Alternative Investments

Posted by Bryan on 04 Sep 2008 | Tagged as: Investment Ideas

Alternative Investments have a special place in the economy today because people are distrustful of just about all regular investments. Some alternative investments are those such as off shore accounts, property in other countries and precious metals. These alternative investments do well during a recession. This is why so many people are seeking these type of investments today.

Because of the advent of the internet and the daily use by most of us, it is easier than ever to make alternative investments. This includes those such as off shore accounts that the average American would not have known how to open 10 years ago. Because the internet is the information highway, we are now privy to information that was once only afforded to those who could afford to pay for it. This includes how to open up an offshore account in the Cayman Islands, which is considered to be a tax shelter for those who do not want to pay a capital gains tax. When you earn money on an investment in the United States, you have to pay a capital gains tax, unless you have a tax deferred account. A tax deferred account is one where you only pay the tax on the interest when you cash in the account or withdraw from it. Retirement accounts are tax deferred accounts. Government issued bonds are also tax deferred.

The lure of regular, American investments such as stocks, real estate and bank investments were always that the United States is secure, the stock market is never going to crash, real estate will always be worth what you paid for it and banks will not fail. One by one, all of these ideals are starting to crumble in the United States. The stock market has been in a bear mode since 2001. There have been times it has rallied, but for the most part, the US never fully recovered from the financial hit it took on September 11th. The residential real estate market crashed to the point that foreclosures are at an all time high. States like California, Florida and Nevada are seeing such an influx of foreclosures that entire subdivisions are sitting empty. People who never thought they would see the inside of a bankruptcy court are getting foreclosed upon and seeking bankruptcy protection against judgments. People who purchased a $500,000 house now find it is worth $300,000 and are paying for something that is losing value every day.

Banks are failing. Fannie Mae and Freddie Mac, two entities that back up bank loans are practically bankrupt. The federal reserve has bailed out a non commercial bank for the first time ever and more are expected to follow suit. The dollar continues to decline. No wonder people are looking for alternative investments. Those that we have been taught to trust are all going under.

Gold and commodities are where it is at now and are the best alternative investments in the United States. They are a bit safer than off shore accounts and foreign properties, but do not have the potential for as much yield. Still, these are all alternative investments that are well worth considering in your investment portfolio.

David Spicer is a very successful investor. David has put together a YourGuideToInvestments.com to advise newbie investors and help people to make their money work for them. If your looking for investment strategies, investment basics or types of investments you should check out his site today.

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The Importance of Saving

Posted by Bryan on 20 Aug 2008 | Tagged as: Investing Basics, Investing Information, Investing Tips, Investment Ideas, Money Management

How can ordinary, even low-income, if not poor, people become rich?  The answer to that question is as simple as it is mandatory:  Start by saving and investing something regularly, even if it is a modest amount, in anticipation of big returns in the future.  Saving and budgeting is the most important part of investing. If you spend more than you earn, you will always be broke.

Your persistent savings will add up with time.  One hundred dollars saved each year will cause your total savings to rise from $100 to $1,000 in ten years.  However, your net worth (or financial wealth) should grow, over time, by much more than the sum of your savings.  This is because of the power of compound interest.  This means that you should expect to receive on your savings some rate of interest (or return or appreciation) each year.  If you leave the interest in your account, your interest will “compound” because you will then receive in subsequent years interest on your savings, plus interest on the interest that you received in previous years. 

Again, if you save $100 for ten years and receive an interest rate of 10 percent, your total savings with interest will grow from $100 the beginning of the first year to $210 the second year ($100 of savings the first year plus $10 of interest on the first year’s savings plus $100 of new savings), to $331 the beginning of the third year, on to $1,594 the beginning of the tenth year.  In short, with compound interest you will have close to 60 percent more in net worth at the beginning of the tenth year than you would have had from the savings alone.

You can imagine with “interest on interest”—or compounded interest—your net worth will build progressively more rapidly with each passing year.  With sufficient savings, enough patience, and a reasonable rate of interest on your savings (or return on your investments),  you can imagine that your net worth (and resulting income level) in the future will be the envy of those who have chosen to spend all their income year after year on many things they could do without, or do with less of. 

To dramatically illustrate just how powerful compound interest can be in building wealth, suppose that you are a newly minted twenty-two-year- old college graduate, with a starting salary of, say, $30,000 a year, and you salt away a mere $2,000 the first year, and only the first year, on your job (which means that you will then save only 6.6 percent of your annual pre- tax income that one year).

