Category: Traders’ Secrets

Traders’ Secrets is something that everyone would like to know, right?
How is it possible that some traders are successful all the time while others fail to make a profit all the time?
That is exactly what Traders’ Secrets will show you.
Traders-Paradise’s team reveal all trading and investing secrets to you, our visitors.

What will you find here?

How to find, buy, trade stocks, currencies, cryptos. You’ll find here what are the best strategies you can use, all with full explanation and examples.
Traders-Paradise gives you, our readers, this unique chance to uncover and fully understand everything and anything about trading and investing. The material presented here is originated from the experience of many executed trades, many mistakes made by traders and investors but written on the way that teaches you how to avoid these mistakes.

Moreover, here you’ll find some rare techniques and strategies that are successful forever, for any market condition. Also, how to trade with a little money and gain consistent returns. By following these posts you’ll e able to trade with greater success. You’ll increase your profits and your wealth, of course.

The main secret of Traders’ Secrets is that there shouldn’t be any secret for traders and investors. Rise up your trade by reading these posts, articles, and analyses!

You’ll enjoy every word written here. Moreover, after all, your trading and investing knowledge will be more extensive and effective.

Traders’ Secrets will arm you with those skills, so you’ll never have a losing trade again.

Alternative Investments Role in Diversified Investment
Investors should pay attention to several issues when adding alternatives to their investment strategy.

By Guy Avtalyon

Alternative investments, which have been used by large institutions and foundations for quite some time, have become more mainstream in the last years. They are more popular among individual investors. Also, there are more available products, which makes investing in alternatives possible for an increasing number of investors.

Alternative investments are a non-traditional approach to investing. They give the ability to invest in sectors and access to assets that traditional investments cannot provide. Investors should understand alternative investments as the potential to improve the overall risk-return ratio of your portfolio. Even a small allocation to alternatives may be reasonable and profitable now for more investors. Previously it wasn’t the case.

However, the non-traditional approach and structure of these investments bring with them unique risks of which investors must be aware of.

Alternative investments have a different approach

Alternative investments use a different approach to investing than do traditional equity or fixed-income investments.
This approach may require holding both long and short positions in securities. Also, it may require to hold private securities instead of publicly-traded investments. And there may be derivatives or hedging strategies as well. Also, investors that use alternatives have a goal to achieve a distinct level of total return. The other investors’ goal is the opposite, they usually pay more attention to relative performance versus an index.
Alternative investments have the potential to magnify the risk but also returns of an investment portfolio. They can possibly improve diversification and reduce risk. This approach is more flexible, investors have a chance to invest in a more extensive set of investments, so the possibility of enhancing returns is obvious.

Different risk

Alternative investments have risks different from traditional investments. They are less liquid, especially in periods of high pressure in the markets. Also, they are more complex and less transparent. These characteristics make it difficult for inexperienced investors to understand and they are more subject to investment manager failure.

The successful implementation of an alternative investment strategy relies largely on the investment manager’s experience and skill because of the wide range of investment opportunities.

Satellite asset classes as Alternative Investments

Satelite asset classes are very suitable for portfolio diversification. They cover everything that traditional investors and funds managers don’t even think about. They are more interested and specialized in asset classes such as real estate, commodities, any that can give high-yield fixed income. Satellites are non-traditional and have a low correlation with traditional assets. But their performances are driven by exposure which represents the similarity with traditional investments.

Types of Alternative Investments

We highlight several types of alternative investments but this list is more illustrative than exhaustive because new approaches are constantly being developed.

Private equity

Private equity is an investment strategy. Its goal is to take part in the growth of the private company. Hence, this strategy is long-term investments all in private securities generally and globally.
Private equity investment strategy covers illiquid asset classes with potentially greater long-term capital appreciation. The diversification doesn’t include public markets.
Only to higher-net-worth individuals use this strategy because it requires more investment experience, hence they are often accredited investor at high minimums and often has liquidity restrictions.

Hedge funds

The hedge funds are an alternative investment. They are designed to protect investment portfolios from market changes, so they will generate positive returns no matter if the markets are up or down.
They could protect the investment from market risk by adding alternative investments to the portfolios to decrease loss and protect capital.
The term “absolute return” is broadly used in connection with hedge funds. This explains how investment strategies are created to generate returns in any market condition. Actually, these funds are “hedging” the markets.

Managed Futures

An investment strategy that seeks to participate in trends in a large variety of global futures markets. Strategies include the use of the stock index, interest rate, currency, energy, and commodity futures. Many managed futures traders apply sophisticated software designed to invest in a disciplined, unemotional fashion, which often results in a lower correlation with traditional assets.

Alternative investments – mutual funds

These funds are not forced by traditional portfolio management systems. They have varying approaches, ranging from the absolute return, long/short equity, a broad mandate, or “go-anywhere” funds, and hedge fund-like strategies. Many of these funds also have a total return or an absolute return objective. They provide access to non-traditional investment. But they also provide investors daily liquidity at fair investment minimum.
Alternative investments can be useful tools to improve the risk-return of an investment portfolio. They can increase diversification and reduce volatility, given low correlations to more traditional investments.

Risks of Alternative Investments
- Higher fees. – Alternative investments can have higher fees. They may also charge additional management fees. While higher than traditional investments, these fees may or may not be excused when comparing returns net of fees.
- More complicated. – Alternative managers invest in a broad variety of investments, such as derivatives, and can use short selling. Understanding that can be difficult for many investors.
- Less transparent. – There can be limited to the underlying holdings of these investments. They use many tools that are not always the best choice for alternative investments. That makes a manager’s investment ability more difficult to assess. Also, some alternative investments are largely unregulated.
- Less liquid. – This is due to holding illiquid investments that can restrict the investor’s ability to offset money invested. For example, some hedge funds do not allow redemptions over the first year of investing. Most of them will allow annual or quarterly redemptions. Moreover, private equity may not allow redemptions for more than seven years. Here is also exposure to a notable lack of liquidity in some trading environments.
- Less tax-friendly. – Most alternative investment strategies aren’t focused on minimizing taxes.
- May disappoint in strong up markets. – They use short sellings to generate absolute returns. That may deter some investors.
- May not diversify risk in extreme down markets. – During the dislocation, the relationships of many different types of investments may increase notably. Investors hold that the more profits of alternatives is connected to the added risk.
Is this suitable for every investor?

Alternative investments can potentially magnify the overall risk-return of an investment portfolio. There are benefits but also risks in these non-traditional investment strategies. The most important is that investors have to be comfortable with alternatives when adding them to their investment strategy.
It is important also to discuss alternative investments with a respectable financial advisor. If you choose this strategy you’ll first need to determine how suitable it is in relation to your current investment approach.
5th October 2018
What is Diversified Investment
2 min read

Nothing more represents the term diversified investment than proverb “Don’t put all your eggs in one basket.” Instead, invest in many baskets and hold a substantially diversified portfolio based on your long-term asset allocation strategy.

A diversified investment is exactly that.

A diversified investment represents a portfolio of various assets that earn the highest return for the smallest risk. This kind of portfolio has a mixture of stocks, fixed income, and commodities. These assets react differently to the same economic occasions and because of that, diversification works. With diversified funds, you can access financial markets while spreading your investments across several asset classes and geographic regions. In this way, you reduce the impact of market fluctuations while maintaining an attractive potential performance.

