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A blog of all sections with no images
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Maximizing Your Trading Years |
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Tuesday, 03 April 2007 |
By Michael Dawson
I discovered Adam Hamilton in late 2002 and since have read his weekly essays without fail every week. I have incorporated his theory on market cycles into my trading strategy. His research has shown that throughout history markets tend to move in great cycles, long bulls followed by long bears. These cycles are around 34 years long - resulting in a 17 year up cycle followed by a 17 year down cycle. Obviously no market goes straight up or down, so within those major cycles are minor counter-cycles to keep everyone on their toes. Our last major up cycle ran from 1982 to 2000. So, we are now 7 years into the down cycle. If you entered the market in 2003 - it doesn’t feel like a down cycle. However, if you bought tech stocks in 2000 you are still down 50%.
Why am I mentioned this? If the average investor gets serious about investing around 30 and retires at 65, they only have 35 years to really put their money to work. So, if you buy into Wall Street’s buy and hold mantra and time it right at the end of 35 years you will have absolutely nothing to show for your efforts. All of the gains of the first 17 years will be given away in the next 17.
I have said all of that to say if you have any desire to become financial free - independent thinking is a requirement. It’s time to throw out many of the truism you have readily accepted especially if it was recommended by Wall Street. Like buy and hold for the long run. Or if you bought a stock at $30 and now it’s trading at $20 buy more. Obviously if you liked it at $30 - you must really like it at $20. Or I’m too busy to manage my finances - I will turn it over to a professional. That one drives me nuts. Number 2 of my “5 Not So Easy Steps to Financial Freedom” is shift. Until you are ready to start thinking differently, make sure that your boss likes you :)
About the Author
Michael Dawson recently said goodbye to a 20 year career in Engineering, Marketing and Sales to focus on living his dream of financial independence as a full-time trader on his on account. He has also established a financial education company, The Time & Money Group, to encourage others to pursue financial freedom and is publisher of the company's blog "Breaking the Shackles of the 9 to 5." His mantra is "Why trade time for money ... when you can have both."
http://www.thetimeandmoneygroup.com/blog
Make sure to read one of Dawson's most popular articles: "Saying Good-Bye to the Time for Money Swap"
Article Source: http://EzineArticles.com/?expert=Michael_Dawson
http://EzineArticles.com/?Maximizing-Your-Trading-Years&id=509319
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Investing - Planning To Make Your Money Last Forever |
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Tuesday, 03 April 2007 |
By Jeffery Voudrie
It’s true that you can’t take it with you, but many are becoming more concerned about what happens to what they leave behind. Thanks to some recent changes in estate laws, strategies that were once only doable by the extremely wealthy are now more accessible by those of more modest means. Read on to see if you can take advantage of these estate planning tools and create a living legacy for your family.
Wealthy families have long used various trusts to increase their fortunes and help shield their assets from excessive taxes. States limited how long these trusts could last, making the managing of these fortunes costly and difficult. But thanks to the actions taken by several states to remove time limitations, now you can create a dynasty trust that can last forever.
Dynasty trusts have several main advantages. Primarily, they keep your hard-earned nest egg from being eroded by estate taxes. Normally, wealth transferred from generation to generation is subject to estate taxes. Over time, large portions can be lost to taxes. This money is preserved in a dynasty trust.
They also protect your assets from creditors, bankruptcy and divorce proceedings. For instance, let’s say your son is a doctor and you leave him a large inheritance. Should he be sued by a patient, those assets couldn’t be touched by the plaintiff if those assets were in a dynasty trust. The same would be true if that son got a divorce. His ex-wife wouldn’t be able to demand a share of the assets in the trust.
We’ve all heard of the problems with trust-fund kids, where the vast wealth left to them takes away their incentive to achieve their own success. That is easily prevented using incentives to encourage your heirs in ways that match your morals and values. For instance, you can withhold funds until a grandchild has earned a college degree.
