Oil prices have been soaring for the past few years. While it is hurting people’s pockets real bad, there are few smart chaps who’re benefiting from it. If you’re also feeling the heat on your wallets and instead want to make money from it, this blog post shall be helpful to you.

Buy Oil Futures

Some people trade crude oil and futures in the commodity market. However, although the market is really huge, not a lot of people really do it. Why? Well, most people don’t know about oil futures contract. The purchase contract basically tells that you can buy a certain quantity of oil, a commodity, and sell it on a particular date.

The key to making profits from oil futures is to guess what the prices of oil would be over a period of time. But since oil prices have been rising quite steadily for the past few years, you can consider investing in it.

Invest in Any Oil Royalty Trust

Few investors smartly invest in oil royalty trust. Oil royalty trusts provide the shareholders with distributions on the profits from multiple oil producing organizations. The distribution is generally termed as dividends. The returns in the form of money can be as high as 30% or more every year.

The key in this form is investment is to spend only in royalty trusts wherein a field’s production is not affected by uncertainties. Those who can make the best from this type of business, usually make a ton of money.

Buy Stocks of Large Oil Companies

Only a few of oil companies are publicly traded. Even though their stocks are usually high, the good thing is – the prices for these stocks do not fluctuate much. If you can manage to purchase their stock options, you’re bound to make a lot of money. Simply because oil companies are always in demand and most of the time, their stocks grow quite steadily.

If you intend to make the most from these stocks, then be sure to have some good money in your pocket because stock prices are generally high but can provide great returns in the long-run.

Don’t Use Excess of Oil

A penny saved is a penny gained. If you use less oil, you obviously save money. The bet here is to be able to reduce your personal oil consumption, so that you spend less money. While this might not seem like you’re actually making money but over a period of time, you’ll have saved so much that you’d love it and continue doing it.

Mutual Funds That Holds Oil Company Stock

One of the easiest ways to make money online is to invest some money in mutual fund that has oil company stock. Majority of mutual funds carry at least one or two oil companies in few of the relevant organizations as well.
If you want to be good at it and make the most from it, be sure to invest in a mutual fund for the long haul and selecting a fund on its growth.

Buy Stocks of Big Oil

Big Oil is a term that represents 7 of the biggest oil firms that controls major portion of the world’s oil. These companies include ExxonMobil, Royal Dutch Shell, Chevron, etc. The stock prices of these organizations are high; however, once you get their stocks, you can be sure to earn a lot of money.

These companies know how to keep their stock prices up and their stocks always keep growing in spite of the volatility in the global oil industry. So, without any doubt, you can invest good amount of money in them.

To conclude, if you choose to make money and choose your investments wisely, you can earn quite well regardless of the rise in the oil price. Do keep the above tips in mind and make sure you get the best from them.

An IPO – Initial Public Offering is an event where a company sells its first stock to the public. IPO’s are basically are of two types – public and private. A privately held company has lesser number of share holders and they have maximum authority over the company.

Whereas a publicly held company has a lot of shareholders and the company is more liable, accountable to the shareholders. The great thing about a large public IPO is that, anybody can invest and purchase its shares. The advantage is – since it is a new IPO, the share price would be comparatively lower and easily affordable.

The measure of investing success is rather simple – How much money did you make off a particular investment? Control Your Cash said it best in their post on IPO’s for Beginners. The amount of risk involved with an IPO is inconceivable to say the least. They are not to be taken lightly and are made for only the adept investors.

Step 1 – First and foremost, get details about the companies that are about to go public. From the progress of the company, understand what company could get you returns and what company wouldn’t in the long-run.
Apparently, not every company that goes public manages to increase or even retain its share price after few months. So, you have to be sure of where you’re putting your money in; whether you’re going to benefit from it or not.

Step 2 – Once you know what company you would like to invest in, then find the S-1 registration statement from Securities and Exchange Commission.

Step 3 – Identify which brokerage companies are taking part in the IPO and reach out to them. Ask them, you want to purchase a particular number of shares of that company.

