Voices in Finance » Investing

How to Invest a Lump Sum of Money

Mike — Thu, 10 Nov 2011 12:45:48 +0000

Occasionally in life we are lucky to have a large lump sum of money through inheritance, prudent saving, bonuses, or perhaps even a lucky OZ Lotto win. It is always tempting to spend money when we have a large amount of it but it is far, far wiser to invest it in a sensible place and watch it grow so that you can reap the benefits of it for a longer period of time. Making a wise investment with your money can lead to greater wealth in the long run and this article will demonstrate how.

Property Investment

Property investment is one of the safest ways to invest your money because the market does not fluctuate massively. This type of investment is a long-term investment but it will never cease to provide returns because there is always a need for housing. As long as you make a wise investment and utilise property valuation software and surveyors, then you can expect to receive returns on your property until you are ready to sell it on.

There are several benefits to property investment over many other sorts of investments because of the control you have over its management and its stability. One of the biggest advantages, however, is the fact that you can invest an even greater amount than you actually have and borrow the rest against the property you are buying. You can invest as much as 80% more than you could alone through the aid of a mortgage, allowing you increase your standing rapidly without the need for further stringent saving.

There are several ways to invest in property but one of the most prudent and fastest returning is the investment in off plan property. This investment involves investing in an as yet unconstructed property based on the plans provided by the developer. Whilst this sounds riskier, it is a tried and tested method which enables developers to reduce their risks and investors to increase their returns.

Stock Market Investment

Undoubtedly, stock market investment is the best, fastest and most tested method of investment. You can expect large returns from the stock market but unfortunately you can also expect large losses. Managing a stock market investment is a difficult process which requires time, understanding and effort, but success in such a market is guaranteed to come with a large reward.

Unlike with the housing market, very few people grow up with a link to the stock market in their lives. The result of this is that whilst you can walk into a house and know if it is nice or not, most people cannot look at a stock trend and discern whether their investment will grow or shrink. Thus, it is vital to educate yourself on the workings of the stock market before investing in them and it is wise to consult a financial advisor before jumping in.

There are definite bonuses to investing in the stock market but it is a time consuming investment. You will, however, never need to wake up in the middle of the night to deal with a burst sewage pipe, and you will have a greater ability to withdraw your funds than when investing in property.

Invest in Something

One thing that is for certain is that an investment is a far wiser use of your money than a purchase of the Lamborghini Diablo that you have always wanted. When you are fortunate enough, or sensible enough, to have a grasp on a pot of money, do not let it sit there and do not spend it; instead plant a seed and watch your money grow.

Six Tips On How To Spend Your Marketing Dollar

Mike — Mon, 24 Oct 2011 16:18:13 +0000

The marketing campaign is crucial to selling your property. While real estate agents will have suggestions on how to spend your marketing dollar there’s many factors you need to consider. Too often, money is wasted on inefficient publicity or expensive campaigns that don’t reach the right audience. Here’s a few useful pointers:

Tip One: Don’t Duplicate Your Advertising

Too often real estate campaigns can be wasted when lavish sums of money are spent in identical areas. This applies to both print and internet. For instance, why buy large quarter page advertisements in two local magazines? Or why pour money into advertising on two very similar property websites? You need to be canny with your budget. If you are putting money into a metropolitan newspaper advertisement do you need to spend on a local weekly paper also? You need to question the value and reach of each marketing buy.

Tip Two: Virtual Tours

Virtual tours are becoming a staple of property promotion everywhere. They are also excellent marketing tools as they allow anyone anywhere in the world to view your property on their laptop. If you’ve got a terrific property investment Sydney located this allows more people the chance to discover it. If you don’t have a video camera yourself your real estate agent should be able to arrange filming of your property.

Tip Three: Social Media

Social media is another non-traditional marketing form that is really taking off. Whether it’s Facebook or Twitter or Myspace or any of the countless other social media platforms that exist, they are all fantastic ways to open up your property to whole new markets. Unlike more traditional forms of publicity, social media allows you to create more of a buzz, plus you can get instant feedback and comments from people who’ve visited the property. The other bonus is that social media campaigns cost you nothing other than time.

