A Stock Market Investment Plan that Never Lets You Down

The bulls and bears of the stock market are both tempting and scary to the investors. Speculators are enchanted by the stock market’s potential to help them in making quick money with a big M. While those who tread with care and caution, often shy away for fear of losing. However, the stock market is not all about speculative gains or black Tuesdays. It is a place where committed companies look for raising money to fund their activities. Serious investors can actually create wealth not only for themselves, but also for the companies and the nation. A wise way to invest in the stock market is to empower your self with information. You have to know and learn about the company you invest in, from past records and future plans.

Irrespective of what the Wall Street Gurus predict or what the economic indicators like Dow Jones Average say, a simple and foolproof way of knowing that a company is doing well is to keep a track of how much dividend income does it pay to its share holders every year. If the dividend rates have been rising steadily every year, you know you have a safe bet. To benefit from the future prospects of such companies, it is a good idea to rollback the returns into the company. Which means, instead of adding the dividends to your savings, you can invest them in the shares of the same company. That way, you can ensure that the dividends you receive are always higher than what you got last, with a larger number of shares getting added to your investment portfolio every time.

The Stock Market Investing Basics

Through stock market investing, you can proactively use your money in order to increase your initial investment; in other words, you can make your money work to your advantage. Stock investments do not work in the same manner as savings accounts. Although both stock market investing and savings accounts both use the compounding principle, savings accounts are inactive ways of investing with a more narrowed focus on the safety of your principle investing amount as opposed to the subsequent return.

If you invest in a company’s stock shares, you in essence become a part owner of that company. If the company gives out profit dividends, you will receive your portion, which is referred to as a dividend income.

The Best Method of Stock Market Investing

First of all, you can easily eat away at your time by budgeting. So as an alternative to expense tracking, which can be quite complicated, you will simply use the financial strategy of paying yourself first. As a general rule, it is wise to split your intended investment amount by applying 30% to various blue chip companies and 20% to several high dividend yields.

Managing Your Portfolio

Another aspect of stock market investing is managing your portfolio. Begin by considering products and services used in everyday life. Take notice as to what consumers use on a daily basis and this will give you insight into the companies who provide these products and services. Learn about their business models as well as general information that pertains to them.

You should also take a look at their profit-loss statement and balance sheet, business profitability, on-hand cash, and the company director’s and auditor’s reports. Other factors to consider are the company’s management team, asset returns, equity returns, price to earning ratio, and their previous five years of credit history.

If all of these aspects appear to be in great shape, you should invest in that company. When it comes to choosing specific companies, look for those involved in industries such as oil and gas, energy, service sector, FMCG, pharmaceuticals, banking, biotechnology, insurance, entertainment, and IT.

Stock Market Investing Philosophy

Your stock market investing philosophy should be to have a small piece of ownership for 10-20 years in a company. This type of philosophy will bring you a great return over time. You should use approximately 5% of your funds for option trading, which is essentially a way to not only hedge your assets, but also earn speculative gains.

Other Stock Market Investing Tricks

There are other tricks you can use when investing in the stock market. Keep the amount of the savings you invest capped at 50%. Also, while it is imperative to engage in speculative investments, if you want to make significant sums of money, keep you investments equal to one-tenth of your portfolio. Never let personal greed influence your investing decisions. Selling under a state of panic is never wise. Always make sure you have a thorough understanding of the market’s current state, what companies you decide to invest in, and the reasons behind your investment decisions.

Some Truths About Investing In Stock Market

Stock market investment evokes two opposite feelings in general public. Some hate stock trading and treat it as gambling, while others love it fiercely. They probably think that investment in shares is a kind of lottery with a jackpot around the corner.

Both views are characterized by a herd mentality. If the stock market goes down steeply, the stock market haters say vociferously: Didn’t I tell you it was gambling?

On the contrary, if the market goes up for a fortnight, there is a sudden spurt in buying all around.

But people cannot stay away from stock investing for a long time. The reason is that the returns from stock market investment are consistently much higher than from fixed income deposits. Investment in stock markets provides the ultimate power to beat the inflation.

