Online Trading

The invention of the Internet has brought about many changes in the way that we conduct our lives and our personal business. We can pay our bills online, shop online, bank online, and even date online! We can even buy and sell stocks online. Traders love having the ability to look at their accounts whenever they want to, and brokers like having the ability to take orders over the Internet, as opposed to the telephone.

Most brokers and brokerage houses now offer online trading to their clients. Another great thing about trading online is that fees and commissions are often lower. While online trading is great, there are some drawbacks.

If you are new to investing, having the ability to actually speak with a broker can be quite beneficial. If you aren’t stock market savvy, online trading may be a dangerous thing for you. If this is the case, make sure that you learn as much as you can about trading stocks before you start trading online.

You should also be aware that you don’t have a computer with Internet access attached to you. You won’t always have the ability to get online to make a trade. You need to be sure that you can call and speak with a broker if this is the case, using the online broker. This is true whether you are an advanced trader or a beginner.

It is also a good idea to go with an online brokerage company that has been around for a while. You won’t find one that has been in business for fifty years of course, but you can find a company that has been in business that long and now offers online trading.

Again, online trading is a beautiful thing – but it isn’t for everyone. Think carefully before you decide to do your trading online, and make sure that
you really know what you are doing!

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How Much Money Should You Invest?

Many first time investors think that they should invest all of their savings. This isn’t necessarily true. To determine how much money you should invest, you must first determine how much you actually can afford to invest, and what your financial goals are.

First, let’s take a look at how much money you can currently afford to invest. Do you have savings that you can use? If so, great!

However, you don’t want to cut yourself short when you tie your money up in an investment. What were your savings originally for? It is important to keep three to six months of living expenses in a readily accessible savings account – don’t invest that money! Don’t invest any money that you may need to lay your hands on in a hurry in the future.

So, begin by determining how much of your savings should remain in your savings account, and how much can be used for investments. Unless you have funds from another source, such as an inheritance that you’ve recently received, this will probably be all that you currently have to invest.

Next, determine how much you can add to your investments in the future. If you are employed, you will continue to receive an income, and you can plan to use a portion of that income to build your investment portfolio over time.

Speak with a qualified financial planner to set up a budget and determine how much of your future income you will be able to invest. With the help of a financial planner, you can be sure that you are not investing more than you should – or less than you should in order to reach your investment goals.
For many types of investments, a certain initial investment amount will be required.

Hopefully, you’ve done your research, and you have found an investment that will prove to be sound. If this is the case, you probably already know what the required initial investment is.

If the money that you have available for investments does not meet the required initial investment, you may have to look at other investments. Never borrow money to invest, and never use money that you have not set aside for investing!

Determine Your Risk Tolerance

Each individual has a risk tolerance that should not be ignored. Any good stock broker or financial planner knows this, and they should make the effort to help you determine what your risk tolerance is.

Then, they should work with you to find investments that do not exceed your risk tolerance.

Determining one’s risk tolerance involves several different things. First, you need to know how much money you have to invest, and what your investment and financial goals are.

For instance, if you plan to retire in ten years, and you’ve not saved a single penny towards that end, you need to have a high risk tolerance – because you will need to do some aggressive – risky – investing in order to reach your financial goal.

On the other side of the coin, if you are in your early twenties and you want to start investing for your retirement, your risk tolerance will be low. You can afford to watch your money grow slowly over time.

Realize of course, that your need for a high-risk tolerance or your need for a low risk tolerance really has no bearing on how you feel about risk. Again, there is a lot in determining your tolerance.

For instance, if you invested in the stock market and you watched the movement of that stock daily and saw that it was dropping slightly, what would you do? Would you sell out or would you let your money ride?

If you have a low tolerance for risk, you would want to sell out… if you have a high tolerance, you would let your money ride and see what happens. This is not based on what your financial goals are. This tolerance is based on how you feel about your money!

Again, a good financial planner or stock broker should help you determine the level of risk that you are comfortable with, and help you choose your investments accordingly.

Your risk tolerance should be based on what your financial goals are and how you feel about the possibility of losing your money. It’s all tied in together.

5 Quick Ways to Take Control of Your Finances

Though it may sound complicated, financial planning is really just a matter of using common sense. For instance, why would you pay $20.00 when you could pay $10.00 for the same item or results?

It’s no more than a guess that you work very hard to earn your money – so you need to make sure that your money is working hard for you in return. That’s one.

Money, when it is all said and done, is a means to an end. You work to make money; you take that money and use it to make sure that you have a place to live, a car to drive, food to eat, and clothes to wear.

