Kevin Kiene
Supply & demand cut both ways, my fellow real estate junkies. Demand has plummeted, so what do we do? Swim against the tide and start buying, of course.
The Purchase Plan: Double Distress
Prices are down, but if you're a real estate investor worth your salt, you still want a killer bargain. So here's the game plan: where others see distress, you need to see dollars.
The purchase plan involves both distressed sellers and distressed properties. Let's consider the case of foreclosures for a moment; why does real estate sold through foreclosure auction sell for less? Because investors can't get inside to see what kind of shape it's in. But there is no question that buyers at foreclosure auctions, especially in today's market that's far oversaturated with them, will score a good deal, provided they know what kind of property they're buying.
So to take maximum advantage of a distressed seller sale by foreclosure, what safer method is there than to buy a property that you already know needs full renovation? There's a discount built into properties needing renovation, because of the hassle of renovating them. Those hassles, which you'll have to be adept at managing, include maintaining relationships with several of each of the following: hard money lenders (for quick settlements and renovation loans), small, local banks (they're far cheaper than hard money lenders and fill the same niche, but are pickier), licensed contractors, inexpensive handymen, and low-cost permanent lenders if your renovation loan is short-term. A distressed property in shambles, sold through a distressed sale, will effectively give you a double discount, which will in turn create maximum cash flow for the next stage: getting paid.
The Payout Plan: Deferred Gratification
We've already established that you have to go against the grain if you want to make money in a slow market like this one. With a depression in demand and an abundance of supply, you don't want to sell, so what do you do? You build your real estate empire, and watch money flow into your account every month as a landlord. When the market shifts in a few years, you'll be poised to sell all those distressed properties bought for a steal, and make a fortune.
There are some challenges involved in being a landlord, so be prepared. First, your money is not liquid; these investments, by their very nature, are long-term and you will have to wait for the market to turn before you can sell. Second, you'll need to be capitalized, both because your other money isn't available and because rental properties will always throw surprise expenses your way in the form of maintenance, repairs, vacancies, and lawsuits. As a final note, it is a wise and happy landlord who hires a property management firm to assume the headaches for them.
Remember the first thing you learned about money: buy low, sell high. The real estate market can and should be your ally, not your enemy; ride the highs and lows alike, and right now that means buying as cheaply as you can and holding the properties as a landlord. Good luck!
Article Source:
http://www.bestmanagementarticles.com
http://investment-management.bestmanagementarticles.com
About the Author:
Read more articles for landlords and real estate investors at EZ Landlord Forms, along with free real estate forms and real estate investing tips and resources.
Read more....
Showing posts with label Market. Show all posts
Showing posts with label Market. Show all posts
7.8.09
Five Years in Review: The Minneapolis Real Estate Market
Kevin Curtis
Poised on top of the real estate mountain in 2003, it's hard to imagine so much change in the Minneapolis real estate market in the last five years. While the bubble has certainly burst and it's no longer a seller's market, key elements like long-term value of Minneapolis real estate as an investment and the quality of life available to residents has not changed. Even after five years of change, the world of Minneapolis real estate is still a great place to buy a home for you and your family.
2003 was a banner year for the housing market across the United States. In Minnesota, 39,440 people were gainfully employed in the real estate and rental industries with a combined annual payroll exceeding $1,237,000,000. Clearly, real estate was lucrative for sales professionals involved in the booming market. Sellers benefited from bidding wars over their homes. Houses could not be built fast enough to meet the exceptional demand for homes in the market.
Over the next two years, the strength of the economy and the housing market caused lenders to start granting adjustable rate mortgages and larger mortgages than people could actually afford. Lending practices got very loose as bankers were caught up in the housing market frenzy. Add the risky business of real estate speculation to the equation and it soon became clear that some of the growth in the housing market was built on shaky ground.
Builders and lenders wanted to continue the exponential growth of years past, and by 2006, it was clear that far too many new homes were sitting on the market unsold. New home building slowed to a stop by 2007, and because builders could not get new homes sold, the value of homes across the country started to drop. Analysts called it price adjustment for the over inflated selling prices of years past, but homeowners simply saw it as less value in their investments.
