Month: July 2011

By Ruhi

Most of the investors are plagued by the questions such as on which instruments should one invest in the Indian share market, what part of their savings should be allocated for risky instruments and for safe instruments. Online trading requires a sound and thorough market knowledge. Only then you will become aware of how to invest in market. Also, this would make you realize and understand better the fact that Indian market, or any other stock market for that matter, does not always ensure profits and loss is an integral part of it.

The usual trend observed in the Indian share markets is that most of the informed and novice investors prefer to buy stocks of highly reputed companies. But this is not the only way of how to invest in share market. It is important that an investor should do an extensive background check before investing into it, no matter how big a brand it is. And the best way of doing it is to peruse through the concerned company’s annual report, its market capitalization, among other details. Once such details look encouraging, you can go ahead and buy its stocks.

Another trend seen in the market is that traders often purchase any low-priced share and subsequently sell it to gain profit arising out of the price difference, which is relatively marginal in most cases. However, this is not a bad practice as markets tend to remain volatile and it is good move to capitalize on such volatility. This holds true specially in case of intraday trading. This also enhances your confidence for share market trading.
Hence, where and when are the natural answers for the question- how to invest in share market? And the brokers are the best entities that can answer this question. The share brokers can equip you with all the relevant and useful information about the share markets and the trading activities. The ycan also help you with the selection of the right investments and in deciding how much of your funds should be parked in which instrument, so that your goal of building up on your savings is materialized in the best manner. You will be charged for getting such services. Many online broking platforms are also available that give the same services, though in an online mode.

As a conclusion, even though the question of how to invest in share market is a pertinent one, and even though there are many approaches that claim to be the right answer to this question, share market India trading remains an unpredictable thing. Therefore, you should to tackle your inhibhitions and help yourself in minimizing your risks.

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how to invest in share market

The Magyar Nemzeti Bank maintained its benchmark base rate steady at 6.00% as inflation drifted down towards its target.  The Bank said: “In the Council’s judgement, the Hungarian economy is likely to continue to pick up slowly over the next two years; however, the level of output will remain below its potential throughout the period.  Domestic demand is expected to recover only gradually.  Consequently, inflation may fall back to 3% by the end of 2012 even without policy tightening, despite the cost shocks hitting the economy.”

Previously the Bank also held the interest rate at 6.00% during its June meeting, after raising it 25 basis points in January this year.  Hungary reported annual inflation of 3.5% in June, down slightly from 3.9% in May, and 4.7% in April.  Hungary’s Central Bank has a medium term inflation target of 3%.  The Hungarian economy grew at an annual rate of 2.4% in the march quarter, faster than the 1.9% growth recorded in the December quarter last year.

USDCAD stays in a falling price channel on 4-hour chart, and remains in downtrend from 0.9777, and the fall extended to as low as 0.9406. Resistance is at the upper border of the price channel, as long as the channel resistance holds, downtrend could be expected to continue, and next target would be at 0.9300. Only a clear break above the channel resistance will suggest that a cycle bottom is being formed, then consolidation of downtrend could be seen to follow.

Daily Forex Forecast

July 26 (Bloomberg) — Robert Slater, author of “Soros: The Unauthorized Biography, The Life, Times & Trading Secrets of the World’s Greatest Investor,” discusses billionaire George Soros’s decision to return money to outside investors in his $25.5 billion firm. Slater speaks with Betty Liu and Jon Erlichman on Bloomberg Television’s “In the Loop.” (Source: Bloomberg)

July 26 (Bloomberg) — John Brynjolfsson, chief investment officer at Armored Wolf LLC, talks about the outlook for financial markets after a political stalemate over raising the U.S. federal debt ceiling intensified. Brynjolfsson speaks with Susan Li on Bloomberg Television’s “First Up.” (Source: Bloomberg)

The Central Bank of Nigeria increased its monetary policy interest rate by 75 basis points to 8.75% from 8.00% previously.  The Bank also increased the key borrowing and lending rates by 75bps to 6.75% and 10.75% respectively.  Bank Governor, Lamido Sansui, said: “The inflation outlook appears uncertain owing to the expected implementation of the new national minimum wage policy and the imminent deregulation of petroleum products,” and that there is “the need for pursuing policies to foster macro- economic stability, economic diversification as well as encouraging foreign capital inflows”.

July 26 (Bloomberg) — Shubhada Rao, chief economist at Mumbai-based Yes Bank Ltd., talks about India’s economy and central bank monetary policy. The Reserve Bank of India raised its benchmark interest rate more than economists forecast to quell the highest inflation rate among major economies, spurring a slide in stocks and a gain in the rupee. Rao spoke with Rishaad Salamat on Bloomberg Television’s “On the Move Asia” prior to the RBI announcing its rates decision. (Source: Bloomberg)

The government’s poor money management is coming home to roost at the worst time. The “solution” to the U.S. debt problem will be some level of austerity and/or tax increases, both of which are sure to grind the economic recovery to a halt.

