A Few Things I Learned So Far This Year
Posted on: November 11, 2016, by : fadmin
  • Investing is easy, but risky. Managing risk seems like the most important thing so far. The enemy of managing risk is greed. Greed will allow you to invest in things without doing all the needed research first and put a larger percentage of your capital than you should for any one investment. Fear and perhaps some greed will also keep you from selling an investment at a loss. In time you learn when it’s better to take the loss so it doesn’t get worse or time up you money and keep you from things that would turn a profit while you are just trying to break even again.
  • If the stock you are holding announces they are going to do a reverse split – sell that mother if you can ASAP. A reverse split that is 1 to 10 will take your 10 shares at $1 and give you 1 share at $10. While you are left with the same value, the reason companies to these splits is to raise the price of their shares so they look better. The problems I have seen is that the reason the share price was so low is generally the same and so now the stock price has pumped up and have farther to fall than before. If nothing else changes, you can count on the share price to fall again.
  • Most people don’t think about timing when they buy mutual funds. When I had a financial advisor they never mentioned it and when I started learning about investing I found very little about it. Unlike stocks or ETFs, the share price you pay when selling is set after the market closes on the same day. If the market goes up or down during the day and closes differently from the day before, your price may also go up or down, depending on what holdings are in the fund. The share price may not change much from day to day, but it can. If you like the price and decide to buy, but the market closes up, then you may pay more than you expect. The same thing happens if the market goes down. The best option if you can delay is to wait until you see the price you like and then act if the market continues down that day to buy, or up if you are going to sell.
  • Lastly, the strategy I have been working on this year is to invest moderate amounts into different index funds. The funds are diversified, and buying a number of different funds provides more diversification. I try to buy the funds when they are somewhat down with the idea of selling them when the increase by about 10 percent. This may take a while and some may even go down. That’s ok, they say you should just buy the funds and hold them, but I want to see how I do by locking in the profits each time I sell. Unlike a stock with it’s higher risk of non-recovery, I will not sell a fund that is down and keep holding it as look as I have to.

 

 

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