How To Invest If You’re Broke..by Investopedia.com

Posted on May 20, 2012 by Albert

How To Invest If You’re Broke

 

 

March 22, 2012 |

 

What’s the biggest problem that people with  lower incomes have with investing? The old saying that it takes money to make money is true, and for those living paycheck to paycheck, there often isn’t enough money left over to put towards investing.

When you need the money now, thinking about IRAs and the stock market might be so far down your priority list, that you find all of these financial experts a little bit out of touch.

However, the fact remains that if you don’t put money away for later years, you will face a catastrophic situation. Someday, you won’t be able to work and social security won’t be enough to live on, assuming the fund is around in 20 or 30 years.

So what can you do? We’ve put together a few ideas for those people who don’t see any available funds for investing.

 

You Need Money

First, we have to solve this problem of limited funds and the advice isn’t new or revolutionary. Something in your life has to go, but it doesn’t have to be a big life change.

How often do you go to Starbucks for your morning coffee? How often do you go to the nearest fast food restaurant for lunch, and how many times have you hit the bar to blow off a little steam after a hard day at work?

What if you cut out even half of those expenses each month, netting you an extra $50 per month? At the end of a year, you would have $600 to invest.
Over 20 years that $600 could become more than $22,000, if you saved that same $600 each year. $600 may not seem like much to get started, but anything is better than nothing, and there are places to put that $600 to that will make a big difference.
DRIPS
DRIPS, or dividend reinvestment plans, allow you to invest small amounts of money into dividend-paying stock, by purchasing directly from the company.
Companies like GE, Coca-Cola, Verizon, Home Depot and Johnson & Johnson are just a few of the companies that allow you to make regular purchases of very small amounts of stock, and reinvest the dividends.
This can add up to a big investment over time and, as you gain a larger balance, you may consider diverting some of these funds into other investments.
ETFs
ETFs, or exchange traded funds, are financial products that track the performance of a certain sector of the investment market.
You can buy as little as one share of an ETF through a broker, and some of these ETFs track the performance of the total stock market, the bond market and many others.
Many ETFs also pay a dividend, making a purchase in a fund like the Vanguard Total Stock Market ETF (VTI) an instantly diversified portfolio that also pays a dividend.
Target Date Funds
Target date funds, as the name implies, target your retirement date by changing the percentage of stocks and bonds to assure that your money remains safe as you approach retirement age.
Some of these funds require a minimum of $1,000, but they may serve as great products for investors who don’t want to manage their portfolio on their own.
Use caution when picking a target date fund because of the high fees that some funds charge.
Don’t Forget the 401(k)
If you have a 401(k) that will match your contributions, invest there first. Since your company is giving you free money to invest, you should always fund your 401(k) before outside investments.
The Bottom Line
Some of these strategies may require the help of a financial advisor, but most people, if they’re willing to give up a few small luxuries, can find small amounts of money to invest into their retirement.
SEE: Job Hunting: Higher Pay Vs. Better Benefits
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5 Advantages Of Investing In Your 20s..by Investopedia.com

Posted on May 20, 2012 by Albert

5 Advantages Of Investing In Your 20s

 

