Investment Articles

With any Online Investment the ability to deposit or withdraw funds quickly is crucial. Historically bank wires were expensive and took a long time to complete. Has technology changed all that?

When I first started online investing I was adamant that I wouldn’t use Bank Wires as I felt they were too expensive and too slow. So, for most of my programmes I have used the various payment processors that have been set up to facilitate these types of transaction.

However, even this option has not been that trouble free as some services have failed at crucial times. Also, more of them are introducing charges to receive funds which means you have to think carefully about the sum to deposit to ensure you cover the cost.

Of course it is easy to generalise and say that none of them provide an efficient and economical service which would be the wrong thing to do. Some provide excellent customer service and are very efficient but you still have to weigh that against the extra steps needed to get funds from and to your personal account.

Time for a re-think

Recently I’ve had cause to step back and think about whether I should reconsider bank wires as my main vehicle for deposits and withdrawals. Two online programmes that I’ve had investments with have reported problems with specific payment processors which clearly creates concern when moving funds.

So, when I wanted to make a deposit to another programme I went back to my bank and initiated a bank wire. Doing this directly with a customer service representative made the whole operation very easy. Yes, it did cost me to do this but at the end of the day I know I will recoup these costs pretty quickly with the returns I get. So, for this transaction it was a good choice.

Not suitable for every situation

Clearly this wouldn’t work with small amounts and I’d suggest that $500 would be the minimum you’d want to contemplate when considering a bank wire but at least you know that it will get to where it’s going and given the new electronic banking systems it can be there pretty quickly as well.

It’s always worth keeping an open mind on any decision you make. Time and Technology may well create an environment where your original decision needs to be modified.

For more great tips on online investing you can visit my blog at http://www.onlineinvestingguru.com

From John Murphy and Online Investing Guru. Sign up as a subscriber via Feedblitz and I’ll send you the Offshore Banking Alert for free

When looking at the different types of investments to put your money in it’s important to understand the risks associated with each. Investment risk generally relates to the possibility of losing your money, either in the short term or the long term.

As an example the kind of factors to take into account regarding risk are:

The risk of falling short term values.
The risk of falling long term values.
The risk the provider going out of business.
The risk of making less than other asset types.
The risk of choosing the wrong investment account, plan or fund.

These provide an idea of just some of the considerations to take into account before making an investment, although the above is by no means an exhaustive list.

In managing risk successfully and choosing the right investments for you the most important element of investing to get right is to realise that the investments have to be personal to you.

The way to do that is to manage the two primary elements of risk. They are:

The risk of making investments that are inappropriate for your needs.
The risk of making investments that are inappropriate for your attitude towards risk.

Taking steps to avoid the first will ensure that you have a well structured portfolio. That is, having allocated some money towards a cash reserve, short term money and long term investments. This will mean you have some cash to fall back on in times of need, some money saved for short term expenditures and some surplus assets invested for the future. Having done this you can be safe in the knowledge that your ongoing financial needs are well catered for.

Taking steps to manage the second will enable you to put together a well balanced long term portfolio that is in keeping with your own personal attitudes. Having assessed what type of investor you are and whether you would prefer mainly lower risk or mainly higher risk assets you can then start to choose what individual investments would be suitable. At this point the list above that relates to the risks associated with individual investments comes into play.

A table of high risk and low risk investments can help you to clarify in your own mind where certain investments sit on a scale of risk.

Ultimately most people will be suited to a well balanced mix of low, medium, and high risk investments. However the extent to which you invest in these levels of risk will come down to personal taste, appetite for risk, and your own financial circumstances i.e. whether you can afford the risks.

Jaskarn Pawar, Director, Investor Profile Ltd

If you are a UK investor with an ISA, Personal Pension or Unit Trust investments then Investor Profile’s free online investment monitoring service could help make your life easier.

Back in the day the standard practice was to invest your money into funds such as unit trusts by completing an application form and sending it to the investment manager together with a cheque in the post. You had no idea when the application would be received by the manager and therefore when your money would be invested. The only confirmation of this happening would be when you receive your contract notes in the post some time after.

It was also standard practice, and still is for many, for the investment manager to charge up to 6% initial commission. So for every £10,000 you would actually have £9,400 invested. If you invested through a broker or financial adviser they would typically receive 3%, or £300, out of that £10,000 investment before the money is even invested.

