Tag Archives: Stocks And Shares

Smart Reasons for Investing in Your Financial Knowledge

Here is a question for you: would you invest in stocks and shares if you didn’t know a thing about them? What about other forms of investments? Would you be willing to sink a good portion of your savings into an investment you knew little to nothing about?

Hopefully your answer would be no in all cases. After all anyone could come up to you with details of a fabulous new investment that was a ‘dead cert’. If you believed them you could be set to lose a huge amount of money.

This is why financial knowledge is so important – and yet it isn’t something that is routinely taught when you’re at school or college. That’s why you owe it to yourself to understand and discover everything you can about your finances and prospective investments as you go through life. It’s one thing to see a potential investment opportunity and be interested in it, but it’s quite another to look into it in detail so you know whether or not it really is right for you.

One of the most important lessons of your life

Financial knowledge isn’t something we’re commonly taught. However, it is something we should all learn and keep on building on as we go through life. Without it we can end up making some crucial financial mistakes, and these can be extremely costly.

Make it your mantra never to invest in anything unless and until you have explored it in more detail. This should help you avoid any investments that don’t seem right for you or aren’t as good as the advertising would have you believe. It is also a lesson in developing healthy and strong financial habits that will get you over many of life’s financial stumbling blocks. After all we all come across some of those occasionally, don’t we?

More knowledge equals better opportunities

Of course, as you learn more about every aspect of your finances and the variety of investments available, the easier it will be to choose the best options for your circumstances when you want to make money. We all make decisions based on our knowledge at that particular time, and if we lack in knowledge we can only ever make a limited decision on what to do.

The same holds true when it comes to investments as well. If you have a choice of three investments you can only ever pick the best one out of those three. If you have a wider choice of ten investments, you have more options. You may well choose something far better than you’d have gained from the original set of three options.

As you can see, the more you understand about finances and investments, the more opportunities you will have, both now and in the future. This means you can look forward with more positivity. Even if you have little financial knowledge at the moment, you can choose today as the day to start finding out as much as you can.

3 Things You Absolutely Must Do if an Investment Fails

However good you are at picking investments, you will have one that fails every now and then. It is impossible to go through life picking all the right investments and never tripping up. If you could do that, you’d make a fortune making recommendations for everyone else!

If you’re relatively new to investing, it makes sense to be realistic in what you can achieve. To this end, here are three things you should do if you trip up with an investment and end up losing money.

1: don’t panic
Yes, it might be the first thing you think of doing, but it’s worth hanging fire before you do. Firstly, as we’ve touched on above, it pays to be realistic. However many investments you have, it’s logical one or two of them won’t turn out the way you’d hoped. This is part of the reason why we don’t put all our eggs into the one proverbial basket.

Take a fresh look at the situation once you’ve calmed down – it may not be as bad as you think. You might be able to minimize the damage or at least decide whether to exit the investment or whether to wait it out to see if it improves.

2: look at why it has failed
If your investment really has turned up its toes and died on you, find out why. In terms of stocks and shares, it could be you’ve bought and/or sold at the wrong time. The only way your failed investment will be a total failure is if you don’t learn from it to prevent the same thing happening again in the future.

For example, let’s say you have lost $1,000 on some shares. By looking at them more closely, you can see you sold at the wrong time. If you had paid attention to the latest news reports and guidance and hung onto them for another week, you’d have minimized your losses, even if you hadn’t made a profit.

3: consider the implications for the future
This really follows on from the point I made above. Let’s look at the failed shares example again. You have two thoughts to consider here. Will you chalk it up to experience and not worry about buying shares again, or will you learn from the experience and use that knowledge to assist you in future purchases?

The decision is yours of course, and it is a very personal one. Some people will be put off by the experience, whereas others will resolve to do better next time so they can choose more appropriate investments with more knowledge.

Whatever path you decide to travel down, you can see how following these three steps will be useful in every case. The more you know and understand about your investments and your approach to them, the easier it will be to minimize the failures you have. These three steps could even make it easier to achieve bigger and better successes in the future.

Penny Stocks Could Cost You a Pretty Penny

Okay so the title is designed to catch your eye. But if you are thinking about investing in penny stocks it is worth realizing you could lose a lot of money in doing so.

This is not meant as a scare story, merely as a way of reminding you that investing in penny shares doesn’t make them any less volatile or safe than regular shares. Indeed, they are generally even more volatile, which is the reason why they are available so cheaply anyway.