In a diversified portfolio, the assets don’t match each other. When one rises, the other falls. It drops down overall risk because some asset classes will benefit, no matter what the economy does. They equalize any losses of the other assets. There is also less risk because it’s difficult the entire portfolio would be destroyed by any single event. A diversified portfolio is the best protection against a financial crisis.

How does Diversification work?

Stocks do well when the economy grows. Investors want the highest returns, so they bid up to the price of stocks. They are willing to accept a greater risk because they are optimistic about the future.

Bonds do well when the economy slows.

Investors are more interested in protecting their holdings. They are willing to accept lower returns for that reduction of risk.

The prices of commodities vary with supply and demand. Commodities include wheat, oil, and gold. For example, wheat prices would rise if there is a drought that limits supply. Oil prices would fall if there is additional supply. As a result, commodities don’t follow the phases of the business cycle as closely as stocks and bonds.

Diversification typically has low correlations to, or do not move in lockstep with, more traditional asset classes. As such, their inclusion in an investment portfolio tends to result in lower overall volatility. Because they have a wider universe in which to invest (public and private) and do not have some of the same investment constraints (can short and hedge), alternative investments have the potential for higher long-term performance than traditional investments.

Investing in diversified funds can, therefore, be an effective tool to:
- Seek growth in your savings with a medium-term outlook and moderate risk
- Benefit from exposure to several markets (equity, bonds) that is adjusted to match current conditions in order to both take advantage of market rallies and cushion against the impact of declines
- Manage your portfolio simply with access to turnkey management: the manager adjusts the make-up of your portfolio over time.
Where can you execute the diversified portfolio?

A diversified portfolio should contain securities from the following six asset classes.

Stocks. Different sized companies should be included. Company size is measured by its market capitalization. Therefore, include small-cap, mid-cap, and large-cap in any portfolio.

Fixed income. The safest are savings bonds. These are guaranteed by the government. Municipal bonds are also very safe. You can also buy short-term bond funds and money market funds that invest in these safe securities. Corporate bonds provide a higher return with greater risk. The highest returns and risk come with junk bonds.

Foreign stocks. These include companies from both developed and emerging markets. You can achieve greater diversification if you invest overseas. International investments can generate a higher return because emerging markets countries are growing faster. But they are riskier investments because these countries have fewer central bank safeguards in place, can be susceptible to political changes, and are less transparent.

Foreign fixed income. These include both corporate and government issues. They provide protection from a currency decline. They are safer than foreign stocks.

Commodities. This includes natural resources such as gold, oil, and real estate. Gold should be a part of any diversified investment because it’s the best hedge against a stock market crash. Research shows that gold prices rise dramatically for 15 days after the crash. This is why people invest in gold. Gold can be a good defense against inflation. It is also not correlated to assets such as stocks and bonds.

Maybe you should include the equity in your home in your diversification strategy.

If your equity goes up, you can sell other real estate investments in your portfolio. You might also consider to sell your home, take some profits, and move into a smaller house.

Most investment advisors don’t count the equity in your home as a real estate investment. They assume you will live there to the end of the time. They saw it as a consumable product, so that encouraged many homeowners to loan against the equity in their homes to buy consumable goods. When housing prices declined, they owed more than the house was worth. Many people walked away from their homes while others declared bankruptcy.

Expected return

Investors often focus too much on the expected return of their portfolio. While the expected return is important, you must also consider the amount of risk that you need to assume in order to achieve that expected return – the higher the expected return, the more risk you must take on to achieve it. When planning your investment strategy, it is important to be truthful with yourself in evaluating how much risk you can manage, and how long you are able to stay on the course through the ups and downs of the market rhythm. With other words, you should determine how much short-term volatility you are willing to accept.

A little bit of history.

An academic named Harry Markowitz introduced the research on what he called modern portfolio theory that people were able to understand diversification in an objective, mathematical sense. This research was so innovative and Markowitz earned a trip to Sweden to pick up a Nobel Prize.

The bottom line

In Shakespeare’s play, “The Merchant of Venice,” written more than 400 years ago, the character Antonio demonstrates his understanding of the concept. He says: “I thank my fortune for it – my ventures are not in one bottom trusted, nor to one place, nor is my whole estate upon the fortune of this present year.” That is a diversified investment.

Risk Disclosure (read carefully!)
3rd October 2018
Who are the greatest stock traders of all time?

5 min read

Yes, we know. Lot of you would say Warren Buffet. Frankly, he isn’t even a stock trader, he’s a deal maker and a shark. Moving on.

What makes a trader ‘great’ in our eyes is intellect, knowledge, and experience, combined together to create a very real handle on the markets and the price movement therein. This means many years, and many, many trades.

Forget all stories about ‘great’ traders that hit it very big on one or two trades. Or about people that took advantage of a housing boom or tech bubble over the span of just a few years to make an absolute killing.

To us, this hints at a potential one-off situation, a case of good luck. Nothing more.

Anyone can hit it big on a single trade.

Often, this is even a result of taking too much risk, not understanding the basics of money management. Honestly, many traders are lauded as extraordinary, but a year or two later the opposite happened and they were back to square one.

You should differentiate a trader with a long track record with consistent returns from a trader with a small handful of trades yielding great riches.

We prefer, respect and seek to imitate are the individuals who have a significant track record, and consistency.

Trading on the exchange market is associated with big money, sometimes with fame and other pleasures of the modern world. However, we rarely have the opportunity to learn how to earn really big money in financial markets.

In our opinion, these are the greatest traders in the world, individuals who have all but proven definitively that they’re capable to play a real ‘edge’ in one of the most difficult games in the world.

Here is the list of the greatest stock traders of all time.

George Soros

Why as a first among all greatest stock traders?

Born in Hungary in 1930, he lived through the Nazi occupation of 1944–5, which resulted in the murder of over 500,000 Hungarian Jews. His own Jewish family survived by securing false identity papers, concealing their backgrounds, and helping others do the same. Soros later recalled that “instead of submitting to our fate, we resisted an evil force that was much stronger than we were, yet we prevailed. Not only did we survive, but we managed to help others.”

As the Communists consolidated power in Hungary after the war, Soros left Budapest in 1947 for London, working part-time as a railway porter and as a night-club waiter to support his studies at the London School of Economics. In 1956, he emigrated to the United States, entering the world of finance and investments, where he was to make his fortune.

Actually, Soros began his financial career at Singer and Friedlander in London at the age of 24. He graduated from the London School of Economics and after that became a legend of the financial industry. His most successful trade gave earned him a profit of $1 billion in a single day.

George Soros is the author of many books about investing and finances.

He actively works in the philanthropic area, he donated more than $7 billion for various organizations.

In 1970 he established the Soros Fund Management, which in the last few decades generated more than $40 billion in profits. Soros is currently one of the thirty wealthiest individuals in the world, as well as “the king of Forex trading”. To most of the financial trades, he is the biggest inspiration to follow. So, he is the ‘teacher’ to many traders. That’s why he is one of the greatest stock traders.

“My success in the financial markets has given me a greater degree of independence than most other people,” Soros once wrote. That independence has allowed him to forge his own path towards a world that’s more open, more just, and more equitable for all.

Andrew Krieger

This one of the greatest stock traders graduated from the famous Wharton Business School at the University of Pennsylvania, is a successful trader, known for his interest in New Zealand currency (NZD).