Dynasty trusts are best suited for those who have at least $500,000 to $1,000,000 in excess of what they need to continue living comfortably. They cost between $5,000 and $10,000 to create and professional trustees usually charge about 1% a year to mange them.
You don’t have to have a million bucks in cash lying around. Real estate, such as rental property, personal residences or vacation homes can be put into these trusts. When planned in advance, they can be set up at your death which allows the use of life insurance to fund the trust. The use of life insurance places these trusts within the reach of many people.
These trusts can last for hundreds of years, so it’s important to write them as carefully as possible. These trusts cannot be changed so they need to be carefully planned. Provisions to change trustees and end or split the trust should be included to allow future generations flexibility to deal with changing laws and situations.
The income from the trust can be paid to beneficiaries each year. In that case, the income is taxed based on each beneficiary’s tax bracket. Any income not distributed from the trust each year is taxed at the trust level where tax rates could be higher.
Dynasty trusts can benefit heirs in many ways. For instance, the trust could own personal residences or vacation homes for the heirs. This provides them a financial benefit, but since the properties are owned by the trust they are beyond the reach of the heirs creditors. This protects those assets for future generations.
If your own children don’t have a need for your assets and you want to pass them on to your grandkids and beyond, dynasty trusts allow you to do that without being subject to generation skipping taxes. If you don’t want to see your hard-earned wealth eaten away by Uncle Sam, a dynasty trust could be just the ticket. So even though you can’t take it with you, you can help provide for generations to come and even pass on some of your values as well.
An Estate Planning Attorney who has experience designing Dynasty Trusts should be consulted. He or she will be able to answer specific questions and help you decide if a Dynasty Trust is right for you.
Mr. Voudrie is a Certified Financial Planner and the President of Legacy Planning Group, Inc., a Private Wealth Management firm in Johnson City, TN. For more information call 1-877-827-1463 or email
This e-mail address is being protected from spam bots, you need JavaScript enabled to view it
Nationally-syndicated financial columnist and Certified Financial Planner® Jeffrey Voudrie provides personal, in-depth money management services and advice to select private clients throughout the USA. He’ll answer your financial question – FREE at http://www.guardingyourwealth.com
Article Source: http://EzineArticles.com/?expert=Jeffery_Voudrie
http://EzineArticles.com/?Investing----Planning-To-Make-Your-Money-Last-Forever&id=512439
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Investing - The Solution To The Investment Roller Coaster |
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Tuesday, 03 April 2007 |
By Jeffery Voudrie
Does investing put you on an emotional roller coaster? If so, you are not alone. The fluctuations of the market are hard for most investors to stomach, and many suffer from financial ‘motion sickness’ as a result. But making investment decisions under these circumstances is a recipe for disaster. Read on to find out how you can get off the emotional roller coaster of investing.
If you feel that you are on the investment roller coaster—if you lie awake at night worrying about your investments or get a knot in your stomach when you hear the markets have fallen—then you most likely have not allocated your portfolio so that it matches your emotional risk tolerance. Changing the allocation of your portfolio should alleviate this problem.
Investors find themselves on an investment roller coaster when their ‘intellectual’ risk tolerance doesn’t match their ‘emotional’ risk tolerance. This creates a ‘fear/greed’ cycle that causes many investors to constantly adjust their portfolio based on short-term circumstances instead of a long-term strategy.
For instance, an investor intellectually agrees with the benefits of equity investing and he decides to put a significant percentage of his money into stock market-based investments. But when the market starts going down, fear grips him and he can’t take it. He wants out.
Once the market recovers, his fear turns to greed. The market went up, so why didn’t his account? He blames his advisor for not telling him to buy, when in fact the investor didn’t act because of fear.
Don’t get me wrong. There is nothing wrong with tactically reducing the amount you have invested in equities to protect your money. That’s exactly what my proprietary money management system is designed to do. But in this case, I am talking about rapidly changing the long-term strategy based on normal market fluctuations.
The problem isn’t necessarily that the investor panics and sells, but that fear then keeps them from getting back into the market when they should. Instead of buying when everyone else is afraid, they wait until the market recovers and it’s too late. They sell low and buy high.
