Frequently Asked Questions About Self Directed Investing
Aug0
Self-Directed Investing
Interested in taking control of your portfolio and becoming a “self-directed” investor within the stock market? You need to know the following.
For most people the idea of self-directed investing comes with a myriad of misconceptions and fears but with the right information and knowledge, making your own decisions can produce significant results.For example, it is very common for properly educated self-directed investors to outperform the stock market significantly, and with the right knowledge, you can consistently produce above average returns.
Basically, self-directing your investments means taking control of your own investments and the responsibilty for the decisions related to your portfolio. By opening a self-directed online trading account, you retain the authority to choose the type of investments you want in your portfolio (e.g. mutual funds, ETFs, individual shares, etc), as opposed to ‘managed accounts’ where a broker or other financial professional with make those decisions.Most managed accounts will charge fees. (The industry average in Canada is about 2½% of your portfolio per year.)
Why Self-Direct Your Investment Portfolio?
So is self-directed investing for you? Understanding your motive for doing anything may often require examining the pros and cons. For self-directed investing consider the following:
- Pros: More control and the potential for better returns, reduced fees, increased liquidity and greater capital appreciation.
- Cons: Investors assume the risk – and the emotional stress. Many also lack the time, knowledge, and discipline.
If you list out your pros and cons then you can work towards getting the answers you need to make an informed decision.
How Much Money Is Needed To Invest?
Many people believe that to self-direct an account, you need ‘lots of money’ – but this is not true. You can self-direct any amount. For example, the new Tax Free Savings Account (TFSA) that allows Canadians over 18 to deposit $5,000 each year beginning in 2009, is eligible to be self-directed.
Other accounts that most Canadians have, including RSPs, RESPs, LIRAs (Locked in Retirement Accounts), can all be self-directed. The amount of money is not the issue.The larger your portfolio, the more shares (or more expensive stocks) you will be able to buy, but it isn’t necessarily the amount that is working as much as it is how well it is performing.
People with a large portfolio (e.g. $250,000 and above) often start by self-directing only a portion of it. There is nothing wrong with using the TFSA as a starting point.Over time, as your knowledge increases, you can transfer more of your RSP into a self-directed account without missing the tax deferral status.
Do Your Research First
Before you open your trading account and start putting your money to work, it’s important to take stock (no pun intended) of a few things. First, understand what you are getting into. Most Canadians express a sense of fear when it comes to making their own investment decisions and investing directly in the shares of companies doesn’t reduce that fear. The root cause of this fear, either consciously or subconsciously, often stems from a lack of knowledge on how the markets work and how successful they can be.Despite what people think, investing in the stock market is not gambling. If you were to ask those that have built great wealth utilizing the markets, you would rarely find “gambling” as a description of their activities.
Although you don’t need a PhD in Finance or Economics to make good investment decisions, it is essential to educate yourself.You couldn’t fly a plane, build a house, run a business or even drive a car without the training and knowledge needed – investing is no different. Skills are learned, practiced, improved upon and finally excelled at.It takes more than a weekend to develop good habits, so be confident of your knowledge and skills before rusing into the markets.
For starters learn the terminology. A great resource is www.getsmarteraboutmoney.ca Developed by the Ontario Securities Commission, this website is a wealth of information on making your own decisions.Then evaluate what educational options you have.It is important for novice investors to build a solid foundation. Look for a company that provides a well-rounded learning experience and compliment that with your own reading and research.Consider how you have adopted new skill sets in your life, you can adopt the same with self-directed investing.
Develop an Investment Strategy
Part of your education should include the development of goals and a strategy including a trading plan that matches your risk profile. Having clearly defined goals allows you to measure how successful you are in acheiving your dreams. Your financial goals can be achieved in any market, as long as you have a solid investment strategy.When you understand what your risk profile is, you are empowered to make decisions within your tolerance level.The majority of novice investors get excited about making money because of course that is the point; however that alone is not a good plan. A good education will teach you three important principles:
- Capital Preservation – keeping your money so you can invest it tomorrow and beyond.
- Money Management – knowing how to segregate your portfolio and your individual decisions.
