Category: Investing Page 1 of 3

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Certificates of Deposit

A certificate of deposit (CD) is a savings certificate, which is simply a receipt to provide proof of ownership for a deposit. The certificate may be issued for either fixed or time deposits and is issued by the deposit location (bank, credit union, etc). Usually, an individual will make a fixed time deposit which lasts for up to five years. The deposit is locked into the account and there will be a guaranteed fixed interest rate. The interest rate that you receive exceeds the typical rate for a standard savings account.

How Certificates of Deposit Work
There are two different types of certificates of deposit, small and jumbo. Small certificates of deposit will be any amount under $100,000 USD. Jumbo certificates of deposit will be any amount over $100,000 USD. The main difference between the two is that only the small certificates of deposit are insurable by the FDIC (Federal Deposit Insurance Corporation).

Once you determine how much you plan to invest with the certificates of deposit you will need to determine the period of the certificate. You can choose anywhere from half a year to 20 years. The term of the certificates of deposit will play a very important role in the overall value of the deposit. You have to make sure that you choose a sufficient length of time to see considerable returns but do not set the length too long if you may cash it out early. Early withdrawal of the certificates of deposit funds can lead to a significant penalty that will limit the amount of profits you make from the investment.

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The only other serious controllable factor of the certificates of deposit investment is the interest rate. You can choose to have a fixed interest rate for the deposit. You may be able to lock in to a generous interest rate but this will depend on the current market. Keep in mind that if the market increases in value then you lose out on interest that could have been made with a variable interest rate set up. If you are looking to set up a long term certificates of deposit then the interest rate will likely be more generous so locking in may be worthwhile.

The Safety of Investing in Certificates of Deposit
If you are looking for a type of investment that eliminates any risk then a certificate of deposit would be a great choice. If you invest in any certificate of deposit under $100,000 USD through any bank that is insured by the FDIC then there is no risk of losing your money. You will be provided with a guaranteed return of your money with the specified interest rate being accumulated to the total value of the certificate.

If you are investing in a certificate of deposit over $100,000 USD then you cannot receive FDIC insurance so there will be some risk with this type of investment. As long as you invest through a trustworthy bank then there should be nothing to worry about though.

What to Know Before Investing in Certificates of Deposit
Before investing in a certificates of deposit you will need to read up more on exactly how they work. You should have a decent understanding on the terms of this type of investment so you can maximize your potential return. One thing to consider will be if you want to invest in a callable certificate of deposit.

Callable deposits may be terminated by the issuing bank, which means that the individual must create a new deposit. If you have this type of certificate of deposit then it is likely that the bank calls it if the interest rate goes down. This forces you to lose out on your higher interest rate if you have a fixed deposit. Only the bank, not the investor, is qualified to terminate the deposit if it is callable.

There are two things that you need to make sure you factor in when deciding on what investment to make in a certificate of deposit. This includes making sure that you use a reputed source for the certificates and that you know the difference between fixed and variable interest rates. If you invest in a certificate of deposit through a broker then check the reputability of the bank that will be issuing the certificate. You will also want to make sure that the bank is FDIC insured for deposits under $100,000 USD when investing in a small certificate of deposit. This will guarantee the safety of your investment. Also, checking the reputability of the certificates broker would be a good idea.

Certificates of deposit are a great choice of investment. They are very low risk and can provide you with a considerable return upon maturity of the certificate. If you are looking to lock up an investment that will guarantee you a return then this is definitely worth considering. Make sure you spend some time reading up on the various options for certificates of deposit before investing so you know how to best set up the certificate for your needs.

Bank CD Rates

When it comes to secure, stable investments, a certificate of deposit, frequently referred to as a CD, from a major bank is possibly at the top of the heap. Renowned as a low-risk form of investment, a certificate of deposit with a relatively high interest rate can be a worthwhile way to store cash that’s unlikely to be used in the short to near term, or even as a way to secure long-term cash assets.

In general terms, a CD is a fairly similar form of investment to a savings account. Investors deposit their money into an account, which is later locked off for the bank to access. These ‘lock’ terms are generally between three and fifty months, although longer-term CDs may extend for over ten years at a time. Generally speaking, these long-term CDs offer lucrative interest rates for their investors.

Unlike a bank account, however, CDs are always held until maturity – funds that are withdrawn in the middle of a maturity period can encounter fines, the forfeit of interest, or may even be held by the bank in question without release. Generally speaking, the incentive for the investor is the high interest rates offered in comparison to a savings account – CDs tend to offer much higher returns.

Bank CD

We’ve looked at some of the top CD interest rates, and walked away with some interesting data on how banks classify and manage their CDs for consumers. From differences between business and personal CD rates to interesting statistics about how the FDIC can protect your investment, read on for a primer on worthwhile interest rates, ensuring your investment is safe, and finding a good CD.

Certificates of deposit are generally regarded as fairly low-risk investments. In fact, the Securities and Exchange Commission – the United States’ leading body on financial regulation – flat out calls them as such in many of their financial primers. But despite the low risk of many CDs, there’s still the possibility than your investment could fail potentially leaving you mightily out of pocket.

This is particularly common in higher-interest certificates of deposit, which often operate outside the bounds of the FDIC – the Federal Deposit Insurance Corporation. This federal corporation is one of several protective organizations in the United States, and is designed to eliminate risks for people that plan to invest in savings accounts, term deposits, and certificates of deposit accounts.

Unlike other financial organizations, many of which fail to ultimately protect the people that they supposedly insure, the FDIC does protect those that invest in banks which operate under it. Since the formation of the FDIC in 1934, not a single depositor has lost their deposit when it was stored as part of an account in a bank, investment firm, or credit union protected by FDIC insurance.