Step 4 – A lot of brokerage companies try to get only their top clients involved in the IPO. Therefore, you might want to offer them some good money for them to do the deal.

Step 5 – Once this step is confirmed, you can open an account with them. However, remember, you must have a DEMAT account, if you intend to purchase a company’s shares.

Step 6 – While applying, remember to read out the complete prospectus for the issue. The document basically contains the details of the company’s finances, growth, its track record and how the company plans to grow its business in the coming days.

Step 7 – The next step is to pick up the application form and fill it up. It is not difficult to fill-up the form because the instructions would be clearly mentioned on it. While filling up the form, don’t forget to mention about the least number of shares you intend to purchase.

The investment brokers usually help you in the form filling process.

Step 8 – That’s it! Once you fill the form, you hand it over to the brokers and they will take care of rest of the things.

A Word of Advice

There are plenty of companies that try to go public, but the sad part is – not all these companies make it really big after they launch. So, the company you select must have the following:

• Great plan for the future and an even greater track record of executing its plans successfully.

• The bigger the IPO, the better. Avoid investing in small IPOs because a lot of times, they do not manage to sustain once they go public.

• Learn about the vision of the company and more importantly, its leaders, so that you can be sure of where it will head in the future.

To conclude, investing in new IPO can be a little trickier than investing in existing public companies because a lot of times, you don’t know much about them. But the moment, you know a particular IPO can make you money, feel free to take a small risk, follow the above steps and purchase its shares. Simple!

Entering the world of Forex trading can be a daunting experience for anyone who has not previously been exposed to the workings of the financial markets. Forex terminology can seem like a foreign language to beginners. There are a variety of buzz words and common market terms that are used daily to discuss the state of the Forex market and the methods employed to trade within it. It can often be helpful to look over the general and more complex Forex market terms before immersing yourself in educational material. There are a few common buzz words that are worth familiarising yourself with in order to better understand how the Forex markets work.

General Forex Market Terms

Liquidity - The measure of price changes in relation to trading volume.

Volatility - The measure of price changes over a period of time for a particular currency.

Market Price – The current price for which any given currency is traded for on the market.

Currency Exchange Rate – The value of one currency expressed in terms of another. This can fluctuate and the change in value can depend on numerous factors both political and economic.

Ask and Bid – The ask price is the price you buy for, the bid price is the price of the demand or the you sell for.
Spread – The difference between the bid and ask prices.

Currency Pairs – Currencies are traded in pairs. The base currency is the first currency in the pair. The quote is the second currency in the pair. View more detailed information on (FX) Currency Pairs.

Approaches to Forex Trading

Forex trading is speculative. As a result, Forex traders must make informed trading decisions based on what they can currently deduce from the markets, what has happened previously and what they expect to happen in the near future as a result of changes to economic and political circumstances within their chosen currency’s country. Fundamental and technical analyses are the two most common methods for forecasting the Forex market. By taking either of these approaches or using a combination of the two, Forex traders can build a picture of potential movements in the market and subsequently discover profitable trading opportunities. Technical indicators help understanding trends and behaviours of the financial markets and fundamental analysis can help traders forecast future price movements.

Fundamental Analysis – Fundamental analysis involves forecasting the price movement and trends in the market by analysing economic indicators, political and social factors

Technical Analysis – Traders use technical analysis and past market data to predict future price movements and market direction. By analysing price and volume charts, traders can identify trends in the market and subsequently, the right entry and exit points to make a successful trade.

Forecasting the Forex Market

Some experienced Forex traders will talk about looking for 5 alarm trades. These are trade opportunities that arise from identifying key indicators that suggest when a trader should enter a trade.

Momentum - Momentum indicators evaluate the speed at which price moves over a given period of time and indicate the strength or weakness of a particular trend. Traders will look for a strong trend in order to make a successful trade.

Trend and Direction – Moving averages can help to identify a trend or market direction that will help traders to find sensible entry and exit points.

Fractals – Chart intervals that may indicate a good time to trade.

