MRMS-new-logo

A BEGINNER'S FINANCIAL GUIDE FOR A RICH LIFE

PRECIOUS METALS WE SHOULD INVEST IN

Precious metals are known to be rare metallic chemical elements and, throughout history, they have been used for different purposes. These elements are considered to be of high economic value and nowadays the most common metals in the monetary market are gold and silver. But when we refer to precious metals, then ruthenium, rhodium, palladium, osmium, iridium and platinum must also be recalled in this area.

find gold photo

Photo by RobRoyAus

Gold is the most popular metal which is used in the jewelry industry, but it is also known for its important role in medicine, electronics, dentistry, and food industry. In the present, this metal is seen more as a real investment, because the current money system is going through a period of stress and more and more people believe that investing in precious metals will be a safe method for the future.

If you decided to invest in gold, you should adopt the best strategy and try to find the most profitable way, based on your needs. You can resort to the physical gold method of investment, which includes coins, bars, and jewelry, or choose the gold exchange-traded funds and the gold stocks.

Silver also has a special place in both coinage and jewelry systems, and it is well appreciated for its high electrical conductivity. This metal has an important role in the manufacturing of musical instruments and dental fillings, or in the mechanical ventilation. Like gold, silver was used as a currency, but compared with gold, the price of silver is rather uncertain.

There are numerous ways in which you may invest in silver, and if you do not know what choice to make, then you should ask for an expert’s opinion. If you prefer a traditional method of investment, you could choose silver bullion bars, but if you would like to search for a new form of trading, then invest in silver coins. Other methods could be those of exchange-traded funds, bank accounts, shares in mining companies and more.

Due to the present effects of the financial crisis, investing in precious metals could be the best choice. When most people think of investing in precious metals, they usually choose the bullion method of investment, but this strategy varies depending on each requirement.

Even if platinum and palladium are also used for different purposes, gold and silver remain the reliable factors of investment itself. For those who are already used to invest in these metals, they are a means to increase their portfolio and a trusted source for the future.

However, even if the demand for precious metals keeps on rising, it doesn’t necessarily mean there will be an immediate spike in price. It depends a lot on their constantly changing supply levels, resulting from active mining as well as the aggressive selling by large stake holders.

You have to do quite a bit of your own research before making your purchases. You also have to provide a storage space that is safe and secure if you elect to park your money on coins or bullion. Investing on precious metals requires maintaining a long-term perspective, meaning you have to be prepared to weather short term market volatility.

Investing in Gold

There are many ways to invest in gold. You can invest in physical gold by buying gold coins, jewelry or other physical forms of the metal. You may invest in gold by buying shares of stock in gold mining companies. There are also Exchange Traded Funds that track spot gold prices (Gold ETFs) which you can include in your investment portfolio.

The most popular and the most convenient way of investing in gold is by buying or selling gold futures through commodity exchanges such as the New York Mercantile Exchange or COMEX. You can either trade directly with the exchange via their regular brokers, or trade online via their online brokers using a virtual trading platform.

For retail investors, it would be wise to do online trading instead of opening a direct trading account with the exchange. It requires less capital and the trading hours are longer.

To start trading gold futures, all you need to do is open an online account with a member broker of the exchange. In the case of gold, your options can be any online broker accredited by CME Globex, India’s NCDEX, Dubai’s DGCX, Multi Commodity Exchange, or Tokyo Commodity Exchange.

Once an account holder, you will be provided with a virtual trading platform which is linked to the global gold market in real time. Using this platform, you’d be able to buy gold futures or trade on spot prices of gold in real time with minimal margin requirements.

Most online brokers use the Metatrader 4 as their virtual trading platform. This is one of the most popular, user-friendly trading platforms around. It allows you to trade any of the many securities serviced by your broker-provider, using only just one account. This trading platform comes with a powerful array of technical analysis tools and real time financial news feed to help you make trading decisions with less difficulty.