So while there may be higher bank CD rates available at a non-FDIC bank, it’s worth considering the risk of this investment against the relatively lower risk offered by an FDIC bank. Insurance is available for deposits of up to $250,000 – larger deposits may also be covered in some cases. This isn’t a huge amount, however for most CDs and other investment accounts, it’s welcome security.

Generally speaking, bank CD rates change based on the current economic conditions. Periods in which banks expect investors not to withdraw their investment may also come with higher rates, although this isn’t always true. Longer deposits, such as those held for over five years, also come with a higher rate of interest, allowing depositors to let their money ‘appreciate’ in value over time.

There’s also an interesting split in interest earnings between personal and business CDs. While the business banking world may be renowned for its more lucrative rates of return, it’s individuals that win out when it comes to certificates of deposit. The average interest rates for personal CDs, for the most part, are higher than their business counterparts, often by a relatively healthy margin.

However, this isn’t always the case, and in many credit unions and banks it may be better to operate as part of a smaller LLC or corporation than as an individual. The rates offered to individuals vary, so it’s always best to investigate. In certain cases, however, significantly better interest rates may be available when you structure your investment as part of a small company or personal corporation.

Standard certificate of deposit rates, as of now, range from a meagre 0.50 percent low-rate interest to fairly worthwhile 1.24 percent interest rates, most of which come from smaller banks. It’s worth noting, however, that many of the smaller banks offering better interest rates are covered by FDIC insurance. This can make them a lucrative investment for those with capital available to deposit.

Other banks, particularly those limited to a specific region, may offer better rates. Recent studies of smaller banks, particularly regional and city-based banks, revealed that rates span all the way up to 1.8 percent APY. On a national level, taking into account all banks and credit unions offering a CD service, the average interest rate is in the league of 0.75% APY – not a highly lucrative offer.

If you’re considering investing in a CD from a major national bank or smaller credit union, it’s very important to do your due diligence. Checking financial stability, interest rates, and other conditions isn’t just a useful task – it’s a necessity. With this information on your side, a smart deposit strategy, and the right amount of available capital, a certificate of deposit can be a stable, worthy investment.

401k Rollover

401k Rollover

In the last thirty-six months, the United States unemployment rate has snowballed from a stable five percent to over nine percent in total. It’s a startling figure, and one that’s resulted in the loss of large amounts of income for thousands of US families. Hundreds of thousands of former success stories are in positions of limited long-term financial outlook, and thousands more are likely to join them.

In situations like this, it’s difficult to know how your long-term financial planning will pan out. The vast majority of professionals fail to plan for recessions and involuntary redundancies, leaving their retirement investments in employer-backed 401k accounts and other long-term funds. While it may seem like all hope is over for these investments, the reality is that it’s fairly easy to recover them.

The 401k account is one of the most popular forms of retirement financial planning for American professionals, having been opted into en masse since the early 1980s. Over the last thirty years it’s gone from a moderately popular retirement savings strategy into the most popular in the country – as of 2011, sixty percent of all American households with middle-aged parents had a 401k account.

401k Roll over

Despite some shortfalls, many of which have been reported on extensively during the last decade, a growing number of households still opt for a 401k plan for their retirements. But what happens if an employer lets you go? What happens if the economy forces you out of your job? What happens if it no longer becomes realistic to work due to a decrease in demand, an injury, or a workplace lawsuit?

The answer, for the vast majority of 401k account holders, is to perform a ‘401k rollover’ and use your existing 401k savings as the basis of a new retirement planning account, all without the ever-common burden of transfer expenses and fees. This allows account holders to access a collection of benefits that would be made unavailable should they withdraw from their 401k before transferring.

There are several options available for households and professionals looking to ‘roll over’ their 401k into a new account. These include the employer-based rollover, which involves transferring into the retirement account set up by a new employer, and the IRA-based rollover, which requires that your 401k is transferred into an individual IRA account. These options are both discussed in detail below.

In the event that you’re offered a job with an employer that uses 401k retirement plans, you might be able to roll your current 401k plan over to your new employer. This is a fairly simple process – your account is simply transferred to the new employer’s 401k plan, which is subsequently used as an operating basis for new investments. Generally speaking, there is no minimum balance for this.

Is this the best option for you? If you’re uninterested in managing your own 401k, then rolling it over into a new employer-based plan is an intelligent option. The fund will be managed for you, with your investment cared for under the guidelines of the plan itself. This offers low flexibility, although the simplicity of this investment option makes it popular amongst most employees.

The second option, of which there are two variations, is to roll your 401k over into an IRA, either a brokerage-backed IRA or a mutual fund-backed IRA account. This allows your retirement savings a great deal more flexibility, particularly in the type of investments that can be made with them. Most 401ks offer limited investments in stocks and index funds, while mutual funds offer greater variety.

This includes ETF investments – exchange traded funds – and individual stocks and bonds, all of which are considered ‘out of bonds’ under an employer-sponsored 401k. Using a brokerage-based account, you can select the exact type of investments that are made using your retirement savings. This allows you to effectively limit or extend the amount of investment risk you’re willing to take on.

The alternative, a mutual fund-based IRA, offers slightly less investment flexibility, albeit with a substantial decrease in costs. As a brokerage account is tied to an individual broker, every sale, no matter how small or significant, is charged and individual fee. When several small investments are made in close succession, this can result in hefty compounded fees and a limited return as a result.

Generally speaking, all of these rollover options are fairly simple to execute, with most able to be streamlined and prioritized through your current 401k provider. It’s generally a case of filing forms to begin the rollover process, and later authorize the retirement savings to transfer from your older 401k account – one that’s held with the terminated employer – into your newer 401k or IRA.

There’s a question on every former employee’s mind throughout this process, and it’s one that’s very difficult to answer. Which one is best for me? With three key options available, two of which use an individual IRA rather than a standard 401k, it can seem difficult to choose. If you feel uncertain, it’s best to speak with a financial advisor – they can assist you in planning well for your retirement.

