| |
| |
|
Investing Information |
|
|
|
Creating a Financial Future - Putting Your Plan Into Action Part 1
This column has previously discussed "picturing the future that we desire", and outlining a plan to achieve it. We mentioned that the plan must include goal-setting, measurement, and implementation. That implementation is this column's focus. Putting the plan into action is what implementation is all about. Its one thing to have goals, but without concrete steps to achieve them, they remain dreams. The last column discussed measuring the money required for each of these goals. Now it's time to figure out how we're going to put that money together. Of course, the first step is the obvious one. We must have a source of income. This could be a salary, an endowment, or even a loan (although we'd normally advise against that last option). One might consider multiple sources of income. This protects against undue dependence on one source. Assuming that some income exists, we can begin to make plans for saving. Based upon our analysis, we can determine how much must be saved on a daily, weekly, monthly, or annual basis to reach our goals. We can then consider if it is possible to grow the money fast enough to reach our target date. If, in the end, we find ourselves unable to save adequately for our goals, we must consider that the problem may not be in our plan, but in our income levels. Sometimes it's simply a matter of recognizing that goals may be unattainable without adjusting income levels. This might involve second jobs, or side businesses, or rather may require stepping back from the current situation entirely, and increasing employability through education or training. Furthermore, it might suggest that new, creative ideas should be considered. Alternatively, it might simply involve selling off unproductive assets. Whatever the case may be, the income level is a crucial part of any financial strategy, and one often overlooked by investment professionals. Finally, once the income levels and saving decisions have been established, we turn to the final component: the investment strategy. The final strategy may include many different types of investments, and use many different types of methods, but in the end, it should always be focused on the goals. For example, if the goal is to purchase a house in 1 year, investing in stocks may not be the optimal strategy unless you intend to take a great deal of risk. On the other hand, if you plan to purchase a house when you have earned enough money, but plan to remain flexible regarding the specific time, stocks may be more viable. This brings us to the consideration of asset types. This is one of the most critical decisions to make. There are at least a dozen different types of assets to choose from. Some of the most popular are: Stocks Mutual Funds Real Estate Limited Partnerships Art & Collectibles Gold/Commodities Bonds Insurance Businesses Derivatives Of course, this list could go on, but we'll focus on some of these. First, let's dispose of the easy ones. Investing in a Business can be a great choice for someone with a solid business plan and sufficient time and capital to make it work. However, many businesses require a full-time commitment, and unless one is able to give up their regular income, it can be a problem. It is possible to start a business part-time, depending on the type, and this may be an option for some. Additionally, one could invest in someone else's business, but here one must be concerned with issues of honesty, compatibility, and incentive. Finally, investing in a business carries with it liquidity problems, because one cannot always sell a business for what its worth without first locating an ideal buyer. Thus, if you've planned to sell at a certain date, in anticipation of reaching a goal, you may have trouble. Limited Partnerships carry with them unnecessary problems, largely because there is not a great market for these either. Thus, even when they have value, one may not be able to sell them easily. In this way they resemble investing in small businesses, and carry the same risks. Insurance truly should not be considered an investment, but I include it here because it is so often sold as an investment. In many ways, it can help one plan for tax considerations, but as a pure investment, it is a non-starter. Art & Collectibles can sometimes increase in value over time, and for those with specialized knowledge in a certain area, it may be a wise speculation. However, much like running a business, it takes time and energy, and has liquidity problems. Still, these can be a small proportion of a portfolio for some investors. Commodities are bulk holdings of any uniform item for which all have a uniform value. This would include oil, orange juice, coal, silver, or pork bellies. Gold is a commodity with unique qualities because of its long history of use as money and reputation as a dependable store of value. All commodities have fluctuating prices in common, and those who invest in commodities generally have an intimate knowledge of the market for that specific good. Over 90% of people who invest in commodities lose money, while the experts generally make a comfortable living. Investing in commodities can be extremely risky for those who do not have specialized knowledge. To reach Scott Pearson for comments or to learn more about his Investment Advisor services, visit http://www.valueview.net Scott Pearson is an investment advisor, writer, editor, instructor, and business leader. As President and Chief Investment Officer of Value View Financial Corp., he offers investment management services to a wide variety of clients. His own newsletter, Investor's Value View, is distributed worldwide and provides general money tips and investment advice to readers both internationally, and in the U.S.
