Archive for June, 2007

by David Van Knapp
Classic economic theory posits that investors always behave perfectly rationally, in their own best interests. Emotions are not involved.

You may be thinking, “That contradicts all my common observations and experiences in life,” and you would be right. Nevertheless, classical economic theory is based on a world full of rational, informed, iron-willed, self-interested, consistent, and efficient actors.

Behaviorial finance, on the other hand, recognizes the obvious: That investors are often influenced by emotion, and that therefore they make illogical, inconsistent, and ill-informed decisions, despite their best intentions to act in their own self-interest.

There have been lots of studies in behavioral finance since the field took off about 30 years ago. The studies–almost astonishing in their variety–have attempted to find out how most people really act when making financial decisions.

It turns out that we humans have several tendencies that don’t help very much when we are investing. They skew our judgment. Here are the most common traits that lead to investor self-sabotage:

–Failing to realize that the loss of an “unbooked” gain really is a loss. Some investors only think it is a loss if their account falls below what they originally invested. They view an intermediate gain as not real, sort of like playing with house money. Sorry, it was yours, and if you didn’t book it, you lost it.

–Failing to book a loss on a hopeless investment, hoping that it will come back. This is called loss aversion–people do not want to admit having made a mistaken investment. Apparently, people feel more pain from a loss than joy at an equivalent gain. They want to avoid regret over the loss, so they just don’t book it.

–Failing to take on enough risk, and thus investing too conservatively. Over many years, the most conservative investments (such as cash and bonds) do not keep up with inflation. Thus ironically what seems most conservative actually bears more risk: the loss of purchasing power to inflation as the years pass by.

–Not accepting a loss as the sunk cost it really is. This “sunk cost fallacy” keeps you focused on the past and diverts attention from what you can do now to get better results in the future.

–Selling winners too soon (to lock in profits, thus creating a feeling of victory), but holding losers too long (waiting for them to get back to even so that there is no loss to regret).

–Forgetting that the real goal of investing is to build wealth as effectively as possible, not to justify decisions you’ve made in the past. This can lead you to fail to evaluate your current investments on their potential to produce gains from this point forward, which at any given time is the important question to ask.

–Becoming paralyzed by too many options. This inability to make “choice under conflict” leads to taking no action at all when action is called for.

–Resigned acceptance of the status quo.

–Ignoring long-run “background odds” in the face of more immediate or newsworthy information. For investors, the important background trend is that the stock market has returned an average of 10% to 11% since before the Great Depression. That’s more than twice as much as the bond market.

–”Preferential bias”: The difficulty in changing an opinion about something once an opinion has been formed, even if the opinion is only subconscious. This causes incoming data to be processed selectively, with supportive information being favored and contradictory information downplayed or even ignored. The end result is reduced objectivity.

Obviously, an investor who is subject to any or all of the foregoing traits cannot be totally rational, even if he or she is trying to be. The Sensible Stock Investor needs to be as rational as possible, because over time, the stock market tends to reward rational decisions. That is, the market tends to move stocks towards their intrinsic values. For example, if you paid too much for a stock, over time the market will reduce your returns from that stock or even turn them into actual losses as it brings the price of the stock back to what it is really worth. Regretting the loss, failing to accept the sunk cost, holding onto the loser too long, failing to look ahead rather then back, and/or resigned acceptance of the status quo obviously do not help you make the best decision in this situation.

Fortunately, we humans can counteract some of our psychological tendencies by using the left side of our brain with the aid of smart tools and processes when we are making investment decisions. Such tools and processes would include:

• A standard system for evaluating whether a company is a good company

• Calculating a well reasoned number as a fair price for its stock

• Resolving never to make snap judgments on fragments of information or hot tips

• Writing out your investment goals

• Taking into account your unique situation, including honestly assessing your appetite for risk

• Choosing a strategy that is likely to lead to achieving your goals without making you uncomfortable

• Making, periodically updating, and using a “shopping list” of investments that meet your criteria; and

• Systematically reviewing your holdings with an eye to the future.

