4 Ways To Invest To Increase Your Personal Wealth

Wealth is never an accident. Even if you happen to inherit it, you still need to manage and grow it.  Some things that wealthy people do to keep their wealth is creating a budget, regulate their spending, and set financial goals. And some of the things that they do to increase their wealth is to take practical steps to learn income-generating skills, network with like-minded people, and take controllable risks when starting a new business venture. However, while managing money and increasing cash flow makes a difference to wealth building, what really accelerates things are investments. 

So, based on the wealth habits of wealthy people, if you would like to increase your wealth, you need to learn how to manage your money well, how to initiate income-generating ventures, and how to take full advantage of your surplus income by investing it.

Choosing the Right Type of Investments 

Every year all over the world, professional investors make millions by investing in all sorts of things.  They know how to make more money than they lose from their investments because they have patiently studied, over a long period of time, their particular types of investments. Consequently, they understand how to correctly interpret financial data and accurately analyze market moves.  

Still, while knowledge, skill, and experience are intrinsic to the process of financial success, nothing really counts until you choose the right type of investment, one that you appear to have a natural aptitude for because it aligns with your personal strengths. If you’re an analytical person, you would be better off investing in exotic currencies than flipping houses. This is because both types of investments call for completely different interests and personality traits. Conversely, if you’re a gregarious person who can’t sit still and quiet for long and who loves to network and make deals, then analyzing price fluctuations won’t fascinate you. 

When trying to decide on the right type of investment, don’t just pick the most profitable investments but choose the one that suits your personality.  

Here are 4 highly lucrative types of investments to consider: 

1. FOREX Trading: 

As a forex trader, you would be involved in a market that strives to satisfy the global demand for the exchange of currencies. The forex market is the world’s largest and most liquid financial market. In fact, trillions are traded every day. According to a Business Insider article by David Scutt, Here’s how much currency is traded every day,  the average amount of currency traded each day is $5.1 trillion. This data derives from the Bank of International Settlements (BIS).

2.  Real Estate Investing: 

As a real estate investor, you would buy, own, manage, rent, or sell real estate for a high profit. You would not, however, focus on improving a property. That’s another specialty, called real estate development. 

3.  Venture Capitalism:

As a venture capitalist, you would invest in business ventures, giving start-ups the capital they need to grow their business. Unlike a banker, however, you would be willing to assume high risk in return for a higher rate of return than if you were to put your money in the stock market. You would take this risk if you saw high potential in a start-up’s proposal. Based on your criteria, you would probably be interested in cutting-edge businesses related to semiconductors, IT, clean technology, or biopharmaceuticals.  

4. Commodity Trading: 

As a commodity trader, you would be involved in trading metals (like gold), energy (like crude oil), livestock and meat (like pork bellies), and agriculture (like soybeans). You would buy or sell based on the laws of supply and demand. In order to decide what market to be in and whether you should buy or sell to make a profit, you would be using charts and technical indicators to try to forecast where the market was moving; and you would also be tuned in to the latest commodity news.   

Make Informed Decisions And Watch Market Moves

When you start to invest, you need to learn how to make informed decisions, a skill that can only come through study and practice. Then after you have made your investment, you need to watch market moves so that you know when an opportunity arises to buy or sell.  

Copyright 2017 Original content authorized only to appear on Money Beagle. Please subscribe via RSS, follow me on Twitter, Facebook, or receive e-mail updates. Thank you for reading.

Professional Investors Weigh In On Investing in 2018

Investors have been bullish about forecasts for the coming year, so far. The next year will most likely be quite eventful for the financial industry in general. The Federal Reserve recently made announcements that businesses should expect multiple interest rate hikes in 2018. Most financiers expect the short-term rates to rise somewhat, but nothing more serious than that. The reason for the interest rate spike is a strong economy and a low unemployment rate, which is a promising investment environment for the next year.

The S&P 500 has the Shiller price-to-earnings ratio at 32, which is more than double the average for long-term finances. That’s a good thing but it’s also one that makes investors cautious, says private equity financier and veteran investor Jason Sugarman. The current political climate also raises concerns at least among some. And yet, there are some sectors that will be highly lucrative for investing in next year, many professional financiers say.

