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One of the most important things that you can do as an investor is to understand what you are putting your money into.   In the words of Warren Buffet, “Never invest in a business you cannot understand.”  With tons of investment options available, the question becomes what’s appropriate for you.  Some options for investments include things like: stocks, bonds, mutual funds, commodities, options, and currencies.  Take for example the complexity of Options Investing, for the importance of knowing what you are invested in.  On a basic level you have call and put options.  A call option gives a buyer a right to purchase shares of an underlying security at a specific price for a certain time period.  A put option gives a buyer the right to sell shares of an underlying security at a specific price for a certain time period.  From there Options Trading can get even more intense, and not understanding the dynamics could lead you to owe thousands of dollars you do not have.

Trend Investing

With Investing following the trends could be disastrous for your portfolio.  What is right for Investor A may not be right for Investor B.  Everyone has different investment timeframes, and tolerances for risk.  There are no guarantees with investing, and no way to predict how long your trend investment will be hot for.  Deciding to invest in something the vast majority of people are investing in is not bad if done for the right reasons.  For example, consider a newsletter that has 30 thousand followers.  All 30 thousand individuals will receive the same advice about the investments recommended or reviewed.  The question you always have to ask yourself is how an investment fits into your overall portfolio.

Doing Your Research

Doing good research is critical to being a better investor.  Today people look at reviews for everything from movies to dentist appointments.  Places like Yelp, and Tripadvisor put reviews right at your fingertips.  The same due diligence that people put into finding activities and services can be applied to investments.  Some things that can be reviewed to make informed decisions include: analyst opinions, financial statements, news, ratings, and returns.  One of the best places to begin your search for answers is the Research Page of your broker.  Other helpful links are below.

http://www.morningstar.com/

http://www.investopedia.com/

http://www.cboe.com/

 


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