PennyPlayer

Investing in stocks is a lucrative business. It is risky as well. There are some risk factors that an investor can control by a bit of intelligent planning, and there are few others one can only attempt to prevent. Hence, in order to be in the game, a prospective investor must have an efficient management plan in place, alongside a pre-set risk levels, which one must expect in a fluctuating market to happen at any time and for which the investor has to remain prepared. The major risk factors that any investor could face in the stock market are inflation, economy changes, market value, and the risks of being too play-safe in the game. At times, one needs to be aggressive; being too defensive can sometimes actually spoil one’s chances.

Inflation, it could happen at any time and it could hit virtually any one, the person’s portfolio or savings not withstanding. Inflation erodes dollar values, and is the root cause of recessions in all forms. When it happens, it is the investors who depend on a fixed income that suffers the most. But, you could remain pretty immune to inflation by diversifying your investments by investing in stocks of those industries/sectors that has a better ability to adjust prices to the inflation rate. Investing in hard assets is also a good option to overcome the inflation wave.

The biggest of risks however is the changes that the economy is susceptible to. It can happen due to a variety of reasons, but for the investor, the results are the same – a drop in returns or crash in stock values. A recent example of this phenomenon is the 9/11 and the recession that followed soon. Again, what is required here, to overcome the downturns, is some intelligent planning. Investing for longer periods or buying stocks of good companies at reduced prices are few intelligent moves you could try out when the stakes are low. Every low in the stock market is followed by a high. So, the chances of you losing out are very less.

Market value refers to the market’s overall perception about a sector or stock. It is the market’s tendency to go after the next hot stock and if your investments do not fall in the elite few, the chances of your investment gets ignored in the race is quite high. This is a standard trend witnessed in the stock market economics and the best possible way out of this inevitability is to diversify your investments into multiple stocks, of different companies, that have a higher chance of anticipated growth in the near future. In short, it is all about predictions and calculations.

Finally, the importance of being aggressive and proactive in the game! Stock investments is all about taking calculated risks, and if an investor plays it too conservative, shying away from taking risks, he/she is not going to make any worthy money out of whatever investments he/she had made. You need to be enterprising and vigilant to make a kill in the stock investment arena. This involves constantly studying the market and quickly responding to market trends by pulling out and reinvesting in the currently happening stocks. The game is definitely not for the laidback and not-so-serious souls for no stocks fetch any returns by default. It needs to be manipulated according to the market trends.

Tags: OTC & Small Cap Info by Rick
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A certificate of deposit is a wise investment for your savings. This is basically a time deposit issued by commercial banks and can also be bought from brokers. The features of a certificate of deposit are that it has a fixed maturity date that can typically range from three months to five years. Similar to fixed deposits, the higher will be the interest rate for larger principal and longer maturity time. Certificates of deposit are available in any denomination. However, like other fixed time deposit, it is not possible to make any withdrawal of funds like in checking accounts. You can get a higher yield in certificates of deposit when compared to T-bills because of the higher default risk banks have.

When making a CD, it is important to find out some information of the CDs of different banks. Find out the minimum amount that has to be deposited and the length of maturity of the CD. The longer the length of the term, the greater is the yield. The interest you earn on the certificate of deposit depends on the amount of money you invest, the term of the certificate of deposit, the bank you choose and of course, the present interest rate of the financial market. Practically all banks offer CDs, so it is necessary to do some comparisons on interest rates before making an investment.

The main benefit of investing in certificates of deposit is the annual percentage yield it offers. Other investment sources offer annual percentage rate where you earn interest in a year, without any compound interest. However in a CD, the total amount of interest you earn in a year is defined by taking compound interest into account. In a certificate of deposit, the interest is calculated more frequently, to give a higher yield. So if other deposits earn interests once a year, the certificate of deposit earns interest at least twice a year. And when calculating interest for the second part of the year, the interest accrued in the first half is added to the principal, to give compound interest. This is the added advantage in investing in certificates of deposit.

Besides its better interest rates, another advantage of CDs is that it is relatively safer than any other investment choices. In a certificate of deposit, you will be aware of when you will be receiving interest, and when you will be withdrawing the amount. Basically, you earn more with a CD than in a savings account with the interest rate of the CD not fluctuating with the fluctuations of the stock markets.

