investment advice http://www.wisebread.com/taxonomy/term/7753/all en-US 7 Investing Lessons From the Two Comma Club http://www.wisebread.com/7-investing-lessons-from-the-two-comma-club <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/7-investing-lessons-from-the-two-comma-club" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/cash-1901091-small.jpg" alt="cash" title="cash" class="imagecache imagecache-250w" width="250" height="175" /></a> </div> </div> </div> <p>When&rsquo;s the last time you heard about someone reaching the goal of becoming a millionaire? Do you even think it's possible?</p> <p>I certainly do.</p> <p>Because over in the <a href="http://www.bogleheads.org/">Bogleheads</a> forum, which is frequented by average, everyday investors, a member recently shared how he reached the major milestone they call the &quot;<a target="_blank" href="http://www.bogleheads.org/forum/viewtopic.php?f=1&amp;t=109571">Two Comma Club</a>.&quot;</p> <p>This club is for people who have achieved a net worth figure with at least two commas in it (in other words, $1,000,000 and up). (See also: <a target="_blank" href="http://www.wisebread.com/the-worst-investments-you-can-make">The Worst Investments You Can Make</a>)</p> <p>Here are the seven key lessons I learned from studying that post and comments to it.</p> <h2>1. Develop the Habit of Saving</h2> <p>In his very first post, our new millionaire said he was <em>always</em> a saver.</p> <p>Being diligent in saving is the most important step in building wealth. It's even more important than <a target="_blank" href="http://www.wisebread.com/why-invest-in-the-stock-market">finding the right investment</a>.</p> <p>Without any savings, you'll have nothing to invest &mdash; even if you have the &quot;perfect&quot; investment. But when you contribute to your investment accounts regularly, you harness the power of compound interest to boost your net worth over the long haul.</p> <p>Here's another way to get serious about saving &mdash; when contribution limits for your retirement accounts increase, do what you can to max them out. Our millionaire used the extra money he got from pay raises and from paying off debts to do this.</p> <h2>2. Have a Purpose</h2> <p>Money is ultimately just a tool that'll help you achieve your other goals. So what are your life goals?</p> <p>One commenter mentioned that after he reached $2 million net worth, he quit his executive position that kept him away from his family. Now, he can spend much more time with them.</p> <p>Do you want to leave a stressful, unfulfilling job so that you'll have more time with your loved ones? Or do you want the ability to donate large sums of money to support a cause that's close to your heart?</p> <p>Having a purpose in mind will keep you motivated to continue working hard when times get tough, and doing whatever it takes to reach your goal.</p> <h2>3. Learn and Get Help</h2> <p>Our millionaire said he didn't always know what he was doing. But he learned by reading good books and listening to knowledgeable people.</p> <p>By doing this, he slowly got his financial act together. This shows that if you start early enough, mistakes aren&rsquo;t fatal &mdash; as long as you learn from them and correct them.</p> <p>So <a target="_blank" href="http://www.wisebread.com/15-investing-tips-from-a-1-wall-street-stock-picker">what's important to know</a> when it comes to long-term investing? One major factor that influences how your investments will perform is your asset allocation. In other words, how do you divide your money between the two major types of investments &mdash; stocks and bonds?</p> <p>If you'd like to learn the asset allocation that I follow, how this allocation has performed in the past, as well as how it's expected to perform in the future, check out the <a target="_blank" href="http://moneytobless.com/simplify-your-investing-with-the-core-four-portfolio/">Core Four Portfolio</a>.</p> <h2>4. Stay the Course</h2> <p>&quot;Stay the course,&quot; was mentioned several times throughout the thread. All this means is to simply create an investment plan (such as the one modeled after the Core Four Portfolio), and then stick to it. Don't waver from your asset allocation when the market is going through a down period.</p> <p>It's doesn't really matter how your investments perform in a year or two. Instead, it's more important that you stay invested over a decade or two. One commenter mentioned that it took 26 years of systematic investing in order to make it to the distinguished Two Comma Club.</p> <h2>5. Make Sacrifices</h2> <p>If something's really important to us, we'll do whatever it takes to make it happen. A commenter mentioned striving towards the Two Comma Club every single day.