Investment Articles

There are synonyms and antonyms in language. However, “saving” and “investing” are neither. The two terms are related financial concepts in that they deal with what we do with our money. While they are often used interchangeably, they each have separate meanings. Most people would have to save money before they invest and this is probably why the terms may get confused.

The most fundamental difference between saving and investing is the financial objective. Saving is protection oriented (merely putting money aside) while investing is growth oriented (seeks capital gain or returns that outweigh inflationary effects). Even if you are getting a fair return on your savings, this does not make it an investment. There are some other notable differences between the two terms.

Risk/ return trade-off

The difference between saving and investing can be pinned down to the level of risk. Savings would generally involve low-to-moderate risk with low-to-moderate returns. Savings funds may also be insured or guaranteed to a greater or lesser extent. Investing involves higher risk with potentially higher returns.

Investment period

Saving is generally designed to meet short and medium-term financial goals while investing occupies a wider investment horizon. This does not suggest that investments cannot be used for the short term or that savings cannot be used for the long-term. However, it is not often appropriate or practical to do so.

Asset classes

The type of fund used can make the difference between saving and investing. You could decide that you just want to save your money. However, if you use a growth option, then you are not saving (as you intended), but investing. Cash options are associated with saving, while growth options are associated with investing. Income options fall between the two and can be considered as a saving or investment based on the nature of the option or your objective.

Liquidity

You would typically have easier access to your money when you save as opposed to invest. The higher liquidity associated with saving suggests that you can readily convert your savings to cash. There’s still some liquidity with investment (you can sell some stocks at anytime for e.g.). However, investment bears some degree of liquidity risk (unlike savings). Liquidity risk refers to the inability to convert your investment to cash when needed for various reasons.

The difference between saving and investing is important in understanding how to undertake portfolio diversification. It can also be useful in detecting poor-quality financial advisors who think it’s just a matter of semantics. Basically, knowing how to distinguish between saving and investing can help you to construct a formidable financial plan.

There is a popular phrase in investing terminology called the ’smart money’… typically this phrase is used to describe the investors that are ahead of market sentiment. These are the people with the foresight to sell before the market crashes and buy before the market booms. The critical question to ask is how we can become part of the smart money?

Beliefs on where the ’smart money’ comes from span between simply doing a little research to make prudent investments and belief in a vast conspiracy of industry insiders that monopolize all of the best business opportunities. My perspective is that the reality probably lies somewhere in the middle of the spectrum, since getting ahead of the market certainly requires some sharp analysis. However, I find it unlikely that it is limited to an exclusive ‘club’ since there is a constant churn of executive ‘insiders’ that fail to predict the market accurately.

One of the easiest ways to move toward the ’smart money’ is to avoid buying into markets while they are inflating (i.e. Stocks in the late ’90’s and Real Estate over the last few years) and selling out when they hit bottom. The easiest way to accomplish this feat is to internalize the fact that once an investment type becomes ‘hot’ it is probably too late for you to capture the big returns. Simple avoidance of stepping off the cliff of market crashes will catapult you a lot closer to the smart money.

The next step is to determine what emerging areas of opportunity will create the greatest gains. This is where things become much more difficult, as it is extremely difficult to determine when down markets will bottom, and start climbing again. One thing is certain though… if a new opportunity is being reported on the television, it is no longer an emerging opportunity and the ’smart money’ is already looking for a new home.

Sincere Thanks, Douglas J Utberg, MBA

“Business, Life, and Everything In-Between”

Many seasoned traders know that position sizing or determining the size of each trade is a vital part of any trading plan. Many beginner traders however make the mistake of not paying adequate attention to this step. They believe that it is enough to simply define the initial stops. This however is a very incomplete way of trying to manage your risks.

Determining the size of every trade is crucial for the protection of your trading float. When you are certain about the number of units that is ideal for you to deal with, you are protecting your capital from getting eroded. Moreover, when you fully delve into proper position sizing, you are also able to identify your win and loss potentials.

What many investors don’t realize is that size matters. The amount that you put in is the indicator of how much you might earn or lose. The more units you purchase, the higher your chances of winning. This is why some immediately invest a lot, thinking that the more risks they take, the more rewards they get. Deciding on this factor however based only on the opportunity to profit well is not advisable. Remember that a big investment also magnifies your chances of losing. To arrive at the best option for you, your risk management system should incorporate a scientific way of defining the extent of an investment.

