Time is not the only factor that affects the risk you take when you invest.
Your own tolerance of risk is an important factor.
Risk is the measurement of your willingness to see your investments shrink in the short-term, even though you know they will increase in the longer term.
You need to have some idea of your level of risk tolerance.
Saturday, 30 January 2010
Time Horizon
What are your major deadlines in life?
How much time do you have to save and invest before you retire?
Your time horizon is very important when you invest, because compounding works best over a longer period.
Time and risk are also related.
If you are young and have many working years ahead of you, you can afford to take bigger risks with your investments than an older person close to retirement.
How much time do you have to save and invest before you retire?
Your time horizon is very important when you invest, because compounding works best over a longer period.
Time and risk are also related.
If you are young and have many working years ahead of you, you can afford to take bigger risks with your investments than an older person close to retirement.
Be realistic: adjust your investment objectives to fit in with your time horizon and risk tolerance level.
You also have to realise that you need to align your time horizon, risk tolerance and investment objectives.
You might have a very short time horizon before retirement and a low risk tolerance, you might want to see significant capital growth.
It is important to be realistic: you have to adjust your investment objectives to fit in with your time horizon and risk tolerance level.
This also means you will have to find a balance between the risk you are prepared to take and your preferred returns. Risk and reward are always at opposite end of the scale - the higher the risk, the higher the potential return, and the lower the risk, the lower the expected return.
Therefore, the importance of you knowing more about who you are and how you want your money to work for you at this stage in your life.
You might have a very short time horizon before retirement and a low risk tolerance, you might want to see significant capital growth.
It is important to be realistic: you have to adjust your investment objectives to fit in with your time horizon and risk tolerance level.
This also means you will have to find a balance between the risk you are prepared to take and your preferred returns. Risk and reward are always at opposite end of the scale - the higher the risk, the higher the potential return, and the lower the risk, the lower the expected return.
Therefore, the importance of you knowing more about who you are and how you want your money to work for you at this stage in your life.
The Aim of Almost Every Investor
The aim of almost every investor is to obtain a combination of safety, income and capital growth.
Sir John Templeton
Sir John Templeton
Three most important personal factors to consider: Your Time Horizon, Risk Tolerance and Investment Objectives
How well do you know yourself
In understanding your relationship with money, what are the 3 most important personal factors to consider?
These are:
By knowing more about yourself and where you want to be, you can now use this knowledge to construct an investment portfolio that fits your unique needs:
Related:
Understand what money means to you: Answer 10 simple questions
http://spreadsheets.google.com/pub?key=tr9oMvjAsDJvkcPgXdd763A&output=html
Asset Allocation: The Best Way to Minimize Risk of Your Portfolio
http://myinvestingnotes.blogspot.com/2011/01/asset-allocation-best-way-to-minimize.html
In understanding your relationship with money, what are the 3 most important personal factors to consider?
These are:
- how long or short a time you have to invest
- how much risk you can tolerate, and,
- your investment objectives and whether they fit in with your time horizon and risk appetite.
By knowing more about yourself and where you want to be, you can now use this knowledge to construct an investment portfolio that fits your unique needs:
- your time horizon,
- your risk tolerance and
- investment objectives.
Related:
Understand what money means to you: Answer 10 simple questions
http://spreadsheets.google.com/pub?key=tr9oMvjAsDJvkcPgXdd763A&output=html
Asset Allocation: The Best Way to Minimize Risk of Your Portfolio
http://myinvestingnotes.blogspot.com/2011/01/asset-allocation-best-way-to-minimize.html
Friday, 29 January 2010
Reviewing the Financial Basics of Investment
- Long hours of back-breaking work do not guarantee financial independence.
- You need to work smarter with your money. Let your money work for you.
- This can be achieved by clever investing and the magic of compounding. This is the only way in which you can really beat your ultimate enemy, inflation, over the longer term.
A difficult environment - why invest? Take time out to try and understand the nuts and bolts of investment.
Compounding cannot take place without investment.
It is through clever investment that compounding makes your money work for you. The two are inextricably linked.
Investment is closely associated with the ups and downs of financial markets.
The last few years were particularly bad, as we saw the emerging markets crisis, the bursting of the internet bubble, then the terrorist attacks in the United States and the subsequent war taking their toll on investor sentiment, and the recent subprime credit crisis. Many investors have seen their wealth being eroded and have become disillusioned with investment in general.
Do not neglect your first priority
One of the big problems is that people think they should invest in equities (also called shares or stocks) despite the fact that they answer 'NO' to all the following three questions:
1. Can you comfortably cover your living expenses, including food and shelter?
2. Do you have enough cash for emergencies?
3. Do you have adequate insurance to protect your family?
The fact of the matter is that these items should be your first priority. It is only SURPLUS FUNDS that you should invest in the stock market.
The fluctuations of financial markets have not proven that investment is inherently bad. There is no other option if you want to combat inflation and increase the value of your savings over time. But political and economic crises do emphasise that:
Time passes all too quickly. Take time out to try and understand the nuts and bolts of investment. Do not allow yourself to run out of time. Read widely and in doing so, you will arm yourself with the knowledge needed to make your money work for you.
It is through clever investment that compounding makes your money work for you. The two are inextricably linked.
Investment is closely associated with the ups and downs of financial markets.
The last few years were particularly bad, as we saw the emerging markets crisis, the bursting of the internet bubble, then the terrorist attacks in the United States and the subsequent war taking their toll on investor sentiment, and the recent subprime credit crisis. Many investors have seen their wealth being eroded and have become disillusioned with investment in general.
