Financial Resource: Beginner Investing to Financial Independence!

A financial education blog to share experiences on 401K, assets, budgeting, cashflow, early retirement, finance, financial freedom, investing, money management and retirement planning using posts, podcasts and video.

Archive for the 'Investing' Category

Beginner Investing and Risk

July 23rd, 2008 by Money Manager

investing riskAs a beginner investor, there is always one thought at the forefront of our minds, “what if I lose all that money”. This thought can sometimes paralyze us and hold us back from moving forward with educated decisions and opportunities to make those rewards.

Most beginner investors first start with the stock market. Considering this investment vehicle, lets look at the risks that you face as an investor. What most people don’t realize is that there are two forms of risk that reside in the stock market:
1. Market Risk
2. Company Risk.

Market Risk
Market risk is first of all something that none of us control and all investors, whether they are novices or experienced, are exposed to this risk. There are all sorts of conditions that influence the market, such as political, economical, cyclical, and day to day financial news. It is a general risk that the entire market faces and as a result stock prices go up and down. Of course there are exceptions but it is very rare to find a stock that is NOT affected by market risk every now and then. There is very little an individual investor can do about market risk so don’t waste your time analyzing it.

On the other hand, market risk can be narrowed down to sectors and industries and therefore the beginner investor can have some control over the choices they make. For instance the financial stocks have been hard hit the last 12 months, real estate and mortgage stocks are also likely to have gone down, whereas certain technology sectors have experienced gains. Factors such as interest rates and economical conditions can give you an indication of which sectors will suffer and those that may prosper.  Within each sector and industry, there are many companies to choose from. Even if a sector is doing well, you then have the company risk to deal with.

Company Risk
The good news is that there is a way to minimize the risk to your stock investments. Instead of putting all your money into one stock, reduce the risk by diversifying your portfolio - select five or more companies. This way you have an average return from all the companies in your portfolio. Some will overperform and some may underperform from your expectations.

Picking the stocks and making a portfolio may be easy for some and relatively difficult for others. Depending on your experience and comfort level, you can either create your own portfolio or pick from portfolios that are already created for you by your investment broker.

Hopefully this was helpful to the beginner investors in our community. Let us know if you have any questions or comments to this post.

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Category: Financial Markets, Investing, Stocks, financial education | 2 Comments »

A Basic Guide To Beginner Investing

July 16th, 2008 by Matt Ehrlin

Many people delay planning their financial future as they do not believe they are in a stable enough position to do so. They may believe they don’t have the funds available to start an investing program. But the nice thing about beginner investing is it can be started on any budget. Investing covers many areas such as stocks, commodities, real estate, finance, bonds, mutual funds, currency, mortgages, etc.

The choices available are huge and will depend on your individual needs but this is probably the best way that any individual can plan to look after their family in future years. Here is some useful basic information if you are looking to do this.

If you are considering the stock market then you will need to plan on studying the companies you wish to invest in otherwise you might as well throw your money away. This is traditionally the number one place to invest. Careful research into individual companies is required before stock and mutual funds are purchased as investments. There are many areas where a novice investor can stumble; let’s face it even the rofessionals get it wrong here sometimes.

The quickest way to get started is by doing it online and it is also the fastest growing sector of investment as it can be carried out by just about anyone providing they have a computer and an internet connection. Using your computer you can research the companies that are offering shares and have a good idea of their performance before you make a decision to invest in them.

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Category: Bonds, Financial Planning, Investing, Mortgages, Real Estate | No Comments »

Wealth and Prosperity through Character Development

May 7th, 2008 by Mind Treasures

Do you think your character has any relationship with your finances?

Are you Purposeful (goals & objectives)? Are you Patient (saving)? Are you Responsible (borrowing)? Are you Moderate (balance & budgeting)? Are you Selfless (retirement)? Are you Reliable (credit)? Are you Courageous (business & investing)? Are you Punctual? (35% of U.S. FICO is based on this character) and the list goes on.