Think about the value of a company before you invest

Let’s say Company A has shares valued at one cent each. Company B has shares valued at $6.78 each. Clearly there is a lot more value in the shares of Company B than those of Company A. This is because penny shares are made available by those companies who show promise for the future. They are created largely to generate funds to put back into the company so it can expand and develop.

Of course we all know lots of companies and businesses fail in their early days. So your task is to invest in penny shares released by companies that have the biggest potential for a great future. Lots of people wish they’d invested in IBM or Microsoft when their shares first came out. They’d be worth a lot of money by now. And when you think about the idea behind penny shares it is easy to see how such an investment can seem extremely tempting.

The reality behind penny stocks and shares

Let’s take a look at the reality of the situation now. The truth is penny shares are affordable for many people looking at getting into the stock market. But they are the riskiest shares of all. You may be able to afford more shares from Company A than you ever could from Company B, but that doesn’t mean it is a wise investment.

The bottom line here is to consider how much you can afford to invest – and also to lose. There is a bigger chance of penny shares nosediving in value and becoming worthless than there is of shares in any other company doing the same thing. There are exceptions of course, which is why you should never invest in any types of stocks or shares unless you know what you are doing and what to expect.

Many people say you should only invest money you wouldn’t miss when it comes to penny shares. There is a lot of truth in this. You should never really invest in it to gain a particular amount of money in return. It is far more speculative than other shares, which is why they are not for everybody.

This doesn’t mean you should avoid them at all costs of course. It just means you should be aware of the pros and cons and of what you are investing in. The more you understand about penny shares, the better your chances are of getting it right.

What Are the Top 5 Commodities Exchanges?

Just as stocks and shares are traded on the stock exchange, so commodities are traded on a commodities exchange. Commodities may be viewed as tangible items, mainly those that are derived from agriculture. Typical examples include wheat, maize and barley, although there are many others. Other commodities can also be traded on these markets, including metals and coffee.

There are plenty of commodity exchanges all over the world, but some are more popular and better known than others. Here are the top five most commonly used commodity markets in the world today, in no particular order.

The Chicago Board of Trade

Not only is this the largest market of its kind, it is also the oldest of its kind. It was founded back in 1848 and some four dozen separate commodities are traded here every day.

Tokyo Commodity Exchange

It should not come as a surprise to hear that Japan has an entry in the top five, and it is the Tokyo Commodity Exchange. A range of metals are traded here daily, along with other oil based items.

NYSE Euronext

This is a very modern company, in stark contrast to the more traditional feel of the two above. It offers the opportunity to trade in commodities of all kinds and cocoa and coffee can be found among the items it offers.

Dalian Commodity Exchange

This commodity exchange hails from China and is nearly twenty years old. It does not make a profit on its trades but provides the opportunity to deal in soybean, palm oil and corn among other things.

Multi Commodity Exchange

The final entry in the top five is this exchange from India. It is commonly known by its abbreviation MCX. It focuses on trading in both non-ferrous and ferrous metals, as well as offering the ability to trade in potatoes and various agricultural oils.

Clearly the Chicago Board of Trade is streets ahead in terms of age, but each commodities exchange has its own style and focus. They do not all trade in exactly the same items, although there is some overlap there. The Chicago Board of Trade probably has one of the largest ranges of commodities to deal with on a daily basis, while others focus in a little more specifically on certain things. After these five there are a couple of other exchanges you may also have heard of, including the Intercontinental Exchange and the Africa Mercantile Exchange.

Dealing in commodities runs along the same lines as dealing in stocks and shares. This holds true in that the prices can go up or down, and you can also choose those items that you feel show more promise in the long run. Commodities are just as much affected by outside forces as stocks and shares are (perhaps even more) and so it makes sense to learn as much about commodities trading as you can if you want to get involved with it. This holds true regardless of which market you decide to use.

How Are Stocks Classified?

If you’re just starting to explore the world of stocks and shares, you’re probably wondering how to figure out which stocks to buy and which ones to steer clear of. It’s best to start by looking at the different types of stock classifications that exist, because this helps to divide the stocks into specific categories.

To this end, we’ve listed some of the most popular classifications here. You’ll find you start coming across these terms as you start considering which stocks to invest in.

Small, mid and large cap

‘Cap’ stands for capitalization. To work out the capitalization of a particular stock, you take the volume of outstanding shares and multiply that figure by their actual price. Small cap usually means the capitalization is under a billion dollars; mid means one to five billion dollars and large is anything over that.

