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If anyone is going for any fresh investment the first thing that he needs to know is the relationship between Risk and Return on investment. Any sort of investment has a risk in it and an expected return associated with the risk. Risk and Return are normally directly related. Now on making your investment decision your role is to minimize the risk and maximize the return. (how to do that will be dicussed later).


DIVERSIFICATION of investment portfolio across different categories of investments such as Debt , Derivatives, EquityForex , Commodity, Venture Capital, etc is a prudent idea.
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Now let us consider investing in a stock market or any kind of investment which is freely traded in an exchange so that its performance is easily monitored and have full liquidity.


MINIMISING RISK AND MAXIMISING RETURN. As said earlier this is the main task of an investor. There are several ways it is done like studying economic condition, country analysis, managements credibility, industry analysis, fundamental analysis of the investing company , liquidity condition of the market, etc.  etc. and  so on. But the central point of all these is analyzing relevant information. There are so many incidents taking place all over but we are bothered only for those which have an effect on our investment. Any incidents which is relevant is a substance of our analysis and further to the extent it effects our investments. Since investments are freely traded in market these incidents should have effect on the price of the stocks. So is it not prudent to analyse the price of the investment itself? These is where the technical analysis comes into play and I personally recommends it to be much easier and effective than any other methods of investing.

However there are some basic assumptions that one should bear in mind when using technical analysis for investing. That there is a complete flow of information in the market and is reflected in the price. Hence technical analysis can only be applied to large cap stocks which have high volume. It cannot be applied to penny stock with low trading volume and whose price can be easily manipulated. It cannot also be applied to newly listed stocks.
For example consider the following statement- “It is definitely possible for an expensive stock to be undervalued, and for a stock that is worth pennies to be severely overvalued.” This is a wrong concept at least for large cap stock where trading volume is high and information flow is substantial .Contrarily the reality is just the opposite. MARKET IS ALWAYS RIGHT . If you are planning to make some money investing in stock market , then this is  the first thing that you need to know. Under no condition no one can be better knowledgeable than the market itself. The most essential thing is that you have to trade with the market, not against it. You cannot imagine to be against the market and make huge profit, that is simply your greed or imagination, yours worst enemy in the market. FEAR, EMOTION & GREED ARE INVESTORS WORST ENEMY. .

Another wrong concept that most of the investing community have is that fundamental analysis is for long term investing and technical analysis is for short term investing. My personal opinion is that you can apply technical analysis for long term investments also.
The only difference will be that if you are using technical analysis for long term investments then the charts has to be analysed for a longer duration. Besides it is more likely that technical analysis will give you early sign of exit for your investments than your fundamental analysis because it is safe to assume that if there is any so called fundamental news on your investment it is not that always you will be the first person in the market to know it. Now there are prudent investors in the market who have the news and on that whatever they act will certainly going to effect the price of your investment. So technical analysis is most likely to give you early signals. Converse is also true i.e. entry signal can also be effectively generated by technical analysis.

But if you are really thinking to make some money by investing in financial markets, then FOREX MARKET has the highest of all potentials. You can make a fortune with little investment by strategically and prudently investing in FOREX MARKET. One can really make a killing in FOREX MARKET by leveraging  today’s technology appropriately.



 



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