Category: Investing


Futures Trading

All futures contracts are generally made for the purpose of speculation or hedging. As such, the general procedure for settlement is the neutralization of the original contract by an opposite contract on settlement, so that only difference between the current and the contract price is paid or received. It is rare that actual delivery of the goods is taken, and the price paid in settlement of futures contracts.

Futures trading is the most notable feature of business activity on the commodity exchange. In fact, the commodity exchanges are organized mainly for futures contracts. The futures contracts are made for two distinct purposes: speculation and hedging. Accordingly, they are either speculative or hedging contracts. Speculative activity is such an important part of the commodity exchanges that commodity exchanges are sometimes referred to as the speculative market.

All speculation represents an attempt on the part of individual to peep far into the future out of the window of the present. Speculation refers to an attempt to estimate the future trend of prices and proceed on that basis, to result in profit. Commodities may be bought at the current price with the assumption of selling them at a higher price in future or vice-versa.

The line between gambling and speculation is very thin. On the surface both appear to be the same, but in fact speculation refers to the taking up of legitimate enterprise (purchase or sale of property, commodities, etc.) on the basis of an analysis of market trends and other factors that have a bearing on prices. When, however, people start speculating recklessly and blindly without applying their mind and intelligence, and without possessing the resources necessary to meet their commitments, it degenerates into sheer gambling.

How To Invest With Success

Whether they’re working in the business world or stay-at-home mothers, many people today are drawn to the risky allure of investments, which can mean either huge rewards or painful losses. While it’s impossible to predict the fluctuations of the market with 100% accuracy, as you build your portfolio, you will learn to accept the losses and keep in mind the successes always waiting around the corner.

No one can control the market, but you can control what you invest in. Research products and know the businesses you’re putting your trust – and, more importantly, your dollars – in. One of the most common errors new investors make is jumping to invest in a hot stock from the previous year. It’s a common pattern for a market high to descend to a market low – right at the time you’re investing. This is not always the case, but it pays to invest in a strong stock rather than a fad that’s in one year and out the next.

It’s also important to know why you’re investing in that particular stock. For instance, if you invest strictly to gain some momentum, when prices fall you’ll know to drop out; otherwise, you’ll sit there wondering whether to wait it out or cut your losses.

Ironically, while it’s impossible to predict the market, investments are all about timing. Two of the most important decisions investors make are when to take profits and when to cut losses. When the market is up, some say it’s best to run a profit – a risky choice that could mean a huge loss or an enormous reward. However, many prefer to take their money while the market is rising, in case a fall is on the way. When the market is down, nearly everyone agrees it’s best to close out before it gets worse to avoid losing any more money, cutting your losses.

Most importantly, only invest what you can afford, and have a good reason for investing. Losses are a real part of investment, which means you can’t afford too many rash decisions, especially when you’re starting out. Don’t let the market determine your bank account unless you’re using it to your advantage, whatever that may be.

The smartest thing a new investor can do is study the market. Before investing in a product, look at its record. Don’t jump into any investments – think them over first. Some good sources of information about investments include The Wall Street Journal Guide to Understanding Money and Investing (3rd Edition) by Kenneth M. Morris and Alan M. Siegel, The Real Life Investing Guide by Kenan Pollack and Eric Heighberger, and The Only Investment Guide You’ll Ever Need by Andrew Tobias.

If you stay well-informed and make careful decisions, the market can be an exciting tool. In the business world, anything can happen, and with the market highs come enormous rewards that are well worth the risks.

Do You Pay Yourself?

The typical scenario is that you get your paycheck. After you recover from the shock at how little is left after taxes, you proceed to divvy it up among all your outstanding bills, intending to put whatever is left over into your savings.

But there never seems to be anything left over and your savings don’t grow.

A better plan would be to pay yourself first. Don’t let the money get into your hands.
You might find that you actually begin to grow your savings much quicker this way.

If you work for an employer with a 401K plan, the first thing you should do is to fund it to the max. If you can’t afford that, at least put enough in to get the full matching contribution form your employer.

This investment is made before taxes. Your investment is larger and with the employers contribution grows quickly.

Next have a brokerage or mutual fund company debit your banking account monthly. This money should first go into an IRA – if you have five years or more to go to retirement, make it a Roth IRA.

Next have a few dollars more be debited to go into a no-load, low cost mutual fund. The younger you are, the more aggressive your choice of fund can be.

After that is done, then figure out how to pay your bills and living expenses. If money is tight, cut back on your living expenses and use the extra money to pay down your debt.

Start with the lowest balance first. Once that debt is paid, take the amount of money you were paying on that debt and add it to the payment on the next lowest balance debt. Continue doing this and you can be totally debt free within 5 to 7 years.

Another version of this method is paying the highest interest rate debt first. The principal is the same, you just see more progress with the first method, although it could be more costly based on how your debt is distributed.

(If you don’t believe me, get the premier version of Microsoft Money or Quicken and use the “Debt Reduction” module. You will be shocked at how much money you will save and how fast you can eliminate debt this way.)

The idea is to scrimp at the expense of your current lifestyle, while leaving your savings to grow and you debt to shrink.

I know many of the people reading this will scream that this is an impossible plan.
But it is quite doable with a little will power and the ability to delay gratification for a while.

The problem is that if you don’t do this, your future might turn out to be very bleak.


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