In-depth Investing for Beginners: How Does It Help Build Wealth?

21 minutes to read

In-depth Investing for Beginners

Are you intrigued by the concept of investing and want to learn more about investments? Then you’re in the right place!

This article will present the most important investment basics, that beginners need to know. We will also look at why investing is beneficial and what you may miss out on if you don’t take advantage of it.

If you want to build wealth — either for retirement or to achieve financial freedom — usually, it isn’t enough to make money and save some of it.

As Robert Kiyosaki said, “For every dollar you save, you can give a work suit and send it to make more money for you.”

Today, anyone can invest, with a few hundred dollars and a phone with an internet connection, anybody can get started.

However, the world of investing can seem complicated, and we often don’t know how to get started in the first place. We can find ourselves in a real sea of jargon on the Internet, where sometimes it is difficult to find the best of the available information.

Because of this, many people don’t even start investing and so, due to inflation, they continue to lose money without even realising. With the right basic knowledge, investments can be made to be much more simple.

This article will give you all of the most important information that you would need as a beginner starting out on your investment journey.

As there is a lot of information packed into this article, please see our Table of Contents below:

1) What is Investing?

1.1) 1. Cash flow / Direct income

1.2) 2. Capital gains

1.3) 3. Cash flow + Capital gains

1.4) Investment means the purchase of income-generating assets

1.5) The Difference Between Investing and Speculation

1.6) Investor Vs. Speculator

2) Why is it important to invest?

2.1) Why is it not enough to save?

2.2) Build Wealth With the Power of Interest

3) When should you start investing?

4) Misconceptions about investing

4.1) Myth 1: Investing is Difficult/ Complicated

4.2) Myth 2: The Luck of Investing

4.3) Myth 3: It Takes a Lot of Money to Invest

4.4) Myth 4: Only The Rich and Professionals Can Invest

5) Investment Funds

5.1) 1. The Main Asset Classes

5.2) 2. The Correlation between Return On Investment (ROI) and Risk Exposure

5.2.1) High Yield, Low Risk?

5.3) 3. Diversification

5.3.1) Think in portfolio

5.3.2) ETFs: One of the Best Tools for Diversification

6) Investment Concept: Summary

What is Investing?

By investing, we mean a long-term process of buying income-generating assets with the aim of earning a return from it in the future.

Self-made money-man Warren Buffett once said:

“Investing is giving up today’s consumption in order to consume more later.”

Where does the return / gain come from?

It can come from three different sources, as explained below, where we will use examples to illustrate the given point:

1. Cash flow / Direct Income

Example #1: When you invest in a company’s shares, you actually become one of its shareholders.

As incredible as it is, when you buy an Apple share, for example, you’ll be a part-owner of the company, even if you’re going to own only a fraction of the shares issued.

From the profits generated by Apple, you, as a co-owner, receive dividends on your shares every quarter.

Example #2: If you invest in a property and rent it out, you’ll get a monthly wage fee in return, in the form of the rent you receive from your paying tenants.

2. Capital gains

The prices of both shares and property can rise, from which you can achieve capital gains.

Example: If Apple performs well, the price per share will increase. Let’s assume you bought an Apple stock for $100, which later increased to $150. In this case, you would have made a total capital gain of $50.

3. Cash flow + Capital gains

For many investments, you can get your returns from both sources. In the case of shares, you can receive dividends (although not all companies will pay dividends) and capital gains.

In the case of real estate investment, in addition to the monthly wage fee, the price of your property may also increase.

Investing Means Buying Income-Generating Assets

It’s no coincidence that we highlighted “income-generating” assets above. Colloquialism and the media often misuse investment as a concept.

For example, you may often hear people remarking that they have invested in a new car or a new phone.

For these purchases to be considered an investment, we must ask the following question:

Is this ‘XYZ item’ going to produce any future returns?

If the answer is no, then the new purchase is not an investment at all but instead is known as an ‘obligation’. This is because it may incur maintenance costs, but in turn won’t subsidise the user for these costs in any way, meaning they will be out of pocket.

Another thing to consider in this case is that the item’s value is also constantly depreciating (falling).

As we have said, buying a car for personal use is not an investment; it is a cost. But this can be changed if, for example, you were to start a courier company from which the vehicle will become a means for you to earn from.

Contrary to popular belief, trading, Forex and cryptocurrency purchases aren’t actually considered to be investments. Instead, these are officially known as speculations.

The Difference Between Investing and Speculation

Despite there being critical differences between these two concepts, it can be difficult for beginners to distinguish between the two, this is also true for those who are more experienced.

According to the world-renowned investor, Philip Carret:

“The man who bought United States Steel in 1915 for $60 to profit from the sale at a higher price is a speculator. In contrast, the gentleman who bought American Telephone to get a dividend yield of more than 8% is the investor.”

Carret also, quite concisely, said the following:

“Speculation is the purchase and sale of securities or commodities merely in the hope of profiting from their exchange rate fluctuations.”

As one of the greatest investors of all time, Warren Buffett’s example reflects the difference between speculation and investment:

“There are two types of devices that can be purchased. One is where the asset itself generates returns for you, such as rental properties, shares, or a farm. And then there are devices that you buy in the hope that later someone will pay more for them, but the devices themselves will not produce anything for you. I think the second is speculation.”

Our take-away from this is an investor thinks in the long-term and buys an asset because of its future cash flow. Here the assets primary purpose is to keep your invested capital safe while achieving adequate returns simultaneously.

Opposite to this, a speculator buys a particular asset merely in the hope that its price will increase (or fall) due to market sentiment, regardless of whether the fundamental value of the underlying asset has changed.

Investor Vs. Speculator

The most critical differences between investment and speculation are the level of risk exposure and the certainty of retaining any invested capital.

In this case, the investor is more assured that they will not lose their money, whereas the speculator should know that there is a high probability that the investment can be lost entirely.

The problem is when a person believes they’re investing when they’re speculating, possibly causing some unexpected losses.

So, why would people speculate when they know the probability of loss is high?

The answer to this could be for the same reason that many people like to gamble – some may think speculation is exciting due to the, sometimes high-stake, risk, and that investments are boring in comparison.

To clarify, there is no issue with speculation, should you wish to put some of your capital here, but we must make the point that, if you wish to build wealth, then this might not be the best way to go about it (at least until you gain some market experience dealing with risk).

The best, most safe and proven way to build wealth for a beginner may be to invest.

In the world of personal finance, the general consensus is to never speculate more than 5% of your total wealth.

Why?

In the event that you lose everything that has a high-risk probability, it won’t have a big impact on your financial situation due to your other portfolio assets.

Why is it important to invest?

Since investments also involve certain risks, from time to time the question of whether it is really worth investing in the first place may arise. And, it may also be asked if there is a better alternative? Let’s look into this:

Why is it not enough to save?

Saving is the number one and most important element in achieving your financial goals, but without investing you won’t get much out of your money, depending on a number of variables.

The purchasing power of the amount held in fiat currency (Liquid cash) and that held in a bank account, is steadily decreasing due to inflation.

Many people don’t realise this fact. For example, if you set aside $10,000 today and don’t touch it, you will likely still see the same amount in your bank account in 20 years. The problem in this is that, due to inflation, in 20 years this amount will carry much less purchasing power. Meaning its value has steadily decreased throughout the years.

By investing, however, you can maintain the purchasing power of your money against inflation and increase it at the same time.

This is well reflected in the chart below, which shows an inflation-adjusted value (Real value) of $1 held in various assets (e.g. stocks, bonds, gold or cash in dollars) between 1802 and 2012.

It is clear that if you invested in stocks, for example, your initial $1 investment increased to $1,029,045 (above inflation!).

Conversely, if you kept your money under your pillow (DOLLAR), the initial $1 dropped to 0.051 cents due to inflation.

So you didn’t do anything, and yet you lost — you couldn’t even keep the value of your money.

Therefore, to answer the question posed at the beginning of this section: yes, where investing does involve risk, the alternative is guaranteed loss.

Build Wealth With the Power of Interest Interest

If you want to build wealth, whatever the reasoning (e.g. providing a good pension, building passive income or achieving financial freedom) – investing is necessary for achieving this goal.

You can increase your money by buying income-generating assets. You can then use the funds generated by these assets to purchase further additional assets that will, in turn, generate even more money. You can even continue to reinvest earnings infinitely if you want to build the portfolio quicker than you would otherwise be able to do so.

As Ben Franklin said, “Money that money produces, produces money.”

Thanks to compound interest, as you continue to reinvest earned capital, your wealth will begin to grow at an ever-accelerating rate.

Read more about compound interest and use our compound interest calculator to see how much return a month / year you can make. Click Here

The following illustrates the effect of interest rates:

As you can see, over time, an increasing and larger portion of your wealth is made up of yield (part marked in purple).

By the end of the 20 years, your total wealth was about $7000, of which you only invested about $1000.

When should you start investing?

This Chinese proverb. Although it has its own applications, it is very much true for investments too:

“The best time to start planting a tree was 20 years ago. The second best time is today.”

Why is this relevant?

The earlier you start investing, the longer you can utilise the power of interest rates.

Let’s make three examples; Michael, Jennifer and Sam.

Michael started investing $95 a month at the age of 25, for 40 years until he was 65.

Jennifer began her investments 10 years later, depositing around $126 per month, for 30 years until she was 65 years old.

Sam discovered the investments very late, meaning he only started investing at the age of 45. Because she was so far behind the others, she decided to double Michael’s monthly deposit, so Sam invested $190 a month for 20 years until she was 65.

So all three invested, on average, the same amount – that is, $45,600 – all across different time horizons.

The question is, who made more?

Let’s look at:

Note: Image is for illustration purposes only and doesn’t reflect mentioned figures

Even though all three investors allocated the same amount over time, Michael was the one who ended up with the most considerable capital.

He enjoyed the power of compound interest for the longest time, so even though Jennifer and Sam invested the same amount, Michael’s money worked harder than the other invested capital amounts.

Why? Take a look at our Compound interest calculator here to see how it works for yourself!

Misconceptions about investing

Many people have certain misconceptions that will stop them from getting started altogether. So let’s begin this section by dispelling the most common misconceptions you may encounter.

