I have been involved in trading forex for 25 years and still amazes me how many people think forex day trading or scalping makes money - it doesn't its simply the dumbest way to trade and will lose you your money. Let's examine why.
Countless millions of traders trade trillions of dollars each day and it is impossible to determine what this mass of people will do within such a short time span as a day or a few hours.
Support and resistance levels are meaningless, as volatility can and does move prices anywhere in a day session. If you don't believe me lets look at the proof.
The first question you need to ask yourself is if forex day trading really did make money why is there no real track record of gains to show the success? There are thousands of day trading systems promising gains and none of them have a real track record - what do you get? A lot of hype and a track record that is simulated (not traded for real) in hindsight (knowing the closing prices). Here is the normal one you will see which is a CFTC standard one:"cftc rule 4.41 - hypothetical or simulated performance results have certain limitations. unlike an actual performance record, simulated results do not represent actual trading.
Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown".
Put the above disclaimer on a track record and you can say anything you want and vendors do. They appeal to lazy or greedy traders and the trader buys and gets a guaranteed loss and the vendor makes a guaranteed profit from the sale. Day trading is simply the dumbest way to trade and sensible knowledgeable people fall for it all the time - maybe the don't stop to think or simply miss the disclaimers when they buy these systems. You can if you want to prove me wrong try and find a track record ( that's real dollars and audited) I saw one day trading system show his bank balance of evidence of his success - success in selling day trading courses, NOT trading that's for sure!
So if you find one be sure to let me know. I have been looking for a day trader to prove me wrong for 25 years and I Haven't found a long term track record of profits and know I never will. So avoid day trading and pick another method that will help you gain currency trading success by trading the odds.
Wednesday, January 2, 2008
Forex Education - 3 Vital Tips To Make Money Fast In 2008
As we turn into the New Year it's a good time to make changes and take action - if you are trader who is not doing well or a potential trader then these 2 tips will help you make money fast not just in 2008 but at anytime and they should be a cornerstone of your forex education.
The first point I want to make needs serious thought 95% of traders lose money not because they can't learn forex trading (anyone can) but because they believe certain myths and commonly accepted wisdoms that are wrong.
The tips below are not conventional but don't let that worry you the bulk of traders don't make money so being in the minority is good so here are your 3 tips
1. Be Patient Trade Less
Many traders think the more they trade the more they will win but this is simply not true in forex trading in fact the opposite is true - the more you trade the greater the chances are you will lose. You don't get paid for the effort or amount of trades you make - you get paid for being RIGHT that's it. I know traders who trade every day and make nothing and others who trade a few times a year and make over 100% annualized gains!
The majority of novice traders believe the day trade and make money myth and that's all it is a myth. Day traders don't make money period. If you don't believe me, try and find a real track record on a day trading system and you will be looking for ever. You have to catch the big high odds moves and they can ONLY be spotted by looking at longer term data and data within a day is meaningless. If you like the buzz of trading you will lose - if you are patient and wait for high odds trades you will win.
2. Diversification
You will have heard it countless times diversify; don't put all your eggs in one basket etc. On a small account of $1,000 or less you don't have enough to diversify and make big gains at the same time. All diversification does is dilute gains - wait for the big moves and load them up with as much as you can afford.
3. Take Bigger Risks
You will hear many give you the advice of only risking a maximum of 2% on a trade - well on 1,000.00 that's $20 you won't make much doing that!Wait for the good trades and load them and risk up to 20% on a small account. You can only diversify and risk less per trade if you have enough cash and that's $10,000 + if you don't you need to risk more - period!4. Have Courage Learn to accept big gains! Hang on you may say all traders can do that because that's why their trading currencies.
They are - but they don't understand accepting a big gain is harder than taking a loss. Why? Because as soon as a trader sees a profit he wants to take it and the bigger it becomes the harder the temptation is to resist. As open equity swings keep eating his open profit it becomes too much and he snatches a mediocre or minor gain. What happens next? The trade goes on to make 10,000 20,000 or more and he's not in.