He left his position at Solomon Brothers and in 1986 joined Banker’s Trust. And immediately became a worthy employee, which rewarded him in higher capital limits ($700 million instead of standard $50 million!). His position allowed him to gain profit from the Black Monday crash in 1987. If you are old enough, you will never forget Black Monday.

On October 19th, 1987, the financial markets plummeted, with the Dow Jones falling almost 22%. Panic spread around the world, with most markets down by more than 20% by the end of October.

There was no reason for this.

In fact, the tumult in the markets became a self-fulfilling prophecy as investors ran for the doors. At the time of the crash, Andy Krieger was known as one of the most aggressive currency traders in the world.

He decided it was time to attack, and took a creative and unbelievably aggressive approach to take down the Kiwi dollar. He had access to huge leverage through currency options. With leverage as high as 400:1, he could bring unsustainable pressure to bear on New Zealand’s currency.

He created such a large short position that the Bank of New Zealand literally had no defense. After all, he claimed that his short position was so large that it was bigger than the entire New Zealand money supply. You have to have a strong nerve and complete confidence to do something like that. And Krieger had plenty of both and wot that bet.

After earning $300 million in selling the New Zealand currency, Andrew Krieger became famous in the trading field. In 1988 he started working for Soros Management Fund and later changed it to Northbridge Capital Management.

He is also known for his philanthropic work – after the tsunami in 2004, he donated $350,000 for the victims.

Stanley Druckenmiller

Stanley Freeman Druckenmiller was born on June 14, 1953, is another of the greatest stock traders. He is an American investor, hedge fund manager, and philanthropist. He is the former chairman and president of Duquesne Capital, which he founded in 1981. He closed the fund in August 2010 because he felt unable to deliver high returns to his clients. At the time of closing, Duquesne Capital had over $12 billion in assets.

From 1988 to 2000, he managed money for George Soros as the lead portfolio manager for Quantum Fund. He is reported to have made $260 million in 2008.

George Soros and Stanley Druckenmiller famously worked together on a trade to short the British pound in the 1990s, reaping a $1 billion. At the time, Druckenmiller ran Soros Quantum Fund and leveraged it by one and a half times to make the bet.

In one interview, a young Druckenmiller described Soros’ thinking when he made the enormous trade.

“If there’s one thing I’ve learned from him, it’s when you’re right and you know something, you really feel it, you can’t have enough,” Druckenmiller said. “And if I had to sum up his investing philosophy in one sentence, it’s that it’s not whether you’re right or wrong, you just have to have the maximum when you’re right, and that’s his unique and innate ability.”

Druckenmiller now runs the New York-based Duquesne Family Office.

He started there after closing his Duquesne Capital, which reportedly accumulated annual returns of 30%. Soros operates Soros Fund Management, with roughly $30 billion in family assets under management.

Bruce Kovner

Bruce Stanley Kovner was born in 1945. He is an American investor, hedge fund manager, and philanthropist. He is Chairman of CAM Capital, which he established in January 2012 to manage his investment, trading and business activities. From 1983 through 2011, Kovner was Founder and Chairman of Caxton Associates, LP, a diversified trading company
Kovner serves as Chairman of the Board of The Juilliard School and Vice Chairman of Lincoln Center for the Performing Arts. He also serves on the Boards of the Metropolitan Opera, and the American Enterprise Institute.

Kovner has reportedly attributed his money making success to “stupid governments”, implying that the policy mistakes of central banks and governments cause disequilibria in financial markets that can be exploited.

Kovner borrowed $3,000 on his MasterCard in early 1977 and began trading on his own. He made $1,000 on his first two trades copper and interest rate futures. Kovner says his earlier trading experience was the most memorable.

The first time he lost control of the trading process was in the soybean market. ‘’’It is seared into my memory. A shortage developed in soybeans, running his $4,000 position up to $45,000 in six weeks. In a moment of insanity, I discarded a hedge limiting losses if prices turned down, which they did. ’’In a panic, he liquidates his position, escaping with a loss of $23,000.’’

Yet he still had $22,000, five times what he started with. ‘’I had a huge gain but lost half before getting out? I lost half the profit in an hour. I closed out the trade and was physically sick for a week. In retrospect that was a very good thing, says Kovner. It helped me understand risk and create structures to control risk.”

A music lover!

He has best been known to treat friends to private performances at his New York City home by up-and-coming musicians, often from New York’s Juilliard School. Kovner grew up in the San Fernando Valley east of Los Angeles. When a bad case of writer’s block stymied his quest for a Harvard PhD., Kovner drove a cab to pay the rent, took harpsichord lessons at Juilliard and dabbled at a succession of pursuits while seeking this true calling. In 1976 he found it: currencies and futures speculating.

All the rest is the history of the greatest stock traders.

Jim Rogers

James Beeland Rogers Jr. was born on October 19, 1942. He is an American businessman, investor, traveler, financial commentator and author based in Singapore. Rogers is the Chairman of Rogers Holdings and Beeland Interests, Inc. He was the co-founder of the Quantum Fund and creator of the Rogers International Commodities Index (RICI).

Rogers does not consider himself a member of any school of economic thought but has acknowledged that his views best fit the label of the Austrian School of economics.

He started to invest in the 1960s with just $ 600. In the 1970s he joined forces with another legendary investor, George Soros. They founded the hedge fund named Quantum Fund. In the 1980s, Jim Rogers left the fund and began investing in his account.

Jim Rogers is a typical representative of long-term trading.

He is a living legend among traders. Usually, he keeps his positions for several years. But he is looking for shares that are likely to turn out better than the market. In the 1980s, he estimated well that stock markets would be on the rise in that decade.

Rogers invested in German shares. The German market seemed to him the most prospective because the German economy was booming, and the local stock market still did not move up, after the collapse which it experienced in 1962.
Rogers thinks patience is the most important thing in trading. Jim Rogers usually analyzes the market for important fundamental factors. Although he admits that sometimes he looks at charts, which often show panic of the crowd. He happens to do exactly the opposite when he sees a panicky downward movement or euphoric upward movement.

Jim Rogers’ strategy is not easy to describe in a few words. It’s just trading on common sense, as he says.

He is a frequent speaker at universities and guest on television programs on investing and business affairs and one of the greatest stock traders.

Paul Tudor Jones

He is a typical speculator and a legend on Wall Street. His assets are estimated at over 4.5 billion dollars.

In the 80s, he became famous for the documentary film “Trader”, in which he discovered the secrets of his methods used on the stock market.

Jones banned the film’s release, in which often he was nervous. But the film got into a wider group and you can find it without a problem on the Internet.

Paul Jones is a classic speculator who bases his decisions mostly on technical analysis. He works on the futures market. And he believes that to succeed you have to go a bit against the flow. Jones tries to buy in bottoms and sell at the tops, which is a bit opposite to the rest of the market participants.

He started as a broker on the New York Cotton Exchange.

So he can brag of earning a large commission in the first year of operation, which amounted to 1 million dollars. Later he worked as an independent trader on NYCE. hen in 1984 he founded a hedge fund, the Tudor Futures Fund. The fund started with assets worth $ 1.5 million. At the end of 1988, it was already over USD 300 million.

He achieved a three-digit rate of return for five years in a row. In October 1987, when the indices suffered a severe breakdown, Paul achieved a rate of return of 62%.

