Benefits of investing in distressed Companies

investment

Not only big hedge funds love to invest in companies which are in financial troubles, but also lots of experienced individual investors often benefit from investing in distressed businesses. At first glance, it does not make sense to approach dying companies with investments, but in fact, investing in debt can become a most rewarding move you have ever made. How is that?

It is a law of wealth in the financial world: the higher the risk the bigger the potential profit and vice versa. Distressed companies like any other companies issue securities like stocks and bonds. We are interested in bonds, which financially sick companies offer at an extremely low price. Let us explain in detail why this type of investment is a large piece of a delicious money pie.

Why is that beneficial?

Companies, who are on the edge of bankruptcy suffer an unbearable debt pressure and therefore desperately seek for financing. No lenders want to take such huge risk and lend money to drowning business. The only way to attract investors is to issue bonds and sell it at an extremely low price. And the question remains: even at a very low price who on Earth would buy bonds of a Company who has serious chances to collapse in the nearest future?
Here is the concept: a distressed company is not dead yet, and so, there are tiny chances it will recover and get back on track. Logically, the Company’s securities will jump up in price and here is where the profit lies.

Companies

An investor who buys distressed debt should realize clearly that “it’s all or nothing” kind of a deal and the risk is really significant. The possibility of such quick and huge profit attracts corporate investors mostly. Still, private investors can join the hedge fund with a significant part of the distressed debt in a portfolio for a chance to hit the jackpot. There are hedge funds with several divisions who work solely on searching for attractive distressed debt to invest in. The task of an Investor is to minimize the chances of getting into the Company which will really go bust after all. Some think that distressed debt backed by collateral guarantees the non-bankrupt status. It’s a big mistake which may cost you everything and here is why (see below).

What about collateralized debt?

There is a good lesson for all investors out there who are sure that collateralized debt is a protection against losing money. In times of the world economic crisis that took place a decade ago, collaterals in form of property (commercial and residential Real Estate) plunged in price dramatically.

debt

That means, even a collateralized debt imposes a threat for an investor. When the collateral decreases in value, nothing protects investor’s money. If the distressed Company finally collapses, bonds devaluate to zero.

Is the risk worth the reward?

It’s always a matter of own risk tolerance and financial capability which allows you to stay afloat if the worst scenario will eventually happen. Putting money into the distressed debt securities is one of the riskiest types of investing and there are many examples of failed investment hopes and wiped out money. According to Money Management concept, an investor must not invest more than 15% of his money in such risky assets.

Still, some investors find the potential reward attractive enough to risk.
investment

There are three ways an investor can get securities of a distressed company:

  • Hedge Funds (hedge funds buy bonds directly from mutual funds which are not allowed to keep in their portfolios devaluated securities);
  • Bond market. The bond market is a great place to buy bonds directly, without mediators.
  • Directly at the distressed Company (available for Corporate Investors).

Still, the best and most efficient way for an individual investor to access the distressed debt market (especially if you are having not enough money for full-size securities) is exchange-traded bonds. This option allows buying bonds partially instead of full-size bonds packages. For example, if bonds are traded at 900 dollars, a private investor can buy a fraction of it at $50 or even cheaper. This way of making portfolios with fractions of real securities is very popular in micro-investing as it brings the same outcome as investing in full-size stocks, bonds, and derivatives.

Posted in Basic Investment Tagged with: , , , , , , , , , , ,

Variable Annuity Investing

annuity

Amongst all types of investing and all variety of investing strategies, a variable annuity investing stands out of a crowd due to several reasons and many investors prefer getting into it because it definitely brings some advantages. Let’s take a closer look at this type of investing, so you will be able to take advantage of it.

Understanding Variable Annuity

Being a sort of a mix between an Insurance and Investment Contract, Variable Annuity policy offers lifetime payments to an investor. The only difference between investing on your own is that it’s not you but the Company who decides what vehicle your money will be invested in.

Why many investors take variable annuity investment options as a sort of insurance against the unfavorable behavior of their main assets? The reason is plain and simple. Let’s say you have a certain pool of vehicles in your portfolio with the fixed annuity. Everything is great as long as the economic situation is predictable and the inflation rate is relatively stable and low.

annuity

But what if economic environment changes and you start losing your money because your fixed annuity vehicles do not bring you the planned income, just because the value of that vehicles decrease of the value of the money itself goes does (inflation)?

The solution is to diversify the portfolio with stocks and bonds with the variable annuity that offer much higher interest rate. These instruments’ interest rate (and thus, your income) is linked to a certain index, rather than to a fixed %. If the index shows positive behavior, the profit of an investor goes up, as variable annuity rise. On the other hand, if circumstances play not in investor’s favor, annuities will be decreased.

Outpace the inflation with the variable annuity

Variable annuity investing was designed exactly to outpace the yearly inflation rate that may wipe out the profit that is brought by the fixed-annuity vehicles with relatively low % of yield. For this advantage, an investor pays with the increased risk and instability of variable annuity vehicles.

inflation
The variable annuity investing could be considered as an element of retirement plan which brings advantages of both Insurance and Investing: you get your regular guaranteed payments and in case of death the death benefits will be paid to the family (the amount cannot be less than an initial investment made, regardless of the investment performance of the Company).

The inconvenience is that annuities could be withdrawn only once a year and you cannot influence the investment decision and strategy the Company applies. The benefit is that payments are made during the lifetime of a policyholder regardless of the time period.

Accumulation and payout phases

payout

During an accumulation phase, an investor makes payments to allocate his funds within certain vehicles – bonds and stocks. Just like with investing in a mutual fund, investor’s money could be grown or lost (partially) depending on the Company’s performance.

During a payout phase, an investor gets paid in accordance with investing results of the Company. Even in a case of the worst investment scenario, a person gets the guaranteed minimum yield (typically 3% yearly).

