Investment Articles

With high inflation, we need to take control of our finance and plan for our futures nowadays. Living within one means reduce the risk of debt but is it sufficient to secure your future? Why do we need to be financially free and have financial control?

We need to invest to build up a source of income, which will continue to grow and be able to provide a secure future for ourselves and possibly our next generation.

The reasons to invest include:

1. Let your money work for you: Learn to save money and invest the rest so that it grows even when you are sleeping.
2. Cope with inflation: If you have wise investment that surpasses the inflation rate, you have a sound future finances. You have no worries of the prices of dairy expenses.
3. Business owner: Business needs to invest, whether small or big small sized business. Investing not only grow the capital and expand the business but also teaches one to become a successful businessman.
4. Dependents: Money generated from investment can help to pay bills, buy accessories and pay expenses for holidays.
5. Education: Education fee is increasing with inflation. Investing in an education plan helps to support someone’s studies.
6. Assurance: By making long term investment, you can be assured of sufficient money if you plan to retire. Start investing young and you can have a higher return before you retire.
7. Attaining things you want: The returns from investment can be used to get those things that you dream off, such as cars, houses, etc.

Investment return has to be a source of money unrelated to our regular wages, but money from income producing assets. We have to invest in income producing assets so that they will grow and we can be financially independent.

The investment risk level that you take depends on your needs. If you are interested to make fast money, you would be interested in investment which involves high risk. If your plan is for retirement, you would prefer something that is safer and can grow over time.

The main objective in investing is to create wealth and security with time. It is always impossible to earn an income as one will want to retire. Hence, smart investment helps to insure your financial future. The earlier you gain the investment knowledge, the more successful you will be. Longer time in investment means higher return and you can retire earlier.

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Today’s clients are better educated and have more information freely available than at any other time in history. It is therefore, in the financial advisor’s best interest to be completely open with his or her clients about the costs of the various financial products that they are offering.

In the past, unless the client was prepared to read the exceptionally ‘fine print’ or knew the right questions to ask, he/she was kept completely in the dark about the costs of financial products. These ‘hidden’ costs were the fees, penalties and, most controversially of all, trailing commissions which drained thousands of dollars from an individual’s investment annually.

The GFC has educated many investors on the finer points of financial advice. For example, a financial advisor who works for, or is affiliated with, a particular insurance company, bank, mortgage company, finance company or brokerage house will exclusively promote that particular firm’s product. Why? Because he/she receives a trailing commission which lasts for the life of the product. How does this affect the client’s investment? The client gets fleeced $1000s per annum from their investment returns. Yes, these fees and commissions would otherwise been deposited into the client’s account.

More alarming is the fact that due to these types of lucrative incentives, the financial advisor was not acting in the best interests of the client. The GFC has highlighted how many investors were sold questionable products simply because they were the products that paid the financial advisor the highest returns and commissions.

A financial advisor who doesn’t provide transparency will end up with egg on his/her face. Today’s clients know where to find information on financial products. They are not as trusting as they used to be and they are well aware of the trailing commission ‘gravy train’. Today’s clients know that they have a right to demand and receive rebates on fees and commissions generated by financial products.

A financial advisor must observe the rules and regulations of transparency when dealing with clients. They must disclose which companies they are affiliated with and which products they are restricted to selling and why. As potential investors, clients have the right to demand complete disclosure (make sure you get it in writing), by the financial advisor of all associated fees, commissions, rebates, default commissions, terms and conditions, and penalties.

If you are still concerned or unconvinced by the information that the financial advisor has provided you with, there is still one more thing you can do as an investor. Go directly to the Product Provider, that is the company supplying the product to the financial advisor, and make a written request for a disclosure on that particular product’s fees and commissions.

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Just how do you go about investing a windfall? The answer is prudently, with proper planning.

For most of us, a financial windfall is something we dream of. For the lucky few, it becomes a reality. This financial windfall could be from the lottery. Or it could be from an inheritance or stock options; from a maturing life policy or retirement lump sum; or from selling your business.

That sudden windfall can bring real elation but can also cause confusion and stress. It can be quite an emotional time. Some people feel a sense of guilt and want to give away large sums immediately. Others go on a spending spree and blow most of their windfall before they have a chance to think through their options.