Myth 1: Investing Is Difficult Or Complicated

Sometimes, the financial sector may try to overcomplicate investments in the hope that clients will be overwhelmed with all the information and will, therefore, need to make use of their advisory services.

The truth is that with just the most basic knowledge, investments become quite simple; You can acquire the basic knowledge required for it with just a few hours of learning.

Investing will always seem complicated when you don’t understand it in one way or another. But unfortunately, this is just a natural part of human psychology where a lack of understanding will be confusing.

Myth 2: The ‘Luck’ of Investing

Many people don’t invest because they have wrongly learned that investing is just the same as, if not similar to, gambling. However, certain assets, such as cryptocurrencies, do happen to be a little closer to gambling when we compare the levels of risk, which usually creates this misconception.

So what separates investment from gambling? There are many ways in which these two topics differ from each other, although here are the main three distinguishing factors of investing:

With your investments, you have control over the level of risk exposure, and you can also limit your level of loss. Unfortunately, in the case of gambling, you don’t necessarily have the luxury of controlling these factors, meaning you can only win or lose everything.
When you invest, you essentially become the owner of that particular asset, for example owning real estate or becoming a part-owner in a listed company (stocks). When gambling, you don’t own anything once you have assigned your capital to it.
Before investing in any particular product, there will usually be a lot of information (often decades-worth) that you can first analyse to make reasonable and informed decisions. On the other hand, gambling will often not be able to offer this opportunity beforehand

Myth 3: It Takes a Lot of Money to Invest

Depending on the paltform, you can start investing from $10 today, so this misconception is also silly.

Moreover, you can use even smaller amounts of money to build significant wealth in the long run, thanks to the power of compound interest.

However, the important thing is that you start at the earliest moment you feel ready. With this method, you can gain invaluable investor experience with smaller capital mounts, meaning you can keep overall losses to a minimum in the long term.

These experiences will come in handy later in your investment journey when you have more capital at your disposal and start to invest more. If you’re not sure why using this method is helpful, the fact is you will make mistakes when you first start. However, learning from these instances, which produce more minor losses, and being able to apply the experience gained in future situations means you will be better prepared for more considerable risk exposure much quicker.

Myth 4: Only The Rich and Professionals Can Invest

Many people believe that only the more privileged of people can invest. This couldn’t be further from the truth.

Even if this was once true, practically anyone could invest in today’s market. We can say this is regardless of age, income or professional knowledge. And as we previously stated, it can be more beneficial in the long run to you, as an investor, to begin your portfolio with smaller capital amounts.

The Investment Funds

This section will look at the most important basics that you need to know about investments.

1. The Main Asset Classes

There are many investment options. We can classify almost all of these options into a corresponding asset class; An asset class is a group of financial instruments with similar characteristics.

A) Cash and cash substitutes (cash, T-bills, savings accounts)

This is the more simple of the groups, with the lowest risk management requirement. The primary advantage of such investments is high liquidity (immediately available or easy to convert into cash), with a maturity of up to 1 year.

Cash and bank deposits are included here, as are securities such as the Treasury-Bill (T-Bill) issued by the U.S. state, which is internationally recognised and often used as a risk-free interest rate.

B) Fixed income (bonds, government securities, bond ETFs)

It is an investment in debt securities. These are known as fixed incomes because securities offer investors a fixed interest payment within a specified period.

Fixed income is usually simply referred to as “bonds.”

C) Equity (shares, mutual funds, equity ETFs)

The term ‘equity’ derives from the fact that shares are equity securities. By investing in listed companies, we – in turn – become part-owners (or shareholders) of that company.

Through something called an ‘Exchange Traded Fund’, otherwise known as an

ETF, we can acquire shareholdings in a pre-prepared selection of companies at once instead of deciding what companies to allocate our money to one at a time.

An example of a more popular, and more importantly, proven ETF would be the S&P 500, the US index.

D) Alternative investments

As other financial instruments are commonly referred to as “alternative investments”, Real Estate; Commodities; Forex, Hedge Funds, Private Equity, and Derivatives are included in this asset class.

2. The Correlation between Return On Investment (ROI) and Risk Exposure

One of the main principles of investment is that return and risk go hand in hand.

This means that investment opportunities offering higher returns are associated with higher risk at the same time.

In the same way, low-yield investments offer greater certainty because of their low risk.

The following chart shows the yield-risk relationship between investment opportunities within different asset classes:

Both bonds and stocks are good examples of the point that we are trying to make here.

The risk of shares is higher than that of bonds. This is due to the fact that shareholders have what are called “residual claims”. This means that when it comes to any profits a company makes, creditors are paid first and then the shareholders. Meaning that, if the company is profitable, a policyholder’s returns are guaranteed, whereas those expected by a shareholder aren’t so certainly ascertained.

Further to this, in the event that the company goes bankrupt and is liquidated, the creditors’ claims are first satisfied from the assets sold and only after this has been done – and shareholders will only be paid if there is anything left.

Meaning when the liquidation of a company does unfortunately happen, shareholders often get nothing.

As referenced earlier in this section, because shareholders take on higher risk, they also expect higher returns in return.

In another example, government securities have a lower risk against corporate bonds, since the security of our capital depends on a state’s ability to repay us, compared to this companies carry more risk.

Of course, there are exceptions to this. An Apple bond is much safer than, say, a Ugandan government bond. This is because smaller countries carry more risk.

High Yield, Low Risk?

A recurring question you may sometimes hear, or even ask yourself is; “How can I get a high return with low-risk exposure?”

Unfortunately, there isn’t such a thing, at this moment in time, that can be utilised.

If there were, it would be an arbitrage situation that investors would understandably take advantage of very quickly and so it would disappear in the blink of an eye.

For example, imagine an extreme situation in which the yield of an almost risk-free government bond is higher than the yield of a stock, which carries a much higher risk;

Institutional investors (whose thousands of employees and computer algorithms constantly monitor the market) would immediately start buying government securities, as it has become quite attractive compared to other investment opportunities. This would increase the demand for government securities and therefore the price.

A higher price would simultaneously mean a lower yield, thus correcting the yield on government securities to the point where it reflects its risk.

So if you want to get a high return, you have to take a higher risk.

3. Diversification

While the risk of investing cannot be completely eradicated, it can be reduced by avoiding unnecessary risk.

You may have heard the saying, “Don’t put all your eggs in one basket.” This is very relevant here.

Many people make the mistake of investing all their money in one particular company’s shares. If you were to do this, and something happened to your chosen company, you could lose a lot of money or even potentially lose all of your invested money.

Think in Portfolio

Instead of individual stocks or bonds, you may want to consider a portfolio that is more broad and diversify your investments across different asset classes.

This will make the performance of your portfolio less dependent on the performance of a single asset class, which will:

Reduce the risk of your investments
Increase the return on your entire portfolio
With a well-diversified portfolio, you can achieve a much more favourable return-to-risk ratio.

As we have already seen, each asset class has its own unique feature and they each have an individual reaction to different market changes.

In general, where one asset class performs poorly, another will moderate or offset it.

Example: In times of crisis, when stocks tend to fall sharply, bonds can provide security, thus balancing the performance of your portfolio.

Not only should you just diversify between asset classes, but it would be beneficial to at least consider diversifying the products bought from within the same asset class.

Example: Instead of just one company, you can invest in many multiples, allowing you to spread your risk a lot more.

As you can see, you can diversify on three levels:

Between asset classes
Within asset class between different, individual investments
Between different regions and industries

ETFs: One of the Best Tools for Diversification

The following question is a great one, not to mention reasonable to ask:

“I don’t have the money to buy hundreds of shares. In fact, I don’t have the time or knowledge to properly manage them. What should I do?”

There is a saying about finding a needle in a haystack. There is also a continuation to it which says, “Instead of looking for the needle in the haystack, buy the whole haystack instead”

With ETFs you can buy the whole haystack, figuratively speaking anyway.

With a single purchase you can buy into hundreds or even thousands of shares for any amount you can put aside. Minimum amount can vary platform by platform on eToro you can start investing from $10

Investment Concept: Summary

We’ve all heard that we should invest, but many people don’t start. Many are held back by the potential investment risks.

Investments can be risky, but if you invest according to a well thought out investment strategy, you can reduce these risks and have a fairly higher degree of certainty that you won’t lose as much as someone who doesn’t have a set strategy.

Don’t forget because of inflation, if you don’t invest, you are guaranteed to experience some form of a loss.

So therefore investing remains the most beneficial way to achieve your long-term financial goals of building wealth.

While investing may seem complicated at first, with proper research, it will surely become a lot more simplistic and can show good returns.

Have you invested before? Or perhaps you are currently studying and plan to invest in the future?

Whichever situation you are in, we hope that we have been able to cut the jargon for you by clarifying the truths of investing.

Please understand that NO information in this article should be considered investment advice and should only be used as a guideline.

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BEST INVESTMENT SINCE 1927: SMALL VALUE SHARES

10 minutes to read

Our article will look at which shares would have made us the most profit if we had bought them between 1927 and 2019. We will talk about the so-called small cap stocks and discuss how much these stocks outperformed the U.S. stock index, the S&P 500.

We will also talk about how much differently these stocks have performed over the past decade and how well this could mean small value stocks may perform in the future.

Our topics:

What was the result of small value investment between 1927 and 2019?
What does small value stock mean?
Value-glamour anomaly in the stock market
How value shares outperform periodically

What was the result of small value investment between 1927 and 2019?

If we look at the yield on small value shares in Professor Kenneth French’s Research Portfolios database, we find that the annualised return on small value shares was 14.5% between 1927 and 2019. Meaning small value stocks outperformed the S&P 500 index by 4-5% annually, with a yield of 10.2% in the same period. So you could say that small value stocks have been the best investments in the U.S. stock market for the last 80 to 90 years, but over the last decade, the value factor has underperformed the stock market, which affects small value stocks well.

The problem with the above comparison is that we compare stock indices. Still, we cannot invest directly in stock indexes, so we get a more accurate picture when comparing specific investment products. For this purpose, I raised the Vanguard Fund Management S&P 500 Index (VOO) (VFINX) and the VB (DFA) US Small Cap Value etf.

