There are only a handful of financial questions that we ask our self every day. Finance is not a cloth where one size does fit all, what needs to be done at any particular time vary widely from person to person.
Even the answer we supposed to have known already does not remain valid for long. Our financial priorities keep on changing along with the circumstances. It’s to your best interest that you seek answers to these questions regularly.
Below are the most basic financial questions on investing and how I do feel about them.
Should I buy Shares in this Market
When I am writing this, there has been a market meltdown, so today, I will advice any one to buy stocks but, when you are reading this, stock market might be sitting at its peak and buying shares now might not be the most intelligent decision you could ever make.
Here, I would like to take note of Warren Buffet’s strategy, he gets on to the market when it’s in decline and he keeps on sitting over his investment for long, very long time. I follow his strategy and tap on to the market when it’s in decline and hold on to my stocks till I need the money or till I remain optimistic about further growth.
As per experts’ opinion, when you are retired or nearing retirement, you should stay away from stock markets, do not invest further money in direct stock purchases unless you are sitting on a pile of cash you don’t bother to lose.
Which Stocks Should I Buy
I can only answer about myself; I can’t and shouldn’t suggest what you could buy right now. I do not speculate about stocks, I do not buy a stock which is less than $5 a piece. I buy shares which have a history of paying dividend continuously in last 10 years.
Before you start stock picking, ask yourself why in the first place you want to buy a stock directly from market? If it is to increase your passive income then there is risk involved, can you devote time to do proper research on a stock? Once you buy, can you keep on updating yourself about the stock on weekly basis? Can you be able to read each quarterly statement of the stock? Lastly, can you afford a negative return at times on this part for your investment?
If answer to any of the above questions is in negative, you would probably not do any favor to your self by investing in to stocks directly, even if you get around and make a hefty profit, it’s just by chance.
If you can cope with the above requirements, then ask yourself which stocks have consistently performed and which stock’s business model I am fully comfortable with. Then ask your self if the company can do as well in future.
The last thing I do before investing in individual stocks is determine how long I can hold the stock and what is the potential of the stock growth up to that point. There is no point in listening to others about a stock’s long-term potential if you are just going to hold it for 6 months.
Should I Day-Trade?
Answer varies between people, I do not day trade. But, there are people who make a lot of money trading stocks over a day. Unless you have disposable income you should refrain yourself from day trading, it could wipe off your wealth. On the other hand if you are in to gambling, day trading is definitely better option, at least day trading has more odds in favor of your success than gambling.
In order to day-trade, you need to pick up a handful of stocks and analyze each of them, you need to equip yourself with a number of theories and charts and graphs associated with each of them. Also, a very important requirement is that you should always be acquainted with latest news on the stocks you day trade with. You would probably also need to be in stock trading communities.
If you can do these things, go for day trading, it makes a lot of money but, be cautious as I heard people going bankrupt for wrong stock picks or wrong timing.
Bond Fund or Stock Fund
I do have investments in stock funds and bond funds. Stock funds have higher risk and higher return, meaning stock funds give you higher positive or negative return as compared to bond funds. It depends on your risk tolerance, I would again think that if you are retired or nearing retirement, it’s probably better to lower exposure to stock funds.
Bond funds provide low but steady positive income. There are other forms of bond funds which might give you better return, such as high yield bonds they provide high yield only because they invest in lower investment grade papers and bonds, thus increasing risks of default on behalf of the bond issuers.
Historically high yield bond funds and stock market produced similar (almost) return.
Always research the constituents of the fund before investing, as well as, compare the fees.
Should I Invest in Real Estate?
Investing in real estate is probably easier as prediction can be made more reliably. We are renting now with a plan to buy our first home sometime next year. You can invest in real estate; in fact it is lucrative business right now.
Before you invest in real estate, do your home work and make sure that local real estate market is on upside before investing even a penny. Before you sell, make sure the other costs are factored in also. Fees, like broker fee, service charges, agent fee, closing costs etc. can really make your gain in to loss if you sell too close to your purchase price.
