Top 10 Financial Resolutions for the New Year
By [http://ezinearticles.com/?expert=Samantha_Chang]Samantha Chang
With the new year just around the corner, most of us are thinking about the holidays and spending time with loved ones. And while Christmas and New Year's Eve are a time to eat, drink and be merry, reality usually sets in on New Year's Day, which leads to the traditional round of resolution-making.
So for the new year (in addition to eating better and exercising more), you might want to consider these 10 resolutions for putting your financial house in order.
1. Think Strategically About Your Money
When it comes to vacations, most people plan months ahead, carefully selecting a destination and the best way to get there. Financial decisions should involve the same type of strategic thinking. You should choose a financial "destination" and then map investment, savings, insurance and household needs to arrive as planned. People who think strategically will know if they're on track to reach their goals and when they need to adjust their plan to match their financial situations.
2. Develop Financial Relationships
It's never a good idea to make major decisions in a vacuum. Ideally, you should try to develop relationships with people who can help guide your financial well-being. Get to know them, and let them get to know you. That way, they're more likely to go the extra mile to provide the kind of personalized service that can keep your goals on track. A good accountant can help you save money. A banker can help with loans when you really need them, and a lawyer can make sure your personal affairs are in order.
3. Boost Savings, Cut Debt
Limiting debt is critical to reaching your financial goals. Therefore, it's important to keep nondeductible interest to a minimum. As you liquidate debt, you may want to direct those dollars to savings. You can also maximize your savings by contributing to company-sponsored tax-deductible savings programs such as a 401(k), a health savings account or a 529 college savings plan. You should also consider making major household purchases on a "pay-as-you-go" basis. Anytime you reduce debt, you are, in effect, giving yourself a raise.
4. Review Household Expenses and Set a Budget
Cash flow management is fundamental to financial planning. Basically, this means spending less than you earn. To do this, you should decide how much you want to save and then adjust your budget accordingly. Try tracking your expenses for three months so you know where your money is going. This way, it's easier to start making intelligent decisions about spending habits.
5. Plan Ahead for Marriage and Family
You may not have tied the knot yet, but if you do plan to marry someday, you should start planning now. For example, do you and your partner see eye-to-eye on financial matters? Do you know whether you'll use a joint checking account or separate accounts? How many children, if any, do you plan to have? How will a family change your insurance and housing needs? Financial arguments can frequently lead to divorce. By planning ahead, you can help minimize stress on your relationship.
6. Review Employment and Education Options
Too many people fail to take advantage of employee benefits, especially when it comes to retirement plans. Most companies match a portion of an employee's 401(k) contribution. Consider it "free money" or a guaranteed return on your investment. An increasing number of companies also match contributions to college and health savings accounts and provide tuition reimbursement. An advanced degree can enhance your earning potential, so find out if your company can help finance higher education.
7. Develop a Crisis Management Plan
A financial emergency usually strikes when you least expect it. The loss of a job, a change in your personal situation such as a divorce or a health crisis can quickly drain your financial reserves. The best hedge is an emergency savings account equal to at least three-and ideally, six-months of living expenses. Repay the account promptly, even if it means cutting back on other things. The goal is to avoid piling up debt-or worse, bankruptcy. A crisis management plan can provide some peace of mind and keep you moving toward your financial goals.
8. Review Insurance Needs
You can use insurance to protect your assets. Life insurance can provide a decent financial cushion in the event of a spouse's or partner's death. Therefore, it's important to regularly review your policies.
9. Leverage Your Assets
You can leverage assets to take advantage of financial opportunities. For example, if you have a low-interest mortgage, think about directing any extra cash to higher-paying investments rather than paying down the loan. A home equity loan is usually cheaper than a consumer loan, and interest is tax-deductible. If you have a brokerage account, you may want to consider using it as collateral for a loan. The interest may be lower than your investment return and conventional loan rates.
10. Manage Your Taxes
Taxes can take a huge bite out of income and capital gains, so you may want to consider the following steps:
--Maximize your and/or your spouse's 401(k) and IRA contributions.
--Consider opening a health savings account, even if you don't plan to use the money.
--If you own stock, consider selling it before the end of the year if it's generating losses.
--Think about increasing charitable contributions or setting up a trust.
These transactions can all yield tax deductions. By planning ahead and taking small steps now, you can start getting your finances in order by the start of the new year. Happy holidays!
Samantha Chang is the executive editor of The Improper, a lifestyle magazine in NYC. A business and lifestyle journalist for 12 years. Samantha writes about personal finance, fashion and health/fitness. Visit her out at http://www.theimproper.com
Article Source: http://EzineArticles.com/?expert=Samantha_Chang http://EzineArticles.com/?Top-10-Financial-Resolutions-for-the-New-Year&id=861425
Monday, February 4, 2008
Friday, February 1, 2008
Becoming a Millionaire
How to Become a Young Millionaire by Vince Shorb
Youth has its advantages and one of the biggest rewards is a powerful force that will almost ensure you become a young millionaire. There are simple steps you can take, when your young, that will help you harness the power of this force; making becoming a millionaire a breeze.