So what should you with your windfall? The best approach is to take your time. Pay the lump sum into a bank account and wait, while the news properly sinks in. Then weigh up all your options. By all means consider gifts and frivolous ideas and whims, such as the dream house or the Lamborghini but do take the time to think. After your initial elation subsides, you need to take a hard nosed look at some important issues.

For example, some people think about giving up work. That’s fine, if the sums stack up. If, say, you win, or come into, £1 million at the age of 30, you’ve probably got a good 50 years left to live. Taking that sum on a cash basis for ballpark planning purposes, this would leave you with £20,000 a year for life to live off. That’s OK but not going to fund a lavish lifestyle. Then take inflation into account, say at a conservative average of 2% per year, and by the time you reach 65, your £20,000 will be worth half what it is today. And you’ll still have 15 years to go!

So you would need to think carefully about the sort of investments you make at the outset, to optimise your returns to fund the lifestyle you want. And you may still need to work – or perhaps create a new business venture of your own!

Of course, if you come into £1 million at the age of 60 or 70, it’s a somewhat different picture.

Whatever, you need to take stock of your financial situation. Use this initial period to think about your financial future and your financial objectives. What do you want to achieve with the money? What sort of lifestyle do you want? How much can you spend each year? What’s the best way to invest the money to achieve your objectives – cash, property, equities? Are there gaps in your insurance coverage? Do you need estate or inheritance tax planning?

If you have consumer debts, – mortgage, loans, overdraft, credit cards – in most cases it probably makes sense to consider clearing them first and then to look at what to do with your net lump sum.

As you can appreciate, it is crucial that you get expert financial advice, to help you with your financial planning process. The insight and experience of a good financial adviser, plus tax and legal experts, can help you make the most of your new opportunity. They can show you how long your windfall might last, based on projected investment returns and withdrawal rates. They can also explain all the various investment options, so you can select those that match your objectives, timescales and attitude to risk. From there, they can help you structure the appropriate asset allocation strategy for your investment portfolio.

Your financial adviser can also help you with other financial needs, such as life insurance and long-term care. Whatever your windfall, life insurance cover may be needed to help meet your family’s ongoing needs as well as help pay inheritance tax expenses should you die. And an extended stay in a hospital or nursing home can seriously eat into your assets. A long-term care policy may help cover the costs.

A financial windfall could also raise the need for inheritance tax planning, whilst it will be important to make sure at this stage that you make a will. If you have one already, make sure that it is updated.

So all in all, if you come into a financial windfall, don’t go bananas! Take your time before deciding what to do with it – and talk to professional financial advisers as well as your family.

Chris Flood, MA (Oxon), MBA, is a marketing and management consultant based in Bristol UK. He writes articles on investments and financial planning as well as other subjects. To find out more on how to invest a windfall, please go to http://www.kelland-gloucester.com/how-to-invest-a-windfall.asp.

Further information about Kellands Gloucester and its services can be found at http://www.kelland-gloucester.com

American investors lost trillions of dollars as a result of the bear markets of 2000-2002 and 2008. As a result of such losses, mutual funds companies are beginning to offer so-called absolute return mutual funds. The goal of an absolute returns strategy is to achieve, positive, more consistent returns under all market conditions. While the power of consistent returns has long been recognized, investors should be aware that the new absolute return funds often use different approaches in trying to achieve such results, some more questionable than others.

The focus on absolute returns has been long overdue. While many investors and investment advisers focus primarily on returns, smart investors realize that the true secret to successful investing is managing investment risk. Legendary investor Benjamin Graham first advanced this concept decades ago. Investors would be well advised to read Charles Ellis’ classic, “Investment Policy-Winning the Loser’s Game” (the more recent edition simply goes under the title of “Winning the Loser’s Game”) for a simple explanation of the concept. Simply put, the concept of absolute returns simply follows the Wall Street axiom of “don’t tell how much you made, tell how much you were able to keep.”

Many investors lost money in the recent bear markets because they adopted the popular static buy-and-hold approach to investing. But the recent bear markets offered further proof that the buy-and-hold approach is fatally flawed in that it fails to recognize the cyclical nature of the stock market. What most investors do not realize is that the buy-and-hold approach is based largely on a famous study known as the BHB report and a misrepresentation of the study’s findings.