Volatility - The degree to which prices fluctuate can help traders anticipate future price changes.

Oscillations/Cycles – Repeated patterns, cyclical market movements or trends within the market can be identified in order to time entry and exit points that they expect will be most beneficial to a trader.

Forex Trading Strategies

Scalping – Scalping is a quick trading method where traders only hold their positions open for short periods of time in an attempt to make small profits quickly.

Swing Trading -Â Swing trading involves buying or selling currencies at or near the end of up or down price swings. Swing traders look for violent swings in order to trade more profitably.

Trend Following - Trend following involves focusing on the price, picking a suitable entry point, waiting for the trend to carry a position into profit and waiting until an actual change has occurred in the trend before exiting a particular position

In an economy when everything – from real estate to stocks – looks gloomy, gold appears to be the most viable investment. Not because of its shine or because women love it, but because it does provide some great returns to its investors.

The fact is, gold prices are not unpredictable like stocks and bonds and has witnessed stable growth. In fact, trends have shown that the prices of this precious yellow metal have simply surged in the last decade. And, it is going to continue to grow for several years to come due to:

1. Volatility in Stock Market
2. Boost in Number of Foreclosures
3. Rise of Inflation and National Debt Continue
4. Surge in Unemployment Rate

So, you see? Investing in gold is perhaps the best option available right now to ensure a secure and stable future for you and your children.

Here, in this blog post, we are going to discuss about the 6 things that you need to do to make the most from your gold investment:

1. Invest Only in Physical Gold

A lot of people fall in the trap of investing in ETF’s and stocks on the stock market whenever they intend to invest in gold. But that, I think, is their biggest mistake. Gold investments in ETFs should be made only when you comprehend the ins and outs of it.

In my opinion, the real worth of gold lies in the metal itself. When you purchase pure metal, regardless of the dollar value, you’ll continue to have an asset that can give you returns when needed.
The more it is, the more returns you would drive.

2. Purchase From a Reputed Company

The best place to purchase gold is from a reputed company. There are many scams out that you might get trapped into. So, it is always advisable to purchase from companies that are both credible and reliable.

Some of the best places to purchase gold bullions or gold bars are:

• Apmex
• Scotts Dale Silver
• Bullion Direct
• AmerGold

These are some of the most popular gold sellers that you can buy from. A couple of factors to consider while purchasing from any of these are: the price of the gold and the quality.

3. Be Aware of the Do’s and Don’ts

One of the major mistakes that most people, while investing in gold, make is – they don’t educate themselves about the industry. In simple terms, they know that gold has returns in it, they go and purchase it. Simple!

But that is not how things should be done. Being a gold investor, it is imperative that you learn, understand everything that you do. The idea is to meet the purpose of receiving maximum returns from your investment.

Learn about the market value, enquire about different types of gold forms, find the best company, etc. In short, be sure of what you’re putting your hard-earned money into.

4. Invest in Gold Bars

Gold bars are admirable and attractive. And above all, gold bars fetch great returns. Perhaps more returns than gold in any other form –be it coins or jewelry.

If you want, you can purchase gold bars with beautiful images engraved on them. No, they don’t add up to the value but it does look really appealing. You can order gold bars of different sizes and shapes.
So, when you have such pure gold in your kitty, without any dilution and with such magnificent finishing, the returns would definitely be amazing.

5. Do Not Put All Your Money in Gold

While gold investment in important, I believe, putting all your eggs in one basket is never a smart move. But without a doubt, gold should be given utmost preference.

Therefore, the best way to do it is – first calculate your expenses, find at least one other investment option and only when you’re sure that you can survive for at least 6 months after investing gold and the other opportunity, you should purchase it.

You can divide your into three major regions – Gold as a priority, an alternative investment and of course the money that can help you sustain a living.

In conclusion, gold is the present, it is the future. You make an investment today, you shall reap its benefits tomorrow. And following the above concept can significantly decreases the risk factor involved and get you benefits beyond your expectations. Go for it!

