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Perhaps you are thinking about doing some personal investing on the stockmarket. Well, that is fine but don’t blindly jump in; you need to really understand how the stockmarket works before you can learn how to recognize a good stock to invest in. In this article I will briefly explain what stockmarkets actually do.
The Two Core Functions of the Stockmarket
In fact, the stockmarket is divided into two distinct and different types of markets. The first is called the primary market and the other is the secondary market.
The Primary Market
The primary market is when companies issue new shares and they are offered to the existing shareholders or to the public. The best way to comprehend the primary market – think of the resemblance to a new car dealership. The money you pay the dealer for your new car goes to the manufacturer less the dealer’s profit. A similar scenario goes on in the primary market; the money raised by the new shares goes to the company minus any costs.
Normally, companies offer new shares for expansion; like constructing a new factory, to extend a new product line, or to refinance debt. This can be defined as the raising of capital by sharing the risk in return for potential higher profits.
Secondary Markets
The secondary markets are where investors can sell and buy stocks and shares. With the car analogy, we now consider a second hand car dealership. If you buy a second hand car from the dealership, none of that money goes to the car manufacturer. In its place, the second hand car dealer has paid for a used car from the owner and has now sold it to another owner.
This way of bringing sellers and buyers together is how the secondary market of the stockmarket functions. The same that you are free to buy and sell a car, you can also buy and sell shares at will. This is the liquidity of the markets or the way to turn assets into cash. In fact, without the secondary market there would not be a primary market.
What Moves the Markets?
Essentially, the reasons that markets move can be boiled down to either the rational or the irrational factors. It is, of course, a lot more complicated than that. There are however only three main reasons for the markets to move and these are the irrational group approach of the investors (swings of pessimism to optimism with regards to risks), the fundamental factors (as an example – inflation, depression or government policies), and the technical factors (for example investment trends or the popularity of a product or industry.)
It is necessary to know what moves the markets so that you can make better investing decisions both for long term and short term investing. You also have to take all of the factors into consideration all together and not just one factor if you want to minimize your risks. Learn and gain knowledge about the stockmarket before jumping in and you may make a better return on investment than if you just kept your money in a savings account.
William Wilkie is a writer of personal finance services and products. Check out his website for the top Identity Theft Program from TrustedID. Click here to get your own unique version of this article with free reprint rights.
“The rally in bonds at this point looks a little bit overdone,” said Tom Higgins, chief economist at Payden & Rygel Investment Management in Los Angeles. “If you’re going to park money temporarily then cash I think is the way to be but I think that we’re going to form a bottom.”
I’d like to know if being in a bond fund is the same as being “in cash”?
If not, please advise, what vehicles are available for 401K and IRA account investors to “be in cash”?
Thank you.
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Safe high return investments Los Angeles
Lets face it, we all want high return investments but the majority of investors achieve mediocre returns and this is they don’t understand two important facts.
If they did, they could be on their way to far higher returns And a true high yield investment.
Let’s look at the above in more detail and two keys to making huge returns from your investment.
1. Success Has U in it!
What does this mean? Well, if you want to get rich you are going to have to do it for yourself.
Forget your broker, asset manager and friends, you need to step up and accept it’s down to you. This is true of anything in life, not just high return investments.
Don’t worry. its not as daunting as it seems.
If you see a trade make your own mind up and don’t listen to others – Do as you think best.
Let’s give you some help on how to do this.
2. Most investors can’t handle big gains!
You may think I am joking, as we all want big gains, don’t we? True, but most of us cannot cope with the mental aspect of accepting them. Let’s look at this in more detail and it will all become clear.
Look at a chart on any currency or commodity and what do you see?
Big trends that go on for months and years, most traders can get in on them, but can’t stay with them. This is the problem and prevents them from getting a high yield investment.
Why? Because human emotions work against them, and they can never turn their trades into the profits that are staring them in the face.
For example, many traders enter a trade and are up say $3,000 dollars on a $10,000 account they have got 50% profit so let’s bank it – Wrong!
The big trades only come a few times a year, so you need to milk them for all their worth to turn your trades into a high yield investment.
Destructive emotions
The larger a profit becomes the more a trader wants to take it, but each small correction in the market that eats into account equity then plays havoc with their emotions.
The fear of losing what they have causes them to act in the wrong way.
In the end they snatch the profit, as they cant handle (and don’t have the conviction) to ride the trade for what it’s really worth.
They bank a couple of thousand dollars and then see the trade pile up $10 or 20,000 and their not in.
How to make a high yield investment work
A High yielding investment can be yours, but you need to do the following Have the mental discipline to accept and go for huge gains!
This is not mentioned much, but it’s just as important as all the usual advice like cut your losses quickly etc in fact it’s far more important.
Look at any chart of currency or commodity and you can see long term trends that last months or years – So go for them.
Here is some sound advice to turn your trades into a high yielding investment.
1. Accept responsibility for your trading and do your homework.
2. Use a long term technical system.
3. Trade infrequently The big trends only come a few times a year, so these are the ones you want to be in on.
4. Have the courage to go for these trends and ride them for all their worth.
5. Use options with lots of time to expiry and buy them at or near the money They give you staying power.
6. Give yourself a wider stop and don’t bring it up to quickly where you can get stopped out by market noise.
7. Trade markets that trend long term such as currencies and energies.
8. Aim to make 100% per annum and ignore what all the experts tell you!
Your asset or fund manager will never give you a true high yield investment as they rely on commission and trading frequently to make a living and this is not going to help you make profits!
Do the above and you will soon see that if you pick your own trades and have courage and confidence – You can beat any fund manager and create a high yield investment they will envy!
MORE FREE INFO
On finance including investments and becoming a succesful trader succesful trading visit our website for articles features and downloads at:http://www.net-planet.org/index.html