The stock market is like a gold mine for those who invest money in it. It is one of the best ways for an investor to become wealthy. Making money in the stock market is like mining a gold mine, it is both easy and difficult. It is easy if you know how to do it and know where to find the gold. It is difficult if you go in the wrong way, in which case you will end up only with mud and stone. The stock market can increase your wealth. However, if you do not invest wisely you can end up losing all your money.
It is essential to know how to invest in the right stock and profit from stock market. The following are some tips that you can get you started and help you achieve success.
- Understand the market
Before investing in the stock market, you need to understand the market. You need to know how the stock market works and also understand past performance, present situation, and future prospects. Apart from understanding the market, you also need to learn about the industry sector and the company in which you are investing. Investing blindly without knowing anything is dangerous. It is therefore necessary that you understand the market well before you start investing.
- Consider mutual funds
When one talks of investing in the stock market, the obvious reference is to buying stocks. You can also consider investing in mutual funds. This is suitable if you are a first time investor and are not ready to take too much of a risk. In a mutual fund, a professional fund manager would handle the investments. The fund manager would monitor the market and help you build wealth. This is a safer and less risky way of investing in the stock market. Once you begin to earn money and gain confidence, you can then start buying stocks on your own.
- Do your research
After understanding the market, you need to do proper research about the company or mutual fund you want to invest in. This would necessitate reviewing the performance of the company/fund. You can refer to various websites, journals, newspapers, and also do your own study. You need to consider fundamental analysis (based on financial statements and publicly available sources) and also technical analysis (predicting stock movements based on past performance). If you are serious about making money in the stock market, you can even consider doing courses on fundamental and technical analysis. Research is the best tool to help you make an informed decision while investing in the stock market.
- Don’t try to time the market
Buying low and selling high is the secret to making money in the stock market. The problem though is knowing what is low and what is high. If you try to time the market by waiting until the market reaches a low or high before investing, you may be waiting too long. Even veteran investors cannot predict how the market would behave. So don’t try to time the market. Instead, set goals for investment and invest in the market as per these goals.
- Stay for the long-term
To succeed in the stock market, it is necessary to stay for the long-term. You cannot expect to make money overnight or in a few months. If you want to earn wealth, then you need to stay invested for many years. Think for 15, 20, 30 years. That’s the way to earn wealth in the stock market. In the short-term many developments take place in the stock market. This should neither excite you nor depress you. The market has its fluctuations, don’t worry about them. In the long run, the market can help you earn good returns on your investment.
- Go for a systematic investment plan
Instead of investing a huge amount at one go, you can consider a systematic investment plan to invest in the stock market. Whether investing in stocks or mutual funds, you can invest a fixed amount every month. This helps you to slowly and steadily invest in the market. For example, once your research tells you that company X will give you good returns, then invest a fixed amount, maybe 500 every month to buy shares of company X. You need to do this month on month, and year on year. The power of compounding ensures that your investment will grow more in this way.
Assuming an average return of 9%, if you invest just 1000 every month, you can become a millionaire in 25 years. When you earn more, you can invest more money. This will help you accumulate more wealth over a period of time. The main advantage of a systematic investment plan is that if the market falls, then the value of the stock you want to buy falls, which means you can buy more of it. If the market rises, your overall investment rises. The benefits of a systematic investment plan make it ideal for those who want to earn money in the stock market.
- Never get lured by tips
There are lot of tips and rumors circulating that would tempt you to invest your money to buy a particular stock. The tips would tell you that if you invest money in a particular stock, you can expect huge returns quickly. In most cases, these tips are meant to lure small investors into making someone else become wealthy. If you get a tip from a very reliable and knowledgeable source, you can consider it. Else, ignore all tips you get and focus on your strategy of investing.
- Don’t let your emotions get the better of you
Most people who lose money in the stock market do so because they allow their emotions to override logic. Getting tempted to make a quick investment to earn money or refusing to sell a stock because you have some emotional connection with it are sure ways of losing money. You need to be logical and analytical while investing money in the stock market. Emotions have no place in the stock market. Emotions like fear and greed can make you lose your money. So put aside your emotions, stick to your investment strategy, and be disciplined in your approach. That’s the way to be successful.