Tax-deferred investment

Tax-deferred investment

Another beneficial aspect of Variable Annuity Investing is that it goes via special, tax-deferred subaccount. That doesn’t mean that the payments received by the policyholder are tax-free, but instead of paying taxes for the period the money was earned, an individual is allowed to pay taxes later in the future when his income is grown enough for making tax payments painless for the budget.

Posted in Basic Investment Tagged with: , , , , , , , ,

TOP Investment Blogs you should be reading daily

money making

We have picked the most informative and regularly updated blogs about investing, ran by professional financial experts and researchers. The best part is that all the knowledge is given for free, so here is your unending source of valuable online reading.

1. Enterprising Investor by CFA Institute

The blog is in the world’s TOP-3 of the best blogs about smart investing. Here you will find an impressive diversity of articles that cover all topics related to economy and investments. Authors – are financial experts (including Ph.D.) making researches and reviews on daily basis and sharing views with their readers from all over the world. Along with investment reviews and advices you will find great tips on how to improve own mindset to show better investment performance. All articles are available for free access.

Enterprising Investor

2. The Big Picture

The blog is launched by the Barry Ritholtz, the CIO of the Ritholtz Wealth Management. Barry makes great data-saturated reviews, written by understandable (even for newbies) language.

investors

He covers U.S. economy and Trump-related shifts to make it easier for investors to stick to their directions investment strategies in a modern economic environment. The author writes excellent pieces for startups investors, providing them with clear and deep analysis of main sectors of the economy: agricultural, high-tech, finance and banking. The content is updated several times a day where three-four new reviews are added. We consider “The big picture” blog an amazing, investment-oriented alternative to large international newsfeeds.

3. The Reformed Broker

broker

A NY-based financial advisor makes daily updates by creating an excellent investment content for individual and corporate investors who want to have a fine-tuned info-assistant. The blog is oriented on helping investors align their investment actions with financial goals, by providing them with valuable daily tips, recommendations, and practical advice. “The Reformed Broker” updates once or twice a day, keeping our eyes on the ball. Highly accurate forecasts, along with regular reviews made the blog one of the most widely read online resources throughout the Internet. The blog is in TOP-10 in the biggest ratings.      

4. Good Financial Cents

finance

This pretty small but highly informative resource is everything you need to have to read about the most important things of personal finance. It is not only the teaching blog but also the inspiring resource that stimulates everyone to become financially independent by making wise and reasonable investments. The runner of the blog is also a well-known author of a book on personal finance and a CEO of a wealth-management Company. He says his mission is to make people ready and knowledgeable enough to take charge of their lives to create a wealthy, financially independent future, “cent by cent”.

5. Financial Samurai

business

It’s definitely not for those who plan financial hara-kiri, but rather for those who consider themselves true financial warriors, not willing to give up any potentially profitable opportunity. An exceptional concept is backed by the well-written posts and valuable advice that author provides us with taking no fee for it. Moreover, he offers a free wealth management service in order to help us optimize our capital.

The resource is updated regularly and the content is not like that one you can find on hundreds of financial web-pages. This blog is exclusive, very specific and written by plain and simple words.  

6. Kathryn Cicoletti, Ms. Cheat Sheet

investment

An extraordinary smart author has made an exceptionally interesting blog about personal finance and investment. Who could ever think before that financial blog could be captivating and even funny? A former financial analyst gives us high-quality content, both in written posts and in a format or letters.

She claims that finances will never be boring again for her followers and she keeps her word. You can leave your email to receive letters with analysis of current economic and investment opportunities and risks.

Kathryn Cicoletti is also an author of the best-selling book you can get through her blog.

7. Crossing Wall Street

money making

Eddy Elfenbein, who is a professional speaker and portfolio manager is an author of the blog dedicated to investment. The author knows the inside “kitchen” of the Wall Street and lead the readers through a very-well written analysis, reviews and news that make an impact on everything that relates to moneymaking.

Dozens of reviews and news are placed daily on pages of Eddy’s blog, so you will stay informed on every significant shift in the Corporate world: merging and acquisitions, shares prices forecasts, macroeconomic news and data – all this and much more if delivered in comfortable, brief, and neat manner.   

8.Obvious Investor

investing

Here you will find everything you need for low-maintenance investing. Unlike many other investment blogs, “Obvious Investor” is purposed for lifting up the financial literacy level by providing a simple and clear explanation on various topics. Tips, articles, accounting lessons, and other types of really good read are available for free. We find it extremely helpful that the author explains in detail all aspects of tax planning and budgeting for the average normal person. By reading “Obvious Investor” you can save lots of money as you won’t need to hire a financial expert to make up your financial issues or clarify questions related to it.

9. Sure Dividend

stocks

If you are into investing in stocks, especially in high-yield stocks of small Companies, you will find this professionally written blog a “holy grail” for your daily investment steps.

The author, Ben Raynolds, provides a deep analysis of stocks (S&P500 and other), with pretty accurate forecasts for long-term investing and short-term trading. All content is easy to comprehend and implement due to lots of visuals and charts that accompany financial analysis. The content is updated regularly, about 6 times a week, so you will always stay well-informed about market sentiments and trends on stocks exchange.    

10. Abnormal Returns

investing

The title of the blog lives up to its name totally. Everything here is dedicated to getting maximum returns from whatever you invest in. By subscribing (leaving your email) you get yourself a daily dose of most precious financial advice from the whole investment blogosphere.

The author (Tadas Viskanta) of the blog does not create his own content but instead collect the most valuable pearls of financial analysis and investment tips from the whole Internet. What he also does is select the really helpful ideas and forecasts and separate it from the tons of “bs” you will lose yourself in by surfing the Web on your own.

