Options are derivatives. Derivatives are a type of security along with primitives. Securities are standardized financial instruments. A financial instrument is a legally binding contract that has a value attached to it, usually monetary.
Investors can simply buy stock from a company and hold onto it, in hopes it will appreciate. If the company decides to pay out dividends, the investor can reap a part of those dividends, in direct proportion to his share in the company.
A call option is a right sold to another investor. This right concerns an underlying asset, which usually is stock. Typically, if an investor holds stock in a company in multiples of 100 shares, he can sell options against this stock, one option per 100 shares of stock. The buyer of the option will pay for it with an amount calledpremium. In exchange, he will get the chance to exercise his right to buy the stock covered by the option at a pre-determined, fixed price. If the stock goes up, the option buyer (or holder) will make a profit by buying expensive stock for little money. You can learn options and make a monthly income from them.
There is an economic attribute attached to options called intrinsic value. If stock appreciates, the option's intrinsic value will be the difference between the stock price and the pre-determined price (strike price). This will be a positive number. If the stock goes down, the intrinsic value will be null. As a rule of thumb, a lower a strike price will trigger a higher intrinsic value and involves a smaller risk. Obviously, small risks also bring small returns.
If you learn options you will have an easier chance with getting a greater intrinsic value set up on your stock options. You can learn options off of the Born to Sell website.
Making one or several investments in an online property auction can seem like a daunting and frightening task. There are many risks involved and large sums of money. For every success story you hear about someone paying a couple of grand for a million dollar turnaround, you'll hear just as many horror stories about spending hundreds of thousands on a dilapidated, decaying home that isn't suitable for a family of cockroaches. Regardless of how well prepared you are, a lot of it comes down to good luck. There are; however, a few things you can do to try and safeguard against beginner mistakes.
Research
As with any investment, taking the time to learn about the market, terms, and real estate in general will give you a huge advantage. If it seems like too great a task to undertake, start small and narrow down your research to manageable areas. Take a small suburb or area of a city that you are interested in and start visiting open houses and talking to real estate agents. They will give you an idea about the current market prices, the average time homes remain listed, and other important trends. Once you have a grasp on a certain area, you'll be able to whittle down your choices in an online property auction with ease.
Use Logic
If buying for an investment or your just looking for your own personal home, try to stay cool and collected during an online property auction. Many people become heated and emotional if a bidding war starts, throwing their financial goals out the window in order to "win." While you do have to win the bidding war, make a plan and stick to it. Don't let your good judgment be clouded by the intentions of other bidders. Also keep in mind that there will be other opportunities if you have to let one go.
Take Advantage
One of the biggest advantages to an online property auction is that no one has to see you. Yes, your face alone can end up costing you thousands. Auctioneers and sellers can often read people and will see if you start to sweat. They know someone who is willing to lose their cool in order to get that real estate. In an online property auction you can get as worked up as you like and no one has to be the wiser.
Finances
Have your finances all organized and in order, as well as your budget for the lifetime of your intended mortgage and then some. While you can't protect yourself against every potential hardship, don't go into buying real estate and expect to "wing it" if you find your ideal home for much more than your initial budget. Be realistic and know when to let a "steal" go. After all, it isn't that great of a deal if at the end of the day you really can't afford it. You also may not even be able to sell it, making matters far worse.
If you are thinking about an online property auction to find a house or make an investment, consider a professional and knowledgeable service. For more information, visit: http://www.civicsource.com/
After getting tired of the pitiful sums of money my bank was paying as interest on my savings account, I decided to do something about it. I looked for an alternative and that is when I settled for the EE Series Bond Value that is provided by the Federal Government. A few years down the line I decided to see how much interest had been generated by my saving bond. I used the following steps to do this.
I collected all the bonds that I wished to evaluate and logged on to the internet. I then searched for the US Treasury's securities website which is called Treasury Direct. At the website, located near the top edge I clicked on "enter" under the individual's headline. I was then given a menu and I selected "price your savings bond". A navigation bar then appeared on the left and I selected the savings bond calculator. A list of options was then presented to me and I chose "get started". Next I entered the date for which I wanted to redeem my bonds. In my case I entered 13/02/2011 which is on the eve of Valentine's Day. I want to surprise my girlfriend with an engagement ring on Valentine's Day.
I then left the EE bonds that appeared on the drop down menu and I opted to select the denomination of the value of my bonds from the denominations menu. Next I input the serial number of my bond. I then entered the date on which my bond was issued. I then clicked on the calculate button and the value of my bonds was shown. My girlfriend is sure to be pleasantly surprised on Valentine's Day.
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Many investors are attracted to CFD trading because they can trade in stocks without paying large amounts. Contract for difference trading is a system in which a person can enter the market by only paying a small percentage of the total cost of a share. When the cost of the share rises, the investor makes a profit on the difference in the initial and current cost of the share.
Watch Market Closely
To get started, one can open an online CFD trading account with a company involved in this business. Most banks also allow dealing in CFDs directly through the client's account without involving any third party. Investors have to keep an eye on the market to see whether the prices of the concerned shares on which their CFD trading are based are rising or falling. This helps calculate their profit or loss. If the cost of each share rises by five percent and the investor has purchased each CFD at five percent of the initial cost, he makes a 100 percent profit on his investment. Similarly he can also undergo heavy losses if the price of each share falls by a similar percentage.
Sell At The Right Time
It is a good idea to do such trading through a company which is in this business. This is because it has experts to watch the market and sell a CFD when the value of the share becomes too low. Such experts can advise the investor to do CFD trading in shares which are performing well in the market. Although the investor can study the market himself, it requires a lot of time. In addition, to avoid major losses in such kind of trading, it is important to sell CFDs at the right time, before the cost of the share falls too much.
Though there are many companies involved in the business, investors should search for the one that offers good leverage and also keeps the client updated about how his CFD trading is faring.
CFD trading can give high returns without investing too much money as cost of a CFD is only a small part of the share's value.
Lots of people work hard all their life to put some money away for their retirement and leave behind some funds for the next generation. If they're prudent with their investments and live within their means, this can total a few million dollars. A few million dollars is nothing to scarf at, but it doesn't put you in the same league as Bill Gates. Owning a small business, having some real estate and a good retirement plan will often add up over time. The research and consulting firm, Spectrum Group, says that in 2009 there were 7.8 million families with a net worth of $1 million, excluding their primary residences.
Some folks claim these people represent a "privileged" class of Americans, especially during these times of rampant foreclosures and high unemployment. Somehow, success in achieving the American Dream has turned into a bad thing. I wonder what would happen if everyone felt this way and simply stopped working. Then all the naysayers should be happy. Of course, there wouldn't be any tax money to pay for all the wonderful things that the government does for you, but that's besides the point.
