by: Joseph Kenny
The practice of trading commodities is known as futures trading. Experience combined with patience can make such a transaction very lucrative. It involves the trading of tangible items, like silver, gold, oil or even crops. This practice is based on your ability to predict the future price of a commodity. Companies and individuals alike make investments in futures trading. The wisest way to begin futures trading is to set your financial goals and conduct a well-planned research, before you get into it. Consider hiring a professional broker because even though it may be initially expensive, the expertise of the broker will help you to avoid the common novice mistakes.
Future trading endeavors can either be very beneficial or utter failures. Everything depends on how smart your moves and decisions are. You can be on your way to success, once you get an idea of the operations involved in this trade.
These are a few points to keep in mind:
- Remember that the prices at which the commodity futures are sold is not determined by the commodity exchanges. Prices are established on the demand and supply conditions. If the sellers are more than the buyers, the prices will decrease and vice versa. They are also determined by the buy and sell orders.
- Futures markets are considered clearing houses for the current demand and supply information. Buyers and sellers of financial instruments, agricultural commodities, petroleum products and metal meet in these markets.
- The primary purpose of a futures market is to provide an efficient method to manage the price risks.
- Hedgers and Speculators are the two groups of futures traders.
- Hedgers: They place their interest in underlying commodities and try to avoid the risk included in the change of the commodity prices. You can be protected against the fluctuations that take place in market prices by hedging. Transferring the risk to a professional risk taker is involved. For instance, if you are a manufacturer, you can protect yourself from the fluctuations in the price of raw materials by hedging in the futures market. Hedging includes hedge sale and hedge purchase. You can buy and sell futures of the same quantity, as a protection against the risk in price change, while you still hold the stocks.
- Speculators: They predict market moves and buy commodities of no practical use to them. They purchase these commodities ‘on paper’ and make a profit out of it.
- If you do not have the required experience or resources, it is advisable for you not to attempt speculating or predicting the market. Future performance results cannot be based on the results of your past performance.
- Futures contracts are traded on a futures exchange. They are standardized contracts that help in the buying and selling of a certain commodity, at a certain pre-set price and date. This contract gives the right to buy and sell, unlike the options contract that does not.
The advancement in technology and electronic communication has introduced new and better tools for futures trading. However, you could end up losing thousands of dollars if you do not execute the procedures involved correctly.
Wednesday, November 29, 2006
Thursday, November 23, 2006
Hold ‘em Or Fold ‘em: Tips On Managing Foreign Investments
by: Stephen McLaughlin
A successful baseball manager knows when it is time to pull his starting pitcher out of the game and bring in his ace reliever. A good poker player knows when to get up and leave the table with his winnings after the cards start going against him. A top boxing trainer knows that sometimes it is better to throw in the towel and save his fighter for another night, rather than having him go on all 12 rounds and risk serious injury. In the world of sports, the top people know what to look for, and know the actions that need to be taken to give them the best chance for success.
The same holds true with investing – and particularly in the area of foreign investing. Knowing when it is time to cash in your overseas investments is every bit as important as finding the right investments in the first place. The challenge, of course, comes from the fact that your foreign investments are affected by factors that, in many cases, your US investments are not. While it is certainly true that we live in an increasingly global economy, those trends and events that affect the New York Stock Exchange and the NASDAQ – and specifically the companies that trade there – will not necessarily have the same effects on the businesses you have invested in South America, Europe or Asia. In order to maximize the profits of your foreign investments, it is necessary to monitor a number of factors within the specific regions you are doing business in and take these factors into consideration when making the decision on whether to stay with an investment, or get out. These factors include:
Regional Economic Stability: Despite occasional fluctuations, and upward and downward turns, the American economy has been remarkably stable for years. While, as any Venture Capitalist can tell you, this certainly does not make investing in American companies a foolproof proposition, devastating, fast moving economic downturns in the over all US economy are few and, thankfully, far between. This is not necessarily the case worldwide. War, natural disasters, changes in a specific nation’s economic policy and in some areas even revolution – all of these factors play a part in analyzing a region’s economic stability. To protect your investments, it is necessary to be completely familiar with the area in which you have put your money, and keep a close eye on both regional economies and the local economies of the areas in which the businesses you have invested in are located. By watching the economic trends in a specific region closely during the entire length of your investment, it is often times possible to accurately assess exactly the right time to pull your money out for maximum profit.
Regional Political Stability and Policy: In the United States, every two years national elections are held which influence the direction the nation as a whole will go. But regardless of whether it is the Republicans or Democrats who win, the essential stability of our governmental structure – and in most cases the nation’s foreign policies – remains basically unchanged. This, however, is most certainly not the case in many other parts of the world where you might have your investments. One need look no further back than Hugo Chavez’s election as President of Venezuela in 1998 – and the disastrous effect his government’s anti-American policies had on numerous investors in Venezuelan businesses – to understand the dramatic effect the political stability of a nation can have on your investment dollars. While it is probable that you will have a country or region well researched before you invest in companies located there, it is also critical that you constantly monitor the political stability of that nation while your money is there. It is equally important to keep an eye on the region as a whole as, particularly in Latin America and the Middle East, changes in some of the larger, more powerful countries in the region can have a dramatic effect on the countries you may have your dollars invested in.
Regional and Multi-national Trends: What is “hot” in the United States is not necessarily going to be a best seller in Argentina, or in Germany, or in Singapore. Whether due to economic considerations on the part of customers or general taste and preference changes that are influenced on a national or cultural level, each unique area of the world has its own trends that need to be watched. This is particularly true in the area of consumer goods and manufacturing where what customers are interested in purchasing can often times change on a monthly – or even weekly – basis. While it is certainly not possible to predict what any given market will do every time, all the time, by carefully monitoring economic and cultural shifts in a given region and keeping a close eye on the purchasing trends in that region, you will give yourself a much better chance of getting your money out at the proper time to maximize profits.
The above examples are just three of the many factors that need to be taken into consideration when making the decision to stay with a foreign investment, or get out when you feel that the getting is good. While ultimately the decision on whether to stay or go will be based on your basic belief in a particular investment’s continuing viability and profitability, it is critical that you not only have access to the most up-to-date information across a broad spectrum of economic and social trends, but also either have or hire the expertise to analyze that information as it pertains to your specific investments. Overseas investing can be among the most profitable things you can do with your investment capital, but also one of the riskiest. The best way to minimize that risk is to make sure you have the tools to allow you to get out with your profits intact, and not stay in the game one inning too long.
Author Bio: Steve McLaughlin founded Global Market Insights, with offices in Europe and the U.S., with his vision of giving clients two synergistic competencies: knowledge of the global marketplace and industry expertise in manufacturing, finance and information technology. Steve has over twelve years of international experience in three continents, having started in executive search as a Beckett-Rogers Associate. Steve is a graduate of Rice University, where he was student body president, and completed post-graduate studies in International Economics at the Universidad Mayor, Santiago, Chile.
A successful baseball manager knows when it is time to pull his starting pitcher out of the game and bring in his ace reliever. A good poker player knows when to get up and leave the table with his winnings after the cards start going against him. A top boxing trainer knows that sometimes it is better to throw in the towel and save his fighter for another night, rather than having him go on all 12 rounds and risk serious injury. In the world of sports, the top people know what to look for, and know the actions that need to be taken to give them the best chance for success.
The same holds true with investing – and particularly in the area of foreign investing. Knowing when it is time to cash in your overseas investments is every bit as important as finding the right investments in the first place. The challenge, of course, comes from the fact that your foreign investments are affected by factors that, in many cases, your US investments are not. While it is certainly true that we live in an increasingly global economy, those trends and events that affect the New York Stock Exchange and the NASDAQ – and specifically the companies that trade there – will not necessarily have the same effects on the businesses you have invested in South America, Europe or Asia. In order to maximize the profits of your foreign investments, it is necessary to monitor a number of factors within the specific regions you are doing business in and take these factors into consideration when making the decision on whether to stay with an investment, or get out. These factors include:
Regional Economic Stability: Despite occasional fluctuations, and upward and downward turns, the American economy has been remarkably stable for years. While, as any Venture Capitalist can tell you, this certainly does not make investing in American companies a foolproof proposition, devastating, fast moving economic downturns in the over all US economy are few and, thankfully, far between. This is not necessarily the case worldwide. War, natural disasters, changes in a specific nation’s economic policy and in some areas even revolution – all of these factors play a part in analyzing a region’s economic stability. To protect your investments, it is necessary to be completely familiar with the area in which you have put your money, and keep a close eye on both regional economies and the local economies of the areas in which the businesses you have invested in are located. By watching the economic trends in a specific region closely during the entire length of your investment, it is often times possible to accurately assess exactly the right time to pull your money out for maximum profit.