February 15, 2012 |

Young adults often face financial challenges due to burdensome student loans, relatively low-paying junior-level positions and a lack of budgeting experience.
While twenty-somethings know they are supposed to be saving for retirement, the golden years seem unimportant and a long way off compared to the consumer purchases that could be made now.
For many young adults, it seems easier to put off any investing decisions until their financial situation becomes, at least theoretically, more stable. Twenty-somethings, however, are actually in a prime position to enter the investing world, even with college debt and low salaries.
See: 7 Stable Investments For Your Retirement.
Time
While money may be tight, young adults have a time advantage. There is a reason that compounding – the ability to grow an investment by reinvesting the earnings – was referred to by Albert Einstein as “the eighth wonder of the world.”
The magic of compounding allows investors to generate wealth over time, and requires only two things: the reinvestment of earnings and time.
A single $10,000 investment at age 20 would grow to over $70,000 by the time the investor was 60 years old (based on a 5% interest rate). That same $10,000 investment made at age 30 would yield about $43,000 by age 60, and made at age 40 would yield only $26,000.
The longer money is put to work, the more wealth it can generate in the future.
Take on More Risk
An investor’s age influences the amount of risk he or she can withstand. Young people, with years of earning ahead of them, can afford to take on more risk in their investment activities.
While individuals reaching retirement years may gravitate towards low-risk or risk-free investments, such as bonds and certificates of deposit (CDs), young adults can build more aggressive portfolios that are subject to more volatility, and that stand to produce larger gains. (For more information, check out A Simplified Approach To Calculating Volatility.)
Learn by Doing
Young investors have the flexibility and time to study investing and to learn from both successes and failures. Since investing has a fairly lengthy learning curve, young adults are at an advantage because they have years to study the markets, and to refine their investing strategies.
As with the increased risk that can be absorbed by younger investors, so too can they overcome investing mistakes, because they have the time needed to recover.
Tech Savvy
The younger generation is a tech savvy one, able to study, research and apply online investing tools and techniques. Online trading platforms provide countless opportunities for both fundamental and technical analysis, as do chat rooms and financial and educational web sites.
Technology, including online opportunities, social media and apps, can all contribute to a young investor’s knowledge base, experience, confidence and, ultimately, expertise. (To learn more, read Technical Analysis.)
Human Capital
Human capital, from an individual’s perspective, can be thought of as the present value of all future wages. Since the ability to earn wages is fundamental to investing and saving for retirement, investing in oneself – by earning a degree, receiving on-the-job training or learning advanced skills – is a valuable investment that can have strong returns.
Young adults often have many opportunities to increase their ability to earn higher future wages, and taking advantage of these opportunities can be considered one of the many forms of investing.
The Bottom Line
Saving for retirement is not the only reason to make well-planned investments. Many investments, such as those made in dividend stocks, can provide an income stream throughout the life of the investment.
Twenty-somethings have certain advantages over those who wait to begin investing, including time, the ability to weather increased risk and opportunities to increase future wages. (For additional reading, see Why Dividends Matter.)
by

Jean Folger

Jean Folger is co-author of the award winning book Make Money Trading: How to Build a Winning Trading Business, and has written numerous articles appearing in Futures Magazine, Smart Trade Digest and other online venues. She is co-author of the eBooks Volatility Indicators: Techniques for Profiting from the Market’s Moves; and High Profits in High Heels: Secrets from Today’s Top Women Traders.
Jean is a system researcher for PowerZone Trading, LLC , a company she co-founded to develop commercial indicators and custom trading systems for the TradeStation and NinjaTrader platforms. Previously, Jean was a real estate broker and a high school English teacher. Jean can be reached at jean@powerzonetrading.com.

 

 

 

 

 

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Portfolio Management Tips For Young Investors..Investopedia.com

Posted on May 19, 2012 by Albert
 
 

Portfolio Management Tips For Young Investors

 