Do not neglect your first priority
One of the big problems is that people think they should invest in equities (also called shares or stocks) despite the fact that they answer 'NO' to all the following three questions:
1. Can you comfortably cover your living expenses, including food and shelter?
2. Do you have enough cash for emergencies?
3. Do you have adequate insurance to protect your family?
The fact of the matter is that these items should be your first priority. It is only SURPLUS FUNDS that you should invest in the stock market.
The fluctuations of financial markets have not proven that investment is inherently bad. There is no other option if you want to combat inflation and increase the value of your savings over time. But political and economic crises do emphasise that:
- You should be clever about investing.
- You should know the investment basics.
- You should get serious about your money and retirement.
Time passes all too quickly. Take time out to try and understand the nuts and bolts of investment. Do not allow yourself to run out of time. Read widely and in doing so, you will arm yourself with the knowledge needed to make your money work for you.
Compounding: your ultimate friend
If inflation is your ultimate enemy, compounding is your ultimate friend.
Einstein even called it the eighth wonder of the world - and being the genius he was, he would have known!
Compounding is the best weapon in your arsenal, the one thing that can make your money grow, despite inflation.
Compounding simply means that the returns on the investment grow too, and not only the capital. It is growth on growth, or interest on interest.
The longer you invest, the more your money will grow. That is why time is important, and the earlier you start investing the more you will earn.
Delaying your investments is as bad as not investing at all.
Example of Ann and Peter, two young people.
Ann saves $500 a year. She starts when she is 15 years old and invests in the stock market for 10 years at a return of 20% a year. After 10 years she stops adding money to her nest egg.
Her friend, Peter, only starts to save when he is 40 years old. After initially squandering his income rashly, Peter starts saving $40,000 a year for 25 years, also at a return of 20%.
Who do you think has the most money at retirement?
How did Ann achieve this? Not because of:
But because of:
Einstein even called it the eighth wonder of the world - and being the genius he was, he would have known!
Compounding is the best weapon in your arsenal, the one thing that can make your money grow, despite inflation.
Compounding simply means that the returns on the investment grow too, and not only the capital. It is growth on growth, or interest on interest.
The longer you invest, the more your money will grow. That is why time is important, and the earlier you start investing the more you will earn.
Delaying your investments is as bad as not investing at all.
Example of Ann and Peter, two young people.
Ann saves $500 a year. She starts when she is 15 years old and invests in the stock market for 10 years at a return of 20% a year. After 10 years she stops adding money to her nest egg.
Her friend, Peter, only starts to save when he is 40 years old. After initially squandering his income rashly, Peter starts saving $40,000 a year for 25 years, also at a return of 20%.
Who do you think has the most money at retirement?
- The total amount of $5000 that Ann had saved over 10 years, gave her a grand total of $22.9 million at the age of 65.
- Peter on the other hand, battled to save a total of $1 million and ended up with $22.7 million.
How did Ann achieve this? Not because of:
- the rate of return: both earned the same return on their investment, nor
- the capital she put in: Peter put in far more.
But because of:
- the time factor. Over time, Ann had growth on her money and on her returns. Compounding is a winning recipe.
Inflation: your ultimate enemy
Inflation erodes your money systematically.
Inflation simply means that prices of goods and services go up, so the purchasing power of your money decreases and you have to pay more to maintain the lifestyle to which you have become accustomed.
For example, your pension may seem to be adequate now, while you are saving for it. However, after a number of years' retirement, you may suddenly realise that the amount you had set aside is not enough and you cannot maintain your standard of living. With life expectancy on the increase, people often outlive their money.
Even in the current relatively low-inflation environment, inflation can make a big difference in your retirement.
For example: if you hid $1,000 under your mattress today and left it there for 20 years, even at a fairly low inflation rate of 3%, it would have shrunk to the equivalent of $544 - almost half its original value.
So inflation eats away at your money. It has no regard for how hard you have worked, how many hours you have put in or even how efficient you are. Your money simply becomes worth less as time goes by.
Inflation simply means that prices of goods and services go up, so the purchasing power of your money decreases and you have to pay more to maintain the lifestyle to which you have become accustomed.
For example, your pension may seem to be adequate now, while you are saving for it. However, after a number of years' retirement, you may suddenly realise that the amount you had set aside is not enough and you cannot maintain your standard of living. With life expectancy on the increase, people often outlive their money.
Even in the current relatively low-inflation environment, inflation can make a big difference in your retirement.
For example: if you hid $1,000 under your mattress today and left it there for 20 years, even at a fairly low inflation rate of 3%, it would have shrunk to the equivalent of $544 - almost half its original value.
So inflation eats away at your money. It has no regard for how hard you have worked, how many hours you have put in or even how efficient you are. Your money simply becomes worth less as time goes by.
Your money's job description and your principal financial goal: "Work to give a real rate of return."
Return is a very important concept in the investment world. It is simply the difference between the money you start off with and the money you end up with. In other words, how your money has grown.
The rate of return is the pace at which you achieve that growth, and is normally expressed as a percentage per year.
The nominal rate of return does not take inflation into account, while the real rate of return is the nominal rate of return less the inflation rate.
E.g.
Nominal rate of return for FD 4%
Inflation 3%
Real rate of return for FD 1% (4% - 3%)
You should learn how your money can work for you to increase over time and to beat inflation.
Your money should give you a real rate of return. This should be your money's job description and your principal financial goal.
