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DeletedUser394
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[FONT="]Your Risk Tolerance[/FONT]
[FONT="][/FONT]
[FONT="]This is one of the most important things to consider before you invest. It’s never good to lose sleep over an investment. Ask yourself what risk level you think you can handle without harming yourself emotionally. Many people can’t stomach swings of more than 10%, and some people withdraw their money after losing 20%. Ultimately it’s up to you and what you think is right for you. Never invest in something that you don’t fully understand or are having second thoughts about.
[/FONT]
[FONT="] [/FONT]
[FONT="]Your Age[/FONT]
[FONT="][/FONT]
[FONT="]This is another important factor to consider before investing. A sixty year old on the verge of retirement will not have the same goals as a thirty year old saving up for a new home. While the sixty year old will be interested in securing his or her money, the thirty year old will want to invest his money for long term growth.[/FONT]
[FONT="][/FONT]
[FONT="]Your Time Horizon[/FONT]
[FONT="][/FONT]
[FONT="]Your time horizon is the amount of time, (expressed in years), that you plan to invest your money, which normally ends the day you retire or pass away. The sixty year old will have a time horizon of about 10-15 years, whereas the thirty year old will have a time horizon of 35-45 years.[/FONT]
[FONT="][/FONT]
[FONT="]Your Personality[/FONT]
[FONT="][/FONT]
[FONT="]Are you lazy? If so, you might want to hand your money over to a mutual fund manager or an index fund. Otherwise investing, especially in individual stocks, requires a lot of well planned research. It’s pretty straight forward once you get the hang of it, but most people don’t have the time.
[/FONT]
[FONT="] [/FONT]
[FONT="]Set Goals[/FONT]
[FONT="][/FONT]
[FONT="]You need to have a clear path to follow, as to what you would like to accomplish financially. Trudging aimlessly through will more often than not leave you grounded. Goals are essential. Without them, how do you know where to start?
[/FONT]
[FONT="] [/FONT]
[FONT="]Asset Allocation[/FONT]
[FONT="][/FONT]
[FONT="]After deciding on the issues above, it’s time to determine your necessary asset allocation. Asset allocation is simply the amount of diversification, (stocks, bonds, cash, etc), that you have in your investment portfolio. This is normally expressed in a percentage form. Ultimately it is up to you to decide alone or with the help of a financial advisor, because after all it’s your money.[/FONT]
[FONT="][/FONT]
[FONT="]What Type of Investor Are You?[/FONT]
[FONT="][/FONT]
[FONT="]There are three general categories of investors – active, passive, or regular. The passive investor typically relies on the tips/advice of others. He or she only reviews their portfolio once in a while and rarely changes their holdings. [/FONT]
[FONT="]Active investors, also known as traders are looking for fast appreciation. Many people in this group day trade, and ride the stock market up and down like a roller coaster ride. Active trading can be dangerous to your portfolio especially if you don’t have a lot of experience, and few people can actually turn a profit. People who dollar cost average are also considered active investors who are more on the passive side. [/FONT]
[FONT="]Regular investors will generally return a steady (not necessarily higher) profit over time. A regular investor does his or her homework, researches every investment, and finds ways to keep costs low. You can argue that a person who dollar cost averages can also be placed in this category, provided that that person is consistently looking for better investments.[/FONT]
[FONT="][/FONT]
[FONT="]Dollar Cost Averaging[/FONT]
[FONT="][/FONT]
[FONT="]Dollar cost averaging is one of the smartest things a greenhorn investor can do. While it generally is better to do with index funds, exchange traded funds, and mutual funds, you can also apply this strategy to stocks and other securities. Dollar cost averaging is very simple to do, and can build wealth, especially during a bear market. [/FONT]
[FONT="]It involves putting a set amount of money aside to buy more shares in an investment that you already own. Pretend that you buy 5000$ worth of the Vanguard 500 index fund, a fund that tracks the S&P 500. The Vanguard 500 is currently trading at $120, so you would be able to purchase 41.67 shares. Then every month you add $500 to buy more shares. Take a second to look at the chart below.[/FONT]
