Investment Strategies for the Average Joe

Investment strategies for the long term are a vital to our future. How you invest now may be the difference between a comfortable retirement, and working for the rest of your life. Nobody likes the idea of having to work for the rest of their life, and we have put together a list of do's and don'ts to secure a comfortable retirement.

Tip #1 Educate yourself

There are people out there who play the stock market like they play the lottery. This is very dangerous, gambling on the stock market is the equivalent of going to Las Vegas and putting your life savings on the line. With any investment that is going to provide a decent return, there is risk. How much risk you take on with any investment directly affects the return. The general rule of thumb is, the higher the risk, the higher the return on your investment, and likewise, the lower the risk, the lower your return. The risk of investing into just a savings account has been explained.

While investing in stock is riskier, educating yourself can reduce the amount of risk you take on. This includes finding out what common terms are and what they mean. Understanding the financial statements of the company you want to invest in, and understanding the market that you are investing in.

Tip #2 Devise a plan

This step is just as important as the first, having the education is useless without having some kind of direction. Decide where you want to be by the time you retire, where you want to be when you hit fifty. Evaluate where you are now and what you want to accomplish in the next year, you can never plan too much.

You will also need to decide what kind of retirement you want to have. Do you want to maintain the quality of life you have now? Do you want to retire rich? Filthy rich? Or do you want enough to just get you by every month? Realize what you want to do and devise a plan.

Tip # 3 Investing is vital to your retirement

This cannot be stressed enough. It used to be that you worked for a company for 30 years until you retire, you get your office party and the faux gold watch, but you had a pension and social security waiting for you afterwards. Nowadays you have companies cooking the accounting books, and executives being the only ones with guaranteed pensions, and CEO's abandoning their companies leaving their employees with nothing while they take their guaranteed multi-million dollar pensions home.

What does this mean? It means that the person with your best interest is you. Nothing is guaranteed any more, not even social security. Corporations are replacing pensions with 401k plans, in essence they are shifting the responsibility for your retirement from them to you. It is up to you to decide whether you want to invest in your future. Realize that if you decide not to invest at all, you are throwing you future away.

Tip # 4 Research Research Research

There are so many reasons that you need to research whatever investment vehicle you choose. Whether its real estate, stock, whatever, you should never invest off of an assumption. Most investors refer to this as due diligence. First and foremost, never invest off of a "tip." There is always someone out there that knows what the next big investment is. They'll tell you to buy some shares of so and so stock because they are guaranteed to give you phenomenal returns.

While the advice may have some truth, it is best to do a little research first before putting any money into it. When doing research, it helps to understand financial statements. In general, if a company has more costs than it does revenue, this means the company is not turning a profit. In 2000, Amazon.com (NASDAQ: AMZN) was selling its shares at $113.00 per share, all while never having turned a real profit since the company started.

Today Amazon's stock can be bought for $45 a share. Imagine if someone invested their entire life savings into Amazon's stock at this time, they would have less than half of what they saved left. This is the reason for the most recent stock market crash, investors were buying shares from companies that could not show a profit. Companies were having lavish office parties every week because their stock was flying through the roof, all while their product sales could not fund these expenses.

Another reason for the recent stock market crash is because a lot of investors invest with emotion rather than knowledge. Over the holidays investors feared another terrorist attack, so they sold shares fearing another attack would drive the stock market back down. The emotion was fear. And that fear is detrimental to the stock market. If enough investors get scared and begin to sell their shares, the market will surely drop. If more investors are buying than selling, the stock market will rise.

Tip # 5 Inflation

The final tip is also a part of research, understanding inflation. It is important to know that as it pertains to your future, inflation is not good. The Webster's dictionary defines inflation as: an increase in the volume of money and credit relative to available goods and services resulting in a continuing rise in the general price level. In other words, as time goes on, prices rise.

A good example of inflation, is how a million dollars today, isn't what it was 20 years ago, and it wont be what it is 20 years for now. If it would take $2 million to retire today, find out what $2 million will be by the time you retire, otherwise you will be selling yourself short.

Robert Abrom is the CEO of Abrom Research Inc., find more resources for your journey to entrepreneurship at http://abromresearch.com

How To Make Money In Stocks

Interested in trading and investing in stocks? Well, the first step is to understand some stock trading basics. In this article we'll take a look at what stock market investing and trading involve, and how investors and traders make money from stocks.

A "stock" - more commonly known as a share in some parts of the world - means a portion of ownership or equity in a company. As such, a stockholder is essentially an owner of that company with specific rights and obligations. Companies list on the stock market - or more precisely, a specific stock exchange - to sell their equity to the public, and thereby raise capital they can use to grow their business. Once a company has listed on a particular stock exchange its shares can be traded on an ongoing basis by investors and traders alike.