Some financial advisors will mislead investors and tell them that there is no reason to make adjustments in one’s portfolio since the BHB study found that asset allocation, not individual investments, accounted for 93.6% of investment returns. What the BHB study actually found was that asset allocation accounted for 93.6% of the variability of investment returns, not the returns themselves,

Looking at only three types of investments, stocks, bonds and cash, the BHB study concluded that the variability of a portfolio’s investment returns increased as more money was allocated to the more volatile investments. In retrospect, this seems to simply be common sense. The key takeaway for investors is that the BHB study, however, did not study the determinants of actual investment returns, did not claim to do so, and made no representations regarding same.

Advocates of the buy-and-hold approach to investing often offer numbers regarding the cost of missing the “best” days of the stock market. As a trial attorney, I am always interested in the other side of the story, what is not being said. In this case, what is not being said is that recent research indicates that the benefits of avoiding the “worst” days of the market far outweigh the cost of missing the “best” days of the market.

A recent study by Javier Estrada of the IESE Business School found that missing the “best” 10, 20 and 100 days of the stock market (defined as the Dow Jones Industrial Average) during the period 1990-2006 reduced an investor’s returns by 38%, 56.8%% and 93.8%, respectively. On the other hand, Estrada found that avoiding the “worst” 10, 20 and 100 days of the stock market improved an investor’s returns by 70.1%, 140.6% and 1,691%, respectively. The study found similar results for the period 1900-2006. The difference in the numbers is due in large part to the fact that investors have to earn more, sometimes significantly more, than they lost just to break even and the time spent in making up for such losses constitutes an opportunity cost for an investor.

So what does this mean for investors? Does this mean that investors should engage in short-term market timing to avoid market corrections? Not at all, as trying to time the short-term swings in the stock market would be both costly and virtually impossible.

Absolute return investing simply acknowledges the cyclical nature of the market and then takes advantage of such nature to maximize potential performance. Those familiar with the classic book,”The Art of War,” will recognize this strategy of using the nature of things to one’s advantage as a cornerstone of General SunTzu’s strategies, but it is equally applicable to investing.

The truth is that most investment portfolios fail to take advantage of the nature of the market, as they contain too many investments with a high correlation of returns, meaning that the investments react in like manner to market conditions and therefore fail to provide an investor with adequate protection against downside risk. A 2007 study by Schwab Institutional reported that 75% of investor portfolios studied were inappropriate for the investor in light of the investor’s goals and/or financial situation. This unfortunate situation is often due to the shortcomings of the commercial asset allocation/portfolio optimization software often used by financial planners and investment advisers.

Fortunately, investors wishing to implement an absolute returns strategy can do so on their own and save the costs and expenses involved with mutual funds. There are a number of investment products currently on the market that can greatly simplify the process of constructing an absolute returns portfolio. By heeding the advice of General Tzu and focusing on investment alternatives that have varying levels of correlation of returns and monitoring the stock market to decide when portfolio reallocation or substitutions may be appropriate, an investor can effectively manage investment risk and improve their potential for investment success.

James W, Watkins, III is an attorney, a CFP professional and an Accredited Wealth Management Adviser. His areas of expertise include wealth preservation, wealth protection and fiduciary law. He is CEO of InvestSense, LLC, a registered investment adviser firm located in Atlanta, Georgia. For additional articles and information, visit http://www.investsense.com. Mr. Watkins can be contacted at tawj3@yahoo.com.

One of the most important skills in life is understanding your money, and the correct ways to make it grow. Of all the language, math, and science skills schools teach to help you get a paying job, they never teach you how to take care of the money you make. Of course, having a well paying job is the first step to survival and paying expenses. Keeping as much of that money you make savings is also really important. This includes careful spending and taking advantage of sales and coupons.

But then what? If you ask most retirees they’ll tell you it is scary once that paycheck stops and all you have to depend on is those life savings. Especially for this current working class generation, from whose retirement funds the government is “borrowing” from to pay for our debt, we have no dependable social security for retirement. The theoretical solution, which everyone knows, is investing so your savings grow over time as the investment grows, and that investment growth covers your retirement living expenses.

