Online Investing in Stocks and How To Start With Brokers

Any investor who wishes to make use of an online stock broker – whether to take advantage of the decrease in fees, or to manage their own research – needs to be prepared for a significant difference from the world of traditional or discount brokers. First and foremost, stock investors must be prepared to manage their investments according to their own research, and they must be comfortable without a friendly voice at the other end of a telephone line. For all of their benefits, one area that stock brokers may be lacking is customer service!

The choice to select a broker for your investment portfolio makes a world of sense, and this is true whether you are dealing with a few thousand dollars… or even several millions of dollars. Some people may look down their noses at online brokerages because they charge a lesser fee for their services, and they don’t tend to be interested in chit-chat when taking orders on the phone or in person. This is not a bad thing, it’s simply business. It takes about the same amount of time for the brokerage to manage some stocks for any client, no matter how large or small the sum may be.

stock-brokersThose making use of a broker will usually have a wealth of information at their disposal, however. With online brokers there is often a glut of 24-hour information available for comparison and research, and investors can take full advantage of this to decide on their stock market strategies. With these tools ready and waiting, a savvy investor who understands this information and can apply it well will likely feel much more comfortable in dealing with an online broker. These investors know what they are looking for, how to accomplish their goals, and really need very little in the way of coaching or outside advice. However, newer (or less confident) investors who do not fully grasp all of the analysis at their fingertips might be more at ease with a traditional broker while learning the ropes a bit, and could later make the jump to an online broker.

The best advice for working with an online broker, then, is to learn the things you need to be successful as a stock investor. Once that knowledge has been gained, however short or long the time that it takes, then the future interaction with an online broker will be both streamlined and comfortable.

It can be tempting for individuals to consider moving away from an online broker as their net worth begins to grow, just because money managers seem to have a special cache for the wealthy. However, investors should ask themselves if this move “up the ladder” is always the best choice? It is not hard for people to become a bit “pound foolish”, as the British say, once they have more money to be managed. For many people, they can manage their sizeable accounts every bit as easily online as they did when they were just starting out. In fact, it may be even more satisfying.

Once an investor has learned how to research the stock market well, and has seen success with his or her efforts, is that really the time to start asking someone else how to do things? Sticking with an online broker – for the right reasons – can make all the sense in the world… even once the investments have really started to improve one’s quality of life!

Gold Investing and Your IRA – Why You Should Look At Stocks

Central banks keep currency reserves so that they can purchase the domestic currency, which is considered a liability for the central bank since it prints the money or fiat currency as IOUs). Gold reserves are held in large quantity by many countries as a means of defending their currency, and hedging against the U.S. dollar, which makes up the bulk of liquid currency reserves.

Gold preserves wealth which is why countries hold large gold reserves, and why investors buy Gold stocks. If their own currency comes under attack, they can use their gold reserves to defend and protect the value of their own currency. A great example of this is Iran. International sanctions against Iran for their nuclear program caused the Iran’s paper currency, the rial, to plunge over 50% in value. Iran has started on an massive gold acquisition program to protect its rial currency. Turkey is Iran’s biggest natural gas customer, but Western sanctions prevent it from paying Iran in U.S. dollars or euros. Iran is instead paid in gold. Gold exports from Turkey to Iran jumped to $6.5 billion in the first 11 months of 2012 from just $54 million for all of 2011, as the United States tightened sanctions over Iran’s disputed nuclear program.

The U.S. State Department said in December that U.S. diplomats were in talks with Turkey over stopping the flow of gold to Iran. Turkish Economy Minister Zafer Caglayan said last week that the gold sales to Iran would continue, saying the trade was carried out entirely by the private sector rather than between states and was not subject to sanctions.

Some are even speculating that Iran will try and accumulate enough gold to put its currency, the rial, on the gold standard thus defeating sanctions by the West aimed at destroying the value of its currency.

“Iran is very keen to increase the share of gold in its total reserves,” says Gokhan Aksu, vice chairman of Istanbul Gold Refinery, one of Turkey’s biggest gold firms. “You can always transfer gold into cash without losing value.” Think about that for a minute. This is exactly what you and I will be doing with our gold IRA investment one day. We accumulate gold now and when it’s time to pull it out when we retire, we will have the IRA custodian sell our gold and precious metals inside our IRA on the open market and send us the cash.

The West targeting Iran’s currency via restricting trade in euros and U.S. dollars is making Iran’s allies dump the U.S. dollar at an even faster rate. In most regions in the Middle East and certainly around Iran, the U.S. is viewed as an outsider, a bully if you will, affecting trade in their region via the bully U.S. dollar.

