Despite the negative outlook of the Remain party prior to and during the EU referendum, stocks in the UK soon recuperated the losses they’d seen in the period immediately following the shock outcome of the U.K. withdrawing from Europe. The replacement of David Cameron with Theresa May, as well as a quick response from the Bank of England, meant that the FTSE picked up 7% compared to where it had been at close of markets on referendum day, representing a gain in market confidence. The FTSE 250 also saw a raise by half as much.
Representing the best-performing industries responsible for this upturn were the healthcare, IT and materials sectors. Conversely, telecoms and real estate have not seen the same kind of improvements, lagging behind the aforementioned top performers. However, the question that investors must pose themselves is whether these sectors epitomize a chance to capitalize on a market that has disregarded Brexit, if only temporarily.
Why is Real Estate Underperforming?
The real estate sector’s lack of improvement can be attributed to a fear of the unknown that Brexit may bring, long-term. The sector is comprised of Intu Properties, Land Securities, Hammerson and British Land, all of whom were largely impacted in the aftermath of Brexit. Stocks fell, and fund managers issued freezes on redemptions in an effort to slow losses. Now, there is fear that the demand for retail space and offices will reduce as companies make a move to Europe, which would adversely affect property value and possibly even spur a mass sale of property by vendors. It has already been seen that some pending property trades fell through in the aftermath of the referendum, and there is little confidence in the industry at present, however we are still relatively early on in the process of leaving Europe and it still remains to be seen what impact this sector will see in the long-term.
Housebuilders Market Surpasses Real Estate
The FTSE 100 has seen mixed performance in the aftermath of Brexit. Some companies, including Burberry Group, Compass Group and WPP, among others, are over 10% up when compared to their levels prior to the EU referendum. Conversely, others, including many high-street names such as M&S, Dixons and Next, have seen quite the opposite. Leading the downturn is, again, companies within the property sector, with Taylor Wimpey down by around 19%, for example.
The result of the referendum vote is not the only factor impacting on the performance of companies within this sector. Rather, additional factors are weighing in on the industry, which includes changes to property stamp duty (house purchase tax), as well as changes to the taxation of buy-to-let property investment. These two factors have had a key role in the deceleration of the property market overall, particularly in more affluent areas of the South East. When coupled with the fact that Brexit has dissuaded many potential sellers, property prices are reluctant to fall anytime yet.
Rather interestingly, housebuilders have bucked against the trend, attributed partly to the fact that they operate in a different space to the UK’s used property sector. Many of these companies are reporting rising demand for new builds, with record highs of completed new build contracts following the Brexit vote, as the government support for increasing housing remains strong. These companies are conveniently placed in a niche market that still sees an ongoing housing shortage, and whilst this demand may fall as Brexit goes through and net immigration comes down, there is no immediate sign of demand dropping off.
Telecoms Shares Slow Growth
In addition to real estate, another sector seeing underwhelming performance since the June 23rd vote is the telecoms industry. Representing the FTSE 100 share of this sector is Vodafone and BT, up 1.56% and down 11.3% respectively, when compared with the day prior to the result of the country’s vote.
This result is not particularly shocking when considering the history of BT. Its acquisition of EE was an attempt to retain a hold in a fast-moving mobile market, whilst the company also battled to compete with Sky by investing a great deal in football presenting deals. Despite these advances, consumers within the mobile market are far more likely to retain older handsets and spend less on new contracts when economic pressure increases, which would account for their underwhelming performance in spite of the efforts outlined above.
All of this information tells us that a continuous re-rating of the real estate industry is required, if the underperformers are to return to a level competitive with the best-performing stocks within the UK markets. For spending to rise on discretionary items, the situation also necessitates some sign that the economy will come out of the other side of Brexit in a better state than many have predicted, and that salaries will not stall. For consumers confident in the continued growth of over-performing stocks, CFD Traders such as CMC Markets provide the opportunity to invest in the market.
No matter how comfortable you are with your present job, we are all looking for avenues to make a little extra cash. Whether you need to make some headway in paying your credit card debt, or want to buy something useful, or simply want to have more cash to spend, one of the best ways to do is to sell a few things that you do not need. This will not only give you a cash influx, but will also help you get rid of clutter. Before you start selling your stuff, you need to know where to sell the items, and which items are worth money. Without proper planning and research, you might give away expensive items for a few bucks. The best place to sell your stuff is online, through sites like eBay. But sometimes it is more efficient and effective to hold a garage sale, particularly if you have a garage or attic full of junk to sell.
Clothes and Accessories
Ever wondered what to do with that closet full of clothes and shoes that no longer fit you? A great way to get rid of these clothes and accessories is to sell them online on e-commerce sites such as eBay. In fact, clothes and accessories are one of the best things to sell on eBay to make money. To make sure that you earn the maximum amount of cash from selling your clothes, you need to make sure that you give short descriptions and photographs of items that you are listing. Remember that branded clothing and accessories fetch a higher price than non-branded items. If you are listing a branded item, make sure that you describe it properly with the name of the brand, condition of the item (used or new), size, and material it is made of.