The graph below clearly shows that the small value portfolio (11.37%) outperforms the S&P 500 index (8.03%) between 1994 and 2012.

small value shares

But after 2012, small value stocks (10.85%) are lagging, with the S&P 500 index outperforming by 14.73%.

However over the past decade, small value stocks – and practically the value factor – have diminished the stock market’s impact. We have considered the possible causes of this change, so let’s look at what small value shares mean.

What does small value stock mean?

A ‘small value share’ is a term for any shares with a low market capitalisation, i.e. small companies, and are underpriced based on various fundamental indicators (e.g. P/E – Price-to-Earnings ratio, P/B – Price-to-Book ratio, P/S – Price-to-Sales ratio, P/FCF – Price-to-Free Cash Flow). Investors are actually exploiting two stock market anomalies by investing in value shares; because one only invests due to the size factor, i.e. low-cap stocks have a premium yield.

Between 1927 and 2010, the average annual return on shares with the largest market capitalisation was 10%, while the average yearly return on shares with the smallest market capitalisation was 21.26%. When the U.S. stock market was split into ten different parts. This defined the largest and smallest stock categories, according to their level of capitalisation.

The smallest category of shares became the lower deciles. In contrast, the largest market capitalisation became the upper decile, meaning this group is the top 10% of shares with the largest market capitalisation. But this anomaly is observed not only in the case of shares with the most and least significant market capitalisation but continuously it has been shown that those with smaller caps can make a higher possible yield; see picture below.

For example, the 50% of shares with the smallest capitalisation would show an average annual return of 17.24%, if the value of all U.S. stock was to be halved. In contrast, the 50% of shares with the highest capitalisation would only offer a return of 13.32%.

The other is the value factor, i.e. purchasing underpriced shares on the basis that their future value will out-perform. This value factor is based on well-known investors, such as Warren Buffett’s investment methods, but backtesting has shown that the value factor is a common element even in long or short techniques.

However, the problem is that the impact of the value factor has diminished over the past decade. As a result, some indicators may no longer achieve any additional returns (yields that outperform the S&P 500 index), but some other indicators still prove effective. In any case, these are the reasons behind newspaper articles in which you read that Warren Buffett’s method of investing, or value-based investing, has failed, it is not working.

Value-glamour anomaly in the stock market

The truth is that different premiums on the stock exchanges have changed over time. As an example, let’s mention the most well-known premium, the risk premium of the stock market, which also forms the basis of the CAPM (capital Asset Pricing Model) and shows a decades-old correlation, i.e. investors receive a return premium in exchange for equity market risk. This yield premium averages 8.24%, and at a stat value higher than 2 (3.91), indicating a statistically significant result. This is a robust, significant observation, and the value factor is similar.

However, in the case of the risk premium, we also find that it is not always positive. We will use the following periods: 1929 – 1943, 1966 – 1982, and 2000 – 2012 to highlight this. In all of these periods, the risk premium of the stock market was negative – the S&P 500 index would have given you a lower return than risk-free investments would have done. Let’s also discuss that, if we take an even more comprehensive retrospective look, there have been several negative risk premiums in the past.

As you can see, not so long ago,the risk premium was negative in periods of 10-12 years, therefore the fact that the value premium has been negative for the same length of time, is a trend more than it is a surprise. The presence of this extended period isn’t a surprise, simply because stock markets have longer cycles, but as you can see in the graph above, the value premium averages 4.7% per annum.

We have also talked about the reasons behind the underperformance of value shares, and in this article the so-called value-glamour anomaly also appears, i.e. popular growth shares (glamour) underperform the shares selected based on their longterm value, but it is still possible that growth shares can outperform in the short term.

Value shares outperform periodically

It is worth being aware that the returns available on the stock market and stocks also change over time, so while it sounds reasonable that the yield of the S&P 500 index is 10% per year, this average is calculated over a period of 90-years. Over a shorter investment horizon (e.g. 5-10 years), yields are significantly spread relative to the average, depending on valuation.

The graph below shows the P/E ratio (Price-to-Earnings ratio) of the S&P 500 index over the past 25 years. Over the past 25 years, the average P/E of the S&P 500 index has been 16.39. The graph also shows the boundary of single standard deviation (13.24 and 19.54) with dashed lines, i.e. assuming a normal distribution, the P/E ratio moves in the range 13.24 to 19.54 for 67 per cent of the period. And if the P/E rate leaves this band, we will see a level of appreciation that is relatively rare (33% of the time).

If we look at the double standard deviation, the P/E ratio varied between 10.63 and 23.23 in 95 per cent of the period.This means that above 23.23 (now 21.72), we will witness a rare event with a probability of 5% based on data from the last 25 years.

The problem is that a high P/E ratio predicts low future returns. For example, in the photo below, you can see the 1-year forecast. The descending yellow line shows that with the increase in the P/E ratio (on the X axis), the available annual yield falls (Y axis). The problem is that the standard deviation of the data is substantial. In some years, yields are very far from the yellow curve, i.e. the indicator is unsuitable for an annual forecast (the correlation factor of 9% indicates this).

In the case of forecasting five-year annualised yields, the forecast is much more accurate. The standard deviation of the data is smaller, but this also shows us the above correlation. Or a more accurate (80% correlation factor) is the Shiller P/E ratio.

The essence of the above is that the rise in the stock market is typically driven by growth shares, so value shares underperform in the mature phases of a bull market when it comes to the stock market. You can see an example of this in the graph below, where you can see an index in yellow showing the largest 1,000 growth companies in the U.S. stock market. In grey, is the most sizeable price of 1,000 value shares.

It can be clearly seen in the picture above that in the bull market preceding the dotcom bubble, growth shares outperform significantly, and then by the end of the crisis, they fall back to the same level as value shares. This is followed by the period when value stocks begin to outperform.

And then, over the past 10 years, growth stocks have outperformed strongly, and the gap will widen spectacularly after 2015. At present, the P/E ratio increase correlates with growth shares’ price increasing.

And if we compare the valuation of value and growth shares, we can see a similar situation. In the picture below, you can see that before the dotcom bubble (2000), growth shares will become more and more expensive fundamentally (downward curve). Then the valuation of growth shares will again approach reality (falling prices on the stock exchanges, this will improve the P/E ratio). However, over the past five years, we have seen that growth shares have become more and more overpriced, when compared to value shares (the curve is falling).

Therefore, we have seen that growth shares outperform value shares over time in certain periods. However, over more extended periods, value shares usually outperform. There are also logical reasons for the overperformance of growth stocks; think of the irrational behaviour of some investors in the stock market. Even in longer periods of time, momentum drives up prices, but this results in an overpriced situation (and in-turn predicts lower future returns).

The bad news for investors is that such overpriced situations can persist for years, and as previous examples show, there’s nothing special about an effect not working on stock markets over a 10-year horizon. Of course, small value and value shares may outperform again sooner or later, but this will have to wait.

The topics that we have/will cover are: stock market trading, stock market investing, correlations that could result in additional ROI, facts and misconceptions about the Stock Exchange and stock market anomalies, as well as many more!

Before considering investing in small-cap stocks you should do your own research (DYOR) on them. To help get you started, we have found a great article that will bring you some extra knowledge.

Read more from Us

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Risk Management for Forex and CFD Trading

8 minutes to read

Risk Management for Forex

Learn the best risk management practices for successful Forex and CFD trading.

In order to trade Forex and CFDs, leverage is needed, and it can greatly multiply your profits. Due to the risk associated with leverage, though, your losses can be significantly increased too. The higher the potential profit, the greater the risk, so it is a prerequisite for your subsequent trading to understand the risks of leveraged trading. Your guide to Risk Management for Forex and CFD Trading.

As we said, Forex trading does have high risk. Thankfully, in many ways, you can lessen this.

This article will guide you through the basics of applying risk management strategies. Please note that this is not financial advice, and we are merely providing an informative resource for you to educate yourself on this topic further.

What Does Risk Management Mean?

General trading risks

Your profit opportunities are always closely correlated to market risk.

Think of risk management as a package of assets and activities that you can use to keep your losses low and potentially increase your profits.

Risk management in Forex trading is based on the following four fundamentals:

Identifying the risks of Forex
The analysis and assessment of these risks
Solving ways to reduce the level of risk
Consistently using these solutions with careful management and consistent utility

Examining markets is a priority for both novice and experienced traders alike. Finding a good market “entry” is vital. However, this doesn’t lessen the value of risk management has, for professional and new traders alike.

We also wrote an article about market risk specifically click HERE to read it

Leverage effect

Most people choose Forex and CFD trading because of the possibility of leverage. Why? Because with leverage, we’re going to have a much smaller margin requirement, with less capital – this helps produce a more significant profit margin.

REMEMBER; If the market doesn’t go your way, you could lose a lot more!

The more leverage you use, the faster you can win or lose. For example, there is a chance that you could choose leverage higher than you can handle. If this were to happen, it could cause you to no longer manage your assets sufficiently, potentially causing losses. Less leverage can be an attractive option to reduce your risks, but, at the same time, any potential profits would deflate because of it. Therefore, it is worth carefully considering the degree of leverage you have.

Incorrect market valuation

Trading Forex pairs, CFDs begins by deducting spread costs (difference in buy and sell price). Immediately after opening the position, there will be a negative value in your profit column. You should be aware that your trade will not always be profitable. It doesn’t matter how much you lose. To keep losses within reasonable limits, you should set a stop loss. However, remember that setting the “stop-loss” too narrow will mean your position may be closed even with minimal market movements.

Remember, not all positions will close in the green (profitably).

Rapid market movements

The market continuously moves because of news, opinions, trends, and political decisions.

For example:

Suppose a central bank announces that it is changing the interest rate. In that case, this suddenly causes considerable movements in the markets, and significant gaps (breaks) in the exchange rate may appear very quickly.
A prominent market participant may intentionally cause market ‘pain’, generating a significant downward shift by liquidating specific, more prominent positions.

Sometimes there may be unexpected market movements. Even if you feel like you are constantly watching what is happening, you can never know precisely what will happen in the next few minutes.

What do we suggest for that?