</p> <p>Our millionaire made sacrifices by committing his future pay raises to paying off his mortgage early. That gave him the extra money to max out his retirement accounts and speed up his journey to financial freedom.</p> <h2>6. Surround Yourself With Like-Minded People</h2> <p>Birds of a feather flock together. By reading this millionaire's post, another commenter received encouragement and realized that the goal of becoming a millionaire was possible for him, too. Join an online forum such as Bogleheads for the motivation or <a target="_blank" href="http://www.wisebread.com/how-and-why-to-start-an-investment-club">form an investment club</a>.</p> <h2>7. Once You Get There, Stay There</h2> <p>A commenter noted that the first part of your investment life is all about accumulating wealth. Once you've reached your goal, the second part of your life is all about not losing what you've worked so hard to gain.</p> <p>How do you do this?</p> <p>By continuing to do what you've been doing all along: Living below your means, paying yourself first, and managing your debt wisely.</p> <p>For instance, since retiring, our millionaire is <em>still</em> in the habit of saving. He still develops savings goals for future spending. Yes, he's saved up for future vacations, car repairs, and property taxes among other expenses.</p> <p><em>Which one of these seven investment lessons speaks the loudest to you?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/darren-wu">Darren Wu</a> of <a href="http://www.wisebread.com/7-investing-lessons-from-the-two-comma-club">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/what-is-keeping-you-from-a-life-of-financial-independence">What is keeping you from a life of financial independence?</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-times-raiding-your-retirement-accounts-early-is-okay">4 Times Raiding Your Retirement Accounts Early Is Okay</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/this-one-thing-will-get-you-to-1-million-tax-free">This One Thing Will Get You to $1 Million (Tax-Free!)</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-important-things-to-know-about-your-401k-and-ira-in-2016">5 Important Things to Know About Your 401K and IRA in 2016</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-tell-if-your-401k-is-a-good-or-a-bad-one">How to Tell if Your 401K Is a Good or a Bad One</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Investment Retirement forums investment advice saving two comma club Wed, 08 May 2013 10:36:32 +0000 Darren Wu 973755 at http://www.wisebread.com 5 Business Lessons from Billionaire Investors http://www.wisebread.com/small-business/5-business-lessons-from-billionaire-investors <div class="field field-type-link field-field-url"> <div class="field-label">Link:&nbsp;</div> <div class="field-items"> <div class="field-item odd"> <a href="http://www.openforum.com/idea-hub/topics/managing/article/5-business-lessons-from-billionaire-investors" target="_blank">http://www.openforum.com/idea-hub/topics/managing/article/5-business-lessons-fro...</a> </div> </div> </div> <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/small-business/5-business-lessons-from-billionaire-investors" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock_000009169510Small.jpg" alt="" title="" class="imagecache imagecache-250w" width="250" height="166" /></a> </div> </div> </div> <p>Think you've got nothing in common with the likes of billionaire investor Warren Buffet? Think again. Turns out you can glean some important business understanding by taking a close look at what makes billionaire investors successful in what they do. Success: that's a nice thing to have in common.</p> <h3>They Choose Proven Industries</h3> <p>Buffet, and others, can well afford to take a risk or two, but their hallmark is not investing in risky new ventures and unknown industries. Rather, billionaire investors tend to put their money into industries which have proven themselves both in long-term demand and profitability. While the newest, most innovative, and interesting option is always tempting &mdash; who doesn't want to be smart enough to know about the next big thing, and make huge sums of money from it? &mdash; it isn't a sure bet, nor even a good one.</p> <p><em>Business Take Away:</em> Invest your time and money in what has proven to have a strong ongoing demand and/or a strong ongoing returns for your business. You can apply this principle to everything from employees to strategies, innovation, and products. Marketing, for example, continues to morph as we continue to refine Internet marketing methods. You should track your ROI in the online marketing you do, then invest more of your marketing dollars into efforts that work. The same goes for managing people; if a position opens up in your company, look at the employees you already have who have proven capable, trustworthy, and productive. Would one of them fill that spot? If you have an employee who has proven worth to your business, then it's a low risk to invest in a higher salary and higher level of responsibility for that employee.