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21 myths investment


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21 myths investment

  1. 1. 21 Essential In Investment
  2. 2. WelcomeWelcome to “21 Essential In Investment”Presentation. This presentation will provide you with informationto quickly and effectively plan, build, maintain and analyze yourinvestment.History of Stock Market has repeatedly proved that investors are notalways rational. Just as they can bid up the price of a growth stock toohigh because they are so enthusiastic about its prospects, they can alsopummel a good stock that has momentarily slipped to unrealistically lowprices. That’s where bargain hunters swoop in.
  3. 3. 1. Diversify Your InvestmentPortfolioMaintaining a diverse investment portfolio is a relatively simple way to continueto make investments while taking steps to insure that youre not going to looseeverything should certain stocks or sectors of the stock market drop in value.Despite the usefulness of diversification, many people still maintain a verylimited number of investments in very similar stocks... often because the stocksare given as part of a stock-option plan from their employer or because theindividual simply doesnt know how to take advantage of diversifying theirportfolio.
  4. 4. 2. How to Choose an InvestmentSetting your Investment GoalsAsk yourself, “What do I want to accomplish through my investments?” For most investors, the following investmentgoals or objectives, or some combination of these, provide an initial answer to that question:SafetyThis objective reflects a conservative investment philosophy with minimal risk of loss of the original investment (the“principal”).IncomeAn “income” objective is achieved by purchasing investments that provide a stream of income through regular payments,which may or may not decrease the invested principal.GrowthThis category refers to investing for long-term growth or appreciation in market value. Growth investments carry a higherrisk than either safety or income oriented investments. Growth investments generally provide little or no dividendincome.SpeculationSpeculative investments carry a higher-than-average possibility of loss. This strategy often includes short-term trading ofnew or unproven companies’ stocks or options. Although there is the possibility of higher and faster rewards, speculativeinvestments also are high risk, meaning there is also the possibility of larger and faster losses of some, or your entireprincipal. “Risk” and “Return” to meet your goalsAs an investor, you choose your investment goals with an emphasis on one or more of the above categories. You mayalso wish to allocate portions of your investment portfolio to more accurately express your investment goals.
  5. 5. 3. Investment in propertyStarting off with a small investment property can also help you become a betterproperty manager. It is easier to adequately address the needs of just onetenant than it is trying to solve the problems of several tenants at once. Part ofmaking an investment property successful is adding value to the rental. If youcan learn how to please one tenant, then you will be in a better position toextend what you have learned and please all the tenants in a larger complex.Indeed, experience is priceless.
  6. 6. 4. Dividends and ReinvestmentReinvesting dividends is an easy way to make more money off of a particularstock or investment... after all, the investment is doing well enough to be payingdividends, and the reinvestment means that you have more of the stock orinvestment than you did before.If the dividends that you receive are paid to a money market account, you mayalso choose to reinvest them into other stocks or investments than the one thatoriginally paid them... this can be especially useful if you are receiving dividendsfrom one of your investments that you have a lot of shares in, but you haveanother investment that you dont have much of.
  7. 7. 5. Remember theseinvestment basics:Rule one:No matter how you choose to invest your money there will always be a degreeof risk involved.Rule two:Risk and return go hand-in-hand. Higher returns mean greater risk, while lowerreturns promise greater safety.Rule three:Do not invest in anything you do not fully understand.
  8. 8. 6. Stock TrackingMany financial sites offer stock and investment tracking services free of charge,which enable you to get recent quotes from stocks and other potentialinvestments of your choice. In addition to simply being able to track the currentprices of these investments, you are also generally able to view the history ofthe stock or investment for the past month or longer, sometimes viewing theperformance of specific stocks for the past one to five years or more.By signing up with websites that offer stock and investment tracking, you canalso have sudden changes in the stocks that youre tracking e-mailed to you orsent to your PDA or similar electronic device.
  9. 9. 7. Diversify into no more thantwelve different companies.Owning shares in twelve companies is plenty. It would provide the diversity tosleep well at night, and provide a cash dividend every week of the year. Start byowning three companies, and build from there.Determine how many shares you want of each company before moving on tothe 4th, 5th, and 6th. Invest in sets of three different companies at a time, untiltwelve are owned.
  10. 10. 8. PersevereSuccess in the stock market is not so much derived by buying a company’sstock at the lows, but is almost guaranteed successful through rupee-cost-averaging over the years.One of the most powerful methods of investing in the stock market is having theperseverance to continue adding shares to your stock positions over the years,through reinvested dividends and quarterly infusion of funds, be it 50 rupees, or100 rupees a month. Persistence, persistence, persistence, and your stockmarket investment philosophy will become unbeatable!
