You’ve probably heard about the importance of diversifying your portfolio.

The question is how do you do it and what if you have limited capital to invest and can’t afford to purchase a lot of different stocks at once? In this video, we’ll introduce you to two new asset classes: exchange-traded funds or ETFs and real estate investment trusts or REITs. These will enable you to diversify your portfolio and generate passive income without having to invest too much. First, let’s look at ETFs also known as tracker funds.

ETFs track the performance of a stock index like the STI Dow Jones Hang Seng or commodity and bond indices. These are useful for new investors because by simply investing in ETFs you’re effectively investing in the price movements of all the companies listed on the underlying index. This makes it much easier to diversify your portfolio, then if you picked individual stocks and commodities especially if you’re starting out with limited capital.

Besides stocks and ETFs, however, there is another popular asset class, one that’s been around for thousands of years. Yup, real estate. So, how can a new investor with limited funds, invest in this market? Through a real estate investment trust or REIT.

A REIT is a company that invests in real estate properties and by investing in a REIT, you can share the benefits and risks of owning a real estate portfolio. In short, a REIT allows you to buy and sell properties as if they were stocks by buying a stake in a REIT.

You are effectively vested in all the properties owned by the REIT, so as the REIT makes its profits from asset appreciation and rental income, you will receive regular payouts which can provide you with passive income.

We’ve come to the end of part 1 of our video series. We hope you’ve learned the importance of making your money work for you and the different asset classes and opportunities that are available to you. In the next part of our series, we’ll explore the big market cycles and find out how to better time your purchases so you can receive the biggest benefits possible.

If you want to make money by timing the stock market you need to follow the trends.

Buying and selling creates its own momentum and a market that’s moving up or down is likely to keep moving in that direction for a certain period of time.

What this means is that you should avoid trading against the current trend.

For example, when the market is bearish and heading down, don’t try to predict which stocks have hit bottom, that would be like trying to catch a falling knife.

Instead, find an objective way to both identify the current trend and decipher when that trend has changed too, because just like the saying goes, “the trend is your friend, except at the end”.

So, let’s explore two simple techniques for identifying market trends.

The most common ways to look at the nature of a trend’s movement. As a stock moves up or down, it rarely does so in a straight line, rather it zigzags forming a series of highs and lows.

If the highs keep getting higher and the lows keep getting higher that stock is in an uptrend. If the highs get lower and the lows get lower, you’re looking at a downtrend. And if the highs and lows are consistent over a certain period, it’s in a sideways trend.

Another way to identify the market trend is to look beyond the daily price fluctuations and determine the general direction of a stock.

You do this by calculating an average. For example, a 20-day simple moving average or an SMA, is an average of the past 20 days of closing prices, which moves or updates on a daily basis by incorporating the latest prices.

If the SMA is sloping upwards, that’s an uptrend; sloping down downtrend and sideways, means flat.

A 20-day SMA gives a good picture of the short-term trend but you can also use other periods like the 50-day SMA and the 200-day SMA for the long-term trend. Those aren’t the only moving averages, however, there’s the exponential moving average or EMA, and the weighted moving average or WMA, which gives more weight to recent prices.

As a trader, you can use any of these techniques individually, but for the most accurate picture of market trends, you should use them all.

Because when it comes to behavioral analysis, the best way to increase your chances of success, is to consider as much data as possible.

So that’s market timing! Next, let’s cover support and resistance zones.