A part of being prudent with your money is the responsibility of doing some estate planning. Estate planning helps control what your heirs get, when, and on what terms. It also helps in keeping down the taxes paid at death. This isn't evading taxes. It's paying what you legally owe and no more. In order to properly plan, it's necessary that the government initiate regulations that the public can expect will be stable enough for plans to be projected into the future. After all, no one knows when they are going to die and people can't be expected to change their estate planning every five minutes.
Under the Bush Administration, Congress passed a major tax bill entitled the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) that dealt with a number of estate planning issues. Many provisions of this bill were set to lapse in 2010. This would allow Congress to take up the matter again and decide what to do in for the future. Instead, Congress has let the Act lapse and thrown everything into turmoil.
In 2009, the estate tax exemption was set at $3.5 million. Putting it another way, estates under that amount paid no federal estate taxes. In 2010, when EGTRRA lapsed, there was no estate tax regardless of the size. In 2011, the estate tax exemption returns to the pre-2001 level of $1 million.
Unfortunately most Americans think this issue has no direct impact on them. After all, only 1 in 160 people who die a year owe estate taxes. Perhaps these people should rethink their position.
Because of Congress fumbling the ball, the family of Yankee owner, George Steinbrenner, was able to escape estate taxes estimated up to $600 million. Combined with the deaths of three other billionaires in 2010, it cost the government $6.5 billion in taxes. In a time of economic recovery, letting this kind of revenue get away can not bode well for the popularity polls in Washington.
Secondly, if we return to the $1 million exemption in 2011, small businesses could suffer "liquidity" problems when trying to raise funds to pay the taxes. This can lead to the liquidation of many businesses along with the loss of jobs. I thought Congress said they were trying to create jobs. You don't do it by closing small businesses.
The likelihood is that Congress will act upon this mess and in all probability will simply extend the provisions of EGTTRA for a couple more years. Of course, they could have done this in the first place and avoided the problems caused by their screw up.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and cannot be invested into directly.
Glenn ("Chip") Dahlke, a senior contributor to the Living Trust Network, has 30 years in the investment business.
He is a Registered Representative of Linsco/Private Ledger and a principal with Dahlke Financial Group. He is licensed to transact securities with persons who are residents of the following states: CA. CT, FL, GA, IL. MA, MD. ME, MI. NC, NH, NJ, NY.OR, PA, RI, VA, VT, WY.
If you have any questions or comments, Chip would love to hear from you. You may contact him at dahlkefinancial@sbcglobal.net. You may also contact him at the Living Trust Network. Its web site is http://www.livingtrustnetwork.com.
Copyright 2010. Living Trust Network, LLC. All Rights Reserved
Over the last couple of weeks we have witnessed a series of conflicting reports from all over the media complex as to why equity markets are under pressure. Predictably, as soon as the markets recover a bit these same pundits come up with all sorts of reasons to cheer.
Needless to say these hysterical reports, bullish or bearish, are entirely worthless. CNBC, with its ridiculous "fat finger" report, has proved its irrelevance as a financial news source. In fact, this embarrassing story (released with less than an 1/2 hour to go in the trading session) stinks of manipulation and seems to implicate CNBC as a pawn in a propaganda ring.
But I digress, my purpose today is to offer a little clarity to the situation. So without any further ado, let's map the market developments and see what, if any, conclusions may be reached.
Support:
Government support is the primary reason equity markets have traded higher over the last year. That support has taken the form of, to name a few, "cash for clunkers," foreclosure prevention, home buyer credits and a myriad of Fed liquidity programs.
The result of this support has been the release of government supplied economic numbers that appear promising and suggest GDP expansion (Did you pick up the sarcasm in that sentence? Sorry!).
To sum up, large quantities of Fed-provided quantitative easing and rosy economic numbers are the fuel driving markets higher. Now Europe and the European Central Bank (ECB) have joined the fray. Supposedly close to $1trillion of liquidity will be thrown into the gaping mouth of the debt monster.
Pressure:
Abysmal - as in the size of an abyss - amounts of world debt are swallowing up prodigious amounts of liquidity.
China - China's equity markets have for some time been a leading indicator for US markets and risk assets in general. Recently, the Shanghai Index reached into bear market territory with a 20% decline from the highs of the year. This is not a good omen. Moreover, China's economic expansion could be labeled the lynchpin of world economic growth and the recent measures by China's central bank to tighten liquidity is, to say the least, problematic for a world drowning in debt. The recent increase in consumer prices of 2.8% in China only exacerbate the problem as it would appear inflation is accelerating.
Goldman Sachs - Common knowledge suggests the markets swooned because of violence in Greece. This is absolutely not the case. We can draw a direct line to the beginning of this most recent market drop and the day Goldman Sachs ( GS ) faced the Senate tribunal. Government crucifying of the financial space is heating up and will only get worse as senators fight for re election this November. GS is the undisputed heavyweight champ of the financial space and if they fall the financials as a whole will experience painful P.E. multiple contraction. In the last few weeks GS's credit curve has inverted. Credit protection on GS cost more for 1 year than 5 years. If this trend persists a debt downgrade for GS could be in the offing which would in turn send financial shares tumbling.
This Just In: As I write this the "Senate Finance Committee votes on amendment to create a new ratings agency; yay's have it 64-35, amendment agreed to..." Can you hear that? That's the sound of a GS debt downgrade being written. The congressionally approved ratings body will likely remove the conflict of interest inherent in the current private rating agencies business model. Hence, we would not be surprised to see Moody/Fitch/S&P make a preemptive downgrade.
Financial Group (FINs) - FINs have always been a leading indicator for overall market direction. If GS drags the FINs down the rest of the market will suffer. Make no mistake, as the volume of negative news and behavior towards the FINs grows louder the equity markets will suffer.
Greece - I would be remiss if I didn't include this component as part of the pressure on the markets. The proposed trillion euro bailout seems dubious at best. Lest we forget weeks were required to raise just $30 billion and now somehow the finance ministers got together over the weekend and $700 billion was pledged?! Now these ministers must go back to their respective countries and try to get funding. This funding request should be a tough sell. After all, the German people recently voted the ruling party out of one house after the first 40 bil Euro bailout. In fact, rumor has it a reintroduction of the German Mark may be in the offing. How about England? They have yet to participate in any bailout and now elections have created a coalition (read: do nothing) government.
The simple fact remains that all this talk of bailouts is actually missing the real point: Greece has a solvency issue not a liquidity issue.
Conclusions/Questions:
Q: Will liquidity expansion trump debt implosion?
Q: Will excess liquidity continue to find its way into the equity markets?
Q: Will Chinese tightening and supposed European austerity plans actually drain marginal liquidity?