Once the dust settled in 2008, however, homeowners realized that although their homes had lost a bit of value, their homes were still solid investments. Compared with the performance of stocks and 401Ks, home equity was a solid place to put hard earned money for those willing to keep homes until the economy began to pick up speed.
While the past five years in Minneapolis real estate have been filled with drama, one thing a smart investor realizes: current prices in the housing market make this the ideal time to buy. Houses and condos that were once out of reach financially are now less expensive and ready to be purchased. In addition, the influx of one-time homeowners that now want to rent homes instead of paying over-inflated and financially dangerous mortgages makes this the ideal time to venture into rental property ownership. Rentals are a great way to invest and make money in the current economy.
The future is anyone's guess, but one thing is certain: Minneapolis real estate is one of the best ways to invest in your future. Over the long haul, it's sure to pay off; thanks to the strength and bright future of the city's schools, commerce and the entrepreneurial spirit of its residents.
Article Source:
http://www.bestmanagementarticles.com
http://real-estate-management.bestmanagementarticles.com
About the Author:
Kevin Curtis is a licensed agent with RE/MAX Advantage Plus. He is The Minnesota Real Estate Team's 2007 Agent of the Year. Kevin and his team provide great service and ongoing insights into the Minnesota Real Estate market at
Read more....
Poised on top of the real estate mountain in 2003, it's hard to imagine so much change in the Minneapolis real estate market in the last five years. While the bubble has certainly burst and it's no longer a seller's market, key elements like long-term value of Minneapolis real estate as an investment and the quality of life available to residents has not changed. Even after five years of change, the world of Minneapolis real estate is still a great place to buy a home for you and your family.
2003 was a banner year for the housing market across the United States. In Minnesota, 39,440 people were gainfully employed in the real estate and rental industries with a combined annual payroll exceeding $1,237,000,000. Clearly, real estate was lucrative for sales professionals involved in the booming market. Sellers benefited from bidding wars over their homes. Houses could not be built fast enough to meet the exceptional demand for homes in the market.
Over the next two years, the strength of the economy and the housing market caused lenders to start granting adjustable rate mortgages and larger mortgages than people could actually afford. Lending practices got very loose as bankers were caught up in the housing market frenzy. Add the risky business of real estate speculation to the equation and it soon became clear that some of the growth in the housing market was built on shaky ground.
Builders and lenders wanted to continue the exponential growth of years past, and by 2006, it was clear that far too many new homes were sitting on the market unsold. New home building slowed to a stop by 2007, and because builders could not get new homes sold, the value of homes across the country started to drop. Analysts called it price adjustment for the over inflated selling prices of years past, but homeowners simply saw it as less value in their investments.
Once the dust settled in 2008, however, homeowners realized that although their homes had lost a bit of value, their homes were still solid investments. Compared with the performance of stocks and 401Ks, home equity was a solid place to put hard earned money for those willing to keep homes until the economy began to pick up speed.
While the past five years in Minneapolis real estate have been filled with drama, one thing a smart investor realizes: current prices in the housing market make this the ideal time to buy. Houses and condos that were once out of reach financially are now less expensive and ready to be purchased. In addition, the influx of one-time homeowners that now want to rent homes instead of paying over-inflated and financially dangerous mortgages makes this the ideal time to venture into rental property ownership. Rentals are a great way to invest and make money in the current economy.
The future is anyone's guess, but one thing is certain: Minneapolis real estate is one of the best ways to invest in your future. Over the long haul, it's sure to pay off; thanks to the strength and bright future of the city's schools, commerce and the entrepreneurial spirit of its residents.
Article Source:
http://www.bestmanagementarticles.com
http://real-estate-management.bestmanagementarticles.com
About the Author:
Kevin Curtis is a licensed agent with RE/MAX Advantage Plus. He is The Minnesota Real Estate Team's 2007 Agent of the Year. Kevin and his team provide great service and ongoing insights into the Minnesota Real Estate market at
Read more....