</p> <h3>They Are In It for the Long Term Investment</h3> <p>Investing in the stock market is not a get-rich-quick plan, and rarely does it work that way for investors. Billionaire investors look at stocks that will grow in value over time, and put money in early on, not expecting to pull a profit from it in a few months or even in a few years.</p> <p><em>Business Take Away:</em> You may find yourself with a runaway product, bringing in more profits than you ever imagined within your first year or two, but those scenarios are rare. The more common scenario is months and years of building slowly, finding investors, tracking money, building a brand, delivering on promises, and moving into profitability with a steady climb from the beginning. Climbing, by the way, is tough work.</p> <h3>They Know Where Their Money Goes</h3> <p>When you've got billions to invest, it seems like it might not be a big deal to toss a few million here, a few million there, and not worry too much if you lose some. But the smart investors &mdash; the ones who continue to have that kind of money to invest, year after year &mdash; are not careless with their money. Carelessness in small amounts of money is a sign of carelessness in general, and when money is your business tool, you've got to treat it with respect and care.</p> <p><em>Business Take Away:</em> As a business owner or manager, or as a sole proprietor (freelancing, anyone?), you have to know where your money goes. This matters in terms of your time &mdash; are you spending hours on jobs that you could outsource or assign to an employee? &mdash; and in terms of the actual money flowing through your business. You need to track income and expenses, spot disparities, and continually check for holes where money may be slipping away, taking profit with it. That doesn't mean that you have to be money-driven, but it does mean that you have to be money-aware. You simply can't run a successful business and be ignorant about the money involved in it.</p> <h3>They are Constantly Learning About New Opportunities</h3> <p>While billionaire investors are not going to be swept away in the next big fad (see Choosing Proven Industries, above), they are in the habit of constantly watching the market, learning about new opportunities, and staying aware of technological developments, political changes, and other trends that impact the market, the economy, and how they can best invest in it.</p> <p><em>Business Take Away:</em><b> </b>The parallel is rather obvious. You have to be aware of what is happening in your business, among your competitors, and with the market demand in general. If your main competition has just released a smashing new product that could threaten the survival of your business, you'd better know about it. If a shift in the economy, or a new development in technology, can cause your target market to shift into new buying habits, you'd better know about it. Your business survival depends on your ongoing, continuing knowledge of what you sell, what your competitors sell, and what your market wants to buy.</p> <h3>They Don't Rest on Past Successes</h3> <p>If anyone could rest on their laurels, these folks could. As a billionaire, do you really need more money? But most of big investors continue to watch the markets, to learn, to share their knowledge, to invest in new businesses and old ones, to plan for the long-term returns they may not even be around to see.</p> <p><em>Business Take Away:</em><b> </b>You've got to keep moving forward. Innovation is a key to business success. Peter Drucker says &quot;systematic innovation&quot; is one of the &quot;universal entrepreneurial disciplines,&quot; and a &quot;condition for survival.&quot; After a tough climb up the business mountain, you'll be tempted to sit back, take a break, and just let things roll long. Do that, for, say, two or three days. Then get back to work. The challenge of running a business is that the formula that worked for initial success is not going to be the formula that works for ongoing success. Unless you are leading the business forward, you'll find yourself failing merely because you're attempting to repeat the past while everyone else is marching into the future.