A guide from MAKEONLINEMONEYINFO.NET
CONTENTS 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27.
Shock Warning««««««««««««««««««««««««2 Income is not wealth«««««««««««««««««««« 3 No debt is a good debt«««««««««««««««««««4 Do things differently«««««««««««««««««««« 8 Find out what your boss earns«««««««««««««« 9 Make sure you love what you do for a living«««««« 10 Recognise the value of time«««««««««««««««« 11 Ideas are the new hard graft««««««««««««««« Invest from your surplus««««««««««««««««««13 Get a good broker«««««««««««««««««««««« 15 Be tax smart««««««««««««««««««««««««« 16 Invest in money-makers, not flashy pipe dreams««« 17 Diversify, Diversify, Diversify««««««««««««««« 18 'RQ¶WLJQRUHJOREDOPDUNHWV«««««««««««««««« 19 Invest for income«««««««««««««««««««««« 20 Understand how to recover from losses««««««««« 25 Avoid Investment/Trading Seminar Scams««««««« 27 Understand that conflicting advice may all be correct« 29 Investing on news«««««««««««««««««««««« 30 Understand the jargon and the charts«««««««««« 31 Do not under-estimate your life-expectancy«««««« 32 'RQ¶WIRUJHWJRRGROG-fashioned saving««««««««« 32 Enjoy without addiction««««««««««««««««««« 33 All bulletin boards are positive««««««««««««««« 34 Aim for multiple income streams««««««««««««« 35 You never know enough«««««««««««««««««« 36 $QGILQDOO\««««««««««««««««««««««««««« 37
Please turn over...
This Guide is not going to make you rich overnight (at least not tonight, unless you are extremely lucky). This guide is not for those who are hoping for a µget rich quick¶VFKHPH because, although it is unfashionable to say it ± there is not really any such thing. No, this guide is different. You have not just wasted money on yet another scheme or system which will ultimately fail despite the claims made in the advertising. What is it then? Well this is a guide to help you accumulate wealth steadily and sensibly. You may indeed have great rises in financial wealth in short periods of time. You may also have to take some losses. That is all part and parcel of this experience. What we are aiming for is that in the long term, your gains will outweigh your losses by some considerable distance. You should also avoid some of the mistakes that many people make. In fact, you should be able to avoid making the mistakes that MOST people make. <RXKDYHKHDUGLWVDLGWKDW³NQRZOHGJHLVSRZHU´ In the wealth building game that is certainly true. Those who have the knowledge are able to capitalise on how the system works. The rest are simply going about their daily lives hoping that somehow things will be different next year, without actually doing anything about it.
Well ± now is your chance to do something about it!
Secret Number 1 ³Income is not wealth´ Your biggest barrier to attaining wealth is yourself. It is no use blaming everything and everybody else if you are actually living your life in a way which is not helping you to build your wealth. Ultimately, you will only become wealthy if you spend less than you make each month. Most people think that you need to have an enormously high monthly income to be considered wealthy. Actually ± there are many people who have lower level incomes but act more sensibly with their money and so overall are wealthier. Any fool can get a high income ± but the same fool will spend it all so that there is nothing left when that income ceases. Please understand ± Income is NOT wealth. In financial terms (for there are other types of wealth), your wealth is the part of your net worth that makes you money (either income or capital growth) without you needing to work hard for it. So for example, whilst a teacher may work hard each week to get their monthly salary, somebody with a property portfolio can be paid each week in terms of rental and capital gain on their houses, for doing relatively little. If they were to add to this some high dividend paying stocks, and maybe some regular returns on sales of a book they wrote some time ago, you can see how they would be considered wealthier than the teacher. They could actually continue to live in the manner they have become accustomed for as long as their portfolio paid out ± which would normally be longer than a normal salary. Even better, they would not have worked themselves into an early grave in the process! Ask yourself this question. How long could you continue with your normal spending habits, if your regular monthly pay were to be stopped? Your aim should be to make it so that a regular monthly salary from an employer becomes a nice bonus! ,I\RXGRQ¶W- you will forever be bound by the lie that it takes a high income to become wealthy, and it requires working all the hours in the day and night to achieve that salary. Believe that - and financial independence and security will always be just out of reach.
Please turn over...
Secret Number 2 ³1R'HEWLVDJRRG'HEW´ Although most of us will go through life needing to borrow money at some point or other, be it to ease cash flow by the use of a credit card, or by taking out a mortgage on a family home ± the paying of interest will of necessity mean that we have paid back much more than we borrowed. This is a sure fire way to eat at your wealth. The more debt you take on, the more difficult it will be to get out of it. It is like a drug, and it can destroy you in the same way. Any debts you take on need to be targeted and cleared as soon as possible ± Yes, even your mortgage. What should I do first ± clear the debts or invest? As I said, we all have some debts at some point in our lives. It may be that we are still faced with a student loan after university. It may be that we needed to take on a loan to buy a new car (more on that later), or it PD\EHWKDWZHKDYHVRPHIXUQLWXUHRQDµEX\QRZSD\ODWHU¶GHDO$OPRVW without exception, we will have a mortgage. And then comes the quandary: If all my money is pumped into paying off the debts, I will not be doing any saving for a rainy day or for my life when I have retired. Thankfully, this dilemma can be solved with a fairly simple calculation. The answer depends on two variables: 1. How much interest you are paying on your debt, after tax. 2. How much interest you expect to earn on your investments, after tax. Please note that there are two types of debt. At one side we have the worst kind - very high-interest debt that comes from things like credit cards and store cards. This kind of dead is lethal and should really be avoided unless absolutely necessary. It should only really be used to aid cash flow, and it should be paid off each and every month if at all possible. The second kind of debt is the lower interest variety;; things like the mortgage or student loan. Often, the interest on this kind of debt is low enough that it may worth holding onto the debt for its full term. The bottom line is: If you can guarantee a higher after-tax return by investing than the after-tax interest rate you would pay on your debt, you should go ahead and invest. If not, you should clear the debt first. 4
Here are some examples for you: Example 1 Imagine you have a 30 year, £150,000 mortgage with a 4 percent rate. If you expect to earn an after-tax return higher than 4% on your investments (the odds are reasonable that you will if you have a long- term view), then you should invest rather than pump additional funds into the mortgage. Example 2 Imagine you have a £10,000 credit card debt with a 22% interest rate. You should only invest if you think you can earn a 22% after tax return on your investments. The average return on the stock market has been somewhere around 11-13%, so this seems a risky proposition. In this case, it would be foolish to invest and you should instead work on clearing the debt first. KEY POINT: You need to do what is best for building wealth long term. Many people cannot see that paying off a debt is actually saving them more money than they would be able to make any other way. Do the calculation and work out what is best for you. Credit Card Debt is Deadly How to find the money get out of credit card debt Many people struggle to pay more than the minimum balance off each month, and as such, they never eat into the debt. Here are a few tips about how to get rid of the most deadly debt of all. Until this has gone, \RXGRQ¶WVWDQGDFKDQFHRIEHFRPLQJZHDOWK\ 1. Do you have any investments you can use at this stage? As you will have seen from the last calculation about whether to invest or pay off the debt ± with credit cards it is always better to pay it off first. Therefore, if you have money in savings accounts or invested in bonds or stock, it is more than likely in your best interests to use that investment to clear your debt at this stage. Remember, if your investment is not inside an ISA, it is taxable. It is subject to capital gains tax and you will pay tax on the dividends. As pointed out earlier, it is debateable whether you will ever beat the 25-29% needed to make it worth keeping the investment rather than paying off the debt first (even if it is inside an ISA). Cash in the investment and use it to lower your debt.
Please turn over...
2. Do Â you Â need Â all Â that Â stuff? Â A Â life-Âlaundry Â is Â a Â useful Â way Â of Â cutting Â down Â our Â debts. Â When Â was Â the Â last Â time Â you Â read Â those Â books Â or Â rode Â that Â bike? Â Are Â you Â likely Â to Â use Â the Â tent Â again? Â Why Â not Â sell Â it Â all Â on Â eBay Â or Â Amazon Â Marketplace. Â Making Â a Â few Â hundred Â pounds Â at Â a Â car-Âboot Â sale Â could Â also Â help Â to Â cut Â down Â your Â debt. Â 3. Ditch Â the Â subscription Â lifestyle Â Many Â of Â us Â subscribe Â to Â Sky Â and Â to Â a Â daily Â newspaper, Â or Â a Â monthly Â magazine. Â We Â also Â pay Â for Â extra Â insurance Â plans Â on Â our Â mobile Â phones Â and Â electrical Â appliances. Â We Â love Â the Â fact Â that Â we Â can Â use Â 900 Â minutes Â of Â talk Â time Â and Â 3000 Â texts, Â with Â unlimited Â data Â download Â on Â our Â mobile Â plan. Â However, Â all Â this Â adds Â up Â and Â we Â need Â to Â decide Â whether Â we Â want Â to Â become Â wealthy Â or Â not! Â When Â was Â the Â last Â time Â you Â exceeded Â the Â data Â download Â of Â the Â mobile Â package Â below Â yours? Â What Â about Â the Â talk Â time? Â 'R\RXXVHDOOWKRVHÂľIUHHÂśPLQXWHV"'R\RXQHHGFKDQQHOVRQ\RXU TV? Â How Â often Â do Â you Â actually Â read Â the Â paper? Â Could Â you Â pick Â one Â up Â on Â your Â way Â to Â work Â instead Â of Â having Â it Â delivered? Â Small Â changes Â in Â your Â monthly Â subscriptions Â can Â actually Â save Â hundreds Â of Â pounds Â which Â can Â be Â channelled Â to Â paying Â off Â debts. Â 4. 'RQÂśWpay Â for Â the Â brands Â whHQ\RXFDQÂśWWHOOWKHGLIIHUHQFH Â We Â are Â all Â suckers Â for Â advertising Â (otherwise Â companies Â would Â not Â invest Â PLOOLRQVLQLW +RZHYHUIRUDZKLOHWU\VRPHÂľKRPH-ÂEUDQGÂśRUFKHDSHU alternatives Â in Â the Â super-Âmarket. Â Â Fill Â up Â the Â car Â with Â fuel Â from Â the Â supermarket Â rather Â than Â paying Â the Â premium Â price Â of Â the Â named Â brands. Â Go Â to Â the Â local Â cafĂŠ Â rather Â than Â the Â big Â brand Â and Â big Â price Â COSTA Â or Â STARBUCKS. Â All Â the Â money Â you Â save Â will Â help Â you Â to Â cut Â down Â on Â your Â debt. Â 5. The Â Snowball Â effect Â The Â idea Â behind Â getting Â rid Â of Â your Â debts Â is Â that Â once Â gone, Â you Â will Â have Â more Â disposable Â income Â available Â to Â put Â towards Â your Â goal Â of Â becoming Â wealthy. Â People Â often Â wonder Â whether Â they Â should Â attempt Â to Â target Â the Â largest Â debts Â first, Â because Â they Â are Â accruing Â the Â most Â in Â terms Â of Â interest. Â However, Â it Â is Â quite Â demoralising Â to Â see Â how Â little Â difference Â you Â are Â making Â to Â a Â large Â debt. Â Meanwhile, Â your Â smaller Â debts Â are Â also Â growing Â and Â you Â end Â up Â standing Â still. Â You Â should Â pay Â the Â minimum Â balance Â on Â each Â debt, Â and Â channel Â all Â the Â extra Â money Â you Â have Â made Â by Â following Â steps Â 1-Â4 Â above, Â into Â clearing Â the Â balance Â of Â the Â lowest Â debt. Â Â
6 Â Â
Once that debt has gone altogether, you take the money you were paying to that and channel it onto the next largest debt. Now repeat the process until you have only one debt left. All spare income can now be targeted at removing the final debt. In effect, you have gradually increased the amount of spare money simply by knocking off one debt at a time. This is FDOOHGWKHµVQRZEDOO¶Hffect. Remember, even small amounts will make a difference. It only takes a handful of snowflakes to make a snowball ± this will get the ball rolling. And in the long run ± even a few pounds a week extra will save a thousand pounds over the year on a credit card bill. KEEP AT IT ± it is really worth it and will unlock all the other secrets in this guide.
