Real wealth creation is achieved by owning revenue streams that are under your control. While you surely can’t ask someone into giving you their money, the best way to build wealth is by creating value for others, so instead of thinking "Wealth Creation" you should think "Value Creation". That will give you the right mindset that you need to become really successful, because it shifts the focus from you to your customers in the case of starting a business.
For Instance, wealth creation through real estate investing is still one of the best ways to become financially independent. When it comes to real estate investing the choices are endless. Should you invest in mobile homes, apartment buildings, condos, single-family homes, office buildings etc? One of the key ways to build wealth is by acquiring or building multi-apartment houses. This is how really successful real estate investors build dynasties.
The Real Power Of Real Estate Investment Is Rent Income
In order to grow wealth, it's important to make your money work hard for you -- not the other way around. In fact, Robert Kiyosaki, author of the No. 1 best-selling personal finance book "Rich Dad, Poor Dad," built his entire money philosophy around this concept.
Generating income from passive, rather than active, income sources is the best way to do this.
Investments that yield passive income include dividend-paying securities, rental properties, profits from a business you do not directly manage on a daily basis -- even royalties on creative work or inventions. In other to be wealthy, one must plan and work toward a financial goal. There must be a clear vision of what you want and take the necessary steps to get there.
The wealth mentality is not as mysterious as many people think. Small tweaks, goal setting, and long-term financial planning can move you one step closer to wealth. For the typical individual, there are other key ways to be an owner aside real estate and stock. They include:
Gold And Silver - Gold and silver are one of the most stable ways to accumulate wealth.
A Good Business Idea - Just ask Bill Gates how well that worked out.
If you're aiming for true wealth, consider starting your own business. According to Forbes, nearly all of the 1,426 people on its list of billionaires made their fortunes through a business they or a family member had a hand in creating.
As a business, aside money on a regular basis to build a nest egg, investing at least part of those funds in the stock market can be an excellent way to grow your money, but to maximize your return you need to invest your money wisely.
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The wealth mentality is not as mysterious as many people think. Small tweaks, goal setting, and long-term financial planning can move you one step closer to wealth. For the typical individual, there are other key ways to be an owner aside real estate and stock. They include:
Gold And Silver - Gold and silver are one of the most stable ways to accumulate wealth.
A Good Business Idea - Just ask Bill Gates how well that worked out.
If you're aiming for true wealth, consider starting your own business. According to Forbes, nearly all of the 1,426 people on its list of billionaires made their fortunes through a business they or a family member had a hand in creating.
“Many middle class workers think that starting a business is too risky," noted Robert Wilson, a financial advisor and frequent contributor to CNN, NBC and CBS. "The wealthy understand that what's risky.”
As a business, aside money on a regular basis to build a nest egg, investing at least part of those funds in the stock market can be an excellent way to grow your money, but to maximize your return you need to invest your money wisely.
Firstly, separate your money into funds you can afford to leave invested for five years or more, and money you might be in need of within the next five years. Only long-term funds should be invested in the stock market. Funds you expect to need within the next five years should only be invested in safe investments, including money market funds and certificates of deposit.
Secondly, determine how much you can afford to set aside each month. Look at your monthly cash flow, as well as any monthly income you draw on the business. Decide how much you want to invest--once you know how much you have to invest you can set up a monthly investment to the mutual fund of your choice.
Read a number of financial publications on a daily basis. Some of the best financial publications include the Wall Street Journal and Investors Business Daily. Barrons is a particularly good source of information about mutual funds. Also review several financial websites; some of the best include CNN Money and Yahoo! Finance.
Index funds are an excellent choice for long-term stock market money, due to their low expenses and excellent track record.
So How Do You Research And Find The Best No-load Funds?
Mutual fund research can be made easier with a good online research tool. If you are looking to buy the best no-load mutual funds, review an existing fund, compare and screen different funds or you are just trying to learn something new, mutual fund research sites, such as Morningstar, can be helpful and easy to use.
Search "screens" on their online tools allow for an investor to narrow their search for no-load and load-waived funds. Most of the online mutual fund research sites require you to register for "free" or "premium" access. Review the charges and expenses for each mutual fund you are considering.
Keep in mind that the expense ratios for index mutual funds can be as low as 0.20 percent, so you can use that as your benchmark figure. Index funds also tend to outperform their managed counterparts on a long-term basis. An article in "Money" magazine explained that managed mutual funds tend to incur much higher expenses, including the cost of hiring a team of money managers. Those money managers need to pick a lot of winning stocks just to cover those extra costs.
Complete the application for the mutual fund you prefer. Make sure you include your Social Security Number or Employer Identification Number, as well as your name, business name, address and phone number. You could complete the automatic investment section to have money transferred from your personal or business bank account on a regular basis.
