1. Create a Personal Expense Account
Open a current account just for household expenses, but avoid accounts with a monthly fee. Next, figure out roughly how much your monthly expenses—everything from electricity to entertainment—are, and put that exact amount into this expense account from your salary. Put the rest of your salary into your savings account and let it accumulate until you need it.
Not only have you just taken the guesswork out of saving, but you've also created a budget without the hassle of doing a monthly line-by-line accounting of what you've spent. If you have £100 left in your current account at the end of the first month, put the extra £100 into your savings account. If you have nothing left, cut back on expenses the following month.
2. Take a Salary Cut
The cash you don't see every month can only help you. You want to put as much of your gross salary into your works pension as is reasonable, especially if your employer matches your contributions. There are numerous tax benefits to this to list in one post. Needless to say, don't put less than 10 percent of your salary into your pension plan each month. Because of the tax benefits, your take-home pay will drop by much less than this. That seems like a lot, but trust me, you'll never miss it. And in 10 years, you'll be giddy every time your pension statement arrives. If you're under 30, put all your money in stocks. At 30 onward, start dripping this into cash, bonds, and other safe investments.
3. Become a Predator in These Unpredictable Times
During downturns or unpredictable times, emotions like guilt or fear can prevent you from making wise purchases. Are you thinking about making an offer on a foreclosure, or buying some cheap furniture or jewelry off Craigslist from a guy who's down on his luck? The herd would call you a vulture, but you're buying from a willing seller—not taking advantage of him. That guy (and even that bank) is just trying to make a clean start. So shrug off the stigma. The economy will thank you.
4. Hold Steady
For people who are a decade or more away from retirement, investing in the stock market has proved to be the best way to grow wealth. But most investors can't match the market's performance. Why? Because sell-offs freak them out. They tend to sell on the dips and then miss out on the climbs.
The market may feel like a yo-yo if you follow it day to day. But imagine that a boy is playing with that yo-yo as he climbs a steep hill. That metaphor best captures how the market has performed over the years, says Ric Edelman, the author of The Truth About Money. The gains have tended to be longer—and larger—than the dips. Edelman's koan: "Focus on the hill, not the string." In other words, stiffen your spine and keep buying through those dips. That's the only way to make the most of the climb.
5. Keep Your Perspective
You can't predict much in these times, but you can bet your last pound on two things: First, the economy soars and plunges, and second, nothing rises in price endlessly. The only people who seem to remember these truths and act on them—that is, those who can overcome the recency effect—have a lot of experience. People who've been in the game long enough, whether it's real estate or anything else, have seen the cycles and had the chance to curb their overconfidence.
So seek financial advice from people who not only are impartial (that is, not trying to sell you anything) but have also been there and done that—two or three times. That means working with financial planners, estate agents, and other professionals who have been in business 15 years or longer. With their help, you'll see the future.
Showing posts with label stock market. Show all posts
Showing posts with label stock market. Show all posts
6 Tips For Picking and Buying Shares
Tip 1 - Know the kind of investment you want to make
Are you looking for capital growth - do you want shares whose price is going go up strongly or are you looking to create an income through shares which pay high dividends? They both require you to take different factors into account when choosing a company to invest in.
Tip 2 - Understand the risk you are taking with your money
There is no such thing as a sure-fire winner. Share prices can go down as well as up and investors may get back less than their original investment. Past performance is not a guide to future performance.
Before buying shares you need to decide what level of risk you are prepared to take. Are you looking for shares that that don't carry too much risk or are you prepared to accept higher risks in return for potential higher returns
Tip 3 - Understand how the company makes its profits
What does the company do? The more you understand how the company operates the better informed you'll be and you'll be able to make sound investing decisions about whether those shares are a good home for your money or not.
When you invest in shares you buy a piece of a business. You literally become a part-owner. So its important as an owner to know who is managing your business. Its your money that you are trusting them with!
Tip 4 - Beware of trying to time the market
You should always check the recent price performance of any share you are thinking of investing in - that stands to reason. But don't just look at what the price has done. Try to work out why it has done what it did. What news has impacted on the share price What is the stock market sentiment towards the share.
There are always two sides to a stock market story. A share that is low in value may represent a good buying opportunity OR it may be low in value because the company is losing money. A share that is rising may rise further as the company makes greater profits or it may be overpriced and due for a correction that will see it fall back.
Tip 5 - Don't put all your eggs in one basket
Alright it is a cliche. But cliches become cliches for a reason! Investing in a range of companies will help reduce your overall level of risk. Lets be honest, not every investment you make is going to be a winner. Spreading your investment around means diversifying into different stock market sectors as well; having all your investments in several different companies that operate in the same sector is almost as risky as putting all your money into just one company.
However don't spread yourself too thinly. Structure your portfolio of investments to take account of how much money you have to invest. Remember to take account of your dealing costs. They can eat into any profit you may make. The right number of companies in which to invest is not a precise science and depends on your individual circumstances.