In the end, you want to apply your intelligence and objectivity to overcome self-defeating emotional tendencies in your investing. Left-brain-based systems and processes can help you to do that.

Dave Van Knapp is the author of “Sensible Stock Investing: How to Pick, Value, and Manage Stocks.”Learn more about his step-by-step approach for individual investors at http://www.SensibleStocks.com . Or go directly to Amazon.com, where the book has a perfect 5-star reader rating: http://www.amazon.com/gp/product/059539342X/sr=1-1/qid=1155381420/ref=sr_1_1/002-5852738-5260830?ie=UTF8&s=books .

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by Alex North
So, you are looking into ways of making money on the Internet? - Aren’t we all, and it seems very hard to find the winning strategy. I have a recipe for you,

Everyone trying to make money online is trying to make something, with nothing. This will never work for obvious reasons if you can look at things objectively. You have to have something to be able to make something. Simple as that. If you invented the Ipod, great, you are a millionaire 100 times over (they just sold their 100 millionth copy).

If Ipod was created by a new company as their first product, who would make the most money on the short term scale (less than 12 months)?

The venture capital companies or business angels that put up the core investment in the company to realize the product. Every company with a strong product must capitalize their company to get the first product on the market, and the VC companies makes a ridicules amount of money on seed funding and startups because they are the source of funds for the entrepreneurs with the product, the next cool product. The next 100 million dollar product.

So, am I saying that you have to figure out the next super cool product or service? No. I am saying you should try to get in on the VC level with your investments, since they have the largest leverage on the capital. If you buy a stock today, for $10 a share, and if it went up to $12, it would be great, but what if you bought the same stock for 30 cents and sold it for $12?

Well, it is not easy to be a VC, since it requires access to a lot of money, money we first must earn. But what if you got a chance to add a small investment to a pool that would do seed and startup funding, and take the gigantic percentage increase from the stock on your money directly?

Let’s assume there is a company trying to get a funding of $3 000 000 for getting the product out there, and selling 49% of the company’s equity for 30 cents a share, would you take the risk of a 3000 dollar investment to own shares in that company if the product and idea is good?

I would. And I did. On one particular investment I went from an investment of $4000 and made the exit at the IPO (when everyone else was getting in) I sold my shares for $2,5 each, and I bought them for 10 cents. Please count the percentage on that.

Yes, it is astronomical.

But how did I dare risk $4000 for a product that was only on the drawing table? It was easy for me, knowing the power of Internet and the marketing waves on the Internet, I saw an opportunity that was so good it had problems to fail. Well, you see, if the product is good, it will sell, and by understanding the product everyone that can think for a minute can take the right decision. Risk is higher but the reward ratio is much higher if it works.

Did you know that over 30 different VC companies turned Skype down, they didn’t believe in the product. Skype had a very tough time getting the funds to develop the first versions. Skype was sold to Ebay for an astonishing $5 BILLION. What do you think the down turning VC’s said afterwards?

Skype is a hype, it will blow over. It is crazy how much power the VC’s do have since they are controlling the funds, and they do know each other so they talk to each other. The VC behind the Skype funding, paid about $1M for 30 % of the Skype Corp, and guess if they where happy when Ebay bought it.
But isn’t there a significant amount of risk involved in early investments in companies? Sure, risk is much higher than if you left the money on the bank, or on the stock exchange. But you are looking into a way of making money, and to be able to make money you have to risk certain money to be able to succeed. Risk is somewhat similar to any business; will they make it? Will the product sell? Will it boom? What happens if it just sells and not booms?

The ground rule is, how many ways is it possible for me to make money in this particular investment? Is it all depending on one thing or do they have multiple income streams?

What about track record? They have none, the company is new, remember. It is all down to the product and its market. Why is everyone talking about track record anyway? It is of course risk reducing to get in at a later stage, but reward ratio is then lower. I like the risk, makes it fun, and sure, I would not bet my house, only small money, less then $10 000 for me. If you cant afford to loose the investment, do not do it.