- Risk Management – preserving your capital in case of unexpected mistakes or corrections.
All of these need to be a part of your strategy and decision process.
How Much Time Is Needed To Manage My Own Investments?
Educating yourself takes time – but how much time is needed to manage your portfolio on an ongoing basis? This is a subjective question, and will depend in part on how quickly you want to achieve your goals.
For instance, the investor that makes a few decisions a year and follows a buy and hold strategy will not spend nearly the amount of time that a more frequent trader will.At the same time, it is more likely that the investor that makes good strategic decisions only a few times per month will create higher returns.
Remember that the amount of decisions doesn’t necessarily mean an increase in profits. It isn’t how often you put your money to work that counts but how well you put your money to work.In order for an investor to make 2-3 percent return on their portfolio, they should spend about an hour a day staying informed of what is going on in the markets. Don’t shy away from spending the time however, since your financial future is one of the most important aspects of your life.
The Bottom Line On Self-Directed Investments
Self-directed investing doesn’t have to be time consuming and it doesn’t require a million dollars but it does require knowledge — good goals, a good plan and a good strategy
For more information on Self-Directed Investing, download your copy of the ebook: Stock Market Investing: The Untold Story and learn how to outperform the stock market in your investment returns and live with financial security.
Read More
- Why Investments For The Future Are Popular Now « UK Prestige Blog Arena
- Leveraging GIS and Blackberry Investments Using Freeance View « %scratchworkspace%
- Four Common Misconceptions About Online Data Entry Jobs | dunbeacon.net
- What should the average investor put their money into when oil and gold start to drop? | Business & Finance
- Sam Stein On Gibbs Vs. ‘Profes… | america1first.com
- Filing for Bankruptcy? Clear Your Misconceptions First | Articles Directory – Submit Articles Free
- Tikkun Daily Blog » Blog Archive » Islamophobia: Stoking Fears about an American Community
- Employee Training – A Wise Investment | SMALL BUSINESS CEO
- Constructing the future of career guidance : Smaart Advice – Advice and News for Career Professionals
- SCOTUSblog » Decisions on Monday
- Financial And Investment » Increase Your Training Intensity – Training To Failure
- Some Misconceptions About Kyle Lohse | Pitchers Hit Eighth :: A St. Louis Cardinals baseball blog
- Commodity Mutual Funds, The Best Way To Invest Your Money | Financial News
- Computer/Mobile phone/Gadget related writers[profes only] by kill4lov3 – OutsourcedHelp.com – Outsource Projects to Reliable Service Providers, Contractors and Freelancers
- One Court of Justice » COA Opinion: Mental-health professionals breached duty of care to patient by failing to protect her from former patient with whom she had been in group therapy
- Does SlideShare Pro make sense for investor relations? | IR Web Report
- Online Degree | 8 Misconceptions Robbing You From Earning An Online College Degree
- 6 Things Every ETF Investor Should Know « ETF Trends
- 6 Reasons Active ETFs Are Better Than Mutual Funds « ETF Trends
- Why Search Precedes Purchase Decisions for Canadian Moms – The eMarketer Blog
Mail this postPopularity: unranked [?]
Finding Ethanol Investment Market Stock
Jan0
Normal 0 false false false MicrosoftInternetExplorer4
Ethanol and its significance in the stock market investing world
In the bid for the world’s search for alternative sources of energy as time is currently running out given the current scarcity of crude oil, there have been numerous initiatives by companies to develop the potential of different alternatives to crude oil such as natural gas and ethanol.
Ethanol is a colorless, clear liquid with an agreeable odor. This is the natural component of ethyl alcohol. Corn, wheat, potatoes and other plants can produce starch that is made into ethanol by the process of fermentation. It can be used as fuel by mixing it with the regular gasoline and this becomes gasohol.
These sources of alternative fuels are currently one of the faces of future technologies that are being developed and researched on by many technology energy companies listed in the stock market. These technology companies have been popular picks of long-term technology savvy investors for more than 5 years.
The potential of ethanol has been the focus of a lot of technology companies in stock exchanges most commonly those listed in the NASDAQ stock exchange. These technology companies have been popular picks of long-term technology savvy investors for more than 5 years.
