Investment Articles

No matter what instrument is traded, be it stocks, futures or forex, chances are most people trading it are obsessed with finding the perfect indicator, and the perfect entry point. As a professional trader, I’ll let you in on a little secret about your favorite indicator: it probably does great, 50% of the time – before factoring in commissions and slippage.

Most indicators out there, including the most popular ones like moving averages, stochastics, relative strength, etc. all work about 50% of the time. Just as good as tossing a coin. This truism probably applies to 95% of the indicators out there.

The 5% of indicators that do work are usually closely guarded secrets, not available for sale to the public anywhere. After all, if you had a golden goose, would you sell it?

Browse the Internet for a while, and you’ll see fabulous indicators for sale. You can even find them on auction sites! Of course, you will only see the excellent examples of how the indicator works, not when it breaks down. Don’t be fooled. They all break down under some conditions. There is no “Holy Grail” indicator.

So, let’s say you buy an indicator or indicator package. Can buying it really be that bad? In a word, yes. In fact, the more money you spend, the worse it is, and not just because you spent a lot on it.

Any indicator you pay for is dangerous, because once you “invest” in an idea, you will spend a lot of time to make it work in your systems, even if that means unintentionally curve fitting or over-optimizing. Spending money on an indicator gets you emotionally involved, and that can spell trouble. Typically, you consciously or subconsciously have the need to be right in your purchase, and that will eventually hurt you.

What is the solution? Spend time studying and observing the markets, and then create your own indicator that numerically describes what you see. Or, develop a trading strategy that doesn’t use any indicators at all. Chances are, with some hard work, you can find something that is better than flipping a coin.

And now I would like to invite you to claim your FREE Instant Access to my Monte Carlo simulator spreadsheet and weekly newsletter when you visit http://www.kjtradingsystems.com.

From Kevin Davey – Award Winning Trader.

It’s a bold claim to say that any investor can profit from trading. This is especially since a lot of people think that trader success depends a lot on luck and innate skill. In reality though, even if you aren’t born a natural at picking fantastic investments with little thought, you can learn how to make the right decisions.

It’s important to drill into your consciousness the idea that great traders are not born, they are made. Although there may be one or two exceptions to the rule, most top earners are where they are now because they took the time to educate themselves. Depending on a person’s capacity to retain concepts, financial education can take the form of formal classes or short video courses. So what exactly do you need to take home from a course to start enjoying trading profits?

It goes without saying that some degree of technical skill needs to be developed. Most successful investors have had to deal at some point with charts, software, graphs, market analysis and the like. If you have a natural aversion for all things technical, this is the first thing that you need to correct.

Surprisingly, technical aptitude is not entirely the most important element to get on top of. There are many high earning investors who know very little about technical analysis but still manage to draw outstanding gains. A number of these individuals maintain full time jobs in different fields while participating in profitable trading. In most cases, the secrets of these individuals lie in trade psychology and trade systems.

Investment psychology mainly involves knowing when to hold on and when to let go. Traders who allow themselves to be incorrectly driven by emotions either hold on too long to a position or let go too soon because of their fear of losing. Through proper training, you can teach yourself when to enter and exit trades logically and without the burden of emotional prodding.

In the world of investing, the appropriate psychological state is often created. This is because it is really the direct result of using a reliable trading plan or system. In other words, you only profit from trading because committing to a plan makes you more disciplined, logical, focused and confident.

There are various parts to a good plan. One of the most important components however is risk or money management. Aside from psychology, this is one element that you retain control over. This is what you need to settle to make sure that you trade only within the limits of your personal risk tolerance. Because loss is an unavoidable part of trades, you need to be certain that you never suffer more than you can take. This is the best way to protect your capital and prevent it from completely disappearing. Hence, you are also placing yourself in the best possible position to achieve gains.

With the right mind set and a reliable system, profitable trading is definitely within your grasp. Aside from technical training, make sure your educational course includes sections on psychology setting and system creation.