The best way to make income from your stock market investment is to evaluate your investment against the returns within a specific period of time. The most common mistake that the investors make at the time of buying the shares is that they do not target the specific levels of returns. Moreover, they do not evaluate the risks in making investment in a particular stock.

It must be understood that investment in share market cannot ordinarily result in windfalls of money. It has been found that share market tends to go up despite the frequent falls and over time an investor can earn an average return of 15% to 20% per annum on his investment.

It should be noted that an average return of 15%-20% should not be taken lightly. The returns can be astounding when they are allowed to be compounded.

The second necessity is that you should use the principle of stop loss.

If, however, you wish to earn 30% return in one year, you must set a target of rotating your investments thrice a year and also fix a target of earning 10% on your portfolio in each rotation, that is to say, when you enter or exit the market.

In the same way you must set a stop loss limit too. If you suffer a loss of 10% on your investment, you must exit the share. If you set similar limits on your losses, you are saved from incurring huge losses.

If you are a beginner in stock market investing, the best course would be to first try learning by trading on a mock portfolio. Even if you do not set target on your profits, you must set your stop loss limits.

You must learn to structure your portfolio on the basis of how frequently you need the income flow and the capital return. You must also determine the composition of your portfolio on the basis of your age, status in life, your sources of income and above all your risk appetite.

It is always advisable to follow the age old wisdom of not putting all your eggs in one basket. In other words, you must learn to diversify your portfolio. It must also be noted that diversification should not be resorted to for its own sake. According to Warren Buffet, wide diversification is only required when investors do not understand what they are doing.

Your broker may remain to be your guide in investing in stocks and shares, but you must ultimately try to build up your own methodology in trading or investing. So you must learn to track the movement of the prices of your stock rather than depending upon the signals provided by your stock broker. Remember, it is your own money that is at stake.

The best principle in managing your stock investments, as said earlier, is to fix and stick to the buy and sell targets. It is better to sell off your stock when you have reached your target even if its price appears to be shooting skywards. You do not know when it may fall all of a sudden or even wipe off your lower targets. Set small goals, because they are not difficult to achieve.

Active Investing in the Stock Market

“Life is full of uncertainties. Future investment earnings and interest and inflation rates are not known to anybody. However, I can guarantee you one thing.. those who put an investment program in place will have a lot more money when they come to retire than those who never get around to it.”
-Noel Whittaker

Active investing is a strategy used in the stock market. People who are actively investing will buy and sell stocks regularly. They monitor the stock market and find way to make quick money. Most people are passive investors. They make long term investments which offer profit over a number of years. Active investors make short term, high risk investments which quickly increases their profits.

Active trading used to be something that only a financial professional could do. An investor would have to pay commission and management fees to their financial investor each time they wanted to buy or sell a stock. However, with modern technology the average individual can become an active investor. Active investors can now trade from the privacy of their own living rooms. It is quicker, easier and more profitable for the investor. Another great thing that active investing, online, offers is access to a wide range of research. Ten years ago, an investor would have to seek out a local professional investor for information and help. Today, traditional local brokers are becoming obsolete.

The difference between an active investor and a passive investor is time. For people who are saving for retirement and enjoy the comfort of steady and constant growth, passive investing works well. Passive investments include IRAs, Mutual Funds, and Bonds. However, there are some people who want to take a more aggressive and active role in their financial portfolios and they want their money now.

Becoming an active investor is not something you can just dive into. The key to being successful is being well educated and informed. Active investing can net an investor a 19% return on investments which are slightly more risky then long term investments that offer a 4% return. There are risks associated with active trading however most people find the benefits well worth the risk. The current trend is having a stock portfolio which is one part passive investing for the future. The other part of the portfolio is active and aggressive investing. This is a great way to balance and diversify a stock portfolio.

If you are interested in becoming an active trader all you need is a bit of education to move from low return to high return stock investments. This will allow you to make and use your money today not some time in the distant future. If you are interested and do not know where to begin contact a financial advisor who can point you in the right direction. In as little as two hours a week investing time, you can increase your investment profits drastically. Live the life you deserve, consider active investing today.

