Monthly Archives: May 2017

Mutual Funds: Advantages and Disadvantages

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Like the other existing investments, mutual funds do have their advantages and disadvantages. It is important to know these before you make your final decision and invest in mutual funds. Doing your research is a vital action on your part. In this post, both the advantages and disadvantages of mutual funds will be presented to help you decide rationally and sensibly.

Definition of Mutual Funds

Mutual funds are a type of investment vehicles comprised of a pool of funds from several investors to meet the purpose of investing in a number of securities like bonds, stocks, currency exchange and other similar assets.

These are being managed by money managers (those who are in-charge of investing the fund’s capital to generate capital gains and achieve profits for the investors). The portfolio is structured and conserved in such a way that it matches the objectives of the fund as specified in its prospectus.

Advantages of Mutual Funds

  1. Instant Diversification

Mutual funds invest in a wide array of securities. If you are aiming for a diversified portfolio, then investing in mutual funds is for you. A mutual fund can offer you with a basket of stocks.

  1. Account Size Does Not Matter

It is perfectly alright if you have a small-sized investment account or if you only have limited capital to begin with, since a mutual fund offers you a wide range of exposure to several stocks, you do not need to buy such stocks yourself. Once you, chose a mutual fund, you are given access to diverse portfolios and to participate equally in the gain or loss of the fund.

  1. Specialized Money Management

 Fund managers are considered as experts in the investing field. Hence, mutual fund companies have more capability and resources than the average individual investor.

 Disadvantages of Mutual Funds

  1. Intraday Trading Not Possible

The “NAV” price is unknown, thus, you cannot really employ intraday trading strategies. It makes intraday trading impossible on sudden price movements in the market.

  1. Loss of Connection

 In mutual funds, the investment decisions are not reliant on you. Chances are your decision would not be regarded unless you will be called for some quarterly investor calls and updates. This in turn translates to a lack of interpersonal connection both to your account and to the people in charge of the fund. It can mean difficulty for you when managing your portfolio. The decision to buy or sell an asset is dependent on your manager.

  1. Costs are an Issue

 Costs are a part of a mutual fund’s reality. As a matter of fact, such costs can decrease your overall profits.

  1. Fluctuating Earnings

 The possibility that the value of a mutual fund will decline is high. Like other investments, you might end up with no return at all. This is due to the fact that mutual funds are affected by the price fluctuations of the stocks that constitute the fund. It does not mean that it is being run by a professional manager, the performance would be impressive.

  1. No Insurance

Mutual funds are not insured against losses – therefore, there is a possibility that losses can occur or even losing your entire investment.

Conclusion

Mutual funds both have the gains and downsides, and as an investor, you should be able to evaluate such carefully. The probability of success in a mutual fund tends to increase if you know what you got yourself into and if you totally understand the basics.

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Tips to Put in Mind When Dealing with IPO Stocks

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A number of people say that buying IPO stocks is an exciting part when investing in the stock market. In order to make better investment decisions, it is important that one reads investing guidelines and know-hows. Analysis and understanding must be applied to better utilize your readings. If you are one of the people who are eyeing on investing in IPO stocks, written here are some tips you can take into consideration.

What is an IPO?

Initial Public Offering or IPO is the manner where the shares or stock of a private company is opened to the public. Usually, this is done by smaller, starting companies that seek to expand their capitals. For some cases, there are large private companies that would like to begin being publicly traded.

What makes IPO exciting?

Buying IPO stocks seem to attract the attention of both traders and investors in the stock market. Traders make the most out of the price rallies that follow after a company’s listing period. On the other hand, it is a chance for investors to be a part of a particular company’s beginnings until it grows massively in the market.

 

What are some of the tips that you can consider when dealing with an IPO stock?

1. Develop a plan.

Knowing your financial goals matters a lot. Yet, as your goals begin to unfold before your very eyes, planning is an integral part. Following a plan helps you to stay on track and recognize your stock market strategy.

It can also help you come up with an educated decision if you should buy such IPO stock or even deciding if you are going to hold it for a short, medium, or long-term period.

2. Do your research about the company.

In today’s social media age, cases of people giving in to herd mentality are increasing. There are people who believed instantly to an advice and then they get hyped afterwards. It is important to be cautious of stock market tips that you follow.

The best thing to do is to research and study the fundamentals of the company which will be out for an IPO. Is it a company looking for operations expansion or one that will use the money to pay enduring debts?

Consider a company that must qualify to any of the following: part of a growing industry, with good earning records, having a dependable management, offer top-quality and unique products and one having a robust balance sheet.

3. Steer clear of first day listing volatility.

Avoid buying shares during the initial days of listing as this period is usually volatile. Basing it from history, IPOs do trade higher than that of their offering price during such stretch.

For short-term traders, they will do their profit-taking activity after several days. The ideal period to buy the IPO stock is after the correction period where the stock has recovered.

Conclusion

When dealing with an IPO stock, a well-informed investor can outpace and perform better than the others. A number of companies go public every month, it is best to apply the following tips mentioned in this post.

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What Makes Financial Advisors Necessary?