Please turn over...
Secret Â Number Â 3 Â Âł'R7KLQJV'LIIHUHQWO\Â´ Â Most Â people, Â believe Â it Â or Â not, Â will Â continue Â to Â do Â the Â same Â things Â that Â they Â have Â always Â done Â and Â the Â same Â things Â that Â their Â parents Â have Â always Â done Â Âą Â even Â when Â they Â know Â it Â has Â not Â brought Â them Â success. Â Â If Â you Â look Â at Â your Â parents, Â and Â discover Â that Â they Â worked Â extremely Â hard Â all Â their Â life Â to Â earn Â a Â reasonable Â salary, Â and Â then Â had Â to Â cope Â with Â a Â reduced Â income Â upon Â retirement Â Âą Â do Â you Â want Â to Â be Â in Â the Â same Â boat? Â Â If Â not, Â check Â yourself. Â Â Are Â you Â doing Â anything Â differently? Â Â Are Â you Â planning Â at Â the Â moment Â on Â relying Â on Â your Â company Â pension Â (or Â even Â your Â state Â pension) Â to Â get Â you Â through Â your Â retirement Â years? Â Are Â you Â hoping Â that Â things Â will Â just Â be Â alright? Â Well Â wise Â up. Â If Â their Â method Â GLGQÂśWZRUNIRUWKHPLWLVQRWJRLQJWREHDQ\GLIIHUHQWIRU\RX Â Â You Â have Â made Â a Â good Â start Â by Â buying Â this Â guide. Â This Â will Â help Â you Â to Â think Â differently. Â Â But Â remember, Â you Â will Â also Â need Â to Â DO Â things Â differently. Â Â Â Â
8 Â Â
Secret Â Number Â 4 Â Âł)LQG2XWZKDW\RXU%RVV(DUQVÂ´ Â Â OK Â Âą Â So Â I Â said Â that Â income Â is Â not Â wealth. Â That Â is Â true. Â However, Â whilst Â you Â are Â working Â on Â building Â your Â wealth Â you Â will Â be Â relying Â on Â your Â income, Â and Â a Â high Â income Â is Â a Â much Â easier Â starting Â point. Â Now Â whatever Â your Â line Â of Â work Â is, Â it Â is Â important Â to Â aim Â for Â a Â job Â in Â which Â you Â can Â rise Â up Â the Â ranks. Â It Â is Â also Â important Â to Â recognise Â that Â with Â each Â promotion, Â you Â should Â be Â getting Â a Â rise Â in Â pay. Â Now Â here Â is Â the Â thing Â that Â most Â people Â simply Â do Â not Â consider: Â ,I\RXUERVVGRHVQÂśWHDUQPXFKPRUHWKDQ\RXZK\VKRXOG\RXH[SHFW much Â of Â a Â pay-Ârise? Â You Â will Â find Â that Â in Â offices Â and Â schools Â all Â over Â the Â country Â people Â take Â on Â new Â responsibility Â at Â work Â for Â what Â amounts Â to Â a Â token Â gesture Â Âą Â more Â a Â badge Â of Â honour Â than Â a Â pay-Ârise. Â People Â convince Â themselves Â that Â they Â are Â doing Â it Â more Â for Â the Â experience! Â However, Â in Â other Â offices Â and Â schools, Â people Â are Â doing Â the Â same Â jobs Â for Â much Â more Â money. Â The Â reason Â for Â this Â is Â simple Â Âą Â the Â Top Â Earner Â is Â on Â a Â great Â salary. Â
If Â the Â top Â man Â or Â woman Â has Â a Â very Â healthy Â salary, Â there Â is Â more Â scope Â for Â those Â under Â that Â boss Â to Â be Â paid Â well. Â If Â your Â boss Â earns Â ÂŁ60,000 Â and Â his Â or Â her Â second Â in Â command Â earns Â ÂŁ50,000 Â why Â should Â you Â be Â offered Â much Â more Â than Â ÂŁ40,000 Â for Â simply Â running Â a Â department? Â Instead, Â apply Â to Â run Â a Â department Â at Â another Â firm Â where Â the Â boss Â is Â on Â ÂŁ150,000 Â and Â you Â should Â find Â that Â your Â salary Â has Â risen Â in Â the Â same Â way. Â ,I\RXFDQÂśWPRYHWRDQHZILUPÂą Â GRQÂśW Â take Â on Â the Â post Â of Â responsibility Â LIWKHSD\GRHVQÂśWPDWFKWKHLQFUHDVHGZRUN-Âload. Â All Â it Â will Â do Â is Â drain Â your Â time Â and Â patience, Â for Â little Â financial Â reward. Â There Â are Â better Â ways Â of Â using Â that Â spare Â time Â to Â make Â money Â (more Â of Â that Â later) Â instead Â of Â investing Â time Â in Â a Â company Â that Â will Â not Â invest Â its Â cash Â in Â you. Â Â Â
Â 9 Â Â
Please Â turn Â over... Â
Secret Â Number Â 5 Â Âł0DNHVXUH\RXORYHZKDW\RXGRIRUDOLYLQJÂ´ Â All Â over Â the Â developed Â world Â there Â are Â people Â who Â are Â in Â the Â rat Â race, Â and Â FDQÂśWZDLWWRJHWRXWRILWEHFDXVHWKH\KDYHSLFNHGWKHZURQJSURIHVVLRQ Â Â It Â may Â well Â pay Â them Â handsomely, Â but Â it Â gives Â them Â no Â joy. Â This Â is Â a Â sure-Âfire Â way Â to Â eat Â at Â your Â wealth. Â Â People Â who Â hate Â their Â day-Âjobs Â end Â up Â spending Â all Â their Â money Â trying Â to Â find Â ways Â of Â improving Â their Â lives Â and Â bringing Â some Â joy Â back Â in Â to Â an Â otherwise Â dull Â and Â frustrating Â existence. Â This Â will Â ultimately Â leave Â nothing Â left Â for Â the Â time Â it Â is Â most Â needed Â Âą Â that Â is, Â when Â the Â job Â finally Â stops Â at Â retirement Â and Â you Â are Â able Â to Â enjoy Â it. Â At Â this Â point, Â your Â lifestyle Â would Â have Â to Â change Â because Â there Â are Â no Â funds Â left. Â The Â job Â has Â taken Â all Â the Â best Â years Â away Â from Â you. Â Â The Â best Â thing Â is Â to Â find Â a Â job Â you Â love Â Âą Â and Â then Â you Â will Â be Â paid Â every Â day Â for Â doing Â something Â you Â actually Â enjoy. Â In Â fact, Â it Â could Â be Â said Â that Â you Â never Â actually Â work Â at Â all! Â Â Â
10 Â Â
Secret Â Number Â 6 Â Âł5HFRJQLVHWKH9DOXHRI7LPHÂ´ Â Many Â people Â who Â strive Â to Â be Â wealthy Â have Â little Â understanding Â of Â the Â value Â of Â time. Â They Â work Â all Â the Â hours Â under Â the Â sun Â in Â order Â to Â gain Â just Â a Â few Â more Â pounds Â on Â the Â pay Â slip Â each Â month. Â However, Â they Â have Â neglected Â to Â notice Â one Â important Â fact. Â They Â are Â not Â finding Â the Â time Â to Â enjoy Â their Â income. Â In Â fact, Â they Â have Â no Â time Â to Â enjoy Â their Â income Â because Â of Â the Â hours Â they Â are Â working! Â Â You Â know Â you Â are Â truly Â wealthy Â when Â you Â have Â the Â ability Â to Â control Â your Â time Â and Â use Â it Â as Â you Â see Â fit. Â You Â are Â only Â wealthy Â if Â you Â are Â able Â to Â spend Â your Â time Â doing Â the Â things Â you Â really Â love Â doing. Â It Â may Â well Â be Â that Â you Â do Â really Â love Â your Â job, Â and Â that Â is Â absolutely Â fine. Â The Â key Â thing Â is Â to Â be Â able Â to Â have Â the Â freedom Â to Â do Â it Â when Â you Â want Â to Â and Â not Â do Â it Â when Â you Â GRQÂśW7KLVLVWUXHZHDOWK Â Â <RXQHHGWREHDEOHWRVD\Âł5LJKW,ÂśYHKDGHQRXJKQRZDQG,DPQRW JRLQJWRZRUNDQ\PRUHÂ´$WWKHVDPHWLPH\RXQHHGWREHDEOHWRKDYH the Â confidence Â that Â you Â will Â be Â able Â to Â continue Â to Â live Â in Â your Â current Â house Â and Â with Â your Â current Â life-Âstyle. Â You Â need Â to Â be Â able Â to Â enjoy Â the Â same Â holidays Â and Â eat Â the Â same Â kinds Â of Â foods. Â Â If Â there Â is Â a Â need Â to Â cut-Âback Â and Â tighten Â the Â belt Â immediately, Â this Â will Â mean Â that Â your Â free Â time Â is Â not Â as Â enjoyable Â as Â it Â could Â be. Â Â Sadly, Â this Â is Â the Â situation Â most Â retired Â people Â find Â themselves Â in. Â Despite Â working Â hard Â all Â their Â lives, Â their Â pension Â and Â investments Â simply Â do Â not Â provide Â them Â with Â the Â lifestyle Â they Â had Â dreamed Â of. Â Â Right Â now, Â then, Â you Â need Â to Â work Â smarter. Â Enjoy Â your Â life Â whilst Â you Â can. Â Value Â your Â time. Â Â
Make Â your Â income Â work Â for Â you, Â rather Â than Â simply Â working Â for Â your Â income. Â Â Â
11 Â Â
Please Â turn Â over... Â