A Brief Glance About the Stock Market

Depending on monthly salary alone is not sufficient to fulfil dreams. It has become necessary for every person to find ways to earn additional income. Saving money is essential. It would be difficult to lead a happy life after retirement by depending on annual salary alone. Of the different paths available for a person, investing the right amount in stocks is a healthy option. However, there is a necessity to understand about the working procedure of the stock market.

A stock market is a public entity. Economic transactions occur at this place. It is a platform where stocks and derivatives of a company are available for trading. Every stock has a specific price set by the company. $36.6 trillion dollars is the world’s stock market value. Possible investors buy or sell stocks or derivatives of a company. A stock exchange is a formation of mutual corporations or entities of corporations. It specializes in bringing both a buyer and a seller onto a single venue.

Stock market platform is an open market. It includes individual investors to large hedge fund traders. A professional working in the stock exchange notes down the request and performs the necessary action of buying and selling. Transactions are also carried out physically in a stock market. This is referred to as public outcry. Under this procedure, a trader enters the participation of the auction by placing a verbal bid. However, availability of computer and internet changed the entire scenario. Trading is now carried out electronically. The internet connects numerous traders from different parts of the globe. Virtual trading is easy in comparison to physical trading. It eliminates the need to visit a stock exchange physically. Moreover, with complete information available on the internet, it becomes easy for a trader to buy or sell stocks at the right time.

Trading takes place when the ask price and the sell price coincide. This is a first-come-first-served procedure due to multiple bidders in the market. A stock exchange plays a vital role in exchanging securities of a company. It is important for a company to list their stocks with the exchange. Selling securities or derivatives helps a company raise capital. Any business can sell a specific percentage of ownership in the public market to raise capital. An economy where the stock market is rising is considered as an up-coming economy.

The central bank watches the entire trading procedure. This is essential for smooth flow of financial system within a country. It also regulates the pricing of a stock, as most companies increase it for financial benefits. Share prices have a direct effect on household wealth. A stock exchange acts as a protector and as a mediator to a buyer. This reduces risk and helps an individual investor to avoid counterfeit actions. A smooth functionality in a stock exchange drives economic growth. Companies have an opportunity to expand, create employment and increase.

Mastering Challenges in Your Stock Market Investing

We know that there is no easy quick-fix to developing wealth. How many of you who are in salaried employment moved straight from no experience to a position of seniority and expertise in whatever field you chose to work in.

Chances are that path was slow, you may well have had to study either formally in an education institution or through a period of on the job training and supervision. There were undoubtedly times when you hit problems…problems with learning the next skill that seemed so difficult, problems on the job when unexpected things occurred that were new experiences for you, and perhaps times when you had to deal with difficult situations.

Although often tough, these situations will have contributed to your growth as an employee, gave you invaluable experiences that you could draw on in the future and potentially created the opportunity for promotion and reward.

Why then should your investing journey be any different? Why do some expect wealth to drop easily into their lap? The reality is that most people will not become wealthy because they will either perceive that starting that the journey is too difficult (or in other words too much of a problem). The majority that do overcome that first set of problems and actually start soon give up when faced with new problems and realise that perhaps it is not the quick fix that they seem to feel is their right, subsequently give up and go onto the next doomed scheme which again will be short lived in duration when problems occur.

‘Problems’, as we term them, are a fact of life, necessary for growth of us as individuals, communities and the human race in its entirety. Every new invention, life-saving drug, life-changing discovery has occurred because someone, somewhere, sometime identified a problem and chose to find a solution. Problems may serve a protective function to highlight things we need to know or do, and the reality of it all in simple terms is that the only time you will no longer have ‘problems’ is when you are feeding worms and no longer on this mortal coil.
So on to taking the context of problem management and applying key concepts to your trading.

What may constitute a trading problem?

The obvious is a trade that has gone wrong way resulting a capital loss, this may be over a number of trades. Often this is too simplistic. In broader terms i would like to suggest that a trading problem is not only the above but rather anything that effects your ability to have a plan, trade a plan or reviewing your plan in the way you KNOW you should do. Any deficit, in any of these three areas can result in a capital loss. Invariably it is this rather than a hunt for the holy grail of technical indicator to add to your game that will make a difference on a sustained basis.
Let us start with probably the number one key issue, that of your attitude to trading problems.