[FONT="] [/FONT]
[FONT="]Assuming that you stick to your plan of investing $500 every month, in January you can only purchase 3.57 shares. As the price of index fund changes, so does the amount of shares that you can buy for the same amount of money. The average price of this index fund was $108.34. Assuming you were to spend that same $5500 to buy shares in that same fund when the price was at its average of $108.34, you would have been able to buy 50.77 shares.[/FONT]
[FONT="]If you stayed with your original plan of dollar cost averaging, you would now have 84.55 shares with the same regular deposits of investment! Dollar Cost Averaging is a great idea for anyone interested in investing, but who might lack the experience and or time to invest in more complex financial instruments. When the price of the fund goes down, you buy more shares, therefore allowing a higher value of appreciation. When the price of the fund goes up, you buy fewer shares, limiting the amount of money you would otherwise have to spend. This strategy works great over time, especially for index funds and exchange traded funds. If you were alive during the great depression or even the correction of 1987, (there were over 30 market corrections over the last 100 years), and you stuck to your dollar cost averaging plan, you would probably have a suitable nest egg for retirement. That’s because when everyone was selling their stocks and other securities, fearing the end of the world, the prices declined so fast that you could pick up many stocks at bargain-basement prices. [/FONT]
[FONT="]Like I said, throughout history there have been over 30 corrections. It’s important to note that after each one of these, the rebounds were higher than the last. Don’t use the “end of the world†as an excuse to stop dollar cost averaging or to even sell your shares. As you might be aware, the stock market has never yet defaulted, since its creation many many years ago.[/FONT]
[FONT="][/FONT]
[FONT="]Diversify, Diversify, Diversify[/FONT]
[FONT="][/FONT]
[FONT="]Diversification is one of the key components to investment success. While your gains will typically be lower than if you’d invested your money in only a few places, your losses will be minimized.[/FONT]
[FONT="][/FONT]
[FONT="]Practice Accounts[/FONT]
[FONT="][/FONT]
[FONT="]These are excellent ways to get a feel for what it means to be an investor. On most sites you are given a set amount of “play moneyâ€, which you can then invest in real time on the world’s stock exchanges.[/FONT]
I've been working on these for a while :smxB:
[FONT="][/FONT]
[FONT="]This is one of the most important things to consider before you invest. It’s never good to lose sleep over an investment. Ask yourself what risk level you think you can handle without harming yourself emotionally. Many people can’t stomach swings of more than 10%, and some people withdraw their money after losing 20%. Ultimately it’s up to you and what you think is right for you. Never invest in something that you don’t fully understand or are having second thoughts about.
[/FONT]
[FONT="] [/FONT]
[FONT="]Your Age[/FONT]
[FONT="][/FONT]
[FONT="]This is another important factor to consider before investing. A sixty year old on the verge of retirement will not have the same goals as a thirty year old saving up for a new home. While the sixty year old will be interested in securing his or her money, the thirty year old will want to invest his money for long term growth.[/FONT]
[FONT="][/FONT]
[FONT="]Your Time Horizon[/FONT]
[FONT="][/FONT]
[FONT="]Your time horizon is the amount of time, (expressed in years), that you plan to invest your money, which normally ends the day you retire or pass away. The sixty year old will have a time horizon of about 10-15 years, whereas the thirty year old will have a time horizon of 35-45 years.[/FONT]
[FONT="][/FONT]
[FONT="]Your Personality[/FONT]
[FONT="][/FONT]
[FONT="]Are you lazy? If so, you might want to hand your money over to a mutual fund manager or an index fund. Otherwise investing, especially in individual stocks, requires a lot of well planned research. It’s pretty straight forward once you get the hang of it, but most people don’t have the time.
[/FONT]
[FONT="] [/FONT]
[FONT="]Set Goals[/FONT]
[FONT="][/FONT]
[FONT="]You need to have a clear path to follow, as to what you would like to accomplish financially. Trudging aimlessly through will more often than not leave you grounded. Goals are essential. Without them, how do you know where to start?
