Smart Stocks Investing

How I Reduce My Investment Risk?

There are several types of investments you can make like long term ones or short term ones. Some investments can be in the form of stocks, shares, bonds, mutual funds, real estate, and savings. No matter what your investment is, the expectation is always there that you should get more returns. However, there is no type of investment that comes completely risk free. Some amount of risk is present everywhere.

However, there are ways through which you can reduce these risk factors. A lot of the precautions work well for shares and stocks. The DCA or dollar cost averaging technique is one of them.

When investing in stocks, the DCA technique ensures that higher priced shares are bought in smaller numbers and the lower priced shares are bought in higher numbers. This rule applies for just a month and every month is calculated individually. You are actually spreading the risks by investing in different types of stocks or shares. The profits always get maximized through this technique. However, the risk is when the time period is stretched.

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Am I an Investor Or a Trader?

So before I start scouting for education articles and reading books about investing and trading, it’s important for me to understand and to know myself, and to know what are my strengths, my preferences, and the available time that I can set aside for trading or investing.

I will start with my preferences, and move from there to my strengths, then to the time that I have available for me.

What would I like to be accomplishing? What kind of life do I want to have?

A couple of years ago, or maybe a bit less, the concept of leading a life where I can generate my own income, without having to work for someone and wait for my salary from month to month was almost inconceivable.

I used to say to myself: "I’ll just do well at my work, and have a safe source of income deposited into my bank account at the end of every month", but the thing is that I also wanted to be financially free, and to be able to control my own time.

The more I educated myself about finance and about investing, the more I saw how a job can be a big life sucker, and it can also be a very risky thing to have.

Working from 8am to 6pm (the way I do now) means that every working day you are forced to spend 10 hours of your day working for someone else, and frankly speaking, I didn’t really like the idea of busting my ass off to make someone else rich.

It’s true, I’m getting paid for my service, but for 10 hours a day, I felt that I deserve to be paid much more, and I should be paid based on my efforts and not based on how many hours I clocked in.

The risk of having a job comes from the fact that my ability to generate income is directly connected to the fact that I’m working for someone, it meant that if any given day I get laid off, my income generation is halted to zero, and to be honest, the more I grasp this notion, the scarier having a job seems to me.

So I better start learning how to generate my own income very quickly.

Now, even though I still have a job, and still work from 8am till 6pm, I am aiming towards leading a life where I’m not working for anyone, and earn based on my effort and not based on my time, and where no matter what the conditions are in the world, I can still have a source of income flowing in.

One more preference I need to add, I want to be able to have a steady cash flow into my bank account, and I can only achieve that through trading, since value investing means freezing the funds for months and years on end before translating these profits into cash in the bank.

This way through trading I can create income, and through value investing I can create wealth.

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Warning! One Day You Will Want to Retire, Will You Be Ready?

I have been advising my clients for years now there have been warnings galore about the baby boomers retiring from the mainstream workforce. Such an exit will cause shortages in labor force, put pressure on wages and health services. There has been a ticking time bomb for all Governments, around the Globe. There has been plenty of talk but as usual little action. In 1997 the Australian Liberal government tried to fix the crisis in the nursing home industry by introducing accommodation bonds. The Labor then ran such a politically motivated scare campaign that the scheme was dropped.

The sobering truth is that we all have been saying this for years. If people were well informed and act early, they could have a chance to make a real difference to secure a better lifestyle for their retirement future. The Governments will not have the taxation/revenue structures to be able to support us… the writing has been on the wall for a long time. Thank goodness we, our investment club members, have started to make a difference. It is said that new medical breakthroughs may extend our life expectancies. If this is the case, then can you imagine just how far off the mark for health and welfare budgets the governments forecasts are, this places even greater pressure on society.

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How to Generating Personal Wealth

Generating personal wealth is a gradual and well thought out mental process that takes long term determination and strict self-discipline. There’s no need to get a massive income in order to be capable to keep a substantial amount of money whenever you’re willing to put in the effort, and regularly put money apart once you are able to, over an extended period. There’re six key ways in which you are able to build your wealth for the future.

1. Start saving as soon as you are able to.
The first, and maybe the most significant formula is to start saving as soon as you are able to. Do not leave it till it’s too late. You may not be in a condition to start saving now, for instance if you’ve a family to take care of, but you had better never assume that you do not need to think about it because you’re still young. The earlier you start, the more you’ll have saved once you need it. Even if you are able to only manage small savings, they’ll still mount up.

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Warren Buffet – 3 Surefire Ways to Get Rich During a Recession!

By Tyron Mcdaniel

As a student of business I am always keeping my eyes on the moves of what those who possess the success I desire are doing! What are they thinking about the current financial opportunities and what are they doing with their money and time!