His method gives you the opportunity to purchase a given item at an attractive price, but it can also be very dangerous. Jones found out about it in 1979, when he worked as a trader on NYCE.

On the cotton market, prices fell to new minima and slightly rebounded. And Paul decided that this was the effect of activating stop-loss orders and open a large long position. The market after a shortstop continued to go down.

However, Jones increased his position, although he felt that he could make a mistake. He managed to close the position after a few days. And the loss incurred only on this transaction amounted to 60-70% of the total capital. Jones was so depressed about the situation that he almost gave up his membership in the NYCE. But, he did not give up.

Jones’s approach seems right to buy in holes and sell at the tops, not vice versa.

The most important matter in speculation is proper capital and risk management. Jones was convinced how important these elements were in a really painful way.

He showed a strong character when he decided to continue and it was a huge success.

Most of the financial traders are building their careers in silence, but there are a few that have become popular because of their great trades. But remember, their stories are full of hard work, dedication, and patience. They are people with the power of influence, whose moves had an impact on the whole industry.

What else we may conclude?

There is no only one, the best way to play in financial markets. Everyone has to find their own. However, regardless of which strategy we choose, we must have strict rules of conduct, which we stick to, which is the best in this profession. And maybe one day, become one of the greatest stock traders and deserve our names in the list the best of the best.

Risk Disclosure (read carefully!)

2nd October 2018
Select Mutual Funds By Using Relevant Criteria

Examine fees and exit loads, read the offer document, analyze portfolio and holdings but here is a lot more.

By Guy Avtalyon

When starting to make the investment decision it’s important to know what criteria to use to know how to select the right mutual funds. If you don’t know anything regarding mutual funds and you are interested to invest in mutual funds, you are always confused about where to begin.

That’s the beauty of investing in mutual funds! You do not need to be an expert or even a finance freak to start investing in mutual funds.

One of the most frequent questions is how to select the right mutual funds to invest in.

Who manages mutual funds?

Mutual funds are managed by professional managers.

But not all funds are equally well. There are many funds that are not able to beat the index. That’s why it’s really important for you to select the right mutual funds that will fulfill your investment goals.

Most beginners just look at past performance while researching the best mutual funds to invest. But there are two equally important factors to be checked before selecting any fund: The objective of the fund matches your investment goals and what are the different risks associated with the fund.

Mutual fund investing is a long-term ratio. It’s different from the direct investment in stocks, where people can change the stocks fast, mutual funds are a long time task. Most people hold their funds for over 8 even over 10 years. Hence, it’s important that you choose the right fund and avoid ones that might result in you to lose both time and money.

How to select the right mutual funds?

I’ll show you, step by step.

Read the offer document: One of the most voluminous documents, also known as the prospectus. The first and the biggest step while choosing a mutual fund is to read the offer document. From the top to the bottom.

There you can find all the important details like the fund’s objective, scheme type, past performance, details about the asset management company, classes of the underlying assets, etc. It’s not difficult to understand these documents.

Match the goal of the fund with your own. Every mutual fund has a specific aim. And based on that aim, they decide different factors like asset allocation (equity to bond weight), risks, dividend payouts, tax benefits, theme/sector focus, etc.
You have to read the offer document of the fund in order to identify whether the fund aims to meet your investment needs. If their aims are not pertinent to you, it might not be the right option to invest in those funds.

Examine fees and exit loads. The mutual funds will charge a fee for their services and to meet different expenses. This expense ratio can be 2-2.5%. Some mutual funds may charge you a fee upfront when you invest (entry load), or a deferred sales charge when you sell your shares (exit load). As a value investor, you should stay away from mutual funds with high fees and loads to avoid unnecessary costs.

What criteria to use to know how to select a mutual fund?

Examine the past performance of the fund. The past performance of a fund isn’t a guarantee of how well it will perform in the future. But it will give you an approximate idea about the returns and expectations. You should compare the funds’ past performance to the benchmark because it will give you a better idea of its actual performance. Stay focused on long-term performance (3 years or greater) and compare it with its competitors and index.

What else can you do?

Analyze portfolio and holdings. This may be a little tricky for new investors. The main question is how will you understand whether the holdings are good or bad? The key point is to make sure that the fund is investing in the type of securities in which you are interested. Analyzing the portfolio will give you a good idea if the fund is the right fit for you or not. There is also another trouble while analyzing the portfolio and holding. The portfolio can be changed from time to time. The manager may choose to buy or sell securities because the managers are independent. And if you are not regularly reviewing the fund, the current allocation might be a little different from the time when you invested in the fund. That’s why you should always review your fund every six months after purchasing to confirm that fund achieves your goals.

Check your fund manager. The fund manager is the one who makes all the major buy/sell choices on your behalf. That’s why you have to find out more about the fund manager. Find how long this fund manager is handling the fund. Check if the fund manager has other funds for managing. If the other funds are also doing alike good, then it is a good sign. But if just one fund is performing well, while the other funds are struggling, then it might be a problem.

Check the credentials of the fund house. You do not want to get involved with a troublesome fund house which might bring you problems.

The procedure to select the right mutual funds to invest requires a careful study of the fund. To whom you can trust? Better make your own decisions based on examinations.

And a very important note: Do not rush with investing. There are hundreds of mutual funds in the market. Take your time to analyze them and find out the one that best suits your goals.

Happy Investing!

1st October 2018
Investing In Crypto – How To Prepare For It?

2 min read

According to the study conducted by London-based investment firm IW Capital, reveals that only five percent of British crypto investors realize a profit. But only 38% of the general population has any understanding of cryptocurrency or the underlying technology.

The data reveals that, fundamentally, Brits do not have enough information or knowledge on the topic of investing in crypto. In fact, many have no knowledge about the subject whatsoever.

Despite a widespread dearth of knowledge surrounding this particular asset class, disconcertingly facts appeared. One in 20 Brits – nearly 3 million – have invested in cryptocurrency without fully understanding it. Only 5 percent have taken advice from a financial adviser when investing in cryptocurrencies.

Crypto is unpredictable

As promising as crypto can be, however, it’s also been labeled one of the riskiest investments of 2018.

It simply crypto seems to be unpredictable.

We will show you how to be prepared for investing in crypto on the example of bitcoin, the most popular and largest one.

Some believe bitcoin was a bubble that has burst and is now fading away slowly, and others think it’s going to run to new highs.

Yes, bitcoin is risky, but it is still a popular investment option.

Should you be considering this risk these are some of the things you can do to prepare.

If you try to figure out what exactly influences bitcoin’s price for years now, the answers are not immediately obvious.
Bitcoin is global, decentralized, and unbound by sweeping restrictions. It can develop in different ways in different places. That said, some factors that influence the price have become clearer over time, and government regulations are at the top of the list.

Government rulings that affect the trade of bitcoin can by extension affect the price immediately. Imagine that all governments suddenly made it illegal to deal in cryptocurrency (some already did it). This would in a minute remove a massive market, reducing demand for a short time.

Everyone should follow regulatory news.

What is unclear about investing in crypto for the majority

Those who learn why it’s useful, and where its value comes from, can be a little bit puzzled by exchanges. There are a lot of them out there. They handle bitcoin transactions in different ways, with different fees, different acceptable payment methods. And varying selections of additional cryptocurrencies that can be handled. That’s why investing in crypto can be unclear for the majority.

However, it’s still worth keeping an eye on. Because changes in exchanges can also impact the price simply by making bitcoin more accessible. Or, in some cases, by increasing visibility for competitors.