And with luck, you take that money to enjoy some of the finer things in life. Many people believe that money is made to spend, and in a sense, that is validly true, and you will spend it – but not necessarily today.

If you are young, it is hard to imagine that you will reach a point in life when you can no longer work for your income. It may be a long way off, but that time will come, and you must be prepared for it. You cannot expect to start saving for retirement the year before you will need to retire!

The sooner you start saving and investing for your retirement, the better your retirement years will be – and that should be a major goal for everyone! When you retire, you will start spending the money that you’ve worked all of your life to earn and save. With luck and planning, there will even be some or plenty left over to give your grandchildren or great grandchildren a good financial start.

Just because you make a lot of money, you don’t have to spend a lot of money. We would all like to live rich and famous lifestyles, but it isn’t very realistic. Common sense is best when it comes to money, so again, why would you pay more for something that you can have for less? If you are using common sense, you wouldn’t!

If you don’t have to spend your money, don’t. It really is as simple as that. Instead, put that money to work for you, and have it make more money for you and your future.

Planning Ahead - Start Now

Retirement may be a long way off for you – or it might be right around the corner. No matter how near or far it is, you’ve absolutely got to start saving for it now. However, saving for retirement isn’t what it used to be with the increase in cost of living and the instability of social security. You have to invest for your retirement, as opposed to saving for it!

Let’s start by taking a look at the retirement plan offered by your company. Once upon a time, these plans were quite sound. However, after the Enron upset and all that followed, people aren’t as secure in their company retirement plans anymore. If you choose not to invest in your company’s retirement plan, you do have other options.

First, you can invest in stocks, bonds, mutual funds, certificates of deposit, and money market accounts. (This topic has been discussed in detail in another chapter.)

You do not have to state to anybody that the returns on these investments are to be used for retirement. Just simply let your money grow overtime, and when certain investments reach their maturity, reinvest them and continue to let your money grow.

You can also open an Individual Retirement Account (IRA). IRA’s are quite popular because the money is not taxed until you withdraw the funds. You may also be able to deduct your IRA contributions from the taxes that you owe. An IRA can be opened at most banks.

A ROTH IRA is a newer type of retirement account. With a Roth, you pay taxes on the money that you are investing in your account, but when you cash out, no federal taxes are owed. Roth IRA’s can also be opened at a financial institution.

Another popular type of retirement account is the 401(k). 401(k’s) are typically offered through employers, but you may be able to open a 401(k) on your own. You should speak with a financial planner or accountant to help you with this. The Keogh plan is another type of IRA that is suitable for self employed people. Self-employed small business owners may also be interested in Simplified Employee Pension Plans (SEP). This is another type of Keogh plan that people typically find easier to administer than a regular Keogh plan.

Whichever retirement investment you choose, just make sure you choose one! Again, do not depend on social security, company retirement plans, or even an inheritance that may or may not come through! Take care of your financial future by investing in it today.

Why You Should Invest

Investing has become increasingly important over the years, as the future of social security benefits becomes unknown.

People want to insure their futures, and they know that if they are depending on Social Security benefits, and in some cases retirement plans, that they may be in for a rude awakening when they no longer have the ability to earn a steady income. Investing is the answer to the unknowns of the future.

You may have been saving money in a low interest savings account over the years. Now, you want to see that money grow at a faster pace. Perhaps you’ve inherited money or realized some other type of windfall, and you need a way to make that money grow. Again, investing is the answer.

Investing is also a way of attaining the things that you want, such as a new home, a college education for your children, or expensive ‘toys.’ Of course, your financial goals will determine what type of investing you do. If you want or need to make a lot of money fast, you would be more interested in higher risk investing, which will give you a larger return in a shorter amount of time.

If you are saving for something in the far off future, such as retirement, you would want to make safer investments that grow over a longer period of time.

The overall purpose in investing is to create wealth and security, over a period of time. It is important to remember that you will not always be able to earn an income…you will eventually want to retire.

You also cannot count on the social security system to do what you expect it to do. As we have seen with Enron, you also cannot necessarily depend on your company’s retirement plan either. So, again, investing is the key to insuring your own financial future, but you must make smart investments!

Foundations of Investing

When it comes to investing, many first time investors want to jump right in with both feet. Unfortunately, very few of those investors are successful. Investing in anything requires some degree of skill. It is important to remember that few investments are a sure thing – there is the risk of losing your money!

Before you jump right in, it is better to not only find out more about investing and how it all works, but also to determine what your goals are. What do you hope to achieve with your investments? Will you be funding a college education? Buying a home? Retiring?

Before you invest a single penny, really think about what you hope to achieve with that investment. Knowing what your goal is will help you make smarter investment decisions along the way!