Find A Trading Plan That Can Generate Real Profits.
Visit http://www.freetradingsystems.org For Expert Advice.

Being a successful investor is not hard but it is more difficult than it looks. What makes it more difficult is not acquiring the mental the skills you need, accounting and basic mathematics can be learned by anyone. What makes it difficult is the emotional or behavioural skills you need. The difficulty in mastering these skills is that the wrong approach is hard wired into our brains, making it very difficult to take the correct action.

Here are my 7 indispensable traits of a great investor:

1. The ability to seek and buy undervalued securities

At first glance this seems easy but it is not. Ignoring companies with upwards rocketing share prices while looking companies those share prices are hitting new lows is not easy. A current market example will be ignoring companies like Amazon (PE = 66) and Apple (PE = 22) and be looking at companies like the German insurance giant Allianz (PE 9) and other solid companies left behind in the current rally. This trait will result in you not being able to talk about your portfolio at cocktail parties because after mentioning your investments you will either get a blank stare or asked if you are mad and do not read the newspaper? I am immediately self excluded from hot stock conversations at cocktail parties. It does not bother me in the least as I invest to make money not to have something to talk about.

2. The ability to stick to your investment process

Even the most time tested investment processes under-performs in some years. In fact studies have shown that they can under-perform for up to three or four years. It is exactly the reason why Joel Greenblatt says that, in spite of the spectacular success of his Magic Formula, it will never become so popular that its effectiveness will be reduced. If you follow a time tested investment process and it is under-performing, by all means re-evaluate the reasons why it is under-performing, but be very careful before changing it. You may be changing at exactly the wrong time. Think of the value investors that started investing in internet stocks just before the internet bubble burst.

3. The willingness to learn from past mistakes

This is also harder than it sounds. Losing money on an investment is a painful experience. However working through your past mistakes provides the perfect opportunity to see where you went wrong and improve your investment process.

My best example is in 2007 my largest position Lambert Howarth went into administration. It was not so much the complete loss that hurt my performance it was the fact that I allowed the position to become a too large a position in my portfolio. Especially such a small company.

I also keep an investment diary where I write a short note on the reasons for buying as selling an investment. I have also started keeping track of investment after I sold them to see in order to compare my sell decision with the share price performance after I have sold. I review both on a half yearly basis and, if appropriate, make adjustments to my investment process.

4. Have the courage of your conviction

Once you have gone through your company valuation process and completed you analysis it is time to put your money on the table and invest. If the share price is moving against the market hitting new lows it is of course a reason to be careful, and a reason to make sure you have not overlooked something, but if not it is time to buy. Irrespective of what friends, colleagues or other investors may be thinking or doing. Because of my fear that it will get even worse, I missed the March 2009 lows and did not invest. That was in spite of me watching companies I have already analysed fall to ridiculously low prices. I am talking of price to earnings ratios of less than four. I watched the companies drop to price earning ratios of four and even two and still did not buy. But I learned from that experience, made changes to my investment process and I think I will be able to buy when it happens next time. Believe me it will.

5. Have a system for managing risk

Risk management is not rocket science. But you have to think of what your tolerance for risk is, write it down, and implement it as part of your portfolio management.

Things you have to think about:

That is the maximum percentage of your portfolio you want to invest in one company? Mine is 4% as I want a minimum diversification if 25 names in my portfolio.

Will you follow a strict stop loss system? For example sell at a 16% to 20% loss irrespective of what has happened. I have developed a semi-rigid system that works for me based on valuation and portfolio weighting. Its a bit too complicated to explain here but it will be part of a future article.

What percentage of your portfolio will you invest in one industry? I have a rule of about 20% but its not something I apply rigorously.

If you use multiple investment strategies do you have a limit as to that percentage of your portfolio should be invested in each. For example if you follow a low price earnings strategy what is the maximum percentage you will allow to have room for other strategies such as low price to book companies? I do not have any limit with regards to any strategy.