However, like all other things, the CDs also have their shares of disadvantages. The first disadvantage is that in the long run, the returns you receive here are rather paltry when compared to other investment sources. Besides this, it is not possible to make a withdrawal on the money deposited until the completion of the CD. If it is absolutely necessary to make a withdrawal from the CD, it is possible only on the paying of a huge penalty.

Tags: CDs by Rick
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I ran across this excellent piece of information and advise at Bankrate for anyone considering real estate investing, or ‘house flipping’ as an investment avenue. It has some very important caveats and pitfalls that you need to watch for if you embark on this road.

Q- “Why is it called “flipping” when an investor buys a house under value and sells it for what it’s worth? Whenever I hear the word, it seems to have a negative connotation. ”

A- “You’ve really hit on something here, especially with your “sell it for what it’s worth” comment. But let’s back up for a second. Some honest and handy rehabbers who buy properties that are physically and (or) financially distressed, then promptly fix them up and turn them over — or “flip” them — to a new owner are being punished because of rising mortgage fraud over the past decade.

Sadly, it was the old “one-bad-apple” syndrome that caused most of the acrimony. During the overheated housing market of the late 1990s and early 2000s the distinct odor of greed wafted over the industry. Not satisfied with healthy profits, a number of participants sought excessive profits and didn’t let things such as ethics and the laws get in the way.

 

The results: The buyer gets a house he’s not qualified for. The investor gets an obscene profit. The real estate agent gets a commission. The fraudulent deal elevates all other properties in the neighborhood by elevating “comps,” or comparable house prices in the area. The buyers have difficulty making payments they were never qualified to make and eventually default. The lender gets stuck holding the bag.

That gave “house flipping” a negative connotation, even though the majority of flippers are earnestly investing significant cash and sweat equity trying to add bankable value to a home before releasing it back into their market’s for-sale inventory. But in 2003, the Federal Housing Administration imposed restrictions on the resale of homes that happen within 180 days of an initial sale and stopped insuring mortgages on all properties that sold more than once in a 90-day span. Many private lenders joined in with similar policies to tighten underwriting standards for “flips.”

Those actions, not surprisingly, slowed down the rehab pipeline a bit. No longer could many honest investors quickly dig into fixer-uppers they bought legally from distressed sellers or foreclosures and then expect to recoup their investments in an equally expedient manner. There are many credible arguments both pro and con as to whether this is good.

But this gets back to your “worth” statement. So much of our country’s economic engine is driven by investing in something of substance, adding value to it, and “flipping” it to people who desire the polished end product — and are quite happy to pay what it’s worth, whether it’s a reconditioned house, car, boat, antique or power generator.

So, no, house “flipping” is not inherently bad. In fact, semantics may partially be to blame for its bad rap. What “flipping” is to the housing game, “wholesaling” is to most other businesses. “

Tags: Real Estate by Rick
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Over the long term stocks have provided us with great average return results. But this average return masks a great deal of volatility, because returns have fluctuated within a very wide band. This extreme volatility is the chief risk of investing in stocks, but it is a risk that tends to recede from investors’ memories after a lengthy period of generally rising stock prices. Those investors new to investing in stocks may underestimate the volatility of stocks because volatility has been muted in recent years. Time greatly reduces, but certainly does not eliminate the volatility in returns from stocks. On the other hand, there is no guarantee that you will earn above average returns even if you hold stocks for two decades or more. Investors who are relatively new to investing in stocks may benefit from some perspective about bear markets. During the bear markets, Indexes declined an average of 25-35%. Although the average bear market lasted a little longer than 12 months, it took an average of almost 20 months for the Indexes to return to the levels achieved before the market downturns. Although no one can reliably predict the timing of bear markets (or bull markets, for that matter), a prudent investor should understand the extent to which stock prices can decline and should be prepared to “ride out” these periods when they occur. The big danger from bear markets is that investors will sell at or near the bottom of the downturn. Those who got out of stocks missed an extraordinary rebound in stock market performance.  Since risk is inescapable when investing in stocks, perhaps the greatest risk is that you will never invest in stocks because you can never be sure when is “the right time” to invest. Uncertainty is a permanent feature of the investing landscape, and trying to discern the ideal time to invest is almost always a futile exercise. Don’t be swayed by market fluctuations or the opinions and predictions from market analysts and forecasters! Your investment strategy and expectations should all be based on your personal objectives, time horizon, risk tolerance and financial situation. It should not be determined by the direction of the financial markets or the opinions of “The Experts!”

Copyright © 2005 I.E.C. Haramis

Tags: Investment Strategy by Rick
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