Investment and Its Importance

Investment is important from many points of view. Before doing investment, it is essential to understand what is investment and its importance?

“Investment is an act of investing money to earn the profit. It is the first step towards the future security of your money.”

Need of Investment

The investment can help you in the future if invested wisely and properly. As per human nature, we plan for a few days or think to plan for investment, but do not put the plan into action. Every individual must plan for investment and keep aside some amount of money for the future. No doubt, the future is uncertain and it is required to invest smartly with some certain plan of actions that can avoid financial crisis at point of time. It can help you to bring a bright and secure future. It not only gives you secure future, but also controls your spending pattern.

Important Factors of Investments

Planning for Financial investment – Planning plays a pivotal role in all fields. For the financial investment, one must have a pertinent plan by taking all rise and fall situations of the market. You should have a good knowledge of investment before planning for financial investment. Keen observation and focused approach are the basic needs for successful financial investment.

Invest according to your Needs and Capability- The purpose behind the investment should be clear by which you can fulfil your needs from the investment. In investment, financial ability is also a component that can bring you satisfaction and whatever results you want. You can start investment from a small amount as per your capability. You should care about your income and stability to choose the best plan for you.

Explore the market for available investment options – The investment market is full of opportunities, you can explore the market by applying proper approach. You can take help from financial planners, managers who have thorough knowledge about investment in the market. Explore the possibility of investment markets and touch the sublime height of success by the sensible investment decisions.

By taking help from an experienced, proficient financial planner and traders can also give you confidence to do well in the field of investment. Now the question strikes the mind that what are the types of investments?

Types of Investments

Mutual Funds- Basically the mutual fund is a managed investment fund in which money is pulled from the investors to buy the securities.

Commodity Market- In India, it is a popular place of traders to invest their money. The commodity market comprises of MCX (Multi Commodity Exchange) and NCDEX (National Commodity and Derivatives Exchange) both. In Multi Commodity Exchange market, you can invest in crude oil, precious metals as gold, silver and base metals as copper, aluminium, nickel, zinc and many more. While in National Commodity and Derivatives Exchange market, you can invest in all agricultural commodities as guar, soya bean, cotton, sugar cane and many more.

Stock Market- It is the place where various people trade globally and earn the maximum return on investment. However, it is essential to know the bull and bear of the stock market for investing in it. The Stock market for investment also includes the equity market and nifty market. You can invest in equities and nifty market and get good amount profit by focused approach and keen analysis of market trend.

Bonds – It is the best ways to gain interest on your principal amount. The interest and period of time depends on the agreement. In this, a holder lends a particular amount to the issuer (borrower) for a fixed period of time. At this time, you will get the interest from the borrower and after completing that fixed period of time borrower will return back your money. A long term tool for financial investment.

Fixed Deposits – The Fixed Deposit (FD) service is provided by various banks that offers investors a higher rate of interest on their deposits as compared to a regular savings account. Fixed deposits have the maturity date to gain the return on investment.

Real Estate- One can also invest in the real estate and deal with the residential and commercial property. This is also a trending way to earn a good return on investment.

There are various financial planners, financial managers, trading tips provider who can give you numerous options for investment in the market. But it is essential to choose the options wisely.

Finance, Credit, Investments – Economical Categories

Scientific works in the theories of finances and credit, according to the specification of the research object, are characterized to be many-sided and many-leveled.

The definition of totality of the economical relations formed in the process of formation, distribution and usage of finances, as money sources is widely spread. For example, in “the general theory of finances” there are two definitions of finances:

1) “…Finances reflect economical relations, formation of the funds of money sources, in the process of distribution and redistribution of national receipts according to the distribution and usage”. This definition is given relatively to the conditions of Capitalism, when cash-commodity relations gain universal character;

2) “Finances represent the formation of centralized ad decentralized money sources, economical relations relatively with the distribution and usage, which serve for fulfillment of the state functions and obligations and also provision of the conditions of the widened further production”. This definition is brought without showing the environment of its action. We share partly such explanation of finances and think expedient to make some specification.

First, finances overcome the bounds of distribution and redistribution service of the national income, though it is a basic foundation of finances. Also, formation and usage of the depreciation fund which is the part of financial domain, belongs not to the distribution and redistribution of the national income (of newly formed value during a year), but to the distribution of already developed value.

This latest first appears to be a part of value of main industrial funds, later it is moved to the cost price of a ready product (that is to the value too) and after its realization, and it is set the depression fund. Its source is taken into account before hand as a depression kind in the consistence of the ready products cost price.

Second, main goal of finances is much wider then “fulfillment of the state functions and obligations and provision of conditions for the widened further production”. Finances exist on the state level and also on the manufactures and branches’ level too, and in such conditions, when the most part of the manufactures are not state.

V. M. Rodionova has a different position about this subject: “real formation of the financial resources begins on the stage of distribution, when the value is realized and concrete economical forms of the realized value are separated from the consistence of the profit”. V. M. Rodionova makes an accent of finances, as distributing relations, when D. S. Moliakov underlines industrial foundation of finances. Though both of them give quite substantiate discussion of finances, as a system of formation, distribution and usage of the funds of money sources, that comes out of the following definition of the finances: “financial cash relations, which forms in the process of distribution and redistribution of the partial value of the national wealth and total social product, is related with the subjects of the economy and formation and usage of the state cash incomes and savings in the widened further production, in the material stimulation of the workers for satisfaction of the society social and other requests”.

In the manuals of the political economy we meet with the following definitions of finances:
“Finances of the socialistic state represent economical (cash) relations, with the help of which, in the way of planned distribution of the incomes and savings the funds of money sources of the state and socialistic manufactures are formed for guaranteeing the growth of the production, rising the material and cultural level of the people and for satisfying other general society requests”.
“The system of creation and usage of necessary funds of cash resources for guarantying socialistic widened further production represent exactly the finances of the socialistic society. And the totality of economical relations arisen between state, manufactures and organizations, branches, regions and separate citizen according to the movement of cash funds make financial relations”.
As we’ve seen, definitions of finances made by financiers and political economists do not differ greatly.
In every discussed position there are:

1) expression of essence and phenomenon in the definition of finances;

2) the definition of finances, as the system of the creation and usage of funds of cash sources on the level of phenomenon.

3) Distribution of finances as social product and the value of national income, definition of the distributions planned character, main goals of the economy and economical relations, for servicing of which it is used.

If refuse the preposition “socialistic” in the definition of finances, we may say, that it still keeps actuality. We meet with such traditional definitions of finances, without an adjective “socialistic”, in the modern economical literature. We may give such an elucidation: “finances represent cash resources of production and usage, also cash relations appeared in the process of distributing values of formed economical product and national wealth for formation and further production of the cash incomes and savings of the economical subjects and state, rewarding of the workers and satisfaction of the social requests”. in this elucidation of finances like D. S. Moliakov and V. M. Rodionov’s definitions, following the traditional inheritance, we meet with the widening of the financial foundation. They concern “distribution and redistribution of the value of created economical product, also the partial distribution of the value of national wealth”. This latest is very actual, relatively to the process of privatization and the transition to privacy and is periodically used in practice in different countries, for example, Great Britain and France.

“Finances – are cash sources, financial resources, their creation and movement, distribution and redistribution, usage, also economical relations, which are conditioned by intercalculations between the economical subjects, movement of cash sources, money circulation and usage”.
“Finances are the system of economical relations, which are connected with firm creation, distribution and usage of financial resources”.

We meet with absolutely innovational definitions of finances in Z. Body and R. Merton’s basis manuals. “Finance – it is the science about how the people lead spending `the deficit cash resources and incomes in the definite period of time. The financial decisions are characterized by the expenses and incomes which are 1) separated in time, and 2) as a rule, it is impossible to take them into account beforehand neither by those who get decisions nor any other person” . “Financial theory consists of numbers of the conceptions… which learns systematically the subjects of distribution of the cash resources relatively to the time factor; it also considers quantitative models, with the help of which the estimation, putting into practice and realization of the alternative variants of every financial decisions take place” .

