To understand a good portfolio involves understanding the importance of increasing value or equity.
----Investopedia: >----
1. A stock or any other security representing an ownership interest.
2. On a company's balance sheet, the amount of the funds contributed by the owners (the stockholders) plus the retained earnings (or losses). Also referred to as "shareholders' equity".
3. In the context of margin trading, the value of securities in a margin account minus what has been borrowed from the brokerage.
4. In the context of real estate, the difference between the current market value of the property and the amount the owner still owes on the mortgage. It is the amount that the owner would receive after selling a property and paying off the mortgage.
5. In terms of investment strategies, equity (stocks) is one of the principal asset classes. The other two are fixed-income (bonds) and cash/cash-equivalents. These are used in asset allocation planning to structure a desired risk and return profile for an investor's portfolio.
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In a simplified manner of speaking, Equity = Asset Price (FMV) - Asset Liability (cost)
If the asset price increases as liablity stays the same, equity will increase.
If asset price stays the same and asset liablity increases, equity will be negative and you may want to think about selling (if there is negative cash flow).
If asset price and liablity increased together, equity will not change.
The right investment should not be based primarlily on equity as many real estate investors will tell you. Buy into the right deal today, by make money at the front of the deal and have the proper exit strategies before signing on the dotted line.
In the securities realm, you are basing your investment on a guess of what will go up and NOT come down. Did you know that stocks on a senior exchanges are LEVERAGEABLE the same way real estate is leverageable? A structure many people are doing today is leveraging the equity in their homes and redirecting it into higher growth investment strategies.
Home equity line of credit (HELOC) - if you get a HELOC at 8%, but invest in a mutual fund with a financial institution that averages a return of 15%, you will be placed in a net 7% earnings. You can leverage your securites on senior exchanges (such as stocks listed on AMEX, NYSE, etc.) like you would with your property.
Why build equity?
Using a house as an example, equity in a home is stable and predictable, a home cannot move nor be stolen, and the home is backed by land. By leveraging the value of the land, you can build investment assets without spending selling your property.
The richest menin the world (Warren Buffet, Donald Trump, Robert Kiyosaki, etc.) will tell you that holding assets and leveraging them to build an investment portfolio is how they have become financially successful not, by buying and selling, but buying and leveraging. Getting creative using leveraging is essential when you learn how to invest money.
Wednesday, February 13, 2008
Learn how to invest money, start a business, and network
There are different ways to reach financial freedom which involve completely different paths. You can strike it rich through a huge lottery winning, although that is highly improbable. You can work for a company and fight your way to the top, level by level, getting paid more, taking on more resonsiblity, and hopefully getting closer to financial freedom, or almost certain life un-freedom. Or you can become an entrepreneur just by starting to think like your own boss.
If you stop and think about it, how many people do you know got rich and financially free by working a 9-5 job and occasionally overtime. If you do know some, and you should, how long did it take them? Are they now retired and happy? What about the rest of the people you know? Are you headed down the same direction?Isn't is surprising to know that less than 20% of people make more than $80,000 in North America, give or take, and that less than 5% of the population controls more than 90% of wealth, again give or take. We live in a society of spenders. We live in a society of appreciating land values. Unfortunately, we also live in a society of inflation and depreciating dollar value. So what can we do about it?
Start thinking like your own boss! Building an entrepreneurial mindset is a definate way to get ahead. Start seeing opportunity where others miss out. Ray Kroc, the founder of Mc Donalds, once said something like this about his business, "I sell hamburgers, but I'm in the business of real estate." Paul Hartunian sold the Brooklyn Bridge back in the early '80s. His story is mind-blowing. Apple, Microsoft, Burton Snowboards, mom 'n pop diners... these ideas among others much simpler were were all built on filling a consumer need. Business is that easy!
Networking. It is never too late to start, nor is it ever to late to meet people. To get ahead in business, you need to build business relationships. This may sound difficult, but it isn't really, so long as you are willing to put yourself out there. Everyday, in every city there are seminars going on. How to make money today by selling an endless supply of doodads, lotions and potions, how to make money in real estate, how to invest money in stocks or forex (foreign exchange)...the list goes on, and on, and on. The point of these seminars and your attendance is not for you to buy each and everyone, but to build a foundation of sales techniques, language usage, and courage to talk to random strangers. You'd be surprised of the kind of people you will meet in such a seminar. Now a days, both young and old, and those looking to make a change in their life.