  11. 11. 9. Investment Plan that neverlets you downLet us find out why companies that give ever-increasing cash dividend incomeare a good choice for investment Your Share Holding Goes Up And So does Your Dividend Income. Your Dividend Income Increases Even If Stock Prices dont. You are not hit by Inflation. Start Young.
  12. 12. 10. Economical RetirementInvestment PlanA forethought example:I want every stock market investment to supply me with ever-increasing cash for the rest of my life. I want myretirement investment portfolio income to grow until the income from my portfolio replaces the income from my jobwhen I retire.A patience example:I will make quarterly investments into each security owned to raise the cash dividend supplied by each stockmarket investment. I will start by owning three companies which will supply me with cash dividends every month of theyear. I will also add the cash dividends to the quarterly investments. I will build this stock market retirement investmentplan up until I own 500 shares of all three companies. Once 500 shares of each company are owned, I will begininvesting in three more companies. Owning six companies will provide ever-increasing cash dividends twice a month,until I retire. My patience will eventually acquire 12 companies, providing me with income every week of the year.A wisdom example:I will only purchase those companies that have a historical record of raising their dividend each year. I know that a low2% dividend paying stock is not necessarily bad. It means the company in question is a growth stock, using most of itsprofits to expand. A growth stock makes up for the lower dividend yield by faster stock appreciation in the marketplace(however, the company will still show a historical record of raising their dividend each year). I will diversify into 3stocks, right from the get-go, even if it means I start off with as little as 5 shares of each company. I will not paycommission-fees. I will place emphasis on increasing the cash income paid to me from all my stock market retirementinvestments.
  13. 13. 11. Choose Investments ThatPay Off1. The stock market is risky businessGenerally, most people believe that buying stocks are as easy as 1-2-3. Of course, it can and in fact anybody is capableof doing it. But the problem lies on the fact that few people only know when to sell. And that is, in its greatest sense, theheart of stock market.So, the best advice for people to get the best stock market investment, it is best not to gamble everything that they haveon it, especially if they dont have a good understanding of how it works. Its better to loose a little than loose really,really big.2. The "trailing stop strategy."Most experts incorporate this when getting stocks. What they usually do is to "ride" their stocks really high, and maintainan exit strategy in the event that things get out of hand. This is where the liquidity of their investment is extremely vital toones business. That is, they should know that whatever liquidity they have can be easily converted into cash.3. Invest only in what you are comfortable with.Even if particular investment opportunity, say, an exciting IPO of a big company, looks very attractive, it is a must forevery investors not to invest on it if they are not prepared to risk losing their money on it. In this way, people will be ableto get the best stock market investment by following this very important advice.
  14. 14. 12. Learn the Art of TimingStock Market InvestmentsMarket timing determines whether a stock seller or a buyer will benefitmonetarily or otherwise from his purchases or sales. Most stock holders holdtheir stocks up and wait for the value to increase. When the value of thesestocks increase in the market, this is the time when they plan to sell because itis at this time that profits are projected to be high.However, peaks and lows in the stock markets are unpredictable and irrational.But this does not mean that timing stock market investments is not good. It isnot advisable to ignore the times when there is significant undervaluation andovervaluation in the stock market. This is the importance of timing stock marketinvestments. To buy stocks which are guaranteed to peak while they are stillselling low; and to sell high value stocks which are expected to fall. If aninvestor ignores these important market movements, then he is bound to loseinstead of gaining huge profits from overvaluation in the stock market.
  16. 16. 14. Financial tools forinvestment decisionsPRICE EARNINGS RATIO:The most important ratio that investors should look at is the Price Earnings (P/E) Ratio. In layman’s terms this is theshare price divided by the profit per share. The P/E Ratio of a Company should be compared against other companies inthe sector and against the market as a whole. I also believe a good test is to compare the P/E Ratio of a company withother similar companies quoted on stock exchanges.NET ASSET VALUE (NAV):Though there are many strategies that investors should follow, I tend to follow a strategy where I would buy investmentcompanies if they were at a discount to their NAV of at least 20%. I tend to find that the downside is restricted ifinvestors follow such a policy. If the market were in a bear market phase (i.e. falling market), I would widen the discountto say 30%. If in a bull market then the discount could be narrowed to say 15%.EARNINGS PER SHARE (EPS):Another tool that should be used by investors is to look at the track record of the company concerned. By this I mean thegrowth (or lack of it) in Earnings per share. A good management team should be able to register a solid annual increasein EPS of say 15% per annum. It should be able to do this on a consistent basis.
