Best Investment - How to Find the Best Investment

Do you know the best investment? You'll know after you read this article. It's easy. The best investment is the one whose profits you keep. If your profits vanish because you -

• Hold until your profit turns into a loss.
• Hold until a small loss turns into a big loss, and then a huge loss.
• Hold so long your annual return turns small even when you do profit.

Then you're not making the best investment. So what can you do? You need to know about Exit Strategy and Position Sizing.
Exit Strategy
Never make an investment without knowing when and how you'll get out. That's called an Exit Strategy.

• You should have an Exit Strategy before you invest in anything.
• You should be able to write it down. Nothing fuzzy allowed.
• Know what will trigger your sell order.
• Good Exit Strategies let you keep your profits and cut your losses. That's your best investment.
• Wall Street Wisdom - "Cut your losses, but let your winners ride."
• A few big wins and many small losses can equal a win overall.

Position Sizing
Never risk more than 3% of your portfolio in any one position. And that's on the high side.

• Why so small? Look at what it takes to recover from a loss -
• Lose 50% of your portfolio, and you've got to make 100% on what's left to recover your loss. Is 100% profit easy?
• Lose 25% of your portfolio, and you've got to make 33.3% on what's left to recover your loss. Is 33.3% profit easy?
• Lose even 10% of your portfolio, and you've got to make 11.1% on what's left to recover your loss.
• Small losses leave you with enough capital to keep investing.

Control risk by controlling position size. The less you invest in any one thing, the less you risk. That's your best investment.
Your Exit Strategy affects your Position Size.

• If your Exit Strategy were to sell after a 25% loss, you could put up to $12,000 of a $100,000 portfolio into one investment, because -
• $12,000 X 25% = $3,000 = 3% of $100,000
• If your Exit Strategy were to sell after a 10% loss, you could put up to $30,000 of a $100,000 portfolio into one investment, because -
• $30,000 X 10% = $3,000 = 3% of $100,000
• You risk only what your Exit Strategy will let you lose, not your total investment.
• Mechanical Investment
• Emotion is the investor's enemy. People hold too long because of greed and fear.
• Greed for even bigger gains. Fear of realizing a loss.

The best investment is mechanical.

• Follow your Exit Strategy like a machine. Automatically. No matter what your feelings scream.
• Place exit orders with your broker in advance.
• Acting when the time is right makes your best investment.

Exit Strategies Explored

• So what do Exit Strategies look like? Stop Orders are the best known.
• Tell your broker to sell if the price falls to some specific point.
• Some people use 8% below the purchase price. Others use 10%, 15%, or 25%.
• Stop orders don't always do their job.
• The price can fall way below your stop point before your order gets filled.
• Market makers sometimes sell to force a stock price down.
• They want to trigger other people's stop orders, so they can buy their stock cheap.

Stop Orders can also be used to sell when the price rises to some specific point.

• Decide in advance on a good return -
• Two or three times the amount you put at risk.
• If you use technical analysis (if not, don't worry about it),
• sell near strong resistance, or
• when the stock looks over-bought, or
• when the trend changes, etc.

Stop - Limit Orders limit the price you'll accept after a stop order is triggered.

• You might not get out at all, if the price falls below your limit.

Trailing Stop Orders automatically raise the stop price if a stock price rises.

• If you bought a stock for $50, and used a 10% trailing stop -
• You'd sell if the price fell to $45.
• But if the price rose to $60, your stop price would rise to $54. ($60 - 10%)
• The stop price never falls after it rises.
• Trailing Stop Orders are good ways to hold on to profits, but
• Trailing Stop Orders may push you out of stocks sooner than you want.

Put Options work like insurance policies.

• Buying a put lets you sell your stock for a safe price of your choice.
• The cost of a put reduces your profit, but -
• You're safe, no matter what happens to the stock. That's your best investment.

