Jul
26
Balanced Investment Strategy for Portfolio Management
Filed Under investing | Comments Off
NobleTrading asked:
Balanced investment strategy is perhaps the most followed and successful investment strategy for portfolio management. Its primary aim is to keep a balance between investment risk and return. A balanced investment strategy combines the merit of aggressive and defensive investing strategies.
Aggressive investment strategy involves investing in high return high risk investments with the sole purpose of maximizing return from investments. It involves allocating major portion of portfolio capital to invest in equities, equity based funds and highly volatile markets. Investors following aggressive investment strategy often look for comparatively short-term profiting and wish to invest more in growth stocks, and small caps and mid cap stocks. Advantages of aggressive investing include quick profit, high return over investment and no need of large portfolio capital. It can work really well for experienced investors and investors who are very strict in their money management. Disadvantages include high risk, high volatility in total portfolio value and no surety of profit. It less supports novice investors and investor looking for monthly earnings or living costs.
Defensive investment strategy is just opposite of aggressive investment; it’s purpose is to preserve the capital and ensure some return from investments. It involves investing in low profit low risk investments like bonds, money market funds, treasury notes, and equities with minimum price volatility and good dividends. Defensive investors look for long-term profits and/or monthly earnings. Advantages of defensive investment strategy include reduced risk, predictable income, better investment planning and diversification of portfolio. This strategy mainly suits beginners. Disadvantages include low return from investments and requirement of high capital investments.
In balanced investment strategy, the investor tries to keep a balance between his aggressive and defensive behaviors. It involves balancing of both return and risk by diversifying investments in both high return high risk and low return low risk investments. Balanced investors often follow a portfolio capital allocation rule telling how much to invest in equities and bonds and how much to invest in treasury notes, precious metals and funds. Usually one portion of portfolio is actively managed and other portion is left to grow automatically. Balanced investment strategy can be slightly aggressive or slightly defensive with respect to investments made.
The greatest advantage of balanced investment strategy is the diversification of portfolio and hedging against high total portfolio value volatility. It is good for investors looking for medium-term (3 to 5 years) profits. Other advantages include flexibility in portfolio management, better results with better capital investments, (almost) predictable income and manageable portfolio risk. Balanced investment strategy support both beginners and experienced investors and can be an option for monthly earnings for living.
Gloria
Balanced investment strategy is perhaps the most followed and successful investment strategy for portfolio management. Its primary aim is to keep a balance between investment risk and return. A balanced investment strategy combines the merit of aggressive and defensive investing strategies.
Aggressive investment strategy involves investing in high return high risk investments with the sole purpose of maximizing return from investments. It involves allocating major portion of portfolio capital to invest in equities, equity based funds and highly volatile markets. Investors following aggressive investment strategy often look for comparatively short-term profiting and wish to invest more in growth stocks, and small caps and mid cap stocks. Advantages of aggressive investing include quick profit, high return over investment and no need of large portfolio capital. It can work really well for experienced investors and investors who are very strict in their money management. Disadvantages include high risk, high volatility in total portfolio value and no surety of profit. It less supports novice investors and investor looking for monthly earnings or living costs.
Defensive investment strategy is just opposite of aggressive investment; it’s purpose is to preserve the capital and ensure some return from investments. It involves investing in low profit low risk investments like bonds, money market funds, treasury notes, and equities with minimum price volatility and good dividends. Defensive investors look for long-term profits and/or monthly earnings. Advantages of defensive investment strategy include reduced risk, predictable income, better investment planning and diversification of portfolio. This strategy mainly suits beginners. Disadvantages include low return from investments and requirement of high capital investments.
In balanced investment strategy, the investor tries to keep a balance between his aggressive and defensive behaviors. It involves balancing of both return and risk by diversifying investments in both high return high risk and low return low risk investments. Balanced investors often follow a portfolio capital allocation rule telling how much to invest in equities and bonds and how much to invest in treasury notes, precious metals and funds. Usually one portion of portfolio is actively managed and other portion is left to grow automatically. Balanced investment strategy can be slightly aggressive or slightly defensive with respect to investments made.
The greatest advantage of balanced investment strategy is the diversification of portfolio and hedging against high total portfolio value volatility. It is good for investors looking for medium-term (3 to 5 years) profits. Other advantages include flexibility in portfolio management, better results with better capital investments, (almost) predictable income and manageable portfolio risk. Balanced investment strategy support both beginners and experienced investors and can be an option for monthly earnings for living.
Gloria
Jul
25
Investment Corner Part 2
Filed Under investing | Comments Off
Joe Ficalora asked:
Different Types of Investments:
As we said last time, owning a stock is like owning part of a company. As the company rises or falls in value, so does the price of it’s stock. A key distinction is that the value of the stock is not only driven by the fundamental value of the company, but by other factors as well. These factors may include overall stock market trends, domestic versus foreign trade issues, business sector climate, etc. Owning a bond, is like owning part of a loan to a company or institution, like the State of Texas. Bonds typically pay a fixed amount of dividend as the loan is repaid. The bond’s value is determined by the interest rate on the underlying loan, and the current interest rates and trends in the marketplace. For example, who would not want own a 10% bond right now, when the money markets or bank passbook savings accounts are paying 3%? Should the institution or company fail or default on the loan, you could lose all or most of your bond’s value. Large companies or institutions usually issue bonds; so the risk is greatly reduced over owning a company’s stock share.
A stock mutual fund, is a group of stocks owned by a fund company to achieve certain investment objectives. Likewise a bond mutual fund is a group of bonds held to achieve a certain investment objective. Mutual funds, in both stock and bond types exist in many styles and forms. Fundamentally they are a savvy collection of stocks or bonds assembled and professionally managed for a specific or combination of investment aims. These typically diversify your investments so that no one particular company can sink your entire investment. The converse is that no one single stock can shoot your mutual fund up to a huge return.
Typically each mutual fund focuses upon growth, income, value, large, small or mid-capitalization companies, or a combination of these objectives. There are thousands of different funds and dozens of fund families to choose from. There are also companies that rate mutual funds, like Morningstar (www.morningstar.com ). Some mutual funds use a management team to select and prune stocks in the portfolio, some use certain methods, and some follow the leadership of a single fund manager. You should check these out before investing in a particular fund.
An oft-overlooked mutual fund consideration is the management fee or what are referred to as 12b-1 fees. Most fees are in the range of 1 to 2%. Be wary of any fund outside that range. The United States Securities and Exchange Commission can help unravel some of these issues for you. A good starting point is their investor section on mutual fund performance, specifically www.sec.gov/investor/pubs/mperform.htm . They also have a fund cost calculator to help take into account the fund management fees. Some funds are no-load mutual funds because they do not pay a sales person any commissions for selling fund shares. These are typically lower in cost, and if you own them for a long time, they can make a difference in the net return on your mutual fund investment. Conversely, there are loaded funds, which charge a commission when you invest in their fund. These vary widely in amounts, so ask for exact details before investing. Some require you to pay the sales commissions; others add that to the fund expenses. Either way it’s a cost to you. The Vanguard Funds (www.vanguard.com ) are often mentioned as a leader in creating no-load, low cost mutual funds. You will find compelling arguments at their website for owning no-load funds. You should check carefully on overall fund performance including fees when evaluating fund choices.
Measuring Risk:
Most mutual fund and stock tables and resources will list something called the beta or volatility of the items listed. Beta is a measure of the risk of the security listed associated with variation of the security when compared to the overall stock market. If beta is 1, then the stock or mutual fund varies about the same as the general market index. If less than 1, then the security is less volatile than the general index of comparison, with higher than 1 meaning more risk.
Measuring Risk-adjusted Returns:
There is also parameter called alpha, which is the market-adjusted return of the security. If alpha is positive, then the security earned a higher return than the relative market index of comparison. If alpha is negative, then the security earned less than the market did.
Minimizing Overall Risk:
Risks in the future may be reduced in the present only through preparation, planning and actions!
We discussed preparation and planning for the future in the last Investment Corner, which is a key risk-reduction strategy.
Risk reduction for investing is typically achieved through:
• Diversification,
• Portfolio Allocation,
• Pre-determined buying and selling prices, and
• Adherence to personal investing rules.
Now let’s look at the first part of risk reduction strategy for investing.
Diversification:
Diversification is spreading out your investments across several areas to reduce risk and capture growth in multiple places. Diversification is typically done at several levels. At the uppermost level, we typically diversify investments across different investment vehicles, such as cash, stocks, bonds and real estate. By doing this, we reduce several important risks. Inflation can reduce the value of cash on hand over time, which is why smart folks do not keep their life savings in cash hidden in a mattress! On the other hand, inflation can drive down the value of fixed dividend investments like bonds as well. Real estate may rise or decline with inflation, depending upon the health of both the local and the greater economies. Fixed hard assets like precious metals funds (gold) will usually rise on inflation or fears of inflation. Other risks include stock market declines, individual company bankruptcies, and so on…. By not “placing all the eggs in one basket” we lower our exposure to risks through diversification. During broad stock market declines, many folks move assets from stocks to cash or bonds. And of course the opposite during bull market runs.
Another diversification notion is that of slicing up your investment by specific growth sectors. Within a specific type of investment vehicle, say Mutual Funds, we diversify across the available growth and income sectors. Typically this is large, medium and small companies, as well as high dividend or high growth type stocks. You also could look into diversifying into domestic or international companies such as Asia-Pacific.