C: As my mom would say, "we must live the questions and the answers will reveal themselves." So, remain vigilant, defend principal and let the markets be your guide. Don't force your will on the market and avoid complacency at all costs.
C: No matter which is the victor, the Tidal Wave of Liquidity or the Trench of Debt, one asset class will not only survive but flourish. The precious metals, Gold and Silver, are now advancing to new highs against all fiat currencies. I have written repeatedly over the last few years that the true inflection point for Gold and Silver will arrive when their values increase even in the face of a rising US dollar. The time is now. Please hold on to the Bar!
Disclosure: No positions
Bret Rosenthal is Principal of RCM, LLC, and founding partner of the Fortune's Favor Family of Funds. Bret Rosenthal is responsible for the day to day management of the Fund's investment and business activities. Rosenthal Capital Management, LLC, is an independent investment management company founded by managing members Gary and Bret Rosenthal.
Prior to starting Rosenthal Capital, Mr. Rosenthal served as Director of Investments at Wachovia Securities, plus Senior Vice President of Investments at Prudential Securities. In both cases, Mr. Rosenthal constructed and monitored investment portfolios for high net worth individuals, trusts, pension plans and foundations. From 2003-2005 Mr. Rosenthal sat on the... More Directors' Council at Wachovia Securities.
Prior to that time, he spent three years on the Chairman's Council at Prudential Securities. While at Prudential Mr. Rosenthal developed a computerized trading system that was highlighted in the book The Winner's Circle (2002). During this time, he also became a registered investment advisor and was covered under Prudential's ADV documents.
Mr. Rosenthal received a Bachelors of Science in Business Administration from Boston University.
For more on Bret visit: http://rosenthalcapital.com/blog.
In call option selling, covered means safety. In this article we are going to look at a covered call example. Suppose you buy 100 shares in the Old Times company at $55/share. This will cost you $5500. The same day you write a call option against it at a strike price of $60 (The strike price has to be higher than what you paid per share in order to make a profit.) Let's say you charge $2 per share for the option. That means you will get a $200 premium if somebody buys the option.
If the stock goes up, the buyer of your call option will be inclined to exercise his option. He will do that when the share price significantly exceeds the strike price. If he exercises his option when the stock is at, say $63 a share, you will be compelled to sell. You will cash in $6300. Together with the $200 premium, that makes $6500. If you subtract the $5500 initial stock price, you are left with a profit of $1000 (minus commissions). With the $6500 you can buy more stock, if you wish, or invest it in some other way.
If the stock falls, the buyer of the call option is not going to exercise it and the option will expire worthless. In that case you simply cashed in the $200 and, at the option expiration date, you can merrily sell another call against the same stock.
A simple covered call definition would be: a strategy to sell call options against an underlying asset that you already own.
The covered call example here should show you how you can get more. You should see this covered call definition function through the Born to Sell site so you can know what you can earn through the use of options.
On Friday, November 5, 2010, the Associated Press published an article about the record number of bank failures since the Savings and Loans crisis. As of the date of publication, the 141 bank failures in 2010 has exceeded the 2009 figure of 140, suggesting that bank failures remain a growing part of the financial services sector. However, the number alone does not tell investors a whole lot except that there are more failures than in 2009. Digging a little deeper, we see that the value of those failures is less than half of what it was in 2009, suggesting that the smaller and weaker financial services firms are the ones bringing those numbers higher.
Although numbers have indeed surpassed the prior year's total number of failures, investors should look at whether or not the system is actually improving. Since the FDIC is having to incur much less of a deficit for those 141 failures than it had to incur for the 140 for all of 2009, the bottom line is that the financial services system is actually in recovery mode. This is an important turning point because finance-related recessions (or recessions that are caused by financial services firms) typically take much longer to end, making the recovery process a longer and often more painful one.
In addition to failures costing less, the FDIC has also been rebuilding its deposit insurance fund. Before the financial crisis, it held a surplus of $50 billion; after 2008, it had a deficit of $21 billion. The Economist points out that after the first 140 failures, the deposit insurance fund had reduced its deficit to $15 billion, a sign that the financial services firms that have survived up until now have been helping to rebuild that fund fairly aggressively (to compare apples to apples, imagine reducing your debt load by roughly 30% in less than 1 year... this is what the FDIC has essentially done).
The point of taking note of these bank failures is not just about pointing out that the system continues to have its flaws (or just cheaper flaws), but to point out that as these last few remaining, troubled financial institutions disappear under the wings of the FDIC, the larger and stronger financial services firms stand to benefit. There are many ways these survivors can get stronger, including acquisitions of the highly discounted assets of the troubled firms. But most importantly is that these surviving firms, whose capital base is just strong enough already, will start to see a growing customer base as further evidence of economic recovery push people through their doors for the services they provide.
Ultimately, financial services firms are not to be avoided by investors. To the contrary, these historic numbers (of failures) make the case for greater investor interest before the price for these stocks gets too expensive.
--> See what Equity Funds hold Financial Services at MutualFundSite.org.
Chris has more than 17 years of financial services experience. He is a regular contributor to the Mutual Fund Site, where a review of the Third Avenue Value Fund was recently published.
I have to laugh when the government comes out with its core inflation numbers. When you look at those numbers you get the picture that things are just cruising along nicely. Nope, no price increases here. But when you look at the things that aren't included, like food and energy, you get a much different picture. We are paying more for things we most need. Regardless of what the Fed or government says, this trend is going to continue. As such, I highly recommend looking into ways to use inflation in your favor.
I am a big subscriber at looking at pain points for investments. As such, it is easy to see that food and energy costs, among other things, are going up. Since these areas are going to be a real pain in the behind, it would be a good idea to invest in them. Another simple thing you can do to hedge against future increases in food costs is to buy more of it today. Obviously this goes for non perishable food goods. This way you can take advantage of today's cheaper price tomorrow. Obviously, energy costs are a little harder to hedge in this way. Since energy prices will be rising, the energy sector is a good place to park some cash. You can also invest in weather proofing your home. This is a real bang for the buck activity.
Gold and silver are definitely two great inflationary investments. I'll let the 1970s speak for themselves. Today we find ourselves faced with a similar situation, but our debt increase provides much less wiggle room. I think that will provide a lot of currency pressure that wasn't seen in the 1970s. In any case, the price of gold went over $800 in the 1970s. Based on inflation alone, gold should be higher today. And now that Bernanke and the Fed are printing money like it's going out of style, I find no reason for those prices to go much higher. It is interesting to note that silver always lags behind gold. It lags, yes, but it runs much longer and much higher than gold. By higher I mean in terms of percentages.