One obvious item that most people overlook for selling is furniture. Most homeowners accumulate a lot of furniture, some of which are never utilized much. Now you can sell old and unused furniture and make a fair amount of money in the process. Before you hold a garage sale, first make an inventory of all the furniture that you want to sell (or get rid of). If you have inherited an old piece of furniture from your grandmother or aunt, it is a good idea to get it appraised before selling it in a garage sale. That piece of old furniture might turn out to be a valuable antique. If you have a few pieces that are particularly well-crafted or you bought from a branded furniture store, you can list them on Craigslist. As with clothing, in listing furniture too, you need to give a good detailed description along with pictures to attract customers.
Do you like taking great pictures that are unique? Then how about selling your photographs to stock photo sites to make some money. Stock photography sites buy high quality images from photographers and then resell them to ad agencies, websites, magazines, and brochures. To make money through this venture, you need to take good photographs with high quality images. It is also a good idea to first browse the stock photo site and observe the kind of images they have in stock. This will give you an idea about the quality of images that they are looking for and if you will be able to match that. Remember that you get paid only when your images sell. So choose your subject for your photographs wisely, as unique images with a clear concept sell more.
Books and Music CDs
Another great item to sell to make money is books. Books, magazines, and even music CDs can fetch a good amount if they are rare or bestsellers. Older books with unique titles sell more easily than generic books. Paperbacks generally sell for less. You need to know about the salability of the books you possess before you sell them on websites or in garage sales. Any book or novel that is out of print now or which is signed by the author will fetch a higher amount.
Collectibles like antique vases, pitchers, antique metallic frames, jewelry boxes, and porcelain figurines are also great items to sell to make money. You can hold a sale at your place to sell off these items or you can list them on online auctions in eBay. If you think that your product or item has a high value, then selling them through an online auction is your best bet.
If you are creative and make handmade crafts that friends and family rave about, then selling these items is a great option. One way that you can sell such handmade items is to hold a small exhibition in your home. But a better and more convenient way of selling handmade crafts is on Etsy, which is an e-commerce website where you can buy and sell handmade items, vintage goods, and craft supplies. For selling crafts on Etsy, it has to be handmade by you and you cannot sell anything that is mass-produced. A great advantage in selling on Etsy is that you can do it from the comfort of your home; all you need to do is dispatch the item to the seller directly after receiving the payment. If you have vintage crafts or goods, then you can sell those at Etsy as well.
Selling items that you do not need is a great way to earn extra cash. Before you sell anything that you consider to be valuable, like your grandfather’s handcrafted snuff box or your great-aunt’s tallboy, get these items appraised. Sometimes these items might turn out to be valuable antiques and it could be a very bad decision to sell it.
A job is never really appreciated, unless and until it gives you its worth. And if you are just idle at home and thinking on what to do, then you have more reasons to be happy as there are innumerable ways to keep oneself busy and at the same time, earn money. And when it comes to teenagers and kids, it is the dream of every parent to see their kids understand their responsibilities at a tender age and it doesn’t get better than this, when you and your kids both have some easy ways to make money from home.
10 Simple Ways to Earn from Home
Money making is a talent in itself and devising new ideas for it requires creativity. Besides, before opting for a job which you would like to do from home, make sure it is something close to your heart. Passion driven hobbies make excellent jobs and they make working absolute fun. Here are some of the good money making tips, applicable across all the age groups.
Freelance content writing is one of the best ways to make money from home. Such writing jobs come as contracts, where the person may be hired on a project basis to write the content as desired. This is one of the best jobs for people who have a flare for writing on myriad topics. But before you earn your coveted pocket money, make sure that you are thorough with the copyright laws and the employee agreement annexures of the project you have opted to work for. In certain cases, some rights may also be offered to you for selling the piece of information, which happens to be your indigenous write up.
Many websites today are in dearth of people who can research well, because researching requires a lot of patience and diligence to assimilate information on a particular topic. Of course, this is a good start for people who are extremely net savvy and enjoy Internet surfing a lot. For this, however, one must be knowledgeable in web programming and HTML tags. Also, an Internet researcher must be well versed about Internet terminology and other aspects like search engine optimization. To start from home, all you need is your own website with your own DBA. Once done with the setup, there are a lot of free homepage services that will provide other design tools, web space, and email as needed. Start your job by marking the presence of the site on the Internet.
This is a new concept in itself. If you have gone through many online retail review stores telling you what to buy and what not to, it is because it hires people as merchandise or mystery shoppers to evaluate a store’s performance. The merchandising is inclusive of retail and grocery stores as well, where you may be required to follow the planogram to do the assessment for the firm. A planogram is nothing but a descriptive version of the products, on how they must be installed, stacked, restocked, and maintained. The same kind of a procedure can be followed for restaurants, where parameters like customer service, food service, and management can be taken into consideration for the assessment. The best aspect of this job is that, one can choose it at convenience, including the place. The same concept can be used for e-shopping as well.
Try Hands at Craft
If your kid has a good hand at craft work like origami, then nothing like it! Making greeting cards with the most innovative designs, or Christmas lanterns with beautiful patterns, or making exquisite paper bag puppets can fetch your child a bounty. Making designs for Halloween costumes or whitewashing the neighbor’s fence can add on to your piggy bank.
Blogging is a place where the passion to write can be combined with the urge to earn. It is the best way of doing business at home. With minimal start up costs, one can gain a loyal and an impressive readership that can add on to your daily income. Depending on the network traffic, its ranking, and the way it is advertised, it sure is a tangible source of income for you. This is a good option for the teen crowd who are very much interested in Internet advertising of their blogs.