You may want to use automatic tool systems, such as stop-loss and take profit parameters, to close your positions on time for you. However, it is essential to know that inputting a stop loss does not promise to eradicate the possibility of loss completely; it can only limit how much loss you can suffer.

Market gaps

Suddenly the exchange rate jumps, which is clearly evident on the chart.

A gap usually occurs after the market closes, but there are situations when the exchange rate reacts to unexpected economic news or events in the case of an open market.

Why is this important? If such an open market gap is created, the set stop loss and take profit levels will only be executed with the closest exchange rate available. An example on the EUR/USD graph:

An unusually large weekend gap emerged on this chart
There is no bid/ask within the gap, which means that the stop loss placed is only triggered at the nearest exchange rate after the gap.

Risk Management for Forex

The presented gap on the chart shows a negative slide in Forex Trading rules. But, of course, there is also an example where slippage can result in a higher return for the client, since the profit taking has been achieved in a more favourable place.

Risk management tools

Stop loss – know your limits

Prices can move very quickly, especially if the market in a period of volatility or nervousness. Therefore, a well-placed stop loss “reacts” much faster than any manual trader would be able to react, making it one of your most serious risk management tools.

Countless articles and articles have been written about choosing the proper stop loss, but there is no golden rule that can apply to all traders and their different trades. The appropriate stop loss location for each trade must be determined separately by answering the following questions.

What is your trading timeline (just know – for a longer-term position, there may be more volatility)?
What is the target price, and when can we expect to reach it?
What type of account do I have, and what balance do I have on my current account?
Do I currently have any open positions in the market?
Is my position size appropriate for my account size, balance, trading timeline, and market situation?
What is the general market sentiment (volatility, liquidity, news, external factors)?
How long is the market open (e.g. is the weekend is approaching or when will the market closing be happening in the evening)?

Since there is no general rule on setting up a stop-loss, we recommend using a free demo account so that you can learn to get to grips with proper implementation without any real risk happening to you. Here are some trading examples of different stop loss uses. If you have a real account, you can use MT4’s extended trading features in the same way, which displays the risks associated with each stop loss in the specified currency.

Position size

Even the best of traders can experience non-profitable positions. For example, ending with 5-8 out of 10 trades positive is considered a successful ratio in Forex Trading. Therefore, a well-chosen position size is critical to get through any market movement.

Select leverage

As you already know, too much leverage can increase your risk, and even a few negative trades can ruin your good results. So, we want to remind you:

To choose the right level of Forex leverage for you, and don’t get in over your head.
use our trading calculator in MT4 Supreme or on our website to see different trading situations, which will help you later choose the right position size for your live trading.

External factors

Keep in mind that several external factors can affect your trading strategy on Forex. Such factors:

power outage and/or internet connection problem
you are busy or hijacked by office work.

Try our trading calculator to practice different trade scenarios.

(Try the trading calculator)

Be aware of the picture as a whole

Forex and CFD trading can provide substantial profit opportunities when buying or selling. But remember, it can also cause losses if you don’t practice and learn risk management. Identify your weaknesses and manage them. This will be what will help control your losses – even if you have 8-10 winning trades, just one single losing trade can absorb all of those profits.

We know that the psychological factor in a loss-making trade can discourage many novice traders. But it is essential to understand that loss is part of trading. So, before you start your first live trade, understand:

Losses are inevitable
And know how to process them psychologically before they happen.

This guide is intended to facilitate the trader’s risk management with descriptions and examples. As well as what tips we offer, we ask that you do these two things:

Keep this fundamental information in mind as you improve your personal risk management strategy
Understand that the information we have provided here will only help you to limit your losses – it will not solve them.

But listen, remember, Forex and CFD trading isn’t Heaven and Hell itself. You can significantly improve your profit/loss ratio for successful trading by selecting the correct risk management methods and applying them consistently.

You can try Forex trading risk free with a demo account. There are many brokers out there that we could recommend, one of which being Etoro.

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HOW TO BE A SUCCESSFUL INVESTOR

9 minutes to read

HOW TO BE A SUCCESSFUL INVESTOR

Several helpful principles could assist in achieving desired portfolio results and become a successful investor

If you follow, or even at least consider, these nine investment principles, your portfolio will undoubtedly thank you:

Invest simply

Avoid emotive decisions

Keep out-goings low

Invest passively

Invest long-term

Appropriate risk distribution

Diversify

Be tax efficient

Invest regularly

Invest Simply

Although it may seem incorrect, the most straightforward investment solutions are usually the most profitable. Don’t complicate your investment strategy unnecessarily. Invest in such a way that you can understand your own strategy without too much effort.

Even the legendary investor and billionaire – and one of the richest men on the planet – Warren Buffett, followed a simple rule when choosing investments:

He only invested in companies that he understood, and companies whose products he encountered on a daily basis – Coca-Cola, for example.

Avoid Emotive Decisions

The biggest enemies of investments are the investor’s emotions and the so-called mental limitations that are characteristic of all people.

These natural limitations include:

Herd mentality

Subordination to mass consensus causes this and stems from the idea that a majority can’t be wrong. However, as history shows, it is one of the most dangerous forms of behaviour in finance, causing events such as bubbles, sell-outs and periods where there is fear of buying markets when they’re low, etc. Stay impartial to the market and be decisive – instead of eager to follow a ‘trend’.

Too much self-confidence

People tend to hold themselves in high regard and feel they can handle some things better than other people. To believe the following can be naive and will result in losses: ‘I can outperform the market, even though 99% of investors who have gone before me have not’. Try to keep your ego away from any decision making events.

Self-deception

In general, we often tend to (subliminally) choose to pay more attention to information that matches up with our own theories and opinions. Unfortunately, facts that go against our own ideas are likely to be put to ignored. This is also subconscious. Keeping as open of a mind as possible is crucial.

Fear of loss

Numerous studies have shown that we experience a surge of serotonin when we reach a profit- causing a positive mood boost. Although, opposite to this, the same studies also show that the fear of loss is three times stronger. Because of this, many people resort to the quick sale of profitable securities and retain loss-making positions. Adopting this strategy is not appropriate investment behaviour and should be avoided.

Mental myopia

This may be an unfamiliar term to some. Simply, it means that the small yet essential pieces of information that aren’t as obvious at first glance can be quickly forgotten or not even noticed at all.

Not only this, but current affairs and information that may signal a near-future threat tend to take precedence. Here, decisions are more short-term and can even be impulsive at times. An example of this mentality would be buying while prices are increasing and then selling when the price begins to lose momentum and reverses.

Financial studies have evidenced that a vast majority of individual investors produce lower returns than the market offers due to this series of natural behaviours.

To be successful in financial markets, you should not allow emotions to affect your investment choices. Minimise how much resolution, decision-making and intervention you undertake in periods of heightened emotion.

Keep Out-goings Low

Costs absorb a portion of your profits. The level of cost that you incur is critical to the positive or negative outcome of an investment.

If you want to invest successfully, we aren’t saying to avoid costs altogether, as this is next to impossible if you wish to progress. So, although costs are inevitable, just remember that the lower your expenses are, the higher your potential return could be.

Passive investment in the market

Passive investment would likely be the most optimal way to meet the three previous investment fundamentals successfully.

Passive investing essentially means investing regularly “buy it and forget it”. The advantage of passive investing is that it requires little to no intervention in the portfolio. So it’s more about the “buy and hold” strategy. The strategy does not seek the timing of investments or the selection of specific securities.

You can expect higher returns on passive investment due to reducing the risk of human error, as well as the minimal costs.

Increase your financial knowledge

The easiest way to make any particular investment successful is to take the profits offered by the market. There is a very low probability that you will achieve a higher yield in any other way in the case of a long-term investment.

The only caveat with this is being able to know when to take these profits. Therefore, through experience, you will learn how to best exercise patience and reason to get the most out of your investment when the time comes.

Invest Long-term

There is a saying that goes, “You walk slowly, and you will live longer” This phrase is more relevant in finance than any other aspect of life.

The key to success in investments is the interest rate. Thanks to this, the value of the investment increases faster every year.

Furthermore, the long investment horizon also reduces risk. Financial markets fluctuate from time to time, but they generally have historically moved in the same direction and have increased in the long run. The companies you invest in make billions in profits every year. This profit is always legally reversed in the company’s value (the price of shares), regardless of the market’s current mood.

Speculation is short-sighted, and no billionaire got rich because of it; they made their wealth with successful investment. The natural profitability of financial markets ranges from 8% to 10% per annum.

HOW TO BE A SUCCESSFUL INVESTOR

Logarithmic development graph of the SP500 index for the last 70 years. Average annual growth of 7.8%, with dividend reinvestment 11.34%

You can use TradingView to backtest assets.

A successful investor invests in the long term. They don’t give in to momentary worries or highs and adhere to the investment strategy. Short-term fluctuations in investment do not give rise to changes in their approach.

Appropriate Risk Distribution

To be satisfied with your investment, you need to know your relationship to risk.

The placement of financial assets means the distribution of different investment vehicles. Assets will differ in profitability and the risk associated with them. Historically, the most effective assets are shares, but their prices sometimes fluctuate more than bond prices, which offer lower but more stable profits.

The correct distribution of investments determines your future return and is an essential tool in passive investment.

There is no universally appropriate distribution. It differs for each investment and varies from investor to investor.

Invest like a professional.

There are a few different correlations between investor goals and portfolio composition when it comes to investing. The following strategies show this:

Choose more stocks and fewer bonds if you have a longer investment outlook.
If you want to invest most of your savings, choose more bonds.
If you have a higher appetite for risk, choose more stocks.

Diversification, i.e. the distribution of risk

Allocation is about the composition of an investment’s specific distribution, and diversification refers to its diversity. If you buy shares of 10 major oil companies, they are your allocation, but because the same ‘niche’ is the focus of the products, the portfolio diversification is much lower here. Portfolio diversification is important from several perspectives, especially for passive investment:

Reduces the risk

At some point, you have most likely heard the old saying of not putting all of your eggs in one basket. This saying talks about the fact that all of the eggs will break and therefore be wasted if the basket falls over. This ideology is how you should approach investing. The more assets in the portfolio, the lower the portfolio’s risk (since the loss of one of them is negligible when considering you will still have the rest of your holdings), meaning diversified portfolios are more stable.