Another interesting area for inflationary investment is in bonds, interest rates, and debt. I'm not going to go into all the ins and outs of systemic market dynamics. But I think it's a fair assessment that rates will go much higher in the next decade. Obviously, on the consumer market side, the best play for you would be to lock in a super low rate. This way your debt will take less to service. You can also buy funds that bet against US treasuries. This way you can take advantage of the crazy monetary policy in place. And finally, it should be noted that, if played right, that debt becomes much cheaper to pay off at a later date. Inflation haven investments retain your wealth. As those dollars lose value, things like a locked mortgage rate home payment remain the same. In this way, as your investments take off, you can later pay down or pay off things like a home. It's a good strategy.
Paul has been writing informative articles like this for 6 years. Come and take a look at his newest site which discusses a jogging double stroller and general information about a double stroller to help users make an informed choice about them.
There is no shortage of information that exists out there on tips and techniques for investing, that's for sure. What's more, there is no shortage of Miss-information on tips and techniques for investing that exists out there, either.
Nowadays it seems that there are far too many so-called "financial experts" claiming to offer the ultimate hot tips and techniques for investing, whereas it is the very advice of these so-called experts that is leading people down the path of losing money.
Far too many people today have been victimized as a result of the recent economic downturn due to faulty tips and techniques for investing. This is because they lacked the knowledge of how to make sound investment decisions on their own. And instead they blindly put their trust in the tips and techniques for investing that are doled out based on hype, based on emotion or based on following the rest of the crowd.
If you want to learn the PROPER tips and techniques for investing, then you absolutely must take it upon yourself to seek out the knowledge of everything there is to know about the mechanics of investing, a proper understanding of the forces at work that drive the market up or down, what are all of the different types of investment vehicles available to you, and what are the different types of investment strategies that you can employ to earn profit.
In other words, you need to become your own financial expert. You need to arm yourself with as much knowledge as you can about investing. There is a lot more to tips and techniques for investing than just "buying low and selling high" or "buying and holding".
If this all seems overwhelming to you, keep in mind that investing isn't easy. If it was, then everyone would be doing it, and everyone would have been successful at making money. But as you can see, there are both winners and losers in the game of investing.
I'll bet you are reading this because you want to be one of the winners.
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There are some advantages of semi-numismatics for those who collect this type of coin. If you ask numerous people about why they collect this particular type of coin, they are likely to tell you that they do so because they believe it is a protected value, in that the coins have a rare quality to them and therefore cannot be confiscated by the government. For others, there are other advantages of semi-numismatics to consider. Regardless of what the reasons are, many people do prefer this type of coin and will seek them out.
What Are They?
To understand the value behind semi-numismatics, first understand what they are. This can get a bit confusing. The definition of numismatic, according to some sources, is that it is the study of currency, including coins. According to the United States government, numismatics coins are gold coins that have, for some reason, a recognized special value to them as defined by coin collectors. This is, perhaps, the most important part to understand if you are in the market to buy these particular types of coins.
Why Them?
The advantages of semi-numismatic coins can actually be quite extensive. One of the reasons that this type of coin is so valuable has to do with that recognized value. Many of these coins have high bullion content in them. They are also often older coins. This includes older coins such as British sovereigns, gold Swiss francs and even French francs. In some of these coins, the gold content is almost 1/5 of an ounce, making them a high content type of coin.
What makes these coins even more interesting is that they are oftentimes more affordable that some of the graded rare coins that are out there. They are smaller in size, too. This translates into a simple situation - these coins are more affordable to purchase and that is one of the main reasons that so many people are buying them, or at least seeking them out. However, it is important to note that they have not performed as well as some other coins over the long term.
So, the underlying question is, why do some people prefer them? The advantages of semi-numismatics are quite often because, to new buyers, these coins are easier to afford and therefore more readily available for purchase when you want to accumulate a higher value of gold coins in your collection for adding value to your portfolio.
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Jason Whitney is a numismatic expert and CEO of US Secure Coins, based in Lumberton, Texas. For more information about investing in precious metals and collecting rare coins, visit www.ussecurecoins.com.
As we delve into the different methods of trading penny stocks, and the different online services that help facilitate trading, let's first understand what a penny stock is. Simply put, a penny stock is a stock that trades at a low price accompanied by low market capitalization. By low market capitalization, we mean the stock's (company's) total gross value is very small relative to larger, well known stocks on the various exchanges. Further, penny stocks are typically traded outside of the major exchanges due to their low price, market capitalization, and overall risk.
Understanding penny stocks is vital to any investor trading portfolio. Due to their very low price, penny stocks certainly don't get the exposure that their big mid to large cap stocks brothers do. For example, an investor could, through an online brokerage service, buy a few thousand shares of a small cap stock, however, even if a penny stock rises say .10 cents in a week, the investor might not be able to sell all of his shares because of the small cap exposure of the stock.
Therefore, it is important to understand how to trade small issue stocks...what to buy, when to buy, and how much to buy at one time. It is possible to earn handsome returns following the right research and investing strategy. Though penny stocks have lower market capitalizations, one benefit that small cap stock have over their large cap brothers is that they're somewhat independent and have more resiliency in harder economic environments. Investors typically liquidate more of their large cap holdings and re-invest in other assets including penny stocks. There are many success stories of those who re-evaluated their investing strategies during recessionary times and way out performed the larger conventional stock market.
So how do i learn more about the penny stock market? There are various books and programs available that detail investment strategies for successful penny stock trading. If you're interested in a program online, through a book, or a periodical, do your homework to ensure that the strategy endorsed or held by the author is backed up by true success stories of investors who really achieved good returns over a period of time. Also, if a promoter touts his program as "successful", "the best available", or "guaranteed", make sure that they stand behind their product or method in some way either through a refund program if their product turns out to be bogus or they invest independently along with you so they're putting their money where their mouth is.
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We are all in a habit of looking at every investment from a short term point of view, so that it would yield high returns; however as they advice if you really want your money to grow you need to opt for long term investment.
At the same time it is very much known that stocks are volatile; so to start with, typically you should have enough cash reserves to take care of your living expenses or handle any unforeseen emergencies or demands, that is what most of the financial advisors would suggest.
Do you Want Returns within Five Years?
The obvious and safest places to invest would be certificates of deposit of banks preferably; the best part here is that Federal Deposit Insurance Corporation guarantees safety of your funds for up to $250,000 against a minimum initial investment of a few hundred dollars or less.
Recently, rates of interest for 6 month CDs were about 3%. However if you are looking at exposing your principal amount to a little more risk then you can invest in short-term bond funds. For such investments the minimum investment requirement hovers around $1,000.
Do you want to invest for a much longer time frame?
Well now we are talking, you would definitely want to consider investing your funds where the returns grow faster and better, which of course means stocks. Stock market has outperformed every other kind of investment over a period of time.
