Category: How to Start Trading – Beginners

Invest in any age, put the money in the stock market

2 min read

Invest in any age. Don’t care how old you are you, you should put the money in the stock market. You should invest. Also, it doesn’t relate to how wealthy you are.

What makes us think like this.

The stock market is, yet, the genuine way we have for the progress.

Think!

Who invests a nice part of salary every year can be compensated after a decent number of years.

For our financial growth, long-term investing is the best way to increase our wealth.

Build your investing portfolio with the right stock and bond mix.

Support it with index funds to maintain costs low. Avoid hedge funds for small investors and ETFs. In other words, you have to be smart and manage your investments.

It is never late. Yes, we know. Everyone will tell you that the early ages are the best time to start investing.

That’s true, but also, you can invest in any age.

The stock market is open space, who would forbid you to invest at age after 40, for example? Or after 50?

Human’s life is longer and longer. Hence you could buy some stock, invest in bonds and in some index fund and supply your investment account for the next 10 years.

When picking stocks you need to have in mind how you project to manage your investment. Say you are in your 40s, so you might want to invest in some high-risk assets.

You might choose shares in some new or small company. But you might be interested in some abroad assets and developing markets.

If, however, you plan to invest shortly before retirement you will need some different strategy.

Therefore, you should invest in a less volatile property. For example, you might like to invest in bonds and shares that are paying plentiful dividends. If you are an older investor who just starts investing it is recommended to hold a mix of stocks, bonds, and index funds. Just put your money in the stock market.

Invest in any age no matter how old you are.

The S&P 500 gives a 10% return per year, with dividends included.

You might think it isn’t too much, but thanks to phenomena of compound interest you will double your capital every seven years.

You see, just a little amount of money simply put in the stock market can produce big pays after some time.

Where to invest in your 50s?

As you are nearing your retirement it is allowed to be a more aggressive investor so put your money in the stock market. For example, you may have a portfolio with 60% in stocks and 40% in bonds. It is a good balance for the majority of investors. Keep in your mind your plan to retire at 65 and you have 15 years at least to collect very nice income thanks to compound interest.

Of course, it is best if you can start earlier. But, truly, you may invest in any age. Think how much you will have after 14 years if you start in your 50s with $10,000. The compound interest phenomena are on the scene again. Just count, after 7 years double, and the next 7 years, and… Not bad, not at all.

Maybe you wouldn’t be able to buy the new house but you might have enough for a relaxed life.

That’s why you should invest in any age.

risk disclosure

30th May 2019
Creating strategy for Forex trading

Forex Educational Series – Part 3

by Hans Stam – A Forex trader

Creating a strategy

We left off in the previous chapter talking about creating a strategy of your own.

It’s obvious you do not want to lose money, your aim is to be right on your trading as much as possible to make a profit.

So how can you create a strategy that will work for you?

I mention specifically it has to work for you because many will sell trading signals on their analyses, but once you try to implement the signals, your timing could be off and totally miss the trade.

Then again, who knows if that signal is very successful and why would you trust other traders signals?

Of course, that’s a personal choice to make, but once you would decide to create your own strategy, here are some tips.

Demo testing before creating a strategy

While creating a strategy that works for you, you obviously do not want to spend a lot of money so you will use virtual money using a demo account.

Once you have set up your demo account, you can start trading as if it was real money, but more importantly, you get to know the trading station you will be using later on.

You see all kinds of options, and most will not apply to you so you will have to figure out what you will use or not.
For instance, the chart used.

If you like to open a demo account.

Charts

Most will stick to candlestick charts but there are many other types of charts to choose from.

Also, there are timeframes you can choose from.

In this example, we’ll stay with candlesticks but many other types of charts will have similar info.

A candle represents what the price did in a specific timeframe.

If you pick an hourly chart, it shows candlesticks and the info of the price in an hour.

Main info a candlestick is giving you the Opening Price at the beginning of that hour, the highest price, the lowest price and the closing price of that hour.

The next candle would start its opening price where the previous candle ended its closing price.

(If that is not the case we speaks of having a gap, but that’s not common)

If you would change your hourly chart to a 5-minute chart, it would give you a lot more information whereas the hourly would give you the bigger picture.

It’s for you to decide what you do with that information and how you would apply that in your strategy or not to apply it at all.

Indicators

Using charts you will also have indicators. For example, you can use a curving line which follows the Simple Moving Average of the price known as SMA.

Others are MACD or RSI to name a few. There are countless indicators, and it’s up to you to use some of them or to ignore them.

Every indicator you would use has its own specific purpose and shows you the result of what that indicator is designed for.

We can’t go through all of them, so if you choose to apply you can do some research on a specific indicator.

Most commonly are MACD, RSI, Moving averages, often in combination with trendlines, Channels which form, Support/Resistance, Fibonacci or Elliott Waves, etc.

It’s up to you what you want to use or go a completely different way in your trading.

Trends

Often when patterns emerge from the charts it shows a direction to where the price is heading.

If you see a clear direction you could translate that to yourself as seeing a trend.

As we talked about previously, we would like to figure out what most other traders would do, and seeing a trend could be useful.

If you build your strategy, you could make up some rules for yourself to test and see what result that gives you, one of them could be catching those trends.

The beauty of trying that out on a demo is, it will be virtual money, so even if you lose, no harm is done. But it is very useful while creating a strategy.

Stick to what works

While trying out your strategy starting from scratch, you will notice some things work, others don’t.

Try to figure out what causes losses, and eliminate those reasons by altering your strategy to where that won’t happen again.

Then go test it again on your demo.

You decide when you think your strategy is working properly, then you can try to trade real money and go make a profit.

As soon as you notice it’s not working, stop trading and go back to demo trading, see what caused it to fail, and alter the strategy.

Rules

When you look at how others trade, they often have rules. Institutions also have rules which you cannot break if you want to work there.

The big advantage we have as private traders is that there are no rules at all.

We can make up our own rules. It’s our money, our strategy, and whatever anyone else says, you can choose what to apply or not.