The U.S. Market will be the Best Bet for 2018

Global recovery from the last financial crisis is still in the rebound stage, especially after international crises like Brexit and the fall of oil prices. In this environment, the safest market to invest in next year will likely be the US, says Jack Bogle, the founder of Vanguard, the largest mutual fund in the world. American companies continue to be highly innovative. The major tech advancements are still pioneered by companies based in the U.S. S&P 500 for annual average over a 10 year period was 8.04 for the U.S., while it was only 2.01 for the MSCI EAFE index that tracks stocks located outside of U.S. and Canada. Going by data and expert opinion, the majority of investors should be flocking to the U.S. market in the coming year.

Lucrative Stocks in 2018: Disney and Amazon

The retail giant Amazon reported remarkable billion-dollar earnings just on Black Friday this year, cementing a continuing shift of consumers switching to online purchases, even on a traditionally in-store purchase day. The other super stock of the coming year will most likely belong to Disney, the legacy brand that recently announced a historic mega-merger with 20th Century Fox. If the deal goes through, Disney would secure a massive chunk of the content industry, and prove to be one of the top players in the streaming sector. Investors who prefer stock will most likely see remarkable surges for Disney and Amazon stock in the coming year, predicts Jason Sugarman.

Bank and Tech Stock will Dominate in 2018

In addition to the above, tech and software companies continue to surge ahead and maintain high-quality stocks. Oracle and trucking company Paccar showed remarkable growth this year. Bank and technology sector stocks are speculated to perform especially well in the next year. The proposed high-interest rates would benefit banks the most. Continuing innovation in areas like virtual reality keeps tech stocks on the top level as ever.

While the typical cautions remain, 2018 is set to be a great year at least at first for investing in US stocks, among others. But investors are strongly advised to keep an eye on the news for political issues.

Copyright 2017 Original content authorized only to appear on Money Beagle. Please subscribe via RSS, follow me on Twitter, Facebook, or receive e-mail updates. Thank you for reading.

Do You Believe These Money Myths?

There are a lot of different things you’ll read when it comes to your money.  The personal finance world has lots of people with many opinions.  I’m one of them!  But with so much out there, it can often get confusing.  What do you believe?  What’s true and what’s a suggestion?  I don’t have all the answers.  But there are a few money myths that I’ve seen come up more than a few times.

#1: Always Pay The Higher Interest Loan First

The higher the interest rate means that less of your payment goes to your principal.  This is true.  So, you should always pay the highest interest loan first, right?

Not always.

I think you have some flexibility here.  If you have a loan with a low balance, maybe consider paying that off first.  It will free up some cash flow.  Plus, paying off a loan will give you a ‘win’ on your scorecard.  Those can be very important and might be worth a few bucks in higher interest in the short term.

#2: It’s Too Late To Start Saving

Many people start saving for retirement or their first home right out of the gate.  If you’re one of those people, then congrats.  But if you’re not, don’t worry.

It’s never too late to start saving.  I don’t care how old you are.  Many people who give this answer are just making excuses to continue bad habits.

I don’t care if you have friends that are your age who are already retiring and you haven’t saved a buck.  You should and you can start making a difference.

#3: You Have To Choose Between Paying Off Debt Or Saving Money

I’ve read at least a thousand pieces over the years on this topic.  Which is better if you have extra money?  Paying off debt?  Or saving/investing?

I’ve never understood why people think it has to be either or.  It doesn’t.

If the answer isn’t clear or you don’t have motivation toward one, why choose?  Try a mix of both.  Either one is going to help you in the long run.  And, you might find that one excites you more than the other.  If that happens, then you can make adjustments.

#4: Having An Emergency Fund Is Good Enough

OK, so you saved $1,000 for an emergency fund.  You’re covered, right?  Wrong.

The fact is that even if you’ve built yourself a cushion, there is still work to do.  What if you have an emergency greater than $1,000?  How will you restore your fund if an actual emergency depletes your fund?  What if someone comes to you with an emergency of their own?

Be prepared.  Think ahead.

#5: Following Someone Else’s Budget Is Your Ticket To Success

A budget that works for someone else may not work for you.  Everybody has different circumstances and different needs.

Also, many people are at different stages of how they can handle a budget.  Someone who’s never used a budget should start simple. If they tried to use the budget template of someone that’s had one for twenty years, it probably won’t work.

Budgets come in all shapes and sizes.  There is no one size fits all.

#6: Focus On Cutting Spending To Save Money

This isn’t bad advice.  It’s actually really good advice.  However, it may not always be the best advice.

After all, the advice here only focuses on one side of the equation.  Spending.  This is great, but there’s also opportunity that comes by making more money.

