Wednesday, September 26, 2007

Investing Made Simple

Why is investing so important? Investing is the vehicle that drives your goals to reality, especially for your retirement. If you just put your money in a regular savings account, chances are it isnt going to grow to the amount you need to retire successfully. While there is a great deal of risk associated with investing, if you understand your risk and manage your investments regularly, investing can be the difference between retiring and not retiring. However, many of us are terrified of investing, therefore, we are either not investing at all or not investing properly. Follow these guidelines to make investing as simple as possible.

For amateur investors, mutual funds are the way to go. They offer diversification, professional money management and ease into the actual mutual funds with low minimums. The chief complaint against mutual fund is their fees. This can be managed by sticking to no-load mutual funds and keeping your expense ratios low (below 1.50%). Individual stocks need ongoing monitoring, which most of us dont have the time to do. Also, most stock portfolios are not properly diversified. If you do buy stocks, stick to companies that you know well and plan to hold on to for a long time. Make sure they are part of a diversified portfolio.

It is very important to pick your time frame (when you want the money) and your risk level. Make sure both of these are aligned with your goals. For example, if you want the money in less than five years to save for a down payment on a house or a vacation, you should keep it in very safe investments, like a money market account. Whereas if you want the money in twenty years or longer (i.e. retirement), you are able to take on a bit more risk. Your risk level is determined if you are conservative, moderate or aggressive. Think about recent decisions you made in your personal life and apply this to your investments.

Regardless of your risk level, you need to be diversified. This means spreading your money over different types of investments, therefore, spreading your risk around. How you spread your money among different investments is called your asset allocation plan. To keep your investments as simple as possible, limit your portfolio to no more than five mutual funds. You can also choose one Lifecycle or Target Retirement Date mutual funds. This is one mutual fund that provides a diversified portfolio based on when you want your money. Most mutual companies offer them.

Even if you have a financial advisor, you should know what is going on and understand what you own. The more you know about your investments, the better your relationship with your financial advisor will be. On an ongoing basis, take charge of your investments and learn more about them. You can do this by taking a course, opening your statements, reading a book, reading the business section of the newspaper or investing articles on websites. Magazines like Money, Smart Money, Kiplinger are geared towards people that are not in the financial industry and are fun to read. Start with the cover article; dont try and read the whole thing, just spend 10 minutes a week. It will be much more manageable and you will enjoy it!

Written by Galia Gichon

(Copyright Down-to-Earth Finance LLC 2006)

Galia Gichon, Founder of Down-to-Earth Finance, demystifies personal finance particularly to women through unbiased financial education. With over 14 years experience in financial services and an MBA in Finance, she does not manage money or sell investment products. You can subscribe to her weekly e-mail newsletter at for smart tips to save more money and independent advice about mutual funds and retirement. She can be reached at 212.734.0433 and

How To Conduct Successful Fundamental Analysis

When an investor is scouting for potential bargain's in the markets, fundamental analysis will always take a top-down approach. Fundamental analysis will generally look at a number of different area's and these will be the national economy, at industry level, and at company level. Generally the term simply refers to the analysis of the economic well-being of a specific entity as opposed to only price movements.

By no means take this article as a be all and end all explanation of the process as it is a very broad discipline, but use it as a guideline on how to conduct the basics. Below I will briefly set out the basis for fundamental analysis for the three area's mentioned above earlier.

National Economy
Fundamental analysis in this instance is likely to focus on economic data principally produced by governments to assess the present and future growth of the economy. There are a wide variety of factors relating to fundamental's within the economy. Obvious economic indicators would include inflation, exchange rates, interest rates, debt and saving levels and consumer confidence. If you are already an investor you will know that publication's from the Fed or the Treasury with reference to any of these can have a profound affect on the stock market as a whole.

At the Industry Level
Fundamentals within this area are likely to focus on an examination of supply and demand forces for the products or services offered. Although this may seem vague in essence what the investor will be doing is trying to ascertain if it is viable to enter (invest his money) within a certain sector or industry. For example here in Britain the coal mining as well as ship building industries are both in major decline but there are still companies out there. Now if an investor was not made aware of this or did not conduct the appropriate research with reference to these sector's then they would have a higher risk of losing money.

