January 19, 2018

Investing For Beginners, Stock Markets, Bonds, Mutual Funds, Precious Metals

Investments and Investment Strategies For Beginners

Investments and Investment Strategies

We have talked about defining yourself as an investor . Depending on what kind of investor you are, there are, for the most part, three different types of investments or categories within which you can invest.  Essentially they include stocks, bonds, and cash.  Seems pretty simple, right?  Well, it certainly is not.  My advice is to proceed with caution, investing as in any other technique you develop to accomplish a specific purpose, especially one of achieving financial freedom or amassing significant wealth, can easily become very complex and risky. But, a lot can be accomplished by educating yourself, expanding your knowledge and understanding through solid research, and last but not least, by learning from your mistakes and continually honing and refining your strategy and system.

Fortunately, the amount of information and knowledge that you’ll need to equip yourself with is directly associated with the sort of investor you are.  As there are basically three types of investments as stated above, there are also primarily three types of investors.  They include the conservative, moderate, and aggressive.  And as with the varying combinations of investments your can make within the financial markets, there are also a broad spectrum of each type of investor within each of the three basics.

The conservative investor is often an investor who may be a bit older and have less time to play their hand in the financial markets before retirement.  They may also just be conservative by nature and not readily willing to part with their hard earned dollar and seek to achieve low but consistent returns on their investments.  They tend to place their money in interest bearing savings or money market accounts, Treasury bills, or Certificates of Deposit.  These investments are representative of the safest investments as they are low risk and grow over a long period of time.

Moderate investors tend to be a little younger than the conservative investor and likely have a bit more time to accomplish their specific financial goals.  They tend to be somewhat more diverse than the conservative investor and invest in cash, bonds and may dabble in the stock market.  Moderate investing is a cadre of low to moderate risk investment within the cash and bond market and may also include investments in real estate, providing the investment is of relatively low risk.

Aggressive investors tend to be young and commonly do most of their investing in the stock and financial markets within specialized, highly unpredictable sectors and may even invest significant portions of their portfolio in foreign markets. All can be highly volatile and extremely risky; however, these investments tend to be the ones that provide the greatest, sometimes even astounding, returns on investment.

Before you begin investing your hard earned money, it’s important to clearly analyze and understand your particular financial position and consider what your goals are.  You want to ensure that you possess a thorough understanding of your investment style and strategy and develop a plan that fits within that framework.  Lastly, knowledge is power.  The more you know and understand about the particular investments and their associated risks, the better off you will be when it comes to meeting your long range financial goals.

Beginners Investing Common Mistakes To Avoid

Common Investing Mistakes to Avoid

No matter what type of investor you are, or how long you have been investing your money, invariably you have probably made some mistakes along the way, perhaps even some costly mistakes. But, first and foremost, one of the biggest mistakes people tend to make is to not invest at all.  Do you want to make your money work for you?  You can!  Even if all you can spare is a few dollars a week, now is the time to commit to doing so.  You’d be amazed at how much money you could put aside to invest if you were to really get creative and analyze your monthly outlay with new frugal vision.  As with any decision, what it really boils down to is a choice.  You too, can make a choice to start investing today.

While choosing not to invest and delaying and postponing investment into your financial future are two of the biggest mistakes many people make, investing before you are in the financial position to do so is another rudimentary problem.  Before you begin investing you will want to ensure that your financial situation is in order first.  Get your credit cleaned up first.  Start by paying off high interest loans and credit debts you may be carrying, then set aside at least three months of living expenses in savings and don’t touch it.  Make that your emergency fund should you find yourself unemployed or unable to work for an extended period of time due to an emergency medical situation.  Once you have your financial house in order, you will be ready to begin letting your money work for you with a sound investment strategy.

That brings me to another common mistake people make when they invest.  Don’t invest to get rich quick.  Let’s face it; we have all heard the Cinderella stories of investors who were in the right place at the right time with the right amount of cash that turned an obscure, risky opportunity into one of the most astounding investments in their financial portfolio. How may Cinderella’s do you know?  That’s what I thought, me too, not a one!  But I do know many who equipped themselves with the knowledge they needed to invest based on their particular financial goals and situations that have capitalized on the opportunities that do exist in today’s financial markets.   If you are going to invest to get rich quick, you will likely loose most if not all of your investment.

