How To Determine Where To Invest

By Pauline Go

In present investment scenario, there are many different types of investments, and there are many factors in determining where you should investment your hard earned money.

There is no doubt that determining where you will invest first starts with conducting a research. Here you will be researching various types of investments, trying to figure out what your risk capability is, determining what your investment style is and finally what your investment goals are.

This is similar to buying a new car. It goes without saying that you will do some research before making a final decision. You will look over the car, and take it for a test drive before buying it. The same thing happens with investments.

Learning about the stock market and investments are time consuming. But it is time that is well spent. You can refer to numerous books and websites to educate yourself. If you want, you can even take a course at a local college. Thanks to the Internet, you can actually play the stock market with fake money to get a feel of how things work. This is possible by looking for Market Games or Stock Market Simulation on a search engine. This is an excellent way of learning about how investments work in the stock market. Investments other than the stock market have to be learned by reading. Here you can refer to books at your local library or read as much as possible on the various websites that are devoted to this topic.

If you have a financial planner, go visit him and inform him of your financial goals. Ask for his suggestion. Your financial planner will tell you where to invest your money and help you set a plan so that you reach your financial goals.

About Author: Pauline Go is an online leading expert in finance industry. She also offers top quality financial tips like :
Loans With Bad Credit History, Using Your 403b To Pay For College and Federal Credit Union & Financial Services

The World's Billionaires 2008

by Luisa Kroll

The number 13 has long been considered unlucky by superstitious people around the globe. How fitting, then, that Bill Gates' reign as the world's richest person ends after his 13th year at the top.

Despite being worth $58 billion, $2 billion more than last year, Gates is now just the world's third-richest person, ceding the top spot ranking to his good friend and partner in philanthropy, Warren Buffett, whose net worth jumped $10 billion to $62 billion. (All stock prices and net worth valuations were locked in on Feb. 11.) Ranked No. 2 is Mexican telecom tycoon Carlos Slim Helú, whose fortune has doubled in just two years to $60 billion.

It is certainly a dawning of a new era. But not just because of Gates' fall. The 22nd annual rankings of the World's Billionaires reflects all sorts of upheavals in the list's makeup. Two years ago, half of the world's 20 richest were from the U.S. Now only four are. India wins bragging rights for having four among the top 10, more than any other country.

For the first time ever, the number of billionaires Forbes could identify crossed into four figures, reaching 1,125. The total net worth of the group is $4.4 trillion, up $900 billion from last year. Despite the turbulence in the U.S. markets, Americans account for 42% of the world's billionaires and 37%, of the total wealth; those shares are down two and three percentage points, respectively, from last year.

Sixteen years after the collapse of the Soviet Union, Russia, with 87 billionaires, is the new No. 2 country behind the U.S., easily overtaking Germany, with 59 billionaires, which held the honor for six years.

The rankings include 226 newcomers. Seventy-seven of the new faces come from the U.S., half of whom made their fortunes in finance and investments, including John Paulson and Philip Falcone, both of whom became wealthy shorting subprime debt. Another third of the new billionaires comes from Russia (35), China (28) and India (19). Two of the most noteworthy new entrants are South Africa's Patrice Motsepe and Nigeria's Aliko Dangote, the first black Africans to make their debut among the world's richest. Dangote is also the first-ever Nigerian billionaire.
It is also a record-breaking year for young billionaires, with Forbes finding 50 under the age of 40, 25 of whom are new to the list. Sixty-eight percent of these under-age-40 tycoons built their 10-figure fortunes from scratch, including Google co-founders Sergey Brin and Larry Page; former Enron trader John Arnold, who now runs a hedge fund; India's Sameer Gehlaut, who started online brokerage Indiabulls; and, last but not least, Facebook founder Mark Zuckerberg, who at age 23 might just be the youngest self-made billionaire in history.

Zuckerberg is probably destined to be the most talked about newcomer of the year because of his age and ingenious social-networking site, but there are fascinating entrepreneurs of all ages climbing into the ranks. Some of the more notable ones include China's Gao Dekang, who is one of the world's biggest makers of down jackets and vests; Portugal's Americo Amorim, who turned his grandfather's small cork operation into the world's largest; and Brazil's Eike Batista, who built and lost a gold mining fortune, before hitting it big in iron ore. He is now the world's richest mining billionaire.

