Investment Articles

When starting out on your investment journey, one of the critical stages involves setting the foundations. In fact one of the most common questions I receive from clients is… OK, you’ve convinced me that property investing is the way to build serious wealth. So where do I start?

Step 1 is (unfortunately) the most commonly ignored phase in the property investment process. What is Step 1 you ask – it’s establishing a plan.

If you don’t know where you’re going then any road will get you there (as they say)! The moral to this story is that you must set goals and have an investment plan, unlike me when I first started… investing based on ’spur of the moment’ decisions. It cost me many thousands of dollars BUT more importantly it taught me some very expensive lessons, lessons I have never forgotten. This is a good example of failing to plan.

The ’silver lining’ on this cloud was that I was able to use the capital losses to offset future capital gains thereby reducing my future tax liability, although there are much more effective ways to legitimately minimise tax.

Imagine meeting up with yourself in 15, 20 or 25 years. How would you like to see yourself? How would you like relatives, friends and business colleagues to see you? This process requires that you think about and start with your destination in mind and seriously consider how you would like to be remembered.

Once you are able to clearly visualise that, you are much more likely to be able to describe how you would like to live. Answers to these questions should be reflected in your values and your values must be written.

This process should include:

- Establishing your goal(s) – be specific: you’ve likely heard about S.M.A.R.T. goals (ie they should be Specific; Measurable; Achievable; Realistic and Time Bound) – Preparing a budget

- personal cash flow and balance sheet: you’ll be amazed at just how much money you waste. In fact many of my clients find that the money they can save, allows them to purchase either their first OR another investment property

- Designing an action plan. Include all specific actions required to achieve your goal(s): yes, this is a painstaking task BUT one that’s well worthwhile. What you are doing here is breaking down your goal(s) into ‘bight-sized’ chunks

- Persist – most folks give up… don’t be one of them: many folks give up just because they are faced with a challenge – that’s the reason approximately 95 percent of people end up dead or dead broke

- Find a mentor – someone who has already done what you want to do… this will fast track your success. As I always say: you will pay for your education one way or another, either learning through very costly mistakes OR paying for your knowledge!

My philosophy is always to find someone who has the knowledge and experience and pay them to teach me. It’s much quicker and far less expensive. In fact it’s an investment in yourself and that’s extremely important.

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Imagine having a life where we have to work only once and the money keep coming in again and again, weeks after weeks, months after months. This, in a nutshell, is what the concept of Passive income is all about.

It is the best income in the world because it comes in automatically, without any major involvement on our part. (Although we have to do the initial hard work for generating it).

Here we discuss some of the ways of generating Passive income.

1) Real Estate

When one has a piece of Income producing Real Estate (One which you own and have given out on rent), then it can be considered a superb source of income. This is because the tenant would be working to run his business and he would be paying the landlord a fixed rent on a monthly basis just for using the property. Initial Work Required: – Investment in property and further modifications, if required, based upon which it can be leased out to prospective tenants.

2) Fixed Deposits in Banks

Just imagine having a million USD in a fixed deposit in your bank, from where you earn a minimum of 10 % per annum. That makes it USD 1, 00,000 per year or close to USD 8000/- per month, And the best part is that you are not even working to earn that USD 8000/- You are free to do other things while the money comes in. (Though in the above point, we have taken a million dollars just as an example, but it applies to small sums of money as well). Initial Work Required: – One needs to work and generate sizable savings in his bank prior to investing in a bank deposit.

3) Network Marketing

This is based upon the fact that, more the number of business associates one has, more is the business volume generated and more is the possibility of generating royalty income / passive income. Once a person is able to build a strong foundation for his business (which means educating enough people about the benefits of the products, business model and making them associates in his business network, then he can be rest assured that the business can run ahead indefinitely and he can expect bigger cheques every month in his mail.

4) Patents, Books, Songs and other similar Royalty income generating assets.

Under this category, the singers, writers and inventors own the rights to their respective assets and whoever wishes to use their work would be giving a royalty income to the creator of the asset. So, here the owner does the hard work only once and gets paid repeatedly.

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Wealth can mean different things for many people, and the word can be applied in many contexts. For an investor, wealth becomes an objective – a primary financial goal. To accumulate capital in their portfolio and to invest and grow the amount of expendable income, becomes a priority when managing investments. The measure of someone’s wealth extends to the total assets owned and can include real estate, funds, liquid assets, as well as other forms of investments.

How a person measures or calculates their wealth is important, and a method should be developed. It will directly affect their approach to investing, and the financial strategies used. How a person manages risk when investing is also an important factor, even more so than the returns.