Choose a fee-only financial planner if you feel you or your business needs help with its investments. A fee-only planner derives no income from the investments recommend. Instead planners are compensated solely by their clients. This means that a fee-only financial planner does not have the built-in conflicts of interest that commission-based advisers often do. You can find a fee-only adviser in your area by visiting the National Association of Personal Financial Advisors at napfa.org.
Complete the application for the mutual fund you prefer. Make sure you include your Social Security Number or Employer Identification Number, as well as your name, business name, address and phone number. You could complete the automatic investment section to have money transferred from your personal or business bank account on a regular basis.
Choose a fee-only financial planner if you feel you or your business needs help with its investments. A fee-only planner derives no income from the investments recommend. Instead planners are compensated solely by their clients. This means that a fee-only financial planner does not have the built-in conflicts of interest that commission-based advisers often do. You can find a fee-only adviser in your area by visiting the National Association of Personal Financial Advisors at napfa.org.
How To Invest In Bonds
Government entities and corporations raise money by issuing bonds. The issuer of a bond is a borrower who makes interest payments each year. Investors purchase bonds as an investment. The investor earns interest each year and is repaid their original investment on a specific maturity date. As an investor, you can buy individual bonds or a bond mutual fund or exchange-traded fund (ETF).
The purchaser of a bond is a creditor and the bond issuer is the debtor. When a bond is issued, it is sold to investors for the first time. The investor pays the issuer (government or corporation) for the bond.
Understand how bonds are issued. Bonds are issued with a certificate in electronic form. The par value is the dollar amount stated on the face of the bond certificate. The annual interest rate paid to the investor is also included on the bond certificate, along with the maturity date. Once the bond is sold to the initial investor in the primary market, the bond can be traded between an unlimited number of investors.
Bonds are bought and sold between investors in the secondary market. If an investor sells a bond before the maturity date, they sell the security at the current market price. The market price may be higher or lower than the par value (issue price). Investors can purchase bonds through a brokerage firm which is in communication with governments and companies that want to issue debt.
They also have access to the markets where bonds trade in the secondary market. Consider how much advice you need to set up an account. If you plan to direct your own investments, you can set up an account online by going to the website of a brokerage firm such as Fidelity or TD Ameritrade.
You can also go to your local bank or full service firm; just make sure you shop around, as fees and services can vary a great deal. When an investor opens an account, the individual will be asked to complete a customer new account form. They will answer questions about investment experience and risk tolerance. When the account is approved, the investor can transfer funds into the account to purchase bonds.
Purchase individual bonds for your portfolio. One investment objective is your time frame for investing. If an investor has a specific time period for investing, they can select bonds that mature near that future date. Bonds have maturity dates from just a few years to 30 years.
Investors should consider the maturity date of the bond, and when they need access to their invested funds. Investors must also check the following:
Check the bond’s rating - An investor must consider the credit rating on the bond. Credit rating refers to the ability of the bond issuer to make all required interest payments and to repay the principal balance on time.
The higher interest rate compensates bond buyers for taking more risk. The bond with the lower bond rating is judged to have a higher risk of not paying interest and principal payments.
Place an order - Once an investor decides on a bond, a brokerage firm can place the order for him or her. If new offerings are available, investors can buy a bond when it is issued. Most bond purchases, however, are placed in the secondary market. In that instance, the investor is buying the bond from another investor.
An investor will receive a confirmation from the brokerage firm. The confirmation details the purchase. Trade confirmations should be kept on file. Most investors typically hold their securities at the brokerage firm. That allows people to easily access and sell the bonds, or turn them in at maturity. Investors also receive a statement from the firm.
You can also go to your local bank or full service firm; just make sure you shop around, as fees and services can vary a great deal. When an investor opens an account, the individual will be asked to complete a customer new account form. They will answer questions about investment experience and risk tolerance. When the account is approved, the investor can transfer funds into the account to purchase bonds.
Purchase individual bonds for your portfolio. One investment objective is your time frame for investing. If an investor has a specific time period for investing, they can select bonds that mature near that future date. Bonds have maturity dates from just a few years to 30 years.
Investors should consider the maturity date of the bond, and when they need access to their invested funds. Investors must also check the following:
Check the bond’s rating - An investor must consider the credit rating on the bond. Credit rating refers to the ability of the bond issuer to make all required interest payments and to repay the principal balance on time.
The higher interest rate compensates bond buyers for taking more risk. The bond with the lower bond rating is judged to have a higher risk of not paying interest and principal payments.
Place an order - Once an investor decides on a bond, a brokerage firm can place the order for him or her. If new offerings are available, investors can buy a bond when it is issued. Most bond purchases, however, are placed in the secondary market. In that instance, the investor is buying the bond from another investor.