Next, don’t put all your eggs in one basket.  Depending on your financial situation spread out your investment strategy to incorporate various types of investment for the best possible return.  As you gain more knowledge, experience, investment savvy and capitol within your portfolio, the more opportunities you have to diversify and capitalize on investments that are risky which may prove to be highly lucrative.  Again, it will depend a lot on your particular investment style.

For the beginning investor or the seasoned stiock picker , consistency, strategy, and long term planning will help you to achieve your financial goals. So make the commitment and judiciously embark upon your journey to financial security today!

Beginners Investing , Growth Stocks Or Value Stocks

Perhaps you are ready to start investing on stocks. You have done some research , secured a stock broker and funded your account. What kind of stocks should you consider? Certainly there is no shortage of options. Again your decision should be based on your goals and what type of investor you are. Growth stocks and Value stocks, both have merit, but which one should you choose. I properly balanced portfolio will include both, but for the moment lets investigate growth stocks versus value stocks.

Growth Stocks

Stocks are priced according to the value of the companies’ earnings in the perfect world. We do not live in a perfect world. That is an understatement, for sure. Growth stocks are stocks whose earnings are expected to grow at an above average rate relative to the market. Growth stocks don’t usually pay dividends. They prefer to re-invest the company. Generally speaking, one will pay a premium for growth stocks as investors are paying for the future profitability of the company. Growth stock investors don’t mind paying premiums for growing stocks because they believe the increases in earnings will justify the higher valuation.
Growth stocks are more volatile, but produce quicker profit and loss than for example income stocks. It is all about expectations with growth stocks. Growth stocks usually have P/Es of 25 or higher, which reflect those lofty expectations. As long as those expectations are met with earnings the stock will continue to grow and with it your profit potential. Growth stocks usually feature strong growth rates. Lets say you find a company with a PE of 25 and a growth rate of 54%. You may have found a winner here, but these types don’t usually fall into your lap very often. On the other hand lets say you are invested in a growth stock and the company reports less than expected earnings for a quarter. Expected earnings are those that professionals are predicting. One bad report and all you paper profit can be lost or reduced.. Many companies can remain growth stocks for years. Home Depot is a excellent example. I owned several hundred shares of Home Depot in the late 1980’s and it remained a stellar performer for a decade, but all good things come to an end.

Value Stocks

On the other hand values stocks function and trade differently than growth stocks. Value stocks are those with low price-earnings ratios and high projected earnings-growth rates. Value investing has proven to be a successful investment strategy.  These stocks have usually fallen out of favor for some reason. Perhaps a negative earning report or negative company new about the future outlook for earnings. This doesn’t make these stocks bad investments. Value investors want firms that, although going through a rough period, have a solid history of profitability.  As with any commodity, buying at discount to true value is good for the bottom line, in time. Value investors look at value stocks as bargains, like the stock is on sale. Value stocks are often confused for cheap stocks, which they are not. They are undervalued for some reason. A company with a track record for producing profit generally will produce that profit again. When this happens the market, the investors will notice and prices will begin to increase and you will fell all the wiser for spotting this company and buying its shares at a discount when no one else was noticing.

Beginners Investing Basics , Day Trading Or Long Term Investing

Investing, even for the beginner investor is about you and your specific goals. Investing for you doesn’t have to be risky, frustrating or stressful and shouldn’t be. The problem is most people lose sight of their long term investing goals. Stock market winners like Warren Buffet have done long term investing again and again. I think you will agree long term investing has worked very well for him. Investing in the stock market is not a get rich quick business. Much like the proverbial tortoise and the hare fable, long-term investors will usually win, if they practice discipline and purpose in their investing strategy. Lets look at some different styles and compare the differences