Gold futures (including current month or spot gold) are traded by lots. Each lot is equivalent to 100 ounces of gold. Some brokers offer micro and e-mini accounts where lot sizes are smaller (10 ounces and 1 ounce lots) compared to regular accounts where 1 lot is equivalent to 100 ounces of gold.

Nymex gold has a ticker symbol of GC while its electronic trading counterpart under CME Globex is EGC. CME Globex E-Micro Gold future has a ticker symbol of MGC.

Trading is highly leveraged with margins as low as 1% of the notional value of the contracts. Maximum leverage for gold micro account can be as high as 1:1000. However, current regulations in the U.S. limited the leverage for margin trading to no more than 1:50.

Minimum contract size for micro accounts is 10 ounces with minimum $0.10 per ounce price increments. Margin call is set at 40% of the notional value. Automatic cut point is at 10%NV. (Notional value = number of ounces x current price / 100). For regular accounts, initial margin requirements start at $2000 for every position taken.

Current Gold Outlook

Gold prices have been plummeting for the last 2 ½ years, losing 27% of its value and dropping by more than 38% from its September, 2011 high of $1,923.70 per ounce. The main contributing factor to this horrendous drop in prices is the improving U.S. and global economies which triggered the capital flight from safe haven to more meaningful investments – a logical move expected to happen when the economic outlook is all pink and roses. However, the question is after 2 ½ years of stormy down trend, has it reached bottom and ready to mount another rally?

By all indications, gold has lost its luster as a safe haven for investment funds, and investors are not likely to get on board any time soon. All things considered, what will come into play is the demand-supply equation. With gold production dwindling consistently and as the demand for gold remains constant, it won’t be long before the short supply of gold gets back its firm hold of the market.

The fact remains that the total gold supply dropped by 3% last year and the supply crunch is predicted to continue for another year or so, which may trigger another gold uptrend in the near term. However, bottom picking is tricky and should be done with extreme care and only after an exhaustive analysis of current price movements.

Silver Facts

Silver is like gold in many respects, particularly as an investment vehicle. The price movement of silver is more volatile, though since market liquidity is 18 times lower than gold. This means even single volume transactions can have a profound impact on silver prices. Worst, large traders or investors have the potential of influencing the movement of silver prices. Under normal market conditions, silver tracks gold prices with a ratio of 1:50 gold/silver.

The physical demand for silver is estimated at a mere $15.2 billion per year. However, the industrial uses of silver are on the rise from the silver-based biocides found in almost all industrial, consumer, and commercial products to the latest technology using Nano-silver particles with applications that include bone cement, wound dressings, surgical masks, surgical instruments, and lately as silver particles on the surface of home appliances.

The regular silver futures have the ticker symbol of SI with a contract size of 5,000 ounces per lot and requires an initial margin deposit of $11,000 with a maintenance margin requirement of $10,000.

The micro silver future, on the other hand, has a ticker symbol of SIL and has a contract size of only 1,000 ounces per lot. The initial margin requirement is $2,200 per lot with a maintenance margin requirement of $2,000.

Silver Outlook

Analysts believe there will be little investment appetite for silver especially after shedding 35% of its value from mid-December, 2013 prices despite the growing demand for it from the industrial sector. It will continue to track the price of Gold which is currently also in the doldrums.

 

Continue Reading

PUTTING IT ALL TOGETHER

There is a lot of information about investment trading. If this is one area that you would like to explore for yourself, one of the very first points you should settle from the start is what you will be trading. Tackling this is the only way you can take the right steps to isolate the best resources to help you get started.

money photo

Photo by Cooperweb

Several markets are great for investors. Among your best market options are stocks, options, CFDs, commodities, and currencies. If you take a look around at where the top investors are, you might see that many of them have investments in two or three markets. You shouldn’t follow the same step as a beginner.