A double-dip recession is not just possible… it’s likely.

How bad could it get?

The unemployment rate could surge to 20% and mortgage lending standards may get 400% more difficult — and that’s just the beginning.

If mortgage rates rise (which they will soon) it will become even harder to get a home loan. The minimum down payment for “qualified” mortgages could increase to 20%, removing a large amount of prospective buyers from the marketplace and drive home prices even lower.

U.S. Government “Underemployed”

Because the odds of not paying their bills are much higher, individuals with poor credit must pay higher interest rates if they want a loan. High credit card, loan and mortgage rates keeps these folks locked in a vicious circle.

The government is about to find itself in this same cycle.

Right now the U.S. has a AAA credit score, the equivalent of 850 on the FICO scale (which ranges from 300-850). With that score, the U.S. can borrow money (sell bonds) at the lowest of interest rates. If the U.S. were to lose its “risk free” status and/or default, its borrowing costs would rise substantially.

Worse yet, Washington is bringing in less income now. High unemployment and underemployment mean less tax revenue. Americans are making and spending less than they were just a couple years ago.

Like so many of its citizens, the U.S. government is underemployed. This is where the cycle begins…

The U.S. dollar is the world’s reserve currency, which means our money is at the center of the world’s economy.

Take China for instance; it owns $1.15 trillion of our debt. Imagine Hu Jintao getting a notice of default from the U.S. Treasury Department… the reaction would not be good.

America’s next payment of $30 billion is due on Aug. 15 — and that’s just interest.

Here are our biggest debt holders.

The federal government, like Greece, will have to back out of the promises it made. Money and government jobs will dry up, adding to unemployment and low consumer sentiment.

It’s already happening.

(Don’t forget to sign up for Smart Investing Daily and let me and fellow editor Sara Nunnally simplify the market for you with our easy-to-understand articles.)

Government Shedding Jobs

The BLS (Bureau of Labor Statistics) had this to say in its last employment report:

Employment in government continued to trend down over the month (-39,000). Federal employment declined by 14,000 in June. Employment in both state government and local government continued to trend down over the month and has been falling since the second half of 2008.

It will only get worse. Meredith Whitney, the popular banking analyst, predicted a wave of municipal bond defaults to occur this year. While this hasn’t happened yet, her warnings should not be ignored. The inevitable may be delayed.

Local governments have slashed payrolls and spending and raised taxes to reduce budget deficits. This Band-Aid may be working now, but not for long. As you cut Americans’ wages, add people to the unemployment lines and tax your working citizens whose home values are still decreasing, you eventually end up with the same problems you were trying to solve… only worse.

Can you see the cycle here? There are too many factors pointing to serious contagion in our economy. We must not get complacent.

As traders and investors, we need to put economic theory aside and look at the real ramifications of what is happening and how it will affect our investments.

Where Do You Put Your Money?

The stock market has brushed all of this aside. The reality of this perfect storm hasn’t sunk in yet. A double-dip recession is on the way. It might not be as severe as 2008, but it will be nasty nonetheless. Sara recommended silver in yesterday’s issue, which I agree is a smart place to move your money, as well as gold.

Protecting your portfolio is key to building wealth.

Another key is to find pockets of strength and stability. It won’t be easy… We saw how the last crisis knocked nearly everything flat.

Look to energy and wireless infrastructure companies like General Electric (GE:NYSE), Skyworks Solutions (SWKS:NASDAQ) and American Tower Corp (AMT:NYSE). These companies will benefit from our need to improve our wireless communication and electric grids, which are going to be in demand with increasing mobile connectivity and the evolving smart grid.

This sector has outperformed the S&P 500 over the past two years…

Just look at this chart!

View larger chart

Of course, this is just one pocket of strength you can put your money in.

You will also find alternative strategies and tips in our new FREE podcast series. My colleague Joseph McBrennan offered an interesting agricultural play and last Friday I demonstrated how you can use other people’s money to buy stocks at a discount in this volatile market.

Because of high rent demand and a tough housing market, apartment REITS are also still appealing — you can find more details in a Smart Investing Daily article I wrote here on June 14.

Options will become more and more prevalent as investors learn how they can greatly reduce risk and volatility in their portfolio. I think they are the only way to absolutely cap your risk.

The point is, you don’t need to be a passive, reactive investor… You can start building in defenses like gold and silver, and find those pockets of stability, to build wealth while the market’s looking the other way.

