Four Things You Need to Know Before Investing in Stocks

Stocks can be a great investment with the market returning a historical average eight percent return. Too many would-be investors make mistakes going into the market and instead of earning profits on their trade, they end up losing their initial capital. Before you invest in the markets, there are four things you should know before placing that order to buy.

The first thing you need to know about investing in the market doesn’t have anything to do with PE ratios, capitalization or any other fancy investing terms. The first thing you need to know is about yourself. All investments carry an element of risk. Usually the higher the risk, the higher the expected return. As an investor, you need to be comfortable with a level of risk you are willing to accept. If you are a very risk-adverse investor, then other types of investments may be more suited to you than the stock market. Or if you still want to invest in stocks, you should stay with the safer “blue-chip” stocks. Blue chip stocks are historically stable and pay a regular dividend.

Secondly, as an investor, you need to understand the market and the companies you invest in. You don’t have to become an expert, but you do need to understand the basics of market mechanics, the history of the companies you invest in terms of stock price trends, profitability, consumer demand, etc. Playing the stock market without knowing the basics is like playing baseball without knowing the rules.

A third thing you need to know before investing is what are your goals. Just knowing you want to “make a fortune” isn’t good enough. Specific goals should be set at the onset of your investing career. Take into consideration things like the preservation of capital, rate of return and loss limits. In fact, each trade you make should adhere to the investing rule of plan your trade, trade your plan.

Emotions figure high when it comes to money, making it, but especially losing it. It is easy to get caught up in the soaring euphoria of seeing a trade take off. The fourth thing to know is to take your emotions out of the equation. If you have planned your trades well, you know at what price point you’re going to invest, and you know how much you are willing to loss, and what is the target profit on a trade. Knowing all this in advance will help you remain objective about a trade.

Warren Buffett–The Ideal Financial Investment Mentor For Beginners

The financial world is filled with people eager to offer investment advice. While many of these individuals are well-educated and highly-successful, this article will focus on using Warren Buffett as one’s financial adviser and mentor.

Warren Buffett currently serves as CEO of Berkshire Hathaway and is its #1 shareholder, The fact that Buffett’s net worth as of June 2015 is estimated to be $69 billion speaks for itself.  In a recent interview, this financial guru explained how he has been learning and perfecting his fianncial portfolio since the tender age of 11.

For those new to the investment world, there is no better way to learn and grow than to roll back the hands of time to your childhood and investigate Buffett’s Secret Millionaires Club. This animated television series comprised of 26 episodes, now available on DVD, is geared to teaching children the ropes of financial investing. The  basic premises are: learning how to make sound financial decisions and the ABC’s of starting your own business.

As an outgrowth of the aforementioned program, the year 2011/2012 saw the launch of “Learn & Earn,” consisting of finance and investment education materials including lesson plans for school classrooms and reinforcement activities for usage by parents and youth group counselors.

Here are three steps outlined by Warren Buffett for the beginning investor, regardless of age or financial worth.

Step: 1 Plan of Action 

The first consideration is to envision your future life’s ultimate dream, but to bear in mind that there is a definite difference between what you actually need to exist comfortably versus what you want. Once your vision for the future is firmly planted in your mind, the next must-do is to honestly evaluate every aspect of your existence including your current financial footing and spiritual beliefs in order to realistically establish your goals.

Step:2 Institute Your Plan

Your ability to read and spending time doing it is one of your most important investment tools. In addition to reading, enroll in appropriate classes, industry blogs, webinars and podcast. By all means, take the time to apply what you learn to your current situation and your goals.

Step 3:  Seriously Evaluate Your Associations

According to Buffett, the five people you spend the most time with have the greatest influence and impact on your self-image and your goals. Along with his friend Dr. Carmen Harra, a highly-esteemed psychologist and certified counselor, he advocates not licking old wounds but healing them by accenting positives and eliminating negatives.

Both of these individuals advocate that relying on your inner-self /intuition is an extremely important investment tool. As the lyrics of an old song go, “just let your conscience be your guide.”

Are Mutual Funds a Good Investment?

A mutual fund is a professionally managed pool of money that has been usually invested by individual investors. The funds invest mostly in stocks, but there are funds that also invest in bonds, government debt (i.e., T-Bills) and other income producing assets. In the equity markets, funds can be found that invest in the broad market while others cast a narrow net in only certain industries, or in companies of a particular size or age. Geographically, funds invest in US companies, or there are funds specializing in larger regions and even down to specific countries. The breadth of the range of mutual funds almost guarantees that someone looking to invest can find a fund tailored to their personal choices.

But the question is what makes a fund a good investment. As already said, funds are professionally managed by people who know the underlying fundamentals of the stocks they are trading in. Also, the enormous amounts of money funds control and the diversity of their portfolios can mitigate a lot of the swings in the market. Because of the importance of the funds investments, fund managers often have direct access to top-level executives at the companies they invest in so their information and knowledge is as current and complete as possible.

On the other side, funds can be expensive. The fund managers, staff, and other expenses are paid for out of the earnings and asset pool they control. As an individual investor in a mutual fund, you have no say about which companies the fund invests in. While having a professional looking out for your money sounds like a great idea, fund managers do sometimes make mistakes, and not only your profits (both realized and not) may disappear along with a portion of your original investment.