Think of the product, is the product a good idea? is the market good? If so, then it is just a matter of your own financial capacity. You have to have SOME money in order to make an investment. A few thousand dollars should do it. And yes, if you only make one investment the first time, you have an exciting period ahead, when the progress reports are coming in, since you are a shareholder you will get information updates regular.

If it pays off good, if you can sell the shares for $3-5 each and bought them for less than 50 cents, please save at least 50 % of the profit before entering new deals. This is how you get rich over time. There is no getting rich quick thing, it all takes a lot of time and a lot of sense. Do the math and do not get in heavy (with all your got), save the profit and get a less risky investment with some of the profit and let some of the profit go to new equity deals in new companies with exciting products, on the right market.

I cannot recommend anything to you, but I can tell you the truth, it is impossible to make something out of nothing. And when it pays off, it is fun, you feel very light, very energetic and the sunshine around you makes your day beautiful.

If it doesn’t pay off as planned, well you tried, and you do have the shares, most companies will come around so at least you get something back. And there are always new deals to consider. Do you remember the sum Mr Donald Trump was owning 99 banks when he crashed? It was billions of dollars. Where is he now? Oh yeah, he has a few billions in net worth again, and boy that man is a genius, or is he? What did he do? He took risks, thats all what it comes down to, take the right amount of risks and capital at stake, to do the deals that pays off the highest.

There is no secret here, it is common sense, risk and some money at hand.

Are you up for it?

There is even an opportunity for you to get shares, no money down, shares for free. Does that sound interesting? But you have instead of money down, work to do as a reseller instead. Your time for free shares.

Astonishing.

Alex NorthBetting Professionalsales@bettingprofessionals.comhttp://www.bettingprofessionals.com

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by joansmithston
The importance of having a financial adviser or planner cannot be overstated. Do you fix your own car? Do you do your own housing additions? Do you represent yourself in legal matters? Then why would you attempt to advise yourself when it comes to what’s at the very heart of you: your money? When you are making decisions of money allocation, you cannot afford to mess up. That is why you ned to spend a little to save a lot.

You see, when people start to consider the bare facts of their money expenditures, by nature they are then in the mood to be penny conscious. That’s when a lot of them think that they can maximize resources more efficiently than by spending for the services of a financial adviser or planner. Then they go out and pay the mechanic, contractor, and lawyer without as much as a second thought. Does that make any real sense?

You need to understand that when it comes to your finances, that is probably the most important reason to hire services. Now, with that given, it’s time to learn a few rules concerning which financial adviser or planner to hire. After all, you don’t just hire any old mechanic, do you? Here’s what you do:

Research financial advisers. Tell them in person that you have something very, very precious to you and your family that you need their help to monitor and plan about: your money. Look them in their eyes as you develop a feeling concerning rather or not they are the right professional for the job. Listen to your gut. If they don’t make a lion’s impression, thank them as you’re walking out of their office forever. Do not take it lightly; it’s your life, your future.

Written by Tony Smithston. How to become rich? Focus on investing wisely on long term wealth building techniques like real estate, mutual funds, stock market, businesses and other income generating assets. For more on money making discussion join www.teamwealthbuilder.com, the online community solely devoted to tips to become a millionaire.

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by joansmithston
There are as many people trying to sell you advice on how to achieve financial freedom as there are people who still need it. Of all the gurus offering their advice, there seems to be some key elements that they can all agree upon. We are going to explore those elements here to give you an understanding of how to begin your personal journey to financial freedom.

To begin with, let us define the concepts that define what it means to be financially “free”. Of course it means to have the money that you need. It should also entail not having to constantly work and worry in order to get the money. That means that you want to develop a source of passive income, income that continually and perpetually regenerates with minimal involvement or effort from you. You need to have your time free to enjoy the fruit, not always be out planting the trees. Right?

You’re going to need investment capital. That means you’re going to have to earn it, win it, steal it, or inherit it. After that, you need to save it to invest it. So let’s say like most of us, you have a job. You work, but do you save? To save, you’re going to need a budget. To develop a budget, you need to examine your spending habits. In the examination of your spending habits, you’re going to need to be willing to accept where it is that you waste money.