At the Company Level
When a potential investor is conducting fundamental analysis this is the area that they will want to dedicate most of their time too. That is the individual company (the stock) they are looking to invest in. What an investor will be trying to do is determine if a stocks price is over or undervalued by focusing on underlying factors that affect a companies actual business and its future prospects. There are a variety of factors that a potential investor will be investigating. Examples of these will include business concept, management, competition and financial data. The majority of this information is readily available in the public domain through a variety of sources helping the investor to make a more informed decision.

So in this article we have gone over briefly the top down approach that an investor savvy in the process of fundamental analysis would use to pick a stock that the data would lead him too.

Oliver Gillies is a Trainee Sales Trader who has been working for a firm of stockbrokers in the City Of London for the last year. He also trades his own successful portfolio (11.5% in the last two months June-August). You can learn more by visiting his blog successful investors

What Every New Trader Should Know About Trading Stocks

Do you sometimes feel that trading stocks isn't going the way you think it should?

Just when you think you're getting the hang of it, the market comes along and bodyslams you back to reality. It's enough to make you think the market's primary function is to make a fool of traders.

We've all been there. We make a buck here and give back a few bucks there. Then, all of a sudden, we give back several. The market did it had its way with us. It's just not fair.

Or is it?

It's always easy to rationalize our losses. The market did something unusual...the specialist ripped us off...only the big boys make money...

But consider this...all traders take's part of trading. However, good traders make money. Sure they have losses but they don't go back to square one wondering what happened. They expect to take losses.

And, if they make money, it's because they know what they're doing. But they know something many of us never think about. They understand something so basic it often escapes attention.

No, it's not a new trading system...or indicator...or chart pattern. And it's not anything your computer can crank out. And it's not anything your broker will tell you. But it is a basic truth that has always been with us.

Let me tell you what I'm talking about...

I believe John Carter, author of MASTERING THE TRADE, said it best, "The financial markets are naturally set up to take advantage of and prey upon human nature. As a result, markets initiate major intraday and swing moves with as few traders participating as possible. A trader who does not understand how this works is destined to lose money."

Think about this for a minute...

It may go a long way to explaining why many traders don't make money. And to understand it is to realize we are often our own worst enemy where trading stocks is concerned.

Imagine...your own human nature is holding you back. Many of the things that make you what you are....your emotions...your behavioral patterns...your biases...are the very things that conspire to deplete your bank account.

They are what the market preys on to take advantage of our very nature. What's more natural than fear and greed. And what's more detrimental to trading than decisions based on these two're own silent saboteurs.

It's easy to deceive yourself when buying a stock. It's even easier to deceive yourself when you own the stock. Human nature goes into action to override decisions that are in your best interest.

Astute traders have said for a long time that the market works diligently at creating the most pain for the most people. It means the same thing. This is not a new concept. Winning traders have understood it forever.

So, if you're interested in trading stocks, why not step back and take a good hard look at at this statement. In itself, understanding Carter's statement is not the end all to trading success. But it is a good beginning because it involves a basic concept.

When you understand this statement, trading suddenly makes more sense. It's not the haphazard affair that some people create. You don't just throw money at the market and hope good things happen.

You begin to understand that trading stocks with a plan is the way to overcome emotions and habits that work against you.

It becomes easier to see why most traders often do the wrong thing... they're fearful when they should be aggressive...and they're aggressive when they should be fearful. It's called trading on your emotions. It's also called following the crowd. And it's why the train leaves without you.

But it doesn't have to...

Good things happen when you begin to understand how the market preys on human nature.

Thomas McNatt trades full time. His website,, is a valuable source of information and resources for new and struggling traders.

Can You Make Money In Penny Stocks?

Yes, you can! But the amount of money you make in penny stocks is directly proportional both to the amount of homework you do and the amount of discipline you have. Penney stocks are one of the most volatile investments into which you will ever put a dime, capable of breathtakingly fast gains and even faster collapses. So if you intend to trade penny stocks, you must be willing to monitor your investments constantly during market hours, and sell when you are in profit. You should also use stop-loss orders if your broker allows it.

