Year: 2019

PENNY STOCKS – How much does it cost to invest in

3 min read

Penny stocks sound cheap, don’t you think?

Yes, because they are. They are also called micro-cap stocks

Penny stocks describe shares of a company that trades for low amounts. It is usually between $0.01 to $2.00. But some institutions count a penny stock is anything that trades for less than $5.00 per share.

They’re not expensive, so what’s the catch?

So why trade penny stocks?

Everyone who entered the stock market knows that penny stocks equal a bigger risk than regular stocks.

The reason for inflated risk is simple. The companies that hold penny stock typically have no profits and minimal operations.

Many of these companies are speculative because they are thinly traded, usually over the counter instead of on major exchanges like the New York Stock Exchange.

They usually trade on the pink sheets or on FINRA’s over-the-counter bulletin board (OTCBB) and are not required to file with the Securities and Exchange Commission (SEC).

These stocks have low liquidity due to a lack of buyers and sellers. Hence, orders may not be filled right away or even at all. Moreover, volatility tends to be high among OTC (Over-the-counter) stocks, and bid-ask spreads are frequently large.

Investors in penny stocks should be prepared for the possibility that they may lose their whole investment.

Plus, penny stocks are notorious for being part of so-called pump-and-dump schemes. The scammers buy up shares and then promote it as the next hot stock on blogs, message boards, and e-mails. Once the stock price is unnaturally pumped up by all the gossips, the scammers sell their stake. The investors stay with big losses.

But…

Where penny stocks have the advantage is the low cost.

Also because of the simple math of penny stocks. If you buy shares for $0.40, and if the stock goes up by $0.20, then your profit is at 50 percent. That’s the pie-in-the-sky scenario.

However, it’s just as easy for your $0.40 share to go down by $0.20 and lose 50%, instead.

So, a $1,000 investment could lose value pretty quickly.

Of course, not everything is so dark.

Several years ago, CNN published a story about a young man who made his first million dollars from trading penny stocks.

He decided to begin with his life savings of $1,500. And 3 years later his portfolio was worth more than $1 million.
See how worth it was.

So, how to trade penny stocks?

We warned you but, yet you still want to trade penny stocks.

It is possible to trade penny stocks successfully.

If you trade penny stocks successfully, they really can offer the greatest risk-reward ratio of any investment type. But take care, the odds are not in your favor if you don’t understand what you’re doing. The must is, you have to learn. You must have the knowledge, education, in order to understand the market to successfully trade penny stocks.

And you must stay far away from scammers. Read the fine print on any email or ad you see on social media and in emails. If you find a disclaimer at the bottom of a social media post or an email, be cautious.

That means that someone’s getting paid to post an ad.

YOU WOULD LIKE TO READ The awesome thing is that you can invest in stocks online for free. See HOW!

It’s possible to profit when you understand the game, but the odds are against you when you don’t. And worse: manipulators and scammers often run the penny stock game.

For investors who can’t afford shares of Apple, for example, the potential gains from trades like this are too good to pass up.

So penny stock trading prospers. With a relatively small investment, you can make a nice return if the trade works out.

So, if you spot an advertisement that promises dollars from your pennies just remember these several rules:

Never trust the sweet stories

You must not believe the penny stock stories that are touted in emails and on social media websites.

And you have to say no. Let’s say, you can’t invest in penny stocks as if they were lotto tickets.

Unfortunately, that’s what most people do, and they lose over and over. Think of penny stocks as people that you can’t trust.

Instead, focus on the profitable penny stocks with solid earnings growth and which are making 52-week highs.

Read the disclaimers

Penny stocks are sold more than bought. They come as tips in emails and newsletters.

Remember, the free penny stock newsletters are not giving you tips out of the goodness of their heart. Read the disclaimers at the bottom of the newsletters. And you will see. They are getting paid to pitch a stock because their investors want a presentation for the company. There is nothing wrong with that, but almost all penny newsletters make false promises.

YOU WOULD LIKE TO READ Online stock brokers make investing easier than ever

You have to know something. There is a difference between stocks making a 52-week high based on an earnings breakout and stocks making a 52-week high because three newsletters picked it. The disclaimers at the bottom of the email or newsletter, which the SEC requires, reveals very often a conflict of interest.
They are being paid to pump up the stock, but they rarely tell you when to sell. Usually, it’s far too late.

Sell your penny stock quickly

The charm of penny stocks is you can make 20% or 30% in a few days. If you make that kind of return, sell quickly.
Never get greedy, aiming for a 1,000% return. The penny stock is getting pumped up, take any profits. And move further.

Never trust company management

Don’t believe what you hear from companies in this penny stock’s world.

The companies are trying to get their stock up so they can raise money and stay in business. That’s okay, but there is no reliable business model or accurate data. So, most penny stocks are scams that are created to enrich insiders.

There are large circles of the same people run promotions using different press releases and companies.

Never sell short

Don’t do it.

Penny stocks are too volatile. If you’re on the wrong side of the trade, you could lose 50% or more on a short squeeze. Another problem is that it’s difficult to find shares of the penny stock to short. Leave shorting penny stocks to the pros.

Focus on penny stocks with high volume

Stay with stocks that trade at least 100,000 shares a day. It could be difficult to get out of your position if you trade stocks with low volume.

Traders Paradise suggests that you trade penny stocks that are priced at more than 50 cents a share. Penny stocks that are trading less than 100,000 shares a day and are under 50 cents a share are not liquid enough to be in play.

Don’t trade large positions

You really need to be careful with position sizing. Never learn the hard way not to trade big. Famous traders rule is not to trade more than 10% of the stock’s daily volume.

The limitation of position size will provide you to get out of the stock faster.

The bottom line

If you want to invest in penny stocks you have to learn.

By the way, learn from Timothy Sykes, who is famous for turning his Bar Mitzvah gift money of about $12,000 into millions by day-trading penny stocks while in college. For the past years, Sykes has been teaching his strategies through the sale of instructional newsletters and video lessons. You can find his lessons very easy.

28th January 2019
Mass exodus if May allows no-deal Brexit?

3 min read

More and more of British companies have already triggered emergency plans to manage with a no-deal Brexit. If the UK crashes out of the EU. Many of them will move operations abroad, claim the British Chambers of Commerce.

It said that in recent days alone, it had been told that 35 firms had activated plans to move operations out of the UK, or were stockpiling goods to combat the worst effects of Brexit.

It looks that many companies had acted to protect themselves since May’s Brexit deal was decisively rejected by MPs in the Commons earlier this month.

The worst effects of a no-deal Brexit

Actually, it has seen a sharp increase in companies taking actions to try and protect themselves from the worst effects of a no-deal Brexit. No deal has gone from being one of several possible scenarios to a firm date in the diary.