Over the past half century inflation (courtesy: consumer price Index) risen at rate of 4.3%(annually), so looking at the way at which inflation reduces your power to spend, stock market is the only option that can help you out of this situation. And especially if you are looking at long term investment the best place to invest is in stocks. Now the worry is how do we get started? When and where to invest? Here are a few suggestions:
- Invest in Mutual Funds
If you are a rookie investor the safe way to get a feel of the stock market is via mutual funds, which helps you to invest into diversified portfolio of numerous stocks/ bonds. The other major advantage that Mutual Funds offer besides diversification is that your funds are managed by expert stock traders whose core job is to closely follow the stock market. Mutual funds give you an option of investing as low as $500 to $1000 and as a novice you would rather want to start with minimum initial investment till you get a hang of it.
- Day Trading on US Stock Exchanges
Well I would not suggest this, mainly because you ideally need $25000 in your account for day trading effectively (which is buying and selling stocks on the same day), this needs a lot of experience and know-how of the market and also calls for huge piggy bank.
- Now to answer is $5000 enough?
Yes it is, we have already mentioned that if you are looking at investing in mutual funds you could invest a smaller amount than $5000, however if you are looking at trading at the stock market then to start with $3000-$5000 is a good amount, until you have mastered your instincts and emotions while trading.
As for commissions, you would pay about $5-10 per trade to popular browser-based discount brokers like E-trade, TradeKing or Scottrade.
At Compare Broker, we can assist you in opening an investment account with a leading brokerage. Visit our site for latest reviews of offers and promotions from different brokers. Our blog section is regularly updated with informative write-ups for traders and investors.
The decision about whether you should use managed accounts or not is supposed to be a personal one because each individual's situation is different. Several years ago, it was not possible to get access to these accounts unless you had millions. This has changed and the requirements are now lower. With managed accounts, it means that you sign a part of your power of attorney to an investment manager. The individual will run the portfolio on your behalf. You can choose to have them run the entire portfolio or just a part of it. The first thing the professional will do before offering their fund management services will be to determine what your investment goals are. They will also assess your risk tolerance and time horizon before making a decision. There are various advantages that you will benefit from when you use this type of fund management service.
One of the main advantages of managed forex is custom allocation of assets. The portfolio that the professional will come up with will be based on your investment goals and not a general approach. Your goal can be to increase your income or grow your assets.
Managed forex also offers you a lot of transparency. This is different from mutual funds where you are not aware about what you have in the account. With this type of service, you know exactly what you own.
Tax management is another benefit that you get from this option. The professionals can run your portfolio using a specific technique to ensure that the taxes you pay to the state and federal government are reduced.
With this type of product, the fees are competitive and this makes it very easy for you to get something that is within your budget. Most of the professionals charge a flat rate for an entire year instead of a commission based rate.
With this type of financial service, you get to work with some of the most experienced people in the industry. The systems that they use have been applied for several years therefore you can trust them.
One of the things that make these accounts so popular is the fact that they offer you a lot of convenience. This is because you do not have to run the portfolio yourself. You have the services of a professional therefore you can dedicate your time to other business operations. It is also a good idea if you are just starting out and you are now aware of how things function.
If you decide that this is the best option for you, it is important to find the right professional to handle your investments. This can determine whether you will be able to increase your profits or not. It is not a suitable option for everyone and this is why it is important to evaluate the particular situation that you are in before you get started. It might be the solution you need to make money from your investments.
Managed accounts offer various benefits if you use the right professional. Use the provided links for more details about managed forex and fund management
Let's start from scratch. Contracts are legally binding agreements between two parties. Some contracts have something valuable specified in them, like money. Let's call these financial instruments. Since you can buy and sell a contract, you can also buy and sell financial instruments.
As contracts, some financial instruments have very specific clauses, which makes them difficult to trade. Others have standard clauses, which makes them easy to trade. Let's call the latter securities. In the security category, some deal with primary assets (like stocks and bonds), others deal with more securities. The latter ones are called derivative securities. Their value derives from the value of an underlying asset. Many times this asset is stock.
Derivatives of a certain type are called options. These involve trading a right to trade on their underlying asset. (Sorry for the tongue twister.) Let's look at an example.
A call option is a derivative that gives its buyer (the option holder) the right to buy (call in) a given stock at a pre-determined price (known as the strike price). The holder will pay a premium for the option, but may buy or may not buy the stock. The actual buying of the stock is called option exercise.
The holder will exercise his option only if stock appreciates significantly. This way he will get to buy expensive stock for a small price. On the side of the option seller, he should engage in this transaction only if there is a high open interest for the specific option trio he intends to sell, comprising of stock, strike price and expiration date.
The option exercise involved in option trading can involve a good amount of open interest that you can take advantage of. You can learn how to work with a good option exercise on the Born to Sell site.
A holiday gift for taxpayers? After a 277-148 passage in the House and an 81-19 approval in the Senate, President Obama signed the 2010 Tax Relief Act into law on December 17, extending the Bush-era tax cuts.1 Here is the impact of the new legislation:
Current federal income tax rates are preserved for everyone. The federal income tax brackets will remain at 10%, 15%, 25%, 28%, 33% and 35% for 2011 and 2012.
Unemployment insurance extends for 13 more months. This is retroactive, so the federal extension of long-term jobless benefits applies from December 2010 through December 2011.
A payroll tax holiday occurs in 2011. The payroll taxes that employees pay will drop from 6.2% to 4.2% next year. (There will be no payroll tax cut for employers in 2011, only employees.) As envisioned, this will result in a savings of about $1,000 next year for a wage earner bringing home $50,000. This replaces the Making Work Pay credit.
Estate taxes will be milder than at any time in the past 80 years. For 2011, the federal estate tax drops to 35%. The estate tax exemption rises all the way to $5 million. President Obama had earlier characterized these parameters as too generous, but he and Congressional Democrats ultimately accepted them.
Tax breaks for middle-class and working-class families won?t sunset. As a result of the new law, the child credit, the child and dependent-care credit, the EITC, and a $2,500 tax credit for higher education expenses will all be around in 2011.
No marriage penalty. The new law wards off the comeback of the marriage penalty so that married couples may take a more generous standard deduction.
Taxes on capital gains and dividends top out at 15%. Passage of the 2010 Tax Relief Act means rates will top out at 15% through 2012.
Businesses may expense 100% of their investments in 2011. In fact, qualified investments made after September 8, 2010 and before January 1, 2012 are eligible for this bonus depreciation. In addition, 50% expensing will be available for qualified property placed in service during 2012, and so-called ?long-lived? property and transportation property may be eligible for 100% expensing if it goes into service prior to 2013.
The tax break for IRA gifts to charity returns. The IRA charitable rollover, as it was informally called, was much beloved by non-profits and IRA owners, but it went away in 2010. In basic terms, it allowed someone 70? or older donate up to $100,000 in IRA assets annually to one or more qualified charities. This opportunity is back for 2011 ? and the especially good news is that Congress included a special rule in the new tax bill allowing IRA gifts made in January 2011 to count for 2010.
