The global financial markets are trying out the balancing act. On the other hand, the financial markets specific to the US, have still not been able to stabilize. The investor sentiment has been badly hit. Investors till now are feeling reluctant to tally give up their worries, as the rate of unemployment has remained high enough, after the recession. Debts too have piled up. However, still people are trying out stock market investments, in order to be able to make at least some money out of it, so that they can get out of debt.
Stock market investment and debt pay off
If you are planning to make use of the investment you have made in the stock market to consolidate your debts, tread carefully as the markets are still volatile. And under such circumstances, you need to watch how the markets are turning out to be. If you are not able to predict the movement of stocks in the market, take help of an experienced stock broker. The mantra of success in the stock market is to buy stocks at a lower cost and sell them at a higher price. However, there may be times when the price of stocks nosedive. And so do the returns. It is a good market for buyers but the sellers are at a loss.
However, there are various benefits of stock investment and these are:
Long term growth – Stock investments can offer you the long term growth plans. Stock market is in fact, one of the greatest places for you to invest the money and then let it grow over the length of time, till you can make huge income and as a result become rich. You may also be able to receive compound interest, on the same.
Extra cash – If you practice regular stock trading, like buying and selling stocks, you may be able to enjoy extra cash flow every month. This may help you to make the payments on the unpaid debts.
Outperforms other investments – The returns through the stock market investments can be higher in comparison to those to be earned through any other forms of investments. With time, the money is supposed to grow even more.
Even if you enroll in a debt consolidation program, you will be able to use the money to make the debt payments, through the consolidation program. When you sign up for a debt consolidation program, you take the help of a debt consolidation firm which is going to guide you through the consolidation of your debts. The debt consolidation firm you hire, will either charge fees from you or will charge very nominal fees. Taking help of professional in solving your debt problems can help you to attain financial freedom fast. This is because, the debt help professionals know how creditors operate in the debt help industry and guide you accordingly.
When you enroll for a debt consolidation program, you have to make payments as per a new repayment schedule. So, you need to shell out some cash each month. If you have an additional source of income that you earn from the stocks, it can help you in consolidating your debts and making payments each month. This is how debt consolidation and stocks help you in solving your debt problems.
Foreign exchange trading involves buying and selling different currencies. It works on the theory that is similar with share market. As we know that to make the profit, you have to buy at lower price and sell at higher price, or we can also sell at higher price first and buy at lower price. But its not as easy as it sounds. By studying certain market conditions, you can actually make profits in forex. All you have to do is to analyze the forex in a correct way and do the good trade.
Currency trading charts
Why to go for Foreign exchange trading? There is an option to invest in stock market also but here are a few important advantages of currency trading over stock market.
Forex trading is done on 24-hours basis. This market is open throughout day and night as somewhere in the world, there must be this buy and sell trading is going on. Traders involved in forex trading strategy can always get that first hand information and can act accordingly. The currency rate is actually run through telecommunication all over the network of banks 24 hours a day from 00:00 GMT on Monday to 10:00 pm GMT on Friday. There are ECNs (Electronic Communication Networks) which bring together buyers and sellers.
There is a superior liquidity in the market as there are always buyers and sellers to purchase and sell foreign currencies. Forex trading market size is 50 times bigger than the New York Stock Exchange and liquidity of such large market ensures price stability. Forex trading stop orders could be carried out more simply. This makes Forex trading signal more liquid and permits Forex traders to take benefit of trading opportunities as they happen rather than waiting for the market to open the next day.
100:1 High Leverage in forex trading
100 to 1 leverage is commonly available from online forex dealers, which substantially exceeds the common 2:1 margin offered by equity brokers. This gives them a huge leverage in their trading and presents the potential for extraordinary profits with relative small investments. Leverage can also go the opposite way and may lead to huge losses if you are not careful.
Forex trading transactions have no commissions. Forex Brokers can earn money by fixing their own speculation between what a currency could be bought at and what it could be sold at. In difference, Forex traders have to pay a commission fee or brokerage fee for every futures transaction they come in to the view. The forex market is so large that no one individual, bank, fund or government body can influence it for a long period of time. In forex trading strategy, you can trade between seven currencies but not everyone trade in all.