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/annie-mueller">Annie Mueller</a> of <a href="http://www.wisebread.com/small-business/5-business-lessons-from-billionaire-investors">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/250-tips-for-small-business-owners">250+ Tips for Small Business Owners</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-5-best-credit-cards-for-small-businesses">The 5 Best Credit Cards for Small Businesses</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-inspiring-stories-of-normal-people-building-a-thriving-online-store">4 Inspiring Stories of Normal People Building a Thriving Online Store</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/100-ways-to-make-more-money-this-year">100+ Ways to Make More Money This Year</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/lessons-we-can-learn-from-blockbusters-demise">Lessons We Can Learn From Blockbuster&#039;s Demise</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Small Business Resource Center business lessons investment advice small business warren buffet Wed, 04 May 2011 22:00:42 +0000 Annie Mueller 532484 at http://www.wisebread.com 5 Reasons to Ignore the January Effect http://www.wisebread.com/5-reasons-to-ignore-the-january-effect <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/5-reasons-to-ignore-the-january-effect" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock_000010813141XSmall.jpg" alt="January Calendar" title="January Calendar" class="imagecache imagecache-250w" width="250" height="249" /></a> </div> </div> </div> <p>It's that time of year where the stock-market myth about the January Effect rears its ugly head, so it's also time to point out why investors shouldn't alter their existing investment strategies to try to chase returns that are no more likely to materialize than if they did nothing at all.</p> <p>The concept of the January Effect is that stock prices tend to increase in the month of January each year, more so than other months. Therefore, investors who purchased securities during the month of December are, in theory, likely to be rewarded with outsized gains if they sell later in January of the new year. The concept gained prominence in the 1980s based on a review of historical data showing the phenomena was relatively common going all the way back to 1925. The theory is that in December, investors sell losing stocks at year-end to offset capital gains elsewhere, thus artificially depressing share prices of stocks that were already negative on the year. Investors then swoop in and re-buy those same shares in January.</p> <p>According to a recent <a href="http://www.cnbc.com/id/40548635">CNBC article</a>, December is the new January, and investors should start buying now. They go on to recommend purchasing this year's losing stocks in the S&amp;P 500 index. Well, I'm not buying it at all. Here are several reasons why this advice should be ignored:</p> <h2>Market Efficiency</h2> <p>There's an age-old debate about efficient markets and whether the theory holds true, but in essence, many economists believe that there is so much information provided to the investing public in real time, that at any given time, asset prices do reflect all currently known information, and thus assets are fairly valued. While some would counter that insider information and near-term panics like the recent flash-crash alter the notion of efficient markets, the January Effect would be immune to these characteristics (i.e. no more likely to experience insider trading than any other stock). In this particular example, since the January Effect myth is so widely propagated, it is unlikely to occur each and every year without investors arbitraging the spread in performance and reducing it to random chance.</p> <h2>The Internet</h2> <p>The Internet takes market efficiency to a whole new level. Whereas historically the January Effect was relegated to academic papers, books, and newspapers, now there are instant reminders like the aforementioned CNBC article constantly prompting investors to fulfill the prophecy. This just results in front-running, hence eliminating the purported benefit.</p> <h2>It's Not Guaranteed</h2> <p>There have been some years where the January Effect did not achieve its desired effect. Do you want to experiment this year and find out if this is one of those years? Investing in an FDIC-insured CD provides you with a guaranteed return. Stock market investing does anything but.</p> <h2>Standard Deviation and Investment Risk</h2> <p>Would you bet $100 to win an extra $1 in a game of chance? Probably not. While overly simplified, the concept holds true. If attempting to exploit the January effect, you are, in essence, taking on market risk with very high volatility for a marginal return. By subjecting yourself to a brief attempt to &quot;beat the market&quot; with this gimmick, you're putting yourself at undue risk given the relatively paltry return.