Although investment performance returns from these alternative energy companies may not yet be as competitive as the established companies that are currently in the business of the popular fossil fuels, the technology for these alternative fuel companies may still be a long way of waiting as the issue of having the necessary infrastructure to produce and distribute alternative sources of fuel like ethanol will take quite some time.
Investors that are optimistic on the future of these alternative energy companies believe that the technology will still require longer waiting. Aside from the waiting of new discoveries, the infrastructure and distribution of energy products produced from alternative energy sources like ethanol will still be more costly.
It will also not necessarily be competitive at its initial stages of introduction to the stock market investors as compared to the established production and distribution processes of companies producing fossil fuel energy products.
While the wait for the availability of alternative energy sources to the public may still be long and initially costly, the world will still have to push forward the developments of alternative energy sources as the world reserves of fossil fuels are already depleting and sooner or later the alternative sources of energy will have to be much more of a priority not only of companies engaged in its development but also of the general public as well.
Mail this postPopularity: 5% [?]
7 Tips To Get Control of Your Emotions When Investing in Stocks
Dec0
If you’ve ever invested in stocks, then you probably know that the market is highly dependent upon the emotional reactions of its investors. But did you know that emotions are the reason that most investors don’t make the kind of money they should? That’s right, by learning how to control your emotions you can significantly impact the success you have in the stock market. Here are 7 tips you can use to help get control of your emotions when you invest.
1) Create an Investment Plan and Document It
Writing down and documenting your investment plan is proven to help keep you focused and on track. In order to accomplish what you want to with your investing, your plan should include investment goals, any specific portfolio objectives and a specific time frame to achieve them. You should revisit your plan regularly to help keep you on track and help prevent short term events from distracting you from your investment goals.
2) Plan for the Worst
Always think through as many different scenarios as you can when it comes to your investment plan. Visualize and write out all of the positive and negative situations that could happen to your investments and create a plan for how you’ll respond. Think of it as an emergency plan so you’re always prepared no matter what happens. By doing this simple exercise, you can significantly decrease or eliminate the emotional reaction you have to a situation because you’ve had to time to think it through in advance.
3) Focus on Value
If you want to decrease the risk of your emotions taking over, focus your energy on value investing. By focusing on value investing, you will avoid being influenced by the news of the next big “winner.”.” Value investing is a great way to help overcome the emotional roller coaster to profitable investing.
4) Set Limits and Stick to Them
Setting limits on your investments can dramatically reduce your anxiety level and emotional response to the market. By including limits for both buying and selling any current or potential stock in your portfolio, you’ll make better decisions than other emotionally charged investors. This requires advance planning and discipline to not only create your buy and hold prices but also to initiate them when the market fluctuates. This disciplined action of buying and selling using pre-set limits will help to minimize your potential losses and insulate you from making bad decisions based upon emotion.
5) Invest on a Regular Basis
By investing regularly, you can create an investing routine where you make decisions based upon your goals rather than outside influences. This helps to eliminate the need that many inexperienced investors have to “follow the herd” and overreact. By using your plan and investing regularly based upon your specific goals, it will also help to better insulate you from market volatility.
6) Limit Your Transactions
Often times, the more transactions you make the more likely you are to fall victim to the emotions of the market and lose sight of your long term goals. The more transactions you make that are short term, the more random your decisions become and the greater the risk. By limiting your transactions you can focus on the longer term trends and decrease your costs.
7) Evaluate and Learn from Your Mistakes
Anytime you make any type of mistake, take time to consider what went wrong. Then write down this information and figure out how you can use it to your advantage next time. This one easy technique can help make your investing even more profitable because you’ll avoid making the same mistake twice.
With these 7 tips you’ll be able to map out your investment goals and keep your emotions in check so you can make your investment portfolio even more profitable.
And by making more profitable investments you can spend more time and money on things you enjoy like spending time with your family, traveling and doing hobbies like taking pictures and then displaying your memories in beautiful wood picture frames. This way you’ll be reminded of the fun times so you’ll continue to stay motivated to invest.
Mail this postPopularity: 5% [?]