There are certain trading signals that give indications to the trade. These forex signals are delivered by email, instant messenger or direct to your desktop. Some services even offer auto-trading, allowing you to auto-execute their trading signals direct into your broker account. For more about these forex,forex trading strategy,forex signal, visit: www. connection2forex.com
Stock picking is a very complicated process and investors have different approaches. However, it is wise to follow general steps to minimize the risk of the investments. This article will outline these basic steps for picking high performance stocks.
Step 1. Decide on the time frame and the general strategy of the investment. This step is very important because it will dictate the type of stocks you buy.
Suppose you decide to be a long term investor, you would want to find stocks that have sustainable competitive advantages along with stable growth. The key for finding these stocks is by
Smart Stock picking can be a difficult process.
looking at the historical performance of each stock over the past decades and do a simple business S.W.O.T. (Strength-weakness-opportunity-threat) analysis on the company.
If you decide to be a short term investor, you would like to adhere to one of the following strategies:
a. Momentum Trading. This strategy is to look for stocks that increase in both price and volume over the recent past. Most technical analyses support this trading strategy. My advice on this strategy is to look for stocks that have demonstrated stable and smooth rises in their prices. The idea is that when the stocks are not volatile, you can simply ride the up-trend until the trend breaks.
b. Contrarian Strategy. This strategy is to look for over-reactions in the stock market. Researches show that stock market is not always efficient, which means prices do not always accurately represent the values of the stocks. When a company announces a bad news, people panic and price often drops below the stock’s fair value. To decide whether a stock over-reacted to a news, you should look at the possibility of recovery from the impact of the bad news. For example, if the stock drops 20% after the company loses a legal case that has no permanent damage to the business’s brand and product, you can be confident that the market over-reacted. My advice on this strategy is to find a list of stocks that have recent drops in prices, analyze the potential for a reversal (through candlestick analysis). If the stocks demonstrate candlestick reversal patterns, I will go through the recent news to analyze the causes of the recent price drops to determine the existence of over-sold opportunities.
Step 2. Conduct researches that give you a selection of stocks that is consistent to your investment time frame and strategy. There are numerous stock screeners on the web that can help you find stocks according to your needs.
Step 3. Once you have a list of stocks to buy, you would need to diversify them in a way that gives the greatest reward/risk ratio. One way to do this is conduct a Markowitz analysis for your portfolio. The analysis will give you the proportions of money you should allocate to each stock. This step is crucial because diversification is one of the free-lunches in the investment world.
These three steps should get you started in your quest to consistently make money in the stock market. They will deepen your knowledge about the financial markets, and would provide a sense of confidence that helps you to make better trading decisions.
With a plethora of ways to analyze bonds, it might make your head spin. Even so, evaluating the potential risk before you buy and calculating your potential returns is an essential step in the process of acquiring bonds.
1. Evaluate All Potential Risks
You should pay attention to all the details – interest rates, inflation, how easy it is to sell that particular bond, you name it.
2. Credit Risks
It doesnt matter what kind of bond you choose to invest in, there is always a credit risk. In 1995, U.S. Treasuries, considered the gold standard of bonds were close to default for the first time in history. For corporates and municipals the risks are even greater, running everywhere from the AAAAaa to B and below. These are often called junk bonds.
3. Bond Evaluation Checklist
- What is your earning potential?
- What is the current earnings per share?
- What is a typical divident payment?
- What is the outstanding debt?
- What forseeable technological changes might affect this bond?
- What is the track record of management?
As debt loads grow, the amount of interest paid increases, reducing the amount for such investments as well as bringing a company closer to default on existing debt, since only so much can be sustained by current revenues.
5. Interest Rates
A large number of bond issues have maturities with 5-30 year periods. Any change in the prevailing interest rates affects unmatured bonds in two ways. A rise in rates depresses the price for those considering selling prior to maturity, since investors can get a better rate with a new instrument. Also, the pressure to sell rises, since the bondholder can himself get a higher rate with a new instrument. The longer he holds the older one, the more opportunity costs he incurs.
7. Dealing With Inflation
Inflation is the enemy of bonds. It will significantly reduce your return on any bond. Even ignoring tax issues, an 8% bond in a 4% inflation environment is worth half its coupon value. Historically, inflation tends to increase more than it decreases. When it does decrease the general economy tends to suffer, worsening returns for all investments. Know the rate of inflation and the market conditions before you invest.