January 20 2012 |
Too many young people rarely, or never, invest for their retirement years. Some distant date, 40 or so years in the future, is hard to imagine. However, without investments to supplement retirement income, if any, retirees will have a difficult time paying for life’s necessities.
TUTORIAL: Stocks Basics
Smart, disciplined, regular investment in a portfolio of diverse holdings, can yield good long-term returns for retirement and provide additional income throughout an investor’s working life.
An often stated reason for not investing is a lack of knowledge and understanding of the stock market. This objection can be overcome through self-education and step-by-step through the years, as an investor learns by investing.
Classes in investing are also offered by a variety of sources, including city and state colleges, civic and not-for-profit organizations, and there are numerous books targeted to the beginning investor.
However, you’ve got to start investing now; the earlier you begin, the more time your investments will have to grow in value. Here’s a good way to start building a portfolio, and how to manage it for the best results. (For related reading, see Top 5 Books For Young Investors.)
Start Early
Start saving as soon as you go to work by participating in a 401(k) retirement plan, if it’s offered by your employer. If a 401(k) plan is not available, establish an Individual Retirement Account (IRA) and earmark a percentage of your compensation for a monthly contribution to the account.
An easy, convenient way to save in an IRA or 401(k) is to create an automatic monthly cash contribution. Keep in mind, the savings accumulate and the interest compounds without taxes, as long as the money is not withdrawn, so it’s wise to establish one of these retirement investment vehicles early in your working life.
Another reason to start saving early is that usually the younger you are, the less likely you are to have burdensome financial obligations: a spouse, children and mortgage, for example. That means you can allocate a small portion of your investment portfolio to higher risk investments, which may return higher yields.
When you start investing while young, before your financial commitments start piling up, you’ll probably also have more cash available for investing and a longer time horizon before retirement. With more money to invest for many years to come, you’ll have a bigger retirement nest egg.
To illustrate the advantage of value investing as soon as possible, assume you invest $200 every month starting at age 25. If you earn a 7% annual return on that money, when you’re 65 your retirement nest egg will be approximately $525,000. However, if you start saving that $200 monthly at age 35 and get the same 7% return, you’ll only have about $244,000 at age 65. (For additional reading, see Accelerating Returns With Continuous Compounding.)
Diversify
Select stocks across a broad spectrum of market categories. This is best achieved in an index fund. Invest in conservative stocks with regular dividends, stocks with long-term growth potential, and a small percentage of stocks with better returns, along with higher risk potential.
If you’re investing in individual stocks, don’t put more than 4% of your total portfolio into one stock. That way, if a stock or two suffers a downturn, your portfolio won’t be too adversely effected.
Certain AAA rated bonds are also good investments for the long term, either corporate or government. Long-term U.S. Treasury bonds, for example, are safe and pay a higher rate of return than short- and mid-term bonds. (To learn more on investing in bonds, read Bond Basics: Different Types Of Bonds.)
Keep Costs to a Minimum
Invest with a discount brokerage firm. Another reason to consider index funds when beginning to invest is that they have low fees. Because you’ll be investing for the long-term, don’t buy and sell regularly in response to market ups and downs. This saves you commission expenses and management fees, and may prevent cash losses when the price of your stock declines.
Discipline and Regular Investing
Make sure that you put money into your investments on a regular, disciplined basis. This may not be possible if you lose your job, but once you find new employment, continue to put money into your portfolio.
Asset Allocation and Re-Balance
Assign a certain percentage of your portfolio to growth stocks, dividend paying stocks, index funds and stocks with a higher risk, but better returns.
When your asset allocation changes (i.e., market fluctuations change the percentage of your portfolio allocated to each category), re-balance your portfolio by adjusting your monetary stake in each category to reflect your original percentage. (For more information, read Five Things To Know About Asset Allocation.)
Tax Considerations
A portfolio of holdings in a tax-deferred account, a 401(k), for example, builds wealth faster than a portfolio with tax liability. You pay taxes on the amount of money withdrawn from a tax deferred retirement account.
A Roth IRA also accumulates tax free savings, but the account owner doesn’t have to pay taxes on the amount withdrawn. To qualify for a Roth IRA, your modified adjusted gross income must meet IRS limits and other regulations.
Earnings are federally tax free if you’ve owned your Roth IRA for at least five years and you’re older than 59.5, or if you’re younger than 59.5, have owned your Roth IRA for at least five years and the withdrawal is due to your death or disability, or for a first time home purchase.
The Bottom Line
Disciplined, regular, diversified investment in a tax deferred 401(k), IRA or a potentially tax-free Roth IRA, and smart portfolio management can build a significant nest egg for retirement. A portfolio with tax liability, dividends and the sale of profitable stock can provide cash to supplement employment or business income.
Managing your assets by re-allocation and keeping costs, such as commissions and management fees, low, can produce maximum returns.
If you start investing as early as possible, your stocks will have more time to build value. Finally, keep learning about investments throughout your life, both before and after retirement.
The more you know, the more your potential portfolio return, with proper management, of course. (For related reading, see Investing 101.)

