7 Investing Mistakes And How To Avoid Them

Making mistakes is part of the learning process. However, it's all too often that plain old common sense separates a successful investor from a poor one. At the same time, nearly all investors, new or experienced, have fallen astray from common sense and made a mistake or two. Being perfect may be impossible, but knowing some of common investing errors can help deter you from going down the well-traveled, yet rocky, path of losses. Here are some of the most common investing mistakes.

Using Too Much Margin
Margin is the use of borrowed money to purchase securities. Margin can help you make more money; however, it can also exaggerate your loses - a definite downside.

The absolute worst thing you can do as a new investor is become carried away with what seems like free money - if you use margin and your investment doesn't go your way, you end up with a large debt obligation for nothing. Ask yourself if you would buy stocks with your credit card. Of course you wouldn't. Using margin excessively is essentially the same thing (albeit likely at a lower interest rate).

Additionally, using margin requires you to monitor your positions much more closely because of the exaggerated gains and losses that accompany small movements in price. If you don't have the time or knowledge to keep a close eye on and make decisions about your positions and the positions drop, your brokerage firm will sell your stock to recover any losses you have accrued.

As a new investor, use margin sparingly, if at all. Use it only if you understand all its aspects and dangers. It can force you to sell all your positions at the bottom, the point at which you should be in the market for the big turnaround.

Buying On Unfounded Tips
We think everyone makes this mistake at one point or another in their investing career. You may hear your relatives or friends talking about a stock that they heard will get bought out, have killer earnings or soon release a groundbreaking new product. Even if these things are true, they do not necessarily mean that the stock truly is "the next big thing" and that you should run to the nearest phone to call your broker.

Other unfounded tips come from investment professionals on TV who often tout a specific stock as though it's a must-buy, but really is nothing more than the flavor of the day. These stock tips often don't pan out and go straight down after you buy them. Remember, buying on media tips is often founded on nothing more than a speculative gamble.

Now this isn't to say that you should balk at every stock tip. If one really grabs your attention, the first thing to do is consider the source. The next thing is to do your own homework. Make sure you "research, research and research" so that you know what you are buying and why. Buying a tech stock with some proprietary technology should be based on whether it's the right investment for you, not solely on what some mutual fund manager said on TV.

Next time you're tempted to buy a hot tip, don't do so until you've got all the facts and are comfortable with the company. Ideally, obtain a second opinion from other investors or unbiased financial advisors.

Day Trading
If you insist on becoming an active trader, think twice before day trading. Day trading is a dangerous game and should be attempted only by the most seasoned investors. In addition to investment savvy, a successful day trader needs access to special equipment that is rarely available to the average trader. Did you know that the average day-trading workstation (with software) can cost in the range of $50,000? You'll also need a similar amount of trading money to maintain an efficient day trading strategy.

The need for speed is the main reason you can't start day trading with simply the extra $5,000 in your bank account: online brokers do not have systems fast enough to service the true day trader, so quite literally the difference of pennies per share can make the difference between a profitable and losing trade. In fact, day trading is deemed such a difficult endeavor that most brokerages who offer day trading accounts require investors to take formal trading courses.

Unless you have the expertise, equipment and access to speedy order execution, think twice before day trading. If you aren't particularly adept at dealing with risk and stress, there are much better options for an investor looking to build wealth.

Buying Stocks that Appear Cheap
This is a very common mistake, and those who commit it do so by comparing the current share price with the 52-week high of the stock. Many people using this gauge assume that a fallen share price represents a good buy. But the fact that a company's share price happened to be 30% higher last year will not help it earn more money this year. That's why it pays to analyze why a stock has fallen.

Deteriorating fundamentals, a CEO resignation and increased competition are all possible reasons for the lower stock price - but they are also provide good reasons to suspect that the stock might not increase anytime soon. A company may be worth less now for fundamental reasons. It is important always to have a critical eye since a low share price might be a false buy signal.

Avoid buying stocks that simply look like a bargain. In many instances, there is a strong fundamental reason for a price decline. Do your homework and analyze a stock's outlook before you invest in it. You want to invest in companies which will experience sustained growth in the future.

Underestimating Your Abilities
Some investors tend to believe they can never excel at investing because stock market success is reserved for sophisticated investors. This perception has no truth at all. While any commission-based mutual fund salesmen will probably tell you otherwise, most professional money managers don't make the grade either - the vast majority underperform the broad market. With a little time devoted to learning and research, investors can become well equipped to control their own portfolio and investing decisions - and be profitable. Remember, much of investing is sticking to common sense and rationality.

Besides having the potential to become sufficiently skillful, individual investors do not face the liquidity challenges and overhead costs large institutional investors do. Any small investor with a sound investment strategy has just as good a chance of beating the market, if not better, than the so-called investment gurus.