These basic conceptions and quantitative models are used at every level of getting financial decisions, but in the latest definition of finances, we meet with the following doctrine of the financial foundation: main function of the finances is in the satisfaction of the people’s requests; the subjects of economical activities of any kind (firms, also state organs of every level) are directed towards fulfilling this basic function.

For the goals of our monograph, it is important to compare well-known definitions about finances, credit and investment, to decide how and how much it is possible to integrate the finances, investments and credit into the one total part.

Some researcher thing that credit is the consisting part of finances, if it is discussed from the position of essence and category. The other, more numerous group proves, that an economical category of credit exists parallel to the economical category of finances, by which it underlines impossibility of the credit’s existence in the consistence of finances.

N. K. Kuchukova underlined the independence of the category of credit and notes that it is only its “characteristic feature the turned movement of the value, which is not related with transmission of the loan opportunities together with the owners’ rights”.

N. D. Barkovski replies that functioning of money created an economical basis for apportioning finances and credit as an independent category and gave rise to the credit and financial relations. He noticed the Gnoseological roots of science in money and credit, as the science about finances has business with the research of such economical relations, which lean upon cash flow and credit.
Let’s discuss the most spread definitions of credit. in the modern publications credit appeared to be “luckier”, then finances. For example, we meet with the following definition of credit in the finance-economical dictionary: “credit is the loan in the form of cash and commodity with the conditions of returning, usually, by paying percent. Credit represents a form of movement of the loan capital and expresses economical relations between the creditor and borrower”.

This is the traditional definition of credit. In the earlier dictionary of the economy we read: “credit is the system of economical relations, which is formed while the transmission of cash and material means into the temporal usage, as a rule under the conditions of returning and paying percent”.
In the manual of the political economy published under reduction of V. A. Medvedev the following definition is given: “credit, as an economical category, expresses the created relations between the society, labour collective and workers during formation and usage of the loan funds, under the terms of paying present and returning, during transmission of sources for the temporal usage and accumulation”.

Credit is discussed in the following way in the earlier education-methodological manuals of political economy: “credit is the system of money relations, which is created in the process of using and mobilization of temporarily free cash means of the state budget, unions, manufactures, organizations and population. Credit has an objective character. It is used for providing widened further production of the state and other needs. Credit differs from finances by the returning character, while financing of manufactures and organizations by the state is fulfilled without this condition”.

We meet with the following definition if “the course of economy”: “credit is an economical category, which represents relations, while the separate industrial organizations or persons transmit money means to each-other for temporal usage under the conditions of returning. Creation of credit is conditioned by a historical process of fulfilling the economical and money relations, the form of which is the money relation”.

Following scientists give slightly different definitions of credit:
“Credit – is a loan in the form of money or commodity, which is given to the borrower by a creditor under the conditions of returning and paying the percentage rate by the borrower”.
Credit is giving the temporally free money sources or commodity as a debt for the defined terms by the price of fixed percentage. Thus, a credit is the loan in the form of money or commodity. In the process of this loan’s movement, a definite relations are formed between a creditor (the loan is given by a juridical of physical person, who gives certain cash as a debt) and the debtor.
Combining every definition named above, we come to an idea, that credit is giving money capital of commodity as a debt, for certain terms and material provision under the price of firm percentage rate. It expresses definite economical relations between the participants of the process of capital formation. Necessity of the credit relations is conditioned, from one side, by gathering solid quantity of temporarily free money sources, and from the second side, existence of requests of them.

Though, at the same time we must distinguish two resembling concepts: loan and credit. Loan is characterized by:

o Here, the discussion may touch upon transmission of money and also things form one side (loaner) to another (borrower): a)under the owning of the borrower and, at the same time, b) under the conditions of returning same amount or same quantity and quality of the things;

o The loaning of money may bear no interest;

o Any person may take part in it.
With the difference with loan, credit, which is somehow a private occasion of the loan, represents:

o One side (loaner) gives to the second one (borrower) only money, and _ for temporal usage;

o It may not bear no interest (if the assignment doesn’t foresee something);

o In it creditor is not any person, but a credit organization (at the first place, banks).
So, a credit is the bank credit. To our mind, it is not correct to use “credit” and “loan” as the synonyms.
Banking crediting is the union of relations between bank (as a creditor) and its borrower. These relations touch upon:

a) Giving a certain amount of money to the borrower for definite purpose (though, we meet with the so-called free credits, aims and objects of crediting are not appointed in the assignment);

b) Its opportune returning;

c) Getting percentage rate from the borrower for using the sources under his/her disposal.
The essential foundation of the credit essence and its important element is existence of trust between the two sides (in Latin “credo”, from which comes the word “credit”, means “trust”).
From the position of circulation of money forms (in the abstraction, historical process of formation economical relations and social budget and banking systems expressed by them) comparing different definitions of finances and credit, the paradox conclusion appears: credit is the private occasion of finances. And truly, from the position of movement of the money forms, finances represent the process of formation and usage of the funds of cash means. Very often such movements are fulfilled without returning, but sometimes, it is possible to give loans from the budget for the investment projects of other needs. Also, when a manufacture or corporations use their cash funds and we mean the finances of industrial subject, such usage may be realized as inside the manufacture or corporation (there is no subject about returning or not returning of the usage), so gratis under conditions of returning. This latest is called commercial form because of transmitting the sources to others, but even in this occasion, it is the element of financial system of the manufacture and corporation.

From the point of cash means movement, main character of credit is the process of formation and usage of the funds of cash means under the conditions of returning and, as a rule, taking the value-percentage. If gating the credit value doesn’t take place (even in the exceptional occasions), according to the movement form, credit becomes a private occasion of finances, as from the net financial funds (consequently from the state budget) the loans which bear no interests may be used. If gating credit value takes place, by the appearance form, credit is discussed to be financial modification.

From the historical point of view, finances (especially in the sort of the state budget) and credit (beginning with usury, later commercial and banking) were developing differently for considering credit to be the part of finances. Though, from the genetic-historical point of view, previous loaners, before giving loan, needed gathering the permanent capital not returning, that is the net financial foundation. The banks analogously needed concentration of the important own capital for influxing the consumers’ means and for getting higher percentage rate under the conditions of returning. Herewith, exactly on the financial basis, in the sort of financial fund (which later partially becomes loan fund) part of the bank capital appears to be the reservation (insurance) part of the fund, which by nature is financial and not loan. So notwithstanding the essential distinctions between finances and credit form the genetic-historical point of view, credit appears to be formed from finances and represent their modification.

From the essential position of expressing economical relations of finances and credit, we meet with cardinal distinctions between these two categories. Which mostly expressed by the distinction of the movement forms notwithstanding they are returnable or not. Finances express relations in the aspects of distribution and redistribution of social product and part of the national wealth. Credit expresses distribution of the appropriate value only in the section of percentage given for loan, while according to the loan itself, a only a temporal distribution of money sources takes place.
Herewith, there is a lot of common between the finances and credit as from the essential point of view, so according to the form of movement. At the same time, there is a significant distinction between finances and credit as in the essence, so in the form too. According to this, there must be a kind of generally economical category, which will consider finances and credit as a total unity, and in the bounds of this category itself, the separation of the specific essence of the finances and credit would take place.

