Tag Archives: investment

What Is Your Investment Style?

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Knowing what your risk tolerance and investment style are will help you choose investments more wisely. While there are many different types of investments that one can make, there are really only three specific investment styles and those three styles tie in with your risk tolerance. The three investment styles are conservative, moderate, and aggressive.

Naturally, if you find that you have a low tolerance for risk, your investment style will most likely be conservative or moderate at best. If you have a high tolerance for risk, you will most likely be a moderate or aggressive investor. At the same time, your financial goals will also determine what style of investing you use.

If you are saving for retirement in your early twenties, you should use a conservative or moderate style of investing � but if you are trying to get together the funds to buy a home in the next year or two, you would want to use an aggressive style.

Conservative investors want to maintain their initial investment. In other words, if they invest $5000 they want to be sure that they will get their initial $5000 back. This type of investor usually invests in common stocks and bonds and short term money market accounts. An interest earning savings account is very common for conservative investors.

A moderate investor usually invests much like a conservative investor, but will use a portion of their investment funds for higher risk investments. Many moderate investors invest 50% of their investment funds in safe or conservative investments, and invest the remainder in riskier investments.

An aggressive investor is willing to take risks that other investors won�t take. They invest higher amounts of money in riskier ventures in the hopes of achieving larger returns � either over time or in a short amount of time. Aggressive investors often have all or most of their investment funds tied up in the stock market.

Again, determining what style of investing you will use will be determined by your financial goals and your risk tolerance. No matter what type of investing you do, however, you should carefully research that investment. Never invest without having all of the facts!

The Importance of Diversification

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“Don’t put all of your eggs in one basket!” You’ve probably heard that over and over again throughout your life…and when it comes to investing, it is very true. Diversification is the key to successful investing. All successful investors build portfolios that are widely diversified, and you should too!

Diversifying your investments might include purchasing various stocks in many different industries. It may include purchasing bonds, investing in money market accounts, or even in some real property. The key is to invest in several different areas – not just one.

Over time, research has shown that investors who have diversified portfolios usually see more consistent and stable returns on their investments than those who just invest in one thing. By investing in several different markets, you will actually be at less risk also.

For instance, if you have invested all of your money in one stock, and that stock takes a significant plunge, you will most likely find that you have lost all of your money. On the other hand, if you have invested in ten different stocks, and nine are doing well while one plunges, you are still in reasonably good shape.

A good diversification will usually include stocks, bonds, real property, and cash. It may take time to diversify your portfolio. Depending on how much you have to initially invest, you may have to start with one type of investment, and invest in other areas as time goes by.

This is okay, but if you can divide your initial investment funds among various types of investments, you will find that you have a lower risk of losing your money, and over time, you will see better returns.

Experts also suggest that you spread your investment money evenly among your investments. In other words, if you start with $100,000 to invest, invest $25,000 in stocks, $25,000 in real property, $25,000 in bonds, and put $25,000 in an interest bearing savings account.

What Are American Depositary Receipts?

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The investment known as ADR stands for American Depositary Receipts, which is a tool used to make it easier for investors to invest in foreign markets. Instead of having to find a broker with capabilities in the foreign markets where the securities trade, an investor can just receive ADR’s from a depositary bank that collects the foreign company’s shares.

A prime advantage to using ADRs is the liquidity. Since the process of investing in foreign markets has become easier, the market has become far more liquid. The annual dollar volume of ADRs has increased from $75 billion dollars in 1990 to approximately $650 billion in 2010.

As technology advances it’s become easier to invest in foreign companies and we can see this through the use of depositary receipts. Not only are depositary receipts issued in America, but they’re also issued in other countries as well, such as Euro DRs, Singapore DRs and China DRs.

Of special note, the Hong Kong listed Bank of Communications Co. gained approval in 2006 to offer shares on China’s stock exchange and are willing to offer China depositary receipts (CDRs). By issuing CDRs, the bank is better able to sell shares to foreign investors, making it easier for them to invest in the fast growing, Chinese economy.

Investing Is Much Tougher When You’re In Debt

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If you are like most people, you’ve probably grown very comfortable with the credit card that you now carry. This is normal, and I don’t blame you, but it may be time that you consider changing to a card with a lower interest rate. This can be very advantageous to you in many ways.

These days the competition is so fierce, that finding a card with a lower rate will be no problem for you at all. In fact most credit card companies are going crazy with their offers of incentives to get you to switch to their cards. You may be worried about your not so perfect credit, but have no fear, because even with spotty credit, you’ll likely still be able to find a lower rate card. Of course, if you have good or great credit, this will open up your possibilities even further. Just shop around and review different companies.

You can save a bundle of money by switching to a lower interest card even if you carry a balance on your current card. I know you want to pay that card off, that’s the goal of many other people in your shoes as well, and you can shave a ton of time and money off of that balance by switching for a lower interest rate. In fact, there are so many card companies that are willing to give you a zero percent interest rate if you transfer your balance, that you’d be a fool not to at least check out your options to be quite frank.

It may be the case that you feel you have no need for switching since you have no problem paying the balance every month now; in fact you actually pay it early. However, what about in the case of an emergency, when something life changing kept you from paying that balance so easily. These are the times that you need to be thinking about.

Most often the initial term for the zero percent interest will be for will be for 6 months when switching. Your new card will be extremely helpful to you, if within that time you quest for eliminating debt is successful. Just be sure to watch out for that time period to end. The card companies are supposed to notify you when the initial time period is over, but you should always watch for yourself since it’s your responsibility no matter what.

If you can, pay off your entire balance as soon as possible. This will not only give you great debt relief, but free your money up for investing in your future as well. You must be strategic when using your low interest card; it can save you tons of money in the long run.