Should You take the Jump or Should You Stay in Your Seat?

Do you consider yourself as a risk-taker? If you are in the stock market and trading stocks, among the safety measures that you can use is risk/reward calculation. You’d be surprised how easy it is to do the calculation. What you have to do is just divide the net profit by the price of your max risk and that is it!

Realizing what is Reward from Risk

Unfortunately, retail investors could lose tons of money when they opt to invest their money and there are numerous reasons associated to this. Among these reasons are brought by the investor’s incapability or lack of knowledge to manage risk. In the financial world, you’ll hear risk/reward very often. But do you really know what it exactly means?

Investing your money into market comes with certain degree of risk and you must be compensated for taking risks. If someone you trust asked you for a 50 dollar loan for instance and then offered you to pay 60 dollars within 2 weeks, it may not be worth of the risk. However, what if the same person said you’ll be paid 100 dollars within the same period? The risk of losing 50 dollars is overshadowed by the money you can make.

By figures, this is a 2:1 risk/reward. This is a ratio in which most professional and experienced investors would immediately jump over. Likewise if you are offered 150 dollars, then it makes the ratio 3: 1. Now, let us bring the same analogy to the stock market. Assuming that you’ve done your research and discovered a stock that you like. You took notice that company XYZs stock is trading currently at 25 dollars, down from its recent high of 29 dollars.

Risk and Reward in Action

You firmly believe that if you make your purchase now, XYZ will recover back to 29 dollars sooner or later and then, you can cash in. You have 500 bucks to buy stocks and thus, you bought 20 shares. When it reach its 29 dollars share once again, you can cash in and made an automatic 100 dollars profit without hassle.

Another thing to know is that, every person has tolerance risk of their own. You might be someone who loves adventure but somebody else prefers to stay at home and relax. This has to be taken into account as well. Your risk tolerance will be different from others.

Worst comes to worst, you can contact a bankruptcy lawyer by visiting this website to help you recover your financial status.

Handling Trades/Investments while Minimizing Risks

It is natural to make mistakes. It is what makes us humans. However, letting mistakes as is and not learning anything is dangerous. More about this when you are into investing or trading. While you’d see a number of businesses like rental property management Atlanta, coffee shops and restaurants and everything in between are enjoying their success, they somehow made mistakes along the way. They analyzed it and ensure not to commit the same twice.

It is very common among investors to be involved in long-term holdings. It is natural for them as well to exchange-traded funds, trade in stocks and several other securities.

In general, traders are buying and selling options and futures and holding these positions for shorter period of time and involved in more transactions than they could handle. While investors and traders are interchangeably used by some, they are actually following different trading transactions.

Yet, they are guilty of committing the same mistakes over and over.

Recommendations to Avoid Failures in Trading and Investing

Of course, there is no easy way to see success. It all boils down to hard work and discipline. Making a commitment to success is just a matter of time if you’ll be able to harness those two things and implement the said tactics below.

Preparing a Trading Plan

Seasoned traders only involve themselves in a trade only after having a well-defined plan. They do know the exit and entry points, the amount of money to be invested in a trade and maximum loss they can afford to take.

Newbie on the other hand might fail to have a plan before commencing on their first trade. Even if they do, they might be susceptible to stray from defined plan than what experienced traders would do.

Do not Chase after Performance

Countless traders or investors will opt for strategies, managers, classes and funds as per the current performance of the market. That feeling of “missing out on great returns” has resulted to making bad investment decisions.

If a certain strategy, class or fund has been performing well for the last 3 or 4 years, then we know for sure that we should have made investments to it 3 or 4 years ago. However, that cycle that resulted to its exceptional performance might be closing and the smarter thing to do is to move your money out than pour it in. After all, it is up to you what to do. In trading, there’s a popular saying that big risks come big rewards.

Ways in Investing in Cannabis Stock Market

Cannabis stocks are high-growing but high-risking as well.

Cannabis market is growing really high internationally. The global amount spent for cannabis is almost near to cover up $24 billion last 2019. In estimation, the total growth of the cannabis market is expected to soar up to $63.5 billion in 2024.

With this, it has a computed of 21% compound annual growth rate. Because of the said growth, many investors are gearing toward on the cannabis Stocktrades market. The question is, what are the ways to successfully invest in marijuana?

Steps in Investing into Marijuana Stocks:

Before investing, it is better to understand the stock trading as a form of it to be successful in the field. Below are some of the key steps to successfully invest into the fast-growing market of cannabis.

• Know the types of marijuana products

Generally, cannabis products are categorized into two – medical marijuana and recreational marijuana. The medical marijuana, also known as medical cannabis, is widely legal in almost 33 states in the US and about 30 countries worldwide. In order to obtain this product, a prescription signed by a medical practitioner is required. The product is prescribed often for depression, anxiety, stress, and pain. The Food and Drug Administration approved the first medicinal marijuana product in June 2018.

Meanwhile, recreational marijuana tend to deliver the psychoactive aspect of the plant’s active substance. Its use has also been legalized in 11 US states but for adult use. After the legalization of the recreational weed, the Canadian parliament opened their market for cannabis business in October 2018. The legal consumption of recreational marijuana is through smoking of the cannabis flower.