For example, the positive effect would be if a major new exchange emerged for bitcoin, or an existing service started facilitating bitcoin purchases. But the negative effect could come about if an existing exchange. With a broad user base announced that it would begin supporting a cheaper alternative to bitcoin.

The more bitcoin is accepted as payment, the more demand there will be for it.

Last year has been bitcoin’s emergence as a widely trusted payment method for online casinos. They do a great deal of business internationally.

Many platforms started looking for more secure and anonymous ways of accepting money, and bitcoin-only casinos started to emerge. A major shift like this can give millions of people a new incentive to use bitcoin. You should keep an eye out for these types of stories.

Crypto volatility

Although crypto might offer more volatility than most, the crypto market landscape shares fundamental characteristics with other investment markets.

For example, the figures of losses are not wildly different from Forex, where new traders would often be better off flipping a coin or the stock market, where, according to science, 95% of all traders fail.

Amateur trading and investing have led to countless tales of monetary losses. Most derive from the human capacity to make decisions based on emotions. Rather than research or tried-and-tested methods.

In both, the trading and investment worlds, this story plays out time and time again, making the profitable trader a statistical anomaly. And leading the average individual investor to underperform the market index by 1.5 percent.

So, where the problem is? In lack of education.

What can you do?

You need to make sure that you’re in the right financial situation before you start investing in any asset or commodity.
If you’re in a position where you’re still paying off any debts your money would be better invested in a savings account rather than in cryptocurrencies.

However, if you have substantial savings account on hand, you may find yourself in a much better position to be able to invest in this volatile, but forever exciting, commodity.

But, before you ever place down the first cash sum, you must understand what cryptocurrencies are, how they work and how their market typically behaves. You have to understand what Blockchain is, how it works and, where possible. And how some country’s sudden ban or adoption of any cryptocurrency can affect the entire market.

And practice.

There are plenty of platforms and brokers who will offer you a free practice account, without risking any of your own money. This way, you can get a much better feel for what you will be doing with your own funds.

More about how to pick a good platform you may find here.

An unfortunate fact of the industry is that cryptocurrencies are volatile. Prices for any cryptocurrency can rise and fall at incredibly fast rates. Provide a monetary shock absorber to ensure you don’t land in financial trouble.

But whatever you do, be prepared for potential disappointment if the market begins to crash. On that way, trading and investing in cryptocurrencies will be much easier to handle.

With the right platform, with the understanding of just what to expect from cryptocurrencies and a good personal financial situation, you can try your hand at investing in cryptocurrencies with limited risk.

Risk Disclosure (read carefully!)

29th September 2018
What is Mutual Fund Investment?

Can mutual funds give you better returns, are they safer investment choice, what are types of mutual funds? Read all here.

By Guy Avtalyon

A mutual fund is a company that puts together money from many people and invests it in stocks, bonds, or other assets. The investment portfolio of a mutual fund is a combination of stocks, bonds, and other assets. When an investor acquires shares of the fund becomes the owner of the part of these holdings.

Mutual funds investment can give you a better return in a much safer way

The performance of mutual funds depends mainly on the fund manager who manages the fund on your behalf. Making the decision based on knowledge, picking a well-performing fund manager is utterly important to your success. For all of that, you should need some basic information on mutual fund investment.

OK, you own the mutual funds comprising a collection of stocks and bonds. That is your upper hand.

Why? First of all, it allows you to buy in with notably less money than it would take to purchase the same portfolio of stocks/bonds on your own. Second, you spread the risks out there among a group of investors if something goes wrong.

How the mutual fund portfolio is structured

It isn’t one single stock or bond of one sector alone. Therefore you can reduce your risks of losing your money to a greater extent. Always keep in mind that you may be the worst loser in the stock market due to a periodical deep cut in share prices. True is, there is no full-proof method or strategy that is completely safe and without risks. That’s the fact. But, mutual funds have lower risks than many other investment options. This makes them suitable for novices, traders who lack proper knowledge and skills in the investment market.

Mutual funds often have much better rates of return than the average savings account at the local bank.

Besides that, you may have minimum risks in this type of investment compared to other more risky ventures.

Even more, if you have some idea of which sectors are performing well, you are at an advantageous position of choosing a good sectoral fund. But be cautious, you should select a well-rated company. Diversification is the key to a healthy portfolio and mutual funds will help you get a diversified portfolio.

This is one of the safest ways to invest your money in the long term if you are young enough and in no hurry for retirement because the most mutual funds do not have the high payoffs that many investors seek to include for their retirement planning.

What are the main types of mutual funds?

Essentially, there are three types of mutual funds with some variations on each:

Money market mutual funds are an open-ended mutual fund. These types of funds invest in short-term debt securities. This is regarded as safe as bank deposits yet providing a higher yield. These funds are great for long-term investors. This slow and stable access to investing is better than leaving your money in an interest-paying savings account.

Equity funds that may provide slow growth over time with some income along the way.

Fixed income funds are created to provide a current income. This is great for those who have retired or for investors who are extremely conservative.

Besides this, you need to have certain basic knowledge about diversifying your portfolio of rated mutual funds. That can give you an attractive return with the highest safety. In a roar bull market, investing in Diversified Equity Fund is the best option (60% of the total fund), then comes Balanced Fund (20%), followed by Midcap Fund (10%), Small-cap Fund (5%) and Liquid Fund (5%). If you’re a conservative trader, you may opt-in Debt Fund. But if you’re optimistic, you can go for index funds as a systematic investment plan. Index Fund can deliver you a very profitable return in a bull market. Why? Because index fund includes highly rated performing stocks with diversified sectors and reliable.

One of the benefits of investing in a mutual fund is that offers professional investment management and potential diversification

Ways to earn money by investing in a mutual fund:

Dividend Payments. A fund earns income from dividends on stock or interest on bonds. The fund pays the shareholders almost all the income, lower for expenses.

Capital Gains Distributions. The price of the securities in a fund may grow. By selling a security that has increased in price, the fund has a capital gain. At the end of the year, the fund shares the capital gains, lessen by any capital losses, to investors.

Increased NAV. When the market value of a fund’s portfolio rises, the value of the fund and its shares increases also. If the NAV is higher the value of shareholders’ investments will be higher too. NAV is calculated by adding up the current value of all the stocks, bonds, and other securities, including cash, in its portfolio. Then, subtract the manager’s salary and other expenses, and then divide that result by the fund’s total number of shares.

All funds carry some level of risk. It is possible to lose some or all of the money you invest. The reason is obvious, the mutual fund holds securities that can decrease in value. Dividends or interest payments are also changing along with changes in market conditions.

A fund’s past performance is not important because past performance does not predict future returns. But past performance will never tell anything about the future performances but can tell you how volatile or stable a fund has been in the past. If you find a fund had more volatility, that is a sign that there are higher investment risks.

Every mutual fund must file a prospectus and regular shareholder reports, that’s by the law. Read the prospectus and the shareholder reports before you invest. Also, the investment portfolios of mutual funds are managed by investment advisers. You should always check that the investment adviser is registered before investing.

28th September 2018
How To Choose An Asset To Invest In
You don’t need to be an excellent asset picker to build your wealth. Just avoid get-rich-quickly schemes.

By Guy Avtalyon

How to choose an asset? Don’t pick only one, or form the same asset class, mix them.

