Everyone invests in stock to make a profit – the vast majority of traders do, in any case. However, for many people just getting started in stocks and shares, it is not always easy to tell which options are likely to do better than others. Of course, one of the best ways to prepare for buying stock is to look carefully at precedents and past performance. However, there are still going to be a few indicators that give you some idea about what to expect.
No one is clairvoyant when it comes to which stocks and shares are likely to make their portfolio boom. Many people make investments in green stocks and socially responsible shares a priority, for example, as society is moving in such a direction. AskTraders certainly has plenty for you to dive into in that respect. However, looking at what society ‘prefers’ is only a very small piece of the bigger puzzle. Let’s take a look at a few tell-tale signs that your prospective investments are likely to do well for you.
Growth stocks are fairly expensive
The best growth stocks available, of course, are those that spike high, and spike fast. This isn’t to say that they are unlikely to be volatile the other way around. However, it is likely to be obvious to many that a firm growth stock will be making big strides in very short spaces of time.
Alongside this trait, of course, is the price. It’s very rare that you will come across a ‘hidden gem’ – in the sense that you happen to find a solid growth stock that’s extremely cheap. The more lucrative and better-performing growth stock, by and large, will be more expensive to buy than your average.
This sounds like a fairly simple point to make, but it’s one of the most important indicators to keep in mind. All investors should be keeping close tabs on their cash flows in general. However, if you notice that a particular stock is spiking in price much higher than its peers, and at a fast pace, then it’s likely that it will be growing significantly in the short term. Long and short – more than a few shrewd investors already know what they are getting into!
Growth rates are pretty broad
One of the first things that all investors should look into when buying new stock is the growth rates and averages. While it’s pretty safe to place money into a stock that has a growth rate of 5%, lowest, year on year, stocks that grow at around 10% (or even as low as 8%) are likely to be going places, fast.
Of course, this is likely to be a secondary factor to the above. Once you have found the price of a potential growth stock, you will probably want to consider its current rate and/or pace of growth. 10% is pretty impressive – and it does indicate that this is an investment that’s going to continue skyrocketing at its current trajectory.
Check the dividends
Yes, dividends can be very useful, and many investors look for their availability – but a stock with little to no dividend payouts will likely keep on growing. Therefore, if you are interested in growth stocks, it is worth considering whether or not you are going to be willing to sacrifice your dividend potential on route.
High growth stocks will likely do away with dividends altogether for a very simple reason. Instead of eschewing cash regularly to shareholders, they can simply keep pumping money into their growth. This occurs with the understanding of shareholders that, in time, they can expect even bigger wins if they are willing to hold off on dividends.
This is where many traders will likely part ways. Some will prefer to hold onto their dividend-friendly approach to maximize the small wins, while others will risk it all and see a stock through on its growth under this proviso.
Share prices are historically higher – in correlation – than most
Another simple figure to consider when identifying growth stocks is, of course, share pricing. Share price correlations will generally tell you how a stock or company is performing over the long term. However, it’s also a key indicator for spotting stocks that are likely to grow exponentially for years to come.
Looking at the past performance of a share price, if you notice considerable spikes or a long route upwards, then you are very likely to be getting involved in a high growth stock. Keep in mind that the longer the upward run, the more likely this is to be the case.
Of course, it does not always follow. There are some growth stocks that can and will plateau, and others that will hit a downslide depending on a variety of different factors.
Is it worth hunting down growth stocks?
On paper, it might seem as though all investors will likely want to get behind growth stocks. However, as with all market purchases, there are risks involved. Even if a stock has all the hallmarks of the above, there’s no guarantee that it won’t avoid volatility and start plummeting in future. There is, regrettably, no such thing as a ‘sure’ scenario here.
Growth stocks can, on occasion, fall harder than average stocks depending on what is causing the drop. Major reputation damage or political concerns, for example, are likely to cause growth stocks to fall from grace fairly hard. That’s because it may be hard for shareholders to justify the expensive prices they normally retail at on the markets.
Smaller stocks and those with steadier growth credentials are likely to recover or plateau quicker, simply because they have less distance to fall. Ultimately, it is all about investing in a stock that is going to weather storms, not just keep growing and then crash and burn when things go slightly awry.
As with all stocks, growth options can be lucrative – but you need to be very careful about where you put your money. Can you really afford to follow a growth stock right to the peak – and then prepare for the fall?
Hitting age 40 can be a major wakeup call for a lot of people. The cold, hard fact of the number often throws people into a panic, reminding them that they haven’t got all that long to work for their own future, and the future of their whole family. If you’re approaching this big milestone, or you’ve just passed it, here are some important steps you should be taking to assure a stable future…
Shave Down your Debt
If you still have credit card debt, student loan debt or outstanding debts from medical bills, the next priority on your list should be shaving down and ultimately eliminating that debt, so you can put more towards saving and investing for the future. With credit card debt, the only real option you have is to set a plan for paying it down quickly, and then stick to it. If you still have debt from a student loan, the first thing you should do is see if it’s tax-deductible based on your bracket. If not, you’ll simply have to work at paying it down, but your cards should take priority. Aside from this basic financial planning, you should also check the interest rates on your cards and loans, and see if you can find anything lower.