Funding of the cash means is common to the researched economical categories. It takes place in any separate system of finances and credit, which have been touched upon during the analyses of defining finances and credit. Word combination “funding of the cash sources (fund formation)” reflects and defines exactly essence and form of economical category of more general character, those of finances and credit categories. Though in the in economical texts and practice, it is very uncomfortable to use a termini, which consists of three words. Also, “unloading” with an information hardens greatly its influxing into the circulation even in the conditions of its strict substantiation and thoroughness.
In the discussing context we consider:

1) wide and narrow understanding of economical category of the finances;

2) discussing finances in narrow understanding under general traditional meaning;

3) discussing finances, as funding of the cash means, in wide understanding, which concerns finances – in narrow meaning and credit – in complete meaning.
Termini “funding” and its equivalent “fund formation” are used by us as the purposeful structuring of cash means, which is based on two poles – accumulation of money sources (gathering) and its usage for definite purpose in the way of financing and crediting.
We have established a new termini – “finance-investment sphere” (FIS). Analyses about interrelation of finances and credit made by us give us an opportunity of proving, that in the given termini, the word “financial” is used with the meaning of funding cash sources, its purposeful structuring. In this process we consider at the same time financial, credit and investments’ economical categories.

Let’s sum up middle results of discussing new concept – “finance-investment sphere” and discuss its investment consisting parts.

The concept “investments” was brought into the native economical science from the West. In the Soviet economical science they for a long time used in the place “investments” the termini “capital placement”, which expressed the usage of the industrial factors in the sphere of real industrial activities during realization of capital projects. From one glance, this termini in its concept is identical to the “investments”, consequently it is possible to use them as synonyms. Though the termini “investments” and “investing” have the advantage towards the termini “capital placement” from linguistic and philological points of view, because they are expressed with one word. This is not only economical and comfortable in the process of working with the termini “investment” itself, but also it gives an opportunity of termini formation. More concretely: “investment process”, “investment domain”, “finance-investment sphere” – all these termini are much more acceptable.
Changing native economical termini with foreign ones is purposeful, if it really matters (by keeping parallel usage of the native termini for the inheritance). Though we must not change native economical termini into foreign ones all together, when by ordinal traditional language easy to explain private and narrow concrete processes and elements get their own termini. The “movement” of these termini is approved in the narrow professional bounds, but their “spitting out” into the economical science may turn economical language into the tangled slang.

Let’s discuss termini – “investment” and “capital placement’s” usage in the economical literature.
Investments are placement of funds into the main and circulation capital for the purpose of getting profit. “Investments in material assets – are the placements of funds into the mobile and real estate (land, buildings, furniture and so on). Investments in financial assets are the placements of funds into the securities bank accounts and other financial instruments”.

We don’t meet with the termini “investments” in the earlier economical dictionary, but we meet the combined termini “investment policy” – the union of the industrial decisions, which guarantee main directions of the capital investments, the activities of their concentration in the determinant suburbs, on which the reaching of planned rates of development of the society production is depended, balancing and effectiveness, getting more and more production and profit of the national income for every lost Ruble”. For today, in the most actual definitions, the capital investments are bounded only by financial means, when not only financial, but also the investment of natural, material-technical and informational resources takes place. Labour resources take an actual place in the investment process. They themselves fulfill this or that investment process.

A positive side of the discussed definitions is that they connect investment policy and capital placements (investments):

– economical development according to the key directions to the concentration;

– providing high rates of economical growth;

– raising an economical effectiveness, which is expressed:

a) by growing the throw off of the production and national income for every lost Ruble;

b) by fulfilling the branch structure of the investments;

c) by improving their technological structure;

d) by optimization of their further production structure.

Compared with such definition of the investments (capital placement) the definition of investments in the dictionary attaching the “Economics” seems to be unimproved: “investments – the expenses of gathering production and industrial means and increasing material reserve”. In this definition current expenses (production expenses) are mixed with the investment (capital) expense. Also, not the investment expenses but (though the investments are followed by the appropriate expenses) exactly advancing. It differs from the expenses by that the means (means) are put by returning the advanced values, also, under the conditions of growth, to which the concept-advanced capital is corresponding. the advancing may be realized in the money, natural-material and informational forms.

Except the termini “investments”, there are two more termini related with the investment. They are shown below.

“Human capital investment” – any activity provided for rising the workers labour productivity (in the way of growing their qualification and developing their abilities); at the expenses of improving the workers’ education, health and raising the mobility of the working forces”. It is very useful to use the mentioned termini, though it needs one correction: the human capital investments do not concern only workers, but also the servants, representatives of every kind of labour.
“Investment commodity, capital goods – a capital.”

In the official manuals of political economy of the reformation time the capital investments are discussed as “expenses for creating new main funds and widening, reconstruction and renewing the active ones”. In this definition the investments (capital placements) during separation of the forms (types) of further production of the main funds are bounded only by main funds (without increases of the circulation funds and insurance reserves):

a) creating new ones;

b) widening;

c) reconstruction;

d) renewing.

Also, the concept of the industrial gathering appears, at the expenses of widening of basic, circulation funds and also insurance reserves takes place”.

You’ll meet below the definitions of investments from “the course of economy”: the investments are called “placements of fund into the basic capital (basic means of production), reserves, also other economical objects and processes, which request long-termed influxing of material and cash means. “According to the division of capital into physical and money forms, the investments too must be divided into material and cash investments”.

They apportion investment commodity, to which belong industrial and nonindustrial building objects, vehicles purposed for changing or widened technical park and the furniture, increasing reserves and others.

“They call the total investments of production an investment product, which is directed towards keeping and increasing the basic capital (basic means) and reserve. Total investments consist of two parts. One of them is called the depreciation; it represents important investment resources for compensation of renewal till the level of before industrial usage, wearing out and repairing of the basic means. Second consisting part of the total investments is represented by net investments – capital investments for the purpose of increasing basic means”. Depreciation is not a compensation resource of wearing the basic funds out, but it is the purposeful financial source of such resources.
Human capital investment is “a specific kind of investments, mostly in education and health protection”.

“Real investments are the investments in the economical branches and also, they are kinds of economical activities, which provide influxing the increases of real capital, that is increasing material values of the industrial means”. We can agree with such definition with one specification that material and nonmaterial values too belong to the real capital (wealth), consequently science-researching experimental-construction results, various information, education of he workers and others. Such service as organization of the excitable games, also the service of redistribution social wealth from one private person to another (except charity).

“Financial investments represent placement of funds into the shares, obligations, promissory notes, other securities and instruments. Such investments, of course, do not give increases of the real material capital, but they help getting profit, consequently at the expenses of changing the course of the securities in the time of speculation, or distinguishing the course in different places of sell and purchasing”. We share wholly such definition, hence it follows that financial investments (if it is not followed by real investments as a result) do not increase real material wealth and real nonmaterial wealth. According to this context, the expression below is very important: “we must distinguish financial investments, which represent placement of the funds in the ways of selling and purchasing the securities for the purpose of getting profit and financial investments, which become cash and real, moved to real physical capital.”

In the “economical course” quoted before long and short-termed investments are separated. Recognizing the existence of the bounds between them, the authors ascribe short-termed investments to “one month or more” investments. If we get such conditioned criteria, that we can call the investments which overcome the terms of some months, long-termed ones, which is very doubtful and we don’t agree with it. A long-termed character of the fund placement is a significant feature of the investments (short-term doesn’t combine with the concept of investments). Principally, it would be better to point out quick compensative, middle termed compensative and long-termed compensative investments:

– less then 6 months – quick compensative;

– from 6 months up to the year and a half – middle termed compensative;

– more then the year and a half – long termed compensative.

We stopped at the definition of the investments in the capital work “economical course” for the special purpose, as, in it the author tried to discuss the concept of investments systemically and quite completely, herewith the book is published just now.

We’ll return to the discussion the definition economical category of “investments” in different publications in the following chapter. The definitions given here are quite enough for having a notion of the level of lighting up the given category in the economical literature.
What conclusions may be made according the definition of the mentioned economical category in the published works, except the made notions and specifications?