Reasons For Investing In Penny Stocks
Keeping all the caveats in mind, there are still good reasons for including penny stocks in your portfolio. As their name suggests, they dont cost a lot, so you can build a significant positions in a company for a relatively small amount of money. While you may never own a thousand shares of a blue chip stock, you can own tens of thousands of shares of a penny stock.

Because you can own such large amounts of a penny stocks, you dont need to see a large gain in price to make a respectable profit. Each time the price of the penny stocks of which you own ten thousand shares goes up a single penny, your position will increase $100 in value. But if you get greedy, you can lose your profits by waiting too long to sell.

What To Learn About Penny Stock Companies
Penny stocks are not merely gambles if you spend the time to research them. You just need to educate yourself in certain aspects of the companies in which you want to invest; pay particular attention to the industry in which the company operates; the expertise and reputations of the companys management and the market acceptance of the companys product or services; past trading patterns of the companys stock; and how the sector which the company is in is influenced by economic and political factors.

You can find brokers to trade you penny stocks, but you will pay a commission much larger than that charged for stocks traded on the larger exchanges. Your broker will fill your buy and sell orders, so you wont have to monitor you penny stocks so closely, but his commissions will eat into you profits or add to your losses.

Penny stocks make up an over whelming percentage of all the stocks traded in the US each day. Over three-fifths of all NASDAQ and over three-quarters of all NYSE trades are of penny stocks, and this enormous liquidity means that you will almost never have difficulty getting your penny stocks orders filled.

Penny stocks are a worthwhile investment for those who the effort to understand them, and have the discipline to stand apart from the crowd.

You can also find more info on Hot Penny Stocks and Investing In Penny Stocks. is a comprehensive resource to get information about Penny Stocks.

Make the Right Choice

The rapid growth of retirement-planning options such as 401(k)s, IRAs, and variable annuities has provided an ever-increasing variety of investment choices within each plan to save for retirement years. Yet, a number of reports show that an alarming number of todays investors are oblivious to the importance of asset allocation in their retirement portfolios performance. This is despite the fact that financial advisors and the financial press have emphasized the asset allocation decision as critical to investment selection.

Market studies published in the Financial Analysts Journal in 1986 and updated recently show that how dollars are allocated among stocks, bonds and cash equivalents is the single most important decision an investor can make. In fact, according to the studies, security selection and market timing are far less important to a portfolios performance compared to the overall asset allocation.

Although these results have been widely publicized by the financial press and investment firms, a lot of retirement plan participants arent taking the message to heart. Company stocks and guaranteed investment contracts (GICs) still compose a bulk of the assets in the countrys defined contribution plans.

Company stock and GICs roughly constitute almost two-thirds of all retirement plan assets. Equities, the next most popular investment choice, composed less than a fifth of the portfolios. Bonds and cash equivalents represent the remainder of the assets. At first glance, one might suspect that plans are limiting the investment choices available to participants. However, this is not necessarily the case. Factors such as employee loyalty and familiarity account for the popularity of company stock.

On the other hand, GICs offer a fixed rate of return with a minimum of risk, thus making them attractive to investors who are understandably cautious about their retirement savings. However, placing too much money in GICs could limit an investors ability to achieve higher returns available from other investments and necessary to achieve retirement goals.

Employees also tend to stay put and never transfer their balances to other investment choices within their plan, even when new investment options may be added. Retirement planning is a process that needs to be periodically reviewed. This means updating asset allocations and taking advantage of new investment opportunities.

Given the variety of investment choices available, there is almost no legitimate reason to have a portfolio that is not properly diversified. Buying company stock develops an ownership interest in your company that can make work financially and personally rewarding. GICs can help you balance your portfolio with a fixed-income component. However, to really minimize risk and enhance your ability to achieve superior returns, a diversified portfolio is recommended.