MORE RESOURCES:
Google News |
|
|
|
RELATED ARTICLES
Preholiday Trading The Light Crude Continuous Contract closed at $66.13 a barrel Friday, after hitting an all-time high at $67. When NOT to Invest Unfortunately, many investors who are seduced by the lure of easy money try to become "active" investors before they have the skills, the resources, or the appropriate intellectual framework to do so.This is not to say that investing in stocks is extraordinarily difficult . Building The Foundation For Wealth You wouldn't build your home on anything less than a solid foundation. Similarly, you can't build wealth and financial independence without first having sound foundational principles to build upon. Secret Stock Options Trading Strategies the Experts Don`t Want You to Know To understand stock options, we need to look at Webster’s Dictionary’s definition of the word strategy.Webster’s Dictionary defines the term strategy as1. High Volatility Investments Penny stocks and options are high volatility investments that attract both the trader and the long term investor because of the small amount of capital required to make substantial gains as compared with less volatile higher priced stocks. The long term investor buys a stock believing that a company's value will increase over time and the stock price along with it. Emotions: A Traders Worst Enemy; Get Rid of Fear and Greed - Youll be Glad You Did You hear it over and over and over in books, forums, and chatrooms. Fear and greed, fear and greed, fear and greed. Chile Leads the Latin Pack Everyone's talking about China. Don't miss the opportunities in the other CHI. Missleading Fund Names Wreak Havoc On Investor Returns! Mutual fund managers use fake fund names to part you from your money such that you cannot judge what a fund does by its name. Many funds have names that are outright misleading or even deceptive. Success Trading: Some Basic Terminology for New Traders The world of trading can get very complex because the financial markets are complex. There thousands and thousands of successful traders out there today. The High Price of Oil In less than four years, the price of oil has risen about 300%, or over $50 a barrel. The Light Crude Continuous Contract (of oil futures) hit an all-time high at $67. Annuity Owner Mistakes Okay, so I can tell you I have sat in front of countless numbers of people who have made mistakes when purchasing and owning annuities. And I have visited people who wish they never got involved in an annuity. Need To Trade! You don't HAVE to be trading.As a novice trader, you'll often feel the need to trade. Retirement Plan Considerations Cheat Sheet for Small Business RETIREMENT PLAN CONSIDERATIONS are something every small business person needs to be thinking about. Do you have a strategic plan? Don't expect to have social security save you. The American Age of Inflation is Over "The American Age of Inflation is finished." So says economist Robert Samuelson in his December 2nd Washington Post column. Why You Need To Buy and Sell Gold Coins (Part 3) Putting Rare Coin Market Cycles to Work for You.. Should You Put Your Annuity in an IRA? Let me start by answering that question.. Buying a Home - Your BIGGEST Investment This column has often focused on intangible investments like stocks that a young investor might hold in their portfolio. While these are one of the most important components of an investment plan, it is not the dominant one for most young people. Eight Questions to Ask Your Financial Advisor You may like your financial advisor, but is he really looking out for you? All advisors are not created equal, and you have a right to know what makes them different! You also have a right to ask yours if he compares!(1) Do you use a holistic approach to financial planning by determining my values and goals?(2) Do you work on a fee-only basis, a commission basis, or both, and why?(3) Do you have company-established insurance requirements, or do you recommend insurance only when it is needed by your clients?(4) Do you attempt to 'beat' the market through timing and selection, or do you believe that attempts to do so are not worth the additional level of fees and risk? Are you aware that a vast majority of my returns will be based on asset allocation, rather than timing and selection?(5) Are you a Registered Investment Advisor, and therefore a fiduciary? In other words, must you legally and ethically put my interests above your own?(6) Do you meet with your clients at least three times a year to refine their portfolio and find out how events in their lives may have changed their financial goals?(7) Do you return phone calls the same day you receive them, and are you available to answer questions as they arise?(8) When you wake up each morning, do you ask yourself how you can best be of help to your clients that day?Adjust these questions as you see fit, and depending upon what your own objectives and needs are from an advisor. The best advice is to never be afraid to ask!© 2004 Matthew S. Diversify! The best way to avoid being hit hard by a stock market crash or another Enron/Worldcom fiasco is to make sure you don't put all your eggs in one basket. Diversification helps ensure steady growth of your net worth as you accumulate more assets. Consolidation Period The economic data reported Fri showed continued above trend growth with disinflation (at the core level, excluding food and energy) in the second quarter. Real output growth has slowed from about 4% in 2003 & 2004 to just over 3 1/2% so far this year, while a core inflation rate fell from 3% last quarter to 2%.
|