However, all three of these options offer a relatively low-risk, potentially rewarding way to prepare effectively for your retirement years. From employer-sponsored 401ks to rewarding individual IRA accounts, there’s always an option out there to suit you. Finding that option, however, might take a great deal more thought, planning, and introspection than many ex-employers expect it to.

Tax Deductions

14 Easy Ways to Save Money on Tax Deductions

Taxpayers were all looking for ways to save money on taxes. While paying taxes is a duty of every responsible citizen, you don’t necessarily need to pay as much as you are right now. One thing that should keep you motivated while preparing your tax return is the allowable tax deductions. If you know about the items that can qualify for a deduction, you can actually save money by avoiding overpayment of your taxes. What many of the tax payers fail to recognize is the tax laws are really setup with ways to help you.

The National Internal Revenue Code of 1997 details certain items that may be deducted from your taxes, including business or professional expenses and premium payments on health and hospitalization insurance. The goal of tax planning is to increase the amount of these legitimate expenses for a given taxable year, within the bounds allowed by law.

Tax planning is a great way to start for availing tax benefits and savings. If you are looking to maximize your savings, then you need to keep an account of your incomes and expenditures and prepare all your saving plans in advance. To plan your savings, a key factor that is crucial to your tax saving plan is the income earned per annum as well as the income tax laws governing the country.

On November 2010, 10th anniversary issue of Entrepreneur magazine, writers Lyre Pore – Villafaña and Iris Cecilia Gonzales shared 14 Ways to Cut Your Taxes. Ways that most tax planner commonly do to legally increase allowable tax deductions. And I’m also sharing it with you here. Please CONTINUE READING…

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1. Book expenses that don’t have to be paid until the following year.
According to Tax lawyers Serafin Salvador Jr and Martin Mijares an enterprise on accrual basis may enter into contracts for various expenses such as gasoline, merchandise and security services, with its suppliers (or) contractors, so that it can already accrue an expense deductible in the current year although payments it to be made at a future period. This mean that you may deduct from your gross income for 2012 the purchase of goods and services you used this year, although, payment will not be made until 2013.

2. Accelerate tax deductions by reducing the depreciable life of building and other fixed assets.
According to Salvador and Mijares, the taxpayer is allowed to adopt a plan or method of apportionment of the cost of the fixed assets provided it is reasonable and has due regard to operating conditions during the taxable period.

3. Treat customs duties as an expense.
To increase the total deductible from the current year’s gross income, Salvador and Mijares suggested that instead of capitalizing custom duties and taxes paid on imported equipment, raw material, and other supplies, it’s better to consider treating these amounts as expenses in the period the duties and taxes are paid.

4. Treat interest paid for the purchase of fixed assets as outright expenses.
According to the tax code, a company my treat interest incurred on the purchase of property used in trade of business either as an expense or as capital expenditure. When an expense is capitalized, it forms part of the cost of the acquired property that will have to be taxable over several years. To lower the income of the current year, increase the amount of expenses by claiming the interest as an outright deductions from gross in the year the interest is paid or incurred.

5. To increase the amount of deductible losses, write off fixed assets that are no longer used.
There are instances when a company may be allowed to write off idle or obsolete assets that are not yet fully depreciated, and claim the amount as a deduction from gross income. Check with the Bureau of Internal Revenue or a tax planner to determine the requirements for writing off fixed assets.

6. Establish and contribute to a pension plan.
By establishing and maintaining a pension trust, the employer may actually be able to advance the deduction for retirement costs pertaining to employees who will be retiring in the future.

7. Carry over the net operating loss.
The tax code allows an enterprise to deduct from its gross income the net operating loss of the business over three years immediately following the year of such loss, provided that there hasn’t been a substantial change in the company’s ownership. For instance, if a company lost P1 million in 2011, it can claim this amount as a deduction in the years 2012, 2013, and 2014.

8. Choose the recipients of your charitable donations.
To receive a tax benefit when contributing to a particular cause, consider giving to organizations that are allowed by law to accept donations that can then be deducted from taxable income.

9. Consider legal structure of the business.
The organization of the business has a huge implication on taxes if the taxable income is P500,000 and below. At this level, an enterprise registered as a sole proprietorship will be slapped an income tax ranging from 5 to 30 percent. On the other hand, if it were set up as a corporation, it would have to pay a flat rate of 32 percent regardless of whether the taxable income is P100,000 of half a million.

10. Amortize pre-operating expenses.
Startup companies are allowed to amortize their pre-operating expenses over a period of five years. For example, if an entrepreneur spent P100,000 to set up his company in 2011, he can subtract P20,000 from his gross income in each of the five years from now until 2016.

11. Properly substantiate all deductions.
A major reason why taxpayers end up paying so much in taxes is poor substantiation for allowable deductions. For transportations and travel expenses, substantiate the claim for deductions with the documents containing information about the date of travel, its purpose, person who incurred the expenditure, places traveled, amount of expenses, and means of transportation used.

12. Withhold the necessary taxes.
Income payments such as salaries of employees, rental of office space, and payments to suppliers – are considered valid expenses only when withholding taxes have been properly deducted and remitted. An entrepreneur must be firm with supplier who request the taxes not be withheld from their collections. Companies that fail to withhold taxes from payments to suppliers will not only be required to pay the withholding tax themselves plus surcharge and interest; they will also be disallowed from claiming such payments to suppliers as deductions from their gross income.

13. Declare your input tax.
A businessman will enjoy a deduction if the declares the amount of merchandise he uses for his business. Let’s say the business is an office supply store. All you have to do is declared the total amount of VAT you paid when you purchased your supplies. This amount will be deducted from your own VAT.