The stock market represents the general supply and demand for companies' stock. Companies "list" - or make their stock available for people to buy and sell - on various stock exchanges located around the world. Historically, stock exchanges were physical locations where representatives of people wanting to buy or sell stock dealt with each other to facilitate the various stock transactions. These days trading is facilitated by computer systems.

Unless you have the requisite license, you can't directly buy and sell stocks yourself. You need to pay a broker to do so on your behalf. Historically, you might have called an individual broker to transact a trade for you; these days it's often just a matter of visiting an Internet based brokerage and filling in an order form.

To make money in stocks, you essentially need to buy a stock at one price, and sell it at a higher price. The increase in price is theoretically due to the increase in the value of the company, based on its financial performance.

"Fundamental" investors are those who do in fact take the view that, over time, stock prices reflect the value of a company. How do these investors assess value? Well, they study a range of fundamental information that will supposedly give them a glimpse into the future prospects of the company. This ranges from the company's own financial health, to the health of the industry in which it operates, to the strength of the economy at large. After performing such fundamental analysis, such an investor decides how to trade stocks they're interested in.

"Traders" tend to have much shorter time horizons. They buy and sell within weeks, days and - in the case of day traders - hours or minutes. In such time periods the prices of stocks are much more volatile and tend not to reflect corporate value so much as market psychology.

Traders seek to use the short term volatility of the stock market to their advantage. They use "technical analysis" - analyzing trends and patterns in stock prices - in order to spot opportunities to profit on upward, downward and even sideways price movements.

You will generally find that fundamentalists and technicians are both ardent believers in their particular perspective on the stock market. Both will say that that their philosophy makes for the best trading systems.

While books with titles such as "stock trading for dummies" seek to de-mystify the trading systems used by traders, there are equally a range of rather complex trading systems. Many full-time, professional traders won't reveal their trading systems, while others readily sell their systems in home-study courses and the like. Your best bet is probably to test some different systems and then choose the one that works the best.

I hope this overview has given you an idea of how to trade stocks. There is certainly more to grasp, but at least you now have a foundation in how the stock market works.

About the Author:
Mark Crisp Free 7 Part momentum Stock Trading Course at: http://www.stressfreetrading.com

Investment Strategies

Investment strategies for the long term are a vital to our future. How you invest now may be the difference between a comfortable retirement, and working for the rest of your life. Nobody likes the idea of having to work for the rest of their life, and we have put together a list of do's and don'ts to secure a comfortable retirement.

Tip #1 Educate yourself

There are people out there who play the stock market like they play the lottery. This is very dangerous, gambling on the stock market is the equivalent of going to Las Vegas and putting your life savings on the line. With any investment that is going to provide a decent return, there is risk. How much risk you take on with any investment directly affects the return. The general rule of thumb is, the higher the risk, the higher the return on your investment, and likewise, the lower the risk, the lower your return. The risk of investing into just a savings account has been explained. While investing in stock is riskier, educating yourself can reduce the amount of risk you take on. This includes finding out what common terms are and what they mean. Understanding the financial statements of the company you want to invest in, and understanding the market that you are investing in.

Tip #2 Devise a plan

This step is just as important as the first, having the education is useless without having some kind of direction. Decide where you want to be by the time you retire, where you want to be when you hit fifty. Evaluate where you are now and what you want to accomplish in the next year, you can never plan too much. You will also need to decide what kind of retirement you want to have. Do you want to maintain the quality of life you have now? Do you want to retire rich? Filthy rich? Or do you want enough to just get you by every month? Realize what you want to do and devise a plan.

Tip # 3 Investing is vital to your retirement

This cannot be stressed enough. It used to be that you worked for a company for 30 years until you retire, you get your office party and the faux gold watch, but you had a pension and social security waiting for you afterwards. Nowadays you have companies cooking the accounting books, and executives being the only ones with guaranteed pensions, and CEO's abandoning their companies leaving their employees with nothing while they take their guaranteed multi-million dollar pensions home. What does this mean? It means that the person with your best interest is you. Nothing is guaranteed any more, not even social security. Corporations are replacing pensions with 401k plans, in essence they are shifting the responsibility for your retirement from them to you. It is up to you to decide whether you want to invest in your future. Realize that if you decide not to invest at all, you are throwing you future away.

Tip # 4 Research Research Research

There are so many reasons that you need to research whatever investment vehicle you choose. Whether its real estate, stock, whatever, you should never invest off of an assumption. Most investors refer to this as due diligence. First and foremost, never invest off of a "tip." There is always someone out there that knows what the next big investment is. They'll tell you to buy some shares of so and so stock because they are guaranteed to give you phenomenal returns. While the advice may have some truth, it is best to do a little research first before putting any money into it. When doing research, it helps to understand financial statements. In general, if a company has more costs than it does revenue, this means the company is not turning a profit. In 2000, Amazon.com (NASDAQ: AMZN) was selling its shares at $113.00 per share, all while never having turned a real profit since the company started. Today Amazon's stock can be bought for $45 a share. Imagine if someone invested their entire life savings into Amazon's stock at this time, they would have less than half of what they saved left. This is the reason for the most recent stock market crash, investors were buying shares from companies that could not show a profit. Companies were having lavish office parties every week because their stock was flying through the roof, all while their product sales could not fund these expenses. Another reason for the recent stock market crash is because a lot of investors invest with emotion rather than knowledge. Over the holidays investors feared another terrorist attack, so they sold shares fearing another attack would drive the stock market back down. The emotion was fear. And that fear is detrimental to the stock market. If enough investors get scared and begin to sell their shares, the market will surely drop. If more investors are buying than selling, the stock market will rise.

