In addition to my career in finance and accounting, I have experience running my firm and may even be considered a marketing specialist. I appreciate good marketing, but only if it’s honest. No of the state of the financial markets, there will always be those who would like to take advantage of the situation to make a sale. This is perfectly OK; in fact, it’s the American way. Get the Best information about Cryptocurrency crime investigation.
The problem is that the tides don’t always stay the same, and when they do, those who bought into the opportunity often find themselves holding yesterday’s product today. It will cost them ample time to get out of yesterday’s opportunity, either in the form of investment losses, penalties, fees, or both. Nothing is inherently wrong with any possibilities, but the timing could be better.
Although the best time to invest in anything is when prices are low so that you can benefit from subsequent growth, the opposite is true for fixed-rate return vehicles like bonds. In general, it’s not wise to invest in an appreciating asset just as it’s about to peak, has already peaked, or has fallen from its high, or in a fixed rate product just as interest rates are falling but have yet to hit bottom. Four such instances are provided below.
1. Fixed annuities, certificates of deposit, savings accounts, and money markets are the first category.
Your initial investment in fixed annuities and certificates of deposit is safe from market risk. Because their set rate of return is attractive when losses hammer assets like stocks, both are typically actively marketed during periods of market volatility. While this is wonderful for now, keep in mind that rates are meager, and the government is producing money like crazy. The only thing backing this money is the government’s ability to tax its citizens (you and me!). Additionally, keep in mind that the value of your money will decrease because there will be a lot of newly created dollars in circulation as the economy recovers and the tide turns. Two consequences must follow: First, inflation will skyrocket, driving up the prices of everything we buy and consume regularly.
Two, the Fed will have to hike rates to rein in the inflation above and prevent it from getting out of hand. You should be fine if you keep the liquid cash element of your portfolio in places like bank accounts or money markets, where you have easy access to your funds and where interest rates are rising (albeit more slowly than inflation in most situations).
However, taking money out of a time investment like a CD or fixed annuity early can result in penalties, and it would be awful to be invested at 3% when the Fed jacks up rates in the 5-6% level, as you’ll be making half the rate of inflation. So while it is prudent to maintain a portion of your savings in a fixed-rate investment at all times, you should avoid making significant commitments to assets that have penalties for early withdrawal during historically low-interest rates.
2. PRECIOUS METALS, GOLD, AND SILVER
While “gold bugs” aren’t entirely wrong whenever sh*t hits the fan, you may want to read on before investing in gold. A small percentage of your portfolio, perhaps 5 to 10 percent, should always be invested in precious metals. Gold and other metals are fantastic because their value tends to rise when the economy does poorly, making them a non-correlated asset class compared to stocks, bonds, and real estate. The problem with gold is that it tends to fall after the economy recovers, often very severely, and stays there for quite some time.
Throughout the vast bull run between 1982 and 2000, gold was not an intelligent area to invest extensively because stock investors wiped the floor with everyone and enjoyed dividends throughout the downturn. Investors in stocks and bonds can expect dividends and interest payments in addition to any gain in value, while the only guaranteed return from gold is in its price.
For the above reasons, I prefer having a more extensive holding in stocks and bonds and a smaller holding in gold and metals. Last but not least, some proponents of gold and metals argue that the current economic downturn is different and that America as we know it is about to collapse; therefore, now is the time to stock up on gold, food, guns, and ammunition before anarchy reigns supreme.
In response, I assure you that the United States will emerge stronger from this catastrophe just as it has from every other economic downturn, military conflict, racial upheaval, and terrorist attack it has ever endured. If you’re not a gun collector needing an AK-47 and ammunition, you should focus on disciplined investing.
3. TRADING SYSTEMS (DAY AND STOCK)
Ten years ago, it was arguable that a monkey could toss darts at the stock page of the local newspaper and come out ahead. When the stock market is tearing, it can feel like anything is possible. Market dips are viewed solely as bargains to be snapped up. Everyone here can probably relate to the above scenario, and they can also probably attest to the reality that when the stock “system” is doing well, opportunists emerge with just as much enthusiasm as fixed income and gold bugs do when circumstances are dire.
The guru of the moment rents out conference rooms at hotels in all of the main cities so that you may hear all about the surefire way to make millions. Day trading can be so lucrative that it might replace full-time employment.
While I do not doubt that some people have done well doing this, I consider them to be the outlier. In the financial sector, a proverb says, “Never confuse brains with a bull market.” This adage is made for this situation. There are two things I’d like to know from these experts.
The first thing I want to know is why you always choose to visit during stock market booms. Most individuals want to know what to do when things aren’t going well. Then how does your system function exactly? However, the geniuses with “can’t fail” plans disappear once a bad market occurs. Still, trying to convince? Have you noticed more commercials for these systems recently than in 1999 or 2004?
I guess not very many. Not that I’m aware of, either. Second, if your system is so great, why are you selling it for hundreds of dollars a copy when you might be making enough to retire comfortably? Third, because of the technical expertise and extensive research required for stock analysis, most large institutions employ experts specifically for this purpose, and even then, the results may need to be more reliable.
Finally, investing in a diverse portfolio of passive indices has been shown to outperform the “experts” on most occasions. If you pursue this option, you should be ready to conduct equivalent research independently. This brings us to my last category of exploiters…
4. PROPERTY
You must be hiding away in a cave in the South Pacific without a television if you have yet to see a commercial trying to sell you a method that will make you rich through real estate. Now that the housing market has crashed, these are more common than ever. “flippers” and “fixer uppers” are still active today, but foreclosure professionals have taken center stage. Like the stock market, I will never tell you that you can’t do something (can’t is a four-letter word in my book).
However, don’t allow yourself to be fooled into thinking that you can become the next Donald Trump with little to no effort on your part or that deals requiring zero down payment and a hundred percent loan are waiting around every corner. My question for the “systems” guys is similar to what I pose to stock gurus: if your system was so fantastic, why would you spend money on infomercial time to peddle it to the masses?
Successful real estate investors I know have done, and continue to do, a great deal of research into their respective markets. Most people who want to avoid being overcharged for labor are either skilled craftspeople themselves or acquaintances who are.
Despite what the gurus may tell you, only some pay their rent, pay it on time, and take care of their (actually your) house, so it’s a good idea to familiarize yourself with landlord/tenant rights in your state and area. All of these abilities are teachable. Possibly, maybe, will you? If you’re going, to be honest with yourself, you shouldn’t decide to get tired of the project after you’ve already started putting up money for it.
Cash-on-cash return formulas and cap rates are not fun to calculate if you need help comprehending the nuances of your 401(k), mutual fund, or brokerage statement. For example, suppose you want to diversify your portfolio but don’t want to deal with “the 3 T’s” (toilets, tenants, and trash).
In that case, you can still gain exposure to real estate at a reasonable cost by purchasing a real estate ETF (Exchange Traded Fund), much like you can gain exposure to the stock market by buying a stock index ETF. Do your research before venturing out on your own in your community. Remember that “The Donald” learned much about the real estate industry from his father, Fred Trump. Robert Kiyosaki, the author of Rich Dad Poor Dad, followed a similar path, only he learned from a friend’s dad. Neither relied on advice from an internet guru.
The “four horsemen of the financial apocalypse” have been named. First, investing your hard-earned money is a straightforward and dull procedure for most people. Consider your risk tolerance and investment time horizon before deciding on a portfolio’s asset allocation. Then, rent “Wall Street” and spend a night or two imagining that you’re Gordon Gekko if you need a jolt of adrenaline.
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