Nowadays the story can be quite different. I say can be because it is not necessarily so. Most investments you make will still follow the same process as above.

However it does not have to be that way. These days you have discount brokers such as Investor Profile that provide a fully automated system that allows you to invest online, safely and securely, quickly and easily. There is the minimal of effort involved in making your application.

You have what is called a fund supermarket to go shopping in. That means rather than only being able to choose from the fund range of a particular investment manager, on a system such as that provided by Investor Profile you can choose from funds provided by all sorts of different fund managers, all in one place, then continue to view your various holdings in one place. A fund supermarket such as this can hold as many as 1500 funds for you to choose from.

You would think that for this added ease of use and flexibility of choice that the broker/financial adviser is finally earning their money. But in fact the new breed of online investment providers actually discount the initial commission you pay.

Investor Profile does not believe you should pay such high initial commissions so promise to not take any initial commission at all. That’s 0% commission to Investor Profile every time you invest. That’s because we believe you should have more money invested at the beginning because this is proven to help you earn more in the future.

So when considering how, when or with whom to invest the benefits of investing online are compelling and indeed changing the industry. For years the investment managers have been creaming off money every time people invested in their funds. Now the good guys are coming to town and they’re here to help you do the right thing so that you can benefit for years to come.

Jaskarn Pawar, Director, Investor Profile Ltd

If you are a UK investor with ISA, Personal Pension or Unit Trust investments then Investor Profile’s free online investment monitoring service could be what you need.

One individual had $11,000,000 invested with Bernard Madoff. This represented 95% of this persons’ net worth. Don’t let the same happen to you.

However attractive an investment appears you should never invest a substantial portion of your funds in it. There are countless examples of investors who thought they were on to a good thing, put all their money in to it only to find some time later the whole thing collapse.

Understanding Uncertainty

I’m pretty sure that if you look back at business reports prior to the economic crisis you would be hard pushed to find any commentator who was warning about the potential problems that would eventually surface and cause so much mayhem worldwide.

In hindsight of course there are now legions of advisers who claimed that they could see what would happen. Personally, I’m not convinced.

Human psychology is a strange and wonderful thing and many of us want to believe what we are told. We become part of the herd mentality and stop thinking for ourselves. This creates problems when knowing where to invest.

Even the best performing investments have indifferent performance now and again and we should accept that the uncertainty surrounding the global economy will always create both positive and negative situations. Unfortunately not many individuals have the knowledge or expertise to assess uncertainty and deal with it successfully.

Spreading the Risk

The answer therefore is to accept that uncertainty exists, that it will throw a spanner in your plans and that it needs to be planned for.

In other words your investment strategy must include the ability to spread the risk of your investment portfolio. So, it is wise to create a strategy that includes the following investment groups:

Cash – Sufficient to provide your living expenses for up to six months
Savings account – Rainy day fund for emergencies
Stocks – Dividend bearing growth stocks
Fixed Income bonds – gives confidence of future returns
Commodities – Gold, Silver and the like
Online Investments – Greater risk for greater reward

It wouldn’t be appropriate to put figures against the categories above as each individual has their own preferences but each should be considered.

Further Detail

Of course within each category there is also the ability to diversify and this should be considered. If we look at the Online Investment category you might split further by:

Passive Investment
Forex
Sports Arbitrage
Network Marketing

This list is just a sample of the type of investments you could invest in and should give a good spread of risk for your funds.

As you start out pick at least two opportunities and when they show positive progress invest some of your returns in a new programme. Then all you have to do is repeat.

No matter how convincing someone sounds about a specific investment don’t be tempted to invest a large proportion of your funds.

For more great tips on online investing you can visit my blog at http://www.onlineinvestingguru.com

From John Murphy and Online Investing Guru

Back in the day the standard practice was to invest your money into funds such as unit trusts by completing an application form and sending it to the investment manager together with a cheque in the post. You had no idea when the application would be received by the manager and therefore when your money would be invested. The only confirmation of this happening would be when you receive your contract notes in the post some time after.

It was also standard practice, and still is for many, for the investment manager to charge up to 6% initial commission. So for every £10,000 you would actually have £9,400 invested. If you invested through a broker or financial adviser they would typically receive 3%, or £300, out of that £10,000 investment before the money is even invested.

Nowadays the story can be quite different. I say can be because it is not necessarily so. Most investments you make will still follow the same process as above.