11. Irrelevant Investor

Investor

Director of Research at Ritholtz Wealth Management provides his reader with a sophisticated financial content with daily updates. The pages of his blog treasure brilliant articles for traders and investors who prefer active strategies and maximized returns. If you need to get an exact stock exchange indexes and securities analysis with the explanation of shifts and market sentiments – you are welcome to follow Michael Batnick and raise your investment outcome. Actually, we find this blog mandatory to read for everyone who is involved in stock trading (or any other type of securities).

12. Gannon on Investing

Investing

Along with providing great analytical pieces for the common audience, the author does the write-up on preferred stocks on demand. You will find here Gannon’s own research and analysis as well as recommendations on what sources and blogs you should be reading in order to have a full and clear picture of the investment environment. He posts comprehensive and detailed (backed by charts) reviews of specific stocks regularly (with the free access to all materials).

Posted in Financial Advisor Tagged with: , , , , , , , , , , , , , , , , , , , , ,

The TOP-10 biggest investment frauds in modern history

investment

The investment world is full of temptations in terms of easy and dirty money. From time to time world’s newspapers blast with another loud story of billion dollar scam investigation. The scenario is always almost the same: a promising looking Corporation, fooled investors, fake accounting reports, and a financial disaster as a result. Needless to say but all “key heroes” of these frauds are now in jail.

Let’s take a look at the most notorious investment scams in a modern history, which were committed with the purpose to earn billions, but ended up with the jail sentence.

1. The case of Bernard Madoff

This case has shaken the investment world in the 2008 year, when the criminal scheme exploited by a billionaire Bernard Madoff was revealed.
Madoff used a well-known Ponzi scheme to collect money from investors and pay dividends from incoming funds of newly entered investors. The “bubble” exploded in one day when the thousands of fooled investors have lost their money, by bringing Benard Madoff staggering 65 billion dollars.

Bernard Madoff

The court gave to Bernard Madoff 150 years in prison and his case was officially announced the biggest investment fraud in history, committed by an individual. Also, this case has triggered some changes in financial laws and rules.

2. Kazutsugi Nami and L&G Company

This Japanese founder of the “Ladies &Gentlemen” (L&G) food company, has managed to involve into fraud thousands of individual investors who trusted him with their money. He was arrested in 2009 due to a massive fraud with invented by him virtual currency called “Enten”. The total amount of investor’s money involved into Nami’s fraudulent scheme is above 1 billion dollars.

Kazutsugi Nami

Tokyo-based chairman of L$G Company (that went bankrupt shortly after Nami’s arrest) has managed to use the well-known “Ponzi scheme” with an unbelievable success. He attracted money by promising people 36% of yield, so before the arrest, he owned a financial pyramid of the 128 billion yen net worth! 

3. The “Enron” case in 2001

Enron Corporation

Enron Corporation case is officially called the largest investment scam as the total amount of money involved in the fraud was about $65 billion. The energy company was accused of a large-scale accounting fraud that eventually took out about 80 billion dollars from the stock market and undermined the whole financial market of the country. Being, probably, the most discussed investment scandal, Enron Corporation shares collapsed from 90 dollars to unbelievable 1 dollar and even below that. The story has ended for the founder of Enron with 24 years of sentence in jail.

4. Joseph Nacchio and Qwest Communications International fraud

The former Chief Executive Officer of the Quest Communications International was arrested in 2007 for committing one of the biggest investment scams through inside trading and false data that made investors buy the worthless shares of his company.

Joseph Nacchio

The key of his scam was the misinformation about the performance of his company. Nacchio convinced investors they are about to get a huge profit as shares will soon rise to an all-time high, who in facts, his company was heading to the financial catastrophe. The total amount of Nacchio’s scam is about $3 billion.

5. Bernard Ebbers and WorldCom scam

Before the famous case of Bernard Madoff, this financial scandal with the WorldCom company was the largest scam in the U.S. history. The founder, Bernard Ebbers, has managed to mastermind the $100 billion investment scam by giving a false hope and misleading information to investors who were buying shares of the WorldCom at $64 per one share (which was an unimaginable price these times).

Bernard Ebbers

Bernard Ebbers was the one aggressive investor who was constantly acquiring smaller companies in hopes to enlarge the market share for WorldCom. It’s hard to believe, but more than million private investors bought shares and bonds of the WorldCom and have lost their money eventually.

6. Sam Israel and the case of Bayou Hedge Fund Group

This case of investment fraud is not that significant as previous ones, but it devastated financial status of thousands of people who trusted the Bayou Hedge Fund with their money (about half a billion dollar).

Sam Israel

He had promised to his gullible investors that in ten years his Company will raise from $300 million to mind-blowing $10 billion. Furthermore, when in the 1998 year the Fund showed dramatically poor performance, Sam Israel faked accounting reports and sent it to his all investors. Based on these fake reports investors kept bringing money having no idea what’s really going on.

When the fraud became revealed, Sam Israel was sentenced to 22 years in prison.

7. HealthSouth case in 2003

The company was the leading Corporation, providing health care services in the U.S. HealthSouth showed a massive growth that allowed it to buy several small companies to increase the market influence. The beginning of the end has shown up when the CEO Richard Scrushy has commanded his accountants to falsify accounting reports the purpose to show the higher net profit numbers to investors.

health care services

Another “nail in the coffin of HealthSouth was placed by the founder when he sold company’s shares massively on the eve of Company’s loss report release.

8. Dennis Kozlowski and Tyco International

Dennis Kozlowski

As a former CEO of Tyco International, Kozlowski confessed to the court his shocking spending was out of “pure greed”. He stole more than 150 million dollars during his 27 years “career” in Tyco International by paying for his lavish lifestyle (luxury items, crazy parties, etc), and granting himself unauthorized bonuses from the Company’s budget.

