Currency trading has become extremely popular, and easier than ever.
With web sites like Forex Currency Pro offering numerous tools for beginning Forex traders, it is more popular than ever to attempt to "trade the world" by speculating on the future of exchange rates within the currency marketplace. For more information on trading strategies and the basics of trading foreign currency as a component of your portfolio, visit Forex: Currency Trading in Review.
While we are all about diversifying our investment portfolios at compounding returns, we prefer to make long term investments in businesses that have a competitive advantage over their peers, believing that by choosing a portfolio of long term, dividend paying equities it is possible to build wealth without the risk of speculative investments. For this very reason, we advocate investing in Dividend Growth Stocks for the Long Term as the single best way for the average American to build long term wealth and passive income.
Trading Forex is appealing to many people who are tired of the unpredictability of the stock market, disillusioned by the dismal returns in real estate, or have begun to shun bonds due to their low rates of return.
But even with the resources and tools available through sites like Forex Currency Pro, it is important to keep these types of endeavors in their proper place within your portfolio.
While we believe firmly that every investor eventually needs a little "mad money", with which to chase those elusive, market beating returns that everyone likes to brag about, it is very important to wager no more than one can afford to lose on this type of speculation.
Despite the outstanding tools of sites like Forex Currency Pro and others, trading Forex remains highly speculative, and can result in rapid and devastating losses. For this reason, it remains essential to keep the bulk of your investments in long term, conservative investments while feeding your speculative side with a "mad money" fund that you do not need in the short or even long term.
June 24, 2011
June 22, 2011
Buy and Hold vs. Buy to Own Stock Investing
Is buy and hold a dead strategy? Perhaps.
But the fundamental ideas behind buy and hold investing remain as viable and practical as ever, as long as investors purchase stocks with the mindset of an owner.
For the uninitiated, buy and hold stock investing involves a "set it and forget it" mentality in which investors purchase shares of stock and then hold the shares through market upheaval and economic uncertainty, counting on the strength of the economy itself and the company's management to ensure long term stock returns.
This type of buy and hold investing has brought suffering to its advocates in recent years, for good reason. Purchasing shares of a stock is not the end of an investor's research process, but only the beginning. History has proven that the greatest investors not only buy when the time is right, but also know when to sell a stock.
The Oracle of Omaha himself, Warren Buffett has often been called a buy and hold investor. But Buffett would likely challenge this characterization. While Warren Buffett is credited with stating his favorite holding period for stocks is "forever", Buffett's holding company Berkshire Hathaway frequently rebalances its own portfolio based on economic conditions and a change in a company's prospects.
At compounding returns, we often advocate a long term, dividend portfolio as one of the best ways to reduce market volatility and ensure returns even during market downturns. But even investors with a long term mindset must understand that no matter how much you love a company, you must be willing to part with the company when its story changes, or the upside potential begins to wane.
Think of yourself as a "buy to own" investor. In purchasing shares, you are purchasing a piece of a living breathing company with a potential for growth but also with the potential for failure. If you believe the company has a rich future ahead of it (and this belief is validated by the financials), then you should not sell, despite market fluctuations. But, if the future looks dim... well, hope in a company will not fund your children's college or your own retirement.
Buy and hold may be a dead strategy, but buying to own will never fail. Though it requires more research, hard work, and a long term, investor's mindset, behaving as an owner will always keep you in the correct mindset as an investor and keep you from getting sandbagged in the market.
But the fundamental ideas behind buy and hold investing remain as viable and practical as ever, as long as investors purchase stocks with the mindset of an owner.
For the uninitiated, buy and hold stock investing involves a "set it and forget it" mentality in which investors purchase shares of stock and then hold the shares through market upheaval and economic uncertainty, counting on the strength of the economy itself and the company's management to ensure long term stock returns.
This type of buy and hold investing has brought suffering to its advocates in recent years, for good reason. Purchasing shares of a stock is not the end of an investor's research process, but only the beginning. History has proven that the greatest investors not only buy when the time is right, but also know when to sell a stock.
The Oracle of Omaha himself, Warren Buffett has often been called a buy and hold investor. But Buffett would likely challenge this characterization. While Warren Buffett is credited with stating his favorite holding period for stocks is "forever", Buffett's holding company Berkshire Hathaway frequently rebalances its own portfolio based on economic conditions and a change in a company's prospects.
At compounding returns, we often advocate a long term, dividend portfolio as one of the best ways to reduce market volatility and ensure returns even during market downturns. But even investors with a long term mindset must understand that no matter how much you love a company, you must be willing to part with the company when its story changes, or the upside potential begins to wane.
Think of yourself as a "buy to own" investor. In purchasing shares, you are purchasing a piece of a living breathing company with a potential for growth but also with the potential for failure. If you believe the company has a rich future ahead of it (and this belief is validated by the financials), then you should not sell, despite market fluctuations. But, if the future looks dim... well, hope in a company will not fund your children's college or your own retirement.
Buy and hold may be a dead strategy, but buying to own will never fail. Though it requires more research, hard work, and a long term, investor's mindset, behaving as an owner will always keep you in the correct mindset as an investor and keep you from getting sandbagged in the market.
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