Increases yield

No one can certainly predict which asset will have the highest return from year to year and which will have the most significant loss. Every year, the winner or loser is different for each asset class. The effort to invest exclusively in the winners usually produces worse results than the market. Therefore, the choice of a wide variety of devices is the most sensible.

Conditions for passive investment

Passive investment is about investing in the market.

All securities traded on a stock exchange or in that region represents the market.

If you want to invest in the market, it would be most beneficial to build a portfolio that has a similar composition as the market. Doing this would give your portfolio a high level of diversity.

Tax-efficiency

If you want your investment to reach the highest possible income, it is necessary to reduce the tax rate as much as possible.

There are separate categories within which you can find different asset classes and investment methods, along with varying tax pay classes. There are several ways to optimise your tax payments for investments.

It is essential that, when setting up your investment strategy, you keep in mind how it will cause you to be taxed.

Invest regularly

If you don’t have a large amount of savings that you can utilise here, don’t despair. Investing monthly with smaller amounts is perfectly fine – everyone starts somewhere, and it isn’t necessary to put everything on the line to be an investor.

From the point of view of budget planning, it is easier to set aside a small amount per month than to wait for a more significant, one-time capital amount to be put together. It is better to increase the value of your money correctly from the earliest available moment instead of being a bull in a china shop.

Moreover, regular investment is also interesting in terms of risk. When buying securities, you do not have to fear every month that the market will not fall shortly after the investment. A monthly fixed amount of investment reduces risk by buying more shares (cheaper) and vice versa (more expensive). This is known as Dollar Cost Averaging, which we have mentioned in a previous article

Investing regularly is an accessible solution which means that anybody can become an investor in their own right.

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Long-term investment: A “How to”

11 minutes to read

Long-term investment article

Generally speaking, long-term investment is usually a beneficial solution for those who want to increase their money and can spare the money for many years to come.

In general, long-term investments are more profitable than short-term investments. Although, on the other hand, it does still come at a price of its own. Long-term investment requires more experience on the part of the investor.

You shouldn’t rush your purchase, and the product should be carefully selected, as the yield will be influenced solely by the future of the product – This is why we always stand by the DYOR (Do Your Own Research) mentality.

Long-term or short-term investment, which to choose?

Compare the best long- and short-term investments available on the market based on maturity, profit and risk.
Decide which product is best for you.

Five principles of long-term investment

Before you begin investing, it is crucial to be aware of the aspects that will help you make the best decisions.

1. Choose an investment that will satisfy your goals

When you invest your money, you need to know how much risk you can take. You must select the product according to your own needs.

2. Invest in multiple products

The more products you buy, the more confident you can be that you won’t lose your money to a company. Diversification usually results in a lower risk.

3. Don’t try to time

Many people want to invest with the buy low and sell high strategy. However, such timing is risky and often gives experienced investors a hard time.

4. Shop as planned at regular intervals

Regular investment is a well-established technique. The basic concept is to divide the amount you want to invest into several parts and invest the capital at predetermined intervals.

Experience has shown that this technique makes it cheaper to obtain shares overall. This is known as dollar cost averaging

5. Check your investments

You should look at your portfolio at least once a month. The market is constantly changing, so the balance between your products can easily be upset. If you notice this, it is recommended that you redistribute the amount invested..

How can I invest?

There are many different ways a person can invest to shape and build their portfolio. However, as there are distinct differences between the available products, it can be overwhelming to choose which ones to allocate capital.

Here, we have put together short explanations of each product you will see most often:

Shares

Minimum capital: From $1 You can start even with a small amount as you can even buy just a fraction of a share

Possible profit: very high

Time horizon: 5+ years

Savvy: very high

Risk: very high

Stocks are one of the most popular types of investment. Many people buy shares because there is a large amount to choose from and everyone can likely find a suitable product for them. Stock investment can be beneficial in both the short term and the long term.

The biggest problem with securities like this is that they can be risky. Many factors influence the value of the shares. For example, the company could go bankrupt casing you to lose your entire investment.

If you decide to buy shares, we recommend you diversify by buying shares in several companies instead of just one.

Long-term investment shares

S&P 500 index growth from 1981 to 2021. This includes the value of the largest 500 companies in the United States.

Property

Minimum capital: over $100,000

Possible profit: high

Time horizon: 10+ years

Savvy: medium

Risk: medium

Real estate can be a profitable long-term investment. There will always be demand for it, so you can be sure that a property will likely hold its value in the future.

When buying real estate, it is worth considering several aspects. Your chances for success will likely be higher if you purchase real estate in a developing city, in a popular neighbourhood.

An apartment can potentially be a lucrative passive income when run correctly. Why – because if you rent it out, you can make a profit long-term, continuously, not just from a single, one-time sale.

Investment fund

Minimum capital: $1,000 to $10,000

Possible gain: medium

Time horizon: 1-5 years

Savvy: low

Risk: high

An investment fund can benefit people who want to save long-term but are less knowledgeable about the market.

Experienced investors manage this fund and will invest your money in different products. They get a small contribution from the profits but, in return, they help you put your money in the right places.

Anyone who buys into an investment fund can choose an open and closed-end contract. The open-ended contract can be sold at any time, but the closed-end fund can only be redeemed at the end of the term.

Risk:

Although experienced investors manage money for a living, they too can also make bad decisions. So, keep in mind that an investment fund is sometimes almost as risky as buying securities yourself.

Bitcoin

Minimum capital: From $1 You can start even with a small amount as you can even buy just a fraction of a Bitcoin called Satoshi

Possible profit: very high

Timescale: 1+ months

Savvy: very high

Risk: very high

Bitcoin was the first cryptocurrency and is considered to be the most popular. By design, it helps people to store their money in a secure, location separate from the bank in their own crypto currency wallet that only they have access to and no-one can control it but we will talk about this in a separate topic.

Because of its popularity, many investors choose to trade with Bitcoin, this is evident when looking at price increase patterns. Bitcoin is being adopted as a currency by more and more businesses, but the future of virtual currency is still not known.

Bitcoin chart

Bitcoin has increased over the years. The price is expressed in US dollars (USD).

We only recommend cryptocurrency investing for individuals who have some experience and/or are aware of the risks involved.

ETF

Minimum capital: $1,000 to $10,000

Possible profit: high

Time horizon: 1-5 years

Savvy: low

Risk: medium

ETFs are exchange-traded investment funds. An ETF includes several securities, primarily shares of similar companies.

Because it invests in multiple products simultaneously, it is safer than a single stock, but it also has a lower yield. For this reason, shares are usually bought by those who think in the long term.

By purchasing an ETF, you would be investing in the product behind the investment fund. An ETF can be more than just a security; it can also be a commodity. Most ETFs are index trackers.

Commodities

Minimum capital: $1,000 to $10,000

Possible profit: very high

Time horizon: 5-10 years

Savvy: very high

Risk: very high

Many people think that some commodities products aren’t profitable. In contrast, various raw materials and essential products can be an excellent long-term investment.

There are several ways to invest in such products. The easiest way is to buy the goods or choose a suitable aforementioned ETF.

Risk:

In the case of commodities products, risk must be taken into account due to the government’s and economy’s heavy influence on the market.

Benefits of long-term investment

> In most cases this form of investment produces a positive return.

> The best weapon against recession.

> It can require little effort and little attention when ran well.

>You can use profits to reinvest back into the asset.

> Long-term yields will not be affected by temporary fluctuations.

Disadvantages of long-term investment

> It takes a lot of patience.

> It is more difficult to diversify than with short-term investments.

> It demands determination and commitment.

> It’s hard to know which investment would be worth it the most.

> To choose a good product, you need experience.

Pay attention to this in case of long-term investment

Before you decide to invest in the long term, you may want to be aware of a few things.

Don’t have unrealistic expectations. Long-term investments only develop over time, so don’t expect an immediate return.
Take the risk. Like all investments, long-term alternatives are risky.
You need knowledge. It is not worth starting the investment hot-headedly, and long-term investments require both experience and strong research.
Optimize your investment. If you’re thinking long-term, it’s worth keeping your money in more products.

Misconceptions

There are some misconceptions that novice investors often misjudge. We want to take the chance to correct some of these misconceptions for you, because:

Shares do not always yield high returns in the long term
Bonds can sometimes out-perform shares
You don’t have to wait for the market’s “lows” to invest
You may not benefit if you leave your money to experts
Investment should not be based only on past returns
The chance that you may lose the amount invested, indeed exists

Before you invest your money, consider the fact that this money will be written off and is ‘no longer yours’ and that this could last for years, or even decades. So never invest more than what you can afford.

If losing the amount invested would result in financial difficulties, you’ll probably have to reduce it. This also includes utilization of personal loans which, a lot of the time, is not a wise move in the long term – only invest if YOU can!

Before deciding, think about the worst-case scenario since, with this, you can assess your potential situation including any negative consequences, making a sensible decision easier to achieve.

Where and how can I invest?

If you want to invest in real estate, you need to look for an apartment or house on the market.
If you would like to invest into a bank deposit, contact your bank.
If you were to buy a security or cryptocurrency, it is easiest to do this through an online broker.

If you are looking for such a platform, we recommend eToro to you. eToro is one of the most popular online brokers; their services are available both on mobile and PC.

Investing in eToro

Anyone can use eToro, and CopyTrading makes it an excellent choice for novice investors.

Registration takes a few minutes, but you will need to verify your identity after completing your user profile. To do this, you will need a scanned, document.

On the site you can choose from several products, such as:

Shares
cryptocurrencies
ETFs
CFDs
Indexes

Once you’ve confirmed your user account and deposited into your account, you can purchase any product. The use of eToro is entirely free of charge and there are no hidden fees.

$100,000 demo account

Novice investors will receive a demo account. The preliminary account allows you to test the site and gives you some experience of the market. Making it easier to decide what product(s) you want to buy later with the demo account.

CopyTrading

CopyTrading is one of the most popular services on eToro. Here you are able to replicate the movements of a more experienced investor, gaining further insight into market strategy at the same time – all whilst hopefully making a profit when they make good decisions.