 

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Marc Davis

Marc Davis
Marc Davis is a veteran journalist with more than 20 years experience reporting and writing on business, finance, corporate management and legal subjects. His writing has been published online and in print by Adweek, Arthur Andersen, The Chicago Tribune , Encyclopedia Britannica, Insight Magazine, The John Marshall Law School Magazine, The Journal of the American Bar Association, Rotarian, and numerous other national periodicals and websites.
Marc is also a published novelist.  His novel, “Dirty Money,” published by Dell, was nominated for an award by the Private Eye Writers of America. He is also the author of non-fiction children’s books, including a biography of Florence Nightingale and a history of the Georgia Colony. Marc’s new novel “Bottom Line,” a revealing look at corruption, fraud and thievery in a global management consulting firm, will be published in early 2013 by The Permanent Press. Marc was also a former licensed commodity broker at the Chicago Board of Trade.



 

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Why so troublesome..?

Posted on April 1, 2012 by Albert

During my interaction with my friends and ‘fans’ in the last few months, I was often asked this question. Why do we need to take so much trouble to learn so much about investing?

I can frankly say that I am not surprised at this kind of attitude towards such ‘boring’ subject as investing! The fad now is ‘social’. Facebook, Twitter or the likes, that is. Who wants to ‘study’ about investing, man! (to quote a guy who said that to me.)

My response to this question is simple. Hey, guys, why do we go to school to learn? Why study accountancy, engineering or zoology to fulfill our ambitions? And paying a fortune to do that!

The reason is simple. We are not born with these knowledge on Day 1. We may know how to ‘talk’ but may not know how to read if we do not learn starting with the alphabets.

We study hard to get our degree in the field that we love. Then we go to work to earn a living, hopefully to build a successful career and family later on. Not only that, we would continue to learn as we go so as to climb up the corporate ladder, thereby enhancing our social status along the way.

Now, we should view learning about investing in the same light as you learn about your job or career. To progress further and be better than the present. We all work hard to support our family, provide for our children’s education and later, for our own retirement. This is, of course, a very good kind of attitude.

But the problem is we do not work forever! Maybe you also do not want to. Or, circumstances may force you to stop working. There are plenty of examples happening everyday. I do not want to put them here to give you additional stress!

Hence, we must find ways to assist us, at least, in preserving our income or better still, enhancing it! The main aim is to work for our money now with the hope that the money will be ‘working’ for us later in the future. We cannot afford to have the situation where ‘when our hands stop, the money also stops!’ That means working from hand to mouth. That is not a pretty situation to be in, folks!

You cannot rely on the money or fund managers to do that for you. You cannot even depend on the government to take care of you, even if you are a citizen of a ‘welfare country’! You have read the news! No need to elaborate further!

The best solution is to take upon yourself the responsibility of managing your own wealth, no matter how small it may be. We have a saying in my country that little by little, after a while, it can become a mountain!

Learn as much as you can about investing. After all, it is FREE via the internet! So much information is available that you cannot say you are not aware or do not know! You have to be aware and know them thoroughly, for the sake of your family, your children, and for yourself for retirement!

So, why so troublesome? Well, the answer is simply no pain no gain! We need to put in the effort first before we can hope to harvest something in due time. So, put in that extra effort now in order to have a bountiful harvest later.

Wishing you a ‘new beginning’ in your pursuit of financial freedom with this ‘new light’!

Always THINK POSITIVELY & ACT PROFITABLY!

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