Publisher’s Note: Currencies have never played a larger role in our investing success than right now. With Europe in great flux, Uncle Sam begging for more cash and no end to this debt mess in sight, there has never been a better time to get rich from the action. Taipan’s team has proven it.

Michael Sankowski is a world currency expert. Our readers have been begging for his next report. Now they have it…

Article brought to you by Taipan Publishing Group. Additional valuable content can be syndicated via our News RSS feed. Republish without charge. Required: Author attribution, links back to original content or www.taipanpublishinggroup.com.

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July 26 (Bloomberg) — Keagan York, head of foreign-exchange strategy at Compass Global Markets, discusses the outlook for the Australian dollar, British pound and gold. York, speaking from Sydney with Mark Barton on Bloomberg Television’s “First Look,” also talks about the U.S. debt-ceiling debate. (Source: Bloomberg)

A lot of my friends are having kids right now. Over the weekend, we had some friends over for dinner. One of them brought his eight-year-old daughter. She loves animals, and was great with all our dogs and horses, but we ended the night exhausted! Explaining the rules, keeping a watchful eye over the bigger dogs, reminding her to use her inside voice… I’m still tired from the visit.

And I can’t begin to imagine how much harder it would be with two kids. Especially with the arguments, trying to decide who’s right and who needs a time-out.

The mainstream financial media is like a couple of eight-year-olds. We hear arguments from both sides — corporate earnings are beating records, but at the same time joblessness could jump to 10% again.

Which is it? And how do you plan an investment strategy against such bipolar predictions?

I believe the U.S. economy is at another tipping point. The recent market rallies are unsustainable, are similar to an extinction burst… You know, when a child is throwing a tantrum and he lets out one last big scream before he falls asleep.

But in case I’m wrong, wouldn’t it be nice to know of an investment that could make you profits if the market rises or falls?

Well, I’ve got one for you…

Invest in Silver

Silver is an interesting precious metal. It protects against inflation like gold. But silver also has a lot of industrial uses. That makes it like copper, which booms during economic recoveries.

One of the toughest aspects of gold is to find out if it’s trading more as a currency or a commodity. Is gold demand up because of concerns about the debt crisis? Or is gold up because of jewelry demand in India and China?

It’s an important question, but one that doesn’t apply in the same way to silver.

Silver straddles the metals industry. Certainly, gold and platinum have industrial uses, and we like both of these precious metals as investments right now. Consider this, though. About a quarter of all platinum consumption came from recycled platinum.

That’s not the case with silver, and that could mean increased demand during an economic recovery.

In fact, 487.4 million ounces of silver were used for industrial purposes in 2010. That’s well over four times the amount of silver used to make coins and medals. That’s also a gain of about 20% from 2009.

Not bad in a struggling economy.

With uses that span electrical circuits, water purification, photography and other industries, industrial silver demand makes up 66% of silver production.

But there’s another aspect of silver that should get your attention — silver investments.

World investment demand climbed 40% last year to more than 279 million ounces. And get this… Hedge funds and money managers increased their silver positions by 19% last week, according to the U.S. Commodity Futures Trading Commission… the third week of gains.

How High Could Silver Prices Go?

Bloomberg reports that silver could climb as high as $70 an ounce by next March… a jump of almost 75% from current prices.

Let’s take a look at a chart to see if this is a realistic forecast.

View Chart

This is a chart of silver futures for September delivery. See that pop from late April? A huge move… but prices fell short of silver’s all-time high of $50.35 an ounce in January 1980.

Since January 2011, silver prices have climbed 26%. That’s not a bad gain; it beats gold’s gain of 12% handily. But that’s not near the pace silver would need to climb in order to meet a 75% gain by next March.

Is it possible? Yes. Between September 2010 and May 2011, silver prices climbed 140%.

But just as quickly, a huge chunk of that gain disappeared when silver prices dropped from $48 back below $35.

Realistically, silver prices may test that all-time high by Thanksgiving. At that point, smart investors should ruthlessly protect their gains.

That strong resistance silver shows around $50 an ounce will be tough to beat. Expect a drop in prices anywhere above $48.

For investors considering an exchange-traded fund like the iShares Silver Trust (SLV:NYSE), look to the price spike in late April to find your resistance point.

For investors looking at silver mining companies, be aware that mining costs, like fuel prices, impact profits. Keep an eye on operating margins as companies report earnings. Lower margins could mean lower earnings moving forward.

Written by Sara Nunnally for Taipan Publishing Group. Additional valuable content can be syndicated via our News RSS feed. Republish without charge. Required: Author attribution, links back to original content or www.taipanpublishinggroup.com.