If you want to make money you need to have courage and accept that open equity will eat into your profits and have confidence to hold for a bigger longer term gain. If you want to make more money from your forex trading and you are starting off with a small account make the above part of your forex education and you will see your profits increase dramatically.
The first point I want to make needs serious thought 95% of traders lose money not because they can't learn forex trading (anyone can) but because they believe certain myths and commonly accepted wisdoms that are wrong.
The tips below are not conventional but don't let that worry you the bulk of traders don't make money so being in the minority is good so here are your 3 tips
1. Be Patient Trade Less
Many traders think the more they trade the more they will win but this is simply not true in forex trading in fact the opposite is true - the more you trade the greater the chances are you will lose. You don't get paid for the effort or amount of trades you make - you get paid for being RIGHT that's it. I know traders who trade every day and make nothing and others who trade a few times a year and make over 100% annualized gains!
The majority of novice traders believe the day trade and make money myth and that's all it is a myth. Day traders don't make money period. If you don't believe me, try and find a real track record on a day trading system and you will be looking for ever. You have to catch the big high odds moves and they can ONLY be spotted by looking at longer term data and data within a day is meaningless. If you like the buzz of trading you will lose - if you are patient and wait for high odds trades you will win.
2. Diversification
You will have heard it countless times diversify; don't put all your eggs in one basket etc. On a small account of $1,000 or less you don't have enough to diversify and make big gains at the same time. All diversification does is dilute gains - wait for the big moves and load them up with as much as you can afford.
3. Take Bigger Risks
You will hear many give you the advice of only risking a maximum of 2% on a trade - well on 1,000.00 that's $20 you won't make much doing that!Wait for the good trades and load them and risk up to 20% on a small account. You can only diversify and risk less per trade if you have enough cash and that's $10,000 + if you don't you need to risk more - period!4. Have Courage Learn to accept big gains! Hang on you may say all traders can do that because that's why their trading currencies.
They are - but they don't understand accepting a big gain is harder than taking a loss. Why? Because as soon as a trader sees a profit he wants to take it and the bigger it becomes the harder the temptation is to resist. As open equity swings keep eating his open profit it becomes too much and he snatches a mediocre or minor gain. What happens next? The trade goes on to make 10,000 20,000 or more and he's not in.
If you want to make money you need to have courage and accept that open equity will eat into your profits and have confidence to hold for a bigger longer term gain. If you want to make more money from your forex trading and you are starting off with a small account make the above part of your forex education and you will see your profits increase dramatically.
Forex Education - No Trading Experience, 2 Weeks Training To Millions In Profit
This story is about a famous experiment in 1983, when trading legend Richard Dennis wanted to prove anyone could learn to trade so he taught a group of people who had never traded before then set them off to trade - the result? They made $100 million in 4 years. There is a lot you can learn from this story and use in your own forex education.
The turtle experiment proved ANYONE can become a successful trader, with the right Forex education and everything about trading can be specifically learned by anyone with the desire to succeed.
This is Of course true - but still 95% of traders lose their money and the turtle experiment can give you an insight into why and how you can enjoy currency trading success.
The Experiment
The people Dennis selected represented a variety of different people of all ages, both sexes and from all walks of life including:An actor, security guard, a couple of professional card players, an auditor, a boy fresh from school and a female exchange clerk - so a diverse group of people! They then went on to make annualized 70% returns and make $100 million and many went on to become trading legends.
Dennis taught a Trend Following simple trading methodology - but also the confidence and the discipline to follow it through periods of drawdown, to long term currency trading success.
What You Can learn
The reason most forex traders fail is simply they cannot adopt the right mindset to succeed. Having a sound method is only part of the equation for success - you must have the confidence and the discipline to follow your system through draw down periods to win longer term. If you can't follow your method with discipline, you really have no method at all.
Dennis proved that a simple system that traders could understand, applied with discipline, could lead anyone to success and he was proved right. This logic of course still applies today.
The way to make money in forex trading is based upon the following:
A Simple Logical Method + Understanding of It = Confidence = Discipline = Forex Success.
