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Five fundamental tips for long term investors

If are the kind of person who wants to take an active part in your investing and not let some other person do it for you, then you have to be prepared to do a few basic things to make it more likely that you are happy with your investment choices and with their performance.

Investing is a very personal choice because it is not without financial risk, but as any honest financial expert will tell you, with investing, you’ll likely gain more than you’ll lose if you make the effort to learn about your investments and make sound decisions. But at the same time, there are no guarantees, and you need to be prepared for losses and gains. You also need to be patient. Don’t expect to see a return on investments for several months, and it could take a year or more for you to see a significant return from any investments. The following five investing tips should help you get started in the world of investing, but if you have questions or specific concerns or just want some reassurance, you should definitely get in touch with a local financial advisor or an investment firm.

  1. Be prepared to spend money for stocks and other paper assets: Stocks, mutual funds, and other paper investments is one financial area where you really will have to spend money in order to make money. But it’s easy to see why this is the case: you need money to purchase these kinds of assets. Once purchased, so long as they perform well enough, your stocks will earn your money. And on that note, be prepared for even the best performing of stocks to lose on occasion. It happens to even the most conservative and frugal of investors, so don’t beat yourself up too badly if you end up investing in a stock (or even a couple of stocks) that winds up under-performing.
  2. Be patient
    Rome wasn’t built in a day, and neither is a company. Even already-running companies will need some time to take the capital they receive and convert it into a successful company. On average, it can take a company who’s selling stock six or more months to begin showing even a moderate return on the capital they received.
  3. Build a portfolio of paper assets: It’s understandable that you’d like to play it safe by going for low-risk stocks or other low-risk paper assets, but if you want to have a great portfolio that won’t let you down, mix things up a bit. Try to have about 60 percent of your shares in low-risk companies, 25 percent in moderate-risk stocks, and the remaining 15 percent in high-risk stocks. Low-risk and moderate-risk stocks will keep you balanced, while the loss from a small percentage of high-risk stocks will not hit hard – but on the other hand, gains from those high-risk stocks could certainly have a nice impact.
  4. Look beyond paper assets: While stocks, bonds, mutual funds, and other paper assets are by far the most common investment vehicles for the average person, the investing universe is a lot bigger than just paper. Starting your own business, however small, may be a great way for you to get an economic benefit from your personal skills and connections. Like paper assets, businesses both large and small have risks, so it may be best to start small so that your mistakes don’t hurt you that much.
  5. Keep learning: Once you are committed to investing, you should also be committed to learning about investing. Between the Internet and your local library, you have access to more information about investing and investments than you can possibly learn in ten lifetimes. However, you are not investing in every option under the sun, so you can easily focus your learning to those areas where you are either investing in now or plan to invest in the future. The day you think you don’t need to learn is the day that you should hire someone else to do your thinking for you.

No deposit home loans as a viable option for new homeowners in Australia

When moving out on your own, you’ll generally start out renting, perhaps renting a room in a friend’s house, sharing an apartment shared with one or more other people, or if you’re really lucky and find a good deal, a place that’s all your own. But while renting has many advantages like being able to move at any time, contract modification options, or not having responsibility for appliance repairs, there’s also something to be said for owning your own home. Home ownership is a dream for many renters, simply because home ownership, while often cheaper in the long run (and certainly more rewarding), can also be quite expensive at the offset. Typically buying a home requires that you provide a down payment on the home itself, and then there are closing costs and moving costs to consider. For many prospective buyers, home ownership winds up being delayed or put off altogether, due to the high cost of a down payment.

Fortunately for prospective home owners, there are such things as no-deposit home loans, though you’ll need to know where to look for them. It pays to let banks know right away that you want a no-deposit loan, so that if they do not have such a loan available, they can let you know right away – and thus you’ll both avoid wasting time and resources.

Banks and other lenders in Australia such as Homestart are able to provide no-deposit home loans that also have low interest rates. But despite these low rates, no-deposit loans are not always easy to find. So when you do find them, it’s important to fill out application paperwork accurately, and provide all requested documents. Saving on the cost of a down payment is a worthwhile investment, since having more money to start out with and just a monthly mortgage loan payment to make is always a good deal to have. So if you find yourself in a position of wanting to buy a home but not having savings or a personal loan from a family member or a friend to use for a down payment, do your best to seek out a no-deposit home loan.

The UK electricity market reform – which are the CFDs to look out for

A new Energy Act to attract private investment to the UK electricity market passed into law in December 2013, and an Electricity Market Reform delivery plan to transform the country to low-carbon energy generation was published. If you’re considering embarking on some CFD related trading in energy investments in the UK and elsewhere, you may be wondering what the new energy strike prices could mean for your portfolio.

The UK government will need huge extra investment to successfully meet its commitment to both 2020 carbon emissions targets and reliable energy provision. The new mechanism to support this is called the Feed-in Tariff: Contract for Difference (CFD), and works by stabilizing revenues to energy generators, allowing them to commit to long-term investment in new, lower-carbon energy infrastructure. Generators receive a an amount needed to restore revenues to their former level, also knows as a top-up, when the market rate is lower than the strike price, and pay out when it’s higher. The government hopes this will encourage both large and smaller investors in cleaner energy generation by making their returns more reliable. It also creates new opportunities which may appeal to investors with a ‘green’ investment agenda.

CFDs have been around since the early 1990s, and became more popular around the turn of the current century when traders realized the potential in their substantial leverage. A small investment can be used to access a large amount of assets, and trading is done on the margin. This can result in huge gains, but also huge losses, and it’s worth noting most professional traders underwrite their CFDs with more predictable futures trading. Their appeal for newer investors is the comparatively low requirements for both capital and commitment.

The new energy funding mechanism is due to commence in 2014-15 and is intended to replace the existing ROCs (Renewable Obligation Certificates) which currently exist to support cleaner energy technologies – a major difference being the inclusion of nuclear energy generation projects in the CFD scheme.

The UK is a world leader in wind power generation, and based on the strike prices issued in December 2013, research suggests investors can expect offshore wind projects commissioned in 2014-18 to yield up to 12% returns – slightly more favorable than those from ROCs, which will continue to be available until 2017. Prices for onshore wind projects have been fixed somewhat lower. Some commentators believe the strike prices will require further refinement before they create a significantly more attractive investment opportunity.

CFD trading can reap rewards but is notoriously risky. If you’re planning to invest through CFDs, always spread your risk to limit your exposure.