I’ve come to the conclusion that the Stock Market is an easier medium for investors to understand (i.e., to form behavioral expectations about) than the Fixed Income Market. As unlikely as this sounds, experience proves it, irrefutably. Few investors grow to love volatility as I do, but most expect it in the Market Value of their equity positions. When dealing with Fixed Income Securities however, neither they nor their advisors are comfortable with any downward movement at all. Most wont consider taking profits when prices increase, but will rush in to accept losses when prices fall.
Understanding Fixed Income Securities is very important when considering investment vehicles
Theoretically, Fixed Income Securities should be the ultimate Buy and Hold; their primary purpose is income generation, and return of principal is typically a contractual obligation. I like to add some seasoning to this bland diet, through profit taking whenever possible, but losses are almost never an acceptable, or necessary, menu item. Still, Wall Street pumps out products and Investment Experts rationalize strategies that cloud the simple rules governing the behavior of what should be an investors retirement blankie. I shake my head in disbelief, constantly. The investment gods have spoken: The market price of Fixed Income Securities shall vary inversely with Interest Rates, both actual and anticipated
and it is good.
Its OK, its natural, it just doesn’t matter, I say to disbelieving audiences everywhere. You have to understand how these securities react to interest rate expectations and take advantage of it. Theres no need to hedge against it, or to cry about it. Its simply the nature of things. This is the first of three successive articles Ill be writing about Fixed Income Investing. If I dont improve your comfort level with this effort, perhaps the next one will strike the proper chord.
There are several reasons why investors have invalid expectations about their Fixed Income investments:
(1) They dont experience this type of investing until retirement planning time and they view all securities with an eye on Market Value, as they have been programmed to do by Wall Street.
(2) The combination of increasing age and inexperience creates an inordinate fear of loss that is prayed upon by commissioned sales persons of all shapes and sizes.
(3) They have trouble distinguishing between the income generating purpose of Fixed Income Securities and the fact that they are negotiable instruments with a Market Value that is a function of current, as opposed to contractual, interest rates.
(4) They have been brainwashed into believing that the Market Value of their portfolio, and not the income that it generates, is their primary weapon against inflation. [Really, Alice, if you held these securities in a safe deposit box instead of a brokerage account, and just received the income, the perception of loss, the fear, and the rush to make a change would simply disappear. Think about it.]
Every properly constructed portfolio will contain securities whose primary purpose is to generate income (fixed and/or variable), and every investor must understand some basic and absolute characteristics of Interest Rate Sensitive Securities. These securities include Corporate, Government, and Municipal Bonds, Preferred Stocks, many Closed End Funds, Unit Trusts, REITs, Royalty Trusts, Treasury Securities, etc. Most are legally binding contracts between the owner of the securities (you, or an Investment Company that you own a piece of) and an entity that promises to pay a Fixed Rate of Interest for the use of the money. They are primary debts of the issuer, and must be paid before all other obligations. They are negotiable, meaning that they can be bought and sold, at a price that varies with current interest rates. The longer the duration of the obligation, the more price fluctuation cycles will occur during the holding period. Typically, longer obligations also have higher interest rates. Two things are accomplished by buying shorter duration securities: you earn less interest and you pay your broker a commission more frequently.
Defaults in interest payments are extremely rare, particularly in Investment Grade Securities, and it is very likely that you will receive a predictable, constant, and gradually increasing flow of Income. (The income will increase gradually only if you manage your asset allocation properly by adding proportionately to your Fixed Income holdings.) So, if everything is going according to plan, all that you ever need to look at is the amount of income that your Fixed Income portfolio is generating
period. Dealing with variable income securities is slightly different, as Market Value will also vary with the nature of the income, and the economics of a particular industry. REITs, Royalty Trusts, Unit Trusts, and even CEFs (Closed End Funds) may have variable income levels and portfolio management requires an understanding of the risks involved. A Municipal Bond CEF, for example will have a much more dependable cash flow and considerably more price stability than an oil and gas Royalty Trust. Thus, diversification in the income-generating portion of the portfolio is even more important than in the growth portion
income pays the bills. Never lose sight of that fact and you will be able to go fishing more frequently in retirement.
