Many people invest their money in the stock market, but only a small percentage gains experience necessary in order to become a truly seasoned investor. This is because a large percentage of new investors don’t stay long enough in the stock market before they drop out.

Selling And Buying

We have gathered the most common tips that the experts suggest that a  new investor should learn before entering the big stock exchange game:

1. Just because you have earned anything on the stock market doesn’t mean you’re an expert. Enjoy your earnings but always keep in mind that the stock exchange is more complex than any single person can understand.
2. Options have a small life span. Always check closely for the expiration date and mark potential selling points.
3. Sometimes the party ends. As we saw in October 2008, the market can wipe out years of profit in a matter of months or even weeks. Understanding that the market has reached its peak is what differentiates the biggest winners and the worst-off losers. When you feel that the market reached its peak, you should sell.
4. Daring might reward you in remarkable profits. A sophisticated and daring investor can achieve what might seem impossible to all other average investors. Keep in mind, though, that rushing into a complicated situation without a real understanding is not sophisticated it is just plain stupid.
5. Sometimes, no matter how much you planned and thought about it, you lose money more and more. Knowing to cut your loses is an important attribute in an investor that expect to survive in the rough stock market. Even the great Warren Buffet lost from time to time, but the only difference is that he can afford losing a couple of million dollars and you can’t.
6. Every time that you lose money on the stock exchange, you gain a unique chance to learn from your mistakes. To waste this opportunity by not learning from your mistake will only assure that you will make the same mistake again.

Ailon.

The CEO Game

Creating Your Own Luck

Why do we need Luck?
Two people are applying for the same position. Both have about the same GPA from the same university. Both have a good background and experience. Only one will get the job–do you think that the interviewer will know which one is better skilled for the job? He`ll probably base his decision on factors that have nothing to do with the candidate’s skills. It might be gender, age, skin color, the ethnicity etc. You`ll never know what the final decision was based on.
People will tell you that you don’t need luck. They will also tell you that the only thing you need is ambition and hard work. I`ll give you all the time in the world, but you still won`t be able to convince me that the last person who won the lottery`s jackpot had high ambition and worked hard for that. I`m not trying to tell you to play the lottery now, but this extreme example can show us that luck is a factor in life that should be taken under consideration and for sure you want it to be on your side.
Turn your luck into calculated risk:
The lottery is not the place you want to put effort to increase your odds. This is because there is nothing legal you can actually do in order to change your odds of winning – every ticket you buy has the same odds of winning, but if you buy all of the possible tickets you will end up losing money – not a great deal. You need to increase the odds in scenarios which your actions can actually make this difference.
If you own a startup, and your main goal is to sell it to a big company, you`ll need to go out and meet with people. Make sure everybody in the industry knows you. The more people that know you, the bigger your chances are to make the big exit. There might be a chance of 1:1,000,000,000 (this number has no statistical evidence) that a stranger who has no idea who you are or what you`re doing will come up to you and ask you “Hello, is there a chance that you`re working on this startup and you want to sell it?” But if more people know what you are doing, the odds increase magnificently. Focus your efforts in the right directions and in the right places in order to maximize your chances. In this example you control your luck by letting people know about your business.

In a different example, I want to invest money in the stock market. There is a constant risk in the market; we never know what`s going to happen tomorrow, things changes constantly and rapidly. New information sends the stocks up and down without prior notice. If you`ll buy one stock, you`re relying mostly on luck. We have seen good stocks go down in good market and we have seen bad stocks flying in a bad market. Nothing we can do about it. If we want to control the luck and turn it into a calculated risk, we need to have a wide and diverse portfolio.
The statistical error:
I personally look at good luck and bad luck as statistical errors. If we`ll look at the normal distribution, I believe that if something occurs on the right side of the distribution that’s a result of good luck, if something occurs on the left side that’s a result of bad luck. The middle is where we expect the result under normal circumstances. At this point, we want to put our efforts in moving to the right side of the scale, creating, by doing so, more “good luck”.

Assaf Arie.

The CEO Game.

Reacting To The Rates

How do the lender and the borrower decide what interest rate fits the?

First of all there is a benchmark for the interest rate; this benchmark is the central bank’s interest rate. The central bank in each country determines its interest rate in order to manage macro parameters such as: investment rates, unemployment, and inflation. Why is the central bank’s interest rate a benchmark? Because the main bank can always print more money and so there is no way that the central bank won’t return its debt and therefore this interest is considered to be free of risk or “safe”. This is not entirely true, however; if inflation increases the lender have less purchasing power in the end of the loan process.