- Diversify your risk
The stock market has inherent risks. Don’t amplify your risks by putting all your money in one place. Instead of investing 1000 in one stock, you can invest 250 in 4 stocks. This spreads your risk across four different stocks. If one of them fails, the other three can still help you earn money. Whereas if all your money was in one stock and it failed, you lose everything. Also, avoid investing money in the same types of stocks. Invest in companies from different industry sectors.
While investing, you can invest in blue-chip companies (well-known companies with a good track record) or mid-cap companies (companies with a fair market size that are poised to take off), or small cap companies (new companies with a low market capitalization). Based on your market research, try to invest money in each of these types of companies. This is another way of diversifying risk and being safe. The blue-chip company can help you earn steady returns, the mid cap can help you get big profits, even if it fails you have the blue-chip to fall back on. The small caps can take off really big. Even if it fails, you would not have invested too much. Diversification is a must to reduce your risk in the stock market.
- Be realistic in your expectations
Most people enter the stock market after learning about how someone made millions in a few months. This could have happened due to luck or investing extremely wisely. In either case, you should not expect to get the same results. This is an unrealistic expectation that can cause you a lot of pain. Expecting to make a lot of money in a short time is highly unreasonable. You may do it if you are lucky. However, in most cases, it won’t happen. Look at the past record of the market. On average 9% to 12% returns is what you can expect. If you can get more, it is a bonus. Don’t set unrealistic expectations that can demoralize you and affect your investing.
- Don’t put everything in the stock market
You have worked hard to earn money. In the quest to be rich, you plan to invest all your savings into the stock market. This is the biggest mistake you can do. Never invest everything in the stock market. This can be extremely risky and if you lose money, you will be left with nothing. Invest only a part of your savings in the stock market. A thumb rule is to invest (100 – your age) in the stock market. So, if you are 30 years old, you can invest 70% of your savings in the stock market. The rest should be invested in safer options like bonds, bank deposits, etc. The logic here is when you are young, you can take more risks.
As you grow older, reduce your investment in the stock market. When you turn 40, you can have 60% of your savings in the stock market. This helps you reduce your risk gradually so that by the time you retire you have sufficient savings in safer places. This will help you overcome the risk of a stock market crash when you want to take out your earnings from the stock market.
- Book profits regularly
You may be in the market for a long-term and plan to stay invested for 20 or 30 years. This doesn’t mean that you shouldn’t sell some of the stocks to make a profit. When the market reaches an all-time high or the stock you have invest in has given you a windfall profit, don’t hesitate – book the profit. You can always reinvest some of the profit back into the company so that if it goes still higher, you can make money. You should not be placed in a situation wherein after you have a record profit on paper, you stand by and watch the stock fall to a low. You can sell stocks to earn profits but don’t spend it all. Put back the money into the stock market, so you can continue in your disciplined strategy of earning money.
- Get rid of deadwood
Deadwood refers to stocks, which are not earning you any money. Periodically review your investments. Use fundamental and technical analysis to understand how a stock is performing and how it is likely to perform. If you are clear that the stock is deadwood, then get rid of it. If you wait hoping to earn some money from it, you may lose more. Get rid of losing stocks periodically and re-invest the money in better stocks.
- Use the services of an investment advisor
Investing in the stock market to make money requires hours of research and follow-up. If you do not have the time or inclination to do this, you can simplify your job by using the services of an investment advisor. The investment advisor is a financial professional who understands the stock market well. The advisor can suggest stocks for you to invest and help you build a portfolio that can earn you money. The advisor would also monitor the performance of your stocks for you. For doing this, you would have to pay a fee. It would be worth paying a fee to a professional if it can help you build wealth. Make sure you select an advisor who is registered, is well-qualified, has plenty of experience, and has a good track record.
Estate planning for wealthy celebrities or UHNWIs
By Sean Sheridan, Client Director, ZEDRA Isle of Man
Estate planning often gets pushed aside…sometimes with disastrous knock-on effects for a family. With today’s evolving regulatory environment, future planning can be challenging and often daunting.
Despite inevitable obstacles, there are ways to minimise the burden to enable even celebrities to have future generations enjoying the benefits of their wealth. In this article we explore why estate planning gets overlooked, and why it’s so important to protect prosperity and interests.