Last week the Airbus, Europe’s largest aerospace manufacturer, which employs 14,000 people in the UK and supports another 110,000 through supply chains, warned of potentially disastrous effects of no deal on its UK activities.

Tom Enders, the boss of Airbus, said: “Please don’t listen to the Brexiters’ madness, which asserts that because we have huge plants here we will not move and we will always be here. They are wrong.”

UK exporters need access to the EU’s customs union

Ever since the vote to leave the EU in 2016, business groups including the BCC and the Confederation of British Industry have lobbied ministers, arguing that UK exporters need access to the EU’s customs union. Because it allows goods to be imported tariff-free.

The CEO of Airbus, the global leader in aviation, clearly warned that Brexit threatens to destroy the developmental life in the UK. He urged the British to “not listen to the madness of Brexit’s supporters,” who argue that Airbus will remain forever in the UK because there are huge factories in that country.

Airbus has more than 14,000 employees in the UK. Another 110,000 people work in related activities.

Britain should leave the EU on March 29th.

The Dutch authorities have announced that they are in contact with more than 250 foreign companies planning to move to the Netherlands due to the UK leaving the European Union.

“It is not so easy to move huge factories to other parts of the world, but the Airplane Industry is a long-term business. We will redirect investments quickly in case there is no agreement on Brexit with the European Union. Do not be misled, because a lot of countries are barely waiting to be opened factories of Airbus parts there”, said CEO of Airbus Tom Enders.

But the prime minister May has insisted that the UK must leave both the customs union and EU single market. And that the referendum result of 2016 is to be fully respected.

YOU WOULD LIKE TO READ Brexit deal, is it to be or not to be?

Political debates about no-deal Brexit

Labour MP Yvette Cooper has revealed to the Observer that two major employers in her West Yorkshire constituency had written to her. They are warning of the damaging effects of no deal on their UK operations. Burberry, the luxury goods manufacturer, employs 750 people in Castleford and Haribo, the confectioner, 700 across her constituency.

Cooper is pushing for a Commons amendment that would pave the way for Brexit to be delayed until the end of this year. It looks that MPs may need to work longer and lose their February half-term break if Brexit is to be delivered on time.

The extra hours will be needed to get its legislation onto the statute book before the planned 29 March exit.

Theresa May will seek backing for her deal in another Commons vote on Tuesday.

Commons leader Andrea Leadsom described bids by MPs to prevent a no deal as a “thinly veiled attempt to stop Brexit”.

Writing in the Sunday Times, she said this would be an act of “constitutional self-harm”.

The UK is due to leave the EU at 23:00 GMT on 29 March and the prime minister has faced repeated calls to rule out the prospect of leaving without a deal if no agreement can be reached.

There is a grave concern about a bill, proposed by Labour MP Yvette Cooper. It could extend Article 50 – which triggers the UK’s withdrawal from the EU by nine months. That means the prime minister has to secure a deal by the end of February.

The Queen does not show any political views but…

The British Queen has called on citizens to find “common language” and respect “different points of view”.

Commentators say the remarks are considered the debate about the Brexit, while deputies will have to vote again next week on an agreement to leave the European Union.

BBC journalist who follows the royal family, Nicholas Bichel, believes that there is no doubt that the queen “sends a message”.
The Queen, as head of state, remains neutral in political matters and usually does not express her views on the controversial issues.

However, speaking at the event marking the 100th anniversary of the Sandringham Women’s Institute in Norfolk, the queen said: “The continued emphasis on patience, friendship, a strong community-focus and considering the needs of others are as important today as they were when the group was founded all those years ago.

Of course, every generation faces fresh challenges and opportunities. As we look for new answers in the modern age, I for one prefer the tried and tested recipes, like speaking well of each other and respecting different points of view; coming together to seek out the common ground, and never losing sight of the bigger picture. To me, these approaches are timeless, and I commend them to everyone.”

The queen’s call touched the same questions as her Christmas message, in which she invited people to treat others with respect, “even when there are deepest differences.”

The Brexit rises tensions on the once-bloodiest border in Europe

Thousands of people travel every day for over an hour and a half across the Irish Sea to the United Kingdom. This is not only an important commercial line but an important cultural connection for many in Northern Ireland, which now directly depends on the parliamentary majority Theresa May.

The city Larne shows its loyalty to London. The roads through the nearby villages are painted in the colors of the crown. Local Unionists the Irish, angry opponents of Catholic Irish, have their MP, Sammy Wilson.

“We have strong historical ties with the rest of the United Kingdom for hundreds of years. It’s a common faith, a common language, and we will not give up on that,” he said.

Unionists, who support the government Theresa May, refuse to support her proposal for Brexit if their relationship with the rest of Britain become more difficult. And the prime minister has not given them a satisfactory proposal so far.

The main concern of the Unionists is whether the peace agreement for Northern Ireland which has ended decades of bloodshed will be respected.

May is facing the problem that Wilson is not ready for a compromise.

Their interests would be satisfied if they would leave the EU without an agreement. Then, they could say that this item has been removed from the agenda.

Wilson argues that the Union’s insistence on the status of the border is a violation of the terms of the peace agreement.

“This would mean that our laws are written in Brussels, not London. In other words, we would be constitutionally separate from the rest of the United Kingdom, which is a breach of the Belfast agreement,” said Wilson.

The MPs also proposed a number of amendments with alternative proposals, which include postponing the deadline for abandoning the EU on March 29, in order to avoid issuance prior to reaching an agreement.

Many MPs fear that leaving the EU without a formal withdrawal agreement would cause chaos in ports and business disturbances, although some supporters of Brexit support this option, and believe that this view is excessive.

YOU WOULD LIKE TO READ The Brexit deal that risks “letting the British people down”

Another amendment concerns the escape and ensuring that the border between Northern Ireland and the Republic of Ireland will not be returned.

Both the UK and the EU believe that restitution of border controls could jeopardize the peace process, but Brexit’s advocates are afraid that the safeguard mechanism could connect Britain with EU rules for an indefinite period without any declaration of them.

Risk Disclosure (read carefully!)

27th January 2019
Online stock brokers for beginners

2 min read

It is easier than ever to find good online stock brokers. The benefits are numerous. You can learn and invest in the comfort of your own home. The research team at Traders Paradise made some research. We tried to find the options on the market that are good for you. So, we wanted to find the best online stock brokers for beginners and super investors alike. We had to deep into the financial world with stock experts.

And we hope that this research will help anyone get started.

The popularity of index fund investing and robo-advisors is rising. It may seem the trading of individual stocks is lost. But, it isn’t the truth.

