by admin on March 12, 2010
Suffice it to say, 2009 was nothing short of a yo-yo ride for many investors, especially those who sunk funds into short term investing. The major asset categories of debt, equities, and real estate became very unstable overall. The only exception to this rule was gold investing and many investors purchased the precious metal in order to hedge against inflation and other economic uncertainties. While other investments spiraled downward, gold prices achieved new highs while the instability of the economy continued.
The highs that gold prices experienced were literally unprecedented. However, since peaking, it corrected roughly 6% to 7% and appears to now be consolidating somewhat at those levels. Now we must look ahead to 2010 and what short-term investing will entail in order to recover from the prior year and protect you from the year ahead. So how does this year look for investors currently as well as the rest of the year?
Tips for short-term investing in 2010
As far as short-term investing in 2010 is considered, many financial analysts and experts are thinking that the “bulls” of the market will recover nicely and retain the upper hand overall. Despite the feeling on this, investors will need to be extremely selective as setbacks are still going to occur. Here are some suggestions for balancing and protecting your portfolio throughout the rest of the year.
Buy stocks that have a global footprint – in some cases, particularly and economic environment that is experiencing slower growth, bigger is usually better. Look at global company stocks that have enough clout to offset adversities and then capitalize on them.
Substituting bonds with stock dividends – stocks in companies which display solid balance sheets as well as showing a pattern of stable earnings are much better equipped to handle economic fluctuations and instabilities. Additionally, the dividend income that they produce is a viable alternative to bonds and the uncertainty surrounding them.
Purchase index-funds with a larger cap – despite the fact that many small-cap and mid-cap securities performed much better than large-cap stocks, many analysts and experts feel that those global companies (see above) will finally have their day in 2010. As things currently stand the last remaining niche of undervaluation lies with these larger, blue-chip companies and their stocks.
Technology stocks are still recommended – in 2009, technology sector funds outperformed other stock sectors in the US and witnessed an unprecedented 63% gain as well as continuing to be the primary S&P 500 stock sector. Although that is a cautionary note, the potential for strong technology sector gains are still prevalent.
The energy sector is red-hot and still heating up – so far this year, energy stocks have been on a continual tear and are not showing any signs of a future downturn or slowdown. Mutual funds in the energy sector are up another 7% in addition to the 46% gain that was experienced in 2009. The bulls of this sector are banking on continued successes in the future and you should consider this as well.
by admin on March 8, 2010
An introduction to short-term investing
Your goal when you take up short term investing, the goal is to achieve the highest amount of gain in the shortest period of time possible. Additionally, you must be willing to assume huge risk when you are investing in short-term options and the fact that you could lose significant amounts of money.
Despite this fact, other investors are more than willing to take those increased risks in order to achieve those potentially huge gains. Although short-term investments are an excellent way to earn what you want immediately, you need to remember that these investments are extremely volatile as well.
How to invest for the short term
The following is a list of the 5 steps you should consider whenever you are contemplating any short-term investments:
Anticipate setting aside a larger sum of money for short-term investing – this will offset the shorter period of time encountered while you are allowing your investments to reach maturity. This also holds true for 1-year Certificates of Deposit (CD’s) and higher rated stocks.
Mutual funds displaying returns of 12% or greater are recommended – although these are considerably more risky as a short-term investment, they are more likely to ensure a greater rate of return and will probably help you to attain your goals quicker.
Don’t forget about short-term bonds – there are short-term bonds available that only take 1 to 2 years to reach maturity and realize significant gains. The typical return on these types of bonds is roughly 3%. So it follows suit that if you are anticipating a larger return, you will need to invest more capital up front.
Real estate is still a sound investment whether long-term or short-term – just be aware that this is considerably more challenging than just simple investing. It involves procuring larger amounts of capital up front. However, it results in the increase of the property value and a quick resale of that property. This concept is oftentimes referred to as “flipping” and can produce some very sizeable returns on your investment.
Consider investing in loan-participation funds – these typically offer a tremendous rate of return but they are also the most volatile short-term investment out there along with stocks. Loan-participation funds are usually classified as any investing you do involving companies that are attempting to use your funds in order to pay off a prior debt. Despite the fact that the possibility of default is extremely high, 75% (or more) of the initial investment is normally recovered.
Short Term Investing Cautions
You would be wise to consider consulting with a broker or financial planner to customize a short-term investment strategy that is tailored to your specific needs. This gives you a greater chance of gaining the right advice and direction as well as the possibility of realizing a very significant return on your investment. Just remember that investing for the short term carries significantly higher risk than long-term investments and you need to make sure that you educate yourself and do considerable research before jumping into this.