Culinary Skill at its Best
Trying out new recipes and advertising them, is not a new concept but is not easy either. If one knows the right way of advertising his or her culinary skills, one can really make a fortune. Try out some simple recipes and demonstrate it in front of a crowd, and it is bound to get your talents rolling back in the form of money.
Stocks, Bonds, and Affiliate Marketing
Stocks and funds is another good option to consider. But before one enters into this domain, he or she has to do a thorough study on the working of the stock market. Another good choice is Internet affiliate marketing. If you are good on this subject, minting money on eBay and other similar online shopping stores will be fun.
All children at some point in their life nurture a passion for dancing, and a few are born with the talent which shows out in the crowd. Teens who are passionate about dancing can start off with a dance class. The resources needed are bare minimal. All one needs is to rent a large room depending on the number of students, and a music system.
Teaching happens to be the noblest of all the professions. One of the best means to earn from home, it is also a liberating experience for those, who have a passion to teach. It also happens to be one of the best ways for teens.
If you have an uncanny art at designing clothes, then you might as well like to give a try at starting a clothes boutique at home. This may also give you further ideas for starting a clothing line in future.
Taxation in the U.S. can be rather complicated. The purpose of levying taxes is to obtain revenue to keep the government running and provide public services. Different types of taxes are imposed on working individuals to achieve the same. There are certain tax deductions that can be reduce taxable income, like mortgages, charity, medical bills, etc.
There is no exemption from taxes however. After all, taxation plays an important role in the financial decision-making of a nation. Taxes are very widely classified. The paragraphs below provide some of the important tax types and their descriptions.
An Introduction to the Tax Structure
As mentioned earlier, in the U.S., taxes are collected by the federal and state governments.
There are two principal types of taxes―direct and indirect.
In simple terms, direct taxes are paid directly to the government or any authorized entity, while indirect taxes are collected via a series of taxpayers―mostly by means of increase in the prices of goods.
From an economic perspective, direct taxes are levied on and collected directly from a specific group of people.
Indirect taxes are collected from an organization other than the people actually responsible for the taxes.
Examples of direct taxes include income tax, wealth tax, etc. Examples of indirect tax include excise duty, sales tax, service tax, etc.
Main Types of Taxes
Income tax is levied on every working individual, and is collected by the Internal Revenue Service (IRS).
The states and local governments have their own income taxes as well.
The tax is levied on your personal income, interest income, and revenue from business.
Income tax brackets are generally progressive―the more you earn, the more taxes you pay.
Federal tax rates are higher than the state tax rates.
You can reduce your taxable income by means of certain allowances and deductions.
Remember that not all states have imposed a state tax. A federal income tax is mandatory though.
This is imposed by most local governments, since it is used to finance local services.
The tax is levied on real estate (mostly) and may apply to their property too.
This tax is deductible, and many American citizens may qualify for a interest deduction on mortgage. However, legally, the tax is deductible only if the real estate property is used for public welfare.
Since the tax is imposed on realty, it always depends on the market value of the property. The annual rates may vary between 0.9% to 1.2% of the property’s current value.
The total tax amount collected is used to fund public services, such as schools, sanitation, security, etc.
The amount is paid to the local government or the county, based on the state guidelines.
The federal as well as state governments make it compulsory to pay payroll taxes.
It is a tax that the employer pays on behalf of the employee, i.e., the amount is deducted from his paycheck.
It is authorized by the Federal Insurance Contribution Act (FICA), and hence, is also called FICA tax.
There are two types of payroll taxes in US―Social Security tax and Medicare. Every employed individual in the U.S. is supposed to have a Social Security number.
Medicare and Social Security are federal run programs that provide benefits, generally for American citizens. Payroll taxes are used to finance these programs. The tax amounts to 7.65% of the income, of which 6.2% is for Social Security, and 1.45% is for Medicare.
It is a type of indirect tax and is imposed on purchased goods and services.
The amount varies as per the price of the goods as well as the set rules and regulations of the state. Mostly, it is a percentage of the paid price.
It is levied on most of the purchased products, except food items. Also, some states/counties/cities charge a nominal amount on the product price, while others may charge a hefty amount. The percentage varies between 0 to 16%.
The amount is collected by the merchants at the time of sale and deposited with the state authority.
The types of sales tax include vendor tax (it is paid by the person doing business, and depends on the amount of goods sold), consumer tax (it is paid by the buyer at retail outlets and then sent to the state), and a combination tax.
This tax is considered regressive, since families with lesser annual income end up paying a major part of their salary for sales tax.
Also called excise duty, it is similar to sales tax, except that it is levied on particular goods.
Also, it depends on the number of goods sold, not the amount.
The Federal government may impose a certain percentage of tax on every liter of oil, irrespective of the price per liter.
An excise tax may be charged on items, like beer, cigarettes, gas, etc.
States may charge an additional tax on these goods as well.
This tax is also called ‘sin tax’, since they are mostly imposed on such goods that are harmful to health. The purpose of excise tax is to make an effort to minimize the purchase of unhealthy items. It is mostly combined with sales tax.
It is also called inheritance tax. It is levied by the Federal government and some of the state governments too.
The property you leave behind after your death is called estate. If you have more estate than required, the estate tax is to be paid on the inheritance of the property by your heirs.
