Profitable Investing Goals - The Number One Tip for Making Profitable Investments

Michael Jordan, Joe Montana, and Tiger Woods were great for a reason, they had goals. The same is true of those entering the investment field, have a goal in your career and set your mind to reach that goal. Before even making your first transaction in the world of stock investing you should ask yourself, what are you expecting to achieve?

Everybody likes to be charitable, but it has a place and a time and neither is found in the world of stock investing.

Most investors simply want a good return on their investment. But what is considered a good return? Enough for retirement? If it is based on what they want for retirement the question becomes how long is it until retirement age? If it is in two years your investment strategy will be much different than for those who are retiring in 15 years time.

As an example, let's use me as a typical investor. 40 years old with a decent income and the ability to invest $300 per month. We'll have to change my circumstances just a bit and imagine I have nothing in my portfolio but I want the ultimate dream - I want $1 million dollars to retire with. The question is, if I have the $300 available right now, is my target something I can hit?

Assuming that I can match - if not better - a stock index return wich is running at 10.4% annually, my sum would be worth roughly $380,000 by the time I get to retiring at 65 years young.

Damn - missed my $1,000,000 target!

To hit that level - I need to invest more than $300 per month. (To hit that I'd need a return of at least 17 - 18% pa.
Okay - an index fund isn't going to do it for me, especially as the history of these shws it won't better much more than the 10.5% mark!)

Okay - let's look at another scenario for me shall we?

Let's imagine that I've actually been working away at my investments and funds for a while (must have listened to my dad!!) and I have a touch over $100,000 saved away.

Can I hit the target million with that amount as a lump sum starter?

Well, if I am set in using the index funds as my investment vehicle of choice, the answer is Yes!

So long as no major market upheaval hits and remains (ignoring the standard fluctuations you'll get over an extended period of investing) I should have over the $1,000,000 mark by the time I retire - and I won't have to add a cent more to my savings either.

But what makes this ossible for me to hit my target? The fact that I HAD a target.

Goals - targets - aims, they all help us to focus on getting to the end of the race with the result we want.

Goals to help you focus on your investment are what help you design your investment plan.

Do you need to be aggressive and look for a major return or can you simply protect your savings and earn a more modest return to reach your goal?

Set yourself a (realistic) towards it, keeping it in mind always.

Be modest and be focused.

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Speculators and Speculation

Speculators get a bad rap. Speculation in stocks, currecies and commodities futures is a necessary part of our economy. Many people have the idea that there is no added value in people "gambling" on commodities prices, for example. The truth is, most people just don't understand of the role of speculators and speculation.

The Truth About 'Speculation'

Speculative trading is crucial to a modern economy. Let's use corn for an example. A farmer can plant his corn, and then see the price drop so low by harvest time that he loses his investment, and possibly goes bankrupt. How can he prevent this?

By selling some of his future production now, at a set price, he can plan ahead safely. The contracts he creates and sells will go up and down with the price of corn, but the risk is all in the hands of the speculators who buy them. They profit by re-selling them if the price goes up, and they lose money if it goes down. Our farmer, though, has his price, and can plan his business now.

Now, on the other side, a cereal company needs predictability in the prices of their basic commodities, in order to plan future production. They can't hire new employees and buy new equipment, only to see the price of corn triple, making consumers unwilling to buy their expensive corn flakes. Buy a contract for future delivery at a set price, and they can plan, and again, the speculators take on the risk. They sell a contract, planning to buy the corn necessary for delivery. They make money if the price drops, and lose if it goes up, because they have to deliver at a set price.
Not just farmers, but all industries based on basic commodities would go through terrible swings in fortune if it weren't for these "gamblers," who take on the risk. Without them, there would be more bankruptcies, and more dramatic swings in consumer prices. In all markets with speculation, speculators provide the liquidity and ability to plan ahead that is needed.

New Ideas In Speculation

Maybe we need more speculation, not less. Wouldn't it be nice if businesses and even individuals could guarantee that gas for their cars would be near the same price next year? Speculators could provide that guarantee, and some businesses would love that kind of predictability.

You buy a contract, for example, to get your next 1000 gallons of gas at $2.20 per gallon. You put down a small deposit, and pay as you go, but you know that the next 1000 gallons will be $2,200, guaranteed.