The critical relationship between the two classes of securities in your portfolio, is this: The Market Value of your Equity Investments and that of your Fixed Income investments are totally, and completely unrelated. Each Market dances to its own beat. Stocks are like heavy metal or Rap
impossible to predict. Bonds are more like the classics and old time rock-and-roll
much more predictable. Thus, for the sake of portfolio smile maintenance, you must develop the ability to separate the two classes of securities, mentally, if not physically. For example, if your July 2005 Market Value fell, it was because of higher interest rates not lower stock prices. More recently, the combination of higher rates and a weaker Stock Market has been a Double Whammy for portfolio Market Values, and a double bonanza for investment opportunities. Just like at the Mall, lower securities prices are a good thing for buyers
and higher prices are a good thing for sellers. You need to act on these things with each cyclical change.
Heres a simple way to deal with Fixed Income Market Values to avoid shocks and surprises. Just visualize the Scales of Justice, with or without the blindfold. On one side we have a number that represents the Current Market Value of your Fixed Income portfolio. On the other side, we have a small i for interest rates, and up or down arrows that represent interest rate directional expectations. If the world expects interest rates to rise, or even to stop going down, up arrows are added to i and the Market Value side moves lower
the current scenario. Absolutely nothing can (or should) be done about it. It has no impact at all on the contracts you hold or the interest that you will receive; neither the maturity value nor the cash flow is affected
but your broker just called with an idea.
The mechanics are also simple. These are negotiable securities that carry a fixed interest rate. Buyers are entitled to current rates, and the only way to provide them on an existing security is to sell it at a discount. Fortunately, one rarely has to sell. Over the past few years of falling interest rates, Fixed Income securities have risen in price and investors (should) have realized capital gains as a result
adding to portfolio income and Working Capital. Now, that trend has reversed itself and you have the opportunity to add to existing holdings, or to buy new securities, at lower prices and higher interest rates. This cycle will be repeated forever.
So, from a lets try to be happy with our investment portfolio because its financially healthier standpoint, it is critical that you understand changes in Market Value, anticipate them, and appreciate the opportunities that they provide. Comparing your portfolio Market Value with some external and unrelated number accomplishes nothing. Actually, owning your fixed income securities in the most freely negotiable manner possible can put you in a unique position. You have no increased risk from a reduction in security prices, while you gain the ability to add to holdings at higher yields. Its like magic, or is it justice. Both sides of the scales contain good news for the investor
as the investment gods intended.
Property Investment is one of the oldest forms of wealth accumulation and should always be part of a larger portfolio of investments so as to balance out your risk. However, unlike other paper securities, the financial value of a house or for that matter any other investment property does not vary very much. Granted it may increase slightly over time or drop a little during a property slump, but this is marginal. That is why banks over time created a separate type of loan for real estate as opposed to other forms of movable chattels and this is the mortgage. This article series will highlight for you three ways to make more money and maximise your return on investment (ROI) when purchasing your property.
The first method is for you to increase your ROI by using leverage from the bank. When you purchase with your own money and then use the banks money to pay for the rest of a property, the return on investment would be the total cash flow minus the interest paid out to the bank and this would trump purchasing the property merely using your own money. So in other words, your return on investment would increase because you are in effect using less money to make more profit and this is the basis of the concept of financial leverage in real estate investing.
A separate spin on this idea is for you to always divide up your initial capital into several lots and purchase several plots of property at the same time and generate several cash flows from your property investment. Note that while doing this, always have an eye out for which part of the property cycle you are purchasing in. If you purchase a property during the rental boom years, there is a chance that your cash flow calculations might not hold during a downturn in the economy, thus always take a more conservative outlook to your cash flow calculations.
In conclusion, using financial leverage from a mortgage can be used as a way to increase your return on investment. However, mortgages are complex instruments and the best way for you to get the best deal is to find a mortgage broker who can then do the maths and determine the best mortgage for your particular property investment. Remember its not how much you make in gross from your rental property, but how much you get to keep after taxes and interest payment that is key to making money from property investment. This is a three part series and we will continue in the next article on how to buy a property at a bargain and boost your property investment ROI.