Save for College
The advice from most financial advisors is that you should start planning to save for your kids’ college education more or less as soon as they’re conceived, even if you’ve only got a small amount to spare. Hopefully, you’ll be able to increase the amount you regularly put away through stocks, real estate, forex or other investments. You can enter a 529 college savings plan in order to shave down the amount you or your kids have to borrow in order to go to college. A lot of state universities run their own paid tuition plans that will allow you to lock down the cost of tuition at current rates. Obviously though, you or your child may have a more prestigious (but less accessible) school. A lot of families will need to sit down and think of realistic ways to minimize the cost of education, like spending a couple of years at a community college before a four-year university.
Max Out your Employee Benefits
As soon as you reach your 40s, you should be putting as much money in your 401(k) as your employer matches as a bare minimum. Even if you aren’t making any profit on this investment, your money will double just from your employer matching it. Retirement plans vary from business to business, so take steps to find out how much you can contribute, and if it’s practical, maximize what you’re putting in up to that limit. There’ll usually be someone at your work who can explain everything you need to know about different investment options. Most importantly, you need to understand why it’s generally better to make proactive investments when you’re in your 40s, rather than when retirement is just around the corner.
We all know that midlife can be a time of profound challenges as well as great opportunities. Most people in their 50s have to cope with the rising costs of tuition for their kids and they worry about losing their jobs, just in case they can’t afford retirement. But they also have the luxury of not having to pay other costs associated with children, as well as the fact that they are in their peak earning years.
It’s a good idea when you’re making the most money to put as much of it away as possible and build your own wealth fund. According to a study by Hearts and Wallets, the most successful savers, those who built their nest eggs to ten times their pay, did it by saving around 15 percent of their income for 10 years. Here’s how to go about it the smart way.
You might not think it, but the free advice offered as part of your 401(k) plan might actually be beneficial. It turns out that those who accept advice on their 401(k)s actually end up getting a higher return than those that don’t. A study by Financial Engines and Aon Hewitt found that returns for people getting advice were between 1.9 and 2.9 percent higher.
If you’ve got some spare capital sloshing about, could you get a better return by investing in a rental property? The chances are that you could if you put your money into a house located in an up-and-coming area. Right now prices on properties in booming cities like San Francisco and Dallas are sky high, but there are opportunities elsewhere, especially in areas likely to benefit from working and middle-class rejuvenation. Keep track of trends like demographics, wages rates and employment to predict where rental incomes will grow the fastest.
Transfer Your Assets And Defer Tax
At some point in your 50s, you’ll probably want to convert your assets from one category to another. The problem with doing this, however, is that the taxman will want to take a cut, locking you into certain investment classes. There is a solution, however. A 1031 exchange property allows you to defer taxes you pay to the IRS if you want to convert the assets held in your house into some other form. Of course, you’ll eventually have to pay capital gains when you cash in your investments, but you’ll also avoid paying tax in the interim, potentially saving you a lot of money in the process.
Find Out How Much Your Investments Are Costing You
Something like 60 percent of investors never takes the time to calculate how much their advisers are paid, thinking that their advice is free. It’s not, of course, meaning that it pays to shop around, especially over the long term. Even an adviser charge of 1 percent digs into your interest payments substantially and could end up costing you thousands of dollars over the long term. Find out exactly how much money is being taken out of your investments to see whether you could get a better deal.
Before you invest your money, you need to think about what the wisest investment to make is. Here are some of the best investment options this year.
Mutual funds are good for beginners because you don’t have to take any big risks or decisions for yourself. Mutual funds pool together the money of many different investors and then the manager running the operation will invest that cash in bonds and different stocks. It takes out a lot of the risk involved in investing.
You should make sure you check out the experience and track record of the manager before you invest though. Some mutual funds are managed passively and other actively. Actively managed funds are the best option because the manager reacts to trends in the market to find the best results.
Gold is like a port in the storm. It’s the best investment option for people who don’t like the risks of investing but still want the rewards. Gold goes up and down in value the same as other types of investment. But it’s nowhere near as volatile as other types of investment. This means you won’t lose huge amounts of money if you invest in gold.
Other types of precious metals like silver and platinum are good for investing in as well. If you’re going to invest in silver, make sure it’s 90% Silver. That is the best form of silver to invest in at the moment. Platinum is doing very well on the market at the moment, so don’t rule out that option either.
Buying stocks and shares is the most conventional and straightforward form of investment. Playing the stock market isn’t for everyone. You have to be attentive and on the ball at all times. You need to monitor the market and adjust your investments accordingly. This can make it a lot of fun as well though.
When you’re starting out, it’s important to remain cautious. Don’t be tempted to put all your money into one company. You should spread your investments so that you don’t run the risk of losing your cash if they company fails. By spreading your investments across various companies, you’ll be able to handle setbacks.
Investing in property takes time and effort, but it can be hugely rewarding as well. You have to start by finding the right property to buy. It should be something with a lot of potential and pulling power on the market. Having said that, it doesn’t need to be in great shape. Look for rough diamonds that you can improve and sell on at a profit.
Once you have your first home bought and renovated, you can rent it out, or you can sell it on immediately. When you have the taste for it, you’ll probably want to go back for more. As your confidence grows, you’ll be able to build up a solid portfolio and make a lot of money in the process.
These options are the best forms of investment in 2015, so think about which one is best for you.
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