So let’s now say that you are aware of your income, what you have to spend to accommodate your life, what you spend unnecessarily, and that you have decided that you desire to save that investment capital. We have now gotten to the point where most people fail — miserably. It’s called will power. You have to exercise the will power to cease your money wasting. You will have to save - S*A*V*E!

Written by Tony Smithston. Team Wealth Builder Forums, an online community of people looking for financial freedom. All information about recommended books, links to income generating opportunities available. Register for free at www.teamwealthbuilder.com and get to know about the income generating assets to achieve Financial Freedom at the earliest.

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by Tonysmithston
In America the single largest investment most of us will ever make is the purchase of our home. For many of us our home is our number one asset and is a strong appreciating asset. When you decide that you are ready to make that step into home ownership, you should be happy to know that it is likely one of the most sensible investment decisions you are going to make in your life.

A common question many home buyers have is should they buy a home now with little or no money down, or should they wait and save up until they can afford what they want. The general answer is that it is always better to purchase a home sooner than later. because rent is money down the drain. Also the sooner the better because once you purchase your own home you will start to see the potential tax benefits, as well as begin to build your home’s equity. You can locate many different first time home buyer loan programs which often require little or no money down to be approved for a loan.

Another reason that sooner is better than later when it comes to purchasing your own home is because if you aren’t very good at saving up your money so far, chances are likely that you will continue to have money saving issues. Saving money is something that you have to go out of our way to do, and it takes practice and repetition to get in to the mode where you want to save all of your extra cash.

The best financial decision you can make when it comes to home ownership is to get in as soon as you can, with a home and loan that are suitable for you. You can even start off with a small home and property, but anything is better than wasting your money on rent and basically paying your landlord’s mortgage.

Written by Will Smithston. Get yourselves involved in the discussion of money making through long term wealth building methods like stocks, mutual funds, real estates and other income generating assets. We, at www.teamwealthbuilder.com offers a safe and reliable platform for money making discussions.

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by joansmithston
When you are looking for some great financial investment tips, you need to listen to the advice of the experts. You don’t consider yourself an expert mechanic most likely, so you don’t go around advising others on their repair needs. Then why would you try and advise yourself about investing your money? Do not forget that if you make unwise decisions, you can lose every penny that you have. By the way, that’s your first tip: Get advice from professionals.

Tip 2: Diversify. You need to not only diversify by not putting all of your money into one stock, say Coca-Cola. You need to diversify beyond one stock type, say soft beverages. It’s simple, mix it up.

Tip 3: Study and learn. If you are considering a certain investment, do not go in blindly or on a whim. Do your research. Learn about the company or venture that you are considering to finance with your money.

Tip 4: Long-term investing. You need to stand by your investments because of the very nature of the short-term markets is to fluctuate. Don’t stand by them with too much loyalty though. Enough can become enough. Sell before you lose.

Tip 5: Know your limitations. You have to determine, in advance, what your high target prices and stop-loss prices are. Determine them and them stick to them, regardless of anything. The goal is to keep your money and hopefully to grow it.

Tip 6: Don’t forget tax season. Learn how to “split” you income. Get professional advice. The IRS is up to date with their knowledge. Do you just want to make the government money, or do you want to make some?

Tip 7: Don’t exhibit the traits of one who is addicted to gambling. Yes, investing requires risk-taking. However, that implies risk assessment and knowledge of personal limits for those who will come out ahead.

There you are: seven great financial investment tips to get you on the right path to financial freedom. Enjoy and prosper!

Written by Tony Smithston. Team Wealth Builder Forums, an online community of people looking for financial freedom. All information about recommended books, links to income generating opportunities available. Register for free at www.teamwealthbuilder.com and get to know about the income generating assets to achieve Financial Freedom at the earliest.