If you are investing for income or want to diversify your portfolio, you may want to consider investing in bond funds.
Bond funds can offer investors many of the same benefits of individual bonds, in addition to the advantages of diversification and professional management, according to “Bond Funds: The T. Rowe Price Investment Guide.”
Investing in bond funds is different from individual bonds. When you invest in a bond, you lend the issuer money. The issuer then pays you regular interest for the duration of the bond and repays the principal at the bond’s maturity date, provided the issuer does not default.
Consider Bond Funds to diversify
A bond fund is a mutual fund that comprises many bonds, with a professional fund manager who buys and sells securities to keep the fund true to its specific investment objective. A bond is a debt security, similar to an IOU. Bonds can serve as an attractive “middle ground” between stability (cash) investments and stocks, offering investors the potential for more meaningful returns than cash investments – with less overall volatility than stocks.
An appropriate asset mix is essential to your long-term investment success. Although diversification cannot protect against loss in a declining market or assure a profit, a diversified portfolio should be less volatile than one that’s invested in just stocks. That’s because the underperformance of one type of investment may be offset by the strong performance of another.
Investing in a combination of short, medium and long-term bond funds can help you pursue income while addressing the risk of rising interest rates. This is called laddering.
Remember that shorter-term bond funds carry a lower risk and return potential than longer-term funds. That’s why a diversified bond portfolio can provide a continuation of income, along with some protection from the impact of rising rates.
As an example, a laddered bond portfolio might consist of bonds with one, five and 10-year maturities. Investing in both shorter and longer maturities can help your strategy stay on track during both high and low interest-rate climates.
T. Rowe Price offers a variety of 100 percent “no-load” bond funds, meaning the investor does not pay sales charges or commissions.
A Winning Approach to Trading in the Stock Market
Many traders lose simply out of ignorance. They base their trades on hunches, news, or tips from friends, and do not define specific risk and profit objectives before placing trades.
Others have the merit of educating themselves but fall victims of their emotions. They hold on to losing positions hoping they will turn into winners and sell winners by fear of losing a small gain. They overtrade to fulfill a need for action or by fear of missing out.
The consistent winners follow a winning approach:
- They have a strategy to enter and exit trades
- They use good money management
- They take consistent actions, they follow a trading plan
- They keep good records so they can review their actions
- They avoid overtrading
- They have a winning attitude
A strategy to enter and exit trades
You need to a strategy to put the odds in your favor for each trade you take. Your strategy should be as objective as possible and include the following elements:
- Entry: conditions required before you can enter a trade – may include technical analysis, fundamental analysis, or both.
- Initial stop loss: price at which you will close the entire position if it does not go in your favor. The risk per share is the difference between the entry price and the initial stop.
- Initial price objective: price at which you will take some or all profits if the trade goes in your favor.
- Trade management: set of rules that dictates your actions while a trade is opened. It may include trailing stops, closing position, etc…
For every action you take, the reason should be clearly described in your strategy.
Money management rules to keep losses small
The goal of money management is to ensure your survival by avoiding risks that could take you out of business. Your money management rules should include the following:
- Maximum amount at risk for each trade. The different between your entry price and your initial stop loss is your risk per share. Your maximum amount at risk for each trade determines the share size.
- Maximum amount at risk for all your opened positions.
- Maximum daily and weekly amount lost before you stop trading – avoid trying to trade your way out of a hole after a loosing streaks.
During your learning phase, your goal should be to survive, not to make money. Start with low limits and raise them as you become a consistent winner otherwise you will simply go
A Disciplined and Organized Approach to Trading in the Stock Market will help you win!
Good record keeping
Although the process of gaining experience cannot be rushed, it can be made much more efficient by keeping good records of your actions. Good records will allow you to:
- Review your actions at the end of each day to make sure you followed you strategy, not your emotions.
- Learn from your losses – they cost you money, make sure you get the education in return.
You should also keep a journal of your observations.
A trading plan to keep emotions out of your decisions
During trading hours, emotions will turn smart people into idiots. Therefore you have to avoid having to make decisions during those hours. This requires a detailed trading plan that includes your strategy and your money management rules.
