How to cut your Debt?

You are fed up with your debt and want to start all over again? Tired of collection calls and worry about what would happen tomorrow? Tired of living pay day to pay day?

You are not alone. Each and every human being takes a debt atleast once in their lifetimes in one way or the other. The key to get out of debt is self-discipline. The best part about this is that you do not have to depend on financial advisor or some wall street guru or anyone else to get your life back on track. So, let us take a look at how it can be done.

Professionals often say that we should pre-pay our mortgage or you should keep paying the minimum due to the credit card companies but not the full amount due. Their argument is that if you have extra cash, you are better off investing in the stocks, bonds, real estate, gold etc etc for a better return rather than paying off your debt. 

Well, this is true in some cases who have enough cash to pay off their debt in a flash. For others like me, I would prefer to pay off any debt I have. Investing in the market in any instrument like stocks, bonds, precious metals, real-estate etc in no guarantee to get returns. Rather, we could loose that money pretty quickly especially in this volatile market. However, what is guaranteed is that we are paying interest on our mortgage every month until that is paid off. Most importantly, having no debt on your shoulders, just changing your life. It gives you confidence to try out new ventures and in your abilities to manage your debt.

Let us consider a very simple example. Banks lend us money at a mere 3.5%-4% these days. Banks are guaranteed to keep collecting 3.5-4% interest on the their loans every month in the normal situation. If there are 10 such loans they are guaranteed on collect 35-40% income on their investment.
Banks have enough smart people working for them. If we were to follow the so-called financial experts, banks should not make lend money on just 4% rather they should invest in hot items like stocks, bonds and real-estate and that will generate a very high return.

Guess what! Banks followed their advice in 2008 and we all know what happened.

Again, There are no guarantees on the returns in any investment. However, any interest charges/late charges etc are guaranteed every month if there is any outstanding dues against you.

So, save some money every month and focus on reducing or eliminating your debt before we start investing. You will have more success and more favorable results.

Have a question? Please leave a comment and I would be glad to answer.

Read Stock Charts and improve your winning

There are four components that make stock a winner

• Fundamentals of the company like company management, business model, margins etc
• Sector performance to which the stock belongs to
• Market conditions like investor sentiment, market outlook
• Technical Indicators that we will discuss

Each of the above four components carry 25% weight towards making a particular stock a 'WINNER' or a 'LOSER'

Technical Indicators, in my opinion, are the easiest to read and often result in profitable trades.
While there are hundreds of technical indicators, I will discuss the most basic and the most important. So, let us start and understand more about it.

To generate free Stock Charts for any equities, visit http://stockcharts.com/

In the  above chart, there are few indicators to understand as below
1) Relative Strength Index: It is intended to chart the current and historical strength or weakness of a stock or market based on the closing prices of a recent trading period.The RSI is classified as a momentum oscillator, measuring the velocity and magnitude of directional price movements. Momentum is the rate of the rise or fall in price.The RSI is most typically used on a 14 day time-frame, measured on a scale from 0 to 100, with high and low levels marked at 70 and 30, respectively. Definition taken from http://en.wikipedia.org/wiki/Relative_Strength_Index
The point to note here is that when RSI gets over 70, it is known as OVERBOUGHT condition whereas when the RSI falls below 30, it is known as OVERSOLD.
OVERBOUGHT and OVERSOLD are good signals to EXIT and ENTER the trade respectively as his visible in the chart.

2) MACD: It is used to spot changes in the strength, direction,momentum, and duration of a trend in a stock's price.The MACD is a computation of the difference between two exponential moving averages(EMAs) of closing prices. This difference is charted over time, alongside a moving average of the difference. The divergence between the two is shown as a histogram or bar graph.
Exponential moving averages highlight recent changes in a stock's price. By comparing EMAs of different periods, the MACD line illustrates changes in the trend of a stock. Then by comparing that difference to an average, an analyst can chart subtle shifts in the stock's trend.
Since the MACD is based on moving averages, it is inherently a lagging indicator. As a metric of price trends, the MACD is less useful for stocks that are not trending or are trading erratically.
The point to note here is that when the MACD line crosses the signal line and starts moving up, that is a good time to ENTER the trade and vice-versa when the MACD line cross the signal line on the way down, that is a good to EXIT the trade.

3) Moving Averages: Moving averages act as SUPPORT and RESISTANCE for the price as shown in the chart. As you can see in the char, GOOGLE tried to cross 50-day MA from Mar 2011 to Mid June 2011 and it failed. 50Day Moving Averages acted as a RESISTANCE. But when it finally closed above 50DMA, it literally flew

So as you can see, technical indicators give us a lot of clues as to which direction the stock is headed. You can base your ENTRY and EXIT strategies based on these indicators and end up on the winning side.

Click http://www.stocktradingtogo.com/2007/04/30/stock-charts-understanding-the-basics/  to understand all the fields in the chart.

Have a question? Please leave a comment and I would be glad to answer.
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