Never underestimate your abilities or your own potential. That is, don't assume you are unable to successfully participate in the financial markets simply because you have a day job.

When Buying a Stock, Overlooking the "Big Picture"
For a long-term investor one of the most important - but often overlooked - things to do is qualitative analysis, or "to look at the big picture." Fund manager and author Peter Lynch once stated that he found the best investments by looking at his children's toys and the trends they would take on. Brand name is also very valuable. Think about how almost everyone in the world knows Coke; the financial value of the name alone is therefore measured in the billions of dollars. Whether it's about iPods or Big Macs, no one can argue against real life.

So pouring over financial statements or attempting to identify buy and sell opportunities with complex technical analysis may work a great deal of the time, but if the world is changing against your company, sooner or later you will lose. After all, a typewriter company in the late 1980s could have outperformed any company in its industry, but once personal computers started to become commonplace, an investor in typewriters of that era would have done well to assess the bigger picture.

Assessing a company from a qualitative standpoint is as important as looking at the sales and earnings. Qualitative analysis is a strategy that is one of the easiest and most effective for evaluating a potential investment.

Compounding Your Losses by Averaging Down
Far too often investors fail to accept the simple fact that they are human and prone to making mistakes just as the greatest investors do. Whether you made a stock purchase in haste or one of your long-time big earners has suddenly taken a turn for the worse, the best thing you can do is accept it. The worst thing you can do is let your pride take priority over your pocketbook and hold on to a losing investment, or worse yet, buy more shares of the stock since it is much cheaper now.

Remember, a company's future operating performance has nothing to do with what price you happened to buy its shares at. Anytime there is a sharp decrease in your stock's price, try to determine the reasons for the change and assess whether the company is a good investment for the future. If not, do your pocketbook a favor and move your money into a company with better prospects.

Letting your pride get in the way of sound investment decisions is foolish and it can decimate your portfolio's value in a short amount of time. Remain rational and act appropriately when you are inevitably confronted with a loss on what seemed like a rosy investment.

The Bottom Line
With the stock market's penchant for producing large gains (and losses) there is no shortage of faulty advice and irrational decisions. As an individual investor, the best thing you can do to pad your portfolio for the long term, is to implement a rational investment strategy you are comfortable with and willing to stick to. If you are looking to make a big win by betting your money on your gut feelings, try the casino. Take pride in your investment decisions and in the long run, your portfolio will grow to reflect the soundness of your actions.


Reference:

• http://www.investopedia.com/articles/01/121901.asp?partner=basics031612&utm_source=1&utm_medium=Email&utm_campaign=Basics-3/16/2012#axzz1pivBg8Rn

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How To Teach Your Child About Investing

Have you taught your children about investing? As your child becomes more aware of money and other financial concepts, it is vital that you arm them with some important investment knowledge. Read on to find out how to impart some investing smarts to your children. If you don't have the basic knowledge required for investing, and need to learn more yourself.

Investing Should Be a Family Activity

Some parents are guilty of not discussing personal finance with their children, and almost all parents are guilty of not discussing investing with their children. Investing should be a family activity. Children mature at different rates, so it may take some time before your child is ready to tackle concepts like portfolio creation and asset allocation; however, the basics of investing can be taught quite young.

Risk and Reward

Before you have your kids spending Saturdays at the library using the internet to check company profiles, you will have to explain risk and reward. Risk is the possibility that an investment will lose some or all of its value. Reward is the percentage of gain that your investment experiences over time - the return on investment (ROI).

Below we will sketch a brief picture of the two more common investments: debt securities and stocks.

Easy Ideas to Tell Your Kids About: Stocks

Stocks are variable risk, variable return investments. On the whole, they are categorized as high risk and high return. You have to make it clear that all the risks involved in the stock markets can't be predicted.

Easy Ideas to Tell Your Kids About: Debt Securities

A bond is a low-risk, low-return investment. Typically, bonds pay only a small amount over the prime interest rate because they are backed by stable institutions (usually banks or governments). You can buy bonds from unstable regions of the world that offer better returns, but these countries often have unstable governments, so you can't necessarily count on getting that return down the road.

Getting Your Child's Attention

When you are checking your stocks, show your child the companies of which you own a small part. If you own any exciting companies that might be of interest to your children - plane manufacturers like Boeing, sports equipment specialists like Bauer, technology and video game companies like Sony - make sure that you request the company's current investor relations package, or print it off the internet, so that you can show your child more about those companies, including how much they earned, what they make and how many people work for them.