It’s safe to say at some point, your savings will be tied to the stock market. Could be through pension funds, 401k’s, IRA retirement funds, life insurance, etc. What’s critical for you to know is whether you, your current financial advisor, or another financial advisor is the one to trust your hard earned money with.

The standard pitch a financial advisor will give you is that the stock market goes up in the long run. By the time you retire in a 20 or 30 years your investments will be worth more than when you started right? While the statistic is true over 50 or 100 years, there are decades in between where the stock market is the same or lower than when you started. What happens if your retirement date happens to be during those bad years? Even if you retired at a time when the stock market is the same as when you started instead of down, it still means your savings did nothing over the decades to help you retire. More devastating would be realizing that years of saving with coupons, sales, and driving cars with higher MPG did little to help compared to how your investments lost.

Know that investing on your own is a challenge, but it is very doable and many regular working class people successfully do it everyday to increase their savings and wealth. However, looking at our self assessment criteria below, if you are still in the “Beginner” stage, it is safer to find a good professional to manage your money for you. The danger is most financial advisors aren’t professional money managers, they’re just advisors who work mostly as salesmen for investing firms.

A simple way to see if your financial advisor is qualified to handle our savings is to ask them to see records of real customers they themselves have personally managed. Look at those records and see if those customers were able to retire comfortably like the financial advisor is promising you. This probably means the financial advisor would have dozens of years of experience and investing his own money along side yours.

Another way to access the qualifications of your financial advisor, yourself, or any other person to manage your money is comparing against criteria we have set:

Level 1: Beginner Beginners have little to no knowledge about the stock market or finance. Most general public investors fall in this level. Beginners can’t consistently make money week in, week out. Month in, month out, Year in year out. If you make a lot sometimes, but also lose a lot, you end up around where you started. That does not help growing your investments. You can see why we say many financial advisors and mutual funds are not qualified to handle your investments. Beginners must be able to do own research and make own judgments without relying on someone else’s opinions and reports. Limited knowledge of basics of fundamental analysis, technical analysis, and financial market mechanics. Everyone’s goal should be to pass as a “Beginner”, like getting a driver’s license.
Level 2: Sophomore Consistently make money with a basic strategy, but not good enough to make a full living. Sophomores can consistently make 1% or 20% a year, but it’s not enough to make a living. However, the consistency is key because it means dependability through proper understanding of investing. With a consistent foundation, sophomores can then improve their strategies, techniques, and even the assets they trade in order to increase their investment returns. Assets like options, futures, and forex have potential for bigger returns, but are also much more dangerous than stocks if you are not consistent yet.
Level 3: Advanced (Solo) Consistent returns, can make a living trading (i.e. has a bread & butter strategy). That means consistently making at least 30% or more returns per year. Very few people fall into this category. Even many professional money managers and millionaire hedge fund managers do not fall into this category because they make their millions on the fees they charge investors, not big returns on managing their own investments.

You should not move up to the next level until you’ve mastered your current skill level and all the levels below. Just as any qualification tests for any license, we say this for your own protection. However, there is no official license required to invest or trade stocks or any other security, so just remember to use your best judgement! If you do things in the financial markets you are not trained for, you will be putting yourself and maybe your family at risk.

Jeffrey lin is an individual futures, options, and stocks trader. His stock market experience helped him launch MarketHEIST.com, an investor’s resource magazine covering investment services, stock trading coaches, and stock trading tools. Check out his free stock market guides for step by step cheat sheets to invest and trade successfully, not stock picks that’ll be worthless tomorrow.

There is a long standing debate in the investment community around actively and passively managed investment. Yet many people are not even aware of what the differences between the two types of investments are. It stands to reason that you should choose a type of investment that fits with your portfolio or serves a certain purpose.

Active Management – Active Investing Focuses on Beating the Market.

An active fund manager will try to generate investment returns that exceed the returns for a given benchmark index. The active fund manager uses intense research and market analysis to increase their ability to find opportunities in the markets. Using available resources, the active portfolio manager selects individual shares or securities to be part of the investment basket. Active investment is based on the belief that prices react to information slowly enough to allow the investment to outperform the market.