Investing. Start investing in your future. Seminars to build yourself and better your and business acumen may not produce you financial income, but it is an investment in yourself to build the skills necessary to begin making a change. Think of it like going back to school. Investing can be a whole lot of things. Investing time to build an idea, investing money, investing in education. Just avoid investing your time in things that waste your time such as television and negative people.
The fact is, there is no "get rich quick" scheme out there that can promise riches overnight. No matter how many guarantees, certificates, and whatever motivators are out there, the only thing that can make you successful in your quest for financial freedom is motivating yourself to do something different. As someone once said, "You can't do the samething everyday, but expect something different!"
If you stop and think about it, how many people do you know got rich and financially free by working a 9-5 job and occasionally overtime. If you do know some, and you should, how long did it take them? Are they now retired and happy? What about the rest of the people you know? Are you headed down the same direction?Isn't is surprising to know that less than 20% of people make more than $80,000 in North America, give or take, and that less than 5% of the population controls more than 90% of wealth, again give or take. We live in a society of spenders. We live in a society of appreciating land values. Unfortunately, we also live in a society of inflation and depreciating dollar value. So what can we do about it?
Start thinking like your own boss! Building an entrepreneurial mindset is a definate way to get ahead. Start seeing opportunity where others miss out. Ray Kroc, the founder of Mc Donalds, once said something like this about his business, "I sell hamburgers, but I'm in the business of real estate." Paul Hartunian sold the Brooklyn Bridge back in the early '80s. His story is mind-blowing. Apple, Microsoft, Burton Snowboards, mom 'n pop diners... these ideas among others much simpler were were all built on filling a consumer need. Business is that easy!
Networking. It is never too late to start, nor is it ever to late to meet people. To get ahead in business, you need to build business relationships. This may sound difficult, but it isn't really, so long as you are willing to put yourself out there. Everyday, in every city there are seminars going on. How to make money today by selling an endless supply of doodads, lotions and potions, how to make money in real estate, how to invest money in stocks or forex (foreign exchange)...the list goes on, and on, and on. The point of these seminars and your attendance is not for you to buy each and everyone, but to build a foundation of sales techniques, language usage, and courage to talk to random strangers. You'd be surprised of the kind of people you will meet in such a seminar. Now a days, both young and old, and those looking to make a change in their life.
Investing. Start investing in your future. Seminars to build yourself and better your and business acumen may not produce you financial income, but it is an investment in yourself to build the skills necessary to begin making a change. Think of it like going back to school. Investing can be a whole lot of things. Investing time to build an idea, investing money, investing in education. Just avoid investing your time in things that waste your time such as television and negative people.
The fact is, there is no "get rich quick" scheme out there that can promise riches overnight. No matter how many guarantees, certificates, and whatever motivators are out there, the only thing that can make you successful in your quest for financial freedom is motivating yourself to do something different. As someone once said, "You can't do the samething everyday, but expect something different!"
Friday, February 8, 2008
How to Invest Money - Building Opportunity
The fundamentals of an opportunity is very easy. Buy low sell high! or leverage and sell high. Opportunity is just about trading or bartering products or information. The real question is what product or information and how do you sell it?
Whether you're in the business of products, services, or information, you have to acquire the assets at a wholesale price to be able to sell at market value or at a discount from market value.
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Products with Value
- If you're selling anything, make sure there is value or quality with that product. Quality will build you crediblity, especially when you're just starting. Satisfy your clients with quality products and services.
- A product can consist of physical units, services, information, or any combination, but understand that along with that product, customers are buying service.
Service
- Provide the highest level of customer service possible. People care as much about price as they do about service. There could be more money in services than there is in direct sales. How restaurants do so well? With repeat customers. Why do people build lifelong relationships with their lawyers, accountants, distributors, etc? Because the build a trusting relationship with them. Service is personal and sells for the long term. Why constantly turn over customers when you can keep the existing customers and not have to find new ones.