The rate of return is the pace at which you achieve that growth, and is normally expressed as a percentage per year.
The nominal rate of return does not take inflation into account, while the real rate of return is the nominal rate of return less the inflation rate.
E.g.
Nominal rate of return for FD 4%
Inflation 3%
Real rate of return for FD 1% (4% - 3%)
You should learn how your money can work for you to increase over time and to beat inflation.
Your money should give you a real rate of return. This should be your money's job description and your principal financial goal.
A few sobering statistics. Only 6 out of 100 people achieve financial independence
It is estimated that out of every 100 people aged 25 today, in 40 years' time:
How many people of 60 and older do you know who are dependent on their family or still have to work? Scary, isn't it?
Many people do not realise that, despite their strong work ethic, their hard work alone is not enough to help them on their way to accumulating wealth and becoming financially independent.
To gain financial independence, your money must work for you. You need to be smart about money, and you need to know your money's enemies and friends.
The story of Rockefeller
As a teenager, John D. Rockefeller, one of the richest men in America in the 19th century, earned $1 hoeing potatoes for a neighbour for 30 hours. A week later, he collected interest of $3.50 on a loan he had made to another farmer a year earlier. Rockefeller learned early on that you do not necessarily need to work harder, but that you do need to work smart.
If you share Rockefeller's determination and want to end up being one of the 6 out of 100 people without financial worries when you retire, you should learn to invest early.
- only 6 will be financially independent
- 34 people will have passed away
- 10 will be drawing a government pension,
- 20 will still be working, and,
- 30 will be dependent on relatives.
How many people of 60 and older do you know who are dependent on their family or still have to work? Scary, isn't it?
Many people do not realise that, despite their strong work ethic, their hard work alone is not enough to help them on their way to accumulating wealth and becoming financially independent.
To gain financial independence, your money must work for you. You need to be smart about money, and you need to know your money's enemies and friends.
The story of Rockefeller
As a teenager, John D. Rockefeller, one of the richest men in America in the 19th century, earned $1 hoeing potatoes for a neighbour for 30 hours. A week later, he collected interest of $3.50 on a loan he had made to another farmer a year earlier. Rockefeller learned early on that you do not necessarily need to work harder, but that you do need to work smart.
If you share Rockefeller's determination and want to end up being one of the 6 out of 100 people without financial worries when you retire, you should learn to invest early.
Everyone wants to be financially independent
Acquiring investing knowledge is important. The earlier you acquire this knowledge of how your money can work for you, the better for you.
In order to gain financial independence you need to understand first and foremost that hard work is important, but not enough. You should also be clever about making the money you earn work hard for you.
You also need to know yourself before you make any investment decisions. Your objectives and the time you have in which to achieve them are the 2 most important factors when deciding on an investment programme.
Unfortunately, very few investors realise this when they start. You will need to find out how much risk you can tolerate, as well as what your relationship with money is.
Investment options are increasing dramatically in number and sophistication. Many people stumble along, buying a share here and a unit trust there. Only when they start learning about investments do they realise that they have made a mess of things. You have to make the most of this sophistication by adhering to simple principles and basic truths when compiling your investment portfolio.
The road may sometimes be bumpy, and at times you may wonder whether it would not have been more prudent to keep your hard-earned money under your mattress. But you will see that patience will be rewarded, and the ability to achieve long-term objectives depends on a long-term plan.
In order to gain financial independence you need to understand first and foremost that hard work is important, but not enough. You should also be clever about making the money you earn work hard for you.
You also need to know yourself before you make any investment decisions. Your objectives and the time you have in which to achieve them are the 2 most important factors when deciding on an investment programme.
Unfortunately, very few investors realise this when they start. You will need to find out how much risk you can tolerate, as well as what your relationship with money is.
Investment options are increasing dramatically in number and sophistication. Many people stumble along, buying a share here and a unit trust there. Only when they start learning about investments do they realise that they have made a mess of things. You have to make the most of this sophistication by adhering to simple principles and basic truths when compiling your investment portfolio.
The road may sometimes be bumpy, and at times you may wonder whether it would not have been more prudent to keep your hard-earned money under your mattress. But you will see that patience will be rewarded, and the ability to achieve long-term objectives depends on a long-term plan.
Very good advice for the younger investors contemplating stock investing
When is a good time (age) to invest in the stock market?
3:02 am on January 28, 2010
Hi, I am 20 years old and am looking to start investing into the stock market. I have been told that I am too young to invest and that I will end up broke. I am going to be an accountant, so I know how to handle my money. Also, I was curious if there is a minimum to invest at a time or if I can invest a small amount now and invest more once I have established myself? And finally am I too young to invest?
Donald F 3:02 am on January 28, 2010 Permalink
I am glad that you are asking this question at your age. Like in everything else in life, there’s nothing like starting early. You are studying to be an accountant, so you already know the power of Compounding, and what it can do. Consider this excellent article about the benefits of starting early and what Compounding can do for you, when you start early.
Power of Compounding
http://www.valueresearchonline.com/story/h2_storyView.asp?str=4007
Next, I would recommend you to first get solid grounding in Investing. 3 must read books. If you haven’t heard of these, buy them NOW, today. They will be your invaluable guides to safe & prosperous investing and future wealth creation.
