Rules for Investing- How To Build a Portfolio of Safe, Secure Investments
By admin | October 5, 2008
Author: Ann Marosy
In order to invest wisely, you need to have a suitable investment plan that will ensure the appropriate amount of growth for you. Your investments will also need to be safe and easy to manage.
Developing an Investment Plan:
The first step in developing an investment plan is to identify what type of an investor you are. Investor types are often determined by their stages in life. Here is a guide:
- Single person under 40 years old. Focus: Long-term investments, medium to high risk. Emphasis: capital gain, compound growth.
- Two-income married couple, no children, aged 20 to 40 years. Focus: Long-term investments, medium to high risk. Emphasis: capital gain, compound growth.
- One-income family, young children, aged 20 to 40 years. Focus: Long-term investments, low to medium risk. Emphasis: compound growth.
- Single person, aged 40 to 60 years. Focus: Medium-term investments, medium risk. Emphasis: capital gain, compound growth.
- Married couple with adolescent or independent children, aged 40 to 60 years. Focus: Medium-term investments, medium risk. Emphasis: capital gain, compound growth.
- All investors, aged 60 and over. Focus: Short to medium-term investments, low risk. Emphasis: Income.
The following are examples of investment portfolio mixes for the various types of investors.
Low Risk Investments:
Low risk investments are predominately cash, fixed interest and superannuation. This has the lowest risk of all investments but has also the lowest return - in today’s market, approximately 3% to 6% per annum. Fixed interest includes cash, cash management trusts and bonds. They return approximately 5% to 10% per annum, sometimes as high as 15% if you invest in global bonds in good markets.
Superannuation returns and risk profiles vary from institution to institution, however the best and safest usually return on average 10% per annum.
Medium Risk Investments:
Medium risk investments include property and non-speculative shares. Diversified funds, which invest in a range of asset groups, are also considered to have medium risk profiles. Average returns from these types of investments will range from 8% to 15% per annum.
I also like to include the broad spectrum of mutual funds, to be discussed later, in the range of medium risk investments. Some can return up to 25% and more depending on the fund type and managers.
High Risk Investments:
High risk investments include all speculative shares, futures and any other type of investment that is purely speculative by nature. Because with these types of investments we are betting on whether the price will go up, or sometimes down, I often classify this as a form of gambling. Accordingly, the returns are unlimited but so is the ability to lose the total money invested.
The basic rule for investing in highly speculative stock is to build in ’sell-out’ thresholds, three up and three down. For example, if you buy a stock at $20.00 per share, your sell-out thresholds might be:
Sell out threshold 3 $30.00
Sell out threshold 2 $25.00
Sell out threshold 1 $22.50
Buy $20.00
Sell out threshold 1 $17.50
Sell-out threshold 2 $15.00
Sell-out threshold 3 $10.00
Each time your stock reaches one of the threshold levels, you sell a third of your stock.
If the stock starts to rise, you sell a third at $22.50 and then another third at $25.00 and so forth. If the stock starts to fall, you also sell a third at $17.50, then another third at $15.00 and the final third at $10.00. In this way, you will never lose all your money, however you have also put a cap on the total profit you will make on the investment. This I have found to be the best and safest method for investing in speculative shares. In 1987, my husband and I were saved from the severe losses of the Wall Street crash because we were well and truly out of the market by taking our profits beforehand. Like all systems, this strategy will only work as long as you obey the rules and do not get too greedy.
Mutual Funds:
Mutual Funds are a selection of investments that are professionally managed by a financial institution or organization. These institutions have a wide range of specialists, researchers and advisor’s who devote their time to ensuring that the fund invests in the best companies and assets.
As well as the advantage of having experts manage your investments, managed funds also give you the ability to invest in a wide range of shares, property or fixed interest markets, either locally or internationally, for as small an outlay as $1,000. In the latter case, they also require a savings plan where you agree to deposit additional capital of a minimum $100.00 per month.
Because managed funds cover the whole spectrum of investment risk profiles, you can easily cover your preferred investment portfolio, as described above, by investing in several different funds.