But the central bank only gives loans to other banks, and then those banks give the public loans at a higher interest rate. How do those banks decide what interest rate to offer to which client? The commercial bank uses data it gathers on us as individual and estimates what the risk is that we won’t be able to repay the loan. The interest rate the bank offers us is based on a statistical model that most accurately predicts this chance.

How does the central bank control the investment in the country? Well, it’s easy to guess … The main bank uses the interest rate to control how much money will circulate the market and how much individual will desire to invest money. If the central bank’s interest rate is high, most people will prefer to save the money in the commercial banks and profit from the high interest rate. The high rate will cause much money to sit in the bank, and if the money just sits in the bank you can’t use it to open new businesses and promote new initiatives. On the other hand, a low rate of interest may cause many people to use their money to open new businesses and create more workplaces. For example, if you can open a business that promises a return of 7.5% of the money you invested each year, and the interest rate is 10%, you would just put your money in the bank and get 2.5% more on your investment. But if the interest rate is 2.5%, then you can open your business and earn 7.5%, 5% more than the interest rate that you will get form the commercial bank.

So, what does this have to do with the CEO Game? Well, the CEO Game is unique among business simulations for the degree of realism involved in game play — that is why it is a serious game, and not just a game. Interest rates will change as you play the CEO Game, reflecting changes in the real world. In order to be a successful business tycoon, you will have to understand how the changing interest rate changes your interests — and make changes accordingly.

Omri.

The CEO Game.

My last series of articles introduced basic methods for becoming a smart, safe and profitable investor or a trader. The objective is to use these strategies before even beginning to invest. In response to my article, I received an email from a good friend of mine who said that he sees himself as an “entrepreneur,” not as an investor.

Investor Or Entrepreneur ?

This article will clarify the differences between an investor and an entrepreneur and explain why the entrepreneur needs to understand the investor`s mind in order to succeed in the business world.

As I previously explained, the investor is constantly seeking value and looking for upsides in long-term investments. Who is going to provide those things to the investor? The entrepreneur, whose job is to create this value for the investors.

An entrepreneur, contrary to an investor, is creating value. There are many ways to create value: It can be done by bringing something new to the world or by improving others` work. For investors, the investment in a new business or startup has the highest return but also the highest risk (they always go side by side); the returns can be 10 times your money and more, but often you`ll lose most or even all of your investment.

Why does the entrepreneur need to understand the investor`s mind?

In order to succeed as an entrepreneur and bring your idea to the world, you need to have funds. There are several ways to acquire those funds:

• Use your own money and savings.
• Get a loan from a bank or a lending company.
• Take a first or second mortgage on your house (similar to a loan except a mortgage is usually fully collateralized – easier to acquire than a regular loan).
• Get private or institutional investors to invest in your company`s future profits by selling them a percentage of the company.

The last option is the one which most entrepreneurs would rather resort to, because they are risking someone else`s money, Because of the appeal of this option, the entrepreneur must wear many different hats and change his way of thinking – if you`ll be able to think like an investor it will be much easier for you to convince investors to invest in you.

How can you get others to invest in you?

Investors see many ideas every day but are looking for opportunities that have the most chance to create long-term profits. As an entrepreneur, you need to understand how the investor thinks and makes decisions in order to convince him/her to invest in your idea.

You`ll do so by understanding and thinking like an investor. Investors are interested in one thing – making money. Smart investors must invest in a diversity of projects or ideas with different risk factors. In this way they level out the risks and maximize their odds for a profit. The expected profits should be higher than returns on the safest form of investment, government treasuries bond. If it is not so the investor will invest in treasuries.

When you talk with an investor, make sure you show the person how he will make money out of your idea, not how this idea will change the world. Changing the world is nice, being part of it is even nicer, but this is a different game. Investors are there to make money and by doing so they help you make money as well. It`s extremely important to remember that both sides need to end up winning. Make it a win-win situation.

The problem most people have when they meet potential investors is that they haven’t prepared financial plans, haven`t shown the cost of the development process, how long the process will take, what is the potential selling price, etc. The financial plans are as important as the idea itself. Showing the investor a good and profitable plan will maximize your chances to attract the investors.

How can the CEO game help you?

In the CEO Game, you will experience running a business, putting your ideas into action and attracting others to invest in your project. In the game you`ll play from both sides – the investor and the entrepreneur.

Assaf Arie

The CEO Game.

In part 2, I talked about the definition through the eyes of an investor. In this article I go through some key definitions for traders. As I mentioned in previous articles, there are big differences between an investor and a trader. In the last article I told you that the important thing for an investor is the seek for value (I gave you Warren Buffet as an example for the value method); an investor is constantly searching for assets which trade for undervalue, discounted prices. A good trader does not care for the “real” value of the asset (it can be a stock, or any other tradable asset), the only things he cares is whether he will be able to sell it tomorrow, or at any other future time, in a higher price.

