The market is risky at present. But then the case with investing in 'speccies' is always risky isnt it?
They are in essence high risk investments at any time in the cycle.
I trade them regularly. Right now the opportunities are still there to trade the speccies and do well...or at least ok.
Gold is still rising Uranium is too. In fact many metals are still going North.
Good time to be trading I reckon...with a keen eye on a change of sentiment of course.
The opportunity to find small junior companies at this time are there. Many will falter, some will do ok. Some will have sound operations underway at prices well below current metals prices, so the 'risk' is perhaps not as great as some may point out...perhaps.
Some people, (pros in the press/brokers/advisers) will advocate only buying blue chip shares and spread the risk accordingly. Thats really sound advice and will not hurt you too much (and importantly their reputations) however its not going to get you too far too soon.
Could you imagine a high profile media personality saying "Buy AEX (for example)?" No way. A reputation could be destroyed on that 'advice'
No, the 'professionals' are not going to go out on a limb and 'recommend' that approach.
Many rightfully point out that its time in the market and not timing. That you should be realistic and patient or put your money into a managed fund or super.
All sound advice.
Others might say dont spread the risk. High risk is potentially high reward. To paraphrase a recent article I read in Money magazine (I think) one guy made the point that if you put all your eggs in one basket and watch it like a hawk...or something like that....you can get much bigger rewards with the higher risk of course. Manage the downside with a stop on these high risk scenarios and ride them upwards...if they go up that is ;)
I have a number of approaches. I have not always 'gone by the book' in the way I approach the market. I do take full responsibility for my trading and manage the downside if an investment or trade doesnt go according to my plan/expectations.
A loan (not necessarily margin loan...any loan) isnt out of the question if your friend firmly believes he has the capacity/companies to make good returns. Very risky indeed....but it will give him the sort of money that enables him to trade.
The average personal loans hover around 11-12% plus fees. Many here would back themselves 'in this climate' to exceed that amount in terms of profit.
For example I might think a company is going to appreciate somewhere in the vicinity of 50-100% or more within 3-6 months. If I truly think this is a distinct possibility, then a loan at the above rates is a good strategy (again managing the risk with a stop loss).
Risk is relative. Research fundamentally and technically can considerably lessen the supposed 'risk' on a company.
But blindly following the crowd wanting quick bucks with no input/effort/research is dangerous.