14. Comply with all the requirements.
Aside from ensuring that proper withholding taxes have been collected and remitted, make sure that your company has complied with all other requisites for deductibility. When claiming deductions for bad debts, for example, be prepared to prove that the company has exerted all efforts to collect the debt. Be ready to support claims for bad debts with letters to the delinquent customers, reports from collection agencies, and ruling from the court.

You would want to retain as much of your hard-earned income, so you might as well take the time to know the factors that can give you more savings, such as certain deductions or expenses you have incurred throughout the year.

It will be a good practice if you keep good records and you understand what deductions to declare and save money during tax time.

The 14 tips mentioned above may not be the best ways to save money but certainly these are good ways to save money on taxes.

If you like this Best Ways to Invest Money post on ways to save money on taxes, please share with your friends on Twitter, Google+ and Facebook. THANKS!

Mr Buffett

Buffetology

Now let us switch the gears and talk about the master investor, Warren Buffet.  A man of simple tastes, Buffet relies very heavily on fundamental analysis.  I cannot recall who told me this about Buffet, either a friend or a relative, that Buffet is confident about all the companies in his portfolio, so much so to the extent that he would not flinch if a stock lost 1/3 of its value overnight because its financials and fundamentals dictate it to be in fact a solid company.  I cannot say that the following information is absolutely verified by Buffet as I have not had a sit-down with him yet, but after reading a biography of his, I do believe it captures his investing philosophy.

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Buffet believes that when investing in a company, the ultimate goal of that investment is to completely own that company.  So under ideal conditions, you would have enough money to own 100% of that company and your money would be safe in this.

Following are some general guidelines and prudent factors to keep in mind, which Buffet follows with his investments:

1.) The company in mind must be able to reasonably predict its earnings

2.) A company with predictable earnings has good economics, which leads to lots of free cash flow, which can be used to by businesses or buying back shares.

3.) These good economics are shown by a combination of the following:

– Consistent improvements on the company

– High returns on shareholders’ equity

– Strong earnings

– A consumer monopoly (which will be discussed later in detail)

– Good management

4.) Always invest while the price is low in order to increase return

5.) First choose which company to invest in, and then let the price and the required rate of return determine when or if to buy.

6.) Investing at the right price in a good business should produce a minimum rate of return of 15%.

Along with these rules are some more specific codes Buffet follows:

Investing should always be approached with a business mentality – i.e. All emotion should be purged from investing.

Always attempt to learn and master one industry, and then do not stray from this industry.

Stocks do not represent so much a market price, as much as a distinct company with certain operational standards behind it.

Dividends are best utilized when reinvested into the company.  This is due to tax avoidance on these payouts.  Also, corporations can often reinvest this money at a higher rate than can an individual, although they must be reinvested prudently.

Holding a stock is better than withdrawing from it, for tax-avoidance reasons.

One topic Buffet especially cares about is the capability of a company to reasonably predict its earnings.  Encompassed in this area is the company’s EPS (earnings per share) and the EPS annual growth rate.

EPS

Buffet is a large advocate of deciding on what company to buy before it hits a favorably low price, that is, “don’t aisle shop!” This idea of knowing the company you will be investing supports the idea that one should be knowledgeable of the industry in which it operates.

According to Buffet, there are two types of businesses: commodity type businesses and consumer monopoly types.

In commodity type businesses, the price of the product is the single most important factor and as a result, significant cash is spent on manufacturing improvements.

Commodity type businesses are often recognized by:

– Low profit margins

– Low return on equity, often less than 15%

– Difficulty with sustaining name brand loyalty

– Many competitors in the industry

– Excess supply

– Erratic profits

Consumer monopoly type businesses on the other hand are stable with predictable earnings.  One key indicator of a consumer monopoly business is to ask whether another fictional company, with a huge amount of cash could compete with it.

These companies often have a high wealth in intangible assets, not in PPE (property, plant, and equipment) and   other fixed long-term assets.

These companies are also nearly debt-free most of the time.  This idea of NOT being leveraged is why Buffet is a large opponent of derivatives and why Buffet steered clear of the CDO and subprime market during the mortgage crisis.

Aside from many other guidelines and rules Buffet adheres when investing, there are 9 specific questions Buffet asks when investigating companies:

1.)    Does it have a strong consumer monopoly?

–       Does it have strong recognizable products?  Does it have to be carried by the distributor, lest he lose money in opportunity costs?

–       If involved in an acquisition, is the acquired company also a consumer monopoly?

2.)    Are the earnings strong and rising?

3.)    Is the company conservatively financed?

4.)    Does it have a high return on equity?

–       ROE should consistently be at least 15%

–       A healthy ROE indicates good management

5.)    Does the company reinvest its earnings?

6.)    How much money is spent maintaining current operations?

–       If a company must use its money to constantly update operations, this is a sign bad sign as that money could be going towards share buybacks or acquisitions

7.)    Does it reinvest money in new opportunities?

–       Good management will often use excess capital to buy back shares

–       One of the most important aspects of management is how profitably it employs its retained earnings

–       Warren prefers minor expenses into research and development

8.)    Can the company adjust prices for inflation?

9.)    Will the value added by retained earnings increase the market value of the firm?

–       Personally, this is the most important question for me.  I am interested in the relationship between the inherent value of a company and its effect on the stock price.

Buffet believes that one sometimes discovers these companies as “conceptual toll bridges.”

1.)    Businesses with products that are used up quickly and with brand-name appeal.  These are sorts of products that effectively lose money for the merchant because they are always bought.  Trademarks and copyrights have immense carrying power.  Some examples of companies that carry these sorts of products are:

Coca cola, Hershey’s, Wrigley’s gum, Advil, Gillette, Hanes, etc.
Pharmaceutical companies often have these characteristics
A good way to identify these products is to walk through a supermarket and identify popular products.

