Short-term vs. Long-term stock investment

Summary:
There are many persons that run towards stock investment as a means to make some quick money. This is perhaps however not the best investment option for persons with short term rewards in mind.

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There are many persons that run towards stock investment as a means to make some quick money. This is perhaps however not the best investment option for persons with short term rewards in mind. The best option when thinking of investing in stocks is if you are interested in accumulating funds over a long period of time. One such example is the investment for future needs such as a nest egg for retirement and so on.

In stock investment both short term and long term investments come with risks attached and therefore nothing is truly guaranteed in the stock market. Today could be very good and tomorrow very bad resulting in great gains or great losses as the case may be. However, in terms of long term investment, it is shown according to statistics that there are no 20 year portfolios that have lost on the stock market. The average returns have averaged about 10 percent and these accounts all have a broadly diversified portfolio of stocks.

In the short term the market is very risky. The market will go up and then go down so if you are only thinking of investing for a short period then this is not the best option. If you are nearing retirement age and now beginning to invest in stocks this is not a good option. The best option in these cases as a protection against inflation, rather than stocks, is to invest in stable investments such as bonds and other cash instruments. This offers more security than stocks in the short term.

So how long is considered short term? Many persons are under the misconception that short term means less than a year but this is in fact not so. In terms of stocks short term is considered to be five years or less and some persons will recommend more years rather than the minimum of five years. A good rule is that if you are going to need your funds in the next five years then stay away from stock investment. Another point to note is that unless you are an active trader then short term investments make no sense. If the funds being used are for retirement investment then being an active trader is also not recommended.

The average down time for some markets is a year but this has been seen to last much longer a well so though for a long term investor this downtime may seen to be a lifetime it will pass but if you are a short term investor you will lose a lot depending on the market fluctuations. Stock investment will offer many great opportunities but can be devastating for a short term investor. If you know that the funds you are investing will be required for use in a short time then choose investment options that are more secure and protected. It is true that you may get lucky and make a fortune but it is also true that the risks are high and that you can lose everything.

Sensex - Stock Market Simulation

Summary:
Why play the stockt market game.NASDAQ, Dow Jones, BSE & NSE; Do they ring any bell? They surely must have. Not every one knows what the color of money is, but what people do know is they want to feel more money and see more money.

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NASDAQ, Dow Jones, BSE & NSE; Do they ring any bell? They surely must have. Not every one knows what the color of money is, but what people do know is they want to feel more money and see more money.

Another well known fact is that the ever increasing number of the average human being would never want to jeopardize his money, which for him, is the sole means of existence. In the end, it is the human craving for more that makes him succumb to his urge and makes him take a plunge.

The only thing that makes the average investor lose out, is his inexperience. The Raging Bull lures many new people into its arena, but little do they realize what's in store for them. The market trends are tough to gauge. No one can ever be sure how high or low will stocks leap! Everything on earth has a risk involved, so does this market. We can't live with it but we can work around it.

Imagine a scenario where you as an amateur investor decide to take a dip. Based on a few tips from a few places, you make your pick. The possibility is that you might hit the nail, or may be you might get nailed. Every player who is a benchmark, be it a game, trade, business (depends on whatever you cal it) has had some level of practice and has learnt things the hard way. People have lost a lot of hope, money and many other things trying to figure out the market. They had to do it the hard way because they didn't have a place to hone their skills. A place where they could learn tricks of the trade, where they could make an investment without the fear of losing anything and at the same time, learn a lot more than the others.

But the question still remains! Would there be such a place. Is it one of those wonderland parties that people always think about and never find? Well!! Not this time. This time round all you investors are in for a good time. It fills me with pride to present to you the game of your lifetime. The SenSex Simulation!! This game is an assortment of all that I have gathered over the years.                                            

The Game is a complete replication of the stock markets with live feeds for the values of stocks. Registered members get to play around with money in their account, using which they can purchase and sell off stocks. The game would also give you your daily stats. These would include your portfolio, the value of your stocks, and whether you have gained or lost out, relative to the market. The SenSex Simulation provides you with a platform to stand out of the ring and get a look and feel of the rumble.

“By the time you know the rules, you're too old to play the game!” It's never too late to start learning. Life is a vicious circle. Someone, who does not stop learning, never stops growing.

It's Time to tame the BULL!!

