Are there safe investment options when you cannot afford a loss?

Believe it or not, there are some investment options that are safer than others when you cannot afford encountering any financial loss.  These provide opportunities for significant growth for those investors who are looking to realize a substantial yield over a shorter period of time, usually less than a 5-year time frame.  These are also viable avenues for investors who want to protect their investments against the loss of that capital as being the primary objective.  If you are attempting to fund your children’s educations or want to do more than annuities to secure more retirement earnings, some of these options are an excellent way to achieve your goals.

Risk profile with investing

All investments involve risk, whether it is something as safe as US savings bonds or highly volatile stocks.  Typically, risk profiles are established once you set up an investment account whether offline or online.  This profile enables the investment professional you are dealing with to ascertain the best investments possibilities relative the risk tolerance abilities of the investor concerned.  Remember that risk is classified from high to low.  The low end involves an investor who is incapable of tolerating risk versus the high end which is associated with aggressive investors.

3 of the most common safe investment options to consider

The following 3 different options should be considered if you need to minimize your risk as well as needing a safer avenue of investment:

Bonds – money market securities typically exhibit lower returns or yields on an investment compared to bonds.  Depending on what entity is issuing the bonds, most risk factors are fairly modest where bonds are concerned.  The lowest amount of risk you will encounter is with US Treasury bonds followed by municipal and then corporate bonds.  The average rate of yield on these different bonds is typically 5.5% to 6%.

Cash and/or money market securities – this category of investment is currently viewed as the safest type of investment and includes financial instruments such as CD’s.  The key to these investments is that they offer better liquidity as well as a safer way to protect the investment’s principal.  Additionally, you need to be willing to exchange those returns for easier access to your funds.

Penny stocks – despite the volatility that exists in today’s stock market, certain stocks are less risky than others.  Penny stocks are considerably less risky where losing money is concerned and could result in tremendous financial gains.  So it follows suit that you should also consider this option, provided you have done sufficient research and know what you are doing when “playing the market.”

Safe Investment Options

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High risk vs. low risk investments

High risk investments are exactly as the name implies, very risky.  Yet they also have the potential to payback large earnings if purchased and sold correctly.  High-risk investments require that the trader be very smart and learn the right timing involved for buying and then selling those stocks.  Conversely, low-risk investments carry little or no risk and are typically held onto for the long term.  Additionally, low risk investments produce smaller yields but they do display steady growth patterns.

What types of investments are considered low-risk?

There are six types of investments which we have categorized as being low-risk fixed income investments and should be considered for your investment portfolio.  These include bonds, CD’s (Certificates of Deposit), ETF’s (Exchange Traded Funds), real estate, standard passbook savings accounts, and US savings bonds.

Bonds – these are considered to be one of the less risky ways of investing in a business because should the company fail and declare bankruptcy, the corporation must attempt to pay off its lenders first.  When purchasing bonds, you are basically lending your money to a corporation.  In return for lending that business the money, you are paid dividends or a set rate of interest.

CD’s – CD’s can be held for as short a time period as 90 days up to 5 years.  You are investing your money into an account that is going to pay you back at a rate of interest that is agreed upon prior to opening the account.

ETF’s – although these are viewed as stock funds, they are considerably less risky so they are considered a viable type of low-risk investment.  Additionally, ETF’s track the three major stock indexes – the DOW, NASDAQ, and the S&P 500.

Real estate – purchasing a home or property has always been considered to be a very wise low-risk investment and has been for decades.  For all intensive purposes, real estate is one of the most practical and safest ways to invest your money.

Standard passbook savings accounts – despite the fact that interest rates have slightly rebounded from all-time lows, this is still one of the safest ways to invest your money.  Plus, your funds are insured by the FDIC (Federal Deposit Insurance Corporation) for up to $250,000 per depositor.

US savings bonds – considered as another low-risk, safe investment and are issued by the US Treasury.  Just like with CD’s or savings accounts, the money you invest is protected by the Federal Government.

Low Risk Fixed Income Investments

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A word about investing in general

There is a wide array of investment opportunities available, some of which can be extremely costly, while others will only require minimum deposits to maintain them.  Additionally, the rule of thumb is that the larger the investment required, the higher the risk, and the greater potential for total loss that exists.  If you are very young and just starting out in the investment arena or have never invested before, you should consider going after those investments that have the greatest potential for a guaranteed return while involving the least amount of risk possible.