Regional Political Stability and Policy: In the United States, every two years national elections are held which influence the direction the nation as a whole will go. But regardless of whether it is the Republicans or Democrats who win, the essential stability of our governmental structure – and in most cases the nation’s foreign policies – remains basically unchanged. This, however, is most certainly not the case in many other parts of the world where you might have your investments. One need look no further back than Hugo Chavez’s election as President of Venezuela in 1998 – and the disastrous effect his government’s anti-American policies had on numerous investors in Venezuelan businesses – to understand the dramatic effect the political stability of a nation can have on your investment dollars. While it is probable that you will have a country or region well researched before you invest in companies located there, it is also critical that you constantly monitor the political stability of that nation while your money is there. It is equally important to keep an eye on the region as a whole as, particularly in Latin America and the Middle East, changes in some of the larger, more powerful countries in the region can have a dramatic effect on the countries you may have your dollars invested in.
Regional and Multi-national Trends: What is “hot” in the United States is not necessarily going to be a best seller in Argentina, or in Germany, or in Singapore. Whether due to economic considerations on the part of customers or general taste and preference changes that are influenced on a national or cultural level, each unique area of the world has its own trends that need to be watched. This is particularly true in the area of consumer goods and manufacturing where what customers are interested in purchasing can often times change on a monthly – or even weekly – basis. While it is certainly not possible to predict what any given market will do every time, all the time, by carefully monitoring economic and cultural shifts in a given region and keeping a close eye on the purchasing trends in that region, you will give yourself a much better chance of getting your money out at the proper time to maximize profits.
The above examples are just three of the many factors that need to be taken into consideration when making the decision to stay with a foreign investment, or get out when you feel that the getting is good. While ultimately the decision on whether to stay or go will be based on your basic belief in a particular investment’s continuing viability and profitability, it is critical that you not only have access to the most up-to-date information across a broad spectrum of economic and social trends, but also either have or hire the expertise to analyze that information as it pertains to your specific investments. Overseas investing can be among the most profitable things you can do with your investment capital, but also one of the riskiest. The best way to minimize that risk is to make sure you have the tools to allow you to get out with your profits intact, and not stay in the game one inning too long.
Author Bio: Steve McLaughlin founded Global Market Insights, with offices in Europe and the U.S., with his vision of giving clients two synergistic competencies: knowledge of the global marketplace and industry expertise in manufacturing, finance and information technology. Steve has over twelve years of international experience in three continents, having started in executive search as a Beckett-Rogers Associate. Steve is a graduate of Rice University, where he was student body president, and completed post-graduate studies in International Economics at the Universidad Mayor, Santiago, Chile.
Monday, November 20, 2006
How to Control Excess Volatility in Your Portfolio
by: Mark Kramer
Successful investing is all about balancing the potential for gain with the risk of loss. However the ideal combination for a particular investor can be tricky. Read about what factors to consider to make better decisions when selecting your investment portfolio.
Affluent investors (which are likely readers of this article) probably already understand that diversification can reduce risk. But what if you own 20 different stocks and then a bear market takes them all down? To help cushion your portfolio against that kind of risk you can diversify into different “asset classes” that may hold up in value when the stock market goes down.
This kind of portfolio diversification is called “asset allocation” because it involves allocating different percentages of your portfolio into different types of asset classes.
• Bonds, cash and real estate are all different types of asset classes that may be expected to offer some protection during a serious bear market.
This is the traditional approach to designing a portfolio mix that will help to control excess volatility; and it involves setting unchanging, fixed allocations in the different asset types (such as 60% in stocks, 30% in bonds and 10% in cash).
• Then there is a newer, more active style of portfolio management that involves adjusting the allocations for the different asset types as market conditions change. The active style is generally referred to as “dynamic asset allocation” or “tactical asset allocation”.
Traditional Asset Allocation -- Balancing Risk and Reward
How do you design a portfolio mix in the traditional way that will maximize returns yet not expose you to more risk than you can handle? That’s the $64,000 question.
Stocks are the “growth engine.” So you want as much stock market exposure as you can handle in the form of mutual funds, index funds and diversified groupings of individual stocks. But you have to balance stocks’ higher growth potential against the risk of a “destructive storm” because the stock market has historically taken dives of as much as 40%, 50% and even 90% during bear markets.
• Since traditional asset allocation techniques are based upon a “buy and hold” approach, the trick is to decide what percentage of your portfolio should be in stocks so you get some of that growth engine working for you, but not so much that you can’t weather a destructive storm if it were to hit.
The right portfolio mix for you will be a reflection of very individual circumstances. The right mix should be consistent with your “risk tolerance”. If you could not weather a short-term portfolio loss of more than 25%, then you may not want stocks to represent any more than about 50% of your portfolio (if you assume that the next destructive storm wouldn’t be worse than a 40% to 50% drop in the market). In that event, a 50% loss in your stock market holdings would translate into a 25% hit to your overall portfolio (assuming the other half is invested in cash or money market funds).
You Can Take More Risk When You are Young
The conventional wisdom is that the younger you are, the more stock market risk you can take. The simple thinking behind this is that a younger person has many more years in which to recover from a “destructive storm” and reap the ultimate benefit of holding stocks in the long term. Clearly, a worker close to retirement could not easily recover from such a destruction of value because there isn’t enough time. By the same token, retired people may have the lowest tolerance for stock market risk since they may be living on a fixed income and can’t afford any loss of value.
• However, young people just entering the work force may have good reasons to avoid taking much risk in the early years. Just like someone approaching retirement, young workers likely have several important, near-term objectives for using their savings: (1) buying a home, (2) paying back school loans and (3) starting a family. Too much portfolio risk could be counter-productive.
At the other end of the age scale, retired people may need to introduce more stock market exposure into their portfolios to have some growth potential that can offset rising expenses during their increasingly longer lifetimes. The rising costs of medical care, combined with the general rate of inflation can do serious damage to a fixed income over 15, 20 or 30 years … and that’s how long many retirees can expect to live.
What to Watch Out For
Deciding upon the right portfolio mix for your particular situation is a delicate question and should involve careful consideration of a broad range of factors. There are a number of important caveats you should understand before entering into a traditional asset allocation exercise with a broker or financial planner.
Bonds Go Down Too: Don’t be mislead that bonds never go down. There is only one instance in which the value of a bond doesn’t change … that is when you hold it to maturity and, like a Certificate of Deposit, it will return the original, face value of the bond. At any other time prior to maturity, the market value of a bond goes up or down in response to the changing level of interest rates. If you own a bond mutual fund, the market value of the fund changes daily with the movement of interest rates. A mutual fund holding long term bonds has the potential to lose as much as 10% to 20% in value during a period of steeply rising interest rates.
Online Asset Allocation Tools are … well … “Canned”: Many brokers and mutual fund companies include an online tool on their websites that you can use to generate recommended asset allocation percentages for your portfolio. These tools can be helpful as you consider the different factors in your situation and what impact each should have on your allocation decision. But many of these online tools are too simplified and may not be able to take into account certain critical factors in your own unique situation. Suffice it to say that these canned tools don’t really substitute for an in-person interview with a good financial planner or advisor.
Maximum Downside Risk Should be Considered: When you seek guidance on the right asset allocation mix for you, be aware that you can get wildly different answers from different advisors, and from different canned online tools. There are various reasons for this; but one main reason you can get very different answers from the experts is the kind of measure they use to define risk. Many advisors use statistical measures of “historical market volatility” that do not effectively take into account the maximum loss potential of a major “destructive storm”. These advisors are more likely to recommend you put a much higher percentage of your portfolio into stocks. Before accepting such a recommendation, know that the stock market has lost between 40% and 50% of its value three times in the past 35 years, most recently earlier in this decade. And of course, the Great Depression was much, much worse.
