LET YOUR MONEY GROW

There is one simple thing that separates the rich from the poor – this one principal is the reason the rich build more and more wealth, and the poor get even poorer, and traditional streams of education fail to teach our youngsters meaning most are faced with having to figure it out for themselves… and most never do.

But first, let’s look at defining the problem in simple terms so we’re all on the same page – what’s needed is some basic definitions of common terms that are often misunderstood.

One of those big problems we face as a society in this modern age is debt. More specifically – bad debt.

There are two types of debt you can have – good debt and bad debt. The difference? Well, the simple defining difference is that bad debt is credit you obtain and then use to purchase liabilities – or several liabilities. This could be taking out a loan for a new car, or purchasing this years holiday on your credit card. Good debt is credit that you leverage in order to purchase assets – this could be taking out a mortgage to purchase a rental property that’s going to return you a second, almost passive income.

The first thing we should probably clear up is the definition of an asset and a liability – they are not what most people think they are! For example, the house that you own and live in – is it a liability or an asset? Let’s make the assumption that you’ve been lucky to pay off your mortgage and you own it outright – how would you answer that question bearing that in mind?

Most people believe their home is an asset – especially if they have no mortgage on it. How can it be a liability when I haven’t got any credit to support it’s ownership and I have a store of value in the property’s equity? Well, according to Rich Dad Poor Dad, the simple definition of a liability is something that costs you money to own, and an asset is something that you own that provides an income over and above the expenses incurred to own it.

So, in the case of your house, unless you’re renting it out and making a profit, it’s a liability – it costs you money to own it and live there! You pay water and electricity bills to keep it operational, you pay council tax for the pleasure of it existing within a certain jurisdiction, and you probably pay insurance to protect the potential downside. If you’re not charging rent to someone to live there over and above YOUR costs then it’s costing you to own it. It’s worth mentioning also that if you rent it out but don’t make enough from the rent you’re charging to cover the expenses then it’s still a liability – the defining difference is whether it achieves positive cashflow or not.

Hold on, I hear you cry, but I don’t have a mortgage and I can sell my property for hundreds of thousands of pounds if I wanted to so it’s an asset because when I sell it I’ll make lots of money! Erm, not quite. You see, you only realise the paper value stored in a property like that once you sell it… and you can only sell it for what someone is prepared to pay. For example, you might have been unfortunate in a relationship and going through divorce where you need to sell quickly – you’re a highly motivated seller, and there are no buyers in the market for your type of property who are prepared to pay what you want to sell it for. All of a sudden, the value in your assets diminishes considerably simple because of someone else’s perception of value.. which could be drastically different to yours! You only realise the value in an asset like that at the point of sale, and there’s no guarantee you’ll find any buyers at the time you’re looking to sell, and there’s no guarantee that if you find a willing buyer that they’ll want to pay what you think it’s worth. This doesn’t sound like a very reliable asset to me – especially given the potential return can so easily change based on multiple variables that are completely out of your control. Yes – you might sell and make a profit, but you might equally have to sell at a loss, and you won’t know which it’s going to be until the point of sale.

Now that we’ve clearly defined good and bad credit, and the definition of an asset and a liability, let’s have a look at the key problem most people face when it comes to finances – financial education.

The one key difference between the rich and the poor is this; the rich know how to master their money and create assets that provide multiple streams of income – more simply, they understand the art and the science of putting their money to work in a way that means their money makes them more money without the controlling person having to exchange time for more money.

But this is exactly the opposite of what we’re taught in school, where the focus is on finding a skill, becoming qualified, and then finding a position where you can exchange your time for money for the rest of your life.

Okay, but what’s wrong with that?

Well, nothing if that approach aligns with your values and allows you to achieve your goals in life. However, the key limitation with this approach is this – you only have 24 hours in a day like everyone else, so what happens when you reach a point where you’re exchanging all those hours for an hourly wage? Well, when there’s no more hours in the day to exchange, you’re not only burnt out and unfulfilled because you have no time to direct towards the things you love in life (let’s face it, most people are far from doing a job they love), but you have now hit your earnings ceiling. How do you earn more when there’s no more time to exchange? This is the key limiting problem with this approach.

Yes, most of us will have to start with this inefficient exchange in order to generate our first income, but it’s what we do with the fruits of our labour that really defines where we’re going to mature into wealthy people or poor people. For those of us who have been lucky enough to have some financial education, we start to do things with our money that let it grow all on it’s own. For those who don’t, they spend all their spare money on holidays, new gadgets, and toys – aka liabilities!

This behaviour sends us into a downwards spiral that can be extremely difficult to get out of. You earn money, and use that money to buy liabilities. Those liabilities increase your monthly outgoings, meaning you have to exchange more time for money to increase your income so you can continue to service the new liabilities you have purchased. You increase your income further so you again have some surplus (but you’re now working 12 hours days and barely seeing your family), and then you use that surplus to purchase more liabilities… and so the vicious cycle continues. Can you see now why this behaviour is so destructive to people’s finances? Can you see why we have such a problem with bad debt these days? All because financial education is considered unimportant by our educational institutions. This needs to change, and this change starts with you educating yourself, so you can go on to educate others and set the next generation up for greater levels of financial success.