A typical type of actively managed portfolio is a unit trust in which investors own a portion of the fund. The selection process is generally based on specific criteria and/or the manager’s judgement, which focuses on specific securities and relies on timing of trades. Active management usually incurs higher costs that reduce returns. By choosing the right investments, taking advantage of the market trends and managing risks, active portfolio managers can generate returns that outperform a benchmark index.

Passive Management – Passive Investing Focuses on Reducing Costs.

A passive fund manager attempts to generate returns that match the returns of a given benchmark index. This is often referred to as index tracking or a buy and hold approach to investment management. Passive portfolio management such as ETF’s contend that it is difficult or impossible to consistently beat the market over time despite superior stock pricing and manager skill. Rather than trying to choose winners, passive investors believe that market returns are there for the taking if aligned with a buy and hold strategy for overall sectors or asset classes.

Because passive investments like ETFs simply reflect an index, no research or market analysis is required. Trading costs also tend to be lower because fewer trades are made. In addition, fewer trades are more tax efficient. However, returns tend to be lower than the benchmark due to the costs associated with trading.

The approach of passive management is based on the concept of efficient markets, which states investors have equal access to information and therefore it is difficult to gain advantage over other investors. Therefore reducing investment costs is the key to improving returns.

Ultimately the choice of active or passive portfolio management should be determined by the investor’s personal preferences and goals. Investors should start at the end and work backwards to the beginning. By identifying goals first, the investor will have a better idea of what strategies are needed to achieve their investment goals.

PSG Online is a web portal that provides clients with the ability to trade, invest, insure and plan for their financial well-being. Achieve your life’s ambitions: Build a portfolio of assets to grow your wealth over the long term. Buy shares locally or invest offshore in listed companies. Manage your own portfolio or choose passively managed Exchange Traded Funds (ETFs)or Unit Trusts.

You have likely heard the old saying, ‘Don’t put all your eggs in one basket.’ This summarizes the entire philosophy of a diversified investment portfolio. The idea is to spread out the risk. You do not want to have 100% of your investment capital riding on a single investment. For example, you would not want to have your entire investment portfolio allocated to commodities. This might represent very slow growth and/or improper risk allocation. Likewise, you would not invest 100% of your capital into penny stocks that may go up and down in value just as quickly as the wind blows. Maintaining a diversified investment account will allow you to reap the benefits of multiple investments while at the same time protecting yourself from a single catastrophic loss if one of the investments happens to tumble.

Stock Market Investing Is A Fundamental Element Of A Diversified Portfolio

The United States stock market has increased in value, on average, about 11% since the 1920’s. This includes the time of the Great Depression, the stock market dive of 1987 and the dot-com crash of more modern times. Over time, the stock market increases in value. Those who invest in the stock market are in a position to benefit from this slow increase in value. Those who invest for the long-term are most able to capitalize on the growth of the stock market. It is a fundamentally sound investment when done properly. There are number of ways to invest in the stock market including mutual funds, spider funds, and stock indexes, to name just at few of the methods. Individual stock purchases can also be profitable if done correctly. As always, talk with an investment adviser about your options and how stock investment fits into your overall game plan.

Penny Stock

A more specific type of stock market investing revolves around penny stocks. These are stocks that have a small price tag and potentially a significant return. However, the potential also exists for significant losses if prices go against you. For this reason, penny stocks are generally considered to be a risky investment and are not suitable for all investors. The appeal of the penny stock is to ‘find the next Walmart.’ What this means is that the investor (or perhaps in this case the speculator) is looking to buy a company stock for a very small amount of money (perhaps just a few pennies) in the hopes that it may soar to be worth several dollars per share in the future. This is generally the fundamental game plan with a penny stock.

Mutual Funds Investing

Mutual fund investing is another one of the ways to invest in the stock market. Mutual fund exist for the purpose of spreading out risk. By their very nature they are designed to help increase overall portfolio returns while at the same time reducing overall risk to investment capital. The way this is achieved is to spread out the mutual funds overall portfolio into a number of different stocks. This diversification can help with risk reduction. People enjoy investing mutual funds because it allows them the opportunity to invest in a number of different companies all at the same time. It also allows for their money to be managed by a skilled professionals so that as individuals they do not have to do the decision making themselves. For these reasons it is easy to see why mutual funds have a very broad appeal and are one of the most popular investment opportunities available. Bear in mind that just because a mutual fund has done well in the past does not necessarily mean that they will continue to do well in the future. This is one of the challenges common to mutual funds.