Before investing in the stock market you need to be well versed with two aspects of the market; how it works and how you can make it work for you. Understanding the stock market is necessary. Before you invest in any company, you must look at its current success and speculate its future growth and success. One must learn how to forecast profitable stock options and invest in them.

In order to have a fool proof strategy, information about stock option trading is necessary. There is a lot that you can do with the stock options at your disposal.

It is almost impossible predicting the stocks’ future prices because of their speculative nature. An investor’s perception about a company’s performance and growth in the future is what makes the stock prices work. But this assumption is not fool proof, it is just speculation.

Though technical analysts track stock prices in detail they provide a lot of assumed information. Warren Buffet, the Wall Street Wizard of Omaha is a fundamental analyst. His trick is to estimate the stock’s prices in the future and then buy the stocks.

Knowledge of available stock options is necessary. Not being familiar with the options will make you invest blindly, increase chances of risk to a high level and ultimately lose almost all that you have invested. No profit, total loss.

Awareness of strike price, premium, expiration and call regarding trading in stock options is necessary. Once you are well versed with these you can move ahead and devise profitable strategies for your investment.

Putting your entire stock option trading information to the right use will only be possible after the evaluation of your strategies constantly. If few strategies don’t work, make alterations. Rethinking your strategies and bettering them will take you ahead. Continuous study of the stock options must be done even after you start investing.

How to Forecast?

Forecasting is not sooth-sailing. Forecasting is extreme guessing after calculating risks. Usually when the year starts many forecasters make their predictions and often many of their predictions turn out to be untrue after the end of the particular time span. There are factors that go against a forecast; calling for the extremes, inconsistency, reacting to fluctuations.

There are different types of forecasters. Some have a conservative approach towards their predictions and some forecasters are bold and make call for the extreme. It is a ‘do or die’ situation. It all is based on risk.

If you call the big shots and turn out right then you get recognized in the market but if your calls go wrong your reputation is hurt. The market works on risk and risk alone.

The reason behind inconsistency of forecasts is the usage of the same information, spinning it around and using it in various ways for a long period of time. Reacting to the market’s fluctuations in a hasty manner makes many forecasters go downhill. Though panic and reaction is natural, keeping calm and assessing the current and future situation of the market will produce good forecasts.

Short term forecasts have lesser potential of a greater risk than long term forecasts. A short term forecast ranges from one or two quarters of the calendar. A short term forecast is effective as there is less risk of the forecast going awry due to the assessment of the market’s current condition.

A long term forecast means that in the long term things might go extremely wrong and what was thought of as profitable would lead to big losses. Hence short term forecasts are safer.

To forecast a company’s performance in the stock market you should be well versed with the market’s working. For maximizing the potential and reaping good returns, an investor must have a good forecast of the long term potential of the company. To forecast long term potential, learning about the company’s trends in the past, and keeping in mind the tendency of an error is necessary.

For long term forecasting, discipline, experience and research is required. Looking at the averages is a conservative approach and until you gain experience in the market, a conservative approach is more preferable than making extreme calls. The stock market is all about speculation, forecasting and taking risks.

Once you are a master at these, you can move ahead of other forecasters and reap profitable returns from your investments.

The Wall Street releases a list every year to guide investors to invest in companies which have the highest possibilities of turning your investments into more valuable assets. For this it sets up a panel of expert strategists who give their take on the market. This list is a quick guidance for the companies you should invest in.

And hence, this year’s Wall Street list is as follows –

List of the Names of Strategists on the Panel

• Richard Bernstein – CEO and Chief Investment Officer, Richard Bernstein Advisors
• Dan Chung – CEO and Chief Investment Officer, Fred Alger Management (Alger Funds)
• Bob Doll – Chief Equity Strategist, Blackrock
• Tom Lee – Chief U.S. Equity Strategist, JPMorgan Chase
• Ann Miletti – Senior portfolio manager, core equity, Wells Fargo Advantage Funds
• Kate Warne – Chief investment strategist, Edward Jones

These were the five strategists on the panel and below are their investment themes for the year 2012:

1. USA Assets are good investments even during bad economic times.

2. U.S. Treasury bonds yield low yet they offer diversification. Mainly because they remain as a sole major asset class and the direction of their prices move opposite to where stocks and most assets move.