A speculators role is to back the other side of the contract (to sell it). He is the one guaranteeing your price, so if the average price for the next 1000 gallons is $1.80, you still pay $2,200 in the end, but his cost is $1,800, so he makes $400 on the contract. Now if the price averages $3.30, he pays $3,300. You still pay $2,200, so he gambled and lost $1,100.

Speculators, like most gamblers, will probably bet on almost anything. We need to find more ways for them to take on our risks. Just imagine the many contracts could be invented, based on speculation.

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Why your share market investing is failing?

Every investor has several characteristics that combine to make them successful. The degree of success depends on how well you can implement these and how well your strategy works.

The method investors have for selecting shares that they want in their portfolio is arguably one of the most important areas of being a successful investor. For me personally I have stuck to selecting shares that are leading ie blue chip companies, whose price histories are in a long term uptrend and that are themselves doing better than the market average.

The next vital component is the trading plan. This doesn't need to be overly complex. You just need to know what you will do if the share price goes up, down or sideways. If you can cover these three things then you have a contingency for anything the share price can throw at you. And more importantly you will prevent yourself from reacting to sudden market fluctuations that happen all of the time.

The trading plan should also incorporate an overall strategy for the share that you have selected and explain the reasoning behind why you're doing what you're doing ie why you decided to place your order level at this particular point.

You will need a robust risk management strategy and to be successful in the long term you will need to implement the strategy. The number of times I've seen people unwilling to action there risk management plan when the share price reaches their pre-determined value price is a little bit scary.

The above three things are great to have in place but don't forget that you must be disciplined in implementing them otherwise you're setting yourself up for failure. And you should remember that to get good at anything you need to practice and you need to gain experience. Champions are made in training. Not on the track.

After identifying these strategic factors you should consider how much you are willing to outlay on each share. It is important to try and spend the same amount on each share ie $5000 across a portfolio of 10 shares in different industries in order to maintain a balanced portfolio.

Finally before deciding to go ahead with any investment you should asses whether its risk to return is worth it. There is no point risking $1 to try to make 50 cents. Over my investing lifespan I have stuck with a ratio of 1:3. For every dollar that I am risking I stand to make at least three or if I stand to make $3000 from a trade then I am willing to risk $1000 in order to make it. The reasoning behind this ratio is that no matter how good you are you will always loose in some of your investments. Having a ratio like this ensures that when the of the investments pay off they more than compensate for any that lose.

To recap any successful investor must exhibit these characteristics over the long term.

Take responsibility for themselves and make their own decisions. They take the credit for making profit and accept the responsibility for any losses. They learn from these decisions and improve over time;

Make investment or trading plans and stick to them They make trading plans based on reliable information in the clear calm light of day and not emotional reactions that may emanate from the panic or euphoria of the share market. And, they stick to their plan;

Assess the Risk/Return Ratio of each trade They only enter into investments that offer reasonable potential for profit;

Manage the risk of every investment . And never lose too much;

Allow for contingencies in the plan so they know what they are going to do if the share being traded goes up, down or sideways in price. The share price can do nothing else. But you can do what you planned. The plan then dictates the actions and prevents unprofitable emotional reactions;

Only put their money into financially secure companies ;

Buy shares when they are cheap and sell those that are expensive relative to their price trends;

Only trade in companies whose prices are in trending up;

Trade unemotionally and have the discipline to trade the plan. They plan the trade and trade the plan;

Keep taking money out of the market. You only make money when you sell shares; and

Have sufficient confidence that has been gained from experience.

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The Benefits of High-Yield Investment

High-yield investment can turn out to be very rewarding for investors. Although there is a certain amount of risk involved in high-yield bonds investments, they can also be very profitable for investors if they are targeted towards companies that have the potential to recover from their financial instability.

A high-yield bond, also known as a junk bond or non-investment grade bond, refers to debt security that has a very low rating. High-yield bonds are usually rated below BBB (according to Standard & Poor's) or Baa3 by Moody's; therefore they have a rating lower than the investment grade. Investors have access to high-yield bonds either through mutual funds or through individual business investments. High-yield bonds investments through the means of mutual funds are considered to be a lot safer, as they considerably reduce the chances of investing in non-profitable business trusts or companies. High-yield investments can become very profitable, as they can sometimes produce returns higher than those of solid, above investment grade bonds.