Guidelines for smaller money investing

Believe it or not, you can start investing towards your future for as little as $25 a week and maybe less than that.  The following are the 4 basic steps that you should take if you only want to invest the minimal amount of money in a low-risk environment:

• Step #1:  Create an investment allowance based on the frequency of your paydays – if you open a standard passbook savings account, which is a very secure starting point where investing money is concerned, even depositing $5 weekly will result in a $260 balance (not including interest).
• Step #2:  Decide whether or not you want to increase your deposit or paying off your debts while at the same time tucking the same amount away for emergencies
• Step #3:  Avoid paying more than 2% in commissions or investing fees no matter what the amount is that you are investing
• Step #4:  Consider the options that follow which are based on the amount of money that you have to safely invest

If you can invest up to $20 at a time:

• Invest directly with DRIP’s (Dividend Re-Investment Plans) or DSP’s (Direct Stock Purchase plans)
• If the company you are looking to invest in does not offer one of these plans, then you should contact a broker (offline or online) regarding their offers for these types of investments
• Find a small buy-in mutual fund that will allow you to invest as little as $25 monthly

If you can invest up to $500 at a time:

• Find an “index” fund that tracks a broader market – these have realized an average 10% annual yield regardless of whether the economy was on a downswing or an upswing since the S&P 500 was established
• Don’t forget about discount brokerage accounts

How to Invest Small Amounts of Money

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What does margin mean?

In the financial sector, the term “margin” refers to a form of collateral that the holder of futures contracts, options, or other securities is responsible for depositing in order to cover the counteract party’s credit risk.  In most instances, that counter party is either a broker or financial advisor.  That risk is incurred by a securities holder that has:

• borrowed cash from a another party in order to purchase options or other securities
• got involved in a futures contract
• sold options or securities short (i.e. a short sale or short selling)

Additionally, that collateral can take the form of either cash or other securities.  This is usually deposited into what is called a “margin account” that you establish when going through a brokerage in order to purchase stocks.  The terminology “margin” used to be referred to as a “performance bond.”

What is margin buying?

Margin buying refers to the practice of purchasing securities with the funds that were loaned to you by your broker/ brokerage account while putting up collateral by using another form of security.  This method does have the tendency to magnify any losses or profits that are realized on these types of securities.  The net value is defined as and determined by the difference between the value of the loan and the particular security in question.

It is normally equal to the investment that was placed up front but is required to remain above a minimum margin amount established by that particular broker.  This insures that the broker is protected against a decrease in value of those securities to the extent that the person investing the money cannot cover the loan.  Additionally, there are 4 different forms of margin requirements as follows:

• additional margin
• current liquidating margin
• premium margin
• variation margin

The advantages of purchasing on margin

The key advantage to making margin buys is the fact that you can leverage the amount you invest in larger, more substantial yields.  Just like businesses or corporations borrow money in order to in projects that have potentially profitable returns, the same holds true when you are borrowing and leveraging that cash that you are investing.  When you practice leveraging your investment, this amplifies every aspect when a stock increases in value.  If you are careful, and you invest wisely you can increase the size of your gain substantially.

Buying Stocks on Margin

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The stock market and short-term investing

If you aren’t aware of what short-term investments are, they are basically high-risk financial instruments which can realize substantial gains or yields over a short period of time.  Stocks typically fall into this category of investments as they can be very volatile yet yield huge returns on that investment.  For all practical purposes, the hopes and dreams of numerous educated investors have come true whenever they have invested in the stock market for short-term financial gain.

Considerations regarding the best short-term stocks to purchase

Keep in mind that where the modern day world and its economy are concerned, stocks have oftentimes been the foundation of that economy.  This is the allure of many investors as well as the possibility of realizing a sizeable financial gain in a short period of time.  However, this has also been a place where many investors have experienced considerable financial loss and where their life savings have crashed and burned.

Remember to consider the fact that numerous dangers exist whenever you are investing for the short term in the stock market.  Something you definitely need to consider is the fact that if the company you invested in goes “belly up” (i.e. bankrupt), you lose everything that you invested.  On the other hand, you could receive a sizeable gain on that investment as well.  So you really need to have some knowledge of the stock market and the many shortcomings involved.  It would be wise to talk to a broker or your financial advisor.

4 steps to choosing the best short-term stocks

For many of us, the internet has provided us with a very convenient method of shopping.  You can price shop and make your purchase online while avoiding the hassles of the traffic and the crowds you encounter while shopping outside the home.  The same holds true with online investing, but you do have to be careful when you engage in this investment activity.  Here are 4 steps you should consider when searching for the best short-term stocks to buy:

• Step #1:  Develop the method you want to use for choosing short-term stocks
• Step #2:  You should investigate some of the more popular online brokerages and do some comparisons of fees and rates of interest income if that is involved
• Step #3:  Educating yourself by subscribing to a publication that offers advice and tips on short-term stock investment picks is also recommended
• Step #4:  Take advantage of any investment software applications available

Best Short-Term Stocks to Buy

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What is FOREX?