At the lower levels of investment diversification are multiple choices within a specific growth target. Most advisors strongly recommend diversification within a stock or bond market holding. If you feel for example that the Internet’s growth will continue or expand soon, buying stock in several companies who offer Internet products would help lower risk of any one company not doing too well. Diversification across several stocks is usually done in simple form through equal partitioning. If for example you had $10,000 to invest, how would you do it? You could place 20% of your total investment amount in each of 5 different Internet stocks as in Table I:
Table I –Stock Investment Diversification
Stock Name Current Price 90 Day High 90 Day Low Amount Invested ~ Shares
Company A $25 $28 $20 $2000 80
Company B $40 $40 $20 $2000 50
Company C $60 $60 $20 $2000 33
Company D $300 $300 $198 $2000 7
Company E $8 $9 $3 $2000 250
By looking at the trading ranges across the 90-day history, you can estimate the risks or volatility of each stock. Do the stocks have the same risks? Do they all have the same growth potential?
One approach would be to allocate risks equally, as opposed to allocating investment equally. You would be to use the information in the range of stock trading prices to assess risk and re-allocate your investments as this diversification calculator shows below in table II:
Table II – Risk Diversification Calculator
Risk Diversification Calculator
Investment Amount $10,000
Stocks 5
Stock_1 Stock_2 Stock_3 Stock_4 Stock_5
90-day Max $28 $40 $60 $300 $9
90-day Min $20 $20 $20 $198 $3
Cur. Price $25 $40 $60 $300 $8
Trade Rnge 32% 50% 67% 41% 100%
Eq. Amt $2,000 $2,000 $2,000 $2,000 $2,000
$$ at Risk $640 $1,000 $1,333 $819 $2,000
Risk Ratio 1 1.5625 2.083 1.28 3.125
Risk-Red. $2,000 $1,280 $960 $1,562 $640
Adj. Inv.$3,104 $1,987 $1,490 $2,425 $993
If you do not want to do the research and monitoring required for several individual stocks or bonds, choosing a mutual fund may be the wisest choice, with a smaller but usually acceptable return on your investment. The key question you need to answer is not “Should I diversify?”, but rather “How will I diversify my investments?”
About YOU
The primary things you should know about yourself before selecting among the different types of investments are:
I. How much of my time is available to monitor/manage my investments?
II. How often do I want to change my investment choices?
III. Do I want help and advice from investment professionals?
These are important questions you need to answer for yourself. All investment requires some time commitments to monitor and manage. When stock markets or life situations begin to change, you may need to change your investment choices. If your experience level does not warrant it, getting professional help may increase both your results and comfort level.
I. Time to manage your investments: Your time is worth money! At least if you can put it to good use in managing your investments… but do not become obsessive with it. Investments take time to grow. Every investment portfolio must be watched and pruned from time to time. You wouldn’t want to look back after 5 years and find that right after your investment choices were made, that the business climate changed and those choices had become poor performers.
Two typical uses of your time applied to investment managing:
• Weekly, monthly or quarterly checking for:
o Stock movements
o Business climate changes,
o Company news
• Annual or quarterly allocation changes
o Re-planning or shifting your plans
o Pruning and re-diversification
o Reallocation of investment amounts
Weekly or Monthly Check-ups
If you buy individual stocks and bonds, these will need monitoring more often than if you had purchased mutual funds. However, stock and bond funds need attention too, just less often.
Some questions you should answer for yourself are:
• Can I afford time each week to check investments (Friday night or Saturday morning)? This is important for individual stocks and bonds.
•Am I disciplined enough to check my investments periodically? This is critically important, as the business environments are constantly changing.
• Can I put this on a monthly calendar and stick with it? Monthly checkups are important no matter what your investments may be…
• If I get an automatic e-mail sent will I read it? Many investment houses will do this for all accounts above a certain size limit. You can pool your investments under one roof, usually with savings in cost plus perks for research, quotes, e-mails, etc. Both Fidelity and Schwab are good examples of these services once you reach certain size limits.
Quarterly or Annual Check-ups
If you are only into mutual funds as investment vehicles, then you need check them only quarterly or annually. After all you are giving up some small amount of income to pay for professionally managed investments, right? You may want to keep up with monthly or weekly news on the investment fund management team, however, as management team shakeups there could cost you. The key thing is disciplined reviews and setting a schedule that you can stick to. Ignorance in this case can be dangerous, so do it together with your spouse or a family member that you trust. As you get good at it, the time required to do these should drop from several hours to perhaps an hour to review all your investments. If you have been keeping tabs on things, it can be shorter still.
“Even if you’re on the right track you will get run over if you just sit there!” - Will Rogers.
II. Changing your investment choices:
The challenge when deciding to change investments is often the emotional content. “We had a return of say 7%, when the broader markets got only 5%”. How did the overall group for your investment vehicle do? Morningstar provides good index comparisons, as do other groups. If your choices did not perform above the class average for 1 or 2 quarters in a row, it’s probably a good idea to consider other alternatives. That may require all the same diligence of researching an investment as you did originally. If you are seriously concerned and need to act quickly, you can always sell and put the proceeds into cash or a money market for a short time while you do the research.
III. Getting help from professionals:
I have often found the larger funds and investment houses to be a plethora of information via the Internet. They have how-to guides, acronym explanations, and in general some great advice. If however, these seem to complex for you, or you would prefer to seek out a single person with whom to deal, then find a Certified Financial Planner. The best ones should be able to provide references, a track record, and a good deal of services all at your doorstep. These services do not come free and can be in the thousands of dollars to set up your initial plans. Be certain to check 3 to 5 references and interview several planners before deciding. Determine what you pay exactly and what you get exactly after your selection is made. Be certain that they are certified, a place to begin is: http://www.cfp.net/ .
Summary
We’ve covered a lot of ground in this topic of stock and bonds versus mutual funds. Primarily remember that individual stocks require more monitoring, but can yield higher returns. The same applies somewhat to individual bonds. Newer investors to these may want to start with mutual funds, Money magazine has an annual issue every February that is very helpful and is usually available at public libraries. Finally remember to lower your risks by diversification, no matter what investments you make. Ask yourself the questions we reviewed about your time commitments and discipline for monitoring as part of the investing process. And of course, read-up on the Internet and some of the books listed below.
Next time – Portfolio Allocation, Pre-determined trigger points, and Personal investing rules …
Self-Study:
Some great resources to continue your journey are located on the web.
Try visiting these sites:
•http://www.greatcompaniesgreatcharts.com/archives/001864.html
•http://www.rightline.net/home/gate_rm.html
•http://www.investorguide.com/stockfaq.html
•http://www.pascoresearch.com/int_alpha.asp
•http://www.stockbook.com/Evaluator/
Or read these well known authors and books:
• William J. O’Neil: How to Make Money in Stocks
• John Boik: Lessons from the Greatest Stock Traders of All Time
• John C. Bogle: Common Sense on Mutual Funds : New Imperatives for the Intelligent Investor
Additional info from this author may be found at http://www.sbtionline.com
Matthew
Different Types of Investments:
As we said last time, owning a stock is like owning part of a company. As the company rises or falls in value, so does the price of it’s stock. A key distinction is that the value of the stock is not only driven by the fundamental value of the company, but by other factors as well. These factors may include overall stock market trends, domestic versus foreign trade issues, business sector climate, etc. Owning a bond, is like owning part of a loan to a company or institution, like the State of Texas. Bonds typically pay a fixed amount of dividend as the loan is repaid. The bond’s value is determined by the interest rate on the underlying loan, and the current interest rates and trends in the marketplace. For example, who would not want own a 10% bond right now, when the money markets or bank passbook savings accounts are paying 3%? Should the institution or company fail or default on the loan, you could lose all or most of your bond’s value. Large companies or institutions usually issue bonds; so the risk is greatly reduced over owning a company’s stock share.
A stock mutual fund, is a group of stocks owned by a fund company to achieve certain investment objectives. Likewise a bond mutual fund is a group of bonds held to achieve a certain investment objective. Mutual funds, in both stock and bond types exist in many styles and forms. Fundamentally they are a savvy collection of stocks or bonds assembled and professionally managed for a specific or combination of investment aims. These typically diversify your investments so that no one particular company can sink your entire investment. The converse is that no one single stock can shoot your mutual fund up to a huge return.
Typically each mutual fund focuses upon growth, income, value, large, small or mid-capitalization companies, or a combination of these objectives. There are thousands of different funds and dozens of fund families to choose from. There are also companies that rate mutual funds, like Morningstar (www.morningstar.com ). Some mutual funds use a management team to select and prune stocks in the portfolio, some use certain methods, and some follow the leadership of a single fund manager. You should check these out before investing in a particular fund.
An oft-overlooked mutual fund consideration is the management fee or what are referred to as 12b-1 fees. Most fees are in the range of 1 to 2%. Be wary of any fund outside that range. The United States Securities and Exchange Commission can help unravel some of these issues for you. A good starting point is their investor section on mutual fund performance, specifically www.sec.gov/investor/pubs/mperform.htm . They also have a fund cost calculator to help take into account the fund management fees. Some funds are no-load mutual funds because they do not pay a sales person any commissions for selling fund shares. These are typically lower in cost, and if you own them for a long time, they can make a difference in the net return on your mutual fund investment. Conversely, there are loaded funds, which charge a commission when you invest in their fund. These vary widely in amounts, so ask for exact details before investing. Some require you to pay the sales commissions; others add that to the fund expenses. Either way it’s a cost to you. The Vanguard Funds (www.vanguard.com ) are often mentioned as a leader in creating no-load, low cost mutual funds. You will find compelling arguments at their website for owning no-load funds. You should check carefully on overall fund performance including fees when evaluating fund choices.
Measuring Risk:
Most mutual fund and stock tables and resources will list something called the beta or volatility of the items listed. Beta is a measure of the risk of the security listed associated with variation of the security when compared to the overall stock market. If beta is 1, then the stock or mutual fund varies about the same as the general market index. If less than 1, then the security is less volatile than the general index of comparison, with higher than 1 meaning more risk.
