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Have you always wanted to enjoy the sort of profit opportunities that are only possible from stock market investment – where the average long term gain has exceeded 10% a year for decades – but been put off by either the complexity or the cost? Or maybe you are already a shareholder and keen to reduce your risks and increase your returns? Either way, you should consider becoming involved with an investment club.

The investment club concept is simplicity itself. A group of friends, colleagues or neighbours pool their money in order to invest in stocks and shares. To get the club started members put in a lump sum – perhaps a few hundred pounds – after which they each make a fixed monthly contribution. Some clubs call for as little as ?100 a month investment, others set the limit somewhat higher. Once the club has sufficient funds it will start to make investments. At any point individual members may withdraw their cash and a collective decision can always be made to wind the club up.

As a way of making money, investment clubs offer some fantastic benefits.

To begin with, they overcome one of the biggest problems facing private investors: how to diversify. The best way to avoid losses and optimise profits when investing is to put your money into a portfolio (or range) of different company shares. There is no magic number of companies you should invest in, but I would have said the absolute minimum was 15. Due to the cost of buying and selling shares it is rarely worth investing less than ?2,000 in any one company so for a private investor to even begin to diversify he or she must have at least ?30,000 – and ideally considerably more. This is a lot of money for many individuals to find but not for an investment club. For instance, a club with 20 members contributing ?300 each on day one and ?25 a week thereafter would manage it in under a year.

The next advantage that investor clubs offer is that the members are pooling more than their money. Deciding which company shares to buy in order to maximise your returns is a time-consuming business. First you have to select the sectors you are interested in. Then you have to pick out companies you believe will do best. Given that there are hundreds of companies listed on the London Stock Exchange not to mention all the other stock markets around the world it is definitely a case of ‘many hands make light work’. Furthermore, different members of the club may have specialist industry knowledge that can further boost the chances Read more…

Multiply Your Money ? Invest with Care

The investment in stock multiplies quickly. The certificates of deposits may give you interest rates ranging from 4 to 5% depending on the deposit period. Out of the interest that you receive, you have to pay income tax as if it is applicable to you.

The invisible deduction on the interest comes from inflation. The inflation rate of about 3% in USA makes a hole in your pocket without your knowing it. When you consider income tax and inflation together, you may be actually loosing money rather than making money on your certificate of deposit.

Excess Money ? Your Saving

The money you every month or year earn is not all spent in the same year. Clever and careful persons always control the expenditure so that they always have an excess of money over the expenditure. This is the rate that drives the future progress of a country

The personal saving rate in USA has been lower at 8% compared to other countries where the rates of 15 to 30% have been the norm over last few years. This excess money is the saving you can invest. Since the savings available in USA is only 8%, the case for investing wisely becomes stronger.

What is the best avenue?

If you can take some calculated risks, the stock markets become the focal point of investing. The increase in the wealth can be phenomenal. An investment of $10,000 made in Microsoft shares in 1986, was worth $3.5 million in 2004. There is no way in which the certificate of deposits can match this kind of increase in personal wealth. But remember not every company has the growth rate of Microsoft.

The General Impression

The general impression about the stock market continues to be bad and the cases of persons going down in stock market become the talk of social circle. No one talks of Warren Buffets of stock markets until they have reached the level of legends. Such legends may be few in number, but there are many Warren Buffets in waiting in wings about which one knows or cares to talk about.

So What Do I Do?

The key is to start investing wisely and go up as you progress. If you follow the tips given below the Read more…

Do you have the prerequisite qualities that allow you to start an stock investment club?

First of all, what is an investment club? It can be simply defined as a group of people who poll thier resources to make a large investment in the stock market, who share a common interest in investing in the stock market.

So are you the ONE to start an investment club?

Answer these questions:

1) Are you looking to make fast money?

If your answer is yes, this is not for you. You should consider investing on your own. That will have higher risks of course.

A main feature of the investment group is to start to learn how to invest your money and to invest for a long term rather than a short one.