The broker you work with could have some rules, but other brokers might not have those rules at all.

Choosing a broker may be of importance when you want to trade your strategy.

It really takes some creativity and patience to create your own style, but once you have done that, the rewards will be all yours.

Mentor

If you think to yourself, it’s hard to do all that work, can’t I just get a mentor?

Well, that may be harder than you think.

Often when people look for a mentor they end up in a strategy that can be incredibly difficult to follow.

The alternative is to just let some robot trade which is programmed by these “companies”

Real mentors will learn you how to think for yourself, and if what they have tried and tested makes sense.

The reason why a mentor is very valuable to you

…is that you will have to make your own decisions in the future.

You can’t rely on anyone else to make all the decisions for you, because what would happen to you when that mentor decides to just quit?

Or what would happen when that mentor starts to charge you $1.000 a month just to follow instructions?

If that would happen, the information may or may not be that valuable, but you would still have to make more to end up with a profit.

A good mentor will take you by the hand and walk you through all your questions, pointing out the stones on the road so you can find your way in the dark.

I once met a man who had sold over a thousand courses for the price of $300.

So he made over $300.000 just by selling his course and in addition, he lets his students pay an additional $30 a month just to get access to “Hindsight Trading” on YouTube.

When I talked to him, he did know a lot about indicators, etc. but frankly, I thought he didn’t know what he was talking about as he was guessing just as we would too.

He’s a great salesman, but that is not a guarantee you will get value for your money.

In the end, results count and you will be the judge if it is worth your money or go look for another mentor if you would need one in the first place.

Q&A

If you like me to cover a specific item regarding trading, just let me know by sending me an email, and I’ll try to clear that up in the coming articles.

Best Regards,
Hans Stam

29th May 2019
Forex is the area to focus on

Forex Educational Series – Part 2

6 min read

by Hans Stam, A Forex trader

The terminology of trading Forex

When I first started showing interest in trading, I might have been where you are now, so I will go back a long way to put myself in that place again and try to help you.

The first obvious attempt was going for stock trading and I didn’t have a clue what I was looking at.

After I had done a course on stock trading I soon got stuck on terminology.

Also, I figured out very quickly, stock trading was not for me.

At the end of the course I was getting really good grades, but in real life that didn’t do much for me as I simply did not have the money to buy stocks in masses and get something of real value back. Back then I had to go to the bank and buy stocks, but the commissions were very high and it wasn’t really worth the effort.

The other problem I had was I did not understand the language traders used, so in my writing, I will try to explain every step so you can follow this series with ease.

First, I will try to explain trading to you, before going to set up an account and trading platform, as that is a totally different story.

Options vs Forex

When I figured out stock trading was not for me simply because I did not have the money, I soon found out about trading options.

The big plus of trading options was that you didn’t actually buy the stocks, but you bought a contract to buy these stocks at a certain price.

Think of it as getting an option to buy a house, it simply means the house is being taken off the market for a while because there is a potential buyer.

Now I was able to trade at leverage. Instead of buying 100.000 shares hoping they would go up to sell them again against a profit, I could buy a contract to buy at current price and keep that option for say 3 months, if the price went up I could still buy these shares at the previous price and make an instant profit.

Instead of actually buying and selling these stocks or commodities like oil etc. the put and call options that were being traded.

The contracts were much cheaper than buying the actual stocks or commodities, but the negative to me was that if the stock went against the option, the option was worthless.

Why would anyone buy a contract that would allow them to buy a stock at a higher price than they could at the current price? If that happened, the money to buy the option was gone.

So back to Forex. Again, forex trading is being done using leverage. But this time, although you may lose some of your money, it’s always worth something.

Closing out your position (your trade) will still have some value even if the other currency went down. That’s when I knew, Forex will be the area to focus on.

Bull and Bear Market

You might have seen this before, and you probably have.

Think of the bull of Wall Street, or the phrase bullish or bearish markets.

Maybe it seems irrelevant to write about this, but once you are looking at a chart, it’s good to see of the Pairs go up or down.

When the market is heading upwards, we call that a bullish market. When it’s heading down, it’s called a bearish market.

The way to see this clearly, think of it like a bull that takes you on his horns and throws you up in the air, as where the claw of a bear crashes you down.

Explaining Pairs

In our previous example, I used the pair EUR/USD.

But how about Base and counter currency?

In this example, it’s simple to understand you can buy the Euro against the Dollar.

But what if I want to buy the Dollar against the Euro, I don’t see that pair anywhere?

That’s correct, so instead of buying the Dollar, you will now Sell the Base currency, the Euro.

That also explains the next bit of terminology, Buying the Euro (EUR/USD) now becomes going LONG, and buying the Dollar now becomes going SHORT on the pair EUR/USD.

Simply put, Long is buying, and Short is selling the Euro against the Dollar pair (Where in fact you are buying the Dollar as the counter Currency of the pair)

Analyzing the market

As you may have read in the previous article, there is a difference between trading and gambling.

So what makes the difference? And why are traders not agreeing with each other on where prices will go?

The final judge is the market itself, and sometimes you are right and sometimes you’re wrong.

To make sure you are more right than wrong, you would want to try to analyze what the market is going to do based upon what other people think.

Although, there are analyses of the market, even so, if everyone would disagree with the projections and still went another way, the market as the judge would rule that the price would head towards supply and demand.

Unfortunately, that doesn’t happen often in real life. If you’re interested in reading more about this, Google George Soros and see what he did.

The majority of traders will try to analyze based upon two different types of analyses, Fundamental or Technical.

Knowing that other traders have the same information, they will very likely try to figure out what most others decide to do based on the presented information and go along with the flow.

Fundamental vs Technical in Forex

Fundamental analyses, in a nutshell, are more or less analyzing where the market will go based upon the news and events that happen around the world.

It’s possible the influence of these analyses are very high, high enough to even close the markets temporarily. Think of an event like 9-11 or a war for example.

More common in this type of analyses are reports that are presented publicly like unemployment rates or elections etc.

