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How to Invest? Investing in Shares (Stocks) and Mutual Funds
The Stocks and Shares shop, Leeds
Why investing? How to invest in stocks (shares) and mutual funds?
These are valid questions. It is again more important where to invest? Whether investing in Mutual funds or in stocks? The questions are more important in the present time of economic crisis. Financial problem has stormed over almost everyone.
If we search for the root cause of the American economic crisis and the financial problem we find a trend of over expenditure. American people have been spending continuously more than their means. Banks and financial institutions had also been issuing credits to them in an anticipation of ever growing the market and individual income since decades. However, everything has an end.
The bubble is burst and the American economy has shocked with sub-prime crisis. Failure of major financial institutes has intensified the problem. Now everything is in a downtrend. There are few or no buyer for real estate. Stock markets are crying for liquidity. US $ 700 bailout plan of the Federal Government does not work.
The answer to the root cause of the problem is that most of the American people did not save and invest. It is not the earnings that make one rich but it is the saving that makes. We grow rich when we learn to convert savings into great investments says Robert Kiyosaki in Rich dad Poor dad.
Mutual funds and shares (Stock) are major tools for investment. Economic advisers normally advice for investing in diversified funds. Investors generally have mutual funds, equity shares, fixed deposits, bonds etc in their portfolio.
Investing in Shares or Mutual funds?
Great investors use these financial instruments intelligently and mint money. Investments do not only need money but financial education too. One has to know the techniques of investment. Financial intelligence is the key word of investment as per Robert Kiyosaki (Cashflow quadrant).
The investors who have little or no knowledge of financial instruments may opt for mutual funds. The fund managers are educated and skilled professionals. They are equipped with knowledge of the market. They do research works for the market and take appropriate decisions of investing or disinvesting funds on behalf of their clients. Mutual funds keep some percentage of profit and pass out the rest to their clients. Though all derivatives have exposure to market risks, mutual funds are comparatively safer.
They used to have huge funds, access to local and foreign markets, the capacity of hiring top professionals and management capabilities. Many times foreign stock markets are better than local. It is very difficult for an individual to have all these facilities. Moreover, it is impossible for small investors and newbies in this field. Hence, it is advisable for the starters to begin with mutual funds. The beginners can also diversify their funds both into mutual funds and shares.
(Starters may also opt for bonds, fixed deposits in the banks and financial institutes, Gold and Silver. However, this is not the topic of present article hence excluded)
Smart players play mainly in shares.They are smart enough to smell market trends. They also have big risk bearing capacity. Generally, they are trained and well-experienced individuals and groups. They have already acted with their investments in bonds, mutual funds etc.These provide them both with liquidity and safe income that enhance their risk-bearing capacities.These smart investors earn huge money both in bull and bear markets. There is no doubt that money flows to them from all sides.
Mutual Fund sales growth from 2004 to 2013
Asset class wise holdings in mutual fund industry
Some newbies look them minting money and jump into the unknown and dangerous zone of share market. They go there out of their greed and innocence. They want to make money overnight that is not possible in general. They normally loose huge money in the share market.
Sometimes they loose everything they have. The situation becomes worse when they invest with borrowed money with a great hope to become a millionaire or even a billionaire. They live in fool's heaven and make big losses. Their dreams generally turn into a big fuss. The article is intended to save them from big losses. I will be glad if this article will help them.Experts suggest some simple tips to follow:
1. Newbie should invest in bonds and mutual funds and gain experience.
2. If they want to invest in shares they should do it carefully. It is better to consult professionals or experienced persons in the field. A small ratio of available funds may be invested in shares and the major portion is to be kept in bonds and mutual funds.
3. It is better to Watch the market trends regularly and listen to experts. Learn to read economic and financial data. Read documents carefully before investing. Try to understand writings between the lines. Manage your funds judiciously. Do not be overenthusiastic.
4.. Learn and acquire financial skills. Be financially intelligent. There is no alternative of knowledge. If you have knowledge, control over yourself and if you are financially intelligent money will start flowing towards you.
So be smart. Wish you best of luck in the stock market.
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Disclaimer: ( The writer does not guarantee a profit from any investment. The hub is based on reading materials available in hard and soft copies and consulting experts. Readers should check it. Investments are subject to market risks and one has to take his own decision. The author is not and will not be responsible for any loss or damage).
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