You might think that the best investments are those that are diversified. Most likely, you’re thinking that the more diverse your portfolio, the lower your risks of losing. This might initially seem logical since different markets have different risk levels. One loophole to this reasoning, however, is that you will understandably be unable to gain mastery over any market.

Let’s clarify things. Investing can get pretty complicated regardless of the market you’re in. You need to learn loads of technical terms and processes. Moreover, you also need to build up your instinct for detecting good trades. What this implies is that you need a large amount of time and effort to learn the ins and outs of just one market. Once you dive into wide investment trading, you could lose all you have because you don’t have the level of skill and knowledge needed to get you through.

What you should want to know is which market is the ideal one to get into first. Logically, you should start learning the ropes in a market that you are at ease with. You’ll find out which market this is if you start reading about each to get a feel for what is easiest for you to learn and understand.

Many specialists would point out that the easy path is to trade stocks first. Obviously, this doesn’t mean that stock trading is simple. Among all the markets, though, the stock market is the most clear-cut. Also, you will find that there are quite many excellent resources for you to access and use. There are more than a handful of expert references and tools that you can tap for stock trading to help you make the best investments possible.

There is also a lower degree of risk in the stock market than in any other market. Take note that no one is spared from the possibility of losing a lot in this market. Stock traders, however, do lose less than those in other markets who invest just about the same amount of cash. This is because stocks, unlike currencies, are not leveraged. Keep in mind that high leverage assets can yield huge profits for small investments but also present the risk of huge and quick losses.

The actual secret to earthly wealth is in investment trading. You can only ensure great profits though if you make sure you make the right market choice. Don’t trade everything. Settle on only one market and master it.

 

Continue Reading

THE INFAMOUS RULE OF 72 ON INVESTING

How to Double Your Money in 7 to 10 Years

Every investment guru will tell you that if you simply park your money and leave it untouched in a portfolio containing a mix of any non-speculative, dividend earning, and stable investments, it will eventually double its value after a specific period of time. This is not magic or an empty promise. This is a mathematical probability that uses the power of compounding interests.

Ask any investment banker or financial adviser you know and they will tell you it is true. They have had this knowledge for a long time, yet for some reason they seem to be hiding it from us. This infamous mathematical probability is called the Rule of 72.

investment photoThe Rule of 72 is basically a mathematical shortcut meant to determine the future value of a certain amount. Specifically, it calculates the length of time it will take an investment to double in value if it is left to grow with compounding interest. According to the rule, if you divide the number 72 by the annual rate of return, it will give you the length of time for your money to double with the given rate.

Mathematically, the Rule of 72 is expressed as follows:

Annual Rate multiplied by Number of Years (for it to double) = 72

If the annual rate is given, you can get the Number of Years (for it to double) with this:

Number of Years (for it to double) = 72 divided by the given Annual Rate

If you want to know at the rate you will double your money for a given number of years you can use this:

Annual Rate = 72 divided by desired Number of Years

 Following the formula above, you will arrive at 7.2 years for your money to double its value at 10% compounded annual rate of return (72/10%). Similarly, you can calculate that it will take 10 years for your money to double at 7.2% (72/7.2).

Clearly, the ball is really on your side of the court. As indicated by the calculations above, it is highly possible for you to double your money within 7 to 10 years – but for that to happen, you need to invest your money in a portfolio mix that gives an annual collective yield of between 7.2% and 10% c.

Using this as your basis therefore, what you need to do is to carefully put together a mix of investment instruments which have demonstrated their consistency in providing similar yields in the past. The bottom line is – it still is your call.

Your choices of where to put your money will actually depend a lot on what kind of an investor you are – as well as on your appetite for taking risks.

If you are the conservative kind with no appetite for risk taking, then your portfolio must only include investments that are considered relatively safe and stable. This can be a diversified mixture of blue chip stocks and investment grade bonds.

Blue chip stocks are those issued by financially stable and well-established companies with billions of dollars in capitalization. These companies are not likely to go under in the near term. They are also known for paying increasing dividends through the years (some even for decades).

