Investment Losses

Michael Hehn asked:


Not long ago investing was easy. There were few places you could invest and if you had money you wanted to invest, you left it to the professional stock brokers. However, deregulation of the financial markets has changed all this. In the past 20 years new investment products have been launched, changes have been made to the tax systems and retirement plans which have altered the attractiveness of many investment products.

Up to about 20 years ago, share investing was purely in the domain of the wealthy. For most people it was difficult to trade in overseas stock exchanges, there were no such thing as cash management trusts, installment warrants, exchange traded options, dividend imputation, reset preference shares and endowment warrants - to name a few. Now about 50% of investors are “mums and dads” investors who either own shares directly or in managed funds. Unfortunately, in recent years many investors have been “burnt” because they did not understand the risks of investing in financial markets.

Governments around the world have made it clear that it is important for people to take control of their own financial futures. The sustainability of government funded pensions is under pressure. If you do not save and invest, you will suffer a significant decline in your retirement living standard. The average life expectancy is about 80 years, so if you retire at 60 years of age, the savings you have accumulated in the 40 years of your working life will need to fund your retirement of 20 years or more.

Deregulation of financial markets, interest rates and currencies means that the market determines the value of investments and not government decree. This provides opportunities for educated investors to build wealth and for unwary investors to lose wealth. You must understand the opportunities and risks.

The ground rule is that if you want to be a successful investor in financial markets, you must educate yourself about investing. Even if you put your faith in a licensed investment advisor, not all are competent. It is essential that you understand how the financial markets work so that you do not put your hard earned money in the hands of an incompetent advisor who is only interested in the commissions available. How can you tell whether a particular investment is right for you? The only sure way is to become familiar with the language used in the financial industry and to have a sound investment strategy. Does this mean that you should keep you money safe by putting it under the bed or keeping it in the bank? No - but you do need to understand the risks involved and set ground rules for successful investing.

There are a number of ground rules in investing that haves stood the test of time. With time, patience and effort you can become a successful investor in all the areas that are open to you. This will not come overnight and you will have to be prepared for that fact there will be times you lose money. However,perseverance is a virtue above all others. The road is not always easy, but nothing worthwhile is.

Here are the ground rules for successful investing:

1. Be your own investment manager. No advisor or stockbroker should do it for you. Only you know what your real needs are, what your temperament is - and only you are motivated by your own best interests, not sales commissions. It is also more fun to do it yourself.

2. Confront risk and then reduce it through spreading your investments.

3. Take a contrarians view to investment markets. That is, look for opportunities and do the opposite of what everyone else is doing.

If your investing facts are out-of-date, how will that affect your actions and decisions? Make certain you don’t let important investing information slip by you.

4. Do not be put off by investment jargon. Master it instead.

5. NOW is the best time to start investing. Do not wait for the markets to improve. If the share market is filled with gloom, that is the time to buy.

6. Make good quality shares the core of your investment strategy. Then you can rest easy when you invest in more speculative areas.

7. Always consider tax implications of making investments but never let tax minimization be the main objective. The fundamental rule is to think in terms of after-tax returns.

8. Keep up to date through reading the financial papers and searching independent investment research websites.

9. Discussing investments is stimulating. Condition your mind to talk to others about investing, especially people who are more experienced and knowledgeable than you are.

10. Do not be greedy. Discipline yourself to cut your losses with bad investments and cash in when you have made a reasonable profit.

11. Be patient. Rome was not built in a day. Similarly, you may not become wealthy overnight, but you will over time.

12. Never invest in anything you do not understand. If a particular investment sounds too good to be true, it usually is.

13. Pay yourself first. Most people invest money they have left over after paying the bills. Allocate yourself the first 10% of your monthly income to build up your investment capital. By doing this you will force yourself to become an investor and the long term benefits will be enormous.

If you master these 13 ground rules, you will be a successful investor. You will rival so-called professionals and will sleep easily at night knowing that money is the least of your worries.



ASHLEY

William Smith asked:


Investing can be defined as the resources with the expectation of some satisfaction or profit in return by putting forth an effort. By Investing we will invest more into our future, not just as a state but also as a society.

Investing money is different from saving money, as in that money that is invested is committed for a period of time with a sure risk for the purpose of earning a financial return. The concept of saving money merely means to put it aside as a store or reserve.

Your goal in Investing could be to make the greatest return possible resource within the shortest period of time without losing any of the principle amounts you have originally invested.

Many people are afraid in Investing their hard earned money because one of the most leading reasons for this fear is ignorance. People should understand that the more they learn and understand the better equipped they will become to make wise decisions as a money manager for Investing.

Why Investing can be Important?

While Investing one of your key responsibilities is not only to provide for yourself and your family, but resource within the short term but also to trait within the long term. Unlike saving money, Investing will always be associated with a risk factor.

The degree of risk is dependent on the Investing option you choose and is typically proportional to the potential return of the investment. The old saying, “If it sounds too good to be true…” it typically is. Each person has a different tolerance for risk. You would never be Investing in things that make you lose sleep at night.

Mainly due to the negative effects of inflation, it is the opinion of many people that making the choice not to invest is the greatest risk you can most defiantly make with your savings. Inflation is the single greatest threat to your future financial well being in Investing. It results trait within the constant, steady erosion of money’s value.

When to start Investing?

To start Investing, time is your greatest asset element within the accumulation of wealth. You could begin to invest as soon as possible but not until you have built a solid financial foundation for yourself. Investing requires a long-term commitment.

The money you allocate to would not be money that will be required for many years. To trait within the event of a major depressing financial situation, you definitely wouldn’t want to be forced to withdraw money that has been allocated in a long-term investment to meet the requirements of a short term need.

Thus, it is imperative that, no matter what may come, your financial foundation must be strong. As a minimum, you would eliminate all of your consumer debts like the credit cards, student loans, furniture loans, auto payments, etc and build an adequate cash emergency account.

In many cases, for Investing if you or someone that understands and has the expert knowledge to start your investment program while you still have existing consumer debts then it is similar in effect as to borrowing money to make your investments. The greatest risk free return will always be to pay off the existing consumer debts before committing your money to Investing needs.

Where can Investing be done?

Usually, there are an unlimited number of Investing opportunities. The investment selections would include a moderate level of risk in exchange for a reasonable rate of return keeping in mind the maximum degree of diversification. It is most important to understand if you are ready to begin Investing, then your first plan could be one that is qualified by the IRS.

The Qualified savings plans are those that are designed by the IRS (government) with sure tax advantages to encourage citizens to participate in a long-term savings program. The basic qualified plan that is available to all the people that have earned income is the Individual Retirement Arrangement (IRA).

An IRA can consist of many numerous styles of Investing plans. It can either be a mutual fund, a certificate of deposit (CD) at a local bank, or a number of other options. An IRA comes in three different forms:

1. Long-established Deductible IRA

2. Most common Nondeductible IRA

3. Roth IRA

Investing today, has given a wide range of choices like the stocks, bonds, mutual funds, treasury securities which include savings bonds, options, commodities, commodity futures, real estate investment trusts, also known as the REITs, variable annuities and many more.

Those who have thought to invest must investigate before and remember that every single investment involves some degree of risk. These securities are not insured by the federal government if they fail, even in general speaking, if you or someone that understands and has expert knowledge purchase them through a bank or credit union that offers federally insured savings accounts, then make sure you have answers to all of these questions before you actually start Investing.



EDMOND