1. Intelligent Investor -Benjamin Graham
Considered the bible of all investors, this will foremost teach you the basics and most importantly, how not to lose money. Thats the first lesson you need, believe me
2. One up on Wall Street -Peter Lynch
This is another classic. Tells you how to spot winners from what you see around you. successful products, companies. Practically shows you how you do not need to be a hot shot financial analyst to be able to spot good moneymaking opportunities in stocks
3. Common stocks Uncommon Profits- Phil Fisher
As you dabble for 1 or 2 years, make some money and also make some small (hopefully) mistakes, you will start itching to catch the multi-baggers, the ones that go up 4x-10x in a couple of years! This book show you how to sift out probable winners
As you start reading the books, start an online trading account like someone mentioned e-Trade, use the principles in the first book to buy a few good stock at a reasonable price. Start listening in on the financial channels, start reading a business daily, daily. Check out great investing basics websites like
http://beginnersinvest.about.com/
http://www.investopedia.com/articles/basics/
http://www.kiplinger.com/moneybasics/
And ask questions to the more experienced investors at popular forums, hang in lurk at some of the great investing forums for pearls of wisdom and when you have a query that you have to have answered post a quick one. Consider Chucks Angels -a nice yahoogroup for wannabe investors too http://finance.groups.yahoo.com/group/chucks_angels/
Good Luck. You are not too early by any standards. I would say just about right time. Get cracking, boy!
Eka A 3:02 am on January 28, 2010 Permalink
When the stock market have got into bullish.But it up to the economics,although perhaps economics slow down but you can get profit in bearish.it up to your skill.I will show you and example that present you about the US recession can’t effect to everyone,thus you can make progit on this situation. here this link
http://finance-fantasy.blogspot.com/2008/05/us-financial-crisis-has-not-had-bad.html
cashing 3:02 am on January 28, 2010 Permalink
Try <— http://earn-cash-today.com/stock
Good luck!
ha ha ha thats funny im 16 and i invest in stock options
Liz A 3:02 am on January 28, 2010 Permalink
You can invest at any point in your life and start with small amounts if you like. There are alot of different investment options out there so study up on it first and see what fits for you. If you go with stocks, remember the old saying "buy low – sell high"
To start, go to you local bank and talk to an advisor. They can give you some good option advise for free, that’s their job. Of course they would like you to invest through them, but you don’t have too.
andy 3:02 am on January 28, 2010 Permalink
When I was in the Navy, there were people your age investing in the stock market and making money. If you have spare money and can handle the risks go for it. I would start with an online stock trader such as e-trade to get your feet wet. It usually takes a few hundred dollars to get started. Good luck and happy investing.
Ray 3:02 am on January 28, 2010 Permalink
Anytime is good to invest. Your age is NOT a factor if you understand the marketplace and it’s ramifications.
There is no minimum – but you need to understand you pay commission per trade and buy the stock at it’s current market price.
And hope the price goes up. Then you sell it for profit.
However, there are also stock options you can trade as a tool to hedge your investments.
You should also look at futures trading as a tool for investment and hedging.
In the futures market (also called "commodities"), you can buy OR sell without ownership. You are "betting" or speculating the price of gold, or crude, or sugar, or wheat will go up OR go down. Much riskier than stocks, but you can make a lot of money in a short period. (you can also loose it just as fast!)
You can use a broker who will offer advise or trade yourself online- like schwab online.
However, it is the your responsibility to do the research.
What type of stock and the companies you invest in will determine your chances of success.
Dump it all on one stock or smaller amounts in a few different stocks? These are some things you will have to decide.
Also- DO NOT listen to people who give you TIPS. Chances are, by the time you hear the "hot tip", it’s too late. Someone else has already cashed in.
Watch the movie Boiler Room. IT will teach you a good lesson- how you can get scammed by what appear to be legitimate brokers.
DO YOUR HOMEWORK FIRST before you give anyone a cent.
Good Luck-
Sheri Dev 3:02 am on January 28, 2010 Permalink
Ziggy,
Investing in direct equity market without proper knowledge is risky. Till achieving the required knowledge, you can select mutual fund path by applying SIP (systematic Investment Plan) with best available funds today. that is recommended.
Still, you want to know about the time buy stocks, please read further.
There are two types of activities with share and stock. 1. Stock trading 2. Stock Investing.
Stock traders commonly buying stocks today and selling immediately the same day or next day to get small profits. This is dangerous for someone doesn’t have proper knowledge. The method most of the traders using to analyze a stock called Technical Analysis using trend and historical performance charts. It is a kind of speculation that can give you money or cost you money.
Stock Investing also same but, investors throughly analysis companies using various fundamental analysis tools and once they found a good one, the will invest on that. compare with the above, stock investing have long term investment perspective of 5 to 15 years. This will give them proper profits time to time from there in vestment.
Now about the time to invest:
There is a basic approach seeing that, buy stocks in low and sell at high. This is OK but you have to watch a lot and have skills to identify the stock moves.
The best time is to buy stocks is "Any Time" you want. But if you buy stocks at any time, you have to follow some criteria.
Best wishes and go ahead.
Here’s my stock answer to investing rookies. Two suggestions:
1. Get professional advice from a fee only financial planner. Someone who sells advice – NOT products on commission like a stockbroker does. Fee Only Planners have no reason to give you anything but their best advice, since they want you to be happy and refer friends. And their compensation isn’t tied to what you invest in, eliminating conflicts of interest as much as possible. I think this makes sense in the same way it makes sense to hire a mechanic to fix your car – you just don’t want to spend the time and effort to figure it out for yourself. This is the most expedient method, but is more expensive out of pocket, than DIY, much like a mechanic. It still should be much cheaper than a stockbroker’s loads, fees and commissions however.
