Money managers are some of the best paid professionals in the world. Private Equity (PE) titan Steve Schwarzman earned more than $800 million in 2015. Hedge fund manager, Ken Griffin earned more than $1 billion in the same year. Hedge fund managers make money by taking 2% of their funds and a 20% of their profits. This makes the managers some of the wealthiest people in the world. Surprisingly, anyone can make money in this field. All you need is a computer with an internet connection and some money. Technology has made investing in global stocks and bonds possible to people from around the world. This article highlights a brief guide on making profitable trades.
To be a successful trader, you need to find companies or bonds that are priced below their value. The logic is similar to a normal trader does. They buy their products cheaply and sell them for more money. This is because no one likes to overpay for an item. In finance, the value of a stock does not depend on the share price. For instance, if company A has a share price of $10 and a price to earnings ratio of 15 and company B has a share price of $5 and a PE ratio of 20. Which one is cheaper? The fact is that company B is expensive because investors are willing to pay 20 times the earnings of the company. This logic is usually valuable for investors who want to hold the company for many years. A trader on the other hand looks at the share price. A cheap share price is better to them because a slight positive movement can lead to better profits. Therefore, when finding the best stocks and bonds to trade, you should look at the price very carefully. You don’t want to overpay.
With thousands of companies listed in the stock market, the challenge traders face is on selecting the best stocks and bonds to buy. Every trader has his own way of finding these companies. One of the best ways of finding these companies is to focus on the industries that interest you. Stocks in the major exchanges are put into several categories depending on their products or services. Some of the categories are: financial, consumer, utilities, and materials. As a trader, you should select companies in the industry that you are interested in a lot. For instance, if you are interested in banks, you should trade bank stocks. Also, if you prefer trading bonds, you should specialize on bonds. There are thousands of corporate and government bonds which you can trade in.
After identifying the sector(s) that you are mostly interested in, you should now create your hot stock picks. These are the stocks that you and the market seems interested in. They are stocks you will find in most portfolios of investors. Some of the current hot stocks right now are Facebook, Netflix, Google (Alphabet), and Amazon. They are commonly known as FANG. They are hot right now because of their performance and the services that they offer. Who wouldn’t like owning a company like Netflix which provides thousands of movies? However, owning hot stock picks has its disadvantages. This is because they tend to be very volatile. A simple miss can make a company go down. For instance, if Facebook misses the monthly active users estimate, shares can plummet.
As you research and learn about trading, you will find many companies providing various services. Some of the most common products are signals and stock picks. You will often find companies that offer stock recommendations to the clients. Many people use these companies to get trading information. In addition, the finance media has its own professionals who make projections. Jim Cramer, the founder of The Street and a television personality who hosts Mad Money for CNBC is one of the best-known stock pickers. Thousands of investors listen to him. However, the stock picks by most professionals usually don’t add up. For instance, a week before the collapse of Lehman Brothers, Jim Cramer went on TV and recommended the bank to his viewers. He has also made hundreds of false calls in the past.
As you browse, you will find many websites advertising free stocks and bonds signals and lists. While it’s a problem to read these stock ideas, you should conduct your own due diligence on the stocks they recommend. You should have your own methods of evaluating companies before going long or short.
There are thousands of penny stocks in the market today. For beginners, it is important to identify these companies and spot their characteristics. By doing this, you are able to reduce your scope of research on these companies. You are able to focus on the penny stocks that matter. The best way to do this is to find daily penny stock picks from people who specialize on penny stocks. As mentioned above, you should only find the companies and do what you believe in, what they advise you to . A while back, Bloomberg had a report where a trader kept on buying shares of a company. The stock kept on going up every day. After a while, the trader decided to exit his trade. Unfortunately, there was no one to sell the stock to. He was the only buyer.
After finding the penny stocks that you are interested in, you can compile them in a watchlist. Doing this will make it easy for you to find the stocks understand their trends. You will know when they are moving up and when they are going low.
Becoming successful in stocks and bonds trading takes a lot of time. You need to be resilient and willing to learn. You should also be a risk taker. Just as starting a business, trading is a risky activity. Learning and practicing will help you identify your strengths and weaknesses. It will also help you come up with ways to allocate capital based on your risk profile.