Dennis Kozlowski has got a maximum jail sentence of 25 years and became one of the most discussed people who committed such a notorious fraud.

Posted in Financial Advisor Tagged with: , , , , , , , , , , , , , , , ,

Keys to stable and successful long-term investing

long-term investing

Let’s start with the basic rule of successful investing: you don’t have to be smarter than others but you have to be more disciplined than the rest. This is a number one rule of a #1 investor Warren Buffett who has earned his 60 billion wealth through making successful long-term investments.

Long-term investing implies different principles and different strategies, comparing to short-term money-making. An investor should not focus on rapid profit growth as it implicates increased risks. Long-term investing usually involves bigger money, so assets of high risks and high volatility may damage the whole portfolio. Let’s take a closer look at keys of success in long-term investing.

1. Stay calm during panic time

If you are after strategic long-term goals – there is no place for emotions. Panic often happens on the market, especially when certain economic or political news arrives.

Your main task is not to get your attention distracted by intraday market’s ups and downs from your long-term goals. If you have bought shares of really good, reliable company – never follow the crowd that will provoke you to sell it each time the market is panicking.

Stay calm

The really great and worthy vehicles will show steady gradual growth year by year with some short and sometimes rapid downtrends in between. Buy and hold – is the golden rule of successful long-term investing.

2. Diversification is the key

Success in long-term investing is impossible without smart portfolio management. Diversification may somehow limit the potential profit received from the price growth of a certain vehicle, but along with that it also limits the risk and (as a result) an extensive money loss if the price plummets.

In order to diversify an investment portfolio, you must keep the pool of vehicles in balance, according to the level of risk of each asset.

Diversification

Along with that, you should keep in your portfolio some “opposite” assets that means assets which price behaves opposite to one another when a certain economic situation occurs.

Also, there are investment instruments that are widely considered a safe haven, means whatever the circumstances or even global economic crisis when everything goes down in price, those vehicles go up in price as everyone starts converting their assets into that particular instrument: gold for instance.

3. Keep your long-term goals in mind

long-term goals

Keep your long-term financial goals in sight and never sacrifice them for the sake of the occasional risky deal, even if it promises a too “tasty” piece of a money pie. However, according to money management, if you can afford risking 20%-30% without having your long-term portfolio hurt, you can buy some high-yield risky assets. No short-term opportunities, however attractive they look, worth of changing long-term plans.

4. Don’t give a room for emotions

Whatever the market’s sentiment, you should trust only real data and long-term forecasts. You should never allow your emotions, whether it’s an excitement or fear of loss, make you overwhelmed. Your rulers are reasoning and calculations, rather than impulses and sudden decisions.

room for emotions

The most successful investors say, that if something looks too good – it’s highly likely a game of large investment corporations with the purpose to trigger massive sells or purchases or certain securities.

If you will follow your emotions like the 99% of market players, you’ll inevitably get a very costly lesson.

5. Revise and get rid of “dead” assets with no remorse

investment portfolio

You should revise your investment portfolio at least once a year or every time after a significant economic or political shifts. This will allow you to get rid of unsuccessful or zero potential assets in order to redistribute money among new vehicles.

6. Choose brilliant vehicles at fair price over fair shares

fair price

The number one rule of billionaires who made their wealth on investments is: don’t hunt for a price, hunt for excellent vehicles (shares mainly). Even if something mediocre (in terms of commercial potential) is offered at a very attractive price, you should not buy it, as it will inevitably go down sooner or later. Instead of this – look for really worthy stocks, and buy most brilliant ones, whatever the price.

7. Make discipline and patience your best friend

patience

Unlike in short-term investing, where a timely made unplanned decision can bring you some profit, long-term investments are based on patience. You should buy and hold vehicles that bring you moderate but regular stream of income, plus their value must gradually and steadily increase year by year.

Best vehicles for long-term investing

Here are the most reliable long-term investment vehicles you can choose under whatever circumstances:

  • Shares of the TOP companies: Apple, Amazon, Netflix and other companies that are #1 in their industries. Their shares are pricey, but they will bring you a guaranteed, steady growth.
  • Shares of leading companies of the biotechnology industry. This is the future. Many of these companies that are highly demanded now will disappear in future due to the rapid world’s development. The major breakthroughs are expected to happen exactly in the biotechnological sphere, so the lion part of investments will flow there. By buying now shares of these companies you will create your wealthy future.

long-term investing

  • Gold and other precious metals. Gold will stay liquid and highly demanded till the end of times. It does not matter what types of vehicles create the main part of your portfolio, but you should always include gold as this your guarantee and funds protection in a case everything will go wrong. Gold will save your money under any circumstances (even during a global economic crisis, when the rest of financial instruments go down).
  • Treasury bonds are semi-annually paid bonds (by the government). Treasury bonds will not bring high income but these are one of the most reliable securities for long-term investing.
Posted in Financial Advisor Tagged with: , , , , , , , , , , ,

TOP-10 richest and smartest investors of all times

investors

Fortunes are made not only on the legendary Wall-street. Most successful and richest investors reveal the stories behind their financial triumph and it turns out that most of them weren’t born with a silver spoon in a mouth. However, all of them have a phenomenal ability to foresee economic and investment trends, ups and downs and use it in own financial interests. Anyways, all of them had experienced huge losses at times but it’s truly remarkable how they have managed to get back on track in glory and win their “the most successful investors” titles. All of them take their honorable places at Forbes ratings.

Here are the TOP-10 investment stories behind the richest investors of all times.

1. Warren Buffett

He is the first is our list for a reason. His nickname Oracle of Obama deserves a special notice. Warren Buffet is undeniably the most famous and the richest investor of all times with the fortune of about $60 billion. Buffett’s investment preferences are broad: from investing in top U.S securities on the stock exchange to investing in economies of many countries, including countries of the third world.