On the other hand, investment grade bonds are municipal or corporate bonds with high (AAA to AA) to medium (A to BBB) credit rating and are therefore thought to be least likely to default.

Let’s assume that you have a portfolio mix made up evenly of blue chips stocks and investment grade bonds. If the blue-chip stocks in your portfolio have an average annual yield of 10% and your investment grade bonds have an annual return of roughly 6%, then these two should collectively give you a net return of 8%. Using the Rule of 72 formula, you divide 72 by the net return (8%) to get 9 years – the length of time to keep your money invested in this mix for it to double its value – and 18 years to quadruple it.

The speculative investors may, however, find the waiting time of 7 to 10 years too long and too boring. They are the types of investors who are willing to face bigger risks for bigger pay-offs. They are fully aware of the fact that in investing, the bigger the risks you take, the bigger the rewards will be.

Because they are in a hurry to supersize the value of their investments, they prefer to put their money on the more volatile stock options, delve on highly leveraged trading, or get engrossed with picking penny stocks. These are the types of investment where you can double your money overnight or lose your shirt just as fast.

Some words of caution though. If it’s a nest egg you want to build for the future which you are looking forward to helping you go through your golden years comfortably, then it’s best to avoid being speculative. Set your sights instead on placements that will provide you with reasonable and stable annual returns with less risk.

And in case somebody comes along trying to convince you to join their speculative bandwagon by showing you his almost spotless trading records, put one thing in your mind – “A sterling performance in the past is not a guarantee of future results.”  Resist the temptation to turbo-charge your investments and stay conservative. Your money is bound to eventually double in time anyway so why take the extra risks?

Below is a Rule of 72 chart showing the type of returns that will double your money over a corresponding period of time. This may help you in your search for the best placements for your money that will double it in time.

 

   

% Annual Investment Yield

 

Number of Years to Double your Money

 

72

3

x

24

=

72

4

x

18

=

72

5

x

14.4

=

72

6

x

12

=

72

7

x

10.2

=

72

8

x

9

=

72

9

x

8

=

72

10

x

7.2

=

72

11

x

6.5

=

72

12

x

6

=

72

13

x

5.5

=

72

14

x

5.1

=

72

Continue Reading

THE KEY STEPS TO SUCCESS IN REAL ESTATE INVESTMENT

investing photo

Photo by 401(K) 2013

If one wants to successfully invest in the property market be it residential or commercial during an economic down turn, then this can be a difficult task. With property prices spiraling downwards and the few buyers that are out there in the market that does have the financial support or capital to buy simply will not pay competitive prices for property.

Due to this situation, it is essential if you are considering investing in property, to fully understand current market conditions to achieve the greatest returns on your property investment. Property investment has long been a popular type of investment which, in theory, simply involves a process of buying property to rent later out to tenants or customers and in the end sell on at for a profit.

Unfortunately, in an unstable economy as we find ourselves in currently, achieving this success with this type of investment can prove to more elusive and more difficult, then the simple purchasing and leasing / renting of properties. All new investors must fully understand that to achieve their success with this type of investment; success is dependent on their ability to wisely and carefully make their investment in real estate.

Investment in property involves the investing one’s money into the property with the aim of making a profit. In generally, these investments are concerned with the buying of properties, renting to consumers or tenants and at some future date selling them when prices are high to make a profit on the appreciated market value. Real estate can mean any brick and mortar building or property located on land which is bought and sold. It can range from an apartment/office building to smaller structures like storage units or garages.

To achieve success in real estate investment, there are several steps to follow. Let us go through the important key steps to follow:

1. You must choose your Market

As an investor, you will want to choose a market in which you hope to be the most successful. It will not matter if you are buying, selling, or renting, as business is more likely to be profitable for you when you are working in a market that best suits your personal needs.