Just by following a consistent investment plan you could be enjoying the freedom that comes with being a young millionaire. A simple investment, in the overall stock market, could help you to retire young. Consider these examples:
- $149 invested each month starting when your 18 years old could make you a young millionaire at age 52.
- $687 invested each month starting when your 18 years old could make you a young millionaire at age 40.
Financially educated youth have tremendous advantages that average young adults don't have. Just by being aware that you can retire young with a simple investment strategy is enough to encourage some to take the necessary steps to reach young millionaire status.
Becoming a young millionaire is easy when you start young because you have the power of 'compounding interest' on your side. Compounding interest is defined as the interest earned from the initial money you personally invested plus the interest earned from the amount your investments have already returned. To clarify, the money that you already made from your investments starts to earn you money. So, year after year, you're making money off money you already made.
Investing young allows you to get the maximum benefit from compounding interest. Because you're making money (earning a return) on what your investments have already paid you, the younger you start the faster and larger your investment account may grow. That's why investing young gives you a huge advantage.
1) Savings. The first step on the road to becoming a young millionaire is to set up a simple savings plan. Pay yourself first by setting money aside into an investment before you start spending your paycheck. Getting in the habit of paying yourself first will benefit you your entire life and will help you retire young.
2) Invest young. Don't get caught up in thinking 'investing' is hard; it's actually easy. There are simple investments, available to the inexperienced, that will get you started investing young.
The stock market offers some investment vehicles that are lower-risk while offering the potential for long-term gains. One type of investment vehicle is known as broad based market index investments. These are investments in the overall market like the S&P 500 and NASDQ 100. For example, you can invest in all 500 stocks of the S&P 500 with one simple investment index investment vehicle. The S&P 500 index is one way for the non-professional investor, that doesn't have a lot of knowledge or time, to profit from the stock market.
3) Consistency. Simplicity equals consistency; and consistency is a major factor in becoming a young millionaire. Choosing a simple investment vehicle is the first step. Next it's simple a matter of modifying your investment account so your make consistent investments automatically.
There is a basic investment technique called 'dollar cost averaging'. This plan can be set up so it's automated. Contact your bank to set up your investment plan so each month a set amount of money is invested for you. The best part is that once this structure is set up you can sit back and just review your monthly statements. With a consistent investment plan you could reap huge profits over a long-term.
4) Multiply your money. The basic stock investment method mentioned above will get your money working for you immediately. For those of you looking to become a young millionaire sooner there are ways you can speed up this process. Learn about the investment vehicles discussed below and you will be able to afford the things you want sooner and achieve wealth at a faster pace.
A. Real estate. Real estate investments can be credited with making the majority of young millionaires. It gives you the power of leverage so you are making money of money the bank loaned you. When done right you could expect to double your investment each year! Just by purchasing real estate while you're young could easily make you a young millionaire.
B. Entrepreneurship. It's never been an easier time in history to start a business. Plus now day's you can have a global company with small initial investment. Entrepreneurs not only make money from their business each month but also they can sell all or part of their business for additional money.
You could start a business that earns you an extra few hundred a month or one that is your entire source of income. Either way it can help to secure your financial future plus give you greater cash flow now. What's more, there are tax benefits available to business owners that will keep more earned money in your pocket.
Becoming an entrepreneur can help you become a young millionaire and give you the luxury of being able to retire young.
The sooner you start investing the sooner you can become a young millionaire. You'll discover by following a simple investment guide you can easily retire young. You have the power of compounding interest on your side that will do most of the work for you. The best part is you will be able to do what you want when you want, retire young, have free time and be able to afford the things that you really like. Start now and the take steps to become a young millionaire today!
Vince Shorb, the leading financial literacy advocate and young America's success coach, guides young adults step-by-step to become young millionaires. He developed the first multi-media course, 'Financially Free by 30', that gives them exact plans to retire young. Go to http://www.FreeBy30.com now to access exclusive free videos.
Article Source: http://www.articlerich.com
Youth has its advantages and one of the biggest rewards is a powerful force that will almost ensure you become a young millionaire. There are simple steps you can take, when your young, that will help you harness the power of this force; making becoming a millionaire a breeze.
Just by following a consistent investment plan you could be enjoying the freedom that comes with being a young millionaire. A simple investment, in the overall stock market, could help you to retire young. Consider these examples:
- $149 invested each month starting when your 18 years old could make you a young millionaire at age 52.
- $687 invested each month starting when your 18 years old could make you a young millionaire at age 40.
Financially educated youth have tremendous advantages that average young adults don't have. Just by being aware that you can retire young with a simple investment strategy is enough to encourage some to take the necessary steps to reach young millionaire status.
Becoming a young millionaire is easy when you start young because you have the power of 'compounding interest' on your side. Compounding interest is defined as the interest earned from the initial money you personally invested plus the interest earned from the amount your investments have already returned. To clarify, the money that you already made from your investments starts to earn you money. So, year after year, you're making money off money you already made.
Investing young allows you to get the maximum benefit from compounding interest. Because you're making money (earning a return) on what your investments have already paid you, the younger you start the faster and larger your investment account may grow. That's why investing young gives you a huge advantage.
