Steve Selengut
Most people (including myself) would insist that Equity Investing is the most difficult to master. After all, that is the venue for: erratic price fluctuations caused by an endless supply of social, economic, and political variables; the standard Wall Street misinformation, corporate malfeasance, self- serving financial gurus, and product sales persons; a myriad of popular and market moving speculations from IPOs to Option and Margin strategies; thousands of media talk shows and their financial markets' experts. When you think you understand the stock market brother, you are in serious trouble.
But more devastating than everything that has been done to turn Equity Investing into a product shopping mall of some kind, is the bottom-line/market-value brainwashing that has taken the calm, secure, and smiley-faced world of Income Investing and turned it upside down. I get more phone calls and e-mails from confused Income Investors than I ever receive from a simple plunge in Equity prices. Admittedly, very few Equity investors get to that special place, shouting "Eureka!" as they first realize that corrections in the "Shock" Market are every bit as lovable as rallies. But not recognizing that slowly rising interest rates is as much a boon for both fixed and variable Income Investors as it could possibly be a temporary set back for a struggling economy... well, that's just another example of irresponsible investor counter-education from our much too respected enemies in the financial institutions.
Income Investors must learn to hold these truths to be self evident: (1) More interest on your invested dollars is just plain better for you than less income on your invested dollars, and the amount you have allocated to Income Investing should never change because of market factors. (2) A change in the Market Value of the Fixed Income Securities you already own has absolutely no bearing on any assumptions that could possibly be made about the credit worthiness of the issuers of the securities themselves. (3) A change in the Market Value of your Fixed Income holdings will rarely have a negative impact on the regular recurring income that you receive and, after all, you bought these securities for the income in the first place. (4) Buying fixed income securities in a rising interest rate environment has a positive, compounding effect on portfolio yields and, at the same time, plants the seeds for future capital gains as interest rates recede. (5) Many fixed and variable income securities can be added to as interest rates rise both to increase the average yield AND to decrease the average cost of the securities.
Why is this not easy? It's not easy because financial professionals and pseudo-professionals alike won't let it be. If you have a properly designed Investment Portfolio, you must view each segment separately and with an understanding of the purpose of each. Avoid advisors who consider the bottom line market value of such a portfolio as anything other than an "expectation corroborator" (and your just going to have to call me if you don't know what that is). Your portfolio market value should never be a surprise and, more importantly, it should never be looked at as something to be particularly concerned about... at least not immediately. For example, you had to be living in a cave somewhere and smoking something really special to think that your Interest Rate Sensitive (or Investment Grade equity) portfolio would be up in market value from June of 2007 through mid-January of 2008.
You really have to learn to love the simplicity of Income Investing. Interest rate sensitivity is a given (and, by the way, interest rate expectations themselves are sensitive to inflation expectations). Price movements are both predictable and meaningless. We actually have an investment condition that approaches certainty. This is an investment nirvana, people! Don't let those guys in the pinstripes get you confused. Don't panic, don't switch, and don't cry in your beer. Look at the income number on your statement and go "hmmmm" when you see no meaningful change in either direction. (Actually, if you're doing this properly, the year over year Base Income figure should have increased.)
So the recent bad news (all of it) is really good news for investors and yes, just as higher interest rates are actually better than lower ones to a certain extent, so should lower stock prices be welcomed with more smiles than tears. Only those speculators who haven't taken their rally profits are unhappy with corrections... and that is true in both Equity and Income Securities Markets. Dealing with both events at the same time can make your bottom (line) a bit uncomfortable, but only until you recognize that smaller numbers are better for buying and that their larger cousins are best appreciated with sell orders.
During all types of corrections, some investment professionals will play to your fears, encouraging you to cut your losses, and to switch to something else... generally something that is cycling upwards. You don't have losses UNLESS you fall for this switching advice. Don't be pushed into such decisions no matter how smart the arguments seem. All fixed income investments (with the exception of open end Mutual Funds) are created equally and switching just doesn't work. An unhappy investor is Wall Street's best friend, so don't allow interest rate movements in either direction to affect your investment mood.
Article Source :
http://www.bestmanagementarticles.com
http://investment-management.bestmanagementarticles.com
Wednesday, January 30, 2008
How To Invest Your Money For The Best Possible Returns
Gregg Hall
Have you ever wondered how your mutual funds really work in the hands of your professional investment manager? Although it may not be a good idea for you to handle your mutual funds and other financial investment personally, it would not hurt you to understand some of the basics concepts involved in investment handling.