Whatever the news is, usually this is affecting the market greatly and prices will go up or down rapidly, sometimes in seconds.

Once the move happens, you probably are too late already because of the speed, so many will preset orders in case the market goes up or down fast, others will already have the trade open based upon their expectations of what will happen with certain rates like unemployment.

Technical trading Forex

…is something completely different.

When trading based upon technical indicators, many will look for patterns in all kinds of shapes and sizes.

There are many tools to use, think of moving average price waves based on the last X numbers of price values.
Others are Elliott waves or Fibonacci for example.

Also, support and resistance levels are used a lot. When a price is trying to go upwards, it often happens it will try to break a ceiling, bounce back, and have another attempt to breakthrough. Once that happens often, a resistance level is forming. Other traders will see that too, and will most likely trigger a lot of buying orders once that level is broken which is a self-fulfilling prophecy as it will go up because others will buy in that direction which supports the move.

The support level works the same, the difference here is that it supports the lower side of a move.

So the difference between Gambling and Trading basically is that you can try to analyze what most traders will do and go along with that direction.

If you made it this far, you really seem dedicated to learning! Well done!

When you need mentorship, please contact me by clicking here.

Is there another way?

In short, Yes.

We’ve been over Emotions, we’ve been over Analyses. So basically I need to be a robot?

No, you don’t, you can be a vibrant human being and still get very good results.

In fact, it doesn’t have to be difficult at all, but it does require a bit of money to do it right.

I’ll say it out loud, it will take between $5.000 – $10.000 to get started, so a few hundred doesn’t really get you very far with this option.

If you want to know more about this option, please contact me here and I’ll set it up for you.

What is PIP?

For consumers, the best-known decimal is in cents.

For example, if the rate EUR/USD is 1,12 it means that 1 Euro is worth 1,12 Dollar.

It would be very difficult to trade on that decimal.

So in trading, we add a few numbers behind the comma and start trading in PIPs.

PIP (Price Interest Point) Although some have other versions, it’s the point on the market.

1 PIP equals 1/100 cent on the dollar.

Example:

1.1200 to 1.1300 equals a price change of 100 PIP’s and that equals 1 cen

1.1200 to 1.1201 equals a price change of 1 PIP…

But wait, there are more digits when I’m trading?

Correct…

When you see 1.12000 to 1.12001 that’s 1/10 PIP So we call that a Pipette.

Hopefully, this is a simple way to understand how that works.

Demo Trading

The best way to start learning is to open an account and start demo trading. You can do that by clicking here.

Those account with real live numbers are FREE to use, and most will be temporarily but on request, most brokers will extend the trial period.

It might be overwhelming at first, but the good part is, you can get to learn how it works, and you can see directly if you make or lose money.

By the time you are ready, you can open a live account, and start trading for real.

Be aware, going live is really different!

The main difference is, you can refresh your demo, where on a real account your money is gone when you lose.

I have seen people trade on a demo and all seemed reasonable, but when they switched to a real account their balance went south.

The most common difference I noticed was the demos were being traded without much stress in comparison to live-accounts.

It didn’t really matter if this was about thousands of dollars or a few dollars; the tension was just making traders fail a lot quicker on the live account.

Most common mistakes were taking profits way too early, and experiencing fear of loss which totally ruined their trades.

Although some brokers do have their tricks, it’s usually something you can figure out and workaround, but the human factor makes trading more difficult than you may think for most people.

Many also think it will not affect them until they realize they too are human.

Artificial Intelligence (A.I.)

Many of us are aware of Alexa, Siri, and other A.I. which to a lot of us is very intriguing.

For us Forex Traders this is the future.

If you want to experience A.I. which checks your trading and gives you advice on where to focus, you can try that out for free by clicking here.

What you will need is a Free demo account or set up a live-account by clicking here.

This A.I. does not give you strategies, but it makes you aware of the risks you are taking, and if you are doing well or where you need to improve.

If you are struggling to get a good score, and need to perfect your strategy, wait until upcoming articles where I will explain how to create a strategy of your own.

This is not like the trading robots you may have heard about, as I believe you always will have to keep a close eye on your trading instead of letting whatever robot take your decision from you because to a robot it doesn’t matter if it is blowing your money away or not. And of course, we don’t want that to happen.

We will go through more valuable information coming very soon!

Hopefully, you appreciate the value offered to you on this website, stay tuned!

Best Regards,

Hans Stam

risk disclosure

27th May 2019
Forex – What is it – The Differences and Similarities With Other Tradings

Forex Educational Series

by Hans Stam

As a Forex Trader, I would like to create a series of short explanations about how this market works. What are the pros and cons etc?

My aim is to make this as clear as possible, so you can follow the process step by step.

What is Forex?

Forex (FX) is the abbreviation for Foreign Exchange.

When you travel to another country, you may want to exchange your local currency to the currency of the country you’re traveling to.

At the bank or airport, you can exchange your money into the currency used in the country you are heading.

The exchange office works with an exchange rate, depending on the current value of both currencies of a “pair”.

A Pair is, for example, a euro against a US dollar which would be the EUR/USD pair, where the EUR is the base currency, and the USD the quote or counter currency.

EUR/USD – Base / Counter

At the end of your trip, you like to exchange the remaining funds again, back to your currency.

Again, the exchange rate can be changed as it is constantly changing.

So it could be very possible that you will get more value back compared to when you first exchanged it, or a lot less value.

The excitement of Forex trading

This exchange can make or lose you money, and that is very interesting to investors, especially the part where the trader can make money of course.

Just like stocks, currency can be traded on the Market, and you don’t have to go to an exchange office to do it.

So what makes Forex different from trading stocks?

First of all, you don’t have to find a buyer for the trade you are holding, you can close the trade any time you want and instantly get the current value credited back to your trading account.

The second main difference is, leverage!

For instance, the broker gives the trader a 1:100 Ratio with your broker, which means you can trade 100 times the value you pay for.

An example would be trading the Pair EUR/USD and you would buy 10.000 Euro’s, the broker will then take 100 Euro’s locked in your account while you trade the exchange rate over 10.000 euro.

