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Reasons To Invest

Most people consider that an investment in the stock market is a method of obtaining goals to retire and nothing else. But this is very far from the truth. Many people invest in stocks looking more at the short term picture than the long term. The following examples should give you some inspiration in case you have not looked into the positive result of smart investing in stocks and mutual funds.

  1. Buying the home of your dreams. Being able to pay cash is not absolutely necessary, but imagine how amazing it would be to pay off a house immediately. Naturally, down payments are good to have, too. The more money you can put down, the lower your interest rate will be. That means you will pay less over the life of your home. This will create instant equity for you and make your home more valuable.

  2. Giving your kids a college education. While not as far down the road as retirement, it is a longer term investment. We all dream of sending our kids to college, but the idea of planning for retirement is a little harder to grasp. However, many of us are not sure how to give our kids the college education that we desire for them.

  3. Medical expenses such as braces. When you have children, you need to be aware there will be unexpected medical and dental expenses. Even though you have a good insurance company, you will probably have some bills to pay along with deductibles and the extra payments that may be incurred. It is certainly beneficial to have some money salted away earning interest to help you handle these situations.

  4. Taking the vacation of your dreams. There are always things we haven’t done, places we haven’t gone, sights we want to see, but haven’t yet. Too frequently, people concentrate all their efforts on their long term goals, and forget to enjoy life today. Our children are only little once. If you are going to take them to Disneyland, you should do it while they are young. Then they can have fun and and the fond memories that go with it. The wonderful memories they will have of the time spent with you are priceless and more than enough reason to invest your money in this way.

  5. Emergency funds. Things will happen in your home that will be unexpected and costly. If you just keep your money in the bank, the interest rate will be very low compared with other investments. So by investing the money, it will be working harder for you. When you need it for an emergency, it will be waiting for you, and it will have grown a bit more. That will really help you to handle those unexpected emergencies.

So, even if you are not investing for the common reason of securing retirement, there are a myriad of other reasons to invest. If you have never thought of the reasons listed here and along with others that aren’t, isn’t it time to start now? There is nothing to keep you from building your future by starting to invest now!

Stocks vs. Mutual Funds

Some may think the idea of comparing stocks to mutual funds a little odd, since mutual funds are commonly made up of stocks, bonds, or some combination of both; it is necessary to compare the two when it comes to choosing which is best for your financial future. Below we will discuss some of the primary differences so you can make an informed decision about which choice best suits your financial needs.

Mutual funds are the best option for the everyday man or woman looking to invest. The high costs associated with buying, selling and trading stocks can eat up a significant portion of any profit. These fees are often used to divert the trading of stocks, instead of encouraging it. Contrarily, the big trading companies afford large discounts for their clients who spend more, making the stock market trading game seems more exclusive by making it easier for those who have a great deal invested than they make it for someone who is new to trading. Mutual funds offer easier access to those who don’t have a large disposable income to invest and need to take baby steps (such as $100 per month) toward their financial goals.

There is usually less risk when buying a mutual fund than with buying individual stocks. There are a lot of different reasons why this occurs. The first thing to consider is that mutual funds are not commonly invested in one sector, industry, or company. Therefore, if a particular stock performs poorly, the profits from the fund’s other investments will help balance out the loss and lessen the blow. This means any potential loss is actually shared by a large group and thus when a loss actually occurs, it will have much less negative impact than if you were the sole owner. The fact that the funds are already diversified helps protect from huge changes in the market like those seen recently when the sub-prime mortgage industry went belly-up, leaving many investors ducking for cover.

Share the riches. Spread out the risk. Mutual funds give a feeling of community, unity, and shared risk for those who buy into a particular mutual fund. In most cases this is an advantage since it allows a lot of investors to carry significantly less risk than if they purchased individual stocks on their own. There is a fund manager with extensive experience dedicated to managing the fund and doing everything possible to ensure it’s profitability. You will not see this if you are investing in stocks. When it comes to the stock market, the only people who care about how well your stock is performing are those that you pay such as your financial advisor, accountant, and/or stockbroker.