There are many advantages that you can derive if you understand the basics of the stock market. First, understanding the movement of the stock market will help you determine whether or not your investment will be growing in heaps in the next few years.
Second, it would help you forecast your earning potentials so that you can actually foresee how much you will be earning even after you have retired. To understand what is a stock market, let us first define what is a stock. A stock is a certificate of proportional ownership on a company. Note that big companies have shared ownership, meaning, there are many people, organizations and other corporations who has ownership over it. The shared ownership is facilitated through the distribution of stocks based on the amount invested by the person, organization and other entities over the company. The ownership of stockholders over the company is proportional in the sense that the value and the number of your stocks in a company would determine the degree of ownership you have over the company.
If you own stocks in certain companies, you can actually share in the profits that the company will make over a certain period. Companies usually give out dividends or profit shares to their shareholders at the end of the fiscal year or the calendar year depending on the accounting cycle used by the company. For companies that are really doing well, they sometimes give dividends more than once a year.
This could be very beneficial to shareholders who invest a large sum of money in the form of stocks in the company. Another way for you to earn on the shares of stock that you get from a company, is because the value of shares of stocks tend to appreciate if the company is doing really well. If the company is listed in the stock exchange you could actually cash in your investment for a handsome profit when the value of the stocks appreciate.
Is it possible to really earn a lot of money investing in stocks? There have been many people who got rich investing in the stock market but there are also some who lost their shirt in this venture. You must understand that the stock market could be volatile every now and then. The key here is to be really ahead of the game by keeping close watch of your investments and the movement of the market. Or that would be the job of your professional investment manager.
Article Source :
http://www.bestmanagementarticles.com
http://investment-management.bestmanagementarticles.com
Have you ever wondered how your mutual funds really work in the hands of your professional investment manager? Although it may not be a good idea for you to handle your mutual funds and other financial investment personally, it would not hurt you to understand some of the basics concepts involved in investment handling.
There are many advantages that you can derive if you understand the basics of the stock market. First, understanding the movement of the stock market will help you determine whether or not your investment will be growing in heaps in the next few years.
Second, it would help you forecast your earning potentials so that you can actually foresee how much you will be earning even after you have retired. To understand what is a stock market, let us first define what is a stock. A stock is a certificate of proportional ownership on a company. Note that big companies have shared ownership, meaning, there are many people, organizations and other corporations who has ownership over it. The shared ownership is facilitated through the distribution of stocks based on the amount invested by the person, organization and other entities over the company. The ownership of stockholders over the company is proportional in the sense that the value and the number of your stocks in a company would determine the degree of ownership you have over the company.
If you own stocks in certain companies, you can actually share in the profits that the company will make over a certain period. Companies usually give out dividends or profit shares to their shareholders at the end of the fiscal year or the calendar year depending on the accounting cycle used by the company. For companies that are really doing well, they sometimes give dividends more than once a year.
This could be very beneficial to shareholders who invest a large sum of money in the form of stocks in the company. Another way for you to earn on the shares of stock that you get from a company, is because the value of shares of stocks tend to appreciate if the company is doing really well. If the company is listed in the stock exchange you could actually cash in your investment for a handsome profit when the value of the stocks appreciate.
Is it possible to really earn a lot of money investing in stocks? There have been many people who got rich investing in the stock market but there are also some who lost their shirt in this venture. You must understand that the stock market could be volatile every now and then. The key here is to be really ahead of the game by keeping close watch of your investments and the movement of the market. Or that would be the job of your professional investment manager.
Article Source :
http://www.bestmanagementarticles.com
http://investment-management.bestmanagementarticles.com
Calculating Your Investment IQ
Steve Selengut
Stocks, bonds, index funds; averages, recessions, market rallies and corrections; mutual funds, technical analysis, financial statements; commissions, taxes, and discount brokers. Just how much do you know about investing, or perhaps a better question: is there any "know" in the investment vocabulary? So many terms, ideas, and strategies; so little time and money! Here's a list of thirty mostly-true or mostly-false comments for you to kick around with your friends and fellow investment bloggers:
1. Every Properly Diversified Portfolio will have up to 5% of its market value in each of these areas: miscellaneous speculative opportunities, gold or other commodities, small cap stocks, and global index funds.
2. Financial Professionals are well trained in all aspects of investing, investment portfolio design, and management. Consequently, a significant portion of their compensation is tied directly to how well they help their clients develop high quality, properly diversified, and goal directed portfolios.
3. Buy-and-Hold continues to be the proper investment strategy for most individual investors, especially if automatic reinvestment of income is part of the package.