Full disclosure, I am such an advisor.
-or-
brckr1 3:02 am on January 28, 2010 Permalink
best time was about 2 months ago, or when the market was low. your not too young to invest, just talk with a brokerage firm or your bank…do alot of research first…..then wait….you may not make money fast but if you invest in good companies and look to the future………look at alternative energy stock, wind, solar, fuel cells, companies thet reclaim waste and those that turn waste emissions into energy…GRGR.PK on the NYSE….TMG.V,APV.TO and SBX.V all on the TSX………read what T. Boone Pickens has announced………
http://investing.hirby.com/when-is-a-good-time-to-invest-in-the-stock-market/
3:02 am on January 28, 2010
Hi, I am 20 years old and am looking to start investing into the stock market. I have been told that I am too young to invest and that I will end up broke. I am going to be an accountant, so I know how to handle my money. Also, I was curious if there is a minimum to invest at a time or if I can invest a small amount now and invest more once I have established myself? And finally am I too young to invest?
Donald F 3:02 am on January 28, 2010 Permalink
I am glad that you are asking this question at your age. Like in everything else in life, there’s nothing like starting early. You are studying to be an accountant, so you already know the power of Compounding, and what it can do. Consider this excellent article about the benefits of starting early and what Compounding can do for you, when you start early.
Power of Compounding
http://www.valueresearchonline.com/story/h2_storyView.asp?str=4007
Next, I would recommend you to first get solid grounding in Investing. 3 must read books. If you haven’t heard of these, buy them NOW, today. They will be your invaluable guides to safe & prosperous investing and future wealth creation.
1. Intelligent Investor -Benjamin Graham
Considered the bible of all investors, this will foremost teach you the basics and most importantly, how not to lose money. Thats the first lesson you need, believe me
2. One up on Wall Street -Peter Lynch
This is another classic. Tells you how to spot winners from what you see around you. successful products, companies. Practically shows you how you do not need to be a hot shot financial analyst to be able to spot good moneymaking opportunities in stocks
3. Common stocks Uncommon Profits- Phil Fisher
As you dabble for 1 or 2 years, make some money and also make some small (hopefully) mistakes, you will start itching to catch the multi-baggers, the ones that go up 4x-10x in a couple of years! This book show you how to sift out probable winners
As you start reading the books, start an online trading account like someone mentioned e-Trade, use the principles in the first book to buy a few good stock at a reasonable price. Start listening in on the financial channels, start reading a business daily, daily. Check out great investing basics websites like
http://beginnersinvest.about.com/
http://www.investopedia.com/articles/basics/
http://www.kiplinger.com/moneybasics/
And ask questions to the more experienced investors at popular forums, hang in lurk at some of the great investing forums for pearls of wisdom and when you have a query that you have to have answered post a quick one. Consider Chucks Angels -a nice yahoogroup for wannabe investors too http://finance.groups.yahoo.com/group/chucks_angels/
Good Luck. You are not too early by any standards. I would say just about right time. Get cracking, boy!
Eka A 3:02 am on January 28, 2010 Permalink
When the stock market have got into bullish.But it up to the economics,although perhaps economics slow down but you can get profit in bearish.it up to your skill.I will show you and example that present you about the US recession can’t effect to everyone,thus you can make progit on this situation. here this link
http://finance-fantasy.blogspot.com/2008/05/us-financial-crisis-has-not-had-bad.html
cashing 3:02 am on January 28, 2010 Permalink
Try <— http://earn-cash-today.com/stock
Good luck!
jjunit 3:02 am on January 28, 2010 Permalink
"I have been told that I am too young to invest and that I will end up broke."ha ha ha thats funny im 16 and i invest in stock options
Liz A 3:02 am on January 28, 2010 Permalink
You can invest at any point in your life and start with small amounts if you like. There are alot of different investment options out there so study up on it first and see what fits for you. If you go with stocks, remember the old saying "buy low – sell high"
To start, go to you local bank and talk to an advisor. They can give you some good option advise for free, that’s their job. Of course they would like you to invest through them, but you don’t have too.
andy 3:02 am on January 28, 2010 Permalink
When I was in the Navy, there were people your age investing in the stock market and making money. If you have spare money and can handle the risks go for it. I would start with an online stock trader such as e-trade to get your feet wet. It usually takes a few hundred dollars to get started. Good luck and happy investing.
Ray 3:02 am on January 28, 2010 Permalink
Anytime is good to invest. Your age is NOT a factor if you understand the marketplace and it’s ramifications.
There is no minimum – but you need to understand you pay commission per trade and buy the stock at it’s current market price.
And hope the price goes up. Then you sell it for profit.
However, there are also stock options you can trade as a tool to hedge your investments.
You should also look at futures trading as a tool for investment and hedging.
In the futures market (also called "commodities"), you can buy OR sell without ownership. You are "betting" or speculating the price of gold, or crude, or sugar, or wheat will go up OR go down. Much riskier than stocks, but you can make a lot of money in a short period. (you can also loose it just as fast!)
You can use a broker who will offer advise or trade yourself online- like schwab online.
However, it is the your responsibility to do the research.
What type of stock and the companies you invest in will determine your chances of success.
Dump it all on one stock or smaller amounts in a few different stocks? These are some things you will have to decide.
Also- DO NOT listen to people who give you TIPS. Chances are, by the time you hear the "hot tip", it’s too late. Someone else has already cashed in.
