Monday, January 7, 2019

The path to passive income is investing!

Most people work day by day at work and at the end of the month they give out the money they earn or transfer it to a card. Others have several types of income or several part-time jobs. Their income depends on the ability to work and the amount of work done. The smartest earn money without doing anything physically. This type of income is called passive income.

Interest from such income may accrue from deposits, dividends from stocks, deductions for business partnerships or fees from books and other products. For all people, the chances are almost equal to only some of them love security in the form of a monthly payment, while others have a freedom in which they can do whatever they want, and the money will still be credited to their account.

The first steps to passive income are investing. At the initial stage, it will be difficult because, not knowing all the basics of investing, you can make a mistake and lose your money. This often happens with newbies who trust emotions and trust their money to scammers, who in turn are looking for naive and inexperienced investors.

You can start investing from a small amount and invest at least 10% of your income every month. After a few months, you will have developed a habit and it will not be so difficult for you to invest money as at the beginning. It is also important to learn and learn about new ways of investing. Over time, you will learn to invest in assets such as stocks, business, commodities, or gold.

After a few years of intensive investment, your passive income will only grow, and you will work less and less or you may stop working at all. While others were spending money in bars and watching television, you invested and trained. Now the other person works further, and you get income, and spend your free time as you wish.

Several investment rules

Before you start investing your money, read through a few rules. Such investments as in trust management companies and Forex in PAMM accounts, of course, bring much more than a deposit in a bank, but if you make a wrong choice, you can not only win, but also lose a large amount, get upset and forget about this venture. and forever. To avoid this, you need to follow the rules of investing.

Before you invest your money. You must be clear about where exactly your capital is invested and what risk you might expect. Do not make a decision under pressure, thoughtlessly. Examine all the information, read the reviews, delve into the subtleties of work, selected projects.

Never invest your last cash or take a loan to invest. Imagine a picture of what will happen if you lose all investments, what kind of life you will have then, and you have to pay the loan or interest will start to grow. Start investing only on deferred free funds, without prejudice to yourself and your family. Only when you become a professional investor, you can count on credit funds for a more rapid increase in investments.

Do not believe the screaming slogans about maximum profit. It is better to have a small but stable profit than to lose everything. Forex profits can be up to 10 percent per month. In certain trust management companies, in some cases, it reaches up to 20 percent. Now on the Internet a huge number of scammers who promise higher incomes. Treats them with need. Trust your investments only to trusted exchanges and companies.

It is better to make investments in several directions. Because even the most professional traders make mistakes and suffer heavy losses. Such a distribution of investments, in case of failure in one project, is compensated by the profit of another. We recommend at least 10 investment tools, proven and reliable, and not random.

By following these rules of investing, almost everyone will be able to have passive income with minor risks. For this you need to try how this mechanism works. Try to spend less than you get. Monthly save at least a tenth of all your income on investments. Look for monthly and invest in reliable companies. And you yourself will notice how your capital will increase.

Equity investment


Equity investment generally refers to the buying and holding of shares of stock on a stock market by individuals and funds in anticipation of income from dividends and capital gain as the value of the stock rises. It also sometimes refers to the acquisition of equity (ownership) participation in a private (unlisted) company or a startup (a company being created or newly created). When the investment is in infant companies, it is referred to as venture capital investing and is generally understood to be higher risk than investment in listed going-concern situations.


Table of contents
1 Direct holdings and Pooled funds
1.1 The Pros and Cons of holding shares directly or via pooled vehicles

2 Fundamental Analysis and Technical Analysis
3 How share prices are determined
4 Related Material
5 Further Reading

Direct holdings and Pooled funds
The equities held by private individuals are often held via mutual funds or other forms of pooled investment vehicle, many of which have quoted prices that are listed in financial newpapers or magazines; the mutual funds are typically managed by prominent fund management firms (e.g. Fidelity or Vanguard). Such holdings allow individual investors to obtain the diversification of the fund(s) and to obtain the skill of the professional fund managers in charge of the fund(s). An alternative usually employed by large private investors and institutions (e.g. large pension funds) is to hold shares directly;in the institutional environment many clients that own portfolios have what are called segregated funds as opposed to, or in addition to, the pooled e.g. mutual fund alternative.


The Pros and Cons of holding shares directly or via pooled vehicles
The major advantages of investing in pooled funds are access to professional investor skills and obtaining the diversification of the holdings within the fund. The investor also receives the services associated with the fund e.g. regular written reports and dividend payments (where applicable). The major disadvantages of investing in pooled funds are the fees payable to the managers of the fund (usually payable on entry and annually and sometimes on exit) and the diversification of the fund that may or may not be appropriate given the investors circumstances.