4. It's a better Investment-Income Strategy to buy shorter duration corporate and municipal bonds (rather than higher yielding long-term debt) because the market value doesn't fluctuate as much with anticipated changes in the direction of interest rates, and that is the most important concern with income investing.
5. If an investor can learn to control his own Greed and Fear, he will have a much better chance of investing successfully.
6. Asset Allocation is a strategy used by investors to move assets from weak market sectors to strong ones in order to improve the growth of the Investment Portfolio's bottom line.
7. No Load Mutual Funds are particularly good for investors because the mutual fund company does not charge anything for its services.
8. In the long run, investing in the stock market will assure you of keeping up with Inflation.
9. The proper gauge of your total Investment Portfolio Performance is the change in market value over the course of a calendar year, compared with the change in one of the more respected stock market averages during the same period of time.
10. Quality, Diversification, and Income are considered by many investors to be the three basic principles of investing.
11. Mutual Funds have always been a safer route to long-term investment success than trying to create your own portfolio of individual securities.
12. The Dow Jones Industrial Average is comprised solely of investment grade companies, and generally gives a clear indication of what is going on in the stock market.
13. Smart Cash is an integral part of any asset allocation formula because it allows investors to time the market successfully. Professional market timers know precisely when to move into or out of cash in anticipation of the next major directional change in the market.
14. It is a well-known fact that there are certain Core Portfolio Securities that belong in all investment portfolios if long-term success is to be expected.
15. There is no such thing as a freebie on Wall Street.
16. Closed End Mutual Funds (CEFs) are not popular with Wall Street professionals because they are inherently more risky than normal mutual funds.
17. Packaged Investment Products are designed with a sincere concern for the financial well being of the average investor, and are good for everyone.
18. Zero Coupon Bonds are an important part of the fixed income portion of the investment portfolio, especially when retirement is contemplated within five years or so.
19. The second step in every stock purchase should be the establishment of a Stop Loss Order. Such an order assures you that your losses will be limited to a specific percentage of your purchase price.
20. The IGVSI tracks the market value of a small but elite group of New York Stock Exchange equities.
21. The Four Most Important Investment Ideas include: buying only high quality securities, diversifying properly, using discount brokers exclusively, and establishing reasonable profit-taking targets.
22. Profit Takers and Traders hurt the average investor.
23. Investment Grade Value Stocks will be the next red-hot market sector.
24. "Sell your losers and let your profits run" is the essence of sound Investment Management thinking.
25. The November Syndrome is the partial result of the interaction of Wall Street institutional window dressing and the Infernal Revenue Code.
26. It is important that you take your Tax Losses regularly, particularly if you have held the losing position for less than one year.
27. Annuities, particularly Variable Annuities, are perfect investments at retirement both for people of limited resources and for the wealthy.
28. Technical Analysts can predict the future movements of the economy, individual securities, and the stock market with a very high degree of accuracy.
29. Index funds will always beat the market, or market sector, that they are designed to track.
30. The keys to successful investing are Asset Allocation using only two investment buckets: Equity and Income, and the development of realistic expectations about their market value performance.
Investing is as fascinating as it is frantic, as scary as it is exciting, and as intimidating as it is satisfying. But perhaps the most interesting thing about it is how educationally unprepared most individual investors are for the adventure! Books have been written, graduate degrees awarded, and doctoral dissertations presented in most of the topical areas touched upon so glibly above. Most of you will give your seal of approval to too many of the statements. Contact the author to determine your IIQ.
Article Source :
http://www.bestmanagementarticles.com
http://investment-management.bestmanagementarticles.com
Stocks, bonds, index funds; averages, recessions, market rallies and corrections; mutual funds, technical analysis, financial statements; commissions, taxes, and discount brokers. Just how much do you know about investing, or perhaps a better question: is there any "know" in the investment vocabulary? So many terms, ideas, and strategies; so little time and money! Here's a list of thirty mostly-true or mostly-false comments for you to kick around with your friends and fellow investment bloggers:
1. Every Properly Diversified Portfolio will have up to 5% of its market value in each of these areas: miscellaneous speculative opportunities, gold or other commodities, small cap stocks, and global index funds.
2. Financial Professionals are well trained in all aspects of investing, investment portfolio design, and management. Consequently, a significant portion of their compensation is tied directly to how well they help their clients develop high quality, properly diversified, and goal directed portfolios.
3. Buy-and-Hold continues to be the proper investment strategy for most individual investors, especially if automatic reinvestment of income is part of the package.