It’s easy to understand you can make far more profit over 10.000 euro, than over 100 euro.

When the market goes your way

Now, when the market goes your way, and close the trade to take the profit, you get the initial 100 euro credited back into your account. So all that happened was that you win or lose the price difference from where you entered the trade to where you closed the trade over 10.000 euro.

It’s logical that when you take profits over 10.000, you make a high percentage on 100 initial deposit.

This goes both ways, so it can be risky, but the rewards can also be a very nice ROI (Return on Investment)

If you like to find out more about how you can enter this market, please visit my page.

Can you really make a living trading the Forex Market?

That is a question I’m getting a lot, so I will try to give some clarity.

The exact percentage of the people who really make a consistent profit is low.

Some speak of a top 5% and that is going as low as a top 1%.

What most traders will agree on is that the number is low whatever that percentage might be.

So how come many people are still trading this market and how come so many are struggling?

The first answer on to why so many people still have an attraction to this market is that it’s possible to make a lot of money really quick, on the other hand, they can lose it just as fast.

But in the end it is very simple, you either are right in the direction your trade will go, or not.

I will elaborate in later articles some more about market directions, but this is the basis of all trading.

The trader buys or sells at a specific price, hoping the counter currency will have a positive price change for their trade.

Forex isn’t the same as gambling

Some traders are hooked on the possibility of great profits, and you could compare it to Las Vegas Casinos, and it can be very addictive.

So that it the why people keep on trying, it’s like gold fever or putting your money on Black or Red in a Casino.

Second, why are so many people struggling with this fairly simple way of trading?

The biggest reasons are emotions and lack of knowledge which basically makes it like gambling.

The lack of knowledge speaks for itself, but how about emotions?

Many struggling traders have fear of loss and get excited too quickly when they are winning.

It’s usually when people are doubting a strategy they bought or came up with themselves and experience fear of losing.

When they see the trade going against them, they let the trade go really deep, but when the trade finally goes their way, they can’t wait to take the profit and have that excitement produce an adrenaline kick.

The strategies can be altered

Often strategies are altered, without really knowing why, but if they had that strategy a bit different on the last trade, then their loss would have been profitable in their mind, forgetting the trade would probably have been closed well before it matured.

Hindsight trading has been used a lot with this type of trader, and that doesn’t count.

The top percentage of the traders who make a consistent profit have learned to do things differently, and it would be wise for traders to have a mentor who knows where the pitfalls are.

Also, it is typical for this kind of gambling trader to put in a few hundred dollars, while in reality, the minimum should be at least $5.000 just to have a buffer.

Once a trade goes against the direction desired, it will need some breathing space. The bigger the buffer, the longer you can keep the trade open.

Fact is, you will not lose a trade until you take the loss, or when you run out of margin. So part of that is a decision, the other part financial.

If you like to find out more about strategies or have specific questions, please visit my page.

I hope this short explanation has your peaked interest, and it is clear to you how the basics work.

In the next article, I will go deeper into some facets of trading the FX Market and its terminology.

Make sure to bookmark this page, and come back to read more soon.

24th May 2019
How to invest in a mutual fund

4 min read

To invest in a mutual fund, you can buy into a mutual fund through a mutual fund company, bank, or brokerage firm (similar to stocks).

Typically, funds are either equity funds (investment in stocks), fixed income funds (investment in bonds), or money markets (kind of like cash).

You will have to consider what is the minimum threshold for investing in the mutual fund. Because different funds have different investment minimums.

Also, you will have to decide if you want to invest in a load or no-load fund.

This means you will either be paying commission or not. But regardless of if you invest in a load or no-load fund, you’ll still be paying some fees. So, you have to factor that in when deciding.

And, it is really simple to invest in a mutual fund.

You simply determine the amount of money you’d like to invest in a mutual fund over the phone, online, or in person. There are so many options today.

Online brokers generally often offer more diverse selections. However, you will have to open an individual retirement account.

There are several expenses to account for. Like, transaction fees accumulated when investing in a mutual fund, early redemption fees if you wish to sell a fund in the first 60 to 90 days, and expense ratios that are a percentage of your investment.

You can make money off of your mutual fund by selling it for more than you paid for it. Or through a variety of distributions like dividends or interest that can be paid out throughout your investment. However, most mutual funds will reinvest dividends for you unless you specify otherwise.

Can money invested in mutual funds be lost?

We will try to keep it simple. If you have invested only in mutual funds, theoretically the money can be lost.

Reasonably – it depends.

Well, investments are time unstable. So, at some period, your portfolio can hit the loss.

But over the long period in time, the odds of losing your money are close to null.

Yes, there might be accidents like some major market breakdown which could destroy your collected profits notably. But, in most cases, it is for a short time and markets would recover and your investment too.

Let us explain.

During the 2008 financial crisis, the fall in stock prices led to near 50% decline in the portfolio value of many people nearly throughout the world. Many people had panicked because this was a huge story. But, inside a one year, the portfolio value jumped back to its 100%. So, if some investor was really holding till today, it would be extra up 50–60% at least. In short, the possibilities of losing in the long-term are very small when investing in mutual funds.

Take a look at this chart:

Let’s do some math.

You invested $100 and holding it for 10 years earning 15% CAGR = $404.5.
You remember from the previous lessons: CAGR is the compound annual growth rate (CAGR).

Some breakdown in the 11th year decreased prices by half – $202. But, this is still a return of 7.3%.

The risk, if you are forced to sell here is not reaching your financial intentions and considerably it will influence your habits if you are retired.

But what we can learn from the history of the present business world? The value of assets has jumped back to healthy from the critical after the great depressions.

One note more. Instead of focusing on the systematic investment plan (SIP) a better choice is a focus on the systematic withdrawal plan (SWP). That’s the point where you begin to take out your money from risky assets. You are close to your goal and place in secured assets.

So, the chances of not reaching your financial aims are reduced.

The note: Mutual fund investments are subject to market risk.

