Investment Articles

One of the biggest factors that most newcomers to the financial world have to overcome is feelings of intimidation when it comes to investments. For decades, investment portfolios and the stock market have belonged to a very small percentage of the population: the wealthy, the heavily business-oriented, or those with a degree in economics. It has long been a field in which knowledge is power, and power translates to a nice, fat bank account.

Unfortunately, this type of thinking leaves few options for those with smaller savings accounts, no working knowledge of the finance world, or an inability to trust the traditional system with their hard-earned funds. The sad truth is that many people avoid seeking the help of a financial advisor for both personal and financial reasons – none of which should be a barrier to a sound future.

Investment Myths

You have to have thousands of dollars set aside to begin investing. One of the biggest barriers to investing is that people believe in the old adage that you have to have money to make money. After all, how can you even begin to think about investing if you can’t even save enough money to get started? Although there are certain types of accounts that require a minimum investment, you can also start small. You may get a lower return to start out with, but small investments in bonds, common stocks, and IRAs are typically easy to do, don’t require huge funds, and allow you to learn as you go so that you can grow more comfortable with investing as you are able to save more money.

I won’t be able to access my money in an emergency. Another common financial fear is that your money will be tied up in investments so that you won’t be able to access the funds in the event of a medical or family crisis. While there are some types of accounts that will charge you a heavy fee for early removal of your money (like CDs), there are other types of accounts that won’t (likemoney market accounts). The trick is to determine the best types of investments for you and your lifestyle – there is no right or wrong way to do it. In many cases, it’s best to work with a financial advisor who can help you create a portfolio that is a good balance of long-term savings and shorter-term options that will give you more freedom with your money.

I might lose all my money. When investing in the stock market, there is always a chance that your savings will be lost or drastically reduced. However, this isn’t very common, and it usually happens to those who rely only on high-risk investments. When you invest moderately and under the guidance of a financial advisor who will spread your money out in several different types of accounts, you stand a very good chance of making money over the next ten, twenty, thirty, or even forty years. The trick is to view investing as a long-term plan; you might not become independently wealthy by next year, but you will have something to fall back on when you’re ready to retire.

The benefits of investing are too large to ignore, even if you don’t have a large savings account, are currently in debt, or know virtually nothing about finances.

Your best first step is to meet with a financial advisor who can help you determine what you should do first and how you can begin to get a better control of your future. The best financial advisors will look beyond the figure in your bank account and work with you to make sure you are comfortable every step of the way.

Questions? Email me at wesley@thewandwgroup.com and visit our website at http://www.thewandwgroup.com New Money Talk is a weekly article focusing on retirement, personal finance, and estate planning.
Comments and questions are welcome, but because of the volume of email, personal responses are not always possible.

In lieu of the financial meltdown, individuals are finding it increasingly difficult to borrow money at a reasonable rate. Credit card companies and banking institutions have adopted stringent lending policy and procedures. At the end of the day, consumers are now facing the challenge of higher interest rates. Under these circumstances, individuals are turning to companies that offer peer money lending services for personal loans. Unlike the traditional banks and card companies, these companies can offer lower interest rates and fees. While most people use the peer money lending services to borrow money, did you know that individuals are also making money through these companies?

To be able to earn cash through peer money lending, you first need to register as a lender with the companies offering these services. Some of the more well-known peer lending companies include LendingClub and Prosper. Each company has its own set of criteria in order to become a lender; individuals should review this information carefully before signing up to lend money. Assuming you have reviewed the information and are comfortable with the risks involved, you are now free to make bids on the loans. Before lending cash to individuals, it is important that you familiarize yourself with how things are done.

The primary method peer lenders earn money is by loaning their money in exchange for higher interest. The borrower agrees to repay a certain amount of interest and principal every month within a specific time frame such as three years. To ordinary investors not familiar with peer lending, this might seem risky. After all, what if the borrower defaults? Well, in this worst case scenario, the peer lender loses the full amount he or she loaned to the borrower.