3. Small U.S Stocks can be invested in as if you buy small caps, more so of financials and industrials, who avoid trouble from abroad by benefitting from the U.S economy, you will have a good chance.

4. Dividend paying stocks are not original and this defensive play is expensive. But given the investor’s risk aversion, they can get more expensive.

5. Avoiding credit sensitive plays is for your own good. There is a good chance of underperformance from investments that borrow and leverage. Examples are housing, commodities, emerging markets, hedge funds and big banks.

6. Apple – (APPL) Computers is a good investment as the Late Steve Jobs innovation firm is going to come up with iPad 3 and iPhone 5 this year, both of them will garner immense number of sales.

7. Lowes – (LOW) is a home improvement retailer that is most likely to benefit from even the slightest of improvements in a fallen housing market.

8. OpenTable – (OPEN) has a possibility of 25% growth rate along with consumer following. It is a possible target for takeover.

9. Qualcomm – (QCOM) the leading chipmaker is in a position from which it can profit from the upcoming next generation faster and higher speed wireless mobile networks.

10. Life Technologies – (LFTC) provides life sciences products and equipment and is globally well known. It had a 30% stock drop, a 52-week high, but it is most likely to profit from a growing health care system.

11. UnitedHealth – (UNH) is the largest HMO in the USA. It is growing exponentially with a massive number of 70 million customers.

12. Dell – (DELL) has in its offering a good risk/reward tendency even though the number of challengers in the PC business has increased. Its stock is cheap and expectations are low. There could be a rise in the shares if it can bring together two good earning quarters back to back.

13. HollyFrontier – (HFC) It has cheap refinery and more unloved when compared to most of its rivals. Its refiner spreads have narrowed but its margins are better and that makes it good in the long run.

14. Philip Morris – (PM) has a strong pricing power, free cash flow, a 4% yield adding to dividend growth. Buybacks of shares is a plus.

15. Raytheon – (RTN) is a big time defense contractor. Its defense budget has less exposure to big ticket items and its revenue is more recurring than competitors.

16. The level of mortgage and vacancies are on a 20 year high when affordability vs. renting is taken into consideration. This has not been seen since the years 2006 and 2008. If there is a pick up in the housing section, anything related to it like consumer discretionary names and finances will prosper along with it.

17. Comcast – (CMCSK) is a cable provider which provides media and high speed data and it is likely to pick up growth there is a rise in the housing market.

18. ON Semiconductor – (ONNN) is being sold at around 50% of its value in the private market. This is because of its losses due to the Tsunami Japan and Thailand floods.

19. Hertz - (HTZ) is a rental car company. It has a strong brand name and it is banking from the higher rental volumes when compared with air travel. It has a potential in the market because of its longer term rentals.

20. PepsiCo – (PEP) has a 3.2% dividend yield and a quite reasonable valuation in the market.

21. Johnson & Johnson – (JNJ) is diverse when looking at its geography and product popularity. It is likely to profit from consumer, pharmaceutical and medical businesses.

22. Intel – (INTC) is moving into the stream of mobile phone space. It has a dividend yield of a good 3.6%. It has a below market P-E ratio of 10.

23. Grand Canyon Education – (LOPE) is a for-profit online educator. It has a campus in Arizona and its management is strong and this is garnering more credibility and students.

Thus, The Wall Street list for investing money in 2012 has been mentioned above. While these companies may provide opportunity for your ROI, Wall Street is always surprised at the end of the year by how much potential they have over-looked. For instance, milk was the top commodity for 2011.

Hope this helps you earn higher ROI from your investments!