Most traders however use methods that are not logical with good examples being day trading or scientific methods, or they follow someone else. Of course if you use a method that's not logical you stand no chance but if you try and follow someone else without believing or testing their logic you will fail as well. You are going to get losses (don't let anyone tell you won't) and its here the correct mindset is so important your discipline is based on confidence and you need this to stick with your method.
Discipline is vital to success and this is based upon inner knowledge and understanding.The turtle experiment is part of trading history, the story should act as inspiration to anyone who wants to learn currency trading and enjoy currency trading success. It imspired me to start my trading career 25 years ago and has inspired countless traders over the years, as it shows that anyone has the oportunity to achieve success if they learn the right knoweledge. If you understand the above then you to could become a successful trader and make the income you desire from trading global forex markets.
The turtle experiment proved ANYONE can become a successful trader, with the right Forex education and everything about trading can be specifically learned by anyone with the desire to succeed.
This is Of course true - but still 95% of traders lose their money and the turtle experiment can give you an insight into why and how you can enjoy currency trading success.
The Experiment
The people Dennis selected represented a variety of different people of all ages, both sexes and from all walks of life including:An actor, security guard, a couple of professional card players, an auditor, a boy fresh from school and a female exchange clerk - so a diverse group of people! They then went on to make annualized 70% returns and make $100 million and many went on to become trading legends.
Dennis taught a Trend Following simple trading methodology - but also the confidence and the discipline to follow it through periods of drawdown, to long term currency trading success.
What You Can learn
The reason most forex traders fail is simply they cannot adopt the right mindset to succeed. Having a sound method is only part of the equation for success - you must have the confidence and the discipline to follow your system through draw down periods to win longer term. If you can't follow your method with discipline, you really have no method at all.
Dennis proved that a simple system that traders could understand, applied with discipline, could lead anyone to success and he was proved right. This logic of course still applies today.
The way to make money in forex trading is based upon the following:
A Simple Logical Method + Understanding of It = Confidence = Discipline = Forex Success.
Most traders however use methods that are not logical with good examples being day trading or scientific methods, or they follow someone else. Of course if you use a method that's not logical you stand no chance but if you try and follow someone else without believing or testing their logic you will fail as well. You are going to get losses (don't let anyone tell you won't) and its here the correct mindset is so important your discipline is based on confidence and you need this to stick with your method.
Discipline is vital to success and this is based upon inner knowledge and understanding.The turtle experiment is part of trading history, the story should act as inspiration to anyone who wants to learn currency trading and enjoy currency trading success. It imspired me to start my trading career 25 years ago and has inspired countless traders over the years, as it shows that anyone has the oportunity to achieve success if they learn the right knoweledge. If you understand the above then you to could become a successful trader and make the income you desire from trading global forex markets.
Forex Trading - 6 Character Traits That Cause 95% Of Traders To Lose
Forex trading is all about having the right method but also the right attitude. Here we will look at 10 character traits that the losing 95% of traders have and if you want to enjoy currency trading success you need to avoid them.
Here they are in no particular order of importance.
1. I am not responsible
A symbol of losers - they think success will come with no effort on their behalf and blame everyone else for their failure from the tip they got from friend, newswire or broker, to the market being against them. These people make up a surprising amount of the losing majority and they fail to see that no one can give them success but themselves. Instead of seeing this they do the following.
2. I Like to take expert advice
If you do be very careful as most of the people who put themselves out as experts on the net are anything but - their marketing companies and have never traded in their lives. Again a vast amount of traders buy systems with unbelievable track records and then are surprised when they fail in real time (they never look at the disclaimer that says the track record is a simulation and not real). If something looks to good to be true it probably is and this is very true in forex trading.If you follow an expert and have not done your homework on the logic they base their views on, then you are unlikely to have the confidence to follow their method with discipline when it hits a losing period. If you don't follow a method with discipline then you have no method at all.