6. Have the courage to sell

This point may seem obvious but it is not. I have fallen in love with a good performing company only to see the share price decline after reaching a new high. I am sure you know the feeling. In order to avoid this happening I re-evaluate the companies in my portfolio soon after the release of interim or annual results to see if there any fully or overvalued positions that have to be sold.

I also have a system in place where I review a position after an increase of 50% and 100%.Usually however this problem takes care of itself. I do not like having more than 30 companies in my portfolio. Should I thus want to add a new position I have to decide what position to sell before the new company can be added. This process results in new undervalued positions being added to my portfolio all the while at the same time getting rid of over or fully valued positions.

Also remember, the lowest risk profits in any position are made when a company moves from being undervalued to fairly valued, as this is the time when you have the largest margin of safety. Holding a security with the expectation that it will move up in price from fairly valued to highly or overvalued is risky as downside protection i.e. the amount of undervaluation is gone.

I learned the above traits over the 20+ years I have been active in investing. Some were learned with financial losses, something I hope I can help you avoid. Investing is not rocket science. It has more to do with common sense than most people realise. If you have answered the important questions and have a system in place to take care of the ups and downs you can be certain of acceptable investment returns over time.

Tim du Toit is the editor and founder of Eurosharelab. He has more than 20 year of institutional and personal investing experience in emerging and developed markets. Tim is based in Hamburg, Germany. More of his articles can be found at http://www.eurosharelab.com

Arbitrage is the execution of a number of transactions to create a risk free profit. To be pure arbitrage, there must be no risk at all and the transactions must be simultaneously executed. In the world of instantaneous communications and cyber trading, arbitrageurs have found it more and more difficult to exploit situations, simply because markets are getting more efficient due to geographical, technological and communication barriers being removed to a large extent.

Theoretically, arbitrage occurs when an asset trades at one price and simultaneously trades at another. As markets have become increasingly regulated and specifically standardized, without more, it is rare for this to occur.

Another manner in which arbitrage can occur is when cash flows are required to price an instrument or commodity, and the same assets with the same cash flows are available at different prices. Related to the concept of cash flows, if a price of something in the future is certain, and it is able to be acquired in the present and dealt with for contingencies at a price that is different to the future price, arbitrage is possible.

These opportunities quickly disappear in efficient markets such as those operating today, however often they are available to those willing to invest resources into their acquisition. If complex calculations are required, even software is only as good as its inputs and so the more accurate and timely the inputs, the more opportunity to exploit arbitrage opportunities. Further, physical handling of assets may require logistical resources and if these are precise and reliable then they represent no risk and can be efficiently enlisted into the arbitrage sequence.

In simple terms if the cost of an ounce of gold cost US$1000 with delivery due in 6 months time, if it is possible to buy gold now at US$800 and it only costs US$100 to transport it and store it securely until that time, a profit of US$100 would accrue. Again, if A$100 can be exchanged for US$60, and that US$60 can be exchange for €80, if that €80 can be again exchanged for more than A$100, a profit will be realized.

Some forms of arbitrage are not the classic form described above, as they involve the operation of other variables which either would not be available ordinarily to all participants (such as information the quality of which is a risk in itself), or the execution of transaction in assets that are similar but not exactly the same. While risk in these investments may well be reduced infinitely, theoretically a risk is still apparent and therefore the transaction is not imbued with the features of classic arbitrage.

This article was provided by George Acheson – he writes on a variety of subjects including the debt management process in the UK.

Well if you can answer that question then you’d better start sending your resume out because a lot of people will be desperate to hire you. The truth is building a good and solid investment portfolio is very much like building a better body. It takes a lot of research, and then actually enduring a great deal of blood, sweat, pain and tears and it takes a long time to see any results to speak of. There is a way to lessen the pain and that is to listen to those who have been there before, so pay particular attention to the research part and do not put your eggs in one basket.

