In: Categories » Legal and finance » Investing » Investments ~ How to build my own online information system
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Investments provide opportunities to make money in both a bull market (that is, an up market) and a bear (down) market. No one ever knows for certain whether the market will go up or down, but investors can develop an information system to watch indicators for potential price changes and investment opportunities. This article introduces the elements you can use for building an online investment information system that meets your specific needs. in bond prices and interest rates often reflect trends that may affect stock prices. That is, if bond yields decline, investors often rush to purchase stocks, causing stock prices to increase. Investors need this information to decide whether they should buy, sell, or hold. Gathering, organizing, and saving this information can be time-consuming. However, using your own online information system can make the process more efficient. Successful investing involves five basic steps: 1. Identifying new investments 2.Analyzing investment candidates 3. Purchasing investments 4. Monitoring investments 5. Selling investments — and reaping your rewards The following sections summarize online sources of the information you need for each step. Knowing what type of information you need and where to get it online can help you build your personalized online information system. Identifying new investments Before investing, you need to clearly state your financial objectives and know your risk-tolerance level. This information can help you determine your required rate of return. By doing this type of homework, you can determine which categories of financial assets you may want to consider investing in. For example, if you’re selecting investments for your Individual Retirement Account (IRA), you don’t want to invest in tax-exempt municipal bonds (because being tax-exempt twice isn’t the best way to make use of tax exemptions). Analyzing investment prospects The process of analyzing investment prospects includes examining groups of investments or individual securities. For this task, you need information to forecast the timing and amount of future cash flows of investment candidates. That is, the price you pay today is based on the future income of the asset. Figuring out what the asset will be worth in the future requires some homework, analysis, and luck. Purchasing investments After you decide which investments you want to purchase, you have to decide how you want to purchase them. For example, you must decide whether you want a full-service broker or, for online investing, either a premium discount broker who offers online trades and advice or a discount broker that only executes your trades and doesn’t offer any recommendations. You may participate in an automatic investment plan (AIP). With your approval, this type of plan deducts a certain amount from your checking account to purchase mutual funds, savings bonds, or other investments. Monitoring investments If you have more than one investment, you likely want to monitor and compare their performances to the market and to similar investments. Selling investments You need to decide what proportion of your personal wealth you want to invest in specific assets, how long you want to hold those assets, and whether now is a good time to sell those assets to harvest your rewards.
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