Value Investing

Value investing is generally a broad definition of investing done by purchasing companies that have fundamentally sound value. In other words, a company that displays consistent earnings and offers a good value for the price of the shares offered would represent a company fitting into the category of a value investment. A number of fundamental investors organize their portfolios according to a value investing approach. Buying stocks that are of good value can represent a fundamentally sound investment strategy.

Bonds Investing

When you talk about bonds investing you generally think of safe and secure investments, and for good reason. Bonds generally represent one of the safest investments available. A bond is something like a promissory note. A company or government might issue a bond in order to raise funds for a particular project. When raising the funds, the entity will offer a bond containing a specific investment return which is to be repaid to the investor according to the term and length of the bond. It is something like lending money to a company and then giving you a specific return on your money. This can represent one of the safest forms of investments and likewise is popular for many people.

Commodities Investing

Commodities can represent one of the more confusing types of options available for investors. It is best to consult with skilled professionals and financial advisers when it comes to the topics of commodities. Commodities can be viewed as both a high risk opportunity as well as a safe and secure opportunity for financial returns. It depends on the approach first and foremost. Many investors view commodities as a hedge against their other investments-designed to provide a counter-cyclical approach to investing that can help diversify overall risk and returns.

Consult With An Advisor

Consulting with the skilled investment adviser is one of the best options that any investor can take before allocating their money. It is a good idea to diversify, but if the diversification is done without a systematic game plan than the results can be less than spectacular. A solid game plan, rolled out over a long period of time can be one of the best approach is to systematic, long-term investing that will yield fruitful financial returns. Long-term investing should be the goal of almost every investor looking to double and triple their capital in the years ahead. Begin first by talking with your investment adviser about a systematic game plan for your investment blueprint.

For more great tips and expert advice on investing for a bright and secure future, please visit us at http://www.elementaryinvesting.com.

Investing is such a complicated field that there are literally tens of thousands of books written on the subject. Investing can be quite difficult, depending on the strategy, though it and can also be simple and straightforward if done properly. One of the best pieces of investment advice ever given is to diversify your portfolio into several different investment vehicles. This can help you spread out the risk and achieve a steady return on your investment capital. This is the goal of most investors. This type of investing can be categorized broadly as value investing and with a diversified investment strategy that holds a goal of long term positive returns.

Value Investing
On the whole, value investing is generally defined as investing that focuses on buying investments that have good value. This is a fundamentally safe and secure type of investment strategy. The goal is for steady appreciation and consistent yields on capital invested. Value investing is a fundamental and lies at the base of a solid financial investment plan. Buying investments because they are a good value is a mark of a solid investment plan. If you buy companies because they are good value, then chances are you will be in a position to enjoy capital appreciation in the years to come.

Stock Market Investing
Stock market investing is one of the fundamentals of value investing. By diversifying investments into the stock market it is possible to spread out investment funds into a wide variety of different companies and their stocks. It is certainly very difficult to choose specific stocks that are going to go up in value immensely in the years to come. The Walmart-like stocks are few and far between and taking them at their outset is almost impossible. This certainly does not mean that you should not try. Buying fundamentally sound stock market investments can be a goal and ticket to a fruitful financial future ahead.

Penny Stock Investments
Penny stocks are those that bear their own name. These stocks are often valued very lowly and the costs are often quite low-often times ranging from a few pennies per share up to a couple dollars per share at the most. Some investors believe that there is great potential return in penny stock investments because you can buy for such a low cost a large amount of shares and if there is any appreciation in value this year value will likewise increase. An increase in the share value will yield an increase in the investment return as well.

Bonds Investing
Bonds are another core element of a diversified investment strategy. Bonds typically have slow and steady growth patterns and consistent yields year after year. This makes them the ideal investment for slow and steady capital appreciation. There are several different types of bonds available ranging from government-backed bonds to higher risk corporate bonds. Bonds remain one of the best ways of diversifying a portfolio with safe and secure investment returns. Talk with an investment adviser about the different kinds of bond ratings and how the different types of bonds will play an important part in your overall investment portfolio.