Watch the movie Boiler Room. IT will teach you a good lesson- how you can get scammed by what appear to be legitimate brokers.
DO YOUR HOMEWORK FIRST before you give anyone a cent.
Good Luck-
Sheri Dev 3:02 am on January 28, 2010 Permalink
Ziggy,
Investing in direct equity market without proper knowledge is risky. Till achieving the required knowledge, you can select mutual fund path by applying SIP (systematic Investment Plan) with best available funds today. that is recommended.
Still, you want to know about the time buy stocks, please read further.
There are two types of activities with share and stock. 1. Stock trading 2. Stock Investing.
Stock traders commonly buying stocks today and selling immediately the same day or next day to get small profits. This is dangerous for someone doesn’t have proper knowledge. The method most of the traders using to analyze a stock called Technical Analysis using trend and historical performance charts. It is a kind of speculation that can give you money or cost you money.
Stock Investing also same but, investors throughly analysis companies using various fundamental analysis tools and once they found a good one, the will invest on that. compare with the above, stock investing have long term investment perspective of 5 to 15 years. This will give them proper profits time to time from there in vestment.
Now about the time to invest:
There is a basic approach seeing that, buy stocks in low and sell at high. This is OK but you have to watch a lot and have skills to identify the stock moves.
The best time is to buy stocks is "Any Time" you want. But if you buy stocks at any time, you have to follow some criteria.
- First, you should have a long term investment perspective of 5 to 10 years.
- Second, you should study and analysis companies to know whether the stock of this company is suitable to invest or not. to analyze a company, great investors like Benajamin graham and warren buffett provided some valuation methods. read the same here: http://uliponline.blogspot.com/2008/05/ten-points-ben-grahams-last-will-and.html if the company is suitable to this valuation methods and your investment horizon is long, buy the shares at any time not considering the market status and hold the shares. You will certainly get handsome profit.
Best wishes and go ahead.
gampublic 3:02 am on January 28, 2010 Permalink
Two things first: Generally, I’ve found accountants great with tax forms/laws, not so hot as investors, so beware of overconfidence. Second, you’re asking how to time the market, and history and study after study shows no one is worth a darn at it over time.
So the short answer is "A soon as possible *when* you know what you are doing". Here’s my stock answer to investing rookies. Two suggestions:
1. Get professional advice from a fee only financial planner. Someone who sells advice – NOT products on commission like a stockbroker does. Fee Only Planners have no reason to give you anything but their best advice, since they want you to be happy and refer friends. And their compensation isn’t tied to what you invest in, eliminating conflicts of interest as much as possible. I think this makes sense in the same way it makes sense to hire a mechanic to fix your car – you just don’t want to spend the time and effort to figure it out for yourself. This is the most expedient method, but is more expensive out of pocket, than DIY, much like a mechanic. It still should be much cheaper than a stockbroker’s loads, fees and commissions however.
Full disclosure, I am such an advisor.
-or-
2. Do It Yourself – Read Books – for investing, my favorite authors are Larry Swedroe, Rick Ferri, William Bernstein, and John Bogle. Basically, they skip over the “pop finance” garbage (most media) that’s simply a distraction, and get down to real professional quality investing while still being accessible to most reasonably intelligent people. You will find this has nearly nothing to do with accounting as you study it. If you don’t mind spending the time to figure it out right, and are interested in the topic, this is a perfectly good choice, and less money out of pocket.
Your Call. Good Luck.
brckr1 3:02 am on January 28, 2010 Permalink
best time was about 2 months ago, or when the market was low. your not too young to invest, just talk with a brokerage firm or your bank…do alot of research first…..then wait….you may not make money fast but if you invest in good companies and look to the future………look at alternative energy stock, wind, solar, fuel cells, companies thet reclaim waste and those that turn waste emissions into energy…GRGR.PK on the NYSE….TMG.V,APV.TO and SBX.V all on the TSX………read what T. Boone Pickens has announced………
http://investing.hirby.com/when-is-a-good-time-to-invest-in-the-stock-market/
Investing In A Bear Market
Investing In A Bear Market
We are in the 6th inning of the residential RE crisis and the 1st inning of the commercial RE crisis. Most of you are trapped in normalized bull market valuation methods (Income Statements and Cash Flow statements) which states "earnings growth and cashflow" are what you should follow. In a bear market you should be focused on the (Balance Sheets and Cash Flow Statements). Notice the switch from income statement to balance sheet. Read some of my first few blogs and you will see before the residential RE crisis started in mass I was focused only on balance sheet items (cash and debt). I was right and the worst balance sheet stocks got killed not the ones with the biggest losses.
If you actually look at how I ranked builder stocks using cash and debt and applied it to other industries you would see the same result. Why? When a bear economy is upon us credit markets tighten, loans do not get renewed, cash flow turns negative, borrowing costs go up, interest burden becomes magnified, asset prices drop, etc.....
Wall Street can't value stocks as easily when the future is uncertain and earnings go negative or are falling. Bear markets are about surviving and the companies that thrive DURING AND AFTER a bear market are the ones with the best balance sheets buying assets on the cheap. They are also the companies that have the cash to continue to invest in future product while their competitors are trying to stay alive vs. thinking and investing in future operational profit.