3. I don't like being wrong
Well in forex trading your going to be wrong a lot of the time, as only you can be wrong and the market price is always right - no matter what you or I think. Most traders hate taking a loss and looking stupid but the markets do that to everyone and even the best traders lose at times. If you try and argue with the price and justify your position, you will run up losses and lose and your emotions will take over.
4. I deserve to win I am smart
I have met some very clever people in forex trading and the majority of them lose - if you think that being smart helps you then it won't. In forex trading you get paid for being right with your trading signal that's it and it's a fact that the best forex trading systems are simple. They work far better than complicated ones as they have fewer elements to break. Clever people tend to over elaborate their trading and think the more they put in the more they get out but this does not apply in forex trading. If you want to make money keep it simple and remember forex trading is probably 20% method and 80% mindset.
5. I am not a patient person
If you are an anxious or nervous person then you are unlikely to win at forex trading. You need patience to wait for the right opportunities and you need patience to hold positions through short term volatility to bigger profits. If you are an anxious trader you will probably let your emotions get the better of you trade too much, engage in revenge trading etc and lose.There of course other losing traits but the above are very common ones and hold anyone of them and you will lose.
Forex trading is not hard to learn anyone can do it but most fail because they don't realize that correct mindset is the key to success. To be successful at forex trading you need to rely on yourself, have a deep understanding of why your method works, so you can have the confidence to apply it with discipline. If you understand the above you can avoid these common losing traits and get a mindset for forex trading success.
Here they are in no particular order of importance.
1. I am not responsible
A symbol of losers - they think success will come with no effort on their behalf and blame everyone else for their failure from the tip they got from friend, newswire or broker, to the market being against them. These people make up a surprising amount of the losing majority and they fail to see that no one can give them success but themselves. Instead of seeing this they do the following.
2. I Like to take expert advice
If you do be very careful as most of the people who put themselves out as experts on the net are anything but - their marketing companies and have never traded in their lives. Again a vast amount of traders buy systems with unbelievable track records and then are surprised when they fail in real time (they never look at the disclaimer that says the track record is a simulation and not real). If something looks to good to be true it probably is and this is very true in forex trading.If you follow an expert and have not done your homework on the logic they base their views on, then you are unlikely to have the confidence to follow their method with discipline when it hits a losing period. If you don't follow a method with discipline then you have no method at all.
3. I don't like being wrong
Well in forex trading your going to be wrong a lot of the time, as only you can be wrong and the market price is always right - no matter what you or I think. Most traders hate taking a loss and looking stupid but the markets do that to everyone and even the best traders lose at times. If you try and argue with the price and justify your position, you will run up losses and lose and your emotions will take over.
4. I deserve to win I am smart
I have met some very clever people in forex trading and the majority of them lose - if you think that being smart helps you then it won't. In forex trading you get paid for being right with your trading signal that's it and it's a fact that the best forex trading systems are simple. They work far better than complicated ones as they have fewer elements to break. Clever people tend to over elaborate their trading and think the more they put in the more they get out but this does not apply in forex trading. If you want to make money keep it simple and remember forex trading is probably 20% method and 80% mindset.
5. I am not a patient person
If you are an anxious or nervous person then you are unlikely to win at forex trading. You need patience to wait for the right opportunities and you need patience to hold positions through short term volatility to bigger profits. If you are an anxious trader you will probably let your emotions get the better of you trade too much, engage in revenge trading etc and lose.There of course other losing traits but the above are very common ones and hold anyone of them and you will lose.
Forex trading is not hard to learn anyone can do it but most fail because they don't realize that correct mindset is the key to success. To be successful at forex trading you need to rely on yourself, have a deep understanding of why your method works, so you can have the confidence to apply it with discipline. If you understand the above you can avoid these common losing traits and get a mindset for forex trading success.
Different Kinds Of Bonds
Investing in bonds is highly insured, and the returns are most often extremely credible. There are four basic Kinds of bonds on tap and they are sold through the Government, through corporations, state and local governments, and foreign governments.
The paramount thing about bonds is that you will get your initial investment back. This makes bonds the flawless investment vehicle for those who are new to investing, or for those who have a low risk resistance.