Getting the right guiding figure to enter a trade isn’t as complicated as you would imagine. You simply have to divide your already predefined maximum loss in dollars by your stop size. The result is the maximum number of units you should purchase on a single trade.

To settle on your maximum loss, identify the percentage of your float that you can bear losing. It is perhaps most sensible to settle for a loss of about 2% because this is neither too small nor too big. To identify your stop size, get the difference between the entry price and initial stop.

In some cases, you may need to further refine this part of your risk management strategy. Depending on your tolerance for risks, you may still view the resulting size as too huge for you. In this case, it would be wise to add another rule to keep your investment money safe. You can set a maximum percentage figure that corresponds to a specific dollar value over which you are not willing to lose. You can say for instance that you are not willing to lose more than 20% of your total float. Hence, if the result of your initial size calculations goes over this, you can follow your extra rule to further scale down your purchase of units.

Position sizing may seem like a technical trading step. In reality though, it is just a sensible way of making sure you don’t drown with the weight of your losses. Do not consider trading without paying due attention to this step. Put as much importance on it as you would on identifying your stops and the size of your float.

Discover More About How Position Sizing Can Protect Your Investments.
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The question is how to invest money to make money. The answer is to invest money only after asking a few questions about investment basics. Here are the questions to ask, and how to invest money to avoid scams and bad deals in general.

How to invest money, rule #1, is that there is no such thing as a perfect investment. A perfect investment would have the following features: guaranteed safe, guaranteed to make money and lots of it, high liquidity, zero costs and expenses, big tax breaks, and easy to monitor… so you always know where you stand financially. All investments can be compared based on investment basics, but no honest proposition contains all of the above features.

A scam will generally IMPLY that safety and high profits are guaranteed. Your first question before you invest money: what are the specific guarantees for safety and investment returns? If the answer you get sounds confusing or misleading, you have no need to ask any more questions. Something is rotten in Denmark, since no investment offers high safety and high profits… except scams. Now, let’s move on to some other investment basics and questions to ask. Remember, a large part of knowing how to invest money involves knowing how to avoid bad investments or those that don’t fit your needs.

Ask about LIQUIDITY. How quickly and easily can you get your money back if you want to cash in? What will it cost you? This is a very honest question, and the answer you get should be straightforward. You’re out to invest money to make money; not to get stuck with a loser that will cost an arm and a leg to liquidate.

The COST OF INVESTING is another investment basic you need to ask about. Most investments involve charges and fees to buy, hold, and/or sell. Many times the details are in the fine print, so make sure to ask upfront. High investment costs can turn a winner into a loser. For example, a good simple fixed annuity will pay a competitive interest rate and will have no charge to invest or hold; and no charges to cash in after just a few years. The wrong annuity contract can cost you 3% or more a year in charges and fees, plus heavy charges if you cash out in the first few years.

Be real careful when an investment promises tax breaks. Ask questions first and get it in writing before you invest money. Then, run it by your tax professional if you have one. If you don’t, take a pass. Your goal is to invest money and make money in the process. Not to take a chance and wind up in trouble at tax time.

Our last area of concern in regard to how to invest money and investment basics I refer to as VISIBILITY, or the ability to monitor your investment. After you invest money, then what? Can you track the value of your investment so you know where you stand financially at all times? Will you receive statements each quarter and at the end of each year showing the value of your investment assets?

As a financial planner, some of the worst horror stories of new clients I interviewed were brought to light when I asked to see their records for the investments they held. Sometimes their records or statements were incomplete or otherwise questionable. Sometimes, these investors could find no records at all and didn’t know who to contact to find out the status of their investment. That’s a perfect example of how to invest… NOT.

Before you invest money, sort out the investment basics covered in this article to avoid scams and other major investment mistakes. Don’t be afraid to ask the questions presented here. If you are dealing with honest people, they will be glad to answer your questions. If not, look someplace else.

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.

Over the course of the last two decades in the financial industry, I have had good fortune, and yes, bad fortune in learning about the realities of investments. When I speak with investors, it’s not uncommon for some people to insist on certain delusions they have accumulated regarding the subject. This article is an effort to give you some the characteristics of any investment proposal that deserves your careful scrutiny and distrust.

Most investment scams have certain characteristics in common:

1. Secrecy – Any investment program that is worth anything can stand up to the scrutiny of financial advisors, accountants, attorneys and anybody else with some investment acumen. Many scams create this confidentiality to give the investor the feeling that they are “on the inside,” privy to investments only available to wealthy families or a select group of fortunate people. The confidentiality requirement is designed to prevent you from communicating with others about your involvement so you will keep believing what the scammers are telling you.