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by joansmithston
What are the steps to financial independence? In order to figure out the answer to this age-old question, we need to know what it is first. For the purposes of this article, let us define financial independence as being independent of your financial situation; not having to spend your life serving others or even working to have what you need to get through life meeting your personal goals. Let’s also disregard the theories that would propose living without money in some warped sense of existence. We all need money, and the more of it, the better. To become financially independent, we need some ground rules.

There are so many gurus out there publishing book after book about what these ground rules should entail. For this short article, let’s stick to the basics — those rules that are undeniable.

The first such rule is that you must wear a cap now to let your hair down later. Put a cap on your spending. This is not to say that you have to give up all luxury. You are still aloud to enjoy every day of your life, and are seriously encouraged to. However, you need to be constantly aware of your spending. Maybe you should not buy that new Corvette even though you could possibly stretch to afford it. There is a reason for this, and it is rule number two: Saving.

Saving is the hardest thing for most people to do. The enticement of instant gratification, temptation, is the true root to the evils of poverty. If you want to have bank in the future, then you need to develop the bank today. If this were not so, you would already consider yourself to be independent of your finances. It comes down to determination. You must employ the power of your will to save money. This may entail embracing those things that are said to be best: the free ones.

The third rule here is to develop your brain, especially when it comes to managing your assets. Rather you invest in real estate, stocks, business or any number of diversified ventures, you need to be smart. The goal is to develop a passive income that works for you; it provides for you with minimal effort from you. There is no one way street here. On the contrary, there are as many ways to grow wealth as there is to use it up. Have the willpower to learn, and then learn d is your oyster!

Written by Tony Smithston. Team Wealth Builder Forums,Want to be a millionaire? By investing your money wisely you can succeed. Visit www.teamwealthbuilder.com for all tips regarding how to become a millionaire. We offer you no shorcuts, but a discussion platform to uncover the vast opportunities to achieve financial freedom.

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by joansmithston
The reasons why you should keep a budget are plentiful. By budget I mean a recode of expenditures, not just a list of bills. It’s easy enough to grab a paper and pen, sit down and list your monthly bills. You need more though. You need a way to monitor every penny that ebbs into your financial scheme. Most people would agree that they do not have any money to simply throw away. However, that is exactly what many of us do, daily.

If you have financial goals, then you need to watch every cent that you have control over. You see, that’s the key: every penny that you control. There are two key words here: “you” and “control”. The “you” could not be any more direct in its implication: there is X amount of money in your life. Likewise “control” doesn’t mean simple possession. You actually have to intentionally control your pennies. If you erroneously consider a singular penny worthless, then you need to consider a nickel, then a dime, quarter, and so on.

Imagine yourself throwing one quarter off of your private yacht. Now, throw another, and another. Let me tell you something: If you continue throwing those quarters overboard, it will not take that long for your yacht to become a bass boat, then a canoe, and then you sink. Get it?

Sit down each day and tally up every penny that you spent that day, every one. When done, look over you day and ask yourself if you really needed to spend the extra five bucks on the oversized lunch that you didn’t even finish. Not to mention the fact that it destroyed your “diet” for one more day. Think that five bucks is the equivalent of twenty of those quarters that you should be saving towards that yacht.

Written by Tony Smithston. Get yourselves involved in the discussion of money making through long term wealth building methods like stocks, mutual funds, real estates and other income generating assets. We, at www.teamwealthbuilder.com offers a safe and reliable platform for money making discussions.

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by Ann Moss
Many look upon jewelry as a statement of art or a personal decoration that defines their appearance. For the wearer, gold can not only enhance strong emotional feelings about a person’s appearance, but it can also make a person feel beautiful, successful, indulgent, confident, and/or sexy.

Since gold has a long lasting financial value, it can support the buyer’s decision when purchasing jewelry in general, or specifically gold jewelry. This may be one of the reasons why people desire and purchase gold jewelry. 18kt, 14kt, and 10kt jewelry has long been defined and marked making it a “purchase investment opportunity”.

The key is to know if the piece of gold jewelry is worth purchasing for the gold value versus the design value. These are the two factors that make up a piece of jewelry. By taking the design value out of the equation, a factual decision can be made on purchasing jewelry as a gold investment.