Millions of investors continue to trade individual stocks and other securities. Because online stock trading sites make investing easier it’s important to do so using the best online stock trading sites.

Investors should know the best online stock brokers to trade with. They have the right to know. Some online stock brokers are known for their award-winning customer service. But the others are known for low-priced stock trades or powerful trading tools. Traders Paradise-Finance wants to highlight some of the best brokers available today. Actually, we want to give you some tips for choosing a broker.

Criteria for the best online stock brokers

The best online stock brokers offer low fees, great customer service, and smart research tools.

Discount brokers charge as little as $4.95 for online trades. Compare that to the $100+ that many full-service brokers charge. It seems like a no-brainer choice to choose the discount broker. But, you must know how to pick the right one.

Trading online is a self-directed practice, and you need the right broker backing you up.

But it is a stormy time for online stock brokers.

Between significant cuts in commissions and a few major acquisitions, the competition is fierce.

YOU SHOULD READ Stocks Online for Free – How to Invest

So, let’s like this, there is no one best online stock broker. But each one has different strengths and weaknesses. Our aim is to spotlight them and help you find the best one for your investing style.

Every trader should care about cost. A few of the fees we analyzed include:

Cost per transaction:

Commissions are typically an investor’s biggest cost base. For example, in 2016, a usually unassisted transaction fee averaged about $8. But early 2017 brokers decrease their commission. Fidelity, E*Trade, and TD Ameritrade, also did that. Now, you can trade for as low as $4.95. No matter what the price, though, for us, transparency is key. We wanted to see affordable pricing structures.

Account minimums:

Seeing your wealth shrink due to a tough market or bad strategy isn’t fun. It’s worse if you’re also getting dinged by your broker’s minimum account balance requirement.

Charges for data and tools:

The best online stock trading sites have quality market data like real-time quotes, educational resources, and stock-screening tools built right into their platforms. But some, we have to say, like Fidelity and TD Ameritrade, stand out for also providing top-shelf resources. And it is totally free of charge.

Extra costs:

Executing a trade over the phone, for example, can increase an $8 commission fee to $25 or more. Some platforms offer free education on sophisticated strategies but require an upgraded platform with an annual fee. Besides cost, we valued educational material, reports and tools, and the usability of the platform itself.

After Traders Paradise conducted this research, the following to be our top picks:

The best for cheap trading is Ally Invest. But beginners would like E*Trade. Speaking about the platform the best has TD Ameritrade. Best research and tools have Fidelity.

Why use a discount broker

A discount broker costs you much less money per trade. You won’t have the steep commissions that full-service brokers charge. What this means is more cash in your pocket and the opportunity to make more trades.

The main reason is cost.
But here we will break down who would do better with a full-service broker and who could get by with a discount broker.
Because cheaper isn’t always better.

Let’s see in this way.

Do you have a large number of large investments?
Or you not have the desire nor the know-how to handle your portfolio?
Can you afford high commission fees?
Maybe you not have time to manage your portfolio effectively?

If your answers are “yes” to each of these questions, a full-service broker might be the best option for you.
But, if you want to save money on each trade made or like to be in control of your investments, the discount broker will suites you better.

Because you don’t want to be pressured to take other investments and you want to make frequent trades.
The other things to consider when you have to choose your online stock brokers are:

Minimum deposit/balance:

Some brokers require a minimum deposit to open the account. Others don’t have a minimum. Yet others require a minimum average balance over the life of the account. Determine what you can afford to keep in the account if choosing accounts with a minimum requirement higher than $0.

Customer service:

Take a trial run on any broker’s website that you are considering. Check out the support they have readily available on their website. But you should also email and call them with questions. See how long it takes to get an answer.
A discount stock broker can save you a lot of money and save your portfolio. But they aren’t for everyone. Here are a couple of other choices you may want to consider:

Robo-Advisors: If you are familiar with a completely “hands-off” approach, robo-advisors can save you even more money. The automated system uses an algorithm to invest your money for you. After you input your risk thresholds and investment goals, the computer does the rest.

YOU SHOULD READ Automatic Trading – What Is It

Peer Lending: This is those who want to stay away from stocks and bonds for now. If you are one of them, consider peer-to-peer lending. You decide how much money you want to invest and what type of risk you want to take. The minimum investment is often about $25. You can break your investment up into as many loans as you want. This helps diversify your portfolio.

Full-Service stockbroker: If you have a lot of money to invest or need that in-person advice, a full-service stockbroker is for you. You’ll find them at your larger brokerage houses, but keep in mind that their commissions are higher than discount brokers. In the most common situations, you will have to pay $100 – $200 per trade versus $4 – $7 per trade.

The bottom line

Using a discount broker is a great way to trade and keep your profits. Choose your broker wisely by paying attention to hidden fees and understanding account minimums. A discount broker is a great way for beginning and experienced investors alike to invest in their future.

To find which online brokers suits you the best, you should read Traders Paradise’s WALL OF FAME.

Risk Disclosure (read carefully!)

25th January 2019
Stocks Online for Free – How to Invest
Why invest in stocks online for free, where to find broker, is it really free? Read this post to the end.

By Guy Avtalyon

Technology is making it easier than ever to invest in stocks online for free. However, some places still are charging outrageous fees and commissions to buy stocks and ETFs online when it’s possible to invest in stocks online for free.

Some of the firms that advertise “get started with just $5” can charge you huge fees as a percentage of what you invest. Truth is, we saw some really dishonest financial advisors charging thousands!

We can offer this: everything held equal, the less you pay in fees, the better your returns.

Where to find stocks online for free

Gratefully, we live in the 21st century, and there’s never been a better time to be a small investor.

For 95% of people, that’s fine. For those who want to buy individual stocks, there are still places that allow you to buy stocks online for free.

You have only a few ways to buy stocks online for free.
Thanks to developing technology investing is cheaper. More and more companies are lowering their fees and commissions.
It is possible that they will continue with costs reducing in the coming years due to competition. So, it’s reasonable to expect the cost will drop more.

Fees don’t have to stop you from making wise and lucrative investments.

And now, in today’s mobile world, investing is becoming easier and cheaper than ever. Buying and selling stock investments is not as easy as watching TV series but don’t worry it is not rocket science either.

Today you can enter your stock trades from stockbrokers websites for stock trading apps. It’s very convenient. Just read reviews of the best trading apps and you can find the best selection for you.

Some of them you can find on Traders Paradise’s Wall of fame, like E-trade, TD Ameritrade or Fidelity.

We can suggest you these 3 the best stock trading apps for beginners.
- TD Ameritrade
It is the best for ETF trades. You’ve probably discovered Exchange Traded Funds (ETFs) and you want to cut fees, but you want to maintain a well-diversified portfolio.