2) Are you an expert on the stock market?

Take the investment club as an oppurtunity to learn the ins and outs of investing, as a group, and slowly. So be prepared to be an amateur, to learn from the group, and offer your wisdom and share your knowledge. If you stand out as being the odd one out with plenty of experience (and pre-conceived notions about the stock market), you may not do well in this setting.

3) Do you want to make a killing in the stock market?

Again, be realistic. You will be learning along with the group, makeing mistakes along the way, and enjoying successes as well. If you have dreams of striking it rich, you will be starting the club for the wrong reasons.

4) Do you have lots of money to invest?

You don’t need a lot of money Read more…

In my previous message about investing for beginners, I tried to convey some of the realisations that a new investor needs to make to help him or her become successful.

This time, I am going to offer a few thoughts on what I believe helps me to be successful and a few examples of what can and may go wrong. As ever, I hope that this isn’t below your level of either confidence or competence as I don’t wish to insult. However, I have found that there seem to be far more people that want to understand finance ‘a little better’ than there are people who can lecture on the subject.

Firstly to an example. Back in the mid 90’s I joined an Investment club in the UK. I knew a couple of the members from a local health club I was a member at. Knowing that I was (a) keenly interested in investment and (b) more knowledgeable than most of them, I was invited along.

Suffice to say that on the first evening, I realised that I had been invited along to do all the work! I enjoyed the work so that didn’t actually bother me. I also could purchase some additional investment tools ‘for the club’ which I couldn’t justify for myself.

The main work of analysis was carried out by myself and another member who is a long-time friend and no mug in the world of shares and investment himself. We were using as our template a theory offered by Jim Slater which centred around price / earnings growth ratios. In short, it was highly successful.

At the end of the first year, we were ‘up’ by around 80%. Admittedly, this was during the tech-boom bull and any idiot could get 30% pa without trouble or effort, but still we were very impressed. The second year started well too and within 6 months of year two, our small company growth share portfolio (the only portfolio) was up comfortably over 100%. Nice work if you can get it.

For those of you that haven’t been a member of an investment club and don’t know, they are a democracy. Every opinion counts equal in a vote to buy or sell, whether they understand investment – or not. Here was our trouble. If you can believe it, making an enormous profit was ‘boring’ and they needed ‘excitement’. To me, making money as quickly as we did was not merely exciting – it was thrilling!! But, when we wanted to sell they wouldn’t and when we offered rock solid buy predictions they disliked something and again, we wouldn’t.

I think our lowest point was not buying shares in a UK pizza delivery firm (that was growing very quickly and would have turned into a great investment) because (and I kid you not) one of the founding members didn’t like ‘Italian food’. Who cares?

The club ended rather badly with arguments and falling outs. Several years later it still has a couple of holdings in shares that might ‘one day turn around’. Fat chance!!!!

So here is the tip: why do you want to invest? This needs analysis.

My friend and I invested because we were willing to put in the effort, wanted to increase our holdings, make money and frankly, we like winning in a global market against the nation’s smartest minds!!

Our other members however, were there to gamble. It was just fun. Who cares about the result? We all meet in a pub, have a meal, chat about shares and throw some money at the market. We wanted profits, they wanted a social group.

After being up by over 100% after 18 months, we closed the club at a loss of both money and friendship. Ridiculous.

What about you? Why do you want to invest? If you want to gamble, take up sports betting. You get to watch a game as well as be financially involved – that sounds much better.

Do you plan to follow the market? If you don’t, best to keep away.

I’m not the world’s greatest at tracking a market – I can admit it. Each day, I look at the shares in my portfolio, funds I advise clients about, prospective investments I am mulling over, general financial news and read a few posts by other advisers / analysts online. And yet, if I’m honest, I worry that don’t pay enough time each day to the markets.

If you want to make serious decisions, with serious amounts of money and (hopefully) make serious amounts of profit, you need to be – SERIOUS!!!