Mutual Funds Investing
Mutual funds are yet another way of diversifying investment risk and return. Some mutual funds specialize in high risk/high yield type investments, while others mirror segments of the stock market (as in Spider Funds, which buy the exact companies that appear on certain stock indices). Mutual funds are run by a board of directors and a management team in most cases. These individuals have the responsibility of making the investment choices for the entire fund.

Mutual funds are traditionally one of the most popular investments options and routes to take. Mutual funds are easier to become involved with than almost any other investment. They are often times the starting place for investors who are looking to have the potential for return while also curving the risks in spreading out the potential downside. One of the challenges with mutual funds, however, is the fact that there are so many and they can be difficult to choose between them. Out of thousands of different mutual funds, finding one that meets your investment requirements can be tricky. It also should be noted that just because a mutual fund has done well in the past that does not mean that it will continue to do well in the future. Very few mutual funds maintain a steady track record over time.

Commodities Investing
Commodities are another option for a diversified investment portfolio. Commodities represent certain items like corn, oil, gold, silver, and other such natural items classified as commodities. Commodities can often be used as a ‘hedge’ investment and have a safe and secure track record. Investing in commodities should be done with the help of an experienced investment adviser only or with much experience under your belt. They are not typical investments and should not be viewed as ones that are as easy to invest in as bonds or mutual funds. Typically, commodities investments can be used as a counter-trend type of investment, or in other words, as a protection against loss when other types of investments seem to be falling. Commodities will typically hold their value contrary to the stock market as a whole.

All of these different types of investment options should be discussed with a qualified investment adviser or broker. To venture into these investments on your own can be dangerous. It should be mentioned that with any investment there is the potential for loss. Anytime you have the potential for substantial gain, likewise you have the potential for substantial loss. Some of these investments are more secure than others. You should discuss your options and your long-term strategy with your investment adviser to determine the best plan moving forward. You’ll want to create a diversified plan that creates a steady return while minimizing risks.

For more great tips and expert advice on investing for a bright and secure future, please visit us at http://www.elementaryinvesting.com

In the current financial marketplace, with low interest rates and market volatility, getting a really good return on your investments is difficult to achieve. Most investors are always looking for that special product or stock that offers extra special returns. However, to get the sort of returns that are significantly above average requires not just excellent research, analysis, financial advice – and luck; it also requires courage, as you are entering into the realms of risk-taking.

It is a truism that risk and reward go hand in hand – the bigger the potential investment return, the greater the potential risk of loss. So the question is, when it comes to investing your hard earned savings, have you got the stomach for what could be a roller coaster ride, in order to ensure you get the best possible investment returns?

As an investor, your attitude to risk is crucial and should be one of the first things that you discuss with your financial adviser. But discussing it is perhaps not enough, as it allows subjectivity to creep in, both on the side of the investor and adviser.

This is why several financial adviser firms now use risk-profiling tools to provide objectivity to the whole investment planning process. These tools are not just gimmicks but provide the basis for a meaningful discussion that is not “led” by the adviser.

The results can be surprising and can highlight gaps between an investors’ actual and perceived risk tolerance. They can also show disparities between the investors’ risk tolerance and current asset allocation. Also, if you are investing as a couple, both of you should take the test separately because it can highlight differences in attitudes that need consideration.

There are various tests out there, including some sophisticated online options. Several providers of investment products also offer risk and asset allocation tests but these should be treated with caution as they veer towards recommending their own products. Personally, I quite like the simplicity of questionnaires provided free by some financial advisers as they are quick and easy to complete, make you think and can lead to a productive dialogue with the adviser.

Most tests measure an investor’s risk tolerance and create a risk profile for that investor, along with a recommended asset allocation strategy.

Obviously other factors also come into play, such as an investor’s risk capacity. In other words, the investor may be willing to take risks but may not be financially well placed to do so. So the ability to absorb losses should also be taken into account.

Similarly, age and timescales have an impact. For example, whilst the attitude to risk of investors approaching retirement may still be gung-ho, they should perhaps consider safer investment options. On the other hand, even cautious younger investors looking at an investment window of 10 to 20 years will actually find that the likelihood of losses in equities is small and the returns greater. For them, equities carry far less risk than someone on a short timescale.