It is possible to over-diversify. If an investor holds several funds, then the risks and structure of his overall position is an amalgam of the holdings in all the different funds and arguably the investors holdings successively approximate to an index or market risk.

The costs or fees paid to the professional fund management organisation need to be monitored carefully. In the worst cases the costs (e.g. fees and other costs that may be less obvious hidden fees within the workings of the investing organisation) are large relative to the dividend income payable on the stock market and to the total post-tax return that the investor can anticipate in an average year.


Fundamental Analysis and Technical Analysis
To try to identify good shares to invest in, two main schools of thought exist: technical analysis and fundamental analysis. The former involves the study of the price history of a share(s) and the price history of the stock market as a whole; technical analysts have developed an array of indicators, some very complex, that seek to tease useful information from the price and volume series. Fundamental analysis involves study of all pertinent information relevant to the share and market in question in an attempt to forecast future business and financial developments including the likely trajectory of the share price(s) itself. The fundamental information studied will include the annual report and accounts, industry data (such as sales and order trends) and study of the financial and economic environment (e.g. the trend of interest rates).


How share prices are determined
One theory about equity price determination in professional investment circles continues is the Efficient Markets Hypothesis (EFM), although this theory is being widely discredited in the academic and professional markets. Briefly, this theory suggests that the share prices of equities are priced efficiently and will tend to follow a random walk determined by the emergence of news (randomly) over time. Professional equity investors therefore tend to spend their time immersed in the flow of fundamental information seeking to gain an advantage over their competitors (mainly other professional investors) by more intelligently interpreting the emerging flow of information (news).

The EFM theory does not seem to give a complete description of the process of equity price determination, for example because share markets are more volatile than a theory that assumes that prices are the result of discounting expected future cash flows would imply. In recent years it has come to be accepted that the share markets are not perfectly efficient, perhaps especially in emerging markets or other markets where the degree of professional (very well informed) activity is lacking.

Another theory of share price determination comes from the field of Behavioral Finance. In Behavioral Finance, it is believed that humans often make irrational decisions, particularly related to the buying and selling of securities based upon fears and misperceptions of outcomes. The irrational trading of securities can often create securities prices which vary from rational, fundamental prices valuations. For instance, during the technology bubble of the late 90's and subsequent 'burst' in 2000-2002, technology companies were often bid beyond any rational fundamental value because of what is commonly known as the 'greater fool theory'. The Greater Fool Theory holds that because the predominant method of realizing returns in equity is from the sale to another investor, one should select securities that they believe that someone else will value at a higher level at some point in the future.

Sunday, January 6, 2019

Diversification is the main rule of the investor

By definition, any investment of money carries a certain degree of risk, and in order for the investment process to be reliable and justifiable over a long period of time, the investment must be diversified - distributed among different instruments. Similarly to the saying from the IT world: investors are divided into those who use diversification and those who already use (as in my case).

The first reason to use diversification is to reduce the likely loss of the investment portfolio. The more investment instruments it includes, the greater the chance that the profitability of the other instruments will cover the potential loss of one of them. Of course, this does not negate the need to rationally pick up assets in the portfolio, because if it is all cracking at the seams, then there will be nothing to compensate for the losses.

Of course, the profitability of the wide-diversified portfolio will be very average, which can be observed by analyzing the reports of experienced investors, but taking into account the substantial amounts that can be lost with a more risky strategy, we will find such a reasonable price for reliability.

In the event that we want to actively manage our portfolio to generate increased profits, diversification will give us the right to take risks. At the same time, investment instruments are distributed in certain proportions, where most of them are "conservative" with moderate risk and profitability, providing us with a safety cushion, we distribute the remaining 20-40% among "aggressive" instruments (young PAMM accounts, HYIPs, etc. .) in anticipation of super-profits. It is important to reallocate funds in a timely manner according to the initial strategy so that the ratio of reliable and risky instruments always remains constant.

When creating a diversified portfolio, it is important to take into account all possible investment risks and remember that the distribution of funds within the same market (different PAMM accounts of one broker) at best will protect us only from trading risks, but in case of problems of the market itself (broker's bankruptcy, legal restrictions) we will lose everything. The growth of investment inevitably encourages the development of new markets and financial instruments, because even when limited to investing in one state (especially such as ours), we are not insured against crises, devaluation, and negative economic and political changes.

