| |
| |
|
Investing Information |
|
|
|
How To Start Investing For Financial Independence, Part 1
Today, I am going to start a multi-part series about how to go from being a beginning investor to being "financially independent" in a steady and predictable way. At our website, we get tons of e-mails about how do I start, how do I start with little $'s, etc., etc., etc. If you are asking this question, congratulations because you are ahead of most. All of us have been there at some point. I must warn you?. What I am about to share here for free is what "gurus" across the nation charge thousands of dollars for in weekend seminars. The "secrets" revealed are going to seem pretty simple because quite frankly, there are no secrets. The methods used here have been done for centuries and there is no real reason to complicate them. Let's apply these principles to see how fast someone might become financially independent without betting the farm. Realize that everybody has wildly different starting points and different financial goals. For this series of articles, we assume that an individual has access to at least $15,000 liquid capital (or home equity) to start, is at least breaking even with their current income versus expenses, and has decent credit to obtain financing. Note there yet?.... See the footnote below. To start, what you need is to make your money grow while keeping your current income stream, and current expense level in place. I can't say this more plainly?..To change your current financial path, you have to us your money and your time to grow additional income streams that increase wealth. There is many ways to do this but we are going to use investing in real estate as an example. Now for beginners, here is the really bad news?? As an investor, you reap rewards by putting your money in HARMS WAY. You do everything in your power to minimize your risk but bottom line is that real investors make money by taking CONTROLLED risks. As investors get better, they learn how to make fantastic investment returns doing things that all their friends and relatives thing is crazy?.. However, they know exactly what risks they are taking are why those risks are small in comparison to the potential rewards. One reason people really like real estate investing is leverage; i.e, you can purchase an expensive property using 0-20% of your own money while financing the rest. So if you put 10% down for example, and then the property goes up by 20%, you have made a 200% return (ignoring expenses, taxes, etc. for simplicity). Of course this works in reverse? If the property drops by 20%, you have lost not only your original investment but have to come up with another 10% as well?.. Ouch! For someone beginning, here is what I would suggest:1) Look for an opportunity that will return at least 150% in 2 yrs or less; 2) Be mentally and financially prepared if the investment does not work out; 3) Have VERY good reasons why you don't think you will lose money?? You may not make as much as expected but you would rather not lose money at this stage. 4) Be patient. This single result should not either make or break you but it is crucial to a longer term plan. In our Mastermind Group, we are bringing out a land project (see related article Land Investing that appears to meet these criterion (each investor has to decide for themselves). So let's say the purchase price is $150,000, with 10% down and another $3,500 in closing costs. With good credit, then the financing obtained would make the land payments for 2 years while waiting for growth. Now let's say after you did your analysis, looked at what had happened in the past, looked at why you thought more and more people would want this property, etc., you decide that you think this property will average 20%/Yr escalation over the next 2 years. MORE IMPORTANTLY, you decide that barring a major meltdown in the market, you think there is little chance that you can't at least break even after 2 years. So if you end up being right about the growth, then you might net a tidy $43,000 (before taxes) or so after everything is considered. After long term capital gains at 15% let's say, then you just picked up about $36,000 of the "market's money". That is money that if you take a loss on the next investment will not be nearly as painful as if you lost your original money. When you combine this with your original investment amount, you now have around $55,000 of operating capital for step 2. Realistically, you cannot predict how much you will make from the investment. When I invest, I try to establish in my mind what is reasonable. Frequently, I have been surprised to the positive and made much more than expected. Sometimes I have made less. The key being to put yourself in a low risk situation where you have a strong reason to believe the market will go in your favor. To accomplish this first step, let's look at what you really had to do: 1) Had to be willing to put $$ in harm's way; 2) Had to educate yourself enough to evaluate the risk and the opportunity; 3) Had to find the opportunity or be in a position to have the opportunity presented to them; 4) Had to act. I would like to comment on the education side. As a former professor, I have seen very smart people spend 1,000's of hours and 10,000's of thousands of dollars educating themselves to "earn a living"; this is a great move in many cases. On the other side, I have seen very smart people who want investing to be a major source of income but will not spend any time or any money educating themselves. To me, this is a recipe for disaster. By the time we finish this series, you will see that with a few simple steps, implemented over time, many people can easily produce more money than from their regular job. Furthermore, many people will put 100's of thousands of dollars at risk but know almost nothing about what they are doing. If you chose the path of making your investment dollars grow steadily with time, I hope this does not end up describing you. ** Footnote: If you are not yet at that level, here is what I suggest. First, read Michael Masterson's book called "Automatic Wealth". This is an excellent book on how to rapidly change your financial position while staying employed. Next, I would read Van Tharp's new book called "Safe Paths To Financial Freedom". Van uses a very different thought process from many and so adds a great deal of rounding. Like anything else, you will not agree with everything written in these books but they provide some great thought processes. When you have some capital and are cash flow positive, them come back and revisit this article. Chris Anderson is a leading authority on preconstruction real estate investing and has been referenced in many venues including the New York Times and USA Today. Free sign up at GetPreconstructionDeals.com to get continuing education and articles or visit his Investing Mastermind Group to get access to world class investing projects.
