The expression, "don't put all your eggs in one basket" is meaningful when it comes to investing. Don't put all your money in one stock. Also, buy fixed income securities (i.e. bonds) and stocks. Don't pick only one type of investment.
2. Do Your Homework
Obtain and analyze as much information as possible before making your investment decisions. This will alert you of any problems a company may have, or what to expect from your investment.
3. Set Goals & Limits
Determine the price (high target price or low stop-loss price) at which you're willing to sell. Analyze interest rates to decide what return you want.
4. Don't Gamble With Money You Can't Afford To Lose
The less you can afford a loss, the more conservative you should be in your choice of investments.
5. Don't Be Greedy
Don't expect your broker to recommend stocks that will double in value within a few months. If you do have a stock that goes up considerably -- i.e. 50% or more -- sell.
6. Invest For The Long-Term
Company stock prices will fluctuate, sometimes unfavourably, in the short-term. Invest for the long-term, but keep your current financial needs in mind. You never know when you might need some of that money.
7. Avoid Acting On Impulse
An impulse buy, whether at the mall or on the stock market, is still an impulse buy. Stick to your plan. Don't buy a stock on a hot rumor; you'll get burned 90% of the time.
8. Go For Value
Undervalued stocks will help create the most growth in your portfolio. Look for bonds of companies that are out of favor too. They should be selling at a deep discount.
9. Tax Planning Is Important
Consider income-splitting techniques. (Ask your investment advisor).
10. Get Professional Help
If you're starting out, hire the best professional help you can afford. Professional advice will likely pay for itself within a short period of time. Once you become used to the market, do the research yourself. Later on in the game, switch to an online broker.
Well, a stock is a certificate that shows that you own a small fraction of a corporation. When you buy a stock, you are paying for a small percentage of everything that that company owns; buildings, chairs, computers, etc.
As a part owner of the company, the amount of stock that you own determines the amount of ownership that you have.
For example, if a company has 10,000 shares of stock outstanding and one person owns 100 shares, that person would own and have claim to 1% of the company’s assets. The benefit of owning stock in a corporation is that whenever the corporation profits, you profit as well. Therefore, the risk is that the company could do poorly or even go bankrupt (normally not a good thing for stockholders).
There are two main types of stock: common and preferred…
1. Common stock usually entitles the owner to vote at shareholders’ meetings and to receive dividends. 2. Preferred stock generally does not have voting rights, but has a higher claim on assets and earnings than the common shares. For example, owners of preferred stock receive dividends before common shareholders and have priority in the event that a company goes bankrupt and is liquidated.
A few notes on stocks:
* Although they are potentially riskier than some other investments, a key benefit is that stocks have no limit to how high they can go in price. The most you can lose is the amount you invested. * Historically, stocks have outperformed most other investments over the long run. * You can now purchase most stocks at many online brokers for under $10 a trade and some online brokers offer free online trading.
“If you fail to plan, you plan to fail”. A trading plan is especially crucial in forex trading to stay ‘in-control’ against the emotional stress in speculative situation. Often, your emotions will blind and lead you to the negative sides: greed causes you to over-ride on a win while fear causes you to cut short in your profits. Hence, a well organized operation has to be predetermined and strictly followed.
2. Trade within your means
If you cannot afford to lose, you cannot afford to win. Losing is a not a must but it is the natural in any trading market. Trading should be always done using excess money in your savings. Before you start to trade in Forex, we suggest you to put aside some of your income to set up your own investment funds and trade only using that funds.
3. Avoid emotion trading
If you do not have a forex trading plan, make one. If you have a trading plan, follow it strictly! Never ever attempt to hold your weakened position and hope the market will turn back in your favor direction. You might end up losing all your capital if you keep holding. Move on, stay within your trading plan, and admit your mistakes if things do not turn as you want.
4. Ride on a win and cut your losses
Forex trader should always ride till the market turns around whenever a profit is show; while during losing, never hesitate to admit your mistakes and exit the market. It is human nature to stay long on loses and satisfy with small profits – this is why as we mentioned earlier that a strictly followed trading plan is a must-have.
5. Love the trends
Trends are your friends. Although currency values fluctuate but from the big picture it normally goes in a steady direction. If you are not sure on certain moves, the long term trend is always your primary reference. In long run, trading with the trends improves your odds in the Forex market.
6. Stop looking for leading indicators
There aren't any in the Forex market. While some firms make a lot of money selling software that predicts the future, the reality is that if those products really worked, they wouldn't be giving the secret away.