1) Savings. The first step on the road to becoming a young millionaire is to set up a simple savings plan. Pay yourself first by setting money aside into an investment before you start spending your paycheck. Getting in the habit of paying yourself first will benefit you your entire life and will help you retire young.
2) Invest young. Don't get caught up in thinking 'investing' is hard; it's actually easy. There are simple investments, available to the inexperienced, that will get you started investing young.
The stock market offers some investment vehicles that are lower-risk while offering the potential for long-term gains. One type of investment vehicle is known as broad based market index investments. These are investments in the overall market like the S&P 500 and NASDQ 100. For example, you can invest in all 500 stocks of the S&P 500 with one simple investment index investment vehicle. The S&P 500 index is one way for the non-professional investor, that doesn't have a lot of knowledge or time, to profit from the stock market.
3) Consistency. Simplicity equals consistency; and consistency is a major factor in becoming a young millionaire. Choosing a simple investment vehicle is the first step. Next it's simple a matter of modifying your investment account so your make consistent investments automatically.
There is a basic investment technique called 'dollar cost averaging'. This plan can be set up so it's automated. Contact your bank to set up your investment plan so each month a set amount of money is invested for you. The best part is that once this structure is set up you can sit back and just review your monthly statements. With a consistent investment plan you could reap huge profits over a long-term.
4) Multiply your money. The basic stock investment method mentioned above will get your money working for you immediately. For those of you looking to become a young millionaire sooner there are ways you can speed up this process. Learn about the investment vehicles discussed below and you will be able to afford the things you want sooner and achieve wealth at a faster pace.
A. Real estate. Real estate investments can be credited with making the majority of young millionaires. It gives you the power of leverage so you are making money of money the bank loaned you. When done right you could expect to double your investment each year! Just by purchasing real estate while you're young could easily make you a young millionaire.
B. Entrepreneurship. It's never been an easier time in history to start a business. Plus now day's you can have a global company with small initial investment. Entrepreneurs not only make money from their business each month but also they can sell all or part of their business for additional money.
You could start a business that earns you an extra few hundred a month or one that is your entire source of income. Either way it can help to secure your financial future plus give you greater cash flow now. What's more, there are tax benefits available to business owners that will keep more earned money in your pocket.
Becoming an entrepreneur can help you become a young millionaire and give you the luxury of being able to retire young.
The sooner you start investing the sooner you can become a young millionaire. You'll discover by following a simple investment guide you can easily retire young. You have the power of compounding interest on your side that will do most of the work for you. The best part is you will be able to do what you want when you want, retire young, have free time and be able to afford the things that you really like. Start now and the take steps to become a young millionaire today!
Vince Shorb, the leading financial literacy advocate and young America's success coach, guides young adults step-by-step to become young millionaires. He developed the first multi-media course, 'Financially Free by 30', that gives them exact plans to retire young. Go to http://www.FreeBy30.com now to access exclusive free videos.
Article Source: http://www.articlerich.com
Tips and Techniques for Successful Investing
Tips And Techniques To Successful Investing
By [http://ezinearticles.com/?expert=Joseph_Kenny]Joseph Kenny
The main objective of any investment is to make money and gain from a profit. Experienced investors usually study market trends before investing. However, inexperienced investors depend on the advice from financial advisors and brokers to guide their investments. Money always grows with time in the stock markets. A successful and profitable investment involves a lot of patience and constant monitoring of market fluctuations. In order for an investment to be profitable, it is important to adopt flexibility and diversification of funds. Listed below are some important points-to-remember:
Flexibility: Investors need to be flexible with their investments. Investment strategies involve regular analysis and reviews of the financial market. Amateur investors should seek help from financial advisors on their investment portfolio. Long-term planning and asset allocation are very important to an investment portfolio. Mutual funds, variable annuities and variable universal life insurance or VUL products provide good ground for investment flexibility. Another type of investment is Survivorship Variable Universal Life Insurance or SVUL. SVUL covers two people in one life insurance policy. The benefit is payable after the death of the last surviving insured person. The investment portfolio should be designed to help diversify the investments.
Diversification: Diversification involves making different investments to gain from higher returns. This risk-management technique of investing helps to diversify the investments in stocks, bonds and cash. It does not waive off the risk of loss totally, but it definitely creates more avenues for profit. The investor can invest in a number of different companies, foreign securities and mutual funds. Even if one company declares a loss, the investor still has the other investments to fall back on. Diversification is a good method to counter the risk involved in the total loss of an investment.
Simple Approach: It is safe for amateur investors to follow simple guidelines for investing money. Immature investors should not invest in companies that they are not very sure about and haven’t researched. A simple approach to investment is to stake money in recognized companies that offer high returns and show a consistent growth pattern. It pays to conduct a research on the company before making an investment.
Be Disciplined: Market trends fluctuate due to several reasons. An investor’s judgment should not be based on momentary instability. It is not advisable to make a change in the adopted strategy mid way. However, regular analysis and timely reviews help to keep abreast with important information of the stock market.
Invest Smartly: Investors need to be well informed and alert all the time. Cautious long-term planning is as important as being patient. Investors ought to be methodical when following an investment strategy. It is equally important to understand and monitor the economics and trend of a company. The investor should be updated regularly on business, political and stock related news to learn the political implications that may affect the company in future.