The best way to find what fund suits your investment strategy is to read the fund’s prospectus. This is a legally required document by the Securities and Exchange Commission that the fund must provide you on request. In this document, it lists the historical returns the funds has had and a review of its expenses and fees charged to the fund. Usually, a biography of the fund managers is included so you can get an idea of their background and personality.

By reading the prospectus of several funds, you will get an idea of the strategies each fund uses to maximize your returns and find a fund that closely matches your own goals and investment objectives.

Igor Cornelsen Advocates Investing Sooner Rather Than Later

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Investing is a pivotal part of everybody’s life. Planning for the future, making sure that you’re going to have enough money for retirement are the types of concerns that literally everybody shares. That’s why you can never get involved with investment planning too early.

Outliving your money is one of the scariest things that people face when it comes time to retire. Igor Cornelsen advocates effectively planning for how you would like to live out your retirement. That’s why you’ve got to plan ahead, and figure out how much of an income you’re going to need.

What’s more, getting involved early is a necessity, because that’s what’s going to help you make a difference in the long term. The earlier you invest, in safe long term investments, the more money that you’re going to earn when it does come time for retirement.

Leaving your money in the market, invested for a long period of time, can lead to tens of thousands of dollars earned on safe investments, even if you’re not starting out with that much money in the first place. It’s all about making that commitment to set money aside, and researching safe places that provide you with guaranteed growth.

Just be sure that you diversify your investments. The worst problem that you could run into is failing to properly diversify your investment portfolio. That’s where you run into trouble, and you end up losing money because you put all your eggs in one basket.

Always diversify, because it limits the impact of an investment going bad.

Careful Points to Consider Before Making An Investment

When you’re buying stock, you’re literally buying a piece of a company. That means you have to think carefully about your investment, to ensure it’s going to be worthwhile in the long run. Meaning, finding the right type of company that you can trust with your money is the name of the game. Carefully investing requires making intelligent, and informed decisions about the probability that a company can succeed.

Think about this for example, a company that frequently has trouble keeping the same CEO at the top for very long, probably has something going on behind closed doors. There’s probably a reason that then CEOs keep moving in and out, and that might be a situation that’s best left avoided for you.

Sometimes that’s evidence that there’s a bigger problem afoot, something that you probably don’t want to get involved with. Whether there’s a problem with the books, things just don’t seem to be profitable enough, whatever the case may be.

Another thing to watch for, is the company’s history. Some companies are cyclical. Meaning there will be times when the company is more profitable, and times when they are less than profitable. These cycles could last for years, or even longer sometimes. But many industries come back with a fury after a slow time. Exploring that history could be key to getting in on an investment while it’s still cheap, knowing that it will pay off soon enough, when the cycle completes.  

Africa Hitting Major Investment Highs and Lows

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Africa is expected to see further investment into their technology start-ups throughout 2014, but that’s mainly due to the fact that the entire world is seeing a bit of a boom in that regard.  But Africa, despite having some great tech start-ups is lagging behind the rest of the world when it comes to funding.  That’s because of the nature of their products.

Right now, most of the tech start-ups focus on regional, or even more local development focuses.  They don’t have the broad global appeal to make them major world winners, and to draw more attention to that cause.  That’s why what Africa really needs, is that one major global winner.

Something that the entire continent can have as an example of what the company can bring to the world, in terms of technology.

Another big aspect are the local banks holding them back.  Finding funding is always difficult, but that’s made even worse by banks in Ghana, which feature a 28% interest rate on these types of business loans.  That’s keeping plenty of companies out, that desperately need funds to continue their work.

Despite the fact that there are plenty of advantages in Africa, if some investors would notice those. Like the most cheaper cost of labor, so that you can stretch those investment funds much further.  Plus the continent is on the same time zone as Europe, allowing for more easy integration into the global economy.

But a lot of Africa’s success needs to come from African entrepreneurs and their commitment to making their products appealing on a global scale.  That means traveling to major technology hubs like Silicon Valley, and London, where they can showcase ideas and attract those world investors.  That will help the benefits of investing in Africa shine through.

Igor Cornelsen Emphasizes The Importance of Productivity and Profits in Investing

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Making intelligent investments requires a different type of thinking. There are tons of magazines, websites, and financial advisers that are going to tell you the current market trends. But going with trends is never a good way to make money in the long term, and that’s something that Igor Cornelsen had to find out the hard way, through time tested experience.

What he’s found over the years is that you have to look at a company’s potential to be productive, and the potential to maximize profit. First off, productivity might not mean what you think.

Productivity in an investment measures the potential that any given good or service has to become more expensive in the future. Take something like gasoline for example. As there is fewer and fewer fossil fuels, there is going to be less gasoline, and more demand. That means the price is only going to go up, so investing now almost guarantees some sort of positive movement down the line. The same is true of real estate, as inflation will always push property values up.

But you also need to realize that any given investment is just like owning a piece of a business. That means taking control of a small percentage of a corporation. So an investor needs to determine the potential of a business to make money. Plus you want to take a look at how likely a company is to weather a storm, and be successful in the long term.

Companies that don’t have a huge long term profit potential probably aren’t going to be worth your time or effort.