Tip Four: Know Your Target Audience

Think about who’s likely to be interested in your property. This may depend on factors such as location; size of property and other features. This in turn will influence where you advertise. If you have a large family friendly home then it’s no good advertising your property in single magazines. The price range of your property will also affect where you publicise. An expensive, higher end home with top of the range facilities would be of interest to executives, for example, so you should look into advertising in publications that they read.

Tip Five: Internet – which sites, Domain, etc

Internet advertising of properties is huge and a lot of your traffic will find your property via the internet. There are many options available to you. You can advertise, for instance, directly via banner ads or pop ups or rollovers. Some sites will have different rates depending on your placement on the web page. You need to research each site and find out how effective they are at generating traffic. One simple method of doing this is do a google search and see how quickly their properties come up.

Tip Six: Signage

Physical signage still has its place and is greatly effective. They cost money but are generally worth it. The more visible and prominently displayed they are, obviously the more useful they will be. Real estate agents usually organize the signs for you. Having a large billboard outside your property will be yet another way of alerting potential buyers and you need all the help you can get.

When Selling Is a Bad Idea- Understanding Property Market Reverses

Mike — Tue, 18 Oct 2011 13:12:46 +0000

According to recent studies Sydney property owners made a big mistake selling into a very cold market in the last year. About $800 million in net losses were incurred, pretty big money in anyone’s language. If you own or if you’re buying an investment property, it’s well worth your while to explore this issue to make decisions regarding your portfolio.

The simple fact is that property prices naturally move up and down. Sometimes they don’t do anything, particularly in a tight credit market. Booms don’t last forever. Property investors need to consider all angles in terms of their property values, and plan ahead for contingencies like slow markets or price slumps.

How losses happen

The losses in the Sydney property market need a lot more scrutiny. There are some very valuable lessons to be learned from this situation, and they’re particularly relevant to property investors.

All property owners try very hard, often for years, to avoid taking losses on their properties. Resistance to downward moves in property prices is always very strong.

Losses occur due to several common issues:

The owners can’t afford to hold the property: This is an absolutely textbook scenario, in which cashflow dries up or can’t match costs of holding property. The property owners are in a rock or hard place situation, in which selling involves taking a loss, but holding could be even more expensive, building up costs.

Income from rental dries up: If, as many property owners do, you use rental income to finance borrowing, you can find yourself in a very tight squeeze if the property is unoccupied for any significant length of time. Six months without a tenant can compromise a tight budget.

Property costs: Some “bargains” are only bargains for sellers. If you purchase a property that needs major outlays of cash for improvements or maintenance, these costs can sabotage your investment strategy very effectively. One major building defect, for example, can cost six figures quite easily.

The local property market hits a slow period: This affects your ability to make capital gains. The “ROI factor” kicks in and many people get out of property investments to free up capital to make better money elsewhere.

Unrealistic expectations of returns: Some people just don’t do their arithmetic when investing in property. The average increase in mainstream housing prices in Australia is 8% per year, which is just slightly above the median interest rate in recent years and not much more above the CPI. Overestimating returns is asking for trouble, and sellers often lose on this basis, underestimating costs and expecting too much of returns.

Dodging the bullets and avoiding losses on property investments

The best way to avoid taking losses on a property investment is to lock in an investment with a lot of upside and long term capital gain potential. A good example of this approach is one favored by professional investors, who’ll buy an upscale investment property off the plan as a watertight investment. These brand new buildings are less susceptible to broad market moves, because they’re a better class of property, and usually built in high demand areas.

In any market, quality keeps its value. Remember that when you’re looking at your investment options.

The Name’s Bond. Fixed Rate Bond

Mike — Wed, 28 Sep 2011 07:29:24 +0000

Whilst many Americans have a stronger desire than ever to save, the depressingly low interest rates available on bank accounts means there is little gain to be made on putting money away.