</p> <h2>Commissions, Taxes, and Net Benefit</h2> <p>Shifting money from your existing holdings in order to exploit this supposed effect and then selling again within a month is likely to erode any possible benefit that was realized. Not only would you incur commissions on the buying and selling, but you will have generated tax liabilities on the strategy as well. At the end of the day, what will the net benefit be? A highly randomized return minus commissions.</p> <p>To recap, it has been proven time and time again that the best approach for retail investors is to stick to a long-term investment strategy focusing on diversification and low fees, and not reacting to external market jitters and hype. I may well be proven wrong come January, but I would chalk that up to random chance. I'll take my boring, <a href="http://www.wisebread.com/etfs-offer-incredible-benefitswith-a-dark-side">ETF investing approach</a> any day.</p> <p><em>Are you going to experiment with the January Effect?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/darwins-money">Darwins Money</a> of <a href="http://www.wisebread.com/5-reasons-to-ignore-the-january-effect">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-2"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/looking-to-invest-right-now-5-basic-investing-tips-for-any-market">Looking To Invest Right Now? 5 Basic Investing Tips For Any Market</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/beginners-guide-to-reading-a-stock-table">Beginner&#039;s Guide to Reading a Stock Table</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-reasons-millennials-should-stop-being-afraid-of-the-stock-market">7 Reasons Millennials Should Stop Being Afraid of the Stock Market</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/learn-how-to-invest-with-these-5-stock-market-games">Learn How to Invest With These 5 Stock Market Games</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-money-moves-to-make-as-soon-as-you-conquer-debt">7 Money Moves to Make as Soon as You Conquer Debt</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Investment financial risk investment advice stock market Thu, 09 Dec 2010 13:00:09 +0000 Darwins Money 372566 at http://www.wisebread.com Is Real Estate a Good Investment? http://www.wisebread.com/is-real-estate-a-good-investment <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/is-real-estate-a-good-investment" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/3138433544_448983a6fb_z.jpg" alt="real estate plan" title="real estate plan" class="imagecache imagecache-250w" width="250" height="179" /></a> </div> </div> </div> <p>Currently, we find ourselves in an economic quagmire with many investors ferreting opportunities to grow individual wealth. Unlike Baby Boomers, the need to search for personal wealth opportunities are particularly important for young investors, as we need to ensure that enough money is put into retirement &quot;piggy bank.&quot; If you consider the general economic trend, young adults have to work longer into retirement years than previous generations in order to sustain a standard of living they were accustomed to in their working years. Consequently, young investors need strong investment returns that exceed the rate of inflation in order to avoid working in later years.</p> <p>In lieu of our insatiable appetite for moderate to high rates of return, young investors know that traditional bonds won't meet our needs, as they normally return 5% per year. Consider that inflation is normally 3%, which leaves us with a real rate of return of only 2%. To be exact, it's slightly less than 2% based on the Fisher hypothesis, a theory where interest rate is independent of monetary measures, particularly the nominal interest rate. Hence, a real rate of return of a paltry 2% won't afford a 20-something the desired monetary growth for their long-term personal investment portfolio.</p> <p>If bonds don't give young investors a high rate of return, many economists would suggest investing in stocks. The basic theory of stocks is that the greater the financial risk, the greater the reward. Most young investors know about those who have made a great sum of money in the stock market. We often overhear our friends and colleagues discuss how they made thousands of dollars in the market over a short amount of time.</p> <p><strong>But let's check the facts&hellip;</strong></p> <p>Consider that 10 years ago, the <a href="http://www.standardandpoors.com/home/en/us">S&amp;P 500</a> hovered at approximately 1,400. Today, it's at approximately 1,100. That's a decrease of 21% &mdash; an unpalatable figure for those who want to eat in retirement. Not only has the S&amp;P declined, but the <a href="http://www.google.com/finance?client=ob&amp;q=INDEXDJX:DJI">Dow</a> is down by 3%. Again, it's not a return needed to prepare a young person for a decent retirement. Net takeaway: stocks.