Needed: Years of Patience
If you had invested in the stock market in 1964, you would have bought in just before one of those destructive storms rolled in. This storm was a monster and you would have waited 17 years before breaking even on your investment … actually about 27 years if you take the effects of inflation into account.
The drawback of the traditional asset allocation technique is its reliance on a “buy and hold” philosophy. The method is based upon the belief that you can’t successfully time the markets … that you just have to sit tight and collect your average historical return of about 7% per year on stocks over the long run. In fact, it can be the very long term. Studies show that in many previous years, going back 100 years, investors have had to wait 20 to 40 years to actually achieve that average long-term market return.
Stepping Aside to Avoid the Destructive Storms
This painfully obvious problem with the traditional approach has fueled development of a more active investment style that seeks to avoid most of the ravages of destructive storms, when they arrive. The active approach can reduce the risk involved with holding stocks; and can allow the average investor to tolerate a higher percentage in their portfolio. So if the “traditional” allocation approach says you can only tolerate 40% in stocks, the “active” approach might allow you to tolerate up to 75% when the market is bullish.
But it takes timing of the markets to be successful. While the timing success of market “gurus” has long been suspect, the reputation of market timing has grown steadily among sophisticated investors given the increasing reliability of computerized models that analyze a host of quantitative factors about the market.
The point of these computer models is to identify longer-term market trends and invest in them until the trend falls apart. A strategy for actively changing the asset allocation of a portfolio can be driven by this kind of market timing analysis. For example, such a dynamic strategy would have had you heavily invested in stocks during most of the 1990’s while the bull market was raging. Then it would have moved your portfolio out of stocks and into something else in 2000 after the market peaked and a new stock market downtrend became evident … thereby avoiding most of the damage suffered by the average buy and hold investor.
Active portfolio management is now accessible to the average small investor because there are a growing number of individual investment advisors, market timing services and investment newsletters that employ these techniques with success. Some of these services can even be used to help you manage a 401k portfolio. Now you can weather the destructive storms by moving your portfolio out of their way and sitting happily on a dry dock or enjoying better weather in some other climate
Successful investing is all about balancing the potential for gain with the risk of loss. However the ideal combination for a particular investor can be tricky. Read about what factors to consider to make better decisions when selecting your investment portfolio.
Affluent investors (which are likely readers of this article) probably already understand that diversification can reduce risk. But what if you own 20 different stocks and then a bear market takes them all down? To help cushion your portfolio against that kind of risk you can diversify into different “asset classes” that may hold up in value when the stock market goes down.
This kind of portfolio diversification is called “asset allocation” because it involves allocating different percentages of your portfolio into different types of asset classes.
• Bonds, cash and real estate are all different types of asset classes that may be expected to offer some protection during a serious bear market.
This is the traditional approach to designing a portfolio mix that will help to control excess volatility; and it involves setting unchanging, fixed allocations in the different asset types (such as 60% in stocks, 30% in bonds and 10% in cash).
• Then there is a newer, more active style of portfolio management that involves adjusting the allocations for the different asset types as market conditions change. The active style is generally referred to as “dynamic asset allocation” or “tactical asset allocation”.
Traditional Asset Allocation -- Balancing Risk and Reward
How do you design a portfolio mix in the traditional way that will maximize returns yet not expose you to more risk than you can handle? That’s the $64,000 question.
Stocks are the “growth engine.” So you want as much stock market exposure as you can handle in the form of mutual funds, index funds and diversified groupings of individual stocks. But you have to balance stocks’ higher growth potential against the risk of a “destructive storm” because the stock market has historically taken dives of as much as 40%, 50% and even 90% during bear markets.
• Since traditional asset allocation techniques are based upon a “buy and hold” approach, the trick is to decide what percentage of your portfolio should be in stocks so you get some of that growth engine working for you, but not so much that you can’t weather a destructive storm if it were to hit.
The right portfolio mix for you will be a reflection of very individual circumstances. The right mix should be consistent with your “risk tolerance”. If you could not weather a short-term portfolio loss of more than 25%, then you may not want stocks to represent any more than about 50% of your portfolio (if you assume that the next destructive storm wouldn’t be worse than a 40% to 50% drop in the market). In that event, a 50% loss in your stock market holdings would translate into a 25% hit to your overall portfolio (assuming the other half is invested in cash or money market funds).
You Can Take More Risk When You are Young
The conventional wisdom is that the younger you are, the more stock market risk you can take. The simple thinking behind this is that a younger person has many more years in which to recover from a “destructive storm” and reap the ultimate benefit of holding stocks in the long term. Clearly, a worker close to retirement could not easily recover from such a destruction of value because there isn’t enough time. By the same token, retired people may have the lowest tolerance for stock market risk since they may be living on a fixed income and can’t afford any loss of value.
• However, young people just entering the work force may have good reasons to avoid taking much risk in the early years. Just like someone approaching retirement, young workers likely have several important, near-term objectives for using their savings: (1) buying a home, (2) paying back school loans and (3) starting a family. Too much portfolio risk could be counter-productive.
At the other end of the age scale, retired people may need to introduce more stock market exposure into their portfolios to have some growth potential that can offset rising expenses during their increasingly longer lifetimes. The rising costs of medical care, combined with the general rate of inflation can do serious damage to a fixed income over 15, 20 or 30 years … and that’s how long many retirees can expect to live.
What to Watch Out For
Deciding upon the right portfolio mix for your particular situation is a delicate question and should involve careful consideration of a broad range of factors. There are a number of important caveats you should understand before entering into a traditional asset allocation exercise with a broker or financial planner.
Bonds Go Down Too: Don’t be mislead that bonds never go down. There is only one instance in which the value of a bond doesn’t change … that is when you hold it to maturity and, like a Certificate of Deposit, it will return the original, face value of the bond. At any other time prior to maturity, the market value of a bond goes up or down in response to the changing level of interest rates. If you own a bond mutual fund, the market value of the fund changes daily with the movement of interest rates. A mutual fund holding long term bonds has the potential to lose as much as 10% to 20% in value during a period of steeply rising interest rates.
Online Asset Allocation Tools are … well … “Canned”: Many brokers and mutual fund companies include an online tool on their websites that you can use to generate recommended asset allocation percentages for your portfolio. These tools can be helpful as you consider the different factors in your situation and what impact each should have on your allocation decision. But many of these online tools are too simplified and may not be able to take into account certain critical factors in your own unique situation. Suffice it to say that these canned tools don’t really substitute for an in-person interview with a good financial planner or advisor.
Maximum Downside Risk Should be Considered: When you seek guidance on the right asset allocation mix for you, be aware that you can get wildly different answers from different advisors, and from different canned online tools. There are various reasons for this; but one main reason you can get very different answers from the experts is the kind of measure they use to define risk. Many advisors use statistical measures of “historical market volatility” that do not effectively take into account the maximum loss potential of a major “destructive storm”. These advisors are more likely to recommend you put a much higher percentage of your portfolio into stocks. Before accepting such a recommendation, know that the stock market has lost between 40% and 50% of its value three times in the past 35 years, most recently earlier in this decade. And of course, the Great Depression was much, much worse.
Needed: Years of Patience
If you had invested in the stock market in 1964, you would have bought in just before one of those destructive storms rolled in. This storm was a monster and you would have waited 17 years before breaking even on your investment … actually about 27 years if you take the effects of inflation into account.
The drawback of the traditional asset allocation technique is its reliance on a “buy and hold” philosophy. The method is based upon the belief that you can’t successfully time the markets … that you just have to sit tight and collect your average historical return of about 7% per year on stocks over the long run. In fact, it can be the very long term. Studies show that in many previous years, going back 100 years, investors have had to wait 20 to 40 years to actually achieve that average long-term market return.
