"Following what everyone else is doing is rarely a way to get rich." - Jim Rogers
Tuesday, 21 June 2016
Monday, 20 June 2016
Quote for the day
"The whole secret to winning and losing in the stock market is to lose the least amount possible when you're not right." - William O'Neil
Sunday, 19 June 2016
Investing and Stock Market Risks: Defining Risk
"Take a chance! All life is a chance. The man who goes the furthest is generally the one who is willing to do and dare. The 'sure thing' boat never gets far from shore." - Dale Carnegie (1888 - 1955)
In 1998 Economics Professor and Nobel Prize winner Paul Samuelson (1915 - 2009) noted that: "Many people now believe that if they simply hold stocks long enough they will not, lose money for statistics have shown that since 1926 the U.S. equity market has not suffered a loss in any given 15 year."
He called it a fallacy, and conceded that it is truly likely that if you hold stocks over long periods of time that they would tend to produce returns higher than other assets. But to believe that it is a God given statement... Is simply not correct!
Investing and stock market risks do not go to zero over long periods, but there are many articles that reflect how risk goes down the longer the time period. What is seldom introduced is the fact that if there is a significant onetime loss, it can be monumentally overwhelming.
In any case, Samuelson noted that: "The problem is that when stock prices do turn down (as inevitably happens even in the strongest of bull markets!) your optimistic equity exposure can overwhelm your gut level risk tolerance, leading to poor short-term judgements and even outright panic!"
Risk is a complex, multidimensional concept that manifests itself in various ways. Risk is omnipresent and includes stock market crashes, corporate bankruptcies, currency devaluations, changes in sentiment, in inflation and interest rates, and even major changes in the tax code.
Risk is generally defined as return volatility, or the degree of ups and downs of returns. But there's more to risk than volatility. Risk and long-term reward are generally related. Risk is the chance that your actual return will be less than you expected.
People sometimes think that a good return can be achieved with little or no risk. Unfortunately, that's impossible. To achieve your objectives, you need to assume certain risks and avoid others.
Your ability to handle risk is related closely to your individual circumstances, including your age, time horizon, liquidity needs, portfolio size, income, investment knowledge, and attitude toward price fluctuations.
What's highly risky to one individual may be no problem to another!
Short-term fluctuations are not that relevant for long-term investors who have the discipline, patience, and understanding to deal with them. Stock funds are actually less risky than money market funds for those with long time horizons.
Well-informed investors are far less likely to let risk get the best of them!
Those who understand the various elements of risk are better equipped to enjoy a profitable long-term investment journey.
Source: http://www.greekshares.com
In 1998 Economics Professor and Nobel Prize winner Paul Samuelson (1915 - 2009) noted that: "Many people now believe that if they simply hold stocks long enough they will not, lose money for statistics have shown that since 1926 the U.S. equity market has not suffered a loss in any given 15 year."
He called it a fallacy, and conceded that it is truly likely that if you hold stocks over long periods of time that they would tend to produce returns higher than other assets. But to believe that it is a God given statement... Is simply not correct!
Investing and stock market risks do not go to zero over long periods, but there are many articles that reflect how risk goes down the longer the time period. What is seldom introduced is the fact that if there is a significant onetime loss, it can be monumentally overwhelming.
In any case, Samuelson noted that: "The problem is that when stock prices do turn down (as inevitably happens even in the strongest of bull markets!) your optimistic equity exposure can overwhelm your gut level risk tolerance, leading to poor short-term judgements and even outright panic!"
Risk is a complex, multidimensional concept that manifests itself in various ways. Risk is omnipresent and includes stock market crashes, corporate bankruptcies, currency devaluations, changes in sentiment, in inflation and interest rates, and even major changes in the tax code.
Risk is generally defined as return volatility, or the degree of ups and downs of returns. But there's more to risk than volatility. Risk and long-term reward are generally related. Risk is the chance that your actual return will be less than you expected.
People sometimes think that a good return can be achieved with little or no risk. Unfortunately, that's impossible. To achieve your objectives, you need to assume certain risks and avoid others.
Your ability to handle risk is related closely to your individual circumstances, including your age, time horizon, liquidity needs, portfolio size, income, investment knowledge, and attitude toward price fluctuations.
What's highly risky to one individual may be no problem to another!
Short-term fluctuations are not that relevant for long-term investors who have the discipline, patience, and understanding to deal with them. Stock funds are actually less risky than money market funds for those with long time horizons.
Well-informed investors are far less likely to let risk get the best of them!
Those who understand the various elements of risk are better equipped to enjoy a profitable long-term investment journey.
Source: http://www.greekshares.com
Quote for the day
"Some investments do have higher expected returns than others. Which ones? Well, by and large they're the ones that will do the worst in bad times." - William Forsyth Sharpe
Saturday, 18 June 2016
6 Money Mindsets For A Healthy Financial Future
By Jonathan Wiggins
Your mindset towards money can greatly impact whether you succeed or fail financially. What role do you see money playing in your life over the next few years? How will you balance investing, spending, and saving? The answers to important questions like these greatly depend on your mindset. In this article, you will find some tips that may help you refine your views on money and its role in your life.
Your mindset towards money can greatly impact whether you succeed or fail financially. What role do you see money playing in your life over the next few years? How will you balance investing, spending, and saving? The answers to important questions like these greatly depend on your mindset. In this article, you will find some tips that may help you refine your views on money and its role in your life.
