All posts by Gina Parks

How Not To Be A Victim Of A Bad Mutual Fund

We have all heard the advantages of investing in a mutual fund over trying to pick individual stocks. First of all mutual funds hire professional analysts that are market experts and devout many hours of study to the various stocks. Unless you want to devout a large portion of your free time to the study of the financial reports, you probably won’t have as much information to make a decision as a mutual fund manager.

You also shouldn’t forget the well documented advantage of diversification. By holding several non correlated investments, risk is reduced. Put simply, some go up, some go down and combined, the return levels off the fluctuations, or risk.

Finally, a mutual fund offers smaller investors a chance to invest in small increments rather than having to save a large chunk of cash to purchase 100 shares of stock.

Because of all the advantages, it’s not really surprising that mutual funds have become a very popular form of investing. Now there are thousands of mutual funds to choose from, so how does one make a selection? Try to consider these few tips:

Jumping on the recently performing best fund is what you need to avoid. It may seem like the safe and rational thing to do, but like individual stocks, you want to buy low and sell high, not buy high and pray for more growth.

It’s likely that good funds may not be enough to overcome the force of the overall market. Funds that can exceed the broad market without increasing the risk is what you should be looking for. Risk parameters are what each fund has and they are required to follow it. To understand what these are, you need to read the prospectus closely.

Make sure that the number of funds that you own are limited. Diversifying into many mutual funds will not increase your return by much nor will it reduce your risk unless you are trying to simply achieve the same returns as the broad market.

Funds that become too popular and too big tend to slip in performance. This is due to several reasons.

The type of fund being totally dependent on your investment objectives is one final point you need to keep in mind. Designed for your objectives are certain funds and these can either be for retirement, growth, income, funding the kids college, etc.

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Stock Options – A Pretty Penny

Many investors feel like they don’t have a big enough say in the companies that they have invested in at some point or another. Many times this can result in the investors failing to take full advantage of any opportunities that may arise and leave them struggling to make a profit. Investing in penny options I a good way of getting more leverage and increase the size of your portfolio at the same time.

You will usually find that the price of many stocks rises in steps f either five or ten cents. Penny stock prices don’t use this method and their prices varying in pennies. Traders can increase their leverage by investing in penny stocks as this means you can get into investing without masses of capital behind them and should their stocks fail they haven’t lost that much money.

Penny options offer you the chance to make a profit in a relatively short amount of time because of the small amount of money and smaller competition. Lots of people are drawn to penny stocks because you will not lose more than you initial investment. Stock options, as opposed to standard regular stock, do have their own drawbacks. Over a short period of time it is possible for penny options to change massively. These could be for the better or the worse.

It is vital that you put some effort in to finding out if the options you are considering buying will suit your needs. Penny stocks are cheap but their liquidity may not be what you need. To stop yourself from making a big mistake you should always check your brokerage cancellation policies beforehand. Finding out what the time decay of any options you buy are very important. Plan for how long you are going to keep the options for before trading them and buy options that will expire well after that point.

You don’t need to worry about expiration dates if you are planning on trading your options in a single day. In this situation the front month option will work out just fine for you. Penny options are not the common now days. You will be playing catch up with many crafty brokerage firms and some savvy traders who already use this method.

Patience is a virtue, especially when dealing with penny stocks. Penny options have the unnerving ability to move quite a lot in just a few minutes and instead of panicking you need to sit down and relax. If you are prone to worrying and stressing then maybe trading penny options is not the game for you.

A great way to get yourself some extra leverage without the capital you would need for blue chips then trading penny options might be for you.

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