Therefore, individuals are turning towards fixed rate bonds as offering not only better returns, but a secure way to invest money without risk.

By taking out a bond, the saver is essentially loaning money to the organization that is seeking finance, with the guarantee that the capital will be returned, plus interest, after a set time.

It is possible to obtain adjustable rate bonds or those with a fixed return, with both sorts having their own benefits and drawbacks.

A fixed rate bond will never vary and the holder knows exactly what their return will be at the end of the term, regardless of what happens in the market.

This provides a degree of security for people wanting to plan for a specific purpose, or at least be sure of a minimum return on their money.

If interest rates rise, those with a fixed rate bond are at a disadvantage as their rates have already been locked in, meaning they are unable to make the most of changing market conditions.

However, this lack of flexibility is the price that security comes at and if interest rates drop, those with an adjustable rate bond will lose out and holders of fixed bonds will have a distinct advantage.

One of the biggest benefits to purchasing a bond is that the interest rates are usually far superior than can be found in a conventional savings account and the amount paid out never waivers.

But unlike a bank account, money in a bond cannot be withdrawn immediately as it has effectively been lent to the institution – and the length of bonds are usually a minimum of five years. Some bonds run for as long as 30 years, a considerable commitment for anyone.

It is usually possible to withdraw money from a bond early if really required, but the financial penalties for doing so will be hefty.

The other factor to take into consideration is the rate of inflation as the gains made over the lifetime of the bond can become meaningless if inflation has risen at a higher rate, However, providing the interest rate on the bond always exceeds inflation, the holder will be better off, no matter how long the investment is held.

A fixed rate bond also becomes more in demand when interest rates are low because of the certainty of the return that it provides, but can become less popular when interest rates are high.

It can be tough to decide between a variable rate bond and a fixed rate, with the possibility of far greater gains by not locking in, but also the chance of losing out.

A good interim measure is to only select short term bonds that have a fixed rate, providing you suspect interest rates will increase and this will provide the security of a guaranteed return without being saddled with a poor investment in the longer term.

If, of course, the opposite is true and interest rates are expected to take a prolonged nosedive, it may be worth considering locking in your returns for as long as possible.

There Are Many Good Stocks To Invest In

J. Hamilton Fraser — Tue, 02 Aug 2011 13:37:22 +0000

Playing with stocks – Are you playing the stock market now?

Our economy is somewhat dismal and has been for quite a few years, but there are many good stocks to invest in right now. Here are a few tips on how to play in the stock market.

1. Always apply dollar-cost averaging – what this means is to not sell your stocks when the market drops, instead you must take advantage of the dips and buy additional shares while the price is low. It is a good practice to buy low and sell high.

It takes nerves, but if you think that you do not have what it takes, then you need to understand the following solution – dollar-cost averaging. Make regular investments over time so as to be buying stocks when the price is in motion – NOT when the stock has reached its peak. This can provide great protection for times when the markets are down, click here to see how.

2. Fluff Up Your Cash Cushion – Create a cash cushion so that you may survive when times are tough. Experts recommend that you have approximately a half years worth of living expenses at your disposal (a cash cushion) and by having this cash cushion, you can keep your stocks in your portfolio where they can continue to make money for you. No cash cushion means that you would run the risk of selling them for less than what you paid for them.

3. Balance Your Trading – By finding the right balance in your trading, ie: not overly aggressive or more conservative than is necessary is a good way to achieve success and reach your financial goals. The best balance is to invest in cash and bonds (not too heavily) as well as hot stocks and sectors. Keeping your portfolio balanced can ensure safety.

4. Turn Your IRA to a Roth – By turning your IRA into a Roth IRA you can eliminate the tax that you pay on the income that it generates. For a more detailed explanation on how a Roth IRA can save you money, click here.