There are many strategies to manage risk. Risk will be different for every investor, as will the amount of risk that an investor will be able to tolerate. For an aggressive investor, the willingness to accept high risk is different from a very conservative investor.

Individual risk is related to an investor’s personal wealth – the amount of money that he or she can afford to lose and for how long. It is also related to how much that particular investor needs to earn and within what time frame.

Managing individual risk depends on how much money can be invested, at a comfortable pace for the investor. It also takes into consideration how much time the investor has, for example as in the case of retirement. Factors such as the number of years until retirement and the rate at which the investment grows, will determine the type of investment and risk taken.

Market risk is another factor to consider when managing risk. This is the typical risk associated within a specific market. For examples, stocks dive and real state bubbles. The ability of an investor to survive these conditions in the market, should determine how they approach it with their portfolio – if they enter it at all.

Money should be invested in a variety of areas to assist in avoiding losses. To manage market risk, investors should consider staying within markets that they are familiar with. Investors who understand risk, the markets, and their expectations in time, are able to develop a well diversified investment portfolio.

Risk can be managed by building a cushion to minimize it, or by ignoring it. The most valuable way you can manage your investment risk is by educating yourself on what you are intending to become involved in. Knowledge is power, and power is money.

Looking for more risk management strategies and tips? Visit us at Global Mutual Funds – Australia’s pre-eminent provider of global investment product alternatives and solutions. Find out what you need to know about equities, options trading, and how exchange traded funds can help build your long term wealth.

Compounding is one of the most common mistakes made by an options trader when they are making long-term investments. It consists of putting profits back in to the investment, so that the profits can earn profit too. This is great strategy if you are a stock trader; many people have made their fortunes through re-investing profits, but for an options trader, it is extremely risky. If you compound your profits you will also be compounding your losses, and you may end up with nothing as you are dealing in leveraged stock options.

If you are looking for a long-term stock options strategy, you should be considering LEAPs call options. These options expire between six and twelve months in the future. They offer a simple way of making a long-term investment in stock options, without the need to compound monthly. LEAPs allow investors to make money in a leveraged style from the same movements in underlying stock that stock traders benefit from, but without having to use as much money. When you are making such a long-term investment is can be seriously detrimental to compound your profits.

Here is a sample scenario of what could happen:

Imagine you have decided to invest one thousand dollars into the January 2008 options of a particular company. It is trading at ten dollars on January 1st 2007, and the ten dollar strike price LEAPs call option (JAn10call) expiring in January 2008 can be bought for two dollars. You invest your thousand dollars and buy five contracts. When January 2008 comes around, you find that the company stock is doing well and it is trading at twenty dollars when the Jan10call expires, giving the LEAPS call options a value of eighteen dollars. You sell the LEAPs call options and get an 800% profit, because you make five hundred times eighteen dollars, or nine thousand dollars. A stock trader also buying at ten dollars would only have made 100% profit.

You believe that the company will continue to do well, and decide to compound your interest. You put your entire nine thousand dollars back into the company; into the twenty dollar strike price LEAPs call options (Jan20call) which will expire in January 2009. These are again two dollars each.

Unfortunately things don’t go as well this time, as at some point, almost every company will go through a rough patch and take you by surprise. In this case, lets assume the stock fell to nineteen dollars as the Jan20calls expired. As an options trader you have just lost all your money – including all the profits you made the year before. A stock trader would only have lost the dollar difference. You are left with zero.

This is why compounding your earnings can be so dangerous when trading in stock options. You can literally lose it all.

Looking for more option trading strategies and tips? Visit us at Global Mutual Funds – Australia’s pre-eminent provider of global investment product alternatives and solutions. Find out what you need to know about equities, options trading, and how exchange traded funds can help build your long term wealth.

Options can be a good way of investing your money, even if you are not wealthy to begin with. If you already have some basic knowledge of trading in stocks and bonds, you are well aware of the wide range of strategies that can be used. Everything from the basic buy and hold to those which use complicated technical methods of analysis are utilized. Likewise, there is a similar range of strategies, which can be used for options trading.

Essentially, options are contracts that confer the right to buy or sell a specific stock, bond or similar type of underlying instrument at a particular pre-determined price, within a specific time limit. Options, which give an investor the right to buy, are known as call options, while those giving the right to sell are put options.

The investor can act at any time, up to and including the expiry date, if they are holding what is known as an “American” option, while those known as “European” options can only be acted upon on the actual expiry date. There is no real geographical difference in these options types any more, although they did historically belong to the US and Europe. The American options are often used for stocks or bonds, while the European versions are commonly used for indexes.

