If you are planning to invest in the Share Market, you need to have a strategy to ensure you make money RATHER than lose it, like most investing beginners. Here’s Jon Lynch’s top 4 tips for making money in the Share Market.
Increased Share Value vs. Regular Dividends
These differing circumstances highlight one of the main questions you should ask yourself when considering which shares to buy. Are you seeking increased share value (capital gains) or regular dividends? That is, do you want your shares to increase in value so that you can sell them and make a profit, or would you prefer to be paid regular dividends that are greater than the cost of living?
Need for Liquid Assets
Another thing to think about is whether you will require some of your funds in the near future. You may want to buy a house or travel overseas. If that is the case, you should carefully consider the shares you choose, as well as how much you wish to invest in the share market in the first place.
Although the market has proven to return higher profits over time than most other secure forms of investment, the market does experience peaks and troughs. If you enter the market at the wrong time and wish to sell within a short period, it is conceivable that you could lose money. If you are using the share market just to house your funds and realise a small profit, security is the key.
Attitude to Risk Taking
Some people like taking risks. They jump out of airplanes and parachute to the ground or they bungee jump from cliff tops and bridges. Others prefer to keep their feet on the ground. A quiet walk in the bush is more their style. The same applies to buying shares. You have to feel comfortable with your decision. Think about your attitude to risk before choosing stock. If you’re not comfortable with the highflying approach, steer clear of shares that offer potentially large returns but with a greater degree of risk. Make sure you’ll be able to sleep well at night. Remember that all types of investments are a form of gambling, though some are obviously a higher risk than others.
Taxation Situation
As with anything to do with money, earnings and investing, taxation is also an issue.
The way that you purchase shares and the type of return you get will affect the amount of tax that you’ll pay. Some dividends you receive may incur a tax; others will come to you tax-free. Selling shares will possibly make you liable for capital gains tax. Again, it depends on your individual circumstances and the types of investment decisions you have made.
It is recommended that you sit down with an accountant or financial adviser before committing yourself to a large investment in the share market. They will be able to go through your situation and work out the best way for you to invest.
Jon Lynch is Marketing Manager of the Capital Intelligence Group of companies, including HomeTrader - Australia’s leading share trader education centres. We focus on teaching you how to create wealth through the share/stock market using a customised trading plan or system that is right for you, your situation and your goals. Visit our website and register for your free introductory DVD “Learn To Make Money On The Stock Market” at http://www.learnshares.com.au
Wall Street has been preaching for years and years to investors how and where to put their money. The “experts” have put forth these ideas for so long that they seem to be carved in stone just like Moses did with God’s 10 Commandments. The only difference is that what Wall Street preaches is lies that will make you broke.
It will be difficult in this short space to elaborate on them, but please stop and give a long think to all of these commandments.
1. Do research
2. Buy and Hold
3. Dollar Cost Average
4. Diversify
5. Buy a good stock and put it away
6. You can’t afford to be out of the market
7. Never try to time the market
8. Rearrange your portfolio with age
9. Your broker will watch your account
10. The market always comes back
The first 3 are preached by every broker who breathes. Consider that if you can find out about a company so can everyone else so what good is it? If you haven’t figured out Buy and Hold by now you are either broke or have not owned any stock. Dollar Cost Average is only for suckers - you could have bought Enron from $90 to nothing. When your broker says diversify he means he doesn’t know what to do with your money so he recommends putting some here and some there and a little in the safety deposit box or under the bed and hopes some of it will make a profit. He doesn’t know.
Hope is the most expensive word in the dictionary of any investor.
Buy a good stock and put it away. That is what the talking heads in CNBC-TV have been saying. Brokers, analysts and financial planners touted Enron last year as a quality stock. Even their bonds carried an investment grade rating. I don’t mean to leave out Xerox, Global Crossing, Pan American (for you old timers) and about a thousand others if you want to take the time to look. I am not exaggerating. In 2000 there were more than 1,000 stocks on the Nasdaq that lost 90% of their value.