There is quite deeply, concretely and thoroughly defined the concept of “investments”, different definitions in the economical literature; but mostly in every works about the investments discussed by us until now, there is not opened the essence of investments as an economical category. In every monograph , even if it has a title investment, as an economical category , there is given only the definition, concept of investments. But, as the Academician Vasil Chantladze explains, “a concept is a discussion, which proves something about the distinguishing feature of the researched object. A concept out of much essential characteristic features represents only one, and essential in it is only – definition”.

But the categories are much wider; it is “a key, the most fundamental concept of every science”. Economical categories theoretically represent real, objectively existed productive relations. A category is the defining of occasions of existed characters, connections, relations of the objective world. Generally, any educational process is fulfilled by the categories, which give opportunities for dividing the processes and occasions semantically, for expressing the definitions of a subject and realize their specific peculiarities and economical relations of a material world.
Our goal is exactly to substantiate investments – as an economical category and also, as a financial category in the narrow understanding.

Here we apply for another manual thesis made by the academician Vasil Chantladze: “every financial relation is an economical one and every financial category is and economical one, but not every economical relation and economical category is financial relation and financial category”.
In the process of defining the investments, it is important to take in mind the sides of resources, expenses and incomes, because investment, from one side, is the result of the manufacture’s activity, and, from another one, – a part of income, which, in this case, is not used for usage.
Another occasion: it is advisable to discuss investments in two aspects: as a category of reserve and flow, which will reflect exactly the connection between “placement of funds” and “investments”.

As we’ve mentioned above, not long ago, in the well-known Soviet literature the concepts of “the placement of funds” and “investments” were accepted to be the synonyms and concerned to be investment of sources for further production of the main funds and formation of the turnover funds. We meet with such understanding of the concept of “investment” (here, they separate three types of the investment expenses: investments in the basic capital of investments, investments in the house building and investments in the reserves) in the modern economical publications and it is mostly used on the macro level during a statistical analyze of economical processes. In this concrete occasion investment is the category of reserve.

Investing Money in 2014 and 2015 for Retirement – An Old Pro’s Viewpoint

In 2014 and maybe 2015 and beyond, investing money will be tougher and putting together the best investment portfolio might mean investing money for safety vs. higher investment returns. The best investment ideas are slim pickings. There is very little that is normal in today’s world of finance. My reasoning and background follows.

In 1971 I had my Masters in Business (finance) and knew nothing about the investment world or investing money. Actually, I found it quite embarrassing, because adults that I would meet in the business world thought that I might have the best investment ideas in my pocket – due to my education. The years that followed were not the best investment environment, and I became a stock broker in Columbus, Ohio in 1972. I learned real quick what my job was really all about: selling investment ideas… SELL the sizzle NOT the steak… I was informed by my sales manager.

Forty years later, investing money is a game that I find has changed little. It’s all but impossible to find the best investment, and the world of investing money is primarily a sales game aimed at uninformed investors (more than 90% of the investing public). I once read that NOW is always the hardest time to invest money. I’ve seen difficult times in the markets for over 40 years and I’ve NEVER repeated that phrase until now.

At this time, I am afraid that it is really true. Allison and I have three children, who are all basically 30-something and trying to make it in a difficult world. Investing money for retirement is not an option for them. It is an absolute necessity if they don’t want to work for the rest of their life. Many folks my age are covered by pension funds plus other entitlements, but that’s not the norm for 2014 and beyond. Now, let’s get down to business and talk about investing money in 2014 and beyond; and the best investment ideas I can muster as an older (but still on top of my game) retired financial planner.

If you have a 401k at work participate in it, and take maximum advantage of your employer’s matching contribution if your company offers this feature (it’s free money). Investing money here is automatic and almost painless. This is one of the best investment ideas available for accumulating a nest egg for retirement. Plus, the tax advantages will put a smile on your face each year at income-tax time.

Open a Roth IRA with a major NO-LOAD mutual fund family and start investing money each month through their automatic investment plan. Enter “no-load funds” into a search engine and you’ll see some of the biggest and best fund companies at the top of the page, names like Vanguard, Fidelity and T Rowe Price. Give them a toll-free call if you have questions – like do you qualify, how much can you invest a year, and will they send you free literature. A Roth IRA (or Roth 401k if available) is one of the very best investment ideas for accumulating money for retirement. A Roth account (IRA or 401k) is TAX FREE investing, as long as you follow the rules. Tax free is as good as it gets and difficult to find.

Mutual funds are the average investor’s best investment vehicle because they offer both professional management and instant diversification in the form of a managed portfolio of stocks, bonds, and money market securities. When you invest money in a fund, you own a very small part of (own shares in) a very large investment portfolio. There is always a cost for investing money in funds. All funds charge for yearly expenses. This can amount to less than 1% a year in NO-LOAD FUNDS, with no sales charges when you invest money and no extra ongoing management fees. Or, you can pay 5% in sales charges off the top when you invest money, 2% or more for yearly expenses and 1% to 2% in additional management fees if you work through a sales rep (financial planner, adviser, or whatever).

One of the best investment ideas for 2014, 2015 and beyond: keep your cost of investing money as low as possible. This could make a difference of tens of thousands of dollars over the long term. A dollar saved is a dollar earned.

Do all that you can to learn about investing money; and especially learn about stocks, bonds, and mutual funds. Once you understand stocks and bonds, getting a handle on mutual funds is a piece of cake. What are the investment options inside your employer’s 401k plan? The vast majority of them are likely mutual funds – mostly stock funds, bond funds, and/or balanced funds (that invest in both stocks and bonds). There will likely also be one or two safe investment options that pay interest: a money market funds and/or a stable account.

Investing money successfully in 2014 and beyond could be very difficult due to today’s investment environment. First, record low interest rates mean that safe investments that pay interest are paying close to nothing. Second, bonds and bond funds pay more interest, but when interest rates go back up to normal levels they WILL LOSE money; that’s the way bonds and bond funds work. Third, stocks and stock funds are pricy, having gone up in value and price well over 100% since 2009. In other words, best investment ideas are few and far between.

Here’s the best investment strategy in 2014 and beyond for beginners who want to start investing money for retirement and keep it simple. In a 401k and/or Roth IRA account invest (monthly or each payday) equal amounts into a stock fund, bond fund, and money market fund. If your 401k has a stable account option use this instead of the money market fund if it pays more interest.

Mutual funds are always one of the best investment ideas for most investors – if you invest money in low-cost no-load funds. (Your 401k plan should have no loads, sales charges). When investing money for retirement in 2014 and 2015 keep three factors in mind. Two of these always apply: keep costs low and invest money across the board in all three fund types listed above. Your third factor is to give money market funds equal weight in 2014 and beyond for added safety. Normally, you would give them less weighting.

Is Out-Of-State Real Estate Investing Right for You?

Have you made up your mind to start investing in real estate, but you’re torn in deciding where to invest?

Are you thinking about making a local investment, but wondering if an out-of-state investment might be better?

This is one of the first of many choices you’ll have to make when you decide to invest in real estate: the simple question of where you should invest your hard-earned dollars. While there are definite benefits to investing in your area, there are also some potentially profit-limiting downsides.

That’s not to say investing in outside areas doesn’t have its own pros and cons. Let’s take a look at both and see why out-of-state real estate investing might be a profitable option you have not yet explored.

Investing Locally

This is the most obvious choice for many real estate investors, but is it really right for you?

If you choose to buy a property local to you, you’ll rest easier about your investment since you know the market. First, you know your competition. You might know the names of professionals you can trust and you’ll have an intimate understanding of what the cost of living is for that area and how to make things more affordable.

Second, if you like to be hands-on, it will be much easier for you since you’re right there. If you want to see the property, it’s just a short drive away. If you want to talk to the property manager face-to-face, you just put it on your calendar for the end of the day.