At the moment and if you have the capital, property is also a good way to go; interests rates are still reasonably low and the economy is improving. This is a great time to invest in land and developments, just make sure you use your common sense and pay a little more for property in better locations rather than cheaper badly located property. Remember that there are also two things that will be a good feature to look out for in buying property, a sea view and does the area give you access to a sunrise and a sunset that will make you believe in God.

A cheaper option and one that people really need to look into are the MLM opportunities available on the internet. They are cheap and sometimes even free to start and all they take is a little persistence and a hunger to make your lot and situation better. They require you to recruit people into the program and if you cannot think of anyone that could use an opportunity like this to make money right at this moment, please share your secret with the rest of us my friend because you are the keeper of the ‘Holy Grail’.

You do hear people screaming that these MLM opportunities are all rip offs and maybe some of them are, but you get the sharks in all the seas, oceans and areas of investment and business. Everything in life is a calculated risk and with a starting investment of $3 to $10 and considering what you can gain; MLM is a risk worth taking. All this concept is are a bunch of regular people getting together, pooling an extremely small portion of their resources together and benefiting each other that way. Come to think of it, that should scare the living daylights out of rich swine that have gotten rich off the efforts of others for decades. One does wonder where the source of all the scaremongering and scam shouting comes from in light of that little hypothesis.

The truth is that the best investment to make is in yourself; to get off your butt and start to find out what opportunities are out there. With the advent of the internet, the highly unappreciated, precious resource of cheap information is more available than ever. Now is the time to stop playing victim and get off your butt and do the research. Then you will have to grow a pair and take a risk. Forgive the bluntness of the article, but you need to be woken up and start fighting for what you want to make those dreams come true.

The author has spent a lot of time learning about stocks for cheap and how to find value stocks. Read more about stock trading investments at Shawn’s website.

Are you looking for a really useful stock market trading tip? Keep reading because in this article I am going to give you some great stock market advice.

Ever heard the expression, “they’re not building anymore land” The point of this expression is – if you want to make money own property. Sadly owning property is beyond the reach of most people, luckily there is an alternative.

This alternative is R.E.I.T’s (real estate investment trust). So what is a R.E.I.T? Basically it’s a trust company which buys, develops, manages and sell’s property. By buying stock in a R.E.I.T you are buying a portion of a pool of real estate.

Buying shares in a R.E.I.T has many advantages some of them are

· If you buy shares in a R.E.I.T you are essentially buying pieces of property i.e. physical assets with long expected life spans and income potential through rent.

· R.E.I.T ’s allow the man on the street who does not have vast amounts of capital to invest in property.

· Because the funds of these trusts are pooled together there is a large amount of diversification going on

When picking a R.E.I.T you should do your homework, here are a few tips to help you.

· Good management – when picking a R.E.I.T to invest in you should know the management team and their track record.

· Diversification – it is important that the R.E.I.T you invest in is properly diversified, owning too much of one kind of real estate can cause big problems.

This article should give you a good overview of real estate investment trusts, if you found this stock market trading tip useful please visit my website by following the links below.

Need more money? Imagine trading stocks for a living a loving every minute of it! Visit http://www.stockmarketinvesting101.org to learn about a stock market strategy that is a license to print money

We all know the importance of investing. But what your investment advisers and investment gurus will not tell you is: how inflation is slowly eating up your investment returns!

But first, what is inflation? Inflation is the increase in general price level of goods and services produced in a country. It does not imply that prices of all goods and services are increasing in same proportion. While Prices of some goods may rise relative to other goods and some may fall, but on an average, inflation can still be positive.

Inflation affects us in two important ways. First, it reduces the purchasing power of your income and second, it wipes out the real return you gain from your investments. Just take a look at a simple example. If average inflation this year was 5%, it means that a product that was worth Re.1 last year, can be bought for Rs.1.05 this year. This also means that the purchasing power of your rupee is reduced by 5%.