The Advantages of Employing a Stock Broker

J. Hamilton Fraser — Wed, 20 Jul 2011 19:14:03 +0000

If you are one of the many who would want to take advantage of the profit-generating capacity of the stock market, then employing the services of a stock broker will certainly do you good. There are many investors who only have the courage to invest in the stock market for a short time and then as soon as they have generated a good sum of money, they immediately back off for fear that they might lose what they have already gained. In dealing with a broker, you must treat them as a partner and not as a slave. You have a role to play and that is to make the final call. Their responsibility is to provide you with several of the best options out there.

There seems to be no stopping the number of banks and financial institutions that offer their brokerage services online. This activity has been brought about by the seemingly stable exterior that has been displayed by the stock market in spite of the recession. While this is indeed beneficial for small scale traders and investors, the question of choosing the right online brokers still hang in the air. One of the most effective methods of finding the best among the many options out there is the process of elimination. In this way, those that does not meet the standards of the investor could be gotten rid of. Those that make the short list can then be closely scrutinized and weighed in terms of their consistency with the goals and values of the stakeholder.

You might be tempted to simply get the services of the cheapest online broker however I assure you that this is not always a great move. Instead, employ the services of someone who already has ample experience in the industry since you surely would want him or her to know how to handle most of your future concerns and problems in the stock market. Moreover, make a list of questions for the remaining few on your list. Choose the one who will be able to give you the most positive answers that are congruent with your needs as an investor.

Investing in the Environment

J. Hamilton Fraser — Sun, 17 Jul 2011 12:55:03 +0000

Mutual fund managers do not often choose to invest in environmentally friendly companies. Portfolio 21, an investment firm that operates in the city of Portland, will help an investor grow his money using companies that support the environment. The fund managers go out of their way to make sure the companies listed in the funds are finding some way to make the world a better place.

American firms are not the only companies that believe in helping people support green friendly companies. The Swiss technology firm ABB develops new technologies that reduce environmental impact. One of the company’s more recent products, GridSync, helps a business use its electricity more efficiently. The company works with natural gas, wind, and oil industries to help them develop technologies with lower impact.

Everyone knows that Cisco systems makes routers. Cicso, based in California’s Silicon Valley, had developed a device that lets businesses monitor and control power switches remotely. The remote switches can turn systems in remote buildings on and off at the push of a button. The system not only reduces energy consumption, it saves business money.

If you are looking for an eco conscious real-estate company to invest in, South Africa’s Growth point fits the bill. The company can determine the impact of commercial buildings and suggest more efficient land use of existing resources.

Eaton provides sustainable energy technologies for the global market place. It continues to develop hybrid cars and electric cars and improve the efficiency of these vehicle. Variable speed drives made for other machines can help a business work with peak efficiency.

IBM is not a name that causes many people to think “environmentally friendly”. Old Blue has been in the business machines business for over a century. While its computers have long ceased to run Windows, it still makes a wide variety of servers and data centers. Servers and data centers require a lot of energy. The rooms also need to be air-conditioned. The air conditioning can consume a lot of power if it is not controlled correctly. International Business Machines designs its systems to handle much of their cooling needs on their own. The better cooling technology reduces the need for the air conditioning systems in a building to work beyond their capacity.

Portfolio 21 has released a top ten list of green companies which includes these five and more. Of course, there are also other environmentally friendly companies around such as those building eco-friendly electric cars, solar panels and other appliances to help everyday people make a difference in the world.

How to Bet on Falling Indices with Exchange-Traded Funds

J. Hamilton Fraser — Sat, 02 Jul 2011 11:01:01 +0000

Many investors know well that stock markets can move in both directions, both up and down, over sometimes long periods of time. Anyone who wants to profit from these developments must be able to make gains in their portfolio in both cases. Traditionally, this was done through short selling or put options, both possibilities being available usually only to experienced and financially strong traders. Today, exchange-traded funds (ETFs) offer an additional option to profit from falling indices through the use of inverse ETFs.