ETFs maintain a tax-advantaged structure. They usually offer lower fees than comparable mutual funds. But, most brokerages charge you to buy and sell ETFs. Well, this broker, TD Ameritrade, don’t do so.

TD Ameritrade offers over 100 commission-free ETFs from industry giants iShares, Vanguard, and even more. Because of the diversity of no-load ETF funds, TD Ameritrade is, in Traders Paradise’s opinion, top broker for the people who want to consider tax-loss harvesting on their own.

Moreover, TD Ameritrade also has no minimum and no maintenance fee IRAs.

TD Ameritrade’s mobile app also offers research, information, and portfolio analysis that makes free investing that easier. But we have to say, TD Ameritrade charges for some ETFs, mutual funds, and equity trades. Our suggestion is, filter for no-load ETFs before you buy.

TD Ameritrade has about 4,120 no-fee funds.
- E-trade
This broker offers thousands of mutual funds with no transaction costs.

Mutual funds are the old-school ETF similar principle from the diversification angle. Like ETFs, they hold many individual investments. Hence, investors get some level of diversification in a single fund.

Unlike ETFs, they are priced, they aren’t traded with a commission but with a transaction fee charged by the broker. That’s because they are bought and sold at the end of each trading day.

That fee can be pretty big, sometimes almost $50. But many brokers have a list of no-transaction-fee funds.

Of those that do, E-Trade put up the best showing, with about 4,440 and 4,350, respectively. This is why this broker tops our list of best mutual fund providers. That means you can buy funds on those lists with no charge. Though as with ETFs, investors in these funds will pay expense ratios.
- Fidelity
It is the best for Free ETF Trades & No Minimum IRA. Fidelity allows you to invest for free. This is surprising for most people because most people don’t connect Fidelity with “free”. But, Fidelity offers a range of commission-free ETFs. That allows the majority of investors to build a balanced portfolio.

Fidelity IRAs have no minimum to open, and no account maintenance fees. Let’s say, you could deposit just $5, and invest it for free. That makes this a much better deal compared to some other companies. Furthermore, Fidelity just announced that it now has two 0.00% expense ratio funds. And yes, they are free.

So, you can not only invest commission-free, but these funds don’t charge any management fees. This is truly free investing. But to make it a prime app, it has to have a great app, and Fidelity has it. Fidelity has a great app, so that makes them the top broker.

Fidelity’s app is the easiest to use out of all of the investing apps we’ve tested. All their features work brilliantly together, and they have tones of them. Plus, they are the all-in-one option. With them, you have a full service investing broker. And that is more than just free.

Why invest in stocks online for free

Investing in stocks is supposed to be about building wealth. Well, paying trading commissions can slow your progress..Small fees on stock trades might not seem like a big deal. Most online brokers charge $10 or less for each transaction. But keep in mind that’s per transaction. If you are just starting out as an investor, or if you have only small amounts to invest, even a small fee can take a big bite out of your profits.

But now, you know how you can invest in stocks online for free.
24th January 2019
Buying Stock Without a Broker – Ways to Do

Is it possible to buy stocks without a broker? Why shouldn’t be? Here is how to do that.

By Guy Avtalyon

Buying stock without a broker offers some advantages and disadvantages. Young investors are worried about investing in the stock market.

The financial crisis of 2008 strongly disturbed our formative professional years. We can still feel its specter lingers a decade later. Only 33% of millennials own stock, according to a 2016 Bankrate survey.

The other survey, a 2015 Harvard University survey found that just 14 percent of millennials trust Wall Street.

As any good stockbroker or experienced investor can tell you, you can find bad brokers more often than the good one.

Being “bad brokers” means those who put their own interests above that of their clients. We have a list of bad reputation brokers here on Traders Paradise’s wall of shame.

So, we must consider how to buy stock without a broker.

However, that worst brokers do this in a perfectly legal way, by causing desire and weaknesses to their clients’.

How do they do that?

Here are three main practices that bad stockbrokers practice. They claim to their clients that aiming for stability rather than growth. Wrong!

Usually, they force clients to obtain an income from two different sources, typically in an illicit way. Also, some of them are emphasizing low-risk, low-return, high-fee structured products in client accounts.

That’s why many new investors ask how to buy stock without a broker.

Because of the lack of confidence in brokers, many millennials don’t have the startup cash to fund an IRA or a brokerage account. That typically requires either automatic monthly payments or a minimum investment of around $1,000-2,500, plus commission fees of around $4-7 for every trade.

For those people who want to go down this path to business ownership, one option can be to check out direct investment plans.

But it is with varying degrees of success. Of course, there is no requirement that you have to work with a broker to invest in stocks or particularly equity funds.

Buying stock without a broker offers some advantages and disadvantages.

You will need to measure them based on your personal situation. But our goal is to provide you a good handle on how to invest without a broker.

But it’s up to you to make a decision about whether such an approach is appropriate for you. You have to know your unique circumstances and preferences. Because there is no unique solution for everyone.

Let’s say, you had a broker but you noticed that your broker sometimes uses unfamiliar words and phrases to describe investment concepts. Some of this stockbroker jargon is simply a shorthand that brokers use amongst themselves. They use them to refer to familiar situations without having to go into any detail on the underlying concept.

Your head is going to explode hearing every time some strange words that cause suspicions.

But investing can be simpler if you buy stock without a broker. Just by investing in shares through a company’s direct stock purchase plan.

The first and easiest way to buy stocks without a broker

It is when companies, often blue chips, fund a special type of program. It is called a DSPP or Direct Stock Purchase Plan.

The main goal of these plans originally was designed as a way for businesses to let smaller investors buy ownership directly from the company. In the beginning, they were working through a transfer agent or plan administrator. They still do the same. Most plans allow investors to buy stock without a broker if they agree to either have an amount taken out of their checking or savings account every month for six months. Often $50 is the acceptable minimum. The other way is to make a one-time purchase, which will cost you $250 or $500.

These plans are surely not as comfortable as getting a broker. You can’t just buy and sell a variety of company stocks at any time, for instance. Plus, you won’t have a diverse portfolio if you only own stock from a few companies. Moreover, with some plans, you won’t even escape fees. So, you have to be careful about what you sign up for.

This means trades without commission

But we have to say, direct stock plans are a good way to experiment with the stock market without putting too much money into the game.

Ordinarily, the plan administrators use your cash to buy shares of the company. It can be on the open market or freshly issued from the business itself, on predetermined dates. The average cost of the purchases is weighed out.

Also, they can use some other methodology to equalize the cost among investors. And the direct stock purchase plan statement arrives quarterly. All with a listing of the number of shares you own and dividends you receive.