</p> <p>After examining the investment opportunity in bonds and stocks, the next stop on our journey is real estate. I have often heard that real estate &mdash; particularly buying a home &mdash; is an investor's best asset. Let's see if this is a valid claim.</p> <p>Depending on your sources, the average home price in the U.S. at the beginning of the millennium was approximately $160,000. Today, that same home will sell for approximately $200,000. Before we attempt to determine whether real estate is a good investment for a 20-something, consider that home prices rose considerably during the first half of the decade. If we explore the change in home prices, the average home increased by $40,000, or 25% over the decade. If you do the math &mdash; considering present value, future value, and time &mdash; this equates to a 2.2% compound increase year over year. Congratulations, we're now in the positive rates of return.</p> <p>Just one moment. We haven't considered the rate of inflation, which we know historically is greater than 2.2%. Not only that, we haven't taken into account that it cost us approximately 5% to 6% a year to borrow the money to purchase the home.</p> <p>Granted, we all have to have a roof over our head, and I'm not suggesting that real estate is a bad investment, but it is my personal opinion that if your home is your best and biggest investment, then you may be in trouble. Young investors need to undergo a paradigm shift in which they view real estate as a place to live and not as a money generating asset. It is vital to our long-term financial success that we understand that homes are not a money machine that will make us all rich, but a place to live that affords us the ability to raise children and keep us warm during the winter months. A home may be your biggest investment &mdash; but it may not be your best investment. In my opinion, diversifying your personal portfolio and including a healthy blend of stocks, bonds, and real estate is the best way to go.</p> <div class="field field-type-text field-field-guestpost-blurb"> <div class="field-label">Guest Post Blurb:&nbsp;</div> <div class="field-items"> <div class="field-item odd"> <p>This is a guest post by Antar Salim, MBA. Antar serves as a coordinator for Rasmussen College School of Business, at the <a href="http://www.rasmussen.edu/locations/minnesota/twin-cities/eagan/">Eagan, MN college</a> campus, where he teaches <a href="http://www.rasmussen.edu/degrees/business/">business degree</a>-seeking students.</p> </div> </div> </div> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/antar-salim">Antar Salim</a> of <a href="http://www.wisebread.com/is-real-estate-a-good-investment">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-10"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-reasons-you-shouldnt-invest-like-warren-buffett">7 Reasons You Shouldn&#039;t Invest Like Warren Buffett</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-investments-that-usually-soar-during-the-summer">7 Investments That Usually Soar During the Summer</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-pros-and-cons-of-paying-cash-for-a-house">The Pros and Cons of Paying Cash for a House</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-foolproof-ways-to-protect-your-money-from-inflation">4 Foolproof Ways to Protect Your Money From Inflation</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-best-ways-to-invest-50-500-or-5000">The Best Ways to Invest $50, $500, or $5000</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Investment Real Estate and Housing bond buying a home investment advice stocks Thu, 16 Sep 2010 13:00:16 +0000 Antar Salim 238864 at http://www.wisebread.com Looking To Invest Right Now? 5 Basic Investing Tips For Any Market http://www.wisebread.com/looking-to-invest-right-now-5-basic-investing-tips-for-any-market <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/looking-to-invest-right-now-5-basic-investing-tips-for-any-market" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/nyse_2.jpg" alt="" title="" class="imagecache imagecache-250w" width="250" height="188" /></a> </div> </div> </div> <p>A lot of people have been asking me recently, is this the stock market bottom? Is it time to jump into stocks?&nbsp; Well, it's human nature to be asking these questions, especially now that the market has dropped precipitously around 30% or so from its peak.</p> <p>But when we invest based on market movement, we're actually applying our emotions into the mix. In effect, we're timing the market to some extent as we see great bargains in stocks right now, salivating over the cheaper stock prices. </p> <p>But what if there was a way to invest with less worry and less emotion? Now I can't say that you can be entirely worry-free when you invest but you can certainly mitigate concerns over your portfolio when you apply a few techniques, which I've personally chosen to follow myself.