Investments carry the element of risk and therefore investors are advised to investigate before investing. It helps to follow the general guidelines of investment and invest smartly.
Joe Kenny writes for Card Guide, offering the latest information on
credit cards in the UK, apply for a [http://www.cardguide.co.uk/transfers.html]0% balance transfer credit card and start clearing credit card debt today.
Visit today: http://www.cardguide.co.uk/
Article Source: http://EzineArticles.com/?expert=Joseph_Kenny http://EzineArticles.com/?Tips-And-Techniques-To-Successful-Investing&id=366223
By [http://ezinearticles.com/?expert=Joseph_Kenny]Joseph Kenny
The main objective of any investment is to make money and gain from a profit. Experienced investors usually study market trends before investing. However, inexperienced investors depend on the advice from financial advisors and brokers to guide their investments. Money always grows with time in the stock markets. A successful and profitable investment involves a lot of patience and constant monitoring of market fluctuations. In order for an investment to be profitable, it is important to adopt flexibility and diversification of funds. Listed below are some important points-to-remember:
Flexibility: Investors need to be flexible with their investments. Investment strategies involve regular analysis and reviews of the financial market. Amateur investors should seek help from financial advisors on their investment portfolio. Long-term planning and asset allocation are very important to an investment portfolio. Mutual funds, variable annuities and variable universal life insurance or VUL products provide good ground for investment flexibility. Another type of investment is Survivorship Variable Universal Life Insurance or SVUL. SVUL covers two people in one life insurance policy. The benefit is payable after the death of the last surviving insured person. The investment portfolio should be designed to help diversify the investments.
Diversification: Diversification involves making different investments to gain from higher returns. This risk-management technique of investing helps to diversify the investments in stocks, bonds and cash. It does not waive off the risk of loss totally, but it definitely creates more avenues for profit. The investor can invest in a number of different companies, foreign securities and mutual funds. Even if one company declares a loss, the investor still has the other investments to fall back on. Diversification is a good method to counter the risk involved in the total loss of an investment.
Simple Approach: It is safe for amateur investors to follow simple guidelines for investing money. Immature investors should not invest in companies that they are not very sure about and haven’t researched. A simple approach to investment is to stake money in recognized companies that offer high returns and show a consistent growth pattern. It pays to conduct a research on the company before making an investment.
Be Disciplined: Market trends fluctuate due to several reasons. An investor’s judgment should not be based on momentary instability. It is not advisable to make a change in the adopted strategy mid way. However, regular analysis and timely reviews help to keep abreast with important information of the stock market.
Invest Smartly: Investors need to be well informed and alert all the time. Cautious long-term planning is as important as being patient. Investors ought to be methodical when following an investment strategy. It is equally important to understand and monitor the economics and trend of a company. The investor should be updated regularly on business, political and stock related news to learn the political implications that may affect the company in future.
Investments carry the element of risk and therefore investors are advised to investigate before investing. It helps to follow the general guidelines of investment and invest smartly.
Joe Kenny writes for Card Guide, offering the latest information on
credit cards in the UK, apply for a [http://www.cardguide.co.uk/transfers.html]0% balance transfer credit card and start clearing credit card debt today.
Visit today: http://www.cardguide.co.uk/
Article Source: http://EzineArticles.com/?expert=Joseph_Kenny http://EzineArticles.com/?Tips-And-Techniques-To-Successful-Investing&id=366223
Portable Alpha - Investment Strategies
Portable Alpha - What It Is, Where to Get It, and How to Use It by Justin Lenarcic
So much is being written about the emergence of “Quantitative Funds” and why this type of investment is becoming popular among both individual and professional investors. Eleanor Laise, in her Wall Street Journal article titled “Stock-Picker Jobs Going to Computers” wrote that “investors are attracted to quant funds for their non-emotional, disciplined method of investing. It is a well known fact amongst investment professionals that “investor psychology” is the most difficult variable for anyone to manage. Our fear and greed most often get in the way of good judgment and a well thought out investment strategy.” One method of developing a quantitative portfolio includes adding alpha to the investment screening process. Although the idea of alpha is thought to be complicated and only for the technically inclined, it’s available for any investor and now easier than ever to utilize. With this strategy readily accessible, it makes sense to build a portfolio of long-term investments and then augment the return by actively trading a portion of the portfolio using technical analysis and portfolio management.
The real question is not if it can be done, but how can it done. Specifically, how does an investor, be it individual or professional, utilize the power of portable alpha? Before the “how to” can be understood, one must appreciate what alpha is and what investments are available that make utilizing portable alpha easy.
What is Portable Alpha?
According to Lawrence C. Strauss, in his Barron’s Online article titled “Does Low Volatility Mean Lower Returns” alpha “the money-management industry’s buzzword du jour refers to the measure of a stock’s performance beyond what the market provides. But how to calculate Alpha and more importantly how to compare various investment alternatives simultaneously using the same definition of Alpha has been a difficult problem for investors to solve.” Alpha, in its purest sense, is the measure of a fund or portfolio's risk-adjusted return relative to the market. A positive alpha value, such as 1.0, means that the fund or portfolio outperformed the market by 1.0%. The higher the alpha value, the more incremental gain is awarded for actively managing the investment by choosing securities that outperform the market, as compared to merely accepting the market return.