However it does not have to be that way. These days you have discount brokers such as Investor Profile that provide a fully automated system that allows you to invest online, safely and securely, quickly and easily. There is the minimal of effort involved in making your application.

You have what is called a fund supermarket to go shopping in. That means rather than only being able to choose from the fund range of a particular investment manager, on a system such as that provided by Investor Profile you can choose from funds provided by all sorts of different fund managers, all in one place, then continue to view your various holdings in one place. A fund supermarket such as this can hold as many as 1500 funds for you to choose from.

You would think that for this added ease of use and flexibility of choice that the broker/financial adviser is finally earning their money. But in fact the new breed of online investment providers actually discount the initial commission you pay.

Investor Profile does not believe you should pay such high initial commissions so promise to not take any initial commission at all. That’s 0% commission to Investor Profile every time you invest. That’s because we believe you should have more money invested at the beginning because this is proven to help you earn more in the future.

So when considering how, when or with whom to invest the benefits of investing online are compelling and indeed changing the industry. For years the investment managers have been creaming off money every time people invested in their funds. Now the good guys are coming to town and they’re here to help you do the right thing so that you can benefit for years to come.

Jaskarn Pawar, Director, Investor Profile Ltd

If you are a UK investor with ISA, Personal Pension or Unit Trust investments then Investor Profile’s free online investment monitoring service could be what you need.

In October 2009 the UK government introduced new contribution limits for ISA (Individual Savings Account) investors. From 6th October 2009, those aged over 50 can invest up to 10,200 GBP in an ISA. Up to 5,100 GBP of this could be invested in to a Cash ISA. For those that are under 50 years of age these rules will apply from 6th April 2010. Until then the old rules will remain in place.

This marks a significant increase to the contribution limits for ISA investors. The ISA was introduced in April 1999 when the original limit was 7,000 GBP. It was then increased by just 200 GBP to 7,200 GBP in April 2008 after some nine years of waiting for the contribution limits to be increased.

However it is thought that even this seemingly nominal increase was just to make it easier for investors to put away the round number of 600pm GBP into an ISA, rather than the unusual looking 583 GBP. So this new increase should be seen as the first real increase to the limits in over 10 years. Why now? Well the government wants to encourage UK investors to put money away for their future and be more financially sound with their money. Investing in an ISA can help you achieve this.

Other than the personal pension no other product on the market can offer such a wide choice of investments as well as such generous tax incentives. Not having to pay capital gains tax on your investment profits or not having to pay income tax on your savings cannot be underestimated.

By maximising the use of your annual ISA allowance you can build up a substantial sum of money held within this tax advantaged product. So unless you have a larger portfolio there is no reason why any of your assets should be held outside of an ISA and potentially subject to capital gains tax when they don’t need to be. So if the government is extending their generosity by increasing the ISA limits then it should certainly be a decision that all investors are happy about.

Please note that all tax bases, levels and reliefs are subject to change at any time and are dependent on individual circumstances.

Jaskarn Pawar, Director, Investor Profile Ltd.

If you are a UK investor with ISA, Personal Pension or Unit Trust investments then Investor Profile’s free online investment monitoring service could be what you need.

Will Rogers is quoted as saying “More important than the Return on your Investment is the Return of your Investment.”

To me that means you should diligently safeguard all your online investing account details and ensure you have a robust plan to achieve this.

The Bad Guys are Clever

The longer you’ve been on the internet the more it becomes an integral part of your life. It provides services that save you time, effort and hassle. It becomes your shopping plaza, your bank, your social calendar and many other useful things.

Of course to do this you have to ensure that the services you use are protected so that your details are known only to you. As you encounter more and more sites that require you to create an account with a user name and password the more you’re inclined to grow weary and end up by using the same details for each site you visit.

You convince yourself that life is easier that way. Unfortunately you are playing right into the hands of online crooks who use a myriad of ways to entice you to give up your information. You may even be caught out without realising it until its too late and the damage is done.

And of course there’s always the chance that hackers find there way into a database where your details are stored. Without you even knowing it your details are compromised.

Trust Nobody

So what should you do to make sure that you keep your account details secure? Firstly always be suspicious especially when visiting a new site on the internet.

If you have accounts at several online investing programmes make sure that the details you use for username and password are always unique. This way if your information is somehow compromised on one site then it won’t be able to be used against you on others.