That is to say, if you have a lot of property―including business revenue, security, cash, insurance, etc., and you distribute the property among your kith and kin, they will have to pay heavy estate tax on the same.
The federal government charges a maximum of 40% of the property for estate tax, while the states use comparatively lower rates. In some states, the amount paid depends on the relation between the deceased and the taxpayer.
It is similar to the estate tax, but is levied on a large amount of transferred wealth. The wealth here may include shares, donations, cars, etc.
All gifts above USD 14,000 are taxable. The tax collected is 40% of the gift value.
The federal government charges a much lower amount for gifts as compared to estates.
If you plan to leave a huge number of assets for your heirs, it is advisable to seek advice from a tax professional and organize the assets.
Miscellaneous Taxes Paid
Capital Gains Tax: It is paid on the sale of stocks and bonds. You may also be subject to a capital gains tax on the sale of real estate.
Hotel Tax: It is the amount that hotels charge above the regular room rate.
Use Tax: It is paid for the different services that you use, like toll, licenses, cell phone, air travel, rental cars, lease, etc.
Luxury Tax: It is imposed on expensive items like jewelry or automobiles.
Fuel Tax: It is a type of user tax imposed on use of fuel―diesel, oil, gasoline, etc. The money is used for the maintenance of roads and highways.
Corporate Income Tax: It is levied by the states on huge corporations. The amounts vary as per the state.
Unemployment Tax: It is paid to unemployment agencies to help people find jobs. It is levied by the federal government.
Foreign Tax: It is the income tax imposed by the government of the foreign country. You have to pay a percentage of whatever income is earned by you in that country.
Failure to pay taxes on time may lead to severe repercussions. As a responsible citizen, it is essential to pay taxes on time. You may seek advice from a tax professional if you are confused about which taxes you have to pay.
Varishtha Pension BimaYojana is administered by LIC and is a single premium pension policy. Looking at the increasing demand in India for this policy for the enhancement of social security and welfare of senior citizens Vatishatha Pension BimaYojana was revived by the Government. In this policy, the post-tax return is guaranteed to be 9%-9.8% p.a.
The Government has removed the Varishtha Pension BimaYojana from the preview of Service Tax in Budget 2015 in order to make this policy more appealing. With effect from 1st April 2015, there is no service levied on the premium paid towards this scheme.
Let us learn more about the details of this scheme –
- Minimum Entry Age – LIC Varishtha Pension BimaYojana is only available to the individuals who are 60yrs and above. However, there is no limit on the maximum age for a person to enter in this policy. This policy can be entered only by Indian citizens.
- Time limit – This scheme is open for subscription only for a small period of one year.
- Returns – Varishtha Pension BimaYojana assures a rate of return on the policy of 9% which amounts to 9.38% return annually.
- Lock-in Period – under this policy the investments get locked in for a period of 15 years.
- The rate of Investment – In this policy, the minimum investment is fixed at Rs 66, 665/- with a ceiling limit of Rs 6, 66,665/-.The ceiling limit of this policy applies to the dependents, whole family, and spouse.
- Payout Option –The policyholder can decide as to how he wants his dependents or a nominee to get paid. He can opt for monthly, quarterly or annual option depending on the need.
- The amount of Pension – In Varrishtha Pension BimaYojana the amount of pension ranges from Rs 500/- to Rs 5000/- per month. This amount depends on the investment amount and also which pay-out option is chosen. This pension amount is paid during the lifetime of the pensioner.
- Withdrawal – In case of any unforeseen event like critical/serious illness of spouse or self or in the case of sudden death, the policy can be surrendered before 15 yrs.The value of surrender would be given after deducting 2% as a penalty for premature withdrawal.
- Loan Facility – This policy give a benefit of a loan up to 75% of the value of the investment after 3 yrs of policy completion.
- Payment to the Nominee – In the case of death of the policyholder, the nominee gets the full investment amount.
- The option of Free-look period – Like any other insurance policy, this policy also offers for a Free-look period.
Service Tax Exemption in Varishta Pension BimaYojana –
According to the last year Budget 2015 there is a Service Tax exemption given to the policyholders on the investments made.However, people who have already invested in this plan prior to April 2015 will not enjoy this tax exemption would feel neglected as the returns which they get would be lowered because of the implication of service tax. Before service tax used to be at the rate of 3.09% on the invested amount because of which the implication is on the guaranteed rate of return gets reduced by almost 0.27%.
Drawbacks of Varishta Pension BimaYojana –
- In this policy, the maximum pension amount is Rs 5000 which after the maturity of 15 yrs does not suffice the basic needs of the investor.
- The ceiling limit of this policy included the whole family because of which the maximum pension amount cannot be higher than Rs 5000.
- The taxability of the pension lowers the returns and gets the pension to 8.1% to 8.44%.
- Liquidity is also one of the drawbacks in this scheme as the money gets locked in for a period of 15 yrs with premature withdrawal charges of 2%.
In my opinion, it is wise to invest in this plan if a person who retires is not looking for higher returns and who falls in the low tax bracket of 10%.
Are you a distracted driver? Most people would say that they aren’t because they believe that they are driving safely and maintaining the right safety standards at all times. Unfortunately, that’s not always the case and you may find yourself making little mistakes that cause you to be extremely distracted without even realizing that you’re doing it. Of course, some of the things that you do you may not see as a distraction, but they are definitely taking your attention and they have caused a large number of accidents.