Personally, I don’t like the idea of gambling much. I consider myself to be either a speculator or an investor, not a gambler. When I first started investing, I didn’t know the difference (though I started at 18 and had no-one to guide me). That meant that all my investments were gambles. Mostly, they weren’t so hot.

These days, I assess and analyse much more. I avoid ‘turnarounds’, since I don’t think they turn around too often. Greater life experience has taught me to recognise that most companies that need to turn, or might turn, are already dead – they just don’t know it yet.

I also have learned my lesson with ‘development’ companies. You know the thing, one great idea that ‘if’ they get to market will make ‘tens of millions’. I own shares in a couple that I bought years ago. Broadly, I was right to buy. Of all the development stocks I could have bought, these actually did develop and do make products. They just don’t make profits yet – years after I bought.

One of my development picks actually dominates the bluetooth market. That’s right, I invested in the company that developed much of the bluetooth technology we use today! How could it not make a bundle of money? Am I a genius or what? Years later, I am still down 65%.

Another has an amazing fuel saving device for gear boxes in cars, lorries and off-road vehicles. In this age, you’d think that fuel saving technology would be all the rage. Over the years, I have bought more shares in the lows and sold them in the highs to make some ‘trading’ profits. But still my initial investment (I think 8 years ago) is down.

Though I may not have realised it at the time, these were not investments, they were gambles. So is the stock exchange really a place for beginners?

An investment is in a company Read more…

Picture this. You can?t make any sense of the market, and things are going haywire. You take a deep breath, and quickly click your mouse. You breathe a sigh of relief when the sell confirmation appears on the screen. Six thousand shares had just sold at 7. That?s right, a $4,200 profit in only about 20 minutes. This, certainly, could become the highlight of a trading career. That was about the quickest $4200 that a person could ever make. It was 9:46 A.M. The rest of the day was now open.

Does this happen everyday to every trader? I think not. However, there are enough of these stories around that the mystique and appeal of independence can be a draw for those that hear of the possibilities.

Those who decide to make the commitment to day trading soon learn that the only thing day traders should be concerned about is the next five minutes. Every trade should be a precise, well-calculated move. The goal is (Floyd?s Four-Gets) to get in, get a profit, get out (as quickly and as safely as possible) and get away (don?t over trade the play). That is the daily routine of the day trader.

This might sound surprising, but it is not the job of the day trader to understand the ?comings and goings? of the of market movement. The day trader?s sole responsibilities are these:
1) End each day ?flat,? that is, without any positions;
2) Make a profit, no matter how large or small;
3) Keep all losses small and manageable.

The most important thing to the day trader needs to be the ?fast buck.? Most people do not have a concept of the real work of the day trader. They confuse the role of trader with investor. Traders don?t invest. Traders trade. They are not necessarily concerned with long-term trends and market conditions. You won?t catch a day trader putting in a lot of time with The Wall Street Journal, long-term graphs, charts, and research. In fact, knowing too much could hurt the day trader. Things move too fast. There isn?t time to listen to brokers and analysts and to decipher rumors. Day traders may not even know the names of the businesses whose stock they are trading. The stock symbol is the important thing.

Besides the three responsibilities of the day trader, there are three goals:
1. To profit consistently and significantly from day trading;
2. To become better day traders with more experience;
3. To maintain a disciplined and business-oriented approach to help attain day-trading objectives.
Within the boundaries of the day trader?s responsibilities and goals, all market volatility, regardless of cause, must be approached as an opportunity for potential profit. A day trader is not concerned about what is right or wrong in the market nor does a day trader have time to consider the ?why? of things.