Drawbacks to Local Investments

On the other hand, investing solely local can narrow your options. Not every market has the inventory of good investment opportunities that you can avail yourself of if you invest out-of-state. The local inventory of available properties may or may not be big enough or well-suited for investment opportunities.

You also run into the problem of whether your local market is the one you want. The recession made a huge impact on housing markets throughout the country and some areas have recovered at different paces than others. You might find yourself out-priced in your current market, but even if you aren’t, you might not be able to see a favorable future where you’re at.

Investing Out-of-State

If you decide to invest out-of-state, you can greatly increase your options. You can literally choose any location, any market and invest in properties there. Whether you want to invest in Florida vacation homes and coastal villas or homes in the suburbs of Detroit, the sky’s the limit. You can make your investment fit your price point and interests.

By investing out-of-state, you can put your money to work in markets with high ROI. You pick and choose which markets you’re interested in, and which ones are rising stars in the real estate investment scene, ignoring your own market’s changes.

Investing out-of-state also allows you to scale based on your needs. For many would-be investors, their local market is priced too extravagantly to make real estate investment prudent. The cost of living in a different state, just a few borders east or west, might be considerably lower. That means you can snatch up excellent properties at a much lower cost than you might in your own market.

Even better, you can snag those investment deals on excellent properties that would go for three to four times as much, if not more, in your own local market. Your purchasing power becomes much stronger in other markets, because everything’s relative.

Challenges of Out-of-State Investments

There are still some challenges to these remote investments. First of all, you have to learn who you can trust and maintain the peace of mind that comes from having easy local access to your investment. You also have to be able to trust that the property you’re investing in is what it’s advertised as.

The property is also more difficult to visit if you like to be hands on. You might have to fly out to visit the property, which some people enjoy but others are seriously bothered by. If you are the type of investor who prefers the more passive turn-key approach, this is an excellent opportunity.

Finally, the market won’t be what you’re used to. Nothing will be quite the same as being there and immersing yourself in the market, but you can learn and study. You just have to rely on someone else to have knowledge of the nuances of the market.

Doing Out-of-State Right

There is a solution to all of the challenges of real estate investing outside your state. When you find a reputable, proven company to handle your turn-key real estate transaction, you have someone you can count on to know the market you’re investing in. Here are the main reasons you should find a partner to work with you on your out-of-state investments.

  • They can keep a more educated eye on the market, since they know all of the nuances of that area.
  • They’ll serve as your presence near your investment, keeping everything on track, so you don’t have to make numerous trips to the property.
  • If the turn-key real estate investment firm is reputable, they want you to succeed. This means they’ll do anything they can to make sure you do succeed.

The question becomes, whom can you trust? You want to make sure you engage in a partnership with a firm who is reputable, knowledgeable and engaged in your market. Referrals from other investors are key, so be on the lookout for like-minded people who have been there and done that.

You should also investigate what the turn-key operation offers you, and what their fee or cut of your profit is. Ideally, you’ll want a partner who can help you throughout your investment lifecycle, from acquiring the property to managing it.

Getting Started

We’ve gone over the benefits and drawbacks of out-of-state investing, so now the decision is yours to make. Do you still want to invest locally or have you realized that the time is ripe to diversify your portfolio and invest in out-of-state properties? The benefits of out-of-state real estate investment are huge and the drawbacks can easily be mitigated by partnering with someone in the area in which you’re investing.

Even Beginners Can Make Money Investing in Mutual Funds

Even if you don’t really understand stocks and bonds and the markets they trade in, you and other beginners can make money investing in mutual funds once you get a handle on the mutual funds universe. Here we take the mystery out of investing for beginners.

News flash: Tens of millions of Americans make money investing in mutual funds without knowing what they are doing. Caution: They also lose money unnecessarily and they are not investing as beginners, because they have been doing it for years. Let’s look at what you really need to know to make money investing on a more consistent basis while avoiding serious losses.

Mutual funds were created and promoted as the average investor’s vehicle for investing money in stocks and bonds. That’s just what they are – packages of investments managed for investors by professional money managers. They make investing for beginners simple. You simply open an account, and put your money down with instructions as to how much to invest in which funds. Example: You send in $10,000 to buy shares of ABC Stock Fund. Soon you will own shares in that fund and will own a very small part of a very large portfolio of stocks. The number of shares you will own will depend on the share price at the time your purchase order is processed.

Whether or not you make money investing in mutual funds without taking much risk depends on which funds you invest money in and how you go about it. There are basically three traditional fund alternatives: stock (diversified), bond, and money market funds. You should invest in ALL THREE TYPES if your goal is to consistently make money investing in mutual funds. You also need to understand asset allocation, so you can tailor your total mutual fund portfolio to fit your risk profile. And remember, investing for beginners need not be difficult.

Diversified stock funds are the riskiest of the three and they are your growth engine for earning higher returns. They invest your money in a broad spectrum of stocks representing a number of different industries. This makes investing for beginners simple compared to picking your own stocks. You make money investing here primarily through price appreciation (the fund share price going up) and through dividends. The major risk: share prices fluctuate and can fall significantly when the stock market falls. One year you can make 20%, 30% or more; and you can also lose that much. Over the long term, investors have averaged about 10% a year. Notice I said LONG TERM.

Bond funds invest your money in bonds, which are debt securities that pay interest. Their primary objective is not growth, but rather to earn higher interest for investors than they could earn from safe investments like bank CDs. Traditionally, you make money investing in these mutual funds primarily through the dividends they pay you from the interest they earn. Normally they pay considerably higher dividends than stock funds do, but similar to stock funds their share price fluctuates (usually much less). You can profit from higher share prices, but you can also lose money here. They are considered to be safer investments than stock funds, but bond funds are not necessarily safe investments.

Money market funds invest your money in high-quality short-term debt instruments (IOUs) and pay current interest rates in the form of dividends. Unlike the other two mutual funds, their share price is pegged at $1 and does not fluctuate by design. As interest rates go up the dividend increases, and as rates fall so does the dividend. You make money investing in these mutual funds only through the dividends paid. These mutual funds are considered to be safe investments, and can be used as a cash reserve awaiting bigger opportunities.

To make money investing in mutual funds without worrying your head off you should invest in all three to have a balanced investment portfolio. Here’s what I mean by balance and why it is so important to investing for beginners. Holding either stock or bond funds involves the risk of losing money. If you invest in both this will lower your overall risk. Reason: oftentimes losses in one are offset by gains in the other. Money market funds add flexibility and a cushion of risk to your overall portfolio of mutual funds. The more safety you want the more you allocate to money market funds.

An example of investing for beginners follows. You invest $10,000 equally allocated to the three basic fund types. A couple of years later you see that the stock fund is worth quite a bit more than the other two. The good news is that stocks performed very well. The bad news is that a major decline in stock prices could wipe out your profits and more. To keep things in balance, rebalance once a year so that you are back to equal amounts in each fund. This is very important if you want to make money investing in mutual funds on a consistent basis without unpleasant surprises every few years.

Investing for beginners is not about getting rich quick and neither are mutual funds. If you want to grow your money for a long term goal (like retirement) this article was written for you. You can make money investing in mutual funds without much effort or worry once you get a handle on the basics.

Offshore Investment – The Ideal Way for Saving Your Wealth

What Is Offshore Investment?

Offshore investment refers to a wide variety of investment strategies that take advantage of tax benefits offered outside of an investor’s home country.

There is no scarcity of money-marketplace, bond and equity assets offered by trustworthy offshore investment companies that are fiscally sound, time-tested and, most importantly, legal.

What Is Offshore?

Offshore explains the repositioning by an entity of a trade process from one countryside to another, typically an operational process, such as manufacturing, or supporting processes. Even state governments make use of offshore investment. More recently, off shoring has been associated primarily with the sourcing of technical and administrative services supporting domestic and global operations from outside the home country, by means of internal (captive) or external (outsourcing) delivery models.