Eating/Drinking While Driving
Studies have shown that between 70 and 85% of drivers admit that they eat or drink while they are driving at least occasionally. It probably seems normal and not that big of a deal but you’re actually over 3 ½ times more likely to get into an accident if you’re doing either of these things than someone who isn’t. Other studies have found that the increase is almost 80% and even near misses are accredited to this with a whopping 65% being considered a result of eating or drinking.
Using Radio/Phone While Driving
Whether you’re just changing the radio station, adjusting the volume, making a phone call or anything else, it’s entirely possible to get distracted by the technology in your car. Over 400,000 people are believed to have been injured in just one year because of distracted driving and using a radio or phone is one of the high points for this. Without accounting for texting, which has become an extremely dangerous aspect of using a phone while driving, approximately .33% of all accidents (not just distracted) are related to the use of a phone. This is a big part of why many vehicles now come with hands-free calling and controls, and why a lot of people like brand new vehicles. You can get one for yourself by getting no credit car loans.
Passengers in the Car
If you have passengers in the car you have a much higher chance of getting into a car accident and the more passengers the higher the chance. With teens especially this becomes an important consideration and a lot of teens find themselves being distracted by their friends in the backseat. Having anyone in the car for adults definitely increases the chances of having an accident too however. So it’s important to limit the number of people in your vehicle and make sure that you’re not talking or looking around too much instead of watching the road.
No matter what’s going on around you it’s important to always keep your eyes on the road. If you’re not careful you could easily end up in an accident and the people around you could suffer because of your mistake. That’s why you want to make sure that you’re not getting distracted even by the little things around you. The radio or your passenger may not seem that dangerous, but they definitely could be if you’re not careful about what you need to do to keep everyone safe.
From past generation gold has more values in the market, it is considered to be one of the precious metals that are very expensive. Same like gold, platinum and diamond are also the costly metals used in making expensive jewels and ornaments. Though several decades and centuries pass the eagerness towards these costly metals are never ending.
People consider these are their assets so they purchase more gold jewels as per their economical wealth. People who have one kilogram of gold jewels are considered to the rich people since it will cost lots of money according to the market value of gold.
Mostly women is every part of the world love to wear costly ornaments and accessories that enhance their beauty. It will be elegant to see the women dressed in traditional suit with ornaments on grand occasions. Gold ornaments always reflect some glowing look on face that look charming on women. Normally gold is obtained from the rocky areas in underground; it is not simple process to get gold since it involves so many processes. Normally we obtain mixture of many metals hence purification and separation process is carried to split the gold alone. Many companies are involved in mining work to obtain gold from the available areas. Day by day nature wealth is decreasing hence gold is becoming one of rare metals which is the main reason for the price value.
Ideas for starting a gold business
Researchers and scientist are taking many innovative steps to find out places that has more gold. Satellite is helping more for the people in finding out the natural wealth around several places of the world. Research process is still continuing everywhere to get more gold using it they can increase their status with more currency value.
Even for small carat of gold is precious according to current trend if you have small pound of gold then use it for gaining more money. If you decided to sell gold then choose the right people who will get your gold in current market price. Gold always have good market value, it is used for various purposes especially for ornaments, decorations and manufacturing any expensive accessories gold metal is used highly. If you wish to sell gold then pick the customers easily at online anywhere.
Gold is exported to several countries; people who involve themselves in the gold buying business tend to invest on share market, so when the price increases their share values will also increase highly in the market.
It is good learn some market trend, current statistics of share market and procedures followed in purchasing or selling high quantity of expensive metals. Internet helps people to take initiative steps in gold business for the successful career. Before involving you must get license from the government which is important to showcase yourself as trusted seller in the market.
Keep updated about the current value which might help you to pick your choice as per your opinion. Check the purity percentage and exact caret while purchasing bulk amount of gold from companies.
Once you have learned some important statistics then it will be easy to pursue your business.
You can utilize the period of low interest rates to take a review of your portfolio, and try to diversify it in order to distribute the risk. Make small changes to your portfolio to gain income during the low rate period. Also, don’t think that earning a low interest rate is bad. It is possible that your return on investment may not suffer as much as you anticipate.
Be on the lookout for buying and selling opportunities, and explore alternate financial instruments other than depositing money in the bank. As you may not like to invest your money or lock it for a duration when the rates are lower, consult your investment adviser and search for other lucrative alternatives. Here are a few investment options that can be utilized when investing in a low interest rate environment.
Preferred stocks or preference shares are hybrid financial investments, as they have properties of both equity and debt instruments. The interesting aspect about it is that the dividend on preferred stock is fixed, and is paid to you before any other common stockholders. Though a preferred stockholder may not have any voting rights, he may get preference, when it comes to claiming the assets, in case of a financial problem faced by the company. This will ensure that you will get an income in terms of dividend, even in the low interest rate environment.
moneyCertificates of Deposit (CD)
Another important vehicle of investment is a Certificate of Deposit (CD). It is a time deposit which is sold by banks, credit unions, and thrift institutions. Like your savings account, a CD is insured and hence, is risk free. It has a specific term and fixed rate of interest. The rate of interest is higher than other flexible accounts which allow withdrawal of money before completion of the term. However, if you invest in a long-term CD at a low interest rate, your money will be blocked for a certain duration without much returns. Also, if you withdraw money before duration, there is a penalty attached with it. Hence, it is advisable to ladder your CDs. It means, that you will have to invest in different short-term CDs with varying dates of maturity. You can then invest the proceeds in one long-term CD with a higher rate.