22.7.09
Investing in the Stock Market for the Individual Investor
By: Harry Hooper
Foreword
Over the past few years the stock market has made substantial declines. Some short term investors have lost a good bit of money. Many new stock market investors look at this and become very skeptical about getting in now.
If you are considering investing in the stock market it is very important that you understand how the markets work. All of the financial and market data that the newcomer is bombarded with can leave them confused and overwhelmed.
The stock market is an everyday term used to describe a place where stock in companies is bought and sold. Companies issues stock to finance new equipment, buy other companies, expand their business, introduce new products and services, etc. The investors who buy this stock now own a share of the company. If the company does well the price of their stock increases. If the company does not do well the stock price decreases. If the price that you sell your stock for is more than you paid for it, you have made money.
When you buy stock in a company you share in the profits and losses of the company until you sell your stock or the company goes out of business. Studies have shown that long term stock ownership has been one of the best investment strategies for most people.
People buy stocks on a tip from a friend, a phone call from a broker, or a recommendation from a TV analyst. They buy during a strong market. When the market later begins to decline they panic and sell for a loss. This is the typical horror story we hear from people who have no investment strategy.
Before committing your hard earned money to the stock market it will behoove you to consider the risks and benefits of doing so. You must have an investment strategy. This strategy will define what and when to buy and when you will sell it.
History of the Stock Market
Over two hundred years ago private banks began to sell stock to raise money to expand. This was a new way to invest and a way for the rich to get richer. In 1792 twenty four large merchants agreed to form a market known as the New York Stock Exchange (NYSE). They agreed to meet daily on Wall Street and buy and sell stocks.
By the mid-1800s the United States was experiencing rapid growth. Companies began to sell stock to raise money for the expansion necessary to meet the growing demand for their products and services. The people who bought this stock became part owners of the company and shared in the profits or loss of the company.
A new form of investing began to emerge when investors realized that they could sell their stock to others. This is where speculation began to influence an investor's decision to buy or sell and led the way to large fluctuations in stock prices.
Originally investing in the stock market was confined to the very wealthy. Now stock ownership has found it's way to all sectors of our society.
What is a Stock?
A stock certificate is a piece of paper declaring that you own a piece of the company. Companies sell stock to finance expansion, hire people, advertise, etc. In general, the sale of stock help companies grow. The people who buy the stock share in the profits or losses of the company.
Trading of stock is generally driven by short term speculation about the company operations, products, services, etc. It is this speculation that influences an investor's decision to buy or sell and what prices are attractive.
The company raises money through the primary market. This is the Initial Public Offering (IPO). Thereafter the stock is traded in the secondary market (what we call the stock market) when individual investors or traders buy and sell the shares to each other. The company is not involved in any profit or loss from this secondary market.
Technology and the Internet have made the stock market available to the mainstream public. Computers have made investing in the stock market very easy. Market and company news is available almost anywhere in the world. The Internet has brought a vast new group of investors into the stock market and this group continues to grow each year.
Bull Market - Bear Market
Anyone who has been following the stock market or watching TV news is probably familiar with the terms Bull Market and Bear Market. What do they mean?
A bull market is defined by steadily rising prices. The economy is thriving and companies are generally making a profit. Most investors feel that this trend will continue for some time. By contrast a bear market is one where prices are dropping. The economy is probably in a decline and many companies are experiencing difficulties. Now the investors are pessimistic about the future profitability of the stock market. Since investors' attitudes tend to drive their willingness to buy or sell these trends normally perpetuate themselves until significant outside events intervene to cause a reversal of opinion.
In a bull market the investor hopes to buy early and hold the stock until it has reached it's high. Obviously predicting the low and high is impossible. Since most investors are "bullish" they make more money in the rising bull market. They are willing to invest more money as the stock is rising and realize more profit.
Investing in a bear market incurs the greatest possibility of losses because the trend in downward and there is no end in sight. An investment strategy in this case might be short selling. Short selling is selling a stock that you don't own. You can make arrangements with your broker to do this. You will in effect be borrowing shares from your broker to sell in the hope of buying them back later when the price has dropped. You will profit from the difference in the two prices. Another strategy for a bear market would be buying defensive stocks. These are stocks like utility companies that are not affected by the market downturn or companies that sell their products during all economic conditions.