Day Traders

Traders that participate in day trading are called day traders. Day trading is a very risky trading style. Day Trading by definition is the buying and selling of a security within a single trading day. Stocks are never kept overnight because of extreme risk of prices changing to the detriment of the trader. The rewards of a day trading strategy can be substantial. The risk follows suit. Remember anytime the reward of trading any equity is great, conversely the risk carries the same weight or more if things go south. Ill give an example. I explored day trading a a strategy briefly in my investing career . A stock was purchased at 10 AM one Friday morning priced at $ 8.32 . 2000 Shares were purchased. The stock quickly rose to near $9.00 one hour later. The stock was held. Why? Pure and simple greed. If it went that high that quick perhaps it would go higher, right? That’s the problem with most beginning day traders. There are ways to make money with dat trading but it is not for the faint of heart. By the way the stock mentioned above was sold at the market close that day at under $7.50 a share, money lost and lesson learned

Long Term Investing

Long Term Investing on the other hand reduces your risk substantially and your stress level. Thinking of your investment on a long-term basis, takes away the day-to-day monitoring, even the minute-by-minute monitoring required in day trading. So what happens if your stock goes down on price? Market declines are a normal part of the equity investing cycle. So long as the story behind the stock is still good, market downturns can provide investors with buying opportunities that can add to their long-term growth potential. Stock experts say over the long term the stock market is still the place to put your money if you’re looking for the best returns. Here is another example , albeit one that has a measure regret. There was a day when IBM was the bell weather stock of the Stock Market. As IBM went so did the market. IBM simply controlled the comuter industry. I had read about a company named Dell Computers and did some research on the company. I decided no one could compete with IBM. I was wrong obviously , but the point is what if I had invested just $ 1000.00 dollars in Dell on that day and held the stock. I will figure out what it would be worth today and post in another article . Suffic to say it would be a significant amount.

Mutual Funds Still A Good Place To Start Investing

You were talking with friends at dinner the other night and you listened intently as they described how they made thousands of dollars in the stock market today. Well that would get my interest too, but you will find more people losing money in the stock market than making their fortunes, especially thos who are beginning investing in the market. That is if they are truthful. The main reason is they are buying hype and a story, when in fact what you really want to invest your money in is the company and their earnings, their plan to increase those earnings, and how well they performed in the past. Sounds like a lot of research doesn’t it? It is Investing is not a get-rich-quick scheme, but rather a process that favors educated and patient investors who value the long-term. Stocks can offer the best returns on your money if you invest wisely and use common sense.

Mutual Funds are still the best vehicle for beginning investors. Mutual fund investors receive the return earned on the holdings in the fund’s portfolio less any fees or expenses, but before investing in any mutual fund, ask for and obtain a prospectus. Mutual funds are required by law to provide prospectuses. Mutual funds are no different than any other investment; before you invest, you must know invest your own investment goals and objectives.  Mutual funds offer another alternative to investment. Fund managers just don’t go out and pick investments with your money out of a magic hat. They are professionals and this is their business. Although you may not know them personally, they are handling a personal product on your behalf, your money. Checking their track record BEFORE you send your check is imperative to preserving your investment capital and helping you to sleep in peace at night. Fund shares can be bought either through a brokerage firm or directly from the fund itself. Investing through the fund itself will usually save you some money in commissions, but that is not always the case. If all this sounds confusing, it is supposed to. You are a beginning investor, you will learn more and it will start to make sense. Now why do we say mutual funds are a great place for the beginning investor to start? The answer is very simple. They limit your risk and you can still enjoy a handsome reward.

Beginners Investing , The Basics

If you have arrived on this page it is likely you either want to learn about investing or you have learned some already. These pages can help both types of people. Investing for many is exciting and for a few of those the anticipation of beginning becomes overwhelming. You have heard many an advertisement that states these investments are not suitable for everyone; you can and will lose money. There is a reason they say that. It is the truth. With investing, there is a inherent risk of losing your money. Most beginning investors usually do.

So before you invest your hard earned money it is best to learn a few important principles to reduce your risk. By the way what is your risk tolerance? We will cover that in our pages. First and foremost it is important to establish your goal for investing and your expectations for your return on those investments.

Lets say you were living in Alaska, I was in Texas, and I invited you over for dinner. The first thing you would ask is for directions to my house. Imagine if I told you, oh no worries I live in Texas you’ll find me. Seems impossible doesn’t it? The same thing is true of investing. Without road maps your chances of arriving at your destination, in this case your investing goals, the chance of success are greatly diminished. You must have a plan, and then work your plan,