You should also be aware that mutual funds can be traded and/or used more easily than stocks. They are also cheaper to trade. A local bank, on the internet, and from online trading companies, and even at a company 401k plans are many places you can buy mutual funds. In simple terms, mutual funds try very hard to be accessible to everyone. Most importantly, when it comes to purchasing mutual funds, devote some time to researching the history and performance of the fund you’re thinking of investing in, in addition to the fund manager for your peace of mind.

There are many differences between mutual funds and stocks. For a small time investor, mutual funds are a good option to explore. For the small investor, mutual funds are commonly the best way to go since they are less risky, have less fees, and allow the owners to gain a slow and steady return on their investments.

Developing A Working Investment Strategy For An Economic Depression

When investing it is wise to remember that business cycles wax and wane. Recessions come and go and so do depressions. An often quoted fact is that if you had purchased a range of stocks on the New York Stock Exchange the day before the 1929 market crash and held them for years you would have made a fair amount of money. The point is not to run out and purchase stocks as the market sinks further. The point is that life and investment will continue during a prolonged economic downturn and eventually things will get better. Now is the time to develop a workable investment strategy to not only survive the possible depression ahead but to make money.

Severe recession, abnormally high levels of unemployment, scarce credit, bankruptcies, reduced trade and investment, and currency devaluation are all characteristics of an economic depression. What we have not already seen we may still see.

How long will the coming depression last and how will it end? The depression of the 1930’s lasted a decade until the United States entered World War II. The Great Depression ended with massive government investment and spending for the war effort. The previous “Great Depression” lasted from the 1870’s to the 1890’s. During the depression of the later 19th century life and investment did not stop. Immigrants created farms and cities in the American West. Investment in cattle created the trail drives. Investment in railroads populated the American West. Investment in research by Edison, Bell, and others created the groundwork for today’s electronic world.

The investment question on the eve of depression is what are the trail drives, railroads, telephones and light bulbs of the first years of the 21st century? What investment strategy will work during a depression?

An investment strategy from the California Gold Rush days comes to mind. “When everyone is digging for gold it is time sell picks and shovels.” What are the picks and shovels to sell during the next depression?

An obvious area of investment is medical research. The coming administration will ease up on the current restrictions on stem cell research. With prolonged life and cures for diabetes, Parkinson’s disease, Alzheimer’s disease, congestive heart failure, and degenerative joint disease as holy grails investment in stem cell research will continue despite an economic depression.

The arms industry will probably not be a hot area of investment. You need money to project military power and with problems at home the USA will likely pull back from war in the Middle East and avoid troop deployment overseas at all costs. With the Great Depression as a backdrop the “America First” movement almost kept the USA out of World War II.

What to Expect

The current chairman of the Federal Reserve, Ben Bernanke, has written extensively about the causes of the Great Depression. His research seems to have convinced people that the recession of the early 1930’s was converted into the Great Depression by tightening of credit by the Federal Reserve and by the Smoot Hawley Tariff Act that reduced global trade. Investment withered with credit tightening and retaliation for America’s tariffs cut off America’s export markets.

Thus it should come as no surprise that the government’s response to the current credit crisis is to throw money in the pot hoping to improve the credit situation. If this strategy works investment will renew and a global depression will be averted. The problem is that no one knows if throwing more and more money at the problem will help.

Let’s say that the bailouts of financial institutions avert a global depression but leave tax payers world wide with huge budget deficits. Where does investment capital come from then? Perhaps instead of a global depression we are in for a very prolonged period of economic stagnation. If that is the case the same strategy applies. Sell picks and shovels instead of looking for gold. Learn about medical research investments, especially regarding stem cells. Be very wary of high tech armament companies in a poorer world.

Why Diversify Your Portfolio?

Investing carries risks for both beginners and experienced professionals. If you are just getting started, you need to learn, above all, that all investments carry some amount of risk. While some investments are riskier than others, none are totally safe. This is exactly why you do not put all of your investments into one stock, bond, or fund which could devastate you financially if it fails.

Simply put, in order to reduce some of the risk involved that comes with investing, your investments portfolio should contain a variety of investments. I’m sure you have heard the old adage, "Never put all of your eggs in one basket." When you diversify your portfolio, it is like putting those eggs into several different baskets, thus protecting them from being totally wiped out by poor market conditions or by unscrupulous characters.