Consider that we all have limited time in our lives in which we can focus on saving money.  If your time allows you to cut $1,000 per month in expenses, that’s great.  But what if you focused that time on earning more money instead?  If you could earn $2,000 per month with the same effort, then focusing on cutting expenses could actually be costing you $1,000 per month.

#7: The Stock Market Is Always Going To Go Up

It may seem like this is true given that it pretty much has for the last ten years.  But it doesn’t.  And it won’t.  Don’t believe people on CNBC that tell you that ‘this time it’s different’.  And that the market can go up forever.

It’s not and it won’t.

Everybody needs to keep an eye on the market and recognize that it’s not a one way only road.  The experts that tell you that it can only go up probably have a plan in place.  And when the market starts going down, they’ll have executed their plan before they go back on the air and talk about the downturn.  Trust me on this.

The fact is, they don’t care about your money.  They care about theirs.  Don’t get the two confused.

Readers, what advice have you heard that may need some corrections or clarifications?  What do you think about the items I mentioned?  Please let me know your thoughts in the comments below.  Thanks for reading.

Copyright 2017 Original content authorized only to appear on Money Beagle. Please subscribe via RSS, follow me on Twitter, Facebook, or receive e-mail updates. Thank you for reading.

Being a Better Long-term Investor

We tend to bring our biases everywhere and we interpret information according to these biases. It is human nature and often hard to escape. We tend to be heavily influenced by recent and previous events or trends.  In order to become a better long-term investor, there are some things to know.

Information and News

Every day we are bombarded by new information and investment news, which we use to make decisions. This should be a taxing process, but our brains make it easier by using mental shortcuts that help us make a quick decision without the need for lengthy analysis. These mental strategies are known as heuristics. Heuristics may help us save time, but may lead to errors in judgment. There are many behavioral biases and some of them should be all too familiar: Biases that affect our decision-making processes include anchoring (relying heavily on one piece of information), over-confidence, fear, confirmation bias (only searching for information supporting your belief), over-extrapolation and greed, to name but a few.

Investments require time to be successful. The triggers, mistaken beliefs and psychological traps that drive our investment behavior often cause irrational acts, which can destroy wealth.

Consider the Global Financial Crisis: Equity funds enjoyed excellent returns in the 5 years leading up to the 2008 crash. These returns caused investors to flock to the stock market, which drove the market even higher. Then came the crash and those very same biases, that once drove investors to the market, had led them to the biggest sell-off in the market’s history. Many investors found that, had they not succumbed to their biases, their losses would have existed largely on paper.

In fact, investors who did not give in to their emotions managed to make back their losses and, in some cases, almost double their money (in absolute terms) by September 2016.

It is important to note that this strong recovery was in part driven by the monetary policies devised by the central banks to increase asset returns globally. Previous market crashes have taken longer to recover in absolute terms and longer when one accounts for inflation.

What about stable funds?

Stable funds function to protect the investor’s capital. If you are averse to risk and seek stability then this is probably the best fund for you. This doesn’t mean that some investors in a stable fund are immune to emotional behavior. Many investors in stable funds tend to over-extrapolate short-term performance trends, which in turn informs their decision to invest or withdraw. The problem arises when investors withdraw on a downward trend and thus don’t benefit from the performance on the inevitable upward trend. This is why they don’t achieve the same returns as the unit trusts in which they are invested.

 So what should you do?

Overcoming one’s biases can difficult, but the first step is identifying them. Try and assess the information you receive and only use it when relevant. This increases your chances of seeing a better outcome. It is a good idea to find an investment manager you trust, who employs an investment philosophy that aligns with your goals. Make sure you understand the unit trusts you have invested in. This will make it easier to remain calm during periods of fluctuation, allowing you to benefit from the eventual upturn.

Dips in performance lead to lower prices, which generally makes it a good time to add to your portfolio (if you have the means to expand). In the end, it is the combination of heuristics/investor behavior and market/fund performance, which determines investor returns.

Try and identify your own personal biases and try to overcome them. This will allow you to make more rational decisions. Listen to your financial advisor and stick to an investment strategy tailored to your needs. Short-term market volatility is common and should not affect your long-term strategy. It’s easy to slip into old patterns, but a good financial advisor can help you make rational sense of all the information you have and help you stick to your plan.

Copyright 2017 Original content authorized only to appear on Money Beagle. Please subscribe via RSS, follow me on Twitter, Facebook, or receive e-mail updates. Thank you for reading.