Be like the best companies. Stop listening to doom and gloomers, raise cash, invest in yourself, work twice as hard, stay focused and push forward doing whatever you have to in order to make money. Invest it wisely. You may not make as much today, but deflation pushed all your consumer good prices down too. Everything is on sale even at the Chicken Ranch.
http://kolkalamar.blogspot.com/2010/01/investing-in-bear-market.html
We are in the 6th inning of the residential RE crisis and the 1st inning of the commercial RE crisis. Most of you are trapped in normalized bull market valuation methods (Income Statements and Cash Flow statements) which states "earnings growth and cashflow" are what you should follow. In a bear market you should be focused on the (Balance Sheets and Cash Flow Statements). Notice the switch from income statement to balance sheet. Read some of my first few blogs and you will see before the residential RE crisis started in mass I was focused only on balance sheet items (cash and debt). I was right and the worst balance sheet stocks got killed not the ones with the biggest losses.
If you actually look at how I ranked builder stocks using cash and debt and applied it to other industries you would see the same result. Why? When a bear economy is upon us credit markets tighten, loans do not get renewed, cash flow turns negative, borrowing costs go up, interest burden becomes magnified, asset prices drop, etc.....
Wall Street can't value stocks as easily when the future is uncertain and earnings go negative or are falling. Bear markets are about surviving and the companies that thrive DURING AND AFTER a bear market are the ones with the best balance sheets buying assets on the cheap. They are also the companies that have the cash to continue to invest in future product while their competitors are trying to stay alive vs. thinking and investing in future operational profit.
Be like the best companies. Stop listening to doom and gloomers, raise cash, invest in yourself, work twice as hard, stay focused and push forward doing whatever you have to in order to make money. Invest it wisely. You may not make as much today, but deflation pushed all your consumer good prices down too. Everything is on sale even at the Chicken Ranch.
http://kolkalamar.blogspot.com/2010/01/investing-in-bear-market.html
Are You Paying Too Much For Stocks? Market Value is Not Equal to Actual Value
Are You Paying Too Much For Stocks?
Market Value Not Equal to Actual Value
A small loan can help you if you are short of cash until your next payday, but if you invest in the stock market and follow the crowd in their buying and selling habits, you may end up with many more liabilities than assets. Why? Have you noticed how much the stock market fluctuates in a day, and also the ups and downs of prices? Does that mean that the companies’ values goes up and down as much as the share price, or does that mean that there may be some other force at work here? As you can see, market value of a share doesn’t equal ACTUAL value of the same share, in terms of the value of a company.
Market Price Based on Emotions, Not Logic
One of the pioneers in value investing, Benjamin Graham, believed that many people rely too much on their emotions when investing rather than their logic. This explains the fluctuations of the market, and also why a lot of people think it’s risky to invest in it. What makes it risky is the constant buying and selling that goes on day after day, hour after hour. This constant buying and selling is what either drives the share price up or down, and it’s what creates the risk.
Ben Graham suggested in his book “The Intelligent Investor” that if you want to build your wealth from the stock market, you need to use a “dollar cost averaging” technique, meaning to consistently buy more shares at a lower price over time. As inflation and company values grow over time, your investments will be worth more in the long run. It’s also called “buy low and sell high” which you might have heard about. Unfortunately, most people tend to bring their emotions into their investing, and will panic and sell when the price is going down, because they are afraid to lose any more money on their investments, leaving them open to take out a small loan to survive.
Beyond the Smoke and Mirrors
The stock market is riddled with confusing terms, acronyms and policies, making it very difficult for the average investor to understand. All this is just smoke and mirrors designed to keep most people in the dark and dependent on high-priced brokers to navigate the investing maze for them. However, if you were to peek behind the curtain, you would see that all the confusion is just smoke and mirrors.
Inflated Price? Inflated Value!
In an effort to control the market prices, brokers and fund managers will either buy or sell enough shares to drive the price back up or down, depending on where the prices are going. Perhaps it’s due to a company that got good news or bad, and investors are trying to position themselves to not lose a lot of money, or make some. This tends to skew the value of a share price, and unbalances the market. Thus, a share price that has risen too quickly will have many shares sold off by fund managers or brokers to drive the price back down. Similarly, if a share price is dropping too fast, they’ll buy as many shares to even up. So if there are inflated prices, don’t go believing it’s actually worth that much. In fact, they may not be worth much at all!
P/E Ratio Tells it All
There is a very simple way to determine if a certain share price is on target or not—look at the Price per Earnings ratio. This is a valuation method that takes the company’s current share price on the market divided by the per-share earnings over a certain time frame, usually one year. If the price of shares in a company are $ 24 per share, and the earnings over the previous year were $ 2, the ratio of P/E is 12.
Buy Low, Sell High
When you can learn how to find the correct value of a company or share, you will know when the share price is at its lowest, and when you can buy. After share prices crest, you can sell your shares and pocket the rest without needing a small loan. If you do this, you will be able to make money on the stock market when everyone else is losing money.
http://www.401kinformationblog.com/are-you-paying-too-much-for-stocks/
Market Value Not Equal to Actual Value
A small loan can help you if you are short of cash until your next payday, but if you invest in the stock market and follow the crowd in their buying and selling habits, you may end up with many more liabilities than assets. Why? Have you noticed how much the stock market fluctuates in a day, and also the ups and downs of prices? Does that mean that the companies’ values goes up and down as much as the share price, or does that mean that there may be some other force at work here? As you can see, market value of a share doesn’t equal ACTUAL value of the same share, in terms of the value of a company.