Don’t forget that we humans are creatures of habit so if a crook finds your details on one online investment programme they are likely to test other similar programmes as there is a good chance you might have invested there as well.

Simple Strategies to adopt

It should go without saying that whatever method you choose to create user names and passwords you need to keep a record.

SIDEBAR: If your memory is anything like mine you can’t remember where you parked the car half an hour ago let alone what user name and password you are using on a site you visited three months ago.

If you are just a little creative with user names you’ll not only create new ones but they can also be used to remember when you joined. Let’s assume your name is Mike and you join a new online investment programme on 01 December. To help you protect your details and at the same time remember when the account was created you could use a user name like mi01ke12 (I’m using the UK date format).

For passwords something more sophisticated is needed. This is where it pays to do some online research and find a software tool that does all the hard work for you. You must create strong unique passwords for any online investment programme you belong to.

Free programmes that have received great reviews are:

Roboform
Keepass (the one I use)
Access Manager
I’d recommend you take each one for a test drive to see which one you feel most comfortable using.

SIDEBAR: Don’t forget to change passwords regularly to provide an added degree of protection

Adopting these simple strategies will ensure that you can protect your valuable information easily and keep the bad guys at bay

For more great tips on online investing you can visit my blog at http://www.onlineinvestingguru.com

From John Murphy and Online Investing Guru

For online investing to be treated seriously as a viable option the companies involved need to demonstrate commitment to investors.

When online investment programmes first started they quickly gained a bad reputation as many of them were revealed as scams. This severely damaged the public view of these opportunities and that perception still exists.

I believe it is time for things to change. The global economic crisis has shown that even well respected financial institutions cared little for their small investors with the result that interest rates on savings accounts are now derisory.

This is a golden opportunity for online investing companies to attract these disillusioned people but they must do it in a credible and honest way.

Is regulation the answer?

Nearly all online investments make it abundantly clear that their dealings fall outside any existing regulatory framework as they want to avoid members running to the authorities at the merest hint of a problem.

There are many horror stories where online investment companies have fallen foul of regulators (especially in the US) and the result has virtually always been losses for investors. So, I don’t believe online investing companies would currently welcome regulation under current legislation. Ultimately, this may be an aspiration as authorities learn and understand more about how these companies work.

Where to Start

So if formal regulation isn’t viable what alternatives exist? Some companies may argue that their industry is currently being regulated by the myriad of online monitoring sites as these demonstrate whether programmes are paying or not.

Personally I don’t believe this is the answer as monitoring sites can only work in a reactive way and are not that useful for predicting whether an opportunity is viable to start off with.

To my way of thinking there are two options to consider:

An independent group of investors could be set up to undertake due diligence on a programme that wishes to offer online investing services. They would need access to the company to be able to verify the claims that are being made on how funds are generated and the people involved
A self regulating body set up by the companies themselves which would define a code of practice that companies would need to adhere to if they wish to join. This should also include investor representatives as this is a key element of trust building

Time for Change

For too long online investors have suffered poor service, patchy communication and untrustworthy programme administrators. As I look at some of the online programmes today I can see that things are changing but we are still not at a point where the ordinary investor would consider an online investment as a viable alternative to basic savings accounts for example.

Clearly there will always be greater risk involved in online investments but I don’t think programmes should hide behind that as an excuse for poor service. If the risks are explained fully and clearly, if programmes communicate often and honestly then I believe the industry would reap great rewards both in terms of their own reputations but also in the number of people that would trust them with their investments.

Isn’t it time online investors were offered a better and more reliable service…

For more great tips and commentary on online investing you can visit my blog at http://www.onlineinvestingguru.com
From John Murphy and Online Investing Guru

Online Investing can be a realistic source of additional funding as long as you take the time to research things properly.

In my first 7 tip article I introduced online investing beginners to some of the key things that they need to do to be successful. But of course there are always other things that will help to ensure success and this article aims to help with that.

1. Use software to manage confidential information

As soon as you decide to invest online develop a strategy for keeping your account details secure. Be mindful that online investment opportunities are tempting targets for thieves. Use a robust strategy for user names and passwords to minimise the chances that anyone could access your account. Do not use the same user name and password for more than one account.