Secret Â Number Â 7 Â Âł,GHDVDUHthe Â new Â KDUGJUDIWÂ´ Â Gone Â are Â the Â days Â of Â needing Â a Â trade Â in Â order Â to Â support Â yourself. Â Gone Â are Â the Â days Â of Â the Â protestant Â work Â ethic, Â in Â which Â we Â are Â told Â to Â feel Â JXLOW\LIZHDUHSDLGIRUWKLQJVWKDWGLGQÂśWWDNHXVPXFKWLPHRUHIIRUW Â Â Because Â of Â the Â internet, Â ideas Â and Â products Â can Â be Â presented Â and Â marketed Â by Â every Â man Â woman Â and Â child Â on Â the Â planet Â (well-Âalmost). Â And Â yet, Â people Â still Â fall Â into Â the Â age-Âold Â trap Â of Â assuming Â that Â the Â only Â way Â to Â live Â is Â to Â give Â up Â all Â their Â energy Â and Â time Â to Â a Â company Â in Â exchange Â for Â being Â paid Â at Â the Â end Â of Â the Â month. Â Â What Â you Â need Â to Â do, Â whilst Â doing Â your Â day-Âjob, Â is Â to Â experiment Â on Â finding Â your Â own Â marketable Â product. Â It Â could Â be Â something Â you Â make Â and Â sell. Â It Â could Â be Â a Â service Â you Â offer. Â It Â could Â be Â something Â you Â buy Â and Â sell Â on Â for Â a Â profit. Â Or, Â it Â could Â simply Â be Â the Â smart Â use Â of Â the Â pay Â yRXUHFHLYH,ÂśOOH[SODLQZKDW,PHDQ Â Â You Â get Â your Â pay Â each Â month Â Âą Â what Â do Â you Â do Â with Â it Â then? Â Â 'RQÂśWWHOOPHLWDOOJRHVRQSD\LQJWKHELOOV,IWKDWLVWKHFDVH\RXQHHGWR go Â back Â to Â my Â advice Â on Â how Â to Â free Â up Â some Â additional Â income. Â Â What Â is Â left Â over Â will Â be Â enough Â for Â you Â to Â start Â a Â business. Â Yes, Â I Â am Â absolutely Â serious. Â You Â can Â start Â a Â business Â on Â the Â internet Â for Â as Â little Â as Â ÂŁ5.00 Â a Â year Â Âą Â it Â just Â takes Â the Â setting Â up Â of Â a Â website, Â and Â of Â course Â a Â product. Â Now Â that Â is Â where Â you Â use Â your Â time Â and Â energy. Â Be Â creative. Â What Â would Â YOU Â buy? Â What Â would Â your Â friends Â buy? Â What Â do Â YOU Â know Â that Â others Â would Â be Â interested Â in? Â Which Â service Â would Â YOU Â pay Â for? Â Â Give Â it Â a Â try. Â You Â only Â need Â to Â make Â a Â small Â amount Â of Â money Â to Â have Â more Â than Â you Â have Â now. Â Once Â you Â have Â that Â small Â amount Â of Â money Â coming Â in, Â you Â can Â put Â it Â to Â good Â use Â by Â investing Â it. Â Â Money Â is Â like Â a Â seed. Â It Â will Â only Â grow Â if Â you Â plant Â it Â wisely. Â Â Â Â
12 Â Â
Secret Â Number Â 8 Â Âł,QYHVW)URP<RXU6XUSOXVÂ´ Â Building Â wealth Â takes Â time. Â You Â may Â make Â small Â amounts Â relatively Â quickly, Â but Â using Â these Â amounts Â to Â make Â the Â serious Â money Â is Â where Â the Â ULFKEHFRPHULFKDQGWKHUHVWGRQÂśW Â Â The Â way Â to Â lose Â money Â quickly Â is Â to Â invest Â from Â money Â you Â cannot Â afford Â to Â lose. Â There Â are Â always Â losses Â in Â investing Â and Â if Â you Â invest Â money Â you Â cannot Â afford Â to Â lose Â and Â subsequently Â lose Â it, Â so Â begins Â a Â downward Â spiral Â of Â loss Â chasing. Â This Â is Â an Â emotional Â roller-Âcoaster Â which Â eats Â away Â at Â funds. Â Each Â new Â investment Â becomes Â more Â risky Â as Â an Â attempt Â to Â recoup Â the Â previous Â losses, Â and Â wherever Â emotion Â is Â involved Â in Â investing Â there Â is Â likely Â to Â be Â disaster. Â All Â investment Â portfolios Â need Â to Â have Â a Â spread Â of Â different Â types Â of Â LQYHVWPHQWLQWKHP7KH\QHHGWREHÂľGLYHUVLILHGÂś. Â This Â way, Â if Â one Â area Â (manufacturing, Â for Â example) Â is Â hit Â hard Â and Â drops Â in Â the Â market, Â your Â ZKROHSRUWIROLRZRQÂśWVXIIHU,QIDFWRWKHUDUHDVLQ\RXUSRUWIROLRPD\ bounce Â to Â compensate. Â I Â will Â show Â you Â how Â to Â create Â such Â a Â portfolio Â later. Â However, Â on Â each Â and Â every Â day, Â the Â markets Â move Â up Â and Â down. Â Three Â out Â of Â four Â stocks Â will Â follow Â the Â direction Â of Â the Â market Â in Â the Â long Â term. Â This Â means Â that Â if Â there Â is Â a Â big Â reason Â for Â the Â market Â to Â take Â a Â tumble, Â the Â chances Â are Â your Â portfolio Â will Â also Â drop Â down. Â This Â is Â no Â use Â if Â you Â were Â hoping Â to Â use Â some Â of Â this Â money Â to Â pay Â your Â weekly Â shopping Â and Â food Â bills Â or Â mortgage. Â You Â should Â be Â aware Â too Â of Â what Â is Â called Â the Â BID/OFFER Â spread Â (or Â BID/ASK). Â This Â is Â essentially Â the Â difference Â between Â the Â asking Â price Â that Â you Â have Â to Â pay Â to Â buy Â a Â share Â and Â the Â selling Â price Â that Â you Â will Â get Â if Â you Â sell. Â At Â any Â fixed Â point, Â the Â selling Â price Â is Â always Â less Â than Â the Â buying Â price. Â For Â this Â reason, Â as Â soon Â as Â you Â purchase Â some Â shares Â (and Â assuming Â the Â price Â stays Â the Â same Â for Â a Â while) Â you Â will Â have Â lost Â money. Â Factor Â in Â the Â stamp Â duty Â (Tax) Â you Â have Â to Â pay Â on Â your Â purchase Â and Â the Â commission Â you Â have Â to Â pay Â your Â broker Â for Â carrying Â out Â the Â deal Â and Â you Â will Â have Â lost Â even Â more Â on Â the Â deal. Â In Â fact, Â the Â price Â of Â the Â shares Â will Â have Â to Â rise Â considerably, Â just Â for Â you Â to Â break Â even. Â As Â soon Â as Â you Â sell Â the Â shares Â you Â will Â have Â to Â pay Â a Â commission Â charge Â and Â potentially Â some Â capital Â gains Â tax Â too, Â so Â to Â really Â make Â money Â the Â rise Â has Â to Â have Â been Â worthwhile. Â Â
13 Â Â
Please Â turn Â over... Â
Trading Â too Â frequently Â (a Â temptation Â if Â you Â are Â desperate Â for Â the Â money) Â is Â a Â sure-Âfire Â way Â to Â see Â your Â gains Â eaten Â up Â in Â bid/offer Â spread Â and Â commission Â losses. Â With Â this Â in Â mind, Â you Â should Â see Â that Â you Â simply Â cannot Â expect Â to Â make Â money Â easily Â and Â quickly Â and Â it Â is Â therefore Â beyond Â stupid Â to Â invest Â money Â that Â you Â need Â for Â other Â purposes Â like Â paying Â bills. Â
ÂľOnly Â invest Â what Â you Â are Â prepared Â to Â loseÂś Â This Â is Â a Â psychological Â state Â of Â mind, Â but Â a Â very Â important Â one. Â Emotion Â has Â no Â place Â in Â investing. Â Nobody Â is Â happy Â to Â see Â money Â go Â down Â the Â drain. Â However, Â with Â investing, Â you Â simply Â have Â to Â be Â prepared Â to Â see Â it Â GRMXVWWKDWRU\RXVKRXOGQÂśWHQWHULQWRWKLVJDPHDWDOO7KHSODQRI course, Â is Â to Â win Â more Â than Â you Â lose, Â so Â that Â in Â the Â long Â term Â your Â portfolio Â grows Â and Â your Â net Â wealth Â increases. Â It Â is Â simply Â a Â fact Â that Â you Â will Â have Â to Â take Â some Â losses Â along Â the Â way. Â Â So Â is Â it Â worth Â it? Â Â Yes. Â The Â growth Â of Â money Â is Â exponential. Â By Â that, Â I Â mean Â that Â it Â grows Â at Â a Â faster Â rate Â as Â the Â size Â of Â the Â sum Â increases. Â This Â is Â because Â of Â the Â beauty Â of Â compounding. Â Â Â Earning Â a Â 10% Â return Â on Â ÂŁ10,000 Â is Â only Â going Â to Â get Â you Â ÂŁ1,000 Â before Â tax. Â However, Â 10% Â return Â on Â a Â ÂŁ1,000,000 Â portfolio Â is Â ÂŁ100,000. Â This Â is Â naturally Â far Â more Â impressive, Â despite Â needing Â no Â more Â effort Â or Â work Â on Â your Â part. Â Once Â this Â return Â is Â compounded Â every Â year, Â the Â larger Â sum Â will Â grow Â at Â a Â considerably Â faster Â rate. Â Â
With Â compounding Â (assuming Â just Â a Â 10% Â return Â per Â year), Â even Â ÂŁ10,000 Â can Â turn Â into Â ÂŁ44,402 Â over Â 15 Â years! Â Â Â Â
14 Â Â
Secret Number 9 ³Get a good broker´ There are countless good brokers out there who can purchase and sell your stock for you. They offer many different levels of service and you need to decide what it is you want and need. You can get a fully managed portfolio whereby you pay your broker a fee and a percentage of your gains. They will discuss with you and advise any major decisions to buy or sell and will then make the transactions for you. This kind of service can be useful for people who do not want to make the effort of getting their feet wet and doing the research themselves. It tends to be for the more risk averse people. The problem with such a scheme of course is the additional cost of the brokerage and the loss of money in commission. You can also go to brokers who will let you make all the decisions, and will simply act as executors of your decisions. They will charge you a flat fee per trade. Some will charge a quarterly or even monthly fee for the privilege of having the account and there will often be an additional fee IRUµLQ-DFWLYLW\¶± meaning that you have not made enough trades in the month. These brokers can act by telephone and many now have platforms where you can do it all yourself on-line. Personally, I recommend the newest breed of broker ± the online investment platform. There are some great deals out there and depending on your trading frequency, you can get considerably lower execution fees than with traditional telephone brokers. Some do not charge for the account or have any inactivity fees. The best will have a portfolio manager section on the website which enables you to see all your stock holdings, and their current position in terms of price, profit and loss. You can action buys and sells in real time, or as regular subscriptions. You can choose to purchase (or sell) a set number of shares, or a set cash value. I like to use the Interactive Investor platform (www.iii.co.uk) and I tell you that without prejudice or any commission. As I said, there may be better deals out there for you at any given stage, so do shop around.