Knowing When To Trade

What makes you a good trader?

A trader looks for short-to-medium term trades, meaning that a trader looks for quick movements in the market. In order to become a good trade,r you`ve got to be cold-blooded and follow specific rules you set to yourself. You also need to understand the movements, trends and the psychology behind the market and the other investors or costumers. You need to remember that trading is all about buying cheap and selling expensive. As a trader, you don’t care about what it is that you are buying, the only thing you care about is to sell it in a higher price than you paid. It can be a stock, land, house, commodity or any other merchandise that have a market you can buy and sell at any time. Liquidity is very important for traders; the last thing you want to happen is to be stuck with an asset without the ability to sell.

The three questions that need to be answered are the same from part one and two of the article:

1. What are you buying?
2. Why are you buying?
3. When are you selling?

What are you buying? This time, the answer is a little different from part one and two. You want to buy an asset that is tradable at any time. As I wrote in paragraph two, liquidity is one of the most important factors for traders; you cannot be a trader in an illiquid market (unless you have very high margins to cover the risk you are taking).

What is an investor?
An investor is someone who looks for value, he cares about the company, he needs to know what the company does, he needs to understand the main business of the company and how the market is changing, he also needs to know how changes in the global market effects this company. An investor needs to have some kind of valuation to the price of the company, according to the business it is operating in (different businesses demands different valuations theories). A good example, or maybe even the best example of an investor, is Warren Buffett; you can read more about him at Wikipedia.

Warren Buffett - Best Example of an Investor

The three questions that needed to be answered are the same from part one of this article:
1. What are you buying?
2. Why are you buying?
3. When are you selling?

What are you buying? – The answer to this is the same as specified in part one

Why are you buying? – As we said in part one, this is where the hard work starts. In an investor’s view, he needs to find value in the stock, so what does it mean? It means that he needs to do a valuation to the company and compare it to the market value; the difference between different companies will be the value. When your valuation is higher than the market value you say that there is an upside in the stock, when your valuation is lower you say there is a downside in the stock. After you find a stock with an upside that you think is good enough for you and you decide to buy, it`s not enough to buy and wait till it reaches your target, you need, every reasonable period of time, which changes from business to business, to update your target price according to the changes in the businesses market. This is not a simple task; you need to have a lot of knowledge and information about your company and its market.

When are you selling? – Here you have two choices:
1. Having a stop loss
2. Not having a stop loss
Before I will continue I will define the meaning of stop loss for you – a stop loss, as you can understand from the name, is a point you stop your loss automatically. For example, if you buy a stock for 10$ a share, and the maximum loss you are willing to absorb is 15%, then your stop loss will be placed at 8.5$, means that if the stock drop to 8.5$ or less, it`s automatically being sold.
I think that if you are considering yourself as an investor, and you know and understand what is that you are doing, you don’t need to have a stop loss, but you need to remember that investing can take couple of hours to study, but life time to master. Also, investors are long term players; you can not consider yourself an investor if you are a short term player, because economic theories work only at the long term.
A good use of stop loss is when changes appear in the market or the company after the stock price had slumped. The last crisis we were going thru is a good example of that, but even then – a good investor, that is looking at the market as one big piece, could see, and needed to see, the distortion in the market prices, and could expect the globally slump.
Regardless to having a stop loss or not, you need to constantly analyze the company you are investing in, the market of this company and the global market. Always remember that in the real economy it’s all about mutual influences (I will talk more about it in future articles).

So, are you an investor?
Like everything else in life, it’s all starting with a decision. Not everyone can be an investor, remember that if you put money in a company, it doesn’t necessarily make you an investor – it only makes you to someone who invest money in the company or bought their stock, nothing more than that.
In the 3rd part of the article, I will discuss a little bit about traders and trading.

Assaf Arie

The CEO Game.

Learning From The Crisis

The root of all evil, can be traced back to October 2007 roughly, with a market slowly declining from a record height, influenced by problems associated with way-to-many delinquencies and foreclosures(forced and caused by mortgage borrowers). Then came the near collapse of titanic companies including the American International Group, Fannie Mae and Freddie Mac. Chapter 11: Next to follow, was the horrific bankruptcy of the Lehman Brothers, rattling an already stressed market and leading panicked investors to invest in U.S. Treasury Bonds, assuming it a safe haven. Bonds Buzz, Piggy Bank frenzy call it what you will. This mega chain of events (any many more not mentioned) totaled to 30$ trillion losses.