Tip # 5 Inflation

The final tip is also a part of research, understanding inflation. It is important to know that as it pertains to your future, inflation is not good. The Webster's dictionary defines inflation as: an increase in the volume of money and credit relative to available goods and services resulting in a continuing rise in the general price level. In other words, as time goes on, prices rise. A good example of inflation, is how a million dollars today, isn't what it was 20 years ago, and it wont be what it is 20 years for now. If it would take $2 million to retire today, find out what $2 million will be by the time you retire, otherwise you will be selling yourself short.

About the Author:
Robert Abrom is the CEO of Abrom Research Inc., find more resources for your journey to entrepreneurship at http://abromresearch.com

Recession Investing And The Housing Market

Why could the U.S. be heading into a recession? The most likely reason is the housing market - a multi-faceted subject. There's the new home building sector.

It's important because it employs so many people, not just in construction but, by extension, in the industries that supply materials to the homebuilders - lumber, concrete, appliances, and even retailers like Home Depot.

Think about all the "stuff" that goes into a home and how much you buy when you move. A slowdown (or collapse) in new home building has a ripple effect throughout the economy and could drive up the unemployment rate.

Housing market problems are not limited to new home sales. The value of your home and the market for sales of existing homes is falling. By how much and for how long is the big question. But the problem here is the equity we have in our homes is evaporating.

Even worse, those of us who have recently purchased homes or have taken money out of our homes, through refinancing or home equity loans, may have no equity left. A reduction in home values reduces homeowners net worth, causing them to pull back on spending.

The mortgage market mess is the last, but the not least, of the housing market issues. The big problem is not subprime mortgages, it's adjustable rate mortgages. Bumps in mortgage payments due to contractual provisions or an increase due to a rising LIBOR rate - most mortgages are tied to this rate and it may rise even if interest rates fall in the U.S. - will force consumers to cut back spending in other areas. Lastly, will more stringent lending standards exacerbate the new home construction and/or existing home value problems?

There are other economic concerns as well - consumer spending (beyond the impact of the housing market), rising energy prices, the U.S. balance of trade deficit (are jobs being exported as a result?) So, if you're concerned about the possibility of a recession, and who shouldn't be, how do you invest?

The stock market, according to classical wisdom (or folklore) anticipates a recession by six to nine months. Since it's currently at record highs (at least the Dow and S&P) this suggests a recession is not in the offing. But the market could change direction at any time. There's a saying that the stock market has predicted ten of the last five recessions.

So maybe it's not such a perfect predictor after all. The stock market also anticipates economic recoveries. Add to the mix the psychological difficulty of investing in stocks when things are the bleakest (the best time to buy) and it demonstrates the difficulty (impossibility, for most of us) of trying to time the market.

Most investors should be in the stock market to take advantage of growth in principal value and income which comes through the long term ownership of equities. Stocks which do best in recessions are those of the strongest companies and companies whose products consumers must keeping buying (think toilet paper not cars).

The stocks to focus on are big cap companies, consumer staple products and health care. There's an overlap between many big cap stocks and consumer staples and health care companies. I'd also add to this list companies with significant international sales. (Did you know that a majority of McDonald's, and many other U.S. companies, sales are overseas?) There's also a substantial overlap between big cap and international sales. You can find many good mutual funds which focus on these areas.

Will this investment strategy provide a positive return during a recession? Not necessarily but it will keep you in the stock market with a minimum amount of risk and the long term investor will be well positioned if there is no recession or for the upturn in stocks after the recession occurs.

What about bonds, you ask. Don't they do well during a recession? Yes, if interest rates decline as a result, but that may be occurring just when stocks are beginning to rally again.

With long term U.S. Treasuries yielding below 5% (some good money market accounts have higher yields) how much lower can interest rates go, so how much higher could bond prices go? Focus your risk-taking investments on the stock market and keep the rest of your capital in cash.


About the Author:
Bill Byrnes is co-founder of MUTUALdecision, top mutual funds, providing investors with data on the top mutual funds, and author of the MUTUALdecision Blog. He's been CEO, chairman and served on the board of directors of several public and private companies. He holds MBA and JD degrees and is a Chartered Financial Analyst with over 30 years experience in the investment industry.



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