A final thought. Taking the test alone can help you, as an investor, understand your attitude to risk and whether your existing portfolio is right for you but it cannot help you pick products or investments. This is where you still need to talk to a quality financial adviser.

Chris Flood, MA (Oxon), MBA, is a marketing and management consultant based in Bristol UK. He writes articles on investments and financial planning as well as other subjects. To discover your attitude to risk, please go to http://www.kelland-gloucester.com/attitude-to-risk.asp.

Further information about Kellands Gloucester and its investment services can be found at http://www.kelland-gloucester.com

After discussing Differences between Savings and Investments, we will further discuss Investments to see what important factors an Individual Investor must keep in mind before making actual Investment decisions. From First and Seconds Lesson on investment, we have darted down certain points which classify investments from savings, and have noted few factors there that an individual investor must keep in mind to make wise investments, or even, to make investments at all or not.

This Lesson will cover in detail, factors and checks that are or should be backbone of investment decisions.

1. Avoid Hasty and Un-Planned Decisions. In a volatile market and financio-economical situation like present, it has been observed that investors are making rapid investment decisions without involving much planning and analysis. Investors, out of fear and/or lust factor, seem to have ignored and put aside their long term financial goals and all that long planning they had done in a normal market situation. This kind of behaviour must be avoided as it may, and mostly does, add to the already piling up losses. You financial plans may be revived, trimmed and modified but should not be completely ignored as you have had put some hard work and thinking while making those financial plans and setting your financial goals.

2. Draw or Re-Draw a Personal Financial Road Map. As discussed previously in my post on Having a Plan before Writing a Business Plan, we discussed how important it is to know and analyze one’s personal financial position before making any kind of financial decisions. We stressed there that an investor(which in that case was for a proprietor) should first thoroughly analyze his current personal financial position, keeping in mind his future plans regarding his personal life, future major expenses, future earning options i.e. both expected amount and timings. One should have enough cushion for one’s near and far future personal plans, and then see how one can set aside to invest into a new investment)

If you are already very much vulnerable to a financial crisis, based on your current financial condition and future expectations, you should avoid the idea of risking your finances even more by even thinking of a new investment.

3. Knowledge, Expertise and Skills related to Investment. It is always advisable to invest in something you have yourself knowledge and expertise of, instead of completely relying on Investment Managers(if you are going to hire one). If you think you have keen interest in an investment and it is not very technical to handle, you can even yourself manage your investment and save costs. But again it is more advisable to at least have some guidance from one. Having knowledge and expertise of a particular investment class will enable you to make better decisions and look for more innovative and modern ways of investments. So even if you don’t have know how and you trust a particular investment management company, before investing do detailed research and try to get as much as knowledge as possible of the subject, which in this case is an investment.

4. Asses you Risk Tolerance Capacity. Every investment involves some sort of risk, as this is something that differentiates Savings from Investment. If you are investing in stocks, bonds, real estate–there is definitely risk involved. As compared to depositing in Secured Banks. The reward for taking on risk is the potential for a greater investment return. If you have a financial goal with a long time horizon, you are likely to make more money by carefully investing in asset categories with greater risk, like stocks or bonds, rather than restricting your investments to assets with less risk, like cash equivalents. On the other hand, investing solely in cash investments may be appropriate for short-term financial goals. The principal concern for individuals investing in cash equivalents is inflation risk, which is the risk that inflation will outpace and erode returns over time.

5. Timing of Investment. Based on your Financial Position and your long term or short term financial goals, you should assess if this is a right time for you, financially, to make an investment decision. Jumping into an investment decision just for the sake of it can destroy your hard-earned earnings.

Moreover, you should also consider the timings of the economic cycle. You would need to check whether it is the start, mid or assumed end of a financio-economic cycle as you cannot make investment decisions in isolation from the current market conditions.

Muhammad Khurram Shahzad is a Chief Accountant and a Business Advisor in one of the rapidly expanding IT solution firms in MENA region. He writes on different investment and finance related topics in blogs, articles and other forums.

http://www.financialadviceme.blogspot.com