Tuesday, August 30, 2011

Learn the steps of investing your money

If you do a Google search using the words ‘learn to invest money’ there’s sure to find dozens and dozens of sites, at least the title, very well appear to meet this need by offering courses of various kinds.

You can easily guess that if there is a wide range of courses to learn to invest money, of course there is also a big question, otherwise it would not make sense for the various authors to create new courses.

But why people feel this need to learn to invest money themselves?
The answers may be different, but there is one that is most definitely true, because people feel exploited by the banks and want to invest on its own to improve performance and increase seld independence.

The idea is certainly good, but the problem is that it’s not so easy to put into practice.
I have read dozens of books and ebooks on the subject, viewed several courses, talked with many other investors, attended several specialized forums and blogs, and I finally found ALWAYS the following situations:

1) There are professional investors who, when they try to teach something to others, almost no one understands anything;
2) Then there are those who say things so trivial that, after finishing the course, you ask: “So what? What the heck should I do in practice?
3) There are authors who create video courses that last barely a couple of hours, making believe that just four stupid to start investing … and the great thing is that people really believe!
4) Then there are those who organize courses so expensive that you need to hang out a mortgage! If you have all this money, maybe you need not even attend one of these courses.
5) There are those who write blogs without having the faintest idea of what valuable about investing is written within their own blogs;
6) Then there are those who have a forum where people go to exchange tips , but do not know who gives these tips and distributes them on what basis (and in fact, unfortunately, are often given advice really absurd!)

So these are the types of people, contents courses that are available for us on topic related to investment of money. In the second part of this article on ‘learning how to invest money’, we will examine in more detail this situation and see what can be of practical alternatives out of the confusion that often, unfortunately, seems to reign supreme in this area.

If you do not want to risk making bad investments and losing a lot of yourself, I suggest you read very carefully what follows …

In share market investment, if the company is experiencing strong growth, you will make money, if it collapses or if it business performance is bad you will lose money. The share investment is risky in that way, but the gains, can also be very lavish in case you are ready to let you money stay invested for long term (7/10 years) in good companies.

We must therefore consider the equity investment in a long-term horizon of 7 to 10 years.
Moreover, it is prudent to diversify your investments by focusing on several companies, rather than limited to one, even if a company’s past performance has been very promising. Diversification does not eliminate all risks, but you can mitigate the fall in if a stock is offset by the rise in another.

The equity investment is not confined to those with a big bet, it is possible to start modestly. You can indeed buy a single share, or two or three, etc.. if you wish. But it is important not to stop after gathering on a few small handful of shares as it is not sufficient to build-up handsome capital. It is necessary to continue to acquire other securities regularly, so your portfolio reaches 10 to 20 lines to a minimum (for example, if you have a Reliance Industries and Tata Steel shares, that’s two lines).

This policy of small investment at a time, however, is somewhat disadvantageous because you will end up paying more brokerage fees charged by banks and financial intermediaries. If you are determined to build a portfolio of securities, it is better to start, even gradually, and ignore the issue of punitive charges.

After a few years in prison or sometimes a few months, these costs will be blotted by the most widely- capital gains and dividends that you will receive, at least if you were able to choose values ​​profitable.

Finally, the day you will have a big jackpot, the stock prices may be the highest, and you will pay much more expensive titles. By buying regularly over a long period, you reduce the risk of overpaying actions. Your decision, you have to open a securities account with a financial intermediary authorized to carry out transactions on your behalf, individual shareholders cannot directly intervene in the stock market.

It is best to open the securities account with the bank that already holds your deposit account. Purchases would be facilitated, since your bank will dip into your account the money to fund them.
No problem if you are a fan of the Internet: now, all banks accept purchase orders and sales online, and they apply lower fees if they are transmitted through this medium.

However, if such communications frightens you, you can request the execution of your trading orders by sending a written (letter or fax) to your bank. Some brands even have platforms that support your orders by phone.

You can also open a trading account directly from each company in which you want to purchase any securities.

As soon as the securities account is opened, you can start building your portfolio by purchasing shares

 This immediately raises the question of what to buy and at what price?
To avoid excessive risks, the easiest way is to start with the background values ​​of the portfolio. This includes the Top 10 large cap companies. In other words, just because a company is part of the Top 10 large cap company it has an automatic label of prosperity and performance.

Remember to diversify your purchases by investing in different industries. By focusing only on say financial sector (banks, insurance companies …), you will take the risk that in case of large disaster in this sector (like debt crisis of 2008) the value of your shares portfolio will fall drastically.

After selecting the promising title, you have to acquire them without overpaying, a value too expensive will have limited room for improvement. To get an idea on the issue, you can continue the trend in the last 5 years: if the trend is only growing then there is great risk that the price has reached a plateau and is overpriced.

Finally, choose the right values ​​and buy at the right price is not enough. We must dare to sell at the right time, take some profits while there is time. But when you’re a shareholder, either by sentimentality (it is attached to such a value) or confusion (when I sold my beautiful values, what shall I do for money? I might spend it …) either by greed (I expect it up even more), we hesitate, we grope, and it misses the point: time to react, the course has already taken the path of decline.

Do not forget that the profitability of an action cannot be measured only in terms of capital gain (or expected) on the sale. We must also consider the performance, in terms of dividends payouts. The dividend reveals the personality of the company: important, it reflects the growing business, but also a generous distribution policy. It also verifies the solidity and balance. A stinginess on dividends is sometimes a sign of a troubled company, or more concerned with the comfort of its leaders wage as that of shareholders.
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