I subscribe to the philosophy that your life mirrors those whom you spend the time most time studying and emulating!

That said during the onset of the recession Mr. Buffet did something unlike anything he has ever done in his entire business career! He actually thrust himself into the spotlight and began talking more than ever and giving out advice to every television reporter and newspaper journalist that would listen.

He took out a full page ad in the The Wall Street Journal urging the savvy business people of America to wake up and realize that during this recessionary climate was the opportune time to position yourself for long term wealth. He spoke of the immense financial fortunes built during and subsequently just after the Great Depression and he admonished people to not squander this grand opportunity to change the course of their families financial futures!

Unfortunately, most people totally missed the boat as he did interview after interview and went all over the country and world for that matter espousing the virtue of investing when there is "blood in the streets!" In his words, "you need to be buying when everyone is selling everything they have as cheap and as fast as possible!" He then specifically went on to give details into how anyone could amass a fortune quickly in the midst of the recession if they did this one thing!

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Eliminate Transaction Costs When Stock Trading

By Robert Buran

Is it possible to pay zero commissions when stock trading? Well yes and no. Right now I do not know of any broker that will execute orders for you for nothing. But there IS a way that you can use your skills as a trader to pay your broker and still execute the trade without it costing you anything.

Welcome to "pajama trading". Please read on:

If you can eliminate most of your transaction costs you can change the way you trade, reduce risk and make more money. I think the "secret" to realizing this goal is short term trading and that means taking a lot more trades. If you are the kind of stock trader that only takes about ten trades in a year and hangs onto stocks forever you can skip this article because you can afford to pay your broker $50 for a trade and it will not change your bottom line very much. But if you trade like me and execute 10 to 30 trades per day you should not pay any broker more than $4 per trade and you need to strive for positive slippage.

First let us define some terms: Transaction costs, for purposes of this discussion, are the commissions and fees you pay a broker to execute your trade PLUS slippage.

Slippage is the difference between the price your trading system enters a position and the price you actually got when you execute an order in real time based on the trading system you are using. So if you place a resting order with your broker to buy 1000 shares of WOOPS at 1.00 stop and he fills the order at 1.01 your slippage is negative $10. The slippage is negative because that extra penny in slippage is costing you $10 more than the theoretical system trade and this must be added to your total transaction costs.

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Investing Success Comes From Conviction and Executing Your Ideas

By Shafi Saiyed Ph.D.

Do you know how many people investing and/or trading in equity markets truly succeed over long term? Success here means increase in wealth over their investing lifetimes. This group of people includes individual retail folks and professionals. I am sure many of us would have no clue. I do not have any hard core reference to share; however, I can recall reading various percentages that range from 1% to 7%. Without going in specific data points, my observation has been every time this is less than 10% of investing population. More than 90% of the folks will lose money in equity markets over their investing lifetime. Quite startling but this is very true.

We as individuals focus too much on one or two big time success or multipliers but ignore the importance of sustainability and consistency. We fall into the "it is OK" trap. Long term success is not built on few multipliers. Long term success is built on multiple average successes that are sustainable over time.

My articles here may seem to be biased towards long term investing, but irrespective of this, I continue to believe that any form of trading and investing, has its own set of pros and cons. It depends upon what context an individual is looking at it. In the end, trading and investing is done to make money (or increase wealth). Some use approach of capital appreciation, some use dividend income, some do trades to generate income. Like everything else in life, here also, we forget that the key is to have a plan and execute it for consistency.

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A Closer Look at a Publicly Traded Company

With the economy going back and forth along the critical boundaries, investing in a public company or also known as Publicly Traded Company could give you considerable leverage in a relatively tumultuous financial atmosphere. As its definition denotes, publicly traded companies have the permission of selling it securities (bonds, stocks, treasury bills, etc) to the general public. Usually, the stock exchange serves as the point of convergence of these securities, which are sold to other investors, either a company or private individual.

A number of shareholders commonly comprise public companies. However, there are instances when a company, composed of multiple shareholders, is still required to report under the Securities Exchange Act of 1934 to complete their legitimacy as a Publicly Traded Company. Based on history, the first registered public company is the Dutch East India Company, a monopoly created by States-General of the Netherlands to facilitate colonial activities in Asia in early 17th century. The company was also the first to issue stock, which represents the original capital paid by the investors.

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Several Ways You Could Extend Your Exposure to the Stock Market

In bear markets no one wants to have much exposure to the markets. That is if you do not feel comfortable in taking short positions. If you like them, it is better to be as much exposed as you could. But even in that case you usually do not need extra cash but just enough shares from which you could borrow.

In a bull market the more money you put in it, the more you could gain. The problem is that sometimes you do not have enough free cash to input. In times like this one option you may choose is to extend your leverage. A good thing about today’s economic world is you do not have always to use your own money to get more share of the market.

