MORE than Finances

Get your finances in order, and get on with your life!


Knowledge is Power When it Comes to Investment

The more you know… It’s amazing how knowledge changes your behavior. Most of us are bad with money, or we were sometime in the past. We all understand that it’s important to change these kind of financially wasteful behaviors, but we just…don’t…do it. Why is that? I don’t think it has much to do with lack of self-control, though that’s the thing we tend to beat ourselves up about. It’s that we don’t know what we’re doing.


Ol’ Plato once said that ignorance is the only evil. Applied to personal finance, that maxim would indicate that the more we learn about money, the better our financial lives will become. That’s an interesting thought, but you might wonder if it’ll hold water in real life. I can say from personal experience that I wasn’t able to make a change in the way I used my money until I learned about money itself.


Financial knowledge gives you a perspective that you’d otherwise lack. You learn the value of money, and you learn why it’s important not to waste it. You also learn how your life can change for the better if you have more of it, or simply regulate it better. These are important realizations that everyone needs to have if they hope to have any future financial stability. This knowledge is also the foundation of investment. You can’t handle investment if you can’t handle your personal finances.


So where does one start? This can be the most discouraging part of learning about money. Not all of us have the time or resources to get a degree in finance. We just want to have more money left over after we pay our bills. I would recommend a double-tiered approach:


Learn about the money you have. This is the essence of budgeting. You’ll have to track all the money that you brought in during the last couple of months. Try to get your final figure down to the dollar. Then figure out how much you spent. Most people find that the second figure is higher than the first.


Now figure out how much money you should spend next month. When the 1st of the month rolls around, stick to this plan. MAKE it work. If you’re able to make this budget work for several months in a row, you won’t be sinking or treading water. You will have learned the basics of personal finance and you’ll be ready for something more complicated.


Learn about the money you want to have. Investing is about growing the money you have. A great way to learn about basic investment is CMC Markets. They have a lot of educational resources in addition to their brokerage of quite a handful of quick turnover investment forms. Because their investments can be initiated and grown to maturity in hours or days, they’re a great way for a new investor to learn investment before tackling investments which will take decades.


Knowledge is the foundation of investment. Without it, you won’t be able to tell where to put your money. Knowledge is the best way to allay risk in investment. So invest in learning. It has a better return than any other investment.


Are Penny Stocks a Wise Investment?

The traditional notion of purchasing stocks includes using a brokerage and putting your cash in well-known firms that are classified as blue chip stocks. Though, within the last three years or so or so, buying penny stocks has taken The U.S. by storm (along with fx trading). They’re more popular than ever, but should you purchase them?

Small cap stocks are shares of stock that are available for mere cents. Typically they’re shares of stock in small companies that are publicly owned. The exact definition of penny stocks is unclear. Some consider these to be stocks that cost less than $1, but some institutions consider shares that cost less than $5 to be penny stocks. At this particular level, it can be hard to identify penny shares because typically these are stock shares in businesses that have small market capitalization; thus they need your investment. Additionally, they fail to appear in the key stock exchanges. Rather they’re bought and sold via over the counter strategies and on some institutions such as NASDAQ. At $5 for each share, it is possible to locate shares that belong to large capitalization companies that are openly traded in the primary stock exchanges.

Why are people fascinated by making an investment in cheap stocks? To many people, purchasing penny stocks may seem like a bargain. Because they cost so little, you can buy up a great deal of stock shares for a meager amount of money. This is in contrast to acquiring shares in blue chip corporations, which cost 100s, and maybe even thousands for a single share. It is really an interesting option to small time investors who do not have that much money to invest in stocks with.

Micro cap stocks are highly speculative. You really don’t have a clue how the corporation will perform because it’s typically a small or newly established corporation. That means that buying or selling shares of stock can decrease or increase the stock price substantially. Massive purchases of shares can quickly push the price up. That can equate to massive profits for the buyer. For example a $300 per share with a blue chip corporation needs to gain another $300 to double your investment. A penny stock that you just bought for 50 cents merely has to reach $1 before your investment is doubled.

Many start-up firms buy and sell over-the-counter at Pink Slips or the OTC Bulletin Board, which in turn lend them some trustworthiness and enable them to acquire traders. If you’re diligent enough to investigate these organizations, you may be able to pick out appealing start-ups and purchase them before they grow. Suppose one of those is the next Google or Apple inc?