“Offshore ” is usually to portray a country where there are also no taxes or low taxes for foreign persons either individual or commercial.

It is a truth that offshore investment havens have crafted a unique legally recognized and tax free climate for overseas individuals and businesses. They offer specifically to them. More than half the world’s assets exist in such asset havens.

Monetary privacy, a steady legal environment and realistic rulings are the trademark of these jurisdictions.

When we converse about offshore investment financial companies, the term invokes up an image of enormous, shadowy monetary monoliths, investing funds without any transparency.

Advantages

There are many reasons why people like investments in offshore:

1. Tax Reduction

Many nations, recognized as tax havens, offer tax inducements to overseas investors through an offshore investment. The positive tax rates in an offshore investment possible country are intended to encourage a vigorous offshore investment atmosphere that magnetizes outside wealth. For tiny countries like Mauritius and Seychelles, with only a few reserves and a small population, offshore depositors dramatically increased their economic activity.

Offshore investment occurs when offshore depositors outline a company in an overseas country. The corporation acts as a shield for the investors’ financial credits, shielding them from the higher tax load that would be acquired in their home nation.

Because the corporation does not engage in local operations, little or no tax is enforced on the offshore investment company. Many overseas companies also benefit from tax-exempt category when they put in in U.S. markets. As such, making ventures through overseas corporations can clutch a distinct benefit over making investments as an individual.

2. Confidentiality

Numerous offshore investment jurisdictions have confidentiality legislation which creates it is an unlawful offense for any worker of the financial services commerce to disclose possession or other information about their clients or their dealings.

But in the examples where unlawful proceedings can be proved, identities are being disclosed. Thus the Know Your Client due diligence documents are becoming just more complex.

Disadvantages

The main drawbacks are those of costs along with ease.

Many investors like to be capable to meet up and speak to the person setting up their incorporation of offshore investment companies and traveling to the tax haven costs funds.

In a number of nations you are taxed on your universal revenue, so not disclosing offshore investment returns is illegal. In other countries having offshore accounts are unlawful for individuals but authorizations can be obtained from companies.

Several banks in offshore jurisdictions need smallest amount in investments of US$ 100,000 and higher, or to possess assets locally.

The kinds of offshore investment companies usually existing are:

  • Trusts
  • Resident Offshore Company
  • International Business Company
  • Protected Cell Company

These types of companies also exist.

E.g.: Many mutual funds and hedge funds whose investors favor ‘ off shore country’ ventures.

But for average financiers like us too can form offshore companies of relatively small size to fulfill our most everyday needs. Or we can put in, via our off shore investment expert, into offshore companies to own investments in special funds.

There are various uses:

  • Trading Companies
  • Professional Services Companies
  • Shipping Companies
  • Investment Companies
  • Intellectual Property & Royalty Companies
  • Property Owning Companies
  • Asset Protection Companies
  • Holding Companies
  • Dot Com Companies
  • Employment Companies

Trading Companies

Import/Export and general trading company’s activities are also compatible with the structure of offshore investment companies. The offshore investment company acquires orders from the supplier and has the goods distributed directly to the customer.

It does the invoicing to the customer and saves the difference in a tax free country. E.g. Products from China to Kenya could be invoiced by a Seychelles or RAK offshore incorporation and the revenues retained there.

Individuals utilize offshore investment companies to acquire mutual funds, shares, property, bonds, jewelry and precious metals. Sometimes they will also apply these companies to trade in currency, equities and or bonds. The wealthy will also have diversified offshore investment companies for different division of possessions; for different countries or by different categories of investments.

The diversification evades the risk. But also in cases where capital increases taxes are levied, e.g. in property or equity, sometimes it is cheaper to sell the company rather than the individual asset itself.

Professional Services Companies

Individuals, e.g. counselors, IT experts, engineers, designers, writers and performers working outside their local country can gain momentously from using an offshore investment business. The offshore investment business demonstrates the individual as a company worker and gets a fee for the services rendered by the ’employee’ [possessor]. This fee is received and saved tax free. The person can then receive the imbursement as he or she hopes to minimize their taxes.

Shipping Companies

The utilization of offshore investment companies to possess or license commercial ships and pleasure craft is very familiar internationally. Shipping companies mount up earnings in tax liberated offshore jurisdictions and, if every ship is placed in a separate offshore investment company, it can get hold of considerable asset security by isolating liabilities of each individual craft.

Investment Companies

Individuals make use of offshore venture companies to then buy mutual funds, shares, bonds, property, jewelry and expensive metals. Sometimes they will also use these companies to operate in currencies, equities and or bonds either via the internet or through managed funds run by banks and financial institutions. The wealthy will also have diversified offshore investment companies for dissimilar class of assets; for different countries or by different varieties of investments.

The diversification evades the threat. But also in cases where assets gain taxes are levied, e.g. in goods or equity, sometimes it is economical to sell the company rather than the individual asset itself.

Intellectual Property & Royalty Companies

Offshore investment companies are being seen as vehicles to own Intellectual Property and royalties received for software, technology rights, music, literature, patents, trademarks and copyrights, franchising, and brands. These companies are in the type of trusts or foundations.

Property Owning Companies

Owning property in an offshore investment company saves you the funds gains taxes that may be levied at the occasion of the property’s deal, which are avoided by selling the business instead of the property. Other significant benefits are the authorized prevention of inheritance and other transfer taxes.

Mainly, in some countries, e.g. Islamic ones, inheritance is via Shariah regulation and not your determination. So an offshore possession will make sure that the assets owned outside the country need not be distributed according to Shariah Law.

Asset Protection Companies

It is estimated that a professional in the US can be expected to be sued every 3 years! And that more than 90% of the worlds lawsuits are filed in the US.

Amazing statistics!

If you have an income or assets of more than US$ 100,000, you should seriously consider offshore investment companies!

Most offshore jurisdictions require that for a lawsuit, a lawyer must be hired and paid up front before a suit can be filed, thus keeping frivolous lawsuits away. Often a substantial bank bond has to be placed by the government, to even implement a lawsuit. It can also (take years of waiting) to get into court in some offshore investment jurisdictions.

If you have substantial liquid assets you should consider a Trust which would own the offshore company. This will provide a greater degree of protection, at the least expense.

However, we should remember that this structure is for asset protection, not for tax savings and so that the focus should be maintained.

Holding Companies

Offshore investment companies can also be used to own and fund operating companies in different countries. They could also be joint venture partners or the ‘promoter’ of publicly quoted companies. Mauritius is well suited as a country for investing companies because of its favorable double tax treaties.

Dot Com Companies

The internet has made the cost of business entry very low and consequently the legal protection of the company’s assets, both physical and intellectual, that much easier. Dot Com companies now use this flexibility to develop different software projects in different offshore investment companies to invite different investors and to keep the flexibility of raising funds separately for different projects depending on the project’s success. Both Mauritius and Seychelles have Protected Cell Company [PCC] structures available for just this kind of need.

Then there is the possibility of receiving your funds earned on the web into an offshore company’s bank account. Would that be of interest to you?

Employment Companies

Multinational companies use offshore investment companies to employ expatriate staff who are deployed in different tax jurisdictions around the world. To facilitate transfers, reduce the employee’s taxes and administer benefits easily an offshore company employment is preferred. Working on assignments throughout the world.

The Best Investment Funds for 2014 and Beyond?

Here we go one step beyond the basics and suggest that the best investment funds for 2014 and beyond could be funds that invest money in alternative investments. You can debate whether diversified stock funds or bond funds will be the best funds to invest money in, but your best investment could be funds that invest money in alternative investments like gold, oil, and maybe even real estate stocks.

Informed investors know that you should invest money in more than one area in order to have a diversified portfolio. Most investors think that the best investment strategy is to own the best funds, and that your only choices are diversified stock funds and bond funds. Few have a handle on the arena called “alternative investments”. Where do you think the smart investors will invest money when neither stocks (in general) nor bonds look attractive and safe investments are paying record low interest rates?

