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Five of the Worst Investments You Can Make

People are always quick to brag about the wise financial investments they made, and even quicker to share how much they made. However, few are willing to speak up about any financial blunders they made beforehand.

When it comes to investments, it is difficult to determine which one will yield the highest return in profit especially when no one mentions what investments should be ignored in order to avoid financial disaster. The problem is, many people use investments as a tool to “get rich quick” to get out of debt. When it comes to debt, people should use practical methods to relieve themselves of it, such as a balance transfer credit card. When it comes to investments, people should be looking for longevity.”

In order to avoid making a financial mistake, here are the top five worst investments you can make:

  1. Penny Stocks

To many, penny stocks are extremely appealing because their low price. Penny stocks are generally priced under $1 per share. Although that sounds phenomenal and like a quick way to spend a little and gain a lot, penny stocks are priced low for a reason—trade volumes are low. As such, websites and marketers can easily manipulate penny stock prices, which makes it exceedingly difficult to determine which stocks are fraudulent and which ones are real.

  1. College

financewand.comAttending a university itself is not a financial mistake because attaining higher education truly is an investment for your future. But, the problem with college lies in what college you attend. Attending a disreputable university is a poor financial investment because you will be stuck under student loan debt with few employment opportunities.

Make a wise investment by researching which universities have a high statistic of post-grad employment. These universities are usually inundated with well-respected professors who have quality contacts, giving you an opportunity to land a well-meaning job after graduation. Because student loans come with a hefty price, make sure you invest in a university that will pay off.

  1. Timeshares

Timeshares tend to trick investors—especiallynew investors. Owning a timeshare sounds like a great investment and looks like one on paper as well. However, it is one of the worst investment choices you can make because while the business model looks promising, realistically, timeshares offer little in return.

The main reason a timeshare is a poor investment is because unless an investor spends a great deal of time there, it costs far more than it’s worth. Most timeshares only get rented out about 40% of the year, which means the investor is earning nothing during the other 60% of the year. Additionally, if an investor wants to sell the timeshare, he or she will only make about 50% or less of the original price.

  1. Large Homes

Much like a timeshare, investing in a large home well above your means makes the house more of a burden and less of a valuable asset. A big house does not automatically yield a big return investment. In fact, many large homes yield very little in a return investment because regardless of house size, a house is only worth as much as the neighborhood is. Just because you qualify for the expensive mortgage does not mean you should risk your savings and pay for it.

  1. Ill-Researched Investments

Any investment you did not accurately research will probably be a poor financial decision because they potentially could have hidden fees, hidden interest rates, or require you to do work in order to yield a profit.

Before opening your pockets and making a financial decision you will regret later, be sure to give each potential investment ample research.


4 Facts That Your Investment Advisor “Forgot” to Mention

Retirement_incomeIt happens millions of times over the course of a year.  A financial advisor lays out the options, the investor nods wisely and asks a pertinent question, and then – presto! – another year of retirement planning successfully concluded. This process has become so de rigueur that we don’t even question it anymore. The advisor plays his/her role, the stock market plays its role, and the investor greases the system with retirement money. It pays, though, to occasionally take a step back and revisit the system. After all, it is your retirement that’s at stake. Here are four quick facts (that your financial advisor “forgot” about) that can help give you a new perspective.

1. How Much is Your Financial Advisor Getting Paid?

You know that you’re paying him… sort of. Most people never get a bill directly from their advisor. Rather, the fees are deducted straight from the account, and that’s definitely to the advisor’s advantage. After all, out of sight, out of mind. To make matters worse, the fees themselves can vary based on the advisor, on the amount you’re investing, and according to the kinds of products that the advisor is offering you. Typically fees are determined as a percentage of AUM (Assets Under Management), but that percentage can vary based on the size of your assets. Those who don’t have a huge nest egg often have to pay higher fees to help supplement advisor revenue.

Let’s break it down in real dollars. Although those one or two percentage points don’t sound like a lot on paper, in real life they can be a very big deal. Take Morgan and Emma. Both have $100k in their retirement accounts, but there is a 1% difference in what they pay to their financial advisors. Morgan’s advisor charges him .5% of Assets Under Management (AUM), while Emma’s advisor charges her 1.5%.If their funds grow on an average of 7%, then in real terms Morgan’s funds grow at 6.5% per year, while Emma’s only grow at 5.5%. At the end of the first year, Morgan’s account has $106,500 in it, while Emma’s account has the slightly lower amount of $105,500. Not a big deal, right? The thing is that retirement accounts are meant to save for the long term. If you extrapolate Morgan and Emma’s accounts 30 years down the line, you’ll find that Morgan is now sitting on a nest egg of $661,436, while Emma is looking at $498,395. That 1% markup from Emma’s advisor ends up costing her more than $160,000! No wonder they like to keep those fees under the radar.

