Self-Directed Investing

Interested in taking control of your portfolio and becoming a “self-directed” investor within the stock market? You need to know the following.

For most people the idea of self-directed investing comes with a myriad of misconceptions and fears but with the right information and knowledge, making your own decisions can produce significant results.For example, it is very common for properly educated self-directed investors to outperform the stock market significantly, and with the right knowledge, you can consistently produce above average returns.

Basically, self-directing your investments means taking control of your own investments and the responsibilty for the decisions related to your portfolio.   By opening a self-directed online trading account, you retain the authority to choose the type of investments you want in your portfolio (e.g. mutual funds, ETFs, individual shares, etc), as opposed to ‘managed accounts’ where these decisions are made by a broker or other financial professional.Most managed accounts will charge fees.  (The industry average in Canada is about 2½% of your portfolio per year.)

Why Self-Direct Your Investment Portfolio?

So is self-directed investing for you? Knowing why you want to do something usually means you have spent some time looking at the pros and cons.  For self-directed investing consider the following:

• Pros:  More control and the potential for better returns, reduced fees, increased liquidity and greater capital appreciation.
• Cons:  Investors assume the risk – and the emotional stress. Many also lack the time, knowledge, and discipline.

If you list out your pros and cons then you can work towards getting the answers you need to make an informed decision.

How Much Money Is Needed To Invest?

Many people believe that to self-direct an account, you need ‘lots of money’ – but this is not true. You can self-direct any amount.For example, you can self-direct the new Tax Free Savings Account (TFSA) that allows Canadians over 18 to deposit $5,000 each year beginning in 2009.

Other accounts that most Canadians have, including RSPs, RESPs, LIRAs (Locked in Retirement Accounts), can all be self-directed.  The amount of money is not the issue.The larger your portfolio, the more shares (or more expensive stocks) you will be able to buy, but it isn’t necessarily the amount that is working as much as it is how well it is performing.

People with a large portfolio (e.g. $250,000 and above) often start by self-directing only a portion of it.The TFSA is a great starting point.Over time, as your knowledge increases, you can transfer more of your RSP into a self-directed account without missing the tax deferral status.

Do Your Research First

Before you open your trading account and start putting your money to work, it’s important to take stock (no pun intended) of a few things. First, understand what you are getting into. Most Canadians express a sense of fear when it comes to making their own investment decisions and investing directly in the shares of companies doesn’t reduce that fear.It is a lack of knowledge on how the markets work that causes this fear.  People often think of investing in the stock market as gambling yet nothing could be further from the truth.  If you were to ask those that have built great wealth utilizing the markets, you would rarely find “gambling” as a description of their activities.

Although you don’t need a university education in business or finance, it is essential to educate yourself in order to make proper financial decisions.You couldn’t fly a plane, build a house, run a business or even drive a car without the training and knowledge needed – investing is no different.   Skills are learned, practiced, improved upon and finally excelled at.  Good habits take more than a weekend to be developed so don’t rush into the markets before you are confident you know what you are doing.

Learning the terminology is a great place to start. A great resource is www.getsmarteraboutmoney.ca Developed by the Ontario Securities Commission, this website is a wealth of information on making your own decisions.Then evaluate what educational options you have.It is important for novice investors to build a solid foundation.  Look for a company that provides a well-rounded learning experience and compliment that with your own reading and research.You have learned other skill sets in the past, and you can do the same with your investment strategy.

Develop an Investment Strategy

Part of your education should include the development of goals and a strategy including a trading plan that matches your risk profile. When you set clear goals you have a benchmark to measure success. Your financial goals can be achieved in any market, as long as you have a solid investment strategy.When you understand what your risk profile is, you are empowered to make decisions within your tolerance level.  Most novice investors get excited about making money because of course that is the point; however that by itself is not a good plan.  A good education will teach you three important principles:

1. Capital Preservation – keeping your money so you can invest it tomorrow and beyond.
2. Money Management – knowing how to segregate your portfolio and your individual decisions.
3. Risk Management – learning how to preserve your capital in case you make a mistake.

All of these need to be a part of your strategy and decision process.

Does Managing My Own Investment Portfolio Take A Lot Of Time?

Educating yourself takes time – but how much time is needed to manage your portfolio on an ongoing basis? This is a subjective question, and will depend in part on how quickly you want to achieve your goals.

For instance, the investor that makes a few decisions a year and follows a buy and hold strategy will not spend nearly the amount of time that a more frequent trader will.At the same time, it is more likely that the investor that makes good strategic decisions only a few times per month will create higher returns.