The United States Government sells Treasury Bonds through the Treasury Department. You can procure Treasury Bonds with maturity dates ranging from three months to thirty years.
Treasury bonds include Treasury Notes (T-Notes), Treasury Bills (T-Bills), and Treasury Bonds. All Treasury bonds are acclaimed by the United States Government, and tax is only owing on the interest that the bonds earn.
Corporate bonds are sold through public securities markets. A corporate bond is mainly a company selling its debt. Corporate bonds most often have high interest rates, but they are a bit risky. If the company goes belly-up, the bond is valueless.
State and local Governments also sell bonds. Contrasting bonds issued by the federal government, these bonds altogether have higher interest rates. This is because State and Local Governments can indeed go bankrupt contrasting the federal government.State and Local Government bonds are free from income taxes even on the interest. State and local taxes may also be waived. Tax-free Municipal Bonds are common State and Local Government Bonds.
Buying foreign bonds is manifestly veritably difficult, and is often done as part of a mutual fund. It is often remarkably risky to invest in foreign countries. The safest type of bond to buy is one that is issued by the US Government.
The interest earned might be much less, but again, there is completely little or no risk involved. For first-rate results, when a bond reaches maturity, reinvest it into another bond.
The paramount thing about bonds is that you will get your initial investment back. This makes bonds the flawless investment vehicle for those who are new to investing, or for those who have a low risk resistance.
The United States Government sells Treasury Bonds through the Treasury Department. You can procure Treasury Bonds with maturity dates ranging from three months to thirty years.
Treasury bonds include Treasury Notes (T-Notes), Treasury Bills (T-Bills), and Treasury Bonds. All Treasury bonds are acclaimed by the United States Government, and tax is only owing on the interest that the bonds earn.
Corporate bonds are sold through public securities markets. A corporate bond is mainly a company selling its debt. Corporate bonds most often have high interest rates, but they are a bit risky. If the company goes belly-up, the bond is valueless.
State and local Governments also sell bonds. Contrasting bonds issued by the federal government, these bonds altogether have higher interest rates. This is because State and Local Governments can indeed go bankrupt contrasting the federal government.State and Local Government bonds are free from income taxes even on the interest. State and local taxes may also be waived. Tax-free Municipal Bonds are common State and Local Government Bonds.
Buying foreign bonds is manifestly veritably difficult, and is often done as part of a mutual fund. It is often remarkably risky to invest in foreign countries. The safest type of bond to buy is one that is issued by the US Government.
The interest earned might be much less, but again, there is completely little or no risk involved. For first-rate results, when a bond reaches maturity, reinvest it into another bond.
The Bubble Really Does Not Burst
"The bubble has bursted." You hear it stated whenever any investment market has been doing so well for so long and then all of a sudden is not a hot thing anymore. It happened during the internet/tech boom of the late 90's. It happened recently with real estate throughout the United States. It happens to just about every market at one time or another.
The internet/tech boom that we all recall, when just about everyone and their friends were throwing a majority of their money into technology stocks is a great example. Companies that we never heard of and had no idea how they even made their profits, suddenly became our favorite investments. Why not? Every other technology and internet stock was sky rocketing. After all the internet and computers were our future. When there is a wave, and your friends are surfing it, you're going to do the same thing. Investing in companies that were internet related was the "cool" thing to do.
When people see their friends and family making a fortune in a certain market, they tend to not want to be left out. I'm sure you know many people who invested in certain internet stocks that they had no clue whatsoever what the company actually did. Unfortunately these companies were relying mostly on their hype which caused their stocks to soar even though their earnings were not up to par. A few experts began looking at these companies P/E ratios (price per share divided by earnings per share), which showed that most of them were extremely overpriced. Companies that are considered to be "high growth companies" are usually allowed to have higher P/E ratios. However there was no proof that these companies were growing at a large enough rate to off set the high P/E's.