2. Who is Paying Your Financial Advisor?

The first check comes from your account. The second check… well, that’s where it gets interesting. You know the mutual fund that your advisor said was a solid investment? It could be he was telling the truth, but it could also be that he’s getting a hefty “revenue sharing” check from the mutual fund itself. Unfortunately for you, this payment is perfect legal. At the very least it sets up a conflict of interest where the revenue sharing motive might influence your advisor’s better judgment. At the worst, your retirement fund could become a vehicle for whichever funds have the biggest commissions. To further complicate matters, even non-investment products can carry these revenue sharing payments. Banks often give financial advisors incentives for pushing mortgages, credit cards, and checking accounts.Buyer beware indeed.

3. What Kind of Assets Can You Put in a Retirement Portfolio?

Obviously stock, bonds, and mutual funds are perennial favorites for retirement assets. Other assets (e.g. local real estate or a business franchise) can go into a plan, but there are a number of reasons why you won’t hear about them from your advisor. The number one reason is that mutual funds are the easiest asset for your advisor to manage. Put your money in and you’re finished. The advisor doesn’t have to take any personal involvement in the actual financial management, and he obviously can’t be held responsible if the market suddenly tanks. If you don’t like your chances on Wall Street, it might be very possible that a self-directed retirement plan utilizing enhanced retirement platforms is more appropriate.

4. Will Your Advisor’s Plan Actually Provide Enough for Retirement?

That’s the point, right? You’re trying to save enough of those hard earned dollars now so that you won’t have to worry about it later. The question is will your investment strategy pay off? Your financial advisor will usually try to boost confidence in the plan by running it through a statistical program. He puts in your age, your contribution amounts, market returns, and – voila! – out pops a prediction of success. “You are 96% certain to reach your retirement goal.” The numbers are usually pretty good, and why shouldn’t they be? It’s a prediction whose sole utility is to inspire confidence in the recommended plan. The truth is that your financial status could change (earnings can shift for better or worse), and, more importantly, your investments can change. Funds often take a turn at the worst possible time, and the market certainly can’t be trusted with any kind of consistency.

solid_investmentsThis is especially true when we consider the hard statistics. According to the most recent survey from the Employee Benefit Research Institute, more than 70% of Americans don’t even have $100k in their retirement accounts. If one assumes an average retirement period lasting about 25 years, then that means these people will have to be getting along on less than $5,000 a year. What happened to that shiny 96% certainty? It pays to do yourself a big favor and run the numbers on your calculator.

Summary

In short, financial advisors certainly have a role to play. They usually have a good feel for the system, and they can definitely open your eyes to new financial realities. Still, it pays to know where they’re coming from. Sometimes a little knowledge can also be a good thing.


Strategies for Long-term Investing

long-term investingIn the economic environment investors have had to endure the last 4 years, it is a wonder any can look beyond their nose to see what the long-term investment future may look like. Many investors feel as if they are simultaneously juggling a bowling ball, a cat, and a lit firework and if they drop one their portfolio will suddenly disappear. Money managers and certified financial counselors are right there with them speaking as calmly and hopefully as they possibly can about staying focused in the markets without using manipulation or any other means that may land them in trouble.

The reality is that for now, long-term investing is the most sensible way to approach the markets right now. It is certainly a wise strategy for all ties, but especially now. As Warren Buffet said, and I paraphrase, “I never get into a market I cannot endure if it should close for five years.”

Perhaps the days of gravy will return when the economy stabilizes, but if the truth be known, it is not a bad time to invest. In fact in August of 2012 over $34 billion in dividends were paid out by S&P 500 companies. It is predicted that an increase of 16% will be paid out over the previous year. Yes, corporate profits have been strong, but there is so much more to your investment strategy than an immediate payoff.

What is Long-term Investing?

According to Investopedia, long-term investing is “An account on the asset side of an investor’s balance sheet that represents the investments that they intend to hold for more than a year. They may include stocks, bonds, real estate and cash.” Taking this a little further, long-term investing usually looks at least five years down the road.

Goals of Long-term Investing

Typically, most long-term investment goals are aimed at helping the investor achieve finances needed for retirement, college tuition, owning a business, and making a large purchase.

  • Retirement: Of course, investors have their own personal reasons and goals for what they want to accomplish. In fact, under retirement, almost every investor will have their own unique thoughts on what retirement looks like and what they will want to do during retirement. Retirement may include having the home paid off, being debt-free, traveling, working on one’s golf game, starting a second career without financial concerns, volunteering overseas in an orphanage, or simply relaxing on a front porch with a glass of fresh-squeezed lemonade.

An investor who is 30 now and hopes to retire by the time they are 65 have 35 years to save. Most investment counselors will say someone needs a minimum now of at least $3500 a month in income to live modestly in a non-urban area today. In 35 years, they will need a monthly income of at least $12,500.