The top dogs look around for opportunities that are “outside of the box” in search of their best investment alternatives. Welcome to the world of alternative investments. As an average investor trying to find the best funds you might want to broaden your horizons as well. If our economy continues to be lackluster and interest rates rise in 2014 and beyond both diversified stock funds and bond funds could take a hit. So, where can you invest money for higher returns if things turn sour in 2014 and/or 2015?

Gold is not cheap anymore but it is well below its highs as I write this. Gold funds invest money in stocks in the gold and silver mining industry, and they took a major hit in 2013. Historically, gold has been one of the best investment alternatives in times of high uncertainty and crisis. Gold funds might be one of the best funds if things get ugly in 2014 and beyond. They may or may not be your best investment, but adding them to your portfolio at this time to add more diversification could be a good idea just in case.

Another alternative investment that’s a candidate for best investment ideas: oil and other natural resources. Your best funds to invest money in here and keep things simple are called natural resources funds. They too have proven to be good performers when the stock market in general is having a rough time. You might think that gasoline prices at the pump (and oil prices) are high now, but think back a few years. Prices can always go higher, even in a bad economy.

And then there’s real estate as an alternative investment. This industry has recovered from the financial crisis lows, in no small part due to low interest rates. What will happen if rates climb as the economy sputters? Investors usually invest money in real estate with borrowed money. The truth of the matter is that interest rates are still low by historical standards. Real estate funds can be one of your best investment alternatives as investors rush in to buy before rates climb further. The best funds here invest money in real estate investment trusts and other companies in the real estate sector, like home builders. Caution: when rates rise significantly the real estate industry can sputter.

Why do I suggest that the best funds in 2014 and beyond could be those that invest money in specialized sectors like gold, natural resources and perhaps real estate? Historically, in bad times for the economy and stock market in general these industries can attract money as investors search for the best investment alternatives to invest money in. Both stocks (in general) and bonds are selling near historical highs. Bonds have been on a thirty year roll, and stocks have climbed 150% in less than five years. Neither looks cheap by any standard.

In your search for the best investment alternatives to make your money grow, sometimes you need to look outside of the box. You need to invest money so that some of it is safe and available for future opportunities. And in times like 2014 and beyond it’s a good idea to further diversify into alternative investments. The simplest and best investment vehicle for the average investor is mutual funds. The best funds to add to your portfolio are those that can swim against the tide when it goes out.

Investing 101: Before You Start Investing Money

Doesn’t it make sense to learn to invest (some basics) before you start investing money for real? Maybe a course called investing 101 or personal investing would be helpful. Here this retired financial planner relates a story, and then points the new investor in the right direction so he or she does not start investing uninformed.

In the dean’s office of one of the largest universities in America, I recently asked if they offered investing 101, personal investing, or any finance course where the student could learn to invest. “After all, we all need to start investing money someday, and it is much to one’s advantage to be informed vs. uninformed, isn’t it?” That was my response when told, “no, or at least I can’t find one” by the dean. I was informed that they had well over 50,000 current students enrolled and offered THOUSANDS of courses in the various colleges throughout the university. But he could find no course under the heading of personal investing or investing 101, and he was in charge of the curriculum.

We spent about an hour together searching and were both laughing out loud at what WAS offered. How about a course in “the art of falling down”? It’s offered. Investing 101? Which college in the university would offer such a course? “The athletic department is real big here; maybe they could help”, I suggested. After all, professional football players make big money. They need to learn to invest money (in case their career is short) and should start investing early. I knew a few players when I was a financial planner, but like most folks they tend to procrastinate when the money is flowing in. They’re too busy earning it, and don’t have the time to learn to invest.

The truth of the matter is that I don’t find it funny that it’s difficult to find a down-to earth practical course that most people could truly benefit from, because as a new investor you need to learn to invest money before you start investing for retirement or any other financial goal. As a new investor you may not be able to find a financial planner you can work with or afford. Even if you found one, do you really want to start investing money with him or her without first getting your feet wet in the basics of personal investing? Let’s start at the beginning.

Before you get into financial concepts like asset allocation and strategy, you should first learn the very basics: investment characteristics. How can you compare various alternatives to determine which best suit your needs, financial goals and comfort level? In other words, you need to decide what you are really looking for. And you need a list of factors to consider before you start investing money. For example, do you have a long term goal like retirement, and are you willing to accept a moderate level of risk? If so, there are numerous investment alternatives to consider, and you can also get tax breaks.

On the other hand, if you have a shorter term financial goal and might need access to your money at a moment’s notice, that’s a totally different picture. You need to match your financial wants and needs to the various alternatives that have characteristics best suited to your personal investing goals. There is no single best choice for every financial goal. It’s a matter of give and take. I have a list of 5 factors you must consider and a few other things you should consider before making a decision. This is basic investing 101. Whether you are a new investor or you’ve been at it for a while and have never really taken the time to learn to invest – you should learn the basics.

This is the first in a series of investing 101 articles I plan to write. In my next article I plan to put my list of characteristics you need to consider before you start investing money in black and white. Don’t feel bad if you are an uniformed new investor (or a want to-be). Do something and learn to invest starting with the basics.

Once you have a handle on a few basic financial concepts you can start investing with confidence. Once you learn to invest you can reach your financial goals. If you think I’m trying to build your confidence, you are right. Stay tuned to investing 101 as we get back to basics. No offense to anyone at one of THE largest universities in the country, but there’s a void out there and I plan to fill it.

The Best Investment Portfolio for 2014 and Beyond

If you have an investment portfolio (like in a 401k plan) take a good look at it, because it might not really be the best investment portfolio for 2014 and beyond. If you are a new investor, don’t start investing money until you are familiar with the best funds to include in your portfolio in 2014.

Your investment portfolio is simply a list showing where your money is, and for most average investors consists primarily of mutual funds: stock funds, bond funds and money market funds. Here we discuss the best funds and asset allocation to achieve the best investment portfolio in the event that 2014 and beyond becomes a tough environment for investors. You may need to make changes in your existing portfolio; and you should also be aware of the following as a new investor before you start investing money.

As an investor you should receive statements periodically which show you where your money is. The problem is that many investors do not give these statements, which clearly show you your asset allocation and your investment portfolio, the attention they deserve. That can be a problem. For example, if you had 50% of your portfolio allocated to stock funds in early 2009, you could have two-thirds of your money in these funds now. If the stock market takes a big hit, you stand to take a big loss. Let’s take a look at stock funds and the best funds for investing money there first.

The stock market and many diversified stock funds have gone UP in value about 150% in less than 5 years, and numerous financial analysts expect a correction (stock prices to go DOWN) in 2014. If your investment portfolio shows that more than half of your assets are invested in stock funds consider cutting back to 50% or less. If you are a new investor ready to start investing, allocate no more than 50% to diversified stock funds. The best funds: those that invest in high quality, dividend paying stocks vs. growth funds that pay little in the form of dividends. This is your first step in putting together the best investment portfolio for 2014, because it cuts your potential losses.

The best investment portfolio also includes bond funds, which have been good solid investments for over 30 years. Why? Interest rates have been falling, which sends bond prices and bond fund values higher. Problem: interest rates have hit all-time lows and appear to be heading higher. Higher interest rates create losses for bond fund investors. Many investors have an investment portfolio loaded with bond funds and are totally unaware of the risk involved if rates go up. If you are getting ready to start investing money you need to know this as well. When interest rates go UP, bonds and bond fund values go DOWN. That’s about the only iron-clad rule in the investment world.