Brokers
Traditionally investors bought and sold stock through large brokerage houses. They made a phone call to their broker who relayed their order to the exchange floor. These brokers also offered their services as stock advisors to people who knew very little about the market. These people relied on their broker to guide them and paid a hefty price in commissions and fees as a result. The advent of the Internet has led to a new class of brokerage houses. These firms provide on-line accounts where you may log in and buy and sell stocks from anywhere you can get an Internet connection. They usually don't offer any market advice and only provide order execution. The Internet investor can find some good deals as the members of this new breed of electronic brokerage houses compete for your business!
Blue Chip Stocks
Large well established firms who have demonstrated good profitability and growth, dividend payout, and quality products and services are called blue chip stocks. They are usually the leaders of their industry, have been around for a long time, and are considered to be among the safest investments. Blue chip stocks are included in the Dow Jones Industrial Average, an index composed of thirty companies who are leaders in their industry groups. They are very popular among individual and institutional investors. Blue chip stocks attract investors who are interested in consistent dividends and growth as well as stability. They are rarely subject to the price volatility of other stocks and their share prices will normally be higher than other categories of stock. The downside of blue chips is that due to their stability they won't appreciate as rapidly as compared to smaller up-and-coming stocks.
Penny Stocks
Penny Stocks are very low priced stocks and are very risky. They are usually issued by companies without a long term record of stability or profitability.
The appeal of penny stock is their low price. Though the odds are against it, if the company can get into a growth trend the share price can jump very rapidly. They are usually favored by the speculative investor.
Income Stocks
Income Stocks are stock that normally pay higher than average dividends. They are well established companies like utilities or telephone companies. Income stocks are popular with the investor who wants to own the stock for a long time and collect the dividends and who is not so interested in a gain in share price.
Value Stocks
Sometimes a company's earnings and growth potential indicate that it's share price should be higher than it is currently trading at. These stock are said to be Value Stocks. For the most part, the market and investors have ignored them. The investor who buys a value stock hopes that the market will soon realize what a bargain it is and begin to buy. This would drive up the share price.
Defensive Stocks
Defensive Stocks are issued by companies in industries that have demonstrated good performance in bad markets. Food and utility companies are defensive stocks.
Market Timing
One of the most well known market quotes is: "Buy Low - Sell High". To be consistently successful in the stock market one needs strategy, discipline, knowledge, and tools. We need to understand our strategy and stick with it. This will prevent us from being distracted by emotion, panic, or greed.
One of the most prominent investing strategies used by "investment pros" is Market Timing. This is the attempt to predict future prices from past market performance. Forecasting stock prices has been a problem for as long as people have been trading stocks. The time to buy or sell a stock is based on a number of economic indicators derived from company analysis, stock charts, and various complex mathematical and computer based algorithms.
One example of market timing signals are those available from www.stock4today.com.
Risks
There are numerous risks involved in investing in the stock market. Knowing that these risks exist should be one of the things an investor is constantly aware of. The money you invest in the stock market is not guaranteed. For instance, you might buy a stock expecting a certain dividend or rate of share price increase. If the company experiences financial problems it may not live up to your dividend or price growth expectations. If the company goes out of business you will probably lose everything you invested in it. Due to the uncertainty of the outcome, you bear a certain amount of risk when you purchase a stock.
Stocks differ in the amount of risks they present. For instance, Internet stocks have demonstrated themselves to be much more risky than utility stocks.
One risk is the stocks reaction to news items about the company. Depending on how the investors interpret the new item, they may be influenced to buy or sell the stock. If enough of these investors begin to buy or sell at the same time it will cause the price to rise or fall.
One effective strategy to cope with risk is diversification. This means spreading out your investments over several stocks in different market sectors. Remember the saying: "Don't put all your eggs in the same basket".
As investors we need to find our "Risk Tolerance". Risk tolerance is our emotional and financial ability to ride out a decline in the market without panicking and selling at a loss. When we define that point we make sure not to extend our investments beyond it.