  • College Tuition: The cost of college tuition has risen 1,120% over the last 30 years, according to a Bloomberg report. That would mean if things progress at the same rate, parents of a new child must save nearly $500,000 over the next 18 years just to pay for four years of college that now costs $10,000 a year. It is hard to imagine tuition reaching that unfathomable level, but the point is, long-term investing must also be smart as to be able to pay the academic costs that seemingly are out of control.
  • Owning a Business: The downturn in the economy these past four years has prompted inspired people to take more control of their future as we have seen a wave of entrepreneurs enter the market place However, most of these are really small companies doing less than $12,000 a year. They are more like second jobs and are subsidizing school sports, a second car, braces for teeth, or a family vacation.

However, there are others who want something larger and are willing to pay for it. Whether it is owning a Subway franchise or two or more, a small boat tour company in Alaska, a chemical research and development start up, something in technology, or a retail store, it takes capital, and lots of it. Long-term investors understand how much it will take them to start up or purchase the company they want to own and establish benchmarks along the way. Financing issues, finding the right tea to help you, hiring the right employees, location, marketplace, and more will all make up how one goes about investing.

  • A Large Purchase: There are as many large purchases in the mind of an investor as there are people. Houses and vacation homes, cars bought debt-free, weddings, boats, endowments and other financial gifts (see orphanage above), jewelry, travel, funds for grandkids, emergency medical savings, and more can all make up the designation for a large purchase.
  • By earning an MBA in finance you will learn to build a solid understanding of long-term and managerial finance through a systematic approach to financial analysis; applying techniques for planning, forecasting and managing finances; and evaluating and recommending ways to improve your organization’s financial performance. For more information about staying ahead of your finances click here.

Three Strategies for Long-term Investing

Following are three strategies for you to consider when defining, planning and executing your long-term investment goals:

1)      Safe Strategy: This is the strategy chosen by those who do not want to take risk. This will also at best grow an investor’s money the slowest. Just because it is considered “safe” does not mean it is impervious to failure. Usually it means growth will be slowest and there will be many investors in it. It is tragic to look at your statement each month expecting some radical jump in value. Safe can also mean being in an investment like natural gas that will continue to be in demand and for which the resources are great. Index mutual funds and bonds are found here also.

2)      The Faucet Strategy: This is a strategy designed to provide a decent enough return that you will be able to draw out cash occasionally, like turning on and off a faucet, without hampering the overall growth of your investment dollars and longer-term plans. These require more aggressiveness than that of the safe strategy. Investments like these include balanced funds, gold and silver, certain kinds of stocks and real estate.

3)      High Growth Strategy: This is for those who are ambitious and want their money to grow as fast as possible and are typically seeking 12% or more in portfolio growth each year. This is achievable in some economies, but not necessarily now unless you have the brilliance of Warren Buffet. Who would not want these returns But they require much more risk and loss is not uncommon until one hits. “Gambling is not for most investors who are considering retirement, college tuition, mortgages and more. A mix of sound investment combined with some exploratory capital may be wise as one’s portfolio matures,” says Chip Hutchison of the Hutchison Group Rock Hill, South Carolina.

From the writers at RevenFlo


Keeping Up With Gold Prices

Keeping Up With Gold Prices

With the increased number of people who are choosing to invest in gold, and the ever-fluctuating prices, it’s important for you to be able to keep up with the going rates. Whether you are an investor, someone looking to invest, or simply have an interest in gold, then you can find good ways to keep yourself updated on gold prices. Gold prices are constantly changing, yes, but there are many ways of tracking those changes and learning about them so you can use them to your greatest advantage.
In the past, it was up to the daily newspaper or economic journals to track gold changes. Firms dealing in gold had their own ways of tracking gold prices as well, and you would have to work with one of these to get their information. However, as times have progressed, it’s much easier to access this information and have it at your fingertips.
Modern Ways to Track Gold Prices
There must be hundreds of websites out there solely dedicated to the following of gold prices. Services that offer options for buying and selling gold usually keep track of the prices, both locally and worldwide. Many of these websites offer you the option to subscribe and receive regular updates whenever you need them. This can be useful if you want hour-by-hour or daily info on gold prices.An increasingly used way for tracking gold prices comes directly to your smartphone. There are more and more apps being created for people who want to keep up on their investments, and these can be a great option for you if you want to be able to check up on them whenever you feel like it. Apps and mobile websites are both great options for staying constantly informed.

Of course, if you are working with an investment agent, then he or she should be keeping you informed and making sure your investments are going well, but even so you can get the info you need yourself with only a few seconds of work. By using up to date sources of gold price knowledge, you can be sure that your money is where it should be.

Investing in gold is a highly recommended option, and it’s something that nearly anyone can do. If you want to make the most of your cash, and you have had it invested in gold, then be sure to stay updated and pay attention to the trends with these modern ways of getting information.


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