Portable alpha is “portable” because it can be applied across various asset classes. If a manager or individual investor increases a portfolio’s risk-adjusted return relative to the market (alpha) by investing in securities that have little or no correlation with the market, then that manager has created portable alpha. Portable alpha is a powerful investment tool because it can provide investors with greater diversification in their portfolios, lower risks and greater total returns as compared to conventional asset allocation.
There are other varieties of alpha, but in all cases a positive alpha value indicates that the fund or portfolio manager has "beaten the market" through fund or stock selection. Alpha Advisor Service, LLC uses a weighted alpha factor which places more emphasis on recent price movement as opposed to past activity. The purpose of doing so is to pinpoint stocks and funds whose positive momentum is building rather than those that have reached the peak of their uptrend.
Investments That Facilitate Using Portable Alpha
Applying portable alpha to your portfolio can be accomplished by using trade-friendly investment funds provided by ProFunds, Rydex or Fidelity. These companies provide a wide variety of mutual fund selections, including index, sector, bond, precious metals, and international, which can be traded frequently, most without penalty, early trading fee or commission. Some of these companies offer funds designed for hedging strategies. Or for the slightly more aggressive, a few of these companies provide leveraged funds which are designed to outperform their benchmark index through the use of leverage. Exchange Traded Funds, which come in as many styles as mutual funds, also provide an easily-accessible tool for adding alpha to a portfolio.
Many analytical sources provide statistical profiles of investments, most of which are mathematically accurate. The predominant short coming in these tools is that they do not consistently analyze all alternatives. Bond investments will be measured using benchmarks unique to bonds while small cap stocks will be measured against the Russell 2000 etc. To select the best investments, using a level playing field by which to measure portfolio returns is the most attractive.
How to Utilize Portable Alpha
The first step towards utilizing portable alpha involves developing an asset allocation strategy specifically tailored to personal investment objective, risk tolerance and time horizon. Determine how much of the portfolio should be strategically allocated to specific asset classes such as stocks, bonds, sectors, international investments, precious metals and cash. Assign a percentage of investment dollars to each class, and then prepare to fill in the asset class with an appropriate selection of investments.
To select the best investments for each asset class, rank the investments by alpha score from highest to lowest. Then pick the top one or two options for investment within each asset class. Put in place a trailing stop loss on each investment at a reasonable level and watch its performance. If the price violates your watch level, sell the investment and replace it with the next most highly ranked alternative from its class. If no alternatives are available with a positive alpha, hold those dollars in cash until such time as a candidate presents itself. Don’t invest those dollars in another asset class; hold them until a candidate in the particular class becomes available.
This approach satisfies the buy and hold dogma that is unfortunately so engrained in the minds of today’s investors. It supplies adequate diversification while at the same time providing a level of return that’s in line with market expectations. Hopefully, by this point recent market activity has convinced most investors that the idea of buying a stock or fund and holding it indefinitely is no longer the optimal investment strategy. Human nature has a tendency to result in buying and selling at the worst possible moments, minimizing gains and maximizing losses. That’s why the development and implementation of a disciplined investment strategy is so advantageous to today’s investors.
Taking this approach one step further and evolving from a strategic allocation to a tactical or dynamic allocation is the easiest way to generate excess investment returns within a buy and hold strategy. Tactical allocation is predicated on the belief that not all asset classes perform in the same manner and that investment cycles do exist. With so many index funds and ETF’s that mimic the performance of market indices and style-box investments, analyzing the alpha scores of these investments is the quickest way to determine where to increase or decrease a portfolio’s allocations.
Today, with so many internet-based trading platforms available through brokerage firms and banks with minimum fees and almost no trading commissions, active personal investing makes more sense then ever. Affordable high-speed internet connectivity, computers, cell phones and internet brokerage accounts coupled with powerful mathematical statistics such as portable alpha are negating any excuses for experiencing unacceptable investment returns.
I provide a twice-weekly newsletter designed for investors seeking to utilize portable alpha. We analyze over 1700 securities including stock, ETF, and mutual fund investments as well as provide "Buy Recommendations" and "Sell-Limit Watches." If you're interested, try our 30-Day FREE Trial and see for yourself how easy and rewarding it can be.
Article Directory: http://www.articledashboard.com
So much is being written about the emergence of “Quantitative Funds” and why this type of investment is becoming popular among both individual and professional investors. Eleanor Laise, in her Wall Street Journal article titled “Stock-Picker Jobs Going to Computers” wrote that “investors are attracted to quant funds for their non-emotional, disciplined method of investing. It is a well known fact amongst investment professionals that “investor psychology” is the most difficult variable for anyone to manage. Our fear and greed most often get in the way of good judgment and a well thought out investment strategy.” One method of developing a quantitative portfolio includes adding alpha to the investment screening process. Although the idea of alpha is thought to be complicated and only for the technically inclined, it’s available for any investor and now easier than ever to utilize. With this strategy readily accessible, it makes sense to build a portfolio of long-term investments and then augment the return by actively trading a portion of the portfolio using technical analysis and portfolio management.
