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How
The Financial Markets Can Grow More Than Just Your Bank
Account
by John Forman
The financial markets provide us with the opportunity to grow in ways that
most people probably do not even think about. We all know of the gains in
wealth to be had buying and selling stock, bonds, commodities, currencies,
and other instruments. One need not look far to find stories about the riches
to be had. Successful traders, investors and portfolio managers like George
Soros, Peter Lynch, and Warren Buffet have become household names. What is
less commonly talked about is the personal development which takes place
along the way.
Trading and investing, like any worthwhile pursuits, provide
more rewards than just the obvious accomplishments. To paraphrase
the old saying, the destination is not always as important
as the path taken to get there and the things seen along the
way. While it is true that the expansion of one's portfolio
is what ultimately indicates success or failure in the markets,
how those gains are achieved can provide outstanding opportunities
to learn important lessons about ourselves with far reaching
value. These lessons reach across all areas of our lives.
Playing to Your Strengths
We all have our strengths and weaknesses and a kind of structure
in which we operate based on the demands on our time, education,
experience and an array of other factors. In the markets we
need to make assessments about these things to help us decide
what to trade, the timeframe in which to operate, and how to
make our trading and investing decisions. Why? Because it is
unlikely that we will achieve our objectives if we do not honestly
judge ourselves and how best we can operate. For example, I
am unlikely to be a good day trader if I cannot dedicate my
days to watching the markets for long stretches and frequently
buying and selling. I must either choose another course or
alter my schedule to accommodate the demands of being a day
trader.
It is the same in the rest of life. We must constantly consider
our personal inventory and life situation. They dictate what
we can do and how we can do it. That said, these are not static
things. Just as I noted above that I could alter my schedule
to allow for day trading, so too can we change things to expand
our options. Education, in all its forms, is part of that equation.
So too is seeking out new experiences, meeting new people,
and even consciously changing our attitude toward things. If
a goal is important enough, there are things we can do to make
achieving it possible. Part of that is knowing what we have
to work with and how to most efficiently apply it. The other
part is knowing how to open up new avenues.
Knowing Who to Listen To
In the markets there is a vast array of information available.
It comes in every form imaginable, from data released by the
government to commentary by analysts to tips from Uncle Joe.
Some of this information is useful to us. Some is not. A great
deal of what came out in the aftermath of the stock markets
collapsing in 2000 and after was the number of conflicts of
interest those who provided "expert" opinions had.
These people did not have the interests of those they spoke
to about this stock or that at heart, but rather their own
and/or their firm's. Many, many people listened to these pundits
to their detriment. Clearly, a hugely important element of
successful trading is knowing what information is of value
and which sources can be trusted, and what should be taken
with a grain of salt.
The same holds true in all other areas of our life. All of
us are constantly provided with information and advice. Some
is solicited. Much is not. Before we can decide whether to
make use of it all we must be able to assess the veracity of
the source. Some people are trustworthy and wise. We can depend
on what they say. Others do not have our best interests in
mind. We must carefully consider what they say and the motivations
behind it, before deciding whether it is worthwhile or should
be ignored all together. Being able to effectively judge the
input we receive from sources such as our family, friends,
and peers is a priceless skill.
Being Disciplined
Success in the markets is achieved by doing what we know is
the right thing to do. The single biggest reason people fail
to consistently produce the returns they seek is that they
fail to maintain a disciplined approach. Sound familiar? It
is the same as anything else we do. Want to lose weight? You
must be disciplined about diet and exercise. Want to learn
how to play guitar? You must exercise the discipline required
to practice the hours required to attain the skill.
Understanding Why You Fail, Knowing How to Succeed
Perhaps the single greatest thing about trading and investing
in a meaningful fashion is that it provides a fantastic opportunity
to see what you do which causes you to fail and what leads
to success. The conscientious trader/investor has a plan and
thereby a way to make evaluations. Whether things go to plan
and profits accrue, or they do not go well, he or she knows
why and what needs to be done going forward.
Achievement in life requires that one follow a similar course.
No matter the objective or pursuit, we must understand what
it takes to succeed and have ways we can judge whether we are
doing those things or not. To do otherwise is to act in a random
fashion, never sure if we are doing what is right and necessary.
These are just some of the valuable life lessons that trading
and investing can provide. There are plenty more as worthwhile,
to go along with the more commonly thought of value in understanding
how the markets can be used to improve your financial well-being.
And these lessons need not come at great expense either since
modern trading and investing can be done with very small amounts
of money - even none at all in the case of demo accounts. All
the more reason to make the markets a source of both financial
and personal growth.
