The Philosophy of Investing

Whether you are a twenty-year veteran of investment banking or a fresh graduate from business school out looking for their job, there are some very basic premises of investing that have held true for a very long time.

Avoid putting all your financial eggs in a single basket. If you trip on a rock and the eggs go flying out, you will be very lucky to recover one or two that has not been cracked by the fall.

The higher the yield, the higher the risk. Think of risk as the probability of not getting your money back even when you have a signed receipt for it.

If it is too good to be true, it probably is. Try to look out for the catch.
Finally, consider investing in a company that actually makes something. Forget paper tigers and just go old school again.

Planning Your Estate

Most people think you have to be really, really rich to care about your estate. But that’s not true. No matter how “average” you feel your income is, you still want the peace of mind of knowing that your family will be okay even if something happens to you.

The estate plan can do that. You will need to draw up a will, a power of attorney, and a medical power of attorney. This will enable you to accurately list your assets (including investments, savings accounts, and policies) and determine who gets what. Your will also give instructions on who will gain guardianship of your kids, and what decisions you would like to be made in case of medical emergencies.

It will also enable you to distribute your assets directly to your kids rather than your spouse, allowing them to avail of estate tax exemption and protect your spouse from a really high taxable estate.

Wize Trade

Keeping on top of your finances requires keeping up with what’s going on in the financial world. While staying on top of everything that’s going on is not something everyone can do, there are some good resources that can help you make better decisions with regard to your money and investments.

I came across The Wizetrade Blog today and found some very helpful information there. The site provides coverage for their Wizetrade software program which helps investors perform stock market analysis and chart potential entry and exit signals. Timing the market is not for everyone and learning to do it requires skill. The Wizetrade program can help and the company has developed a series of educational tools and events to help investors make the most of their product and learn how to use it in their advantage.

Mutual Funds, Stocks and Bonds

What is a Mutual Fund? It is an investment tool that basically allows a group of investors to pool their money together to gain access to a larger portfolio of stocks, or bonds. A mutual fund is managed by a fund manager who takes charge of investing the money for all the shareholders, or those who invested in the mutual fund.

What is a Stock? A stock is a share of ownership in a publicly-listed company or a commercial enterprise and is the most common ownership investment in the financial market.

What is a Bond? A Bond fund, also known as a fixed income fund is a form of a lending investment tool where you get your returns on the principal plus interest over a predetermined amount of time.

Being an Informed Investor

You would never hand over your wallet to a stranger, or buy a car without taking it out on a test drive And yet many people do that when they invest larger amounts of money. They sign up for an investment scheme because of an interesting magazine ad, or because their hairdresser swore she earned hundreds of dollars on it. They fail to do research, or to think if this investment meets their financial needs.

It’s important to do research. Get a second opinion from someone who does know about money, go on the web and do research, and check if the business is credited, reputable, and trustworthy. And even if it does sound like a good idea—at least on paper—check your financial goals and needs. It may be too risky for your financial situation, or require close monitoring when you don’t have time.

Taking Advantage of Compound Interest

It’s said that Albert Einstein called compound interest the eighth wonder of the world.

Well, it certainly yields wonderful results. In a nutshell, it’s when an asset earns money, which is reinvested so it earns its own money. It’s making your money work for you—every second, even while you sleep.

Compound interest is the secret to long-term earnings. Let’s say you have a thousand dollars. Put it in a savings account with 5% interest and after 12 months, you’ve earned 50 bucks ($1050). But each year, the amount you earn increases, until by the 10th year, it’s generated over $600—just by leaving it alone.