You have to keep this in your mind forever when investing in mutual funds. There are no investments without some risk associated with it.

Missing or getting the money depends completely on the investment period an investor picks.

We will show you how it looks in one more chart. We aimed out the period of big crisis 2008, in the red circle.

For example, you invest $1,000 for a day or two. If the stock market slips the preceding day, the value of your $1,000 will surely not appreciate.

Also, if you invest the same amount for a week and the market is in a downtrend throughout that week, the invested money will not yield any profit.

If you choose to stay invested for a year or more than that, though there is no guarantee, there is a possibility that your $1,000 may go up as a long-term investment horizon is always likely to give better results.

In other words, you won’t lose all your money.

Money can be lost mostly due to wrong timing.

When the market is bullish, people invest aggressively. When the market corrects, people get scared and they take out money when the market is down or sideways.

Say, investing in stocks through mutual fund route is a safer way to putting in money in the ever-volatile stock market. In a mutual fund, your investments are managed by professionals, who ensure the protection of your capital.

Past trends have shown that usually mutual funds are profitable giving an average return of around 10-12%.

Mutual fund investments become even safer and convenient if done via SIP (Systematic Investment Plan) route. SIP is a type of investment set up whereby rather than putting in a lump sum, you put in small amounts of money either in monthly, quarterly or annual installments. This, in turn, enables the fund to benefit from the power of compounding and also isn’t too much of a burden on the investor.

risk disclosure

20th May 2019
Mutual funds are an opportunity to make wealth

3 min read

What are the benefits of mutual funds? How much do they cost? Which funds are right for you? What should you consider before investing?

These are just a few of the questions we’ll answer here.

Mutual funds are not bank deposits and are not guaranteed by any government agency.

They involve risks, including the potential loss of some or all of your investment. Past performance is not a solid sign of future performance.

However, it can help you evaluate a fund’s volatility and how it operates in various market circumstances.

WHY INVEST IN MUTUAL FUNDS?

Advantages

As an example, more than 100 million Americans use mutual funds to invest in their long-term goals. Here are some of the benefits they offer:

Professional management

When you invest in a mutual fund, your money is managed by full-time professionals. They research and select investments that are appropriate for the goals of each fund, and monitor the fund’s performance so they can change the portfolio when needed.

Diversification

Buying shares in a mutual fund make it comfortable for you to spread your investment over many different companies and industries. This may help to protect your assets over market volatility. Nevertheless, diversification doesn’t ensure a profit or defend against a loss.

Choice

Mutual funds give you a wide variety of choices to help meet your financial goals. You can invest for different objectives, at different levels of risk and in different kinds of securities.

Affordability

Mutual funds allow you to invest with a nearly small amount of money. Without a fund, it would usually demand a much considerable investment to build such a diversified portfolio.

Liquidity

You can ordinarily sell your shares at any moment and for any cause. Anyway, there may be exceptional moments when fund purchases are limited because of some extreme market requirements.

Automatic Reinvestment

Mutual funds give you the choice of reinvesting your yields and capital gains in new shares of the fund, without being indebted a sales charge.

A mutual fund is when a group of investors gives money to managers to invest in diversified securities. It can be stocks and bonds, for example. Because it’s group, every part-owner as the investor is, profits and loses an equivalent piece. The costs of the mutual fund are divided according to the cost proportion. And, because the funds are diversified among stocks or bonds and other securities, they are regularly lower risk than individual stocks or bonds.

To some investors, choosing individual securities to invest in and guide can be a risky task.

Access mutual funds. With benefits like added assurance and lower risk, mutual funds are one of the best investment opportunities to enter the market. But before you take your place into the group funds, you need to know the tricks.

Mutual funds are under the control of money managers.

They create portfolios for investment with a pool of money. Often, they have different kinds of investment goals. Some managers, like fixed-income managers, focus on generating low-risk, high pay-off investments for their funds, while long-term growth managers try to beat the Nasdaq or S&P 500 during the fiscal year.

Shares in a mutual fund are typically bought at the fund’s current net asset value (NAV, or sometimes NAVPS) per share. This figure is determined by dividing the total value of all the securities in the fund by the number of outstanding shares.

Mutual funds are actually investments like buying stock in companies.

Investors purchase shares into the mutual fund. That, in turn, provides them a right to the fund’s assets. Hence, the value of the mutual fund represents the value of its portfolio.

Let’s say you invest in a mutual fund. Well, not you but a manager will invest the public funds added to the fund. A manager will invest them in several securities, for example in stocks and bonds.

The manager is ordinarily selected by a board of directors and is frequently an owner of the part in the fund.

Such a fund manager will pick analysts to help in making investment decisions. Majority of funds will engage some accountant who’s task is to measure the net asset value of the fund every day. That will define the price of the share in the fund.

Most mutual funds also have compliance officers who keep up-to-date on regulations.

When investors purchase into a mutual fund, their money is managed by the fund manager. Such professionalist invests that money in different assets with specific intentions for risk and returns in judgment: like long-term increase or fixed-profit.

Some funds may be more dangerous than others, that’s true. But usually, the composition of a mutual fund manages risks well-known low.

Mutual funds only trade once daily and are often part of a 401(k) or an individual retirement account, IRA.

The biggest benefit of mutual funds is, they are handled by someone other than the individual investor. You just have to put the hard decisions in an expert’s hands. The fund manager is more prepared for reasonably allocating our funds than we could do it by ourselves.

The mutual funds regularly submit several portfolios with a group supply of money. So the personal risk to all investors is lessened. So we can say that mutual funds are honestly low-risk and high-reward.

But, mutual funds include some fees in the kind of annual fees and stockholder fees.

Annual running fees usually are 1%-3% of the annual funds under control. The stockholder fees are in line with the commissions paid by when buy or sell funds.

Besides that, an obvious lack of mutual funds is that you don’t have constant control of stocks you’re investing in. Hence, for some traders, this may produce some difficulty, particularly if your fund begins dropping.

