Building The Foundation For Wealth
August 9, 2008
You wouldn’t build your home on anything less than a solid foundation. Similarly, you can’t build wealth and financial independence without first having sound foundational principles to build upon.
I have found that many people are working on wealth building strategies such as maximizing their 401K returns, aggressive stock trading, and real estate investing without such a foundation.
Most of my clients are coming from a "one step forward, two steps back" cycle of wealth building that gets them nowhere in the long run.
There are steps you can take to make sure that you are maximizing and protecting your gains at the same time. Without these steps, you are destined to experience the gain-loss cycle which, in the end, is like spinning your wheels in the mud.
Discover how your employment circumstances affect your wealth building strategy and have more of the things you want by identifying your biggest expense and managing it without having to make more money.
Most people take gains in their cash flow to mean they can spend more on things they don’t need. It is human to want to surround yourself with the things you want to match how you feel about your new income from investments or a raise at work.
Types of Investment
July 31, 2008
The word ‘investments’ is one that most of us are familiar with hearing in financial context. For many of us, it may make us thing of big business and vasts sums of money, but there’s much to the world of investments than multi-million dollar deals.
Although it’s true that, at the top level, investments may run into many millions, it is possible for the average person in the street to invest smaller amounts of money and to invest it wisely. If you’ve ever thought about trying to help your money to grow, then maybe you’ve wondered what opportunities are available.
In truth, investments can cover a wide range of options. One of the most traditional types of investing is in the stock market. This has been viewed by some as being a difficult type of investment to get into, but times are changing. The new range of online stockbrokers available mean that it’s now easy (and fairly inexpensive) to get involved in buying and selling shares. If you’re interested in share dealing yourself, then you’d be wise to remember that there is a risk involved (”shares may go down in value, as well as up”). It’s vital that you investigate the area thoroughly before taking the plunge and you should view shares as a medium to long-term investment. If you invest expecting to make a quick buck, then you’re likely to be disappointed.
Trading For A Living - Part 2
July 22, 2008
In part 1 of this article I started to look at the financial implications of giving up the day job to instead start trading full time for a living. There are more than just monetary considerations as we will see later, but for now, there are some more costs to ponder.
More Costs!
Let’s move on to equipment. Presumably you already have a PC and internet connection by virtue of the fact you are reading this on the internet. But are these both up to the job of trading full time? Again the specifications for both hardware and ISP will depend largely on your trading style, but if you’re relying on a 100Mhz Pentium II and a dial up service, you’re setting yourself up for failure. So budget for quality equipment, budget to keep it up to spec, and budget for some repairs too ? expect the unexpected.
Many traders make the mistake of saying "This will do me whilst I start out, and I’ll get something better when I make some real money". This is quite simply false economy, you are unlikely to ever make real money with a substandard setup (and this applies equally to substandard software and data feeds). This is a cut-throat business and 95% fail, you must give yourself every advantage you can. You wouldn’t enter the Indy 500 in a go-kart with the intention of buying a better car when you’ve won a few races, and the same thing applies here.
The Realities Of Market Timing
July 11, 2008
Market timing systems are based on patterns of activity in the past. Every system that you are likely to hear about works well when it is applied to historical data. If it didn’t work historically, you would never hear about it. But patterns change, and the future is always the great unknown.
A system developed for the market patterns of the 1970s, which included a major bear market that lasted two years, would have saved investors from a big decline. But that wasn’t what you needed in the 1980s, which were characterized by a long bull market. And a system developed to be ideal in the 1980s would not have done well if it was back-tested in the 1970s. So far in the 1990s, any defensive strategy at all has been more likely to hurt investors than help them.
If your emotional security depends on understanding what’s happening with your investments at any given time, market timing will be tough. The performance and direction of market timing will often defy your best efforts to understand them. And they’ll defy common sense. Without timing, the movements of the market may seem possible to understand. Every day, innumerable explanations of every blip are published and broadcast on television, radio, in magazines and newspapers and on the Internet. Economic and market trends often persist, and thus they seem at least slightly rational. But all that changes when you begin timing your investments.
Investing Online Has Its Rewards: Find Out How To Take Advantage Of Them
July 1, 2008
Computerized investing. Online investing. Have you taken the next step yet? These days among savvy investors, online investment resources are synonymous with opportunity.
The capabilities that we currently have at our fingertips were unavailable just ten years ago. The speed at which you can invest with an online broker, along with ease of use (you can trade in your underwear), makes traditional local brokers seem obsolete.
More and more people are taking to "active investing" rather than just sticking money in mutual funds recommended by their advisors. This means atypical investors are now taking active roles in their portfolios and seeing greater returns, if they know what they are doing.
In order to become an active investor, you must know what you are doing. It is your money we are talking about here. The thing is, once you know that there are ways to net up to 18%+ returns on investments that are hardly more risky than what most people consider safe today (mutual funds, diversification), you can hardly live with yourself by leaving your money in a "safe" 4% fund.