The risk must be taken into account

Successful investors also make bad decisions, so don’t expect CopyTrading to relieve you of the risk of investing.

Before choosing CopyTrading, be sure to check investors’ listings. Their profile contains valuable information, including how much their past investments have come out good.

eToro gives you every opportunity to make the right decision.

How do I create an account on eToro? – eToro

Synopsis

Long-term investment requires a lot of commitment, as well as patience, but more often than not this waiting will bear fruit. There are plenty of opportunities for long-term investment in the market; you just need to find the solution that suits you best.

Don’t forget the following:

If you’re a novice investor, try your luck with a smaller amount first.

Before investing long term, it is necessary to heavily consider what kind of product to buy and why any particular one would suit your portfolio.

If you decide to invest in something with a high risk factor, it would likely be a good idea to consult an expert before going ahead.

Only risk as much as you can comfortably lose.

Every investment is done at your own risk and past performance may not always be a reliable indicator of future results. It is never a certainty that an investment will pay off and so careful management is important.

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How To Save On Water Costs In The Household?

5 minutes to read

How To Save On Water Costs In The Household?

How To Save On Water Costs?

Do you know the cost of a single washing machine cycle? Water never gets cheaper and, in the future is only going to get more expensive. To save money, we can protect nature whilst reducing water costs.

In addition, you don’t even need to necessarily limit your use of water since, with the help of our tips, you can begin to learn to think more economically.

Better dishwashing

Saving water should start where we use lots of it – whilst washing dishes. As washing-up is done up to several times a day – we consume a lot of water in this way. Unfortunately, there is no guide on washing dishes properly. Regardless of this, the figures can help you decide what direction to go in – We generally use between 40 litres and 200 litres of water when washing dishes.

How To Save On Water Costs?

To save water, we can wash our dishes in a sink: Soak the dishes in water, wash them using this water with dish soap, and then rinse them with fresh water. Cleaning dishes in this way will halve the amount of water used.

If it feels to you like it is unclean or improper to wash dishes this way – using standing water – then perhaps a dishwasher is the better solution. This is because using a dishwasher will result in the same amount of clean pots whilst only using 15 litres of water!

Buy a flow enricher for taps

If you want to continue washing dishes with running water, buy an enricher. This tool helps to save money by saturating the water with air.

With this great tool, we can still wash dishes with the same level of pressure, while using less water.

Of course, if the water in question is being used for drinking, using one is insignificant, although water consumption can be reduced by up to 85% when washing up and washing our hands. Making this a very effective, money-saving tool.

Use of water in our environment

When living in a family home, water is easily saved by collecting rainwater. Of course, this water isn’t drinkable straight away. But with the help of a proper rainwater collector, enough water can be collected and then treated.

With the help of pipelines, rainwater can be used to flush toilets – this would save quite a lot of water. Why pay for water if we can use some for free – if you are confident processing the water to make it usable that is.

Save while showering

We shower every day, taking into account all family members, this results in quite a large amount of water consumption. It’s better to shower than to take a bath! When taking a shower, you use 60% less water than when filling up the tub.

If you use a eco shower head, you can reduce your water consumption by a third compared to classic showers.

Shaving without wasting

Saving whilst shaving is also a good way to consume less water. It is worth using a sink full of water to rinse the razor of hair, changing it intermittently. This way, we don’t have to run the water nonstop throughout.

Replace the seal

Dripping taps can also be a problem, up to 170 litres of water can drip out of a tap, and this is only if it is releasing 10 waterdroplets in a minute.

That’s about the same as what a family of three spends flushing the toilet every day. At the first signs of dripping, replace the tap seal, as this will save you a lot of money in the long-term.

Do you know how much water the washing machine consumes?

We also asked a similar question at the beginning of the article.

We did this because washing machines cause the most significant amount of water consumption. Therefore, knowing how to save here is crucial. Also, If you have an older washing machine, you’re likely consuming more water than someone with a newer, more ecological model. These older models typically use up to 90 litres of water for a single cycle.

Modern washing machines use around 50 litres of water to wash 5kg of clothing. If you choose a ‘smart’ model that adjusts the amount of water to suit the load, this can save up to 40% more water than one without this feature.

Inspire children

The only way to reduce a household’s water consumption is by all family members contributing to these efforts. With this said, children should also be involved! Usually, children will follow the example of adults, making it easy for a saver parent to teach their children the right habits.

Children are also very emotively sensitive to the fact that some countries do not have enough water.

The need to save is much better understood by children when it is explained to them that there are places where people aren’t even able to drink when needed. This teaching method will help the child understand why saving water is important on a more emotive level! i.e., – With this method, children can be educated to not only save money but also how to conduct themselves responsibly.

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Wanna read some interesting facts about water here you can find 100 amazing facts you should know.

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Inflation: How To Best Protect Your Money!

10 minutes to read

Inflation explained

Despite its continual authority within our economy, precisely what inflation is is still unclear to many people. However, it is an economic factor that affects, without exception, everyone who relies on money to live. From this article, you will learn what inflation is, how to calculate it, as well as how to maintain the value of savings as much as possible despite its effects.

Reporting of inflation

The concept of inflation is of Latin origin, more specifically inflatio – a word meaning flatulence or bloating. However, in economics, it has a different meaning: In this way, it means the permanent deterioration in the value of money. In practice, inflation is a single, sustained increase in consumer goods and raw material prices.

To illustrate a simple example: if a litre of milk cost $1 last year and today it costs $1.10, then the milk is now 10% inflated. However, if only the price of milk has risen, it cannot yet be called inflation on a global scale. Inflation can only be suggested as the cause when a large proportion of products present in the economy become more expensive, all at the same time. So if we can now only buy for $50 less than we could 1-2 years ago, we would be experiencing the effect of inflation, that is, the permanent deterioration of the money.

Types of inflation

Inflation types are grouped according to several criteria. However, we will take a closer look at only two discernable types – those grouped by rate and those grouped due together because the inflation period’s cause. Let’s see the schedule first.

Slow inflation

Slow inflation is when inflation is at levels of around 2-3%. This kind of inflation is the most favourable for the economy, as it positively impacts economic growth.

Walker inflation

Inflation falls into the ‘Walker range’ when its rate ranges between 3% and 10%. Here many goods and services may not be available to everyone. This reduced accessibility happens because wages will, most likely in this case, no longer fully cover living costs. However, despite this, the balance of the economy can still be maintained.

Galloping inflation

If inflation rose above 10%, we would then be in a period of what is called ‘Galloping inflation’. Unfortunately, with this type, we would be on the brink of economic disaster. Wages are now clearly unable to cover general living expenses, due to how quickly the value of money is deteriorating. This factor alone, in turn, can lead to both investors and consumers having a loss of confidence. In the case of galloping inflation, a Government crisis and public distrust of political leaders is not uncommon.

Hyperinflation

Hyperinflation occurs when the rate of monetary deterioration exceeds 50%. From here it isn’t inconceivable for the inflation rate to then potentially jump by hundreds of per cent! This phenomenon is particularly rare, especially in countries with war situations or unstable political backgrounds. Typically the economy is usually destabilised extraordinarily in this situation. To make it worse, this will only be reversed with a series of government decisions and strict austerity. Hyperinflation has been seen recently in Zimbabwe, among other places.

After the Second World War, Hungary experienced an example of this. The value of the Pengő, the currency of that time, fell by 207.19% per day. The Pengő hyperinflation is considered by many to be the worst devaluation in global history to date, so much so that it is regularly used as a point of reference.

Deflation

Simply put, deflation is just the opposite of inflation. In the case of this phenomenon, the value of inflation turns in a negative direction. In practice, this entails huge price drops, which seems optimistic at first glance, whereas it can be a warning signal of an extremely worrying economic situation. If there is deflation in a country, it slows its economy, leading to economic depression, which can cause significant social problems in the long term.

Causes of inflation

According to the economic definition, inflation occurs when the amount of money in circulation exceeds the economic growth of the country, respectively. This is indicated by the original meaning of the word inflation.

For a long time, the value of money was adjusted to the value of some precious metal, more oftenly gold. Fiat currency was then integrated into the market in the second half of the 1900s. Regulatory money value is determined lawfully instead of using this method of ‘balancing’. History shows that printing more money has financed high public debts, unstable economic conditions, liquidity problems and war costs. At the time of printing the money, new banknotes were placed into the market, i.e. the amount of money was “bloated”.

And when economic growth could not keep up with the increase in cash volumes, prices soared. That’s because there’s more money cost per every unit of merchandise.

Nowadays, though, the causes of inflation are more difficult to accurately determine since there are so many theories to consider. According to many, the causes of monetary deterioration today are found in real economic processes rather than just in money printing. The real economy is the part of the economy that is able to remain independent of the financial sphere in the medium or long term.

In the modern age, inflation can develop for two main reasons. Due to the increase in demand (Demand Inflation) and the increase in the cost of producing goods (Supply Inflation otherwise known as Cost Inflation).

What is demand inflation?

In demand inflation, an analogy can be found between the money printing discussed earlier. In the event of low unemployment in a country, a stable economic situation and high wages, consumption patterns increase. At this time, society prefers to sacrifice consumer goods and save less. Thus, as a result of the increase in demand, prices in the economy increase.

What is supply inflation?

Supply, or cost, inflation occurs when the price of products is not due to an increase in demand, but instead due to increases in production costs. The cost of production may increase as a result of both raw material costs and worker wages rising simultaneously. At this time, as demand remains unchanged, traders will make back the excess cost of production from the consumer price, at which point there will be a general price increase.

How is inflation calculated?

The most popular indicator used to calculate inflation rate is the Consumer Price Index (CPI). This value shows the change in the price of goods purchased by the general public and the services used. Most statistical centres, such as the Central Statistical Office, use cpi to calculate the inflation rate.

When calculating the CPI, a so-called consumer basket is defined. This cart includes all products and services whose price changes are tracked. This typically includes basic food, clothing, spirits, tobacco products, cultural services and many other goods.

They calculate the general consumer price index by the weight of the following main product groups.