Nevertheless, the last few months represent one the biggest bull markets in history, with increasing investor confidence and an overall expectation to gain future profits. We can see examples of this in majorcomebacks in the U.S. stock exchange as indices such as the aforementioned Dow and the NASDAQ Composite (all common stocks listed on the market) that have risen by 45% and 60% accordingly. Sometimes good does come out of bad, fortunately for some investors. One can say that as amazing the market’s plunge is its rise, beating chilling predictions of the end of all there is.

Defying all odds, the market has eventually sustained the impact and some say there are signs that the worst is behind us and a recovery is well under way, but tell that to the ones who lost their jobs, businesses, and for the lots who will never those retirement dreams. However, the question which still remains is What have we learned?

• Diversification isn’t always the wise play, sometimes spreading money around doesn’t guarantee more safety. There is no need to abandon this risk management strategy, but to acknowledge its boundaries.
• Markets are symbiotic, when one market begins to fall other markets are influenced. When investors try pulling any money they can salvage from foreign stocks, even classical havens are affected as a result and can experience a bumpy ride. Therefore, we must understand every choice we make, taking time to realize all its aspects as even the sharpest knife in the drawer can become dull when experiencing with confusing investments. With the help of Serious Games, one may be trained to avert and stay clear of some risky investments.
• “Liquidate” your portfolio, private Investors must understand not only the ups, but the downs of their holdings. Make sure, your portfolio is liquid to the certain amount you need it to be, else it will liquidate you. Keep in mind, a “nice” portion of the mistakes made were caused by investors who simply thought their investments were more liquid, and they can exit any time they want.
• The big brother’s contribution. Sometimes the government does work, go figure. The combative measures taken by the public servants may have helped to avoid a much bigger crisis.
• The worst case scenario. Don’t be blinded by shiny glitter of safe-havens. Don’t rush into, “promised” profits being confident you can’t lose, investors who got caught in real estate adventures thinking they will never drop in national extent needless to say a global one, eventually ended up with nothing when the bubble popped.
• No one should be that big. We simply can’t allow having more of those too big to fail companies, meaning: companies who are so big that incase they fall their collapse will cause an economic vacuum. Firms like the Lehman Brothers and Fannie Mae and Freddie Mac had been criticized for years for growing too big and carrying to many debts around. Watch out for current growing megalomaniacs such as Goldman Sachs group and Morgan Chase.

What does that leave us with? Yet another question of whether and how hard inflation and other trouble makers are going to hit. That’s why it is so important to learn from the ongoing crisis and these conclusions, for bailing in time from future made mistakes. Furthermore, learning along with the CEO game can help one analyze the complexity and outcomes of his investments, watching out for issues revolving market interlocks (symbiotic relations), worst case scenarios and liquidity as discussed above. Nevertheless, keep in mind that not all is blue; like I have already pointed out in this article sometimes (some say always) good comes out of bad, so look out for opportunities as they may rise along the way.

Omer Shachnai

The CEO Game.

For start we have to understand what the hell an interest rate is.

Interest Rate.

The interest rate is a tool in the hands of the main bank (in most countries). This tool defines the rate of interest one will receive from the main bank if one invests in the main bank. This tool helps the main bank to control how much money will be in the banks and how much money will circulate in the market for the use of investment or consumption. Since the money is invested in the main bank, which is in the end a government agency, than the chances for receiving the promised interest are considered “safe”. Using this tool the main bank can control the circulation of investments since high interest rates offers investors a “safe” investment and low interest rate encourage them to invest in the market. The reason I use quotation marks around the word safe is because the main banks interest rate are a safest since a country can’t go bankrupt because it can always print more money.

So the next common question is why doesn’t the government always print more money? Well the answer for that question is quite simple and it is in one word “inflation”. Inflation means that the value of the local currency will be weakened comparing to other currencies or goods.

After we understood the definition of interest rates we can now start to grasp the influence of interest rates on every aspect of our modern business world. Most of the companies in the modern world invest their money in different kinds of investments (stocks, bonds, currencies and other goods) and since every investment has its own risk, than companies always find themselves jumping from one type of investment to the other.

In the CEO Game as the CEO you will have to lead your company in the financial world. Knowing where to invest your company’s money can be difference between being the local burger place or the next business tycoon. Inside the CEO game we implemented many of the common financial tools to allow you to act in the closest business simulation to reality as possible.

Omri.

The CEO Game.

Investing Or Trading?

In this article we will talk about the importance of the definition, while in the next two articles we will talk about the difference between being an investor or a trader.