Tip 6 - Know how your share price can be affected
Share prices can be like horses - easily spooked! Many things will affect the value of the shares you own. Stockbrokers and investment banks employ teams of people to analyse them whereas you're on your own. But there are plenty of obvious things you can be doing to understand whats likely to move your shares up or down.
Keep an eye on the news and not just the financial pages. For example a high oil price might be good news for oil producers but it'll hit transport businesses. A cold winter might be good for electricity providers but bad news for retailers.
You may also need to watch whats happening overseas. Many UK companies now have some or even most of their business operations overseas; so you need to know whats happening in the countries those businesses operate in.
Are you looking for capital growth - do you want shares whose price is going go up strongly or are you looking to create an income through shares which pay high dividends? They both require you to take different factors into account when choosing a company to invest in.
Tip 2 - Understand the risk you are taking with your money
There is no such thing as a sure-fire winner. Share prices can go down as well as up and investors may get back less than their original investment. Past performance is not a guide to future performance.
Before buying shares you need to decide what level of risk you are prepared to take. Are you looking for shares that that don't carry too much risk or are you prepared to accept higher risks in return for potential higher returns
Tip 3 - Understand how the company makes its profits
What does the company do? The more you understand how the company operates the better informed you'll be and you'll be able to make sound investing decisions about whether those shares are a good home for your money or not.
When you invest in shares you buy a piece of a business. You literally become a part-owner. So its important as an owner to know who is managing your business. Its your money that you are trusting them with!
Tip 4 - Beware of trying to time the market
You should always check the recent price performance of any share you are thinking of investing in - that stands to reason. But don't just look at what the price has done. Try to work out why it has done what it did. What news has impacted on the share price What is the stock market sentiment towards the share.
There are always two sides to a stock market story. A share that is low in value may represent a good buying opportunity OR it may be low in value because the company is losing money. A share that is rising may rise further as the company makes greater profits or it may be overpriced and due for a correction that will see it fall back.
Tip 5 - Don't put all your eggs in one basket
Alright it is a cliche. But cliches become cliches for a reason! Investing in a range of companies will help reduce your overall level of risk. Lets be honest, not every investment you make is going to be a winner. Spreading your investment around means diversifying into different stock market sectors as well; having all your investments in several different companies that operate in the same sector is almost as risky as putting all your money into just one company.
However don't spread yourself too thinly. Structure your portfolio of investments to take account of how much money you have to invest. Remember to take account of your dealing costs. They can eat into any profit you may make. The right number of companies in which to invest is not a precise science and depends on your individual circumstances.
Tip 6 - Know how your share price can be affected
Share prices can be like horses - easily spooked! Many things will affect the value of the shares you own. Stockbrokers and investment banks employ teams of people to analyse them whereas you're on your own. But there are plenty of obvious things you can be doing to understand whats likely to move your shares up or down.
Keep an eye on the news and not just the financial pages. For example a high oil price might be good news for oil producers but it'll hit transport businesses. A cold winter might be good for electricity providers but bad news for retailers.
You may also need to watch whats happening overseas. Many UK companies now have some or even most of their business operations overseas; so you need to know whats happening in the countries those businesses operate in.
10 Warren Buffet Quotes That Should Guide Your Investment Decisions
If you are interested in the stock market, there isn’t a chance that you haven’t heard of Warren E. Buffet. He’s the second richest man in America with a net worth of $44 Billion - that's with a capital B!
Although very rich, Warren lives a “simple” life. He still drives himself to work every day and dines at Gorat’s, a standard, local steakhouse in Omaha. He is widely known for being courteous, personable, and humble. Obviously, Warren Buffett is a genius when it comes to investing and in life, so it pays to listen to his words. Here are ten famous Warren Buffet quotes that we can learn a ton from:
1. “Rule No. 1: Never lose money. Rule No. 2: Never forget Rule No. 1.” Sounds pretty simple, right? But when you’re buying or selling stocks, never losing money can seem impossible because prices fluctuate all the time. Warren, though, believes in buying the value of a company and not its stock price. He buys value at the right price, he doesn’t speculate or gamble. He makes sure that he knows a company’s value and that it will far outweigh the price that he paid for, and that is how he sticks to rule No.1.
2. “You do things when the opportunities come along. I’ve had periods in my life when I’ve had a bundle of ideas come along, and I’ve had long dry spells. If I get an idea next week, I’ll do something. If not, I won’t do a damn thing.” Warren is a patient man. He would never chase prices or force any investment. He waits for the right moment (dictated by either price or market condition) to pounce, and pounce he will. This requires a great deal of discipline, and that is what separates him from the majority of unsuccessful investors. Indeed, patience is a virtue.
3. “Never invest in a business you can’t understand.” This Warren Buffet quote is probably an offshoot of rule No.1. He will only play a game that he is really great at to ensure that his chances of losing are slim. Understanding a business really well can help you smell trouble from miles away. Also, you can never have conviction in something you do not understand, and conviction is what enables you to pounce on a company when the time is right.
4. “It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.” Warren would always put more value in a great company with great products and management than a mediocre one that can be bought on the cheap. A company’s stock price moves with the whims and emotions of traders and speculators, and is never a good indicator of value.