Lotto. Yes, Lotto. It is something that you love to take a shot at. But the Lotto is like a Leprechaun. Even if you finally win a lottery, you’ll probably lose all the money, in the coming years. The lottery is risky and the chances of you winning are so less that even being struck by lightning is more of a probability.

Everyone starts with the small lotteries. They go for $1 lottery or $3 lottery, and soon they feel that they must go for the bigger ones. That is when the ‘Win it all or Lose it all’ is applied. Bigger lotteries ask of you to buy their expensive lottery numbers and you often go forward and buy more than one or two lotteries to assure yourself of greater chances.

But this means you are putting in a lot of money in something which is purely based on luck and in an investment from which you have almost a million to one chance of getting that million dollar return. And by this you almost always watch the winner and the lottery organizers have the last laugh while you see your money go down the drain.

Then there are lottery winners who probably win big lotteries and become so careless about the tons of dollars they have in their possession that they spend it all up in things which will never help them in the long run. It is a finance fact that almost every lottery winner, after ten years of winning a big lottery, ends up more or less in the same situation before they had won anything.

Over the years there have been too many people participating in lottery competitions. Out of every four Americans¸ one claims to have met a lottery winner. And multimillion dollar lottery schemes and wide propaganda create a sort of euphoria in the market, in groceries, in gyms, in medical stores and almost every other place you’d go.

This makes more and more people have a shot at the winning ticket. But this only makes it more difficult. The number of contestants doesn’t grow by hundreds or thousands, but by millions. More than 65% of Americans have participated in Lottery games. Everyone enters a lottery with a high hope of winning it even though they know the truth. And they end up losing all they have.

Well, this habit of spending can be replaced by the more financially and logically sound investment in the stock market. The stock markets, unlike lottery tickets, are not based on luck. In a stock market, you can buy a particular share of a venture or anything that is sell-able and you can, over time, be repaid with much higher amount of money.

Let us look at a person who has benefited with the most from the purchase of a share. This is about a painter who painted the popular social networking site Facebook’s office in California. This wall painter, when given options of being paid in money or be given a small share of Facebook’s massive wealth, he opted for the latter. At that moment, the share he was given was very small.

But when recently Facebook went public, the painter’s share multiplied to a whopping $200 million. He didn’t even know of this share up until he saw his name in the newspapers and on the television. Probably, he’d never have to work ever again.

Well, you can do the same by investing in a stock market. You can probably invest in small caps stocks. This will ensure that you have a slight risk in it and more chance of earning profits.

But before you invest in any stock market, you must do a lot of research. This research includes learning about various stock markets, the difference between each stock market, the situation of each market, the credibility of the company whose share you’re purchasing of, genuine strategies for better investing, financial background of the firm etc.

Companies are categorized by their Capitalization:

A company’s size is measured by Capitalization (Cap). Companies are also classified by their capitalization. If the market cap of companies is between $10-200 billion, then are classified as Big/Large caps.

If the market cap of companies is between $100 million and $1 billion, then they are classified under Small caps. Small caps are more promising of big returns but carry a higher rate of risk with them. It is wise to invest in small caps companies as if they are found with potential, their market rate will only increase and so will the monetary benefits of your share.

Hence, in conclusion, it is always wise to not depend on vain luck and lose all your hard earned money and better to invest in the stock market and legally and wittingly continue gaining huge profits.

The market is filled with “un-sprouted” small-cap stocks; these are companies that have a market cap of less than $500M. These investments are risky, but they can also offer returns of up to 1000 percent if you invest in them smartly.

Many big time investors will overlook these small-cap investments because of their potential risk, but because of the huge return potential I really feel that they should be part of every investor’s portfolio. Small-cap stocks are from businesses with small market capitalization and if you invest wisely you can beat the big institution investors to the punch.

When looking at small-cap investments it is important to keep in mind that even the biggest brand name companies once started out small. Google started in a garage. This potential is what makes small-cap investing so great. You could be aligning yourself, and your money, with the next big thing. These smaller companies have more growth potential than the larger corporations do. They can change course, make corrections, and stay up with market trend easier than the big guys. They will also garner less attention, which means that you can get a bigger piece of the pie.