Often a lot of outdoor work is involved in real estate trading, unlike stock trading which can be done far easily by sitting in front of your computer at home or work, but risk is generally lower and trading being difficult you don’t have to worry about impulsive trading.
What do you think the most important question you ask yourself on investing? Leave your comment and let me take it from there to answer them.
Disclaimer: I am not a financial expert, I write for self educational and entertainment purpose only. Always do your own research about your investment options.
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I would defintely say don’t day trade. Day trading beats the best investors mostly because you will bring your emotions into trading. If you can trade without fear then I would suggest day trading.
I don’t day trade and I don’t have enough money to buy individual stocks so for now I am stuck with a target date fund in my IRA and some mutual funds in my 401k. I do own a duplex as well. As I earn more money I will start buying index funds and mutual funds. I also will be buying more real estate and some individual stocks at some point.
Agree with those who say they don’t day trade. Especially if, by day trading, you mean trying to time the market in a very short-term way.
day trading is nothing but timing the market within a day.
With housing and interest rates so low, now may a good time to diversify and invest in real estate. The rental market is getting stronger adds to it. Could prices or rates fall further, no one knows for sure. It is certainly worth investigating!
Thanks for your comment, it was your first visit to my blog i guess. Rental market condition is so varied between states. And do you know if rates are going to go down further?
I heard a story on day trading a while back. The good day trader makes money, but it is A LOT of work. They are sitting in front of the computer the whole day and they don’t make a huge amount of money either.
As far as day trading goes, I would recommend against it. Being an accountant, I see my fair share of day traders come tax time, and to the person, I haven’t seen any of them do much better than break-even. The thing is, even moreso than the losses, is the time that they must spend doing it, as evidenced by the sheer number of transactions the make. I honestly think that for all of the time they sit and trade, there are plenty of better-paying options out there. Plus, there is always the risk of addiction, which is never good.
wont you say these people should start blogging instead of sitting in-front of computer to day trade. But they are millions in number, and main force behind broker’s earnings. Do you know in China there are registered companies who just do day trade on different stock exchanges world wide. Its a massive business.
No, I had no idea about the business in China. I would be very curious as to the gains those companies make. I’m not so sure about the blogging idea for these people. Maybe they could go out and get some sun and interact with people 🙂
its a lucrative market to tap in to, we may get a lot of readers
Readers, are you only interested in day trading related section only?
I think the problem is that all of the other questions are pretty much up to the particular individual to answer for themselves based on experience and risk-tolerance. The day trading thing, is something that is easier to give an opinion on I guess. At least for me it is.
thinks its true for every one. 🙂 krantcents did mention about his real estate investment preference.
First time here.. found you due to your Yakezie comment.
I enjoyed this article… another thought for investors to consider instead of traditional real estate is Real Estate Investment Trusts (REITs). They allow you to benefit from the rise of capital, the perpetual returns of rent payments, the passive income, etc. without the risks and hassles of being a landowner/landlord. I wrote a brief article on the Advantages of the REIT in December which may add to this conversation (see http://www.investinthemarkets.com/stock-analysis/realizing-the-advantage-of-the-reit/)
that’s a very well thought and useful information doctor. What do you think REIT average return in next one year, in this market, where housing prices in most of the places still going downward
Won’t try day trading, I don’t have the stomach for it. More of a mutual funds guy and dabble with stocks with fun money. Might look at real estate since we have low interest rates for the next few years.
That’s good point of view to invest in real estate
Hi,
Thank you for your nice article on
Every Day Investment Questions and Answers, I like it. It will help me for my research.
thanks
thanks fo your time Laura!
Choose your best 5 speculative stocks. Do day-trading, it is interesting. You will definitely feel the risks and rewards of doing stock trading.
Very interesting when you loose your every penny this way. I don’t suggest that readers.