2. High Returns – What rates of return should a person receive for investing money? Well, if it sounds too good to be true, it probably is. While 20% returns may be possible for very speculative investments under certain circumstances, anything beyond that is simply not real over time. If any return on investment is greater than what would normally be earned on that type of asset, it is a good indicator that something isn’t right. Consult a knowledgeable financial advisor of your investment plans if you have any doubt.

3. No Track Record – Any investment program should have returns that can be verified by a reputable third party, such as an accounting or law firm. Further, the principals of the program should have fully verified backgrounds with a proven record of successful past investment programs. Moreover, any start-up would have a logical product and a complete business plan replete with reasonable financials and marketing plan. If there is no track record, forget it.

4. Lack of Full Documentation – Any legitimate investment has full documentation, including a prospectus (a document that explains the details of an investment) or offering memorandum (which is for private placement programs, investment programs that are made available to qualified investors and not to the general investor public). Complete contracts would also be provided carefully covering all of the details of the proposed investment. Insist on full disclosure.

5. Guarantees – To my knowledge, the only investments that provide guarantees are insurance policies. If someone is offering you guaranteed returns or a personal guarantee, it’s not worth anything. If you lose your money in the investment, the personal guarantee is only as good as the assets of the person issuing the guarantee (if they had the money for the guarantee, why would they need yours?)

6. No Registration with Regulating Authorities – In order to offer an investment to the public, in most cases, the principal creating such an investment will have to register it with the State. Further, the person selling the investment will have to be registered with the State as a securities salesperson or investment advisor. Lack of such registration is a red flag.

7. Offshore Tax Benefits – For American citizens, there are no offshore tax havens. In other words, US citizens are taxed on worldwide income, regardless of the source. Anyone stating that you can save or avoid income taxes by moving offshore is just dead wrong. There is no surer way of creating a problem than attempting to evade taxes. While there are asset protection reasons to use offshore entities, there are no legitimate income tax saving strategies offered offshore that cannot be done domestically.

I know I said 7 tips, but I thought of one more…

8. International Lure – Investing internationally has a certain allure to it. It’s exotic and different. The only problem is that you transfer your assets overseas and the chance of getting them back may be zilch. The complexities of international financial regulations and laws make it a great justification for someone to not be able to deliver on intended investment results. Just keep your money closer to home.

Greed and Desperation

People invest in these programs due to desperation for money or the desire of getting something for nothing. The way to wealth is through investing wisely in your own ability and production and being intelligent enough to not spend everything you make. Falling victim to any investment scam can be a significant setback to your quality of life. Just don’t play that game. Learn the natural laws of money and apply them and you will be where you want to be in due course.

And if you feel that you are far too beholden to your creditors, maybe it’s time to do something about it. Christopher Music has helped many professionals gain control over their finances and achieve financial freedom — or at least move steadily in that direction. For more information on how you too can loosen your creditors’ grip on your pocketbook, visit Christopher’s website at http://www.wealthadvisoryassociates.com.

Wealth Advisory Associates, LLC is a Florida Registered Investment Advisory Firm and only transacts business in states where it is properly registered or notice filed, or excluded or exempted from registration requirements.

If you have been investing in the stock market the past few years, I can readily understand why you are looking to invest in gold and other precious metals. While the stock market has taken a dive (although recovered a good bit since 2009) the precious metals market, and in particular gold, have been soaring. The good news is, it has only begun to boom! Many are forecasting a further rise in gold and silver prices in the near future, so there is plenty of time to get in on the action.

So what do you need to know to make money in the gold trading market? Not so fast, let’s go over a few basics right away. First of all, I would never tell anyone to put 100% of their money in anything, even gold or other precious metals. No one that I know of can predict the future, so it is always good advice to diversify your portfolio. Where have you heard that before? From every stock broker worth his salt, probably. So with that said, realize now that only a part of your total portfolio should be in gold, how much is up to you. How much can you risk? How quickly do you need to get the money back in a crisis? There are many more questions that I hope to answer here.