With all the rosy news of the past year and the overall gains, it is easy to lose sight of the volatility that has been wreaking havoc on these fortunes on a daily basis for months. For instance, Hong Kong's richest person, Li Ka-shing, lost $5.5 billion of his net worth, all tied to publicly held stocks, in the 37 days between Jan. 4 and Feb. 11.

Meanwhile, mainland China's richest person, 26-year-old Yang Huiyan, fell from $17.3 billion in September to $7.4 billion in the rankings. Google co-founder Sergey Brin's fortune touched $25.5 billion in the past year but is now down to $18.7 billion. Others were hit much harder, falling off the list entirely, including Lehman Brothers chief Richard Fuld and Bear Stearns ex-chief James Cayne (he was sacked), both victims of the world's credit crunch, and Pulte Homes' William Pulte, whose stock collapsed along with the housing market.

What will happen in the next 12 months as we continue our wealth watching? There will likely be some big losers, some big winners and a lot of ups and downs in between. The only certainty is change itself.

Warren Buffett declares America in recession

Suzy Jagger and Dearbail Jordan

Warren Buffett, the billionaire investor, today declared that the United States was in a recession as he withdrew an offer to bail out the increasingly troubled bond insurance industry.

Mr Buffett, the world's third-richest man, said that "from a commonsense standpoint right now we're in recession", despite the fact America had yet to report two consecutive quarterly falls in gross domestic product, the technical definition of a downturn.

He conceded that the economic environment was "nothing like '73 or '74", when the US was in recession and inflation reached 12.1 per cent, but he said that investors should not rule out the possibility of a severe downturn.

Evidence that the recession in residential construction has spread across America's entire building industry emerged today after official numbers showed a sharp slowdown in public and corporate projects.

Construction spending overall in January dropped 1.7 per cent, far worse than Wall Street's expectations of a 0.7 per cent decline. However, for the first time in two years, non-residential and public sector building - which includes new hospitals and office blocks - shrank 1.2 per cent.
The grim construction data suggests that the credit crisis which erupted last summer has hit company spending, spilling over from the financial sector across corporate America as a whole.
Manufacturing data published yesterday also showed another sharp slowdown in February with output at its lowest since April 2003.

Wall Street is expecting another half a percentage point interest rate cut this month, which would see the cost of borrowing fall to 2.5 per cent.

Meanwhile, Mr Buffett also confirmed that a deal to reinsure $800 billion (£403 billion) worth of government-issued bonds, known as municipal bonds, was "not on the table" any longer.
The bonds had been underwritten by MBIA, Ambac and Financial Guaranty Insurance and a deal would have provided a significant boost to the industry. It is feared that insurers will not have sufficient funds to pay billions of dollars worth of claims on toxic investments.

It is understood that Mr Buffett had offered to reinsure the bonds but only at a steep premium which was rejected by the three insurers. However, Mr Buffett had kept his offer on the table until today.

Last week his company, Berkshire Hathaway Investments, revealed an 18 per cent fall in fourth-quarter profit as income from insurance underwriting fell. Full-year profit rose by 20 per cent to $13.21 billion.

Berkshire Hathaway invests in 76 businesses including Tesco, the UK's largest supermarket, of which it owns 2.9 per cent.

Related Links
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Buffett offers to prop up bond insurance market

Investment Pornography - How To Avoid Short-Term Views For Long Term Gains

By Stephen Meidahl

The conversation always begins the same way. "Did you hear the bad news about the market today?" The undercurrent of this question ranges from subtle fear to pronounced hysteria. Regardless of the range, however, the bottom line is that most financial journalism engages your fear instead of your hope.

One of the greatest hurdles to achieving investment truth is financial journalism. Journalists do not exist to provide truth. Financial journalists exist to provide "new" news. Remember, however, that prudent investing requires you to adopt a long-term time horizon. The media, on the other hand, asks you to believe that everything that is truely important happens within the next four minutes. The media exists, and indeed profits, only from the short-term outlook.