An AMT patch, of course. Congress decided it might as well take care of that. It passed an AMT (Alternative Minimum Tax) fix as part of the 2010 Tax Relief Act, thereby exempting about 20 million middle-income households from a potential $3,900 average leap in federal income taxes.
What?s the price tag of all this short-term tax relief? It is sizable. The federal deficit is projected to increase by about $858 billion over the next two years as a consequence.
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A novice trader seems to have some advantage over an old timer: no pre-conceived ideas! If you have been trading for a while and it could have worked better for you it's time to go back to the basics and review your assumptions.
The tug of war between advocates of fundamental and technical analysis has had its run - but why not use both? You don't know how long a trade is going to take to bring the expected profit. In case you get saddled with a horse for a long trip why not make sure it has a good pedigree? We are all impatient and greedy. In case things don't exactly pan out as expected it is comforting to know later that you did indeed do your homework on that stock and it was a sound investment then. Do it at least as a favour to yourself. As the vicissitudes of the market unfold you need the confidence that you entered a sound situation.
Beware of wild random connections. The fact that your last two successful trades involved companies whose names start with letter "C" does not warrant trading more "C" stocks. Said like that it is tantamount to superstition but you would be surprised at the weird assumptions that mess up with your head when you are greedy or fearful - always trying to rationalise and find an explanation for everything...
Operate on several planes simultaneously and correlate what you see. How does your stock behave compared to its industry? How does your stock behave compared to the index? Do the daily, weekly and monthly charts tell the same story? Are we starting a short term retracement within a long term trend? When will you decide the long term trend is over and the correction wasn't minor at all - you missed the top of the market by 2 months(!) Then answer to that can be found by checking the support and resistance levels in each timeframe. It is also safer to build up and unload a position gradually rather than all at once. You only keep in the market the number of shares your risk tolerance will allow.
Set your parameters before you enter a trade. Decide beforehand what your stop loss order will be and your limit target order will be. If you can't be at the computer that day for whatever reasons you can rest assured that both your profit is protected and your loss will not grow bigger.
You have heard it all before but why do you keep breaking your own rules all the time? Discipline and a cool head do not come overnight but you will be all the wiser if you stick to it.
One thing you can do is to compare your performance with an automated trading system and see how you can improve your skills. For such a system check out http://TradingPal.net
For more articles like this check out the author's website at BrunoDeshayes.com
The U.S.chemical industry consists of 170 major companies with several of them having international operations. The products manufactured by these companies span a wide range... from chemicals used in household products like soaps and detergents to agrichemicals and specialty chemicals used in aerospace, health care, technology, telecom, and other industries. Employing over a million people and contributing substantially to exports, the annual output of the U.S.chemical industry is estimated to be around $400 billion. Chemical companies are the second largest energy consumers in the manufacturing sector.
The economically sensitive U.S.chemical industry was hit hard during the Great Recession. Industry titans like Dow Chemical (DOW) and DuPont (DD) saved billions of dollars in costs through restructuring, plant closures, and layoffs.
With costs cut to the bone and economic growth perking up, conditions are ripe for chemical company profits to ramp higher. Merger and acquisition activity is continuing at a rapid pace. Investments in chemical industry sector funds appear quite timely.
Chemical Company Profits Poised to Rise from Improving Demand and Falling Costs
The demand outlook for individual segments of the chemical industry is improving.
Agricultural Chemicals: Worldwide population growth and higher per-capita income in emerging economies are lifting commodity crop prices and driving demand for agrichemical products as farmers seek high quality seeds and greater yields. Agrichemical companies like Monsanto (MON), DuPont, Potash Corporation (POT), and Agrium (AGU) stand to benefit from these secular trends.
Polymers and Paints: The automotive industry that accounts for 10% of U.S.chemical companies' demand has rebounded. Industry analysts are projecting global auto demand to touch 76 million units, with China accounting for 18 million units and the U.S., 13 million units. Dow Chemical, BASF Corp. (BASFY.PK) and PPG Industries (PPG) stand to benefit from increased demand for plastics and coating materials used in automobiles.
Building Materials: The U.S.home building sector is a major consumer of chemicals. Off late, the U.S.housing industry is showing some signs of improvement. The National Association of Home Builders expects annual housing starts of single-family homes to rise 21% to touch 575,000 units in 2011. Building products manufacturer U.S. Gypsum (USG), roofing products manufacturer Owens Corning (OC), and paint manufacturers Sherwin Williams (SHW) & Valspar (VAL) can fare well if the NAHB's expectations come true.
Against the backdrop of rising product demand, chemical company profits are receiving a boost from low natural gas prices since the commodity is used as a feedstock and an energy source. Natural gas prices have not recovered after the Great Recession due to abundant supplies. Gas prices are nearly 50% lower than where they were in July 2008.
Mergers & Acquisitions Appears Set to Continue at a Good Clip
Chemical companies have been active in M&A for some time. Dow Chemical acquired Rohm & Haas for $15.3 billion in March 2009 to expand its specialty chemical line. CF Industries (CF) bought Terra Industries in April 2010 for $4.7 billion to strengthen its position as a global fertilizer company. Eyeing growth in emerging Asian economies, Agrium purchased Australia's AWB Ltd in December 2010.
Recently, DuPont has offered to buy Denmark's Danisco for $5.8 billion to expand into biofuels and food enzymes. Air Products & Chemicals (APD) ended its attempt to take over Airgas (ARG) only after the latter succeeded in getting court approval of its poison pill provision.
Auguring well for continued M&A activity, many of the chemical companies carry hoards of cash on their balance sheets and view acquisitions as a way to grow their businesses.
In sum, chemical companies have a lot going for them and possibility of takeovers adds to investment appeal. Sector rotation practitioners can find interesting opportunities among chemical industry investments.
Sam Subramanian PhD, MBA edits the AlphaProfit Sector Investors' Newsletter, 12-time winner of Hulbert Financial's #1 rank. He blogs on topics including top rated mutual funds for 2011 and best oil ETFs.
There are many different ways to invest your money, especially when you are investing in startup companies that may not have safe guards in place to protect investments. One of the most hands-on ways to get involved with new businesses is to become a private money lender. However, private lending is not something that you should blindly rush into. It takes a certain level of trust in the company that you are investing in, as well as knowledge about the banking and investment fields. You may wish to use the services of an attorney along the way to make sure that everything is legally solvent and crystal clear.
To begin with, when you are investing in startup companies there are a few steps to follow. Private lending begins with educating yourself about the field. You can sign up online to take courses that will teach you about banking, loans, and real estate management, all of which will help you with your investment. The more that you can soak up before sinking your money into this, the higher the chances are of you making a sound investment. Study the market carefully and ask any questions ahead of time that you might have about the small business's market plans.