True Wealth & Prosperity can only be achieved by discovering and developing one’s hidden treasures:

“Regard man as a mine rich in gems of inestimable value. Education can, alone, cause it to reveal its treasures, and enable mankind to benefit therefrom.”

Of course development of hidden potentials (virtues) must be complemented with learning and implementing various elements of local economy in daily financial activities.

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Category: 401(k), Bonds, Business, Environment, Financial Markets, Financial Planning, General, Investing, Mortgages, Real Estate, Retirement Planning, Spending, Stocks, Tax, World, financial education | No Comments »

Learning the Ropes of Investing

April 30th, 2008 by The Eager Investor

Call me a true novice… I am ashamed to admit that I have let retirement money sit unattended and unmonitored for far too long!  WELL NO LONGER!  I just read this great book by Phil Town (Rule #1) who makes investing in the stock market seem much more approachable and real for a novice like myself. 

Honestly, I have fears of the stock market.  Investing in real estate and businesses comes pretty easily to me now, but, when I look at those numbers that seem to go up and down so radically, I truly get scared to invest. 

This book, Rule #1, has put my mind to rest.  I am sitting in front of my computer with poster paper tacked up all around me with tips and elements to investing that are helping me move toward competence in the stock market. 

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Category: 401(k), Investing, Stocks | 1 Comment »

Online Stock Broker Comparisons and Reviews

April 28th, 2008 by Wealth Builder

Online Stock TradingAre you looking to open an online stock broker account and overwhelmed with the number of choices out there? Well, thank your lucky stars! Below is a summary of online stock brokers that I put together to help our Financial Resource community.

Most likely many of you already have an online stock brokerage account, but if you are like me, you may have started an account a while back and continued using the same company and account all these years even though we know there are a lot more options and possibly better ones now. For example, I started an Ameritrade account a little over 10 years ago (the company is now called TD Ameritrade after a merger) and I still have the same account. At that time, my priority was to get the lowest stock trade fee (or lowest commissions). I didn’t care too much for stock analysis and company research, as I used other sites like Yahoo Finance to do most of my research. However, over the last 10 years many things have changed and there are a lot more options out there. Maybe I have been missing out on a lot of new features that could save time and money!

The first point I need to make is that there are many online brokers out there. No one solution fits all, and each of us may have a different need, so I will not be recommending a particular broker to work with. My goal is to summarize my research with the most relevant information to share with our Financial Resource community. This summary can serve as a base to work from or help you to decipher which online broker offers what you need. From there, I highly advise you to research their website, their product and offering, and contact and speak with them, if needed, to get a better feel for what you will get when you open a stock trading account.

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Category: 401(k), Bonds, Investing, Stocks | No Comments »

Plumbing and tenants are driving you CRAZY? Consider Self Storage Investments!

April 24th, 2008 by Johnny Cashflow

In order to get to my financial freedom, I too started with investing in real estate, just as you might have heard from many other investors.  My story is similar in which I acquired my first piece of real estate as a home and investment and from there I went on to purchase several properties that allowed me to become free of the corporate world. 

So the question is why Self Storage? 

After having to deal with my many issues related to owning residential real estate.  And I am certain that you all know of the head aches related to dealing with tenants and all related issues.  We have had nightmare stories from, our tenants turning the neighbourhood into gang infested areas, to prostitution to the final straw of drug dealing.

You might ask why did we let these people into our apartments to begin with.  Well first off, we did not let these people into our apartments and secondly, I am not sure how they have one side to them when applying for tenancy and another once they have moved in.  Anyhow, this article is not about my woes in owning apartment buildings.

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Category: Business, Investing, Real Estate, Self or Mini Storage | No Comments »

What do you need to know before opening an online stock trading account

April 3rd, 2008 by Wealth Builder

Couple weeks back, I wrote about stock investing tips and one of my final tips discussed using an online stock brokerage account once you get familiar with stock trading and have some experience behind you. To continue that topic, it would be helpful to know what features to look for in an online broker, as there are many options out there.