7. Avoid trading in a thin market
Trade on popular currency pairs and avoid thin market. The lack of public participation will cause difficulties in liquidating your positions. If you are beginners, we suggest the big five: USD/EUR, USD/JPY, USD/GBD, USD/CHF, and EUR/JPY.
8. Avoid trading in too many markets
Do not confuse yourself by overtrading in too many markets especially if you are a beginner. Go for the major currency pairs and drill down your studies in it.
9. Implement a proper trading system
There are hundreds of forex trading systems available on line. Pick one that you are most comfortable with and stick with it. Stay organized in your trades and fully utilized stop-loss or limit functions in your trades.
10. Keep learning
The best investment is always the investment on your brain. Without a doubt, Forex trading needs much more than just a few guidelines or tips to be successful. Experience, knowledge, capital, fortitude, and even some help of luck are all crucial in one’s success in the FX market. if you lose in a trade, do not lose the experience in it. Learn from your mistakes and regain your position in the next trade.
Well, I told the world that I saved $330 by switching to Geico from AAA a few months back. I mentioned in that post that I really liked dealing with the insurance gal that I was dealing with. She has always been very helpful and since we have developed a bit of a relationship it makes it much more enjoyable dealing with her.
Saving another $200 a year on car insurance
She emailed me about a week ago asking me if I would be open to her getting me a new quote with a few other insurance companies. Of course, why not? So, she ran it and she seemed to be very excited to tell me that she could get me the exact same coverage for $200 cheaper per year than Geico.
The new company is America First/Liberty Mutual who coincidentally just recently purchased Safeco. I don’t know much about this company. I think the truth about whether or not it is actually a good deal remains a secret until you have a claim. Dealing with AAA on a claim turned out to be quite difficult, so that made the decision to switch even easier. Hopefully I never have to find out how good America First is…
My car insurance lesson
The lesson learned here is that I have saved $530 on my car insurance (keeping the same coverage and limits) over the last 6 months. I didn’t really think I was paying very much, but I am glad I shopped around. It is something to think about. This is another thing to consider if you are trying to save money on your car insurance.
Maybe you have heard about this whole Money Merge account thing or United First Financial and wondered what it is. I did too. I first found out about these programs a little less than two years ago and did some quick investigating, but didn’t do enough research to fully understand the Money Merge thing.
Disclaimer: I do not currently have a Money Merge Account. All the information included here about them is from interviews, research, building Excel spreadsheets, and my own calculations - not my own personal experience using them. I say this because there very well could be some pieces to the puzzle that I am missing, if you see any please share them in the comments.
Also, right off the bat, this product is not designed to be a quick fix to pay off your mortgage and it should only be used by people who are very disciplined with their finances. Honest MMA companies and sellers of the products have said that themselves. If your life is a financial mess, you need to get it cleaned up before considering a Money Merge Account.
So what is it anyway?
In researching this, I found a couple of good explanations of what a Money Merge account actually is. TheSimpleDollar defines it as:
A “money merge account” is a special home equity line of credit placed on your home. Every time you receive a paycheck, the whole thing goes straight towards first paying off any balance in your money merge account, then the entire remainder of your check goes towards paying the interest, then the principal of your home loan. Let’s say you had a mortgage with $1,500 payments and you set up a money merge account. Each month, you received $3,500 in paychecks, but only spent $1,200 (and sometimes less). That means that automatically $2,300 (and sometimes more) goes towards that mortgage each month - an extra $800 towards principal every single month. This means a 30 year mortgage would be paid off in 13 years and two months.
The homeowner sets up a home-equity line of credit (HELOC), borrowing against the value of his property.
Some large sum is withdrawn from the HELOC and used to pay down the primary mortgage.
The homeowner does not deposit his paychecks, etc. into a traditional savings account, but applies them to pay down the HELOC.
From time-to-time, another large chunk of money is taken out of the HELOC and applied to the primary mortgage.
In case of emergency, the homeowner takes more money out of the HELOC.
Though the HELOC will likely have a higher interest rate than the primary mortgage, it’s actually cheaper to maintain because of the way the interest is calculated.
MMA Pros
Pay your home off in less than half the time (for most people)
MMA Cons
You probably won’t know for sure what kind of results you are going to get with the program until it is up and running.
You will need to open another line of credit.
You have to have to be bringing in more money than what is going out each month in order for it to help much.
You have to very closely track your payments!
It will can become very difficult to budget since everything is coming out of the same bucket. And if you you begin spending more than you would otherwise because of that lack of a budget, you quickly nullify the potential gains possible.
Interview with an MMA company
I recently had an interview with the owner of Smart Equity. He agreed to give me some of his time to answer questions that I had about the Smart Equity MMA program and Money Merge Accounts in general. After talking to him, I felt like I got a better understanding of what was actually happening with the system.