It’s easier to put off estate planning than you’d think – even for people like celebrities or UHNWIs who have earned significant wealth. For example, it’s thought that the great Diego Maradona passed away without leaving a Will or other plans for his assets, despite recent years of ill health. There were already reports of a contested estate just weeks after his funeral. Michael Jackson, Prince, James Gandolfini and Philip Seymore Hoffmann all passed away with various issues with their estates, despite having amassed fortunes.
It’s not disorganisation or a lack of desire that stops people planning their estate. In fact, often the last thing people want is to leave family or loved ones having to deal with probate and complex legal affairs at an already difficult time. Many people simply put off estate planning, thinking they will have time later…whenever that is. Alternatively, they may not comprehend how challenging it can be to untangle an intricate estate, and what legal rules there are that surround how an estate will automatically be divided amongst heirs and spouses if forced heirship laws apply. Equally, many people may not know that some loved ones may not get any assets or be looked after if provisions aren’t made in advance.
For UHNWI a properly planned estate can also mean more privacy for family at a challenging time. Many HNWI will choose – along with advisors – a structure that will allow for maximum confidentiality and will keep the details of the estate and any beneficiaries private. Information about beneficiaries of an estate becoming public can also make them a target for press or other unwanted attention. As structures which allow for both discretion and succession planning, trusts can be very popular for this reason.
Trusts also allow for settlors to stipulate the conditions under which beneficiaries may have access to or be given money from a trust.
Trusts allow the settlor the ability to lay out one or more conditions. For example, a settlor could put aside assets in trust to support beneficiaries but not make all the assets available to them at once. This might be to support good governance or simply to protect beneficiaries from some of the hazards associated with wealth, as perceived by the settlor.
Practically, this means a settlor and their advisors might look at different conditions for a trust’s assets. For example, beneficiaries might only receive a lump sum every 10 years. Alternatively, they might get a monthly pay-out, similar to a salary. The settlor might wish that funds are paid out to beneficiaries for the sole purpose of paying for their college education or to purchase a property.
Corporate trustees like ZEDRA ensure that the settlor’s wishes are met, and the assets of the trusts are used in the way the settlor would like and as laid out in the trust deed.
Planning ahead with advisors is vital – especially for anyone with a complex assets and interests that span various geographies may be complex in terms of nature, like IP rights.
Expert advice that’s tailored around an individual’s personal situation is a must, so thinking ahead is crucial. It’s never too early to make sure you’re planning your estate and making sure loved ones or important causes will be looked after when you’re gone.
Dollar edges lower as investors favor higher-risk currencies
By Stephen Culp
NEW YORK (Reuters) – The dollar lost ground on Friday as market participants favored currencies associated with risk-on sentiment over the safe-haven greenback.
Risk appetite was stoked by better-than-expected economic data and expectations that U.S. President Joe Biden’s proposed $1.9 trillion coronavirus relief package will come to fruition.
“The dollar’s down against other currencies but not by a whole lot,” said Oliver Pursche, president of Bronson Meadows Capital Management in Fairfield, Connecticut. “I expect the dollar to be where it is now at the end of the year, and the main reason for that is while I see some signs of improvement in the economy, monetary policy is going to stay where it is.”
“I don’t think the dollar is underpriced or overpriced,” Pursche added.
For the week, the dollar slid about 0.2% against a basket of world currencies, the euro was essentially flat, and the yen lost more than 0.5%. But the British pound advanced more than 1.1% against the dollar, its best week since mid-December.
Bitcoin continues soar to record highs. The world’s largest cryptocurrency was last up 6.6% at $54,961.67, hitting $1 trillion in market capitalization.
Its smaller rival, ethereum, was last up 0.7% at $1,953.28.
The digital currencies have gained about 89% and 1,420%, respectively, year to date, leading some analysts to warn of a speculative bubble.
“One concern I’ve always had (about cryptocurrencies) is how susceptible they are to manipulation,” Pursche said. “But they’re going to continue to gain legitimacy.”
“While it’s great that Tesla made an investment in bitcoin, I’m more intrigued by Blackrock and other major investment firms taking a hard look at cryptocurrencies as a viable investment.”