Market Price Based on Emotions, Not Logic
One of the pioneers in value investing, Benjamin Graham, believed that many people rely too much on their emotions when investing rather than their logic. This explains the fluctuations of the market, and also why a lot of people think it’s risky to invest in it. What makes it risky is the constant buying and selling that goes on day after day, hour after hour. This constant buying and selling is what either drives the share price up or down, and it’s what creates the risk.
Ben Graham suggested in his book “The Intelligent Investor” that if you want to build your wealth from the stock market, you need to use a “dollar cost averaging” technique, meaning to consistently buy more shares at a lower price over time. As inflation and company values grow over time, your investments will be worth more in the long run. It’s also called “buy low and sell high” which you might have heard about. Unfortunately, most people tend to bring their emotions into their investing, and will panic and sell when the price is going down, because they are afraid to lose any more money on their investments, leaving them open to take out a small loan to survive.
Beyond the Smoke and Mirrors
The stock market is riddled with confusing terms, acronyms and policies, making it very difficult for the average investor to understand. All this is just smoke and mirrors designed to keep most people in the dark and dependent on high-priced brokers to navigate the investing maze for them. However, if you were to peek behind the curtain, you would see that all the confusion is just smoke and mirrors.
Inflated Price? Inflated Value!
In an effort to control the market prices, brokers and fund managers will either buy or sell enough shares to drive the price back up or down, depending on where the prices are going. Perhaps it’s due to a company that got good news or bad, and investors are trying to position themselves to not lose a lot of money, or make some. This tends to skew the value of a share price, and unbalances the market. Thus, a share price that has risen too quickly will have many shares sold off by fund managers or brokers to drive the price back down. Similarly, if a share price is dropping too fast, they’ll buy as many shares to even up. So if there are inflated prices, don’t go believing it’s actually worth that much. In fact, they may not be worth much at all!
P/E Ratio Tells it All
There is a very simple way to determine if a certain share price is on target or not—look at the Price per Earnings ratio. This is a valuation method that takes the company’s current share price on the market divided by the per-share earnings over a certain time frame, usually one year. If the price of shares in a company are $ 24 per share, and the earnings over the previous year were $ 2, the ratio of P/E is 12.
- Typically, the higher the P/E ratio is, the higher the expectations investors will have for company growth. This means that you will be able to see higher earnings within the next year with this company.
- However, the lower the ratio, the slower the growth regardless of what the market is doing.
Buy Low, Sell High
When you can learn how to find the correct value of a company or share, you will know when the share price is at its lowest, and when you can buy. After share prices crest, you can sell your shares and pocket the rest without needing a small loan. If you do this, you will be able to make money on the stock market when everyone else is losing money.
http://www.401kinformationblog.com/are-you-paying-too-much-for-stocks/
How to Value Stocks
The Stock Market
The stock market can be a great place to make money. However, the stock market can also be an incredibly frustrating place, where losing money becomes an everyday occurrence. Knowing what to buy and what to sell in the stock market can be very complicated. However, there is a method for estimating the true value of a stock that is both logical and often overlooked. Learning and implementing this method isn't easy, but once fully understood it is fairly easy to use and the results can be very rewarding
http://hubpages.com/hub/How-to-Value-Stocks
The stock market can be a great place to make money. However, the stock market can also be an incredibly frustrating place, where losing money becomes an everyday occurrence. Knowing what to buy and what to sell in the stock market can be very complicated. However, there is a method for estimating the true value of a stock that is both logical and often overlooked. Learning and implementing this method isn't easy, but once fully understood it is fairly easy to use and the results can be very rewarding
http://hubpages.com/hub/How-to-Value-Stocks
Active investing, look laterally in the same industry and trade up in quality
Value investing is never passive. Like other strategies, it is also an active process employing knowledge, skills and using various tools.
One approach to finding a cheap (value) stock starts with a bottom up approach.
Having discover and own a stock in a particular sector, one can also look laterally to analyse other firms in the same industry.
Are these also cheap, and for the same reasons?
You may decide that one of these other companies is a better investment than your initial purchase.
Perhaps, it is a higher quality company, with better profit margins or lower debt levels.
If so, you may trade up in quality, provided that you can still take advantage of the depressed status of the industry.
One approach to finding a cheap (value) stock starts with a bottom up approach.
Having discover and own a stock in a particular sector, one can also look laterally to analyse other firms in the same industry.
Are these also cheap, and for the same reasons?
You may decide that one of these other companies is a better investment than your initial purchase.
Perhaps, it is a higher quality company, with better profit margins or lower debt levels.
If so, you may trade up in quality, provided that you can still take advantage of the depressed status of the industry.
Judgement is required when selling a stock.
The decision to sell a stock requires judgement.
Judgement is required to sell a winner.
Judgement is required to sell a stock that has not recovered.
At some point, everyone throws in the towel.
Even the most tolerant investor's patience can ultimately be exhausted.
There are always other places to invest the money.
A realised loss has at least some tax benefits for some investors.
A depressed stock in the portfolio is just a reminder of a mistake.
What are the triggers?
Judgement is required to sell a winner.
Judgement is required to sell a stock that has not recovered.
At some point, everyone throws in the towel.
Even the most tolerant investor's patience can ultimately be exhausted.
There are always other places to invest the money.
A realised loss has at least some tax benefits for some investors.
A depressed stock in the portfolio is just a reminder of a mistake.
What are the triggers?
- A deterioration in the assets beyond what was initially anticipated.
- A deterioration in the earnings power beyond what was initially anticipated.
- The stock may still be cheap, but the prospects of recovery have now started to fade.
Subscribe to:
Posts (Atom)