Is Now A Good Time To Invest In The Bitcoin Market?
Intelligent People Make Use Of Every Opportunity That Comes Along.
So far, this is the best October in over 30 years! Does this mean that we have turned the corner? The markets reacted to good news in Europe where they seem to have come to an agreement as to how to solve the financial mess they find themselves in. The only problem is that essentially what they seem to be doing is discounting old debt (bond holders being paid off at 50% or so) and replacing it with new debt somewhere in the area of 1 trillion euros (about 1.4 trillion dollars). Who are they going to for the majority of this funding? China of course. They are the only ones at present with enough cash to handle this type of loan… but will they agree to do it… that is still up on the air.
Meanwhile back in the US, housing is showing a few weak signs of life, retailers are optimistic about the up-coming holidays, oil prices remain below $100/barrel, and corporate earnings generally are beating expectations. The middle east is relatively calm for now and with Muammar Qaddafi out of the way the Libyan revolution is past one more hurdle. The US is withdrawing from Iraq which will save billions of dollars. The Republicans have a large and diverse field of candidates making for interesting debates, and President Obama is working hard to get congressional approval of his jobs bill.
We certainly have seen worse times in the recent past, but I`m not sure that it is time to celebrate. First we need to see a definitive working plan in place to solve the European debt crisis. We need to see a return to increasing real estate prices and a reduction in the massive inventory of unsold houses in the US. We need to see a joint bi-partisan effort in congress to reduce the deficit and get the national debt under control. But perhaps most of all we need to figure out how to create more jobs domestically. One of the reasons that the largest US corporations are doing well is that they have been sending jobs overseas as a means of cost reduction. This will continue as long as it is economically advantageous to do so. Our congress is well aware of these problems, but to date has been more concerned with politics, re-election, and party affiliations than with solving the issues at hand.
In short, while the markets seem to be celebrating, until the major issues listed above are addressed by our congress and some real resolutions are in sight, resulting in a return to confidence, I think that we will continue to see a great deal of volatility in the markets. While I am generally optimistic based on the current news cycle, I think it prudent to keep the seat belt strapped on tight for a while longer as it will probably continue to be a bumpy ride.
The Risks And Rewards Of Investing In The Stock Market.
You Have More Options When You Work Out Of Your Home.
Investing in the stock market can be both very risky (because you can lose the money invested) or very rewarding (because you can earn multiples times your initial investment.) This article explores both of these.
There are some ways of investing that are much riskier than others. The main risk is that you never know what is going to happen. On any given day, the stock market could take a dive and your portfolio could go up in flames. Of course, the market usually recovers to a certain level, but even then you could lose a lot of money along the way. And to make things even more risky, the more money that you invest the more money you stand to lose should something bad happen.
It is also risky to invest in stocks if you do not know what you are doing. Many people have heard the stories of getting rich this way. In turn, they think that the process is easy and dump all of their money into it. Just like anything else that has to do with investing money, there are huge risks putting money in the stock market. The bottom line is that you should start out with small investments if you do not have a lot of trading experience.
On the other hand, the rewards can greatly outweigh the risks if you know what you are doing.
The main reward of investing in the stock market comes in the form of money. If you pick the right investments, it is safe to say that you can make a lot of money both in the short and long term. As you begin to learn more and more about investing, you will find that choosing the best stocks becomes simpler. This is not to say that you will easily make money, but you should get a feel for what is right and what is wrong. And don`t forget that in the long run the stock market return is always around 8-10% so even temporary hiccups such as the dot com bubble bursting in the late 90`s can easily be avoided if you are careful and play it smart.
Another great benefit is the fun factor. Sure, you could store away your money in an online savings account, but what fun is that? When you get involved with the stock market you will feel as if you are giving yourself the best possible chance of hitting it big. And with so much on the line, you will definitely be excited each and every time you check the progress of your investments.
There are some risks and large rewards associated with investing in stocks. If you are careful then you can minimize the risks and maximize your rewards. What are you going to do with your money?
After the Crash, Buy This Stock
Big bets don`t scare me. One of my first big bets was made from an Internet cafe in Ghana.
For me, this Internet company was different. Its service was something I used every day, allowing me to find exactly what I was searching for on the Internet every time. Before this, Internet search was horrible. This company had no competition. Other than its programmers and its computer servers, it had no costs. And it was being used worldwide. Even in West Africa, everyone was using it. Now, the company was selling shares to investors for the first time through an initial public offering (IPO).
It seemed like a sure thing to me, but most people were skeptical. And it was easy to see why. The Internet bubble had popped in 2000. Wall Street had taken junky companies and sold shares in them, destroying the wealth of so many people. No wonder most investors stayed away even when a really good company`s shares were being sold.
Long story short… I took about 25% of everything I owned and bought Google`s IPO at $85 in August 2004. I don`t own it anymore, but the shares of Google are up 1,400% since then, making it a stock market superstar.
Everyone wants big gains. Now, unless you want to dedicate your life to analyzing and figuring out markets like me, your best bet is to diversify your portfolio. But it`s critical to do it smartly so that you get the highest return possible and still get a shot at some of those high flyers.
When it comes to diversifying your entire investment portfolio, my colleagues tell you to use gold and collectibles to go beyond financial investments. That`s good advice. Some of my money is in gold, and my collectibles portfolio includes gold coins. And then it`s a bit unconventional. I collect antique gadgets – telephones, cameras, typewriters, gramophones and radios from the early 1900s.
Now, when it comes to stocks, you can get instant diversification by buying an index fund. That`s an OK way to diversify. But there`s a smarter way to diversify that I bet you`ve never heard of. The great thing about this way of diversifying is that you get the safety of being diversified and you get a huge increase in returns. For example, in the current bull market, you`d have made 82% more using this way of diversifying.
Better Returns, Same Risk
You see, when you buy an index fund, you`re diversifying through buying a basket of stocks. For example, the “regular” S&P 500 is a basket of 500 of the largest companies trading in U.S. stock markets. Here`s the key thing for you to understand. The S&P 500 is cap-weighted. Cap weighting means that you end up owning more of the biggest companies within the basket.
In the S&P 500, Apple has a market value or “market cap” of around $607 billion. Apple will have a larger effect on the S&P 500`s movement than toymaker Mattel with its $11 billion market cap. That`s because the S&P 500 is market-cap-weighted. Apple is given a higher weighting – 3.25% of the index compared with Mattel`s 0.06%.
Turns out there is a smarter way to diversify the basket of stocks in an index. It`s been proven smarter, because the index goes up more. Way more. And it`s not riskier.
Score: Equal-Weighted S&P 500: 282%. Cap-Weighted S&P 500: 200%.
By simply changing the amounts of stock in the index, you can get 82% more in return, which is pretty great if you ask me.
Don`t Put All Your Stock in One Basket
Equal-weighted means that every stock in the S&P 500 has the same weight in the index – 0.20%. Big stocks and smaller stocks are treated equally. In a bull market, most stocks are going up. So the equal-weighted index goes up more than the market-cap-weighted version because in many cases smaller stocks will make sharper, faster moves higher than larger stocks.
Don`t get me wrong. You definitely want big stocks in your portfolio. But you want newer, fast-growing stocks that can zoom up like Google too. If you use smart diversifying tools such as an equal-weighted index fund, you get the best of both worlds – the safety of big stocks and the growth of newer, smaller companies all in one.