Don’t waste your money!

risk disclosure

19th May 2019
Young investors feel stress and insecure while investing

The survey “War on Stress” showed young investors feel stressed and insecure while investing.

By Guy Avtalyon

Young investors are stressed when investing. Janus Henderson, the Financial Planning Association and financial portal Investopedia recently conducted a survey named War on Stress about the young investor and their feelings about investing.

This survey is important because the result showed a high level of stress among young investors.

The main concerns among millennials are increasing student loans and stagnant salaries. That makes them stressed more than anything. Those circumstances are in line with their stress.

This survey shows that 53% of millennials are not earning enough to satisfy their financial obligations. So, they have no possibility to invest. The advice coming from financial advisers and experts that exactly Generation Y should start the first investment as soon as possible, sound pretty nice but not relevant for the young people

Stress has an influence on the young investors

Yes, but in other fields of their lives too. The survey shows that stress is a “significant” or “moderate” for their spirit, prosperity, and well-being because it is present in their everyday life.

Young people under the age of 35, said that they are somewhat or very concerned about the effects of a market downturn.

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It is very strange because early investing gives them an opportunity to invest for a longer period of time and make corrections in their portfolios if it is necessary. They have much more time to recover if they hit the losses. Anyway, they have much more time than older.

Stress among millennials

On the other hand, a high level of stress among millennials is logical.

The majority of young investors started to work during or near the time when the financial crisis has begun. People under 35 have fears about their jobs and financial chances, which is in correlation with the possibility to lose jobs and financial support.

And they still didn’t pay off their student loans.

Investing is triggering more stress for them.

Their salaries are $2,000 lower than that it was the case before the crisis., according to the National Association of Colleges and Employers in the US.

Young investors are disappointed with their financial condition.

More than 32% of them under the age of 35, points exactly that problem in this survey.

Previous generations never had such difficult and heavy packages on their shoulders. For example, their student debts were much lower. But not only younger investors feel uncertain. The whole range of investors between 35 and 44 age have worries about retirement. So, stress is the problem for each group younger than 45 age. All of them are upset with the level of stress that they’re feeling.

The 2019 War on Stress survey recognized an important distinction between younger and older investors. It is the difference in the mindsets and stress levels. Millennial investors with some level of financial security and financial goals claimed that they feel less stress.

The conclusion of this survey is that ‘financial literacy and an established plan may have an effect on reducing stress. Well, that is common with other investors.

10th May 2019
The Worst Investor of All Time

There is no such thing – worst investors. Yes? No? Read to the end.

By Gorica Gligorijevic

The stories about the most successful investors are well-known.

Okay! Not all and not everything.

But have you ever heard about the worst investors? Yes, you probably heard about less successful and about great losses.

But out there, in the markets, is one man who did everything wrong.

Yes, he had a great passion for investing, markets, and, most of everything, desire to earn wealth. Moreover, he was on the right path. But he did things at the wrong time. We ran into this tale randomly and was fascinated with this example.

The name of that investor is Bob.

Actually, he is the worst market timer ever. The worst investor of all time.

And lets the story began. Bob started investing in 1970 when he was 22. He planned to save $2,000 per year and increase his savings for $2,000 every next year. So, his plan was to hit that amount and retire at age 65. It should be in 2013.

In 1972, he had $6,00 savings on his bank account and was ready to make his first investment.

He invested in the S&P 500. Just before the market crash for the S&P 500 for almost 50%. He put all his money at the peak of the market. And we all know that after the peak follows drop.

Bob didn’t sell his stocks. He held them tight.

Why?

Maybe he was expecting them to grow again or he was confused or nervous. Every scenario is possible. This decision caused his later destiny.

His case is the best example of the Greater Fool Theory.

Behind the Greater Fool Theory is an idea to neglect the fundamental analysis of asset values. The main hope is to sell your stocks at a higher price to some other greater fool. Bob, the worst investor of all time, held shares in small tech company Wind River. He earned some money, not a small one, the real money.

And the 90s came.

Bob made his second mistake.

He bought the Iomega stocks at its precise peak. At the moment when their share price was on the maximum. It looks like Bob liked high-tech. Or he had confidence in new technologies. You have to admit that his predictions were good but the timing was wrong.

The tech bubble really went up at the end of 1999. Bob had $68,000 of savings to invest. And he bought, just before a 50% or more market downturn that lasted until 2002.

This the worst investor of all time somehow made losses on Facebook 2012. He bought into the IPO and sold these stocks because he noticed that they are climbing down. If he was patient for only one year his investment would be bigger for 40%. That was the difference between the price he bought Facebook shares and price in 2013.

This the worst investor lost money on Tesla also.

Tesla was up to almost 600% after Bob sold. Following his own loser’s pattern, Bob made another wrong decision. When the stock market crashed in 2008 and interest rates dropped to null, he recognized dividends as a 100-percent sure plan to make a profit.

Bob bought Star Bulk Carriers Corp. The dividend yield was 10 %.

He was defeated.

Dry bulk shippers had been hit hard. They lost 95% of its value in a frame time of 8 months. Theoretically, it was expected that Star Bulk should have a steady cash flow. But one of the company’s customers declared bankruptcy. Star Bulk gave the shareholders some cash to hold them satisfied. Actually, they got half of the dividend.

It was not the end.

Bob tried to trade the ETFs in March 2009.

He bought the Direxion Daily Financial Bear 3X Shares. Exactly at the time that stock prices were on their way to hit the bottom. He lost a fortune.

He bought China Mobile in 2007.

Bob read a hopeful report about the increasing amount of Chinese cell phone users. Of course, the price fell the day after his purchase. His worst mistake when he moved most of his 401(k) into cash 2014. But this story has a happy end. Bob ended up a millionaire with $1.1 million.

How is it possible?

Bob planned out his savings. He never paused on his savings goals.

Anyway, Bob was the worst investor of all time.

9th May 2019
Get rich – several steps to reach this goal

3 min read

If financial freedom is in your focus you must have the desire to get rich. Probably a strong one.