Blue chip stocks

This is one phrase most people will be aware of, regardless of whether they have been involved in buying stocks or not. A blue chip stock is one released by a blue chip company, i.e. a company that has been around for a long time and which consistently delivers good results. They may not deliver huge profits but they are seen as reliable and they have far less chance of delivering a loss.

Cyclical stocks

As the name would suggest, these stocks perform well at some times and not so well at others. Take energy stocks for instance. There will be times when there are big leaps forward in this industry, particularly with regard to green energy. At these times you can expect stocks to improve in value. However there will also be times when there is less demand for energy or poor news relating to the sector, and thus the value of stocks will go down.

Defensive stocks

Just as cyclical stocks focus on business sectors that can go up and down, defensive stocks focus on those that are more reliable. Any company that provides a staple item – such as food for example – will typically fall into the defensive stock category.

How can you get the right mix of stocks in your portfolio?

Defensive stocks will be more consistent in their returns than cyclical ones. They are reliable but having said that they won’t produce impressive returns. Cyclical stocks may produce better returns but only at certain times of the year.

Clearly a balanced portfolio is in order if you want to make the most of your returns. It will take time and effort to learn more about the different types of stocks you could invest your money in. However this time is worth spending because you stand a much better chance of receiving a good return.

It is also worth remembering there are many other different types of stocks – hundreds of different classifications – you could delve into. The ones listed here are some of the main ones, providing a good starting point to work from when you are just getting involved in the stock market.

Are You a Knowledgeable Investor?

How much do you know about investing? Many people stick with what they know, rather than trying to expand their knowledge in any way. For instance they might stick with plain savings accounts instead of looking into the potential returns offered by investments in the stock market. They will limit their outlook depending on what they already know, instead of trying to learn more about the potential opportunities available to them.

The question here is obvious – how knowledgeable are you and do you make any effort to expand the knowledge you already have? It’s a bit like going to your local bakery and assuming it bakes the best rolls in town, simply because you don’t have anything else to compare it to. If you started looking a little further afield you might discover a bakery two streets away that bakes the most amazing rolls – far better than your local bakery produces. Wouldn’t you start going there instead to get a better return for your efforts?

It’s all about expanding your field of vision. If you don’t see stocks and shares, you won’t consider investing in them. The same holds true of tax free options and any other investment you may care to think about.

The good news is you don’t automatically have to opt for a new investment you find out about as a result of your exploration. However it will enable you to learn more and take a more educated approach to your investments. You may be missing out on the best investment for your needs, simply because you don’t even know it is there.

You might feel put off by the word ‘educated’. This makes it sound as if the process of learning more about investments is going to be dull and boring, like taking lessons at school. But it doesn’t have to be this way. You can learn as much or as little as you like. If you don’t have any interest in penny stocks, don’t learn about them. If you find you like the idea of investing in long term bonds, start exploring the nature of these bonds so you know what to expect. You’ll soon see you can drift towards those areas of investing that appeal to you, and which might turn out to be profitable for you to sink some money into.

Being a knowledgeable investor isn’t about learning everything there is to know about investing. It’s about letting your interests take you in specific directions. It’s about learning how you can best invest whatever funds you have available in the right areas for you. It’s about developing your own knowledge in the directions that make sense to you. It’s not about following in the footsteps of others or doing certain things because you think that’s what you should do.

So if you feel like you want to develop your investment knowledge, let your own ideas and thoughts lead the way. You might be surprised as to where they take you.

Do You Know Enough to Be a Successful Stock Market Investor?

For many people the obvious route to take when thinking about investing is to head for the stock market. But is this really the wisest route for everyone?

There is certainly a lot of money to be made with stocks and shares. However there are significant losses that can be made too, especially if you don’t know what you are doing. Unfortunately some people are tempted by the potentially big gains available. This means they can end up investing money in shares that are not right for them.

So if you are considering investing in this way, here are some points worth bearing in mind before you do so.

Can you invest money you would be happy to lose?

This is the main point to bear in mind, even if you know little about anything else. Investing your life savings in stocks and shares is not a good move. If the stock market were to crash – and as we know it has happened before on more than one occasion – you could lose everything.

This is why it is wise to split your cash and invest it in a number of different ways. It spreads the risk you are taking as well.

Do you have an interest in the stock market?

You don’t need to know the ins and outs of how a car works in order to drive one. But when it comes to the stock market it does make sense to have a rough idea of how it works and what kinds of ups and downs you can expect. Otherwise there is a much higher chance of investing money in volatile stocks. There is also a higher chance of viewing the market through rose tinted glasses – seeing only the potential gains and not the potential losses.

Do you understand not all stocks are the same?