Benefits
The same forces that bring risk into investing in the stock market also make possible the large gains many investors enjoy. It's true that the fluctuations in the market make for losses as well as gains but if you have a proven strategy and stick with it over the long term you will be a winner!
The Internet has make investing in the stock market a possibility for almost everybody. The wealth of online information, articles, and stock quotes gives the average person the same abilities that were once available to only stock brokers. No longer does the investor need to contact a broker for this information or to place orders to buy or sell. We now have almost instant access to our accounts and the ability to place on-line orders in seconds. This new freedom has ushered in new masses of hopeful investors. Still this in not a random process of buying and selling stock. We need a strategy for selecting a suitable stock as well as timing to buy and sell in order to make a profit.
Day Trading
Day Trading is the attempt to buy and sell stock over a very short period of time. The day trader hopes to cash in on the short term fluctuations in a stock's price. It would not be unusual for the day trader to buy and sell the same stock in a matter of a few minutes or to buy and sell the same stock several times a day.
Day traders sit in front of computer monitors all day looking for short term movement in a stock. They then attempt to get in on the movement before it reverses. The real day trader does not hold a stock overnight due to the risk of some event or news item triggering the stock to reverse direction. It takes intense concentration to monitor the minute by minute movement of several stocks.
Day trading involves a great deal of risk because of the uncertainty of the market behavior over the short term. The slightest economic or political news can cause a stock to fluctuate wildly and result in unexpected losses.
There are a few people who make respectable gains day trading. The people who probably make the most are the self proclaimed "experts" who sell the books or operate the web sites that cater to the day trader. Because of the profits to be made from sales to people who want to get rich quick, they make it seem as attractive as possible. The truth is that in the long run more people lose than gain by day trading. This does not translate into a very good investment.
Author Bio
Harry Hooper has over 30 years experience in portfolio management. He is the senior stock tracker for http://www.stock4today.com.
Article Source: http://www.ArticleGeek.com - Free Website Content
Read more....
Foreword
Over the past few years the stock market has made substantial declines. Some short term investors have lost a good bit of money. Many new stock market investors look at this and become very skeptical about getting in now.
If you are considering investing in the stock market it is very important that you understand how the markets work. All of the financial and market data that the newcomer is bombarded with can leave them confused and overwhelmed.
The stock market is an everyday term used to describe a place where stock in companies is bought and sold. Companies issues stock to finance new equipment, buy other companies, expand their business, introduce new products and services, etc. The investors who buy this stock now own a share of the company. If the company does well the price of their stock increases. If the company does not do well the stock price decreases. If the price that you sell your stock for is more than you paid for it, you have made money.
When you buy stock in a company you share in the profits and losses of the company until you sell your stock or the company goes out of business. Studies have shown that long term stock ownership has been one of the best investment strategies for most people.
People buy stocks on a tip from a friend, a phone call from a broker, or a recommendation from a TV analyst. They buy during a strong market. When the market later begins to decline they panic and sell for a loss. This is the typical horror story we hear from people who have no investment strategy.
Before committing your hard earned money to the stock market it will behoove you to consider the risks and benefits of doing so. You must have an investment strategy. This strategy will define what and when to buy and when you will sell it.
History of the Stock Market
Over two hundred years ago private banks began to sell stock to raise money to expand. This was a new way to invest and a way for the rich to get richer. In 1792 twenty four large merchants agreed to form a market known as the New York Stock Exchange (NYSE). They agreed to meet daily on Wall Street and buy and sell stocks.
By the mid-1800s the United States was experiencing rapid growth. Companies began to sell stock to raise money for the expansion necessary to meet the growing demand for their products and services. The people who bought this stock became part owners of the company and shared in the profits or loss of the company.
A new form of investing began to emerge when investors realized that they could sell their stock to others. This is where speculation began to influence an investor's decision to buy or sell and led the way to large fluctuations in stock prices.
Originally investing in the stock market was confined to the very wealthy. Now stock ownership has found it's way to all sectors of our society.
