There comes a time in every young person's life, when he (or she) must choose: stocks or bonds. I have chosen stocks. Why? In one sentence: Because stocks rock, while bonds are boring. Bonds are predictable. That is, of course, their appeal to "widows and orphans" (Wall Street parlance for conservative investors of all stripes). There is one main fact you need to know about bonds, other than that they are a safe investment vehicle with a fixed rate of return, and that is that the price of a bond goes up or down in inverse relation to the movement (up or down) of interest rates. The price fluctuation is minimal, and you will sleep well knowing that a portion of your portfolio is in bonds (in a bond fund or a so-called blended fund like Fidelity Balanced Fund or Vanguard Wellington).
That said, I reiterate: bonds are boring because they are safe, and stocks are exciting because of the added risk and added potential for profit. Stocks are a sophisticated way of gambling, though if you're smart and you do your homework, the odds tilt in your favor as they never do in a casino or at the track. Stocks are also more complicated, and that counts in their favor as well: the study of a stock's fundamentals -- such as its price-earnings ratio -- can become addictive.
What are price-earnings ratios and why do they matter? The answer is coming!
Get the fundamentals right first! Here are 4 basics for you: 1. Choosing a broker. Select the broker that operates on low spreads. Your broker must have tie ups with large banks. Check to ensure that they are registered with futures commission merchant (FCM) and regulated by commodity futures trading commission (CFTC). 2. Fundamental analysis of the market. This done to understand long-term trends. 3. Technical analysis of the market. This is necessary to understand and analyze the price trends as a result of change in the currency conversion rate. 4. Money management. You must be aware of how much you are investing and how much you are getting back. You have to measure your success from the profit made after a day and not after each trade.
Posted by: | March 30, 2009 at 08:14 AM
I agree. Stock trading is more exciting because it is more interactive. People like to be involved and you don't do anything with bonds except hold them. I love having control over my investments. My latest pick is Mentor Capital (MNTR), which you can learn more about at http://breastcancerinvesting.com
Posted by: mlgreen8753 | September 22, 2009 at 10:40 PM