Some direct stock purchase plans trades without commission. Others charge small fees. Usually $1 or $2 plus a few cents per share, for each purchase. A larger fee, about $15 and a few cents more per share, for a sale. This is a lot lower than what you have to pay at a full-service broker.

Buy stock without a broker by taking advantage of the dividend reinvestment program

In this way, you can add additional shares to your holdings.

This means to enroll in a stock’s dividend reinvestment program or DRIP. DRIPs provide you to take cash dividends, paid out by the company you partially own. And you may plow them back into buying more shares, charging either nominal fees or nothing at all. It depends upon the individual plan.

Have this on your mind. For a typical stock, that’s a lot of transactions over 25 or 50 years on which you aren’t paying commissions. The typical stock may pay out a dividend four times per year. So, count! DRIPs usually come with cash investment options that resemble direct stock purchase plans.

This opportunity means you can regularly have money withdrawn from your account, or send in one-time payments whenever you like.

A lot of long-term investors have become skilled at building wealth through these types of accounts. Buying stock without a broker for years, even decades is a very nice way. You must be heard stories about some housekeeper who left behind $5 million opulence.

They did it just on the way we said above.

You can buy stock without a broker by obtaining a single share through a specialized gifting service

Unfortunately, the financial industry’s decision is to move away from paper stock certificates. And this has become a bit shaky.

But, up until recently, you could use companies that allowed you to buy a single share of stock to get your name on a corporate shareholder list.

Hundreds of companies offer these plans, but each has its own rules for eligibility. It’s normal to be careful about investing in stocks. But some estimates that the average millennial would lose about $3.3 million in retirement savings by avoiding investing completely. Direct stock plans are an easy way to learn the basics and establish a portfolio.

All without spending money, time, and nerves on brokers. Anyway, buying a stock without a broker may be a clever move for investors.

Learn how to trade in the financial academy.

23rd January 2019
The 5 best blue-chip stocks in 2019

2 min read

This article is about picking good stocks by using microeconomics. This means that you look at the stocks of individual companies. Traders Paradise explains how to evaluate a company’s products, services, and other factors so that you can determine whether a company is strong and healthy.

And finally, how to pick 5 best blue-chip stocks.

We want to drive you toward those segments of the stock market that show solid promise for the coming years. That would make your stock portfolio thrive. Putting money into solid companies in thriving industries has been the hallmark of superior stock investing throughout history. It’s no different now. Everything is the same.

Where do you turn to find out about a company’s financial health? When you find the information, you’ll discover how to make sense of that data as well.

We compare buying stock to picking dog. If you look at a group of dogs to choose which ones to buy, you want to make sure that you pick the healthiest ones. With stocks, you also need to pick companies that are healthy.

This article can help you do that. To find 5 best blue-chip stocks.

The 5 best blue-chip stocks as ranked by expected total return.

AT&T (T) is one of the 5 best blue-chip stocks

They are among 5 best blue-chip stocks. AT&T is a global provider of communications and digital entertainment services with 34 years of consecutive increases. They are offering internet access, wireless cellular, and TV services. The company was founded in its current form as a spin-off in 1984. Today, it creates $173 billion in annual revenue, driving a market capitalization of $234 billion. When they reported second-quarter earnings in July 2018, and investors were disappointed. Revenue was down 3% in comparison with the same quarter last year. But the new moment is that earnings-per-share increased by 15%. The company boosted its customers by nearly 4 million. Primarily from prepaid customers in the United States.

DirecTV Now (stylized as DIRECTV NOW, also known simply as DTV Now) is a subscription streaming television service owned by AT&T. As of July 2018, the service has 1.8 million subscribers.

Also, WarnerMedia as part of AT&T has strong growth.

The revenue expanded from $7.3 billion to $7.8 billion year-over-year. All of its segments continue to grow subscriber revenue with special strength coming from HBO.

The WarnerMedia is a significant growth catalyst for AT&T. Second quarter results last year showed that WarnerMedia is growing much more quickly than the rest of AT&T and thus, the acquisition has a bullish development.

AT&T’s competitive advantage is in its enormous participation in the United States and parts of Latin America. The company uses that scale to push wireless, TV, and internet services to millions of consumers in order to expand relationships that are existing. This diversification of AT&T’s legacy businesses and the content library of WarnerMedia is a core advantage AT&T possesses over its rivals.

The dividend is a significant draw for investors as the yield is in excess of 6%. We expect the large yield will be safe for many years to come. Moreover, we are certain that it will continue to grow as well.
AT&T looks attractive from a value and yield perspective.

Owens & Minor (OMI) is among the 5 best blue-chip stocks

Another 5 best blue-chip stocks are Owens & Minor, a healthcare logistics company specializing in contracting packages of healthcare products for hospitals. The company produces $10 billion in annual revenue from more than 200,000 customers. Besides that, the stock has a current market capitalization of just over $1 billion. They had some share price drops in 2017.
The company reported second-quarter earnings in 2018 and results in disappointed investors once again. Revenue grew 8.5% year-over-year as the Byram Healthcare and Halyard Health acquisitions boosted the top line. Adjusted operating income rose 13% but adjusted earnings-per-share fell by 25%.

But the company is solving its issues in a variety of ways. That includes cost rationalization programs and acquisitions. By the way, the acute care setting provides an enormous market Owens & Minor can grow into in the coming years. This should enable the company to continue to grow revenue. Also, it should improve its margin profile over time.

Owens & Minor’s competitive advantages include its established position with hospitals, as well as its recession-resistance.
Owens & Minor sells necessities that are used in high volumes regardless of economic conditions.

So, Traders Paradise sees this as a great advantage.

The stock is yielding in excess of 6% today. We can see modest dividend growth moving forward, but the payout is reasonably well-covered by earnings. Thus, Owens & Minor should be attractive to income investors for this year.

Owens & Minor as producing mid-20% total annual shareholder returns. It is consisting of the high current yield, high single-digit earnings-per-share growth and a double-digit tailwind from a rising valuation. We, therefore, rate Owens & Minor a strong buy for investors seeking growth, value or high current yield. So, they are 5 best blue-chip stocks for 2019.

YOU WOULD LIKE TO READ The Benefits of Blue-Chip Stocks

Cardinal Health (CAH)

Cardinal Health services more than 24,000 pharmacies across the USA and nearly all of its hospitals. In addition, Cardinal is present in more than 60 countries. It employs 50,000 people. And it produces $140 billion in annual revenue. Cardinal Health has a market capitalization of $16 billion. And has 32 years of consecutive increases.

The company’s results in 2018, were mixed. Revenue rose 7%, as did gross profit, but adjusted earnings-per-share fell 23% compared with the same period in 2017.

Cardinal struggled with some negative margin impacts. They announced mail-order customer’s contract, investing in its IT platform. But margins in the company’s generic business continue to fall.