MORE RESOURCES:
Investing - Google News |
|
|
|
RELATED ARTICLES
Short Term Savings Products When you invest, it simply means that you are putting your funds in products, in this case short-term savings vehicles, which will allow you to reap high financial rewards.Here is a list of the more common short term savings products you should consider investing in. Success Trading: Some Basic Terminology for New Traders The world of trading can get very complex because the financial markets are complex. There thousands and thousands of successful traders out there today. Now is the Time to Invest for Your Retirement! Yes, it's the time we've all been waiting for?tax season! We know you've gotten a jump start and filed early this year, right? Of course not, but rather than dreading this part of the year, we should all look to it as a point for new opportunities. Many readers don't realize that even though the New Year has come, they can invest money as if it were still 2004! That's correct, it's not too late. Diversify! The best way to avoid being hit hard by a stock market crash or another Enron/Worldcom fiasco is to make sure you don't put all your eggs in one basket. Diversification helps ensure steady growth of your net worth as you accumulate more assets. Trading Tips No 3: Online Trading and Investing: Buy, Hold, and Hope So you have learned how to trade the markets by mastering a few trading tools like Moving Averages, Channels, Stochastics, MACD, or RSI - that is a great accomplishment achieved by only a few. However, having the tools and rules to trade markets successfully, year in and year out, is only half of the challenge. Beginning Investor - Investment Terms Over the course of the past two months, readers have brought to my attention that there is a steep learning curve for investment terminology. That's why the focus of this month's Beginning Investor column will be investment terminology. The 8 Biggest Mistakes When Designing Portfolios - and How To Avoid Them Are you as good an investor as you think? Do you consider yourself a well-informed investor able to anticipate and avoid nearly all pitfalls associated with investing? Chances are, you are making one of the common errors that could cost you hundreds or even thousands of dollars, or worse yet, your financial independence, control and security."I see people making the same costly mistakes over and over," says Scott Frush, CERTIFIED FINANCIAL PLANNER and author of Optimal Investing: How To Protect and Grow Your Wealth With Asset Allocation (Marshall Rand Publishing; available by calling 1-800-247-6553). Dumb Money Many people have, at one time or another, taken some of their hard-earned funds, and decided to put them in the stock market. These well-meaning individuals either acted on a tip they saw on CNBC, or actually believed one of those crazy faxes/emails that said XBXB @ $0. How to Invest Your Money Think carefully on how to invest your money because if you make wrong decisions it could cost you dearly. There are many ways in which to invest your money and as such seeking the advice of a professional would be a very wise move. Dont Catch a Falling Knife One of the most common mistakes made by inexperienced investors is trying to "catch a falling knife". This is the phrase used to describe the habit of buying stocks that are in "freefall", and is a poor strategy, albeit common among new investors. Discipline in Investing and Trading Discipline can be simply defined as your ability to follow your investing and trading plan.Discipline is a rather simple concept. Creating Wealth by Gearing Up Gearing is where you borrow money to invest. As already mentioned, it is best to clear all your debt before looking at investment. California Deparment of Corporations and Franchise Opportunities Law What CA Needs To Do To Address Issues in FranchisingWe should not allow anymore degradation of California through incessant over regulations in the franchising sector. No other sector of our economy provides as many jobs as franchising. Trading Tips No 7: Developing a Casino Mentality for the Day Trader I submit that the successful day trader would profit well to adopt a casino mentality. At first glance, this sounds reckless and nothing more than a gambling attitude - but it's not. Creating a Financial Future - Putting Your Plan Into Action Part 1 This column has previously discussed "picturing the future that we desire", and outlining a plan to achieve it. We mentioned that the plan must include goal-setting, measurement, and implementation. Annuity Investment - The Whole Truth Do you ever feel like you haven't been told the whole truth? Kind of like something is missing? Well, you are not alone.With many investors awestruck over the last several years by the declining stock markets, many feel like they're out in the cold. Ask The SEC Who is the SEC and why should I ask them anything? The Securities and Exchange Commission in Washington, DC is the government bureau that regulates the securities industry. They make the regulations that all stock exchange listed companies, brokerage houses and mutual funds must follow. When Its Too Late to Save for Retirement You are 55 years old (or somewhere aroundthere) and your company is going to force you toretire at 65. You have $35,000 saved in your401K and that's all. Retirement Plan Considerations Cheat Sheet for Small Business RETIREMENT PLAN CONSIDERATIONS are something every small business person needs to be thinking about. Do you have a strategic plan? Don't expect to have social security save you. DXPortfolio: A Great Passive Investment of 25% to $40% per month First, I need to explain about e-currencies or digital currencies. DXPortfolio are based and supported by the supply and demand of e-currency.
|
|
Credit Report Read articles on business online! Reorder Checks Download free ebook home | site map | Free investing information | Free Stock information | Stock invest information | Finance information |
| © 2006 |