• Learn the various kinds of marijuana stocks

The three main kinds of cannabis stocks are:
1. Growers and retailers – these are companies that cultivate, harvest, and distribute the cannabis end-product to the consumers.
2. Focused biotech – these are pharmaceuticals that concentrate on the development of cannabis drugs.
3. Products and services providers – these are companies that offer cannabis-based products and services like hydroponics products.

• Understand the risks of investing

Generally, investing in any asset entails some amount of risk. But, pursuing to invest in cannabis stocks have higher risks to take. This may include the legal and political perils, the imbalances on the supply and demand of the marijuana products, and the over-the-counter stock danger.

Understanding Stock Trading As A Form Of Investing

Stock trading is the best known and most popular form of investing. A share is actually a security. Listed companies spend these in order to raise money. The value of share ascertains the price that you pay out for this type of security. Values change regularly and are dependent on demand and supply. If many people want to buy the share, the price rises. If many people start selling the stock, the price will fall.

Stock Trading 101

Price return of shares

By buying shares you can earn money and thus achieve a return. These returns are often higher than the returns that can be achieved with a savings account. In the long term, the price of shares usually rises well. There may be an economic crisis, decline or stock market crash, but fortunately, these do not happen much and in the longer term you are often not bothered by this. As a result, it is often possible to achieve a good price return after a number of years and to be able to sell your shares for more money than what you bought them for.

Share in a company

By buying a share, you buy a small piece of the company. You literally buy a share in the company. These shares can give you control of the company. If you own shares in a company, you are a shareholder and welcome to the annual shareholders’ meeting. Here you can express your opinion and you will hear what the management has to say. This can offer benefits because others do not have this information. In addition, some companies also distribute part of the profit to shareholders. This is called a dividend. Large multinationals, in particular, payout stable and high dividend yields. This is especially profitable in the longer term. If you want to invest in the short term, you better look at other aspects.

Stock exchange and (online) brokers

Control in the company is not the reason for most investors to buy shares. Shares are usually purchased to make a profit with this. Stock traders come together on the stock exchange. Here the shares are bought and sold again. The major financial organised institutions trade the shares for their clients on the stock exchange. As a private investor, you buy the shares at a financial institution. These settings are also called brokers. For example, you can invest with your own bank. But this is not often done. Since the rise of online brokers, much has been traded online. Online brokers also often trade at lower rates than the larger financial institutions.

How does stock trading work?

When investing in shares, the goal is to sell the share for a higher price than the price you bought the share for. This way you make a profit. So, for example, you buy a share of ten euros and sell it again for thirty euros. You have then made twenty euros in profit. This profit is called a return.

There are two types of investors, long-term investors, and short-term investors. Short-term investors often sell their shares within a few days and sometimes within a few minutes. They take more risk and expect a high return. They keep a close eye on the economic news and respond to the rates. Long-term investors sometimes hold their shares for years. They often do research in advance into the company they want to invest in and invest in companies they trust. They take less risk and often have a lower return.

What are the advantages?

  • Control in a company
  • Dividend return on company profit
  • Good price return in the long term

What are the risks?

  • Does not offer a guarantee for making a profit
  • If the company is not doing well, the value of shares goes down

In addition to the price return that you as an investor can achieve, you can also achieve dividend returns. If you buy a share, you buy a small part of the company. Many larger companies distribute part of the profit to their shareholders. This profit is called a dividend yield.

 

Taking a Loan for Investment Purposes?

The only time when it becomes a sensible decision to take a loan is when you are using it for investment. In financial experts, this is a lingo known as “invest a loan”. This is when the ROI of loan is higher and risks level of investments is low. It is not recommended for investors to make investments in something that’s risky such as derivatives or stock market.

In addition to that, if ever an investor has taken out a loan, it doesn’t make sense to put money in investment that’ll mature only after the loan is due. It is necessary that the investor to guarantee that the ROI is higher than the loan cost. Well, there are instances when you can use this to your advantage too like by taking lawsuit loans for a fast pre settlement funding.

Then again, there are bonds and CDs or Certificate of Deposits that can be used as an investment option. These are alternatives that’ll mature in 90 months or maybe less and could yield more than 10 percent of loan cost. Being able to have good understanding of when and how leverage and margin comes to play can help investors to answer such question.

Trading as an Investment Option?

As a matter of fact, you can make trades with just a modest 30 dollar starting price. With this amount, you can start trading the following:

  • Metals
  • Stocks
  • Commodities
  • Stock indices and;
  • Energies

The best part, you can all of this with a regulated and licensed broker.

For all those who are about to open a real account for the first time, it is imperative to understand more how to trade to avoid making regrets on your decision.

Management of Portfolio

Managing portfolio do consist of three major elements and these are:

  1. Investing Time Horizon
  2. Diversification of investments and;
  3. Risk Tolerance

In reality, portfolio managers are developing asset management models as per the income, time to retirement, age and the likes. Then after, they are entering your variables right into their model in determining the so-called individualized portfolio.

However, you need to be mindful of the fact that portfolio management is a task not designed for the uninitiated. It is best that this is left to the pros. They are the ones who have vast knowledge and broad experience on how to deal with these sorts of things.