The point of all media is to attract attention. The competition for your interest weighs heavily on every news organization in America. The magazines want you to read them. Television wants you to watch. Radio wants you to listen. Why? To create an audience so that advertisers can expose you to their products. This is not mere griping. This is simply media economics. It is just how it works in America.

Financial journalism is no different. It serves up the apocalypse du jour. Get their attention, it says, with the most mind-numbing, fear-filled, world-ending crisis we can make potentially credible. Then they'll read, listen or watch.

This is, unfortunately, investment pornography. Sure, it is titillating. It attracts your attention. It captures your interest in short, powerful bursts of emotion. But, like all pornography, it is death for serious and careful long-term relationships.

Investment news and investment truth are not the same. They are not related or even in the same universe. Learn this and live.

What's the point? This too shall pass. With the overwhelming daily reports of bad stuff happening in the market you might be tempted to invest the wrong way. The truth is that long-term investors win. The news is that all investors are losing. My advice is to ignore the news and adopt the truth. The news is bad. But truth is that wise investors are marathon runners, not sprinters.

For further information concerning investing, retirement or pensions please visit Stephen O Meidahl's website at http://www.smeidahl.com or read his highly regarded book "Lessons Of A Real Life Investment Advisor."

Stock Market Downside Bets

By Rocko Chen

As mentioned in "Prisoner's Dilemma" I posted a while ago, most efficient teamwork requires absolute faith and discipline from every player. Conflict between individual and collective payoff exists in continuous time. On top of all this, majority of people do not act rationally. It then makes sense that most business type games do not operate in the most efficient manner where maximum potential payoff could occur. The next logical suggestion sets forth that the average multi-staff business has a higher probability toward failure than success.

OK, the question lies in how we can exploit this for profit. Most simply, downside bets on the stock markets. Allow me to illustrate why and how it is done.

An economist visited AUT early 2007 and lectured regarding corporate crisis management. He mentioned that 1 out of 3 corporations experience a crisis every 5 years that it will never recover from. Sounds pretty serious. Enron, WorldCom, AMD, CROX and the New Zealand finance companies come to mind.

David Birch, former head of a business data mining firm, proposed the following Survival Rate of new businesses.

• First year: 85%
• Second: 70%
• Third: 62%
• Fourth: 55%
• Fifth: 50%
• Sixth: 47%
• Seventh: 44%
• Eighth: 41%
• Ninth: 38%
• Tenth: 35%

The numbers show that the conventional "90% failure rate" stands completely unfounded. Despite that, new businesses in general have the odds against them after five years of operations. According to this data, 1 in 2 businesses face failure after first 5 years of operation. This also concurs generally with the "business cycle" theory of economics majors.

Keep in mind if the business goes completely under, your investment on the downside bet would profit close to 100%. E.g. in the last couple of bullish years, a downside bet on the NZ financing companies would have taken losses of 10%-15% each year; and as the funds became fudged, the downside bet would have made well over 50-90%, hence a positive expectancy.

What moves the prices of stocks? The gist of it lies in supply and demand on the exchanges. When volume in initiated buy orders overwhelms sell orders, price moves up, and vice versa. Rational long term investors or short term traders may put in large buy orders making price climb, but sooner or later they will want to take profit, or cut losses. All the while, there is absolutely no guarantee whether the seller would repurchase the stocks.

In other words, there is certainty that stock holders will eventually initiate sell orders creating price drops, yet there is not of anyone recommitting in buying shares of the same stock needed for a rally. This observation alone puts the downside bets at better odds than upside.

Behaviorally speaking, even the professional fund managers "panic" when it comes to low grade holdings. As soon as they realize how worthless anything has become, they would want to dump as much of it as possible while trying to preserve capital. Of course the potential buyers would demand substantial discounts for taking on further risks. This phenomenon explains partially why asset values tend to decline at higher velocity than growth. Another advantage toward the downside bets.

Two simple approaches exist to accomplish this for individual stocks.
1. short-selling positions
2. Put options

I will not get into details of what they mean. Look them up, a sea of information on them exist on the internet.

Research becomes easy when you look for a hopeless business. With the past corporate accounting shenanigans, we all know companies like to fudge their financial statements to appear profitable with promise of further growth. However, they do not have as much incentive to present misleading negative information as demand for their stocks is needed in order to finance business operations.