How Inflation Affects Investments

For the past few years, the US government has increased its deficit spending by more than a trillion dollars a year. This amount of spending is unprecedented. For the current year, our elected officials are talking about a budget which includes approximately 1 ½ trillion in deficit spending. Pumping dollars into the economy at this level is similar to adding a gallon of water to a can of orange juice. As more and more dollars are poured into the economy, the dollar's value is diluted. This dilution increases inflationary pressures which in turn have an impact on your investments.
In an inflationary environment, people who live on a fixed income are typically hurt the worst. As prices increase, they are not able to buy as much as they did before. Creditors with contracts which include fixed interest rates are also negatively impacted. Suppose you were a creditor and you made a loan. The loan has a fixed annual interest rate of eight percent. Inflation was five percent when you made the loan. This means your real rate of return was three percent. If inflation increases to 10 percent next year, your real rate of return would be negative two percent. On the other hand, if you're not the creditor but the borrower, inflation allows you to pay your fixed debt payments with cheaper dollars. You'll be able to pay off your debt faster with diluted dollars.
Investing in stocks may not be as bad as you might think. If a company is run by competent managers who increase prices as costs increase, the company's revenues and earnings should increase as inflation increases. Be sure to invest in stocks that have returns higher than the inflation rate. You can also purchase inflation protected investments like inflation indexed bonds and Treasury Inflation Protected Securities (TIPS). These investments are impervious to inflation risk because their rates move with inflation. An investment portfolio with fixed income securities that are not protected against inflation will see a deterioration of value. If your portfolio has fixed income securities that aren't inflation protected and you expect higher inflation in the future, I recommend moving your money out of these fixed income securities.
In a high inflationary environment, investors look more for investments with a short-term maturity horizon. Investors tend to shy away from investments with long-term maturities due to the increased uncertainty. Because inflation makes it difficult to predict future expectations, investors are unwilling to enter into long-term contracts. Over time this unwillingness has a negative affect on economic growth.
Investors also utilize "stores of value" to hedge against inflation risk. Throughout history precious metals have been used as stores of value. People purchased metals like gold and silver. They have also used other stores of value like real estate, works of art, precious stones, and livestock. Eventhough the value of these commodities change over time, they have shown to retain some value in almost any situation.

Author: Joseph is a certified and accredited business appraiser with Hyde Valuations, Inc. He has performed appraisals and valuation services. He also writes and speaks on business and valuation topics. For more information please visit: http://www.superiorvaluations.com

10000 Dinar - The Latest Investment Vehicle

Iraqi dinar is creating a new sensation in the business world. With a promising future of Iraqi economy being touted by the economists and catching attention of the investors, the demand for Iraqi currency is on steep rise. Investing in 10000 dinar is believed to bring an outstanding return as soon as the ravaged economy recuperates and registers an impressive growth rate.
The potential investors must keep an unblinking watch on the current exchange rate to estimate the return on their investment. The official currency of Iraq came into the market only after great gulf conflict. Now, how can buying currency of a war ravaged country benefit you? 10000 dinar is at all time low in value but things will swing to a favorable change once the devastated economy gradually revives. So, your present investment will get translated into excessive profit in future.
Iraq has the second largest crude oil reserve in the world. The top-most position is occupied by Saudi Arabia. Natural resource of Iraq is a lure to the capitalist economies and international oil companies. Some foreign companies have already set up their establishments on the Iraqi shore. With advanced technology implemented by these companies, the oil reserve has gone up by a remarkable margin. Expectantly, everybody will want to capitalize this situation. Therefore, there is a greater possibility that Iraq will come out of the perilous and parlous situation in near future. Once the government takes initiative to implement the measures for development, 10000 dinar will gradually rise in value. Now you have understood the importance of investing into Iraqi currency dealing.
10000 dinar possesses the most advanced anti-counterfeit features. Watermarks, security thread, optical variable ink, metallic ink etc. are the latest techniques to frustrate the effort of the counterfeiters. All these modern techniques are included in the newly introduced 10000 dinar. Exchange rate of currency is not a static figure but a dynamic one. In accordance with a recent report regarding the Iraqi budget for the financial year 2011, the exchange rate is expected to slide up. This is definitely good news for the investors. Every investment is attached with some risks. Risk aversion is not possible though you can keep it at minimum level. This can be ensured if you are guided by an expert and experienced Iraqi dinar dealer.
Dinar scams are on rise due to possibility of surging profit from such investment. So, you must do extensive research on the dealer before hiring his/her service. Here are some simple tips just for you to avert the scam problems during online purchase:
Invest into the new Iraqi currency instead of old one. The 10000 dinar includes some newest features regarding security. If you are dealing with an honest dealer, the person will take the responsibility to make you understand each and every feature.
The dealer's name must be registered with USA Treasury Department and the Better Business Bureau. Only the registered dealers are identified as the certified ones. They are the trusted persons to seek advice while purchasing 10000 dinar.
For a considerable period of time, the country has been a safe heaven for the smugglers, robberies, drug peddlers and even terrorists. So, make sure not to invest in illegally transported Iraqi dinar because the smuggled 10000 dinar is easily available in the international market.
Do not rely on the dealers who try to convince you that your investment will make a tidy fortune in the shortest time. Daydreaming must not be your cup of tea while deciding on the 10000 dinar investment. You will surely earn profit but it will take years instead of a very short span of time.