Warren Buffett

His biggest Company Berkshire Hathaway with a colossal capitalization is being traded on Stock Exchange at a mind-blowing price of 185.000 dollars per one share!

2. George Soros

George Soros

Without a doubt, George Soros name is known to everyone in the financial world. His fame and success reached the peak in 90’s when he made a bet against the Bank of England and hit the jackpot. In that one single day in the 1992 year he made an unimaginable amount of 1 billion dollars. This deal remains the most successful bet of all times. Soros takes the 16th place of the richest people in the USA with his fortune of about $25 billion. His legendary investment fund “Quantum” earned him billions through investment in almost all possible spheres of economy. He is also a highly influential person in the political world and a sponsor of dozens of international projects and startups.

3. David Tepper

With the average 30% annualized returns the owner of “Appaloosa Management” fund David Tepper became arguably the most efficient investor of all times. For over than 23 years he was (and is) a manager of an 18 billion dollar hedge fund, that brought him his billions.

David Tepper

His net worth is currently over 11 billion dollars, which he has made through successful global macro investing and betting against main currencies, like euro. Last year Tepper has made a bet against euro and returned staggering 11 % and hundreds of millions of dollars (taking into account the volume he made a bet with).

4. Peter Thiel

This man has embodied the “American dream” in its fullest by making an unimaginably successful business from the zero. A co-founder and an owner of PayPal is one of the most famous and ambitious investors in Silicon Valley. Hi is known for his vast investment interests in biotechnology and medical spheres and other high-innovative fields. With the net worth of more than 2 billion dollars, Peter Thiel is one of the youngest billionaires of the Silicon Valley.

Peter Thiel

Thiel is not the richest investors, but he is on our list as the most interesting person with free views and ideas worth of reading the full interview with Peter Thiel.

5. James Simons

James Simons

The founder of one of the most successful ever hedge funds “The Renaissance Medallion Fund” and the owner of a $15.5 billion fortune, James Simons is a true self-made man with a PhD degree of University of California. His huge profits and meteoric career in the investment field is based on his innovation in analyzing short-term market’s inefficiencies. He uses computer models to foresee, predict and get the most out of occasional market’s spikes that for the majority of players seem unpredictable. In other words – James Simons earns where others lose.  Now, James Simons is named a “king of quantitative investment”.

6. Carl Icahn

Carl Icahn can fairly compete for the title of the most successful investor in history with the Warren Buffett.

Carl Icahn

His investment track record exceeds all possible expectations. Hi is still an active investor who prefers shares of such giants as Apple and Netflix and obviously, based on the successful performance of these companies, Carl Icahn receives greater and greater profits.  Currently, his net worth is 17 billion dollars.

7. Edward Johnson

The pioneer of discount brokerage market, Edward Johnson has pretty much shaped and developed an investment sphere the way we know it today.

Edward Johnson

Edward Johnson is a brilliant analyst with almost a paranormal ability to predict market’s behavior. His worldwide Company Fidelity Investment earns him hundreds of millions of dollars a year, so currently his fortune is estimated to be 9.3 billion dollars.  He was the first who made a big market available for small banks, brokers and investment companies by letting them trade with a discount and get the profit from any investment vehicle presented on financial markets.

8. Jorge Paulo Lemann

Jorge Paulo Lemann

Brazilian billionaire with the new worth of $29.6 billion is the founding partner of 3G Capital and the owner of 10% of the biggest in the world beer producing company Anheuser-Busch InBev SA. Lemann considers people with excellent skills as the foundation of his success. He prefers long-term and sustainable deals that bring income for many years. The billionaire leads active lifestyle and is a five-time tennis champion of Brazil. Along with that, Jorge Paulo Lemann is officially the richest person in Brazil now.

9. Ronald Perelman

Ronald Perelman

His taste for investments is so diverse that there is probably no sphere where Perelman has not reaches with his money. He invested in electronic devices, in cosmetics, IT technologies and many other industries. All that brought him staggering $14 billion of net worth. Perelman explains his success exactly by diversifying – investing in many different industries at the same time.

10. Michael Bloomberg

Michael Bloomberg

The former mayor of New York City was placed #2 in the list of the richest investors in the world. His worth net is $33 dollars that he has made through his vast investments and commodity trading.

Currently Michael Bloomberg is a philanthropist who donates billions to educational sphere (Universities and schools construction and development).

Posted in Funds Tagged with: , , , , , , , , , , , , , , , , , , , ,

Common Investment Strategy Types for the Stock Market

Common Investment Strategy

There are millions of operations performed on the stock market daily – and if you want to become a part of it as an investor the best thing you can do to start from is to get some information on 3 possible investment strategies for the stock market:

  • long-term investing
  • speculation
  • participation in mutual funds

Generally, stock market was designed to become a marketplace where goods could be purchased or sold and then it evolved into the place where operations with company shares were performed to attract investors. Nowadays due to the widespread network technologies and large number of advanced forecasting technologies stock market has became a place where almost everyone can participate and earn. However, that doesn’t mean this place is loyal to beginners – you still have to acquire some skills before you can feel confident on the stock market.

So let’s consider four types of strategies available for the stock market today.

Long-Term Investing

Long-term investing is something you can do to amass wealth upon your retirement. In order to find out about the best strategies on the stock market by Warren Buffett you need to be fond of making long-term investments only.

Warren Buffett 

So what is your goal when it comes to this kind of investments? You need to find a company that will perform successfully and tend to become old and reputable brand with a large market share. That means there is no place for fast exchange of assets on the market during the panic on the market or just because you have an opportunity to sell company assets for the good price.