Yes, the growth potential is huge, but you don’t want to put all your financial eggs in this one potentially high risk basket. Small-cap investments shouldn’t represent anymore than 10 percent of your investment portfolio, at the most.

Since small-cap stocks are risky there are a few things you want to make sure you pay attention to along the way. It is easy to get caught up in the dream of potential, and you want to play it smart.

• Don’t Lose Your Cool – What I mean by this, is don’t let something that seems too good to be true lure you in with the potential of big time returns. Small-cap investing is just like any other investment. You need to do your research, make smart decisions, and know exactly what you are getting yourself into. Don’t invest more money than you can afford and check all the avenues you make a decision. This will help you insure that your investment choice is sound.

• Don’t Jump on the Bandwagon – Just because you know a friend of a friend who made a ton of cash from a small-cap investment, doesn’t mean that you need to get in on the deal. Someone else’s success might not mean success for you. Tread carefully.

• Don’t Make Assumptions – This actually goes along with the last point too. When it comes to small-cap investing, or any investing for that matter, you always have to do your due diligence. You need to check out the balance sheets of the company and make sure that you are making a wise decision. It might seem like a great opportunity on the surface, but you need to look further than just skin deep.

• Don’t Think it Will Be a Quick Turn Around – Small-cap investments aren’t going to hit the jackpot in a few months. In fact, you are looking at a couple of years for this investment to pay off. Keep that in mind as you research potential investments and start looking at the details.

• Don’t Go Too Out on the Fringe – The very edge of technology is already a risky investment, when you add the potential risk of a small business you might be biting off more than your portfolio can chew. Stick to businesses that aren’t on the very fringe of the market and you will have a more secure investment.

I personally believe that small-cap investments should be a part of everyone’s portfolio, no matter what circumstance someone is in. The potential lies in front of you and it’s up to you to be able to identify the opportunity and decrease your risks involved. I hope this has helped you understand how small-cap (or even penny stocks) can give you the return on investment you are looking for.

Readers: What is your take on small-cap investments? Do you believe they should be a part of your portfolio? If so, which stocks have you bought? Thank you for reading, hope you’ve enjoyed!

Do you know the difference between a bear and bull market? Before investing in a new stock it is imperative that you understand the differences between these two market trends, but that is just the beginning. Knowing how to read stock charts is crucial because they will show you when profits reach their peak and ultimately, when you should sell.

Determining where the market is, and where a specific stock is, isn’t always easy, which is why people make their living attempting to predict something that is rather unpredictable, like the stock market. Luckily there are some tricks to helping see what you need to be looking out for to help you make the smartest investment choices.

Bears and Bulls

The first thing you need to understand is, for the most part, you want to invest in stocks during a bear market. A bear market is when stocks are falling and selling is the focus. If you get in at one of these points, ideally you will want to ride that investment until the market turns bullish; which is when the market is trending upward. Spotting trends and taking advantage of them is what is going to separate you from the pack and bring you higher returns. If you wait too long you could miss opportunities.

Market Trends

There are actually three kinds of market trends that you need to watch out for. The first is an uptrend. This is when the stocks peaks, and even troughs, continue to move in an upward direction. The second is a downtrend. This is when the stock’s peaks are continually moving in a downward direction. Finally there is a sideways or horizontal trend, in which there is little movement up or down.

Trend Length

On top of the direction of a market trend you also need to look at the length of that trend. A long-term trend can be a trend that has lasted one year or up to five years. Obviously the longer the trend the more likely that trend will continue. An intermediate trend is a marketing direction that has lasted for several months; these trends are less stable and less secure. A short term trend is a market movement that has only happened over a month or less, obviously these are harder to trust.

When you can look at the trend over a specific time frame you will get a clear idea of what that stock is doing and where it is likely to be headed. It’s also important to remember that everything happens in cycles. The goal is to get in when the getting is good and miss out on any serious downturns in the cycle. This isn’t always easy to do or predict. Even if a stock has had a long-term uptrend, know that at some point that is going to change. There are no guarantees.