An investor will receive a confirmation from the brokerage firm. The confirmation details the purchase. Trade confirmations should be kept on file. Most investors typically hold their securities at the brokerage firm. That allows people to easily access and sell the bonds, or turn them in at maturity. Investors also receive a statement from the firm.
The brokerage statement will detail all of the securities holdings at the firm. If an investor decides to sell the bond before maturity, the brokerage firm will quote a sale price. That price is based on demand in the secondary market. When an investor places a sell order, the brokerage firm will deliver securities to the buyer. The investor also receives a trade confirmation for a bond sale.
The most important characteristic of any bond is its issuer. This is because, as an investor, you are counting on the issuer to return your money as promised. Issuers, which may be corporations or governments, vary in reliability.
Invest in bonds of varying quality. By balancing risky investments in lower-rated bonds with investments in higher-rated bonds, you mitigate some of the risk associated with lower-rated bonds. Additionally, the large spread in lower-rated bonds may help buffer some of the effects of interest rates on the value of your bond portfolio.
Moreover, buy bonds with different maturity dates to get the best of short-term and long-term returns. Short-term bonds may be performing better than long-term bonds at any given time, or vice versa. By holding money in both types, you are able to more frequently and benefit from price fluctuations.
Further, invest in geographically diverse bonds. Whether this is within your own country, maybe diversifying between regions or states, or between nations, you can limit a large amount of risk by purchasing bonds from different areas. For example, by purchasing foreign bonds, an American investor might be temporarily insulated from the price effects of a United States interest rate hike.
By investing in different types of bonds, you can lower your overall investment risk. Diversification may include investing in bonds from different issuers, bonds with different maturity dates, and bonds from different geographical areas. Technically, this style of investing eliminates what is known as non-systemic risk, or risk due to fluctuations in markets and industries.
The most important characteristic of any bond is its issuer. This is because, as an investor, you are counting on the issuer to return your money as promised. Issuers, which may be corporations or governments, vary in reliability.
Invest in bonds of varying quality. By balancing risky investments in lower-rated bonds with investments in higher-rated bonds, you mitigate some of the risk associated with lower-rated bonds. Additionally, the large spread in lower-rated bonds may help buffer some of the effects of interest rates on the value of your bond portfolio.
Moreover, buy bonds with different maturity dates to get the best of short-term and long-term returns. Short-term bonds may be performing better than long-term bonds at any given time, or vice versa. By holding money in both types, you are able to more frequently and benefit from price fluctuations.
Further, invest in geographically diverse bonds. Whether this is within your own country, maybe diversifying between regions or states, or between nations, you can limit a large amount of risk by purchasing bonds from different areas. For example, by purchasing foreign bonds, an American investor might be temporarily insulated from the price effects of a United States interest rate hike.
By investing in different types of bonds, you can lower your overall investment risk. Diversification may include investing in bonds from different issuers, bonds with different maturity dates, and bonds from different geographical areas. Technically, this style of investing eliminates what is known as non-systemic risk, or risk due to fluctuations in markets and industries.
First, consider using a mutual fund or an exchange-traded fund (ETF). Mutual funds and ETF's are pools of funds gathered from many investors. The funds can be invested in many types of securities, including bonds. Mutual funds and ETF's are considered investment securities. If an investor wants a portfolio that guarantees a specific dollar amount that will mature on a specific day, he or she should buy individual bonds.
Bond funds are a blended portfolio of bonds. There are dozens of bond maturity dates in the portfolio. Get some advice. When an investor sets up a brokerage account, he or she should ask his or her advisor for some bond mutual fund recommendations.
If the investor is not working with an advisor, then he or she must do his or her own research to determine the appropriate bond fund(s) to use. Match the fund’s investment objective with the investor’s objective. Funds are sold by prospectus. The prospectus is a document that discloses everything an investor should know about the fund. All fund investors must receive a copy of the prospectus.
Place an order for the fund -. Once an investor sets up a brokerage account and transfer funds, placing a mutual fund or EFT order, is very similar to buying individual bonds. Bond mutual funds are priced each day, based on the current value of the fund, whereas an ETF's price varies throughout the market day.
Why Is Asset Allocation So Important?
By including asset categories with investment returns that move up and down under different market conditions within a portfolio, an investor can protect against significant losses. Historically, the returns of the three major asset categories have not moved up and down at the same time.
If the investor is not working with an advisor, then he or she must do his or her own research to determine the appropriate bond fund(s) to use. Match the fund’s investment objective with the investor’s objective. Funds are sold by prospectus. The prospectus is a document that discloses everything an investor should know about the fund. All fund investors must receive a copy of the prospectus.