Given the uncertainty and risks involved with peer lending, what are some of the strategies that investors utilize to protect their investment? First, peer lenders diversify and spread their investment across multiple loans instead of investing everything in one single loan. Savvy investors also scrutinize the borrower’s profile, seeking those with job stability and avoiding those with little work history or high debt to income ratios. Finally, peer lenders reinvest the interest and principle received to take advantage of compounding interest.

So, there you have it. Peer lenders are finding ways to earn more than the simple interest that the traditional banks pay for deposit accounts. While peer lending involves more risk, investors are utilizing multiple strategies to generate high returns and reduce their risk. As with any investment, the key is to take the time to learn how these services operate and how money is made. Ask lots of questions from experienced investors and start with a small investment.

A.W. Shaw was an early adopter and investor of peer money lending. He is passionate about helping everyone increase their personal financial education.

For a FREE peer lending report from Javelin Research, visit http://www.peerlendingmoney.com.

Many people want to play on the stock market in hopes of making the magical selection that will provide them with lots of disposable income and make all their dreams come true. Although it might seem like the stock market is a place where you get thousands of dollars in return for a small investment, there are actually a lot of very complex processes and equations that go into determining who makes money, and who does not. More often than not, naive investors will sink all their money into one prospect only to have it shudder and die within a few months. Not all investing is created equal, and if you want the best dividends, you need to understand how the process works and what to look out for.

The first thing to understand is exactly what dividends are. When a company goes public and starts to trade its stock on the big boards, they begin to take on public shareholders. These shareholders can be investment firms, banks, or normal people that are interested in gaining something back on their money. In a certain sense, these people become partial owners of the company, and when the company does well, it usually rewards them for their initial investment. When a successful company turns a profit, it has the option of distributing percentages of these profits to its shareholders, and when it does, these shared profits are known as dividends.

Many people think that dividends are the fastest way to see a return on your investment without really having to do anything, but it’s important to remember that there are many different ways in which the market and the price of the stock can affect the dividend you do, or do not see. When thinking about getting involved in this type of investing, you must take care to consider the payout ratio very carefully. Many companies will try to attract investors with ratios that sound too good to be true, and they usually are. Anything over sixty five percent is a ratio that you should probably stay away from.

In the first couple of years, it’s important to remember that the best thing you can do with your dividends is reinvest them. Unless something unusual happens, they probably won’t be huge amounts of profit for you anyway, and you can strengthen your portfolio consistently if you allow those dividends to continue working for you in the open market.

Ready to get started? Learn more about investing and dividend yield at http://www.DividendYieldLive.com today!

If you were suffering from an illness and you didn’t know what it was who would you look to for answers? Would you listen to your next door neighbor who is something of a hypochondriac, your brother who works as a porter at the hospital or a website that you find using Google?

Hopefully you would have rejected all those options as whilst they may have an interest in helping you their level of expertise may be less than is really needed. Personally I’d seek out someone who has the knowledge and experience to help me in the first instance.

Do your research

The same should hold true when you want to invest online. You should not rely on hearsay, rumor or speculation as these can result in you losing funds rather than increasing them. At the end of the day any decision you make will be a personal one and you should accept that this is the case.

But before you make a decision you should do all you can to investigate the opportunity so that you feel confident in making that decision. In the vast majority of cases this level of confidence will not be (and shouldn’t be) 100%. There are just too many variables to consider when making any decision such as this. Just eighteen months ago you could have been highly confident making a decision to invest at your local bank, the economic crisis has destroyed even that level of confidence so investing online should raise your curiosity even more.

Clearly there are no formal bodies that you can turn to for reassurance as it is very difficult to police the world of online investments. Companies are based in jurisdictions that provide the most favorable conditions for their operations and they often keep an arms length stance when providing information. To some extent this is justified as they could be exposed to exploitation if details are made available.

This doesn’t mean to say that you should discount all such opportunities, just ensure you do your homework beforehand. One of the ways to do this is to find others who have the experience to help. As the online investing matures more and more people will have a track record of experiences that you can call on.