SIDEBAR: Search online for free software that will help you with this

2. Find an ecurrency exchanger

Online investing programmes use payment processors to manage deposits and withdrawals. Financing payment processors can normally be done either by a direct payment from your bank account or through an e-currency exchanger. Make sure that the e-currency exchanger you use has a verifiable track record and deals with your transactions quickly and efficiently.

3. Do your own research

As you will be investing your own money in a programme the onus is on you to do the necessary research into its viability. There are several good sources of information available to you which will enable you to make your decision. One thing you should be aware of is that online investment websites are not always the best source of information and should always be treated with caution.

4. Find something you have an interest in

As you should treat any online investing as a business it makes sense to look for online investments that you have an interest in. Currently there are programmes that specialise in forex, sports arbitrage, investment funding and environmental projects to name a few. By focusing on one area to start with you will learn to spot trends and how these may impact the investments you have.

5. Decide whether you want passive or active

The decision to get involved in either passive or active online investments will depend heavily on the time you have available and your knowledge and interest in a particular area. The advantage with active trading is that you keep full control of your funds whereas with a passive approach you are entrusting your funds to a group that you may know little about.

6. Use Discretion

Not everyone you know will be supportive of your attempts to invest in online programmes. Don’t let this put you off, it is highly likely that they know very little about the subject and speak from a position of ignorance and fear. Keep your dealings private and don’t broadcast your involvement widely as discretion will serve you well in the end

7. Diversify

Even if you start out with a limited bank be prepared to invest in more than one opportunity straight away. Given the higher risk profile of online investments it is crucial that you develop a strategy for diversification right from the outset. Whilst this may mean your funds could grow at a slower rate you are reducing the potential to lose them all if a specific programme fails.

Nothing is more important than protecting your own money…take the time to get it right

For more great tips on online investing you can visit my blog at http://www.onlineinvestingguru.com

From John Murphy and Online Investing Guru

If you are just beginning in online investing should you take advantage of a programme that offers a very low $5 initial deposit. Just to be clear here I am focusing on online investing programmes that are based on a passive investment approach i.e. you make an investment on the basis of the programme paying a fixed or variable rate of interest per day or week.

With such a low entry point are the online investments being realistic about their offer? Well in one sense I think you can say they are. As many people distrust these forms of investment, companies need to come up with ways to allow people to try what is on offer at little risk. One way to do this is to set the entry point low and assuming things perform as planned the investor would be persuaded and therefore happy to invest more. So as a marketing ploy this approach could be considered acceptable.

For the more cynical observer there could be a view that the programme is going out to attract as much cash as possible before heading off into the sunset. Personally I find this rather short sighted, of course some programmes do fail but as long as a potential investor does their homework it should be possible to root out the bad apples fairly easily before parting with funds.

Practicalities can get in the way

More importantly perhaps is the practicality for beginners to realistically fund a programme with say a $5 investment. Unfortunately you can’t just walk into the nearest branch, put your $5 on the counter and walk out with a receipt. In practice there are a number of hurdles to jump before your investment can start earning.

In a companion article, Online Investing For Beginners and the Tortuous Route For Deposits and Withdrawals, I describe some of the companies that you need to have accounts with when funding an online investment but I didn’t delve into the costs involved. Let’s take a closer look at just what sort of fees you could encounter. I can’t be precise here but the figures I’m presenting are typical and should be considered when investing in any online programme. I’ll use US$ for comparison purposes (I’m making the assumption that bank wires aren’t an option as they generally require quite a high level of investment to be used).

In most cases your funds would need to leave your account and go to an e-currency exchanger. There is generally a minimum fee attached to any transaction which is normally in the region of $25. If you are converting funds from another currency you will also be penalised on the exchange rate (this can be fairly significant). As the funds go from the e-currency account to the payment processor there may also be a charge from the payment processor for receipt of the funds. You wouldn’t normally be charged any fee for making the investment to the online programme itself. In summary you are therefore looking at a minimum of $25 and perhaps a maximum of $30 to $40 to get your investment started. Clearly for a $5 investment this doesn’t make a lot of sense.

What is realistic?

So, as a beginner how much should you consider as a starting amount to invest? In reality I believe you have to consider $100 as an absolute minimum given the charges involved and how long it would take to not only recoup your seed money but the associated charges as well.

The $5 option is more suitable for those who already have payment processor accounts and receive interest from their existing investments.

For more great tips on online investing you can visit my blog at http://www.onlineinvestingguru.com
From John Murphy and Online Investing Guru