Putting Together Your Investment Program:
After you have identified your investment type, you need to either seek a good financial advisor or devote your own time in researching investment options.
Shares have traditionally outperformed other asset groups over time. However, share markets can widely fluctuate in the short term, so any entry into the market should always be done with a long-term view of up to 10 years. Even the best managed share funds can fall if the stock market crashes or enters a severe downward cycle. As long as you ensure that you are with a reputable fund with good managers and are willing to ride the waves, your investment will do well in the long-term. If you are in the short-term, low risk category then your investments should be in the safer, more stable areas with lower returns.
Rules for Investing:
Investing may seem daunting for a lot of people. Maybe you have tried it once and failed, or maybe you are simply frightened of losing your money.
To avoid losing any capital, you simply need to be aware of the main pitfalls and always avoid them. The simple, reliable rules for investing are:
1. Have a plan. Always ensure that you or your financial advisor draws up an appropriate investment strategy for you that incorporates your risk profile, timeframes and financial goals. As foolish as it seems, many people plunge headfirst into investing without thoroughly working through these fundamental issues.
2. Don’t put all your eggs in one basket. Obvious advice, but many people fail to follow it. Many people think that they are on the right financial track by paying off the mortgage on their family home and then buying another property for investment purposes. Think about it! You have put all of your financial eggs in one asset basket - property. What happens if the property market collapses? Despite common thinking that this is a safe way to invest, the outcome is very risky. You have invested all of your well-earned money into only one area.
3. Build in appropriate timeframes. There is an old saying, "When the tea lady starts to invest in the stock market, it’s time to get out." What this means is, when the share market is so high that everyone starts to clamber on board, it has probably reached its peak. There are two ways of successful investment timing. The first is to always pick the low-end of the market to buy and the high-end of the market to sell. This is extremely hard to do. Even the best-informed experts have trouble. The second way is to choose good investments and stay with them over the long-term (say 10 years or more) and ride the waves of the market. For safe, easy investing, choose the second method. Do not buy into the top-end of the market and sell once it starts to fall. You will definitely lose money this way.
4. Avoid high-risk investments. These include risky business ventures, highly speculative stock, tax avoidance schemes or too-good-to-be-true propositions that promise unusually high returns.
5. Avoid borrowing for your investments. Although some financial advisors advocate ‘gearing your investments’, this can be fraught with danger. Gearing means to borrow. If borrowing for investments takes you over your 40% fixed costs margin, you will be cutting it too fine, particularly if you lose your current income level.
6. Stay with the traditional and known. The best and surest investments are fixed interest, property and shares. Although all asset classes will fluctuate over time.
Work out the optimum mix for your investment profile, have a safe plan to work with and you can’t go wrong.
About the Author:
Ann Marosy is an accountant, consultant, and former university lecturer. She was formally a Financial Controller of a Fortune 500 Company, and Finalist of SA Executive Woman of the Year. Ann is the author of the ‘The Money Program’ book series. Visit: The Home of The Money Program
Posted in Financial Planning, Investing
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Bankruptcy is not the Only Solution
By admin | September 22, 2008
If you, like thousands of other North Americans, find yourself swimming in debt month after month with no end in sight, you are probably weighing your alternatives. Bankruptcy may be one of the options you’ve been looking at, but it should certainly be the last one you consider. A bankruptcy will stay on your record for a minimum of 6 years. This means you may be required to sell some of your assets, and it will be extremely difficult to get credit cards or loans for at least the next 6 years after you file for bankruptcy.
If you are beyond debt consolidation, but you have a regular income and are able to pay a portion of your bills every month, then you have an alternative of which many financially strapped individuals are not aware: a consumer proposal. A consumer proposal is basically a debt negotiation with your creditors. You propose paying a lesser amount instead of filing for bankruptcy.
Martin Lander, Owner of CARFCO - Car and Truck Repair Financing had this to say when asked about consumer proposals, "It really surprises me how many people don’t know that this is an option. Often when people can’t make payments on their loans, they think their only option is to file for bankruptcy. What they don’t know, or don’t consider is that many creditors would negotiate a lower payment if it would avoid the customer filing for bankruptcy. If a customer does file for bankruptcy, very often the creditors end up with little or nothing to show, so they will usually be quite willing to negotiate a settlement."