Buying and Tracking

Once you have introduced your child to some basic concepts, you can sit down together allow him or her to select a company. If you have the money, you can buy the stock and track it with your child. You should give the statements to him or her to keep in a financial binder (you can add his or her banking information here also and separate the two different sections with a divider). If you don't have the money, make an artificial portfolio and track the stock for fun.

When your child is older, you can provide a more in-depth explanation of stocks and other investments. Eventually, you want to let your children buy their own stocks. Your child may have enough cash diligently saved up in a savings account by the time he or she is interested in investing. Don't put it all into a bond or the stock market, but invest a third in each and keep a third in savings. This will allow your child to compare the performance of a savings bond, stocks of his or her choosing and the interest from a bank account.

If your child doesn't have any money, you have two options. You can use $100 of your own money to open a discount brokerage account for your child to make investments through, or you can continue to use an artificial portfolio of stocks that your child wants to buy some day. In the latter case, you will need to find ways to maintain your child's motivation.

Conclusion

If you are able to pick stocks together and track them when your children are young, they will get a sense of the up-and-down cycles that stocks go through. This understanding will prepare them for riding out market fluctuations and making informed decisions when others panic.

During all this, you want to allow your child to make real decisions and take real risks. Yes, your child may lose money, but the purpose of this exercise is to familiarize your child with investing. Part of this exercise is learning that any investment has advantages and disadvantages. Your child may not make a fortune, but the experience of gaining and losing money is almost as valuable.


Reference :
http://www.investopedia.com/articles/pf/07/childinvestor.asp?partner=ntu12&utm_source=18&utm_medium=Email&utm_campaign=NTU-2/29/2012#axzz1nqvV81FL

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The Siamese Institutions: Taxes And State Income

The income of the kingdom is diverse in nature. The small tributary kings send traditional gifts in gold or in the commodities of the country to their sovereign. The rice fields pay a variable tax, generally one tical, less than two francs at the present price of silver, per square sên, a measure of forty metres to a side, i.e. about one franc at the rates of that time. With each accession, the land register, summarily revised, is more or less fixed for the duration of the reign. The tenth part of this tax, the only one, more or less, of the kingdom that is not farmed out, is allocated to the provincial mandarins charged with levying it. In order to favour the taking into production of rice fields, the kings of Siam have decided that the digging of a canal will result in obtaining the land over the whole length and stretching on both sides up to a distance of a thousand metres free of charge, with consideration, be it understood, of the rights of neighboring owners. The taxation of plantations, gardens and fruit trees depends on the nature of the cultivation and on the number of trees.

The rights over rice liquor, assessed by furnace and by shop, were already mentioned by de La Loubère. Today, ever more numerous internal monopolies are established, not only on rice liquor and non all the supplies sold in the markets, rice being about the only one excepted, but also on gambling, lotteries, opium, theatres, prostitutes, etc. Numerous abuses are born from the rights of pursuit and arrest of delinquents and smugglers, which have been given to the Chinese farmers.

Another tax is the customs tax levied on all merchandise entering the country or even on the commodities which leave it. The Europeans, in the seventeenth century, called the customs posts by a local name, transcribed as “Tabanque”, a word in which one can still recognise the Cambodian name “Trebêng” which is given to small frames of bamboo fixed on the end of a sticks which serve as signposts at the customs posts.

The tax on barges was already one tical per fathom of length at the time of de La Loubère. Today, the taxes on the local boats and on the junks or foreign ships mooring at the ports of Siam produce an important sum of income. One can also cite the sums from fines and judicial confiscation, the tribute for usage, such as the traditional rights of levy on the inheritances of mandarins, the buy back money for the heavy corvées weighing on the people and finally the trade monopoly of a sizeable part of the exported and even imported goods, the king having been all the time, formerly even more than today being the greatest monopoly builder and trader of his kingdom.

In his capacity as absolute monarch, as eminent proprietor of the country, the sovereign alone disposes of the income of the State of which he consumes the wealth. His royal purse is combined with the administration of the treasury: all the income is brought into it and the payments are only made upon royally sealed mandates or signed by his name. His opulence contrasts with the poverty of the people. In the seventeenth century, Gervaise estimated the annual revenue to be four to five million. The king saved, having very few expenses, barely ever paying but in merchandise for his foreign purchases and he possessed eight or ten warehouses full of rich fabrics, beautiful weapons and urns filled with gold and silver. In the first half of the nineteenth century, the revenues were estimated to be twenty or thirty million. At present, the valuations almost unofficial, approximate in any case, vary between fifty and eighty million francs. But the times are different: the king believes he must spend on public utilities. He creates roads; he maintains a navy, troops, he pays the salaries of the majority of his functionaries.


Reference:

• Etienne Aymonier, Khmer Heritage in Thailand, White Lotus Co., Ltd, Bangkok, 1901, p.50, 51.

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