Spending and Investing Practices

Introduction How come some people make lots of coin, others basically maintain the status quo, and m whatever atomic number 18 awash in debt? What makes the difference? Spending habits the difference between needs, wants, and self-indulgence. Investing practices how time and compound interest can create a fortune. Spending without planning is bump intoking min self-gratification NOW. Over-spending creates a bondage that limits opportunities. We all commit dreams, priorities, fears, and limited time. In large part these argon the key factors that influence what we do with our bills. After all, the coin we have at the moment is limited.The key questions atomic number 18 What be the things that be important to you now, five years from now, in 25 years, etc. How much funds do you have at the moment that is beyond the basics? What are your best garbment choices based upon your age and the time available? financial readiness Definition The process of managing your money and resources to achieve economic and personal satisf operation. The Financial Planning Process. Determining your current financial situation. What is your income, expenses, and debt? Developing your financial goals. What are your rising plans for housing, transportation, medical, marriage, retirement, etc.Identifying courses of action. Evaluating each course of action. Every decision cfall backs off other alternatives. Creating and implementing your financial action plan. Write it d birth. Continually review your plan and revise as necessary. Selecting Financial Goals Should contain time goals Short term goals of a week, month, six months, a year or two years. Medium term goals that may be achieved within five years. Long term goals such financing college for children, retirement plans, Should contain need goals Consumable product goals food, clothing, entertainment, etc. Durable product goals cars, furniture, appliances, sporting equipment, etc.Intangible buy goals health, educati on, leisure, relationships, etc. Goal-setting Guidelines Financial goals should be realistic. State in specific measurable terms Should have a time frame Should indicate the type of action to be taken. Influences on Financial Planning Stage of adult life cycle young single, married, married with children, single parent, older 50+. Marital status, mob size, and employment. Personal prys and major events such as graduation, marriage, children, retirement, etc. Local and global economic conditions such as consumer prices related to inflation. interest rates for acquire money. oney supply printed by government. unemployment related to job availability. Investing In The Stock Market Investing started when someone had an idea that possibly would make money solely didnt have the financing to develop it. So he sought money from others who were willing to risk their funds in exchange for a appropriate of the potential profits. When the idea proved profitable and looked as if it would ge nerate an income for an extended period of time, outsiders would try to buy shares in the company by offering immediate payment to the original owners. If several people start bidding for shares and the share owners were willing to sell, the price increased.What Is Bought & Sold in the Stock Market Stocks are shares of ownership in a company. Shareholders may benefit from company profits and a rising stock(a) price. They may also lose their shirt if the company loses money and stock prices fall. Note, Penny stocks that are low priced tend to be highly speculative with few buyers and sellers and high risk. Below are some well-known stocks. Exchange Traded money (ETFs) hold a diversified portfolio of stocks and/or securities that are minimally managed. ETFs have the following advantages ETFs are safer than stocks because an ETF is a basket of securities.With multiple securities, you arent subject to the wide of the mark array of risk including corporate scandals, after trade earn ing reports, and other factors that affect various(prenominal) stocks. ETFs may be traded during market hours. ETFs allow the use of limit puts and STOP-loss orders. ETFs have no penalties for early withdrawal and are no-load (although usual broker fees apply). ETFs are passively managed so their expenses tend to be lower than comparable mutual funds. ETFs holdings are very apparent and portfolio changes are relatively infrequent. Options are available on some ETFs . Index Funds securities that represent entire sectorsS&P five hundred Index (SPY) Dow Jones Industrial (DIA) NASDAQ 100 (QQQQ) Russell 2000 Fund (IWM). Options are purchasable and sellable contracts that guarantee rights, but not necessarily obligations to buy or sell a security for an agreed upon price within a certain time period. joint funds pooled money managed by overlord money managers who charge for their services. Mutual funds are only traded after the market closes each day. Mutual funds cannot be cling t oed from falling prices during the day. If the market is crashing, a sell order to get out is initiated only after the market has closed.No-Load Mutual Funds no fees charged for buying or selling. On an average these tend to be more than profitable than loaded funds. Loaded Mutual Funds an upfront fee or exit fee is charged to enter or property out a fund. Bonds loans made to a company or government