Consider stock as tools for living, just like any other investment. Stock are the tools you use to accomplish something to achieve a goal. Yes, successfully investing in stocks is the goal that you are probably shooting for it if you are reading our blog. However, you must complete to following sentence: “I want to be successful in my stock investing program to accomplish ___”. You must consider stock investing as a means to an end. When people buy a computer, they don’t think of buying a computer just to have a computer. People buy a computer because doing so helps them achieve a particlular resutl, such as being more efficient in business playing fun games, or having a nifty paperweight.
Know the difference between long-term, intermediate-term, and short-term goals and then set some of each. Long-term is a reference to projects or financial goals that need funding five or more years form now. Intermediat-term refers to financial goals that need funding two to five years from now, while short-term goals need funding less than two years form now.
Stocks, in general, are best suited for long-term goals such as these:
Achieving financial independence
Paying for future college costs
Paying for any long-term expenditure or project
Some categories of stock may be suitable for intermediate term financial goals. If, for example, you will retire four years from now, conservative stock are appropriate. If you are optimistic about the stock market and confident that stock prices will rise, then go ahead and invest. However, if you are negative about the market, you may want to wait until the economy stats to forge a clear path.
Stock generally are not suitable for short-term investing goals because stock prices can behave irrationally in short period of time. Stocks fluctuate from day to day, so you don’t know what the stock will be worth in the near future. You may end up with less money than you expected. For investors seeking to reliabley accure money for short-term needs, short-term bank certificates of desposit or money market funds are more appropriate.
In recent years, investors have sought quick, short-term profit by trading and speculating in stock . Lured by the fantastic returns generated by the sotck market in the late 1990s, investors saw stocks as a get-rich-quick scheme. It is very important for you to understand the different between investing, saving, and speculating. Which one od you want ot do ? Knowing the answer to this question is crucial to your goals and aspirations. Investors who don’t know the difference tend to get burned. Here are some information to help you distinguish among these three actions:
Investing is the act of putting your current funds into securities or tangible assets for the purpose of gaining future appreciation, income, or both. You need time, knowledge and discipline to invest. The investment can fluctuate in price, but has been chosen for long-term potential.
Saving is the safe accumulation of funds for a future use. Savings don’t fluctuate and are generally free of financial risk. The emphasis is on safely and liquidity.
Speculating is the financial world’s equivalent of gambling. An investor who speculates is seeking quick profits gained from short-term price movements in that particular asset or investment.
These distinctly different concepts are often confused even among so-called financial experts. I know of one financial advisor who actually put a child’s college fund money into an internet stock fund only to lose over $17000 in less than then months! This advisor thought that she was investing, but in reality, she was speculating. I know of another advisor who told a client to avoid savings accounts altogether because the client has a 401(k) plan. This particular advisor didn’t catch the crucial difference between saving and investing. The client eventually found out the differences; his 401(k) fell by 40 percent when the bear market of 2000 arrrived.
Fortunately, we can learn from these situations and get back on track. That child that lost the $17000? He is my neighbor and I helped the father to reinvest the remaining funds sign up our newsletter in stockpreacher. The portfolio doubled in valued by the following year. It is still growing. The second fellow that lost 40 percent in his 401(K) account? He became one of our subscriber in our newsletter at stockpreacher.com recouped his losses and his 401 (k) plan is up. As 2005 both investors have portfolios that are beating the general market.
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