So, how do the wealthy grow their money?

There are multiple strategies people use, but they can all be classed as one form of investment or another. You could invest in stocks and shares that not only appreciate in value but that pay you a dividend throughout the year whilst you own them. You could invest in the wild west market of crypto-currencies and benefit for the massive bullish gains we’ve seen in those markets in recent years (I was trading Bitcoin at $900 at the start of 2017, and it’s now broken right through $10,000 – all in under 12 months). You could put your money into cash-flowing investment properties, or you could either start your own business or invest in one.

There are so many strategies you can employ to make your money work for you, rather than you working for money. All it takes is the commitment to educate yourself in whatever vehicle you choose and get started.

I’ve written several blogs on trading and investing that you can find by searching those tags so please feel free to check those out to get some more information on these strategies – there’s also loads of great resources on-line, but there’s also a lot of shit. Be careful and do thorough research from reputable sources.

You can also join my trading education group on Facebook by clicking the following link: LG Trading

You can find some of my trading and investing blogs at the links below:

• Trading: The Basics

• Understanding The Stock Market & Trading

• Financial Wealth: What, How & Why

Enjoy! Please drop me a comment if there’s additional content you’d find value in me covering on this subject!

Source: https://littlegreysays.com/2017/11/29/let-your-money-grow/ 

Dealing With Quiet Periods by Decisive Trading

There are always quiet periods when trading - times when the market just isn't lining up with what it is your trading plan identifies as your trading edge. The problem is that this is the time when most people undo all of the hard work they have done during the 'good' period. In this trading Vlog Decisive Trading explain the importance of remaining patient, and also ways to reframe those quiet periods into a positive!

Double Your Nest Egg With Gold Miners

Diversify or perish. I think that's an H.G. Wells quote.

OK, OK, I know it's actually "adapt or perish." But if H.G. Wells managed investments rather than words, I bet he would have tweaked that quote to my version.

In fact, you've probably heard that golden nugget of investment wisdom before. It's something every investor should be well-acquainted with because it's the key to successful investing.

Plain and simple: Never put all of your investment eggs in one basket. If the market falls out from under that basket, your nest egg is going to crack and spill your savings all over the floor.

It's an easy bit of advice, I know. You can say that diversifying is the smart route, but what exactly should you diversify with?

For that question, I have one answer today: metal mining companies.

Every investor should have a bit of exposure to miners - especially small-cap miners, if you like capturing the quick pops that most of Wall Street tends to miss out on.

It simply gives you access to above-average share price volatility. Particularly today.

Now, many of you might be saying: "But isn't that a little risky?"

It can be, absolutely. Any sector that sees consistent volatility (like crypto assets) can be a bit risky - but much of that risk is managed by having a plan in place. That protects you from making knee-jerk moves or holding onto investments longer than you should.

You just need the right strategy. And if you don't have one in place, I'd say you should start looking for one now, because the spotlight is starting to shine on the mining industry as the commodity market recovers.

According to a report by PwC released last year, the mining industry saw a turning point in 2016. The top 40 mining companies aggregated a net profit of $20 billion - which handily tops the $28 billion loss of 2015. Meanwhile, their valuation climbed into 2017.

In fact, the market capitalization of those 40 companies rose 45% in 2016 to $714 billion.

And the good news is continuing for miners.

Take gold for instance. Miners are particularly sensitive to rising gold prices right now. As gold continues to climb (and it will), gold mining stocks will soar.

It's time to go long in this area.

In fact, since early December, the VanEck Vectors Junior Gold Miners ETF (NYSE: GDXJ) has been climbing away from its support line around $30. It's now up about 14.8%, a nice rally that could prosper further if it breaks through current levels.

All of this is to say that if you're looking to diversify more, miners are a great bet.

Jessica Cohn-Kleinberg is the managing editor of premium services at Banyan Hill Publishing. She also contributes to The Sovereign Investor Daily. To read more, click here.

Article Source: https://EzineArticles.com/expert/Jessica_Cohn-Kleinberg/2380788

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4 Things to Avoid When Investing in Stocks

In 2016 I churned over $1M dollars in trades on one of our retirement accounts. (a more detailed post on that is in the works) My return at the end of the year? About $2K. Wah Wah. We're you expecting a bigger number? So was I.

I don't use that strategy for all our accounts, but trying to "beat the market" I wanted to see how well I could do.

Over the years I've tried a lot of different strategies and have been affected by market psychology just like many people, but looking back after investing for 30 years, my biggest mistakes stand out. I've highlighted here, what I estimate to have cost me by biggest losses during that time. Let's get to it.

#1 Asking friends if a stock is a good or bad investment 

I had a friend who was a heavy user of Adobe products. A lifetime customer, who was intricately immersed in the features and had used their software for many years. When a recommendation to buy the stock popped up, I bounced the idea off of her, and she hedged and wouldn't commit that she thought that there was still growth available within the company. I took that as negative commentary and passed on the stock. The stock has steadily marched from about $40 to topping $170 recently. Asking a friend for a green light or red light on such an investment is the same as throwing darts at a stock chart. You can value their opinion as a customer, but don't read any more into than that.