Let me give you a real-life example. After meeting together countless times, one of my clients agreed that having approximately 40% of his portfolio allocated to high-quality equities was the best way to help him achieve his goals. We talked extensively about the implications, did extensive research on each investment used, and invested the money.
Within a couple of months, this client was beside himself because he had lost $20,000!
But let’s put this loss in perspective. Although the market was down several percentage points, his account was down less than 1%. If you can’t tolerate a fluctuation of 1% then you shouldn’t be in equities.
We reduced his equity percentage down to 7% so he could sleep at night. By the end of that year, the market was up 8%. Most of that gain (as it usually does), came very quickly in a short period of time. And it started (as it usually does) right when nobody thought it could go up.
This client allowed the fear over a 1% loss to prevent him from achieving an 8% gain.
You will only know your true emotional risk tolerance after it has been tested. When tested, we learned that this client’s emotional risk tolerance was much lower then expected. Only then were we able to achieve the appropriate portfolio allocation.
That’s why it is so important that you have the ability to easily make changes to your portfolio without significant cost. That’s why I so adamantly oppose investments that have surrender charges—they cause you to lose your flexibility.
Also, your comfort with investment risk will change over time based on your experience and your situation. This client is becoming more comfortable with normal market fluctuations. We are increasing the percentage he has allocated to equities, but we are doing it slowly.
Recognize that your emotional risk tolerance is probably much less then your intellectual risk tolerance. Start slowly. Build up over time. Be flexible. And work with an advisor who understands and is able to help guide you along the way.
Have a financial question? Send me an email and I’ll personally respond, free of charge. Go to http://www.guardingyourwealth.com and click on ‘Ask Jeff’.
In addition to being a nationally syndicated columnist and Certified Financial Planning Practitioner, Mr. Voudrie provides personal, private money management services to clients nationwide.
Nationally-syndicated financial columnist and Certified Financial Planner® Jeffrey Voudrie provides personal, in-depth money management services and advice to select private clients throughout the USA. He’ll answer your financial question – FREE at http://www.guardingyourwealth.com
Article Source: http://EzineArticles.com/?expert=Jeffery_Voudrie
http://EzineArticles.com/?Investing---The-Solution-To-The-Investment-Roller-Coaster&id=512390
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Tuesday, 03 April 2007 |
By Alexandros Louizos
Forex is an abbreviation of Foreign Exchange. Like it pronounces Forex is the simultaneous buying and selling of a currency pair. Many currency pairs are available for trading (practically all) but traders rely most on some pairs which are called majors. These currencies are called majors because liquidity is major for these pairs and this means that you can sell or buy any of these pairs whenever you like because a lot of these money are in circulation worldwide.
Forex is a physical occurrence in the global economic system. A tourist traveling from Europe to USA exchanges euros to dollars and becomes a potential trader of Forex. Usa companies need to exchange US dollars before exporting to Europe or Japan. Every currency pair has a price which is determined by the law of demand and supply globally. If the demand for a currency is high then it gains in value. If the supply for a currency is high then it loses in value. Today, Forex liquidity is more than 3 trillion dollars daily.
The most important for a trader is the meaning of the value of a currency pair. For example EUR/USD 1.2640 means that you can buy 1.2640 USD with 1 EUR. Remember: An easy rule to remember what this price means is to translate the numerator (EUR) in 1 and take the currency value to be the denominator. Some currencies have special names like Kiwi for New Zealand Dollar, Cable for Great Britain Pound and Aussie for Australian Dollar. If you become an active Forex trader you will listen these names often.
How can a trader make a profit from Foreign Exchange?