To get rich isn’t a pleasant job nor easy. You must have some habits besides natural predisposition or personal desire.

You must have the willingness to win, to climb to the top.

Self-confidence is one of the most important and basic characteristics. But you can also, develop your habits to bring you to the point when you are wealthy.

You have to be determined enough to do all the wise things which lead you to grow your wealth. And, maybe, retire soon.

No one became rich accidentally.

To build your wealth you must have a long-term concept.

You have to be ready to understand the prize of financial freedom.

It will cost you now but later, it will give you a lot of pleasure. Or, building wealth and making money may become your only and final goal.

Why not? It sounds so sexy!

So, what you have to do in order to get rich?

First of all, invest early.

The early bird catches the worm!

Start now!

If you put your money to work ASAP you will give it the chance to grow over time.

C’mon! We can hear that. No, we are not talking BS.

Do you have the opportunity to check data of the stock market for the past decades? Yes, you could do it and after say we are talking BS.

Say you’re in the 20s.

You might have, for example, $500 per month to invest in some low-cost index fund.

How much money you will have at your 60s?

Over a million! Not bad.

You can be a millionaire if you invest just a few thousand dollars every year.

This isn’t a fairy tale. This is the reality. And might be yours.

The tricky part is, if you start 10 years later you would gain under $200,000 if you invest $10,000.

So, start right now!

Saving and investing money now is more beneficial. You don’t have to wait.

Further…

Automate your savings.

Set up an auto deduction from your paycheck. On this way, you’ll be able to bypass risky paths that could lead you to spend your savings.

It’s so simple to delay and ignore what requires to be made.

For instance, to spend more than you have to.

If you automate your savings, you are on the best path to get rich. Being a human we have amazingly poor willpower.
Automating your finances ruins this by letting you save money without having to do it yourself.

Practice intelligent spending like a rich person

Yes, you should spend your money on the stuff that makes you happy.

Just do so with purpose, and avoid the foolish spending. That can lead you to messy finances.

When you spend your money, you just have to have a plan. Your travels, trendy clothes, or going to the restaurants, should be planed.

No one asks you to sacrifice yourself for the sake to get rich.

You have this one life and the point is to live it with pleasure. This life has no rehearsal or repetitions.

Just try to be smart and provide to yourself a bright future.

Further…

Maximize your retirement account contributions.

A small contribution is better than none, that the truth.

But a small force can span too small effects.

If you want to get rich, you have to maximize the rate allowed from the beginning.

This is primarily valid if you are beginning to accumulate your wealth later in life. Don’t be afraid, that will not screw out your cash flow.

We think it’s much difficult to balance the budget year after year to support the increasing contributions.

So, maximize it from the start.

And that revolving!

Why do you need that high-interest debt?

It can dangerously pull you down, and block you to save more.

If you really want to get rich you have to remove the bad habits.

Never ever take credit card balances!

The better choice is to learn how to handle credit effectively.

You have to pay your balance completely each month.

There are some methods to maximize rewards, points, etc. Some card owners know them, but the majority never reach those highs.

Live in harmony with your own system and you will find a key to a successful result.

Have you ever faced someone who is modest and then you were shocked when heard that they are swimming in money?

When you heard that such person is an extremely prosperous entrepreneur and multimillionaire.

Well, millionaires live below their averages. They gather their money, they are not showcasing it.

Say, the habit of spending less now can help you have a bunch later.

Don’t forget, less is more! One day.

Further…

Or how to become an investor and get rich

Victorious investors know all pros and cons. That will take time but if you want to be like George Soros or Warren Buffet, you must have a good education. Also, you have to be well informed.

You will never find sufficient information in some yellow magazine or on Twitter.

Grow as a loyal follower of money, and you can learn of getting rich.

Advanced investors would never put all of their eggs in one basket. So, diversify your portfolio.

Spread your investment over a mixture of investments. From stocks to startups. That will protect you from financial waste if one of your investments drop.

Just be cautious not to store your money too massively in one investment.

And find pros you trust. That will cost you some money, but you have to spend some money to make money.

When you get rich, don’t forget us and our good ideas we shared with you.

Lucky investing!

risk disclosure

8th May 2019
John Bogle – Proud He Was a Billionaire

Who was John Bogle?

By Guy Avtalyon

John C. Bogle, also is known as Jack, was born May 8, 1929, in Montclair, New Jersey. Also, known as one of the Bogle Boys. He had twin brother David Caldwell and older brother William Yates III called Bud. John Bogle studied at Princeton University and in 1951 got a degree in economics. But he didn’t stop his education road. He attended evening and weekend courses at the University of Pennsylvania.

After graduating his main interests were banking and investments. Bogle got a job at Wellington Fund. He worked in administration, marketing and distribution, securities analysis, and shareholder relations. Thanks to his knowledge he climbed very fast in the company’s hierarchy. He became an assistant manager in 1955.

That was a wonderful opportunity for such an analytical mind. He got full access to examine the company and the investment activity. He was ambitious. John Bogle had the initiative. He wanted more and better. Jack Bogle wanted a new fund. And finally, Wellington management changed its strategy of focusing on a single fund. That was Bogle’s first victory and the turning point in his work.

In 1964, by age 35, John Bogle became a CEO, and six years later a chairman of Wellington in 1970. He managed this company with a strong hand. Also, many of his associates claimed that he was rigid. What was all that about?

Bogle insisted the firm diversify its product list in 1958 with the introduction of the all-equity Windsor Fund. He was an innovator. The other innovations followed this one.

But be patient, this is a tale about one of the most brilliant minds among investors. He made a revolution creating the world’s first index mutual fund in 1975. Also, this man changed investing eternally with index funds. He invented the index fund as a form for retail investors in order to provide them to be able to participate in the market with the professionals.

What did John Bogle uncover?

John Bogle uncovered a system for retail investors to approach the market but at a much cheaper cost than the mutual fund. And, you know, if you want something to be done and have a vision and you know that other people can’t see the same goals as you, and you know that they are wrong or tiny-minded, you must be rigid. Especially if you want to succeed. That’s how John Bogle became the titan of low-cost investing.