Spread your net wide

If you don’t have anybody in your immediate social circle who can help then spend time on the internet to search out knowledgeable people. Join forums and discussion groups that offer advice and help. Ask questions and monitor the quality of the answers given. Resist those who clearly aim to sell to you without any regard to your own situation. Make sure you are given the full story about an opportunity, both the good and the bad.

Start small

If you find an investment that you feel confident with begin with a small investment and monitor its performance closely. Keep up to date with news by monitoring forums, blogs and discussions so that if any problems are identified you will find out quickly. Don’t rush into a decision as some problems are exaggerated and given time can be overcome. Use common sense to guide your decision making and create a balanced portfolio to spread the risk.

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

Maintaining a diverse investment portfolio is a relatively simple way to continue to make investments while taking steps to insure that you’re not going to loose everything should certain stocks or sectors of the stock market drop in value. Despite the usefulness of diversification, many people still maintain a very limited number of investments in very similar stocks… often because the stocks are given as part of a stock-option plan from their employer or because the individual simply doesn’t know how to take advantage of diversifying their portfolio. Below you’ll find several suggestions for how you can get the most out of your investment experience by diversifying your investment portfolio and making purchases in various sectors to better guard against market fluctuations.

Defining Diversification

Before you begin to diversify your stock portfolio, it’s important to make sure that you know what diversity is. At its most basic, diversification is simply the process of buying different types of stocks in order to have a diverse selection of stocks from different sectors of the market and representing different industries. The more industries and market sectors you have represented in your portfolio, the more diverse your investments are and the more secure they can become.

Why You Should Diversify Your Portfolio

There are many reasons to diversify your portfolio, several of which all come down to the same basic point. If you own stocks in a wide variety of industries and market sectors, then you are much less likely to be negatively affected by sudden changes in the value of stocks in specific industries and sectors. While you’ll still suffer from the loss of value of those stocks, the stocks that you hold in unaffected sectors or industries will continue to hold their value or possibly even increase in value.

In most cases, the losses that occur in one portion of the market at any given time are merely temporary; whatever caused the dip in value will eventually recover, and the prices of stocks will begin to rise again. Diversification helps to ease the time spent waiting for your stocks to recover, as your other stocks will continue to perform as they always do.

Easy Ways to Diversify

The easiest way to diversify your stock portfolio is to begin making small investments in other stocks each time you make an investment in your chosen stocks. This allows you to continue to buy stock in the companies that you wish to support and that you trust to give you a good return, but you are also able to begin purchasing stocks in unrelated industries or sectors so as to improve the diversification of your portfolio. Making investments in bonds, indexes, and precious metals are also wonderful ways to diversify your portfolio a little at a time.

Online Investments

If you utilize an online investment broker, diversification is just as easy as it would be at a physical brokerage. Utilize the online broker’s research functions to learn about well-performing stocks in industries other than those that you currently own shares in. You might also find that your online broker of choice offers easy diversification packages, allowing you to make a lump-sum investment into the package and the broker will divide it evenly among several of the better performing stocks in a variety of industries and sectors as well as several indexes, precious metals, and bond packages. Combining diversification packages with automatic investment options that are offered by most online brokers is a good way to build a diverse portfolio quickly with minimal research on your part.

Paul Parker writes finance and loan articles for the UK Loans Only website at http://www.ukloansonly.co.uk

For many people, $500 can either be small or a big amount of money depending on their perspective. No matter the perspective, however, you can make a million dollars out of your 500 bucks and get a big bang out of it. The trick is in making small investments at a time from your seed investment capital.

Invest on a Compounding Certificate of Deposits

Banks and credit unions offer certificates of deposit, which are basically savings account with a difference. Certificates of deposit are on a fixed terms, fixed interest basis such that you cannot withdraw it before its maturity date although the interest rates are higher than most savings accounts. To choose from amongst the best CDs that will give you the best bang for your buck, use tools like the annual percentage rate and annual percentage yield. It must be emphasized, however, that you should also consider withdrawal and renewal options, among other things.