The expiry date generally falls on the Saturday following the third Friday of the month in which the option contract expires. Since most investors will be unable to contact a broker on a Saturday, as well as US exchanges being closed, the expiry date will effectively be the third Friday of the month.

With an investment in an American style option, for example an option in stocks, there are two possible outcomes. The investor can either wait for the expiration date, or they can act before the option is mature. (Obviously, for a European style option there is no such decision to be made). Many investors do wait until the expiry date before they do anything, regardless of the type of option they hold.

A typical option will be for one hundred share lots. If the investor is buying a call (right to buy) option for two dollars in a stock that has a strike price of twenty-five dollars, then this will cost them (2 + 25) dollars x 100, that is $2700, plus commissions. As long as the market price is more than twenty-seven dollars this investor is doing well.

If the investor believes that the price has reached its peak before the expiry date, is unlikely to recover again, and it is above twenty-seven dollars, they then can sell early and make a good profit.

It can also be sensible to sell before the expiry date if the price is below the strike price and is probably going to keep going down, or it is already very near to the expiry date and likely won’t have a chance to recover. Getting out early can reduce the overall loss. It is possible to use this loss to offset capital gains tax too.

There is a third choice as well, rather than acting before the expiry date or waiting for the option to reach maturity. The option is a chance to buy or sell, but it does not oblige the investor to do so. The contract can be left to expire, with no action taken on or before the date of expiry. It can on occasion result in a smaller loss to just let the option expire as opposed to using it. There is no obligation to take your buying or selling rights, unlike when you put your money into futures. Whether or not it is a good idea to give up your right will depend on a number of factors such as the strike price, the market price and the premium.

As with any investment, options carry risks. The rise and fall of stock prices and other underlying instruments will occur unpredictably over unpredictable periods of time. The price of an option can vary over time according to these fluctuations and the length of time that is left before they expire. The expiry date is an important feature of options trading, as its distance in time will influence the investor’s decisions.

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Looking for more options trading strategies and tips? Visit us at Global Mutual Funds – Australia’s pre-eminent provider of global investment product alternatives and solutions. Find out what you need to know about equities, options trading, and how exchange traded funds can help build your long term wealth.
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Cautious investors could easily become fooled by some of the investment options available on the high street; and judging by the millions poured into so called ‘guaranteed products’ investors must clearly be reading information I am not.

The biggest concern for investors is the potential for loss of their capital. Most of these types of ‘guaranteed’ or ‘protected’ investments will be sold via the high street in banks. They are typically marketed to those who have an aversion to risk, or as I prefer to say it, where the financial adviser neither explains risk or cannot explain risk.

Risk comes with a potential gain and a potential loss. Understanding what it means to you and can do for you is fundamental to your capital gains and protection.

If I opened a high class Christmas cracker it might say about risk ‘if there are strong winds, you can build a wall or a windmill’. Christmas is great.

So why might many investors be close to losing all their money when they believe they are protected?
These plans work as follows: A plan provider (a bank for instance) creates a product by placing some of your money with another financial institution. That financial institution offers a fixed return to the bank over a set period of time. So for example (in really simple terms) the bank is offered 5% per year over the next five years with UBS. The bank knows that if UBS pay that 5% per year they will have 25% (simple terms) in five years time.

And so they can place 80% of your money with UBS and in five years time the 80% will grow to 100% – hence your capital protection. The remaining 20% will be used to buy a range of complex financial instruments which participate in the upside of the stock market. So you might then see them marketed as ‘100% capital protection’* (note the very expensive asterisk) plus 60% of the upside of the stock market growth’ (typically the FTSE100).

Seems good? Prepare for the deluge:

There are three key points: Firstly the ‘capital protection’ only works at maturity (end of five years typically) and you have to ask yourself over how many five year periods in history has the FTSE 100 not returned at least your capital back? Rarely. So what value does the capital protection really have? None really.

Secondly, these ‘protected’ plans will not benefit from the yield in the FTSE100 (i.e. its dividends). This is currently running at c3.2%. (1) So if you were invested into a product such as that above you would be 17% worse off at the end of the term.

The most worrying issue however, is in relation to the ‘capital protection’. Remember these are aimed at investors who are risk adverse.

There is a potential with these plans that an investor could lose all their money, unlike the stock market where your capital simply fluctuates up or down. If the institution from which you are buying the capital protection goes bust, there is no protection under the financial services compensation scheme, due to the ‘large company’ rule. Therefore your money could be completely ‘out the window’.

And here is where companies put investors at risk. The lower the credit rating of the institution, the bigger the return they offer, so banks can simply move downwards with their choice of provider to then offer higher returns, catapulting your risk skywards.