Inverse ETFs or short ETFs as they are often called, are now the standard way to bet on a negative index performance for most broad and well-known stock indices, for example a short Nikkei ETF. They also exist already for commodities and currencies as well, offering the investor all possibilities for following expected market developments. It is however important to understand that inverse ETFs also use derivatives to achieve their goals, making them just as dangerous as regular derivatives investments. This becomes evident in the tracking error of short ETFs, which is usually higher than that of regular ETFs.

For an even higher amount of risk and therefore of potential return, leveraged inverse ETFs are offered by many issuers. These instruments increase in value by a multiple -usually 2x or 3x- of the negative performance of their underlying index. It should be self-evident that these funds belong to the highest risk category and are only recommended for very experienced investors.

For those who are wondering whether it would be possible to create a “personal” inverse ETF by short selling regular ETFs like a uranium ETF, it should be said that this option really exists, since ETFs are traded like stocks on an exchange. However, this option is actually only sensible for large investors, since otherwise the trading costs would become prohibitively high.

In summary, inverse ETFs are a realistic option for small investors to profit from falling indices in most developed stock markets.

Investing is Not a Good Way to Get Rich Quick

J. Hamilton Fraser — Thu, 23 Jun 2011 08:50:02 +0000

Investing is not a good way to get rich quick. It requires long term planning and patience. If you want to become rich, you must become a savvy investor, and it will take lots of hard work, dedication, and learning in order to become successful. If you think of investing in the short term, you may make a little bit of money, but you are likely to lose it in the long run. If you want to gamble, you may as well play the lottery, because investing your money in random places is pretty much the same thing. You may be wondering “How can you learn to become a better investor?” The answer is financial education.

There are a variety of ways to increase your financial education and subsequently, your financial IQ. You can choose to go to the library and check out financial books, get help from a financial advisor, start investing and make your own mistakes until you know better, you can seek advice from friends, you can go online and look for informational websites, learn how to get passive income from a portfolio, or you can look up how other people made their riches. The only limit is your own determination. If you really want to be rich, it’s going to be a long, hard journey. Unless you were born rich, you probably wouldn’t even be interested in investing. But on the off chance that you care, learn about the different kinds of investments and choose one.

There are three main kinds of investments; the stock market, real estate, and businesses. You can also choose to invest in your future, by buying financial books, saving money in the bank, or putting your money in a 401(k). Depending on your financial situation, each investment has pros and cons. Stock market is usually used for short term investing, real estate is for learning about debt and long term investing, and businesses were designed to learn about management of cash flow. Pick your poison wisely.

Information on Taxable and Tax Free Money Market Funds

J. Hamilton Fraser — Wed, 22 Jun 2011 05:31:11 +0000

Money market funds are offered by brokerage firms, mutual fund companies or banks. Many investors selling stocks place their money into a MMF until they manage to find a better re-investment option for these funds. Therefore, money market investing is often used as a way to save money for potential re-investments in the near future, or other short-term goals. Regardless of where you open the money market fund, chances are that the account will not be FDIC insured, sot there is a certain risk associated. However, you will get better interest rates compared to regular bank money accounts.

The reason why MMF associated risks are so small is because these accounts are highly regulated. The money within these funds is invested in short term but very safe debt securities such as deposit certificates or US treasury bills. The main goal of such funds is to maintain a share value of 1. However, there is no guarantee that your fund will keep its share price. On the other hand, consumers have never lost any money by using these funds.

There are two categories that money market funds fall into taxable and tax free money market funds. The taxable ones generally pay higher yielding, but they are not suited for all kinds of investors. You may be more benefited if you decide to use the tax equivalent yield formula in order to see what fund can give you the best return. Most MMFs have a minimum value amount associated, and thus they allow you to make electronic transfers or write checks and the transaction is done. However, federal regulation usually limits the telephone, electronic and similar preauthorized transactions to a maximum of six per month, from which only three can be by check, debit card or draft. Other institutions may require you to pay a fee if you exceed the account minimum balance by withdrawing money from the fund.