You might want to also run credit checks or find other ways of ensuring that the borrowers will be capable of paying back your private loans. This can be tricky when you are investing in startup companies, because oftentimes the business owners will have already sunk most of their own assets into the company. To help protect your own interests, this is where it's helpful to have a lawyer help you with ensuring that your borrowers are financially solvent. You need to have a high enough level of trust in the small business as well as in the borrower to proceed, with legal backing.
Staying on track of current interest rates is also a good way to make sure that your private loans are set at a level that is reasonable. When you are investing in startup companies, you might want to offer lower interest rates as incentive to the business owner to use your services, but this could prevent you from earning back what you are owed. By keeping tabs on current banking rates, you can stay abreast of the latest trends.For more information on investing in investment opportunities usually or normally not found in the marketplace, click here!
Sean Johnson is an Investment Advisor for http://www.inquest.biz an Investment Referral Service for investors requesting information on specific investments.
Many people have discovered the numerous advantages of Contracts for Difference trading (CFD trading) over the many other products in the investment market. Part of the attraction is that minimal capital is required to open your positions, as well as the ability to trade in numerous markets You will find that there are various reasons that investors use this product.
CFD trading is a margined derivative. When trading on margin the investor only needs a certain percentage of funds to open a position. Most often the margin amount is 10% of the contract's value. Trader will need to keep that margin level readily available, as funds will be removed and dividends will be added. If the traders account falls below the margin they will typically receive a margin call, and in some instances the position will be closed.
An investor is able to make use of leverage and apply it to their positions which in turn may help maximize their profits, as well as can lead to incredible financial loss if not careful. Investors that are experienced tend to do well especially during times of market volatility. Leverage in essence means you are placing a small amount of capital (generally 5-20%) and are borrowing the rest, allowing you to 'buy' more of the underlying asset. If a share price was priced at 10 pounds and you had to pay a 5% margin of deposit and wanted to get 1000 shares you would only need to put down 500 pounds, as opposed to if you actually purchased the shares and needed 10000 pounds.
Not only is the use of leverage and margins a key draw point for investors, another is that only one account is needed; the investor does not need to open a new account for every product they wish to trade in, such as Contracts for Difference, spread betting, and Forex for example.
Unlike traditional stock market trading, cfd trading allows the opportunity for the investor to take a long or short position. This means that one can actually profit from either the rising or the falling price movements of the underlying asset.
Naturally not everything about cfd trading is positive, unlike many of the other derivate such as financial spread betting, the profits the investor makes if any, at the close of the cfd position will be subject to capital gains tax. There is also high risk involvement in this market due to its speculative nature. However, arming oneself with the proper knowledge and facts and data can place the odds of winning higher.
To find out more about Long Positions with CFDs as well as other important information, tutorials and resources, visit an authority website independentinvestor.co.uk and find out all you need to know about CFDs and other markets.
Small Investment, Big Gains
As a small investor has limited funds when compared with corporate and institutional investors, there are many commodities and stocks that are out of reach because of the immensely high prices they sell at. A CFD trade requires an outlay of just a fraction of the total investment value. This advantage lets small individual investors with limited funds take big positions in the market.
For example, investor S prefers to trade in shares directly. He buys 100 shares of company C at #50 apiece bringing his total investment to #5,000. Investor C has a much more limited budget. He takes a long position on CFDs of 100 company C shares. His broker requires that he maintain a 5% initial margin. So, his initial outlay is 5% of #5,000 which is #250. Interest and maintenance charges do apply on investor C's investment, adding to his costs but still his total investment cost does not come anywhere near investor S's #5,000 investment.
The price of the share zooms up to #100. Now, investor S stands to gain #10,000 if he sells his shares in the market. The total gain he will make from the transaction is (#10,000 - #5000 =) #5000. He has doubled his original investment.
Investor C can close his long position in the share and get the change in price for every share he has a CFD on. His broker pays him #50 (change in price) x 100 shares = #5,000 when he closes the trade. Although investor C gets the same sum total from the transaction, his profit is #5000 - #150 = #4850. He has multiplied his initial investment many times over. Although interest, commission and fees are deducted from this amount, investor C has still made a far more profitable transaction than S.
Avoid Stamp Duty
As there is no physical exchange of assets, the CFD investor avoids stamp duty that applies on regular share purchase and sale. When the exposure is high, this translates into significant savings for the investor.
Flexibility to Switch Quickly
CFDs give the investor great flexibility to switch from non performing investments to potential winners quickly and with less cost. Global interbank rates are now low and this has made CFD trading a much cheaper option than before. In fact, when calculated for the short term, holding a position in a share through CFDs is much cheaper than actually owning the shares. This is in spite of the charges, commission and interest levied from investor accounts by CFD brokers.
CFD trading online can result in very profitable investments, provided you know when to invest in them and when to pull out. By keeping your finger on the pulse of the market, you can succeed with contract for difference trades and make attractive returns on your investment.
In the realm of option trading and in very broad terms, open interest will tell you how many options are traded at a given time. Specifically, these options are call options against the same underlying stock, with the same expiration date as well as same strike price. Net debit represents how much money an investor spends to make a buy-write transaction.
Both of these are important economic indicators you should be aware of when trading options. With open interest it's a little bit like in fashion trends. If everybody likes a certain style of clothing, you'll be pretty safe selling that same style, since it's been tried and proven. As a general strategy, analysts advise launching into writing call options only after their open interest exceeds 1000. It just means that at least 1000 options were transacted already. This is done to in order to have a reasonable guarantee that there is more liquidity for your call option(s).
Net debit is the simple difference between how much you spend on acquiring some stock and the premium of the call option you cash in for selling it against that stock. The name debit derives from the fact that your account will be debited as an immediate result of a buy-write transaction (aka covered call). On one side you spend big on the stock (say $5000 on a package of 100 shares) and cash in a little in the form of the option premium (say $200). Your net debit would be $4800.
The net debit that you can spend can be easily reduced if you use your call options wisely. This is especially due to how there are so many open interest options around. You can find details on how this can work and how it will be easy to work with call options through the Born to Sell site.
There are a number of reasons why someone might be interested in investing in startup companies or small businesses. Not only is this a way to potentially make some money yourself, but it also is exciting to help new companies get off the ground and grow. If a small business is making a product that you believe in, or simply offers high quality service, you can help them out with funding, which in turn will help make you money as well. However, there are several factors to consider before you go into this type of investment. Be sure to remember that you should never make an investment that you can't afford to lose.