During the time when the rate of interest is low, you can invest in companies that pay high dividends. Dividend stocks tend to outperform the overall market during such business conditions. This can lead to a rising stream of income, which is not possible in case of bonds. You must choose your dividend paying companies carefully, as this form of investment is not guaranteed by the FDIC, and you may lose a part or whole of its value. Also, check out the risk of dividend tax rates. Invest in companies that are stable and have a sound history of raising distributions. A dividend investment can also lead to an inflation hedge, as companies transfer the rising prices to the cost for consumers and it leads to increase in profits, and thereby, higher returns in terms of dividends. It is advisable that you invest in well performing blue chip companies.
Investing in metal assets can add risk to your portfolio. Also, it does not generate too much income. However, it can be a good way to invest your money during a low rate market condition. Gold is more suitable for the normal interest rate environment, as it is extremely sensitive to price fluctuations. Hence, investing in gold stocks is not advisable at all. You still have the option of investing in silver. There are many established metal traders from whom you can buy blocks of silver, and sell it when the price increases. You can also treat this as a long-term investment.
You can also opt for annuities in which you can create an annuity contract with an insurance company, which takes care of your retirement and other long-term income goals. In an annuity, a person pays a single lump sum premium to the company (insurer). This is distributed back to you by the insurer in terms of periodic payments. The payments may start immediately or at a particular date. Generally, variable annuities grow in a favorable market. You should try to invest in variable annuities, where usually the insurer guarantees a return of your premium, in case there is a problem with the market. Many people utilize these investments to accumulate funds without income or for capital gains, and often go for withdrawal of the amount before the term. So, you can also benefit from a variable annuity that allows withdrawal and re-invest it.
Whatever type of facility—whether residential, commercial or rental—real estate is one of the best investments during a low interest rate scenario. Many people prefer to invest their hard-earned money in this transparent and risk-free investment option, that is bound to fetch excellent returns over a period of time. It does not get affected by the uncertainties of the market, and is relatively, a safe way of investing money. You can also benefit by availing property loans or mortgages for a lower interest rate. Also, in case you are buying a rental property, low rate of interests ensure that your borrowing cost and rental charges result in a positive income for you.
Bonds are fixed income investments that act like a debt security. A bond obligates the issuer to pay interest periodically, and also repay the principal amount on maturity of the debt. It has been seen that bonds help in preservation of capital and give stable returns. However, it has an inverse relationship with interest rates i.e., if you own a bond, on the decrease in interest rates, the value of your bonds with increase and vice versa. Hence, it is advisable that you invest in short-term bonds, as they are less sensitive to fluctuations in interest rates, as compared to the long-term bonds. Also, you can ladder your portfolio of bonds to reduce the interest-rate risk and reap its benefits. However, investing in bonds can also be volatile at times, so conduct a thorough research before investing.
✦ Try to have a diversified investment portfolio, so that you will be able to distribute the risk. This ensures that even if one of your investments does not perform, you can still bank on others.
✦ Take this opportunity to diversify your investment portfolio, as low interest rates are good for stocks. As a company is able to borrow money from the market at lower rates, it undertakes more capital investment or growth initiatives. This in turn leads to an increase in stock prices and thus excellent earnings for the shareholders.
✦ You can also invest in exchange-traded funds (ETFs) or mutual funds instead of stocks
✦ It is best to avoid taking excessive risks, and wait for the interest rates to increase.
✦ You should not invest in long-term fixed deposits.
✦ As bond prices are sensitive to the fluctuations in interest rates, avoid investing in long-term bonds.
✦ Consult your Federal student loan provider, and lock your child’s student loan at a lower interest rate.
✦ Keep a tab on the expenses, in terms of cost and taxation incurred on the investments.
✦ Instead of putting money in your savings account, pay off your credit card debt.
Apart from this, you can also invest in Treasury Inflation-Protected Securities (TIPS), cash value life insurance, a new car, etc. You can also utilize the time of low interest rates by indulging in some philanthropic work. You can use the Charitable Lead Annuity Trust (CLAT) to donate money to charities. Non U.S. citizens may also be eligible for an offshore trust. The offshore fixed trusts offer a predetermined specific maturity, and can pay a higher rate of returns. Now that you know how to invest when interest rates are low, conduct extensive research on each of the investment options before you decide to put your money into it. It is advisable that you consult your investment adviser also. Not only verify the rate, amount of income or returns, but also check out the risk involved when pursuing a certain investment.
Platinum is stated to be the most rarest metal among all precious metals. Hence, whether it is bullion, coins or jewelry, the prices of platinum, most of the time, are above premium. Also, the limited supply of platinum makes it an expensive investment commodity. Gold, on the other hand, is relatively affordable and can act as a strong inflation hedge which platinum cannot. So, in order to know precisely if it is good to invest in gold or platinum, check out the following key differences, and you will know what is the right thing to do.
Inflation and Currency Issues
It tends to increase in price during inflation and currency issues. It does not react favorably to inflation and currency issues.
It is not as rare as platinum. Platinum is almost 30 times rarer than gold as 10 tons of ore are used to produce 1 ounce of platinum.
