Getting started with stock market investing can seem intimidating for beginners — especially as you consider the benefits of and transition to controlling your own investments, rather than paying an advisor or buying a mutual fund or annuity. candlestick
As a self-directed investor you’ve got the potential not only for greater profits (because everything you earn goes to you, not a paid advisor) but to have the satisfaction of controlling your own destiny.
For almost any investor, from beginners to experienced traders, one of the first rules for any investment decision must be to determine whether it follows the basic principles of investing.
The Principles of Investing
Investing for beginners starts with an understanding that every price is determined by supply and demand. At Online Trading Academy, we identify points where supply and demand are out of balance, because that is when price is going to move.
If there are more willing buyers than sellers the price will go up. If there are more willing sellers, the price goes down. It really is that simple and the same principle applies whether you are buying and selling stocks, bonds, real estate, options, currency pairs, commodities or another asset.
Most people look to the stock market when they think about investing. But stocks, or equities, are more complicated than some other asset classes because price is affected by the “fundamentals” of the underlying company’s performance. moving avaredge
Forex trading (which tracks the price of currency pairs, such as the U.S. Dollar and the Euro, relative to each other) and futures index trading (which follows the price of the S&P 500 or another broad market index) are simpler to follow because they track pure price action without the “noise” of company news or other external factors.
Ready to Invest? Here's Where to Start
Many beginners start by investing in mutual funds, but is that a good idea? A mutual fund holds baskets of assets that reflect the investing philosophy of the fund.
There are funds for practically every category, from sector-specific stocks to municipal bonds. Buying these would seem to be an easy way for a beginner to invest because an “expert” is doing it for you.
But consider that you’ll be paying management fees and perhaps loads or sales charges to invest in these funds, thus reducing your potential profits. forex trading
Mutual funds held in taxable accounts may create capital gains surprises when the fund manager sells underlying assets or a stock in the fund pays dividends — causing a tax hit even though you didn’t sell the fund.
And, if you need to liquidate a mutual fund quickly, perhaps because of a dramatic market move or news, you can’t. Unlike stocks and other assets, mutual funds are priced only at the end of each trading day and you won’t know what you made or lost until after the fact.
And what about annuities? Annuities pay a defined or variable return on a regular basis in return for a capital investment up front. In effect, they’re like having a life insurance policy where you don’t have to die to benefit.
But not so fast. The company selling the annuity wants to make money, just like you do. So, you’ll be paying fees behind the scenes.
The calculation of your payout will take into account the interest rate when you buy the annuity (and right now interest rates are near historic lows). If rates should go up, you may be kicking yourself because you could have bought a bigger annuity (measured by the regular payout) for the same amount of capital.
For these reasons, among others, even beginning investors may want to look beyond mutual funds and annuities. Stocks, futures, Forex and other liquid investments allow you to educate yourself on the markets and then make an informed decision rather than leaving the driving to someone else. Remember, it’s your money and nobody cares about it more than you do. fibonnaci
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