For every action you take during trading hours, the reason should not be greed or fear. The reason should be because it is in the plan. With a good plan, your task becomes one of patience and discipline.
You have to follow the plan without exception. Any valid reason for an exception – for example, correcting an oversight – should become part of the plan.
Sometimes the best thing to do is to do nothing. Not trading on those bad days is key to becoming a consistent winner – in some situations it is very tempting to overtrade:
- If you trade to fulfill a need for action, to relieve boredom
- If you can’t find the proper setup but can’t wait
- If you fear you are missing out on a great trade or on a great market
- If you want to make up for losses (revenge)
- If you trade to feel like you are working instead of sitting around. Trading involves a lot of work other than the actual buying and selling.
You should not trade under the following conditions
- You are not following my trading plan
- You have reached your daily or weekly maximum loss
- You are sick or very tired
- You are very emotional (upset, pressured to make money, self-esteem destroyed)
- You are using new tools you are not completely familiar with
- You need time to work on your trading plan
A winning attitude
Losing traders look for a “sure thing”, hang on hope, and avoid accepting small losses. Their trading is based on emotions. You must treat trading as a probability game in which you don’t need to know what is going to happen next in order to make money. All you need to know is that the odds are in your favor before you put a trade.
If you believe in your edge, which is you believe that the odds in your favor for each trade you enter, then you should have no expectation other than something will happen.
Your attitude will have a direct influence on your trading results:
- Take responsibility for all your actions – don’t blame the market or world events.
- Trade to trade well and for the love of trading, not to trade often and not for the money. The money will come as a result of trading well.
- Don’t be influenced by the opinions of others. Reach your own decisions and follow them.
- Never think that taking money from the market is easy and never assume that you know enough.
- Have no particular expectation when you place a trade because you know that anything can happen.
- Don’t try to guess the future – trading is a game of probabilities.
- Use your head and stay calm – don’t get excited or depressed.
- Handle trading as a serious intellectual pursuit.
- Don’t count how much money you have made or lost while you are in a trade – focus on trading well.
Trading Framework was designed to help you build those crucial elements into your trading.
One of the basic rules of investing is that the higher the risk, the more potential for gain. A high yield investment program (or HYIP) is one such program. By investing a small amount, a HYIP offers the possibility of high gain, with some risk.
One of the biggest problems with HYIPs is that they can represent a lot of money placed at risk for a high potential gain. Although they can involve small amounts of money, most investors will invest as much as they figure that they can risk, in order to take advantage of the high potential return. Read: Although they don’t require the huge start-up that other investments do, people do spend as much as they can afford. (Some put in more than they can afford, but this is never recommended.)
Also, some HYIPs are just well disguised ponzi schemes, and are thus highly illegal. (Investigate any investment opportunity, with special care as to the background of the group or person presenting it. Normally, too good to be true would be good advice, but that doesn’t always prove true when it comes to investing.) Some HYIPs are in fact defined as ponzi games in order to skirt legislation that prohibits ponzi schemes as well as uninsured investments; bear that in mind when investigating any HYIP.
However, the problem is that not all investments pay off. With HYIPs, that’s actually the nature of the investment; although they all promise high gain, the problem is that high risk does mean a strong chance of losing any funds involved. Thus, any potential investor is advised to not invest any more than he can afford to lose.
When debating the effectiveness of a HYIP, be advised that that the nature of the investment itself makes gauging that difficult, and that only the investor himself can make that decision. What makes them effective is that they can create a nice profit for the price entailed, but the risk involved makes arguably effective. There is no real way to cushion the investment, as there would be for most investments; again, the nature of the HYIP denies that.
However, HYIP’s can be effective if the investor limits his activity to just one or two HYIPs at a time, and invests conservatively otherwise for the time that he is involved in the HYIPs. That way, the investor has the other investments to fall back on in case the HYIP falls through. This strategy makes the investment more effective, and decreases the risks involved, making them more attractive, and more effective.
HYIPs can thus be very effective investments, especially if the person can afford to lose any funds invested. If the investor is investing assuming that they will get the money back, and with a high yield, and doesn’t allow for the possibility of loss, however, a HYIP can be a potential issue. Investing in general isn’t for the weak; that definitely applies to HYIPs.