FOREX stands for Foreign Exchange Market and is the over-the-counter, global financial market which involves the trading of the different world currencies.  With the exception of weekends, FOREX operates around the clock worldwide during the work week.  The primary purpose of the foreign currency exchange market is to assist investors with international investment and trading of these different currencies.  In addition to this, FOREX enables businesses to convert one currency into another.

Unlike the stock market and other trading systems, FOREX does not involve the trading of hard goods either physical or representative.  It involves the purchasing, selling, and trading of currencies involving the currencies of different economies on a global scale.  As was mentioned above, due to the global operation of the currencies market, trades can be conducted 5 days a week (Monday through Friday) on a 24/7’s basis.

An overview of automated FOREX trading systems

These specific FOREX trading systems utilize software applications in order to predict the downswings and upswings of currency values and enable you to make some profitable currency trading decisions.  Additionally, the better software typically conducts the currency trading for you.  When you use an automated FOREX trading system you simply start up the application on your computer and start conducting your currency trades.  If you have done your homework, you can start profiting immediately.

Today, automated FOREX trading is enjoying a considerable following and is extremely popular with many currency investors.  Suffice it to say, this is a valuable tool for investing in foreign currencies, especially when you are just starting out and not fully knowledgeable of how the FOREX market works.  Best of all, you can use your automated FOREX trading system in similar fashion to stock investment software.

Benefits of automated FOREX trading systems

The benefits of an automated FOREX trading system can be far-reaching when you consider how easily this enables you to start trading and earning a profit with foreign currencies almost immediately.  Most importantly, the best automated FOREX trading systems enable the trader make the best decisions possible when trading foreign currencies.  Here are few more benefits of using this type of system.

• efficient predictability involving the fluctuations of currency rates
• vital technical information regarding market analysis and pricing trends
• easy to sign up, easy to learn, and easy to get started trading
• access to a marketplace that operates 24/7’s, 5 days a week

Just remember to research and investigate several automated FOREX trading systems before choosing one.

Automated FOREX Trading Systems

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The key to finding the hottest stocks to watch is to understand what you are actually searching for.  Here’s a hard and fast rule to consider about watching hot stocks.  You want to figure out which hot stock to eventually purchase before the rest of the investors out there buys that same stock.  It is just common sense, but remember that when a stock starts to heat up and sell, it’s going to drive the price up based on the laws of supply and demand.  The key is to purchase that stock before the demand for it starts.

In so many words, this means that you want to watch out for undervalued stocks before making your move and purchasing shares of it.  Additionally, you will need to know how to identify the stocks and their companies that you are looking to invest in.  As of today, over 3,000 companies are currently listed on the NYSE, so the search can oftentimes be rather challenging and even frustrating at times.  Unless you have an unlimited amount of time on your hands, you’re going to have to narrow down your search fairly quickly.  The following suggestions should be considered before investing any of your hard-earned money in a particular stock.

Find a market sector that you are already familiar with – this will save you a lot of time when searching for a potentially hot stock.  Knowing and understanding that sector could be the difference between considerable gain and losing your shirt.

Choose a stock that has real value – stocks which demonstrate good fundamentals and have a fairly good recent track record are the ones you want to focus on.  Compare the following factors with the stocks you are watching:

• book value
• cash flow
• price to earnings ratio
• return on investment (ROI)

Stay away from those stocks that have potential liabilities – if you find information or news about large companies and their stocks having huge lawsuits looming in the future, walk away and focus on a different stock.

Search out those companies that have a potentially bright future – just remember that past good stock performances can make a U-turn and go in the opposite direction without warning.  Before making a purchase, pay close attention to the analyst’s predictions if you find a stock that interests you.

Forget popularity and what others say – believe it or not, you are probably better off looking for a stock that has not hit the spotlight yet instead of the ones that analysts and so-called experts are ranting and raving about.

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What are municipal bond funds?

Municipal bond funds are defined as any mutual funds that are invested in municipal bonds, also referred to as “munis” and are debt securities which are issued by counties, municipalities, special purpose districts, and states.  In this manner, capital expenditures can be financed and are federal income tax exempt financial instruments.  Additionally, they may sometimes be state tax exempt as well for the residents of those states which have issued them.

Due to their favorable tax characteristics and the fact that they are a fixed-income type of investment, this is a popular financial instrument to purchase.  They typically provide tax relief for those individuals who fall into higher income brackets.  Like other types of bonds, munis are subject to the credit, duration, quality, and yield considerations of the investor.

A word about Oppenheimer Rochester Municipal Bond funds

According to Lawrence Jones, senior mutual fund analyst of Morningstar Inc., an investment research firm, the Oppenheimer Rochester Municipal Bond funds have always been characterized as high flying and high risk funds.  So if you are a novice investor, you need to be aware of this.  Remember the cardinal rule of investing when you are first starting out.  Never invest more than you can safely afford to lose.