Stepping Aside to Avoid the Destructive Storms
This painfully obvious problem with the traditional approach has fueled development of a more active investment style that seeks to avoid most of the ravages of destructive storms, when they arrive. The active approach can reduce the risk involved with holding stocks; and can allow the average investor to tolerate a higher percentage in their portfolio. So if the “traditional” allocation approach says you can only tolerate 40% in stocks, the “active” approach might allow you to tolerate up to 75% when the market is bullish.
But it takes timing of the markets to be successful. While the timing success of market “gurus” has long been suspect, the reputation of market timing has grown steadily among sophisticated investors given the increasing reliability of computerized models that analyze a host of quantitative factors about the market.
The point of these computer models is to identify longer-term market trends and invest in them until the trend falls apart. A strategy for actively changing the asset allocation of a portfolio can be driven by this kind of market timing analysis. For example, such a dynamic strategy would have had you heavily invested in stocks during most of the 1990’s while the bull market was raging. Then it would have moved your portfolio out of stocks and into something else in 2000 after the market peaked and a new stock market downtrend became evident … thereby avoiding most of the damage suffered by the average buy and hold investor.
Active portfolio management is now accessible to the average small investor because there are a growing number of individual investment advisors, market timing services and investment newsletters that employ these techniques with success. Some of these services can even be used to help you manage a 401k portfolio. Now you can weather the destructive storms by moving your portfolio out of their way and sitting happily on a dry dock or enjoying better weather in some other climate
Thursday, November 16, 2006
Stock Valuation - The First Step Towards Intelligent Investing
by: Joseph Kenny
Stock valuation can be considered as a tool for picking out stocks that will bring you good returns. Imagine buying a car without knowing its value, or investing thousands of dollars in property with no potential. Sounds scary? Yet, this is exactly what it amounts to if you put money into deals without assessing their value.
Intelligent investment needs a lot of effort. If you want to invest in stocks, the first thing to look out for is its valuation. Valuation of a stock means the price or ‘actual’ value it holds. If you are doing stock valuation then you need not study the stock chart every time or worry about the trend in the market or the interest rates of the stocks. Never invest in stocks without knowing the value, because that is like going up a blind alley where you have no idea what you will end up with.
Investment in stocks without valuation is like risking your money deliberately. While the fluctuations in the stock market cannot be avoided, with the accurate valuation of a stock, you can minimize the risk factor. It will ensure that you not shoot in the dark, and make sensible investments. Use the valuation of stocks to serve as a guide for buying and selling stocks.
Instead of pouring your hard earned money into stocks without valuation, it is better to be patient and carry out a thorough research to determine the worth of stocks before buying. You do not have to be a math genius, or a stock market guru either. All you need is basic mathematical skill, and the perseverance to look for all the valuation information available.
You cannot make the most of valuation if you do not understand or appreciate its importance in the stock market. Spending a large amount in buying shares based on what others say may well result in losses. Neither should you buy based on media hype, as this may mislead you, and you may end up losing every penny you invested. Owning stocks of a company in the form of shares can be a very good wealth-building tool for you as it grants you claim on everything that the company owns. Hence, assessing the value of the company, the profit it is generating and how beneficial it can prove to you, is a worthwhile enterprise. Valuation can prove to be especially beneficial for middle class investors, as they have limited resources to overcome losses incurred in the stock market.
Therefore, valuation can be considered the key factor in buying stocks. Just as one assesses the value of anything one buys on the basis of a specified standard, stocks too need to be valued to determine whether the investment will bring you returns or not. Be aware, there are companies in the stock market that are making huge profits, but their stocks are of no value. Hence, spending time on carrying out your own research will help you pick up the right stock for your portfolio.
Stock valuation can be considered as a tool for picking out stocks that will bring you good returns. Imagine buying a car without knowing its value, or investing thousands of dollars in property with no potential. Sounds scary? Yet, this is exactly what it amounts to if you put money into deals without assessing their value.
Intelligent investment needs a lot of effort. If you want to invest in stocks, the first thing to look out for is its valuation. Valuation of a stock means the price or ‘actual’ value it holds. If you are doing stock valuation then you need not study the stock chart every time or worry about the trend in the market or the interest rates of the stocks. Never invest in stocks without knowing the value, because that is like going up a blind alley where you have no idea what you will end up with.
Investment in stocks without valuation is like risking your money deliberately. While the fluctuations in the stock market cannot be avoided, with the accurate valuation of a stock, you can minimize the risk factor. It will ensure that you not shoot in the dark, and make sensible investments. Use the valuation of stocks to serve as a guide for buying and selling stocks.
Instead of pouring your hard earned money into stocks without valuation, it is better to be patient and carry out a thorough research to determine the worth of stocks before buying. You do not have to be a math genius, or a stock market guru either. All you need is basic mathematical skill, and the perseverance to look for all the valuation information available.
You cannot make the most of valuation if you do not understand or appreciate its importance in the stock market. Spending a large amount in buying shares based on what others say may well result in losses. Neither should you buy based on media hype, as this may mislead you, and you may end up losing every penny you invested. Owning stocks of a company in the form of shares can be a very good wealth-building tool for you as it grants you claim on everything that the company owns. Hence, assessing the value of the company, the profit it is generating and how beneficial it can prove to you, is a worthwhile enterprise. Valuation can prove to be especially beneficial for middle class investors, as they have limited resources to overcome losses incurred in the stock market.
Therefore, valuation can be considered the key factor in buying stocks. Just as one assesses the value of anything one buys on the basis of a specified standard, stocks too need to be valued to determine whether the investment will bring you returns or not. Be aware, there are companies in the stock market that are making huge profits, but their stocks are of no value. Hence, spending time on carrying out your own research will help you pick up the right stock for your portfolio.
Tuesday, November 14, 2006
Due Diligence
by: Branden Moskwa
Due diligence, what is it? According to a definition on investorwords.com due diligence is the process of investigation, performed by investors, into the details of a potential investment, such as an examination of operations and management and the verification of material facts.
Sounds easy enough right? Then why don’t more of us actually employ due diligence prior to investing our hard earned money (or for the lucky ones, pocket change) into stocks. I mean, it must be a rather large issue if the BC Securities Commission is launching a whole public awareness campaign based on fraud and how to help investors avoid getting scammed, to read the press release click here http://www.bcsc.bc.ca/release.aspx?id=4398.
Investing on emotions….
It is so easy to get caught up in the hype, you see a stock rising and think, I must get in that and before you know it, you are along for the ride. What we seem to forget is that, what goes up, must (almost always) come down. The ride isn’t all that fun when you ride it both up and then right back down to where you bought it from. The important thing to remember is to try and find the reason behind the spike in price. Investing in a company simply because you like the name of it or the stock symbol reminds you of something special, isn’t really investing for the right reasons.
Now, how to execute that fancy due diligence stuff? Well, it really doesn’t take too much time out of your busy day and should make you feel better about your investments or maybe even scare you off from investing all together. Some easy steps to take to decide whether a company is worthy of your dollars may include:
Website – see if the company has a website and visit it. Do you like what you see, does it make you want to rush to your brokerage account and purchase shares or do you shudder at how ugly and outdated it is? Is it easy to navigate and find the information you are seeking? Is the contact information easy to find and accurate? Does it contain any information on the company’s management? In this day and age, not having a website may raise a red flag as this is the easiest way for any organization to communicate with its shareholders, both current and potential ones.
Contact the company – what does it hurt to drop them an email or if they have a toll free number, pick up the phone and give them a call. Does a human ever answer your call? Or do you just float around in the computer que wondering if anyone actually works there? Talking to the president of a company (or, more likely, somebody in investor relations) should give you a better idea of what the company is all about, what direction they are headed in and so on. One thing to keep in mind when communicating with a company though is beware of empty sales pitches and grand things coming out of someone’s mouth that may never come to fruition. Go with your gut feeling here, if something is saying this sounds too good to be true, odds are, it probably is.
Research the company – if there isn’t any information on the company’s financial statements or news releases on their website, visit Sedar to obtain this information. Take a look at the company’s most recent financial statements and those for even the last year perhaps and read their news releases. Doing this research should give you some sort of idea of where the company stands financially, any future plans they may have that will benefit (or hurt) the organization, what they’ve done over the past year or more, etc. Do you feel there is any potential or is the company headed down a road you don’t want to journey down?