Please turn over...
Secret Number 10
³%H7D[6PDUW´ Most people know very little about their tax entitlements, possible reliefs, and the ways in which some of their money can be allowed to grow tax free. 1RZGRQ¶WJHWPHZURQJ,DPQRWDJDLQVWWD[DWLRQXQOLNHVRPH ,QHHG to have my bins emptied, the roads mended, emergency services and the like provided. I should pay my fair share. I even believe the wealthy should pay more than those in relative poverty. That is only fair. But the key thing here is that I should pay my FAIR share. I should not pay more than that simply because I am unaware of the rules. The wealthy know all about how to play the system to their advantage. They are not cheating (well not the decent upright ones). They are doing nothing illegal. It is simply that they are better informed. So your first task is to investigate whether you are paying more in tax than you should. You can do this in one of two ways. The easiest is to book a tax accountant to come round and go through all your paperwork and advise you. This will cost, however, anGLWGRHVQ¶WFRPHFKHDSly. The other route is to go online to the government website for the Inland Revenue and read all the help guides. Take your time. It is inertia that prevents people doing this, and they end up paying thousands of pounds more than they should every single year. Many do this for their whole working career and never know about it. The second thing is to make sure that you use your ISA allowance for saving and investing. ISAs are tax free wrappers for your money. Any capital gain inside the ISA wrapper is tax free. Any dividends paid as income inside an ISA wrapper are µWD[IULHQGO\¶ (reduced tax) and income tax is not charged. A little bit of advice on investing tax-efficiently from an Independent Financial Advisor will go a long way. 7KLVµWD[-VPDUW¶DSSURDFKZLOOKHOS\RXWREHFRPHRQHRIWKRVHZKRVH wealth grows at a faster rate, because you are not constantly giving it away again ± in particular, you are not giving MORE than your fair share.
Secret Â Number Â 11 Â Âł,QYHVWLQPRQH\makers Â Âą Â not Â flashy Â pipe-ÂGUHDPVÂ´ Â Â Too Â many Â people Â are Â wooed Â by Â the Â latest Â technological Â advance Â and Â assume Â that Â because Â it Â is Â new Â it Â must Â be Â set Â to Â make Â millions. Â Well, Â just Â occasionally, Â they Â are Â right. Â However, Â very Â often Â these Â technological Â ideas Â fail. Â 7KHUHDUHPLOOLRQVRIÂľPXVW-ÂKDYHÂśSURGXFWVWKDWSHRSOHVLPSO\GRQRW need Â or Â want Â and Â therefore Â do Â not Â have. Â If Â you Â invest Â in Â the Â company Â that Â makes Â these Â things, Â your Â portfolio Â is Â likely Â to Â go Â down-Âhill Â fast. Â Â Instead, Â you Â need Â to Â think Â about Â true-Âvalue. Â What Â do Â people Â really Â need? Â Yes, Â the Â technology Â to Â listen Â to Â different Â music Â in Â every Â room Â in Â the Â house Â all Â controlled Â from Â your Â phone Â sounds Â like Â a Â great Â idea Â and Â it Â may Â sell Â Âą Â EXWLWZRQÂśWVHOODVRIWHQDV3L]]D'RPLQRHV3L]]DLVFXUUHQWO\RQHRIWKH most Â recession Â proof Â companies Â in Â the Â UK. Â It Â has Â achieved Â year Â on Â year Â profits Â despite Â not Â being Â a Â trendy Â company Â with Â any Â new Â technology. Â And Â what Â about Â refuse Â processing Â companies? Â These Â are Â very Â un-Âtrendy Â but Â are Â absolutely Â necessary Â and Â will Â ride Â out Â a Â recession Â happily. Â Â Again Â I Â say Â Âą Â keep Â emotion Â out Â of Â your Â investment Â decisions. Â Go Â for Â the Â investment Â that Â is Â going Â to Â give Â you Â the Â best Â return Â on Â your Â money. Â Ask Â yourself, Â is Â the Â product Â essential? Â Is Â the Â demand Â rock Â solid? Â Is Â the Â need Â for Â this Â product Â going Â to Â continue? Â Is Â the Â company Â going Â to Â pay Â the Â shareholders Â well? Â Â ,I\RXJHWVWURQJÂľ<(6ÂśDQVZHUVWRWKHVHTXHVWLRQVWKHQ\RXDUHRQWKH right Â track. Â Â Of Â course, Â it Â is Â worth Â taking Â a Â punt Â occasionally Â on Â a Â few Â new Â and Â trendy Â companies Â hoping Â to Â create Â a Â new Â market. Â The Â returns Â can Â be Â phenomenal Â when Â they Â come Â off. Â However, Â you Â must Â remember Â what Â I Â said Â about Â a Â diversified Â portfolio. Â There Â should Â be Â a Â predominance Â of Â regular Â companies Â in Â necessary Â sectors Â Âą Â even Â if Â they Â are Â boring. Â Â You Â will Â be Â interested Â to Â know Â that Â if Â you Â look Â at Â the Â careers Â of Â people Â who Â can Â afford Â to Â send Â their Â children Â to Â independent Â education Â you Â are Â MXVWDVOLNHO\WRILQGWKHFKLOGUHQRIWKHPDQZKRUXQVDÂľVNLSÂśILUPDV\RX are Â the Â children Â of Â a Â doctor. Â You Â are Â certainly Â more Â likely Â to Â find Â the Â children Â of Â builders Â and Â plumbers Â than Â you Â are Â the Â children Â of Â cutting Â edge Â technology Â developers. Â Â Â Â Â
17 Â Â
Please Â turn Â over... Â
Secret Â Number Â 12 Â Âł'LYHUVLI\'LYHUVLI\'LYHUVLI\Â´ Â Not Â all Â investments Â are Â the Â same. Â Â Some Â are Â the Â kind Â that Â will Â grow Â (hopefully Â rapidly) Â in Â terms Â of Â their Â capital Â value. Â Others Â are Â the Â kind Â that Â are Â fairly Â static Â in Â terms Â of Â capital Â value, Â but Â pay Â a Â dividend Â (an Â income Â per Â share). Â You Â should Â invest Â in Â different Â types Â of Â company Â and Â in Â different Â markets Â For Â example: Â A Â Mining Â company Â and Â an Â Oil Â company Â A Â Telecommunications Â company Â Something Â in Â the Â Financial Â Services Â area Â Âą Â like Â Insurance Â A Â Biotech Â company Â (like Â a Â drug Â manufacturer) Â Â You Â should Â also Â look Â to Â diversify Â in Â terms Â of Â growth Â and Â income. Â The Â balance Â of Â this Â depends Â on Â your Â time Â of Â life. Â What Â I Â mean Â is Â -Â Â if Â you Â are Â young Â you Â should Â favour Â growth. Â If Â you Â are Â nearing Â retirement Â you Â should Â aim Â for Â income. Â The Â companies Â that Â are Â likely Â to Â have Â the Â greatest Â growth Â are Â usually Â the Â most Â risky Â in Â terms Â of Â the Â possible Â loss Â of Â the Â investment. Â For Â example, Â if Â you Â invest Â in Â a Â speculative Â oil Â company Â you Â have Â two Â outcomes. Â Either Â they Â will Â strike Â oil Â and Â your Â investment Â will Â go Â through Â the Â roof, Â or Â they Â wonÂśt Â and Â it Â will Â gradually Â dwindle Â away Â to Â nothing Â until Â the Â company Â runs Â out Â of Â money Â and Â goes Â bust. Â Always Â edge Â of Â the Â seat Â stuff! Â It Â is Â foolish Â to Â have Â all Â your Â money Â in Â such Â companies, Â of Â course. Â On Â the Â other Â hand, Â there Â are Â companies Â which Â over Â ten Â years Â may Â not Â really Â change Â much Â in Â terms Â of Â their Â capital Â value. Â This Â means Â that Â you Â are Â not Â going Â to Â lose Â on Â your Â investment Â (although Â nothing Â is Â absolutely Â certain). Â If Â you Â choose Â wisely, Â you Â should Â be Â able Â to Â pick Â a Â company Â like Â this Â which Â also Â treats Â its Â shareholders Â well Â by Â paying Â dividends. Â This Â is Â a Â share Â of Â the Â profits. Â If Â you Â get Â it Â right, Â this Â kind Â of Â investing Â can Â be Â the Â one Â which Â brings Â you Â an Â income Â for Â life. Â Â Â
18 Â Â
Secret Number 13 ³'RQ¶WLJQRUH*OREDOPDUNHWV´ ,WLVDOVRYLWDOWRUHFRJQLVHWKDW\RXVKRXOGDYRLGµKRPHFRXQWr\ELDV¶ It is usually the case that private investors favour the country in which they live in terms of their investment decisions. For some reason, people tend to believe, for example, that because they themselves are British, their money will perform better if invested in British companies. It is as though they think they understand the business better and have some input. This is dangerous thinking though. If all your investments are in one country, then the basic economic performance of that country will influence the growth of your portfolio. Government decisions on interest rates or on corporation tax rules (for example) could have a massive effect on your whole investment, rather than just a part of it.
