"Because good analysis, is good money"
-Invizible INK

Learning by Doing

You can read as many books as you want about investments, markets, or money management but until you actually put it into practice you most likely won't be fully absorbing the information. Sure you can paper trade or use a demo account but there are always real life factors that can't be simulated.

For example, you aren't always emotionally attached to your demo money. If you lose all your demo money you can always press reset and start again. You say things such as, "Oh in real life I wouldn't have done that anyways." or "I was just trying something new to see how it goes." No matter how hard one tries, demo money just isn't real.

Another good example is execution. Can what you do in practice mode be done in real life? When you click buy & sell on your demo trading platform, the trade always goes through, but in real life does that really always happen? What happens when the market is overwhelmed and the prices gap or spike? Can you still close your trade fast enough?

Remember to take these types of factors into account when you practice! Remember, whether you pay to take a course or just dive in and trade for real, you're probably going to pay somebody. Remember not to risk anything you can't afford to lose!

see you next time,... because thePaperBoy knows his paper

Ethanol versus Sugar stocks

Take a look at the latest Barron's roundtable. Sounds like owning sugar rather than ethanol stocks is the way to go to play the rising demand for ethanol according to money manager Felix Zulauf. Since February 2006, the price of sugar has fallen 50% to 11 cents a pound. That's below production costs of about 14 cents in Brazil and India, the two largest producers! This may mean that sugar production is therefore on the decline, while demand is rising due to ethanol. Brazil is also the producer of 5 billion gallons of ethanol a year, and is planing to increase that to 8 billion gallons within the next three years. 22% of Brazil's total fleet of cars are Flex cars, and the government wants the percentage to rise to at least 30%.

Brazil also exports ethanol to the U.S., Japan and China, all of which are raising their demand. "In the past", says Zulauf, "when sugar started rising from a price below the cost of production, it rose 100% or more, on average." His target price is 20 cents. Note that according to Zulauf a 30% increase in the price of sugar (far less than the increase from 11 to 20 cents he's predicting) would eliminate ethanol's price advantage over gasoline. Sugar futures are therefore a better play on ethanol than the sugar-based ethanol producers such as Cosan (CZZ). Investors who can't access sugar futures may consider two commodity ETFs: the PowerShares DB Agriculture ETF (DBA) and ELEMENTS Linked to the MLCX Biofuels Index ETF (FUE).

Spotting Successful Strategies (Part 2): Organic Growth vs. Acquired Growth

Growth. We all know what it means. We have all experienced growth in one way, shape or form. We grow physically and mentally, the children we have grow up, the plants and trees around us grow, the cities we live in grow and so on. However how should a public company grow?

Basically there are two ways in which a public company can grow: organic growth or acquired growth. Which method is the proper avenue for corporate growth? Should a company be using a balance of the two methods? The bottom line is which type of growth shows the public company's investors, clients and general public that they are demonstrating successful strategies and ultimately building shareholder equity and increasing shareholder value.

Organic Growth

Building a public company via organic growth means that the corporate strategy and focus is on internally growing the company through developing new products, services or intellectual property. All in all the company's primary objective is to perform needs analysis, design a product or service, develop that product or service, implement it through marketing channels and evaluate its level of success in the market. A company that is growing organically will find itself dedicating all of its resources into a product. Funding the research and development department, funding the manufacturing division, funding the quality assurance department, funding the marketing and sales teams, etc. At the end of the day, the public company's burn rate is almost entirely comprised of money spent on a product or service.

Acquired Growth

On the other hand, building a public company via acquired growth is the exact opposite. Instead of devoting man power, dollars and time into developing that new miracle product or the latest and greatest, this company will dedicate its resources to acquiring products, services and intellectual property as opposed to building them in-house. The public company will seek technology, products and assets it sees fit to their corporate strategy in order to grow their organization and ultimately build shareholder equity. The clear benefit to growth via acquisitions versus organic growth is time. Money may be saved with this method as well, but harnessing efforts in the right direction for the right reason is priceless. At the end of the day, the public companies need to build shareholder equity. By doing so, it proves to the investors that the public company is positioning itself for success in the market.

There is no secret that we all look at a publicly traded companies success in its stock price. However, the secret is in how a publicly traded company can move the stock price up. It is not within the product that the company invents, develops and markets. Rather it is how the company seeks suitable, profitable and feasible assets to acquire. When these assets are procured, they will increase shareholder equity. Building shareholder equity will demonstrate a public company's successful strategies and as a result increase shareholder value. By increasing shareholder value the stock price will naturally correct itself.