The real question is not if it can be done, but how can it done. Specifically, how does an investor, be it individual or professional, utilize the power of portable alpha? Before the “how to” can be understood, one must appreciate what alpha is and what investments are available that make utilizing portable alpha easy.
What is Portable Alpha?
According to Lawrence C. Strauss, in his Barron’s Online article titled “Does Low Volatility Mean Lower Returns” alpha “the money-management industry’s buzzword du jour refers to the measure of a stock’s performance beyond what the market provides. But how to calculate Alpha and more importantly how to compare various investment alternatives simultaneously using the same definition of Alpha has been a difficult problem for investors to solve.” Alpha, in its purest sense, is the measure of a fund or portfolio's risk-adjusted return relative to the market. A positive alpha value, such as 1.0, means that the fund or portfolio outperformed the market by 1.0%. The higher the alpha value, the more incremental gain is awarded for actively managing the investment by choosing securities that outperform the market, as compared to merely accepting the market return.
Portable alpha is “portable” because it can be applied across various asset classes. If a manager or individual investor increases a portfolio’s risk-adjusted return relative to the market (alpha) by investing in securities that have little or no correlation with the market, then that manager has created portable alpha. Portable alpha is a powerful investment tool because it can provide investors with greater diversification in their portfolios, lower risks and greater total returns as compared to conventional asset allocation.
There are other varieties of alpha, but in all cases a positive alpha value indicates that the fund or portfolio manager has "beaten the market" through fund or stock selection. Alpha Advisor Service, LLC uses a weighted alpha factor which places more emphasis on recent price movement as opposed to past activity. The purpose of doing so is to pinpoint stocks and funds whose positive momentum is building rather than those that have reached the peak of their uptrend.
Investments That Facilitate Using Portable Alpha
Applying portable alpha to your portfolio can be accomplished by using trade-friendly investment funds provided by ProFunds, Rydex or Fidelity. These companies provide a wide variety of mutual fund selections, including index, sector, bond, precious metals, and international, which can be traded frequently, most without penalty, early trading fee or commission. Some of these companies offer funds designed for hedging strategies. Or for the slightly more aggressive, a few of these companies provide leveraged funds which are designed to outperform their benchmark index through the use of leverage. Exchange Traded Funds, which come in as many styles as mutual funds, also provide an easily-accessible tool for adding alpha to a portfolio.
Many analytical sources provide statistical profiles of investments, most of which are mathematically accurate. The predominant short coming in these tools is that they do not consistently analyze all alternatives. Bond investments will be measured using benchmarks unique to bonds while small cap stocks will be measured against the Russell 2000 etc. To select the best investments, using a level playing field by which to measure portfolio returns is the most attractive.
How to Utilize Portable Alpha
The first step towards utilizing portable alpha involves developing an asset allocation strategy specifically tailored to personal investment objective, risk tolerance and time horizon. Determine how much of the portfolio should be strategically allocated to specific asset classes such as stocks, bonds, sectors, international investments, precious metals and cash. Assign a percentage of investment dollars to each class, and then prepare to fill in the asset class with an appropriate selection of investments.
To select the best investments for each asset class, rank the investments by alpha score from highest to lowest. Then pick the top one or two options for investment within each asset class. Put in place a trailing stop loss on each investment at a reasonable level and watch its performance. If the price violates your watch level, sell the investment and replace it with the next most highly ranked alternative from its class. If no alternatives are available with a positive alpha, hold those dollars in cash until such time as a candidate presents itself. Don’t invest those dollars in another asset class; hold them until a candidate in the particular class becomes available.
This approach satisfies the buy and hold dogma that is unfortunately so engrained in the minds of today’s investors. It supplies adequate diversification while at the same time providing a level of return that’s in line with market expectations. Hopefully, by this point recent market activity has convinced most investors that the idea of buying a stock or fund and holding it indefinitely is no longer the optimal investment strategy. Human nature has a tendency to result in buying and selling at the worst possible moments, minimizing gains and maximizing losses. That’s why the development and implementation of a disciplined investment strategy is so advantageous to today’s investors.
Taking this approach one step further and evolving from a strategic allocation to a tactical or dynamic allocation is the easiest way to generate excess investment returns within a buy and hold strategy. Tactical allocation is predicated on the belief that not all asset classes perform in the same manner and that investment cycles do exist. With so many index funds and ETF’s that mimic the performance of market indices and style-box investments, analyzing the alpha scores of these investments is the quickest way to determine where to increase or decrease a portfolio’s allocations.
Today, with so many internet-based trading platforms available through brokerage firms and banks with minimum fees and almost no trading commissions, active personal investing makes more sense then ever. Affordable high-speed internet connectivity, computers, cell phones and internet brokerage accounts coupled with powerful mathematical statistics such as portable alpha are negating any excuses for experiencing unacceptable investment returns.
I provide a twice-weekly newsletter designed for investors seeking to utilize portable alpha. We analyze over 1700 securities including stock, ETF, and mutual fund investments as well as provide "Buy Recommendations" and "Sell-Limit Watches." If you're interested, try our 30-Day FREE Trial and see for yourself how easy and rewarding it can be.