Your goal is to leave shares in your portfolio and see how your dividends and share price grows annually. So if most of the professional traders are seeking for margins and numbers you should pay attention to the next factors when estimating company’s value:

  • product
  • competitive advantages
  • management
  • technology
  • development
  • industry perspectives
  • financial statement

Long-Term Investing

Pay attention to the fact financial statement is pointed to be the last in the lit. Although it is the first thing to be considered you should know that when you are making a long-term investment on a stock market you shouldn’t treat this factor as of high priority no matter what. Technologies, management and competitive advantages are much more important.

The success stories for long-term investments are amusing actually. Companies like Microsoft, Apple, Facebook and others are increasing their capitalization dramatically each year so long-term investing for companies like those is the good idea.

Speculation

Speculation on the stock market appeared from the beginning. speculation allowed is one of the main reasons stock markets allocated billions of dollars yearly as many people dream of earning on stocks.

Speculation is the most risky way of acquiring income on the stock market as if you are up to earn on speculation you need a good trader and a stable flow of insights as well as the advanced skills in information analysis.

Speculation

So how does it look on a stock market? For example, there a company A with a share price of $15. Those who are up to make long-term investments will acquire and keep shares of the company A even if the price will decrease dramatically and won’t sell shares of those grow as well. However, those are speculating and have bought the shares are very intense when it comes to change of price of the company shares. If shares of the company start to grow speculators usually buy shares to sell those at a higher price later, however if the price of shares start to fall, the sell it to save margin.

Speculation has no tolerance to beginners – you need to be sophisticated investor to earn on speculation and frankly this kind of earning can not really be called an investment.

Although speculation can bring you good profits in short terms, it is usually a bad strategy for the long-term period as when speculating you either have to play against market or always be the first to catch a trend which can be complicated.

Participation in Mutual Funds

When it comes to the stock market you can find out that most of advisors or traders cannot provide you with 100% guarantee that a certain company share will raise or fall (if you deal with fair one though). So usually your portfolio is being diversified no matter whether you have chosen speculation or long-term investment strategies.

Mutual Funds

And mutual funds were created to earn on indexes and usually can be called the essence of diversification as when you invest in mutual fund you are investing in market usually and your bet is most likely to play – as no matter what economy and industries grow from year to year before the next crisis appears on the scene.

Such a strategy is a good idea if you want to make a low risk investments managed by experienced financial advisors.

it has to be mentioned that mutual funds are almost ideal for making long-term investment to provide yourself with almost guaranteed passive income upon retirement.

Conclusion

Earning on stock market

Earning on stock market is harsh but possible. Stock market is the safest and the most reliable place to start learning how to invest as it is regulated and secured by government. However, it is risky as well especially if you make big investments without clear understanding of how everything works out there.

So if you want to become an investor on a stock market make sure you know your goal clearly. If you need high returns in several years, choose long-term investments, but if you want to earn fast at a high risk speculation and short-term investments are just for you.

However, if you believe the industry leaders the best way to earn on stock market is to make the minimum of moves and place long-term investments in the same companies and indexes which is not as fun as we can see it is done in movies.

 

Posted in Financial Advisor Tagged with: , , , , , , , ,

How to Use Warren Buffett’s Investing Advices?

Investment Management

Even if you are not involved to investing there is no chance you haven’t heard about Warren Buffett – one of the best investors in the world. His history of success is a matter of dozens of researches and thus his advices and recommendations are usually highly valued by those who get involved to investing.

So one of the most famous and credible advices you heard from Warren Buffett is “Be greedy when others are fearful, and be fearful when others are greedy”. Which means that basically Mr. Buffett recommends to play against the market and make the most unpopular and unpredictable moves on the contrary of the majority of other players on the stock market. However, you should not accept this advice literally as it has some limitations for usage.

Make Sure You Know How Market Works

Usually you can notice that there are cycles for markets to work on – companies’ shares grow or fall and sometimes you can see rather weak relationship between the price change and company’s performance. For example, when company’s price starts growing you can notice that other market players are purchasing shares as fast as possible to sell those for a higher price later.

How Market Works

That’s what Buffett calls greediness in his advice and he recommends to choose reverse tactics when most of the market players are behaving like that. And it is a good piece of advice as you should know that there is always a commission taken upon transaction and the income from operation is taxed so usually there is no sense in buying and selling when everyone does the same as market corrects rather quickly so you cannot make maximum of profit.

Consider Stock Market Valuation

The one factor you should always consider is the stock market value – whether it is rising or falling. Due the past decades the market raised dramatically with shortfalls though so your task as an investor is to provide brief analysis on whether market is rising now and what kind of deals would be the best idea on the current position.

Stock Market Valuation

When the stock market is starting to fall – this is the moment when most of the investors become fearful and start selling and that’s where you need to become greedy as Mr Buffett says. Why? Because in such an occasion when all market falls and stock prices fall as well most of the investors are being and panic and thus they do not provide proper estimation of assets owned. As a result most of the assets become underestimated and sold out for the price which is far lower than the fair one. So you should make sure you see the companies that costs more than marketed.

Such a strategy which is based on earning on market players’ mistakes is a good way to make successful long-term investments just because you know how the market works.

For Most People Active Fund Investment Management Is a Losing Bet

This is Warren Buffett’s conclusion he made after years of successful work on a stock market. Why is he saying that? Well, the reason is that he made some research which has shown that most of the amateurs that made long-term investments in one or several companies without selling stocks in case of price rising or falling made more profits than most of the professionals that made thousands of deals per year connected to purchase and sales of stocks.

Investment Management

The reason this fact has arisen is the fact that there all the deals on the stock market – especially short-term ones are taxed and submitted to commissions which significantly decreases margin from each deal separately.