There are essentially one of two camps you will fall in. Firstly you can perceive problems that occur in your trading as a threat of, or actual, loss of something important, something to beat yourself about or worse attach the blame to others. Perhaps you see these problems as a threat to your competence becoming fearful of continuing to invest, devastating not just your capital, but more damaging going forward, your trading self-esteem.

The second, and one could strongly suggest, more constructive way to look at trading problems is to develop an attitude of that mentioned earlier, to see it as necessary for your trading growth, an indication that something could and should be better in your trading game if you want sustained success. Examples of such could be identifying a gap in knowledge or the way you organise yourself when trading, or simply the need to follow through on a trading plan you have developed. The attitude here is one of building your trading ‘muscle’ so you can remain strong and do the right thing in any market.

The law of natural selection is based on the survival of the fittest. Applying that concept to your trading should you not strive be as fit as possible? Of course this makes sense and here’s the fact, it is experiencing, identifying and addressing problems that will provide you with that trading fitness to not only survive, as many traders wont, but also thrive on a sustained basis.

I have a close friend who i play football with on a weekend. This guy is incredibly fit, with the enviable sculptured frame. I asked him how did he develop the ‘look’, fitness, confidence and stamina that allows him to perform at such a high level on the pitch. He outlined his regime of daily nutrition and fitness regime suggesting that he has developed over a substantial period of time having to work hard pushing weights and exercising through his previous resistance levels. Without going into too much detail the key word I figured is the concept of pushing through resistance, without this he would not have developed the muscle and stamina that he has today.
So bringing this analogy back to your trading practice, seeing problems that you encounter in your trading practice as resistance that you MUST push against and conquer, to build your trading decision-making muscle seems logically the only way you can move to the next level of success.
Think for a moment in terms of where you have come from to date as a trader. Things you once saw as problematic, perhaps a concept you found difficult to grasp, may now no longer be a problem. What was probably difficult for you before, is now easy, as you have pushed against the resistance initially created by the problem. The only reason you were to get to a place of mastering that problem was an attitude that enabled you to push through. That attitude in turn enabled you to make good choices and adopt the behaviours necessary to develop sufficient trading muscle to overcome any barrier that our first group of individuals would never have achieved.

How to Invest in the Stock Market Safely

Everybody understands how important it is to save money for your retirement, and these days it can be more important than ever. The problem is, the stock market is very difficult for the ordinary investor to understand completely and with this massive recession we seem to be in at the moment, the stock market seems crazier than ever.

The alternative used to be to purchase government bonds or certificates of deposit from the bank but with the recession the way it is and the Federal Reserve keeping interest rates and near zero, it doesn’t make any sense to invest in those type of safe havens anymore. If you calculate for inflation they actually pay out a negative interest rate!

Which brings us back to the stock market. Unfortunately I think everybody has had experience personally or have at least known somebody who has lost their life savings in the dramatic market drop recently, and it’s so very hard to climb back on the horse and invest in the stock market but you have to do something!

What’s the solution then? Well I think I have one

My strategy harnesses the power of math and the law of averages. Here’s how it works; set aside a certain amount of money that you would normally invest in your retirement account every month. Set up a system to direct deposit that amount of money, either directly from your paycheck or directly from your bank account into your retirement investment account with instructions to invest it in an S&P 500 index fund (the same fund every month).

Be sure to set up this scenario through a mutual fund or retirement company of some sort so that you don’t have to pay a fee every time you make a contribution to the account.

So what exactly does this strategy accomplish?

Over time historically speaking the market has increased 7 to 8% per year and that’s held true over the last 50 odd years. But it only holds true for the entire market as a whole, not individual stocks and that’s where people get into trouble.

When you invest in individual stocks you can easily lose your money but if you invest in a broad stock market index fund it is virtually impossible to lose your money. The entire market would have to tank in order for you to lose and if that was the case civilization would be over anyway and you’d probably already be dead.

Having the money directly deposited automatically every month means that you will take advantage of the stock markets dips and rises mathematically. Some months you’ll purchase when the stock market is up and some months you’ll purchase when the stock market is down and this is where the law of averages works to your benefit.