The Money Merge Account system
For me, I think I figured out (someone please correct me if I am wrong) a good way to think about it…
Let’s say you had a $100,000 mortgage for 30 years (@ 7%). You would be paying 7% interest on that $100,000. What if you could transfer $10,000 of it into a loan that didn’t charge interest? You would then have a $90,000 balance on your mortgage being charged the 7% and $10,000 that you still had to pay for, but that was at 0%. I think this is what is essentially happening in the Money Merge programs. Once the $10,000 was paid off, you would then move another $10,000 to a loan with no interest. Then you would be down to less than $80,000. If you continue this cycle, it would be paid off very quickly.
From what I understand, this is a very generalized example of what is going on with a Money Merge account. The MMA software does the number crunching for you and always keep you at the most optimal point to pay down the mortgage the quickest. While the software would definitely make this an easier and probably safer process, you could still get great results doing it yourself.
For example, Using the details from the example above…
30 year $100,000 mortgage at 7%
If you paid $10,000 at the beginning of the year with your credit card that had 12 months of 0% you would have to pay $833.33 each month to have it paid off in a year. This assumes that you have an extra $833.33 every month over and above your normal expenses. If you repeated this process each year (according to my calculations) you would have the house paid off in about 7.5 years. In those 7.5 years you would have paid $29,912.69 in interest charges. This would have been a savings of $109,596.21 in interest charges if you did this method rather than just paying your payment each month for 30 years.
I will be the first to admit that a $100,000 mortgage or having $833.33 to pay extra each month may not be realistic for most. It is just to illustrate the point and I picked simple numbers to make the example clear.
You need to have extra cash for the Money Merge to work well
What I see from all this is that, just like any mortgage pre-payment plan, the speed with which the mortgage is paid off is directly related to the amount extra you have to put towards it. If you only have $50 a month extra to throw towards your mortgage, sure the MMA software will help a little bit and may even pay for itself over time, but you are not going to be able to pay off your 30 year loan in 11 years. In the example we had above paying principal only on the mortgage would take 12.5 years and that is assuming the whole $100,000 was at 0%, which the Money Merge can not do. It takes it in chunks so that you have large chunks that are getting lower interest rates, but it can’t take the whole mortgage.
Doing the research, building spreadsheets and running the numbers has led me to one conclusion. It is worth your while to pay extra towards your mortgage. Regardless of whether or not you use the MMA software, it is worth trying to pay some extra principal on your mortgage on a regular basis - it greatly shortens the time you will be paying on the loan.
From what I can tell, the Money Merge software will amplify the process and will help you stay on track, but if you don’t have extra money to pay towards your mortgage, don’t waste your time.
Also, I will say it again, because it bears repeating: you need to have your finances in order before even considering something like an MMA. If you ever pay bills late, if you can’t balance your checkbook, if you don’t know exactly what is going on with your finances, I do not recommend Money Merge Accounts. If that is you right now, I would suggest trying to pay extra towards your mortgage each month and if you can do that successfully for a while, then it may be worth considering.
If you are interested in starting an MMA, I recommend the guys from Smart Equity. They were very helpful and gave me hours of their time - phone calls, emails, research just to help me understand the product. At $695 their MMA is the cheapest one I have found out there (compared to the $3500 UFF product) and customer support is included.
So, those are my thoughts on Money Merge Accounts. I would love to hear from people who are currently using them or who have more information about them in the comments below!
Value Added Tax, or VAT, is levied on top of the cost of a product or service and generates revenue for a government.
Value Added Tax, popularly known as ‘VAT’, is a special type of indirect tax in which a sum of money is levied at a particular stage in the sale of a product or service.
In 1954, the value added tax system was initiated by the then joint director of the tax authority of France, Maurice Laure. VAT came into effect for the first time on 10th April, 1954.
From its inception, the value added tax system was imposed on all major sectors of France – the first country to use this system. Once instituted, it was immediately clear that revenues collected from the VAT system constituted a substantial share of the government’s revenue in the French economy.
Not surprisingly, due to the ease of payment and ready comprehensibility, the value added tax system has been adopted by different nations across the world.
VAT is intended to be levied – or charged – whenever there is some value addition to raw material. The taxpayers on the other hand, will get credit for the amount of tax paid off at the stages of procurement. The value added tax system has proven to be effective in avoiding problems that normally might arise out of the double taxation of goods and services.