Management is sitting for nothing. However, some of the initiatives it is undertaking to combat these troubles. The management is working on controlling costs as well as successfully integrating the Cordis business. The best side of everything, Cardinal remains committed to returning capital to shareholders over share repurchases and dividends. The dividend yield is 3.7% today. It makes Cardinal a strong choice for investors.

Traders Paradise expects total annual shareholder returns in excess of 20% moving forward. We rate Cardinal as very favorable for long-term investors.

YOU WOULD LIKE TO READ How stocks act in the period of the inflation

Walgreens Boots Alliance (WBA)

They have 42 years of consecutive increases.

Walgreens is the largest retail pharmacy in the United States and Europe. The company is present in 25 countries around the globe, employing almost 400,000 people. They have a wide and deep customer base. The company is servicing more than 200,000 pharmacies, doctors and other healthcare centers annually, along with its more than 13,000 retail stores.

The company reported third-quarter earnings last year and results were strong. Revenue rose 14% and earnings-per-share increased by 15%. But, operating income rose just 5.5%. Walgreens announced a new $10 billion share repurchase program and boosted its dividend by 10%.

The company is already in a dominant position in the United States and Europe, and the Rite Aid acquisition should serve to support that position. Walgreens’ business continues to grow in the developed world. So, Traders Paradise takes a stance, it should hold up well during economic downturns.

The dividend was raised last year, and the yield is now 2.6%.

The payout currently makes up less than one-third of total earnings. Traders Paradise expects continued growth in the dividend for many years to come. Indeed, Walgreens has at least 50 years of consecutive dividend increases.

We forecast very strong total shareholder returns for Walgreens in the coming years to 20% annually. This stock is highly undervalued as well as high single-digit earnings-per-share growth. We rate Walgreens a buy for its combination of growth, value, current yield, and dividend growth. Yes, they are one of the 5 best blue-chip stocks.

Altria Group (MO)

Altria Group has long been a source of high rates of dividends for shareholders. It has boosted its payout for 48 succeeding years.

The share price has fallen significantly in 2018 because of the company’s exposure to cigarettes. It caused some angst among investors. However, new products, such as its heated tobacco and E-Vapor products are driving new growth.

The company’s earnings for the first half of 2018 grew by 24%. Yes, revenues were down slightly. Volume declines in the core cigarette segment continue to be an issue but Altria is busy diversifying away in an attempt to mitigate the potential damage.

The worst year was 2017 with 9.4% of shareholders returns. But, the share price has continued to rise and today stands at 5.5%. Considering the yield has been increased for nearly 50 successive years and that the dividend is covered well by earnings, Traders Paradise sees the dividend as a primary source of total returns moving forward.
Altria’s competitive advantage is in its Marlboro brand cigarettes. Marlboro is near the top of global cigarette sales by brand.

Also, Altria is innovative each year.

The best example is its heated tobacco products.
We have to say, the cigarette volume is declining over time. More and more. So, Altria will need to continue to adapt to a market.

The IQOS and MarkTen products are producing strong growth but they are just a small fraction of total revenue. Altria’s story is still about a cigarette/tobacco.

Traders Paradise is forecasting those mid-teens investors have the unique chance for earnings-per-share growth. And for the mid-single digit dividend yield. We rate Altria’s blue-chip stock worth to buy. They are definitely among the 5 best blue-chip stocks.

The bottom line

The blue chips have the highest value in the poker game. But investing should be far removed from gambling. So, we can say that the term “blue chip” has stuck for a select group of stocks.

Why?

Blue-chip stocks are established, safe, dividend payers. They are often market leaders and tend to have a long history of paying rising dividends. Blue chip stocks tend to remain profitable even during recessions. Think about that!

Risk Disclosure (read carefully!)

22nd January 2019
EUR/USD declined this week

1 min read

The US dollar was one of the strongest currencies during the trading week, mostly due to the optimism about Sino-US trade negotiations. EUR/USD declined even as the US consumer sentiment worsened significantly this month.
But previously, 3 days ago, EUR/USD declined dramatically.

EUR/USD declined as the US consumer sentiment worsened significantly this month. Yet the improving industrial production helped the dollar to gain on the euro. Another reason for the dollar’s strength was the rumor that the United States is considering lifting tariffs on Chinese imports.

Check the foreign exchange market. These are the data for some of the most interesting currency pairs:

AUD/USD

The Trend is bullish in the 1-hour chart. Intraday support is present at 0.7017 price level. So, as long as the price stays above 0.7017 support level, look for buy trades. If bearish candlestick closes below 0.7017 critical support level, then up trend is going to end.

EUR/JPY

The Trend is bullish in the 1-hour chart. Intraday support is present at 123.37 price level. So, as long as the price stays above 123.37 support level, look for buy trades. If bearish candlestick closes below 123.37 critical support level, then up trend is going to end.

EUR/USD

The Trend is bearish in the 1-hour chart. Intraday resistance is present at 1.1484 price level. So, as long as the price stays below 1.1484 resistance level, look for sell trades. If bullish candlestick closes above 1.1484 critical resistance level, then down trend is going to end.

GBP/USD

The Trend is bearish in the 1-hour chart. Intraday resistance is present at 1.2965 price level. So, as long as the price stays below 1.2965 resistance level, look for sell trades. If bullish candlestick closes above 1.2965 critical resistance level, then down trend is going to end.

USD/JPY

The Trend is bullish in the 1-hour chart. Intraday support is present at 107.77 price level. So, as long as the price stays above 107.77 support level, look for buy trades. If bearish candlestick closes below 107.77 critical support level, then up trend is going to end.
Images source: www.earnforex.com

22nd January 2019
Blue-Chip Stocks – Investing in them can be a profitable decision

Blue-chip stocks are popular because they can provide a safer position during economic downturns.

By Guy Avtalyon

Investing in blue-chip stocks may have a reputation for being boring and even a bit outdated. But think again, is it an accident that they are preferred by wealthy investors and rock-solid financial institutions?

Anyone would like a part in businesses they understand and that have a demonstrated record of extreme profitability. The blue chips certainly go along with this description. According to generations of investors, blue-chip stocks have brought money for owners. For the one wise enough to hang on them through good times and bad times, inflation and deflation.

And it is well known. The blue chips stocks are always there. They represent companies that are the core of the global business. The firms with the past, with history. Their products and services are present in nearly every part of our lives.

So, why they are almost entirely ignored by smaller, poorer investors? But, at the same time, the blue-chip stocks have been supreme in the investment portfolios of retirees, non-profit foundations. Also in the portfolios of the top 1 percent of the capitalist class.