Measuring Risk-adjusted Returns:
There is also parameter called alpha, which is the market-adjusted return of the security. If alpha is positive, then the security earned a higher return than the relative market index of comparison. If alpha is negative, then the security earned less than the market did.
Minimizing Overall Risk:
Risks in the future may be reduced in the present only through preparation, planning and actions!
We discussed preparation and planning for the future in the last Investment Corner, which is a key risk-reduction strategy.
Risk reduction for investing is typically achieved through:
• Diversification,
• Portfolio Allocation,
• Pre-determined buying and selling prices, and
• Adherence to personal investing rules.
Now let’s look at the first part of risk reduction strategy for investing.
Diversification:
Diversification is spreading out your investments across several areas to reduce risk and capture growth in multiple places. Diversification is typically done at several levels. At the uppermost level, we typically diversify investments across different investment vehicles, such as cash, stocks, bonds and real estate. By doing this, we reduce several important risks. Inflation can reduce the value of cash on hand over time, which is why smart folks do not keep their life savings in cash hidden in a mattress! On the other hand, inflation can drive down the value of fixed dividend investments like bonds as well. Real estate may rise or decline with inflation, depending upon the health of both the local and the greater economies. Fixed hard assets like precious metals funds (gold) will usually rise on inflation or fears of inflation. Other risks include stock market declines, individual company bankruptcies, and so on…. By not “placing all the eggs in one basket” we lower our exposure to risks through diversification. During broad stock market declines, many folks move assets from stocks to cash or bonds. And of course the opposite during bull market runs.
Another diversification notion is that of slicing up your investment by specific growth sectors. Within a specific type of investment vehicle, say Mutual Funds, we diversify across the available growth and income sectors. Typically this is large, medium and small companies, as well as high dividend or high growth type stocks. You also could look into diversifying into domestic or international companies such as Asia-Pacific.
At the lower levels of investment diversification are multiple choices within a specific growth target. Most advisors strongly recommend diversification within a stock or bond market holding. If you feel for example that the Internet’s growth will continue or expand soon, buying stock in several companies who offer Internet products would help lower risk of any one company not doing too well. Diversification across several stocks is usually done in simple form through equal partitioning. If for example you had $10,000 to invest, how would you do it? You could place 20% of your total investment amount in each of 5 different Internet stocks as in Table I:
Table I –Stock Investment Diversification
Stock Name Current Price 90 Day High 90 Day Low Amount Invested ~ Shares
Company A $25 $28 $20 $2000 80
Company B $40 $40 $20 $2000 50
Company C $60 $60 $20 $2000 33
Company D $300 $300 $198 $2000 7
Company E $8 $9 $3 $2000 250
By looking at the trading ranges across the 90-day history, you can estimate the risks or volatility of each stock. Do the stocks have the same risks? Do they all have the same growth potential?
One approach would be to allocate risks equally, as opposed to allocating investment equally. You would be to use the information in the range of stock trading prices to assess risk and re-allocate your investments as this diversification calculator shows below in table II:
Table II – Risk Diversification Calculator
Risk Diversification Calculator
Investment Amount $10,000
Stocks 5
Stock_1 Stock_2 Stock_3 Stock_4 Stock_5
90-day Max $28 $40 $60 $300 $9
90-day Min $20 $20 $20 $198 $3
Cur. Price $25 $40 $60 $300 $8
Trade Rnge 32% 50% 67% 41% 100%
Eq. Amt $2,000 $2,000 $2,000 $2,000 $2,000
$$ at Risk $640 $1,000 $1,333 $819 $2,000
Risk Ratio 1 1.5625 2.083 1.28 3.125
Risk-Red. $2,000 $1,280 $960 $1,562 $640
Adj. Inv.$3,104 $1,987 $1,490 $2,425 $993
If you do not want to do the research and monitoring required for several individual stocks or bonds, choosing a mutual fund may be the wisest choice, with a smaller but usually acceptable return on your investment. The key question you need to answer is not “Should I diversify?”, but rather “How will I diversify my investments?”
About YOU
The primary things you should know about yourself before selecting among the different types of investments are:
I. How much of my time is available to monitor/manage my investments?
II. How often do I want to change my investment choices?
III. Do I want help and advice from investment professionals?
These are important questions you need to answer for yourself. All investment requires some time commitments to monitor and manage. When stock markets or life situations begin to change, you may need to change your investment choices. If your experience level does not warrant it, getting professional help may increase both your results and comfort level.
I. Time to manage your investments: Your time is worth money! At least if you can put it to good use in managing your investments… but do not become obsessive with it. Investments take time to grow. Every investment portfolio must be watched and pruned from time to time. You wouldn’t want to look back after 5 years and find that right after your investment choices were made, that the business climate changed and those choices had become poor performers.
Two typical uses of your time applied to investment managing:
• Weekly, monthly or quarterly checking for:
o Stock movements
o Business climate changes,
o Company news
• Annual or quarterly allocation changes
o Re-planning or shifting your plans
o Pruning and re-diversification
o Reallocation of investment amounts
Weekly or Monthly Check-ups
If you buy individual stocks and bonds, these will need monitoring more often than if you had purchased mutual funds. However, stock and bond funds need attention too, just less often.
Some questions you should answer for yourself are:
• Can I afford time each week to check investments (Friday night or Saturday morning)? This is important for individual stocks and bonds.
•Am I disciplined enough to check my investments periodically? This is critically important, as the business environments are constantly changing.
• Can I put this on a monthly calendar and stick with it? Monthly checkups are important no matter what your investments may be…
• If I get an automatic e-mail sent will I read it? Many investment houses will do this for all accounts above a certain size limit. You can pool your investments under one roof, usually with savings in cost plus perks for research, quotes, e-mails, etc. Both Fidelity and Schwab are good examples of these services once you reach certain size limits.
Quarterly or Annual Check-ups
If you are only into mutual funds as investment vehicles, then you need check them only quarterly or annually. After all you are giving up some small amount of income to pay for professionally managed investments, right? You may want to keep up with monthly or weekly news on the investment fund management team, however, as management team shakeups there could cost you. The key thing is disciplined reviews and setting a schedule that you can stick to. Ignorance in this case can be dangerous, so do it together with your spouse or a family member that you trust. As you get good at it, the time required to do these should drop from several hours to perhaps an hour to review all your investments. If you have been keeping tabs on things, it can be shorter still.
“Even if you’re on the right track you will get run over if you just sit there!” - Will Rogers.
II. Changing your investment choices:
The challenge when deciding to change investments is often the emotional content. “We had a return of say 7%, when the broader markets got only 5%”. How did the overall group for your investment vehicle do? Morningstar provides good index comparisons, as do other groups. If your choices did not perform above the class average for 1 or 2 quarters in a row, it’s probably a good idea to consider other alternatives. That may require all the same diligence of researching an investment as you did originally. If you are seriously concerned and need to act quickly, you can always sell and put the proceeds into cash or a money market for a short time while you do the research.
III. Getting help from professionals:
I have often found the larger funds and investment houses to be a plethora of information via the Internet. They have how-to guides, acronym explanations, and in general some great advice. If however, these seem to complex for you, or you would prefer to seek out a single person with whom to deal, then find a Certified Financial Planner. The best ones should be able to provide references, a track record, and a good deal of services all at your doorstep. These services do not come free and can be in the thousands of dollars to set up your initial plans. Be certain to check 3 to 5 references and interview several planners before deciding. Determine what you pay exactly and what you get exactly after your selection is made. Be certain that they are certified, a place to begin is: http://www.cfp.net/ .
Summary
We’ve covered a lot of ground in this topic of stock and bonds versus mutual funds. Primarily remember that individual stocks require more monitoring, but can yield higher returns. The same applies somewhat to individual bonds. Newer investors to these may want to start with mutual funds, Money magazine has an annual issue every February that is very helpful and is usually available at public libraries. Finally remember to lower your risks by diversification, no matter what investments you make. Ask yourself the questions we reviewed about your time commitments and discipline for monitoring as part of the investing process. And of course, read-up on the Internet and some of the books listed below.
Next time – Portfolio Allocation, Pre-determined trigger points, and Personal investing rules …
Self-Study:
Some great resources to continue your journey are located on the web.
Try visiting these sites:
•http://www.greatcompaniesgreatcharts.com/archives/001864.html
•http://www.rightline.net/home/gate_rm.html
•http://www.investorguide.com/stockfaq.html
•http://www.pascoresearch.com/int_alpha.asp
•http://www.stockbook.com/Evaluator/
Or read these well known authors and books:
• William J. O’Neil: How to Make Money in Stocks
• John Boik: Lessons from the Greatest Stock Traders of All Time
• John C. Bogle: Common Sense on Mutual Funds : New Imperatives for the Intelligent Investor
Additional info from this author may be found at http://www.sbtionline.com
Matthew
Jul
22
Should people start investing in the US Auto Industry?
Filed Under investing | Comments Off
Mr. M asked:
As a college student, some friends and I have been thinking about beginning to invest in the stock market. Would anyone recommend investing in the US Auto Industry (GM, Ford, Chrysler)? The price per share is very low and could do one of two things: go higher or the company could go out of business.
As a college student, some friends and I have been thinking about beginning to invest in the stock market. Would anyone recommend investing in the US Auto Industry (GM, Ford, Chrysler)? The price per share is very low and could do one of two things: go higher or the company could go out of business.
What do you recommend?
Ray
Jul
21
What approach does a person take to begin investing in stocks?