Below are 6 money mindsets that you can adopt in order to set yourself up for financial success.
1. Money Is A Tool, Not A Goal
Think of money as the vehicle that will take you to your financial destination. It can be tough to consistently save and sacrifice simply to have more money in the bank. But, when you formulate clear goals for your life, it will be easier to see how your savings can propel you toward those goals.
What could you do with a couple more zeros in your bank account? You could be better prepared for an emergency or job loss. You could take that vacation you have been dreaming about. You could help a person in need without a second thought.
2. Experiences Trump Things
As you accumulate savings, increase your income, and decrease debt, you will find yourself with more and more disposable income to use any way you please. While it is okay to purchase a few “toys” every now and then, remember that experiences will ultimately bring you more pleasure than things.
Use money to create memories and strengthen relationships with friends and loved ones. This will lead to a more satisfying financial future than simply gathering more possessions. Travel to a new country. Learn a different skill. Pick up a new instrument.
4. Investing Is For Everyone
Today, technology has made it possible for anyone to become an investor and put their money to work. Even if you are a beginner, there are plenty of resources available online to teach you the basics of investing. The key to successful investing is starting early. The earlier you begin, the more compounding interest will work in your favor. As you create your financial plan, be sure to consider how you can make money on your investments in addition to your salary.
5. Money Must Be Actively Managed
Although there are many automated tools available to help us save, invest, and pay bills, you still want to take a hands-on approach to managing your money. You cannot “set it and forget it.” Check all your accounts regularly to make sure everything is working as planned. Did the utility bill go up a little this month? Are your automatic bill payments still being processed properly? Is there room in the budget to add a little more money to the savings account?
6. Money Ultimately Comes From Value Creation
Throughout your financial life, make sure you equate money and income with value creation. In order to earn more money, you need to constantly be searching for more ways to create value in the world. You can do this by taking on new responsibilities at work, finding a job that is more valued by the employer, or by starting a business that provides exceptional value to customers. Other ways you can create value include obtaining specialised certifications in your field, cross-training in different disciplines, and teaching and mentoring others. Each of these will not necessarily pay off in the short term, but over time these behaviour will certainly attract great opportunities to you.
1. Money Is A Tool, Not A Goal
Think of money as the vehicle that will take you to your financial destination. It can be tough to consistently save and sacrifice simply to have more money in the bank. But, when you formulate clear goals for your life, it will be easier to see how your savings can propel you toward those goals.
What could you do with a couple more zeros in your bank account? You could be better prepared for an emergency or job loss. You could take that vacation you have been dreaming about. You could help a person in need without a second thought.
2. Experiences Trump Things
As you accumulate savings, increase your income, and decrease debt, you will find yourself with more and more disposable income to use any way you please. While it is okay to purchase a few “toys” every now and then, remember that experiences will ultimately bring you more pleasure than things.
Use money to create memories and strengthen relationships with friends and loved ones. This will lead to a more satisfying financial future than simply gathering more possessions. Travel to a new country. Learn a different skill. Pick up a new instrument.
3. Think Long Term And Big Picture
What you do with your money today will have a huge impact on your life 5, 10, or even 50 years from now. What kind of life do you want to provide for your family? Do you think you will be interested in pursuing an advanced degree in the future? Is being debt-free important to you? How do you want to support yourself in your retirement years?
Sometimes, we get so bogged down with the day-to-day financial transactions that it is hard to think about the financial future. Still, it is important to periodically check to make sure you are heading toward your long-term goals in addition to keeping the bills paid right now.
What you do with your money today will have a huge impact on your life 5, 10, or even 50 years from now. What kind of life do you want to provide for your family? Do you think you will be interested in pursuing an advanced degree in the future? Is being debt-free important to you? How do you want to support yourself in your retirement years?
Sometimes, we get so bogged down with the day-to-day financial transactions that it is hard to think about the financial future. Still, it is important to periodically check to make sure you are heading toward your long-term goals in addition to keeping the bills paid right now.
4. Investing Is For Everyone
Today, technology has made it possible for anyone to become an investor and put their money to work. Even if you are a beginner, there are plenty of resources available online to teach you the basics of investing. The key to successful investing is starting early. The earlier you begin, the more compounding interest will work in your favor. As you create your financial plan, be sure to consider how you can make money on your investments in addition to your salary.
5. Money Must Be Actively Managed
Although there are many automated tools available to help us save, invest, and pay bills, you still want to take a hands-on approach to managing your money. You cannot “set it and forget it.” Check all your accounts regularly to make sure everything is working as planned. Did the utility bill go up a little this month? Are your automatic bill payments still being processed properly? Is there room in the budget to add a little more money to the savings account?
6. Money Ultimately Comes From Value Creation
Throughout your financial life, make sure you equate money and income with value creation. In order to earn more money, you need to constantly be searching for more ways to create value in the world. You can do this by taking on new responsibilities at work, finding a job that is more valued by the employer, or by starting a business that provides exceptional value to customers. Other ways you can create value include obtaining specialised certifications in your field, cross-training in different disciplines, and teaching and mentoring others. Each of these will not necessarily pay off in the short term, but over time these behaviour will certainly attract great opportunities to you.
Source: www.lifehack.org/
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