Conservative Investors Are LosersWritten by William Cate
Conservative Investors Are Losers By William CateIt isn't your money that counts. It's what that money will buy that matters. To preserve your savings, your money must earn an income that offsets ravages of inflation. If your interest income is subject to taxation, interest level must equalize inflation after taxation. It's 1952. You're a 12-year-old conservative investor planning to retire in 2005. You decide that after you retire, you will want to mail 1,000 postcards over remainder of your life. You put $10 in a bank savings account, which represents cost of 1,000 post cards in 1952. The bank pays you 3% annual interest and after you pay State and Federal Tax on interest, you are earning 1.8% on your postcard retirement investment. In 1992, your postcard fund has grown to $20. In January 2005, your postcard fund will have $27.50 in it for your retirement postcards. Meanwhile price of 1,000 postcards has risen to $230. The cost of a postcard will rise again before you die. If you had a middle class income and retired on a fixed income that equaled your salary in 1993, you are finding it nearly impossible to maintain your lifestyle today. The reason is cost of everything has nearly doubled since 1993. Today, your fixed income buys about half of what it did in 1993. This pattern of certain poverty for elderly has existed since Depression. What's current inflation rate? If you ask US Government, they will tell you that it has hovered around 3%/year for past decade or more. Their statistical data is called Consumer Price Index (CPI). Unfortunately, Government uses statistics that intentionally report a percentage that is far below real inflation rate for average family. Most economists and business people double CPI to get a figure closer to economic reality. Economic Conservatives tend to triple CPI to suggest annual US inflation rate to be around 9%. I'm with majority who believe that inflation rate for years has hovered around 6%/year. What's inflation? The simply answer is that it's any increase in money supply. Governments increase money supply to buy more than they earn from taxation. The increased currency supply depresses value of existing dollars and thus allows Governments to borrow money and repay loan in devalued dollars that offset interest on loan. In essence, Government borrows money and repays it in dollars that buy less than did originally loaned dollars.
| | Day Trading Checklist Written by Trader Jack
Here's a bunch of important things you should know about day trading before you start. First off, can you daytrade if you don't have requisite $25,000 plus? Yes. You can start Day Trading with as little as $750 if you decide to trade using a spreadbetting account rather than a standard broker, allowing you to ignore most day trading regulations about trading frequency. To day trade stocks using a standard brokerage account (8 round trips or more per week) you will typically need more than $25,000 in your account as per Uncle Sam's regulations designed to stop newbies blowing up. You don't necessarily need a 'mega PC' and a direct access account either. The average spread betting firm will give you access to a day trading system that runs happily in browser of any low end PC on a dial-up internet account. Just remember that better your initial setup is, easier you will find it. You will NOT enjoy seeing your internet connection crash just as you try to pull off a perfectly timed exit, so it pays to have alternatives for everything you use in trading. For a list of best spreadbetting firms, consult www.traders101.com .Is day trading most dangerous form of trading? No. The press is full of stories about how dangerous day trading is. This is pure scaremongering by misinformed, because day trading simply means not holding any position beyond current trading day; i.e. closing all outstanding positions by end of session putting you 100% into cash overnight. In reality, day trading can be one of SAFEST form of trading, because you are not exposed to unforeseen events that happen out of hours (like fall of Enron, Tsunamis in Far East etc) and accompanying gigantic losses that can happen during hours when you cannot trade. Many day traders only hold positions for a few minutes - and less time your cash is in play in market, less chance something will go wrong. Anyone claiming to be day trading who holds positions overnight is fooling themselves - remember this. Build up your day trading skills with training - practise paper trading till it is second nature to you (for more on paper trading, head on over to www.traders101.com)! Day trading is like running any other kind of business. Adequate training, experience, capital and dedication is always required. Over time, you may find that day trading becomes relatively easy, but you will still have to 'put in your time'. Day trading is a full time job - you need to be ready to trade whenever market shows you a great opportunity. If you have limited time to trade, you should consider swing trading instead of day trading. Preserve your capital at ALL costs. Limiting your losses when day trading is by far more important than making big profits. Day traders go bankrupt because they lose money, not because they don't make enough of green. When day trading, set yourself a limit on how much you are prepared to lose on any particular trade, and set your stoploss at that level. NEVER move your stop wrong way (i.e. if you are long, and price starts to fall, NEVER lower stop). If stop is hit, take containable loss on chin (rather than a bankroll-busting loss later!). Over time you will get better at placing stops on your trades. Remember that you can make a fortune day trading being right only 30% of time, as long as you cut losses on your 70% losers so that profits on your 30% winners outweighs them. If you reach 50-50, you should be making money, and if you get above 50% winners, well... welcome to club! It is also wise to set yourself a daily limit - if you lose this much in a day, quit trading till next session. It really isn't possible to 'force' profits from market.
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