4. It's a better Investment-Income Strategy to buy shorter duration corporate and municipal bonds (rather than higher yielding long-term debt) because the market value doesn't fluctuate as much with anticipated changes in the direction of interest rates, and that is the most important concern with income investing.
5. If an investor can learn to control his own Greed and Fear, he will have a much better chance of investing successfully.
6. Asset Allocation is a strategy used by investors to move assets from weak market sectors to strong ones in order to improve the growth of the Investment Portfolio's bottom line.
7. No Load Mutual Funds are particularly good for investors because the mutual fund company does not charge anything for its services.
8. In the long run, investing in the stock market will assure you of keeping up with Inflation.
9. The proper gauge of your total Investment Portfolio Performance is the change in market value over the course of a calendar year, compared with the change in one of the more respected stock market averages during the same period of time.
10. Quality, Diversification, and Income are considered by many investors to be the three basic principles of investing.
11. Mutual Funds have always been a safer route to long-term investment success than trying to create your own portfolio of individual securities.
12. The Dow Jones Industrial Average is comprised solely of investment grade companies, and generally gives a clear indication of what is going on in the stock market.
13. Smart Cash is an integral part of any asset allocation formula because it allows investors to time the market successfully. Professional market timers know precisely when to move into or out of cash in anticipation of the next major directional change in the market.
14. It is a well-known fact that there are certain Core Portfolio Securities that belong in all investment portfolios if long-term success is to be expected.
15. There is no such thing as a freebie on Wall Street.
16. Closed End Mutual Funds (CEFs) are not popular with Wall Street professionals because they are inherently more risky than normal mutual funds.
17. Packaged Investment Products are designed with a sincere concern for the financial well being of the average investor, and are good for everyone.
18. Zero Coupon Bonds are an important part of the fixed income portion of the investment portfolio, especially when retirement is contemplated within five years or so.
19. The second step in every stock purchase should be the establishment of a Stop Loss Order. Such an order assures you that your losses will be limited to a specific percentage of your purchase price.
20. The IGVSI tracks the market value of a small but elite group of New York Stock Exchange equities.
21. The Four Most Important Investment Ideas include: buying only high quality securities, diversifying properly, using discount brokers exclusively, and establishing reasonable profit-taking targets.
22. Profit Takers and Traders hurt the average investor.
23. Investment Grade Value Stocks will be the next red-hot market sector.
24. "Sell your losers and let your profits run" is the essence of sound Investment Management thinking.
25. The November Syndrome is the partial result of the interaction of Wall Street institutional window dressing and the Infernal Revenue Code.
26. It is important that you take your Tax Losses regularly, particularly if you have held the losing position for less than one year.
27. Annuities, particularly Variable Annuities, are perfect investments at retirement both for people of limited resources and for the wealthy.
28. Technical Analysts can predict the future movements of the economy, individual securities, and the stock market with a very high degree of accuracy.
29. Index funds will always beat the market, or market sector, that they are designed to track.
30. The keys to successful investing are Asset Allocation using only two investment buckets: Equity and Income, and the development of realistic expectations about their market value performance.
Investing is as fascinating as it is frantic, as scary as it is exciting, and as intimidating as it is satisfying. But perhaps the most interesting thing about it is how educationally unprepared most individual investors are for the adventure! Books have been written, graduate degrees awarded, and doctoral dissertations presented in most of the topical areas touched upon so glibly above. Most of you will give your seal of approval to too many of the statements. Contact the author to determine your IIQ.
Article Source :
http://www.bestmanagementarticles.com
http://investment-management.bestmanagementarticles.com
Foreclosure Investing - The Pros And Cons Of Investing In Foreclosures
Thomas Bladecki
Investing in foreclosures is no doubt one of the best opportunities to make money in today's economy. As with any type of business venture, there are risks involved. Investing in foreclosed properties offers great opportunity to buy homes significantly under market, but there are some risks such as considerable research, under lying lien problems, long-term carrying costs and several others. If you are willing to take the chance on a property or two you may prosper in the end.
Foreclosed homes can be purchased at several stages. First is the pre-foreclosure phase, then the auction phase and finally the REO phase each of these presents their own set of pros and cons. Familiarize yourself with each of these different types of foreclosures, weigh the pros and cons for each, you may be able to avoid a costly mistakes and headaches through the process of investing in home foreclosures.