Invest in Stocks on Your Own

You need not hire a stockbroker to invest in stocks. You can save on the stockbroker’s fees, thereby, allowing your $500 to buy one more share. There are approximately 1,400 publicly-traded companies that offer shares directly to investors. The best thing is that you can choose the terms of investment that suits your needs and seed capital, whether it is terms of minimum stock purchase, enrollment and inactivity fees and other requirements. Examples of these companies include Coca-Cola (one minimum share, no enrollment fees) and Disney (invest for as little as $100 with a $10 enrollment fee).

Invest in Stocks with a Discount Brokerage

If you still want a stockbroker to deal with the nitty-gritty details of your investments, you can always opt for the discount brokerage houses. You will have numerous options in the stocks you can invest in with the added bonus of the stockbroker fees not making too much of a dent into your already meager seed capital. When choosing the discount broker, you have to select based on fees collected, range of access in terms of communication and money, and customer service. You want the best in a discount stockbroker without paying for it with plenty of money.

Go for a Stock Purchase Plan

There are three ways to go about availing of a stock purchase plan (SPP). First, you can ask the company you are working for about an SPP. Depending on the company, it can take the form of compensation when your employer matches your stock purchase or stocks can be offered at a special discount. Second, you can buy smaller quantities of stocks for little to no transaction fees provided that you purchase on a regular basis. Even blue-chip companies can offer this so check with your stockbroker, if you have one. Third, if you are already a stockholder and you wish to grow your investments with the $500, ask the company management about programs where your dividends are reinvested in additional shares or where you can buy additional shares through automatic payments from your salary. Your $500 can add capital to these programs.

Now, assuming that you have an extra $500 every other month from your savings, you can invest in these venues and watch your money grow and grow. After all, $500 can become a million dollars when you invest and reinvest it.

One thing that will help you achieve your investing goals faster is penny stock trading. For more information visit http://www.pennystocktradez.com/.

In many instances, people shy away from investments because of the misconception that you either have to possess plenty of money to start investing or you have to possess plenty of knowledge to navigate the world of investments. Fortunately, this is not the case as you can actually make money one small investment at a time. Take note, however, that dabbling in investment is unlike winning the state lottery’s million-dollar jackpots. You have to exert time and effort, not to mention money, to make more money on your investments regardless if it is on penny stocks or on blue-chip stocks. Here then are the best ways how to succeed.

Learn All You Can

Your initial fear of dabbling in investments has a small basis to it. With the many technical terms, theories and practices to remember about the many types of investments, you will definitely feel at a loss unless and until you hit the books and ask the experts. Keep in mind, however, that even when you feel that you have learned all that you can, there are still things that you need to learn. As such, you must continually educate yourself on the latest news and events, the latest investment tools and the latest market trends as it applies to your investments. All these can become your instruments in earning more money from your relatively small investments.

Build Your Portfolio Slowly but Surely

Don’t fall into the trap of thinking that you must start big to earn big. Even Warren Buffett had to start at some point and so should you. It may be small certificates of deposits for starters, just as long as it can earn the highest interest. The interests earned can then be invested in more certificates of deposits or even certificates of stocks. With each earning, you can roll it to other investments or use it to grow one particular investment.

As can be implied, the important thing is that you stay in the investments market. Yes, you will go through “down periods” that can make the “up periods” appear in vain but that’s just how the market works. However, if you stay in the market, you will be able to make a respectable amount of money than if you had given up the market for good.

Diversify, Diversify and Diversify some more

Remember the adage about not putting all your eggs in one basket? This is applicable to investments, too. No matter how small your investment capital is, it pays to diversify them into many types instead of risking everything in one kind. Plus, remember that with high-rewards investments, the risks are equally high. You can either win or lose in these investments. It should be alright if you win but what if you lose? However, you must not diversify so widely that you cannot keep track of your investments either. You must stay on top of your investments, which is possible when you know what is happening with each one. In other words, don’t spread yourself and your investments too thin.

You do not need plenty of money to make more money from investments. You just need to learn about the business, start small and start today. Visit http://www.pennystocktradez.com/ to learn more.

