Sunday, May 13, 2012

What Kind Of Investor Are You

We have covered a lot of the basics of investing particular the things which are important to know before start investing in stocks or perhaps before actually trading them.

Now, we will cover the topic and discover what type of investor you are. This is an important part because discovering what type of investor you are, you can formulate good plans of attack about your investing strategy. Really, the process of buying and selling stocks isn't the same as buying toys in the mall.

So, in this post... I will show you the three types of investors and your job is to scale yourself which group you belong. Again, if you can't determine exactly what type of investor you are, ask help from your financial planner.

Investing is basically a two step process and it shouldn't be complicated, but you have to take these steps seriously to have a better chance of achieving success. The are two basic steps to investing; determine which type of investor you are and build a portfolio.

The Three Types Of Investors

  1. Growth Investors - These are the type of investors who are always aiming for growth and huge returns for their investments in the long term perspective. However, there are certain risks associated with this type of investor type and need to balanced the returns and growth of the investment. Typically, there are lots of ups and downs here, so proper mindset to tolerate certain losses is a must in favor of a higher returns.
  2. Balanced Investors - These are the type of investors who are cool and relaxed. They always want a slowly and steady growth of their investments. They're conservative but still have the eagerness to take advantage of that long-term growth, accept moderate growth and include more diversity on their investment portfolio.
  3. Income Investors -These are the most conservative among the investor types. Usually, the people belong here are those people who are investing their retirement money. They have a very low tolerance for risks and can't afford to lose the money they're investing. They prefer slow but sure returns on their investments.
Now, pause for a moment and ask yourself which group do you belong. Again, if you can't decide promptly but want to get moving, a financial planner can help. As I mentioned earlier on here, it is sometimes difficult and challenging to ask yourself and make a connection to your inner you and ask where you gonna invest your money?

Below are some suggested investment portfolio according to investor type. Literally, there are tons of ways to invest the money, but, depending on how risk oriented you are, you must choose certain investments you can opt for.

However, with simply 3 buys, you can safely invest in Exchange Traded Funds(ETF) which monitors a wide range of asset classes such as domestic and international stocks as well as bonds.

Recommended Investment Portfolio;


Growth Investor

  • 69% - Domestic Stocks
  • 13% - International Stocks
  • 08% - Bonds
  • 10% - Savings In Cash

Balanced Investor

  • 49% - Domestic Stocks
  • 12% - International Stocks
  • 18% - Bonds
  • 21% - Savings In Cash

Income or Conservative Investor

  • 31% - Domestic Stocks
  • 06% - International Stocks
  • 34% - Bonds
  • 29% - Savings In Cash

Take note that these are only suggestions and you still have to base your investment portfolio on where you are now and perhaps what you think you can.

The Fundamental Analysis Approach Of Analyzing A Company

There are actually several types of approaches or methods when it comes to analyzing stocks from a certain company or business that you want to invest it, whether it's worth going for the long term or not. The most common and widely use approaches of stock analysis are; fundamental and technical analysis.

I'll be focusing on fundamental analysis as this is the most appropriate for beginners and for long term investment. Technical analysis, on the other hand, is more geared towards experience traders and is suited for short-term investments. Day traders are always using this type of analysis on a daily basis to determine whether it is good to buy or sell that particular stocks in that given day.

Ok, let's dive into fundamental analysis and how to use it to check a company's stock potentials. We won't be using in complex formula's here to complicate things. My goal here is to provide you a clear overview on how to go about using fundamental analysis.

Basically, fundamental analysis is nothing more than checking the health of the company's financial status, how is the company's earnings going, up or down, the management, etc. Although, you can buy any stocks based on hearsay or news or perhaps tips from your stock broker, but it's good to know the basics of analyzing it so that in times when there is confusion because of too many differing suggestions, you can always opt your decision based on your own analysis and outlook.

Almost all if not all investors has its very own specific way of determining the stock potentials based on fundamental analysis. However, I will mentioned some common basis in which you can based your analysis and get started. These are the common metrics utilized ever since the beginning of stock market and being use currently by the big boys of the stock market such as Warren Buffett.

Three Fundamental Things For Analyzing A Company


  • Earnings - look for companies which consistent income and possible growth or expansion. A company that is strong and growth oriented tend to have higher market value on their shares or stocks. A company that has consistent growth and earnings for the consecutive 5 to 6 years, this is a very nice indicator.
  • Determine the future growth of the company or its future earnings - How do you gonna do this? Most stock brokers specially online-based brokers will provide tools that can do this analysis. Usually, this will be based on historical data which they have records since that company is listed as securities in the stock exchange.Check if the company has a low price earnings growth ratio compare to its competitor. Normally, dividing the PE Ratio by the projected growth rate then compare it to their competitors.
  • Strong return of equity - This is a good indication how solid the management of that company to handle cash. Will they be going to reinvest to expand the company or otherwise, this can be analyze based on its historical data and the company's balance sheet which is publicly available to its investors. A 15% return or higher is the most common benchmark or indicator that the company possess a solid and good management which has a potential to expand in the future.
Above are the common metrics you can use to get started, although you can also include metrics like cashflow, price to book ratio and dividend growth. Also, do your own detailed research about the company or business you want to buy stocks or shares from. That way, you won't completely rely or based your analysis on stock analyst you encounter in business news in TV or in newspapers.