</p> <p>As an investor for over 20 years who's lived through 2 recessions (and going on a third), here are some tips to weather market cycles without losing sleep:</p> <h3>The Automated Way To Invest in any Market</h3> <p><strong> 1. Look at the long term.</strong></p> <p>The idea of &quot;long term&quot; varies depending on how old you are.&nbsp; The <a href="http://www.wisebread.com/why-young-investors-should-stay-the-course-and-continue-to-invest">younger you are</a>, the longer is your investment time horizon and the more time your investments can grow to make up for bad market cycles or to benefit from the awesome power of compounding.&nbsp; In this regard, investing early gives you a leg up.&nbsp; The flip-side, of course, is that the older you are, the more conservative you should become.&nbsp; A good technique is to diminish your exposure to equities over time by doing portfolio reallocations on a regular basis. <strong><em>Rule of thumb: subtract your age from 100 to yield a recommended percentage for your stock allocation.</em></strong> Though this is a simple way of arriving at a ballpark stock allocation, you'll still need to take into account your risk profile and financial goals to arrive at your final numbers.<br /> &nbsp;<br /> <strong>2. Resist market timing.</strong></p> <p>I learned the hard way that short term market timing is a lousy approach. I've been whipsawed by the market via short sales and stock trades during volatile periods. These days, I resist the urge to market time even while the market dances like a drunk sailor.&nbsp; My take is that if you trade, you should know what you're doing, and not just get into this because you're acting on emotion.</p> <p> <strong>3. Be well diversified.</strong></p> <p>Stock market diversification can be effectively realized via indexing and appropriate <a href="http://www.wisebread.com/asset-allocation-for-all-markets">asset allocation strategies</a>. You can also buy general, actively managed mutual funds and achieve some level of diversification, although this means you're entrusting the performance of your funds to its fund managers.&nbsp; I prefer to do it the passive way -- by tracking the indexes that represent major asset classes. </p> <p> <strong>4. Choose good asset allocations for your portfolio.<br /> </strong><br /> Believe it or not, but the overall total returns of your investments will depend largely on how your <a href="http://www.wisebread.com/best-asset-allocation-for-your-portfolio">asset allocation</a> is structured. Most financial literature will suggest an allocation that includes stocks, bonds, cash, real estate and even precious metals or commodities in your portfolio since these asset classes don't behave in lock step (the less correlated asset classes are, the better!).&nbsp; To the chagrin of most investors, a proper asset allocation hasn't really sheltered them much in recent months -- why?&nbsp; Because only &quot;cash&quot; seems to have survived any form of drubbing this year.&nbsp; Here's hoping that the long term will yield better results for a well allocated portfolio.&nbsp; Here's a discussion about the best places for your money right now.</p> <p> <strong>5. Go automatic.&nbsp; Invest piecemeal.<br /> </strong><br /> <a href="http://www.wisebread.com/dollar-cost-averaging-my-path-to-becoming-a-not-so-nervous-investor">Dollar cost averaging</a> is a great way to ignore the current volatility in the markets. Invest regularly and forget about it.&nbsp; It'll keep you from obsessing about your losses while allowing you to accumulate battered investments at lower prices.</p> <p><strong>6. Keep a casual eye on your portfolio.</strong></p> <p>Diversification, asset allocation and dollar cost averaging are techniques that allow us to be more complacent about our portfolios, but don't forget about your investments for too long!&nbsp; You'll need to evaluate your investments on a regular basis just to make sure you're on track towards your long term goals.</p> <p> <strong>7. Rebalance your investments over time.<br /> </strong><br /> And once you do evaluate your portfolios, you can decide whether it's a good idea to rebalance your holdings to reflect your allocations accurately.&nbsp; When the market goes haywire, rebalancing to keep the asset classes in the correct proportions will allow you to automatically buy those assets that have suffered price drops, while selling out of assets that may be relatively pricier (or that represent a higher weighting or concentration of your total assets).</p> <p> <strong>8. Know when to hold and when to fold. </strong></p> <p>You've got losers? Did you invest in speculative penny stocks, individual stocks or REITs in the last few years? Maybe it's time to unload them now and take the loss.