Filed Under investing | Comments Off
Sparta23 asked:
I have been looking to do this sort of thing for a while now, thru those individual investing firms like Ameritrade, E-trade, Fidelity. But, I did not want to get over my head. I have some retirement with Fedilty, but I want to see how I can do it on my own with out lossing…
Chester
I have been looking to do this sort of thing for a while now, thru those individual investing firms like Ameritrade, E-trade, Fidelity. But, I did not want to get over my head. I have some retirement with Fedilty, but I want to see how I can do it on my own with out lossing…
Chester
Jul
20
Breaking All the Rules - Exclusive World Class Investments to Stabilize Your Portfolio and to Help Double Your Net Worth!
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Kent Sullivan asked:
BREAKING ALL THE RULES! Exclusive World Class Investments to Stabilize Your Portfolio and To Help Double Your Net Worth!!
Cabal Capital Management, LLC announces the launch of the Special Opportunity Fund which provides alternative investment opportunities into extremely low risk, very high financial return Advanced High Income Generation Projects through direct investments.
Our fund is unlike all others that exist today by offering investments that are focused on both strategic and tactical investment opportunities into Highly Advanced Income Generating Project(s) producing vital, very high demand product(s) that are being sold directly into the largest “Major” Universal Demand Markets in the world. These investments allow risk adverse accredited investors the ability to participate in the revenues generated from these projects which allows for and achieves capital growth while providing the investor a low risk opportunity with the benefit of dependable and sustainable alpha generation and the long term growth from these projects. These fully integrated projects have been designed to last 40 to 50 years or longer for their life cycles regardless of the global financial and credit markets.
Our fund is well positioned to effectively tap into these markets to the benefits of our investors. The growth dynamics of the United States and Western Europe is based upon local, regional and domestic consumption of all the products these projects produce. This fund is targeting routine and consistent annual double digit returns (15 – 21%) to investors un-correlated to all securities, commodities, currencies and the credit markets themselves since there will not be any exposure to these markets. All project investments within this special investment vehicle have been specifically developed and designed to perform across various business cycles regardless of global economic conditions.
The current global credit crisis, current stock market contractions and wild swings in the commodities markets does not and will not impact our ability to produce consistent annual double digit returns now or in the future for our investors since we will never have, need or rely on the credit markets to establish margin accounts or leveraged positions which most all hedge fund type investment vehicles require to operate. We do not require nor will we ever utilize prime services which the large investment banks provide (Bear Stearns, Lehman Brothers, Merrill Lynch, etc.). We do not rely on the stock, commodity or currency exchanges to generate income since we can not control any of the events occurring in those exchanges for our investors, thus we are totally un-correlated to all securities, commodities, currencies and credit markets.
In the case of Deflationary and or Inflationary Markets, they will have no real effect on these projects and the products they produce. Coincidentally inflation will only increase the value of the products coming out of the projects, and deflationary markets will have very minimal impact as well since the products produced will always be in very high demand through out the world.
Risk issues are always addressed through risk management and the review procedures for each and every investment made. Unlike most projects which have been developed, planned and master planned, every assumption for each project has been tested, validated, verified and proven or it’s not incorporated into these project(s). Each and every project is also backed up by a detailed Input / Output Financial Cash Model which is a detailed Program / Project Financial Blueprint that shows the quarterly inter-relationships of investments, operational production revenues, operational expenses at all levels, taxes, imposts and fees, special circumstances events, and financial obligations during the life of the Program / Project.
Since energy production and consumption is the key element to any industrialized country, and with energy consumption increasing globally at an annual rate of 5 – 6 %, energy is and always will be vital to both the U.S. and Western European Economies. Allocating to Energy and Bio-Fuels production are two major key areas of involvement and investments within our seven pronged program investment strategies approach, which consists of the following options available to us: Energy: Oil & Gas (Example Project to follow), Bio Fuels: Algae Based Bio-Diesel and Jatropha Curcas {plant} direct fuel source. Algae Based Bio-Diesel is a direct fuel source currently available and ready for full scale production and delivery {This is not a blend for gasoline!} Algae Based Bio-Diesel Fuel production utilizes proprietary photo enhanced, micro nutrient enhanced, continuous flow, automated, sensor quality controlled, bio-chemical industrial processes and then are pressed, centrifuged, oils separated from water, water treated, cooked, cracked and treated all within a 12 hour cycle (Start to Finish) to complete one batch made ready for use in any diesel engine. Initially 270 Million Gallons per quarter to several Billion Gallons of bio-diesel per quarter will be produced depending upon the initial size of a project program. This Algae Based Bio-Diesel Fuel source has a Cetane Rating of 105 -117 compared to 80 – 85 Cetane Rating for #1 diesel fuel currently produced by all the major oil companies, which provides more power, better millage and performance while emitting 60 – 70% less emissions across the board vs. normal standard crude oil based diesel fuels. Algae Based Bio-Diesel emits no sulfur and or nitrogen into the atmosphere, Alternative Energy: Solar / Concentrated Solar Thermal Power Production, Wind and Electric Fuel Cell Systems, Natural Resources: Gold, Platinum, Other Precious Metals Groups and Diamond Mining: Refining, Assaying, Separation using advanced physical technologies and Bullion production of Gold and Platinum as well as Processing, Cutting, Valuation Appraisals of Diamonds and other Precious Stones, Water: Proprietary Water Science / Technology to Produce Fresh Drinking Water to meet Agricultural, Industrial and Human Public Health needs in critically water short areas through Water production, bottling facilities and distribution. This can be accomplished with any available water supply {in ground water tables, above and below ground reservoirs with a high saline content normally not recommended for human consumption}, Sea Waters & Brackish Waters anywhere Globally, Hydroponics: Food Production: Fish Shrimp, Prawns, Fruits Vegetables utilizing USDA inspectors to garner Grade A Choice Status to include direct marketing into Major U.S.A. and International Consumer Demand Markets, and Special Opportunities: Aviation Fuels: JP-1 to JP-12 for Commercial and Military Applications from Algae Based Direct Fuel Sources as well as Advanced Hyper-Speed Information Technologies and other Advanced High Income Generation Project Opportunities as they become available.
It should be noted that traditional large project investments consist normally of only one income generation production element and typically requires three years at the earliest before the investors see any type of modest return on their investment. Our projects produce immediate results in the first year. These Exclusive World Class Projects which are available to us for investments have no less than 2, but normally include 5 or more Major Integrated Income Production Elements within each project. It should also be noted that each income producing element within these projects are so strong that they could stand on their own and support the entire project, which is why many of these elements are developed together to form an Advanced Integrated Income Generation Project depending upon the requirements and location of the program.
All of the projects that this special opportunity fund invests in involve Proprietary Advanced Technologies and Advanced Physical Science / Processes (not known to the great majority of Asset Manager Companies Staffs). Other types of investment pool managers, hedge funds, etc. do not know or even have access to these world class development engineering people and the technologies assets and projects that they develop, implement and manage. Currently we have in excess of $10 Billion Dollars worth of Advanced High Income Generation Projects available to us for investments.
Another Special Note of consideration is that each investment will bring with it potential tax advantages not typically found in other types of investments. Depending on where the project(s) are located and how the project are legally structured and set up (Development Corporations, Development Authority, etc.) could result in tremendous tax advantages, which each investors tax advisor will need to qualify and determine the best approach for each investors own tax liabilities depending upon their current tax status, situation and strategies.
These projects are conducted by Highly Reliable, Senior Internationally Experienced Technical Managers, Senior Science Managers and Senior Logistics / Project Security Management Staffs, which have planned, developed, evaluated and trouble-shot economic development projects and strong income generation projects in over 65 countries during the past 40 years.
There are in excess of 300 Top Level Executive Technical Managers with over 30 years of Experience in each of their perspective Development Sectors available for all projects that our fund invests in. These projects are designed to insure extreme depth of expertise and experience management which is available to any project at any and every stage of the project program, regardless of location of the project anywhere globally.
** Fully Integrated Oil & Gas / Real Example Project:
This Oil & Gas production program is headed up by a Top Level Senior International Consultant which is an Oil and Gas Industry Executive who has been involved in the Oil & Gas Industry over the past 50 years. This Oil & Gas Executive is the Systems Developer, Scientist, Equipment Designer and Engineer who is recognized as an expert in his field by the U.S. Department of Energy who also has called him upon him frequently in the past to trouble shoot particular Oil and Gas fields as a technical advisor and as a trouble shooter to rectify any and all problems associated with troubled oil and gas production fields.
This Top Senior International Consultant has a proprietary and proven 12 step methodology for siting, drilling, completing and production techniques for all wells. He has a historical commercial success rate of 92% for bringing in all of his wells sited, drilled, completed and producing which also has a normal life span of 15 to 20 plus year’s worth of production.
This Advanced High Income Generation Oil and Gas project is comprised of the following:
A Top Down Electric Air Hammer System which is highly sensorized with Professional Engineers and Scientists managing all operational positions. These auto sensor rigs provide detailed information by satellite to a centralized operations and training center where all decisions are made by people with 45 – 50 years of successful completion and production experience.
Each oil and gas well completed will be drilled in both soft and hard rock beds and will vary in depths from 3,000 feet to over 13,000 feet. All wells in this program will be completed initially in the state of Texas, in the United States of America.
Typical production wells will produce 60 barrels of oil per day to 500 – 600 barrels of oil per day and the gas wells will produce in a typical range of 2 million cubic feet of natural gas per day to in excess of 20 million cubic feet of natural gas per day. The total net operating investment will be returned within 4 months of production for each well.