2.)    Communication businesses

Advertising has created conceptual toll bridges in today’s environment
Newspapers work similarly

3.)    Typically these conceptual toll bridges apply more to services than products

As I mentioned in my last post, I would like to thank ALL of you who have been reading and commenting on this blog.  Initially, I did not know where I would go this or who it would cater to but with your support and ideas, I know that we can cultivate a great atmosphere where we can exchange ideas and whatnot.  Keep posting your comments and let us stir our minds towards greatness!!

Gold_Bar

Different Ways Of Investing In Gold Safely

For years, investors have known gold to possess intrinsic value and safe investing features. Since properties, currency and shares are prone to inflation as well as their prices may go up and down with the market, it is far better to invest in gold and silver like gold since the prices will always be expected to increase. Gold, as a commodity, not only has long-term store of value but also provides a hedge against inflation. In last one 10 years, the price of 1ounce gold has shown a dramatic increase from $300 to $1,500 and is likely to raise much more. This makes gold investments very profitable.

Are you interested in making safe investments in gold in gold but don’t know the tips for doing so? Simply check out the tips mentioned here.

Strategies for Investing In Gold Safely:

1) If you’re keen on possessions then you can certainly purchase physical gold in the form of bars, coins and bullion. Gold bullions are made from 100 percent pure gold and they are sold in increments of just one oz. hence they are popular type of investments with regards to purchasing physical gold. Various nations sell bullion coins that are denominated in local currencies. American Golden Eagle is the local bullion currency in the usa which is easily available at local outlets as well as on online websites.

gold-is-money

2) Women especially prefer to purchase gold jewelry. This is due to the fact most jewellery pieces are marked and priced based on the weight and quality (pureness) of metal used in it too as the cost of labor included in making it. You will get the rarest ornament pieces from jewelry auctions and online websites (they offer discounts top). However, purchasing ornaments online will need focus on your part because you will have to determine the purity and price of those items, think about the interest in brand and find out the shipping cost of gold. If you buy excellent quality jewelries, you can make profits by reselling it.

3) Exchange Traded Funds (ETFs) are second most popular types of investments after physical gold. In the event you can’t figure out what to know about gold investing, you are able to seek advice from an ETF expert and invest your hard earned money in it. Look for an online brokerage firm and open up an account there. Evaluate the current market prices of gold ETFs by making use of symbols like SGOL and FLD. They possess ETFs prices at 1/10th the price of an ounce of gold whereas PHYS and IAU have their ETFs costing 1/100th of the cost of an oz of gold.

Firstly, determine the amount of ETF shares you want to purchase and appropriately, divide neglect the amounts. You may make use of the online screen of your brokerage account to purchase ETF shares. The process of buying ETFs is just like purchasing stocks or shares. The broker may offer discounts of $5 to $10 on share trades. Here you must remember that gold ETFs don’t supply you interest amounts or dividends because the profits or losses incurred by investors depends upon the fluctuating selling price of 1 ounce of gold. Thus, you should use ETFs for either short term trading of gold belongings or for making long term savings.

4) If your luck is at peak, you can consider investing in stock exchange and mining companies. You can invest in shares of Barrick Gold (ABX) the largest gold mining company. One benefit of purchasing stocks is you can easily sell or buy them with little fuss.

5) Lastly, there are gold mutual funds which are ideal for group of businessmen. Mutual funds directly track the cost of gold and cost of shares of gold mining agencies and are collectively owned by some people. Look for company that offers lower investments and lets you invest in an automated monthly schedule. Put smaller amounts in gold investments for a long period of time to be able to gain maximum profits. If you are a first time investor, you should collaborate along with other experienced traders of the market to stop losses.

6) You can also buy possessions on monthly installments. You can set up an automatic investment scheme that deduces money from your banking account and directly transfers the profits incurred by you there. This will prevent you from going out of budget.

If you would like more information regarding shipping cost of gold, please check at well-known dealers or visit trusted websites to find opinion from the specialists.

If you want extra information on topic “payday loans“, then you are welcome to check out the author’s website Febs2010– in which you’ll find all types of specific information on the said topic.

ETFs

How to Invest in ETFs

As you start earning, it is good practice to invest the money. Investments provide good financial security for the future. However, when there are so many different types of investments, it may be confusing. Today, let us learn about ETF, which is a simple means of investing to obtain good retains.

What is an ETF?

ETF stands for Exchange Traded Fund. Here, you can buy several bonds/stocks at the same time. An investor can buy shares of ETFs. The ETF share prices can fluctuate throughout the day. They are listed and traded on an exchange. ETFs hold multiple underlying assets.

ETFs offer good alternatives to individual stock picks. While services like Motley Fool make it easier for investors to choose stocks (read the full review here), many investors prefer the simplicity of ETF investing.

ETF Investing

ETF Jargon

There are certain concepts to understand before you can invest in ETFs.

  • Expense ratio – The fee that ETFs charge is called the expense ratio. For beginners, it is recommended to go with smaller expense ratios.
  • Types of ETFs – There are two types of ETFs – passive ETFs and active ETFs. Passive ETFs (also called index funds) track an index and update the portfolio from time to time. If you are new to this, start with passive ETFs. In an active ETF, an investment manager manages the portfolio of securities.

Investing in ETFs

There are 2 ways to buy/sell an ETF. Three points to note before investing in an ETF –

  • Ensure that you have a Demat account. It is needed to hold the ETF units.
  • Open a broker account with a broker/sub-broker.
  • Complete your KYC. You will need documents for proof of identity, proof of address and your bank account details.

You can now use the registered bank account for your ETF investments. You will need the current price of a single share to start investing. Check whether your broker is registered with the stock exchange. Now, there are two ways to buy and sell ETF shares.