Friday, January 4, 2019

Why Is The Stock Market Down Today

When you look at the market indexes each day, at some point you will ask yourself why is the stock market down today? This question will lead you to look at the major news sources for an answer. Over time, they will give you numerous answers as to what caused the market to close lower. Today for example, the market is uneasy about the “debt-ceiling” in the United States and that Moody’s downgraded Greece’s credit rating. On other days, earnings reports might have come in lower than expected. The truth is that while there will be truth in what they say because that was the general news for the day, the real reasons are really probably unclear and to be honest with you don’t really matter to you as you try and ascertain the general market direction each day.
All you really care about is what the market indexes tell you happened — not what the “general opinion” is as to why it happened. You’ll first want to review each index every day. Those indexes are the S&P 500, the Dow Jones Industrial Average (DJIA), the New York Stock Exchange (NYSE) and the NASDAQ. You’ll want to look at each index and figure out whether it closed higher or lower than the previous day. After that, you’ll also want to see whether volume was higher or lower than the previous day. When you do this, you’ll discover one of the four following situations.
  • A higher close on higher volume – This means that there were more shares of stock bought than sold and it pushed the price higher. This is known as an accumulation day. This is what you really want to see.
  • A higher close on lower volume – This means that less shares of stock were sold and prices did increase but is more of a stalling action. While this will happen, it’s not really representative of a market under accumulation and not the ideal close you’d like to see.
  • A lower close on higher volume – This means that more shares of stock were sold than bought and it pushed prices lower. This is known as a distribution day. To much distribution isn’t a positive sign for the overall market direction.
  • A lower close on lower volume – This means that less shares of stock were sold than bought and prices fell. This is a neutral action and what you would expect to see when there is less than demand.
When you look at the market each day, you don’t really care “why” the market went down. You only care about whether the market was under accumulation or distribution. You are concerned about this because you want to only invest in a market under accumulation or an uptrend and not under distribution or downtrend.
As you learn to do this, you can just read the IBD Big Picture column and let them tell you what happened or you can do what I suggest and that is figure out what happened on your own and confirm it with what the IBD editors think. Over time, you’ll find that you can get a handle on what happened instead of why.
Let’s use today as an example:
  • S&P 500 – The index closed at lower at 1,337.43 or .56% lower than yesterday. Volume on the NYSE was 3.9 percent higher than the previous day. Since this is more than .2% decline on higher volume, this is a distribution day for the S%P 500.
  • DJIA – The index closed lower at 12,592.80 or .70 percent lower than yesterday. The NYSE volume was higher as we have already said and so this also represents a distribution day on the Dow as well.
  • NYSE – The index closed lower at 8,357,57 or .60 percent lower than yesterday. Volume was higher as discussed and so the NYSE also suffered a distribution day.
  • NASDAQ – The index closed lower at 2,482.80 or .56 percent lower than yesterday. Volume on the NASDAQ also closed even from the day before. Because it is neither higher or lower. It is not a distribution day.
We know from today’s market action that the S&P 500, the DJIA and NYSE all suffered distribution days while the NASDAQ did not. This information in and of itself doesn’t tell you specifically why the stock market was down today, but it does tell you a more critical piece of the puzzle and that is that it was under distribution. Enough distribution days and it will change the market outlook. Because three out of four stocks follow the trend, and because the IBD currently has several distribution days chocked up for the indexes already, I’m expecting the market outlook might change today to market uptrend under pressure.
This would mean that I wouldn’t want to make any new stock purchases and watch the stocks I am in closely. Knowing what action to take with my stock market investing program is much more important than knowing why the stock market today went up or down.

Why Good Stock Market Investing Strategies Go Bad

I wanted to spend today talking about why good stock market investing strategies go bad. I’ve got a friend who loves investing in the stock market. He spends hours reading about all this stock market investing strategy and that one. One day, he’s investing in options. The next he is selling an index short. The problem with this is that he never quite excels at any of his strategies because he’s too busy trying the next best thing and not working on one specific investment technique. I think this is a common problem and it’s also not helped by the things I talked about in my post about stock market investing for dummies. Rule number one of any investor should be this – become a master at one specific strategy. Taking this one particular step will drastically improve your results.
You see there are all kinds of ways to make money, as well as lose it, in stocks. There’s no shortage of ideas. You can be a value investor or a growth investor. You could focus on penny stocks or on options. There’s always exchange traded funds and indexes or mutual funds. The key for you is that you must pick one and then spend all of your time working on mastering it.
One of the reasons that flipping from strategy doesn’t work is because each requires a certain set of tools and experience. If you are new, then you can bet that you don’t no what tools you should use nor the experience to implement the strategy correctly. They all require a different learning curve. It’s this learning curve that could cost you a fortune over time both in losses or opportunity costs. Let’s face it, if a mutual fund manager can manage your money better than you, you should give it to him (or her).
So if you are going to bother to spend time buying stocks, then take the time to become a master of your craft. Learn one strategy, start practicing it and then throw real cash at it.
The problem with most individual investors is that they invest real cash, never practice and never really hone in on a winning strategy.
Which investment philosophy should you choose? It probably doesn’t matter just as long as it has proven to work. Study the masters like Benjamin Graham, Warren Buffett, William O’Neil or Peter Lynch. Follow their system and make it your own.