2. Determining your Plan

It is essential for you to decide what it is that you hope to achieve with your investment in real estate. Without determining this it will be hard for you to progress with your plans. For some investors, they will decide to rent their investments out for long periods while for others they will prefer to renovate them and then sell them on when the market is high.

It does not matter which avenue you choose, as there is always room to profit in all markets. However, your plan must be in place before starting out, as it lets you make decisions about your property investment when the profitable opportunities appear.

3. Talk to the Professionals

Remember that when you are stating on in real estate investing, there is a lot to learn. A good place to start and get the best advice is a professional real estate investment course. These assist you in achieving the success you strive for with your entry into the property investment market. By studying and learning all the specialized techniques of the business, you are better prepared for what lies ahead.

These professional traders can combine their knowledge and practical experience and will share this with you so that you can integrate what you learn into your personal strategies.

4. Execution

When you have studied all that you can and feel ready to commence with your real estate investment plan, then you must execute the plan. You have already prepared yourself for success, so all that is needed is to execute your investment plan in line with the decision you have made and the and information you have learned.

5. Education

One should note that these investment courses are not only a source of professional strategies, but they also arm you with essential and beneficial information about the ins and outs of the real estate investment industry. For, if you truly plan on achieving success with your investments, you should be fully prepared like a soldier to war when setting out on your journey to success. Attending professional real estate investment courses achieve this for you and it is well worth considering in order to leverage your possibilities of success.

If you ask the most experienced investors where to park your money to realize better long term gains, their common answer will be real estate. Having sad that, let us explore the many ways we can invest on real estate.

You can put your money on publicly listed real estate investment trusts (REITs). REITs are investment vehicles that function much like a mutual fund. Its financial resources pooled from several investors are used to invest on commercial, industrial, or residential buildings, specifically buying, selling, developing, leasing or renting them out.

 

The REITs’ main source of revenue comes from the property leases, from the rent, and other fees collected from their various property holdings. They also earn interest from mortgage properties they own. Another source of revenue is the appreciation in real property value of the underlying assets they manage.

There are two ways you can invest on REITs. You can buy REIT shares directly in the spot market or you can invest your money on mutual funds whose focus is on public real estate.

Surprisingly, America’s young adults have shown an uncanny interest on real estate investing. These millennials know fully well that real investing can provide them with an additional source of monthly income aside from providing a hedge against inflation. But instead of buying actual real estate properties, they instead put their money on real estate investment trusts (REITs).

The reason why millennials are more interested on REITs is because it allows them to invest on real estate properties without the worries of real home ownership commitments tying them down. They enjoy the flexibility of being able to move around from one work place to another looking for greener pastures where they can establish their roots. At the same time, they are able to generate extra income monthly to help them pay off their student loan obligations.

If there are publicly listed REITs, there are also private REITs. Private REITs are also known as private placements. They provide much higher returns than the public REITs, but only a chosen group of investors are given the opportunity to invest in them. Some of the private REITs that give the best returns are exclusively offered to investors who meet the strict accreditation standards they set.

For example, to qualify for the private REITs giving the best returns, the investor must have a net worth of one million dollars or those primary home owners whose annual income for the past two years is $200,000.

The qualifying standards are so strict that only a few investors are able to get accreditation. Most of them invest with these private placements but also enjoy the benefit of investing on a financial instrument with sufficient safeguards that lower investing risks.

There are investors who have the means to purchase real estate properties outright and who prefer to own the actual asset than put their money on trusts. These investors ‘flip real estate properties’. They pour in their capital to purchase cheap real estate properties such as those on the auction block, then make the necessary improvements to up their values.

 

They then sell the properties or rent them out at a much higher price. The main consideration of the investors who ‘flip houses’ and other real estate properties is the projected cash flow the property can generate.

 

For some, a simple way of investing on real estate is to buy the property they choose to live in rather than continue renting one. This way, they are able to build their equity on the property through the monthly payments they make. They can then sell the property at a profit later on.

 

Continue Reading