Effect of inflation gets worse when it impacts the real return on your investment. This can be best explained with a much simplified example. Assume your investment earned a 10% return this year. But if the annual inflation this year was 4%, then the real return that your investment generated was only 8% (i.e. nominal return less annual inflation). This is primarily because during the year, your money has lost some purchasing power due to inflation and a part of the nominal return will be for recovering that lost purchasing power.

It is therefore important to factor in the inflation trends in your investment decisions.

Read more for investment options that can help you to protect your wealth from eroding due to inflation. http://understandingbasicsoffinance.blogspot.com

Geetika

You can learn to invest in 2010 or you can invest with the crowd. Invest like most folks and you might not be a happy camper. Here’s why now is the time to learn to invest. Consider what follows to be your personal financial stimulus package for getting up to speed and on your way to financial success… with a financial education.

There are two basic reasons you need to learn to invest in 2010. First, the gravy train is over. Your employer and your government have their own problems and can not afford to guarantee your financial future. Second, it will not be easy to make money investing in the future. Uncle Sam is up to his eyeballs in debt and major corporations are fighting to grow sales and profits in a new competitive world economy. The future of Social Security is suspect, and traditional pension plans are going by the wayside.

Today it’s a matter of: learn to invest your own money in a contributory retirement plan or an IRA if you work for a living. If you’re older, it’s learn to invest what money you have stashed away or suffer the consequences. In the world of investing money today there is no longer a good safe place to hide and ignore the economy and the markets, because interest rates are near all-time lows. That’s a sword that swings both ways. If you seek the safety of fixed investments like CDs you earn little interest. Try to make money investing in riskier investments like stocks, bonds and real estate and you’re asking for trouble without a financial education.

Our government has been holding interest rates down to stimulate a lackluster economy. Sooner or later rates will rise and inflation will likely follow. Will future higher interest rates give the safety-minded a good safe place to park money? Not if inflation rises to offset the gain in interest rates. Will stocks and real estate be good investments? Only if the economy improves and people can find jobs and pay their bills. And what about bonds?

Bonds will be a guaranteed loser when interest rates and inflation take off. And that’s a problem for the millions of investors who hold bond funds, including those who fled other investments in search of the relative safety and higher interest income offered (under normal circumstances) by bond investments. The problem with the higher interest income from bonds is that it is FIXED for the life of the bond. As the interest rate goes up for new bond issues, the value of existing bond investments will fall as they become less attractive.

Now, do you really want to face the above scenario without a financial education? Even if you have a financial planner? If you plan to invest in 2010 and beyond do yourself a favor and learn to invest, starting with investment basics. Once you understand the investment basics of stocks, bonds, mutual funds, real estate and other alternative investments you’re ready to tackle the investing aspect. Your ultimate goal: putting together a sound investment strategy, with asset allocation and proven investing tools like balance & rebalance and dollar cost averaging working for you.

Without a sound investment strategy you are investing with the crowd, uninformed. The crowd did not make money investing last decade. They lost money and are likely in for more of the same in the future with the threats of higher interest rates and inflation lurking in the shadows. Be different, and get yourself and your level of financial education up to speed!

A retired financial planner, James Leitz has an MBA (finance) and 35 years of investing experience. For 20 years he advised individual investors, working directly with them helping them to reach their financial goals.

Jim is the author of a complete investor guide, Invest Informed, designed for average investors or would-be investors of all levels of financial background and experience. To learn more about investments and investing and his new financial guide go to http://www.investinformed.com.

Confused about when to buy and sell your stock/ETF? A raised financial situational awareness will serve to free you from the ties that bind you to brokers and talking head financial wizards alike. After all, we know how many of them made the right call going into the last crisis.