- People who run a company are just as important as people who sell the products and services. Understanding who controls the company is important because they create the guidelines for how the company operates. Their expectations and efforts will trickle down the chain of command and affect the overal success of the company. If a leader sets the service bar high, chances are the subordinates will follow and the company will be successful and fully operational through referral business alone. Try and be the opportunity that doesn't need external marketing.
Marketing
- A start-up company with a well planned and well executed marketing strategy can largely sway opportunity your way. The problem with huge marketing campaigns are you attract good, solid customers but also unwanted customers. Yes, there is such thing as unwanted customers. Customers not 'qualified' to purchase your product are usually customers who demand more than what the product can deliver. This often turns into financial burdens for a company through logistics of returns, customer service complaints, and negative publicity. Try and create a system that will prequalify only good, and wanted customers.
- Be careful to follow sudden trends. Short term trends leave bad experiences for most customers and clients. There will always be business and profit, but use your senses and learn to decipher what you can and can't benefit from.
Seeing and recognzing an opportunity is vital to building a business. Banking, restaurants, retail, paper routes, and gum ball machines. They started the same way, someone recognized an opportunity and developed a system to make it work. Some have simple systems, while others are more complex systems. Your job as the builder of opportunity is to create the system once you find the market.
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Opportunity can be found everywhere. It's no different than searching for the next big trend, that money making property, or that good stock. You just have to know how to recognize it.
Whether you're in the business of products, services, or information, you have to acquire the assets at a wholesale price to be able to sell at market value or at a discount from market value.
--------
Products with Value
- If you're selling anything, make sure there is value or quality with that product. Quality will build you crediblity, especially when you're just starting. Satisfy your clients with quality products and services.
- A product can consist of physical units, services, information, or any combination, but understand that along with that product, customers are buying service.
Service
- Provide the highest level of customer service possible. People care as much about price as they do about service. There could be more money in services than there is in direct sales. How restaurants do so well? With repeat customers. Why do people build lifelong relationships with their lawyers, accountants, distributors, etc? Because the build a trusting relationship with them. Service is personal and sells for the long term. Why constantly turn over customers when you can keep the existing customers and not have to find new ones.
- People who run a company are just as important as people who sell the products and services. Understanding who controls the company is important because they create the guidelines for how the company operates. Their expectations and efforts will trickle down the chain of command and affect the overal success of the company. If a leader sets the service bar high, chances are the subordinates will follow and the company will be successful and fully operational through referral business alone. Try and be the opportunity that doesn't need external marketing.
Marketing
- A start-up company with a well planned and well executed marketing strategy can largely sway opportunity your way. The problem with huge marketing campaigns are you attract good, solid customers but also unwanted customers. Yes, there is such thing as unwanted customers. Customers not 'qualified' to purchase your product are usually customers who demand more than what the product can deliver. This often turns into financial burdens for a company through logistics of returns, customer service complaints, and negative publicity. Try and create a system that will prequalify only good, and wanted customers.
- Be careful to follow sudden trends. Short term trends leave bad experiences for most customers and clients. There will always be business and profit, but use your senses and learn to decipher what you can and can't benefit from.
Seeing and recognzing an opportunity is vital to building a business. Banking, restaurants, retail, paper routes, and gum ball machines. They started the same way, someone recognized an opportunity and developed a system to make it work. Some have simple systems, while others are more complex systems. Your job as the builder of opportunity is to create the system once you find the market.
--------
Opportunity can be found everywhere. It's no different than searching for the next big trend, that money making property, or that good stock. You just have to know how to recognize it.
Saturday, February 2, 2008
How to Invest Money - Stock Strategies
Creating a plan on how to invest money is important, especially in penny stocks because of the risks involved. The following pointers is an introduction into some basics. It cannot be stressed enough how important it is to continue to learn how to invest money in all types of opportunties because of the constantly changing market climates.
How long should you be invested in a penny stock?
The time spent invested in a penny stock depends on the volume of the stock being traded. You should be weary when investing in penny stocks because a stock with no volume has little market value. Volume dictates liquidity of the stock, and that liquidity is needed to sell the stock. As it's been posted on previous posts, if you invest in a penny stock, make sure you invest in a penny stock that is building equity value or buying assets to back its market price.