N.B. An important notice about leverage is that along with the ability to extend your long positions without adding your own extra cash, leveraging increases the risk of losing all your money. So it should be used carefully and only by persons who know what they are doing.

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How to Read an Annual Report

Reading the annual report thoroughly is a crucial part of value investing. With a few honourable exceptions, most companies emit annual reports with an upbeat spin – and the only way you will find the truth is to go straight to the accounts. Even then, the accountants have polished up the statements – it’s in the notes to accounts where you’ll find all the bodies buried! It’s also there that you find some of the more interesting statistics to use in analysis.

For instance, the number of employees and the aggregate salary is always noted. While that’s not always terribly useful, in a labor-intensive sector it can be quite interesting. It also gives you a good handle on whether the directors have actually achieved the cuts they told you about last year.

An area that is being studied increasingly closely is the note on borrowings. Right now it’s covenants and other limitations that are probably the focus of attention; however if interest rates rise, you’ll also be able to check up which companies have fixed debt and which are exposed through floating rate debt.

Cash is a fairly simple concept, you might think. But be careful; not all cash is available funds. Here again, trawling through the notes you’ll find out whether any of the cash is already spoken for – for instance, client money that is held in segregated accounts.

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Stock Investing – Understanding Stocks and Their Benefits

Everyone has heard of the stock market, either through a fictional account in a movie or television show, or because someone they know has invested money on it. Although many people have this picture of the crowded trading floor covered in trade slips and full of shouting traders, fewer people actually have a good grasp of what stocks actually are, how the trading works, and how the stock market can be a place where you earn money by spending money. If you’re thinking about putting some of your hard earned money into the stock market, it’s important to know a little bit more about how the whole process works and what the benefits are of participating.

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Current Quarter Earning Per Share (EPS)

Study of the last half century’s stock performance found that most of the great company (that gave a significant shares price increased) shows a great increase in the last one or two quarter earning per share (EPS).

From top 600 stocks between 1952 until 2001, 75% show more than 70% earning increase in the last quarter. Even though the rest 25% did not show a stable earning increased but show an average of 90% earning increase.

More stable from quarter to quarter will give more possibility of the next price increment.

• Cisco showed gain of about 150% in the last 2 quarterly earning per share that ended in October 1990, before the stock jumps 1467% in the next 3 years.

• Dell showed gain of 74% and 108% in the last 2 quarter before the stocks jumps 557% in 6 months from October 1998.

• Ascend Communication have 1500% gain increment in August 1994 before the stock jumps 1380% in 15 months.

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2009 Ends With a 10-Year Loss For Stock Investing

For the first time stock investing was a losing proposition for a decade. The stock market lost ground from year-end 1999 through 2009. Stock investing for people owning equity funds was a disappointment to say the least. How should you invest in stocks in the future? Or… should you avoid them altogether?

The bottom line is that you need to invest in stocks if you want to get ahead financially. The real question is how to invest money in them without getting hurt in the process. And the truth of the matter is that few people know how to invest… period. Paint this picture in your mind: stocks (also called equities) have been the best investment since the great depression; and the stock market just had its worst 10-year period in modern times.

Unless you have the time, cash, and inclination to invest in real estate, equities are the best investment for every-day people. Bonds have returned about half as much and money in the bank about half as much again OVER THE LONG TERM. If stocks have rewarded investors with earnings of 10% a year, bonds returned maybe 6% and safe savings alternatives have paid closer to 3%.

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How to Protect Your Portfolio From a Weak Dollar and Runaway Inflation

The U.S. dollar continues to be weak. With all the deficits, bailouts and stimulus packages from Washington, there is a chance that inflation will take off.

If the dollar continues to fall and inflation ramps up substantially, how should you invest your portfolio to preserve your purchasing power?

Your first thought might be to invest in gold. But gold is a better hedge against war and disaster – not inflation. During the last 34 years, the purchasing price of gold has increased less than 3% per year – before expenses. You might then think about treasuries. But they also don’t return much after inflation. Even Treasury Inflation-Protected Securities (TIPs) won’t do well under high inflation.

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The Best Investment Strategy For the Consistent Growth of Your Equity

The challenge of any investment is to turn your money into more money within the shortest period of time possible. That is why you invest, and that is why you always estimate how much will you make from your investment and how long will it take for the expected return to go into your pocket.

Now, doing this with a regular investment product such as a bank CD is easy because you have a fixed annual rate and all you have to do is write a check, make a deposit and your investment is up and running, while you wait anxiously for that year to go by so you can get the expected return, a big fat 2%.

It is a lousy return, but it is the safe way to go, as you know that your money is being managed by experts (or that is at least what we like to believe) and on top of that, your deposit is insured by the FDIC.

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