Fortune Watch

There are only two emotions in the market – hope and fear.The problem is you hope when you should fear, and you fear when you should hope. Sounds a little too smug, doesn’t it? What exactly does this mean? Loosely, it means that when a stock you are holding goes down, you keep holding it hoping it will rise whereas actually you should fear that it will fall more. And when an investment goes up in value, you do the opposite.

This is true for many of us. But fear and hope aren’t the only two emotions at play in stock investing, there are many more. Here’s the full list: doubt, suspicion, caution, confidence, enthusiasm, greed, indifference, denial, concern, fear, panic and finally, despair. Naturally, greed comes in only when markets are at the top. In the list above, the emotions before greed are the ones that are felt on the way up and the ones after greed are felt on the way down.

That’s why the investment pros often say in a mantra-like tone: “There is no such thing as a free lunch.”

The key to successful investing is not to avoid risk altogether but to recognize the risks you are taking. To avoid unpleasant surprises, do your homework. Nothing beats reading the prospectuses and checking the long-term performances of your investments. People rush into purchases even when they don’t understand what they’re buying, People do more research when they buy a refrigerator or a laptop than when they invest thousands in stock. (more…)

The last message you want to see while investing in the stock market.

What is the stock market trying to tell you?

If you watch the stock trends closely, there’s always a message that tells you the future, because stock prices are never about today. They only tell you what to expect—it’s bizarre, but sometimes when the stock of a loss making company spirals upwards, it just means good times could be ahead.

You can read the messages if you’re careful enough and spend some time in analysis.

However, the impulsive stock market jockey does not really care about the trend. More often than not, he only gets one kind of message from the stock market:

Beginners who are not aware of current trade investments and who don’t have enough capital to invest may face a lot of setbacks. These factors, however, should not discourage an individual from investing. If you are too scared to take the risk, you lose a lot of opportunities.

Investing gives you the leeway to increase your income. If you just simply put your money in a savings account, a 2-5% interest will not do to secure your future. Since in this set-up you can easily pull out your savings account, it increases the likelihood of you spending the money in unnecessary expenditures. In a short span, your money is gone and that leaves you with nothing.

Lay down the cards. For beginners, the first thing to do when you plan to invest your money is to have a reality check. To start off, do you have a capital to invest on? It is not just capital but do you have a risk-capital?

Add up your assets and check which of these you are willing to bet and let go. This may be hard at first especially if all of which are valuable to you. But if you carefully choose which assets are of lesser value to you, this will make it easier for you to accept loss if your first investment fails. Since investing is also an expense, consider it a loss anyway but with a potential to grow.

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Market corrections are inevitable and healthy. Stock market corrections can be excellent opportunities to purchase common stocks at bargain levels. Veteran stock investors are not seeing anything in this turbulent market that is particularly unusual.

The fact that this market roller coaster is being pushed by a credit crunch instead of surging inflation or some other economic disaster doesn’t change the need to take a deep breath and sit tight.

Corrections, pullbacks, or whatever you want to call them are a natural part of the market cycle.

If you take a look at the past, there has never been a correction that has not proven to be a good buying opportunity. It has taken an average of less than three months for the market to make up those corrections, which is why most veterans plan to ride out the bumps.

When the market begins its return to normalcy, you don’t want to be on the sidelines. The secret to wealth has always been to “buy when there’s blood running in the street and sell when everyone is pounding at your door, clawing to own your equities.” You must have enough faith in yourself to buy when the rest of the market is selling.

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“People who read Cosmopolitan magazine are very different from those who do not.” so said Donald Berry in ‘Statistics’.

Now you will just not have any idea of how apt that statement is unless you’ve actually read Cosmopolitan (really read it, not just look at the pictures) but I like to believe that fund investors who read Mutual Fund Insight are very different from those who don’t. I have believed so far that there are two kinds of fund investors-thinking ones and non-thinking ones. And those who invest their time and money in reading this magazine must be the thinking ones.

What distinguishes the two? The non-thinking ones are the ones who just follow whatever seems to be the flavor of the day. The thinking ones are those who carefully weigh their options, consider the facts and then take rational decisions. However, in recent months I have seen that sometimes, the final step is the same.

The non-thinking ones unthinkingly follow the flavor of the day. The thinking ones think carefully, then just ignore the conclusions and follow the flavor of the day. They look at returns, ratings, portfolio statistics and whatnot, but then turn around and invest purely driven by the fear of getting left behind by everyone else.

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What do you say? Doesn’t every investor want to own great stocks? Of course they do and so do you, but the “great stocks” I’m talking about are usually the ones a well-meaning neighbor or co-worker tips you off to as the next Microsoft or whatever.

Usually these stocks fall into three categories:

Ornaments – all shiny on the outside, but hollow and easily broken at the slightest touch. They capture the attention of investors easily distracted from sound investing principles with their glitter, but ultimately fail because they are not viable businesses. In six months, no one will remember its name.