[/FONT]
[FONT="] [/FONT]
[FONT="]Asset Allocation[/FONT]
[FONT="][/FONT]
[FONT="]After deciding on the issues above, it’s time to determine your necessary asset allocation. Asset allocation is simply the amount of diversification, (stocks, bonds, cash, etc), that you have in your investment portfolio. This is normally expressed in a percentage form. Ultimately it is up to you to decide alone or with the help of a financial advisor, because after all it’s your money.[/FONT]
[FONT="][/FONT]
[FONT="]What Type of Investor Are You?[/FONT]
[FONT="][/FONT]
[FONT="]There are three general categories of investors – active, passive, or regular. The passive investor typically relies on the tips/advice of others. He or she only reviews their portfolio once in a while and rarely changes their holdings. [/FONT]
[FONT="]Active investors, also known as traders are looking for fast appreciation. Many people in this group day trade, and ride the stock market up and down like a roller coaster ride. Active trading can be dangerous to your portfolio especially if you don’t have a lot of experience, and few people can actually turn a profit. People who dollar cost average are also considered active investors who are more on the passive side. [/FONT]
[FONT="]Regular investors will generally return a steady (not necessarily higher) profit over time. A regular investor does his or her homework, researches every investment, and finds ways to keep costs low. You can argue that a person who dollar cost averages can also be placed in this category, provided that that person is consistently looking for better investments.[/FONT]
[FONT="][/FONT]
[FONT="]Dollar Cost Averaging[/FONT]
[FONT="][/FONT]
[FONT="]Dollar cost averaging is one of the smartest things a greenhorn investor can do. While it generally is better to do with index funds, exchange traded funds, and mutual funds, you can also apply this strategy to stocks and other securities. Dollar cost averaging is very simple to do, and can build wealth, especially during a bear market. [/FONT]
[FONT="]It involves putting a set amount of money aside to buy more shares in an investment that you already own. Pretend that you buy 5000$ worth of the Vanguard 500 index fund, a fund that tracks the S&P 500. The Vanguard 500 is currently trading at $120, so you would be able to purchase 41.67 shares. Then every month you add $500 to buy more shares. Take a second to look at the chart below.[/FONT]
[FONT="] [/FONT]
[FONT="]January[/FONT]
[FONT="]$140 (3.57 )[/FONT]
[FONT="]February[/FONT]
[FONT="]$90 (5.56)[/FONT]
[FONT="]March[/FONT]
[FONT="]$20 (25)[/FONT]
[FONT="]April[/FONT]
[FONT="]$80 (6.25)[/FONT]
[FONT="]May[/FONT]
[FONT="]$200 (2.5)[/FONT]
[FONT="] [/FONT][FONT="]$140 (3.57 )[/FONT]
[FONT="]February[/FONT]
[FONT="]$90 (5.56)[/FONT]
[FONT="]March[/FONT]
[FONT="]$20 (25)[/FONT]
[FONT="]April[/FONT]
[FONT="]$80 (6.25)[/FONT]
[FONT="]May[/FONT]
[FONT="]$200 (2.5)[/FONT]
[FONT="]Assuming that you stick to your plan of investing $500 every month, in January you can only purchase 3.57 shares. As the price of index fund changes, so does the amount of shares that you can buy for the same amount of money. The average price of this index fund was $108.34. Assuming you were to spend that same $5500 to buy shares in that same fund when the price was at its average of $108.34, you would have been able to buy 50.77 shares.[/FONT]
[FONT="]If you stayed with your original plan of dollar cost averaging, you would now have 84.55 shares with the same regular deposits of investment! Dollar Cost Averaging is a great idea for anyone interested in investing, but who might lack the experience and or time to invest in more complex financial instruments. When the price of the fund goes down, you buy more shares, therefore allowing a higher value of appreciation. When the price of the fund goes up, you buy fewer shares, limiting the amount of money you would otherwise have to spend. This strategy works great over time, especially for index funds and exchange traded funds. If you were alive during the great depression or even the correction of 1987, (there were over 30 market corrections over the last 100 years), and you stuck to your dollar cost averaging plan, you would probably have a suitable nest egg for retirement. That’s because when everyone was selling their stocks and other securities, fearing the end of the world, the prices declined so fast that you could pick up many stocks at bargain-basement prices. [/FONT]
[FONT="]Like I said, throughout history there have been over 30 corrections. It’s important to note that after each one of these, the rebounds were higher than the last. Don’t use the “end of the world†as an excuse to stop dollar cost averaging or to even sell your shares. As you might be aware, the stock market has never yet defaulted, since its creation many many years ago.[/FONT]
[FONT="][/FONT]
[FONT="]Diversify, Diversify, Diversify[/FONT]
[FONT="][/FONT]
[FONT="]Diversification is one of the key components to investment success. While your gains will typically be lower than if you’d invested your money in only a few places, your losses will be minimized.[/FONT]
[FONT="][/FONT]
[FONT="]Practice Accounts[/FONT]
[FONT="][/FONT]
[FONT="]These are excellent ways to get a feel for what it means to be an investor. On most sites you are given a set amount of “play moneyâ€, which you can then invest in real time on the world’s stock exchanges.[/FONT]
I've been working on these for a while :smxB:
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