With that, if the financial statements look great, it still remains questionable; yet if the numbers seem awful, they are probably true. I would suggest the following to precede downside bias for a listed company.

• Low total cash holding vs. Market Cap
• High P/E ratio
• High Debt/Equity ratio
• Low Short Interest

Low cash means the company will not likely able to afford any repurchase of their own stocks, drying up supply. A high P/E ratio would give institutional traders a sentiment of "over-valued", and consider selling to take profit. A high debt/equity ratio displays how financially disconcerting the company has become. Lastly, the earlier you get in on the short action, the more you will likely make in profit. You do not want to come "late to the party".

Of course a wealth of additional information could provide a trader with higher winning rate. The above would give anyone a definite edge compared to some newbie "investor" who buys and holds hoping for some Warren Buffet pipedream.

Jesse Livermore, a great stock trader, made several hundred million dollars in 1929 shorting the railroad stocks. Goldman Sachs made several billion dollars last year making downside bets on mortgage backed credit derivatives. When the fudge comes, it becomes a game of hot potato. The buy and holders face blowing up, while the downside bets rake in profits. Which side will you take?

Days Of A Neophyte Mathematician
http://www.rocko.co.nr/
http://matdays.blogspot.com/

The Advantages of Diversifying Your Investment Portfolio

By Kurt Ziegel

Any type of investing is somewhat of a gamble. Unless you are doing strict savings in a savings account (secured with insurance by the federal government up to $100,000 per individual for each institution), or you are buying secured savings bonds that you hold to full maturity, you are not guaranteed that your original principal (the amount of money you originally invested) is going to be protected.

That said, those types of investments usually produce a much lower return than do investments such as those you do in the stock market. Yes, of course, your principal is still somewhat at risk, and you can lose money. However, the key to making money with riskier investments such as the stock market is to diversify your investments. That way, you are almost certain to have some investments that will do well when others are not doing as well. In addition, you should also expect to diversify your portfolio among different types of investments. For example, your investment portfolio should generally be a mix of different kinds of investments, such as stocks, bonds, and short-term assets like CDs or money market funds.

If your employer offers a 401(k) and you take advantage of it, then you have some investments already. If you don't have a good idea of what your 401(k) is comprised of, you should take a look at it and perhaps talk with a financial adviser to see if it's diversified enough.

If your employer doesn't have a 401(k) or you are self-employed, then you're going to have to get started by investing on your own. One of the ways to get started as a new individual investor is to simply begin by investing in some mutual funds; if you earmark them for retirement in a traditional IRA, for example, you can invest tax-deferred, meaning that you pay now instead of later.

Mutual funds are a great way to buy many small "portions" of stocks without having to try to figure out which ones are going to do well or which ones are going to do poorly on your own. In addition, you can do something called "dollar cost averaging." This means that you set aside a certain amount of money every month, usually by automatic payment. This payment is taken out of your checking account every month and is used to buy shares in mutual funds. What you're doing with this small amount of money (whatever dollar amount you specify, oftentimes with an initial lump sum investment to open account) is to buy a portion of every stock in that family of stocks, so that you actually end up going a large number of stocks within that "family." This helps keep you diversified automatically, simply because you own a large amount of different stocks. Do some research to see what is out there, or contact a financial adviser to give you some ideas on what mutual funds are good to start with.

Diversification doesn't end there, though. Besides mutual funds, it's usually a good idea to buy some bonds and some and short-term investments such as CDs and money market funds as well. This is because you not only want to diversify within a certain asset class (in this case, mutual funds or stocks), but you also want to have other types of investments outside the stock market for further diversification. In general, if you have a long time until you're going to need your money (such as 20 to 30 years from retirement), you want to invest more heavily in stocks. If you have a relatively short time until you're going to need your money, you're likely going to want more conservative securities such as treasury bonds or fixed income mutual funds.

Depending on your situation, you'll need to distribute money among the different asset classes differently; even so, diversification is still important so that your investments as a whole are less at risk than they would be if they were not so diversified.

For further Investing and Trading Advice visit Investing Advice Online - a popular online Investment website that provides free Investment Information to new Investors.