Archive for ‘best way to invest money’

July 4th, 2011

Equity Investment Tips

If you are thinking about getting into equity investing, but you’re not quite sure how to go about it, here are a few tips.

Since equity is not a short term investment, you should only use money that is ‘extra’. Keeping invested in a company for at least five years is a good policy and, if you can be patient, ten would be even better. Short term, you may even lose money on your investment, but long term, you have a very good chance of making a profit, or at very least coming out even.

When choosing an investment, the main thing that you should look for is how the company manages their existing resources. Looking at a company’s management efficiency is one of the only ways that you can determine whether or not the investment will make you money in the long run. The equation used to determine the return on equity, or ROE, is the sum that you get when you divide the company’s income by its book value or equity.

Looking at the ROE of a company is a good way to determine whether it is a good investment or not. But you should keep in mind that the ROE may not be 100% accurate all the time. Some companies manipulate their earnings to make it look like they are making more than they actually are. And high tech companies may have intangible assets that are not recorded on the books, but which raise the market value of the company.

One of the best ways to go about investing in equity is through a mutual fund or exchange traded fund. These platforms make it easier for you to diversify your investments, and reduce the risk of big losses. They can also help reduce your investment costs.

Investing in equity gives you stake in whatever company you choose to invest in, so choose wisely. Avoid making emotional decisions that would bias you towards or against certain companies. For instance, don’t invest in an obviously failing clock making company just because you like clocks. And, don’t discriminate and avoid investing in a successful honey producer, just because you hate bees. Silly examples; yes, but you get the point. Be smart, and try to think into the future as much as possible.

To be a successful investor, you need to be able to diversify your investment portfolio. This means that you should invest in companies and markets that are not closely interrelated. This can be difficult, because most markets are interrelated in some way. But, by investing in a wide range of markets, you reduce the risk of loss if one the markets starts failing. If you have all your assets tied up in one area, then if that company or market starts doing poorly, your total investment will be at risk.

Knowledge is power, especially when it comes to investing. The more you know about the different markets and companies you are invested in, the more capable you will be of making sound financial decisions that will ensure your future prosperity. So, do your research, and find out as much as you possibly can before making a final decision.

July 4th, 2011

Getting Started with Equity Investments

Equity investment is probably the most common form of investment, as it is relatively low risk, and can give great returns if the individual is willing to wait a few years. Although the stock market will always be a risky environment to keep your money in, smart investing strategies, like good equity investment, will help to reduce the risk of major losses. The equity market has been very reliable and the returns have been excellent over time, and most experts feel that it will continue like this in the future.

One misconception that many people have, when it comes to equity investing, is that you must wait for the perfect time to invest. While good timing is always great, it is impossible to predict how the stock exchange will change from one moment to the next. You may be able to read certain signs and observe trends, but the truth is that everything can change without any prior notice. Even professional investors that are paid huge sums to try to predict stock market movement don’t always get it right. For instance, there was a recent story circulated about an investment made in an Online Opera Directory service which very quickly fell flat for it’s investors. You will find that most people have been burnt at least once by a similar investment and the trick is to learn from these mistakes so they don’t happen again.

 So when is the best time for you to start investing? The answer: as soon as you have money to invest. Setting aside a portion of your monthly earnings and designating it towards your equity investments is the best thing you could possibly do. It may not be much, but the sooner you start investing, the better. The stock market is always going up and down, so investing early gives you the time you need to ride out any inevitable falls in the stock market, and puts you in place to reap the rewards of the next ‘up’ market.

Consistent investing is the best way to build wealth. Dollar cost averaging is a very good strategy that will help to reduce the average costs of you investments over a period of time. Dollar cost averaging, also called a constant dollar plan, is a strategy in which you invest a fixed amount in one particular portfolio or investment, periodically. This means that you buy more stock when stocks are down, and less when they are up. This can help you to decrease the occurrence of some forms of financial risk that can happen when investing a large lump sum in something. However, when using this strategy, it is important to think about the transaction costs, which would build up month by month, and determine whether the benefits outweigh the cost.

Exchange traded funds and mutual funds are often safe bets to invest in. They help to diversify your stock portfolio and reduce the risk of under performance if you only invest in one particular stock or market niche. Diversity is the key to any investment strategy, and investing in one of these funds can help you to diversify your stock holdings without too much hassle.  Index mutual funds and exchange traded funds can also help you save on investment costs, since they are often very low cost investments and can even be as low as 0.20 %.

Investing in anything can be scary, but the rewards can also be very great. If you are ready to take the plunge and start investing for your future wealth, then having the right tools is the key. The most important weapon you should be armed with is knowledge. So, learn as much as you can and try your best to understand the environment you are investing in, before you make any large investments.