Take a look at the possible pros and cons at the various stages of a foreclosure:
Pre-Foreclosure Phase
This is the stage where the homeowner is still in control of the property. Although the loan is in default and the pressure from the lenders is just beginning. The homeowner is usually in a position to sell the property quickly and avoid the foreclosure process all together. This means hue savings and large potential profits for you.
Pros
20-40% discounts on the estimate value
Low or no down payment, due to the built in equity
Research and inspection opportunities
Sales agreements that are flexible
Cons
Home owner may not be reachable
Fierce competition, many investors are trying to buy these type foreclosures
Time to research documents and court filings
Undisclosed or underlying liens against the property
Auction Phase
Possibly the most profitable stage of a foreclosure. Auctioned properties usually offer the best potential profit when buying foreclosures. An auctioned property is sold during a public auction to the highest bidder. If you have done you, research these types of properties are sometimes sold way under market value.
Pros
Greater discounts can be as high as 35-50%
Great ROI, return on investment
Greater potential profit
Cons
Property inspection is generally not available
Postponed auctions mean valuable time lost and research wasted
Large down payments that must be paid at the time of auction
Incomplete research can cost you a lot of money
You may not win the auction at all
REO Phase
An REO occurs when the lender retains the property after the auction phase. If the bids are not high, enough during the auto the lender will bid on the property to seize control and resell it themselves. In most case, the property has no value to the lender until the house sells; in this case, the lender is usually motivated to sell the property fast.
Pros
Discounts of 5-18%
Clear title, free of all liens
Back taxes are up to date
Lenders may do the repairs, or offer additional discounts
Cons
Low ROI, return on investment
Research must be very through
Potential for loss in the end
When investing in real estate, especially in foreclosures there is great risk involved. While the potential to make a substantial profit in foreclosures you need to make sure that, you do your research and fully understand what your risks are. Properties that offer the greatest profit potential are often times the risky investments.
Article Source :
http://www.bestmanagementarticles.com
http://investment-management.bestmanagementarticles.com
Investing in foreclosures is no doubt one of the best opportunities to make money in today's economy. As with any type of business venture, there are risks involved. Investing in foreclosed properties offers great opportunity to buy homes significantly under market, but there are some risks such as considerable research, under lying lien problems, long-term carrying costs and several others. If you are willing to take the chance on a property or two you may prosper in the end.
Foreclosed homes can be purchased at several stages. First is the pre-foreclosure phase, then the auction phase and finally the REO phase each of these presents their own set of pros and cons. Familiarize yourself with each of these different types of foreclosures, weigh the pros and cons for each, you may be able to avoid a costly mistakes and headaches through the process of investing in home foreclosures.
Take a look at the possible pros and cons at the various stages of a foreclosure:
Pre-Foreclosure Phase
This is the stage where the homeowner is still in control of the property. Although the loan is in default and the pressure from the lenders is just beginning. The homeowner is usually in a position to sell the property quickly and avoid the foreclosure process all together. This means hue savings and large potential profits for you.
Pros
20-40% discounts on the estimate value
Low or no down payment, due to the built in equity
Research and inspection opportunities
Sales agreements that are flexible
Cons
Home owner may not be reachable
Fierce competition, many investors are trying to buy these type foreclosures
Time to research documents and court filings
Undisclosed or underlying liens against the property
Auction Phase
Possibly the most profitable stage of a foreclosure. Auctioned properties usually offer the best potential profit when buying foreclosures. An auctioned property is sold during a public auction to the highest bidder. If you have done you, research these types of properties are sometimes sold way under market value.
Pros
Greater discounts can be as high as 35-50%
Great ROI, return on investment
Greater potential profit
Cons
Property inspection is generally not available
Postponed auctions mean valuable time lost and research wasted
Large down payments that must be paid at the time of auction
Incomplete research can cost you a lot of money
You may not win the auction at all
REO Phase
An REO occurs when the lender retains the property after the auction phase. If the bids are not high, enough during the auto the lender will bid on the property to seize control and resell it themselves. In most case, the property has no value to the lender until the house sells; in this case, the lender is usually motivated to sell the property fast.
Pros
Discounts of 5-18%
Clear title, free of all liens
Back taxes are up to date
Lenders may do the repairs, or offer additional discounts
Cons
Low ROI, return on investment
Research must be very through
Potential for loss in the end
When investing in real estate, especially in foreclosures there is great risk involved. While the potential to make a substantial profit in foreclosures you need to make sure that, you do your research and fully understand what your risks are. Properties that offer the greatest profit potential are often times the risky investments.
Article Source :
http://www.bestmanagementarticles.com
http://investment-management.bestmanagementarticles.com
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