Buying pink sheet stocks could be a high risk endeavor. Since these stocks tend not to show up in the big stock exchanges, there is certainly little regulation and oversight on these stocks. In penny stock trading, you do not have true reporting and disclosure requirements established in trading over the counter.

Since these are little firms, usually they are not liquid at all. They only have a small cap structure, plus they require your money to grow. However, they don’t have a well-known history. You don’t really know if these companies will be able to make a profit. Quite a few penny stock organizations fold and then leave you broke if you aren’t capable to quickly get out.

As a result of limited regulation, it isn’t difficult for fraudulence to take place. Usually top penny stocks tips can be found in newsletters as well as other web pages, but what you don’t know is that these are operated by folks who buy stock, and they push them by telling you to invest. Once you along with other investors buy them, the value will increase and these people will sell them, making large amounts of money.

Pink sheet stocks can be a good way to get started learning about trading, but you must only spend a small percentage of your stock portfolio. Possibly commit no more than 10% of your portfolio to penny stock investing and do your homework. Study these organizations and sign up for stock tips that trustworthy financial journals consider as respectable.

Only put money into penny stocks if you have the time to frequently monitor them since they fluctuate wildly. These are very short-term trades, and you could possibly buy and sell them within a day. And the most critical lesson is don’t be greedy. You do not want to target too high of a return. If a share you obtained at 20 cents show a current value of 24 cents, that’s already a 20% increase. Your best bet is to sell that and don’t speculate whether it will get to 30 cents.

Have you invested in penny stocks? Do you presently have penny stocks?



How Financial Trading Works

Have you ever heard of people trading currencies? Or, maybe you’ve heard of people trading on the FX market? Just hearing those phrases makes it all sound so complicated. But, in reality, trading currencies is not really any more complicated than choosing a stock investment. And that, I’m sure you’ve done at least once in your life.

So what do you do when you try to find a stock to invest in? Do you just do a random search on the internet and find something that has a cool stock symbol (for instance, Harley Davidson’s stock symbol of HOG)? I sure hope not! This was the method back in the late 1920’s, and we all know how that ended up…

No, when you choose a stock to invest in, you carefully study the history of the company. Has it been extremely volatile? How often has the company posted a net profit in the past four quarters? Are they involved in an industry that about ready to take off (like the medical industry or healthcare with the baby boomers)? Do they have a lot of debt compared to their current assets?

These are things that I would hope you would consider when choosing a stock. That, and of course the relative pattern of their stock price over the past few months or years. If they have consistently improved their stock price, it might be a great one to jump in on. Chances are that they will continue their growth and make you some money along the way!

Believe it or not, trading currencies isn’t much different. First of all, before we dive too deeply into the specifics, let’s gain an understanding of what it means to trade currencies. Just like company stock prices, the value of currencies go up and down as well (relative to other currencies). There are obviously many factors that contribute to the rise and fall of these prices, but let’s keep it simple.

Mainly, currencies gain or lose because of the strength that the country shows. If we, as Americans (in the USA), have a strong economy, there is a better chance that our dollar will rise in comparison to another weaker country’s currency. So, if we would have invested in our own currency, we would have effectively increased our earnings. While the concept isn’t all that complicated, I understand that it can initially be tough to grasp. For more information on financial trading click here.

Getting a bit more detailed (which may help your understanding), there is one more point that leads to the devaluation of currencies. You know how the U.S. government decides to flood the market with more money at times? Since this paper money is backed up by absolutely nothing, it essentially decreases the value of each one of our dollars (since there are now more dollars in the market with no extra real value within our nation), which then decreases our currency vs. another.


5 Pitfalls of Investing in the Internet

Since the explosion of Internet startups in the 1990s, investors seek the best companies to financially support with hopes of a good return on their invested dollars. Still, the 21st century continues to bring so many Internet startups of all kinds so how can one avoid backing the wrong company?

1. Failing to Check the CEO’s Background


Image via Flickr 401(k) 2013

One of the fastest growing Internet startup arenas is social media. It’s not just venues for sharing, it’s also social media app development companies. Each of these creative businesses has a design team and an innovator at the top.