The Consumer Price Indexes (CPI) program of the US Department of Labor produces monthly data on changes in the prices paid by urban consumers for a representative basket of goods and services in the United States. Tracking the CPI data began in 1913 and by 1983, inflation had reached 100%. Therefore, today most all data is calculated using a 1983 base of 100. For example, a CPI of 215.3 in 2009 indicates 115.3% inflation since 1983. Below is the inflation calculator based on data provided by the U.S. Department of Labor Bureau of Labor Statistics showing inflation during the past decade:

CPI Inflation Calculator
If in 2008 (enter year)
I purchased an item for $100
then in 1998 (enter year)
that same item would cost:$132.09
Rate of inflation change:32.1%

The above calculator shows that if you put $100 under your mattress ten years ago it, through the inflation of goods and services during the past decade, it would be worth $76 ($100/1.32) today, i.e., worth 76% of its original value or a loss of 24% in terms of 1998 purchasing power.

In order to hedge against inflation, many advisors suggest that you buy various commodities, oil and gas, foreign dollars, Real Estate Investment Trusts (REITS), Treasury Inflation-Protected Securities (TIPS), gold, and silver, etc. All of these investment vehicles are now available through Exchange Traded Funds (ETF’s) where you don’t have to take physical possession of the commodities; for relatively small investments, gold and silver in the form of bullion or coins is readily available and simple to purchase and hold. All of these forms of hedges against inflation can be excellent, however for the purpose of this article, we’ll concentrate on silver.

Silver has always been one of Mexico’s major export materials; in fact, until just a few years ago, Mexico was the largest producer and exporter of silver in the world. Let’s assume ten years ago, instead of putting your $100 under the mattress, you bought $100 worth of silver selling at approximately $5.50/ounce. Today, at $16.65/ounce, you can sell your silver and enjoy a gain of more than 200%, i.e., your $100 investment is now worth $303 resulting in a 1999 purchasing power of $230 (76% of $303); not bad! If you’re concerned that the recent increase in silver prices is only a temporary spike, it should be known that silver was selling at $20/ounce in 1981 and when the Hunt brothers were speculating in 1980, it was driven up to over $50/ounce; now that was a spike! The last time silver was selling for $16.65/ounce was in 1981. Taking the CPI inflation index of 2.37 (1981 to 2009) into consideration, $16.65/ounce in 1981 was equivalent to almost $40/ounce (2.37 X $16.65) in today’s money and therefore it’s not too difficult to imagine a much further increase in silver prices! This logic is further reinforced when you take into consideration the weakening dollar forecast for the near future. (see ten year silver price graph below)

The world’s leading miner and producer of silver is the Pan American Silver Corp. (PAAS), headquartered in Vancouver, B.C. This publicly traded company has silver mines throughout Latin America with a couple of its largest mines in Mexico. In fact, one of these two mines is their only open pit mine and the other huge Mexican mine, located north east of Puerto Vallarta, has been producing the purest silver of all their mines since 1929. The graph below reveals the PAAS stock performance during the past ten years.

Next, let’s analyze the performance of the US stock market during the same ten year time frame. If your $100 had been invested in SPY, the S&P 500 ETF, it would be worth 80 dollars today per the graph below. Let’s take it a step further and adjust for inflation; that $80 would have only $61 (76% of $80) of 1999 purchasing power. Yes, that’s correct; if you were invested in the US stock market and your return was better than average, you’ve lost almost 40% of the purchasing power that you had ten years ago!

Now, let’s compare the ten year performance of the Mexican stock market (Bolsa) to the US stock market. If you had purchased EWW, the ETF basket of Mexican stocks, in 1999, you would have realized a 150% gain and your initial investment would now be valued at $250, with a 1999 purchasing power of $190 (76% of $250); pretty decent, especially when you compare it to the $61 left from investing in the SPY’s!