Word of mouth – do you know of anyone who currently holds shares, or who has held shares in the company? Talking to them doesn’t hurt, but don’t forget to do your own research, don’t invest simply based on what someone else has to say, it’s very easy to get caught up in someone else’s enthusiasm, so it’s always good to take some time to do your own research.
Forums – there are a multitude of investor related forums/discussion boards on the Internet. Visiting these and asking questions of other forum members may be helpful to you, just remember the old adage, don’t believe everything you hear and only half of what you read.
Watch and learn – maybe track the stock for a while prior to investing, see if you notice any trends that you could capitalize on and how news tends to affect/not affect the stock price.
These are a few of the techniques that fall under the umbrella of due diligence, in my world anyways. Everyone has their own tactics they employ for investigating a potential investment opportunity. The important thing is to actually employ them, if you don’t you may be left holding the bag…the empty bag.
One must always remember there are no guarantees when it comes to investing in the stock market, no sure winners all the time, risk is there and always will be. Perhaps if you do your own due diligence, you will be able to avoid some of the losers, heck, you may even make some money on your investments and you can take all the credit.
*Any information contained in this article should not be construed as investment advice, simply the thoughts and opinions of the author.*
Due diligence, what is it? According to a definition on investorwords.com due diligence is the process of investigation, performed by investors, into the details of a potential investment, such as an examination of operations and management and the verification of material facts.
Sounds easy enough right? Then why don’t more of us actually employ due diligence prior to investing our hard earned money (or for the lucky ones, pocket change) into stocks. I mean, it must be a rather large issue if the BC Securities Commission is launching a whole public awareness campaign based on fraud and how to help investors avoid getting scammed, to read the press release click here http://www.bcsc.bc.ca/release.aspx?id=4398.
Investing on emotions….
It is so easy to get caught up in the hype, you see a stock rising and think, I must get in that and before you know it, you are along for the ride. What we seem to forget is that, what goes up, must (almost always) come down. The ride isn’t all that fun when you ride it both up and then right back down to where you bought it from. The important thing to remember is to try and find the reason behind the spike in price. Investing in a company simply because you like the name of it or the stock symbol reminds you of something special, isn’t really investing for the right reasons.
Now, how to execute that fancy due diligence stuff? Well, it really doesn’t take too much time out of your busy day and should make you feel better about your investments or maybe even scare you off from investing all together. Some easy steps to take to decide whether a company is worthy of your dollars may include:
Website – see if the company has a website and visit it. Do you like what you see, does it make you want to rush to your brokerage account and purchase shares or do you shudder at how ugly and outdated it is? Is it easy to navigate and find the information you are seeking? Is the contact information easy to find and accurate? Does it contain any information on the company’s management? In this day and age, not having a website may raise a red flag as this is the easiest way for any organization to communicate with its shareholders, both current and potential ones.
Contact the company – what does it hurt to drop them an email or if they have a toll free number, pick up the phone and give them a call. Does a human ever answer your call? Or do you just float around in the computer que wondering if anyone actually works there? Talking to the president of a company (or, more likely, somebody in investor relations) should give you a better idea of what the company is all about, what direction they are headed in and so on. One thing to keep in mind when communicating with a company though is beware of empty sales pitches and grand things coming out of someone’s mouth that may never come to fruition. Go with your gut feeling here, if something is saying this sounds too good to be true, odds are, it probably is.
Research the company – if there isn’t any information on the company’s financial statements or news releases on their website, visit Sedar to obtain this information. Take a look at the company’s most recent financial statements and those for even the last year perhaps and read their news releases. Doing this research should give you some sort of idea of where the company stands financially, any future plans they may have that will benefit (or hurt) the organization, what they’ve done over the past year or more, etc. Do you feel there is any potential or is the company headed down a road you don’t want to journey down?
Word of mouth – do you know of anyone who currently holds shares, or who has held shares in the company? Talking to them doesn’t hurt, but don’t forget to do your own research, don’t invest simply based on what someone else has to say, it’s very easy to get caught up in someone else’s enthusiasm, so it’s always good to take some time to do your own research.
Forums – there are a multitude of investor related forums/discussion boards on the Internet. Visiting these and asking questions of other forum members may be helpful to you, just remember the old adage, don’t believe everything you hear and only half of what you read.
Watch and learn – maybe track the stock for a while prior to investing, see if you notice any trends that you could capitalize on and how news tends to affect/not affect the stock price.
These are a few of the techniques that fall under the umbrella of due diligence, in my world anyways. Everyone has their own tactics they employ for investigating a potential investment opportunity. The important thing is to actually employ them, if you don’t you may be left holding the bag…the empty bag.
One must always remember there are no guarantees when it comes to investing in the stock market, no sure winners all the time, risk is there and always will be. Perhaps if you do your own due diligence, you will be able to avoid some of the losers, heck, you may even make some money on your investments and you can take all the credit.
*Any information contained in this article should not be construed as investment advice, simply the thoughts and opinions of the author.*
Monday, November 13, 2006
Stock Investing – Midterm Elections Make Drug Companies A Sale
by: Richard Stoyeck
Stock investing is tough enough when you have to deal with the specifics of a company and an industry. When you throw politics into the equation it becomes a whole new ball game. Now stock investing can be a crap shoot at best. Let’s take a look at what’s going on currently, and you decide. First let’s look at a little history.
For the better part of 50 years, the drug industry has been nothing short of a fabulous stock investment. Whether it was Johnson & Johnson, Pfizer, Merck, or any one of a dozen other drug companies that developed into giants, you would have made a killing with these stocks. One of these companies Johnson and Johnson is the best performing publicly traded stock of the last 100 years with a compounded growth history surpassing 15% per year.
It was a simple concept, but yet difficult to execute. These companies created drugs and then marketed them via advertising to a captive audience of doctors, and their captive audience the patients. As a stock investment, the industry was basically unsurpassed. The reason is that every other high tech investment as a rule had a longevity of about 7 years. Technology can obsolete technology very easily as you know.
This was not true of drug manufacturers, where it takes a long time to bring a drug to market. You then have a long patent life, and usually you can extend that patent life at least once. Big Pharma as the drug companies came to be called were making a fortune, and the stockholders with them. When it came to stock investing, you couldn’t own enough of these wonderful companies.
It all started to change in the 1980’s. A marvelous new, but small industry started to emerge called the biotech industry. Rates of growth for Big Pharma started to slow down. Something was needed to kick-start the drug industry once again, and the Federal government was more than willing to lend a helping hand.
By the 1980’s government had become big sponsors of drug research. Our government had poured billions of tax payer dollars into supporting basic and applied research at the college, and university level. Myriad PhD’s were hired, laboratories built, and graduate students employed to go find, and develop the next marvelous drug.
Congress then passed a law that mandated that the discoveries taking place in these government sponsored research labs (usually the top 50 colleges in the United States) would have to be given to the giant drug companies for final testing, and distribution. This meant that Big Pharma would be the recipient of all this largess bestowed on the government labs. The giant drug companies would be the direct beneficiaries of tens of billions of dollars of citizen sponsored research. It was the best of all worlds.
Throughout the 1980’s, and 1990’s, these actions sustained the growth of the major drug companies. Unbeknownst to the general citizen, the major drug companies come up with less than 5% of all the major drugs sold in this country. The real creators have been those government sponsored labs, and the small bio-tech companies that have been spawned everywhere.
Even with the giant government outlays, by the beginning of the 21st century, we started once again to see a slow-down in growth rates for Big Pharma. What was needed was a shot in the arm. In 2003, the federal government supplied the adrenalin, and the drug companies were only too glad to accept it. Congress passed a new part III to the Medicare law which meant that the government was going to start picking up prescription drugs for citizens 65 years of age and older. This program would cost tens of billions of dollars.
More importantly, the government would not be allowed to negotiate the prices of the drugs that they would pay for under the act. This meant that the drug companies would be able to charge BILLIONS OF DOLLARS more than if they had to negotiate. It was the ultimate bonanza for the drug companies, and their profits were inflated by billions. As an aside, the program also called for insurance companies to come in between the user which was the senior citizen, and the Medicare program. This was a successful attempt to also reward the insurance industry with billions in profits.