A credit default swap (basically the cost of insuring a company’s debt) is a good analysis of a company’s strength. Today the cost of insuring £100 of Lloyds TSB’s debt (127.35) is 119% more expensive than the cost of insuring HSBC’s debt. (2)

This cute move of moving down the credit curve is putting millions of cautious investor’s capital at risk and they are oblivious to it.
If you have an investment query e-mail info@wwfp.net

Source:
(1) Invesco
(2) BSAM

About Peter McGahan and Worldwide Financial Planning:

Peter McGahan is an Independent Financial Adviser and the Managing Director of Worldwide Financial Planning Ltd who are authorised and regulated by the Financial Services Authority. ‘The FSA does not regulate Credit Cards, Will Writing and some forms of mortgage and Inheritance Tax Planning.’ Information given is for general guidance only, and specific advice should be taken before acting on any suggestions made. The above represents the personal opinions of Peter McGahan. All information is based on our understanding of current tax practices, which are subject to change.The value of shares and investments can go down as well as up.

Learn how to invest money and prosper; or don’t learn how to invest and continue to invest and lose money. It’s fun to invest money when you are winning. Get a financial education and see for yourself. You will NEVER feel left out once you know how to invest with a sound investment strategy. Let’s start that financial education now.

INVESTMENT BASICS

You can not put together a complete investment strategy without an understanding of the investments that are included in the package. Nor can you build your own house without knowledge of the pieces, parts, and tools required. Concentrate on investment basics before you decide on what plan to go with, or you may not be able to finish the job successfully. This means that you need to understand the investment characteristics of stocks and bonds, and how they compare to each other and to other investment alternatives.

Only then can you learn how to invest and put together a complete investment strategy. Like I said, it’s fun to invest when you’re making money; but you’ve got to start with the investment basics. Most people don’t know stocks from bonds. Start by reading articles or other publications that get down to the basics. For example: what are stocks, what are their risks and potential rewards, and how do they compare to bonds and other investment alternatives.

Now you are ready to learn about mutual funds, which are the investment of choice for most average investors. For most people they are the easiest and best way to invest in stocks and bonds, plus other asset classes. Mutual funds are simply investment packages that are professionally managed for you. To pick the right funds you’ll need to understand the asset class they invest in: stocks, bonds, money market or specialty (other).

HOW TO INVEST

Now you’re ready to learn how to invest and put the pieces together with a sound investment strategy. ASSET ALLOCATION is a crucial part of your investing and financial education, because how you allocate your money to the various asset classes will determine your success or failure… more than anything else. Simply put, how much should you invest in stocks vs. bonds vs. other investments? This is also called your asset mix. It’s much more important than what specific investments or funds you pick.

Once you’ve put a balanced portfolio of investments together you’ve got a great foundation. But if you want to continue to build and prosper you’ll need an ongoing investment strategy to make additions and changes over time as necessary. Read articles on investment strategy, asset allocation, and how to invest. It will all come together for you if you start at the beginning and build a step at a time.

Learn to invest like your financial future depends on it. With Uncle Sam in debt up to his eyeballs and employers fighting to survive, it does.

A retired financial planner, James Leitz has an MBA (finance) and 35 years of investing experience. For 20 years he advised individual investors, working directly with them helping them to reach their financial goals.

Jim is the author of a complete investor guide, Invest Informed, designed for average investors or would-be investors of all levels of financial background and experience. To learn more about investments and investing and his new financial guide go to http://www.investinformed.com.

Buying online is actually the most convenient way to purchase your gold. There are many trusted websites that offer high quality gold bars for everyone who can afford them. Most of these websites guarantee the authenticity of the gold that they sell. You can safely acquire your first gold through these websites by following few simple steps. But of course, it is always better to follow precautionary measures and useful tips from the experts to make sure you do everything properly. Here are some helpful tips that you need to consider in acquiring your first bar of gold.

To buy gold online can sometimes be tricky, especially if you are just starting to learn this business. Protecting yourself and your investment should always be your top priority. When dealing with gold bar sellers, you have to focus on everything the agent is telling you and take time to verify them. Don’t believe in every word you read in the site particularly if it has something to do with the current rate of the gold you wish to buy. Just like trading foreign currencies, you have to research for the current average rate of the gold through the market and see if the offers are reasonable.

You also have to be aware about the differences and the various types of gold before closing any deal. For those people that are not yet familiar with the different types of gold, all gold bars may look the same for them. If you think you are not knowledgeable enough to identify good quality gold bars from those of lesser value don’t hesitate to ask some help from the expert. This way you can safely buy gold bars of high value and quality without putting your investment at risk.