The allure of gold has been with us since at least Egyptian times, and probably before that. It’s shiny, beautiful, valuable, and holds it’s value better than most things. But gold has had it’s up’s and down’s over the years, to be sure. Why is it going up right now? There are several reasons, one of the main things is they aren’t making more of it. Gold has to be mined, and the vast majority of it has already been found. Of course some major gold mines are still operating and producing tons of new gold every year, but a finite product that is in high demand will always retain it’s value. Another reason it is going up in value right now is that some very large countries seem to be buying a lot of it, namely China. China is one of the richest countries in the world besides the U.S. right now, and they are buying obscene amounts of gold and stockpiling it. Are they investing in it? Or is it a safeguard against massive inflation they see coming down the road? That is up for speculation, but either way they now own more gold than all but 6 other countries. Of course the U.S. is still numero uno, but that could change in the future.

Making money in the gold trade can be done in several ways, you don’t have to buy the stuff and worry about where to store it. Unless of course, you really want to! Buying gold bars isn’t really recommended, but hey, it’s your money. And your back if you want to carry that stuff around. I would find another way to cash in, frankly. Especially since there are many other methods that don’t entail any physical labor. Here are a few:

1) Buying gold bars – Instead of owning a paper asset, you can actually go buy gold bullion and either keep it at your house or a certified storage facility.
2) Of course another option is to buy gold coins, which are an indirect investment in gold since the coin itself has value depending on it’s interest from collectors.
3) Gold mining stocks – You could always buy stock in a company that mines gold, with the idea that if gold is going up in value then a well-run mining company would also have a rising stock price. The best mining companies already have been in business for many years, and have a profit built in. Some newer companies are speculative however, and owning their stock would also be considered speculative.
4) Investing in mutual fund and ETF’s – In order to spread out your risk and even manage it better you could purchase shares in a mutual fund that invests in gold assets. Certainly there are many to choose from and some are quite profitable. An ETF is just like a mutual fund, only it can be traded like a stock
5) Futures – Futures, or futures contracts, are paper assets that can be purchased from a futures exchange. A futures contract is nothing more than a promise to obtain a commodity at a standardized quantity and delivered at a specified date in the future.

Well there are the basics of what you can do with gold investing, as always learn as much as you can before investing in anything and know your risk, as well as your rewards.

Are you tired of losing money in the stock market? Or do you just want to learn how to diversify your investments by adding gold or precious metals to the mix? Learn more by visiting us at online gold trading website.

Certificates of deposit or CD’s are extremely well-liked by personal traders. These are much like bonds, however they possess a couple of unique benefits over that fixed investment. CDs have just 1 structural distinction to the typical bond, and that is that interest is paid out on maturity instead of sporadically through the existence of the account. But you can find other distinctions to retain in thoughts, such as that interest on CDs are completely taxable and that CDs are obtainable only via banks and thus carry FDIC protection. A well-liked use of certificates of deposit is by the exercise of making laddered CD investment portfolios, which offer an extremely tailored and risk-free way to create income streams.

You can find two methods to start buying CDs. A simple way is immediately via a financial institution, which can be fairly simple and you will find no commissions. Typically speaking, banks provide various estimates of return based on their individual demand to draw consumer deposits. Furthermore, FDIC insurance policy only safeguards a limited quantity of cash per lender. Which means you might have to shop all over to obtain the most effective rate and completely guard your assets.

In these types of situations, investors frequently work with a brokerage house instead of looking from financial institution to financial institution so that you are able to conserve time. Simply because brokerage houses don’t sell CDs, only dealer them, any CD bought via a broker can be traded just like a bond and commissions tend to be included. By itself, this exercise is harmless, but when you offer using a commissioned merchant or investments markets, warning is justified.

You have to be on the watch for all points when working with brokerage houses, the very first of which can be how commissions can have an effect on the yield to maturity (YTM). Even though a CD might pay out a stated quantity of interest, the precise YTM might be reduced based on fees. Next, you also have to be mindful of what may occur might you have to liquidate your CD prior to maturity. This really is a thing brokers frequently don’t mention until right after the purchase is concluded, or never in any way, and it may charge you.

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When starting a business or making plans to increase and expand a business there are certain guidelines that should be followed to ensure the changes in growth are coming at the right time, and that fiscally, the business owner is responsible for managing the acquisition of new equipment and keeping costs within tolerances that the business can handle. Through capital planning investment control business owners can look ahead to see the needs of their growing enterprise and calculate the appropriate time to make new acquisitions or expand their employee base without putting a strain on the organizations finances.

By following a business and marketing plan organizations are able to prepare a roadmap with specific goals and benchmarks that are design to outline the growth and success of a company. Regardless of the industry or the enterprise capital planning investment control examines the available resources of a company and makes recommendations as to loans and leases for equipment and the plots the advantageous approach to business so that successful incorporation of the business plan will be in line to meet the set forth goals and objectives of the organization in a responsible and timely manner.