Food: 26,401 %

Spirits and tobacco: 10,272 %

Clothing: 3,795 %

Durable goods: 7,703 %

Household energy: 6,538 %

Other wares, fuels: 17,976 %

Services: 27,315 %

It is important to note that they calculate several different consumer baskets. There is also a consumer basket for pensioners and a basket used to calculate core inflation. In these categories, the above categories are weighted in a different way.

What’s wrong with the Consumer Price Index?

Consumer baskets show only an average value. In the second and third quarters of 2021, the rate of English inflation was averagely 5.25% per quarter*, you can see this below.

*https://d3fy651gv2fhd3.cloudfront.net/charts/united-kingdom-inflation-cpi.png?s=ukrpcjyr&v=202201190724V20200908

This does not show the actual value of the deterioration of money. For example, generations Y and Z consume more electronics and, because of the popularity of food ordering, they will usually buy fewer food ingredients. In most cases, they rent an apartment because they are yet to buy their first home. Therefore, they may experience inflation up to 10-20% higher than the consumer basket measured. If you’re running your expenses on a monthly basis and on a budget, you can look back and easily work out how much your monthly spending has changed.

It’s the inflation in your consumer basket that shows you best.

Who could fail as inflation rises?

Inflation affects everyone who makes a living on money. However, some are less at the mercy of the harmful effects of general monetary deterioration. Those who keep their savings in cash are typically the worst affected by inflation. Even those who have put their money into investment vehicles, whose rate of return could potentially not exceed inflation, should not feel safe.

Let’s take a closer look at both scenarios:

Savings committed in low-interest government securities

Most classic government securities have a fixed interest rate. If the inflation rate exceeds these typically low fixed interest rates, the value of our money invested will also decline. To prevent inflation, there are types of low-liquidity government securities that will follow the inflation rate. These can be good solutions, especially in an environment of rising inflation.

Savings committed in bank deposits

The situation with savings committed in bank deposits is similar to that of government securities. The interest rate on standard fixed-term deposits in 2021 ranges from 0.01% to 3%. At an inflation rate of 5%, it is not even enough for our savings to retain their value.

Unbound savings in cash

However, the above methods are still, on some level, more favourable than keeping your money sewn into a pillow or just leaving it in a bank account. In this case, savings are entirely exposed to inflation, and our money is constantly losing value at the relative inflation rate.

How can we protect ourselves against the effects of inflation?

One of the most effective ways can be to avoid the effects of inflation is to invest your savings wisely.

If you decide to invest, putting our savings in assets that are more likely to yield above inflation would be better.

In the case of investments, it is a golden rule that it is not worth putting everything on a single page, i.e. it is more worthy of our time to consider as many assets and sectors as possible. This spreading of investment is called diversification, which also helps to reduce the possibility of risks associated with investing.

For example, if you only buy fixed-rate government securities, you may not gain anything in case of high inflation. In fact, in this case, you may not even keep the value of your savings! You may even lose some of it. But a balanced investment portfolio, which includes stocks, bonds and other assets, is more resistant to inflation.

Would you like to start investing? We’re here to help!

Inflation is an economic factor that everyone should consider. It is essential, especially those planning to embark on a long-term savings plan, to pay close attention to this. In most cases, fixed-rate government securities and bank deposits aren’t pro against inflation. And the only way to lose more money is if we don’t invest our savings at all.

If you want to make your savings valuable and enjoy the returns on your investments, you should put your money in a well-structured investment portfolio. Since creating such a portfolio requires a high level of expertise, it may be important to get more comprehensive help in getting started.

If you are not sure where to start your long-term financial planning journey, please be sure to execute adequate research of your own first (We are not financial advisers!). We only help you gain more understanding, knowledge and approach intuition so that you can make the most suitable forms of investment for you, so that your wealth can be a secure, value-proof foundation for many years to come.

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Making Money Quickly: Top 15 Ideas for 2022 [With Examples]

14 minutes to read

15 money making tips

Making Money Quickly

How do I get money fast? – A lot of people will often find themselves asking this question more often than you would think.

If this is what you’re currently asking yourself, you have come to the right place. Below you will find the top 15 methods that can be considered the best way to make money quickly (with examples!). We have tried our best to make these options as accessible as possible, i.e. for anyone and everyone who is looking into this topic and so there are varying levels of suitability.

Also, please remember that some of these potential possibilities will require a small level of time investment (over a month) for you to see the full benefits from that particular option.

No matter how long you have left of your working life or what your qualifications are, you will surely find a suitable opportunity for you.

Let’s see;

1. Sell Your Barely Used Clothes

Selling clothes you no longer use is one of the quicker ways to make money. If you want to get rid of them quickly, you may want to visit a local second-hand clothing store where you can instantly cash-in on unused clothes. This kind of business includes Cash4Clothes, a company that will pay a set cash amount per kilo of clothing articles.

In the online space, you can also do this on various websites, such as Vinted, Shpock and Depop.

If you wanted to go the extra mile, you could even try to sell them on your own, in one of the ad hoc selling communities, e.g. Facebook Marketplace and some Facebook groups centred around selling. Although please note that here you should pay close attention to taking high-quality photos and using competitive pricing to have the most streamlined experience with this.

Cash4Clothes

2. Sell Old Phones and Other Tech

Do you have an old phone, laptop or unused console? This is a good example of making money quickly, as you can instantly convert your old or unused gadgets into money.

Today, the fastest way to do this would likely be on Facebook Marketplace. Some good photos and an apt description will almost always work wonders. Just like with our previous point, there are also Facebook groups dedicated to the buying and selling of preloved tech and so taking a look at these will usually bear low-hanging fruits when it comes to selling opportunities.

If you don’t have time to create listings or posts and need money faster than this, you can instantly convert your gadgets into cash by utilising stores such as CashConverters, who will review and buy your items, although here earnings will be lower than market value as they will need to take into account the re-saleability of the item(s).

If you’re an Apple user, consider Apple’s device replacement. If you purchase a new device, your old device will be included in the purchase price of the new item.

Another option would be Amazon’s Trade-in program. Here you can get an Amazon gift card for unused electronics products. When it comes to what is regarded as acceptable item condition, this is what they state on their Trade-in program page: ‘We currently accept items ranging from non-functional to good condition. To be paid at the highest value for your trade-in, your device must be in good condition.’ They then go on to link their Electronics Eligibility Criteria which goes into further details for the respective condition categories.

3. Be a Food Courier – JustEat, Deliveroo and UberEats

Food delivery has always held its ground, allowing it to continually develop as an income provider. This has only been further boosted over the past couple of years by the pandemic. You may want to take advantage of the ever-increasing trend of recent years and sign up as a courier, as this is also a super quick way to earn money.

Nowadays, you will find ample opportunity to apply for this type of role and what’s more, you don’t even necessarily need a car, just a bike or even a scooter. In many cases, just like with JustEat, a bike and all necessary equipment can be provided by the company, if necessary, if you are able to reach their central hub.

The beauty of this is that, if you have one, it can easily be managed alongside your everyday job.

This is because it doesn’t have to be full-time and hours can be shaped to meet your needs, whether it be just a few extra hours a day or only on weekends. In addition to making money quickly, this option also greatly benefits your health considering how you will have to get around.

All that is usually needed is a quick online registration and, sometimes, a deposit. Then you can get to work right away.

Learn more about how to get started with JustEat or Deliveroo.

4. Give Away Your Unwanted Gift Cards

Have you ever received a gift certificate for a birthday from a brand that you knew right away that you won’t use it?

You may want to sell these vouchers as soon as possible for quick cash, although, just like with used tech, it will most probably be for a fraction of the face value.

A couple of examples of sites dedicated to the safe buying and selling of gift cards in the UK would be Cardyard and Zapper.

In the US, the more well-known name in this field would be CardCash.

Here are some blogs that are written more specifically for this topic:

UK:

US/Canada:

5. Take Freelance Work Online

While it may not always be one of the quick ways to make money, one of the most popular forms of online monetisation today lies within the world of freelance work.

Freelance sites offer job opportunities in all disciplines, from programming to marketing, to video editing, all the way to education.

The biggest advantage of working as a freelancer is flexibility. You can decide for yourself when and how much you want to work. You are also free to choose whether you want to do it all from home in bed or remotely while lying on a beach somewhere.

Undoubtedly one of the most popularly known freelance sites today is Fiverr, and another is Upwork. Whatever knowledge or experience you have, chances are you can turn it into money here.

Don’t forget, there’s a demand for practically everything!

For example, if you like to write and would love to write blog posts for others, do it in return for a fee. You’ll need to post an ad that says the topic you want to write about, the price and when they find you, you’ll be hired.

But if you want to use your good dexterity, online logo design is a good idea.

Countless online businesses are now looking for unique, creative logos to stand out from other companies. You can upload your portfolio, which will be used by companies to select you.

Also, it is completely possible to find works written specifically in your chosen language on Fiverr’s website. Various translation works, English teaching or even dubbing, the decision is yours.

For example, if you like to write, there are also Facebook groups that are specifically created to promote freelance jobs. The most well-known group has loads of members, so you might want to take a look there too.

It is also important to note that anyone who commits to freelance work, no matter which area they’re hired in, should always inform clients of the most up-to-date, most relevant prices before any agreement is reached so that they can make the best-advised decision.

Fiverr Listings

6. Test Websites and Apps

Another, now increasingly popular, form of ‘work from home’ is the world of online testing. In addition to flexibility, the great advantage of this lies in the fact that it does not require any special computing/IT skills.

The first step usually is that the company performs a short test to assess your ability to work, after which you will then be invited to perform the various tests that they require.

In general, we get a fixed, pre-determined wage for performing a test. Within these tests the operation and usability, of different websites and applications, must be thoroughly tested. When detected any errors then need to be reported to the relevant persons.

Even if you aren’t a native speaker of English, but still have a good level of English skills, why not try these sites too when there is a prospect of more work and better wages;

US-based company, UserTesting.com would be a good starting point where you can earn $10 for just a 20-minute test.

7. Rent Out Your Unused Room Online

A relatively quick way to make money is to rent out an empty room, this would of course depend on available space and any relevant legislation. Once again, as long as it is fully lawful, you could even rent out your entire property if occasionally going on vacation. This will mean your property will be giving you a great passive income, instead of sitting desolate during your time away.

