For first time investing, or re -entering the markets understanding the factors that act as the driving forces behind individual sectors are imminent points to be taken.
Five in a half years ago when markets lost nearly 50% in value investors started fleeing equities, and parking money into fixed income. For the standard mom and pop investor it was not as simple considering their money was in 401k, mutual, and money markets. Now the trend has reversed however the standard mom and pop investors were burned so severely they're in complete limbo as far as what direction to take. From years of studying the financial markets, individual financing, and investing I can safely say that the equities and fix income are better investments than a standard savings accounts. Here's and example; Ok let's say you're looking to invest $3,000 over the next twenty four months. You open a savings account which most likely will pay you 1% to 2% percent annually minus early withdrawal penalties you earn $30 to $60 year end. That's great! Accept if you place a little more thought into it you would see how that compares to how much you spend on daily living cost.
Now let's take equities, and fix incomes.We'll start with equities of course you'll have to do a bit of research prior to choosing which security to buy. I've learned over the years the most successful investors diversify their securities. Diversifying can level off risk. Here's an example; I am going to use three of my securities VLO, NRG,and RGP. I am going to first look at the industry sector of Valero energy which is oil refining, enthenol productions. I would like to point out that it's better to buy securities with quarterly dividend yields. Valero pays a .20 dividend per share at $40.00. I am going to buy 25 shares for $1,000 receiving $5 quarterly dividend payments in addition to capital gains. Now that leaves $ 2,000 in market capital. When I bought Nrg the price was just $17.00 with a 0.06 dividend currently it's at $27 with a .12 dividend and a target of $30. I am going to buy 20 additional shares at $540 and receive $2.40 in quarterly dividends payments plus capital gains. So far I've invested $1,540 with $7.40 in quarterly payments just one third of the $30 I would have earned from the standard savings account for the total $3,000 annual balance. I have $1,460 cash remaining for investment. I originally bought rgp regency energy for $23.00 it's currently at $26.35 with a .46 quarterly yield and a $35 target. I am going to buy 20 more shares at $520 and receive another $9.20 in quarterly yield payments which annual yield earning of $64.80 plus capital gains on a initial investment of $2,060. Watch the price target because this is more or less a forecast given by the analyst on wallstreet in some cases there may be a slight chance of the target price swinging either higher or lower. Six months later, two quarters, each price target is reached slightly and I've earned $35.80 in dividend payments and $130.00 in capital gain. So far I've earned $165.80 with my initial capital of $2,060, and $940 remaining in the saving account.
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