What is a Stock?
A stock certificate is a piece of paper declaring that you own a piece of the company. Companies sell stock to finance expansion, hire people, advertise, etc. In general, the sale of stock help companies grow. The people who buy the stock share in the profits or losses of the company.
Trading of stock is generally driven by short term speculation about the company operations, products, services, etc. It is this speculation that influences an investor's decision to buy or sell and what prices are attractive.
The company raises money through the primary market. This is the Initial Public Offering (IPO). Thereafter the stock is traded in the secondary market (what we call the stock market) when individual investors or traders buy and sell the shares to each other. The company is not involved in any profit or loss from this secondary market.
Technology and the Internet have made the stock market available to the mainstream public. Computers have made investing in the stock market very easy. Market and company news is available almost anywhere in the world. The Internet has brought a vast new group of investors into the stock market and this group continues to grow each year.
Bull Market - Bear Market
Anyone who has been following the stock market or watching TV news is probably familiar with the terms Bull Market and Bear Market. What do they mean?
A bull market is defined by steadily rising prices. The economy is thriving and companies are generally making a profit. Most investors feel that this trend will continue for some time. By contrast a bear market is one where prices are dropping. The economy is probably in a decline and many companies are experiencing difficulties. Now the investors are pessimistic about the future profitability of the stock market. Since investors' attitudes tend to drive their willingness to buy or sell these trends normally perpetuate themselves until significant outside events intervene to cause a reversal of opinion.
In a bull market the investor hopes to buy early and hold the stock until it has reached it's high. Obviously predicting the low and high is impossible. Since most investors are "bullish" they make more money in the rising bull market. They are willing to invest more money as the stock is rising and realize more profit.
Investing in a bear market incurs the greatest possibility of losses because the trend in downward and there is no end in sight. An investment strategy in this case might be short selling. Short selling is selling a stock that you don't own. You can make arrangements with your broker to do this. You will in effect be borrowing shares from your broker to sell in the hope of buying them back later when the price has dropped. You will profit from the difference in the two prices. Another strategy for a bear market would be buying defensive stocks. These are stocks like utility companies that are not affected by the market downturn or companies that sell their products during all economic conditions.
Brokers
Traditionally investors bought and sold stock through large brokerage houses. They made a phone call to their broker who relayed their order to the exchange floor. These brokers also offered their services as stock advisors to people who knew very little about the market. These people relied on their broker to guide them and paid a hefty price in commissions and fees as a result. The advent of the Internet has led to a new class of brokerage houses. These firms provide on-line accounts where you may log in and buy and sell stocks from anywhere you can get an Internet connection. They usually don't offer any market advice and only provide order execution. The Internet investor can find some good deals as the members of this new breed of electronic brokerage houses compete for your business!
Blue Chip Stocks
Large well established firms who have demonstrated good profitability and growth, dividend payout, and quality products and services are called blue chip stocks. They are usually the leaders of their industry, have been around for a long time, and are considered to be among the safest investments. Blue chip stocks are included in the Dow Jones Industrial Average, an index composed of thirty companies who are leaders in their industry groups. They are very popular among individual and institutional investors. Blue chip stocks attract investors who are interested in consistent dividends and growth as well as stability. They are rarely subject to the price volatility of other stocks and their share prices will normally be higher than other categories of stock. The downside of blue chips is that due to their stability they won't appreciate as rapidly as compared to smaller up-and-coming stocks.
Penny Stocks
Penny Stocks are very low priced stocks and are very risky. They are usually issued by companies without a long term record of stability or profitability.
The appeal of penny stock is their low price. Though the odds are against it, if the company can get into a growth trend the share price can jump very rapidly. They are usually favored by the speculative investor.
Income Stocks
Income Stocks are stock that normally pay higher than average dividends. They are well established companies like utilities or telephone companies. Income stocks are popular with the investor who wants to own the stock for a long time and collect the dividends and who is not so interested in a gain in share price.