Bear in mind that the quantity of decisions doesn’t necessarily indicate an increase in the quality of profits.  It isn’t how often you put your money to work that counts but how well you put your money to work.In order for an investor to make 2-3 percent return on their portfolio, they should spend about an hour a day staying informed of what is going on in the markets.  Don’t shy away from spending the time however, since your financial future is one of the most important aspects of your life.

The Bottom Line On Self-Directed Investments

Self-directed investing doesn’t have to be time consuming and it doesn’t require a million dollars but it does require knowledge — good goals, a good plan and a good strategy

For more information on Self-Directed Investing, download your copy of the ebook: Stock Market Investing: The Untold Story and learn how to outperform the stock market in your investment returns and live with financial security.

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For more information on stock market investing or high return investments, be sure to read more at “stock market for beginners“.(KZ0710.1)

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Ethanol and its significance in the stock market investing world

In the bid for the world’s search for alternative sources of energy as time is currently running out given the current scarcity of crude oil, there have been numerous initiatives by companies to develop the potential of different alternatives to crude oil such as natural gas and ethanol.

Ethanol is a colorless, clear liquid with an agreeable odor. This is the natural component of ethyl alcohol. Corn, wheat, potatoes and other plants can produce starch that is made into ethanol by the process of fermentation. It can be used as fuel by mixing it with the regular gasoline and this becomes gasohol.

These sources of alternative fuels are currently one of the faces of future technologies that are being developed and researched on by many technology energy companies listed in the stock market. These technology companies have been popular picks of long-term technology savvy investors for more than 5 years.

The potential of ethanol has been the focus of a lot of technology companies in stock exchanges most commonly those listed in the NASDAQ stock exchange. It can be used as fuel by mixing it with the regular gasoline and this becomes gasohol.

Although investment performance returns from these alternative energy companies may not yet be as competitive as the established companies that are currently in the business of the popular fossil fuels, the technology for these alternative fuel companies may still be a long way of waiting as the issue of having the necessary infrastructure to produce and distribute alternative sources of fuel like ethanol will take quite some time.

Investors that are optimistic on the future of these alternative energy companies believe that the technology will still require longer waiting. Aside from the waiting of new discoveries, the infrastructure and distribution of energy products produced from alternative energy sources like ethanol will still be more costly.

It will also not necessarily be competitive at its initial stages of introduction to the stock market investors as compared to the established production and distribution processes of companies producing fossil fuel energy products.

While the wait for the availability of alternative energy sources to the public may still be long and initially costly, the world will still have to push forward the developments of alternative energy sources as the world reserves of fossil fuels are already depleting and sooner or later the alternative sources of energy will have to be much more of a priority not only of companies engaged in its development but also of the general public as well.

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1)  Write Down Your Investment Plan
Writing down your investment plan is a proven way to help keep you focused and on track. In order to accomplish what you want to with your investing, your plan should include investment goals, any specific portfolio objectives and a specific time frame to achieve them. You should revisit your plan regularly to help keep you on track and help prevent short term events from distracting you from your investment goals.

2) Do Contingency Planning
Always think through all of the different scenarios that could happen when it comes to your investment plan. Imagine all of the possible situations (good and bad) that could happen to your investments and write a plan of how you’ll respond. Think of it as an evacuation plan so you always know what to do when an investment crisis hits. By doing this simple exercise, you can significantly decrease or eliminate the emotional reaction you have to a situation because you’ve had to time to think it through in advance.

3) Focus on Value
If you want to decrease the chance of your emotions running rampant, focus your efforts on value investing. By focusing on value investing, you’ll help to steer clear of the herd and avoid getting sucked into the news of the next big “winner.Value investing is an effective way to to help overcome the emotional roller coaster ride so you can focus on investing.

4) Always Set Limits
Setting limits on your investments can dramatically reduce your anxiety level and emotional response to the market. By including limits for both buying and selling any current or potential stock in your portfolio, you’ll make better decisions than other emotionally charged investors. This requires advance planning and discipline to not only create your buy and hold prices but also to initiate them when the market fluctuates. This disciplined action of buying and selling based upon pre-set limits will help to limit your potential losses and insulate you from bad emotionally charged decisions.

5) Invest Regularly
By investing on a regular basis you can establish a routine and make decisions based upon your investment goals rather than outside influences. This helps to eliminate the need that many inexperienced investors have to “follow the herd” and overreact. By using your plan and investing based upon your goals, it will help insulate you from market volatility.

6) Set a Limit on the Number of Transactions
Often, the more stock transactions you make, the more likely you’ll fall victim to your emotions and lose sight of your long term investment goals. The more short term transactions you make, the more random your decisions become and the higher the risk. By limiting your transactions you can focus on the longer term trends and decrease your costs.