Democrats may have last laugh?
The problem is that it seems likely that the Democrats will take over the House of Representatives in November. If successful, they have already stated their intent to change the program immediately. The Democrats want the federal government to now have the right to negotiate lower drug prices on behalf of the senior citizens. This will result in lowering drug company profits to the tune of billions of dollars.
Here’s the wild part of the whole deal. For decades the Democrats wanted to create a prescription drug coverage program as part of the Medicare Program. They couldn’t get it done. They tried, and tried, and failed, and failed. It took the Republicans to do it, but they only did it, to benefit the drug companies, and the insurance companies as well. Now that the Democrats may take control, they will have the opportunity to roll back the drug companies participation in the outlandish profits they are making. At the same time, the Democrats will be able to keep a program in effect, that they desperately wanted, but could never make happen on their own.
It’s fascinating how what seems to come around, always goes around. Our advice is don’t be caught dead owning drug stocks if the Democrats take over the House in the November election. They are in for some ride on the downside, as we all will be watching the granddaddy of federal giveaways get taken away.
Goodbye and Good Luck
Stock investing is tough enough when you have to deal with the specifics of a company and an industry. When you throw politics into the equation it becomes a whole new ball game. Now stock investing can be a crap shoot at best. Let’s take a look at what’s going on currently, and you decide. First let’s look at a little history.
For the better part of 50 years, the drug industry has been nothing short of a fabulous stock investment. Whether it was Johnson & Johnson, Pfizer, Merck, or any one of a dozen other drug companies that developed into giants, you would have made a killing with these stocks. One of these companies Johnson and Johnson is the best performing publicly traded stock of the last 100 years with a compounded growth history surpassing 15% per year.
It was a simple concept, but yet difficult to execute. These companies created drugs and then marketed them via advertising to a captive audience of doctors, and their captive audience the patients. As a stock investment, the industry was basically unsurpassed. The reason is that every other high tech investment as a rule had a longevity of about 7 years. Technology can obsolete technology very easily as you know.
This was not true of drug manufacturers, where it takes a long time to bring a drug to market. You then have a long patent life, and usually you can extend that patent life at least once. Big Pharma as the drug companies came to be called were making a fortune, and the stockholders with them. When it came to stock investing, you couldn’t own enough of these wonderful companies.
It all started to change in the 1980’s. A marvelous new, but small industry started to emerge called the biotech industry. Rates of growth for Big Pharma started to slow down. Something was needed to kick-start the drug industry once again, and the Federal government was more than willing to lend a helping hand.
By the 1980’s government had become big sponsors of drug research. Our government had poured billions of tax payer dollars into supporting basic and applied research at the college, and university level. Myriad PhD’s were hired, laboratories built, and graduate students employed to go find, and develop the next marvelous drug.
Congress then passed a law that mandated that the discoveries taking place in these government sponsored research labs (usually the top 50 colleges in the United States) would have to be given to the giant drug companies for final testing, and distribution. This meant that Big Pharma would be the recipient of all this largess bestowed on the government labs. The giant drug companies would be the direct beneficiaries of tens of billions of dollars of citizen sponsored research. It was the best of all worlds.
Throughout the 1980’s, and 1990’s, these actions sustained the growth of the major drug companies. Unbeknownst to the general citizen, the major drug companies come up with less than 5% of all the major drugs sold in this country. The real creators have been those government sponsored labs, and the small bio-tech companies that have been spawned everywhere.
Even with the giant government outlays, by the beginning of the 21st century, we started once again to see a slow-down in growth rates for Big Pharma. What was needed was a shot in the arm. In 2003, the federal government supplied the adrenalin, and the drug companies were only too glad to accept it. Congress passed a new part III to the Medicare law which meant that the government was going to start picking up prescription drugs for citizens 65 years of age and older. This program would cost tens of billions of dollars.
More importantly, the government would not be allowed to negotiate the prices of the drugs that they would pay for under the act. This meant that the drug companies would be able to charge BILLIONS OF DOLLARS more than if they had to negotiate. It was the ultimate bonanza for the drug companies, and their profits were inflated by billions. As an aside, the program also called for insurance companies to come in between the user which was the senior citizen, and the Medicare program. This was a successful attempt to also reward the insurance industry with billions in profits.
Democrats may have last laugh?
The problem is that it seems likely that the Democrats will take over the House of Representatives in November. If successful, they have already stated their intent to change the program immediately. The Democrats want the federal government to now have the right to negotiate lower drug prices on behalf of the senior citizens. This will result in lowering drug company profits to the tune of billions of dollars.
Here’s the wild part of the whole deal. For decades the Democrats wanted to create a prescription drug coverage program as part of the Medicare Program. They couldn’t get it done. They tried, and tried, and failed, and failed. It took the Republicans to do it, but they only did it, to benefit the drug companies, and the insurance companies as well. Now that the Democrats may take control, they will have the opportunity to roll back the drug companies participation in the outlandish profits they are making. At the same time, the Democrats will be able to keep a program in effect, that they desperately wanted, but could never make happen on their own.
It’s fascinating how what seems to come around, always goes around. Our advice is don’t be caught dead owning drug stocks if the Democrats take over the House in the November election. They are in for some ride on the downside, as we all will be watching the granddaddy of federal giveaways get taken away.
Goodbye and Good Luck
Saturday, November 11, 2006
Gold Investment Versus Alchemy – Turning Dross Into Gold!
by: Charles Goodwin
I’m often asked if Gold is a good investment and I invariably answer that gold may well be a good long term investment for an investor but I am a wealth creator and the very word “investment” is simply not part of my wealth creation vocabulary.
This statement usually results in a very perplexed look on my questioner’s face.
And so it was with Walter. Walter is a financially struggling bank employee and came to me to learn about wealth creation. (Yes I assure you, there are tens of thousands of financially struggling bank employees out there.)
‘Charles, so you are saying that if you had a spare $25,000.00 you would not even consider exchanging it for gold bullion?’
‘My dear chap, why would a wealth creator swap one asset (money) valued at $25,000.00 for another asset (gold) also valued at $25,000.00? Rather pointless exercise don’t you think?’
‘But gold may rise in value and your money might devalue – isn’t gold a hedge against such occurrences?’
‘Yet equally, gold could go down in price and the currency strengthen – surely what you are contemplating is just a form of gambling, is it not?’
‘On that logic all investment is a form of gambling, as prices of any share or commodity can go down as well as up. That is why one needs to weigh the risks.’
‘Exactly so – and that is why I am a wealth creator and not an investor or speculator. Investors and speculators hope and pray for some future event to occur, whereas a wealth creator insists on increasing one’s wealth at the point of purchase.’
‘But Charles you can’t buy gold bullion at wholesale rates – as you well know the spot price is fixed daily.’
‘Who said anything about paying wholesale price for it – I would prefer to be an alchemist and turn dross into gold.’
Walter’s young moon face went red with frustration. ‘Oh come Charles, please be serious with me and stop toying. I truly want to be wealthy one day and on a bank teller’s salary alone, I can’t see that happening.’
‘Oh but I am being serious. Turning dross into gold is a very enjoyable hobby – the challenge is not whether one can accomplish the task – merely how quickly one can accomplish each stage of the goal one sets for one’s self.’
‘An enjoyable hobby! … But how on earth do you do that?’
‘Simply by making the conscious decision to become a wealth creator – develop your own part time wealth program and stick to it. Besides my book The Secrets Of Wealth Creation Revealed, I’ve written many free articles that are now all over the web. Study them and then begin your wealth program ASAP! There are a thousand and one ways to accomplish the task of turning dross into gold. It’s a matter of first knowing the principles, secondly establishing an easily managed workable plan - then thirdly, having the fortitude to stick at it.’
‘You mentioned setting “goal stages” could you give me an abbreviated example of how one goes about the process?’
‘Well if your desire is to amass gold then if I were you, I would have a clean out boot or yard sale of all superfluous items in my possession (dross) to raise some initial capital. I would take that small amount of money and taking my time (because time is virtually immaterial to the success of this endeavor) haunt charity shops, other peoples yard and boot sales, auctions etc and buy items that I know I can resell at several times the price I paid.