Value Stocks
Sometimes a company's earnings and growth potential indicate that it's share price should be higher than it is currently trading at. These stock are said to be Value Stocks. For the most part, the market and investors have ignored them. The investor who buys a value stock hopes that the market will soon realize what a bargain it is and begin to buy. This would drive up the share price.
Defensive Stocks
Defensive Stocks are issued by companies in industries that have demonstrated good performance in bad markets. Food and utility companies are defensive stocks.
Market Timing
One of the most well known market quotes is: "Buy Low - Sell High". To be consistently successful in the stock market one needs strategy, discipline, knowledge, and tools. We need to understand our strategy and stick with it. This will prevent us from being distracted by emotion, panic, or greed.
One of the most prominent investing strategies used by "investment pros" is Market Timing. This is the attempt to predict future prices from past market performance. Forecasting stock prices has been a problem for as long as people have been trading stocks. The time to buy or sell a stock is based on a number of economic indicators derived from company analysis, stock charts, and various complex mathematical and computer based algorithms.
One example of market timing signals are those available from www.stock4today.com.
Risks
There are numerous risks involved in investing in the stock market. Knowing that these risks exist should be one of the things an investor is constantly aware of. The money you invest in the stock market is not guaranteed. For instance, you might buy a stock expecting a certain dividend or rate of share price increase. If the company experiences financial problems it may not live up to your dividend or price growth expectations. If the company goes out of business you will probably lose everything you invested in it. Due to the uncertainty of the outcome, you bear a certain amount of risk when you purchase a stock.
Stocks differ in the amount of risks they present. For instance, Internet stocks have demonstrated themselves to be much more risky than utility stocks.
One risk is the stocks reaction to news items about the company. Depending on how the investors interpret the new item, they may be influenced to buy or sell the stock. If enough of these investors begin to buy or sell at the same time it will cause the price to rise or fall.
One effective strategy to cope with risk is diversification. This means spreading out your investments over several stocks in different market sectors. Remember the saying: "Don't put all your eggs in the same basket".
As investors we need to find our "Risk Tolerance". Risk tolerance is our emotional and financial ability to ride out a decline in the market without panicking and selling at a loss. When we define that point we make sure not to extend our investments beyond it.
Benefits
The same forces that bring risk into investing in the stock market also make possible the large gains many investors enjoy. It's true that the fluctuations in the market make for losses as well as gains but if you have a proven strategy and stick with it over the long term you will be a winner!
The Internet has make investing in the stock market a possibility for almost everybody. The wealth of online information, articles, and stock quotes gives the average person the same abilities that were once available to only stock brokers. No longer does the investor need to contact a broker for this information or to place orders to buy or sell. We now have almost instant access to our accounts and the ability to place on-line orders in seconds. This new freedom has ushered in new masses of hopeful investors. Still this in not a random process of buying and selling stock. We need a strategy for selecting a suitable stock as well as timing to buy and sell in order to make a profit.
Day Trading
Day Trading is the attempt to buy and sell stock over a very short period of time. The day trader hopes to cash in on the short term fluctuations in a stock's price. It would not be unusual for the day trader to buy and sell the same stock in a matter of a few minutes or to buy and sell the same stock several times a day.
Day traders sit in front of computer monitors all day looking for short term movement in a stock. They then attempt to get in on the movement before it reverses. The real day trader does not hold a stock overnight due to the risk of some event or news item triggering the stock to reverse direction. It takes intense concentration to monitor the minute by minute movement of several stocks.
Day trading involves a great deal of risk because of the uncertainty of the market behavior over the short term. The slightest economic or political news can cause a stock to fluctuate wildly and result in unexpected losses.
There are a few people who make respectable gains day trading. The people who probably make the most are the self proclaimed "experts" who sell the books or operate the web sites that cater to the day trader. Because of the profits to be made from sales to people who want to get rich quick, they make it seem as attractive as possible. The truth is that in the long run more people lose than gain by day trading. This does not translate into a very good investment.
Author Bio
Harry Hooper has over 30 years experience in portfolio management. He is the senior stock tracker for http://www.stock4today.com.
Article Source: http://www.ArticleGeek.com - Free Website Content
Read more....