By consulting with specific partners and financial advisors the business, government agency, or non-profit organization can establish and meet their goals for the development of their organization within the capital planning investment control restrictions that have been set up to keep the enterprise moving in the direction that the owner and board of directors sees for their future. With a plan for the financial strength and grow of the company established following the business plan becomes as easy as conforming to a road map for success.

Manage Advantage, Inc. ( http://www.manageadvantageinc.com/ ) is a small, woman-owned business, to serve the needs of executives in large organizations, particularly the Federal government executive and capital planning investment control.

Your vision for financial freedom may make you wonder what can be the best opportunities for you to go for and get things right! I would say that having money saved up and seeing it grow all the time is one way to make your vision for financial freedom come true. This doesn’t mean that you live your life austerely at the present. Instead, good planning is what should be on the cards.

Proper Financial Planning?

Yes, that is the key. Almost every person starts with a separate bank account towards saving cash initially in their lives, and this never takes them far. The problem is, you will always have something to purchase and spend your money on as long as you have liquid cash available for yourself, at least this is how it works with most people. To be able to see real savings, a secured investment plan is what works.

So start with your plans. How much money do you need each month to support yourself, comfortably but not luxuriously? How much is left from your salary or daily income after that? Divide this remainder in two parts so that the bulk goes towards the secured long term investments while a bit of the remainder stays in your “savings” bank account to cater to any requirements or necessity that you may suddenly come across.

The Investments

Now there are a huge number of investment options. You can go for investments that will mature and offer you the returns after a short while (like a year), or you may go for longer terms as well. And of course there are plans that will let you get your money back even earlier! It all depends on how much returns you want, and how long you may afford to pay towards the premiums.

To fulfill your vision for financial freedom, you need to be assured of the fact that even after you have retired, you must have a monthly (or other periodic) source of income, and see money come in to support you regularly. These are called the pension plans and annuities, and are generally the very long term investments. They are very safe and you may expect complete peace of mind when you retire.

And you may also think about growing your money in the bank and live on the interests derived from it later on. That is also a good option. Consider all these possibilities and options and make sure you do your calculations right. I would personally advice you to speak to an investment company on this, and then decide what may prove to be the best option for you for building your way towards your vision for financial freedom.

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The term options trading refers to buying securities like currencies at a particular time with an idea of reselling it when its price increases. If dealt carefully and attentively, this kind of trading can help you earn large income. Option is basically a contract between the seller and the buyer of the asset such as stocks.

The profit earned or loss suffered in options trading is decided by the price variations in relation to the price that was fixed at the time of introducing the contract. The common areas of trading in which options trading are dealt with include treasury bonds, stock indexes and foreign currencies. Due to advancement of technology and services in options trading, rumors and gossips have become a common affair. Due to the unpredictable nature of the options market, traders prefer a fully managed account with the brokers rather than managing the whole thing on their own.

Some of the frequently asked questions regarding this trading are as follows:

What are the types of options trading products?

Answer: One of the options trading products is the Vanilla options trading. This product is traded over-the-counter and is also called plain vanilla forex option product. The best factor in it is that it carries excellent liquidity for major currencies. The brokers dealing in this product are called plain vanilla forex option brokers. Usually, the option brokers offer plain vanilla forex option via phone instead of online trading.

Exotic options trading is another type of options trading. The term exotic is used because these options deal with those currencies that are rarely traded. This product is also called non-vanilla. Its structure can be different from the structure of a standard option. This product does not offer much liquidity and is designed basically for the individual needs.

How can people begin trading?

Answer: Options brokers help the investors with a quick and affordable way to involve in trading from their homes or offices at any time. In case you are a beginner, you can log on to many online websites offered by these brokers. You can even make demo or trial account that will eventually help you in practicing your trading skills and polishing them. You can also increase your understanding level regarding the functioning of the real time trading market.

Where can they find help regarding their trading strategies?

Answer: As numerous options trading products are available in the market, it becomes extremely essential to understand all the risk factors related to all of them before selecting the best one for yourself. For this, the best mode is to take the help of an experienced options broker who will guide you in selecting the right product with best returns.

Small investors are attracted towards the trade because it gives a very huge exposure to them with a small amount of money as investment. But they must keep in mind that every trade involves some sort of the risk or the other. Thus, it is suggested by the professional experts to invest only that much amount of capital in trading that you can afford to lose.