Oppenheimer Rochester Municipal Bonds are available as 8 different state bond funds with 3 variations of each.  There is also a National Muni available in three varieties as well.  The following is a list of these:

• Arizona Municipal A, B, and C
• Massachusetts Municipal A, B, and C
• Maryland Municipal A, B, and C
• Michigan Municipal A, B, and C
• Minnesota Municipal A, B, and C
• North Carolina Municipal A, B, and C
• Ohio Municipal A, B, and C
• Virginia Municipal A, B, and C

Significantly higher dividends

The key characteristic of most municipal bond funds, as well as Oppenheimer Rochester Municipal Bond funds, is that the dividends they pay are considerably higher than with other financial instruments such as CD’s and Money Market accounts.  Additionally, there are four major categories of municipal bonds with the Government or US Treasury bonds being the lowest risk investment of the group.

On the other hand, municipal bond funds are issued by local entities and governments are come with considerably higher risk.  The bottom line is that if you are a novice investor, you want to make sure that you plenty of research about the particular funds you are considering investing in.

Rochester Municipal Bond Funds

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The following content is a list of 9 suggestions to consider if you are a novice investor and are trying to select the right investment vehicle so that instead of losing money, you actually make money investing in the stock market.

Step #1:  Educate yourself and do plenty of research – study, study, and then study some more.  You cannot put a price on knowledge, especially where investing money in anything is concerned.  Consider reading and reviewing the following about the corporation you are contemplating investing in:

• annual and quarterly reports of the particular corporation
• magazines that focus on personal finance
• proxy statements of the particular corporation
• registration prospectuses and statements of the particular corporation

Step #2:  Develop your goals and decide on a strategy that will help you achieve your goals – it is always advisable that you seek out the advice of a licensed professional

Step #3:  Diversify your investments – in other words, never put all of your eggs into one basket (meaning never put all your money in one stock or other investment)

Step #4:  Look for the most significant tax breaks – 401(k) plans and IRA’s are a good choice where this is concerned as well as Keogh plans should you be self-employed

Step #5:  Find and purchase those stocks that you can hang on to for between 3 to 5 years – even if these are considered a “good” investment, unrealistically high prices make these a bad purchase

Step #6:  Invest in those financial instruments that you are familiar with – this emphasizes the value of educating oneself and doing some serious research so that you avoid investing in a company or industry sector that you are not familiar with

Step #7:  Value comparison is critical – learn how to calculate and determine certain critical financial figures (e.g. price over earnings ratios and the such) when you are comparing one investment with others

Step #8:  Resist the temptation to invest in fads and “too-good-to-be-true” types of investments – just because everybody is investing in annuities or gold (for example) does not mean that you should follow the pack, considering how that pack will change direction without notice and focus on some other investments unpredictably

Step #9:  Knowing when to “fold your hand” – remember to consider holding your investment (mutual funds or stocks especially) for a period of 3 to 5 years, unless it begins to plummet in value, in which case you should just cut your losses and sell out.

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What is “options trading”?

In the financial and investment industry, an “option” is a contract drawn up between a purchaser and seller which afford the purchaser the right, without the obligation, to purchase or sell a specific asset on or before the expiration time of that option.  The price which is agreed upon before the purchaser and seller is referred to as the “strike” price.  In return for agreeing to the option, the seller collects payments from the purchaser.

There are two types of options as follows:

• Call option – gives the purchaser the right to buy the asset
• Put option – gives the purchaser the right to sell the asset

Two further considerations where options trading is concerned is that should the purchaser decided to exercise their rights, the seller will be obligated to purchase or sell the asset at the price that was agreed upon when the contract was drawn up.  The purchaser may also elect not to exercise this right and simply let the option expire.

Assets typically involved in options trading

The underlying asset of the option can be a number of different entities with the following being the most commonly seen:

• a “derivative” instrument (e.g. a futures contract)
• a piece of property
• a security (e.g. bond or stock)

The expected value of the option is typically evaluated by qualitative financial analysts, using a variety of evaluation models, in order to predict how the value of the option may change relative changing conditions in the economy and the market.

5 basics of options trading

If you are contemplating getting involved in options trading, here are 5 key elements that you should be aware of before you start out:

1. Understand the importance that the time factor plays in options trading.  This usually has an effect on the option’s premium
2. Factor the time into your options trading method so you know the average holding period of a trading signal
3. Be aware of market volatility as well as how this will impact the value of that option
4. Develop your own options trading method or system by taking the 3 elements above into consideration and understanding the following concepts: entry signals, exit signals, trade management system, profit factors (which can be greater than your average losses during a number of option trades)…
5. Finally, the final element that you need to consider with options trading is you and your trading psychology.

How do I Learn about Options Trading? | Online Options Trading

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