Just as it is important to diversify into different types of stock, it is also important to spread your investments into different countries. You can do this either by going through a broker who allows you to purchase stock in a foreign exchange directly, or by investing in funds which focus in overseas markets. Once this psychological barrier has been crossed, you will find that you are fishing for investments in the ocean rather than a small lake. There are far more opportunities to find some bigger fish!
Please turn over...
Secret Number 14 ³,QYHVW for income´ This secret is dynamite. What many investors are simply not aware of is that investing for income can actually also lead to capital growth in two different ways, as I will explain. Therefore, it is actually a very sensible idea to invest for income almost entirely, and leave only a small amount of your portfolio for speculative growth. Time and time again, this has been shown to provide a lower risk investment, which actually grown in the longer term. You will not have the white-knuckle ride or the overnight riches. But nor will you have the obvious and real danger of losing the lot! You will have the possibility of financial freedom and true wealth that you dream of. How can these companies grow? Well putting it bluntly, companies that are able to spend some of their profits on the share-holders are by and large the companies that are doing well enough to have no financial worries. This means that they are generally safer bets. This means that over the long term, they will grow at least in line with the stock-market (an average of 12 ± 13%) and often better. In addition to this, you have the dividend payments and using them wisely will make you even more money. Dividend Paying Stocks You need to check what is called the Dividend Yield of a stock. Generally, if it is paying upwards of 4%, this is considered good. If you can get over 6% this is considered excellent. However, some companies seem to pay out exceptional dividends (at about 12%) but on closer inspection this is seen to be unsustainable for the growth of the business. The best companies will only give 40-50% of the profit back to shareholders in dividends. The rest is reinvested into the company to ensure growth. Companies which give much higher dividends are in danger of being excellent payers for a few years and then either going bust or having to stop the dividend altogether. Neither of these is good for an investor.
Remember I spoke of how compounding interest gives ever increasing UHWXUQV":HOOWKHVDPHLVWUXHRIGLYLGHQGV,¶OOH[SODLQ Imagine you own 1000 shares in a company, and for the sake of ease, the share price is £1.00. That company pays you 10 pence per share as a dividend. Obviously, you would earn £100.00 from this dividend issue. Now you have a choice, you can spend that money on a treat, rather like an unexpected bonus (choice 1). Or, you can reinvest the dividends VWUDLJKWEDFNLQWRWKHFRPSDQ\FKRLFH /HW¶VORRNDWZKDWKDSSHQV now. Assuming the share price is still £1.00 (it may not be, of course). At the next dividend payment (still at 10p per share) there is an obvious difference depending on whether you took choice 1 or 2. Choice 1 would mean you still had 1000 shares and would be paid a dividend of £100 again. Choice 2 would mean that you now have 1100 shares and would be paid £110. If this cycle were repeated exactly again, choice 1 would have received £300 in total. Choice 2, with dividend reinvestment would have received £321. With each new reinvestment of the dividend, the growth of the next payout becomes larger. Growth is exponential. Now, I have not factored in dealing costs or stamp duty. Neither have I factored in the rising and falling dividend payments. Neither have I taken into account a rising and falling share-price. Nevertheless, even with all this taken into account, the brute fact remains ± dividend reinvestment will make a portfolio grow exponentially, whereas taking the dividend as a cash withdrawal will leave it on capital growth alone. <RXVKRXOGDOZD\VXVHDµ'LYLGHQG5HLQYHVWPHQW3ODQ¶WKLVVKRXOGEH offered by your broker). This will automatically purchase more stock with the dividend payment, and commission will be much reduced in comparison with organising a separate trade yourself.
Please turn over...
There are other important things to remember regarding dividends. Declaration date: The declaration date is the day the Board of 'LUHFWRU¶VDQQRXQFHVthat they will pay a dividend. Once this has been done, the company now must pay that money to the stockholders. At this point, the Board will also announce a date of record and a payment date. It is usually about the same time each year, but there are fluctuations Date of record: This date is usually DV³H[-GLYLGHQG´GDWHThis is the day on which the company checks its record of shareholders and sees who need to be paid a dividend. If you bought shares after the ex- dividend date, you would not be entitled to the next dividend payment. In fact, the investor who sold you those shares would, despite no longer being a holder! This is the dividend trap. Buying a dividend paying stock once it has gone ex-dividend means that you actually miss out on that dividend (although you do get any subsequent dividends if they are paid and you are holding at the next date of record). Payment date: This is the date the dividend will actually be given to the shareholders of company. Some dividends are paid four times a year on a quarterly basis. Others DUHSDLGWZLFH\HDUO\DVDQµLQWHULPGLYLGHQG¶DQGDµILQDOGLYLGHQG¶6RPH companies pay dividends only on an annual basis. Tax on Dividends The best place to invest in dividend paying stocks is, as I said earlier, inside an ISA. If you are a basic rate tax payer in the UK, you pay a low rate of tax on your dividends which is taken as a tax credit before you receive the dividend. If you are a higher rate tax payer, you would normally pay above 32% (at current rates) on dividend income and then get back the 10% tax credit, but inside the ISA although losing the 10% tax credit you will not pay any additional tax. In addition, any capital gain on your investment inside your ISA is capital gains tax free. Very beneficial to your investment!
Bonds There are many types of bonds that you can buy. Unlike a share, you GRQ¶WRZQDSDUWRIWKHFRPSDQ\± you have loaned money to it (or the government). Basically, a bond is an investment that promises to pay a certain level of interest if the investment is held for a set period. There are variations, of course, and some will promise to pay a set amount only if a few conditions in the market are met. This means that some bonds are higher yielding in interest than others, but are also higher risk. You should also remember that your capital is tied up in the bond for the set period of time. You either cannot withdraw it at all, or will lose all the accrued interest if you cash it in early. It is best not to tie up money for more than 5 years in a bond. Interest rates can fluctuate a great deal in this time and it is impossible to know now whether the bond will still be the best place for your money in five years time. In terms of how many bonds or bond funds to invest in ± you should typically stick to the rule that the percentage of your portfolio in this type of investment should equal your age. For example, a 40 year old ought to have around 40% of their portfolio in bonds. Any more than this will hamper the potential growth of the portfolio and any less will probably mean that the portfolio is too risk orientated. You will see that as you get older, the risk level needs to drop to guarantee income and capital growth is less important. Property Investing in property can be done in several ways. The most obvious (although costly to start up) is to purchase the property directly. Once being the rightful owner of a property (even with a mortgage) it is possible to let it and take a rental income. This has the advantage of helping to pay off the mortgage (if a repayment mortgage deal is taken) and then eventually being an income for doing next to nothing each month. In addition, there is likely to be a rise in the capital value of the property, which can be released at a future date. This cannot be put inside an ISA, of course, so is subject to capital gains and income tax.
Please turn over...
The second approach is to purchase shares in a property based fund. This is essentially the same thing, as you then get a share of the capital gain in the properties the fund owns, and a share in the income of those properties that are let. This kind of fund can be wrapped in an ISA. This is a cheaper way of investing in property, but unlike the first, you do not actually own the property itself. For this reason, if the value of property falls dramatically, the investment can become almost worthless, whereas in the first case, the House (or commercial building) can still actually be used by the owner. It therefore has a practical value and is also inflation busting. What this means is that as inflation erodes the value of the currency, the property itself still exists. This is why some people have mortgages which were once difficult to afford each month, but now many years later cost them less per year than having their daily newspaper delivered! The danger with investing in property is that there are additional costs, such as legal costs, void periods when the property is empty, refurbishment costs and the like which do not occur in stock market investing. In addition, over the long term, the stock market has always out-performed the property market. However, having some property is essential in a diversified portfolio and when in the right area can bring in a good and regular income.
