In the previous lesson we focused on credit cards. We looked at how they work and differ from other more conventional loans such as a car loan. We talked about how they can easily get out of hand and mire you down in debt. More importantly we talked about how to use the mechanics of a credit card to gain control of your credit card debt. But you may ask yourself; why even bother dealing with a potential problem such as a credit card? Credit cards like all other types of debt when used and controlled properly can be of a great assistance in your finances. In this lesson we will go over ways debt can be your friend when used wisely.
Now that you have mastered the art of investing I think I should go over what I do each month. Hopefully, this will help you to get a far better understanding and help you in creating and running your own mutual fund. As we go through this month I will be giving you some other pointers which should help you to make decisions.
Credit cards are often viewed as a sucker’s bet. Most do not see them as an opportunity except as an opportunity to get into a life sucking debt cycle. Look at how many people around you are maxed out on their credit limits. Look at how they struggle to just make the payments. Each month they work hard to get their balances paid down only to have to run them up again to cover needs and wants which arise. I am sure how you have heard the horror stories of if you pay only the minimum balance on a credit card which is maxed out to $5,000 you could be paying for several decades to pay it off. It really does seem like an endless financial nightmare and it can be. However, there is another way to deal with credit cards as well as other debt instruments. There is a secret to credit cards and it is in understanding how they work.
Now that we have covered the main points of why you should learn to create your own mutual fund, the importance of investing responsibly to stave off panic, how panic kills, how a mutual fund works, what various investments are, how to buy stock, and when to sell let’s head in a different direction. For this lesson let’s take all we have gone over and focus on putting it all together.
So far we have discussed why it is good for you to create your own mutual, investing responsibly to avoid panic, creating a budget, various investments, how to create a mutual fund, and in the last lesson we talked about a strategy on how to buy stock. So, it naturally goes that we should talk about the just as equally important when to sell the stock you have acquired. After all this is when you actually realize the fruits of your labor.
Here we find our investor. He has a $5,000 windfall from an inheritance. He wants to take advantage of the stock market. He has done his research on a stock he has been watching. He looked up its Price to Earning Ratio, its Beta (the stock’s reaction to market behavior,) recent Open and Closing prices; He has been tracking its highs and lows. He has been reading up on the company in various business journals. He is very familiar with the company and even knows its Book Value and various debt and other business ratios in comparison to similar companies or industrial averages. Following his best instincts he believes the lowest price will be at about $10. It hits that and he places his order and the purchase goes through at $10.05 a share. He skips off into the sunset thinking he did great only to see the price slip to $9.50 a share. Then the next day it goes down even further. After a few more nerve wracking days the price rebounds and starts to climb again and our investor is back on the plus side. However, stuck in his mind is the idea that he could have purchased the shares for an even lower price and have made even more money.