Multiple producing formations will be completed and isolated with proprietary tools and instruments which will be operated simultaneously through out the life of the wells. The typical life of these well are 15 – 20 years because of the 12 different proprietary methods used for siting, drilling, completion and production techniques, tools, proprietary materials and instruments used on each and every well which prevents formation damage and increases the life cycle of each well to maximize the highest production obtainable.
This program consists of hundreds of oil and gas wells sited, drilled, completed and in production within a 1 – 2 year period. These wells will be sited, drilled and completed in historically very well known and documented oil and gas producing formations within the state of Texas, in the United States of America.
Investors will receive an estimated 15 – 21% annual return per year on their investment, with payments coming at the end of each year from this program. The threshold investment will be an aggregate amount of $400 hundred million dollars which is what the minimum program investment calls for.
Estimated program revenues are based on $60 dollars a barrel and $6.5 dollars per thousand cubic foot of natural gas. Over the last year crude oil (West Texas Intermediate) has sold as low as $50 dollars a barrel up to as much as $147 dollars a barrel. Over the past year natural gas has sold from $5.5 dollars a thousand cubic foot to $11.3 dollars per thousand cubic foot.
Example Oil & Gas Well Profile: One well; properly sited, drilled, completed and producing will conservatively produce 100 barrels of oil per day and 4 million cubic foot of natural gas per day. This provides the overall program (100 barrels x $60 per barrel = $6,000) $6,000 dollars per day of revenue. Each 4,000 cubic foot of natural gas (4,000 x $6.5 per thousand cubic foot = $26,000) $26,000 dollars per day of revenue. Total revenue for this example is estimated at $32,000 dollars per day of program revenue for this example.
** All wells in this program will not produce the same **
Each month this represents a program return of (30 days x $32,000 = $960,000) $960,000 dollars of revenue coming from this one (1) example well. The investment program we are offering involve several hundreds of program wells being sited, drilled, completed and operating within a 1 to 2 year period.
Remember, this is only two elements of a fully integrated Advanced High Income Generation Project which will involve in most cases several other elements to generate very substantial amounts of revenues over the course of the project life. With the combination of several other Advanced High Income Generation Elements within one project, this will enhance the financial returns and revenues of the program itself, and thus will also greatly reduce any associated risk due to the diversification of the different Major Income Generation elements within each project.
Once again, the result of this Special Investment Vehicle fund are highly advantageous investment opportunities that by far exceed the majority of investment opportunities from a financial return and an extremely low risk standpoint by investing in Outstanding Advanced High Income Generation Projects.
Headquartered in San Antonio, Texas, Cabal Capital Management, L.L.C. is managed by Kent Sullivan: www.cabalcapitalmanagement.com
Allison
BREAKING ALL THE RULES! Exclusive World Class Investments to Stabilize Your Portfolio and To Help Double Your Net Worth!!
Cabal Capital Management, LLC announces the launch of the Special Opportunity Fund which provides alternative investment opportunities into extremely low risk, very high financial return Advanced High Income Generation Projects through direct investments.
Our fund is unlike all others that exist today by offering investments that are focused on both strategic and tactical investment opportunities into Highly Advanced Income Generating Project(s) producing vital, very high demand product(s) that are being sold directly into the largest “Major” Universal Demand Markets in the world. These investments allow risk adverse accredited investors the ability to participate in the revenues generated from these projects which allows for and achieves capital growth while providing the investor a low risk opportunity with the benefit of dependable and sustainable alpha generation and the long term growth from these projects. These fully integrated projects have been designed to last 40 to 50 years or longer for their life cycles regardless of the global financial and credit markets.
Our fund is well positioned to effectively tap into these markets to the benefits of our investors. The growth dynamics of the United States and Western Europe is based upon local, regional and domestic consumption of all the products these projects produce. This fund is targeting routine and consistent annual double digit returns (15 – 21%) to investors un-correlated to all securities, commodities, currencies and the credit markets themselves since there will not be any exposure to these markets. All project investments within this special investment vehicle have been specifically developed and designed to perform across various business cycles regardless of global economic conditions.
The current global credit crisis, current stock market contractions and wild swings in the commodities markets does not and will not impact our ability to produce consistent annual double digit returns now or in the future for our investors since we will never have, need or rely on the credit markets to establish margin accounts or leveraged positions which most all hedge fund type investment vehicles require to operate. We do not require nor will we ever utilize prime services which the large investment banks provide (Bear Stearns, Lehman Brothers, Merrill Lynch, etc.). We do not rely on the stock, commodity or currency exchanges to generate income since we can not control any of the events occurring in those exchanges for our investors, thus we are totally un-correlated to all securities, commodities, currencies and credit markets.
In the case of Deflationary and or Inflationary Markets, they will have no real effect on these projects and the products they produce. Coincidentally inflation will only increase the value of the products coming out of the projects, and deflationary markets will have very minimal impact as well since the products produced will always be in very high demand through out the world.
Risk issues are always addressed through risk management and the review procedures for each and every investment made. Unlike most projects which have been developed, planned and master planned, every assumption for each project has been tested, validated, verified and proven or it’s not incorporated into these project(s). Each and every project is also backed up by a detailed Input / Output Financial Cash Model which is a detailed Program / Project Financial Blueprint that shows the quarterly inter-relationships of investments, operational production revenues, operational expenses at all levels, taxes, imposts and fees, special circumstances events, and financial obligations during the life of the Program / Project.
Since energy production and consumption is the key element to any industrialized country, and with energy consumption increasing globally at an annual rate of 5 – 6 %, energy is and always will be vital to both the U.S. and Western European Economies. Allocating to Energy and Bio-Fuels production are two major key areas of involvement and investments within our seven pronged program investment strategies approach, which consists of the following options available to us: Energy: Oil & Gas (Example Project to follow), Bio Fuels: Algae Based Bio-Diesel and Jatropha Curcas {plant} direct fuel source. Algae Based Bio-Diesel is a direct fuel source currently available and ready for full scale production and delivery {This is not a blend for gasoline!} Algae Based Bio-Diesel Fuel production utilizes proprietary photo enhanced, micro nutrient enhanced, continuous flow, automated, sensor quality controlled, bio-chemical industrial processes and then are pressed, centrifuged, oils separated from water, water treated, cooked, cracked and treated all within a 12 hour cycle (Start to Finish) to complete one batch made ready for use in any diesel engine. Initially 270 Million Gallons per quarter to several Billion Gallons of bio-diesel per quarter will be produced depending upon the initial size of a project program. This Algae Based Bio-Diesel Fuel source has a Cetane Rating of 105 -117 compared to 80 – 85 Cetane Rating for #1 diesel fuel currently produced by all the major oil companies, which provides more power, better millage and performance while emitting 60 – 70% less emissions across the board vs. normal standard crude oil based diesel fuels. Algae Based Bio-Diesel emits no sulfur and or nitrogen into the atmosphere, Alternative Energy: Solar / Concentrated Solar Thermal Power Production, Wind and Electric Fuel Cell Systems, Natural Resources: Gold, Platinum, Other Precious Metals Groups and Diamond Mining: Refining, Assaying, Separation using advanced physical technologies and Bullion production of Gold and Platinum as well as Processing, Cutting, Valuation Appraisals of Diamonds and other Precious Stones, Water: Proprietary Water Science / Technology to Produce Fresh Drinking Water to meet Agricultural, Industrial and Human Public Health needs in critically water short areas through Water production, bottling facilities and distribution. This can be accomplished with any available water supply {in ground water tables, above and below ground reservoirs with a high saline content normally not recommended for human consumption}, Sea Waters & Brackish Waters anywhere Globally, Hydroponics: Food Production: Fish Shrimp, Prawns, Fruits Vegetables utilizing USDA inspectors to garner Grade A Choice Status to include direct marketing into Major U.S.A. and International Consumer Demand Markets, and Special Opportunities: Aviation Fuels: JP-1 to JP-12 for Commercial and Military Applications from Algae Based Direct Fuel Sources as well as Advanced Hyper-Speed Information Technologies and other Advanced High Income Generation Project Opportunities as they become available.
It should be noted that traditional large project investments consist normally of only one income generation production element and typically requires three years at the earliest before the investors see any type of modest return on their investment. Our projects produce immediate results in the first year. These Exclusive World Class Projects which are available to us for investments have no less than 2, but normally include 5 or more Major Integrated Income Production Elements within each project. It should also be noted that each income producing element within these projects are so strong that they could stand on their own and support the entire project, which is why many of these elements are developed together to form an Advanced Integrated Income Generation Project depending upon the requirements and location of the program.
All of the projects that this special opportunity fund invests in involve Proprietary Advanced Technologies and Advanced Physical Science / Processes (not known to the great majority of Asset Manager Companies Staffs). Other types of investment pool managers, hedge funds, etc. do not know or even have access to these world class development engineering people and the technologies assets and projects that they develop, implement and manage. Currently we have in excess of $10 Billion Dollars worth of Advanced High Income Generation Projects available to us for investments.
Another Special Note of consideration is that each investment will bring with it potential tax advantages not typically found in other types of investments. Depending on where the project(s) are located and how the project are legally structured and set up (Development Corporations, Development Authority, etc.) could result in tremendous tax advantages, which each investors tax advisor will need to qualify and determine the best approach for each investors own tax liabilities depending upon their current tax status, situation and strategies.
These projects are conducted by Highly Reliable, Senior Internationally Experienced Technical Managers, Senior Science Managers and Senior Logistics / Project Security Management Staffs, which have planned, developed, evaluated and trouble-shot economic development projects and strong income generation projects in over 65 countries during the past 40 years.
There are in excess of 300 Top Level Executive Technical Managers with over 30 years of Experience in each of their perspective Development Sectors available for all projects that our fund invests in. These projects are designed to insure extreme depth of expertise and experience management which is available to any project at any and every stage of the project program, regardless of location of the project anywhere globally.