Seasonal Trading Strategy for Stock Funds and US Federal Employee TSP 401k Retirement Accounts

Summary:
Of course we know past performance does not guarantee future results but there is something here that makes this investor think that just maybe there is something more to the story this time.

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“Sell in May and Stay Away” Words to live and invest by?  I don’t know who coined the phrase but I did a bit of research and yes this strategy would have worked out for you is you had implemented it over the life of the TSP retirement account.   Of course we know past performance does not guarantee future results but there is something here that makes this investor think that just maybe there is something more to the story this time.

There are five funds available in the Thrift Savings Plan.

The C Fund is based on the S&P 500
The F Fund is designed to match the bonds in the Lehman Brothers U.S. Aggregate (LBA) index.
The G Fund invests in short-term U.S. treasuries
The S Fund follows the Wilshire 4500 index
The I Fund follows the EAFE index

From its inception in 1988 through the end of 2005 the C Fund (based on the S&P 500) has averaged 12.61556% per year.  In the months October through May it averaged12.87611%.   From June through September it averaged -0.26056%.   For the same 18 year period, the F Fund averaged 3.356111% for the four months June through September.   Had you sold all of your stock C Fund on May 31 and moved all your money into the F Fund and then moved all of your money from the F Fund back to the C Fund on September 30th, you would have realized a 3.616667% per year increase in your rate of return over 18 years.  Let me repeat this, a 3.616667% annual increase based on only two trades per year.

From 2001 through 2005 the C Fund (based on the S&P 500) annual average was only 2.22%.  Its average gain October through May was 9.24% while it’s June through September average was an appalling 7.02% loss.  Utilizing the same strategy as above, our average rate of return would have jumped from an anemic 2.22% to a healthy 11.38%.  That is an amazing increase of over 9% based on just two trades per year.

Since its inception in 2001 the S Fund (based on the Wilshire 4500 index) has averaged 9.314% and the I Fund (based on the EAFE index) averaged 6.56%.   They show the same pattern of gains October through May, with gains of 14.05% for the S Fund and 10.368% for the I Fund annually during those eight months. They also continue the S Fund pattern of losses Jun through September, a 4.736% loss for the S Fund and 3.808% loss for the I Fund.  Using the same strategy of eight months in the S and I funds and four months in the F Funds, you would have realized additional gains of 6.336% for the S Fund and 5.378% for the I fund brining your rate of return to 15.65% for an S+F strategy and 11.938% for an I+F strategy.  

What do you think about this?  Join the TSPcenter forum and let me know.  My gut tells me we are in for a bad summer.  Of course that could be a result of the pepperoni pizza I just ate.

An Introduction To CFD Trading (Part 1)

Summary:
Want to know all about successful CFD trading? It's easier than you think once you understand the keys to how CFD trading works. This article provides all the tricks and tips you need to know to make it happen.


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Here's a really simple yet useful tutorial on CFD trading that will get you up and running very quickly if you're new to CFD trading.

By the time you finish this article, you'll know how CFDs work, what makes them highly profitable, and understand the costs involved in CFD trading.

CFD stands for Contracts For Difference, which is a derivative product, where you profit from changes in the prices of stocks and shares.

For example, if you buy a CFD on a stock that's $5.00 and the price rises to $5.50, then you profit from that change in price. So if you bought 1000 CFDs, then your profit is $500. That is, the value of the CFDs mirror the underlying stock prices, and you can profit on this movement.

The reasons why CFDs are a very popular trading product, and understandably so, are:

1. CFDs are traded on leverage, and this leverage is typically 10 to 1, with some CFD brokers providing 20 to 1 leverage. This means that a trader with a small float can make decent profits from trading the stock market by using CFDs. For example, you may have a stock trading system that makes a 30% return per annum. On a $5000 float, this is $1500 profit in one year. With CFDs, because of the leverage, the same system can now produce a 300% return, which is $15 000 profit in one year.

2. You can just as easily short sell CFDs as well, and therefore profit from falling markets. This greatly increases the profitability of a trading system because trading opportunities increase dramatically, and the fact that you can profit from both bull and bear markets.

3. The costs in CFD trading are relatively low when compared to stocks. This is especially so, since for a similar and often smaller cost per trade, you can gain 10 or greater times the results from a trade due to the leverage available. The 2 main costs in CFD trading are interest and leverage. We'll come to these in a moment.

4. You can set automatic stop losses. This means that it will take you less time to trade, remove the emotion from exiting a trade when you should, and allow you to exit as the stop is hit, not a day later. You therefore avoid the slippage due to getting out of a trade later than when you intended.

