try to sell gold that has been “hidden”, by contrast, a gold bar becomes much tougher to trace if its distinguishing marks are pounded away. This will be noticeably harder because it’s not easy to prove that it’s genuine. Selling gold in the form of bars, as compared to selling gold coins, in general this is true. Shop around for the best deal if you wish to sell your gold.

Bars of gold are simpler to sell based on their purity. The American Eagle coin has a fixed and stated amount of gold, but it will also have some non-gold alloy, and many dealers will reduce its value accordingly.

You may try to sell gold to a dealer immediately, or sell on eBay at the current price, when you’re happy to see that the market value of gold has gone up quickly, overnight. On the other hand, gold dealers pay less attention to day-to-day trading, and expect prices to snap back to previous levels. In a perfect situation, the dealers you are in contact with will offer to pay you some fixed percentage on the dollar amount of gold that you can sell. This is sometimes not true, you could find a dealer that wants to purchase gold at a percentage discount.

Any dealer should know the current price of gold, but they won’t agree as to whether it will be worth more or less in the future. When you sell gold coins, the variation in offers is because of the aforementioned. It is important to do your research before deciding where to sell your gold coins as the prices dealers or private buyers are willing to pay may vary widely. Before you either buy or sell gold, look around at multiple shops. Shop around to find the best offer for your gold coins. The market price of gold is updated on a continual basis and is relied upon by a multitude of people. As such, offers that you receive on your gold will not vary materially from the market price.

If you have gold that you are considering putting up for sale, you may want to consider selling it over the internet. The sell gold page in Google would help you in finding dealers so that you can sell your gold directly. Click on this site to find dealers who engage in gold bullion trades. eBay is a popular way to auction gold. If you put your gold up for sale at whatever the current price was at that moment, and then the value drops while it is for sale, you will probably have to adjust your price to the current price or be unable to sell the gold.