** Fully Integrated Oil & Gas / Real Example Project:
This Oil & Gas production program is headed up by a Top Level Senior International Consultant which is an Oil and Gas Industry Executive who has been involved in the Oil & Gas Industry over the past 50 years. This Oil & Gas Executive is the Systems Developer, Scientist, Equipment Designer and Engineer who is recognized as an expert in his field by the U.S. Department of Energy who also has called him upon him frequently in the past to trouble shoot particular Oil and Gas fields as a technical advisor and as a trouble shooter to rectify any and all problems associated with troubled oil and gas production fields.
This Top Senior International Consultant has a proprietary and proven 12 step methodology for siting, drilling, completing and production techniques for all wells. He has a historical commercial success rate of 92% for bringing in all of his wells sited, drilled, completed and producing which also has a normal life span of 15 to 20 plus year’s worth of production.
This Advanced High Income Generation Oil and Gas project is comprised of the following:
A Top Down Electric Air Hammer System which is highly sensorized with Professional Engineers and Scientists managing all operational positions. These auto sensor rigs provide detailed information by satellite to a centralized operations and training center where all decisions are made by people with 45 – 50 years of successful completion and production experience.
Each oil and gas well completed will be drilled in both soft and hard rock beds and will vary in depths from 3,000 feet to over 13,000 feet. All wells in this program will be completed initially in the state of Texas, in the United States of America.
Typical production wells will produce 60 barrels of oil per day to 500 – 600 barrels of oil per day and the gas wells will produce in a typical range of 2 million cubic feet of natural gas per day to in excess of 20 million cubic feet of natural gas per day. The total net operating investment will be returned within 4 months of production for each well.
Multiple producing formations will be completed and isolated with proprietary tools and instruments which will be operated simultaneously through out the life of the wells. The typical life of these well are 15 – 20 years because of the 12 different proprietary methods used for siting, drilling, completion and production techniques, tools, proprietary materials and instruments used on each and every well which prevents formation damage and increases the life cycle of each well to maximize the highest production obtainable.
This program consists of hundreds of oil and gas wells sited, drilled, completed and in production within a 1 – 2 year period. These wells will be sited, drilled and completed in historically very well known and documented oil and gas producing formations within the state of Texas, in the United States of America.
Investors will receive an estimated 15 – 21% annual return per year on their investment, with payments coming at the end of each year from this program. The threshold investment will be an aggregate amount of $400 hundred million dollars which is what the minimum program investment calls for.
Estimated program revenues are based on $60 dollars a barrel and $6.5 dollars per thousand cubic foot of natural gas. Over the last year crude oil (West Texas Intermediate) has sold as low as $50 dollars a barrel up to as much as $147 dollars a barrel. Over the past year natural gas has sold from $5.5 dollars a thousand cubic foot to $11.3 dollars per thousand cubic foot.
Example Oil & Gas Well Profile: One well; properly sited, drilled, completed and producing will conservatively produce 100 barrels of oil per day and 4 million cubic foot of natural gas per day. This provides the overall program (100 barrels x $60 per barrel = $6,000) $6,000 dollars per day of revenue. Each 4,000 cubic foot of natural gas (4,000 x $6.5 per thousand cubic foot = $26,000) $26,000 dollars per day of revenue. Total revenue for this example is estimated at $32,000 dollars per day of program revenue for this example.
** All wells in this program will not produce the same **
Each month this represents a program return of (30 days x $32,000 = $960,000) $960,000 dollars of revenue coming from this one (1) example well. The investment program we are offering involve several hundreds of program wells being sited, drilled, completed and operating within a 1 to 2 year period.
Remember, this is only two elements of a fully integrated Advanced High Income Generation Project which will involve in most cases several other elements to generate very substantial amounts of revenues over the course of the project life. With the combination of several other Advanced High Income Generation Elements within one project, this will enhance the financial returns and revenues of the program itself, and thus will also greatly reduce any associated risk due to the diversification of the different Major Income Generation elements within each project.
Once again, the result of this Special Investment Vehicle fund are highly advantageous investment opportunities that by far exceed the majority of investment opportunities from a financial return and an extremely low risk standpoint by investing in Outstanding Advanced High Income Generation Projects.
Headquartered in San Antonio, Texas, Cabal Capital Management, L.L.C. is managed by Kent Sullivan: www.cabalcapitalmanagement.com
Allison
Jul
18
Understanding Mutual Funds and Investment Club Investments:
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Eze ThankGod ik asked:
There are lots of similarities between mutual funds investments and investment clubs, and it is very nice that we understand them, as investors. The first similarity is that both are contributory funds/systems of investments. That is to say that the money being invested is not owned by an individual, rather, it belongs to different people. These are funds that are raised from the contributions by the members in of the investment clubs or contributed by different people and handed to a fund manager for investment, in the case of mutual funds. This therefore makes every contributor to the club are partaker of the gains or loses that accrues from the invested funds. Here, there is no separation of funds whereby you may say that Mr A is not eligible for the gains or loses of the investments because his investments were not there. As long as he remains a member of the club, he remains a partaker of the proceeds of the investments. Like wise, Mr B cannot wake up tomorrow and say that he wants the refund of his invested capital because he is not satisfied with the little fraction that was given to him or that he don’t know why they should invest in company A or B. Every member of the club is a partaker of the gains and loss that comes out from the investments, except one person voluntarily decides to withdraw his or her membership. There are some exceptions however, if as in the case of investment clubs, the club’s protocol is violated, or in the case of a mutual fund, the trust deed or the document agreement is contravened, there is always a contention here of people calling for justice, because a law has been broken.
Another similarity between the two is that both of them are for long term investment purposes. Mutual funds usually takes one year for the investments to mature, at the end of which, the profits will be declared and each individual investor will decide on what to do with his own share, whether to re-invest it back, withdraw only the profit or to withdraw totally from the investments. In the case of investment clubs, they have a longer life span before their investment could mature. Usually, it is between three to five years. This is because, they are few in number thereby leaving them with less financial muscle, which now means allowing their investments to stay longer and increase their profit margin. These two investment windows are not get rich quick program, rather they are solid investment programs that needs time to mature.
The third similarity between the two is that the funds are not under the total control of one man, as regards to investing. It involves a lot of brainstorming by the analysts of the company. One man cannot just wake up and say that this is where I want to invest this funds, it must be in agreement with the members of the executive, and because a lot of brain storming is involved, the nitty gritty of every company they want to invest will be trashed out and in the end, they will settle for the best which they have agreed. It is a popular saying that two heads are better than one, and this is one of the reasons for their excellent performances. What would have been omitted by one person will be noted by the second and everything will be critically evaluated.
There are many other similarities between these two investment vehicles, but I want to stop here. Let me hear your own views on this issue.
Audrey
There are lots of similarities between mutual funds investments and investment clubs, and it is very nice that we understand them, as investors. The first similarity is that both are contributory funds/systems of investments. That is to say that the money being invested is not owned by an individual, rather, it belongs to different people. These are funds that are raised from the contributions by the members in of the investment clubs or contributed by different people and handed to a fund manager for investment, in the case of mutual funds. This therefore makes every contributor to the club are partaker of the gains or loses that accrues from the invested funds. Here, there is no separation of funds whereby you may say that Mr A is not eligible for the gains or loses of the investments because his investments were not there. As long as he remains a member of the club, he remains a partaker of the proceeds of the investments. Like wise, Mr B cannot wake up tomorrow and say that he wants the refund of his invested capital because he is not satisfied with the little fraction that was given to him or that he don’t know why they should invest in company A or B. Every member of the club is a partaker of the gains and loss that comes out from the investments, except one person voluntarily decides to withdraw his or her membership. There are some exceptions however, if as in the case of investment clubs, the club’s protocol is violated, or in the case of a mutual fund, the trust deed or the document agreement is contravened, there is always a contention here of people calling for justice, because a law has been broken.
Another similarity between the two is that both of them are for long term investment purposes. Mutual funds usually takes one year for the investments to mature, at the end of which, the profits will be declared and each individual investor will decide on what to do with his own share, whether to re-invest it back, withdraw only the profit or to withdraw totally from the investments. In the case of investment clubs, they have a longer life span before their investment could mature. Usually, it is between three to five years. This is because, they are few in number thereby leaving them with less financial muscle, which now means allowing their investments to stay longer and increase their profit margin. These two investment windows are not get rich quick program, rather they are solid investment programs that needs time to mature.
The third similarity between the two is that the funds are not under the total control of one man, as regards to investing. It involves a lot of brainstorming by the analysts of the company. One man cannot just wake up and say that this is where I want to invest this funds, it must be in agreement with the members of the executive, and because a lot of brain storming is involved, the nitty gritty of every company they want to invest will be trashed out and in the end, they will settle for the best which they have agreed. It is a popular saying that two heads are better than one, and this is one of the reasons for their excellent performances. What would have been omitted by one person will be noted by the second and everything will be critically evaluated.
There are many other similarities between these two investment vehicles, but I want to stop here. Let me hear your own views on this issue.
Audrey
Jul
17
What Is An Investment Club?
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Adrian Kennelly asked:
The definition of an investment club is simple: a group of people who share an interest in the stock market pooling their resources into one large investment. Defining how an investment club works is more complicated.
In most cases the investment club will be registered as a partnership and the members of the club will make decisions together on what stocks they consider to be a good investment risk.
The majority of the time the investment decisions will be made after some research has been done regarding the stock that is under consideration. This will be discussed at length further in this book.
An important feature of an investment club is that the members are there to have fun as they invest their money and learn about the stock market. Making a profit isn’t the only goal of the club and members are encouraged to have fun as they invest their money.