Another reason is the fact that professional traders are usually only considering short-term factors when making investing decisions. On the contrary, business owners and managers make plans for years or even decades and these plans usually include falls as well with rises consequently.

For example, if there is a company A on a market that is already existing more than 5 or 10 years it is likely that it has a plan for any occasion and even if it loses competition the loss won’t be critical. Anyway, this A company is likely to improve capitalization each year on several percents and the longer it exists the less are the chances some risks are uncovered and the more reliable asset it becomes, the more is the market share.

Active Fund

One more example – this company A may costs $13 per a share today. But in a month the price per share may make $7. What is going to a professional trader? He will usually start selling company’s shares at the moment he sees those are starting to fall. However, this may not be an end the company A as due to the good management and new technologies researched to company managed to increase share price up to 97$ for five years. So if you have just bought the shares as long-term investments and did not give up on the company you can get more that 800% capitalization of your assets for five years – which is rather hard to achieve if you are a regular professional trader making short-term deals.

So if you are an amateur investor that has bought a share of a company on a stock market as a long-term investment you are likely to earn more in most of the occasions than a professional trader. And this was said by Warren Buffett – a person that provides sustainable 20% growth of capital annually for his investors.

Conclusion

Before using an advice of authority make sure you understand its essence and conditions under which adhering this advice would be the best strategy. If you want to know more about stock market investments and diversification of assets please read this article.

Posted in Financial Advisor Tagged with: , , , , , , , ,

How Investing Can Make You Rich Upon Retirement?

Start Investing

Most of the people treat investing a magic stick allowing to make a fortune in couple of years from a couple of thousand of dollars. Well, that’s wrong approach. Investing is more about a routine work with numbers which takes as long as half of your life to make a good retirement package to withdraw with.

So if you want to start investing today and provide yourself with a passive income you should know that investing is more about discipline and figures than about inspiration. Even if your salary is lower than $40’000 a you can amass wealth of $3’000’000 on the moment of your career ending with a significant passive income.

You think that’s impossible? Well, than you know nothing about compounding interest – the reason $100 invested in 1990 could turn into $1’700 in 2004. So below you gonna see recommendations and tips on investing for getting wealth retirement.

Start Investing Early

What is the most popular mistake of Americans today? They do not start investing early. There is no too late date, but due to the interest rates for deposits being compounded the earlier you start to invest the better it is. To make sure let’s consider standard situation. For example, you are 40 years old and you are going to retire at the age of 60 years. Your annual investment amount makes $20’000. So you will invest an overall sum of $400’000. Just calculate the amount of money you accumulate when you get 60 year if interest rate makes 4%.

Start Investing

Now compare these results to another situation when you are 20 years old and your investment payment makes $5’000 annually till you are 60 years old. So you will make $200’000 investments for 40 years which is twice less than the for the first example. But try to calculate the sum you amass at the moment you get retired if the interest is the same – 4% annually.

If compared and calculated you understand why it is better to invest early even if you cannot make any kind of large payments.

Consider Your Employer’s 401 (k) Plan Policies

Plan Policies

Although this plan is not the most profitable one as an investment upon retirement – this fact is fully covered by the fact you get guaranteed checks upon retirement no matter what. So do not hesitate to use this opportunity even if you have better investment options – as the better investment option is the more is the risk and this one considers a risk free passive income in the future.

Do Not Withdraw Investments – Rollover or Reinvest

One of the biggest mistake you can do when situation is changed concerning investments is to withdraw. Do not do it no matter (well, if it is not a matter of life or death). The thing is upon withdrawal you are submitted to penalties and you also lose all your bonuses and compounding benefits.

Reinvest

Just consider a rollover or reinvestment options without withdrawal and losing money. Just believe that such an approach allows you as an investor get much more funds upon retirement.

Do Not Limit Choice of Assets to Invest

There are many types of investments you can make. For example, you can make money on renting real estate  by purchasing buildings with good potential. Or you can buy shares of the companies on the stock market – there are many options to choose from. And the key to success is to make sure you do not cloe available options for you.

Diversification of assets is a strategy which considers purchasing of different kinds of assets so that the situation when you lose all your savings becomes impossible – and that’s what you should do to increase your chances to become rich.

Assets

However, most of beginners investors prefer to earn on short-term deals – the strategy which is a bad idea if you want to form a stable passive income. Why? the thing is short-term deals are taxed on higher stakes and demand from you wasting more time on investing and finding out what’s going on on a market. Long-term investments instead allow you to pay less attention to shortfalls that appear on the market and more rely on prospective.

The best idea for you is to find one or several companies on a stock market in different industries. You only need to purchase shares of these companies and do not sell those until you see the company is up to become a bankrupt. The thing is that if company exists more than 5 years on a market it is likely to expand and grow at least on 15% yearly – just calculate what that means in terms of long-term investments.

What is more? You can also invest in cryptocurrency if you know how it works. For example, if you know – the bitcoins costed nothing in 2009 and now a single coin costs $4800 or more. This is a key to success – you should find as many investment options as you can even it seems hard to you to find time for this – just consider the fact that once you have found a subject capable of bringing you passive income the chances you are going to become a rich man upon retirement grow dramatically.

Investing Is Not Only About Material Assets

Education is believed to be an investment as well. If you go through the course which can help you to improve your skills or qualification it is likely you will get compensated soon. Investments in education seem to be of the lowest risk and highest profit.

Investing

So if you invest in something that allows you to make your job better it is a good decision as you can invest more in future. Just consider you are going to invest in a course that will increase your income on 15%. If you are now investing $20’000 annually you can increase that some up to $23’000 or even more if you won’t increase your spendings. And this may cause increase of your balance upon retirement on a spare million or two dollars.