This is the most important part to understand, so take great care to understand it thoroughly before reading more. The value of a currency pair is not the same during the day but changes second by second all the week besides Saturday and Sunday when the banks are closed. You can buy or sell a currency pair. This means that you can buy or sell the first part of the pair and sell or buy the other simultaneously. For example let’s say that the price for EUR/USD is 1.2640. You can give a buy order for 100 Euros in EUR/USD currency pair. This means that you can buy 100 Euros and sell 126.40 US dollars. After some time the currency pair value is 1.2700. Then you can give a sell order. You sell the 100 euros that you have bought previously and now you can buy 127 dollars. This means that you earned 0.6 US dollars. Let’s say that after some time the pair value is 1.2600. What happens now? You can give a sell order for 100 euros but now you can buy 126 dollars. You lost 0.4 dollars when the deal was closed. A deal in Forex is comprised by a full buy and sell or sell and buy cycle in a currency pair.
Let’s play more: Say the price for EUR/USD is now 1.2650. Sell 10,000 Euros. Buy them back when the price of the currency pair is 1.27 or 1.26.
Have you found the answer? You sold 10,000 euros and bought 12,650 dollars. You bought 10,000 euros back when the price was 1.27 so you sold 12,700 dollars. That's how you lost 50 dollars. On the other hand if you have bought 10,000 euros back with 12,600 dollars you would earn 50 dollars. Notice that the more money you trade the more profit or loss you realize. Make some examples of your own. Be sure to understand these transactions well before reading more.
ALWAYS REMEMBER
When you buy you are "long" in Forex language. When you are long you want the currency pair to appreciate in order to make profit. When you sell you are "short". When you are short you want the currency pair to depreciate in order to make profit.
The last digit of the price in a currency pair is called pip. In EUR/USD 1.2640 the 0 digit is called pip. More specifically the change of the last digit in one unit is called one pip change. The pip numbers in forex is the indicator of your profit or loss. In Forex you trade the last decimal change in the price of currency pair so it is important to trade big amount of money to realize a nice profit.
If you have tried to understand Forex you should have heard the word "margin". What is meant by margin? An official definition is:
"The amount of money of collateral deposited by a customer with a broker, by a broker with a clearing member, or by a clearing member with clearinghouse in order to insure the broker or clearinghouse against loss on outstanding futures positions".
Sounds like Greek? Well, margin is the amount you deposit for trading. The trading company uses this amount as insurance while you trade. Remember the examples of the currency pairs we used before. In order to make a sufficient profit per pip you have to trade at least 10,000 United State Dollars. With margin you only have to trade 100 USD. The remaining 9,900 are forex brokers’ money. When you realize loss while you are trading you lose only from your 100 USD trading money and forex broker does not lose anything of its 9,900 USD. By the use of margin accounts Forex trader can experience great profits will small amounts of money. Beware: Forex trader can also experience great loss with margin accounts.
Let’s look an example of the margin account:
A forex trader opens an account with a forex broker and deposits 1.000 USD. His trading potential capability with margin is now 1000*100=100,000 USD. The trader chooses to trade EUR/USD pair at 1,2600. He sells. The trade is now being realized like this: 100(traders’ money)*100 USD=10.000 USD for this trade (100 of trader’s money, 9.900 broker’s). After a while the trader experienced 100 pip loss. These 100 pips accounts for 100 USD which are taken from his account. The rest 9,900 USD of the forex broker account are remaining untouched. If the trader closed his position in 1,2450 he would have lost 150 USD taken from his account. 9,900 USD of the forex company remaining as it was. The trader would have lost 150 usd which are used as insurance or collateral from the forex broker to allow him to sustain loss.
If the trader bought again in 1,2700 he would have a profit of 100 USD. The profit is always yours. Your money is used by the brokers as collateral for the extra money they put in trade in order to allow you to make more profit with less money. By this way you can get leverage for your deals. If the leverage is 1:100 this means that for every dollar you put in the trade the broker adds 100, and so on for 1:400 etc.
REMEMBER: Margin is the money of your account that broker uses as collateral to trade more money in order to get more profit from your trades with less money. This way you can trade e.g. 10,000 USD for only 100 USD as margin. It is as if you temporally borrow money for investment 100 times the value of your invested money using as insurance the money you invest.