Take the time to periodically review your asset allocation decision, preferably with the help of your financial advisor. If necessary, adjust your portfolio as your long-term plans change; most plans allow you to transfer your assets to different investment classes at least once a quarter. Remember, asset allocation is the most significant tool you have of making a real difference in your portfolios performance.

Fearing the American worker is being left in the dark, Mr. Morris, a fee based Investment Advisor Representative with Raymond James Financial Services, Inc., helps 401k participants get the most out of their retirement plan.

Picking Stocks

Before getting into the stock market, there are decisions you need to make. First, what are your goals? Do you require to build a retirement nest egg, build a portfolio for your grandchildren's security, or do you require to make a effective measure of money fairly quickly? You need to decide if your goals are long or short term. This is important because there are another types of stocks that work better for another goals.

Second, how are you going to trade? You must decide if you are going to execute it yourself or go through a broker. You can purchase shares of stock, bonds or mutual funds direct from a broker, or you can open an account with an online brokerage. You may be required to make a minimum initial deposit. When you open an account, you will require to be aware of things like set-up fees and broker commissions.

Third, you must figure out what your budget is. You need to decide how much you require to initially invest and how much and how often you require to continue investing.

Now you are ready to play the stock market. There is something exciting about picking stocks and seeing how they perform in the future. It's even better when you pick a winner and make a tidy sum of money from your stocks.

You can purchase stocks online through many websites. Online trading is the new phenomenon which is currently sweeping the investment field worldwide. If you accept a limited budget, there are companies that allow you to purchase stocks with no minimums. Other websites accept minimums. The pros to buying stocks this way is you pull the strings and there are no commissions to pay to brokers.

As for picking stocks, there are too many to choose from to count. A mutual rule in buying stocks is diversification. Pick stocks from another companies in another fields.

Picking stocks can be complicated. You can perform lots and lots of research on companies and trends and pick a stock based on your research. Or you can get advice from a number of another people or websites and pick the stocks they recommend.

Tips for picking a effective stock are:

The company doesn't accept outstanding debt.

Consistent growth. If the company's earnings are not growing, it is hard to expect its stock to grow.

The company has plenty of cash on the books.

The company has raised its dividend consistently.

Dividends are income shareholders get from the stock. The Board of Directors of a company decides if it will declare a dividend. Quarterly dividends are mutual, every year or semi every year are less mutual. Many companies don't pay dividends at all.

Dividend-paying stocks offer security in lean times. When you earn dividends, they will either be held in your general account until you tell the broker what you require to execute with them, or they can be automatically reinvested.

Many novices believe there is some mystery to winning the stock market. Some people become millionaires from the stock market after all. The truth is, there is no "mystery." Another people accept another theories, strategies, methods, as well as goals. Some may be high risk while others low risk.

There are another types of trading for another people and another goals.

Four types are:

Scalping- attaining dozens or even hundreds of trades a day trying to scalp a small profit.

Momentum Trading - Finding stocks that are moving significantly on high volume and try to jump on board to ride the momentum train to a nice profit.

Technical Trading - Closely watching charts, graphs, lines on stock or index graphs for signs of convergence of divergence that might indicate to purchase or sell.

Fundamental Trading - Trade companies based on fundamental analysis, which examines certain things like actual or anticipated earnings, stock splits, reorganization or acquisitions.

One of the strategies of experienced investors and online traders is trading stocks with momentum. This can be a thrilling trading method. Investing in momentum stocks is a effective idea especially since certain stocks can bring the possibility to gain up to 100% on the same day. While some momentum stocks may only rise 10% in a few minutes, you would still make $1,000 on a $10,000 investment on the same trading day.

A recommended strategy by some experts is to purchase stocks then hold on to them. Purchase some diverse stocks then forget about it. Don't execute anything with them and keep them as long as possible. After so many years, hopefully you will accept a very nice measure of money from your original investment.

Everyone hopes to purchase a cheap stock which will then take off like a rocket and make tons of money. Sometimes that happens, but more often you purchase a mid-priced stock which rises moderately year after year, eventually earning you a nice sum of money.

Although it can seem complicated at first, attaining money online from the stock market is a effective choice. No commissions, flexibility, you are in charge, and anyone can execute it.

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