I would keep a list of the expected realizable value of such items (wealth total) and keep buying and selling till that list total becomes about $9,000.00 in value. Now I know to you that may sound difficult to achieve right now but please understand, if you are working on 200% minimum mark up, this can be accomplished so quickly. That is $150.00 in sales becomes $450.00 which becomes $1,350.00 which becomes $4,050.00 which becomes over $12,140.00 and so on.
Now as I said, once that total of goods on hand passes $9,000.00, stage 2 of my wealth plan would come into effect. That is, I would then save the proceeds of the next approx $3,000.00 of sales (depending on current spot price) and purchase a 5 ounce gold bar.
The realizable value of the remainder of stock would still be a minimum of $6,000.00. My next task would be to quickly increase this total back up to $9,000.00 and then repeat the gold purchase. You can continue this process until you feel you have amassed enough gold.
You will find as you learn and gain experience, wealth creating will become your second nature. Opportunities will materialize all around you. Soon you will be running in and buying gold bars at least twice a month. People will think you have the Midas touch and you will be able to say ‘No it isn’t that at all – It is all the result of Alchemy and my dear old friend Charles Goodwin!’
Do not worry about the spot price fluctuating. Merely stay detached and consider that you are simply turning dross into gold and of course that is exactly what you are doing. If you have any doubts in your own abilities divide all the figures by 5 and initially buy an ounce of gold at a time. I can assure you the journey is both exciting and interesting. You will learn so much upon this journey and then one day the penny will drop and you will suddenly realize that the world is now your oyster. You can create as much wealth as you desire.’
‘Charles, forgive me – but may I ask the obvious question. You have shown me a fool proof way to amass great wealth, what do I do about taxation?’
‘I am a wealth guru as well as a mystic! Would I leave you floundering without a tax plan equally as simple and equally as effective? No of course I wouldn’t. But at some stage you will simply have to beg, borrow or steal a copy of (or dare I say it – even buy a copy!) The Secret Of Wealth Creation Revealed and truly – all will be revealed!’
I’m often asked if Gold is a good investment and I invariably answer that gold may well be a good long term investment for an investor but I am a wealth creator and the very word “investment” is simply not part of my wealth creation vocabulary.
This statement usually results in a very perplexed look on my questioner’s face.
And so it was with Walter. Walter is a financially struggling bank employee and came to me to learn about wealth creation. (Yes I assure you, there are tens of thousands of financially struggling bank employees out there.)
‘Charles, so you are saying that if you had a spare $25,000.00 you would not even consider exchanging it for gold bullion?’
‘My dear chap, why would a wealth creator swap one asset (money) valued at $25,000.00 for another asset (gold) also valued at $25,000.00? Rather pointless exercise don’t you think?’
‘But gold may rise in value and your money might devalue – isn’t gold a hedge against such occurrences?’
‘Yet equally, gold could go down in price and the currency strengthen – surely what you are contemplating is just a form of gambling, is it not?’
‘On that logic all investment is a form of gambling, as prices of any share or commodity can go down as well as up. That is why one needs to weigh the risks.’
‘Exactly so – and that is why I am a wealth creator and not an investor or speculator. Investors and speculators hope and pray for some future event to occur, whereas a wealth creator insists on increasing one’s wealth at the point of purchase.’
‘But Charles you can’t buy gold bullion at wholesale rates – as you well know the spot price is fixed daily.’
‘Who said anything about paying wholesale price for it – I would prefer to be an alchemist and turn dross into gold.’
Walter’s young moon face went red with frustration. ‘Oh come Charles, please be serious with me and stop toying. I truly want to be wealthy one day and on a bank teller’s salary alone, I can’t see that happening.’
‘Oh but I am being serious. Turning dross into gold is a very enjoyable hobby – the challenge is not whether one can accomplish the task – merely how quickly one can accomplish each stage of the goal one sets for one’s self.’
‘An enjoyable hobby! … But how on earth do you do that?’
‘Simply by making the conscious decision to become a wealth creator – develop your own part time wealth program and stick to it. Besides my book The Secrets Of Wealth Creation Revealed, I’ve written many free articles that are now all over the web. Study them and then begin your wealth program ASAP! There are a thousand and one ways to accomplish the task of turning dross into gold. It’s a matter of first knowing the principles, secondly establishing an easily managed workable plan - then thirdly, having the fortitude to stick at it.’
‘You mentioned setting “goal stages” could you give me an abbreviated example of how one goes about the process?’
‘Well if your desire is to amass gold then if I were you, I would have a clean out boot or yard sale of all superfluous items in my possession (dross) to raise some initial capital. I would take that small amount of money and taking my time (because time is virtually immaterial to the success of this endeavor) haunt charity shops, other peoples yard and boot sales, auctions etc and buy items that I know I can resell at several times the price I paid.
I would keep a list of the expected realizable value of such items (wealth total) and keep buying and selling till that list total becomes about $9,000.00 in value. Now I know to you that may sound difficult to achieve right now but please understand, if you are working on 200% minimum mark up, this can be accomplished so quickly. That is $150.00 in sales becomes $450.00 which becomes $1,350.00 which becomes $4,050.00 which becomes over $12,140.00 and so on.
Now as I said, once that total of goods on hand passes $9,000.00, stage 2 of my wealth plan would come into effect. That is, I would then save the proceeds of the next approx $3,000.00 of sales (depending on current spot price) and purchase a 5 ounce gold bar.
The realizable value of the remainder of stock would still be a minimum of $6,000.00. My next task would be to quickly increase this total back up to $9,000.00 and then repeat the gold purchase. You can continue this process until you feel you have amassed enough gold.
You will find as you learn and gain experience, wealth creating will become your second nature. Opportunities will materialize all around you. Soon you will be running in and buying gold bars at least twice a month. People will think you have the Midas touch and you will be able to say ‘No it isn’t that at all – It is all the result of Alchemy and my dear old friend Charles Goodwin!’
Do not worry about the spot price fluctuating. Merely stay detached and consider that you are simply turning dross into gold and of course that is exactly what you are doing. If you have any doubts in your own abilities divide all the figures by 5 and initially buy an ounce of gold at a time. I can assure you the journey is both exciting and interesting. You will learn so much upon this journey and then one day the penny will drop and you will suddenly realize that the world is now your oyster. You can create as much wealth as you desire.’
‘Charles, forgive me – but may I ask the obvious question. You have shown me a fool proof way to amass great wealth, what do I do about taxation?’
‘I am a wealth guru as well as a mystic! Would I leave you floundering without a tax plan equally as simple and equally as effective? No of course I wouldn’t. But at some stage you will simply have to beg, borrow or steal a copy of (or dare I say it – even buy a copy!) The Secret Of Wealth Creation Revealed and truly – all will be revealed!’
Friday, November 10, 2006
How To Invest Your Money Safely
by: Joseph Kenny
When it comes to making investments, most people know that there is always room for a possible loss. Stock market investments in particular are rather notorious for taking a rather well funded portfolio and emptying it rather quickly. Of course, that does not happen all the time, otherwise no one would do it. If, on the other hand, you do not want to take what many consider to be an unnecessary risk, there are a number of other investments that are reasonably safer, can still bring a good return, and are definitely worthwhile. Here are a couple of them.
A common phrase that is often used these days to refer to the making of your investments safer is having a balanced portfolio. This means that you are not putting all of your eggs into one basket. You know that some markets are a much greater risk than others, such as trading on the stock market, and so you put some of your investment capital into some that are much safer and less likely to be lost. This "balance," created by placing some of your investment into a variety of potential interest bearing accounts, should result in an overall gain.
Investments Depend On The Person
If you are a young person, then it should mean that you would be willing to take a higher risk (assuming you have some capital that may be lost). The possibility of the highest gains, unfortunately, also come from the markets with the potential for the highest change. This means that there is a much greater likelihood of a real loss - especially if you do not know what you are doing. By using the services of an experienced trader however, a stockbroker that has been doing it for years, you minimize the possibility of loss. But you should only invest a portion of your finances into the stock market.