One trading contract is called lot. Lot sizes can vary depending on your account. If you have a mini account the lot size could be 10,000 USD. If you open a standard account the lot size can be 100,000 USD. You can trade multiple lots as long as you have the money in the account to be used as collaterals for the margin. In a mini account of 1000usd initial deposit, you can trade a maximum of 10 lots for 10,000 USD per lot.
These are the basic knowledge one should master in order to start trading forex.
Article Source: http://EzineArticles.com/?expert=Alexandros_Louizos
http://EzineArticles.com/?New-to-Forex-Guide&id=336719
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Top Tips for Effective and Profitable Stock Trading |
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Tuesday, 03 April 2007 |
By Mark Crisp
1. Keep an eye out for an “educated buy.”
If there is a particular stock that is at a low price but is being traded in an unusually high volume, there is probably something that those trading this stock know that you don’t. Find out ways to establish what information they have that you don’t.
2. Have protections in place if the value of a stock lowers.
Whilst I applaud you for engaging in profitable stock trading, you must remember that every time you invest in the stock market there is an element of risk. What will you do if the stock you have invested in plummets in price?
To help protect yourself, you must decide how much you are prepared to lose before you invest. This is an essential part of any trading plan.
A commonly used tactic is the stop-loss. This is a floor price that you will sell a particular stock at before you lose any money. A common amount for many investors is a price 5-10% lower than they paid for the stock.
3. For profitable Stock trading, you should look at a combination of growing your capital, and finding the best returns.
The total amount of money you have to trade, your capital, should be spread between low yield and low risk “blue-chip” stocks, and other stocks with the ability to give higher returns but are possibly higher risk.
4. Write down your trading plan.
You may have a detailed trading plan in your head, but you should write it down. This helps you identify the goals of your profitable stock trading plan, and makes you more likely to stick to your plan if things change.
5. Every trader has access to the same information
There are many successful traders out there who have access to exactly the same information as you do. With the proliferation of online information, everyone can have access to charts, up to the minute stock prices, and company announcements. These same trader’s also have losses, but their effective use of the information available to them gives them the edge in profitable stock trading over those who are not effectively using the same information.
6. Buy on the rumor and sell on the news.
Sometime’s you need to buy as soon as you hear that rumor. For example, if you hear about a potential takeover bid of a company, you want to get in whilst the stock price is low because it will rise.
The same is not true for selling though. Stock trading is not for the faint-hearted and should be treated as a long-term investment. You should not jump ship at every little jump in the road.
7. Work out your entry price and exit price first before buying your stock.
You shouldn’t just buy a stock at any price. For profitable stock trading, you should work out what a stock is worth to you and only buy if it is below that price or it gets down to that price.
You should also have sell prices, for both if the stock increases in value, and if it decreases in value. Stock prices can be cyclical, so it may be in your interest to sell stocks at the height of a boom, buy again if the price goes lower, sell when it goes higher again; and so on and so forth.
8. Diversify your portfolio.
As previously mentioned, there is a risk in investing in the stock market. Don’t put all your eggs in the one basket. Spread your capital across a variety of stocks. You may find that as one stock depreciates in value, another is appreciating in value. This minimizes your losses and leads to more profitable stock trading.
Get your Momentum Stock Trading System and sign up for my free weekly online trading system newsletter here at: http://www.stressfreetrading.com
Article Source: http://EzineArticles.com/?expert=Mark_Crisp
http://EzineArticles.com/?Top-Tips-for-Effective-and-Profitable-Stock-Trading&id=513307
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What Is A Story Stock And Can You Make Money With It? |
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Tuesday, 03 April 2007 |
By Steven Hoven
Story Stocks, What are they and should I avoid them?
What is a Story Stock? Well I don't know if I invited that phrase but my definition of it is simple. A stock that is built around a story. Yes every company has its own story what they do, when they started, their growth etc...
But what I am talking is the company that is ONLY selling the story. They talk about the industry as a whole. (The following is just general #'s of what a typical story stock might say...) The company deals in the medical field and say they have a drug that may down the road cure cancer. The company talks about how big the medical industry is, In the many billions! The company says if we could even just get 1% of the market we would have $100 million in sales. Or our net earnings would be $1 per share.