I am not going to tell you that everybody can make money in the stock market, I think its very nonprofessional to say something like that, and statistics support that. I am also not going to teach you how to make money in the stock market, not because I have something to hide, but because that if something works for one individual it still doesn’t necessarily work for another individual. My goal in the next three articles is to try and give you tools to increase your confidence on building your portfolio.

Before you do anything in the stock market, you need to understand the language. spend some time to learn and understand the important terms of the stock market and the money world, it will increase your confidence significantly. Wikipedia can be a very good source, especially for the beginners among you.

So what is this definition I am talking about? This definition is the key to control your investment and portfolio. It needs to be able to answer three simple, but still very important questions:

1. What are you buying?
2. Why are you buying?
3. When are you selling?

If you can look at yourself in the mirror and answer those three questions, it seems that you are at the right direction, and that you are controlling your investments, and not the other way around.

There is one more thing you need to answer before you start to shape and build your definitions. You need to decide whether you are a trader or an investor. As I said at the beginning of the article, at the next two articles I will discuss about each of them separately. For now, we will try to see how to answer the three questions I mentioned before.

What are you buying? – This is the most simple, yet, most important question. It simple because the answer should be a company`s name, its important because this company`s stock performance will determine whether you will make money or lose money.

Why are you buying? – Now you need to start working. To answer this question you need to detail the entire elements which brought you to the buying conclusion (if you are a short seller – selling conclusion). The buying decision should be based on true and real data, or/and decent assumptions. It’s very important to write down what you expect from the stock/company and why, it`s also important to write down the risks involved with it. You need to remember that great returns comes with great risk, if it was easy – we were all rich and you know it doesn’t work that way. I believe, that if you understand the risk involved, in whatever it is that you are doing, you are much more in control because you are always on top of things – it`s harder to surprise you.

When are you selling? – This might be the most important question because it will determine what will be your maximum lose, yes, you read it right – the maximum lose. A stock can go up thousands and thousands of percentage, but you can only lose 100% (again, talking about stocks buying and not short selling). In the next two articles I will show you the definition different between an investor and a trader according to this question (and the other questions as well). The selling price can be updated (and should be updated), but only in one direction – up, it is also very important to obey your numbers and to remember that the only one you are cheating is yourself.

The answer to these questions will define your investing/trading strategy, but answering those three questions is one thing, following your answers is a different thing. In order to make sure you follow the rules you set to yourself, there are couple of things you can do, I will give you one good example that works for me, but each and one of us react differently to different things and situations, so it is important you find what works for you. What I suggests is to write it down and hang it in a place you can see it during the day, when you see it in front of you it is much easier to obey it then when it is somewhere you can`t see it.

In the next two articles, as I mentioned before, I will talk about the definition different between investing and trading, and you will see how the CEO game can help you work on shaping the right strategy that works for you.

Assaf

The CEO Game.

In this article well discuss real estate investments and how it can provide you an easy and relatively safe channel for investing money and gaining a small cash flow with a chance of gaining capital profit along the way

The price of real estate (for residence) is determent by many factors such as:

Starting Your Way In Real Estate

The land\size price are the most important part of the land price is set by the demand and Supply (D&S) to the specific area of the land, how much you can build on this land by low and for what purpose (commercial, industry, residence) this factors depend on city planning and the demand for this given location .

The other factor that has a great influence over the price of real estate is the building costs. This part can be varying from very cheap costs to very expensive ones.  You can build your compound or house from wood, buy a preliminary house or build it from concrete and blocks all of those have different prices and each has its own advantages and disadvantages. Take in mind that in some places you can’t build in one or more of those row materials due to low safety issues

The problem with the variance of building costs is even more fluctuating when you furnish the house for example high quality flooring (marvel) will cost much more than porcelain or carpet and wood.

Now after we know what influence the price of real estate we can start thinking about real estate as an investment tool. If we don’t have the full amount necessary to buy the propriety you should consider taking a mortgage or finding partners for the investment.

Mortgage is a great tool for financing the full amount of the real estate price without taking a serious personal risk. Mortgage helps you to bridge the gap between the amount you have and the cost of the real estate by using a loan from the bank. In case you can’t pay the bank will take the asset as collateral. In most cases you will pay in time and in the end of the period you will have the house which will allow you keep receiving a stable cash flow from rent. A great example for the potential of earning money through investing in real estate can be found in the book “Rich Dad, Poor Dad” by Robert Kiyosaki. In “Rich Dad, Poor Dad” Robert Kiyosaki describes his life learned lessons on how he got rich through investments in real estate and his “Let The Money Work For You” philosophy. Another recommended book is “Mortgage Loan Modification Book” which describes useful tips and tricks about way to lower your Mortgage payments.

Omri.

The CEO Game.