An investment club isn’t for those people who are looking for a fast way to make some easy money. People who want a quick turn around are discouraged from joining an investment group and investing on their own.
A main feature of the investment group is to start to learn how to invest your money and to invest for a long term rather than a short one.
There are several things that you should keep in mind if you are thinking about starting an investment club or have in interest in joining one that already exists.
Make sure that you understand all the reasons why you should start an investment group and the requirements needed to be successful as a group. The following is a list of important ideas and information that you should consider before starting your club:
Be realistic. If you’re starting an investment club to make a killing in the stock market, you’ll most likely be very disappointed. The goal of an investment club is to learn more about the stock market and if you have dreams of becoming rich you’ll be starting the club for the wrong reasons. Joining an investment club means joining for a long period of time. Expect to be an amateur. Starting an investment club doesn’t mean that you have to be an expert on the stock market. In fact, an investment club is ideal for a group of amateurs who want to learn about how the stock market works and what it can do for them. An investment club is a safe environment in which you can invest a little bit of money and not worry about losing a large amount of your hard earned dollars when something unexpected happens. Amount of money to invest. Don’t think that you need a lot of money for investment purposes to start an investment club. The opposite is in fact true: you don’t need to have a lot of money to invest to start an investment club. You can set a minimal fee for each month’s contribution that is fits into your budget. You’ll have the chance to determine what the minimum monthly contribution should be each month when you have your first meeting of the investment club. Combined investment money. On your own you may not have enough money to invest in the stock market in a way in which you may be able to realize a profit. However, when you combine your investment dollars with the dollars of others in the club you’ll have a significant amount of money to invest in the stocks that you’ve been watching and think may be successful. Keep in mind that just as there is strength in numbers there is also a shared sense of security when you’re not investing alone. Diplomacy. One thing that you should keep in mind is that your voice will be part of the larger group and you may not always have a say in which stocks you want to invest in. If you’re unable to sit back and let another decision take the place of something that you would rather see, then an investment club might not be for you. You’ll need to have the ability to let the majority rule whenever a decision is made. Learning experience. You should be prepared to be satisfied to never realize a profit from the stock market. One of the important goals and features of an investment club is that you benefit from the learning experience of being with other people with the same interests in the stock market. If you never make a penny you should still be pleased with your participation as part of an investment group.
Starting your own investment club will be a pleasurable, and perhaps profitable, way to spend time with other people that share the same investment passion that you do.
You’ll be able to learn about the stock market in a safe and secure environment with other people that understand your fascination with the stock market.
Jared
The definition of an investment club is simple: a group of people who share an interest in the stock market pooling their resources into one large investment. Defining how an investment club works is more complicated.
In most cases the investment club will be registered as a partnership and the members of the club will make decisions together on what stocks they consider to be a good investment risk.
The majority of the time the investment decisions will be made after some research has been done regarding the stock that is under consideration. This will be discussed at length further in this book.
An important feature of an investment club is that the members are there to have fun as they invest their money and learn about the stock market. Making a profit isn’t the only goal of the club and members are encouraged to have fun as they invest their money.
An investment club isn’t for those people who are looking for a fast way to make some easy money. People who want a quick turn around are discouraged from joining an investment group and investing on their own.
A main feature of the investment group is to start to learn how to invest your money and to invest for a long term rather than a short one.
There are several things that you should keep in mind if you are thinking about starting an investment club or have in interest in joining one that already exists.
Make sure that you understand all the reasons why you should start an investment group and the requirements needed to be successful as a group. The following is a list of important ideas and information that you should consider before starting your club:
Be realistic. If you’re starting an investment club to make a killing in the stock market, you’ll most likely be very disappointed. The goal of an investment club is to learn more about the stock market and if you have dreams of becoming rich you’ll be starting the club for the wrong reasons. Joining an investment club means joining for a long period of time. Expect to be an amateur. Starting an investment club doesn’t mean that you have to be an expert on the stock market. In fact, an investment club is ideal for a group of amateurs who want to learn about how the stock market works and what it can do for them. An investment club is a safe environment in which you can invest a little bit of money and not worry about losing a large amount of your hard earned dollars when something unexpected happens. Amount of money to invest. Don’t think that you need a lot of money for investment purposes to start an investment club. The opposite is in fact true: you don’t need to have a lot of money to invest to start an investment club. You can set a minimal fee for each month’s contribution that is fits into your budget. You’ll have the chance to determine what the minimum monthly contribution should be each month when you have your first meeting of the investment club. Combined investment money. On your own you may not have enough money to invest in the stock market in a way in which you may be able to realize a profit. However, when you combine your investment dollars with the dollars of others in the club you’ll have a significant amount of money to invest in the stocks that you’ve been watching and think may be successful. Keep in mind that just as there is strength in numbers there is also a shared sense of security when you’re not investing alone. Diplomacy. One thing that you should keep in mind is that your voice will be part of the larger group and you may not always have a say in which stocks you want to invest in. If you’re unable to sit back and let another decision take the place of something that you would rather see, then an investment club might not be for you. You’ll need to have the ability to let the majority rule whenever a decision is made. Learning experience. You should be prepared to be satisfied to never realize a profit from the stock market. One of the important goals and features of an investment club is that you benefit from the learning experience of being with other people with the same interests in the stock market. If you never make a penny you should still be pleased with your participation as part of an investment group.
Starting your own investment club will be a pleasurable, and perhaps profitable, way to spend time with other people that share the same investment passion that you do.
You’ll be able to learn about the stock market in a safe and secure environment with other people that understand your fascination with the stock market.
Jared
Jul
10
Investment From Abroad is Right or Wrong?
Filed Under investing | Comments Off
Jul
9
Can investing at 16 years old give me the chance to be rich when im older?
Filed Under investing | Comments Off
D3V!N asked:
Im 16 and im already into business.
Investing my money into shares and things like that i believe could help me make some profit, but would it be enough to have me become a multi millionare when i get older?
If not what could i do?
Alex
Im 16 and im already into business.
Investing my money into shares and things like that i believe could help me make some profit, but would it be enough to have me become a multi millionare when i get older?
If not what could i do?
Alex
Jul
8
Rules for Investing- How To Build a Portfolio of Safe, Secure Investments
Filed Under investing | Comments Off
Ann Marosy asked:
In order to invest wisely, you need to have a suitable investment plan that will ensure the appropriate amount of growth for you. Your investments will also need to be safe and easy to manage.
Developing an Investment Plan:
The first step in developing an investment plan is to identify what type of an investor you are. Investor types are often determined by their stages in life. Here is a guide:
- Single person under 40 years old. Focus: Long-term investments, medium to high risk. Emphasis: capital gain, compound growth.
- Two-income married couple, no children, aged 20 to 40 years. Focus: Long-term investments, medium to high risk. Emphasis: capital gain, compound growth.
- One-income family, young children, aged 20 to 40 years. Focus: Long-term investments, low to medium risk. Emphasis: compound growth.
- Single person, aged 40 to 60 years. Focus: Medium-term investments, medium risk. Emphasis: capital gain, compound growth.
- Married couple with adolescent or independent children, aged 40 to 60 years. Focus: Medium-term investments, medium risk. Emphasis: capital gain, compound growth.
- All investors, aged 60 and over. Focus: Short to medium-term investments, low risk. Emphasis: Income.
The following are examples of investment portfolio mixes for the various types of investors.
Low Risk Investments:
Low risk investments are predominately cash, fixed interest and superannuation. This has the lowest risk of all investments but has also the lowest return - in today’s market, approximately 3% to 6% per annum. Fixed interest includes cash, cash management trusts and bonds. They return approximately 5% to 10% per annum, sometimes as high as 15% if you invest in global bonds in good markets.
Superannuation returns and risk profiles vary from institution to institution, however the best and safest usually return on average 10% per annum.
Medium Risk Investments:
Medium risk investments include property and non-speculative shares. Diversified funds, which invest in a range of asset groups, are also considered to have medium risk profiles. Average returns from these types of investments will range from 8% to 15% per annum.
I also like to include the broad spectrum of mutual funds, to be discussed later, in the range of medium risk investments. Some can return up to 25% and more depending on the fund type and managers.
High Risk Investments:
High risk investments include all speculative shares, futures and any other type of investment that is purely speculative by nature. Because with these types of investments we are betting on whether the price will go up, or sometimes down, I often classify this as a form of gambling. Accordingly, the returns are unlimited but so is the ability to lose the total money invested.
The basic rule for investing in highly speculative stock is to build in ’sell-out’ thresholds, three up and three down. For example, if you buy a stock at $20.00 per share, your sell-out thresholds might be:
Sell out threshold 3 $30.00
Sell out threshold 2 $25.00
Sell out threshold 1 $22.50
Buy $20.00
Sell out threshold 1 $17.50
Sell-out threshold 2 $15.00
Sell-out threshold 3 $10.00
Each time your stock reaches one of the threshold levels, you sell a third of your stock.
If the stock starts to rise, you sell a third at $22.50 and then another third at $25.00 and so forth. If the stock starts to fall, you also sell a third at $17.50, then another third at $15.00 and the final third at $10.00. In this way, you will never lose all your money, however you have also put a cap on the total profit you will make on the investment. This I have found to be the best and safest method for investing in speculative shares. In 1987, my husband and I were saved from the severe losses of the Wall Street crash because we were well and truly out of the market by taking our profits beforehand. Like all systems, this strategy will only work as long as you obey the rules and do not get too greedy.
Mutual Funds:
Mutual Funds are a selection of investments that are professionally managed by a financial institution or organization. These institutions have a wide range of specialists, researchers and advisor’s who devote their time to ensuring that the fund invests in the best companies and assets.
