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Posts Tagged ‘Investing’

Many investors, both beginners and experienced, are stuck with the statement that investing in bonds safer than stocks. This is not entirely true.

Financial Planner Benjamin Graham said, should be the first to ask, “depending on condition and price as well,” before stating which one is more secure.

An example will give an overview of this concept. Imagine you have two options to invest. First, corporate debt, aka bonds with interest of 8.5% per year. If the company goes bankrupt, you are in the third row who will receive your money back, after the creditors and shareholders get a share of the liquidation of assets.

In a bankruptcy situation like this, usually the controlling shareholder funds are preferred, after the last new minority shareholder of creditors, including bondholders. But each company can also apply different things.

Should you really avoid bankruptcy situation like this because it is very complex and many new investors are not fully aware of the bankruptcy procedure in situations like the one above.

The second option, the shares in a company that did not have debt trading at p / e ratio of 10, with the yield of 10%. Good management, sales grew more stable and higher than inflation. If something happens to the company, the shareholders being the first to be served because no debt especially bond holders.

In situations like this, you will choose to invest shares in the company because it is safer than bonds. Do not be surprised, there are many more reasons to confirm this theory.

Here are a few reasons stocks safer than bonds as quoted from beginner invest

1. Risk stocks similar to bonds, but stocks will be in front of the queue more than bonds if the company went bankrupt. In his book output in 1934, Graham said, in a normal situation (in the sense of risk is not high), holding the shares as safe as bonds. If there is something in the company, shareholders’ funds will be returned immediately after the employees, landowners, and other vendors to get the liquidation.

2. Usually the minimum interest on the bonds of about 8.5% per year but it has not cut taxes, so the net yield of about 5.53% has been cut in income taxes. So about 35% of the yield or profit that you can run into tax. While the stock, the dividend yield is usually about 5% and only 15% of taxable net yield so much as 4.25%. So the difference between stocks and bonds rather than 3.5% but only 1.28%.

3. If everything goes well, dividend stocks have the potential investors could be improved in order to enjoy a higher share of profits from the rate of inflation. This is usually done after the company raised prices of products and enjoy a surge in profits. This can not happen in bonds, because in the beginning you’ve set a fixed interest that can not be changed. If inflation suddenly rose high as the crisis in 1998, is still interest you received as agreed earlier.

If Not Forever More Safely From Stock, Why Many People Think the contrary? The answer, as many new investors who can not distinguish between volatility and risk.

Volatility is a term used to describe price movements are frequent, fast and sometimes very high or very low. A stock may go up or down as much as 50% in one year.

Volatility and risk is not always the same thing. Perhaps both are still difficult to distinguish, because there are still many people who choose to avoid such volatility. For example, people prefer to get a yield of 8.5% per year, although only 5.53% after taxes, whereas about 11% inflation.

Although inflation eroded, many people feel comfortable with investing in bonds is not to have struggled with all the ‘roller coaster’, as often happens in the stock investment.

In conclusion, the bond today is not as safe as before, such as stocks that are already not too risky. All returned to that statement at the beginning, “depending on the condition and the price also.”

So where is the safest according to you?

Investment plays an important role in our survival. At the present time, saving money is not enough, especially with the interest savings are still far below the annual inflation so the value of your money will be increasingly eroded from year to year.

For example, if you have a USD 100 million is stored securely in a bank with an annual interest of 5%. Thus, in one year you will have a Rp 105 million. That number is increasing, but the actual value falls.

With the inflation, which on average is usually around 6% per year, then if one year ago with the money of Rp 100 million you can buy a car, this year the car price to $ 106 million. The money you save in one year was not even enough to buy a car, even with interest the bank.

To avoid this happening, you need investment. The place could be anywhere, stocks, bonds, mutual funds atua property. This last one is the way of investments that do not require a lot of money, but with a fairly high yield.

By investing in mutual funds, money in the long run will result in higher values ​​of inflation. Mutual Fund is an option for potential investors who do not have large funds, lack of time and access to information and want to have a diversified portfolio.

How do mutual funds invest safely? Here are tips for beginner investors provided by the Senior Financial Planner Akbar’s Financial Check-Up, Lisa Soemarto as he said at the launch of his book “Reaching the future with the Mutual Fund” in the Grand Indonesia, Jakarta, Saturday (26/11/2011) .

1. Consult with your Financial Planner (Financial Planning)

There are plus minus if we direct it to the dealer mutual fund, because of course the sale is limited. It is worth consulting with a financial planner because it is an independent profession. So it can be directly recommended products, continues then we will be more confident to invest.

2. Determine the types of mutual funds based on financial goals

Setting usability funds invested in the Fund. Are the funds for the purchase of assets, to fund children’s education, for retirement or for any other purposes in the future.

3. Set a time period based on the investment needs

Set a time period when the funds will be used. Thus, investors can specify the type of Investment Fund that will be purchased in accordance with the time period. Not all of Mutual Funds in accordance with investment objectives.

4. Know your risk profile

Types of Mutual Funds derived are also tailored to the risk profile of investors. This will determine the allocation of Thomasin magnitude of these types of Mutual Funds that have purchased the customizable between investor risk profiles and risk profile types of Mutual Funds

5. Select Investment Managers

Investment Manager’s background can be read in prospekstus Mutual Funds. Select Investment Managers who already have experience in managing a mutual fund.

The following guidelines can you do in selecting Investment Managers:

Select which already have big names
Check the Fund Fact Sheet, if it shows a good performance of return (return on investment since published) is higher than interest rates and inflation rates. Examples of Mutual Funds A ‘return’ since published in 2006 is 100%. Then ‘return’ Investment Fund is a 100% per year: 5 years = 20%. Above 20% is good.
Select which already has a website because we can download Fund Fact Sheetnya and there is an auto debit each month.
Check if the Investment Manager have had problems in the capital markets
Check how much money is managed by the Investment Manager.

Successful investing.

When it comes to the world of investing three words come to your mind of the uninitiated like me in these matters, the stock market, overwhelming, intimidating and frightening. The reasons for this kind of thinking is due to the fact that if we do not know well what is the investment in which we are getting, you can lose your shirt. Even if the trial and error is key for many investments, someone before you lost the shirt and those mistakes can serve you-people do not want your mistakes will lead to bankruptcy or you will lose the savings you worked so hard to put together.

For many of us the doubts and questions about the world of investment, are endless, so this kind of dating can help you visualize the big picture.

Not guarantee anything, but something we can serve as the authors already suffered and have suffered the vicissitudes of the financial market, therefore we see that such.

1. Investment in knowledge pays the best interest. Benjamin Franklin. When it comes to investing, nothing pays as much as education. Make the necessary research and study and analyze before making any decision.
2. The bearish streaks in the investment world does not end in 4 years, ending in 10 or 15 years or more. Jim Rogers.

May 10 or 15 years of bearish streaks are not common, but during that downtime, lost their shyness and go against the trend. Sure you could very well make a fortune or lose your shirt.

3. I’ll tell you how to become rich: Close the doors. Be fearful when others are greedy, Be greedy when others are fearful. Warren Buffett.

Be prepared to invest in a declining market and “out” on the rise.

4. Investments, what is comfortable is rarely profitable. Robert Arnott. Sometimes, very often, we must leave our comfort zone, to make significant gains.

Know the limits of your comfort zone and try to get out of it in small steps. As much as you need to know the market, you need to know oneself.