Make sure you create a very diverse portfolio to avoid a huge financial loss with one of your stocks. In spite of the risks, you must feel somewhat confident that your investments are safe. You must be able to foster a sense of security in your investments, otherwise you will not have the confidence to add to your investments and maximize their earning potential. You’ll discover that it’s almost impossible to work on a financial future in which you have no faith.

If that does not convince you to diversify, by all means do it so you can spread your wealth around. In order to make money in the stock market game, you should allow yourself a few risk-taking opportunities. Having all of your funds locked into safe, long-term investments will prevent you from being able to do this. Sometimes taking risk feels much more rewarding and exciting than following a conservative, "safe" strategy. Put another way, diversity helps your portfolio achieve a semblance of balance.

Numerous types of investments exist. You can find an assortment of companies, different business sectors, with many types of stocks, bonds, funds and other investment vehicles; all of which come with their own risks and benefits. You can organize your portfolio in a healthy way, and it will pay off for years to come. Compare your stock portfolio to a college education — if you have a diverse liberal arts background, you will become a more well-rounded person than you would have if you just continued to study one academic area.

If you make this happen with your investment portfolio, then the way you will think about your finances will be more positive and exciting than if you put all of your focus into one area and did the same thing for your whole lifetime. Spend some time looking at your finances, and if you don’t have a variety of investments, it is probably time for you to mix it up a little, depending on your current needs.

Investment Types: What Kinds Are Available?

You’ll discover all types of investments available to you in the world of stock market and mutual funds investing, once you enter into it. Even if you have never considered getting involved in stock trading or investing in funds, there are plenty of opportunities that you may never have thought of — opportunities that are available for people who use brokerage services in person and on the Web.

Buying and selling stock are the most popular investment types for the trading public. Buying stock should be thought of as buying a small piece of the company the stock represents. Even though the average share of stock gives you a minute percentage of ownership in a company, sometimes you feel so strongly about a company that having even the tiniest piece of the pie is worth it. Without a doubt it enables you to get acquainted with products that will maximize their returns.

Mutual funds also enjoy much popularity with the investing public. Although they work quite differently than owning individual stocks, you will see that you own a variety of stocks and bonds when you invest in mutual funds. These investments are for people who are looking for long-term gains in a stable investment vehicle that earns money slowly, but steadily.

Day trading is another way to invest, sparking a great deal of discussion — and not always positive. Some people see day trading as an exciting adventure, but there is a great deal of risk and potential for huge losses when an investor does not make sure to learn all of the ins and outs of day trading. Day trading is not investing in the classic sense — it is more like making minute-by-minute transactions hoping to make huge, fast profits. Most people see their investments as a long-term relationships, while day traders see them as one-night stands.

Penny stock trading is yet another risky way to invest money, but millions of people make and lose a great deal of money here. A number of the successful corporations you see on the big boards actually started out as penny stocks; and they often find themselves there again when their success dwindles. Fraud is a huge problem in the market for penny stocks so you need to be extra vigilant if you choose to invest in this risky market.

When you invest in bonds, you are basically lending money to the organization that you are bonding with, and they will repay the loan on a specific date. There is some element of risk, although less than the risk associated with other types of investing. People either swarm to bonds or they would not touch them with a ten foot pole. My personal choice is to deal in bonds as part of a mutual fund. Use your discretion if you decide to invest in bonds.

As it is clear, there are many choices for interested parties. You just need to find the right investment types to suit your financial goals.

Why Invest In Mutual Funds?

If you’ve looked into investing in the stock market before, then you should also be familiar with mutual funds. These next few paragraphs are going to be very informative about your future investing, so please take the time to read and learn from these tips. Mutual funds are a more conservative form of investing in the stock market, allowing for future security and retirement funds. Where stocks are sprinters, mutual funds are the long distance marathon runners.

Once you begin to conduct a bit of research you will find that some mutual funds are considered more aggressive than others as they pertain to safeguarding your future income and yet, in most cases, are still a fairly safe bet when compared to playing the stock market where there is no safety net. Mutual funds are less flashy and a lower risk, but they get the job done in the long run.

Why invest in mutual funds, you ask? The truth is, there is no definitive reason to do so. You must be personally involved when it comes down to which stocks, bonds, and any other forms of investing you wish to partake in. Here are some of the reasons why mutual funds are so enticing. Deciding whether mutual funds are right for your future and financial safety is up to you. You will have to decide what risks to take, and what your financial future is going to require before deciding. The best forms of investments for you may be stocks, bonds, and mutual funds, or a combination of all.