with a guaranteed return if bankruptcy doesnt occur. Often bonds are sold to raise cash to expand the business. Commodities raw materials such as sugar, wheat, pork bellies, metals, etc. During economic expansion commodity prices gene muster up rise due to increasing demand. During a corner or deflationary times the opposite is true except in the case of precious metals.Sometimes when people lose faith in their paper money they purchase gold or silver as insurance against devaluation of the dollar. Currencies paper money that people believe has value. As the amount of paper money incr eases, the value of the paper money decreases. With more paper money chasing goods, the rate of inflation rises (gas used to be 23 cents a gallon). REITs (Real Estate Investment Trusts) publicly traded companies that own and manage investment-grade commercial real estate. REITs invest in office buildings, malls, industrial facilities, hotels, resorts, health care facilities, and self-storage.REITs provide a simple and inexpensive way to invest in commercial real estate without buying property directly. However, they are not very liquid. REITs provide a fairly reliable source of income. At least(prenominal) 90 percent of taxable income essential be distributed annually to shareholders. Financial Participants Banks and Credit Unions typically manage accounts and provide services including checking, savings, loans, credit and account cards, notary services, safe deposit boxes, etc. Brokerage Firms typically manage all types of trades (stocks, mutual funds, ETFs, etc. ) for a fee.So me are full service, providing advice and charging for their services. Others are usher out brokers that handle transactions for a minimal charge. Broker a licensed professional who advises people about investments for a fee and may work for a brokerage firm. Stock and Commodity Markets are exchanges where stocks, options, securities, indexes, currencies, commodities, etc. are traded. Market Maker a professional securities dealer who buys and sells stocks or commodities held in inventory and must ALWAYS provide a bid and ask price at which they will buy or sell something.Investors (speculators) are individuals who usually hold longer-term investments. Traders (scalpers) are individuals who usually trade quickly looking for quick profits. Momentum investors track prices and volume data to identify stocks trending higher. Market Timers try to time their investing so theyre buying at market troughs and selling at peaks. Growth Investors target stocks of companies that produce, and sho uld continue producing, above-average earnings proceeds. Value Investors shop for bargains, hoping to buy low, as the platitude goes, and sell high. on that point are four market trends. Down trending markets in which security prices are falling. People typically do not know how to trade this market. save craft a down trending market is usually the approximately profitable. Security prices fall faster than they rise, typically taking 5 years to reach a high versus 3 months to lose most of the gain. High volatility markets in which security prices swing wildly from one extreme to the other. Day traders and professional traders are very active in this scenario. Up-trending markets in which security prices are rising.Most people invest in an up-trending market because of their optimistic outlook. This market ranks third in trading profitability. Sideways trending markets in which security prices trade within a fairly tight range with little fluctuation. It is important to note tha t . . . currency can be made or lost no matter the market direction Protecting Trades With Stops Frequently novice traders fail to protect profits and lose money even though a security has bounced in and out of profitability several times. The use of a STOP is one way to protect an account.A STOP is a chosen price in which a trader wants to sell a security to prevent a further price decline. There are four kinds of STOPS. Automatic Hard STOP. This STOP is set immediately after the initial purchase and is not changed until it is deleted or adjusted. Market makers may see hard STOPS and often knock them out during trading by dropping the price suddenly and then(prenominal) raising the price in brief thereafter. tracking STOP a favorite. As the price of a stock rises, this STOP correspondingly rises. A Trailing STOP allows a winning stock to hotfoot while protecting against a loss if the price drops.Mental STOP. This STOP is written down but not placed with the brokerage firm bec ause full-time traders may not want to be inadvertently stopped out of a trade due to a momentary large price swing. STOP Limit. A Limit Order is an order to buy or sell at a specific price or better and is only ACTIVATED when the desired price is hit. Searching For investments Determine market trends. What are the current market trends with the Dow, SP 500, etc. Select high-ranking industry in which money is flowing into it. Studies have shown industry ranking is responsible for at least 50% of a stock price movement.Scan For Higher Volume. Look for securities that trade more than 750,000 shares daily. A stock needs to be liquid meaning that there are plenty of buyers when it is time to sell. Search For Top Contenders. The companies should be profitable, with low or no debt. Trading Volume Drives Trends When