How to Plan and Invest $10,000 Profitably in 2011 and Beyond

The issue of how to invest, where to invest, when to invest and how much to invest has been bordering many investors including analysts for ages. Having $10,000 or more to invest in 2011 and beyond profitably is highly achievable and simple as well. In order to make this a reality taking into consideration the economic and political environment across the globe, planning is key.
The first approach for success is to know where to invest. To make this appropriate, diversification should be the pillar. This is because it is not advisable to put all your $10,000 and more into only one stream of investment. Spreading your $10,000 or more among different assets such as money market instruments, bonds, stocks, and real estate is ideal. It is highly impossible for all of these assets to lose excessive value simultaneously.
Money market instruments such as fixed deposits and treasury bills are less risky, hence lower returns comparatively. They provide the investor with ready access. Bonds have higher interest rate but highly affected by interest rate fluctuations. When interest rate goes up, bond prices incidentally falls. It is there reasonable to invest in medium term bonds to lower the effects of interest rate movements in the near future. Equity funds are very volatile but can give an investor who has $10,000 or more to invest an outstanding return when companies are carefully selected. Here, companies with international presence are recommended so as to reduce systematic risk. A well diversified portfolio that includes real estate equities is also encouraged.
The second approach is to know how much or how to invest your $10,000 or more profitably. This decision is very much dependent on the risk tolerance level of the investors. Some investors are risk loving, neutral and averse. So your attitude towards risk should be the motivating factor to help you in making the right decision. If you consider yourself a risk loving or aggressive investor then invest about 60% of your funds in the stock funds including other volatile funds and 40% in the money market and bond funds. However, if you are risk averse, then invest 40% in more risky and volatile funds and 60% in the less risky or less volatile funds.
In 2011 and beyond, knowing where to invest and how to invest a $10,000 or more especially in a well diversified portfolio is the gate way to financial freedom. The years ahead looks brighter amidst the socio-economic challenges but can only be rewarding for investors and analysts who can plan, and adapt to changes and approaches as described above.

A well strategized portfolio will definitely lead an investor to making a lot of money. Having multiple sources of income is also key to sustainable cash inflows. Experienced merchants have come out with free downloadable e-books - step by step approach- to help you make your dream of becoming a millionaire a quick one. Check here for your free copy http://www.make-goodmoney-fast.com.
The author Isaac Akohene-Asiedu is a lecturer in Finance and Statistics and a microfinance prodigy. He is a practical investment adviser and an entrepreneur with many years of investment experience. He likes to share investment tips with people who want to earn financial freedom.