The Australian dollar, which is closely linked to commodity prices and the outlook for global growth, was last up 1.21% at $0.7863, touching its highest since March 2018.
The New Zealand dollar also gained, closing in on a more than two-year high, and the Canadian dollar advanced as well.
Sterling, which often benefits from increased risk appetite, rose to an almost three-year high amid Britain’s aggressive vaccination program. It had last gained 0.27% to $1.40.
The euro showed little reaction to a slowdown in factory activity indicated by purchasing manager index data, rising 0.21% to $1.2116.
The yen, gained ground against the dollar and was last at 105.495, creeping above its 200-day moving average for the first time in three days.
(Reporting by Stephen Culp, additonal reporting by Tommy Wilkes; editing by Jonathan Oatis)
Shares rise as cyclical stocks provide support; yields climb
By Saqib Iqbal Ahmed
NEW YORK (Reuters) – A gauge of global equity markets snapped a 3-day losing streak to edge higher on Friday, as the recent selling pressure on high-flying big technology-related stocks eased even as investors showed a preference for economically sensitive cyclical sectors.
Oil prices fell from recent highs as Texas energy companies began preparations to restart oil and gas fields shuttered by freezing weather, while the U.S. Treasury yields extended their recent rise.
The MSCI’s global stock index was up 0.47% at 681.88, after losing ground for three consecutive sessions.
On Wall Street, stocks steadied as cyclical sectors edged higher while tech names made modest advances after concerns about elevated valuations led to some selling in recent sessions.
“What we saw (this week) represents a market that is tired and may not do very much. So we are headed for some sort of a pullback, but I don’t think we’re there just yet,” said Peter Cardillo, chief market economist at Spartan Capital Securities in New York.
“Investors are not really pulling out of the market, but they are becoming more cautious. It already has factored in another good positive earnings season.”
The Dow Jones Industrial Average rose 119.97 points, or 0.38%, to 31,613.31, the S&P 500 gained 12.93 points, or 0.33%, to 3,926.9 and the Nasdaq Composite added 92.58 points, or 0.67%, to 13,957.93.
The S&P 500 technology and communication services sectors, housing high-value growth stocks, were among the smallest gainers in early trading, while financials, industrials, energy and materials rose more than 1%.
European shares edged higher on Friday as an upbeat earnings report from Hermes boosted confidence in a broader economic recovery. The pan-European STOXX 600 index was 0.64% higher.
U.S. Treasury yields on the longer end of the curve rose to new one-year highs on Friday as improved risk appetite boosted Wall Street, while the yield on 30-year inflation-protected securities (TIPS) turned positive for the first time since June.
Core bond yields have pushed higher globally, led by the so-called reflation trade, where investors wager on a pick-up in growth and inflation. Growing momentum for coronavirus vaccine programs and hopes of massive fiscal spending under U.S. President Joe Biden have spurred reflation trades.
The benchmark 10-year yield was last up 5.1 basis points at 1.338%, its highest level since Feb. 26, 2020.
Oil prices retreated from recent highs for a second day on Friday as Texas energy companies began preparations to restart oil and gas fields shuttered by freezing weather.
Unusually cold weather in Texas and the Plains states curtailed up to 4 million barrels per day (bpd) of crude oil production and 21 billion cubic feet of natural gas, analysts estimated.
Brent crude futures were down 28 cents, or 0.44%, at $63.65 a barrel, while U.S. West Texas Intermediate (WTI) crude futures fell 66 cents, or 1.09%, to $59.86.
Copper jumped to its highest in more than nine years on Friday and towards a third straight weekly gain as tight supplies and bullish sentiment towards base metals continued after the Chinese New Year.
Spot gold XAU= was down 0.58% at $1,785.71 an ounce.
The dollar lost ground on Friday, extending Thursday’s decline as improved risk appetite sapped demand for the safe-haven currency and drew buyers to riskier, higher-yielding currencies. The dollar index was off 0.295%.
Bitcoin hit yet another record high on Friday, hitting a market capitalization of $1 trillion, blithely shrugging off analyst warnings that it is an “economic side show” and a poor hedge against a fall in stock prices.
(Reporting by Saqib Iqbal Ahmed; Editing by Nick Zieminski)
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