The main asset classes are:
1. a) Shares/stocks (also known as equities).
2. b) Bonds (also known as fixed-interest stocks or debt).
3. c) Property.
4. d) Commodities.
5. e) Cash and cash equivalents.
What are the best assets to invest in?

(the return criteria is based off trying to generate $10,000 a year in passive income)
1) Certificates of Deposit (CDs).
2) Fixed Income / Bonds.
3) Physical Real Estate.
4) Peer-to-Peer Lending (P2P)
5) Dividend Investing.
6) Private Equity Investing.
7) Creating Your Own Products.
8) Real Estate Crowdsourcing.

Decide which asset to invest among these

Let’s say like this, investing is about laying out money today expecting to get more money back in the future. This is best achieved by acquiring productive assets. Productive assets are investments that internally throw off surplus money from some sort of activity. To be clear, if you buy a painting, it isn’t a productive asset. After 200 years you’ll still own the painting, which may or may not be worth more or less money. But, if you buy an apartment building you’ll not only have the building but all of the cash it produced from rent over that century.

How to choose an asset suitable for you?

First of all, never invest all your money into one asset. You should mix them. The right asset mix should help balance risk with your expected rate of return on your investments, fit your tolerance for risk, let you get your money when you need it, help provide the growth you need to reach your goals, and change as your needs and goals change over time. When you know all of these you’ll know how to choose an asset to invest in.
- Shares (also known as equities) – Shares are bought through a stockbroker. The easiest way to buy or sell shares is through an online broker. Some execution-only is maybe the best choice. Execution-only indicates the broker will take your order and execute it without giving you any advice. Many execution-only brokers provide lots of information and research about shares but this does not include advice. So, if you want to use some service like this one you’ll have to take full responsibility for your investment. If you do need advice you’ll have to find a stockbroker offering either an advisory or discretionary service. With a discretionary service, you authorize the broker to buy and sell shares on your behalf, but you’ll have to pre-arrange the limits. If you choose an advisory service, the broker will need your permission before taking any action regarding your trade.
- Bonds (also known as fixed-interest stocks). These represent a form of IOU issued by governments and companies when they want to borrow money from investors. They pay a fixed level of interest, with higher-risk borrowers paying more in interest than lower-risk borrowers.
- Property. The property has a good record in providing a financial return that beats inflation, no matter residential or commercial it is. As an investor, you can buy shares in property development or real estate investment companies. Also, you can buy real ‘bricks and mortar’. Funds generally focus on commercial property, but some buy into the residential property as well.
- Commodities. You can find a huge variety of commodities traded on global markets: oil and gas; precious metals such as gold and silver; industrial metals such as copper and iron; and ‘soft’ agricultural commodities such as wheat, rice, and soya. It is almost the same as shares and bonds. Commodity prices can rise and fall in answer to supply and demand
- Cash. It may be a bit strange that cash is considered to be an asset class because the whole reason for investing in the first place is to grow your money faster than if it was left in the bank. But you must have in your mind that cash provides a useful benchmark for all the investment. Finally, investments that don’t beat cash have failed. Cash also provides a safe shelter for funds when markets are bumpy or overvalued. For example, some funds trade in currencies to increase their returns from cash in periods the interest rates are low.
  Being a skillful asset picker isn’t actually necessary to grow your capital. Many people get in trouble particularly when they think of investing as a way to get rich quickly.
Your path to success as an investor or trader is not likely to hinge on whatever hot stock your friend thinks you should buy ASAP. Your success depends more on how smart a portfolio you put together, as well as how you progressively modify or rebalance it over time. And also, knowing how to choose an asset that will generate you nice returns.

Well, how do you invest intelligently, if slowly? You have to respect some basic principles.

Why do you want to start investing?

The main argument for putting your money in anything is to avoid losing your wealth during inflation. In your checking account, cash will still be there in 40 years, if you don’t touch any of it. But you won’t be able to buy anything.

Other crucial reasons might include growing substantial enough savings for retirement and earn enough cash for buying a home. For those kinds of goals, you might want assets with higher returns and therefore you’ll have to take on higher risk.

Also, the very important question is when should you begin investing?

You might already know, but you need to be investing in old age. If you start investing in your early ages you will have many advantages as an investor. Just to name a two: you have more time for your money to grow and more time for market downturns to correct themselves.

How to choose an asset?

Each type of productive asset has its own characteristics and pros and cons. Here is a quick rundown of some of the potential investments you might make as you start your journey:

Business Equity – If you own equity in a business, you are qualified to a share of the profit or losses caused by a company’s activity. Whether you are acquiring a small business completely or buying shares through the purchase of stock on the stock market. Business equity has historically been the most rewarding asset class for investors. It is wise to observe that a good business is a gift that keeps on giving.

Fixed Income Securities – When you buy fixed-income security, you are really lending money to the bond issuer in exchange for interest income. There are billions of ways you can do it, from buying certificates of deposit and money markets to corporate bonds, tax-free municipal bonds, etc.

Real Estate – This is maybe the oldest and most easily understood asset class that you as investors may think about. There are several ways to make money investing in real estate but it typically comes with developing a property and selling it for a profit or owning something and letting others use it in exchange for rent.

Intangible Property and Rights – When it is done properly you can create things out of the air that goes on to print money for you. Adorable! Intangible property includes everything from trademarks and patents to music royalties and copyrights.

Farmland or Other Commodity-Producing Goods – It often involves real estate. Investments in commodity-producing activities are fundamentally different in that you are either producing or extracting something from the ground or nature for what you hope is a profit. For instance, if oil is discovered on your land, you can extract it and earn money from the sales. If you grow wheat, you can sell it and earn cash under any weather. But the risks are remarkable: hail, flood, drought can and have caused folks to go bankrupt by investing in this asset class. But also it can make big rewards.

That is exactly how to choose an asset to invest in.
26th September 2018
Should you trade Forex or stocks?

Choose the instrument to trader based on your strategies, goals, and risk tolerance.

By Guy Avtalyon

The dilemma should you trade Forex or stocks isn’t natural because one trader can trade both. And it could be a smart decision if we consider portfolio diversification. But when people ask this question know exactly what do they want to know.: What has more profits involved? Trading Forex or trading “simple” stocks? Or is it trading options?
Investors and traders have access to a growing number of trading instruments. From tried-and-true blue-chip stocks and industrial to the fast-paced futures and Forex (foreign exchange) markets.

In order to make the best choice, you have to recognize which of these markets are for you.

Forex versus stocks

The most important factor may be the trader’s or investor’s risk tolerance and trading style. As an example, buy-and-hold investors will prefer participating in the stock market. While short-term traders, including swing, day, and scalp trader may prefer markets where price volatility is more present.

For traditional buy-and-hold, “long-only” investors, stocks remain an obvious option for a lot of reasons. Stocks have a long-term history of positive returns. So investors receive income from dividends.

But when it comes to trading, forex trading has a number of advantages to offer. And you should think when deciding whether to trade forex or stocks.

Forex versus Blue Chips

The forex market is the global largest financial market. The forex market has very high liquidity, you can trade around-the-clock, the amount of leverage that is allowed to traders. All these characteristics attract traders to enter the Forex market and start trading.

On the other side are blue chips. Blue chips are stocks from well-established companies, famous brands. These stocks are able to provide profitability even during challenging economic conditions and have a history of paying dividends.