Succeed by seeking and acquiring growth, not by attempting to develop it in-house.

Handling Your Paper

Everyone knows someone who has difficulties managing their own finances. Stop and think about it for a second. Have you ever wondered if the person you go to for financial advice actually knows more than you do? It's rare for people to question the the knowledge of an "expert".

Have you ever stepped into a casino and made a few losing bets? Have you ever felt the urge to unload your entire bank account on the next hand because you had a very good feeling about the next card? Most people have, and lost.

Like a casino, the stock market can work the same if you don't understand its intricacies. You place a trade and wait for the outcome much like dropping a quarter and pulling the handle. The numbers spin as fast as the dials on the slot machine. Sometimes you win, but most times you lose when you're guessing and gambling. We've all heard stories of stock market gods who never lose as much as we've heard horror stories of average joe's that just can't catch a break.

Here is today's reality check:

- Winner's don't gamble, they take calculated risks.
- Winners use proper money management techniques and play only when the odds are in their favour.
- Winners don't trade with emotions, gamblers do.

I don't care if you, your mom, and your neighbor's dog all think that next stock is the big one. I would not unload my bankroll on it, nor would I chase potential gains to recover losses. If you want to be a winner, you need discipline. Here's a few simple rules you can follow: Only risk 5% of your bankroll per trade or pick, don't trade with emotion, don't gamble-analyse your pick.

See you next time boys and girls,

... because thePaperBoy knows his paper

Learn How to Invest Money – Books & Seminars

When beginning your quest to financial freedom, education and knowledge still stand as the most important part of your journey. There are many books out there which will help you learn how to invest money, or leverage your assets. The most important part of each book is not the content directly but the ideas it creates and the actions you take to apply them. Among my personal favourites book list are:

Rich Dad, Poor Dad – Robert Kiyosaki
Cash Flow Quadrant – Robert Kiyosaki
Escaping the Middle Class – Doug Anderson
4 Hour Work Week – Timothy Ferris

I have read many books in the past few years, but these books do stand out and have taught me priceless lessons in how to invest money, how to manage my finances, how to save on taxes, how to operate a business, and how to set financial goals. You will find many lessons in these books to crossover, as with most industries, and the more you are able to connect, the more effective you’ll probably become as your own financial planner.

There is an infinate number of seminars that promise results, claiming you can learn how to invest and make money easily with their system. How do know which works and which doesn’t? The truth is you can’t usually know until you try. As with everything else, if you want to learn how to invest money, you have to treat education as an investment as well. You have to spend time and money if you want a successful financial future.

Losses are normal and you will have to take some hits here and there with bad courses, and bad deals. learn what made them bad, see where you made the mistake, and know how not to make that mistake again.

A few points on what to look for in seminar:

1. Do a google search and try and dig up some information on the company sponsoring the event and the speaker(s) presenting.
2. Do some background research and learn a bit about the topics before walking into the presentation.
3. Ask people about the seminar. Someone will know someone who’s attended that seminar in the past. Ask what they think.

Financial freedom is only a dream to many. If you break down your financial goals, and educate yourself, you’ll slowly realize that there are options wherever you are, despite your age, your credit and your savings. Just remember, your biggest hurdle is within yourself. You have to find your passion to drive and succeed. Take the initiative and educate yourself.

We can all make money, but do we all know how to spend it?

We all have to spend money. There's no way around it. Food cost money, toilet paper cost money and the gas that you used to get these items cost money. No matter how disciplined you are with your money you're going to have to spend it. 

Don't despair. There's hope:

Some banks have credit cards that allow you to earn points that you can later redeem for cash from your gas and grocery purchases.  In essence, you're getting rewarded money for spending money.

On average they'll reward you 5 points for every dollar you spend on gas or groceries. Then after you collect 5000 points. You get a check for $50 up to $300 for the year. So, if you do the math, you're getting a 5% return on the money you're spending to survive.

Sweet huh?

That's the same kind of return as having $10000 sit in a of rare High Yield savings account that gives a return of at least 3% for a year.

So you could either spend around $500/month on Gas and groceries and live normally for year and collect $300.

Or...

You could put away $10000 for a year, eat Macaroni and cheese with ketchup for and walk everywhere you have to go 12 months and collect you $300 in earnings instead.

Sure you'll have an extra $10000 the second way, but something tell me you'll be a lot happier earning your $300 using the credit card.