Bicycle – What your friend doesn’t realize is that this stock is tied to an economic cycle which is about to swing in the opposite direction.. She bought the stock when demand was high and the stock was fat, things are going to change soon and the tires are going flat.

Great but late – Your friend is right about the stock, it is great. Unfortunately, the market has bid up the price past the point where you can realistically expect to make any money. This is the “buying high” part of the equation that results in losses (buy high – sell low).
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I am a bit of a gambler but am not the normal type of punter who you may see in the bookmakers on a Saturday afternoon. I am the kind of gambler who only likes to bet on what you might call a racing certainty. I love the thrill of all things to do with gambling but in my opinion there is nothing better than riding the stock market wave. What I mean by this is attempting to make money from investing in stocks and shares, trying to predict when to buy and sell etc. In this article I will write about the reasons why I believe more people should invest on the stock market.

Some people avoid the stock market because “it’s too risky.” But it can be riskier to not invest. If you put all your savings under your mattress, it probably won’t be enough to sustain you in retirement. If it’s all in a bank account earning 3% per year, on average, then that will barely keep up with inflation, at most. You can do better than that.

Many reasons for many people to do investments, one that can be very common to most of us is to make money. There are also personal reasons that you’ll want to start or join an investment club. You’ll finally have the opportunity to play the stock market in a safe environment that may be low risk and lets you learn more about a subject that greatly interests you.
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The soap company’s marketing head is taking the CEO through the plans for the new product launch. He shows the big boss two versions of the new soap, one that costs $10 and one $20. When the CEO asks, “What’s the difference?” the marketing whiz replies, “No difference, sir, some people like to pay ten, some like to pay twenty.” I was reminded of this ancient joke while I was talking to an acquaintance of mine whose job it is to sell investment products to very rich people in a part of the world that is exceptionally well-endowed with such people. My friend was extolling the virtues of ‘high-end’ portfolio management type of products, which I have never thought to be a good way to invest. “You don’t understand how the really rich think. They want exclusivity. These guys already have all the money they need – what they want is an investment product that is made specifically for them.”

This really struck a chord in mind, more so because, as it happens, I have with me a great deal of first-hand information about the performance of Portfolio Management Schemes. Over the last few months a lot of people have gotten in touch with me complaining about how they’re making less money in these schemes than they would have made had they invested even in average equity funds.

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Approximately eighty percent of our investors are male. But I am willing to bet that eighty percent of the most successful investors are women.I have read many stories and I began to wonder why is it that women tend to be better investors than men. I thought about it over and over, and I could not ignore the facts that women make more successful investors than men.

While this recent research shows that potentially women are naturally talented investors, many are still put off by the macho image of the stock market. Men tend to let their egos make their decisions for them. They hold when they should sell and vice versa. They buy in for fear of missing out on that one big opportunity. They refuse to ask questions or to ask for help in fear of looking silly.

In other words, men are more interested in looking strong, knowledgeable or successful than they are in making money. They invest not to get the best deal out of the market but invest so that they look good.

Women on the other hand, are much more likely to ask questions until they fully understand what they are learning, and they are usually more interested in the goal, (in this case making money) than they are in impressing the people around them.

This quality makes women great investors from all that I have read are that rather than investing according to what will make them look good, women will invest according to a plan—not according to what mood they are in or whether they will be “right” or “wrong”.

Investing is not about being right or wrong. It’s about making money. Women are able to put their egos aside in ways men have trouble doing. This ability to set their ego aside makes women great investors. Need proof?

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As a Financial Planner, I get emails from people who want investment advice. Much of this is not about comprehensive advice but rather; just single questions that are bothering people. This is very useful in my work because one can often spot interesting trends in the questions that people ask.

Over the last few months, I have noticed that an increasing number of people are worried about whether they are ‘managing’ their investments properly. Clearly, the idea is afoot that investments need to be managed. And the genesis of this idea is also clear from some of the email. Sometimes, people ask specifically whether the X investment management plan from Y Bank is better than the A plan from B Financial Services Company. Mind you, most of these are not what are normally called Portfolio Management Schemes. Instead, this is plain old fund sales; dressed up in a brand to look like customized investment management.

Earlier, someone from a fund distribution outfit would contact you, ask a few questions and sell you a bunch of funds, good or bad. Now, his actual actions will be the same but he’ll claim that your fund investments are being managed as part of his bank’s plan, which he claims better than the other bank’s plan.

Now, this branding does not do investors any real harm because it’s just a routine sales stunt of the kind that infests practically every product or service nowadays. However, I get the clear feeling that the kind of sales pitch that is given with these plans is leaving many investors with a certain anxiety. To sell funds dressed up as management plans, investors are told that managing investing is a very complicated activity that requires continuous management. Most investors swallow this line and then start worrying about whether they are managing their investments correctly.

In reality, investment management is an activity that can be as simple as you want it to be.

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