If, on the other hand, you are much closer to retirement age, then you do not want to take such a risk with your funds. Instead, you would want to place your soon to be needed funds into a much more stable growth account, where the loss can be minimized and yet still bring a return in interest.
Stable Investing In Trust Funds
If you are looking to stabilize your investments in the stock market with something that is relatively sure, then you need to consider mutual funds. This form of investing places your investment into the hands of investors that basically do the investing for you. They watch the market, manage the funds, and make the changes necessary in order to keep your account growing. After you inform them of what level of risk you are willing to take, then the rest is done for you. They take your funds and spread them over a diverse sort of investments, and it gives you a much more stable package.
The Most Stable Investment - Bonds
Probably the most stable investment you can make is to buy bonds. The safest, of course, are the US Savings Bonds. These are purchased at a set price and guarantee a set interest amount in a specified time period. You cannot get much safer than that - and probably not much is safer than the US Government - investment wise. If you are looking for the highest stability available, then you need to take some of your investment portfolio and add some bonds to it. Bonds are also available from other corporations, cities, etc., but their strength is limited to the financial strength of the company. The longer the time period of your investment - the greater the risk that the company may not be around.
In addition to creating a balanced portfolio, you need either to become very knowledgeable about financial investing, or you need to seek professional counsel. Many people lose a lot of money every year simply because of unnecessary risks. These risks would never have been taken if they had sought counsel from someone who knows much more than they did about the market and investing methods. A truly balanced portfolio will also have an expert to help guide you through the many potential hazards of the investment world.
When it comes to making investments, most people know that there is always room for a possible loss. Stock market investments in particular are rather notorious for taking a rather well funded portfolio and emptying it rather quickly. Of course, that does not happen all the time, otherwise no one would do it. If, on the other hand, you do not want to take what many consider to be an unnecessary risk, there are a number of other investments that are reasonably safer, can still bring a good return, and are definitely worthwhile. Here are a couple of them.
A common phrase that is often used these days to refer to the making of your investments safer is having a balanced portfolio. This means that you are not putting all of your eggs into one basket. You know that some markets are a much greater risk than others, such as trading on the stock market, and so you put some of your investment capital into some that are much safer and less likely to be lost. This "balance," created by placing some of your investment into a variety of potential interest bearing accounts, should result in an overall gain.
Investments Depend On The Person
If you are a young person, then it should mean that you would be willing to take a higher risk (assuming you have some capital that may be lost). The possibility of the highest gains, unfortunately, also come from the markets with the potential for the highest change. This means that there is a much greater likelihood of a real loss - especially if you do not know what you are doing. By using the services of an experienced trader however, a stockbroker that has been doing it for years, you minimize the possibility of loss. But you should only invest a portion of your finances into the stock market.
If, on the other hand, you are much closer to retirement age, then you do not want to take such a risk with your funds. Instead, you would want to place your soon to be needed funds into a much more stable growth account, where the loss can be minimized and yet still bring a return in interest.
Stable Investing In Trust Funds
If you are looking to stabilize your investments in the stock market with something that is relatively sure, then you need to consider mutual funds. This form of investing places your investment into the hands of investors that basically do the investing for you. They watch the market, manage the funds, and make the changes necessary in order to keep your account growing. After you inform them of what level of risk you are willing to take, then the rest is done for you. They take your funds and spread them over a diverse sort of investments, and it gives you a much more stable package.
The Most Stable Investment - Bonds
Probably the most stable investment you can make is to buy bonds. The safest, of course, are the US Savings Bonds. These are purchased at a set price and guarantee a set interest amount in a specified time period. You cannot get much safer than that - and probably not much is safer than the US Government - investment wise. If you are looking for the highest stability available, then you need to take some of your investment portfolio and add some bonds to it. Bonds are also available from other corporations, cities, etc., but their strength is limited to the financial strength of the company. The longer the time period of your investment - the greater the risk that the company may not be around.
In addition to creating a balanced portfolio, you need either to become very knowledgeable about financial investing, or you need to seek professional counsel. Many people lose a lot of money every year simply because of unnecessary risks. These risks would never have been taken if they had sought counsel from someone who knows much more than they did about the market and investing methods. A truly balanced portfolio will also have an expert to help guide you through the many potential hazards of the investment world.
Making Money Easily
In my early, to mid-twenties I made money easily, recession or not. I never had any debts, except the mortgage and money just seemed to flow to me. But then it all stopped rather abruptly and for years I was left with one question…
Why?
In truth my life changed. It could be argued it completely fell apart. Perhaps the most challenging area of this - long term - was around money and career. In fact I've reflect on these challenges many times, i.e. why do they seem so difficult when all I want to do is do something I love or be spiritual.
Maybe you can relate to this.
More lately I've come to understand that my vibrational field changed. I began to attract and repel through this new spirituality (vibration) rather than my old. This meant that jobs and people and my experience of life began to change. At times I felt like my life was completely breaking down, but the truth is, I was actually breaking through.
I guess it's like a good spiritual healing. Your energy field is shattered and you can begin anew. And while you might feel like you're coming apart at the seems, you're actually reforming.
And what do we find on the other side of this reformation?
Most likely you'll find a person you like more. Someone more settled. Someone who appreciates much more than ever before. Perhaps someone who can tap into heartfelt love and laugh more easily.
Is it easy to do?
I didn't find it easy in the beginning. I'd also say I've been stuck in certain places for certain times. But the further along this spiritual route I've come, the more fun I seem to be having.
One of the areas we may fight with most is our careers or what we perceive to be our 'Life Purpose'. Here we seem to have a struggle with the physical need for money, verses spiritual way of being. It's a struggle that can go on for quite some time.
For years I read books on spirituality, but more recently I’ve been fortunate enough to find a wealth of teachers. As these teachers have passed on their knowledge to me, the financial gates seem to have reopened. It’s as if I had to get off the money path, in order to learn spirituality, so I could return to the money path, but with enlightenment.
My tip for you is to discover your life purpose - your true gift and talent and begin using it in ways that add value to the lives of others. I also suggest that a good teachers can help you, but you have to choose wisely.
Best
Neil
Why?
In truth my life changed. It could be argued it completely fell apart. Perhaps the most challenging area of this - long term - was around money and career. In fact I've reflect on these challenges many times, i.e. why do they seem so difficult when all I want to do is do something I love or be spiritual.
Maybe you can relate to this.
More lately I've come to understand that my vibrational field changed. I began to attract and repel through this new spirituality (vibration) rather than my old. This meant that jobs and people and my experience of life began to change. At times I felt like my life was completely breaking down, but the truth is, I was actually breaking through.
I guess it's like a good spiritual healing. Your energy field is shattered and you can begin anew. And while you might feel like you're coming apart at the seems, you're actually reforming.
And what do we find on the other side of this reformation?
Most likely you'll find a person you like more. Someone more settled. Someone who appreciates much more than ever before. Perhaps someone who can tap into heartfelt love and laugh more easily.
Is it easy to do?
I didn't find it easy in the beginning. I'd also say I've been stuck in certain places for certain times. But the further along this spiritual route I've come, the more fun I seem to be having.
One of the areas we may fight with most is our careers or what we perceive to be our 'Life Purpose'. Here we seem to have a struggle with the physical need for money, verses spiritual way of being. It's a struggle that can go on for quite some time.
For years I read books on spirituality, but more recently I’ve been fortunate enough to find a wealth of teachers. As these teachers have passed on their knowledge to me, the financial gates seem to have reopened. It’s as if I had to get off the money path, in order to learn spirituality, so I could return to the money path, but with enlightenment.
My tip for you is to discover your life purpose - your true gift and talent and begin using it in ways that add value to the lives of others. I also suggest that a good teachers can help you, but you have to choose wisely.
Best
Neil
Subscribe to:
Posts (Atom)
![[Most Recent Quotes from www.kitco.com]](http://www.kitconet.com/charts/metals/gold/t24_au_en_usoz_2.gif)
![[Most Recent Exchange Rate from www.kitco.com]](http://www.weblinks247.com/exrate/24hr-euro-small.gif)