December 23rd, 2008 at 09:36pm
Under Guest+ Option Trading+ Stock Market
Stock markets generally move in cycles. There are times when the economy is strong and share prices are trending nicely upwards, and conversely there are times, such as now, when the economy is looking weak and shares are trading at very low levels. So why aren’t we all rushing to buy shares in this current economic climate?
Well I think sentiment has a major part to play here. You only have to switch on the news to see jobs being cut, large companies closing down and the latest news of the upcoming recession on a daily basis. It’s all extremely depressing and is a major reason why people are not at all positive about shares. This is a common response to all the negative news being broadcast but it’s not necessarily the most rational response.
If you take a step back and look at the current share prices of a few of the largest and most profitable stock market listed companies, you will probably notice how low their share price is currently trading at, particularly when compared to a few years ago. Now take a look at how their profits (and future predicted profits) correspond with these same profit levels of a few years ago. In a lot of cases you will see that these companies are now valued far too low, even allowing for a tougher trading environment in the next few years.
Therefore this means that a lot of these companies are hugely undervalued and yet there are still very few people actually buying, so is negative sentiment and the threat of a recession the only reason why this is the case?
Well I think another reason is because there are fewer genuine investors operating in the stock market nowadays. In this era when short-term trading facilities are available to almost everyone, a lot of people buy and sell shares over a shorter period of time and speculate on the short-term price of a share using things like options and spread bets. Indeed some people believe the days of traditional buy and hold investing are behind us.
As with society in general, we are all so impatient nowadays and few of us like to buy shares and hold on to them for years and years like Warren Buffett, for example. I still think this is a decent investment strategy but there’s no doubting the appeal of short-term trading because in this volatile market, shares can now move 10-20% in a day quite easily, and yet this used to be completely unheard of.
So overall I think there are a number of reasons why investors are not rushing to buy shares. Negative sentiment and the threat of a recession is the main reason, but I think the availability of short-term trading is also a factor.
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Article Source: http://EzineArticles.com/?expert=James_Woolley
By admin
December 23rd, 2008 at 09:24pm
Under Guest+ Option Trading+ Stock Market
Growth investing is investing in companies that are going to show compounding growth in the time to come. The key here is timing thus you buy a stock of a growth company at a reasonably discounted price for a stipulated period and sell it just short of its full potential. This will give you the best return on your investment and that too without bothering about the corrections and crashes in the stock market.
Usually a company with small base can grow at much faster rate as compared to a very big company. Thus, investing in growth stocks has it’s challenges. A company with sound and credible management with just 100 retail outlet can grow at much faster rate as compared to another company with 1000 retail outlet. May be the company with 100 outlets is required to add only 50 additional outlets that year to grow Income and net profit at 50% as compared to the the company with 1000 outlets, which may be required to open close to 500 new outlet to match that growth. Finally, a time will come when even the company with 100 outlets at the beginning may grow large enough to sustain such a high growth rate.
Consider Investing small amounts for Growth Gains
The returns by Growth stocks can be amazing. When you invest for long term, you don’t bother about short term volatility, corrections and crashes in the market. You believe in the stock and the story that is going to unfold and this story can only be deciphered by thorough research. Lets us presume that you invest US $10000 and double your money every 2nd year i.e. approx 40% returns Compounded annually. See how your money grows:-
2nd year US $20000
4th year US $40000
6th year US $80000
8th year US $160000
10th year US $320000
Isn’t it amazing. Three hundred and twenty thousand US $ in just 10 years. Remember, you invested only US $ 10000 once. This is the Power of Compounding, 8th wonder of the world.
Don’t be a Spectator: Get the required Knowledge
It is never too late to get the desired knowledge at any stage in the life. The earlier it is acquired, better it is. So how do you find a good company to invest in that is going to make you money? Always be on the lookout for companies with good growth potential but don’t get trapped into even the good stocks by paying a steep price. This will eat into your returns. Invest in the business that can withstand competition. This type of business will be around longer and sustain superior long-term returns. Companies with high quality and unique products which are difficult to emulate would the horses for the long race.
These are just some basic tips for getting started investing in the stock market. Study the stock market and investing before you actually start. The stock market can be a crazy place sometimes and the better informed that you are, the less you will lose. Get in to get your share of the pie!
Go online with your investing accounts. The fees are lower than the standard brokerage house and you will have anytime and quick access to your investing information and to your account.
Author is a professional blogger and and is a fan of Warren Buffett for his investing style. She also maintains a very famous blog on WARREN BUFFETT. Visit his blog http://www.i-am-warrenbuffett.blogspot.com and http://www.personality-development-blog.blogspot.com
Article Source: http://EzineArticles.com/?expert=Sonika_Gandotra
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