Because small business investments can be riskier than other types of investment, it is possible to lose the money, even for the most promising type of business. However, because investing in startup companies allows more room for growth, without as many investors involved, you could end up making more money in the long run than you would by investing in established companies. The difference comes down more to research than luck. Before you invest in any company, large or small, it's vital to research everything you can about the company, so that you know where your money is going and how it's being used.
To analyze the company that you are interested in investing in, some of the questions you should ask include how long the company has been in business. Although there is no need to rule out investing in a business that has just started, this could be riskier because there is less of a history or background to investigate. When investing in startup companies, find out more information about the owner or management of the company. Ask for references if you can, and find out how extensive the owner's knowledge is of the industry that the business is in.
If you don't have very much knowledge of the industry yourself, then you will also want to do a little bit of market research in this field as well in order to make the best decisions. Ask how much say the investors have in the company's interests, if you wish to have a hand in business decisions. Although investing in startup companies usually doesn't entitle you to help make business decisions of this nature, in some cases you will be asked to have a higher level of responsibility. Make sure that this is clear before signing any contracts. For more information on investing in investment opportunities usually or normally not found in the marketplace, click here!
Sean Johnson is an Investment Advisor for http://www.inquest.biz an Investment Referral Service for investors requesting information on specific investments.
Almost daily you hear of heartbreaking news of someone being swindled of their life's savings. Giant companies that parents have relied on for the tuition of their children have failed to deliver. Rich and famous people too have fallen for fraudulent investment schemes. Nobody, it seems, is immune to the siren call of the con artists or unreliable establishments promising riches or a secure future.
Why are so many people enticed into making ruinous financial decisions? The foremost reason is greed coupled with ignorance. Hopefully by reading some of the more common money risks listed below, the knowledge you gain will be able to improve your chances of safeguarding your investment.
? Abnormally high interest rates. With today's rock bottom low interest rates in banks, many are tempted to put their hard earned cash in those who offer the highest interest rates. Unfortunately, the higher the interest rates the higher the risks you will lose your money. If you cannot resist then, at least, check if the bank is insured with the PDIC and if the amount you are putting in will be within the amount of the insurance coverage. Still I urge caution in this strategy especially if the cash deposited may be needed in short notice. It may take awhile to recover from the PDIC if the bank goes under.
? Pyramid schemes. This racket is when you are made to invest money to gain the right to recruit other investors who are in turn induced to recruit the next batch of investors in a never ending pyramid. Where the income is based on recruitment and not on the product or service being sold then it is a pyramid scheme. Unfortunately, it is not easy for many people to differentiate a legitimate Multi level company from a pyramid scheme. Usually you are told to get in quickly since the company is just starting in this country and so you can easily recruit "downlines" that will make you money while you sleep!
? Other get rich quick business opportunities. Nowadays one of the most common get rich quick schemes are some fly-by-night franchises. If a franchise is too cheap then it may be little more than a ploy to sell you their equipment and supplies. Just think if it were that easy to be rich then why is not everybody rich?
? Incredibly good deals. When something seems too good to be true, it probably is a scam! There are many types of fraudulent deals offered, from the fantastic like the treasure of Yamashita to the more common bargain property deals. Besides checking it out in the relevant register of deeds, seek a reputable and licensed real estate brokers professional's help in verifying a properties ownership since there are many fake titles. Typically, these kinds of deals have a short time limit to pressure you to close the transaction without thinking.
? High risk investments. Properly done, mutual funds, stock market investments, and foreign exchange trading may make money, especially for those who know what they are doing and can afford to lose their investment. We usually hear a lot of people brag about how they made it big in these types of investments but those who were wiped out rarely want to talk about it. However, many people enter these transactions not knowing there is a possibility that they can lose a big deal of their money very rapidly!
? Preneed Plans. Most preneed companies are not scams. However, for several reasons, in the past several years, some of the largest preneed companies were unable to fulfill their obligations to their plan holders. The resulting lost of confidence has reduced the industry to a shadow of its former self. I believe that the industry and our regulatory authorities have learned many lessons from the debacle and hopefully there will be less such disasters. Despite this I would advise that you have a fall back position in case history repeats itself.
There are many more schemes existing and being hatched than can be listed above. Nevertheless, what has been discussed should infuse you with a healthy dose of caution. Perhaps this may suffice to make you take the time to think through more carefully where you will put your hard earned money.
The author is the president of BusinessCoach Inc. Philippines. Want to know more about business topics? BusinessCoach, Inc. conducts business seminars and workshops. You can call them at 727-5628 or visit their website on http://www.businesscoachphil.com for details.
Diversifying your investments has two benefits: you can reduce the risk of losing money while also doing the opposite and increasing the chances for greater gains.
The process of diversifying your portfolio can be as complicated as you wish to make it or relatively easy. Many authors and magazines publish articles regularly about allocating (another word for diversification) your money in your portfolio. Typically these recommendations are based on your age with the presumption you're income will follow a cycle that leaves you with nothing in your golden years. They also presume you will want to invest in bonds, stocks, utilities and perhaps foreign stocks.
Personally I believe these concepts are outdated and based on the concept of one shoe fits all. And while I know Florsheim makes many shoes in 8-1/2 B, none of my friends or anyone I've ever met wears my same size.
When you consider your portfolio it is important to first gage your personality and your goals. Do you want to play it super safe: most of the time or sometimes. Do you want to grow your bank account quickly or are you willing to wait 10 or 20 years?
When you are honest with yourself about your personality, your "risk factor" and your "realistic" goals, not just your dreams; then you can create your diversification chart.
But first there is also the time factor, your time factor. How much time are you willing to spend making money, growing your investment accounts? I know some folks who only want to look at their investments or only have the time to do so about once a month, others are willing to spend an hour or two a week and others pour over the markets every day.
For those with little time, less than a few hours a month, mutual funds, some ETFs and even some stocks would fit the bill. For those willing to spend every day managing their investments mutual funds probably will not fit the bill.
Generally speaking, when I consider diversification I consider certain key groups of investments, each of which can be broken down further, and there are more groups, but these are my key areas for diversifying my portfolio:
1. Stocks - small companies
2. Stocks - large companies
3. Bonds
4. Foreign
5. Utilities or Dividend payers
6. Sectors
7. Asset
Any of these can be selected via mutual funds, ETFs or individual stocks. Again, these groups can be broken down further, for example:
a. Bonds - short term
b. Bonds - long term
c. Emerging markets
d. Domestic
e. Health
f. Transportation
The question is how do you mix and match to diversify your money to meet your goals with these groups? This is our next topic.
Author Raymond Dominick has been investing in the markets since his teenage years. He is the designer of Dynamic Investor Pro investment software. An experienced business manager and journalist, he has been a registered investment advisor representative, also a professional photographer who loves escaping to the wonders of Glacier National Park in Montana.
View his software at: http://www.dynamicinvestorpro.com