Blue chips are less volatile than many other investments. They are often used to provide steady growth potential to investors’ portfolios.

Differences and similarities of trading Forex and stocks

These similarities or differences could give the final idea to your decision of should you trade forex or stocks. Let’s examine them in detail.

Volatility – Some traders, especially short-term or day traders, favor volatility. It provides them to profit from quick price swings in the market.

The other traders are comfier with less volatile and less risky investments. That’s why short-term traders are attracted to the forex markets. While buy-and-hold investors prefer the security which blue chips provide.

Leverage – The forex market offers significantly higher leverage of up to 50:1, and in some parts of the world even higher. But it isn’t all good as it looks. While higher leverage provides the opportunity to build equity with a very small investment (you can open forex accounts with $100), leverage can just as easily destroy a trading account.

Trading Hours

Another consideration in choosing a should you trade forex or stocks is the time period that each of them is traded.

Trading sessions for stocks have a limitation. It is due to the exchange working hours. Generally 9:30 A.M. to 4 P.M. Eastern Standard Time (EST), Monday through Friday with the exception of market holidays.

The Forex market is active round-the-clock from 5 P.M. EST Sunday, through 5 P.M. EST Friday, opening in Sydney, then traveling around the world.

The flexibility to trade during U.S., Asian and European markets, with good liquidity virtually any time of day, is bonus plus to traders whose schedules would otherwise limit their trading activity.

Tax time

Various trading instruments are treated differently at tax time.

Short-term gains on futures contracts, for example, can be eligible for lower tax rates than short-term gains on stocks.

Furthermore, active traders may be qualified to choose the mark-to-market (MTM) status for IRS purposes. This allows deductions for trading-related expenses, such as platform fees or education.

It is strongly recommended that traders and investors ask the advice of a qualified accountant or some tax specialist. Especially since trading forex can make a complicated time to organize your taxes.

Should you trade forex

The internet and automated trading have opened doors to active traders and investors all over the globe. Anyone can participate since there is an expanding variety of markets.

To be able to make a very important decision about what should you trade stocks, forex, or futures you’ll have to understand your risk tolerance, to take into consideration account size, and convenience. If some active trader is not available during market hours to enter, exit, or properly manage trades, stocks are not the best option.

If some investor’s market strategy is to buy and hold for the long term, generating growth and earning dividends, stocks are a practical choice.

The instrument a trader or investor selects should be based on which is the best fit of strategies, goals, and risk tolerance.

25th September 2018
What is Growth Investing and How To Pick a Stock?
Here is how to recognize the best growth investment stocks and how to execute this investment strategy

By Guy Avtalyon

Growth investing is an investment strategy which investors use to find stocks with higher earnings growth prospects. It doesn’t matter how high their prices are. These stocks usually have low dividend yields. Also, they have higher volatility and limited downside protection. Moreover, they are highly sensitive to changes in interest rates. The companies with stocks that trade at high valuation levels usually have a high P/E ratio, high P/B, and P/S ratio.

Growth investing is focused on capital appreciation. Growth investors invest only in companies that have above-median growth. Even if the stock price looks expensive and metrics like price-to-earnings or price-to-book ratios, confirm that. The growth investing strategy is in contrast with value investing.

This investing strategy’s focus is on a company that has a track record of high or rising growth. For example, a company has a stock price that has rise year after year over 3 or 4 years. Such stock is a target of growth investors. But the timeline shouldn’t be so long. Even if a stock rise at price every week for 3 weeks in a row growth investors will be interested in that stock.

Growth investing doesn’t consider direct research or fundamentals only. Very often it may be a response to the market sentiment.

For example, if you drive BMW and your friends also drive a BMW car. And say, the stock has gone up every month for the last six months. Then you know that the overall market sentiment is good. And the sentiment of the consumers is also a good and valuable metric for growth investors.

So, you would buy BMW stock if you support the growth investing viewpoint.

Who are growth investors?

Some famous investors such as Warren Buffett have stated that there is no theoretical difference between the concepts of value and growth (“Growth and Value Investing are joined at the hip”).

That’s because the growth is always a component in the calculation of value. It is constituting a variable whose importance can range from a little too vast. And whose impact can be both negative as well as positive?

Buffet’s opinion in one sentence is: “It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price”.

But the real father of growth investing is Thomas Rowe Price, Jr. who worked and promoted growth investing through his company T. Rowe Price. He founded this company in 1937 and today is a publicly-traded multinational investment firm.

How to execute a growth investment strategy?

The following businesses are suitable for growth investing:
- Emerging markets
- Recovery shares
- Blue chips
- Internet and technology stock
- Smaller companies
- Special Situations
What is the main issue with growth investing? It is the fear you are buying at the top of the growth curve. One way to avoid this is to look for long-term growth patterns.

Don’t look at growth surges that last one week, or one month or several months. If you really found a solid company, it should have a history of solid growth. And be able to demonstrate an upward trend in their share price over many years.

But, Most investors do not relly on growth investing alone. They look at other indicators that can support a pattern for future growth. Let’s take the BMW as an example again.

If they are bringing out new lines of the car, expanding to different countries then it is clear that BMW is targeting growth as a strategy for the company. So, you may own a good stock if you are using a growth investing strategy.
This strategy is most effective in the long run. It isn’t suitable for short-term investors for obvious reasons. Growth companies need time to grow.
Every investor should ask this question: Why is growth investing?
The possible answer could be because you want a long-term financial stability and wealth accumulation. And you’ll be right.

How to identify stocks for growth investing?

Growth investment involves picking essentially strong stocks. These stocks have a promising future compared to other stocks in their sector and will have an edge in terms of returns in the long-term. While choosing stock for growth investing, it is important to ensure some essential factors such as the revenue model, cash inflow, growth prospects with respect to the economy, the company’s executive board, market, competition, etc. Researching would let you know if a stock suits the growth investing strategy or not. It is easy to get an insight when you study the company’s balance sheets and reading up more about its history, endeavors, and goals from its website or some other sources. Before taking the final call on your growth investment, it is very important to ensure whether the asset fits the criteria of optimal returns.

Here are a few parameters that could be helpful in analyzing whether a stock is a growth stock or not:

Return on Equity: This means the profit-making potential of the company. It is calculated by dividing the net income of the company with the total equity of the shareholders.

Increase in Earning per Share (EPS): An increased EPS ensures better growth prospects. Hence, it is very important for you to analyze if the EPS is increasing or not over the observed time.

Projected Earnings: It gives an insight into the company’s expected growth and can act as a good indicator of growth investment.

What are the picks for growth investing?

Small-Cap Stocks: Companies that lie in the suit of small-cap are those that are in their initial growth stages. This makes them more promising in growth prospects, the affordability of the stocks is higher. This enables you to buy a bigger lot of their shares and make a decent investment.

Technology and Healthcare Stocks: These companies could be a good pick for growth investing. They are a kind of revolutionary innovations, which increases the scope of their growth prospects. The fact they are exceptionally well in the market because they target a wider audience, thus resulting in exponential growth. They stand by the characteristics of growth in the investment.

Speculative Investments: Even speculative stocks could bring in a fortune in terms of growth investing as they come at a higher risk. If you are choosing a speculative investment, make sure to practice caution and invest only your surplus funds with due diligence.