One of the unexpected, and unintended consequences of the draconian sanctions against Iran, is that Iran is forced to find alternative ways to buy and sell outside the hegemonic U.S. dollar based global financial system.

One such method is to pay for stuff, and accept payment in, gold.

And apparently, that is what is happening – as it has now been confirmed by Turkey that it is paying Iran in gold for natural gas.

This is a very interesting development, because as other regional players participate in this gold exchange, it creates an awareness that paying in the U.S. dollar or euro is not the only game in town and that with the gold trade, they can no longer be bullied by Europe or the U.S.

So again we see that gold preserves wealth.

China To Continue Buying Massive Amounts Of Gold For The Next 20 Years

China has doubled its gold reserves in the last five years but still holds much less gold than most other nations.

In a country-by-country comparison, the figure was 1.8 percent in China, while it was 76.6 percent in the United States, 73.7 percent in Germany and 71.8 percent in France, according to data from the World Gold Council and the International Monetary Fund.

Gold Reserves

China will be buying gold for many, many years as it pushes its gold reserves from 1.8 percent up to the 70 percent level inline with other developed countries around the world.

Gold Has Renewed Role In Global Monetary System

The Official Monetary and Financial Institutions Forum report concluded, “Gold will increasingly have a renewed role in the global monetary system, attracting a higher level of attention from policy makers and financial market practitioners.”

We can see gold’s rise to dominance in the global financial system by looking at how central banks have bought more gold in 2012 than any time since the 1960s.

Remember, for the better part of the last 50 years central banks had been net sellers of gold. But all the central banks stopped selling gold altogether in 2009, instead becoming the net buyers they remain today.

gold reserves

Amount of gold purchased by central banks

The abrupt shift in policy was brought about by the global financial crisis that began in 2008.

The massive increase in the global money supply and the high level of systemic risk spawned by the crisis drove central banks to diversify their foreign reserves by buying gold.

The Bank of Korea increased gold reserves 20 percent last month. The bank added 14 metric tons in November, bringing the total to 84.4 tons, the bank said in a statement today. By value, holdings increased about $780 million to $3.76 billion, equivalent to 1.2 percent of total reserves, the bank said. “Gold is a physical, safe asset,” the Bank of Korea said in the statement. The precious metal “is a way of diversification, which helps reduce investment risk in terms of foreign-exchange reserves management,” it said.

The National Bank of Ukraine raised the percentage of gold in its reserves this year to 7.72 percent from 4.36 percent a year ago. Since the beginning of 2012, the amount of monetary gold in Ukraine’s international reserves had increased by 25.5 percent, or 230,000 troy ounces, to 1.13 million troy ounces. The bank said it is boosting its gold reserves “to avoid the negative impact of the global crisis on the economic development of the country as it works on diversifying the components of international reserves in Ukraine.”

Brazil doubled its gold holdings in two months, buying 17.2 metric tons in October and 14.7 metric tons in November of 2012.

In August and September of 2012, Iraq increased its gold reserves to 31.07 metric tons from 5.8 metric tons, a nearly 600% increase.

The central banks of the following countries showed increasing gold purchases in 2012: South Korea, The Philippines, Kazakhstan, Russia, Mexico, Turkey, Argentina, Ukraine, along with several others. The central banks are buying gold to reduce their reliance on the U.S. dollar as a reserve asset. The purchases made by the central banks of developing countries have been increasing in recent years, as those nations diversify holdings, partly because of rising foreign-exchange reserves through export-led growth, but also, more recently, as a reaction to the sovereign-debt crises affecting traditional reserve currencies, like the U.S. dollar.

Gold is beginning to re-establish itself as part of the fabric of the financial system.

Gold’s fundamental property as a vehicle for capital preservation continues to endure. It does not matter whether you are talking about Iran trying to preserve its national wealth in the face of crippling sanctions, central banks trying to preserve their wealth against the sovereign debt crisis, governments trying to preserve their wealth against the falling value of their currencies, or you trying to build and preserve your personal wealth in your retirement account. The truth remains that there is no better way to preserve wealth than with physical gold. This confirms that a gold IRA investment is the best and only way to preserve wealth.

Somebody may have told you that learning how to invest in a gold IRA is complicated. If you look at the entire process and try to do it yourself, yes, it can be a little intimidating. But you don’t have to go it alone.

When Is The Time Right For Buying Stocks? A Quick Guide

Is there are right and wrong time to buy stocks? Well, that would depend on your investment strategy. If you are a trader then you may see nothing wrong with buying at a company’s highest share price whereas if you were a value investor you may be more cautious about buying at that same price.

These differing views can occur between different investors on the same stock and at the same price. So which one is correct? The answer is both are correct. The trader could trade out with small short term gains while the investor would be looking at a long term position and may consider the current market cap too high due to the unforeseen rapid increase in stock price.