A profit can be made even if a trader is only right 25 percent of the time, maybe even less. The key is making a lot of money on the good trades and only losing a small amount on the bad trades. The important thing is being right on the right ones. Conversely, a trader could make good trade picks 75 percent of the time and yet still lose money. This comes from being in too heavy on the bad picks. To come out on top a trader needs to admit when he has made a wrong pick and react quickly. Those who get stuck on the research and analysts? calls, have overlooked Read more…

There is a lot of money to be made as a day trader, but it’s not as simple as filling out online surveys, being a mystery shopper, or blogging your way to success. You can be a day trader from home but generally it is considered much more involved than many of the other businesses that people choose to do from home. Day trading can earn you a lot of money in a short amount of time, or if you don’t know what you are doing it can cost you a lot of money in a short amount of time. It’s easy to get over excited when you first get into day trading and over invest and simply not play by the rules of the game. The rule of the game, that is what sets day trading apart from a lot of other businesses you can do from home, is there are things that you should and shouldn’t do if you want a shot at being successful.

The Fun of Day Trading
Many consider day trading the fun part of investing, because there is no need to wait for long periods of time to see your investments grow. While it can be fun to invest in day trading it’s important not to allocate more than 3-5% of your equity corpus for the purposes of day trading. This is a safe amount to stick with because if it is all lost it won’t ruin you financially. Many people get carried away and will take as much as 25% off their equity corpus for day trading and then they lose it all. Twenty five percent of your equity corpus is a lot of time with the same investment, waiting patiently for them to pay off, so you will want to hold back a bit where day trading is concerned.

Day Trading Tools
Many get into day trading and think with all of the technological support they couldn’t possibly lose money. It’s easy to think this with 24 hour access to the stocks via stock market tickers, stock market websites and such. These tools do make day trading easier because you can always be looking for your next big deal, but it doesn’t make it any safer. Remember that day trading is still quite risky and you have to treat it accordingly. Use these tools to your advantage, but it’s important that you realize that they don’t make the Read more…

Despite some intensive searching online, I have been unable to locate a fact that I remember reading some months ago.

The fact was this: 80 percent of private investors lose money in their direct investments.

This is the secret that Wall Street does not want you to know. I guess it could be worse. I remember reading some years ago that 97 percent of all gamblers in the UK lose over time.

There are several reasons for why the majority of investors lose money. The main one is almost certainly due to knowledge. Whilst it is not my intention to suggest that insider knowledge is used, it is hard to imagine that some unscrupulous traders are not involved.

What is more important is that many or most private investors simply do not conduct enough research into the firms in which they plan to invest. Company accounts are not looked at or only briefly. Competitors are not assessed thoroughly.

The stock exchange is a very competitive place to make money. All those red braces wearing investment banker types take the game very seriously and so should we private investors if we plan to win.

In fact, the stock exchange is so competitive that at times even some of these investment banks fail to make a profit, despite all the advantages they hold over the rest of us.

Therefore, we private investors need to work very hard to compete. It is possible. The markets are so large that many private investors can earn a comfortable living online.

It is also vital to be disciplined and to follow investments and companies of interest very closely. If you need to sell out at a moments notice, the discipline to do so is required immediately. Failure can cost you your profits and potentially your initial investment as well.

As prices change, so must your goals. Using a stop loss or some variant can help your selling strategy, but when it is time to sell, you must.

Before you start on your own private stock exchange odyssey, Read more…

Without a doubt in my mind, I believe that the main reasons that most people are unsuccessful as investors are a lack of both preparation and discipline.

Investment in any form is a show of faith in the future, optimism if you prefer. Whether you are buying property, antiques or stocks, you are displaying your positive outlook for your future years.

Yet despite this obviously good intention, many people make dreadful investments and lose large amounts of money. This optimism can become blinding and prevents us from seeing obvious risks or pitfalls. If we do see them, we may discount them or fail to understand their potential implications.

Therefore, understanding the nature of risk is a key lesson that all investors should try to learn before they begin to invest directly in companies quoted on the stock exchange.

For years, investment newcomers were advised to start by choosing a few companies and investing on paper. In other words, the new investor would follow the progress of the company and share price without actually buying. Each day a new plot on a hand drawn graph of the company would help the investor to understand just a little more.

Over time, the investor might spot trends between the company and a leading index or sector. The price might move in odd and unpredictable ways causing a desire for more understanding and education to explain these mysteries.