The value added tax system is designed to address various problems associated with the conventional sales tax system. In sales tax, there is no provision for input tax credit, which means that the end consumer may pay tax on an input that has already been taxed previously. This is known as cascading and leads to increases consumer tax and price levels, which increases the rate of evasion and can be detrimental to economic growth.
The value added tax system deals with these problems quite efficiently. As VAT is imposed on value addition – at every single stage – there is no incidence of cascading. In this way, the final consumers bear the burden of paying value added tax. This system involves absolute transparency at every stage of taxation, thereby making the tax system quite comprehensible and simple.
In some countries like India, the system of VAT has been designed to change the existing system of sales taxation. Value added tax is different from the conventional system of sales tax, because VAT is charged at every stage of value addition – whereas sales tax is imposed on final value of transaction only.
The value added tax system allows for input tax credit, or ITC, on the amount of tax levied at the preceding stage of the value addition chain. The allowance for ITC is normally appropriated from the value added tax liability imposed on the following stage of the sale of the product.
A well-planned investment strategy is essential before having any investment decisions. A business strategy is generally based upon long run period. Formation of business strategy largely dependent upon the factors such as long-term goals and risk on the investment.
As the return on investment is not always clear, so the investors prepare the strategy so as to face the ongoing challenges in investment. A balanced investment strategy is generally required in the process of investment, which possesses long time period and some risk tolerance.
In the case, when a strategy is aggressive the chance of attaining a higher goal is higher. An efficient strategy can be obtained from portfolio theory, which shows good estimates on risk and return.
Investment Strategy is usually considered to be more of a branch of finance than economics. It is defined as set of rules, a definite behavior or procedure guiding an investor to choose his investment portfolio. For example, investing in mutual funds has recently emerged as a very favorable investment strategy.
An investment strategy is centered on a risk-return tradeoff for a potential investor. High return investment instruments such as real estate and mutual funds usually have more risks associated with it than low return-low risk investment opportunities. Return on investment can be calculated on past or current investment or on the estimated return on future investment.
Symbolically, it can be expressed as:
Vf/Vi -1 where Vf denotes final investment value and Vi is the initial investment value. (“f” and “i” should be noted as subscripts)
Return on investment (ROI) is profitable when Vf/Vi-1>0 and the investment is deemed to be unprofitable when the value of final investment is less than that of the initial investment. ROI is calculated to be 1 or 100% when the value of the final investment is twice the value of the initial investment.
Types of investment strategies can be defined as follows: A passive investment strategy attempted to minimize transaction costs.
An active investment strategy guide used to maximize returns based on moves such as proper market timing. This usually mean, “buying in the lows and selling in the highs” or buying investment instruments when they are cheap and selling them off when their price appreciates. This strategy, however, is not very beneficial for small time investors.
Small time investors can adopt the buy and hold investment strategy to invest in equities, which although volatile in nature, give favorable long run returns. Investing in equity markets for small time investors is associated with the investors holding on for very long periods. In the case of real estate, the holding period extends the lifespan of the mortgage. Notably, in case of this strategy, indexing or buying a small proportion of all the shares in market index or a mutual fund is a purely passive variant of the above strategy.
The strategy of value investing, a classic investment strategy propagated by Benjamin Graham simply concentrates on the strategy that an investor buys shares of a company as if he was buying off the whole company without paying any attention to the stock market scenario or any exterior conditions such as the political climate. At the end of the day, if he can buy the stock at less than that its actual future worth to the buyer, the person is said to have discovered a “value investment.”
Investment strategies can also denote the investment strategies a national or federal government should follow to bring about economic growth in a country. This can only be achieved by domestic investment as well as significant FDI (Foreign Direct Investment) flows to particular sectors of countries, especially the less developed ones of Asia and Africa.
In case of India, infrastructural problems, excessive government intervention, rigid labor laws and corruption are stifling the flow of FDI in the critical sectors. Less developed countries such as those in the Asia- Pacific region and Africa can bring about much needed development in these economies.
An investment strategy in mutual funds is probably the best bet for a profitable investment. Mutual funds is defined as a pool of money supplied by different investors and in turn used by the mutual fund company to invest in various assets such as stocks and bonds. However, a detailed research has to be conducted for choosing the mutual fund companies and only those should be considered which have a professional investment manger. This will ensure that the funds get channeled towards the right investments. This also applies for investing in stock markets where a decision to invest should follow a through research about the past and current trends of the stock prices and their Net Asset Values (NAV). Analyses from market researchers about the predicted future trends should also be considered otherwise gains from capital appreciation; capital gain distribution (in case of mutual funds) and dividends might not be realized.
Lastly, investment strategies leading to green investments or investments in renewable sources of energy will be the next big thing in the investment spectrum