Some of the benefits of a consumer proposal are:
- Less damage to your credit rating.
- Interest stops accruing at the time of filing.
- You only pay a portion of the total amount you owe (sometimes as little as 20%).
- You won’t lose your assets.
- Wage garnishment and any other collection activities are stopped at the time of filing.
If you have decided that a consumer proposal is the best course of action for you, your next steps should be to seek the help of a licensed trustee, who will prepare your proposal and send it out to your creditors. Your creditors will then vote on whether or not to accept your proposal. If 75% or more of your creditors vote in favour of your proposal, it will be approved, if not, the trustee will call a meeting of creditors to negotiate new terms.
Bankruptcy should certainly be a very last resort, especially when this option is available and has so many benefits. A consumer proposal is not only better than bankruptcy for you, it is also better for your creditors.
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Finding the Right Lender
By admin | August 21, 2008
The first step in choosing the lender is to establish the kind of loan for which you will be applying. If you have a good credit rating, and aren’t seeking huge sums, you will likely be eligible for an unsecured loan at a standard financial institution. If you have good credit, but are looking for a very large amount, you may be required to apply for a loan secured with collateral. In either case, getting a loan with a major financial institution is almost always your best option. Major financial institutions are typically trustworthy and have millions of customers to prove it. The danger comes if you have poor credit and must turn to alternative establishments for financing. The following are some of the factors that may help you to determine if the lender you choose is right for you.
- Determine the type of loan you need. Any institution lending to an individual with poor credit, will have higher interest rates than standard financial institutions and will require that you use collateral to secure your loan. You will need to decide what asset(s) you would like to use as collateral for the loan. Remember, should you default, you risk losing this collateral, so this decision should not be taken lightly. Your answer to this question will determine what type of lender to look for.
- Determine the reputation of the lender. You can do this by checking with the Better Business Bureau or a similar entity to see if the lender you are considering has a record of frequent complaints against them. If they have, or are a company that is not in good standing, then simply take your business elsewhere.
- Determine if the lender is accessible. Are the loan officers friendly and helpful when you call to ask for information? If a phone call makes you feel as though you are burdening the lender’s employees, look elsewhere. If they are an online loan provider, do they answer emails promptly? A lender that will provide a quality customer service experience will make the process much more pleasant.
- Determine your budget, then check that the lender you choose has flexible payment plans to suit your budget. Some lenders may only provide very short-term loans and payments may therefore be more than you would like to be paying.
- Finally read the fine print. Some lenders can get you into a cycle of paying down interest on a seemingly never-ending basis. Be sure that the terms of the loan are such that you will be paying down the principle as well as the interest, and won’t have to refinance for another term once the loan period has ended.
Good, trustworthy subprime lenders do exist. It just takes a little time and research to ensure that your loan experience will be a positive one.
For more information on whether or not a car title loan is right for you, please visit BHM’s website at http://www.bhmfinancial.com.
Posted in Lending
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Improve Your Credit Rating with a Car-Title Loan
By admin | August 5, 2008
If you are one of the millions of people across North America with bad credit, you may be unaware that there are ways to fix your credit score. A bad credit rating does not automatically improve over time as one might think. In order to fix your credit rating, you must use credit and consistently make payments on time. You will of course have difficulty being approved for credit cards and unsecured loans, due to your poor credit score, but if you have collateral, you can be approved for a secured loan. One such loan is a car-title loan.
A car-title loan uses your car’s title as collateral. Your vehicle remains in your name and in your possession at all times, provided that you make your payments. In consideration of this, it is extremely important that you honestly evaluate whether or not you will be able to make payments on time and without fail, or you may face losing your vehicle. If after examining your finances, you decide that you are ready and able to apply for a car-title loan, your next step should be to find a reputable lender.