  • The first way is to call your broker. You can tell the broker about your trade specifications and buy/sell ETF units through the broker.
  • The second way is to use an online trading terminal. You can place your order on the terminal.

Why should one invest in ETFs?

ETFs are considered as the ideal investment for youngsters. This is because they provide a host of benefits. Some of the benefits are discussed below.

  • Reasonable transaction charges – Compared to other index-tracking products, you incur lesser transaction charges on ETFs
  • Diversification – Diversification is a mantra that the majority of investors swear by. With ETFs, you can spread the risk over several securities. Stock-specific risk is minimum in this case. In a single transaction, you are exposed to a variety of stocks, sectors and commodities
  • Liquidity – ETFs provide ample liquidity. They can be traded throughout the day. If you have limited capital, you can immediately exit a losing investment.
  • Tax-benefits – If you are an ETF investor, the dividends you gain are tax exempt. To sell an ETF unit within 12 months, a short term capital gain tax is levied.

ETFs have the potential to produce great investment growth over a long period.

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Financing Real Estate Investments Using Leverage

How to obtain investment property financing is one of the first things you must figure out as a new
multifamily

investor. Assuming you’re not yet equipped to pay cash, your total acquisition costs boil down to 3 primary components:

The mortgage or loan (traditional bank, mortgage broker, private lender, etc.)
Your down payment (can be out-of-pocket or financed)
Your closing costs (can be out-of-pocket or financed)

THE MORTGAGE
Of course, this is the largest of your investment property financing components, and the specific type of mortgage you get may depend on the nature of the property you are
buying.

For a functional, fully occupied multifamily structure, a standard
property mortgage

will fit the bill.

A
fixer upper,

on the other hand, may require a different funding source, because banks do not like the added risk associated with a rehab job. Additionally, the “non-functional” nature of this type of property makes it difficult to get an accurate
real estate appraisal.

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In fact, most times these appraisals are undervalued, which could result in a bank-mandated reduction of the loan amount, or even a voiding of the deal by the lending bank.

Although I am partial to fixer-upper projects, I did not start out this way. My first few acquisitions were of the more traditional, already-functional type, using regular bank mortgages. And unless you have access to a boatload of cash or to a private lender, you will probably have to start out the same way I did – purchasing currently occupied rental properties.

Although you’ll miss out on the “fixer-upper discount,” an initial focus on fully occupied properties will allow you to learn the ropes before “graduating” to the more advanced fixer-upper stuff. This will also give you time to find a private lender you can trust, which will enable you to execute the rehab strategy.

YOUR DOWN PAYMENT

The largest out of pocket expense associated with investment property financing is usually the down payment. Down payment requirements are more stringent with a traditional bank compared to a private, non-bank lender. For example, many private lenders will finance 100% of the purchase price (not to mention closing & rehab costs), especially if the term of the loan is short (like 6- or 12-months).

But if you need to go with a traditional bank mortgage, a down payment of some sort will almost always be required. The bank’s down payment requirement is defined by the “loan-to-value” ratio (LTV). For example, an 80% LTV loan requires a 20% down payment.

Luckily, the days where lenders required a 20% down payment are long gone. As long as you have good credit, most mortgage brokers can hook you up with a 90% or even 95% LTV mortgage (i.e., you put down 10% or 5%, respectively).

Of course the upside compared to traditional 80% LTV loans is that you put less money down out of your own pocket, which also drives up your cash-on-cash ROI when you sell. However, high LTV mortgages do have downsides:

Interest rates tend to be higher
You may have to pay for points at closing (calculated as 1% of the mortgage amount)
The appraised value must be higher because there is less of an equity cushion
Any down payment that is less than 20% of the purchase price triggers
private mortgage insurance (PMI).

Because of these issues, I would avoid straight-up high-LTV bank mortgages if at all possible. A much better investment property financing alternative is to get an 80% LTV loan, and use a secondary financing source for the 20% down payment. And luckily, you do have a few
zero down options

for the down payment.

Obviously if you cannot find a secondary funding source for the down payment, then you will indeed have to pursue a high LTV loan even though this is not ideal. That said, this can be viable as long as your projected
rental property income

is enough to cover the higher payments. Then, in a few years, you should have enough built-up equity to
refinance investment property

into a standard 80% LTV, 30-year fixed-rate mortgage.

CLOSING COSTS
Unfortunately, closing costs are a necessary evil in terms of investment property financing, even when using a private lender (although bank fees will usually be higher). Click for more info on
closing costs.

FINAL THOUGHTS
The bottom line is that – in most cases – you’ll want to get an 80% LTV fixed-rate loan using a secondary financing source to fund the 20% down payment.

This gives you the best of all worlds…you minimize your out-of-pocket expense while at the same time minimizing your largest go-forward expense item as well as your risk. This maximizes the odds that you will optimize your profit when you
sell

years down the road.

So, investment property financing is not overly difficult, but it does take some time to figure it all out and find the best deal. Just follow the advice on this site and do not waver. Keep moving forward. Yes, you CAN do this!

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SBA Loans

How To Convince an SBA Loan Provider To Finance Your Business

The number of small businesses is the exact opposite of its size, which comprise the majority of businesses in the USA. According to the US Small Business Administration, small businesses account for 99.7% of all businesses in the USA, or a total of 28.8 million. These small businesses currently have 56.8 million employees and covers 48% of the total for USA.

The numbers speak the same with small business funding. Many financial institutions are taking advantage of the large market resulting in more small business funding solutions available. The same Small Business Administration (SBA) report said that there are about 5.2 million small business loans (valued at $ 73.6 billion) released by US lending firms in 2014.