Of those who opt to invest in mutual funds, most consider their stability as the prime reason for doing so. Mutual funds are a low risk, steady growth investment, which is nice to have as an option in this unstable market. Day-to-day changes will be up and down, but in the long run you will see a noticeable growth.

Being able to dump off the headache to someone else is another advantage of mutual funds. The fund manager is a great person to entrust with the burden, since they are willing to take the headaches and decide what’s best to invest in for you. That means that someone else is bearing the burden, so you can use your leisure time to relax rather than trying to decipher complex market information. This allows you to feel safe in giving someone qualified free rein with your money and investments. Make sure to check up on the fund manager’s performance history before deciding on that person.

Another reason for the popularity of mutual funds is the ability for the little guy to invest in them. It’s nice to have a form of investment that the little guy can afford to invest in, and start securing his future. Mutual fund buy ins are less of a risk than stocks, because it’s a group of people investing together in a single pool to make purchases. The risk is spread throughout the investing group, and the buying power will multiply through this method.

Whether or not you want to invest in mutual funds, they have many advantages that you will want to seriously consider.

Stock Investing – How Nervous Should I Be?

After a strong week on Wall Street that ended the month of October, 2008, the market´s turbulence is undeniable.  For much of 2008, massive losses have been followed by impressive recoveries.  News reports that trumpet the end of the stock market as we know it are quickly replaced by new articles proclaiming the resiliency that Wall Street has shown.  While the market has definitely declined during the year, the famous Mark Twain quote that ¨the report of my death was an exaggeration¨ can certainly be attributed to Wall Street as well.  With all that has occurred, doubts still remain.  Should I be scared about stock investing?  This is a question that occupies the minds of many investors today.  Contrary to what some might think, it is not all bad news for Wall Street.

Good News About Stock Investing

The truth is that diligent investors shouldn’t be scared about stock investing, even in these volatile times.  In reality, successful investors don’t pay close attention to the “gloom and doom” of Wall Street news.  Do they listen to it?  Of course they do.  Do they get emotionally involved in it?  No way.  Are you going to see Warren Buffett selling all of his stock tomorrow?  Not a chance.  The investors that find success on Wall Street don’t react to greed and fear.  For them, stock investing is a plan and successful investors stick to the plan.

I know you are saying that you aren´t exactly Warren Buffett; you don’t have billions of dollars to insulate you from quick changes when you are stock investing?  That’s ok; we’re going to talk about why you STILL shouldn’t be scared.  Even if you don´t have Buffett’s billions you do have many of the same trading and investing tools he has.  If you take away his corporate analysts, there are common factors that exist between you and him.  For example, consider this common ground:

  1. Access to Technical Analysis – Ok, he’s probably got a whole company that performs fundamental and technical analysis, but the activity is the same.  What do you know about the companies where you own stock?  If you are buying stock in a new company, can you write a justification for why you should buy it?  If you don’t have the answers it means you aren’t doing your research.  Performing research is easier than ever before and it is accessible to you before you start stock investing.

  2. A Stock Trading System –You may not know what method Buffett uses, but you know that his people chart stocks, analyze trends and look for signals; this is what a stock trading system is all about.  You have access to powerful systems of charting symbols and trends that help you see patterns in stock investing before they occur.

  3. A Stock Trading Plan – Regardless of its complexity, it is a given that Buffett has a trading plan.  When should he buy or sell?  What types of stocks does he need to balance his portfolio?  How does he minimize losses and maximize gains?  Stock investing for him or any other successful trader still includes a plan that outlines these things; yours should too.  Many of the ups and downs of stock investing are driven by people who don’t have a plan and get caught up in the emotion of the market.

You Also Have A Choice

Should you be fearful these days about stock investing?  If you are looking for ways to spot solid investments and minimize your risks, now can be a good time for stock investing.  Remember that the most successful investors are not pulling out of the market; in fact, Buffett is encouraging people to stay involved.  Stock investing is a discipline, not an emotion, and profits can be found even in uncertain times.