This puzzle gives the greatest example, a spectacular glance into the problem of investment management.
Even more, it requires some discussion of behavioral economics.

Blue-chip stocks don’t belong exclusively to the world of retirees and insurance companies. Here’s why.

What are blue-chip stocks?

First of all, the blue-chip stock is a nickname. It describes the common stock of a company that has several quantitative and qualitative characteristics. The term “blue-chip stock” originates from the card game, poker. You know that the highest and most valuable playing chip color in poker is blue.

But there is no general agreement on what, precisely, makes up a blue-chip stock. Hence, there are always individual exceptions to one or more rules. Anyway, blue-chip stocks have several common characteristics.

They are not new, they have history and profitability. They have official data of stable earning power over several decades.
Also, they have long data of continuous dividend payments to stockholders.

They reward shareholders by growing the dividend at a rate equal to or substantially more than the rate of inflation. So, the owner’s income is increasing at least every twelve months even if the shareholder never buys another share.

Blue-chip companies

They have high returns on capital. Also, a solid balance sheet and income statement. Especially when measured by the interest coverage ratio and the geographic and product line diversity of the cash flows.That kind of company repurchases stock when the share price is attractive relative to owner earnings.

They are larger than the classic corporation. Measured by both stock market capitalization and enterprise value, they are among the largest concerns in the world.

It is difficult to unseat market share from them. Sometimes, it comes in the form of a cost advantage achieved through economies of scale, or a franchise value in the mind of the consumer, or ownership of strategically important assets such as choice oil fields. That giant companies issue bonds that are considered investment grade with the best of the best being Triple-A rated.

They are included in the component list of the S&P 500 index, speaking about the USA companies. Many of the blue chips are included in the more selective Dow Jones Industrial Average.

Why wealthy investors prefer blue-chip stocks

Well, one of the reasons wealthy investors prefer blue-chip stocks is because they tend to compound at acceptable rates of return. It is typically between 8% and 12% with dividends reinvested. To say that, holding blue-chip stocks isn’t smooth by any means. They may drop by 50% or more during the period of several years. But over time, the profits perform their extraordinary power.

Presuming that the shareholder paid a reasonable price, it shows up in the total return of the shareholder.
Even when they paid high prices for the ”Nifty Fifty”, 30 years later, investors beat the stock market indices despite several of the firms on the list going bankrupt.

By holding the stock directly, the wealthy can pass them to their children using something known as the stepped-up basis loophole. One of the most incredible, traditional benefits available to reward investors is that all of the deferred capital gains taxes that would have been owed are forgiven.

For example, if the investor, your mother or father at the same time, vested $500,000 worth of blue-chip stocks and held on to them.

Can the blue-chip stocks offer a safer position during economic disasters?

It isn’t a pleasant moment, but, just, for example, they died after they had grown in value to $5,000,000. The successor could arrange that estate in a way that the capital gains that would have been owed on the $4,500,000 unrealized gains ($5,000,000 current value – $500,000 purchase price) are forgiven. The successor would have never paid them. Their children will never have to pay them.

Don’t you think it’s better compounding at a lower rate with a holding you can maintain for the decades? Better than trying to flit in and out from position to position, always chasing after a few extra percentage points? Yes, it is.

Another reason blue-chip stocks are popular is that they offer a safer position during economic disasters. The less experienced and poorer investors don’t think about this too much because they’re almost always trying to get rich too quickly.

They are looking for that one thing that will instantly make them rich. It never ends well. Markets can collapse. You will see your holdings drop by substantial amounts no matter what you own.

Are Blue-chips safe investments?

Don’t let the other people deceive you. One of the reasons blue chips are relatively safe is that dividend-paying stocks tend to fall less in bear markets due to yield support.

Moreover, profitable blue chips sometimes benefit over the long-run from economic disasters. They can buy, or drive out, weakened or bankrupt competitors at attractive prices. The blue-chip stock sets the stage for much better results decades down the line whenever there is a market collapse.

As a conclusion, wealthy and successful investors tend to love blue-chip stocks because the stability means that the passive income is hardly ever in danger. Especially if there is broad diversification in the portfolio. If we ever get to the point that premier blue-chips are cutting dividends en masse across the board, then we will have much bigger things to worry about than the stock market. We’re most likely looking at a civilization disaster.

And if it comes, who will care!

21st January 2019
A Diversified Stock Portfolio – How to create?

Building a diversified stock portfolio is just the beginning but an important part of investing. Here is how to do that.

By Guy Avtalyon

We already mentioned a diversified stock portfolio.

‘Don’t put all your eggs in the same basket’ is probably the most popular saying telling investors about the importance of portfolio diversification. Otherwise, how to spread and reduce risk?

The major advantage of the diversified stock portfolio is its ability to protect your entire portfolio from the volatility associated with different asset classes.

In this article, we look at ways to protect your portfolio by spreading your risk across several different asset classes. Also, some of the many different assets in which you can invest, each with different risk characteristics.

Where is the advantage of the diversified stock portfolio?

The risks attributable to assets cannot be avoided. But when they are managed as part of a diversified portfolio, they can be reduced. Individual assets have a bearing on the overall level of risk you are exposed to.

And the association between the assets has even greater importance. This article considers how a well-constructed investment portfolio should be diversified in a variety of ways. Including overall investment style, a number of individual asset classes, the spread of geographical allocation, and the approach of the fund manager.
The key is to build a diversified stock portfolio with a mix of different investments that make sense for your attitude to risk.

A balanced investment portfolio should hold a mix of equities: stocks, bonds, property, and cash.

Yes, we know. For some of you, the world of investing is complicated. There are mutual funds, exchange-traded funds, target-date funds, a variety of bonds and fixed-income products and then, of course, individual stocks.

These days more and more investors are turning to low-cost ETFs. And necessary, there is the question: is it worth taking the time to build an individual stock portfolio? Yes, it is.

But you have to put in some time and research.

There are various advantages to individual stock ownership.

We believe an individual investor has an advantage over professional investors. But only if you are willing to do the homework necessary to understand the company, management, and the industry underlying each individual stock.

How can you start picking the companies that go into their stock portfolio? Building a solid stock portfolio requires some time, research, and homework.

What is a well-diversified stock portfolio

The diversified stock portfolio should have 10 to 30 individual stocks.

There are 10 stock sectors classified by S&P Dow Jones Indices. These include energy, materials, industrials, consumer discretionary, consumer staples. Also, health care, financials, information technology, telecommunication services, and utilities.

A general rule is to own two to three of the top companies in each main sector.

Stock rankings, screeners, and lists can help individual investors in their quest to find the best stocks for their needs. The rankings can slice and dice stock market members up by returns, market capitalization, dividend yield, price-to-earnings ratio, and other criteria.