The last, but the most important point you should consider in buying gold online or off line is your budget. Do not buy gold without evaluating your financial capacity. Just like in any other kind of investments, it is highly important to consider your financial position because of the large amount of money that you will need to buy gold. At least leave some cash for yourself. After considering these points and evaluating your capacity, you are now ready to secure the future of your family through your gold bar investments. You can also protect your assets by purchasing gold and enjoy its high market value.

** Discover where to Buy Gold Bars online. **

Think back to just a few short years ago, banks were on a lending spree, corporate lines of credit were being issued in record volume and companies were able to raise equity and debt capital with reasonable ease; then came the banking crash which unfortunately brought on an entirely new group of scams preyed on the innocent and naive small business owner which damaged the economy that much more.

Scams such as platform based funding, banking instrument collateralized lending, shelf corporation scams and on and on. Fortunately there is a light at the end of the tunnel thanks to some of the venture capital and private equity industry’s talented global finance executives who have decided enough is enough.

Now entrepreneurs are seeing professional collective funding efforts put forth by these seasoned finance gurus in the form of online membership databases which possess some of the best kept secrets in the global funding markets. Many of these databases include finance companies and methods that have never been available to the public and were used for decades by VC professionals who were able to pull off funding miracles on behalf of clients and in return made hefty commissions.

Now, with these unique contacts being placed in database form they are now available to everyone and anyone who needs capital. Imaging going to one website, joining for a modest fee and getting access to thousands upon thousands of private investors, angel investors, venture capital firms, hard money lenders, private equity firms, aggressive hedge fund lenders, Asian and European finance, factoring and other wonderful and easily comprehensible options to acquire capital.

A few of these membership databases have even taken the next step to give the business owners the elements to promote their business in a way that will help them pass due diligence with ease. Some venture capital executives got so fed up with having a client with a great business model, solid infrastructure, exceptional board of directors and even money in the bank but the deal would die when the company went into the due diligence and offer phase that they actually paid programmers to design a down-loadable application that offers the entrepreneur easy yet extremely powerful publicity with the strength of an actual high end PR firm all at the click of a button, it’s truly amazing.

The economy may not be what it used to be but it has forced the evolution of certain aspects of the financial industry to be more small business and entrepreneur friendly. There is massive funding out there for your company if you take the time to look.

Check out Angel Funding Project at http://www.angelfundingproject.com this is a massive online database put together and managed by some of the industry’s top venture capital executives. You can even download a free massive publicity application that will give you 1,000’s of free promotional links to drive traffic and pass due diligence by investors.

By the end of 1999 only 33 exchange traded funds existed in the world with assets of $39.6 billion. At the end of 2009 there were a total of 1,939 ETFs worldwide with assets totaling over $1.03 trillion according to research from Black Rock. Due to the recovery of the market it surged to a 45% increase in 2009.

Money poured into the ETFs as the market made a huge comeback from the damaging financial crisis. In 2008 the S&P 500 was up 23% in 2009 after falling 38.5% in 2008. The Nasdaq, made a heroic recovery of 43.5% in 2009 after dropping 40.5% in 2008. ETFs assets appear to be on path to reach $1.2 trillion by the end of 2010, according to Deutsche Bank.

In the U.S. at the end of 2009 the total number of ETFs was 772. From 1999 to 2009 they rose from 30 to 698. From 1999 to 2009 domestic assets grew from $33 billion to $705 billion from 1999 to 2009. Between 2000 and 2009 the number of ETFs grew from 6 to 815.

As of the third quarter of 2009 global asset hedge funds had reached $1.53 billion, according to Chicago-based Hedge Fund Research of Chicago. ETFs could eclipse the assets of hedge funds, according to the Wall Street Journal. Investors are able to gain quicker access to liquidity helping ETFs grow faster.

ETFs have long surpassed the assets of separately managed accounts which were up to $527 billion at the end of the third quarter of 2009, according to Cerulli Associates. Commodity funds are another source of which have had aggressive growth. In 1999 separately managed funds grew by $100 million and by the end of 2009 grew by $22.2 billion.

Market conditions of 2008 caused investors to be more risk adverse which made investing in ETFs a great option. When investors began looking for investment options they found that ETFs met their needs and offered less risk, price transparency, liquidity, product structure, holdings transparency and less cost issues. ETFs became a very attractive investment option.

Black Sand trading is an online stock tool that indicates to online traders where and how to invest their money. Black Sand’s clients have consistently achieved a 53% or greater ROI over the past seven years following Black Sand’s signal.