7) Learn from Your Losses
Anytime you make any type of mistake, take time to consider what went wrong. Then write this information down and determine how you can use this information to your advantage next time. This one easy technique can help make your investing even more profitable because you’ll avoid making the same mistake twice.

With these seven important tips you’ll be able to map out your investment goals and keep your emotions under control so you can make more profitable investment decisions.

And by making more profitable investments you can spend more time and money on things you enjoy like spending time with your family, traveling and doing hobbies like taking pictures and then displaying your memories in beautiful wood picture frames. This way you’ll be reminded of the fun times so you’ll continue to stay motivated to invest.

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There are so many investors who claim they are experts with decades of experience in stock trades. From best-selling books in the bookstore to online ebooks, you just do not know who to take note to! virtually every free instigator promises you that his or her guide is all you will ever need to happen as expected in the market even if you are a trainee

Learn how to invest to make money in trades 101:

What ought to you do as a apprentice in the area of stock market investing?

Drop your ego down a notch since you need to agree to the fact that you are a beginner You can buy a book that is cookery to beginners to learn the basic 101 or a website that does the same. Most websites will grant you free in order to get the supportive of the fundamentals

The best thing to do as a stock market trainee is to make a dummy description to play fake trades on the internet. In a dummy credit you have an X sum of play money to advance in a real stock market. It is a great way to learn how things work and it is free.

Once you get the hang of it, you can sign up for a brokerage bank account Be very well thought-out since some companies have many mysterious fees so be sure to ask questions. You can read reviews of companies online to see what relatives are maxim If any character guarantees that you will be rich with no risk, run the other way. something that you devote in has some type of risk.

Do not imagine to attain dramatic hit in the stock market. If you think you can happen to rich in a week or two, you need to reorganize whether or not this is right for you because that won’t go on Any rich investors will tell you that they did not get rich suddenly

A for all pupil confuse is not diversifying his or her folder Never put all your eggs in one holder When you do not put all your money to endow into one separate carry you decrease the risk of losing money

You will lose money every now and then in the stock market and that is unavoidable It is part of the course of action to learn how to authorize Many easy quit for the reason that they are fearful to lose money in trades.

For more information on stock market investing or stock market investing advice, be sure to read more at “stock market for beginners“.

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Many people think that people’s emotions are the only factor in determining investment risk tolerance.Nothing could be farther from the truth. Actually, a lot is involved with determining your personal tolerance for financial risk, and emotions actually play just a small part.

Determining your risk tolerance, with regards to beginner stock market investing, requires awareness of multiple factors. One is that you have to know how much money you have available to invest, and you also have to be thoroughly cognizant of your ultimate financial goals. As a case in point, if you plan to take retirement in 12 years and you haven’t saved anything towards that, you’ll need a substantial risk tolerance and do some hard line investing to have plenty of funds to retire when you want to.

On the other hand, if you begin investing for your retirement in your early twenties, your stock market investing advice risk tolerance level can stay low. Starting early will allow you to let your money grow over time. When you combine this with what you know about your emotional reaction to investing, the proper investment recipe for you will be revealed. This can be difficult to figure out for yourself, so experts recommend that people use a good professional who can expertly assess you risk tolerance and assist you with selecting appropriate investment opportunities.

Knowing your risk tolerance will help you establish an investment style and allow you and the investment professional you select to invest with confidence. In spite of their being multiple investment vehicles there are really only three specific investment styles – and those three styles tie in with your risk tolerance. Those styles are commonly known as moderate, conservative and aggressive. But I will cover those in another article!

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It’s commonly assumed that “risk tolerance” refers only to how you feel about risk.That’s just not true. Several things have to be considered when deciding your risk tolerance, and your emotions are only part of the equation.

Determining your risk tolerance, with regards to beginner stock market investing, requires that you consider multiple factors. One of those factors being that you know how much investment capital you have available, and the other is that you are totally aware of your financial end game. As an illustration, if you plan to take retirement in 12 years and you haven’t even started saving for retirement yet, you will need to sustain a high risk tolerance and do some hard line investing to have enough cash to retire.

On the other hand, If you start investing your money for retirement while you’re still in your early twenties, your stock market investing advice risk tolerance will be low. Developing the saving habit early will create a situation that means you can grow your money slowly with less risk. When you combine this with what you know about your emotional reaction to risk, the proper investment formula for you will be revealed. It’s hard to ascertain this for yourself, so experts recommend that people use a good professional who can expertly assess you risk tolerance and assist you with investing for retirement.

Understanding your personal risk tolerance will help you find your own investment approach and allow you and the investment professional you choose to invest with confidence. Even though there are many investment types, investment styles come in only three types – and those styles sync up with your personal risk tolerance. Those styles are commonly known as moderate, conservative and aggressive. But I will cover those in another article!

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