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A Head Start on Intelligent Investing
Investment Strategies - Head Start on Intelligent Investment
By [http://ezinearticles.com/?expert=Amit_Malhotra]Amit Malhotra
Apart from the theoretical knowledge that an investor gains before investing in stocks, the practical changes and lessons get well off while going through the actual process. Each investor always seeks for making profits but 90% of people end up losing to the stock market, however, very few of all the investors realize the "the risk break" technique. There are various investment strategies that contribute highly to the making of loaded returns.
First strategy points towards well-constructed portfolio that takes into account its integrated investments and diversification. The combined asset classes along with properties and equities get a well-refined structure. It always gets a volatile portfolio that has strength to recover fast even if the market is breaking down.
Another principle strategy includes the investment accompanied by the margin of safety. The margin of safety refers to the discount availed while purchasing any share at its intrinsic value. It not only raises the profit share but also depreciates the level of risk at its downside. It is to be noticed that the shares purchased at under-valued rates tend to have more chances to have a price hike, at least to meet its fair price. Also, they generally prove to be a source for stable earning because of their liquid cash value.
All investment strategies are planned keeping in mind the volatility of a particular market. Hence, next investment strategy includes your expectations for volatility and earning profits from it. No other market, than stock market is more volatile, hence any investor must use the chances of volatile market and device the breaking down for the profits. Most of the investors stop investing in drowning markets, which is not the criteria to be followed. Rather short selling and buying of shares that are expected to rise in future must be invested in. Also, the two ways to diminish the negative effects of market volatility are:
Dollar-cost averaging: buying equal dollar amounts of investments is the right way to achieve the dollar-cost averaging.
Investing in stocks and bonds: for an investor to invest properly in stocks, it is important for him to first save on the money and then try to grow it. Hence, it is important for him to invest in bonds to save the money and then invest in stocks to make sheer profits. Also, investing in bonds get a preserving tool for the hard earned money.
The other investment strategy includes knowing the type of your investments. What kind of investor you are and which objective you are investing in stocks are important to know? Though the investor type could be many but in technical terms the investor can be of two types, on the basis of frequency of investments.
Investors who are investing once in a while, does not posses much of the inclination towards stock market are the passive investors. If you are a passive investor then it is no point being investing in short term investments. However, for serious and inclined investors stock trading is a serious business and a mix for many investments including day trading may be tried. [http://www.sogotrade.com]Sogoinvest [http://www.sogotrade.com//AccountSetup/Default.aspx]Open an account with sogoinvest
If you are new to sogoinvest: [http://www.sogotrade.com/Home/FirstTime.aspx]Online stock trading investment
Article Source: http://EzineArticles.com/?expert=Amit_Malhotra http://EzineArticles.com/?Investment-Strategies---Head-Start-on-Intelligent-Investment&id=935465
By [http://ezinearticles.com/?expert=Amit_Malhotra]Amit Malhotra
Apart from the theoretical knowledge that an investor gains before investing in stocks, the practical changes and lessons get well off while going through the actual process. Each investor always seeks for making profits but 90% of people end up losing to the stock market, however, very few of all the investors realize the "the risk break" technique. There are various investment strategies that contribute highly to the making of loaded returns.
First strategy points towards well-constructed portfolio that takes into account its integrated investments and diversification. The combined asset classes along with properties and equities get a well-refined structure. It always gets a volatile portfolio that has strength to recover fast even if the market is breaking down.
Another principle strategy includes the investment accompanied by the margin of safety. The margin of safety refers to the discount availed while purchasing any share at its intrinsic value. It not only raises the profit share but also depreciates the level of risk at its downside. It is to be noticed that the shares purchased at under-valued rates tend to have more chances to have a price hike, at least to meet its fair price. Also, they generally prove to be a source for stable earning because of their liquid cash value.
All investment strategies are planned keeping in mind the volatility of a particular market. Hence, next investment strategy includes your expectations for volatility and earning profits from it. No other market, than stock market is more volatile, hence any investor must use the chances of volatile market and device the breaking down for the profits. Most of the investors stop investing in drowning markets, which is not the criteria to be followed. Rather short selling and buying of shares that are expected to rise in future must be invested in. Also, the two ways to diminish the negative effects of market volatility are:
Dollar-cost averaging: buying equal dollar amounts of investments is the right way to achieve the dollar-cost averaging.
Investing in stocks and bonds: for an investor to invest properly in stocks, it is important for him to first save on the money and then try to grow it. Hence, it is important for him to invest in bonds to save the money and then invest in stocks to make sheer profits. Also, investing in bonds get a preserving tool for the hard earned money.
The other investment strategy includes knowing the type of your investments. What kind of investor you are and which objective you are investing in stocks are important to know? Though the investor type could be many but in technical terms the investor can be of two types, on the basis of frequency of investments.