Charles Schwab says you can’t afford to be out of the market. He wants to keep your money. I’m sure he will say you can’t time the market, but there are many of us who have been doing it for years. When they say that I know they have not taken the time to learn their trade - investing to make money. Rearrange you portfolio with age should be rearrange your portfolio to make a profit and not lose what you have.
Your broker will watch your account - get smaller. He never tells you to sell those losers or put in a stop-loss order. And you know because you have been told so many times that the market always comes back - except when it doesn’t, especially to the stocks you own.
Put these lies, oops, commandments, up on your wall and recite them to your broker when he calls or you might want to send him a copy.
Al Thomas’ book, “If It Doesn’t Go Up, Don’t Buy
It!” has helped thousands of people make money
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1-888-345-7870; al@mutualfundstrategy.com
When first exposed to the concept of technical trading (making trading decisions based on price chart patterns and price movements), most people will think they have finally found a sure-fire way to make money in the markets. The running joke is that technical traders are searching for the “Holy Grail” in their trading - ie they are looking for that perfect combination of price movement, chart patterns, and chart indicators that will always result in a profitable trade and never give a false signal.
Of course just like in real life, the search for the Holy Grail in trading is never ending. In other words, there has never yet been a system discovered which would always result in profitable trades and never give a bad signal.
One of the most common, and indeed still the most useful, types of chart patterns to study is the moving average (abbreviated MA). A MA is simply a curve that represents previous price action that is usually plotted directly over the price chart. If you were looking at a MA curve on a daily price chart (one price bar per day), each MA chart point is the average of “X” number of days’ price points added together and then divided by “X”. This gives you the average price for that number of days. The first MA chart point cannot be plotted until “X” days have elapsed, and then each successive chart point is plotted after that. The starting day for “X” is bumped up one price bar each day, so that every point on the MA curve represents the latest “X” days. This is much easier to see than it is to describe!
The resulting MA curve follows the price bars somewhat, but a larger “X” produces a more gentle MA curve, (and further removed from each day’s price action). A smaller “X” number produces a MA curve that is a little choppier and more close-fitting to the underlying prices.
A MA can be plotted for any desired time frame, not just for daily charts. Some common price charts day, hour, 15-minute, 5-minute, 1-minute, and tick data. There are also weekly, monthly, and yearly price charts. It really doesn’t matter the time-frame of the chart as for as a MA is concerned. The MA is simply calculated based on the default period for the chart it is being plotted on. Almost all charting programs have some type of MA-plotting capability, but the more expensive charts usually give you more options and more ways to vary and adjust the MA curve.
Traders usually use more than one MA curve per price chart, and make trading decisions based on when the MA curves cross each other. A slower-moving (ie larger “X”) MA if crossed by a faster-moving (ie smaller “X”) MA on the upswing will often coincide with the beginning of a price rally.
Every major up or down move in the market will be signaled by some type of MA curve crossing. At first glance this looks like a tremendously profitable chart indicator and the beginning trader will probably think he has indeed discovered the Holy Grail the first time he sees a chart full of MA crossings that point out where he could have bought or sold for great gain. The problem with MAs is that the curves will also cross when the market is merely moving up and down in a “trading range”. (A trading range looks kind of like the teeth on a saw - a repetitive cycle of ups and downs that never really go anywhere). The trader who only trades MAs will get creamed during a trading range as he is constantly buying, selling, and losing money. Indeed, he will most likely lose any gains he had made during the big price action moves.
So even though MA curves can certainly give us some good idea of market direction they must be used in conjuction with other chart patterns or trading signals to try and improve the reliability of spotting just the major moves, and not getting caught up in the trading ranges. But MA curves are always useful in helping to confirm the price trends and that is how most traders end up using them - as confirmation signals of other pattern indicators and not as primary signals.
Ted is part of a group of Forex traders
that makes its home at:
http://www.ForexProfitMentor.com
Check it out for the latest ideas on how YOU
can trade the Forex for profit!