Gold is available in varying degrees of purity. Post alloying, platinum is 90 to 95% pure.
It is not as dense as platinum. It has a higher density.
Gold enjoys better liquidity than platinum. It may not be easy to find buyers and sellers for platinum.
Gold does not face such problems, and the supply and demand remains steady. Owing to less profit, labor intensive industry, and high operating expenses, many mining companies are planning to cut down the production. This limited supply means the prices will rise.
It serves as a hedge against economic uncertainties and inflation for investors. It is an important investment vehicle and industrial catalyst. It is often used in catalyst converters, spark plugs, fuel cells, and sensors.
Impact of US Dollar
It is extremely sensitive to the price movement of the US dollar; it increases with a fall in dollar price and decreases when it becomes stronger. The value of platinum is not sensitive to the price movements of the US dollar.
Gold enjoys an excellent store-of-value demand, which is higher than that of platinum. As the number of new technological breakthroughs will increase, the demand for platinum will also increase with it.
In a similar situation, world gold will last 10 times more. According to a report by lynncoins.com, the supply of above-ground platinum is limited, and the supply will last for not more than 2 years.
According to a report in forbes.com, gold became pricier than platinum on a few occasions, like post the fall of the Lehman Brothers, 1991 recession, disinflation of 1984, stock market low of 1982, and the gold price rise of January 1980 and December 1974. According to a report on ibtimes.com, history suggests that platinum was traded more than 95% of the time at a premium above gold.
Gold has a better trading volume than platinum. Trading volume is lower than gold.
According to a report on nuwireinvestor.com, the production of platinum is only 6% of the annual gold production. According to the same report, annual platinum production is about 175 tons.
Gold enjoys a good market share in the investment market. Platinum does not enjoy a market share like gold.
People have been using gold as an investment since a long time, and hence, they find it easy to trust this metal. As platinum was discovered only in the mid-18th century, it lacks the years and years of investment history that gold has.
No matter which precious metal you choose, don’t forget to study the current performance indicators before jumping the gun.
The automobile industries in India and China have led to a growing demand for platinum, which will make it a strong investment. Also, the growing environmental awareness will give an impetus to platinum demand as it is used in many eco-friendly devices. However, currently the South African mine strikes have affected the supply to the platinum industry drastically. In such situations, gold wins the vote for a safe investment, hands down.
When you think of return on investment, you should think in the long run, but if you need short-term gains, then there are several options available. Some of them are:
-Mutual funds and stock investing has the capacity to give you excellent return in the short run. Traditionally stocks have given a high rate of return, but then it can be highly risky. One day, you may find the prices of stocks rising high, and the very next, they fall.
-Most of the top-notch companies issue stocks and shares, so you can go for them. Then there are penny stocks which you can also go for. Each of these shares cost less than a dollar, and you need to trade them within a day. You may not get huge returns, but small gains over a period of time.
-You can opt to buy commodities like gold and silver, whose prices are usually on the rise. This is the smartest way to invest money as they give good returns not only in the long run, but in the short term as well. Gold investment can be said to be a safe bet as gold prices remain stable even when the prices of other things go down.
-Trading in foreign currencies is one of those options which you can use for short-term investments high return. The forex trade market is such that you buy foreign currencies when their value depreciates, and sell them when the price increases. This is a high risk option, but can be the best way to invest money short term.
If you don’t want to take all the risks associated with investing in stocks, mutual funds, commodities and forex trading, then you can opt for short-term high-grade municipal bonds, money market accounts, government savings bond and certificate of deposits.
One of the smartest ways of investing money in the short term is ‘flipping’ real estate properties. ‘Flipping’ means buying real estate properties which are on the verge of foreclosure and selling it later on. As the lender does not make any money from a particular property, they may want to get their money back as soon as possible. This gives you a chance to negotiate and buy the property at a lesser rate than the market value. Once you have bought it, you can sell the property at market value.
➤ Tips for Intelligent Investing
➤ Open a Savings Bank Account
➤ Investing in Bonds
➤ Investing through the 401(k)
➤ Certificate of Deposit
➤ Individual Retirement Account (IRA)
➤ Investing in the Stock Market
➤ Mutual Funds
➤ Real Estate Investment Trust – REIT
➤ Gold and Precious Metals
Tips for Intelligent Investing
Goal – Setting
Goals can be short or long term, your eye may be on a beautiful Porsche in a dealership downtown, or maybe, your aspirations are more familial and it’s a home that’s on your mind. A college loan, a formidable-looking mortgage, or even a trip to one of those picture postcard tropical paradises you see so often, plastered across the centerfold of some coffee table travelogue, without a planned investment strategy spread over a number of years, one cannot hope to ever generate the amount of money required to bring any of these dreams to fruition.
All investment goals are invariably influenced by factors such as age, income, marital status and work opportunities. Setting yourself goals for investment can be a very personal, introspective look at ones stage in life, and is different for every individual. A middle-level manager in an accounting firm in his early forties, may decide to take lesser risks and not invest in funds that have a greater composition of volatile stocks, on the other hand this may be the exact opposite of what a young executive in his first or second job would do – go where the returns are the best. A more senior investor, retired or on the verge of it, would probably hold more government bonds than mutual funds or pure stocks, as he needs the assurance that a federally backed financial instrument can give him.