  17. 17. 15. Avoid Dumb InvestmentMistakes ? Dont Forget to Diversify Have Patience Invest Regularly Dont Ignore Investment Expenses Dont Get Greedy Dont Get Fancy
  18. 18. 16. Things To Consider Always set aside some of your money for emergencies before youinvest. Ask for advice from a trained and licensed professional. Be selective in your investment choices. Exercise your right to say“No.” Develop a sensible investment plan and follow it. Judge each company on its own merits. Do not invest on a company justbecause it is part of a fast growing and successful industry. Never invest based on information obtained from an unsolicitedtelephone call. Check the credentials of anyone you do not know who offers to sell youan investment.
  19. 19. 17. Improving Your FinancialSituation With Investments ? Stocks can be very risky but if you start small and give yourself time to get the hang of it, you may enjoy it and may even discover that you have the gift of foresight. Bonds on the other hand may have modest returns but they are probably the best and most secure of financial investments. Currencies are trickier to deal with as their value are affected by so many forces, local or within the country involved, regional and global. Debt is perhaps the single worst thing that you can do to damage your financial portfolio. Do not get the wrong idea, debt can be good when used the right way. In fact, successful businessmen have debts too. It will be risky but the fastest way you can earn big money is to venture on a business. Even something as small as operating a cafeteria in a factory or school or engage in buying and selling of goods over the Internet, can be a great start.
  20. 20. 18. Insure Your InvestmentYou insure your home. You insure your life and the lives of your loved ones. Whynot insure your investments?With current market conditions tossing most portfolios around, it would makesense to protect your portfolio. After all, the work we do significantly lowers the riskof losing money in an investment we choose to get involved in. But we nevercompletely eliminate all the risk in the market.Buying a protective put will help protect your new stock purchases in the market.This can be really helpful when you want to buy a particular stock, but the overallbias in the market is down. What is a put? A put is a contract that gives the buyerthe right to sell stock at a certain price and during a defined period of time, up tothe expiration of the contract
  21. 21. 19. It’s Stocks, Not Markets,that Bring InvestmentSuccess1. Invest regularly, regardless of the present outlook for the economy or stock market.2. Reinvest all earnings, letting the power of compounding work for you.3. Discover growing companies so that your wealth can grow as their sales and earnings grow over the years.4. Diversify your holdings, and dont put all your eggs in one basket, regardless of how carefully you watch that basket.
  22. 22. 20. What is ArbitrageInvestment??In the simplest of terms, Arbitrage means to exploit price differential.Usually it meant looking at differing sources of an investment, and if there was a price difference between Source A and Source B - then the investor / dealer / broker / manager would buy from the lower priced source, and sell on the higher priced source. Example:- The price of Stock ABC was Rs 20 per share on Exchange XYZ The price of the same Stock ABC on another Exchange 123 - was Rs 15 The dealer would buy the stock from Exchange 123 for Rs 15 - then sell on Exchange XYZ for Rs 20 - making Rs 5 per share profit (minus costs). Typically the price differential was very small - and trading had to be extremely quick and liquid - otherwise the markets could go against you in a very short time.This method is often enhanced by the use of leveraging (gearing up / borrowing) (remember LTCM?) - and sometimes using Derivative Structures such as Options - or hedging methods such as selling short.
  23. 23. 21. Strategies-for-long-term-investment1. Review asset allocation2. Maintain liquidity3. Selection of stocks4. Stagger purchases5. Don’t Fly Blind; Have a Financial Plan6. Do control what you can7. Do pay as little attention as possible to the financial media.8. Don’t fall into “Invest and Ignore”
  24. 24. Congratulations Congratulations! After reading the information in this guide, you should be better informed about the overall planning of your investments. The best advice may be to start slowly and grow your investment to meet the needs of your retirement. We hope that you feel well informed about investments for your wealth creation. We would like to invite you to see how blog can help you to create a winning invesment plan.Disclaimer : This report is for the personal information of the authorized recipient and does not construe to be any investment,legal or taxation advice to you. And not soliciting any action based upon it.The report is based upon information that we consider reliable,but we do not represent that it is accurate or complete, and it should not be relied upon such.We or any of its affiliates or employees shall not be in any way responsible for any loss or damage that may arise to any personfrom any inadvertent error in the information contained in this report