Yet the company is trading for .50-$3.
What they don't tell you is they just have an idea and it takes YEARS upon YEARS to develop a drug and it is very expensive. So in the meantime they will be issuing more and more shares of stock. Which dilutes the shareholder value while the CEO is making $100,000+ salary. It could be years upon years before they see even $1 in revenue. Yet that company could have a marketcap of $100 million.
That is what I consider a story stock. A company that has a goal and its a big goal but they are NO WAY NEAR IT. And the value of the company is already valued as if they were already at that goal. THAT IS BIG TIME TROUBLE STAY AWAY!!
Another example (I won't mention company names in case someone mistakes this as a good stock.)
This company deals with WIND Energy. What a GREAT STORY! It is a very hot sector right now. And who wouldn't want to use wind energy. I would love to have wind energy myself getting electric based on mother nature its a great concept. I am by no means an environmentalist but if I can save money and it helps the enviroment then great.
This company was selling a story that wind energy is the future. (Which it may be.) That getting just a small portion of the energy market can mean millions upon millions of revenue. (Which it would.)
I ran across this stock 2 years ago and it was trading in the low $1+ range. Today it is trading at .10 and has a market cap of $3.4 million. So it has roughly 34 million shares outstanding. I don't recall what it had a few years back but even if it was 10 million shares that was a $10-15 million marketcap.
In those 2 years you know how many wind machines they have sold? 0, yes ZERO! They haven't had any revenue in that time.
You know how much the CEO of the company makes per year? $225,000
You know how many employees they have? 11
Not a bad job shuffling papers around not having ANY REVENUE but still making a nice check.
You know how much they spent on Selling and Administration (basically salaries) for the quarter ending June 2006? $1.3 MILLION!! Yet they had NO REVENUE!
Will that company eventually have revenue? I don't know but what I do know is they will issue more and more shares to continue to pay salaries of the CEO and other employees and go deeper and deeper in debt.
So now you know a couple of examples of a story stock, how do you know the stock you are looking at is a story stock?
Well if you get a little 6-8 page magazine all about a Stock via Snail mail. 90% chance that is going to be a story stock.
If you get a spam email talking about a stock that is going to go from .50-$3 in the next 5 days 99.9% chance that is a story stock.
The risk in a story stock is just too great. Because the only thing holding it up is just that a story. The ONLY people that usually win is the company as if the stock goes up they issue more and more stock at the higher price so they can pay for more things. And with story stocks people seem to get sucked into the story so much they aren't able to see a way out of it.
Go on yahoo.com and click finance and enter the stock symbol you can see what the company revenue has been and comments about it. It may even have a message board. Which SOMETIMES can be helpful.
It is your money do a little research. A story stock can be found out very quickly and you really don't need to know a lot about reading the #'s etc..
If in doubt go to http://www.StockDoubling.INFO and I will research it for you if you are really interested in it.
If the email, article or message board you read is ONLY talking about the industry as a whole and not what the companies #'s are YOU HAVE A STORY STOCK.
AVOID AT ALL COSTS!
I have been in story stocks and have been BURNED many times with them. For every 1 good story stock that will have a SHORT term run you will have 10-15 that will fall flat on their face.
Watch for a company with earnings, revenue, book value etc... If it has a good story that is a great benefit but it CAN'T be the main focus of the company.
Steve Hoven, is a trader and creator of http://www.StockDoubling.com
Is it possible to turn $500 into $1,000,000? Well he is trying to find out. If you start with $500 and double your money once a year you could turn $500 into $1,000,000. After just 17 months he already has $4000+ well ahead of schedule. Check out http://www.StockDoubling.com for all the details.
Article Source: http://EzineArticles.com/?expert=Steven_Hoven
http://EzineArticles.com/?What-Is-A-Story-Stock-And-Can-You-Make-Money-With-It?&id=503976
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