As well as the advantage of having experts manage your investments, managed funds also give you the ability to invest in a wide range of shares, property or fixed interest markets, either locally or internationally, for as small an outlay as $1,000. In the latter case, they also require a savings plan where you agree to deposit additional capital of a minimum $100.00 per month.
Because managed funds cover the whole spectrum of investment risk profiles, you can easily cover your preferred investment portfolio, as described above, by investing in several different funds.
Putting Together Your Investment Program:
After you have identified your investment type, you need to either seek a good financial advisor or devote your own time in researching investment options.
Shares have traditionally outperformed other asset groups over time. However, share markets can widely fluctuate in the short term, so any entry into the market should always be done with a long-term view of up to 10 years. Even the best managed share funds can fall if the stock market crashes or enters a severe downward cycle. As long as you ensure that you are with a reputable fund with good managers and are willing to ride the waves, your investment will do well in the long-term. If you are in the short-term, low risk category then your investments should be in the safer, more stable areas with lower returns.
Rules for Investing:
Investing may seem daunting for a lot of people. Maybe you have tried it once and failed, or maybe you are simply frightened of losing your money.
To avoid losing any capital, you simply need to be aware of the main pitfalls and always avoid them. The simple, reliable rules for investing are:
1. Have a plan. Always ensure that you or your financial advisor draws up an appropriate investment strategy for you that incorporates your risk profile, timeframes and financial goals. As foolish as it seems, many people plunge headfirst into investing without thoroughly working through these fundamental issues.
2. Don’t put all your eggs in one basket. Obvious advice, but many people fail to follow it. Many people think that they are on the right financial track by paying off the mortgage on their family home and then buying another property for investment purposes. Think about it! You have put all of your financial eggs in one asset basket - property. What happens if the property market collapses? Despite common thinking that this is a safe way to invest, the outcome is very risky. You have invested all of your well-earned money into only one area.
3. Build in appropriate timeframes. There is an old saying, “When the tea lady starts to invest in the stock market, it’s time to get out.” What this means is, when the share market is so high that everyone starts to clamber on board, it has probably reached its peak. There are two ways of successful investment timing. The first is to always pick the low-end of the market to buy and the high-end of the market to sell. This is extremely hard to do. Even the best-informed experts have trouble. The second way is to choose good investments and stay with them over the long-term (say 10 years or more) and ride the waves of the market. For safe, easy investing, choose the second method. Do not buy into the top-end of the market and sell once it starts to fall. You will definitely lose money this way.
4. Avoid high-risk investments. These include risky business ventures, highly speculative stock, tax avoidance schemes or too-good-to-be-true propositions that promise unusually high returns.
5. Avoid borrowing for your investments. Although some financial advisors advocate ‘gearing your investments’, this can be fraught with danger. Gearing means to borrow. If borrowing for investments takes you over your 40% fixed costs margin, you will be cutting it too fine, particularly if you lose your current income level.
6. Stay with the traditional and known. The best and surest investments are fixed interest, property and shares. Although all asset classes will fluctuate over time.
Work out the optimum mix for your investment profile, have a safe plan to work with and you can’t go wrong.
Bruce
In order to invest wisely, you need to have a suitable investment plan that will ensure the appropriate amount of growth for you. Your investments will also need to be safe and easy to manage.
Developing an Investment Plan:
The first step in developing an investment plan is to identify what type of an investor you are. Investor types are often determined by their stages in life. Here is a guide:
- Single person under 40 years old. Focus: Long-term investments, medium to high risk. Emphasis: capital gain, compound growth.
- Two-income married couple, no children, aged 20 to 40 years. Focus: Long-term investments, medium to high risk. Emphasis: capital gain, compound growth.
- One-income family, young children, aged 20 to 40 years. Focus: Long-term investments, low to medium risk. Emphasis: compound growth.
- Single person, aged 40 to 60 years. Focus: Medium-term investments, medium risk. Emphasis: capital gain, compound growth.
- Married couple with adolescent or independent children, aged 40 to 60 years. Focus: Medium-term investments, medium risk. Emphasis: capital gain, compound growth.
- All investors, aged 60 and over. Focus: Short to medium-term investments, low risk. Emphasis: Income.
The following are examples of investment portfolio mixes for the various types of investors.
Low Risk Investments:
Low risk investments are predominately cash, fixed interest and superannuation. This has the lowest risk of all investments but has also the lowest return - in today’s market, approximately 3% to 6% per annum. Fixed interest includes cash, cash management trusts and bonds. They return approximately 5% to 10% per annum, sometimes as high as 15% if you invest in global bonds in good markets.
Superannuation returns and risk profiles vary from institution to institution, however the best and safest usually return on average 10% per annum.
Medium Risk Investments:
Medium risk investments include property and non-speculative shares. Diversified funds, which invest in a range of asset groups, are also considered to have medium risk profiles. Average returns from these types of investments will range from 8% to 15% per annum.
I also like to include the broad spectrum of mutual funds, to be discussed later, in the range of medium risk investments. Some can return up to 25% and more depending on the fund type and managers.
High Risk Investments:
High risk investments include all speculative shares, futures and any other type of investment that is purely speculative by nature. Because with these types of investments we are betting on whether the price will go up, or sometimes down, I often classify this as a form of gambling. Accordingly, the returns are unlimited but so is the ability to lose the total money invested.
The basic rule for investing in highly speculative stock is to build in ’sell-out’ thresholds, three up and three down. For example, if you buy a stock at $20.00 per share, your sell-out thresholds might be:
Sell out threshold 3 $30.00
Sell out threshold 2 $25.00
Sell out threshold 1 $22.50
Buy $20.00
Sell out threshold 1 $17.50
Sell-out threshold 2 $15.00
Sell-out threshold 3 $10.00
Each time your stock reaches one of the threshold levels, you sell a third of your stock.
If the stock starts to rise, you sell a third at $22.50 and then another third at $25.00 and so forth. If the stock starts to fall, you also sell a third at $17.50, then another third at $15.00 and the final third at $10.00. In this way, you will never lose all your money, however you have also put a cap on the total profit you will make on the investment. This I have found to be the best and safest method for investing in speculative shares. In 1987, my husband and I were saved from the severe losses of the Wall Street crash because we were well and truly out of the market by taking our profits beforehand. Like all systems, this strategy will only work as long as you obey the rules and do not get too greedy.
Mutual Funds:
Mutual Funds are a selection of investments that are professionally managed by a financial institution or organization. These institutions have a wide range of specialists, researchers and advisor’s who devote their time to ensuring that the fund invests in the best companies and assets.
As well as the advantage of having experts manage your investments, managed funds also give you the ability to invest in a wide range of shares, property or fixed interest markets, either locally or internationally, for as small an outlay as $1,000. In the latter case, they also require a savings plan where you agree to deposit additional capital of a minimum $100.00 per month.
Because managed funds cover the whole spectrum of investment risk profiles, you can easily cover your preferred investment portfolio, as described above, by investing in several different funds.
Putting Together Your Investment Program:
After you have identified your investment type, you need to either seek a good financial advisor or devote your own time in researching investment options.
Shares have traditionally outperformed other asset groups over time. However, share markets can widely fluctuate in the short term, so any entry into the market should always be done with a long-term view of up to 10 years. Even the best managed share funds can fall if the stock market crashes or enters a severe downward cycle. As long as you ensure that you are with a reputable fund with good managers and are willing to ride the waves, your investment will do well in the long-term. If you are in the short-term, low risk category then your investments should be in the safer, more stable areas with lower returns.
Rules for Investing:
Investing may seem daunting for a lot of people. Maybe you have tried it once and failed, or maybe you are simply frightened of losing your money.
To avoid losing any capital, you simply need to be aware of the main pitfalls and always avoid them. The simple, reliable rules for investing are:
1. Have a plan. Always ensure that you or your financial advisor draws up an appropriate investment strategy for you that incorporates your risk profile, timeframes and financial goals. As foolish as it seems, many people plunge headfirst into investing without thoroughly working through these fundamental issues.
2. Don’t put all your eggs in one basket. Obvious advice, but many people fail to follow it. Many people think that they are on the right financial track by paying off the mortgage on their family home and then buying another property for investment purposes. Think about it! You have put all of your financial eggs in one asset basket - property. What happens if the property market collapses? Despite common thinking that this is a safe way to invest, the outcome is very risky. You have invested all of your well-earned money into only one area.
3. Build in appropriate timeframes. There is an old saying, “When the tea lady starts to invest in the stock market, it’s time to get out.” What this means is, when the share market is so high that everyone starts to clamber on board, it has probably reached its peak. There are two ways of successful investment timing. The first is to always pick the low-end of the market to buy and the high-end of the market to sell. This is extremely hard to do. Even the best-informed experts have trouble. The second way is to choose good investments and stay with them over the long-term (say 10 years or more) and ride the waves of the market. For safe, easy investing, choose the second method. Do not buy into the top-end of the market and sell once it starts to fall. You will definitely lose money this way.
4. Avoid high-risk investments. These include risky business ventures, highly speculative stock, tax avoidance schemes or too-good-to-be-true propositions that promise unusually high returns.
5. Avoid borrowing for your investments. Although some financial advisors advocate ‘gearing your investments’, this can be fraught with danger. Gearing means to borrow. If borrowing for investments takes you over your 40% fixed costs margin, you will be cutting it too fine, particularly if you lose your current income level.
6. Stay with the traditional and known. The best and surest investments are fixed interest, property and shares. Although all asset classes will fluctuate over time.
Work out the optimum mix for your investment profile, have a safe plan to work with and you can’t go wrong.
Bruce
