Investment Basics

Financial planners generally recommend long term strategies for stock purchases - (i.e. funds placed in the stock market should be looked at as not needed for seven to 10 years). Here are some investment strategies for the stock market:

Buy and Hold - The strategy most recommended. Similar to a long term savings account. The idea is to find a company you are comfortable with, and buy it for the long term. People following this strategy are usually not too concerned with the daily, and monthly ups and downs of the stock, as they plan to hold it for years. (Look at a five year graph, and a major drop in stock price looks like a small bump). Of course the investor is not married to the stock either, so if something about the financial condition of the company changes, it may be time to sell. Many investors try to beat the index funds and will be happy with an average return of 12 to 20% per year.

Day Trading - Risky, but has the potential for greater gain. Also, there are tax consequences of selling before 12 months. Still better than casino gambling, at least there is much more chance of making money, and less chance of loosing everything ;-). The biggest mistake most beginning investors make is trading too frequently.

Dollar cost averaging - The method of purchasing an investment (Stock, Mutual Fund, 401K, etc.) on a regular basis, regardless of the price. For example, suppose you decide to buy a stock with average price in the past year of $20. Rather than trying to time the market in an attempt to buy at the lowest price, the strategy is to purchase a fixed dollar amount, say $100 every month. So one month it may be at $19.75 which gives you 5.06 shares, the next month it might be $21, which would be 4.76 shares for a total of 9.82 shares. The idea is to continue accumulating shares. If the stock selected was a good company at $25, then it still good, and even a bargain at $19. If it goes up to $30, then you can buy less shares, but hopefully your homework revealed that you expect further growth for the company. With this example you would have invested $200 for 9.82 shares

Company Amount Price Shares Total Shares
XYZ Co. $100 $19.75 5.06 ... 5.06
XYZ Co. $100 $21.00 4.76 ... 9.82

At the current price you now have 9.82 shares, worth $206.22 from the $200 invested. The price continues to fluctuate, and you continue accumulating shares at market rates.

The Real Risk - Not Investing
Note that, while investing in the stock market incurs some degree of risk of loss of capital, it should be weighed against the risk of not investing at all, and letting inflation take over.

Get Started
I don't get commission for this link, but I highly recommend Sharebuilder for automatic investing. -- http://www.sharebuilder.com. There are other options, but automatic investing is the best way to stick to it. You just set up a plan and forget about it.

Interesting article on renting vs buying

I don't know if this is a fair comparison, but here is an easy way to look at leverage, which the article below seems to have missed.

If you "invest" $100k into real estate, you generally put down 20% or less, so you are starting with a $20k investment.

Let's assume that in the time it takes to quadruple the value of the real estate investment, you could have made 10 times on your money by investing in the stock market.

Investment Multiplication Future Value

Home
$100,000 x 4 $400,000
Stock
$20,000 x 10 $200,000


There is a better return on the real estate, not because it is a better investment (only four times as opposed to 10 times), but because of the leverage (now worth twice as much as the stock investment).

Actually, you invested $20K in your home and made $380K ($400K - $20K)
Which is a return of 19X on your $20K

You invested $20K in the stock market and made $180K ($200K-$20K)
Which is a return of 9X

Thus even though the house "only" quadrupled in value you made 19X on your money.

While the stock "only" went up by ten times in value you made 9X on your money.

So you did 2.11 times better on the house.
Leverage pays off.


The real estate, if renters are not paying for it, is still a liability until it is paid off, but the leverage is what makes it better. Try asking the bank for $100,000 to invest in the stock market, and they will probably laugh at you. Sure you can get a margin account, but they won't give you $100,000 for your $20,000 deposit. On the other hand, you have lenders fighting with each other to give you money for real estate.