there is a dramatic change in the volume being traded daily compared to its average daily volume, PAY help Typically this means professional money managers are either buying or selling a security. Like a garage sale, when there are a lot of buyers, prices tend to stay put or rise.If there is an abundance of sellers, prices typically fall. Rising prices with high volume mean institutional professional money managers are buying. The larger the volume increase 50% above average the better chance it is a true breakout. During major breakouts it is not special for new market leaders to show volume spikes from 200% to 1000%. Rising prices with little volume is often a suckers rally and novice buyers tend to be taken to the cleaners because the price rise lacks support by institutions. Falling prices with high volume mean institutional money managers are selling.Falling prices with little volume may mean a strong base of support is forming for a possible uptrend. Professionals tend to purchase heavily and then wait four to eight days before buying again. Trend Insights A trend is the direction of movement of a market or individual security. Trends are chara cterized by a series of zigzags that resemble a series of waves with peaks and troughs. There are three trends An uptrend is a series of higher highs and higher lows. A downtrend is a series of lower highs and lower lows. A neutral trend is horizontal, or equal, peaks and troughs, and reflects a period of indecision.This is also known as the consolidation phase. If a trader is wrong about the trends all other factors are basically worthless. What is popular one moment may be a dog shortly thereafter. Trends are your friend. Money is always flowing somewhere Large Market Trends are determined by an analysis of the buying and selling volume of the Dow, NASDAQ, S&P 500, Russell, etc. Sector Trends deal with an overall analysis of similar companies. Listed below are ETFs that cover sectors. Sector ETFs Internet HHH Oil Service OIH transfer of training IYT Telecom IYZReal Estate IYR Big Tech QQQQ Software PSJ Media PBS Defense PPA Construction PKB Insurance PIC Financials IYF Nanotech PXN Alt. Energy PBW Industry Trends are a subcategory of sector trends. This is where individual stocks are listed. Calendar Trends. Some things happen on a recurring basis which cause stock prices to rise and fall most like clockwork. For instance, Christmas goods are usually shipped in August and September influencing the stock prices of UPS or FEDX. Indias wedding season increases the demand for gold. CAN SLIM party ANALYSIS CRITERIAWilliam ONeil, founder of Investors Business Daily Newspaper (IBD), developed the CAN SLIM investing analysis criteria that is based upon many years of explore and readily displayed in IBD. The following is a summary of the analytical criteria used. C = Current Quarterly Profit Increases. Strong growth in earnings, more than any other factor, is what defines the market leaders that potentially are going to experience big price advances. IBD recommends looking for stocks with a profit gain of at least 25% compared to the same quarter of the previous year.IBD found that three of every four such stocks boosted profits by more than 70% in their most late(a) quarter BEFORE their big run-ups. A = Annual Earning Increases should be at least 25% for the last three to five years. Some of the biggest market winners had annual earnings growth of 50%+ before starting their big run-ups. A trend of three to five years of annual earning increases coupled with recent strong earnings in the last several quarters increases the probability of success in an up-trending market. N = New Products, Management, or Highs.It seems that anything new that makes our lives richer, extends our health, or increases our productivity is desirable. Old companies or newly created companies that provide these new things or new services tend to increase in value because of increase in sales. S = Supply & Demand. When there are plenty of buyers and few sellers, prices increase. When demand for stock shares increases, the company with the least amount of shares ava ilable will experience a great price increase. The greater the number shares available (for sale) the less the price performance.Usually older larger companies with billions of shares are more sluggish than companies trading only 50 jillion shares. Note, the larger the percentage of ownership by management, typically the greater the growth potential. L = Leaders, Not Laggards. There are many wannabes also-ran companies. Their price growth results are average at best or a flash-in-the-pan. Select best-of-breed stocks from the top three in strong industry groups with the best quarterly/annual earnings growth. Note, in a bull market correction, the stocks that drop the least are usually the best on rebound.I = Institutional Sponsorship. When big traders (mutual funds, pension plans, etc) are buying millions of shares, it is a good sign the price will run-up. But not all mutual funds are equal in quality. appraise the leaders of the best mutual funds. M = Market Direction. Track the trend averages using the S&P, DJIA, and NASDAQ. And Finally CFO Corporate Fraud Officer. FIAT Money Financial Instrument Administering Theft of Money Insanity Doing the same thing over and over again and expecting different results. Einstein