5. “Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.” This is a great criterion in choosing a company to buy. Only buy stock in a company that will thrive, grow, and excel in the foreseeable future regardless of stock price. I only know one kind of company that fits that description, and that is the great kind.
6. “We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.” Warren knows that the stock market is full of folly. He knows that emotions like hope, greed, and fear dictate stock prices rather than logic and value. When people are panicky or fearful (as in a bear market) he takes that chance to buy great companies at cheap prices. As long as he does his research and knows the real value behind a company, he doesn’t get scared of its price fluctuations.
7. “It’s better to hang out with people better than you. Pick out associates whose behavior is better than yours and you’ll drift in that direction.” This Warren Buffet quote shows his humility and his infinite thirst for learning and improvement. He doesn’t have a huge ego; he doesn’t think of himself as superior than anybody else out there. Nor does he think that he knows everything.
8. “Our favorite holding period is forever.” Warren plays for keeps. He doesn’t buy a company that he wouldn’t hold or manage until a very long time. Making amazing gains, like his, takes time. Start young and go for the homeruns.
9. “Only when you combine sound intellect with emotional discipline do you get rational behavior.” Investors need these two ingredients to successfully parlay the investment game. The sound intellect comes from doing your homework. It is your research and analysis of a company’s business and value. Discipline on the other hand, refers to your ability to wait for the proper price to enter. You shouldn’t chase prices in bull markets and you shouldn’t get scared in bears. Practice emotional discipline and take your investing to the next level.
10. “Without passion, you don’t have energy. Without energy, you have nothing.” Be passionate in what you do and do what you are passionate about. Passion will make you go to the ends of the earth to see a dream fulfilled. It will be your fuel in your journey. It will make you unstoppable. It will see you through when times get tough, and it will make life so worth living.
Took onboard these inspirational, time-tested and proven quote and they'll help both in life and in investing.
Top 8 Tips for Investing Your Income for Income
How do you generate a reliable income when interest rates are stuck at all-time lows?
Here are 8 tips to help you develop income growth from investments:
1. Look for sustainable long-term dividend growth
Investing in businesses when the growth potential is not reflected in the valuation of their shares not only reduces the risk of losing money, it increases the upside opportunity.
2. Inflation always matters
Always bear in mind the detrimental effect of inflation. Bonds offer higher yields than cash but returns can be eroded by inflation. Investment in property or equities are perfect vehicles to help achieve an income that rises with inflation.
3. Look to International diversification
A small number of UK companies account for approximately 40% of dividend payouts in the UK, whereas over 100 companies in the US, for example, can provide an opportunity to increase the longevity of your dividend growth.
4. Patience is a virtue
Investing for income is all about the compounding of returns for the long term. As a general rule, those businesses best placed to offer this demonstrate consistent returns on invested capital and visible earnings streams, so put your money in and leave it to grow.
5. Reliability is the most important
Choose sectors on the equity markets that do not depend on strong economic growth to you deliver attractive returns.
6. Growing cash flow
Look for companies with money left over after all capital expenditure, as this is the stream out of which rising dividends are paid. The larger the free cash flow, relative to the dividend pay-out, the better.
7. Dividend growth
In the short term, share prices are buffeted by all sorts of influences, as the last few weeks have been testament to, but over longer time periods fundamentals will always shine through. Dividend growth is the key determinant of long-term share prices – the rest is sentiment
8. Take a cautious approach
Be cautious of companies that pay a high dividend because they are likely at the end of their current growth cycle.
Here are 8 tips to help you develop income growth from investments:
1. Look for sustainable long-term dividend growth
Investing in businesses when the growth potential is not reflected in the valuation of their shares not only reduces the risk of losing money, it increases the upside opportunity.
2. Inflation always matters
Always bear in mind the detrimental effect of inflation. Bonds offer higher yields than cash but returns can be eroded by inflation. Investment in property or equities are perfect vehicles to help achieve an income that rises with inflation.
3. Look to International diversification
A small number of UK companies account for approximately 40% of dividend payouts in the UK, whereas over 100 companies in the US, for example, can provide an opportunity to increase the longevity of your dividend growth.
4. Patience is a virtue
Investing for income is all about the compounding of returns for the long term. As a general rule, those businesses best placed to offer this demonstrate consistent returns on invested capital and visible earnings streams, so put your money in and leave it to grow.
5. Reliability is the most important
Choose sectors on the equity markets that do not depend on strong economic growth to you deliver attractive returns.
6. Growing cash flow
Look for companies with money left over after all capital expenditure, as this is the stream out of which rising dividends are paid. The larger the free cash flow, relative to the dividend pay-out, the better.
7. Dividend growth
In the short term, share prices are buffeted by all sorts of influences, as the last few weeks have been testament to, but over longer time periods fundamentals will always shine through. Dividend growth is the key determinant of long-term share prices – the rest is sentiment
8. Take a cautious approach
Be cautious of companies that pay a high dividend because they are likely at the end of their current growth cycle.
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