An honest lender will provide you with a car-title loan that is not impossible to pay off. Examine the terms of the loan carefully and ensure that the conditions of the loan are such that you aren’t stuck paying down only your loan’s interest for years. Also make certain that at the end of the term of the loan, you are actually finished paying it and won’t be forced into yet another loan to pay off the remainder. A reputable lender will also be able to provide you with references from past customers. If a lender cannot do this, you might be better to seek financing elsewhere. Check with your local Better Business Bureau, or similar associations to see if the lender has any outstanding complaints against them.
Fixing a poor credit rating is certainly not easy. It can take years to fix a credit rating that was damaged in only months. Repairing your credit means that you must make not only your car-title loan payments on time, but you must pay every single one of your bills on time. This will mean getting yourself organized and perhaps even making a payment schedule to ensure that payments are made promptly. It will take perseverance and determination, but it is possible to get your credit back in good standing.
To find out more about car repair financing and car-title loans, visit http://www.bhmfinancial.com.
Posted in Car-Title Loans, Fixing Bad Credit
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Improve Your Credit Rating with a Car-Title Loan
By admin | August 5, 2008
If you are one of the millions of people across North America with bad credit, you may be unaware that there are ways to fix your credit score. A bad credit rating does not automatically improve over time as one might think. In order to fix your credit rating, you must use credit and consistently make payments on time. You will of course have difficulty being approved for credit cards and unsecured loans, due to your poor credit score, but if you have collateral, you can be approved for a secured loan. One such loan is a car-title loan.
A car-title loan uses your car’s title as collateral. Your vehicle remains in your name and in your possession at all times, provided that you make your payments. In consideration of this, it is extremely important that you honestly evaluate whether or not you will be able to make payments on time and without fail, or you may face losing your vehicle. If after examining your finances, you decide that you are ready and able to apply for a car-title loan, your next step should be to find a reputable lender.
An honest lender will provide you with a car-title loan that is not impossible to pay off. Examine the terms of the loan carefully and ensure that the conditions of the loan are such that you aren’t stuck paying down only your loan’s interest for years. Also make certain that at the end of the term of the loan, you are actually finished paying it and won’t be forced into yet another loan to pay off the remainder. A reputable lender will also be able to provide you with references from past customers. If a lender cannot do this, you might be better to seek financing elsewhere. Check with your local Better Business Bureau, or similar associations to see if the lender has any outstanding complaints against them.
Fixing a poor credit rating is certainly not easy. It can take years to fix a credit rating that was damaged in only months. Repairing your credit means that you must make not only your car-title loan payments on time, but you must pay every single one of your bills on time. This will mean getting yourself organized and perhaps even making a payment schedule to ensure that payments are made promptly. It will take perseverance and determination, but it is possible to get your credit back in good standing.
To find out more about car repair financing and car-title loans, visit http://www.bhmfinancial.com.
Posted in Car-Title Loans, Fixing Bad Credit
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A Bad Credit Rating? What to do about it.
By admin | July 28, 2008
Something that many individuals with bad credit have in common is that they do nothing about it. They accept that they have bad credit and live with the consequences. Many don’t realize that it is actually not that difficult to fix a credit score. It does take patience as it can take a year, or many years depending on how bad your score is, but it is possible. The key is taking action and being consistent. The following are steps that you can take to improve your credit rating.
- Request your credit report. In Canada this means contacting Equifax Canada and TransUnion Canada. In the US this means contacting Experian, TransUnion, and Equifax. Many people are unaware that a poor credit rating could be due to clerical errors. Typos and duplicate entries on a credit report are not uncommon. Once you have your reports, review them closely to ensure that there are no errors. If there are errors, dispute the charges with the reporting agency and you could be back to an acceptable credit rating sooner than you think.
If you have established that your credit report is accurate, and would like to improve it, the following should be your next steps:
- Pay all of your bills on time. If you can’t pay the bills on time, call the company(s) you will be late in paying and let them know when you will be paying. Some companies will note these calls in your customer file and it may prevent them from reporting a non-payment. This will not always work, but it’s worth a try.