Conclusion

It doesn’t matter whether you want to become an investor or give up on a regular job or if you just want to make a guarantee of wealthy retirement – you should consider investment options accurately and always keep in mind that the earlier you start the better it is.

Posted in Financial Advisor Tagged with: , , , , , ,

The mastery of successful investment decisions: learn and apply

annuities vehicles

To be smart in investments means to have all chances to become rich and vice versa. This direct and merciless correlation wipes out an investor’s right for mistakes as one single wrong decision can literally cost a fortune.

If you’ll take closer look at the most successful investments in history, then you’ll see that seemingly lucky deals were not just a pure luck, but in fact, that was a wise foreseeing and clever money management. By analyzing those deals and interviewing some most successful and experienced investors, we have created the list of key concepts you should follow to make your money grow through smart and timely investments.

1.Evaluate risks and be ready for the worst scenario

The most successful decisions are made out of strategic view and profit hunger rather than risk avoidance. Therefore, in order to eliminate the fear from your inner investment reasoning, you should only invest the money that you psychologically are ready to lose. Always keep in mind the worst possible outcome of your investments and make sure that in a case if you will lose you money it will not influence your well-being and comfortable lifestyle.

risks

This approach will help you to focus on somewhat risky but potentially extremely profitable deals.

2. Think “long-term”

Do not ever make decisions based on short term benefit, as you may (and, surely, will) miss the bigger picture and bigger profit.

For instance, when the market starts panicking and starts selling/buying certain securities due to news or anticipations, you should not follow the crowd as it is usually a hoax created by “big fishes”. Big investors often wreak havoc artificially, with the purpose to make the crowd sell assets on low price so big bosses can buy it cheap.

long-term

Aim for long-terms investments and long-terms goals and pick vehicles accordingly: gold, shares of top companies, T-bonds, Real Estate. Don’t put the lion part of your money in high-risk and high-yield assets, but instead choose reliable vehicles that will make your income grow steadily.

3. Focus on profit, but don’t take unnecessary risk

Surely, a total risk avoidance will never make you wealthy as the most profitable deals always require taking a risk. Nevertheless, however strong you hunger for money learn to avoid unnecessary risks, as several small losses will eventually drain your account and destroy your confidence.

profit

It is very hard to resist the urge to join the market during a sudden and rapid uptrend, but remember: “easy money” is usually a trap many market players get into.

One of the best advice and most famous rules amongst top investors is: the best way to earn the money is not to lose it. (Steven J. Lee).

4. Include immediate annuities vehicles in your portfolio

annuities vehicles

During your long-term journey towards the wealth, you will need to have a guaranteed income that will keep you “afloat”. Securities with immediate annuities are the best addition to the long-terms investment strategy, so not only will you have a guaranteed income whatever the performance of your main investment portfolio, you feel also feel more confident and

5. Don’t sell prematurely

investment strategy

“Buy and hold” is the most famous investment strategy and it really works. Patience pays off especially when it comes to Real Estate, “blue chips” shares and precious metals. If you have found a great vehicle you believe in, whether it’s shares of a promisingly looking startup or other securities with outstanding potential. The most common mistake of beginning investors is a wish to sell something as soon as it has reached its first high. This move is driven by fear that the asset will bounce, go down and will never rise back to that price so the profit will be missed.

6. Adjust your decisions to your financial goals

financial goals

The first and foremost step that should precede any investing activity is financial goals setting. How much income do you wish to receive from your investments and whether you want your investment portfolio become the main source of money? If your income will mainly depend on how good the performance of your investment portfolio, there is an impropriate risk of “putting all eggs in one basket”, means losing everything at once.

7. Buy great assets on low price rather than “trash” assets on a great price

assets

It was said by the legendary investor Warren Buffet, that you should search for and buy outstanding vehicles with great perspective when those assets are at their lows (due to any reason), rather than buy something that appears to “shine” temporarily on the market. Learn to distinguish and identify what is worthy and what only seems so.

8.  Pick instruments that are purely data-driven!

 investment vehicles

This strategy of choosing investment instruments will let you be independents of any financial advisors and brokers as the only thing you will need to understand and predict the behavior of your vehicle is tracking the market data and economic news. Choose those investment vehicles which behavior you understand the most, so it will be easy for you to predict things, not just to react to market’s price moves.

9. While making money through investing, live within your means

investing

This is a basic, simple, and mandatory law of getting rich: spend less money than you earn. Do not make expenses that exceed your income in hopes that future profit from investments will cover your expenditures. This is a dead end that one day will make you bankrupt. That is why and you should only live within your actual earnings and start making big purchases only when investment fruits have already appeared.

10. Always reinvest

reinvest

Analyze your portfolio and figure out what is your most reliable vehicle in terms of steady income. Don’t mistake “reliable” with a high-profit one, as high-yield assets are usually risky and unstable in terms of income. So, after you have determined your most reliable investment instruments, get a habit to reinvent in them a part of your profit automatically.

11. Leave your emotions behind the door

Financial markets

Financial markets and investing are not the spheres to involve emotions. We are talking about being overexcited, greedy and fearful. Emotions are not your money friends but rather are the worst advisors in decision making. You should be reasonable, able to foresee and always calculate a risk/yield ratio to have a clear picture.

12. Make sure your  is in a healthy balance

portfolio

Diversification is a cure to everything. A healthy investment portfolio is something that will protect you from the catastrophic loss if one or two of your assets plummet in price, your other instruments that behave opposite to fallen vehicles will save the whole portfolio as their price is supposed to rise  (it calls risk hedging).

For example, it’s a very well-known fact that in a case major market assets fall due to the economic crisis, gold shows instant jump in price as everyone considers gold as a safe haven to keep money in.

Posted in Basic Investment, Financial Advisor Tagged with: , , , , , , , , , , , ,