Assume that you are able to secure an annual rate of return on the investment (above the inflation rate) of 15 percent until retirement.  Amazingly, your onetime investment will be worth, in the purchasing power of today’s dollars, $814,774 at age sixty-five and over $1.64 million at age seventy.

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Organizing Your Debts In Writing

Posted by Bryan on 15 Aug 2008 | Tagged as: Investing Basics, Investing Information, Investing Tips, Money Management

Today you’re going to write down everything you owe your creditors.  That’s right, everything— from your student loans, to mortgages, to credit card debt, medical bills, auto loans, etc.  On a piece of paper, make a complete list of your obligations and here’s what you should write or type out on the sheet: Include the name and phone number of each creditor, your account number, the interest rate you pay, the total balance due, and the minimum monthly payment. 

Why Torture Yourself Listing All Your Bills? You need this information in black and white to get a realistic picture of where you are.  This info will also help you later when it’s time to negotiate with creditors or collection agencies.  Again, write down everything that you owe, even including credit cards that might have only $100 on them.  Don’t make the mistake of leaving those “small” bills out because “Oh, I’m going to pay that one off this month anyway.”  Just write down everything you actually owe as of today.

Many people have a rough idea about how much they owe their creditors.  But there’s no substitute for having true, accurate numbers - not guesstimates.  To fill in the proper figures on your written sheet, or your computer spreadsheet, you’ll have to go find your most recent statements and invoices from your creditors.  Take as much time as you need today to collect all this data.  It’s a crucial step in you getting your finances together.

It’s also a good idea to call the companies you owe and ask for the latest information about your debt, especially if you’re looking at statements that are more than a month old.  Even if the statements are current, you should call your creditors because some of the information on those statements may have changed.  For instance, you may have charged additional items since the closing date on your credit card statement, so now your debt is actually greater than your current statement indicates.  Also, you may have had a teaser rate or a lower interest rate in the past, and maybe that interest rate has now jumped.  Whatever the case, you need to have the most accurate information that is currently available. 

A Wake-Up Call: How Much Do You Owe?  The next step is for you to add up all your debts.  For some of you, seeing your total debt in black and white may be a scary thing: a wake up call to how deeply you are in financial bondage.  For others, seeing your total debt may offer relief: perhaps you don’t owe as much as you feared.  Whatever the situation, don’t panic.  Remember, you’re on the path to financial freedom now and if your goal is to get to “Zero Debt” status, keep plugging along - it will happen, and sooner than you think!

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Savings and Money Market Accounts Explained

Posted by Bryan on 15 Aug 2008 | Tagged as: Investing Information, Investing Tips, Investment Ideas, Mutual Funds

Savings and money market accounts can be found at banks.  Money market funds are available through mutual fund companies.  All are lending investments based on short-term loans and are about the safest in terms of risk to your investment among the various lending investments around.

Relative to the typical returns on growth-oriented investments, such as stocks, the interest rate (also known as the yield) paid on savings and money market accounts, is low but does not fluctuate as much over time.

Bank savings accounts are backed by the federal government through Federal Deposit Insurance Corporation (FDIC) insurance.  If the bank goes broke, you still get your money back (up to $100,000).  Money market funds are not insured.  Should you prefer a bank account because your investment (your principal) is insured?  No.  Savings accounts and money market funds have almost equivalent safety, but money market funds tend to offer higher yields.

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Dividend Reinvestment Plans Explained

Posted by Bryan on 11 Aug 2008 | Tagged as: Investing Tips, Investment Ideas, Stock Market

Increasing numbers of corporations allow existing holders of shares of stock to reinvest their dividends (known as DRIPs) in more shares of stock without paying brokerage commissions.  In some cases, companies allow you to make additional cash purchases of more shares of stock, also commission-free. 

In order to qualify for most DRIPs, you must generally have already bought some shares of stock in the company.  Ideally, you bought these initial shares through a discount broker to keep your commission burden as low as possible.  Although DRIPs reduce your stock commissions on future purchases, DRIPs have their shortcomings:

1. You need to complete a lot of paperwork to invest in a number of different companies’ DRIP stock plans.  Life is too short to bother with these plans for this reason alone.

2.. Some companies that offer these plans are hungry, for whatever reason. They need to drum up support for their stock.  These investments may not be the best ones for the future.

3. DRIP plans don’t eliminate fees.  You still pay fees to buy the initial shares of stock, and many DRIP plans charge nominal fees for additional transactions and services.  Taking these shortcomings into account, you’re better off in the long run using professional money managers, such as those available through the best no-load, cost-efficient mutual funds.