After these experts started criticizing certain internet stocks with extremely high P/E ratios, we saw the stocks for these companies fall enormously. In turn some of these companies were forced to go out of business, signaling a not so good future for similar companies. The bubble didn't really burst. The market didn't just collapse all at once, but it was a gradual process which took months. This is the business cycle in a micro economical sense. The sub market (internet technology) began to fall on a steeper then normal slope. People who had made literally millions in the stock market were now in the negative.
The same thing happened in the real estate market just recently (2006/2007/2008). Real Estate everywhere was soaring. Homes that were selling for just $300,000 in 2000 were going for over $600,000 in many markets just a year or two later. People took out mortgages that had arms on them, and invested their money in real estate. What these people were expecting was that the market would continue to go up for years to come, and that they would be able to sell for a significant profit before the mortgage arm would kick in. What these people didn't take into consideration is that real estate, just like any other investment market, has a cycle of it's own. What goes up much come down, and come down it did.
In this case again, the bubble didn't simply burst either. It rather deflated like a basketball with a slow leak in it. Slowly people could not afford to pay their mortgages because their rate increased (due to the arm). As their rate increased so did the rates of other investors. The price of real estate leveled off, so these people could not sell their investments for a profit. This began happening on a massive scale, and these investors had no choice but to sell at a price lower then they paid in order to make their mortgage payments.
This happens in just about every investment market. There is always hype when things are good, and people jump in at this point. There is a saying "Buy low, sell high", yet even the people that say this all the time buy when prices are high because of this hype. Usually when something seems too good to be true it turns out it is. Remember that. The Bubble will eventually deflate no matter what!
The internet/tech boom that we all recall, when just about everyone and their friends were throwing a majority of their money into technology stocks is a great example. Companies that we never heard of and had no idea how they even made their profits, suddenly became our favorite investments. Why not? Every other technology and internet stock was sky rocketing. After all the internet and computers were our future. When there is a wave, and your friends are surfing it, you're going to do the same thing. Investing in companies that were internet related was the "cool" thing to do.
When people see their friends and family making a fortune in a certain market, they tend to not want to be left out. I'm sure you know many people who invested in certain internet stocks that they had no clue whatsoever what the company actually did. Unfortunately these companies were relying mostly on their hype which caused their stocks to soar even though their earnings were not up to par. A few experts began looking at these companies P/E ratios (price per share divided by earnings per share), which showed that most of them were extremely overpriced. Companies that are considered to be "high growth companies" are usually allowed to have higher P/E ratios. However there was no proof that these companies were growing at a large enough rate to off set the high P/E's.
After these experts started criticizing certain internet stocks with extremely high P/E ratios, we saw the stocks for these companies fall enormously. In turn some of these companies were forced to go out of business, signaling a not so good future for similar companies. The bubble didn't really burst. The market didn't just collapse all at once, but it was a gradual process which took months. This is the business cycle in a micro economical sense. The sub market (internet technology) began to fall on a steeper then normal slope. People who had made literally millions in the stock market were now in the negative.
The same thing happened in the real estate market just recently (2006/2007/2008). Real Estate everywhere was soaring. Homes that were selling for just $300,000 in 2000 were going for over $600,000 in many markets just a year or two later. People took out mortgages that had arms on them, and invested their money in real estate. What these people were expecting was that the market would continue to go up for years to come, and that they would be able to sell for a significant profit before the mortgage arm would kick in. What these people didn't take into consideration is that real estate, just like any other investment market, has a cycle of it's own. What goes up much come down, and come down it did.
In this case again, the bubble didn't simply burst either. It rather deflated like a basketball with a slow leak in it. Slowly people could not afford to pay their mortgages because their rate increased (due to the arm). As their rate increased so did the rates of other investors. The price of real estate leveled off, so these people could not sell their investments for a profit. This began happening on a massive scale, and these investors had no choice but to sell at a price lower then they paid in order to make their mortgage payments.
This happens in just about every investment market. There is always hype when things are good, and people jump in at this point. There is a saying "Buy low, sell high", yet even the people that say this all the time buy when prices are high because of this hype. Usually when something seems too good to be true it turns out it is. Remember that. The Bubble will eventually deflate no matter what!