You’ll immediately see how much the ETF basket of Mexican stocks (EWW) and the Pan American Silver Corp. (PAAS) stock had appreciated in value through 2007 and then fell precipitously in the second half of 2008. More importantly, you can see how both are recovering beautifully as the world recovers from the global recession. Comparing both of these Mexico related stocks to the SPY’s; you may never again want to invest your $100 in a US related stock! Assuming that the global economy continues its gradual recovery, it seems quite apparent from extrapolating the curves below that Mexican stocks and silver are very attractive areas for investing a portion of your portfolio at this time. It’s amazing to see how closely the EWW and the PAAS stock prices have correlated over the past decade!

Finally, let’s look at Mexican real estate. Along the prime region of the Mexican Riviera, property values have tripled from 1999 to 2008 (we don’t have any empirical data but after being invested in the real estate market in Puerto Vallarta for more than a quarter of a century, we can state it as a fact; some properties have quadrupled in value!), after which they have remained flat to perhaps dropping by as much as 20%. Therefore, a real estate investment of $100 in 1999 was worth about $300 in 2008. Assuming a depreciation of $60 (20% of $300) over the past 18 months, it’s now worth $240. In terms of 1999 purchasing power, it’s worth $182 (76% of $240); about the same as EWW and PAAS, not as much as silver, but a whole lot more fun than owning either! When comparing these facts and figures to the $61 of 1999 purchasing power remaining from the $100 invested in the SPY’s, it’s truly disheartening to think of those of you that were fully invested through IRA’s or 401k’s during the past decade. Fortunately, it’s not too late to recoup your losses; in fact, the time could never be better!

The recent drop in Mexican real estate values was caused mainly by the global recession; however, the recent border town drug cartel war news (1,200 miles between PV and Juarez!) and the swine flu scare (three confirmed cases in PV!) contributed significantly to the local real estate recession. The border town drug cartel war and the swine flu scare effects will vanish over time and in all probability, the property values will soon recover to their 2008 highs. Unlike the 20% property value drop in the US, there are virtually no foreclosures dragging down the housing values in Mexico. The housing crisis in the US will probably continue for a couple more years resulting in further erosion of home values by an additional 10-20%. Currently, millions of Real Estate Owned (REO-lender owned) properties exist in the US but you won’t find any in Mexico!

In summarizing, $100 placed under the mattress ten years ago has a 1999 value of $76 today, $61 if in the S&P 500 SPY’s, $230 if in silver, $190 if in the Mexican EWW fund, $185 if in the silver company PAAS, and $182 if in Mexican real estate. Regardless of where in Mexico you had invested your $100 ten years ago, whether it was in Mexican silver, stocks, or real estate, you’ve now got at least three times as much as you would have had if you had invested in the S&P 500 SPY’s! So, here we are in 2009; the question is where best to invest your remaining money after the fiasco of the past decade? With real estate prices 20% off recent highs, long term mortgages of 50% (or more) available in Mexico, and many developers willing to short term finance up to 50%, there has never been a better time to invest in Mexican real estate.

Why hesitate; isn’t it about time that you at least consider making an investment decision totally contrary to those recommendations that you’ve been receiving from your personal financial “guru” that have cost you 40% of your life’s savings? Come on down and retire in Mexico; maybe you’ll even want to buy a bag full of Mexican Libertads or dabble in the Mexican Bolsa through a vehicle such as the EWW fund while enjoying retirement to its fullest! Who knows; as you’re relaxing in your beach front condo on the Mexican Riviera, perhaps your investments in Mexico will gain enough over the next couple of years to recover what you’ve lost during the past decade!

(Please refer to GRAPHS associated with this article)

Jim Scherrer is a retired entrepreneur from Houston, has owned property in Puerto Vallarta, Mexico for 26 years, and has made Vallarta his permanent residence for the past twelve years. He founded Puerto Vallarta Real Estate Buyers Agents (PVREBA), whose mission is to reveal all the recent changes that have occurred in Vallarta while dispelling the misconceptions about living in Mexico. PVREBA acts exclusively as buyers agents by introducing North Americans to Vallarta, showing them properties that meet their needs and budgets, and assisting them through the foreign buying process, with all payments made by the listing agents. For the full series of nearly 70 articles regarding Retirement in Puerto Vallarta as well as pertinent Puerto Vallarta links, please visit us at PVREBA.