Financial situational awareness means you have the tools to accomplish these assessments yourself. This current stock market period represents one of the more trying times from the standpoint of trying to pick winners and letting them ride. Patience becomes a virtue at this time, but it becomes even more important to be able to tell what’s a buying opportunity or just a flash in the pan. The temptation is great to try and “make up” for losses of the recent past. This makes the decisions you make even more critical than at other less emotionally racked investment periods. We’ve seen the folly of pure fundamental based investments-in a panic the baby_and_the bath water all gets tossed out. A clear indication of directional movement above (buying opportunity) or below (toss out with the aforementioned baby) key indications will serve you well and help make your buying decisions evidence based and not emotionally based. This knowledge is what is referred to as financial situational awareness.

If you believe that more cycles of feast and famine are ahead in the markets-as I do, then it becomes even more critical to be aware of the start and end of these cycles. Keys to this lie in analysis of a few key indicators that can quickly help you assess if your favourite stock, ETF, MF or index is indicating a time to buy or stand aside. If anything is certain based on what we’ve seen in the last 10 years, it’s that the idea of buying a stock and holding it for an extended period and expecting it to provide a good return, is dead.

In Ten Minutes to Financial Freedom, I share with you exactly what indicators and how to interpret them. To your financial health.

Candaul Berber is an engineer, who has worked for a Fortune 500 company for nearly 20 years. He is an expert at analyzing data, numbers, statistics, processes and problem solving. Candaul believes his investments in education, life experiences and career achievements have demonstrated the value of financial situational awareness so that he is fully competent and able to provide his family with a solid foundation for good decision making to protect own future. To learn more about financial situation awareness visit his website http://www.financialsa.com/.

Trading is a complicated process that involves a real knowledge base from the beginning to be successful. This means that even a starter needs to know what to expect. There are also different kinds of trading, so it is imperative to know the kind of trading you are interested in. In other words, lacking a fundamental knowledge of options trading, you will not get to enjoy success. A person who desires to make a meaningful profit in options trading has to improve his/her knowledge base for this field at all times.

What follows are some options trading thoughts that will start you off on the right foot:

1. Take the time to get to know and comprehend options trading talk. The language used in options trading is very different than the day-to-day speaking, which can be a big discouragement for people getting into this form of trading. However, with a slight effort in learning the basics of the lingo, you will begin to comprehend the trading a lot better. While just having some familiarity of the lingo of this type of trading is not enough to ensure you will see gains, it will enable you to get started in the field.

2. Put time into attending online and offline workshops and seminars. Workshops and seminars, whether online or offline, are a crucial resource for rapidly adding to your knowledge base of trading options. There are even online tutorials you can take advantage of. Options trading seminars are designed to be useful for all knowledge levels. For the beginner, it is important to only try to understand the basics when you start going to seminars and then build on this knowledge base by continuing to attend more seminars.

3. Use online tutorials as a knowledge resource. There are numerous companies online that give you the opportunity to subscribe to online tutorials which will benefit you greatly. Online tutorials typically provide you with an interactive module that allows you to learn by doing.

4. Find books you can read on options trading, whether through buying or through borrowing. As you begin your research, you will note that there is a ton of information on this type of trading on the World Wide Web, but it will not take long to see that most of the information is the same no matter where you look. This is where reading books focused on this type of trading can be very useful. There are hundreds, or even thousands, of books on options trading available today. However, just because you quickly found a book, do not feel it will give you the information you need. You want to find books that have experts, who are renown in the field, to be the author of the books you read. It is important to get your knowledge from people who know the best techniques.

Reading quality books will teach you methods to use for understanding technical analysis (like using charts), understanding the various marketing analysis tools, recognizing valuable trade options, and planning a strategy that will result in the best profits.

Dr. Cayemitte has studied options trading and all of its nuances. Sharing his knowledge and experience on options trading has always been a part of his trading philosophy. To learn more about his workshops and seminars, visit Options Learning Academy (OLA) at http://optionslearningacademy.com