Take a look at the cost of what you are buying. There are 4 factors:
1. Weight of Gold Jewelry
2. Price of Gold Jewelry
3. Design Allowance of Gold Jewelry
4. Price of Gold Jewelry

An example (gold only jewelry — no gemstones):
• Price of Gold Jewelry - $4000
• Weight of Gold Jewelry — 5 grams
• Price of Gold - $600/gram
• Value of Gold — 5 grams x $600/gram = $3000
• Design Allowance of Gold Jewelry — (Price of Jewelry — Value of Gold) - $4000-$3000 = $1000
• Design Allowance Percentage is $1000/$5000 = 20%

Look for Gold Jewelry where Design Allowance Percentage is 20% or less for Gold Investment. If the Design Allowance Percentage is higher that 20% it will be difficult to get your money back if you sell, as styles go out of popularity.

Summary
Why not purchase gold jewelry as an investment. Gold is known for holding its value, even if the stock market is in a downturn. By looking at the facts, it becomes an easy decision to make.

Ann Moss — Owner — MyDyreJewels.Com offers you the absolute finest diamond jewelry available including gold jewelry. This article is copyrighted by the author.

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by Ralph Maupin
The simple scale of our Real Estate investing operation out grew our ability to effectively manage renovating and marketing all of the properties we were working with. In short, we were generating far more deals than we could handle without significantly re-structuring the business. At one point, there were over 80 properties purchased and waiting for repairs. Holding costs were out of control. Rather than hiring large numbers of new staff and workmen, and thereby working with far smaller margins on each property we worked with, we turned to utilizing what we had in a different way.

Our effectiveness in finding great deals produced more than we wanted to work with. Since then, we have adopted “wholesaling” property to other investors. Also, we no longer concentrate on rental property as we once had for similar reasons, too many properties to manage without a substantial restructuring of our business. Therefore, when we now resell to other investors, we aren’t in competition with them. We have actually become a resource and a partner, in some ways, for many real estate investors.

When we use the term “wholesaling”, we are referring to reselling properties that we have either purchased or are controlling as-is, at a markup that still allows investors to purchase the property at 50% to 70% of the market value. This has allowed us to overcome the problems of managing renovations on a large scale without substantially changing what we do best. This is a valuable lesson to learn from as it can benefit you in your search for property and investments. It is likely if you are involved in real estate investing to any level, you will run across properties, which are good deals, but for various reasons may not be what you are looking for. Whether it is the location, type of property, etc., that makes it undesirable for you; there is someone else out there who is looking for it.

Finding that person may be a lot easier than you think, you may already know them through an investor group you belong to. Placing an ad in the paper or working with Realtors are also viable ways to sell these properties. If it’s a good deal, it will sell. One thing is certain in the business of real estate investments, the “hardest” part is finding a deal. The rest of it falls into place fairly easily once you have.

How does Wholesaler find real estate investor association or groups in their area? Its easy do a Google search on any of following: Real Estate Investing Clubs, Real Estate Investment Association, REIAs, REIA, Real Estate Investing Classes, Real Estate Investing Groups, Landlord Club, Real Estate Mentoring Programs, Foreclosure Boot Camp, Real Estate Training Classes, Real Estate Seminars, Real Estate Schools, Real Estate Courses, Real Estate Investing Network, Real Estate Conventions, Real Estate Boot Camps, and Real Estate Forums. One tip on this and any investment you do is, don’t let greed drive your business. It’s the biggest pitfall to real estate investors. Holding out for the most, highest dollar usually results in disaster. Make money and move on.

An old saying in real estate: “One deal can‘t make you, but it can break you”. Take a win - win approach to your business, it does work the best and ultimately is the only way it works.

Copyright (c) 2007 Ralph Maupin

Ralph Marcus Maupin, Jr. (Mark Maupin), Speaker, Professor, Co-founder National Real Estate Network LLC (REIA), Get Free Real Estate Forms, Terms, Articles and Real Estate Club Locations at: http://MegaEveningEvent.com

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