Investing in research doesn’t have to be for professional portfolio managers. It is for individual investors too.

How to diversify a portfolio between growth and value stocks?

Or between dividend stocks and those focused on plowing their profits back into their operations.

Diversification is a beautiful thing because it can lower risk without lowering the expected return of a portfolio. This is more or less related to magic by Wall Street standards. Use your research and logic to weed out the stocks that you do not like. Or the companies that have historically lost money due to the competitive pressures.

It will be good for you to understand the behavioral psychology and economics at play behind the companies you hold in your portfolio.

For example, knowing the demand elasticity, or how much a change in price will impact the quantity demanded, can be useful in understanding a company or industry’s prospects.

If the price of gas went up 15% tomorrow, it’s very unlikely there would be a corresponding drop in demand. People need to drive, of course.

How to establish an investment time frame in your diversified stock portfolio?

Since you are going to own individual stocks you need at least three to five years. The longer the better. In order to reduce certain volatility.

Hence, to be successful in individual stock investing, you must do your homework. But more importantly, you need to have a steady temperament and be confident in your own convictions and analyses.

Building your diversified stock portfolio may be just the beginning. But, for the interested and dedicated investor, the payoffs could be well worth the work.

Picking good stocks requires research, time, and the ability to evaluate many parameters for the stock, industry, and overall economy.

And while buying a few dividend stocks should earn you some healthy interest income. Your real dividends will be the long-term gains you rack up as you watch your picks grow.

20th January 2019
How to structure your stock portfolio?

The structure of the investment portfolio depends on many factors but risk appetite is maybe the most influential one.

By Guy Avtalyon

How to structure your stock portfolio? The answer to that question depends on your attitude to risk. Here are three sample portfolios.

What is the best structure of a portfolio?

Laith Khalaf, a senior analyst at UK wealth adviser Hargreaves Lansdown suggests this model of your stock portfolio structure:

Adventurous investor
20%: JPM Emerging Markets
20%: Legal & General International Index
20%: Man GLG Japan CoreAlpha
20%: Threadneedle European Select
20%: Standard Life Global Smaller Companies

Balanced investor:
20%: Invesco Perpetual Tactical Bond
25%: Newton Global Income
10%: Stewart Investors Asia Pacific Leaders
25%: Legal & General UK Index
20%: Baillie Gifford Managed

Conservative investor:
25%: Newton Real Return
20%: Investor Perpetual Tactical Bond
10%: Legal & General Global Inflation-Linked Bond
20%: Threadneedle Equity Income
25%: Troy Trojan

How you will structure your portfolio depends on are you a defensive, middle-of-the-road, or aggressive investor. This will partly determine where you invest.

What is a portfolio structure?

The portfolio construction is the process of organizing your investments as a whole, rather than piecemeal.

How can you have the best chance of constructing a portfolio that meets your investment goals?

At a broader level, portfolio construction should be about structuring your portfolio in a way that stands the best chance of meeting you have stated investment aims within your acceptable level of risk.

But be careful, well thought out structuring of your assets will have an enormous impact on your long-term wealth creation. Conversely, the wrong structure could cost you in both ongoing charges or unexpected tax liability.

What factors do you have to consider in deciding on the combination of stocks, bonds, and perhaps commodities to use in building up your retirement portfolio?

Let’s say that the further one is from retirement, the more risk one can take. Thus at 30, you might have a portfolio of 70% stocks, and 30% bonds. At 50, the ratio might be half stocks and half bonds and at 70, 70% bonds and 30% stocks.

This model of stock portfolio structure allows for a more predictable and more stable income from bonds. But it does not take into account the characteristics of the individual or the nature of the stocks and bonds. Moreover, not all stocks are equal.

Structure of the stock portfolio based on risk tolerance

Find how the structure of the stock portfolio matches your risk tolerance.

If your stock portfolio at 30 or 50 is loaded with, for example, half small caps with no dividends, mining stocks with low dividends then the need for bonds is higher. Or if the bond portion of a portfolio is loaded with high-yield bonds subordinated debt, the fixed-income portfolio needs to be rebuilt for security.

As we move from working years during which it is possible to raise savings and make up for investment losses into retirement, the need to cut volatility grows. A mixture of short and long government bonds and corporate bonds can’t compete with the potential of small companies’ stocks to rise. But it does have fundamental security.

But you can implement some other model of structuring your portfolio. For example, you can buy stocks from developed and emerging markets around the world. And you can own real estate through a low-fee fund as a part of your portfolio.

If you live in the USA, Treasury inflation-protected securities, or TIPS are a very good choice. Some of these parts will possibly increase and drop and increase again. It will happen at different times and at different rates. So you can rebalance at least once a year to maintain your target allocation in your portfolio.

David Swensen, chief investment officer, Yale University suggests this, take a look at the image below.

How do the fees influence the structure of the stock portfolio

Fees can make terrible damage to your investment returns.

Even if you hold the higher-risk, but also, higher-return asset classes. In case of, for example, stocks, you can expect high but one-digit or low double-digit returns over a long time. In fact, Swensen said you can end up losing more than half of your returns. The math is simple, you’ll have to pay 1% for your financial advisor, the additional costs are mutual funds fees which are approximately 1-2%. Finally, you’ll have to adjust your returns for the percentage of inflation.

The odds, he said, are in favor of index funds. In his opinion, very-low-fee index funds make the most sense for individual investors.

When it comes to investing there is no such thing as one size fits all.

Speaking about how to structure your stock portfolio, your portfolio has to be well-diversified, equity-oriented for long-term investors, and efficient in the sense that it is as good or better than other alternatives.

Portfolio structure depends on how long you want to stay invested

When you’re investing for the long run, for example, 20 or 30 years, you are expected to make more money holding a fairly large part of your portfolio in stocks or some other assets that have a high rate of return. That’s because historically, stocks offer greater returns than safer alternatives over the long term.

But in the short term, stocks tend to be much more volatile. So as you approach retirement age, investment advisers suggest moving more assets to the “safer than stocks” class.

Let’s say the stock market crashes and you need to spend money out of your portfolio as income in retirement. So, you don’t want to lose 20 – 30% of your savings and to sell your stocks at a lower price. If you’re younger and market crash, you can just stay invested and wait for the market to recover.

But it isn’t all about age

How to structure your stock portfolio is also about the appetite for risk. Risk tolerance is different for each investor. Risk-averse investors will prefer to hold a mixture of the stock portfolio and cash. Cash could reduce overall risk. When wealth increases, it could happen a tolerance for risk to increase also. But when you grow older, tolerance for risk could decrease. Each investor needs to find his/her own stock portfolio structure that suits their risk tolerance. That’s the main point.

18th January 2019