- Don’t cut up your credit cards. Many think that if they don’t use credit for a while their score will be fixed and this is not the case. You must use credit to gain credit. Reduce the amount of available credit on each card and reduce the number of cards you carry. Don’t just cut up a card, but call to have the account closed. Call or write to your credit card companies and ask them to reduce your interest rate. Paying a yearly fee for a lower interest rate on a card on which you carry a balance may be well worth it in the end. Again, if at all possible, be sure to pay your bills on time.
- If you have no cards, try to obtain a secured loan, or a secured credit card to re-establish your credit. Asking a friend or family member to co-sign on a loan or credit card is another method, but beware, if you don’t pay this debt, you may lose a lot more than a good credit score, so this should be a last resort.
Fixing your credit score is not impossible, but it does take patience, persistence and commitment. Following these steps should help you to improve your credit rating.
To find out more about car repair financing and car-title loans, visit http://www.bhmfinancial.com.
Posted in Fixing Bad Credit
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Second Mortgages in Canada: When & How?
By admin | July 22, 2008
Author: Arash Svd
A second mortgage is a loan you get in addition to the first mortgage that you have already registered for your home. Second mortgage rates are generally higher because second mortgages are relatively riskier for the lenders. In order for you to understand why it is so, and decide whether or not a certain second mortgage rate is reasonable, let’s have an example of a second mortgage.
Imagine the value of your home in Canada is $350,000 and you have already got a $200,000 mortgage for your home through a mortgage company In Canada. The remaining will be $150,000 ($350,000 minus $200,000). This is your home equity. In other words, this is the part of your home value that you have not received a mortgage for. Therefore, you don’t owe this much of your home value to a mortgage company.
Now imagine that you need $100,000 for a reason. Because your home equity is $150,000, you can then ask for a $100,000 loan, which is less than $150,000. This new amount that you get as a loan is called a 2nd mortgage. Sometimes second mortgage might be also called home equity line of credit or home equity loan, but they are second mortgages if they are taken in addition to your first mortgage.
In Canada, in order to get a better interest rate, your second mortgage must be insured and the mortgage default insurance premium will be then added on top of your basic loan amount. Although it may first seem that the amount of your second mortgage has been increased, you will usually have lower rates for you mortgage with lower monthly payments when you insure your second mortgage.
In a fixed rate mortgage, as the name suggests, the interest rate for your mortgage is fixed for an appointed period of time which in Canada is usually between 6 months to 25 years. The good thing about a second mortgage with a fixed rate is that you know how much you are paying for a set period of time which is technically called ‘term’.
In contrast, you may want to go for a second mortgage with a variable rate. This means that the fluctuation in the interest rate will determine how much your monthly payment will be appointed for the principle of your mortgage and what portion to be appointed for the interest. If interest rates go down, more of your payment will help reduce the principal of your second mortgage; if rates go up, a larger portion of your monthly payment will be appointed to cover the interest rather than the principle. Although interest rates may fluctuate from month to month depending on market conditions in Canada, the payments of your second mortgage are fixed for a period of one to two years.
Because second mortgage rates, and generally mortgage rates, change quite frequently, you many want to choose a longer-term mortgage if you don’t want to involve yourself with the rate changes. But if you want to choose a more flexible option, a shorter-term mortgage then allows you to potentially take advantage of lower rates.
Article Source: http://www.articlesbase.com/mortgage-articles/second-mortgages-in-canada-when-how-490799.html
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Preparation for Your Loan
By admin | July 16, 2008
When most individuals decide to make a large purchase, such as a home or a car, they carefully examine their finances to ensure that they will be able to make payments and still maintain an acceptable standard of living. Unfortunately, many individuals and families don’t put the same careful consideration into personal loans and they therefore risk losing both their good credit standing and whatever is being used as collateral for the loan. So how should one prepare when considering such a loan? The following steps may help you determine whether you are prepared or not.
1) Determine how much you would like to borrow and for how long you are willing to make payments. Usually, the longer your loan is outstanding, the more interest you will pay.