Bogle was strongly competing from his early days. His battle-fields were all, tennis yards (what a strong drop shot he had) or crossword puzzles or business and markets. His habit was to complete crosswords from the New York Times in ink and later compared his time needed to finish to his children and brothers.

That is a competitive temper! But we have to stay on the course! Bogle’s career had ups and downs. Not a lot of downs, but important to be mentioned. So, the asset management wonder-man made a crucial slip. He approved merger Wellington with Thorndike, Doran, Paine & Lewis. It was an offensive mutual fund company from Boston. Institutional Investor magazine named this new energetic crew of five young managers “The Whiz Kids.”

In 1974, the bull run was over. The bear market of 1973-74 led to bad achievement for Wellington’s funds. The merger was characterized as extremely unwise and was approved by Bogle himself. It caused conflicts between the associates.

John Bogle was fired from Wellington.

Later, he rated it as his biggest mistake, stating, “The great thing about that mistake, which was shameful and inexcusable and a reflection of immaturity and confidence beyond what the facts justified, was that I learned a lot.” Also, he called it “the most heartbreaking moment” of his career.

He was 44, six children. Bogle was out of a job and sick, he had a weak heart. The doctors had told him he had a few years living and advised him to retire to the seaside. He didn’t accept that. But still, he was chairman of 11 Wellington’s funds and he used them to build Vanguard, a new branch concentrated on Wellington fund management.

Bogle offered a new mutual company.

When did The Vanguard Group start?

The Vanguard Group started services on May 1, 1975. With $1.8 billion in assets and staff of less than 50. Bogle gave this name to the new mutual company in memory to Lord Nelson’s flagship and the famous British victory against Napoleon’s fleet at the Battle of the Nile in 1798.

Bogle later said he “wanted to send a message … that our Vanguard would be, as the dictionary says, ‘the leader in a new trend.’ “

“Our challenge at the time,” Mr. Bogle evoked, “was to build, out of the ashes of major corporate conflict, a new and better way of running a mutual fund complex. ‘The Vanguard Experiment’ was designed to prove that mutual funds could operate independently, and do so in a manner that would directly benefit their shareholders.”

When the first retail index fund was created?

It was 1976 when the first retail index fund was created. Very soon, it bought every stock in the S&P 500 index and established the market’s average return. The result was totally sales droop. Only a small number of investors wanted a guaranteed average. Everyone like highs. Big returns, great profits!

Bogle had a lot of critics. It took time for the strategy to be adopted and recognized as a revolutionary type of investing. For the past 5 decades, academics have been discussing the “Efficient Market Hypothesis.” In its most radical mode, EMH states that you might select stocks with a dartboard because they are reasonably priced.

Wall Street responded with what they call “pockets of inefficiency.” Bogle, intelligently, gave up the discussion. His point was that you don’t have to believe the EMH. You just can see things his way, he said.

Bogle believed in what he called the CMH: the Cost Matters Hypothesis. To beat the market you need money.

Vanguard’s first index fund was taunted as an “a sure path to mediocrity,” according to the firm. The index fund makes up 70% of Vanguard’s $5.1 trillion in assets today. He was a great proponent of the mutual fund as an investment vehicle, but at the same time, Bogle was the mutual fund industry’s severe critic.

What did John Bogle criticize?

John Bogle criticized high costs, dishonest advertising, and product conception during his whole career. His radical ideas secured him a reputation as “the conscience of the industry.”

“If a statue is ever erected to honor the person who has done the most for American investors, the hands-down choice should be Jack Bogle,” said Warren Buffett.

Bogle hadn’t been delighted with the form the market adopted his idea. After Bogle’s death on January 2019, Jeff Cox wrote for CNBC:

“When he put together the First Index Investment Trust, it was a mutual fund, which prices at the end of the day and cannot be traded during normal market hours. What has happened to passive investing since has been quite a big difference.” Almost half of the passive field is filled by ETFs now.

They offer lower fees than most mutual funds. Investors are able to trade them through the day. That ability makes them subject to the impulses of the market’s liquidity matters.

John Bogle didn’t like that concept

He hated it so much that he called people who deal in ETFs “fruitcakes, nut cases and the lunatic fringe.” Bogle wanted to explain his opinion about this issue in his final book, “Stay the Course, The Story of Vanguard and the Index Revolution” (Wiley, 2018).

He claimed that ETFs are principally the sphere of speculators with the “rapid trading” in ETFs “done by financial institutions that use them to hedge or equitize cash reserves.” “The arithmetic suggests that only about one-sixth of ETF assets are held by investors with a focus largely on the long-term,” Bogle wrote in his book.

Well, his conclusion at the end of that chapter in the book is that he can support the funds as long as they are wide-based and not used for speculation.

Bogle as a public speaker

Jack Bogle was a pleasant and internationally desired speaker. He would spend hours writing and rewriting his notes. His speeches to the Vanguard crew were legendary. You can read them in his book “Character Counts: The Creation and Building of The Vanguard Group.”

Also, he was a philanthropist, from organ donation to the National Constitution Center. With his brothers, he established “Bogle Brothers Scholarships” at their former college they also attended Blair Academy and Princeton University.

Bogle was a frequent commentator on the financial markets for media, giving advice to individual investors. He wrote 12 books. His best-selling is Bogle on Mutual Funds (1994). About this book, Warren Buffett said it is “the definitive book on mutual funds.”

His last book “Stay the Course: The Story of Vanguard and the Index Revolution” was published in 2018. Bogle suffered many heart attacks. He had a heart transplant on February 21, 1996. Eight weeks later, he was back at work in his Valley Forge office and received a Fund Leader of the Year award.

Incredible and fascinating story, don’t you think! It is impressive how he managed to stay alone with his ideas while everyone was against him. Even his health. But Bogle had self-confidence and strongly believing in his ideas.

That power, that strength to continue despite the opponents, to create something completely new is impressive. He was a real revolutionary.

You have to admire it.

5th May 2019