Ever since I started trading in commodites such as sugar, soybeans, metals, gold, silver and stock equities back in the 1980’s, I realized that the investment world is never equal nor favors the average investor. Anybody that tells you otherwise is mistaken.
You need a professional to manage your money, whether it’s $1000 or $1,000,000, unless you have the tools that will make you equal with the so-called experts in the investment world.
Brokers have two things going for them. They have the experience, meaning they have lost a lot of money before they managed to earn money, and they have access to the latest information and technology.
Before we venture into the deep world of investments and how it will impact your own goals, let’s keep it simple for now.
Let’s assume that you have an extra $1000. You would like to maximize that money and make sure that you get the most out of it; whether you invest it or spend it wisely on the things you need now.
First, let’s look at the economy in a shell. We know that there are still a lot of foreclosed properties around and the equity in your house will not appreciate any time soon. With this in mind, such economic recovery in the next 3 years is really a shot in the dark. So don’t expect to be rich from investment in the stock market any time soon.
If you were to invest in the mutual funds you would expect to earn at least 8 percent or less in 1 year if you’re lucky. Worst case scenario, you could lose 12 percent of its value or more if the stock market collapsef. And if you put it in your 401K, you cannot touch that money until you retire. If you do, then you get penalized heavily.
If you were to invest that money in a certificate of deposit, time deposit or money market account then the interest would be around 3 to 4 percent a year. It is safe and the money is intact for a year.
Unless you have a foreign account which I once had in the Philippines that pays 12 percent per year in certificate of deposit or time deposit but you have to fly to the Philippines and open an account yourself. This means that it will cost you money for airfare and accomodations. It only works if you have at least $100,000 to invest. It makes your trip cost worthy of your investment gains. But, what if you only have an extra $1000 to $2000 to invest?
I did foreign trading before for Cargill Investor Services in Asia so I am aware of the returns you could get by putting money there. It is not an option for an ordinary American who only has a few thousand dollars to invest. You needs at least $100,000 to make it viable.
What if you opened an E trade account and trade this in bank stocks or technology stocks. The bank stocks lost an average of 18% of their value from 2010 to 2011. While technology stocks did not fare any better. Only Apple did well. But that is $522 per share.
You can only buy a few shares of stock with your $1000 investment and you will gain maybe $100 a year if you’re lucky. It is still a better return than all of the above if Apple stocks continue to perform well. What if it goes down? The higher the stock price is the higher the expectation. If it miss a quarter or generate a less than stellar earnings per share then the stock will be hammered. Remember Steve Jobs is no longer here to save the company.
How about if you buy gold or invest in gold like some experts are suggesting. Gold shares right now are trading at $1772 at the Metals Future Exchange. I traded metals when I was with Stotler Group in Chicago. You needs at least $100,000 or more in case you get issued a call margin. Its an investment avenue for the very rich. You need a back up of $100,000 for every $100,000 traded to survive that market.
Be an entrepeneur? If you have access to cheap printer cartridges sell it at ebay or amazon for a profit. Or access to consumer needs like HDTV mount, cell phone cover, accesories and the like. Why not use your $1000 capital to resell items at amazon or ebay.
My point here is that with today’s economic activities and pending gas price hike, the rate of returns on any investment forms are not very attractive. There is more risk and less rate of returns on investment. You are better off keeping the money and using it to buy and sell on the internet.
Or take a much deserve trip somewere. There is a pending move by the airlines next week to return the dreaded fuel surcharges fees on every ticket sold in the United States both for domestic and international trips. Estimated around $25.00 one way to $50.00 for international destination. This surchage according to the airlines is to recover losses from anticipated increase in fuel prices. You just might want to use that money to buy your airline tickets and avoid that additonal fuel surchaged.
When I was working for the brokerage, the most valuable tool we can have against the street investor is information. It is the key in making money and losing money. Investors will get information only after the smart money in wall street already bought into it. Remember that. You as an investor will always be late. You do not share the same platform and technology with the brokers in wall street. I used to sell short stocks before based on the information I believe will drive the stock prices down. By the time the street investor receives the information, the stock is already down. Sometimes this information is reveled to the smart money in wall street minutes or even seconds before the ordinary investors can get hold of it. By that time, its already late to act on this information.
Now you know why Jim Cramer of Real Money or Suze Orman are so popular in terms of investment. It is because they get information ahead of you.
There is so much information out there that pertains to investment. But that I leave if for another day. For now, keep your money. Buy something cheap somewere and resell it at Ebay or Amazon. It’s the only investment option I see worth taking risk for now.