What Is Financial Planning And Why You Should Have One


The subject of financial planning is closely related to investing. Investing without planning is like throwing a handful of rice on the wall and hope that a lot will stick. If you compare it to the financial investing, that means you gonna lose more than you make.

Investing success always entails proper financial planning. Success in stock investing can be be depended alone on market timing, picking the best stocks, tips from the stock brokers or simply hope that you gonna make more even without doing anything. Although it helps, but you need to have some kind of investment discipline and learn how to stay on course.

An investment and financial plans can be considered as road map. You must have a clear idea on how to get from Point A to Point B. Consider all your current financial status and what you want and how much you want 10 years from now. Consider your house' mortgage, education for the children or perhaps a vacation every year to your dreamed destination.

All these covers in your plans both financially and investments, so that, everything will be in proper order and you don't have to use certain money allocated to a particular thing unintentionally, and it maybe too late to realize it.

Write out your plan, specify the things you want to invest in and how you gonna carry it out to achieve that goal. It is not enough to have a plan and never writing it on paper, simply hoping or wanting huge returns.

Say for instance, it is not good enough to say or write "I want a happy retirement", it's much better to write things down on how much you can put aside monthly from now on and what you gonna do to that money in order to grow it, then when you retire you can have a good and more than enough passive income.

And, if you can't figure out your specific plans financially, you can consult a reputable financial planner. These people can come with a decent plan based on what you want and make it realistic. Let's face it, it is sometimes hard to come up with a plan specially on a financial point of view if you don't have any experience on it. Planners will ask you a series of questions and ask you squarely about certain things that can help them formulate a solid financial plan for your future.

The Golden Rules Of Financial Planning and Investing


  • Write down specific goals and make them realistic as well as achievable
  • Don't invest on anything without a purpose
  • Proper assent allocation
  • Diversify your investment, invest in stocks, bonds and even mutual funds
  • Don't get so emotional, always stick to your investing plan
  • Proper mindset
The last one I mentioned doesn't mean it's the least, it is actually important to have the proper mindset in investing. This is where you can achieve goals easily and effortlessly. Having the proper mindset, you can always stay on course on your investment plans and never have to panic even when bear market arrives.

Saturday, May 12, 2012

What Are The Different Types Of Stocks That You Can Possibly Invest In



Before you start your stock investment, first, you have to know the different types of stocks. This way, you have better choices which one would fit your investing character as there are stocks which are good for long-term investment and so for with short-term or better known as the day trading.

The common stocks traded in the stock market are;
  1. Growth Stocks
  2. Income Stocks
  3. Value Stocks
  4. Blue Chips Stock
  5. Recurring Stocks
For detailed explanations of these types of stocks, please watch the video, below. Through this you will learn which stocks you want to invest in and fits to your investing goals.

Remember, for a beginning investors, it is advise to take the long-term type of investments as it is less risky, although most of the time, this type of investments yield a low returns. Now, that does not mean that you don't want to venture into a more risky type of stocks, these are the stocks which have a potential high returns.

So, while you're just beginning, invest in long-term investment, but do a continuous research and try to learn and fully grasp the ins and outs of stock trading. This way, you can build your confidence of opting on stocks which have potential high returns. As long as you already know what you are doing, whatever the risks can be minimized.

The 5 Types Of Stocks Explained



Who Are The Stock Brokers


This is an important step for beginning  stock investors to know what are stock brokers. Brokers are people who will process the buying and selling of stocks. This is where you, the investor, would put an order for a certain stock, buy or sell.

Before that, you need to signup or register to a stock broker. Today, there are two kinds of brokers, the conventional and the online-based brokers. The traditional ones uses telephone when putting an order, that means the investor needs to call them if they want to trade.

While the online-based is more of a modern stock brokers who are are using the internet as the medium of communication between them and the investors. Mostly today, online brokers are more preferred due to convenience and much faster execution of orders.

If you're thinking or just beginning to venture into the stock market arena, you're going to need an online broker.

The first thing you check with a broker is the commission fees as every trade you do entails a commission or a fee for the broker. Normally, online brokers offers a much lower commission fees, this is one of the reason why they're preferred, in addition to convenience and quickness of executing an order.

Choosing A Stock Broker

What Are Securities


Securities in financial point of view is different from those in IT or perhaps in security system as in secure. I decided to talk about this here as most if not all newbies who are entering the exciting world of investing will like to encounter this term.

In the financial or in the investing world, securities represents something as some kind of ownership for a company, in this case stocks or shares are a form of securities.

On the other hand, securities can also represents debt or money being lend, in this case these are called bonds. There are other various forms of securities which are traded in the stock market through the stock exchange.


What Is A Stock Exchange

Almost everyday in the business news whether in TV or in newspapers, we always hear and read the phrase, stock exchange. If you're one of those people who want to venture into the stock market investing, it is important to know the basics of and how it works. In this post, we will be discussing and learning what is a stock exchange.

It is an entity which offers services towards brokers, in this case stock brokers both the traditional ones as well as online-based discount brokers. Additionally, it allows investors to trade securities such as stocks or shares and bonds.

One important job or function of the exchange is to provide the facilities for the purpose of issuing and redemption of the securities mentioned, including the computation of the dividends that is to be paid to the investors.

Among the popular securities commonly traded within the stock exchange are; company stocks or shares, derivatives, unit trusts as well as pooled investments like bonds.

Stock Exchange Explained