Companies that experience a temporary regression, going through less favorable financial situations, usually offer high yields to investors, in order to gain their interest. The trick in high-yield investments is to choose the right companies! Target your high-yield investments towards companies that have the ability to recover from their financial difficulties. For instance, you should avoid high-yield bond investments in companies that are constantly having difficulties in maintaining their position on the market. It is advised to invest in more powerful companies that have the ability to overcome their financial crisis. By investing in such companies through mutual funds, the risk of failure is considerably reduced.

High-yield bonds are a great opportunity to increase investors' profits and they are also a good way of expanding business portfolios. The interest rates of high-yield bonds are also a lot more stable than those of investment-grade bonds and therefore they can build a stable, predictable income. Although high-yield bonds are exposed to some risks, investors are the first ones to benefit from debt insurance, therefore minimizing possible financial losses in case of bankruptcy.

If they are carefully speculated, high-yield bonds can become very lucrative and can also expand the investors' business portfolios. High-yield investments should be always closed through mutual funds, in order to minimize the risks of investing in financially irregular companies. If they are targeted towards the right companies, high-yield investments can be very rewarding in time!

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Managed Forex Accounts EUR-USD Outlook 2008 1-3

The US dollar was the big story in 2007 - if you were selling it. Compared to 2001, the value of the dollar has gone down by 40 percent against the euro. And values at the beginning compared to the ending of 2007 were significantly down: the dollar was down about 13 percent versus the euro, 10 percent versus the yen, and 8.5 percent versus the pound sterling. Its value was at such a record low that supermodels and popular rappers made public their preference for getting paid in Euro, no dollars, please. The US dollar did stop skidding towards the end of 2007, but the question now becomes: has the dollar bottomed out or will the slide continue in 2008?

Why the Dollar Weakened in 2007

The dollar seemed so weak in 2007 because the rest of the global economy continued to grow even as US growth stalled, due in part to steady demand from the Middle East, China and India markets. Countries acted more independently, as illustrated by the Australian central bank's decision to increase rates to stave off inflation at precisely the time the US Federal Reserve was cutting interest rates. Before December in fact, interest rate cuts happened only in the US. In short, some sort of decoupling occurred in the global economy, and this was a key factor to the strengthening of the other currencies and the weakening of the US dollar.

There are signs, as we begin 2008, that the phenomenon will no longer obtain this year and the global economy will again move more closely in step. In the latter half of 2007, economic growth in the UK and Canada slowed down indicating that the two countries were being weighed down by the weak US economy. In addition, the shock waves of the US subprime mortgage crisis have also shaken the financial markets of many countries, particularly the UK, where growth in the past years has depended on housing, mortgages, and the public sector. There are also signs of strain in the Eurozone, notwithstanding the ECB's hawkish position on monetary policy. The pressure to reduce rates will increase if growth continues to weaken further in the US or in other countries. The pressure already forced the UK Bank of England to cut rates in December and more cuts are forecast for 2008.
Interest rate cuts will be the thing to watch in the currency market. The US Fed has already lowered interest rates 100bp in 2006 and another reduction will be more in line with expectations; but if the Eurozone begins to lower rates, this would be a significant departure from current policy, which could signal a major change in the outlook for the euro.

Where US Economy Is Going

The big question is whether or not the US economy is going into a recession, which would seriously impact global growth. Majority of the American public thinks the economy is already in recession, according to polls released in December. Public perceptions notwithstanding, economists think otherwise. A Business Week survey on 54 economists in December showed that the group believes the country will reflect a 2.1 percent growth by the end of 2008 (it registered 2.6 percent growth in 2007). They believe that although the first half of 2008 will be difficult, consumer spending will not stop, albeit more restrained. Fundamentally, the forecast of no recession rests on the assumption that the Federal Reserve will continue its round of rate cuts. Although financial losses in the subprime sector will continue, consumer confidence will depend largely on the Federal Reserves actions to support economic recovery.

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