SBA Loans

The market for small business lending is robust, and one can always find a solution that can fit any need and preference. A business will always have the answer on why get a small business loan. Here are some of the available small business lending solutions, and what you need to know about them:

Conventional Bank Loans

This is usually the first option when it comes to any kind of financing, whether for personal or business purposes. Small businesses, however, find its loan eligibility hard to achieve, and its requirements difficult to secure. They also deploy stringent terms and compliance measures.

The reason why most businesses flock around banks is because the bank’s loans carry smaller interest rates and they can also be generous with the amount as long as the eligibility criteria have been met. The disadvantage would have to be its strict requirements and the need for a collateral.

Alternative Lending Firms

They appeal most small businesses because of lenient terms and flexible repayment options. It is also more convenient to secure alternative funding because most providers can process your application online. This is most especially valuable for emergency cash needs.

Another advantage in dealing with alternative lending firms is their lenient terms and eligibility criteria, a lower requirement for credit score, and its faster processing and approval. The downside, however, is the excessively high interest rates and other additional upfront fees.

SBA Loans

A U.S. Small Business Administration (SBA) loan system is a funding solution backed up by the US government, which aims to support its citizens with the means to build and expand their own businesses. The SBA doesn’t provide the loan itself but serves as a guarantor to the loan coming from both private and public financial institutions that include banks and alternative lenders.

Small Business Administration partners with these financial institutions to offer a wide range of loan types that can suit the different funding needs of small businesses. It has a regulated set of guidelines, which all partners follow, in order to protect the interest of both the borrower and the lender. SBA guarantees for a percentage of the amount of every loan approved, which is about 70–90%. This minimizes the risk for the lender. On the other hand, the fact that a government small business loan is enough to know that the borrower is protected under its own laws and regulations. SBA loans offer lower interest rates than other alternative lending institutions.

The downside of an SBA loan is its long process, and it requires more paperwork. There are also top up fees to be paid when you avail.

Questions To Answer Before Getting an SBA Loan

Before approaching an SBA loan provider, make sure that you have the answer to the following questions:

  1. What is your borrowing intent?
  2. How urgent is your need?
  3. What are your business’ risks?
  4. In what stage of development is your business?
  5. How much do you need?
  6. How long can you pay the loan back?
  7. What is your business plan?
  8. How long have you been operating your business?
  9. What is the cycle of your business? Is it seasonal or consistently producing revenue?

By answering the above questions, you can help the SBA loan provider to assess your capacity and risk tolerance. It can also determine if you are eligible or not.

Reasons Why You May Be Denied From an SBA Loan

Small Business Administration loans are attractive to small businesses because of its advantages like low interest rates, flexible repayment terms, varied loan types, and primarily because it is government backed-up. Most alternative fundings compensate the higher risk involved with their grants by imposing higher interest rates, which can go as high as 80% APR.

Unfortunately, not everybody that applies for it are automatically approved. Many businesses have varied problems with small business loans that can hinder their growth, and here are the most probable reasons why you may not be granted with an SBA Loan.

Yours Is a Startup Company

An SBA loan requires for a business to be operating for at least 2 years.

You may opt for other funding options like angel investing or to a venture capitalist. There is also an online community-based funding solution like crowdfunding, which can cater to start up entrepreneurs. Cash flow based funding like merchant cash advances is also viable. There are also alternative lending companies that specialize in giving capital for startups, but the grant is not that big.

Yours and Your Business’ Credit Score Is Low

Like with conventional bank loans, SBA loans require a strong credit score, which is the most prevalent reason why most borrowers get denied.

A credit score, which most people might probably doesn’t know, is the numerical equivalent of your commitment to paying off your debts. It is computed based on your debt and credit histories with banks and other financial institutions. For example, you own a credit card. When you use your card, you will be billed on a designated cut off. If you diligently pay on time and in full amount and you are consistent with this for a long period of time, then, generally, your credit score will be high. When you do the other way around, say you don’t pay the full amount or you pay late, of course, your score will be low. But having no credit history can equally hurt your credit score because basically, there will be no means for a lender to assess your willingness and responsibility to pay.

There may be a lot of reasons why a business, or you, have a low credit score, and other alternative lending agencies are not too particular with these. Find one that can grant a loan for someone like you, which is also an opportunity to build your credit score again.

You Do Not Have Enough Collateral

Small Business Administration loans like bank loans do require a collateral. This collateral is being shared with the lender and the SBA because they share a part of the guarantee with the loan. Because of this, it may also require you a personal collateral too. This is also the reason why SBA loans cannot cater to startups because most of them doesn’t have more assets that can serve as a collateral.

Your Company’s Industry Is Part of the Grant’s Exclusions

Aside from startups, SBA loans won’t approve the loan applications of businesses in these industries:

  1. Businesses that are engaged in lending
  2. Life insurance companies
  3. Businesses outside the USA
  4. Businesses engaged in networking or any incentive-based model and pyramiding
  5. Businesses that get a third of its gross revenues from legal gambling
  6. Religion-based businesses
  7. Lobbying or political organizations
  8. Speculative businesses like oil explorations

You Don’t Want the Risk for a Personal Guarantee

Small Business Administration loans will need your personal guarantee, which meant your car, your home, and other personal assets. When you give this to the bank as a collateral, you give it the power to sell those when you cannot pay back your loan anymore.

There are other small business loan with no personal guarantee to ask from you, which may be viable if you are intolerant with this kind of risk.