Secret Â Number Â 15 Â Â ÂłUnderstand Â how Â to Â recover Â from Â lRVVHVÂ´ Â The Â stock Â market Â can Â be Â an Â unfriendly Â place. Â There Â are Â days Â when Â hundreds Â or Â even Â thousands Â of Â points Â are Â wiped Â off Â the Â value Â of Â shares Â in Â one Â day Â -Â Â the Â famous Â Âľ&UDVKHVÂś,WFDQKDSSHQIRUDQXPEHURIUHDVRQV and Â the Â thing Â you Â need Â to Â know Â is Â that Â it Â is Â almost Â impossible Â to Â predict. Â Equally, Â it Â is Â almost Â impossible Â as Â a Â private Â investor Â to Â do Â anything Â about Â it. Â When Â trying Â to Â sell Â out Â to Â limit Â losses, Â you Â find Â that Â your Â broker Â simply Â cannot Â get Â you Â a Â price, Â and Â yet Â at Â the Â same Â time Â you Â can Â see Â the Â price Â falling. Â It Â is, Â as Â I Â said, Â a Â frightening Â place Â to Â be. Â However, Â if Â you Â follow Â the Â secrets Â I Â have Â given Â you Â so Â far, Â you Â should Â be Â protected Â against Â some Â of Â this. Â A Â diversified Â portfolio Â will Â help. Â Investing Â in Â good Â dividend Â paying Â stocks Â will Â also Â help, Â as Â these Â tend Â to Â be Â GHIHQVLYHDQGUREXVWLQÂľEHDUÂśRUUDSLGO\IDOOLQJPDUNHWV Â It Â must Â be Â expected, Â however, Â that Â there Â will Â be Â losses. Â They Â may Â not Â be Â as Â dramatic Â as Â a Â complete Â stock Â market Â crash Â Âą Â but Â nevertheless, Â you Â may Â wake Â up Â one Â day Â to Â find Â a Â large Â percentage Â fall Â on Â your Â portfolio. Â Thank Â fully, Â whilst Â it Â is Â certainly Â not Â a Â comfortable Â place Â to Â be, Â and Â whilst Â what Â I Â am Â about Â to Â tell Â you Â seems Â counter Â intuitive, Â there Â is Â a Â stack Â of Â research Â and Â experience Â which Â will Â back Â up Â the Â fact Â that Â it Â works. Â The Â basic Â trick Â here Â is Â to Â purchase Â more Â of Â the Â same Â stocks, Â even Â as Â they Â continue Â to Â fall. Â I Â will Â say Â that Â again Â Âą Â as Â the Â price Â goes Â down, Â buy Â more Â of Â the Â shares. Â There Â is Â a Â psychological Â state Â of Â mind Â you Â need Â to Â get Â into. Â If Â you Â believed Â the Â stock Â was Â worth Â purchasing Â at, Â for Â example, Â ÂŁ4.00 Â a Â share. Â And Â then Â the Â price Â slides Â down Â to Â ÂŁ3.05. Â You Â need Â to Â ask Â yourself Â a Â TXHVWLRQÂł+DVWKHFRPSDQ\DFWXDOO\GRQHDQ\WKLQJWR Â make Â it Â worth Â less, Â RULVLWMXVWLQDIDOOLQJPDUNHW"Â´,ILWLVWKHFDVHWKDWWKHZKROHPDUNHWLV falling, Â then Â what Â you Â are Â now Â seeing Â is Â that Â the Â price Â of Â your Â share Â is Â now Â at Â even Â better Â value Â than Â on Â your Â first Â purchase. Â It Â therefore Â stands Â to Â reason Â that Â you Â ought Â to Â be Â buying Â more Â at Â such Â a Â bargain Â price! Â If Â the Â price Â falls Â again, Â you Â should Â then Â buy Â more Â for Â the Â same Â reason. Â Now Â many Â people Â will Â point Â out Â to Â you Â that Â it Â can Â sometimes Â take Â years Â for Â a Â stock Â market Â (or Â even Â an Â individual Â sector Â or Â share) Â to Â get Â back Â to Â SUHYLRXVOHYHOVVRVXUHO\WKLVLVÂľJRRGPRQH\DIWHUEDGÂś+RZHYHUWKH\ are Â simply Â completely Â wrong. Â Â
25 Â Â
Please Â turn Â over... Â
As Â the Â markets Â recover Â Âą Â even Â if Â it Â is Â 10 Â years Â later, Â the Â value Â of Â your Â investment Â is Â now Â going Â to Â be Â considerably Â more Â than Â it Â was Â when Â you Â first Â bought Â in Â at Â that Â level. Â In Â fact, Â if Â you Â have Â consistently Â and Â regularly Â invested Â into Â the Â stock Â during Â that Â low Â period, Â then Â when Â the Â bounce Â back Â ILQDOO\FRPHV\RXZLOOKDYHORZHUHGWKHÂľEUHDNHYHQÂśSRLQWE\VRPH considerable Â margin. Â This Â LVEHFDXVH\RXZLOOKDYHÂľDYHUDJHGGRZQÂśWKH price Â of Â your Â share Â purchases. Â You Â will Â be Â able Â to Â see Â outstanding Â growth Â LQ\RXULQYHVWPHQWLQFRPSDULVRQZLWKWKHSHUVRQZKRÂľERXJKWDQGKHOGÂś Â I Â have Â already Â mentioned Â dividend Â reinvestment. Â This Â is Â particularly Â important Â during Â a Â bear Â market. Â Consistent Â dividend Â reinvestment Â will Â also Â average Â down Â a Â share Â price Â purchase Â level Â and Â the Â bounce Â back Â will Â again Â be Â all Â the Â more Â profitable. Â 6RWKHVHFUHWEHKLQGWKLVVHFUHWLVÂľ'21273$1,&Âś,I\RXNHHSHPRWLRQ out Â of Â investing, Â you Â are Â likely Â to Â have Â more Â success. Â Investors Â (particularly Â inexperienced Â ones) Â are Â likely Â to Â either Â attempt Â to Â sell Â a Â stock Â and Â take Â a Â loss Â (sometimes Â a Â huge Â loss) Â or Â to Â simply Â hold. Â As Â I Â have Â shown, Â neither Â of Â these Â is Â a Â good Â recovery Â plan. Â An Â Example Â Imagine Â you Â bought Â 105 Â shares Â of Â a Â dividend Â paying Â company. Â You Â paid Â ÂŁ27.29 Â per Â share Â and Â the Â total Â cost Â including Â commission Â and Â stamp Â duty Â was Â ÂŁ2,900. Â Thanks Â to Â reinvested Â dividends, Â in Â four Â years Â you Â would Â own Â perhaps Â 124 Â shares, Â almost Â 20 Â shares Â more Â than Â you Â started Â with. Â Â If Â we Â imagine Â that Â the Â market Â is Â a Â bear Â market, Â and Â the Â stock Â has Â crashed Â (along Â with Â everything Â else) Â to Â ÂŁ23.62 Â -Â Â despite Â a Â drop Â of Â 13% Â in Â the Â price Â you Â would Â actually Â show Â a Â slight Â gain Â on Â the Â investment. Â In Â bear Â markets, Â where Â 50% Â losses Â are Â not Â uncommon, Â you Â will Â agree Â that Â this Â is Â pretty Â impressive. Â Also, Â the Â dividends Â would Â continue Â to Â be Â reinvested Â buying Â more Â shares Â as Â the Â stock Â price Â falls. Â Â Here Â comes Â the Â best Â bit: Â Imagine Â that Â now Â the Â price Â begins Â to Â get Â bullish Â and Â the Â stock Â gradually Â rises Â up Â to Â previous Â levels. Â Well, Â if Â it Â were Â to Â reach Â your Â original Â purchase Â price, Â you Â would Â now Â be Â showing Â a Â gain Â of Â nearly Â 18.5%! Â Naturally, Â this Â will Â only Â work Â if Â the Â company Â is Â robust Â and Â does Â not Â go Â under Â in Â the Â falling Â market. Â This Â emphasises Â again Â the Â importance Â of Â choosing Â decent Â dividend Â paying Â companies Â who Â are Â likely Â to Â be Â around Â a Â long Â time! Â
26 Â Â
Secret Â Number Â 16 Â ÂłAvoid Â Investment/Trading Â Seminar Â ScamsÂ´ Â We Â all Â want Â to Â be Â better Â investors. Â There Â is Â always Â the Â dream Â that Â out Â there Â somewhere Â is Â the Â system Â which Â allows Â you Â to Â pick Â perfect Â stocks Â and Â perfect Â funds Â every Â time. Â We Â would Â love Â to Â have Â insider Â information Â which Â would Â enable Â us Â to Â time Â the Â markets Â perfectly, Â jumping Â in Â at Â the Â start Â of Â a Â bull Â market Â and Â out Â at Â the Â top Â of Â a Â bear Â market. Â It Â is Â this Â desire Â which Â is Â then Â exploited Â by Â others, Â who Â claim Â to Â be Â able Â to Â give Â you Â the Â skills Â you Â need Â to Â become Â stock-Âmarket Â millionaires Â in Â next Â to Â no Â time Â and Â with Â no Â understanding Â necessary. Â Unfortunately, Â these Â people Â are Â skilful Â scammers. Â They Â have Â the Â funds Â to Â produce Â glossy Â leaflets Â and Â book Â top Â London Â conference Â centres Â to Â add Â to Â their Â appeal. Â They Â are Â able Â to Â offer Â free Â meals Â with Â their Â conferences, Â and Â even Â free Â conferences. Â However, Â the Â cost Â of Â buying Â into Â their Â schemes Â could Â be Â enough Â to Â set Â your Â investment Â profile Â back Â by Â several Â years Â and Â in Â some Â cases, Â it Â can Â lead Â to Â financial Â ruin. Â In Â addition, Â it Â can Â be Â very Â difficult Â to Â avoid Â buying Â in Â as Â the Â sales Â pitch Â is Â extremely Â persuasive. Â Remember Â Âą Â these Â guys Â are Â pros. Â ALWAYS Â RESEARCH Â THE Â COMPANY Â OFFERING Â THE Â SEMINAR Â There Â are Â some Â alarms Â that Â you Â should Â listen Â out Â for Â when Â investigating Â such Â schemes. Â 1. Does Â it Â require Â a Â big Â up-Âfront Â payment? Â The Â dodgiest Â scams Â demand Â a Â large Â up-Âfront Â payment Â as Â this Â enables Â them Â to Â cover Â all Â their Â costs Â and Â then Â some. Â They Â can Â also Â be Â long Â gone Â and Â have Â disappeared Â completely Â (call Â centres Â and Â everything) Â when Â their Â recent Â victims Â try Â to Â return Â the Â schemes Â or Â ring Â for Â support Â when Â WKLQJVFOHDUO\GRQÂśWwork. Â Â 2. Âł+LJK\LHOGVZLWKPLQLPDOULVNÂ´. Â Â Remember Â my Â mantra Â Âą Â there Â is Â always Â risk Â and Â you Â should Â never Â invest Â what Â you Â cannot Â afford Â to Â lose. Â When Â these Â guys Â try Â to Â sell Â you Â the Â pot Â of Â gold Â that Â will Â pay Â out Â in-Âperpetuity Â and Â never Â lose, Â you Â should Â get Â out Â of Â there. Â When Â WKH\RIIHUDPRQH\EDFNJXDUDQWHHGRQÂśWEHIRROHG7KHVHJX\VDUH pros Â and Â they Â can Â disappear Â into Â thin Â air. Â Â 3. Âł<RXPXVWVLJQXSWRGD\DVWKHUHDUHOLPLWHGSODFHVÂ´ Â This Â irritates Â me Â beyond Â belief. Â I Â have Â seen Â systems Â advertised Â which Â claim Â they Â will Â only Â take Â 200 Â people Â on Â to Â ensure Â that Â they Â can Â provide Â good Â customer Â service. Â In Â fact, Â they Â are Â taking Â 200 Â every Â day Â that Â week Â and Â every Â week Â and Â providing Â nothing Â at Â all. Â Always Â take Â your Â time. Â Â
27 Â Â
Please Â turn Â over... Â
4. Whatever people tell you, it is highly unlikely that you will miss the boat on a share or scheme. There is always fluctuation up and down in prices and steady rises take years of up and down movements (just look at some charts) in most cases. Taking a week to think about it could well save you your whole investment pot. 5. ³:HWUDGHLQRYHUVHDVPDUNHWVDQGRII-VKRUHLQYHVWPHQWV´ Scammers love to say such things as the average punter who is seeking their golden ticket to financial freedom is less savvy about such things. Off-shore investing and hidden markets in China or Brazil are often used as a way to make it all seem plausible. They may even tell you they spend half the year out there getting to know the way things work ± VRWKDW\RXGRQ¶WKDYHWR7KH\DOVR love to tell you that investing overseas means you can avoid paying tax (which is not true). 6. ³,KDYHPDGHP\PRQH\DQGQRZRXWRIWKHJRRGQHVVRIP\KHDUW ZDQWWRKHOS\RXWRGRWKHVDPH,GRQ¶WQHHGWKHPRQH\,FKDUJH IRUWKHV\VWHPRUVHPLQDU´ If this were the case ± they would offer the whole lot for free with no charge EVER. These guys make money by selling the system only. They probably never trade at all. Do some internet research on them, Find some bulletin boards dedicated to discussing investment systems and investment scams. Ask a few questions. Have others been stung or are these people legitimate? Again ± TAKE YOUR TIME.