Matching Stocks And Strategies With Your Goals
Various stocks are out there, as well as various investment approaches. The key to success in the stock market is matching the right kind of stock with the right kind of investment situation. You have to choose the stock and the approach that match your goals. Before investing in a stock, ask yourself, “When do I want to reach my financial goal?” Stocks are a means to an end. Your job is to figure out what that end is or, more importantly, when it is. Do you want to retire in ten years or next year? Must you pay for your kid’s college education next year or 18 years from now? The length of time you have before you need the money you hope to earn from stock investing determines what stocks you should buy.
Dividends are payments made to an owner (unlike interest, which is payment to a creditor). Dividends are a great form of income, and companies that issue dividends tend to have more stable stock prices as well. Every investor has a unique situation, set of goals, and level of risk tolerance. Remember that the terms large-cap, mid cap, and small-cap refer to the size (or market capitalization, also known as market cap) of the company. All factors being equal, large companies are safer (less risky) than small companies.
Investing for the Future
Are your goals long term or short term? Answering this question is important because individual stocks can be either great or horrible choices, depending on the time period you want to focus on. Generally, the length of time you plan to invest in stocks can be short term, intermediate term, or long term.
Investing in stocks becomes less risky as the time frame lengthens. Stock prices tend to fluctuate on a daily basis, but they have a tendency to trend up or down over an extended period of time. Even if you invest in a stock that goes down in the short term, you’re likely to see it rise and possibly go above your investment if you have the patience to wait it out and let the stock price appreciate.
Investing for a Purpose
When the lady was asked why she bungee jumped off the bridge that spanned a massive ravine, she answered, “Because it’s fun!” When someone asked the fellow why he dove into a pool that was chock-full of alligators and he responded, “Because someone pushed me.” Your investment in stocks shouldn’t happen unless you have a purpose that you understand, like investing for growth or investing for income. Even if an advisor pushes you to invest, be sure that your advisor gives you an explanation of how that stock choice fits your purpose.
An elderly lady who had a portfolio brimming with aggressive- growth stocks because she had an overbearing broker. Her purpose should’ve been conservative, and she should’ve chosen investments that would preserve her wealth rather than grow it. Obviously, the broker’s agenda got in the way. Stocks are just a means to an end. Figure out your desired end and then match the means.
Dividends are payments made to an owner (unlike interest, which is payment to a creditor). Dividends are a great form of income, and companies that issue dividends tend to have more stable stock prices as well. Every investor has a unique situation, set of goals, and level of risk tolerance. Remember that the terms large-cap, mid cap, and small-cap refer to the size (or market capitalization, also known as market cap) of the company. All factors being equal, large companies are safer (less risky) than small companies.
Investing for the Future
Are your goals long term or short term? Answering this question is important because individual stocks can be either great or horrible choices, depending on the time period you want to focus on. Generally, the length of time you plan to invest in stocks can be short term, intermediate term, or long term.
Investing in stocks becomes less risky as the time frame lengthens. Stock prices tend to fluctuate on a daily basis, but they have a tendency to trend up or down over an extended period of time. Even if you invest in a stock that goes down in the short term, you’re likely to see it rise and possibly go above your investment if you have the patience to wait it out and let the stock price appreciate.
Investing for a Purpose
When the lady was asked why she bungee jumped off the bridge that spanned a massive ravine, she answered, “Because it’s fun!” When someone asked the fellow why he dove into a pool that was chock-full of alligators and he responded, “Because someone pushed me.” Your investment in stocks shouldn’t happen unless you have a purpose that you understand, like investing for growth or investing for income. Even if an advisor pushes you to invest, be sure that your advisor gives you an explanation of how that stock choice fits your purpose.
An elderly lady who had a portfolio brimming with aggressive- growth stocks because she had an overbearing broker. Her purpose should’ve been conservative, and she should’ve chosen investments that would preserve her wealth rather than grow it. Obviously, the broker’s agenda got in the way. Stocks are just a means to an end. Figure out your desired end and then match the means.
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