Investment Tips

Prudent investing will help secure your financial future and will help you meet all your expenses and expenditures at different stages in your life. To earn good and safe returns on investments, a great deal of planning is required. You need to plan how much you wish to invest, how long you wish to invest and how much you can stand to lose when things don’t work out.

Importance of Planning

Investing is a long-term activity and involves dedicating a portion of your earnings over time. In a few years, the invested amount could be huge if done correctly. Any significant losses to your account would lead to stress and worries. Hence, a great deal of planning is required.

Investment planning helps:

  1. Reduce investment risks
  2. Reduce tax liability
  3. Reduce unwanted expenditures
  4. Gain maximum returns in the long run

Key Tips for Investing

Start Early

The earlier you invest, the more you will reap. Early investing would also mean you don’t have to invest a large amount every month. Delaying an investing strategy until later in life can become a huge burden.

Risk Tolerance

Find out how much risk you can handle before you invest in any sector. Any industry has risks and stocks that are more prone to risks can bring very big returns or very big losses. It is advisable to consult with an Investment Advisor before you decide to invest your money.

Don’t Invest It All

Do not invest all your money. It is always wise to plan how much you can set aside as savings in your bank account and how much you can use for investing. A good plan would have enough cash as savings to meet at least 4 months of your day-to-day living expenses. Most of your investments cannot be liquidated on short notice or in short intervals and your savings is what will help you in case of emergencies like medical expenses or unemployment.

Decide the Investment Duration

It’s wise to invest for a longer period of time. Any investment requires a sufficient amount of time to grow. If you’re planning on investing in the stock market long-term, then you should be prepared not to take back the investment for at least 5 to 10 years.

If you need your investment capital for emergencies or for purchasing a house or for a vacation, then the stock market may not be the right place to be. You need to think about a lower-risk investment plan. Prices are not always higher at the time you make the withdrawal.

Never Invest In Only One Place

It is never ideal to invest all your money in one place. If you plan on a certain amount to invest each month, spread the money into different types of investments like bonds and equities. Again, each investment has its own risks. You need to decide on your goals and analyze risk factors.

Regular Investing

Regular investing can help you build your account balance faster and easier. Investing once every six months or year would mean you would have to shell out a large portion of your savings or income each time. Situations are changing all the time and you may not be able to handle unexpected expenses as your semi-annual or annual investments would be much larger.

Select Your Investments Wisely

Each investment has its own risks and growth duration. Before investing, it is suggested that you first analyze your personal goals. Even experts cannot predict when a market will be great and when it will crash. Your age category is also important while you select the type of investment. If you are under thirty, it would be advisable to invest in insurance. If you are in your sixties, it is advisable to invest your savings to generate a retirement income.

Finally, it’s all about planning and building the perfect blend. If you’re planning on long-term growth, investing in equities can be ideal. However, equities are also prone to high risks. Any investment is prone to risks. However, with careful planning and investing, you can get maximum returns and enjoy the benefits long into your retirement years.

Investing in Oil Futures

Oil and gas are non-renewable resources that have fueled economic growth to a large extent over the years. Oil and gas are considered essential goods which will probably not be consumed less anytime soon or currently have any substitutes to speak of. These factors make them an example of “price inelasticity of demand”. They cannot be consumed less or have any substitutes. Even if the prices increases, the consumption would not decrease (to a point).

If we believe in the Peak Oil Theory, it is a must that we invest in oil and gas. The supply has peaked in the recent years; however the demand still continues to grow strongly.

Importance of Oil Products

As most of us are aware, crude oil, one of the most vital sources of energy, is being exhausted worldwide. The Mid-East is just not able to cope with the ever increasing demand of gas and oil supplies. Oil and gas are being consumed faster than they can be refilled.

The consumption of oil and gas is greater than what is produced in the same timeframe. The world produces approximately 85 million barrels of crude oil a day while the consumption is 87 million barrels each day.

Depletion of Oil and Gas

The demand and consumption of oil and gas have increased many times over, and the resources and production are depleting at a fast pace worldwide. As the resources and production decreases, demand and prices will increase drastically.

Industry analysts feel that the decline in production can be as high as 13% in the coming years. The year 2005 is considered as the global peak oil period. This would mean that we have already reached the peak of the curve and are now on a slide down. The graph below depicts the Peak oil depletion cumulative published by the Association for the Study of Peak Oil and Gas.

