When Its Too Late to Save for Retirement
August 25, 2010
You are 55 years old (or somewhere around there) and your company is going to force you to retire at 65. You have $35,000 saved in your 401K and that’s all. The house will be paid for by then so you will have a place to live. The company pension will pay about $1,000/month and so will Social Security. What will my life style be like at that time?
Let me give you a clue. You are going to need just about as much as you are making now even with the house paid for. If you are lucky you might have health insurance with your pension, but don’t count on it. You hope Uncle Sam will help out. But don’t count on it.
When that savings you have runs out maybe one of your kids will let you and the misses have the spare room. Scary, huh! Maybe one kid lives in Minnesota where you can spend the summer and the other in Florida where the winters will be nice. But don’t count on it.
You might get lucky and buy one of those stocks that skyrocket from $2.00 to $200. Those chances are 1 in 100 and you don’t have enough money to be taking chances. But don’t count on it.
Trend Following
August 15, 2010
Trend following also called momentum trading is the simplest and safest method of stock market investing. It puts you in stocks and mutual funds that are going up and gets you out when they start down. Properly done there is no guess work.
How many times have you bought a stock or fund because of deep analysis? You have gone to Morningstar and bought their extensive reports ? many of which are months old, but you don’t know that. Maybe your broker sent you a bushel of pretty reports about how wonderful is this particular company. Unfortunately each time you bought it the stock or fund either did not go up or went down.
Once you are touted about some equity you can be sure you are not the first and you might be the last one who bought at the top of the move. What can you do to avoid this kind of Wall Street trap?
Easily Finding A Good Stock
August 6, 2010
There is a tremendous amount of software, complicated high priced newsletters, radio and TV stock pickers and Internet web sites that will help you find a stock that is going to make you rich.
The problem is you don’t know if this is talk or are these gurus putting their own money where their mouth is. Until I know for sure this "expert" has his own cash on the line I don’t want to buy it. If he doesn’t have confidence in his own picks than why should I put my money at risk?
Wall Street wants you to do research. Find out everything you can about a company before you buy their shares. Your broker will send you tons of information on full color click paper, pink sheets, blue sheets, yellow sheets and more. Morningstar will be very happy to sell you a complete report.
One important fact is that if you and everyone else can have this information then it can’t be worthwhile because once a bit of news is known it is immediately factored into the price of the stock. That is why research is worthless. What you want to know is if you buy it will it go up. Obviously there are no guarantees.
Dont Catch a Falling Knife
July 27, 2010
One of the most common mistakes made by inexperienced investors is trying to "catch a falling knife". This is the phrase used to describe the habit of buying stocks that are in "freefall", and is a poor strategy, albeit common among new investors. Sadly, it is a common practice even among old and experienced investors. I’ve even fallen prey to it myself.
Remember, there are two primary approaches to investing: fundamental analysis and technical analysis. We generally fall into the fundamental camp, since we evaluate stocks based upon their valuations, rather than looking primarily at their short-term price movements. We take this direction because we believe this provides the greatest potential for long-term success.
A single-minded view of only the fundamentals of an investment, however, can limit an investor’s profits and lead to some unpleasant positions. This is because there are real limitations to buying a stock as it falls. One may purchase a stock that appears to be a great value at $10, only to see it fall to $5. Surely, if the stock rises again to $20, you may have been "right" to buy at $10, but one might argue that you weren’t "right enough". Buying at 5 would have yielded a 300% return, while you settled for only 100%. Furthermore, if you were convinced that $10 is a reasonable price, you might have saved time by buying it on the way back up instead of on the way down.
Investigate Before You Invest
July 16, 2010
“Through wisdom is a house built. And by understanding it is established. And by knowledge shall every room be filled with precious and pleasant riches!” –Bible
Always do your very own homework … The more you know, the better off you will always be! This requires that you keep educating yourself, and pay attention to all possible events that might affect you.
Understand personal finance matters that could affect you. Understand how each of your investments fits in with the rest of your portfolio and with your overall strategy. Understand the risks associated with each investment.
Gather unbiased and objective information. Get a second opinion, a third opinion, etc. Be cautious when evaluating the advice of anyone with a vested interest.
If you’re going to invest in stocks, learn as much as you can about the companies you’re considering.
Understand before you invest!
Research, research, research!
Read Books and educate yourself!
Experiment with various strategies before you put your own money on the line. Examine all available historical data. Try fundamental analysis, try a technical analysis portfolio, a dividend portfolio, a price/earnings growth portfolio, and any others you might think of. In the process you’ll find out which ones work best for you.
How Do I Start Investing Online and What Are Some Basic Tips?