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People usually take more time shopping for personal items than taking the time to find a trusted financial advisor. There are a number of notions about what a financial advisor is and what do they do. In this post you will be able to see why financial advisors are regarded as necessary.

Financial advisors specialize in a number of areas such as there are advisors which can help you when investing and building your portfolios and financial advising. Anyone, young and old, fresh graduate or even a retiring individual can benefit from having a financial advisor.  It does not matter how much money you have as long as you have the desire to better manage your money.

 

  1. Having a Financial Advisor helps you keep your focus and stay on the right track

They say that when you dream, it is completely alright to dream for the bigger things. Others might even go for their biggest dreams – and hey, it is possible. Aside from knowing yourself and utilizing your capabilities, your financial advisor can help you stay focus and stay directed on your goals.

Having a financial advisor helps you plot both of your short-term and long-term goals. It is necessary since people have the tendency to be swayed from one goal to another and in the end, nothing has ever been accomplished. They help you list down your goals according to priority and length of time needed to reach these. Concisely, financial advisors help you make an informed choice to avoid regrets in the future.

 

  1. Having a Financial Advisor gets your important questions answered

Over the course of your financial planning, you will be faced with tough questions or critical choices that you need to surpass to keep you going. One of the roles of a financial advisor is to help you pin down your pick and be confident enough that you made the right choice.

If you are wondering which of your options make more financial sense, you can always turn to your advisor. Searching in Google doesn’t always give you the answers that are appropriate to you and your situation. That is why financial advisors can have a significant impact on your future.

 

  1. Having a Financial Advisor unites you within and beyond yourself

 If you are single and you do not know what to do, financial advisors can help you connect within yourself. If you are married, and you might have a different reasoning with your spouse, they can act like money counselors. They get couples and the rest of the family on the same page. Everyone gets to share his or her financial goals and finding a common ground where they both can work on. Financial advisors can help find balance amidst divergent goals.

 

Conclusion

You don’t need to have millions to work on your financial plan and decide to have a financial advisor. Working with a financial advisor increases the chance of growing your wealth and ensuring that you put these into good use.

 

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Here Are the Five Commandments of Investing

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The Ten Commandments you have heard since childhood are laws used as standards that deal with man’s relationship to God and man’s relationship to his fellow human beings. These act like a manual for people on how to live a better life. Hence, these are like guidelines which help people to keep themselves out of trouble.

This article will teach you the counterpart of the Ten Commandments compressed into Five Commandments, to guide you in the world of investing and to keep your money in safe hands.

Is investing hard?

For the less knowledgeable, yes, investment is a hard concept and field to grasp; but for those who continue to enrich their knowledge, investing will come easy as it seems. Knowing the right principles and being able to adhere to these religiously can lead you to the path of investment success.

 

The Five Commandments of Investing

  1. Thou shalt be clear with your goals and avoid gambling.

 What separates investors from gamblers is that investors follow a mathematical formula and concrete strategies to be able to profit from their move. Gamblers are not fond of such. They bet their money on unknown and uncertain outcomes.

Do not just invest for the thrill or fun, rather invest for profit. In order to do this, having the discipline is essential to reach financial security and consistent profits. Growing wealth has a science behind it. As a perfect analogy for this one, you should have a particular destination in mind so you would not be lost when you are already at the sea.

 

  1. Thou shalt ensure that thy financial house is in regulation.

 One of the top responsibilities of an investor is to keep his or her personal finances in order first before jumping in the investing activity. Investing when you have debts scattered all around such as drowning in credit card bills and overdue fees can get you into serious problems sooner or later. Take care of your debts first before taking the plunge in the investing world.

 

  1. Thou shalt need to exercise due diligence.

 Exercising due diligence in investing means that you invest within the scope of your understanding. If you do not understand something, it is not advisable to take the risk and invest. When exercising due diligence, it also means that you avoid rushing into making an investment decision. You need to study all positions first before putting in your money.

You need to increase your understanding to be able to come up to an informed decision. Exercising due diligence also means that you know what risk management strategies you need to apply to protect your capital from permanent loss.

 

  1. Thou shalt avoid jumping on the bandwagon.

 This can be considered as having herd mentality (a well-known descriptor of human behavior since people learned to socialize) or the way people are being influenced by their peers to adopt some behaviors. This one applies greatly to the stock market. There is a difference between passive investing and passive investor. When you are a passive investor, you tend to digest all information presented to you and failing to thinking about it critically.

In the field of investing, you have to see things on your own in order to realize the true value of a stock.

 

  1. Thou shalt continue to invest in thyself.

As your portfolio and money grows, so your financial intelligence must increase as well. The level of your investment skills and knowledge reflects your investment results. If you want to improve your profits, you have to improve your financial intelligence.

Moreover, the best investment you can have is YOURSELF. As the good old saying goes, nobody can take away your learning and it can double, triple or even multiply your dividends a number of times for the rest of your life.

 

Conclusion

The above-mentioned guidelines can greatly help you with your investing career. Keep yourselves out of difficulties by observing these proven guiding principles.

 

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