About the Author
John Forman is author of The Essentials of Trading (http://www.TheEssentialsofTrading.com)
and a near 20-year veteran of the markets. For a free e-book on getting started
in trading go to http://www.theessentialsoftrading.com/FreeGuide-GSIT.html
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Treasury
Investments/Securities - Treasury Bills, Notes, Bonds,
Savings Bonds, TIPS And STRIPS
by Mike Singh
Treasury investments, or securities, are bonds issued by the Department of
Treasury. In basic concept, they are the many different forms of loans that
the people of the U.S. give to the government. There are four types of treasury
securities:
1. Treasury bills or T-bills: these are securities that
have a length of maturity that is less than one year (13,
26 or 52 weeks). Therefore, they are offered in a discounted
form. Instead of offering interest along with the repayment
amount, purchasers are offered more money at the time of
maturity than they paid for the bill to begin with.
2. Treasury notes: This kind of security has a longer maturity
date of 2, 5, or ten years, and they are sold in $1,000 increments.
3. Treasury bonds: With a long maturity date of 10-30 years,
these securities can be helpful for investors who need to
build a long-term strategy. Treasury bonds in paper form
can be converted to electronic form.
4. Savings bonds: These securities differ from others in
that they are registered to one person only and therefore
cannot be actively traded. Also, they are the most affordable
kind of treasury investment, as investors can purchase them
for as low as $25.
What are the not-so-popular kinds of treasury investments?
In addition to these kinds of treasury investments or securities,
the government also sells Patriot bonds, and STRIPS (Separate
Trading of Registered Interest and Principal Securities).
These investments separate the interest and principal parts
of the security; they have the structure of a T-bill and
mature between 1-30 years after issuance.
They are also the stripped version of TIPS (Treasury Inflation-Protected
Securities). As zero coupon bonds, they do not pay interest
payments. I Bonds and TIPS complete the wide variety of Treasury
Investments. These bonds are purported to keep up with inflation,
with the interest rate or principal balance adjusting with
the nation's economy.
What are the advantages of investing in the treasury securities?
Except for savings bonds, each of these is traded extensively
on the market and can be easily converted to cash. They are
backed by the Federal government and are usually considered
low or no-risk investments. The interest on these "loans" is
not taxable on the local or state level.
These securities are registered. This simply means that
when these are purchased, the name that these are registered
to is the sole owner. So, if you lose them these can easily
be replaced if misplaced.
How can somebody invest in savings bonds?
In the past savings bonds were issued on paper. Since October
2002, the US treasury went high-tech and started to offer
an online service TreasuryDirect. So, these purchases can
be made online at your convenience.
About the Author
On http://www.bond-trading.org/ you will find articles on tax exempt bond funds
and canadian savings bonds.
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United States Savings Bonds
- How Do I Calculate US Savings Bond Values?
by Mike Singh
A savings bond is a treasury security for investors. In essence, investors
are loaning the government money. They are issued both as paper bonds and
electronic savings bonds. They cannot be traded but can be redeemed after
only one year. There are no dividends, per se, with a savings bond, as the
interest payments are simply added on to the value of the bond, but as tax-deferred
items, the interest doesn't have to be reported to the government until the
bonds are cashed.
The value of a savings bond varies with the kind of bond
purchased - series A, B, C, D, E, EE, F, G, H, HH, I, J
and K. It also depends on when it is cashed and what kind
of interest it has been assigned. Since 1935, the treasury
has issued savings bonds in alphabetical progression. For
example, series A bonds were offered the first year, Series
B bonds followed in 1936, Series C ran from 1937-1938,
and Series D were issued from 1939-1941. Series E bonds,
longest running of the treasury savings bonds, ran from
May 1941 until they were discontinued in 1980.
Series EE bonds were brought out in 1980 to replace the
series E. They can be purchased at half or full face value.
They come in amounts between $50-$10,000, and carry a maturity
date of between eight to thirty years. Those cashed in
before the fifth year are penalized three months' worth
of interest. If EE bonds are purchased through a bank or
other financial institution, it is also known as a Patriot
Bond. There were more kinds of savings bonds, including
the series F and G (which were offered to all investors
except banks), series H, HH, Series I, J and K.
How do we calculate the value?
The value of a savings bond can be calculated by taking
note of the face value of the bond, the interest rate from
the time the bond was issued until the present time, and
whether there are any penalties that have to be deducted.
In addition, it is important to note that a bond that is
issued at half the face value will be worth the face value
at maturity, while a bond that is issued at face value
is worth twice this amount at the time of maturity. Savings
Bonds can also increase in value if they are redeemed past
their maturity date, in which case the interest must be
calculated on a year-to-year basis.
About the Author
On http://www.bond-trading.org/ you will find articles on municipal bond investments
and how do savings bonds work.
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