July 7, 2010
If you are new to investing online, don’t put your entire life savings into an online account. Start with a smaller sum, which will be easier to handle and keep track of. Once you feel confident, you can then decide to add more money to your investing online account.
Once online, many investors tend to concentrate on stocks, specifically large-cap domestic stocks. While these stocks should make up part of your portfolio, they shouldn’t be ALL of it! Take into account your time horizon and risk tolerance to develop a well-balanced portfolio of stocks, bonds, and cash.
If you’re new to investing online and are looking to open a brokerage account, there are some important facts you should know before choosing a broker. Each one has strengths and weaknesses, but not everyone sees a broker in the same way. For example, if you’re comfortable finding your own research for investing online, then the deep discount brokers will work well for you.
Ask yourself?
Trading Commodity Futures Using Support and Resistance - Paper Trading
June 26, 2010
Setting Up a Paper Trading Account
Question: I cannot trade with “real money” as yet; however, how do I go about setting up a paper trade account?
Answer: You can paper trade various ways and it really does not require that you have anything more specialized than a notebook to track your trades and access to charts.
Begin by funding your paper trading account with the amount of money you think you will really begin with, whether it is $2000 or $20,000. I would suggest that you begin with no less than $5000 and $10,000 is even better.
Next you need to decide on which markets you are going to trade. The more money you have in your account, the more markets will be available to you. If you are trading with a $5000 account there is no point in becoming familiar with a market like Crude Oil that has a margin of $3000 per contract!
Assuming that you are a smaller trader, you will be most interested in the lower margin markets like the grains, some of the meats, maybe a metal and a currency or two. I would suggest you limit your scope to about 6 - 8 markets, as these will be enough to track on a daily basis.
Stock Market Retirement Investment Plan
June 17, 2010
For a successful retirement investment plan to work in the stock market, some ‘reasonably sure’ assumptions would have to be made:
The retirement investment plan must take into consideration the one prevailing constant in any stock market security ? risk and uncertainty. Understanding that risk and uncertainty are the key factors that propels the return on investment in the stock market far beyond the returns of Passbook Savings Accounts, CD’s or Bonds are a start. The plan’s key factor would be to use the risk and uncertainty of a stock market security to its advantage.
The retirement investment plan should be founded on the belief that no one can successfully retire without financial freedom. Therefore, the retirement investment plan’s main role would be to supply you with income during your retirement years, while also taking into consideration the risk of inflation. This should be accomplished without having to touch the principle.
The retirement investment plan would require discipline to accomplish its goal. The goal should be clear and specific, and the discipline necessary to accomplish the goal, just as clear and specific. Also, the retirement plan should not be financially out-of-reach, allowing as little as 100 dollars to begin, with as little as 10 dollars a quarter to continue.
Keep Stock Market Investment Profits
June 8, 2010
Have you had one of those huge investment winners ? a stock that went from $2.00 to $80.00? Or any other numbers you want that gave you a gigantic percent profit?
Did you take the profit or did you watch the equity drop back down to what you paid for it? I hope you sold and kept the money. That’s what it is all about. So many times when I was a broker I have seen customers make large profits and then think they were omniscient about trading and within a short period give back what they had made.
As a brokerage company owner I had seasoned brokers do the sane thing. One of my men made $150,000 in a short time. I called to congratulate his performance and suggested he take a vacation from trading for a while. He said, "No, Al, I know what I am doing". The very next month he lost $155,000. What happened?
Listen carefully as I am going to tell you one of the great truisms not found in the trading training manuals. If you are doing any trading whether in stocks, mutual funds, real estate, currencies, whatever, this applies. Print this out, frame it and put it up on your office wall.
Top Ten Investment Mistakes
May 27, 2010
1. Lacking an investment plan a/k/a/ "Don’t take a trip without packing the map". A pre-planned asset allocation generates positive results and eliminates emotional panic selling.
2. Buying cheap stocks a/k/a "Road crews erect “Dead End” signs for a reason". Most stocks with low share prices also arrive at the bottom for a reason. There must be institutional interest to influence price, and many won’t even glance at stocks below $8 or $10.
3. Purchasing story stocks a/k/a "A good fable lulls a child to sleep". Don’t get taken by compelling "story" stocks. The plots include a cure for cancer, a big oil strike or a revolutionary invention. Such promising stories rarely prove true. If the "story" materializes, the company will still be a buy.
4. Selling your winners a/k/a "You gotta know when to hold ‘em’". Don’t sell your winners. These companies combine outstanding management, product and cash flow, creating steady growth for years. Holding these companies for the long run will compensate for other investing mistakes. In fact, one or two big winners can create real wealth.