Investors who are investing once in a while, does not posses much of the inclination towards stock market are the passive investors. If you are a passive investor then it is no point being investing in short term investments. However, for serious and inclined investors stock trading is a serious business and a mix for many investments including day trading may be tried. [http://www.sogotrade.com]Sogoinvest [http://www.sogotrade.com//AccountSetup/Default.aspx]Open an account with sogoinvest
If you are new to sogoinvest: [http://www.sogotrade.com/Home/FirstTime.aspx]Online stock trading investment
Article Source: http://EzineArticles.com/?expert=Amit_Malhotra http://EzineArticles.com/?Investment-Strategies---Head-Start-on-Intelligent-Investment&id=935465
Stock Investment Strategies: For more Financial Independence
Stock Investment Strategies: For more Financial Independence by Micheal James
A good planning and strategy is required to accomplish any kind of work perfectly. This is also true when it comes to stock investment. So, if you want to reach your monetary goals within a specified timeframe – you will have to follow stock investment strategies. In this way, you can manage your funds accordingly.
There are four main factors on which your stock investment strategies will depend:
Objective: The amount of funds you are investing will determine your goal.
Time period: A particular time that you have set to achieve your financial goal.
Return: How much return you are expecting within a certain timeframe.
Subtle risks: how much risk you can take to achieve your objective.
Moreover stock market investing is an excellent way to gain profit from the growing economy. Unlike savings, you are not affected by the inflation rate. Keep the above four points in your mind and you will always feel good as far as your investment and returns are concerned. Stock traders who are already experienced in the stock market investing know everything about the volatile nature of the stock market and are earning millions of dollars from their investment.
What if you are a new stock investor? Nothing to worry about, you can find a wealth of stock market information on the Internet. Important information regarding how to start online stock investment; what are the trading stock options about stock trading companies and above all what are the investment strategies that you should follow – all such basic information are available on the Internet.
The next biggest advantage of stock investing is that everything has become accessible online – from buying and selling of stocks to stockbrokers. Sitting at your home, you can buy and sell stocks online. Online brokers are also available, who not only help you in buying and selling of stocks, they also advice you and keep you updated with the stock market trends.
Being volatile in nature, stock market has always been considered as a risky platform for investment. But the very next question that would arise in your mind is how people are earning so much money through the same investment plans? The answer is quite simple but realistic. These investors are aware of every subtle risks involved with stock investment. Successful stock traders always keep themselves abreast of the latest market updates. With such knowledge, you can also choose stocks that will fetch maximum return.
Online investment method has made things much easier. The only thing you need is a PC and the Internet connection. Search stock trading companies online, find their terms and conditions and the commission rate. You can look for different online trading companies – compare them and find the suitable one as per your requirement. Online financial experts are also available and you can clear all your doubts and go ahead in discussing your stock investment strategies.
Stock market investing is one of the quickest methods of becoming richer. However, always remember - plot a good financial investment strategy first, and then spend your hard earned money to gain financial independence.
stock investing
Pricing and Features for Sogoinvest Investment Packages:online investment
Sogoinvest Interest Rates and Fees:
trading stock options
Article Directory: http://www.articledashboard.com
A good planning and strategy is required to accomplish any kind of work perfectly. This is also true when it comes to stock investment. So, if you want to reach your monetary goals within a specified timeframe – you will have to follow stock investment strategies. In this way, you can manage your funds accordingly.
There are four main factors on which your stock investment strategies will depend:
Objective: The amount of funds you are investing will determine your goal.
Time period: A particular time that you have set to achieve your financial goal.
Return: How much return you are expecting within a certain timeframe.
Subtle risks: how much risk you can take to achieve your objective.
Moreover stock market investing is an excellent way to gain profit from the growing economy. Unlike savings, you are not affected by the inflation rate. Keep the above four points in your mind and you will always feel good as far as your investment and returns are concerned. Stock traders who are already experienced in the stock market investing know everything about the volatile nature of the stock market and are earning millions of dollars from their investment.
What if you are a new stock investor? Nothing to worry about, you can find a wealth of stock market information on the Internet. Important information regarding how to start online stock investment; what are the trading stock options about stock trading companies and above all what are the investment strategies that you should follow – all such basic information are available on the Internet.
The next biggest advantage of stock investing is that everything has become accessible online – from buying and selling of stocks to stockbrokers. Sitting at your home, you can buy and sell stocks online. Online brokers are also available, who not only help you in buying and selling of stocks, they also advice you and keep you updated with the stock market trends.
Being volatile in nature, stock market has always been considered as a risky platform for investment. But the very next question that would arise in your mind is how people are earning so much money through the same investment plans? The answer is quite simple but realistic. These investors are aware of every subtle risks involved with stock investment. Successful stock traders always keep themselves abreast of the latest market updates. With such knowledge, you can also choose stocks that will fetch maximum return.
Online investment method has made things much easier. The only thing you need is a PC and the Internet connection. Search stock trading companies online, find their terms and conditions and the commission rate. You can look for different online trading companies – compare them and find the suitable one as per your requirement. Online financial experts are also available and you can clear all your doubts and go ahead in discussing your stock investment strategies.
Stock market investing is one of the quickest methods of becoming richer. However, always remember - plot a good financial investment strategy first, and then spend your hard earned money to gain financial independence.
stock investing
Pricing and Features for Sogoinvest Investment Packages:online investment
Sogoinvest Interest Rates and Fees:
trading stock options
Article Directory: http://www.articledashboard.com
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