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The 1987 Stock Market Correction

Posted by Bryan on 07 Aug 2008 | Tagged as: Investing Information, Investment History, Stock Market

There have been many stock market corrections, and it seems as though we are in the middle of one now. Below is a discussion about the 1987 correction in the stock market.

The events of October 19, 1987, at the time, were looked upon as a full-fledged stock market crash. In retrospect, no depression or even a recession was sparked by this dramatic fall in prices, but the event is historic nonetheless. One of the aspects that made it so memorable is the fact that to this day, no one really knows what caused it. There are many different theories as to the reason of the correction, but its all speculation.

The ’87 correction, known now as Black Monday was the first ever global stock market crash. The final numbers are staggering, with the Hong Kong stock exchange losing over 45 percent of its value, the Australian stock market losing almost 42 percent of its value, the UK lost over 26 percent, while the New York Stock Exchange lost 22.6 percent.

The October 1987 fall ended up being the second biggest single day percentage drop in the history of the stock market. The biggest one day decline happened in 1914 when the Dow Jones lost just over 24 percent. This drop was attributed to the fact that the market had been closed for four months due to World War I prior to that day. The biggest point loss in history was the first day of trading after the attacks of September 11th, when the Dow lost over 680 points.

Starting in mid-August of that year, the Dow began to correct itself. A series of 100+ point drops plagued the market over the next two months, but the drops were always followed by recoveries. Even days before the October 19 drop, there had been a major dip, and the next day, stocks were back up. It wasn’t until the Black Monday collapse that stocks went down and stayed there.

Possible causes for the crash are usually broken down into a few different categories, including market psychology, illiquidity, overvaluation and program trading. Other possible causes for the correction are attributed to a major storm in the UK which happened on the previous Friday. The storm did not allow traders in the UK to finish their days work and this caused many in the US and around the world (especially in Hong Kong where the crash first started to happen) to sell.

While time has shown the events of October 1987 weren’t quite as bad as some had feared, dramatic market corrections are a part of investing and while they can be terrifying when they happen, they shouldn’t take a savvy investor by surprise.

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Managed Forex Accounts

Posted by Bryan on 04 Aug 2008 | Tagged as: Investing Tips, Investment Ideas, Mutual Funds, Trading

There is a lot of money to be made by trading the Forex, but it can be very risky. If you do not know what you are doing, you can lose a great deal of money. Having said that, if you invest some of your portfolio into the Forex market through a managed fund, then you can make money with it by using the experience of experts. Currently many real estate and world stock markets are going down in value, but having investments in currency can give positive returns during these tough times.  I actually have investments in a currency managed fund through Landau Securities.  By using a life bond, I do not need the large capital to enter the fund. I thoroughly suggest that you have a good currency fund, like the one offered by Landau Securities.

Because forex trading is such a complicated business, there are many systems in place to help new or cautious traders get involved without going bankrupt. There are mini accounts that let you invest only small amounts of money, and there are even automated accounts that let a computer program do it all for you. And in between those extremes is the managed forex account, which gives you full access to the market but gives you an adviser to help you navigate it.

A managed forex account is perfect for someone with no experience, or limited experience, in the forex market. It’s also good for someone who wants to invest but doesn’t want to go through all the studying and training necessary to do a good job of it himself. Furthermore, a managed account is a godsend if you want to invest but simply don’t have the time or the inclination to watch the market 24 hours a day.

Managed accounts always require a minimum investment of at least $10,000, and some have the minimum set as high as $250,000. This makes it off-limits to many individuals, especially considering you never want to invest more than you can afford to lose. It is mostly businesses and corporations that use managed accounts, though more and more well-heeled individuals are taking advantage of it in the 21st century.

The reason for the high minimum investment is that a managed account has to have someone managing it — an actual human being, that is, not a computer program. If the minimum investment were more reasonable, too many people would want managed accounts, and the managers wouldn’t be able to handle their client load. Having said that, you can enter a quality managed account through Landau Securities for a low entry point by using a life bond.

In general, a managed account is best for long-term investors. Someone wanting to get into the forex market, make a lot of money through aggressive, risky ventures, then get out again, would not benefit from a managed account. Most managers favor a conservative, slow-growth strategy, usually suggesting that investors stay with the program for two years to show real profits. (Most systems let you withdraw your money and quit whenever you want, though, with no penalties for doing so.)

There is a fee for managed accounts, of course; nothing comes for free. Usually the fee is based on the performance of the market, with the manager taking a percentage of your net profits each quarter. This fee is well worth it for many individuals, though, as they find a managed account gives them peace of mind with regard to where their money is being invested and what kind of return it’s yielding them.