Losing and Changing

Another important thing to remember when looking at the trend is that 90 percent of traders lose. This is a hard fact to swallow, but in order to win, you have to lose. Losing not only helps you to become a better trader, but it offers you lessons and skills that you would have never earned had you always been on the upside of the trading game.

Adaption is the key. In order to stay up with the trends you have to be willing to make changes, mistakes, and move in a different direction. Trading is playing a serious game and it’s a game where the rules change and you can’t always tell who the winner is, but if you stick to it and are willing to change as it changes you can win, big time.

Much of the conversation around our current economic mess has been around leveraging. This might sound like the buzz word of the week, but leveraging is a system of investing that is used by banks, financial firms, and independent investors. In the most basic sense it works by borrowing money to invest with. Businesses are ‘leveraging’ their debt against future investments and potential returns. When done right it can pay off – big time, but as the current economic situation shows, rarely is it done right.

Leverage is false equity. Here is a way to break it down as simply as possible. Let’s say that you have $5000 in the bank. Your personal equity is $5000. Now let’s say that you also have $10,000 in credit cards. So, the way leveraging works is to look at that debt as equity. So now your personal equity is $15,000. Seems a little weird, right?

Of course, this system doesn’t take into account interest rates, annual fees, transactions costs, etc.; which is only part of its flaw.

The most obvious issue with leveraging is if the investment fails. If you use leveraging to make an investment and that investment doesn’t pay off then your losses are going to be much higher than they would have been without that borrowed money. You see, leveraging increases gains, but it also increases losses. If a company was to try and leverage their shareholder’s money and that investment failed, the interest and credit risk would destroy the shareholders value. Risky business indeed.

Typically, leverages are connected to financial derivatives, which are things like swaps, index futures, and options. Yes, these things are already available to investors, but with leveraging they are much more complicated than the traditional system of simple buying and selling because you are adding borrowing into the mix.

Investors that use leveraging typically expect a double return and the job of the fund is to balance the debt and equity all of the time. But the market moves too quickly to keep things balanced that cleanly and the leverage ratios can easily be thrown off when assets or debts are no longer even. When that happens the fund will have to buy or sell shares, which will drive up the expenses and transaction costs because of the fluctuations of funds, but it will also drive up capital gains taxes. More expenses.

The other side of that is when the fund is losing value. Then it will have to sell shares to reduce debt and that locks in the losses which makes it harder to have a gain in the fund when the market starts to move in the other direction. Just like debt, it makes it harder to get out of it the further you get into it. To the savvy investor this cycle of loss and gain with leveraging is known as the Constant Leverage Trap.

When you start to research the specific leverage funds out there, it won’t take long for you to see that the overall performance is poor. In a bull market they do alright, but in an economic downturn they struggle and that is what a leveraging investment is always going to do. The costs don’t outweigh the risks.

Investors are star struck by the thought of a two for one return with leveraging, but the double is based off of daily returns; which is not the same thing as an annual doubling. With the overhead costs this isn’t earning you as much as you think it is. Because the funds can only survive by selling when costs go down and buying when costs go up, this creates instability and that is difficult to recover from.

The entire real estate industry was based off of the idea of leveraging and for many years this worked and made people a lot of money, but when the housing market crashed, well you know the rest of that story. When you purchase a home with borrowed money and the value of your home increases, you make money off of the deal. Hooray. But many people borrowed money to buy a home and then their home’s value decreased, which put them upside down in debt for a home that was now worth less than they paid for it; or more correctly, they cannot sell the house for as much money as they owe on the mortgage. This is exactly what leveraging is and why it isn’t a good idea.

Leveraging require a high risk tolerance. If you aren’t overly worried about losing all of that money, well then, good for you, go for it. But these investments are highly risky and you shouldn’t enter into them thinking that you are going to make quick money. This volatile market requires a long term investment of up to seven years and during that time you will see a lot of hits against your investments.