Place an order for the fund -. Once an investor sets up a brokerage account and transfer funds, placing a mutual fund or EFT order, is very similar to buying individual bonds. Bond mutual funds are priced each day, based on the current value of the fund, whereas an ETF's price varies throughout the market day.
Why Is Asset Allocation So Important?
By including asset categories with investment returns that move up and down under different market conditions within a portfolio, an investor can protect against significant losses. Historically, the returns of the three major asset categories have not moved up and down at the same time.
Market conditions that cause one asset category to do well often cause another asset category to have average or poor returns. By investing in more than one asset category, you'll reduce the risk that you'll lose money and your portfolio's overall investment returns will have a smoother ride. If one asset category's investment return falls, you'll be in a position to counteract your losses in that asset category with better investment returns in another asset category.
The magic of diversification is by picking the right group of investments. You may be able to limit your losses and reduce the fluctuations of investment returns without sacrificing too much potential gain.
The magic of diversification is by picking the right group of investments. You may be able to limit your losses and reduce the fluctuations of investment returns without sacrificing too much potential gain.
In addition, asset allocation is important because it has major impact on whether you will meet your financial goal. If you don't include enough risk in your portfolio, your investments may not earn a large enough return. A portfolio heavily weighted in stock or stock mutual funds, for instance, would be inappropriate for a short-term goal.
Some financial experts believe that determining your asset allocation is the most important decision that you'll make with respect to your investments – that, it's even more important than the individual investments you buy.
Some financial experts believe that determining your asset allocation is the most important decision that you'll make with respect to your investments – that, it's even more important than the individual investments you buy.
The Connection Between Asset Allocation And Diversification
While diversification is a strategy that can be neatly summed up by the timeless adage "Don't put all your eggs in one basket”, many investors use asset allocation as a way to diversify their investments among asset categories. The diversification strategy involves spreading your money among various investments in the hope that if one investment loses money, the other investments will more than make up for those losses.
So in addition to allocating your investments among stocks, bonds, cash equivalents, and possibly other asset categories, you'll also need to spread out your investments within each asset category. The key is to identify investments in segments of each asset category that may perform differently under different market conditions.
One of way of diversifying your investments within an asset category is to identify and invest in a wide range of companies and industry sectors. But the stock portion of your investment portfolio won't be diversified, for example, if you only invest in only four or five individual stocks. You'll need at least a dozen carefully selected individual stocks to be truly diversified.
Because achieving diversification can be so challenging, some investors may find it easier to diversify within each asset category through the ownership of mutual funds rather than through individual investments from each asset category. Be aware, however, that a mutual fund investment doesn't necessarily provide instant diversification, especially if the fund focuses on only one particular industry sector.
If you invest in narrowly focused mutual funds, you may need to invest in more than one mutual fund to get the diversification you seek. Within asset categories, that may mean considering, for example, large company stock funds as well as some small company and international stock funds. Between asset categories, that may mean considering stock funds, bond funds, and money market funds.
Of course, as you add more investments to your portfolio, you'll likely pay additional fees and expenses, which will, in turn, lower your investment returns. So you'll need to consider these costs when deciding the best way to diversify your portfolio.
Options For One-Stop Shopping - Lifecycle Funds
To accommodate investors who prefer to use one investment to save for a particular investment goal, such as retirement, some mutual fund companies have begun offering a product known as a "lifecycle fund." A lifecycle fund is a diversified mutual fund that automatically shifts towards a more conservative mix of investments as it approaches a particular year in the future, known as its "target date."
Options For One-Stop Shopping - Lifecycle Funds
To accommodate investors who prefer to use one investment to save for a particular investment goal, such as retirement, some mutual fund companies have begun offering a product known as a "lifecycle fund." A lifecycle fund is a diversified mutual fund that automatically shifts towards a more conservative mix of investments as it approaches a particular year in the future, known as its "target date."
A lifecycle fund investor picks a fund with the right target date based on his or her particular investment goal. The managers of the fund then make all decisions about asset allocation, diversification, and rebalancing. It's easy to identify a lifecycle fund because its name will likely refer to its target date. For example, you might see lifecycle funds with names like "Portfolio 2018," "Retirement Fund 2030," or "Target 2045."
In Summary, a Mutual funds make it easy for investors to own a small portion of many investments. A total stock market index fund, for example, owns stock in thousands of companies. That's a lot of diversification for one investment! (A mutual fund is a company that pools money from many investors and invests the money in stocks, bonds, and other financial instruments.)
In Summary, a Mutual funds make it easy for investors to own a small portion of many investments. A total stock market index fund, for example, owns stock in thousands of companies. That's a lot of diversification for one investment! (A mutual fund is a company that pools money from many investors and invests the money in stocks, bonds, and other financial instruments.)