Here we simply mean that some are issued by big name companies we’re all familiar with – Coca Cola or Microsoft for example. Others are issued by small companies that are just starting out.

Everyone wants to invest in the next big global success. If you know what to pick you stand a chance of making a lot of money – just as you would have done if you had invested in Microsoft shares right at the very beginning. But picking future successes is very difficult to do – and best done with money you can lose if that’s what it takes. It is almost a form of gambling when you think about it.

While the breakout successes will achieve the highest returns, they are very few and far between. You are more likely to make gradual returns on a more stable stock from a well known company.

So you see you may not necessarily be the right person to invest in the stock market. It all depends on your level of knowledge, how much you are willing to invest and whether you can accept the ups and downs of this particular type of investment.

Is it Too Late to Make Any Smart Investments for Your Future?

It’s often said that if you want to invest in a pension plan for your old age, you need to get one up and running as quickly as you possibly can. This means you have more years to save the amount you’ll need to get the results you want when you’re older.

But does this apply to all investments? For the most part it does. Take stocks and shares for example. We’ve seen many shares take a tumble in value over the past few months and years, owing to the recession most of the world has been experiencing. But if you were to look at the performance of shares in general over a much longer time period, you’d see they were actually performing quite well in the long run.

Time really is in your favor in many cases. So what does that mean if you are in, say, your forties and you’re thinking of making some investments for your retirement? You’d have been better off making those same plans in your twenties, sure, but does that mean there is no point making them now?

Planning for the future

The main thing to remember here is that you must make the most of the time you have left before the target for your investments arrives. So if you are saving for your retirement and you are currently in your forties, you still have a good few years before you actually retire.

However if you delay your plans because you are worried about whether you have enough time to save for them, you will automatically give yourself a lot less time to save. You should know the difference between delaying because you are gathering information about various options and delaying because you are hesitant about whether it is worth it or not.

To be truthful any amount of time you have to make investments in is worth using. The trick is to find the right investment for the amount of time you have available. Some are naturally time limited so you have to find a vehicle you can use that will get you the best return without posing too much of a risk to your cash. We all have different levels of acceptance when it comes to risk of course, so it makes sense to consider where you sit on that subject.

Another option to consider is whether to spread your money around. This can help to negate the risk of any one single investment you are considering putting your money into. But some investments will spread the risk for you, meaning that one vehicle can put your money into several places.

Clearly you have a lot to think about here. However old you are or whatever goals you have in mind, it is never too late to make an investment choice. The nature of the investment you make could differ depending on your age, but there are always opportunities to consider.

What Should You Do When an Investment Dives in Value?

When you look for investments that stand a chance of paying back more than just a meager rate of interest, you will automatically put your cash at a higher level of risk. For example if you buy into stocks and shares you may end up seeing your investment appreciate considerably – or it may take a nosedive, leaving you with less than you had originally invested.

Some investments are designed to run for specific lengths of time, while others give you more freedom over when you can withdraw your money. If your investment happens to be losing money now, what should you do?

Number one – don’t panic

We’ve seen many instances in the past where people have immediately withdrawn all their money – the classic ‘take your cash and run’ reaction. In many cases the people who hung on and sat back to see what happened found their investments returned to near normal soon afterwards. Those who cashed in early lost money, while those who waited didn’t.

Of course this is not guaranteed to happen. But it is definitely worth finding out more about the situation and the likely outcome before you decide what else to do.

Research how the situation could play out

The most important thing to do is not to rely on one single source of information concerning your investment. Before opting to withdraw your cash, make sure you find out the potential consequences of doing so. Remember that reading any news reports concerning the state of any investment are likely to be overly dramatic in many cases. Find out the real truth and base your decision on that.

Consider how long you were going to hold the investment for in the first place

It has long been the case that when it comes to stocks and shares, it is the overall performance that matters. Even in the case of a recession, when the value of shares can drop remarkably, the share value can eventually bounce back again.

If you were intending to cash in your shares or other investments anyway then it may be prudent to cut your losses now before things worsen. But if you were holding onto them for the long haul it may be better to hang onto them even through tougher times.

Remember there is no single solution for all circumstances

It is wise to remember that there is no ‘one size fits all’ solution to handling a weakening investment. You must consider a range of options before deciding which one would be best for you. But the most important thing to remember is never to react to the event without first looking at it from every angle. This will help you to determine whether you are better off cashing in your investment now, or waiting things out to see if or when they may improve.

There is always an element of risk in whatever decision you make. But in reality you could fare better by acting rather than reacting.

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