Peak oil depletion cumulative
Peak oil depletion cumulative published by ASPO
[Association for the Study of Peak Oil and Gas]

Investing in Oil Futures

Oil prices are going to multiply in the next few years as the demand and consumption rises. The current prices would seem very low when compared to 10 years from now, assuming no new alternative energy sources became competitive.

It is expected that growing countries like China and India will increase their annual consumption by approximately 10% every year. Such enormous annual increases in consumption can be adequately met only for only a few years. As the shortage or demand increases, there will be a huge increase in prices.

Though there are strict SEC guidelines to book reserves for oil and gas operators, members of the Organization of the Petroleum Exporting Countries [OPEC] do not have any such guidelines. Hence, the claims about the oil and gas reserves by these countries cannot be verified by any external resource with proper evaluation. This being the case, there are chances that these countries have overstated their actual reserves. This issue has been widely accepted by many oil and gas experts.

Oil reserves have also started depleting. Larger and older reserves are running out of oil or are becoming exceedingly difficult to extract with oil wells getting deeper and deeper. The last notable oil discovery was at Kazakhstan which was some years ago. This shows that even discovering new resources has also become difficult, or we can say we have already discovered and exploited all possible oil reserves.

Hence, investing in the oil futures market at the current “relatively” low prices would be more profitable than many other investments.

Are Penny Stocks For You?

Investors who enjoy skydiving, skinny-dipping, and bungee jumping will find penny stocks right up their alley. However, even conservative investors find the low risk promise of large payouts quite attractive in penny stocks. Most people who invest in penny stocks are hoping to find the “big one” that will yield a tremendous profit at bargain prices. The fact of the matter is that small companies grow into large companies daily. It is disappointing that the number of people who arrive at the big leagues are very few compared to the people who don’t make it.

Penny stocks are a great method for small companies to finance spikes in growth, iron out rough spots, and manage to make themselves even better. This also gives companies an opportunity to restructure, and by letting their stocks trade as penny stocks, they’re creating revenue that can have a sizable impact by being reinvested into the company. This is a venture that can be frequently successful for the company, but oftentimes is not. This is part of the risk that’s incurred when making investments in penny stocks. When the companies manage to stabilize themselves, grow at a phenomenal pace, and turn into the company you’re hoping they can become, the payouts are astonishing. You cannot think that you will get results right away from your penny stock investment, however.

You should also know that a significant amount of companies use penny stocks as a means of scamming unwary investors. It is not possible to obtain a great deal of information about penny stock companies because, unlike companies that trade their stocks on the big exchanges (NYSE, NASDAQ, etc.), these companies are not obligated to reveal their financial information to potential investors and are not scrutinized to the same extent either.

But the question as to whether trading in penny stocks is for you or not will be almost wholly dependent on your personal sense of adventure, and whether you are willing to incur financial risks. Many are out there who have the firm belief that to achieve a sizable gain, you also have to be willing to take a sizable risk. For many, this applies to love, life and money, and for them it is a way of life. These people act much more impulsively with their money, and willingly accept the risk with no reservation, and without fearing a negative result. These are the people who get along just splendidly, whether winning or losing while investing in penny stocks.

At the opposite end of the spectrum are people that guard their nest eggs jealously, and count on the funds being put into that basket for their retirement security. These are people who, for many reasons, are quite apt to find themselves in a panic throughout a penny stock investment. You can’t actually investigate the companies (a disaster for people who like to plan every detail) and you will have a hard time getting your hands on your money after you invest it. This eliminates some sense of control over the health of your finances, and for investors who like to feel that they’re in control, it’s an uncomfortable feeling. I can understand people who are in no condition to purchase penny stocks. It is a scary way to go about investing when homes, college educations, braces, and retirements hang in the balance.

If your are the sort of person to invest in penny stocks without having to carry along the weighty burden of anxiety, stress, and nervous sweats with you, then you just might discover that you are in the position to change your level of wealth. Even if you step outside your “comfort zone” and make the investment, there’s a lot to be gained. The high level of risk associated with this type of investment should not be discounted. Ultimately, your own individual outlook is the factor to consider. How do you picture penny stocks fitting into your personal portfolio? Such a personal decision must be yours alone.

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