Article: Why rent? To get richer

http://articles.moneycentral.msn.com/Banking/HomebuyingGuide/WhyRentToGetRicher.aspx?page=1

New 125 Miles per Gallon Toyota Prius

Article from: The Future of Things (TFOT)

The Pennsylvania based Lithium Technology Corporation recently demonstrated a new type of "plug-in" Toyota Prius hybrid car. The new model is based on advanced lithium iron phosphate battery which allows the hybrid car to travel up to a distance of 125 miles per gallon of fuel – making it possibly the most efficient mass-produced car in the world.

Lithium Technology Corporation (LTC) announced that its' new lithium iron phosphate (LiFePO4) technology might be incoporated in hybrid cars expected to arrive in the market in 2008-2009. The Toyota Prius demonstrated by LTC was also equipped with a "plug-in" capability which allows it to recharge using conventional power sources (such as a power outlet in the owner's garage). Currently there are no "plug-in" capable cars on the market but special conversion kits are available and a small number of people are already using them to recharge their hybrid vehicles.

Although the new long range "plug-in" Toyota Prius might prove to be even more popular than its current version (which since the launch of its second version in 2004 has sold over 200,000 units worldwide), it is still very far from breaking the world record for the longest drive per gallon of fuel. This record was recently broken by a prototype car built by a team from St. Joseph La Joliverie University in France, which set an astonishing record of 7,148 miles per gallon of fuel (3,039 km per liter).

More information on the new lithium iron phosphate battery technology can be found on the LTC website.

Image: Current model Toyota Prius powered by 168-cell nickel metal hydride (NiMH) battery (Credit: Toyota Motor).
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Passive Income Strategies

A stream of passive income is only as good as your strategy to nurture it. You have to discipline your money, just as you have to discipline yourself in order to reach your goal.As I wrote about in See Money Differently to Attract More, the wealthy look at money from a different paradigm […]



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Hybrid Cars Still Not Worth It?

Hybrid cars break-even point has recently been as much as 15 years, according to Auto-Research firms. But it may drop to only six or seven years if the vehicle price drops, and gasoline rises to over $4.00 a gallon.

As gasoline prices get higher, and dealer incentives get better, the hybrids are becoming more attractive.

Of course the premium you pay for a hybrid may also include other unrelated features, such as an enhanced sound system, leather seats, etc., which have nothing to do with saving gas, but just make the price of the vehicle higher.

This article discusses tax breaks, incentives, gas prices, and other factors:
http://online.wsj.com/...

Let's hope it becomes more economically feasible to use less gas. Although some would prefer to use no gas at all, and buy an all electric car -- if they were available with a reasonable price and performance.

Currently we seem to have two options for an all-electric car -- 1.) underpowered (top speeed of 40 mph), or 2.) overpriced

Zap! is working on a new model with Lotus Engineering called the Zap-X, which looks promising, if the price is reasonable: http://www.zapworld.com

Let's see what the new models bring us.

For now, it seems there is not much savings:

Hybrid Cars No Better than 'Intelligent' Cars -- Slashdot

Debt Free in Three Steps

From Debt Free to Financial Freedom in Three Steps

Did you know that if you pay the minimum payment on a high-interest credit card it could take 33 years to pay it off?!!!

Three Steps to Financial Freedom

1. Find an extra $100 or $200 a month, and add that to your payment.


2. If you have multiple cards, pay the first one (highest interest and lowest balance), then pay off the next one with the $200 plus the minimum payment from the first one.


3. Once all the cards are paid off, use the extra money to invest.

Here is an article from Yahoo Finance:

Yes, You CAN Get Out of Debt
http://finance.yahoo.com/how-to-guide/banking-budgeting/18442

If you can automate the process, it will be much easier. Remember, it takes time to get into debt, and it takes time to get out. Control your spending now! If you are in a hole, stop digging.

An interesting note: Many financial planners will recommend eliminating all credit card debt before investing. That advice causes people to miss out on the power of compounding for all the years that they are not saving or investing, and are just getting deeper and deeper into debt. Remember, even with the above plan, to pay yourself first.