Fix: Do you own research and trust your gut.

#2 Paying too much attention to news sources 

I often evaluate my investment sources, based on what they cost me, and my subsequent return on investment ideas that I garner from their content. Based on that formula, Barron's magazine has probably cost me in excess of $15K for the price of going too heavy on Transocean (RIG), based on a 500 word article written about the offshore drilling company in 2013. The parent company of the Deep Water Horizon rig tragedy that flooded the Gulf coast with oil for 30 days in 2009, looked good on paper. It wasn't and it proceeded to sink from $50 to below $10 over a period of 3 years. With so much noise on all the investment channels it's hard not to be influenced by the stock pick of the day.

I was a little surprised when the story broke that even Jim Cramer doesn't beat the market. Most of this is about making sure that you're balancing your true risk (see below) and researching as much about the company as possible.

Fix: Don't go too heavy on a single investment and use multiple sources to balance your decision.

#3 Watching the market too closely every day

In the past, I've tried to micromanage my investments, in buying and selling, based on overall profit or loss, in a day, week, or monthly period. Most of the time, that has resulted in what is the standard for most people that try it. I end up selling my winners too early, and holding on to my losers (and a larger percentage of the losers) for too long. If you make it to the end of this article, and you can truly come to a reconciliation of your true risk exposure, then at the end of the day, you should feel very comfortable holding your investments, no matter what happens in the market on a day to day basis. (and that doesn't always simply mean "Buy and hold" forever)

One stock that I micromanaged too closely was Fitbit (FIT). It started out like gangbusters and I felt like a genius early on, but there was so much negative sentiment about the stock, even though the company was showing a profit, that when the tide started to turn, I was over exposed. I learned my lessons on that one, but I still hold onto some shares at a risk level that I'm OK with. I do that, because I still believe in the company and I'm an avid user of their products. Based on my current investment, I'm OK if the stock moves down by 10% to 15%.

Fix: Turn the news channels off. There is very little in the way of "Breaking news" that will make a difference in your returns.

#4 Selling too soon

This last one is really the flip side of the same coin, related to the one above. I've lost so much money by selling too soon, that I should long be retired on a beach somewhere. It reminded me of a note that I had sent to my niece that addresses long term investing strategies. From Microsoft to Amazon, many people have stories that include selling too soon, and they shouldn't because it's easily unavoidable.

My most recent premature trigger pull was with Weight Watchers stock (WTW). I had entered a position 3 years ago, and added to the position as the stock fell. I garnered a windfall when Oprah purchased 10% of the company, and made a nice little profit on the bounce. While the stock came off it's highs of around $25 and returned to the low teens for a year, I had always felt the stock was worth in the neighborhood of where I originally established a position, $50. However, after the ups and downs of another year, with no traction, I decided to exit my position of my remaining 600 shares at $17. Today, the stock is at $46.

Everyone has Win/Loss stories, but the bottom line here is, that I went against my own (and my wife's) better judgement of selling too early. The stock is at $46 today, and I would have garnered an extra $18K if I had simply held the stock. Dollar cost averaging works when you sell too. So if you're exiting a position that you think might turn around, simply don't exit it 100%.

Fix: Buy what you know and understand the fundamentals. Also understand the competitive landscape.

Understanding risk

When looking at a basket of recommendations from various sources, in the past, I've sometimes tried to "cherry pick" a guess, based on a gut feel or on buzz that was in the market. Don't try this. It doesn't work. What I realized about what I was doing was that I was taking on way too much "risk". Everyone knows that investments are risky, but you really need to objectively take a look at how much exposure you have, especially across multiple investment accounts. For example if you own offshore drillers in one account, and Exxon in another account, you should consider that as an investment in oil. The more accounts that you maintain, the more difficult that can be.

What gave me a better handle on understanding risk was reading the chapter on the topic from a basic investment book. The book provides practical examples about risk, and reality. When you pick a stock and it gradually slides from $40 dollars a share to $20 dollars a share, then you've lost 50% of your original investment. HOWEVER, the thing that most people overlook is that that same stock must rise by 100% now, just for you to break even. The chances of that happening, especially over a short period of time are very small. Now, I take a much smaller initial position in any stock, and decide over time if I want to subsequently add, subtract or exit from that position.

This also let's you get a feel for management's reporting style, during quarterly earnings reports. Some of these CEO's are maddeningly frustrating with what they say, and how they report their own numbers. Getting a feel for those skills might provide you with an indication of whether you're a good fit for that company, as an investor.

Bottom Line

The bottom line is that you should really focus on learning as much as you can about yourself, as an investor. That includes both strengths and weaknesses. Do all the leg work that you can, and take into account what you know to be historically accurate. History repeats itself, and that is more true in the stock market than almost any other place.

For more content about personal finance visit my blog at https://www.MyCareerReboot.com

Article Source: https://EzineArticles.com/expert/Jim_Powell/2474166

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