The great influence in shaping this investment style had Phil Fisher, whose 1958 book “Common Stocks and Uncommon Profits” is still today a reference for identifying growth companies and we highly recommend this book.
24th September 2018
How To Read A Stock Charts With Examples?

Amateur traders act upon impulses and this is a problem because all is not as it seems in the market.

By Guy Avtalyon

Stock charts are extremely important. When you enter the stock market, which means that you bought your first stock, you will find that you have to follow the movement on the stock market through stock charts.

First of all, you have to register that fund managers and big investors account for 80% of all trading activity in the market. Their buying and selling will either push your stock up or down. But you are the individual investor and your primary intent is to buy stocks big investors are buying ponderously and of course, you want to stay away from stocks they’re aggressively selling. That’s where charts enter. Once you know what to look for, you’ll see that charts literally show you what these big investors are doing. You’ll be able to fast realize when a stock is being ponderously bought or sold. You’ll be able to use that information to identify the best time to buy, sell, or hold your stock positions.

There are many different types of stock charts: line, bar, candlestick, mountain, point-and-figure, and others. You can see them in different time frames: daily, weekly, monthly, and intraday charts. Even each style and time frame has its advantages and disadvantages, all of them provide you information important to make investing decisions.

Also, there are many different types of stock charts that display various types of information. But all stock charts display price and volume. On each stock chart, the price history is visible. The bars represent the amount of trading history.
For example, on a daily stock chart, each price bar shows the prices the stock traded during that day. On a weekly stock chart, each price bar represents the prices the stock traded over that week.

The length of each vertical bar shows a stock’s high/low price range. The top of the bar shows the highest price that is paid for the stock per period and the bottom of the bar shows the lowest price paid. The small horizontal slash shows the current price or where a stock closed at the end of the observed period. The price bar is blue if the price of the most recent trade is equal to or greater than the previous period last price, or deep red if it is lower than the previous period’s price close.

The vertical lines at the bottom of the chart show the number of shares traded during the observed period of the chart. The length of the volume bar shows a value that corresponds to the scale at its right. The color of a volume bar is determined by its corresponding price bar. It’s blue if the most recent trade is equal to or greater than the previous period’s last trade. And magenta if it is less than the previous closing price.
Well, you are beginners so it is important to show you step by step how to read charts.

You can use different websites but I think that Google Finance has a smooth user interface.

How typical stock chart look?

Now let’s take a look at a typical stock chart. We used Dow Jones Industrial for this guide.

You can see, the series of letters after the name of the company is the ticker symbol. It identifies the company on the stock exchange.

We’ll search for AAPL, which is Apple’s ticker symbol.

Then, click the button to expand the chart to full screen:

Now let’s jump into the different pieces and parts of the stock chart so you can begin to read like a pro.

How to identify the trend lines?

This is that blue line you see every time you hear about a stock! It’s either going up or down right? The trend line seems like common sense, but there are a few things I want to show so you can understand it in a little more detail.

You know that stocks will take huge dives and also make huge climbs. If you’ve read previous chapters you’ll know that you have to hold your emotions in control to be a successful investor.

Never react to large drops or huge gains in a positive or negative way. You are using this piece of the stock chart only to see what’s going on.

The trend line should motivate you to dig further. For instance, Apple as a company really took off from 2009 to 2012. But in the period 2012/2013, the stock began to go down more than 40%! This is where your trend line is useful.

Something is happening and you have to pay attention to it. You have to find out what’s going on with this company. Most strong companies can recover from hits like this, but you have to be careful.

I have to recall some history here. Right around this time, Apple experienced a few major changes. First, it’s longtime CEO, Steve Jobs, resigned (2011). Also, around 2012, Apple informed that their profit margins were significantly decreasing, despite the growing smartphone market. They were trying to expand the smartphone into developing countries, but they were too expensive to enter there. And the stock price is falling.

But new CEO Tim Cook made strategic moves with the company and the rest of the trend line shows that.

How to use trend lines?

The lesson here is how to use your trend line as a first peek, an indicator of something worth to look int

The next thing you have to look at is the lines of resistance and support.

These are levels at which the stock stays within, over a certain period of time. A level of support is a price that a stock is unlikely to drop below, while a level of resistance is one that it’s unlikely to go above. It will stay the same until some major change occurs, such as a reduced profit margin.

A stock’s price does the same thing within these lines of support and resistance.

The point here is to know when to buy and when to sell.

Take a look at Apple’s stock chart again:

I want to show you how the process is important. You have to know that everyone will draw lines of resistance and support differently, depending on how long they plan to hold the stock. Short-term investors can draw more to analyze trends during a shorter period.

So, what we can see in this image?

How to recognize the support and resistance levels?

Line A represents the very first line of support shown. Based on trends earlier to this, everyone feels comfy that the stock price won’t go below this point and probably consider buying at this price or higher.

Line B is the first line of resistance. It is obvious that the stock has peaked at that point for now and it is expected to go higher. Maybe it’s time to consider selling at this price or slightly lower.

Line C shows, the stock has bottomed out again, thus creating a new line of support.

Line D shows the stock price has increased significantly and it’s comfortable to establish this as a new line of resistance.

The trend continues with Lines E, F, G, and H, bringing new lines of support and resistance as time goes on. If it seems complicated, don’t worry. because it is. And a lot of these are speculations.

The lines of resistance can help you to decide when to buy or sell. But remember, it’s subjective and it won’t give you a clear opinion of what to do. You have to use some of your own analysis and evaluation.

How to notice in the stock charts if the company pays dividends?

On the next chart, you can see if and when the company issued a dividend, as well as if there was ever a stock split:

A dividend is when the board of directors decides to give a portion of its earnings back to its shareholders. If you own their stock, you get a small piece of the profit.

Some companies issue dividends, some don’t. If a company doesn’t issue a dividend doesn’t mean it’s not worth investing in.

Some companies just prefer to focus on growth, so they’ll reinvest their earnings as opposed to giving it back to the shareholders. Apple, in this case, could pay dividends quarterly without influence on growth.

Also, you can see that there was a stock split in 2014. That is a strategic move made by the company’s board of directors to issue more shares of stock to the public.

In this case, Apple did a seven to one stock split, noted as 7:1, which means that for every share of AAPL shareholders owned prior to the split, they now have seven.

The value of the company doesn’t change, but the share price might. Companies will often do this to attract smaller investors when the share price decreases.

Many times when a stock split happens, more people invest because the share price is often lower. That increases demand and the overall share price.

How to find the trading volume in the stock charts?

On the bottom of the chart, you can see many small, vertical lines. This is a trend of the volumes at which the stock is traded. Volumes shouldn’t be the only determining factor when buying a stock. Usually, trading volumes increase when the company is in public focus, in a positive or negative sense.

When volumes are increasing, it can also shift the price of the stock quickly. Take a look.

Line A, shows a high volume of trading activity that corresponded with a drop in the stock price. Maybe some bad news that day caused people to panic.

Line B, you can see a slight uptick in trading volume that corresponds with an upward trend in the stock price.

You shouldn’t necessarily have to assume it there will be a connection between stock price and trading volume. But it’s good to know what the volumes have been in the past and what they are currently.

If the volumes are high, a lot of people are trading the stock that day and it is a good idea to buy or sell it quickly.

This is the basics of how to read the stock charts. Once you’ve mastered most of these techniques, you should be able to analyze a stock’s historical activity with high success.

21st September 2018