So how to convince the best SBA loan providers to grant you that loan? You’ve got to be positive when it comes to these 5 C’s:

  1. Character – this implies your managerial skills or the strength of your management team. Your team should exemplify a strong sense of responsibility when it comes to their roles in your business.
  2. Credit Score – this is one important factor that SBA loan providers do look for, and it is also one of the hardest to repair. Even though you may be denied with an SBA loan, there is a lot of room in getting another small business loan provider that will fit your eligibility and needs.
  3. Capacity – a strong business plan and a steady cash flow are strong indications of your capacity to sustain in paying your liabilities.
  4. Capital – before getting an SBA loan, you should know how much additional capital you really need to finance your venture. This also includes information about the nature of your intent and the specific reason/plan for the grant.
  5. Collateral – there are different assets that can serve as collaterals other than real estate like personal assets (house, car), accounts receivables, and credit cards. When the cash flow and profits are good, it is best to slowly build up your assets, which can also help you for your unexpected future additional funding needs.
how-invest-real-estate

Real Estate Investing 101: A Beginner’s Guide To Investing In Real Estate

Investing in real estate is not a groundbreaking or new thing. It is a true, tested and legitimate business that can certainly earn you a great wealth if you play it right. Like any other investment, real estate investing also demands understanding of the basic concepts on your part. When you learn it right, buying property, generating rent and avoiding bankruptcy become as easy as playing monopoly. This article will help you understand the real estate investing basics in the simplest way.

❖ Getting Started In Real estate Investing

Generally, the new investors are more comfortable with real estate investing. It is simple to understand and offers plentiful opportunities to earn good fortune. But before you invest your money into this wealth-building vehicle, it is important that you find out the right properties and understand the real estate community well. Make sure that there is no scope left for making mistakes because if you make them, you will lose everything that you have ever had.

❖ Why Invest in Real Estate?

There are many reasons why real estate investing is considered very fruitful. Here are some of the ways you can benefit from this investment:

➣ Appreciation: Real estate appreciation refers to increase in the value of a property over time. When the land around your property becomes busier or scarcer or if the real estate market changes, your property becomes more valuable. But it is completely unwise to invest in real estate to make money only on the basis of appreciation.

➣ Tax Benefits: You can deduct the operating costs of your property from your income. These costs include:

Repairs and maintenance
Interest on loan
Agent’s fees
Insurance
Rates and taxes
Building depreciation
Travel to and from your property in order to facilitate repairs

invest-real-estate

These deductions can be claimed on your tax return.

➣ Rental Income: Rental income that you get through your property can be a means of positive cash flow. You can rent your property for a specific period of time. When this rental income covers all the expenses like insurance, taxes, mortgage, fees with nothing left over, you become break-even. Positive cash flow is when the rent exceeds the expenses. You can also earn through rent appreciation that is increasing your rental income every year.

➣ Improvement:  You can earn better price and more profit from your property by improving its functionality and appearance. Keep upgrading your property from time to time to help retain its value.

➣ Leverage:  You can use Other People’s Money (OPM) to invest in real estate. You get enough time to pay back the mortgage and you can also structure your deal in such a way that no money is invested from your pocket but the benefits are all yours.

❖ Types of Real Estate Investments

After understanding how beneficial real estate investment is, let’s find out how many ways are there to invest in it:

➣ Commercial Real Estate Investing: These are mainly the office buildings. You can lease out the individual offices in the building to small businesses or companies and collect rent.

➣ Residential Real Estate Investing: These buildings include houses, townhouses, apartment buildings and vacation houses that are rented by a family to live.

➣ Retail Real Estate Investing: Strip malls, shopping malls and other retail stores are included in these types of buildings. Along with getting the base rent on these properties, you can also collect a percentage of sales from the tenant store that is used in maintenance of the property.

➣ Industrial Real Estate Investing: These are the properties that generate sales from the customers, who use the facility for temporary use, for example – car washes and storage units.

➣ Real Estate Investment Trusts (REITs): You can invest in real estate through these trusts also. They own a portfolio of underlying real estate and trade like stocks.

❖ Models of Real Estate Investment

There are 3 different ways through which you can generate money for your real estate investment. You can rent or lease your property to a tenant or can sell it. Here is how these models work:

➣ Leasing and Renting: When you rent a property, you allow a tenant to live in the property. In return, they give you a monthly fee. When you lease a property, you give it to the tenant on rent for a guaranteed amount of time that is decided with a prior contract.

There is just one drawback of this model that in spite of giving it on rent and allowing someone else to live in there, the maintenance of the property is your responsibility. If you have more than one property and you rent all of them, the amount of maintenance can be huge. Also, you may have to get the property completely repaired or maintained before selling or renting it again to get it into good condition.

On the advantageous side, you can earn good fortune through rental income if you have more than one property.

➣ Flipping: This means selling your property to earn net profit. With this model, you buy a low priced property, improve it and then sell it for a profit. Though it yields the most reward, it can be very risky for a beginner investor because you will have to predict which property would be sold for profit in the minimum time.

To get the deal right, it is important that you find out the right property that can be flipped for profit. Then you will have to invest in its repairs and remodeling. For this part, it is important that you have sufficient money in your hand so that the repairing work can be completed in the shortest period of time. Since the property is still owned by you, you will have to make the monthly payment on it. That’s why it is important that you complete the remodeling work in the shortest period of time.

Thus all these approaches work efficiently for generating money from your real estate investment. If you are ready for dedicated and hard work, you can definitely make decent profit through real estate investing 101.

❖ In The End

Though investment in real estate can bring you huge profits but if you are a beginner in this field, you should be very careful when you actually put your money into it. Never enter this world with stock market mentality, which is assuming that the past trends will be repeated in the future. Refrain from buying real estate blindly by following everyone’s advice. Always accumulate cash reserves before investing in real estate, especially if you are renting your property. This will save you from unnecessary pressure of shoddy repairs, accepting unqualified tenants and giving into their demands.

You can do well in this business only if you act rationally and don’t assume that real estate is a way to get-rich-quick. Consider it as a business that will take good amount of time to flourish and only then you will be able to reap the maximum benefits out of it.

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