Secret Number 17 ³8QGHUVWDQGWKDWFRQIOLFWLQJDGYLFHPD\DOOEHFRUUHFW´ At the moment, I am hearing advice to invest only in funds, and to pick the best fund managers irrespective of the area in which they are investing, as statistically they will out-perform the market. I am also hearing advice to ignore funds as the commission paid to the fund manager will kill your profits. Instead, people are advised to attempt to mirror the fund managers or pick the stocks themselves. I am hearing advice that the only safe way to make money on the markets at the moment is to stay out of them altogether, and instead to HQJDJHLQµWUDGLQJ¶RUVSUHDG betting which way the markets will go. This enables a win from a rising and falling market. I am also hearing advice that spread betting is a dangerous game likely to bring some hefty losses of more than the original stake. I hear advice that the way to go is to stick to penny shares on the alternative investment markets, as this is where the big growth potential is. I also hear that people should avoid the risky penny shares and stick WRWKHODUJHµEOXHFKLS¶FRPSDQLHVZKRSUHVHQWOHVVULVN So which way is a private investor supposed to go? Well the answer will take you back to Secret Number 12. Diversify. You should have some funds. Leave these to boil over the long term. Subscribe to them regularly. Treat them as your buy and hold investments. You should also have a diversified range of other stocks. Some of these you will treat in the same way as your funds, with reinvested dividends and regular subscriptions. Others, you may trade more frequently ± even taking advantage of some large swings in the price occasionally by buying in and out on the same day or several times a week. You should have some µhigh-octane¶ and risky penny shares. You may lose the lot, but you may have a massive growth in share price. You should also make sure that there are some defensive stocks ± the dividend payers who remain fairly static in the market. And yes, you may engage in some spread betting of the markets as this may be a very lucrative thing to do, whatever the market is doing ± providing you engage in some careful money management and that you minimise your risk with stop losses. This takes you back to my mantra again. ,I\RXFDQ¶WORVHLW± GRQ¶WXVHLWIRUWKLV
Please turn over...
Secret Number 18 ³,QYHVWLQJRQ1HZV´ Many private investors read the bulletin boards and press releases about various companies. They subscribe to tipping services which will advise about what a company is about to do, or the new breakthrough they are soon to launch. The mistake they make at this point is assuming that somehow as a result of the news the share-price will go higher from that point and therefore buying in. In fact, it is usually the case that when there is good news from a company, the share-price rises a little for a short period and then falls rapidly for a longer period. This leaves the new private investor with a loss on their recently bought share. Why does it happen? Well all this information is in the public domain. If you have heard about the share tip or the news (or even the likelihood of good news) so will others. Pro-traders will certainly have heard about it. The share price you are seeing is in fact one which has anticipated the news already. Any spike after this is where inexperienced private investors are buying in. Once this spike has happened, the pro-traders all sell either all or most of their investment in large volumes, causing the price to drop like a stone. Once it is low down, they buy in again ± perhaps, or they may go to another share which is also expecting news and repeat the action there. Unfortunately, this causes the poor private investor to own shares which they bought at the top of the spike. Worse than this, some will panic and sell out as the share drops, taking a loss along the way. Thankfully, because of Secret Number 15, you know what to do in this scenario. Simply buy more on the way down. If you have no spare capital immediately available for such an additional investment, never mind. Hold on to it until you do. It will rise again. So, the trick is to understand what it is that drives a share price. Remember the rule of supply and demand. The price goes up as more demand the share. They do this in anticipation of the news. Once the news is out, demand has gone and so they sell again. Please note that technically it is investor sentiment that is driving the price and not the news at all! Investors behave like a herd. Bizarrely, people spend more money investing as a share price rises, and then sell again as it is falling. It is all about greed and fear. Try to remove your emotional response and WKLQNUDWLRQDOO\DERXWZKDWLVEHVWDQG\RXZRQ¶WJRIDUZURQJ 30
Secret Â Number Â 19 Â ÂłUnderstand Â the Â Jargon Â and Â ChartsÂ´ Â ,WLVFHUWDLQO\WKHFDVHWKDWVPDOOWLPHÂľQHZELHÂśLQYHVWRUVRIWHQMXPSLQ with Â both Â feet Â and Â then Â have Â to Â learn Â by Â their Â mistakes. Â Unfortunately, Â this Â is Â a Â costly Â way Â of Â doing Â things. Â Â It Â is Â also Â the Â case Â that Â inexperienced Â investors Â become Â over-Âconfident Â in Â their Â own Â ability. Â Psychologically, Â it Â is Â easy Â to Â see Â a Â few Â gains Â and Â think Â that Â you Â therefore Â know Â what Â you Â are Â doing. Â This Â is Â compounded Â by Â the Â fact Â that Â we Â do Â not Â like Â to Â think Â about Â and Â dwell Â on Â financial Â losses Â as Â they Â are Â painful. Â Â Â It Â is Â true Â that Â a Â little Â knowledge Â goes Â a Â long Â way. Â It Â is Â truer, Â however, Â that Â a Â lot Â of Â knowledge Â goes Â a Â long Â way. Â Understanding Â some Â of Â the Â fundamentals Â of Â investing Â (that Â you Â do Â now Â because Â of Â this Â guide) Â will Â be Â UHDOO\KHOSIXO+RZHYHU\RXVLPSO\ZRQÂśWJHWE\ZLWKRXWXQGHUVWDQGLQJ some Â of Â the Â jargon Â and Â having Â a Â rudimentary Â understanding Â of Â chart Â technical Â analysis. Â Â You Â can Â study Â for Â weeks Â and Â weeks Â and Â still Â be Â only Â scratching Â the Â surface Â of Â technical Â analysis Â (TA). Â However, Â some Â basic Â understanding Â of Â charts Â is Â quick Â to Â gain. Â I Â would Â say Â that Â you Â need Â to Â understand Â the Â fact Â that Â the Â direction Â and Â trend Â of Â the Â price Â is Â shown Â by Â the Â chart, Â and Â the Â volume Â of Â shares Â purchased Â is Â also Â shown. Â The Â higher Â the Â volume Â on Â any Â rise Â or Â fall, Â the Â more Â momentum Â there Â is Â behind Â the Â move. Â Â Basic Â indicators Â should Â also Â be Â known. Â Simple Â moving Â averages Â (usually Â the Â 20, Â 50 Â and Â 200 Â day) Â can Â be Â used Â to Â see Â where Â the Â current Â price Â is Â in Â relation Â to Â its Â average Â over Â time. Â If Â the Â price Â crosses Â a Â moving Â average Â with Â any Â momentum, Â this Â is Â often Â a Â signal Â that Â the Â direction Â of Â the Â price Â has Â turned Â for Â more Â than Â a Â short Â term. Â Â Using Â Google Â to Â searFKIRUÂľ(OOLRW:DYH7KHRU\ÂśDQGÂľ6WRFN0DUNHW )LERQDFFL/HYHOVÂśand Â reading Â around Â a Â bit Â will Â also Â give Â you Â a Â good Â grounding Â in Â some Â of Â the Â more Â complex Â aspects Â of Â TA. Â Again, Â knowing Â these Â in Â a Â rudimentary Â way Â will Â actually Â put Â you Â miles Â ahead Â of Â most Â private Â investors Â who Â know Â only Â that Â the Â price Â is Â going Â up Â or Â down. Â Â Spend Â some Â time Â searching Â the Â meanings Â of Â investment Â jargon Â in Â order Â that Â you Â can Â engage Â fully Â in Â what Â advisors Â are Â saying. Â It Â is Â no Â use Â thinking Â that Â it Â is Â time Â to Â buy Â in Â a Â bear Â market Â or Â when Â people Â are Â UHFRPPHQGLQJWKDW\RXÂľJRVKRUWÂś Â Â Â Â
Â 31 Â Â
Please Â turn Â over... Â
Secret Â Number Â 20 Â Âł'RQRWXQGHU-Âestimate Â your Â life-ÂH[SHFWDQF\Â´ Â Life-Âexpectancy Â is Â only Â going Â one Â way Â and Â that Â is Â up. Â Enforced Â retirement Â age Â in Â Europe Â has Â just Â been Â dropped Â as Â it Â is Â clear Â that Â people Â are Â living Â longer Â and Â longer Â and Â are Â obviously Â still Â capable Â of Â working Â much Â older Â than Â before. Â Â When Â planning Â your Â investments, Â it Â is Â important Â to Â recognise Â that Â your Â retirement Â is Â going Â to Â last Â a Â long Â time Â and Â that Â there Â is Â a Â high Â probability Â you Â will Â need Â to Â have Â money Â to Â live Â off Â for Â longer Â than Â even Â you Â imagine. Â Medical Â breakthroughs Â are Â happening Â all Â the Â time. Â Our Â understanding Â of Â the Â need Â for Â exercise Â and Â a Â healthy Â diet Â has Â increased Â or Â life Â span Â hugely. Â Standards Â of Â living Â are Â considerably Â improved, Â but Â in Â our Â old Â age Â we Â will Â need Â the Â necessary Â funds Â to Â keep Â us Â in Â the Â comfort Â we Â desire. Â Secret Â Number Â 21 Â Âł'RQÂśWIRUJHWJRRGROGIDVKLRQHGVDYLQJÂ´ Â Â Saving Â money Â and Â investing Â money Â are Â different Â things. Â With Â investment Â there Â is Â always Â a Â risk. Â You Â will Â read Â over Â and Â over Â again Â that Â the Â value Â of Â your Â portfolio Â can Â go Â down Â as Â well Â as Â up. Â In Â fact, Â as Â I Â have Â explained, Â in Â WKHHDUO\GD\VÂľGRZQÂśLVH[DFWO\ZKDW\RXZLOOVHH)RUWKLVUHDVRQLWLV essential Â to Â remember Â that Â some Â money Â needs Â to Â be Â saved Â in Â very Â low Â risk Â ordinary Â bank Â savings Â deposit Â accounts. Â This Â will Â be Â there Â for Â a Â rainy Â day Â (or Â a Â much Â needed Â holiday), Â and Â may Â enable Â you Â to Â siphon Â off Â some Â of Â it Â occasionally Â to Â invest, Â but Â you Â should Â aim Â for Â a Â certain Â amount Â to Â be Â saved Â in Â this Â type Â of Â account Â each Â month. Â As Â a Â general Â rule, Â and Â this Â is Â not Â always Â easy, Â you Â should Â aim Â to Â save Â enough Â to Â cover Â your Â mortgage Â and Â any Â other Â regular Â bills Â for Â a Â few Â months Â if Â you Â suddenly Â found Â yourself Â out Â of Â work. Â This Â gives Â you Â a Â couple Â of Â months Â grace Â to Â get Â yourself Â sorted Â out. Â You Â cannot Â rely Â on Â investments Â to Â do Â that Â as Â the Â volatility Â in Â value Â and Â the Â illiquid Â nature Â of Â the Â money Â (relatively Â inaccessible) Â is Â too Â great. Â Â You Â should Â always Â shop Â around Â for Â savings Â accounts. Â Â Banks Â rely Â on Â LQHUWLD7KH\KRSHWKDW\RXZRQÂśWERWKHUVKLIWLQJ\RXUIXQGVWRD competitor Â because Â it Â is Â easier Â to Â keep Â things Â all Â under Â one Â roof. Â They Â hope Â tKDW\RXZRQÂśWQRWLFHWKHGHDOWKH\DUHRIIHULQJWKHLUQHZ customers. Â BE Â DEMANDING! Â Ask Â for Â the Â better Â deal Â or Â you Â will Â take Â all Â your Â accounts Â elsewhere. Â They Â need Â your Â business Â and Â will Â actually Â bend Â over Â backwards Â to Â keep Â you Â on Â their Â books. Â 32 Â Â