Whether you are a novice or seasoned veteran to online stock trading, here are some important features and points to keep in mind when you open an online stock trading account.

What trading tools do you need to conduct your research? Company historicals, independent market research, real time quotes, SEC reports, etc. Check to see what trading tools are provided by the broker, both free and premium tools, which may cost you.

What types of online trading are you planning to do, stocks, mutual funds, bonds, ETFs, retirement accounts, IRAs, etc.? Are these investments offered by the broker? What are the respective fees for each of these investments?

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Category: Bonds, Financial Markets, Investing, Retirement Planning, Stocks | No Comments »

10 Stock Investing Tips

March 21st, 2008 by Wealth Builder

With the real estate market down and the economy falling into recession, there is a lot of attention on the stock market. Many people are looking at the stock market and hoping to make short term and long term gains. There is no doubt opportunities to make money in the stock market and we should consider these options as well for our investment portfolio. Here are 10 stock investing tips to keep in mind. 

1. Long-term investment
Typically stock prices will go up and down and fluctuate even more in the short term. Don’t pay attention to the daily fluctuations in your stock. Always invest with the long term in mind.

2. Diversify!
Diversiy your investments with low, medium and high risk stocks. Pick some fixed income securities especially in fluctuating markets. As they say “don’t put all your eggs in one basket” applies here.

3. Online trading is quick and easy, online investing takes time
These days the internet has made trading so easy. With one click, you can buy and sell stocks from more than 100 online brokers with low commissions. However, this does not take the homework out of researching and making investment decisions.

4. Don’t gamble!
If you can’t afford to lose the money, then don’t gamble it on a stock purchase. Choose more conservative investments with low risk if you are worried about your money.

5. Don’t expect miracles!
If you come across some recommendations from a friend or broker that a stock is going to double in value in a few months - beware! Don’t go into the investment expecting this. If you are lucky and the stock does go up 50% or more, then consider selling and get your returns immediately.

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Category: Financial Markets, Investing, Stocks | No Comments »

10 Money Saving Tips

March 20th, 2008 by Money Manager

Here are my weekly money savings tips:

1. Maintain a good credit score! It will save you thousands of dollars in the short and long term when you need to borrow money to buy a car or a home. Creditors will give you an interest rate and the loan amount based on your income and credit score.

2. Large sums of money should NEVER be left in a checking account or even a low-interest bank savings account. Rather, put the money into a high interest savings account (like an ING savings), money market fund, or other forms of short term high interest investments with a fixed return.

3. If you have an employer matching 401K plan, maximize your contributions, so that you double your money!

4. Set aside 10% of your paycheck towards some form of long term savings account, like a money market account, mutual fund, retirement plan, or 401K.  As you pay amount increases, your contribution will also increase automatically. 10% will also ensure that you stay ahead of inflation.

5. One of the best investments you can make is to first pay off all your high credit card debts. Credit cards typically carry a high interest rate and by paying off these debts, you get one of the best returns available which also is tax-free.

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Category: 401(k), Financial Markets, Financial Planning, Investing, Real Estate, Retirement Planning, Spending, Stocks | 1 Comment »

Buy an existing business instead of starting one from scratch.

March 19th, 2008 by Johnny Cashflow

It has been my experience from starting businesses from scratch to buying existing businesses with cashflow that it is best to buy one that you have historical data.   

Reliable Cashflow: When you buy an existing business, you are assured of immediate cash flow. My first hand experience is that when starting a business from scratch, cash-flow can be anyone’s guess no matter how great the business plan.  We have written some wonderful business plans and executed based on financial proforma only to fall flat on our faces.

Banking on History: When you buy an existing business, historical financial data allows you to understand the finances and the business. I don’t have to tell you that when starting a business from scratch, looking at other similar businesses is not as beneficial.  Existing businesses will give the added peace of mind of knowing what you are getting in financial returns and how you can slowly improve them.

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Category: Business, General, Investing | No Comments »