Too often, people invest money with dreams of becoming rich overnight. This is possible – but it is also rare. It is usually a very bad idea to start investing with hopes of becoming rich overnight. It is safer to invest your money in such a way that it will grow slowly over time, and be used for retirement or a child’s education.

However, if your investment goal is to get rich quick, you should learn as much about high-yield, short term investing as you possibly can before you invest.

You should strongly consider talking to a financial planner before making any investments. Your financial planner can help you determine what type of investing you must do to reach the financial goals that you have set. He or she can give you realistic information as to what kind of returns you can expect and how long it will take to reach your specific goals.

Again, remember that investing requires more than calling a broker and telling them that you want to buy stocks or bonds. It takes a certain amount of research and knowledge about the market if you hope to invest successfully.

Hidden Value in Your Life Insurance

The economy is tough right now, to say the least. We almost hate to open our mutual fund statements or go online to check the current value of our stocks and bonds because they seem to be headed straight down.

There is one asset, however, that may be worth more than you think it is and that is your life insurance policy.

A life insurance policy is an asset that can be turned into cash. There is now a secondary life insurance market in today’s marketplace.

Institutionally funded provider companies purchase policies from seniors that they no longer want or need.

We, as seniors, can go through what is called a “life settlement valuation” to determine the value of our policies.

This is not for everyone but it could be right for you.

A life settlement only works if the insured person is 65 years old or older and the minimum face value of the policy is $100,000.00 … and some companies will only purchase policies with face values of $250,000.00.

Men who are 75 and women who are 78 and own policies with face values of one to 10 million dollars are more likely to get solid purchase offers.

You will need to verify that the policies are in effect, assess the reasons why the policies were purchased and then decide if the reasons are still valid, hire a licensed life settlement broker and then evaluate the offers that are received.

This whole process usually takes 4 to 12 weeks depending upon the complexity of the policy and medical history of the insured.

It takes all of 30 minutes to complete the forms and about an hour to be educated to be able to convert this previously overlooked asset into cash. That might be an hour and a hold well spent.

Household Planning

That one really IS a “no brainer” and I hate that term. But think about it. In return for paying your rent, you get a place to live and a receipt.

In return for making a house payment, you get a place to live and acquire some personal worth in the form of equity. Buying a house is not out of the question for most people any longer.

The largest obstacle between renters and owning their own homes in the past has been the huge down payment requirements. While renters slowly squirrel away money, property values and mortgage rates climb and climb. Many people have spent years saving for that down payment without making a lot of progress but times have changed.

There are a lot of home loan programs available and down payments are less important now than they used to be. Many require only one to five percent of the down payment to come from the borrower’s own funds and some home loan products don’t require a down payment at all.

Of course a 20 percent down payment means that private mortgage insurance won’t be required but saving that much might be more of a challenge than a borrower can over come. 

A loan consultant can help to determine how much house a borrower should buy and what loan product would best suit their individual needs.

For low-income families there are non-profit organizations dedicated to affordable housing and offer payment assistance programs. In the early 1990s federal housing laws were changed to allow the non-profit groups to help low-income families fund down payments, closing costs and other upfront cash requirements.

The key for potential home buyers is to get as much information as possible prior to buying a home.

They can be sure to buy a property they can afford, improve their credit history so that they can get a better interest rate, and start to build a long term wealth potential for their family.

How to Find the Best Estate Planner

Estate planners who charge little or nothing for their services should be avoided. It is most likely that they are making money for themselves by earning commissions on the investment products they recommend.

The estate planner you choose should be objective and offer more than just investment strategies and financial planning advice. You should ask questions before choosing your estate planner and the answers should plain to you…no beating around the proverbial bush.

Ask if he or she has worked with clients like yourself. i.e. If you are a teacher, has he/she worked with teachers? Has he/she worked with people who have your income level? Has he/she worked with people who share your goals? You are looking for an estate planner who has the experience you need to tap into.

Ask if he or she keeps up with relevant legislation, such as income tax laws, family law, and changes in probate regulations. These things change and the changes will affect the best course you should pursue over time.

Ask how he or she sets fees and earns income. Does he/she sell life insurance, mutual funds or other investment products? If this estate planner does, keep looking. You want objectivity.

Tell him or her that you want to set time lines and ask how he/she can help you meet those deadlines.

Ask if he or she can refer you to other professionals if the need arises… lawyers and accountants for example. Your estate plan is based upon many things that your attorney or your accountant handles for you. The estate planner needs to be able to work with and consider information provided by these other professionals so that your estate plan is based on your needs and goals and changed as your situation changes.

Choose carefully and wisely.