Before investing, see what you can find out about the CEO or top developer. Have they had success in the past? Do they have a business plan with a sound marketing plan? How many other investors have jumped on board. Finally, if they are seeking investors to simply survive and pay operating expenses, these may be Internet startups to skip.

2. Relying Only On the IPO Announcement


Image via Flickr 401(k) 2013

When an Internet company announces their plans to go public with stock most think it’s a good sign the company is going places, but not always. You need to make sure the product isn’t a one-hit wonder and will be gone in a year.

Ask your investment advisor to analyze their past success to determine if the IPO is worth your investment dollars.

While the stock market can be a volatile place, for the enthusiastic and risky investor, when the IPO stage hits, with proper forethought and investment research you may be able to get in on the ground floor and choose to sell when the stock rises or stay if the company shows growth.

3. Not Asking for Corporate Leverage


Image via Flickr IHA Central Office

Social media visionaries may appear to have found the best new way to engage people on the Internet. Before investing, however, what leverage will you have?

Will you be a silent investor with no vote or say? Are they only relying on your as a mentor? Do they just want your money and plan to forget all about you? Will they give you a board position?

These are all good questions to ask and be direct about the leverage and position you’ll gain by investing before you write that check.

4. The Idea Just a Copycat


Image via Flickr pasukaru76

There were the days when MySpace was it and no other social media venue could top it. Facebook and other social media platforms like Digg, StumbleUpon and Pinterest have made MySpace fail in the popularity game.

Some social media investments are wise where others are simply copycats of successful companies hoping to ride their competitors’ tail to success. Find out which category the social media startup falls in before investing.

Avoid the copycats by questioning your brokerage company; for example, if you’re considering an investment firm like Fisher Investments, immediately seek out Fisher Investments office address and be specific about what sort of research you need on the company.

Good investment firms will perform due diligence on the company before advising you to invest.

5. Understanding the Stats Are Against You


Image via Flickr mattiaostmar

According to HLM Distributors, a whopping 90 percent of Internet startups fail.  Fortunately, the other side of this coin is that of the 10 percent that do succeed, they can turn out to be very profitable.

The founders of any social media startup should be just as enthusiastic as you are about your financial backing. This means they have risk management plans, effective marketing ideas, realistic cash flow forecasts and the dedication to the time it takes to be successful. A lackadaisical CEO is sure sign the company may not succeed.

Before you write a check to any Internet startup, even if they have a dazzling business plan, let your brokerage firm be your guide to the inside track and explore the company fully. These tips will surely prevent the pitfalls of investing in any Internet newbie company—especially those of the social media variety.




How Do Interest Rates Affect Your Finances

Everyone seems to talk about interest rates, especially right now because they are historically very low.  However, two decades ago, they were extremely high.  But the real question is how interest rates affect your finances?  Here is the breakdown of you are affected.

When you’re Saving

If you’re saving money, the current interest rate definitely affects savings accounts.  If interest rates are low, you will get a lower interest rate on your money.  If interest rates are high, you will get paid a higher interest rate on your money.

You get better interest rates on long term savings, like CDs, but then you will be locked in when rates rise back up, making your future returns worth less.  When rates are low, it is best to keep money in the short term rates, so that you can take advantage when they rise again.

When you’re Borrowing Money

If you’re borrowing money, low interest rates are a blessing.  Having low interest rates means the amount of interest you will pay on your loan will be less.  Right now, with interest rates being historically low, you can save a lot of money by refinancing any money you’ve borrowed in the past.

However, when interest rates rise, the amount of interest you will pay on your debt will go up unless you have a fixed rate loan.  This put individuals who have variable or adjustable rate loans at a disadvantage.

When you’re Investing

When you’re investing, interest rates can play a little havoc with your portfolio.  If you’re invested in stocks, low interest rates typically boost the stock market because cheap capital allows companies to boost their bottom lines, which in turn boosts shareholder returns.

However, if you invest in bonds, low interest rates typically raise bond prices while lowering bond yields.  If you need the fixed income, this is a bad thing.  If you speculate in prices, this is a good thing.  However, as interest rates rise in the future, bond prices will fall, especially on long term bonds.  That is why it is a good idea to only hold short term debt.

Post by Robert