Allocate no more than 25% to 30% of your total investment portfolio to bond funds to cut your risk. The best bond funds are categorized as intermediate-term funds, where the investment portfolio of the fund invests in bonds that mature (on average) in 5 to 10 years. These are the best funds now because they pay a respectable dividend with only moderate risk. The worst funds to hold now: long-term funds that hold bonds maturing (on average) in 15, 20 years or more. When you review your investment portfolio, get rid of these because they will be big losers if (when) interest rates shoot upward. New investors who want to start investing money: avoid them and allocate about 25% of your money to intermediate-term bond funds to avoid heavy risk.

Sometimes the best investment portfolio is loaded with aggressive stock funds and includes longer-term bond funds. Now, looking at 2014 and beyond, is probably not one of those times. For many years now losses in stock funds have been offset by gains in bond funds. Today the problem for investors is that even the best funds of both varieties could get hit if the economy falters and interest rates rise significantly. That makes investing money today a real challenge… one that few investors are prepared for.

So, let’s say that you start investing money with less than 50% going to the best funds in the stock department and about 25% allocated to the best funds in the bond universe… or you adjust your existing investment portfolio to these levels… where do you invest the rest of it? Even though interest rates are still historically low, you bite the bullet and invest it for safety to earn interest. In a 401k plan your best safe investment is likely the stable account, if your plan has one. Otherwise, the best fund for safety is a money market fund (even though they presently pay almost no interest). When rates go up, they should pay more. Or you can shop the banks for the best rates on short-term CDs, or savings accounts.

I expect that 2014 and beyond will be a challenging time to start investing money or to manage an existing investment portfolio. On the other hand, now you should have a handle on the best funds to consider when putting together the best investment portfolio possible. Remember, you must stay in the game in order to get ahead over the long term; but sometimes moderation is your best course of action.

Questions First Time Investors Should Ask Before Investing

It is easy to find people’s opinion on how to invest in the stock market as everyone has a different angle on what to expect in the stock market at every point in time, but most of the time people’s opinion may be very confusing. The most common problem that new investors do have is how to determine good investments from the bad ones, what to invest on, what time to invest among others. Some of the questions that you need to answer so as to make a good decision when you want to invest are highlighted below.

Is This a Good Time to Invest in Stocks?

On the off chance that you are taking a gander at money markets amid a lofty decrease, you may think it is a terrible time to begin investing. On the off chance that you are taking a gander at it when stocks are reviving, you may think it is a decent time.

Neither one of the times is fundamentally great or terrible in the event that you are investing for the long haul (10 years or more). Nobody can anticipate with any level of assurance which way the share trading system will move at any given time; yet over the long haul, stock markets has constantly moved higher. Each bear advertises is trailed by a buyer market (when stock costs rise). Verifiably, positively trending markets have endured any longer than bear markets, and the additions of buyer markets have more than counterbalance the misfortunes in bear markets

How Much Risk Should I Take?

A standout amongst the most essential fundamentals of investing is the cozy relationship amongst risk and returns. Without risk, there can be no profits. You ought to will to accept more risk on the off chance that you are looking for more noteworthy returns. In that regard, risk can be something to be thankful for, yet just in the event that you take into consideration adequate time to let the inescapable market cycles happen. By and large, in the event that you have a more drawn out venture time skyline, you ought to will to expect a more noteworthy measure of risk, on the grounds that there will be more opportunity for the market to work through the here and there cycles. Generally, understanding financial specialists have been compensated with positive long haul returns.

New investors are regularly encouraged to put fundamentally in common money, which can give moment enhancement, offering the most ideal approach to lessen risk. By putting resources into a couple of various shared assets speaking to various resource classes, (for example, expansive development stocks, global stocks or bonds), you can lessen unpredictability significantly promote without yielding long haul returns.

On the off chance that you are beginning an investment program by investing incremental measures of cash on a month to month basis, you will profit by dollar cost averaging. When you invest an altered measure of cash on a month to month premise, you get some share costs at a higher cost and some at a lower cost because of market changes. At the point when the market decreases, your settled dollar sum will purchase more shares. After some time, the normal cost of your shares ought to be lower than the present market cost. By utilizing dollar cost averaging, your drawback risk will be alleviated after some time.

What Is My Investment Goal?

The most vital question to consider before making any invest is, “What Is My Investment Goal?” Your ventures will contrast boundlessly if, for instance, you are attempting to spare cash for retirement as opposed to attempting to spare cash for an up front installment on the house. Things being what they are, ask yourself, “Is this venture prone to help me meet my objective?”

What Is My Risk Tolerance?

If your investment objective is to profit as would be prudent and you can endure any hazard, then you ought to invest in the National Lottery. Putting resources into lotteries, be that as it may, practically promises you won’t achieve your venture objective. There are speculations for each level of risk resilience. But if you are not a high-risk taker, investing in long-term investment is the key.

What Happens if This Investment Goes to Zero?

Among the 12 stocks in 1896 stock list, only General Electric is still in operation, the other eleven firms in the first record have either gone bankrupt or have been gobbled up. There is a genuine plausibility that any investment you make could go to zero while you claim it. Ask yourself, “Will I be monetarily crushed if this speculation goes to zero?” If the answer is yes, don’t make that venture.

What Is My Investment Time Frame?

As a rule, the more extended your investment time allotment, the more risk you can take in your investment portfolio since you have more opportunity to recuperate from a mix-up. Likewise, in case you’re putting something aside for retirement, and you’re decades from resigning, putting resources into something illiquid (like an investment property) may bode well. “Does this venture bode well from a planning perspective?”

When and Why Will I Sell This Investment?

If you know why you are putting resources into something, you ought to have an entirely smart thought of when to sell it. On the off chance that you purchased a stock since you were expecting 20 percent income development for each year, you ought to anticipate offering the stock if income development doesn’t live up to your desires. On the off chance that you purchased a stock since you enjoyed the dividend yield, offer the stock if the profit yield falls.

Who Am I Investing With?

It is extremely hard to judge the character and capacity of anybody in light of a two-passage portrayal accessible in an organization’s yearly report or a common store outline. However, you ought to at any rate know with whom you are entrusting your money. What is their past record? Things to hope for are long fruitful track records and good dividend and turnover.

Do I Have Special Knowledge?

A celebrated investment expert feels that normal individuals have a tremendous favorable position over investment experts in fields where they work in light of the fact that no investment professional will ever know more around an industry than somebody who works in it. Ask yourself, “Am I putting resources into something I know something about, or am I putting resources into something that some specialist know something about?”

I couldn’t care less how great something sounds. In the event that I don’t totally see how it functions, I won’t put resources into it.

In the event that an investment can’t be clarified obviously, it implies one of two things:

The individual clarifying it doesn’t comprehend it either, or there’s something about the investment that the individual is attempting to stow away.

On top of that, one of the greatest keys to investing admirably is adhering to your arrangement through the good and bad times.

That is difficult. Indeed, even the best investment methodologies have enormous down periods that make you reconsider. Adhering to your arrangement in those extreme times requires a practically religious-like conviction that things will pivot.

Furthermore, the best way to have that sort of conviction is to comprehend why you’re investing the way you are and what every bit of your arrangement is accomplishing for you. Without a solid comprehension, you’ll more likely than not safeguard at the main indication of inconvenience.

Why Do I Still Own That Investment?

It is a smart thought to intermittently look through your investment portfolio to ensure regardless you need to claim your stock. Offering an investment for a misfortune or offering a major champ is exceptionally troublesome. Be that as it may, the greatest distinction amongst beginner and professional investors is that professional investors don’t have passionate ensnarement with their investment and can strip themselves of their investment without kicking themselves if the investment keeps on picking up esteem.

Should I Be Managing My Own Investments?

It is extremely difficult for beginner investor to perform well than a professional investment expert. If you don’t have sufficient energy or slant to deal with your investment, you ought to think about paying an expert to do it for you. Every investor wants to make profit, so there is no harm in trusting your investment in good hand.