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Saving For Retirement Guide

Posted by Bryan on 01 Aug 2008 | Tagged as: Retirement Tips

Jerry has written a guide to help those who are thinking about retirement. So that should mean anyone who is currently working, as you are never too young to plan your retirement.

A Guide to Saving for Retirement

Saving for retirement begins early, and often we can overlook important steps unknowingly. Here’s a quick guide for making sure you’re getting the most out of your retirement savings.

Analyze your needs sooner than later.

The step most people skip is figuring out just how much money they’ll need in retirement. Try to consider your lifestyle. What are you expecting your retirement to be like? International travel? A second home? These are all things to consider when building your savings. You should also keep in mind that, if present trends hold, you may need to pay for much of your own health care because many employers are cutting or reducing the amount of money they spend on retiree health coverage. As you analyze your needs, take into consideration any other resources you may have to tap, such as savings outside a 401(k) or real estate when you do retire.

Don’t neglect your 401(k).

The best place to start when it comes to putting money away for retirement is your 401(k). After all, your company’s 401(k) retirement plan offers you one thing you’ll get few other places: free money. For every dollar the average worker puts into their 401(k), their employer contributes 50 cents.

Many people don’t contribute, or don’t contribute as much as they could. Be sure to add to your 401(k) as often as possible. For those who do, consider boosting your contribution to the max. The maximum number you can add per year to your retirement savings increases at the rate of inflation. Check with your employee benefits office to make sure you’re getting the benefit of your entire match. Government rules try to make sure that retirement programs aren’t being run for the benefit of top execs.

Get the allocation right.

Whether you’re saving in a 401(k) for the first time, or reassessing your current savings, you’ll want to make sure the mix of investments you have is right for your age and the amount of risk you’re willing to take on.

Remember, simply being diversified enough has a bigger impact on your returns than which funds you choose. Take time to examine the list of funds offered in your companies plan and toss out the ones that don’t fit your asset allocation. Keep in mind that your investment options may be limited, depending on what your employer is offering. If you have a question, check with your Human Resources department. Keep in mind that stellar short-term performance alone isn’t a reason to buy.

Try keeping it simple with a six-part approach: One large-cap fund, one mid-cap, a small-cap, an international fund, a bond fund, and a money market fund. For the more advanced investor with multiple savings goals, a well-diversified portfolio typically consists of owning 15 to 20 funds.

Put your finances on automatic.

If your problem is that you find it difficult sticking to a savings plan, then your best bet is to go automatic. This way your employer will take the money out of your paycheck before you have a chance to spend it, and put it directly into your 401(k).

If you don’t have a savings plan at work, or you have the ability to save more money than your 401(k) allows, consider investing elsewhere. You can open up an account with a bank or brokerage and instruct them to automatically debit the funds from your bank account.

And if you feel comfortable with this, you may just feel comfortable automating other areas of your financial life such as credit card and utility payments. Log onto your bank’s Web site for details.

Jerry Warner writes general finance and loan articles for the Bad Credit Loans Online website at http://www.badcreditloansonline.co.uk/

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Mental Toughness Is The Key To Trading

Posted by Bryan on 27 Jul 2008 | Tagged as: Trading

One of the main reasons that people fail in trading is due to a lack of mental toughness. It along with discipline are 2 of the most important attributes needed in oder to become a winning trader. Joe writes his thoughts about mental toughness and trading below.

Mental Toughness

If you want to be a winning trader, you have to learn to handle extreme levels of stress. The markets are often chaotic and unpredictable; they are, no doubt, stressful. You mind has limited resources; when you feel stressed, a great proportion of your resources are devoted to managing the stress. You tend to have little energy left with which to focus on trading. It’s a lot like “cramming” for an examination in school. It takes twice as long to learn material when you cram. Why? It’s because you are more stressed when you are trying to learn under duress.

When you’re struggling to cope with the wildness of the markets, you are similarly trying to perform under duress, and under less than ideal circumstances. As you push yourself to the limit, you use up mental and emotional energy. As you use up resources, there is little mental and emotional energy left for trading smoothly, easily, and with retaining your poise. You are more prone to panic, and may ride an emotional roller coaster as you face winning and losing trades. You may even begin to panic and behave irrationally. It’s essential for survival to be able to cope with the ever-increasing demands of the markets.

Research has proven that, if you can learn adequate ways to cope with stressful situations, events that usually produce stress need not necessarily produce the stress response. You can develop “mental toughness.” The mentally tough person can endure high levels of stressful events, yet not feel stressed out. Coping with stress is similar to weight lifting. If you lift more than your body can physically handle, you can damage muscle tissue. But, if you never push yourself to the limit, you’ll never develop additional strength. Just as you build up muscles gradually, you gradually build up your ability to handle stress.