Retirement Is A Scary Proposition If Youre Without A Plan, And Running Out Of Time
June 20, 2008
Of the 75 million baby boomers nearing retirement today, many are:
* Debt Ridden
* Severely unprepared for retirement
* Under Funded
* Without a Strategy
This is a very serious problem in a country that we can all remember used to assure most people of a retirement where you are taken care of financially.
We all know that social security alone is not the answer to this problem. Many baby boomers are on the cusp of retirement without the ability to pay their basic living expenses with the money they will have coming in after retirement.
This means most will be looking for jobs to compensate, or they will be looking for extensions of their current jobs past the time they had hoped to retire and enjoy their lives comfortably.
Out of embarrassment, many people answer their friends by saying they wouldn’t know what to do with themselves in retirement to justify why they are still working to make ends meet past retirement age.
If you are in the situation above or can picture that situation in the next 10 years, there is something you can do to change that financial prognosis.
Profitability And Stock Turn Rate
June 10, 2008
The inventory of the typical store represents the largest single element of its total assets. The sale of goods from this inventory is the merchant’s chief source of operating profit. Thus, the way in which this merchandise investment is put to work is of utmost importance in achieving a profitable operation.
To illustrate, a retailer may carry an average retail inventory of $200,000, with sales of $400,000, resulting in a 2.0 Stock Turn Rate. If this retailer had the same $400,000 sales but a 3.0 Stock Turn Rate, the average retail inventory would be $133,300. This is a difference of $66,700 at retail or approximately $32,000 at cost.
The cost of owning excess inventory is approximately 2½% per month, or 30% per year. This is due to increased expenses such as interest, insurance, buying expense, receiving department expense, property taxes, markdowns and shrinkage. Therefore, a retailer can reduce these expenses by reducing his average inventory level. In the example above, the annual savings would be approximately $10,000 ($32,000 times 30%).
Are You An Investment Dummy Like Me?
June 1, 2008
I am good at a few things. I can certainly market well and I consult with others about how to bring more attention to their products and services on the internet for a living.
I am a fair musician. I love music and play all sorts of percussion instruments and even dabble with the guitar.
I can cook better than most guys. I can survive in the wild with nothing more than a good sharp knife.
But ask me how to best manage my investments and grow and protect my wealth, and I am like a deer staring into the headlights of oncoming traffic. Paralyzed with doubt, fear, and inexperience.
Much like my clients are when they come to me for marketing advice.
It wasn’t until a new client came to me with an idea for a new book he had written on active investment strategies called “Scientific Wealth Strategies” that I realized I might not be far from figuring this whole investment and wealth protection thing out for myself.
In fact, just by consulting with him on the marketing of his book I picked up a lot of new information that has taken a grand portion of my doubts and fears away.
Rules for Simplified Employee Pension Plans better known as a SEP Plans
May 23, 2008
A SEP is a special type of IRA. Under a SEP plan the employer creates an IRA account for each eligible employee, hence the name SEP-IRA. A SEP is funded solely with employer contributions. Employees do not make contributions to their SEP-IRA retirement account. Any money that goes into a SEP automatically belongs to the employee. Thus, the employee has the right to take his SEP IRA account money with him whenever he stops working for the company.
Any size business can establish a SEP, but the SEP retirement plan is utilized mostly by the self-employed and the small business with few employees. The SEP IRA rules dictate that if the business contributes for one employee, (i.e., the owner), then the business must contribute proportionately for all of the employees. With few exceptions, anyone who works for the business must be included in the SEP. However, you can exclude from participating in the SEP plan anyone who:
1. Has not worked for the company during three out of the last five years.
2. Has not reached age 21 during the year for which contributions are made.
3. Received less than $450 in compensation (subject to cost-of-living adjustments) during the year.
Is Starting A Business For Me? What To Consider Before Starting A Business
May 13, 2008
Do you have the right temperament?
Starting a small business is one of the most serious decisions that a person can take in life. Positively, it often results in higher income levels than one could achieve as an employee together with the unique buzz of being your own boss but conversely it also can be stressful, will demand longer working hours and will probably reduce your ability to take long holidays.
Do you have a definite business idea?
The desire to be your own boss is not enough to succeed. Empirical evidence clearly shows that those who do best normally have previous work experience in their chosen business field or have conducted thorough research.
Research, Research, Research!
Before committing to setting up a new business carry out as much research as possible, perhaps contacting any representative and professional bodies for their input and advice. In addition, it is important to note local market conditions as, unless you have a unique selling point, it is very difficult to succeed where a local market is saturated with established competitors. In addition, it is always wise buy a few pertinent general business books as most will encapsulate the basics of creating a successful business - The formula being remarkably consistent from sector to sector.
