What Do You Know About Investing?

What Do You REALLY Know About Investing?

Most people think they know about investing, but most of what they think they know is misinformation spread around, and is not REALLY true.

Stocks
The most popular of all investing opportunities, are stocks. You can make a lot of money investing in stocks, which means you can also lose a lot of money. You want to keep in mind that most investments in stocks are long term investments.

By making each individual dollar work for you, this in return makes you wealthy over time. There are a plethora of investing opportunities out there.

Investing Tips

1.) Have the Right Expectations
When you are investing in stocks, you want to make sure you aren’t expecting to become Warren Buffet over night. You want to make sure you do the proper amount of research, and make sure you know the history of the market as well as the company you are investing in. Make sure you know how long you are keeping an investment, and then make a commitment.

2.) Don’t Listen to the Media
It will take your decision from being based on research and history, to just “hear-say”. This will hurt your investments immensely.

3.) Stay Focused
You want to make sure you are putting all your effort and focus into your investments. Make sure you treat it the way it is and make sure you do the proper research of all aspects of what you’re investing in.

Mutual Funds
You are pooling your money with a number of other investors when you invest in Mutual Funds. You then pay someone to professionally manage and choose each individual security for you. There are a variety of different mutual funds you can choose to invest in, which range to fit your investment strategy.
3 Types of Mutual Funds
1.) Open-Ended
2.) Unit Investment Trust
3.) Close-Ended

Mutual Fund Investing Tips

1.) Look at the Fees
Always look at the fees involved when investing in Mutual Funds. Makes sure you find the best deal, but make sure you are investing the right amount of money in the right places.

2.) Research the History
One thing you can do to prepare an investment is to check out the history of the Mutual Fund. If it’s doing good, and there is a community of people investing in it, it can tell you if its a smart idea to invest yourself. Always check the history of any investment before you decide to purchase.

3.) Look at the Contract
You want to make sure you don’t just know bits and pieces of what’s involved, but everything there is to know, and then some. Make sure you know all the fees involved with buying and selling funds, and if there are international fees required.

Alternative Investments
Apart from the basic investments, there are other special securities. These investments include gold/silver, real estate, etc. These investments are speculative and can be very high profit, however; you need to have the knowledge.

Bank Investments
Bank accounts are one of the simplest form of investment. This percentage barely beats the rise of inflation, so unless you are keeping hundreds of thousands of dollars in the bank, you won’t be creating any wealth from this form of investment. Another way to invest in your bank is a CD, or Certificate of Deposit.

1.) Gold & Silver
The first thing you want to do before you invest in gold or silver, is to look at the market and decide if now is the best time to invest in precious metals. You want to make sure you are familiar with the variety of ways to invest in silver. You can invest in silver mining companies, silver ETF’s, silver futures, silver bullion, and also silver coins.

You want to make sure you do the proper amount of research, and make sure you know the history of the market as well as the company you are investing in. Make sure you treat it the way it is and make sure you do the proper research of all aspects of what you’re investing in. Makes sure you find the best deal, but make sure you are investing the right amount of money in the right places. If it’s doing good, and there is a community of people investing in it, it can tell you if its a smart idea to invest yourself. The first thing you want to do before you invest in gold or silver, is to look at the market and decide if now is the best time to invest in precious metals.

Essence of Investing

How would your perceive the Essence of Investing?

To the market, the Essence of Investing is considered to be the reality of financial-impact cycles (market, interest rate, economy, industry, etc.) just doesn’t fit at all into the hindsightful, but popular and generally accepted, calendar year assessment mechanisms. Brainwashing again.

Without these natural changes, there would be no hope of gain, no chance of buying low and selling higher. No risk, no profits, and no excitement– boring!

Wall Street knows this, and takes advantage of it mercilessly. In spite of the recent financial crisis, pension plan fiduciaries (particularly in the public sector, go figure) are falling all over themselves to throw money at the derivative and very alternative speculations that crashed the market just months ago.

Think about it. The harboring of these misconceptions (that lower market price = loss or bad and/or that higher market price = profit or good) is the greatest risk creator of all. It invariably causes inappropriate actions within the large mass of individuals who are uninitiated in the ways of the investment gods.