The key is to learn how to handle greater levels of stress, but also to find time to recover. When it comes to the markets, for example, it’s tempting to trade all day, then work late into the night back testing and trying out new trading strategies. However, working tirelessly at such a pace is bound to wear you out eventually. It is very important to rest and recover. That doesn’t mean shrinking back from the markets, but learning to deal with the pressures of the markets at a gradual, realistic pace.

By pushing yourself to greater levels of challenge, but at the same time resting and recovering, you can build up mental toughness in the same way that a weight lifter can handle greater and greater physical loads.

There are some basic steps that a person can take to prepare for stress and become adjusted to it. First, as I’ve stated many times, it is essential to get as much rest and relaxation as possible. People who do not get the proper amount of sleep have limited psychological resources to cope with daily stressful events. Getting extra rest is important. This may mean taking planned naps during the day to rejuvenate. Don’t make the mistake of thinking that you’ll be “missing out” on a trading opportunity by taking a break. Look at it this way: how much are you going to make if you are too tired and wiped out to focus on the market action and trade easily? The proper amount of rest can increase your ability to cope with stress.

Second, it is also important to exercise and eat correctly. Emotions are physiological responses. The more energy the body has to cope with stress, the more “tough” the body can be when extreme levels of stress are encountered. Regular exercise helps the body and mind release pent-up stressful emotions. By making sure you allow your stressful emotions to dissipate, your body and mind will recuperate and be ready to deal with extreme levels of stress.

Joe Ross has been trading for more than 50 years, and is a well known Master Trader. He has survived all the up and downs of the markets because of his adaptable trading style, using a low-risk approach that produces consistent profits.

Joe is the creator of the Ross hook, and has set new standards for low-risk trading with his concept of “The Law of Charts™.” Joe was a private trader for most of his life. In the mid 80’s he shift his focus and decided to share his knowledge. After his recovery, he founded Trading Educators in 1988 to teach aspiring traders how to make profits using his trading approach. He has written 12 major books on trading. All of them have become classics and have been translated into many different languages.

Joe holds a Bachelor of Science degree in Business Administration from the University of California at Los Angeles. He did his Masters work in Computer Sciences at the George Washington University extension in Norfolk, VA. Joe still tutors, teaches, writes, and trades regularly. Joe is still an active and integral part of Trading Educators.

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Investing During The Onset Of Recessions

Posted by Bryan on 24 Jul 2008 | Tagged as: Investing Tips, Investment Ideas, Investment Protection, Mutual Funds, Overseas Investing, Trading

When the economy is booming it is easy to make profits as just about everything goes up in values. However, during the onset of recessions and depressions investing in any old thing will not work. In fact you should invest as if there is a recession about to happen all the time in my opinion.

James writes an article about recession proof investing, but I would have a different approach. I would always invest in mutual funds that make money whether the markets are going up, down or sideways. They are funds that deal in futures, currencies or other derivatives. Trading can be very lucrative during the onset of the recession, as the market can fall very quickly allowing for many good “short” profits to be made.  If you are not confident of trading though, then having some of your portfolio in mutual funds that invest in derivatives is the way to go. I invest in these types of funds via overseas investments.

Recession Proof Investing - Where to Make Money in a Recession

With most Western economies facing economic downturns, if not all out recession it is becoming increasingly hard for investors to find good investments that provide solid returns.

The recent global credit crisis has made it much more expensive for companies to borrow money to fund their activities. Virtually every listed company uses some for of debt to finance part of their trading activities meaning that there are virtually no companies out there that have been unaffected by this crisis. This increased cost of borrowing has forced profits much lower and for some highly leveraged companies it has spelled the end, just as it did for Bear Stearns. All of this has meant that stock prices have been falling and with the economic climate set to get worse traditional equity stocks look set to lose investors money.

Diversification is Key

Traditionally in recessions investors were well advised to move funds into what are known as ’staple sectors’ such as food industries, the theory being we all need to eat and buy their goods. However the impact of increase borrowing costs as well as rising commodities prices has meant that food prices are getting more expensive and hitting the bottom lines of food industry companies.

In order to better recession proof your investments it is essential to learn to not be afraid of investing in new markets or industries. May investors make the mistake of believing they ca only succeed by sticking to investing in their specialized niche. This works when markets are rising however when they are falling it can be compared to trying to pick good apples out of a rotting basket. Instead look for a new fresh basket in which to invest.

Learn more about exactly how to recession proof your investing or learn to trade commodities.

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