This desire for new knowledge is a core trait of successful investors. To succeed in stock exchange investments, it is vital to firstly keep up to date, but if possible to stay ahead of the pack. This might mean reading trade journals, the annual reports of competing firms, company reviews, interviews and much more. This ongoing education is vital to Read more…

It has often been said that there is only two ways to get hurt really bad on a stock trade, getting caught in a “death spiral” by not using DTM: Decisive Trade Management in the way of stop loses and having a stock halted on you. Halts you have zero control over. Death spirals are of your own making if you do not practice the use of stop loses.

Very simply stated Decisive Trade Management is keeping a stock form moving to far against you when the trade goes bad. It is not impossible to have 5 or 6 out of 10 trades lose money and still be profitable for the net of the total 10 trades. What you must do is keep your loses small and manageable and try to maximize you winners. This is done with the proper use of Trading Stops and a strict discipline in using them.

Capital Preservation

It is my firm belief that capital preservation is one of, if not the single most important thing a trader has to concentrate on. It is also my belief that it is always better to error on the side of safety or caution, in general this all comes under DTM: Decisive Trade Management.

Stop loses and the discipline to use them are part of DTM

When you enter a trade, you should have both a possible profit figure or gain that you hope to obtain and a downside loss that “you” are comfortable with if the play turns against you. Only “you” can make that decision as to what these limits are. You are the only one that can determine you risk tolerance and ability to absorb loses on an individual trade. Factors on which these limits are determined include the amount of money you have in your account, your experience and knowledge of the particular stock, news or events affecting the trade and over all market conditions and possibly others. As an example, a trader trading a $250,000 account is more then likely better able to take a $2.00/shr hit on a stock then the trader trading a $25,000 account. Some traders will consider just how well they may have done on a previous trade or number of trades and let the stock run a bit more against them if they have already made a few good trades or if they need to make up for a bad trade or two. This is very risky. I personally don’t like to see risks taken in direct relation to previous trades. I would much rather see a plan that is in effect straight across the board. This goes along with my thinking that ever trader should have a trading plan and then you work your plan. (See Trading Plan: Everyone Should Have One) But human nature what it is, I’m sure the balancing trades against one another is probably being done all the time.

As a personal guide, in a market with very tight trading ranges, I’d think twice before letting a sock turn down by 50 cents or so. That is a very tight stop loss for the most part; again this can be flexible depending on your knowledge of the stock and its trading habits coupled with your own tolerance for loss. On an $85 stock, 50 cents is not all that much, but on a $9-10 stock it’s a much larger percentage. Markets trading in tight ranges and lacking volatility make it much more difficult to recover loses if the follow through is just not there. If the average profit in a trade is 25-75 cents, then letting one get down on you a buck or more is going to wipe out most if not all of the previous gains on two or three plays. It can take that many trades to get back to even.

On the other hand some stocks can move $2 or $3 in a Read more…

The term stock market, as the name connotes, is a place where you can market or trade a company’s stock, which the corporation issues through shares in order to raise capital. Of course, capital is the cost that a company incurs in relation to producing its products and services.

The people who buy these shares are the shareholders, and the term can refer to an individual or an organization.

The term stock market can also apply to all the stocks available for trading (as well as other securities), for example, when used in terms like “the stock market performed well today.”

The stock market involves the trading of bonds, which is a debt security that stipulates that the issuer of the bonds holds the holders a debt. It is exactly like a loan, only that it is in the form of a security. These bonds are traded over-the-counter, which means they are traded directly between two parties. Thisis opposed to exchange trading or the trading that occurs on stock exchanges or future exchanges.

The stock market also involves the trading of commodities, which refer to raw commodities such as agricultural products (coffee, sugar, wheat, maize, barley, cocoa, milk products) and other raw materials (pork bellies, oil, metals).

The stock market is different from the stock exchange, which is primarily concerned with bringing Read more…