5. You can place all your orders in the evenings. With many CFD providers, you can place orders to enter a position the night before. For people who are working, this is a great advantage as they can do all their trading (place their orders to enter and their stop losses) in the evenings, and not need to be at the computer screen or call their broker during the day. Also, if they have any stop losses that need adjusting, they can do so in the evenings as well. Their trading routine with a mechanical system can be about 10-15 minutes per day.

So these are the advantages of CFDs that have made trading accessible to so many people because they provide large returns for a modest float, and can also be traded once a day as well.

Now, we mentioned that there are 2 main costs in CFD trading. Let's have a closer look now at each of them:

1. Commission. With some CFD providers, there is in fact no commission. This also greatly increases the profitability of your CFD trading systems, as well as the fact that you can benefit hugely from the leverage. With other CFD providers, there may be a commission of say 0.15% of the trade size or $15, whichever is greater, each way. These costs are similar or less than the commission associated with stock trading, especially when you consider that the multiplied profits that the leverage gives you.

2. With CFDs, there's interest charged for long positions that are held overnight. For short positions, the interest is paid to you. The amount of interest charged is usually a reference rate plus approximately 2%, and the interest paid is usually the same reference rate minus approximately 2%. And the reference rate is usually a major bank's overnight interest rate.

For example, the interest rate charged for overnight held long positions may be 7.5% or 0.075 per annum. To calculate how much this is for a trade, we need to make it "pro rata". That is, we'd need to divide the 0.075 by 365, multiply it buy the number of days in trade, then multiply it by the trade size. For example, for a trade size of $10 000, held for 14 days, the interest cost is about $28. Not a huge cost. For a short trade, the interest is paid to you, so will offset the cost rather than contribute to it.

So there you have it.

You now understand the benefits of trading CFDs and why they're a trading instrument that allows people with a modest float to make very decent returns, as well as understand the costs involved with trading CFDs.

To learn more about CFD trading, watch out for part 2 of this article.

If you'd like to learn more now about CFD trading, go to this page with a comprehensive <a href="http://www.thecfdtrader.com/cfd-trading-tutorial.php" target="_blank">tutorial on CFD trading</a>

An Overview Of The Stock Market

Summary:
When you are interested in investing in the stock market one of the first things you will need is a reliable and affordable stockbroker

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When you are interested in investing in the stock market one of the first things you will need is a reliable and affordable stockbroker. At one point in time, a stockbroker was seen as a very high priced person that was extremely hard to understand. In today’s world, stockbrokers have become much different, they have begun to make their services cheaper to obtain and in such a way that is easier to understand. This is an extremely wonderful change for the simple reason that you will not be able to trade in any way, shape, or form without a stockbroker.

One of the major rules within the stock market is that no person is allowed to trade within the stock market unless they are a certified stockbroker. A stockbroker, within the United Kingdom twelve million investor’s trade in the stock market, performs every trade that occurs and each one has enlisted the services of a stockbroker.

So you are probably now wondering, what exactly can a stockbroker do for me? There is a wide range of abilities and services that any stockbroker can offer you, at the same time there are also various ranges of fees that will be collected from them. Typically, a stockbroker will charge a commission, a set fee, or some combination of the two. In regards to the services a stockbroker can offer you, there are three basic levels that include only execution, portfolio management, and advice.

When a stockbroker only deals with the selling and buying of particular shares, per the instructions you give them, this is generally called execution only or in softer terms dealing only. With this type of service, they do not offer you any type of advice on any action you want perform. Typically, investors that are experienced or novice in investing will use this type of service. Execution only is cheaper and extremely efficient the fees the stockbroker charges can range anywhere between £20 to hundreds of pounds, this will depend on the specific stockbroker you choose.

Portfolio management is extremely detailed and the most expensive type of service performed and dealing with advice is typically a little more expensive than execution only, because the stockbroker will offer advice and views on what is happening within the stock market. The stockbroker at this level of service will also take the time to explain anything you may not understand very well.

Within the portfolio management service, you can separate these into two other categories these are advisory and discretionary. When under the advisory category, the stockbroker will create a proposal of a portfolio for you; however, he or she will not take any action without express permission from you. Within the discretionary category, your stockbroker will completely run all aspects of your portfolio and will give you reports as needs on how the portfolio is working.