Secret Number 22 ³Enjoy without addiction´ Once you start investing, you will find that it becomes extremely tempting to watch your investments going up and down all day every day. In fact, you can spend hours doing it. This is counter-productive. You could find that you have spent three hours watching a £2.50 rise on your portfolio. In terms of the use of your time, this is very poor. You would be better off spending that time stacking shelves in TESCO and it would give you more money to invest! It is important to remember that there are always short term swings in the market. Watching every one of them will not actually serve any SXUSRVHRWKHUWKDQWRPDNH\RXZRUU\8QOHVV\RXSODQWRµ'D\-7UDGH¶ (and have the time to do so), I would advise only a cursory check of your investments each day. This will certainly allow you to top up your shares when they have fallen, but will not take so much time that it becomes a very poor hourly rate. Remember also to have a clear strategy as to how much you are prepared to risk each month. Secret 8 was to only invest from your surplus. Too much portfolio watching can encourage you to invest beyond this amount as the temptation to buy new shares or top-up others is very strong. 5HJXODUDQGSODQQHGLQYHVWLQJUDWKHUWKDWµIRUFHG¶DQGHPRtional trading is always safer in the long run.
Please turn over...
Secret Number 23 ³All Bulletin Boards are positive´ If you join an online investing community, you will see that each share has a group of investors who will watch the price rise and fall and regularly comment. Some are very experienced investors and others are very new to this game. The key thing to know is that the comments will be almost entirely positive. People who comment on share bulletin boards are almost without exception holders of that share. ,WLVQRWLQWKHLULQWHUHVWVWRµGH-UDPS¶RU talk down a share as it will potentially damage their own investment. In fact, if people do post negative information or views about the share, these posts are often met with hostility and derision. This has the effect of making such posters tread carefully before considering giving any balance to the views on the board. As a source of information about a particular investment, the bulletin boards can be very useful. Private investors are often very good at doing research into the fundamentals of a company. However, you need to be aware that negative comments will be few and far between and that almost every share will be portrayed as the share pick of the decade! Using bulletin boards to make a decision on whether or not to invest is a dangerous game. The information presented should be only part of what you take into consideration. Remember also that all this information is in the public domain and was known by the pro-traders long ago.
Secret Number 24 ³Aim for multiple income streams´ A poll of wealthy people would very quickly show that most of them made their money in more than one way. I have already mentioned that income is not wealth. However, this is particularly the case if your income comes entirely from one source. What do I mean? Well, if you have a good job which pays a very healthy salary ± but that job stops, your income will stop too. You will be left only with what you have managed to put by in the form of investments. However, if you have managed to build up a group of income providers alongside your regular job and investments, then your income will be able to continue for longer without the regular salary. What kind of income providers? I have already explained about investing for income. This is a good place to start. However, you should investigate the possibility of generating other income on the side. There are plenty of part time and flexible working opportunities where you can make a small amount of cash for a small amount of time. Some of the best are the multi-level marketing schemes. Providing the company is a sound one (like Telecom Plus PLC), these can generate a reasonable (or outstanding) income which goes on paying long after the initial work was done. The other area in which to look is the service industry. Can you set up a EXVLQHVVZKLFKZLOOGRSHRSOH¶V unwanted jobs? Cleaning Homes, Washing Cars, Washing Windows, Doing Ironing ± the list is endless. The secret, however, is for you to act as a manager who sets up the deals and employs others to do the hard graft. This way, you get the profits only needing to do a minimal amount of work each week or month. You can expand the business as much or as little as you wish depending on your free time. The beauty of such an opportunity is that once it is rolling it takes very little time to generate the income. Naturally there are some start-up costs and effort, but beyond that not much. Finally ± you could consider writing a guide on something you love and selling it!
Please turn over...
Secret Number 25 ³You never know enough´ It is always important to remember the value of education. We all continue to learn throughout life, but some will be more active in that learning than others. I am not suggesting that you should go out and do a higher degree (although you may, and it could be the best thing you ever did). What I am saying is that when dealing with the challenges that life brings your way and particularly when attempting to move into new areas out of your comfort zone, there is no substitute for education. There are countless books, for example, on technical analysis of charts. It is worth reading some of these. There are weekly eNewsletters you can sign up to which will let you know what is going on in the markets and give analytical comment from experts. There are websites with discussions between opposing views. All of these things you should digest. However, reading the manuals is not enough. You would not expect to be able to win the world snooker tournament simply by reading a manual about how to hold the cue and strike the ball. Nor would you expect to be able to play the violin by reading about the techniques. There is no substitute for practice and exposure to that which you are trying to learn. Many brokers allow you to open virtual trading accounts and you can µSDSHU-WUDGH¶ZLWKRXWULVNLQJDSHQQ\7KLVHQDEOHV\RXWRPDNHPLVWDNHV before hurting your finances. It also enables you to put into practice what you have learned in theory. This part of learning is invaluable. Once you have got the hang of what you are doing and you are familiar with the trading platform you have chosen to use, you can venture into the real account and put some real money in. Jumping in with both feet without any knowledge or practice is rarely a good thing to do.
Remember, there is always time to learn something new.
$QG)LQDOO\« Try not to lose sight of what you are doing all this for. What is it you actually desire? I began this guide by saying that it would help you accumulate wealth steadily and sensibly. However, you have to know why you want to be wealthy. Those who seek money for the sake of money are actually following a blind alley. Those who seek riches in order to be rich will find their life ultimately empty. Instead, you need to visualise what it is you will use the money for. Perhaps you would like to take more holidays with the family. Perhaps you would like to live in a bigger house with more space to unwind and entertain. Perhaps you simply want to be comfortably off without having to give all your time to your employer. Perhaps you would like to retire early so that you can see the world. Perhaps you would like to give to worthy causes all over the world. Perhaps you want to put your children through private education. Perhaps you want security in old age. Whatever it is ± try to focus on this when you are investing. Watching the pounds and pence grow is of no consequence if you have nothing to aim for. Once you have decided what it is you are working towards, fix that image in your mind and factor it in to all your decisions. You will be much more sensible in your approach if you know what it is you are risking. I hope that you have found this to be a valuable guide. I wish you every future success.
U.K. Government Required Disclaimer ʹ The information in this guide is believed to be accurate and sound according to the best information available to the author. The past is not necessarily a guide to future performance. The value of any investment, and the income derived from it, can go down as well as up. You may get back less than the amount invested. Never invest more than you can safely afford to lose. There is an extra risk of losing money when shares are bought in some smaller companies including penny shares. Before investing, or if in doubt about the suitability of an investment please seek independent financial advice.
Please turn over...
Stock Trading Making money from Real Estate Family Budget Demystified Affiliate Marketing Affiliate Disclaimer: The writer of this guide may get a commission if you purchase any products from the links contained in these ebooks. Please note that the ebooks themselves are provided FREE.