Most investors incorrectly think of “risk” as the possibility that the market value of a financial asset might fall below the amount that he or she has invested in the asset. OMG, how could this be happening!

The first steps in risk minimization are cerebral, and involve developing an understanding of the fundamental economic purpose of the two basic classes of investment securities.

Alternative investments? The stigma is gone, but the artificial demand adds risk to all markets.

They are especially risky for the millions of 401(k) and IRA investors who probably can not explain the difference between bonds and stocks, from any perspective. Most investors have virtually no clue what is actually being done inside the products they select, and have even less of an interest in learning about it. They dance knee-jerk style to the daily media buzz.

What is abnormal is the hype surrounding market value changes and the hysteria such hype causes among investors. No way should a weak real estate market translate into near zero bank balance sheet entries– it just doesn’t compute, except when it is popular politics.

Risk is the reality of financial markets and financial assets: the current value of all securities will change, from “real” property through time-restrained futures speculations. Anything that is “marketable” is subject to changes in market value. It is as the gods intended, and portfolios can be designed so that it just doesn’t matter quite so much as you’ve been brainwashed into thinking.

From the investors’ perspective: (a) equity securities are expected to produce growth in the form of realized capital gains, and (b) income securities are expected to produce spendable (or reinvestable) income. It isn’t real growth until it’s realized, or real income until it’s received.

The amount, cause, frequency, range, and duration of market value change will always vary in an “I-don’t-care-who-you-listen-to” unpredictably certain way– the certainty being that the change in market values of investment assets is inevitable, unpredictable, and essential to long term investment success.

401(k) participants are force fed products du jour from self-serving providor menus that make little effort to identify risk, much less minimize it. Very few plans allow participants to develop an understanding of their investment choices with the only education provided by the product vendors themselves.

Most investors have virtually no clue what is actually being done inside the products they select, and have even less of an interest in learning about it.

Here’s an interesting risk in the securities markets, one that governments have cleverly refused to address for fairly obvious reasons. The “Masters of the Universe” routinely get paid obscene amounts of compensation for risking OPM (other people’s money) perhaps a bit too cavalierly.

Real financial risk in equities boils down to: the possibility that a company’s stock (that 30% share of your brother-in-laws’ pizza parlor) will become worthless as management succumbs to economic forces, and/or mandated costs imposed by outside entities whose edicts must be complied with.

Of course you would prefer to skip this step and jump right into some new product athletic shoes that will hurdle you over the work and directly into the profits. How’s that been working out for you? It was once written (somewhere): no work, no reward.

The harboring of these misconceptions (that lower market price = loss or bad and/or that higher market price = profit or good) is the greatest risk creator of all. Risk is the reality of financial markets and financial assets: the current value of all securities will change, from “real” property through time-restrained futures speculations. Anything that is “marketable” is subject to changes in market value. The stigma is gone, but the artificial demand adds risk to all markets.

Risk is compounded by ignorance, multiplied by gimmickry, and exacerbated by emotion. It is halved with education, ameliorated with cost-based asset allocation, and managed with disciplined: selection income, quality, and diversification rules– The QDI.

What ever happened to bonds and stocks, the building blocks of capitalism? Do investors recognize the financial interest they have in the very corporations their elected officials are encouraged to tax, constrain, and regulate into competitive mediocrity?

In debt-based securities, risk is: the possibility that the issuer of an interest bearing IOU (the money your spouse loaned her brother at 6% to start flinging pizza) stops or falls behind on its payment obligations and/or declares bankruptcy and wipes out both owner (shareholder) and creditor (bond holder) interests.

Company fails, shareholder interests become valueless, debt obligations are worthless, while the fat cats keep raking it in, even suing to preserve their bonuses. Boardroom corruption, and direct lobbying (another euphemism, for bribing) of elected officials are two additional risks that investors need to be aware of.

Another mental step in risk minimization is education. You just can’t afford to put money into things you don’t understand, or which the salesman can’t explain to you in ordinary English, Spanish, French, whatever.