So when are you supposed to buy shares? Here is a risk analysis of different entry points and also some of my tips on purchasing so that you well educated before you make your decision:

My 5 Rules for Buying Shares

Here are my 5 stock picking rules that I run through before I purchase any stock. These are not all of the factors that I use but they are nevertheless a good starting point:

Purchase on Current Facts Not Future Revenue – A company may have exciting prospects and good future potential but, in my opinion, it would be wrong to invest solely for that reason. Prices fluctuate and you always have to be careful that you are not investing today at price that reflects the “potential” value of the company in a few years time. I have seen this type of scenario occur frequently in the mining sector where a company’s price will shoot up to reflect an oil find yet investors forget that there are still further costs and risks associated with extraction and production.

Buy When The Company Is Undervalued – I will usually be watching a few companies at the same and it is important that the company I choose to invest in is the most undervalued of those companies and also undervalued in relation to it’s peers in the same sector. It’s important to wait for a good price and not to buy when the overall market is too bullish.
Beware of Number of Shares in Issue – From my experience, you should always tread carefully with a junior company with a lot of shares in issue. It usually means something has gone wrong recently and they’ve had to issue more shares – this could be due to a number of reasons but all of them are bad. I avoid companies which are going to be short of funds in the near term because another share issue and more dilution will be likely.

Invest in an Experienced Management – Don’t give your money to a senior management team with a lack of experience and poor track record. It’s very important to do some due diligence on the management team and this information can be found on their website, by typing their names into your preferred search engine and also inside your broker research tools.

Do You Understand The Business Model? – I tend to only invest in companies that I can understand. The process in which they generate income and their products / services must be easily understandable and clear. I try not to invest in overly complex companies because it makes following progress much more difficult which presents risks. As Warren Buffet once said “I try to buy stock in businesses that are so wonderful that an idiot can run them. Because sooner or later, one will”.
When NOT To Buy Shares in a Company (Beware of These Risks)

When everyone else is buying – Warren Buffet once said “We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful”. When everyone is talking about a stock to buy, it is usually already too late. If a large number of people have purchase stock in the same company before you the price will already be inflated. Never follow share tips blindly as they often end in disaster. It’s always best to do your own research before making a purchase.

When the market cap is too high – Market capitalisation tells us the price the market values the company at. Beware of high market caps, especially in junior companies as it can be a sign that it has been overbought. A high market cap should always be supported by the value of assets, current revenue and profit among other fundamentals.
When you can’t afford it -This one should be obvious but I’ve lost count of the horror stories I’ve read about people becoming bankrupt from investing in shares. You should only invest with what you can afford to lose, do not pour your whole life savings into the stock market, especially if you are still a beginner, and do not take out loans to buy the “flavour of the month” oil company.

The Risks of Buying at the Top

Should you buy when the share price is at a high? If company A was priced at 10p per share and it was at it’s 52 week high, would you avoid it? The highs and lows of stocks can be a useful indication for entry points but unfortunately they only tell half of the story. The other half is the fundamentals. Perhaps something important happened in the last month which made the share price tumble, making it only worth half of what it was before. For example, if Company A was a copper miner and they had to stop mining at one of their mines due to the price of copper. Here is an example of a graph where a a top has been identified:

Share price performance and highlighted high point in African Eagle Resources

Would you buy at the point highlighted above? There’s a number of reasons why that would probably not have been a good entry point i.e. huge leap in share price on the way to 16p, historical resistance point and poor fundamentals (high market cap and the price shot up due to a farm in deal announcement), high risk and limited reward at that point of the company’s lifecycle and news flow. All of these factors together made any further increases in share price unlikely and unsustainable.

The Risks of Buying at the Bottom

What would you consider to be a low share price? When the price hits a 52 week low? A 1 year low? Or maybe the lowest price is the 5 year low? Different time frames make picking the bottom of a share price very tricky and although buying at any one of those points may give the highest risk to reward, you may also inadvertently find yourself buying a company on it’s way to bankruptcy.

Buying at the bottom is not as easy as it sounds and you should not buy at lows when the company in question is on it last legs (i.e. out of money and ideas). In particular, beware of small companies in trouble as it is likely they will lack the management expertise, experience and funds to get out of trouble.

I prefer not to buy the lows of a long term down trending company and would much rather go with a company at a low but with a clearly defined short term range such as the one shown below:

Final Thoughts

Is there a right time to buy? Well, on the evidence provided in this article I think we can agree that there are several ways we can reduce the risk and maximise reward by choosing our entry points carefully. Remember, you don’t have to time things perfectly in the stock market – you just have to be around the right area and patient enough to hold.