2) As you would with a larger purchase such as a car, or a home, carefully review your budget and evaluate the amount you are able to comfortably repay on a monthly basis. Honestly consider the outcome if something unexpected were to arise, would you be able to continue making payments? Compare this amount with your answers to question #1. Do your numbers add up, or will you have to re-evaluate the length of the loan or the amount you are requesting.
3) Consider the type of loan you want. Many people aren’t aware that there are many kinds of loans. Generally people go to their financial institution and apply for either a secured or unsecured loan based on their salary, credit rating and other criteria. Many don’t know that if they have poor credit, or even no credit, that there are alternative solutions such as car-title loans, on which a vehicle is used as collateral. Research your options to determine what is the right loan for your situation.
4) Once you know what kind of loan you want, you should next determine which lender you would like to borrow from. Ensure that your lender is a reputable one. Check with the Better Business Bureau, or a similar entity to see if the organization has complaints against it. If you are not familiar with the lender, ask for references from previous customers.
5) Carefully review the terms of your agreement. You don’t want to be trapped into a loan which pays only interest for months or even years without paying down the capital. If your loan repayment plan is for 24 months, ensure that you will have completely repaid the loan at that point and won’t have to renegotiate further payments.
Applying for a loan is serious business and should not be taken lightly. Remember that if you are not able to make repayments, there will be serious consequences. By taking the right steps, you can ensure that your loan experience will be a good one.
For more information on whether or not a car title loan is right for you, please visit our website at http://www.bhmfinancial.com
Posted in Car-Title Loans
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Why Would I Consider a Car-Title Loan?
By admin | July 10, 2008
Many of us have never heard of a car-title loan and thus wouldn’t consider it as an option if we needed money quickly. But individuals who can’t get money from mainstream financial institutions are often drawn into the credit card trap. That is to say, they end up getting a high interest-rate card since that is all that is available to one with a poor credit rating. Then they begin the never-ending cycle of making minimum payments each month and watching their debt grow. With a credit card in your pocket whenever you need it, you can generate a mountain of debt very quickly and very easily.
With car title loans, like with high-interest credit cards, the interest rates are higher than loans financed by typical financial institutions due to the higher level of risk involved when lending to individuals with a poor credit rating. However, car title loans have set terms of payment, meaning that you can’t fall into the trap of paying the minimum payment and having the interest accumulating more quickly than your payments. A set payment schedule means that your loan will be completely paid off within a set period of time. Unlike a credit card, you won’t be paying off your car-title loan for the next 10 years, provided you find a reputable lender. Indeed some car-title loan lenders will attempt enter you into an agreement which will have you paying interest with no capital for months and even years, so establishing the good standing of the lender you use is essential to having a positive car-title loan experience. Finding a highly regarded lender can also ensure that the payment plan you agree to will be one that suits your budget.
So what exactly is a car title loan you might be asking? It is simply a loan usually given to individuals with a poor credit rating or no credit that uses the borrower’s car as collateral. The car remains in the borrower’s name at all times unless they cease making payments on the loan in which case the car’s title is transferred to the lender. Since a car-title loan is secured by the borrower’s vehicle, the loans are usually processed very quickly and funds can be transferred within hours of submitting an application.
Due to the level of risk involved, car-title loans are certainly not for those with a good credit history, who can obtain financing through standard channels. These loans are for those who, due to poor credit, can’t obtain money by approaching a standard financial institution, and whose only alternative is falling into the credit card trap. For these individuals, a car title loan might just be the best solution when money is urgently needed.
For more information on whether or not a car title loan is right for you, please visit our website at http://www.bhmfinancial.com
Posted in Car-Title Loans
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How to Get Money When you have Bad Credit
By admin | July 7, 2008
If you own your car and are in need of some cash urgently, your solution may be a car title loan. With no or even bad credit, a car title loan could be a temporary way to pay off some unexpected expenses such as car and home repairs. You may even pay off some debt or take a much needed vacation.
The car title loan is a secure loan for the lender because your car is used as collateral, therefore it is very quick and you could have the money needed in only a few hours.
Posted in Lending
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