We can easily do this on websites that specialize in this, the most popular of which today is Airbnb. After a quick registration, we can create our ad by filling out a few well-taken images and some extra details about the place and its amenities.

Airbnb rent your spare room

As we already said, this is an opportunity that provides a particularly stable source of what is known as passive income for those who want to earn a little extra income without having to commit too much extra time or effort.

However, before anyone goes into it, it is worth noting that the maintenance costs of your home may inflate because of increased usage. We will need more cleaning and we may also have to pay a commission to the service provider (Airbnb for example).

Also, if the house, flat, or apartment isn’t owned by you, it is important to carefully review your rental or tenancy agreement to make sure whether or not it includes a non-rental clause. This is what we meant earlier when we mentioned legality.

8. Rent Your Car Out

The good news is, you could also rent your car!

Do you have a car that you don’t use every day? If your answer is yes, this would be a simple and quick way to make money.

This, by the way, can also be another great passive income option.

Community car sharing has been a great success in Scandinavian countries for many years. This form of car rental is becoming more and more common, in more and more countries, and is modelled on the pioneering Danish company GoMore.

The main advantages over classic car rentals are the affordable price and the simple, hassle-free online booking.

If you’ve got a car from your workplace but don’t want to sell your old car yet, it’s worth taking a look at your local car sharing services, which have the option to rent your car permanently, even for a year.

9. Complete Online Questionnaires for Companies

An easy way to make money online? We’re certain that this is one.

This is so easy that it can be done by sharing thoughts and opinions and completing the online surveys. You won’t necessarily get rich from this but, if you have a few hours to spare, it may be a feasible way of easily earning an extra income.

The more popular sites, which are definitely worth trying are TGMPanel and the National Panel. In the case of the latter, you can redeem your points not only for a cash prize, but also for an object prize, or even donate them to a charity of your choice.

Some sites to consider would be: Best Paid Surveys, SurveyBee.net and Paid Surveys UK.

10. Become a Babysitter

One of the most rewarding jobs is guaranteed to be babysitting. Its beauty lies in the fact that anyone, from a university student all the way up to a grandmother can do it, 1-2 hours a week, or even several days.

Originally, requests for this kind of service were moreso made by friends and family, and, in the case of good performance, it was possible to even form a larger client circle thanks to word-of-mouth references.

But this is much easier and faster these days! Although please do bear in mind that most usually, as children are classed as vulnerable individuals, this would need some previous experience in order to prove your personal credibility.

11. Become a Dog Sitter

Like with babysitting, in today’s world you have the opportunity to take care of other people’s pets for money as well by becoming a dog sitter.

If you love animals, have some free time or and even have free space at home, this job is a perfect choice.

It is worth starting with pages such as Rover.com, DogBuddy and Pawshake.

Once you have registered with the respective site and created your profile, you can then start to take on related work such as dog walking, doggy daycare, all the way up to several days of accommodation – at the price you have set.

Making Money Quickly — rover dot com

12. Sell Your Unused Textbooks

As most people will know, textbooks will usually sell for serious amounts of money. Then, at the end of the school year when they’ve been used to their max potential, they’re the first things in a box and left, forgotten, in the attic.

If you thought there was no market for these books, we have some good news for you!

With forever-increasing tuition fees, as well as general inflation causing everything else to go up in price, students are always looking to reasonably cut costs in ways that make the financial side of things easier for them.

You can easily sell these books online, regardless of the topic, in a number of different places, including Gumtree and Ebay.

Facebook Marketplace would also likely be a good starting place.

13. Rent Out Your Parking Space

Does your rent include sole use of a driveway or garage, but you can’t take advantage of it yet?

If this is the case, then it would definitely be worth considering leasing it out. This is because, with very little energy investment, you can make passive income easily by using a forgone asset.

Especially in larger cities, there is a growing demand for closed car parks, given the ever-increasing parking fees and the continuous growth of the domestic car fleet.

If you want to advertise, it’s a good idea to try using flyers around the surrounding areas or any of the advertisement boards that there may be in your residential building.

14. Talk To Your Boss And Take On More Hours

This may be a very obvious idea, but it can sometimes be very easily overlooked by some.

If you think you’d like to work overtime or want to expand your responsibilities within the company, it’s definitely worth asking to set up a meeting with your boss.

Although not guaranteed, more often than not, a proactive mentality is often rewarded!

15. Sit Down to Discuss Your Wage/Salary

As you can probably tell, this point is very heavily related to our previous one.

A lot of people think it’s completely unnecessary to sit down with our bosses about a pay rise, even though it’s a perfectly reasonable and sensible move.

Anyone who consistently makes the most of their position and performs well within their role, can more certainly expect to start this conversation with good standing due to increased credibility in the eyes of the employer!

Success, as in many other cases, depends on how prepared you are. As mentioned in the previous point, proactive attitudes and careful planning are key to the success of wage development.

Summary: The Best Methods for Making Money Quickly

In this article, we looked at the 15 best ways to make money quickly.

Some options are great for instant making money, but some have greater potential in the longer term.

We sincerely hope that at least one or two of these list entries can help you in some way.

All in all, our most important piece of advice is probably to get started as soon as is possible!

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The Ultimate Stock Market Strategy

5 minutes to read

stock market strategy

There can sometimes be a huge amount of confusion in our minds when it comes to what we can define as a stock market strategy. Not only this but it can be hard to find information on what can actually make up a strong market strategy. It is for this reason that we decided to elaborate on the subject for you a little. This topic is so blurred that even the representatives of some brokerage firms may not even know, and if they do they are strategically silent about it.

So let’s get to the point of what we would be able to call a Stock Market Strategy:

In essence Stock Market Strategy is a written set of rules that, after being retroactively tested on a live account, results in verifiable regular monthly profits. Using the set of rules, anyone can learn and emulate the strategy and the results will be the same as previous sharp results. Stock market strategy should always be free from independent subjective decisions, as well as effectual intuitions and emotions. The stock market strategy regulates all events that may occur and must be followed as a rule.

The following technical elements, rules, procedures, and emotional decisions of stock exchange trading or investment are called a stock market strategy:

Risk Minimisation Techniques are only Rule Elements:

These are just one part of a stock market strategy, meaning it would be fair to say that they are unjustified strategies in when used standalone by themselves

Stop-loss:

This is an essential rule element. Once again though, alone and without a strategy, it will likely only cause regular loss

Follow-up Stop:

This is only an optional rule element but needs to be precisely regulated and then tested live after the initial demo testing. This is because it modifies strategy and can even cause loss-making because and can reduce profits when not used correctly.

Take profits:

Another essential rule element. But without an overarching stock market strategy, profits may be rarely met. Therefore frequently using more stop-losses instead of taking profits, when this does become possible, can cause more continuous losses.

Complex Option Techniques (iron condor, vertical spread, short strangle, ratio & back spread, etc.):

Whichever of these techniques may be referred to by some instructors as strategies, they are technically not strategies after all. Calling complex option techniques strategy is a serious error, they are only techniques themselves, but stock trading strategies can be put together from the complex option technical elements to achieve a regular monthly income.

Tips from brokerage firms or trading and investment advisers:

Since the strategy by which these tips are given is unknown, this is essentially based on virtually unwarranted trust. Therefore this should be done with a little caution about it

Waiting it out “Strategy”:

This is the worst attitude, it does not meet any of the requirements of the stock market strategy. Being unable to generate a regular monthly income and having no loss minimization, can cause an indefinite loss or even a total loss of capital.

Technical Analysis, i.e. exchange rate graph (chart) shape trading:

Opening a position at a breakout, at a teacup, or even at the bottom of an upward/top of a downward trend; Surprisingly, none of these actually are stock market strategies.

Some think of a double or triple-top breakthrough as a breakout. Although to another group of people the same thing could appear to be a teacup, and it could further look like a UFO to someone else. Certain people already consider connecting two bottoms to be a trend, other people will only find a trend when connecting at least three points. Some people draw the neckline on the candlestick, some pull the neckline to the end of the candle.

What we are trying to say is that within all of these different forms of analysis there is a strong presence of subjective elements, to the point where it is no longer possible to apply the same set of rules to each one respectively.

Do you know of a precise set of rules that can be applied to this type of analysis, that would then create a sound stock market strategy, providing the user with a regular monthly income?

Stock Trading Under Emotional Pressure:

This is known as defiance trading – overheated emotions cause the stock market trader to ignore the stock market strategy and, further to this, take undue risks. In other words, this is purely a psychological factor and may include mentalities such as:

‘In my previous trading week, I took losses and so now I have to make more profit this week to make up for that. This will make it possible to reach my average monthly profit.

Hopefully, you have made it this far into the article with us!

If you have, we can confidently say that you are now more knowledgeable in the definition of what a market strategy is, what common mistakes and methodologies can negatively affect a market strategy. As well as the factors that can make a strong market strategy when they are put together effectively.

Learn more about Trading strategy on wikipedia

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Giant FTC trial of Facebook dismemberment begins

2 minutes to read

facebook lawsuit

Trial of Facebook

A federal judge has ruled that the US Federal Trade Commission (FTC) can file a lawsuit against the Facebook owner, Writes The Guardian.

Mark Zuckerberg, the owner of Meta — which also owns Facebook, Instagram and WhatsApp — has appealed to the court for the second time to dismiss the trade commission’s antitrust complaint. Judge James Boasberg has now ruled that the FTC’s review action must be upheld.

The FTC is asking the court to declare that the owner of Facebook has been in a monopoly position for years, and is abusing its position, which would cause an obligation for the company to sell its Instagram and WhatsApp apps.

The Guardian has noted that this is one of the largest legal proceedings the US government has launched in recent decades against any technology company.

The commerce committee initially sued Facebook during the Trump administration, and its complaint was rejected by the court last June. The complaint was amended in August and added further details to the charge that the company giant has made it impossible for its rivals to acquire it. Meta’s platforms are used by 2.8 billion people worldwide every day.

A company spokesperson for Meta said that he was confident the company would win in court. It was also added that “the current decision narrows the FTC’s scope by rejecting allegations about our platform policies. It also acknowledges that the trade committee is facing a “big task” to support its position on two acquisitions approved years ago,”.

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