&nbsp; By doing so, you'll achieve two things -- you can harvest your loss and make it benefit you during tax time, and you'll be able to move your position into hopefully better investments like index funds, where your funds can grow with a bit more predictability.&nbsp;</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/silicon-valley-blogger">Silicon Valley Blogger</a> of <a href="http://www.wisebread.com/looking-to-invest-right-now-5-basic-investing-tips-for-any-market">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-3"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-reasons-to-ignore-the-january-effect">5 Reasons to Ignore the January Effect</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/beginners-guide-to-reading-a-stock-table">Beginner&#039;s Guide to Reading a Stock Table</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-reasons-millennials-should-stop-being-afraid-of-the-stock-market">7 Reasons Millennials Should Stop Being Afraid of the Stock Market</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/learn-how-to-invest-with-these-5-stock-market-games">Learn How to Invest With These 5 Stock Market Games</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-money-moves-to-make-as-soon-as-you-conquer-debt">7 Money Moves to Make as Soon as You Conquer Debt</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Investment investment advice stock market Thu, 25 Dec 2008 17:23:53 +0000 Silicon Valley Blogger 2669 at http://www.wisebread.com Clues to detecting the astute investor http://www.wisebread.com/clues-to-detecting-the-astute-investor <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/clues-to-detecting-the-astute-investor" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/people at cookout.jpg" alt="People at cookout" title="People at cookout" class="imagecache imagecache-250w" width="250" height="188" /></a> </div> </div> </div> <p>You may have encountered some financial talk at cocktail parties or neighborhood cookouts. The discussions may have centered on low mortgage rates, debt consolidation deals, and skyrocketing stocks. Sorting through who really knows what they’re doing and who doesn’t can be tricky but, over time, if you watch the game enough, you’ll figure out who the experts are. </p> <p>Here’s my take on the characteristics of the astute investor; he or she: </p> <ul> <li>has invested money over a long period of time and has actively managed a portfolio through market bubbles, bubble bursts, corrections, and crises</li> </ul> <ul> <li>can quote the <a href="http://en.wikipedia.org/wiki/PE_ratio" target="_blank" title="http://en.wikipedia.org/wiki/PE_ratio">P/E ratio</a> of a stock as quickly as its share price </li> </ul> <ul> <li>consumes financial information from multiple sources</li> </ul> <ul> <li>realizes that a stock tip is not a recommendation to buy a stock at any price but rather a mention of a company to begin researching</li> </ul> <ul> <li>studies the strengths, weaknesses, rewards, and risks of market sectors; and knows which companies are best of class in these sectors</li> </ul> <ul> <li>possesses humility, most likely gained from living below his/her means in order to invest and from making at least a few investment mistakes</li> </ul> <ul> <li>knows that net worth is much more than the value of one’s primary residence</li> </ul> <ul> <li>considers charitable giving a given, not an afterthought</li> </ul> <ul> <li>is eager to learn what others know about a sector or company</li> </ul> <p>As you may have guessed or will soon discover, the biggest portfolio and the best performance returns don’t always belong to the smoothest or loudest talker. </p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/julie-rains">Julie Rains</a> of <a href="http://www.wisebread.com/clues-to-detecting-the-astute-investor">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-4"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/6-ways-meditation-can-make-you-a-money-master">6 Ways Meditation Can Make You a Money Master</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-best-money-management-tips-from-john-oliver">7 Best Money Management Tips From John Oliver</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/9-ways-siri-can-be-your-personal-finance-assistant">9 Ways Siri Can Be Your Personal Finance Assistant</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/10-ways-to-increase-your-net-worth-this-year">10 Ways to Increase Your Net Worth This Year</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/9-financial-moves-you-will-always-regret">9 Financial Moves You Will Always Regret</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance astute investors investing investment advice Thu, 06 Sep 2007 20:08:25 +0000 Julie Rains 1115 at http://www.wisebread.com