What should you do if the price goes down?
If the price goes down, don't sell. You can set sell orders for a maximum of about 30 days if you're with a discount brokerage. Place a sell order for a price higher than your purchase price. If you believe the stock will have long-term value, then it is a good time to buy more.
What are your options for minimizing loss?
Setting sell order every time the purchase price doubles initially gets the principal out and leaves potential for growing the asset. Doing this protects the principal and allows you entry into another stock. Don't put your eggs in one basket. Invest in several different penny stocks. Penny stocks are risky, but when one hits, the returns are huge.
What exit strategies can you use to minimize loss?
This game of investing has no set rules to negate chances of loss. However, exit strategies will help minimize losses. Before entering the market and buying the stock, create a plan. Think of what returns you want to make before selling shares, how long you want to be in that stock, and if and when you will need liquidity or cash. Penny stocks are risky, but if you are prepared to play, you can rationally control your position.
The time spent invested in a penny stock depends on the volume of the stock being traded. You should be weary when investing in penny stocks because a stock with no volume has little market value. Volume dictates liquidity of the stock, and that liquidity is needed to sell the stock. As it's been posted on previous posts, if you invest in a penny stock, make sure you invest in a penny stock that is building equity value or buying assets to back its market price.
What should you do if the price goes down?
If the price goes down, don't sell. You can set sell orders for a maximum of about 30 days if you're with a discount brokerage. Place a sell order for a price higher than your purchase price. If you believe the stock will have long-term value, then it is a good time to buy more.
What are your options for minimizing loss?
Setting sell order every time the purchase price doubles initially gets the principal out and leaves potential for growing the asset. Doing this protects the principal and allows you entry into another stock. Don't put your eggs in one basket. Invest in several different penny stocks. Penny stocks are risky, but when one hits, the returns are huge.
What exit strategies can you use to minimize loss?
This game of investing has no set rules to negate chances of loss. However, exit strategies will help minimize losses. Before entering the market and buying the stock, create a plan. Think of what returns you want to make before selling shares, how long you want to be in that stock, and if and when you will need liquidity or cash. Penny stocks are risky, but if you are prepared to play, you can rationally control your position.
1st rule: Knowledge and information
This game is ruled by knowledge and information. The more you know about the stock, the better your chances of survival in the stock game. A movie in the '80s called Wall Street starring Michael Douglas illustrated the importance of information, although his methods of corporate espionage were illegal. Another movie filmed in 2000 called Boiler Room where a group of "stock brokers" sold illegal securites over telephone to unsuspecting investors who had no informaton about the stocks. Both stories are a testament to the importance of correct and accurate information.
2nd rule: Protect your principal
Get your principal in then out as quickly as possible. Robert Kiyosaki, as well as many other financial authors speaks about this all the time. Buy assets and let them grow. As illustrated above, if you pull out your principal, you'll have both cash and an asset to get in on the next opportunity.
3nd rule: Don't get greedy
This game is ruled by knowledge and information. The more you know about the stock, the better your chances of survival in the stock game. A movie in the '80s called Wall Street starring Michael Douglas illustrated the importance of information, although his methods of corporate espionage were illegal. Another movie filmed in 2000 called Boiler Room where a group of "stock brokers" sold illegal securites over telephone to unsuspecting investors who had no informaton about the stocks. Both stories are a testament to the importance of correct and accurate information.
2nd rule: Protect your principal
Get your principal in then out as quickly as possible. Robert Kiyosaki, as well as many other financial authors speaks about this all the time. Buy assets and let them grow. As illustrated above, if you pull out your principal, you'll have both cash and an asset to get in on the next opportunity.
3nd rule: Don't get greedy
It's very easy to get caught up in gains and growth, but remember there is a downside. Losses coming from greed. As an investor you want to make gains, not take losses so make the gains and get out. You'll be surprised how fast little gains add up. Besides, it's better than being in the negatives.
For some interesting new stocks, I found this site that has recently been marketing CEO's of young OTC.BB companies... www.emergingissuer.com.
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