The Risk Quotient
There is no gain without some measure of pain, so the saying goes, and the element of risk is omnipresent once your hard-earned money is on the line, fluctuating with the market and the prevailing economic conditions. It is best to have a margin of safety while investing, so as to keep a buffer between you and these fluctuations, thereby keeping your money safe. The other side of this argument, is that it’s often the risk-takers who stand to gain the most from these corrections in the market, if they have sound reasoning to back their investment decisions. The stock market has made and unmade many good people, it doesn’t mean you have a defeatist attitude and no risk appetite, however, for those who don’t have a taste for the mood swings of the market, there are several investment options in the form of bonds and certificate deposits which will do the job, albeit at a lower rate of return.
It is advisable not to keep more than 75% of your investment confined to a particular asset class. By asset class we mean the investment vehicles like stocks and bonds. Diversification is a way to tone down the risk of losing money when the market is overcome by the forces of demand and supply, or at times, speculation and rumors, resulting in a drop in prices of stocks and the devaluation of personal holdings. One can invest in different types of securities and in funds which spread their portfolio over a range of companies, operating in different sectors of the economy.
Investing is also tying up your money in the form of a financial instrument, and liquidity is important when you want to make changes to your investment portfolio. Investing in stocks, bonds and other types of security comes in handy here, as these can be readily sold or redeemed in case of such requirements. Investing money in real estate, or in a business having a limited liability clause, may tie it up for a considerable amount of time, as there are certain legal formalities involved in the sale and purchase of such assets.
Checking for Tax Advantages
Investing can offer tax advantages too. Bonds carry certain tax benefits, an example is the US Savings Bonds which offers tax exemption at the State and local levels. Municipal bonds also offer certain tax reliefs, however, investing in stocks may incur you a tax liability as the gains from them are taxable.
Return on Investment
What are we investing for but profits, an amount gained that is in excess of the one we parted with, reducing or eliminating the opportunity costs involved in investment plans. Once again you must assess your requirements, what portion of savings are you willing, and able to invest? Which investment route should you choose? If you are a student paying off an education loan, high-stakes stock trading will not be your cup of tea, it may even lose you the few thousands leftover from the loan. It is a good idea to go for a short term Treasury Bill (6 months) or deposit your money into a savings account that has an attractive rate of interest. If you decide to indulge in some stock trading, it is best to stay with money market funds which invest in government securities and not on the open market. This investment plan will undergo changes according to the requirement of the investor, a successful software engineer may want to go for more aggressive trading, investing in a mix of blue-chip and mid-size companies that show promise. However, in all cases, the ultimate result is the generation of profit which makes all the trouble worthwhile.
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Ways to Invest Your Money
Investment methods can be classified in two ways – according to the degree of risk or the time period over which the yield may be derived from them. So you have to choose between high, medium and low-risk investments, keeping in mind the time frame too. Imagine a pyramid of your hard-earned money; ideally, the base of the pyramid should be invested in low risk, long-term investments (after accounting for your day-to-day expenses), the middle pile in short-term investments, with moderate risk and the smallest portion of the pyramid peak, into high-risk, high-return investments. Here are some of the best ways to invest in the long and short term, to ensure financial freedom in the years to come.
Open a Savings Bank Account
A safe method of investing is the savings bank account. Banks offer you a set interest for the amount of money you deposit with them. The current market, however, is still recovering from the disasters of 2008 and the Federal Reserve has decided to keep the target rate near zero until 2015, in an attempt to keep mortgage interest rates under control. So, although homeowners have something to cheer about, interest rates on savings accounts will not be very high, as banks use the Federal Reserve target rates to decide their own rates if interest. This does not mean that there are no banks out there with attractive interest rates and a little analysis can help you decide where to open an account and invest your cash. Bank accounts are known to be the safest and most flexible, if not the best way to invest money. Though the yield is low, the advantage of investing in savings accounts is the freedom to withdraw money anytime, as long as a minimum amount is maintained.
Back to Index
Investing in Bonds
Another great investment option is that of a bond. Bonds are issued by private companies and governments. When you buy a bond, you essentially provide a loan to the private enterprise or the government issuing it. In return, you earn a fixed monetary interest, according to the coupon (interest rate of the bond), after a fixed maturity period. Treasury bonds or notes issued by the government are the safest investment options, with low but guaranteed yields in the long term. Bonds come in various types. A riskier, but high yield option is buying bonds offered by private companies, which are traded on the bond market. The returns on these bond instruments are subject to the performance of the issuing company. Carefully research the bond market and study the risks involved before investing. A treasury bond is always a good investment, but it has a long maturity period.
Such bonds are issued by private and public companies as a quick method of raising capital.
Higher yield than government bonds.
There can be a risk of default if the company suffers losses or the prevailing market conditions force it to defer payment.
Liquidity can sometimes be an issue as secondary markets may not always accept sale of corporate bonds.
Inflation, that many-headed monster, is always a threat as it tends to reduce the value of the bonds in the long term.
Local governments and their affiliated institutions also issue bonds, known as Municipal Bonds or Munis, these bonds are often released by cities, redevelopment agencies, school districts or any other governmental agency beneath the central government.
Municipal bonds are tax-free, this is by and large their greatest advantage. Even though the interest rates on municipal bonds are low, they offset this by giving you a tax-advantage which closes the gap between them and other taxable bonds.
Municipal bonds have negligible default risk as they are backed by government agencies which promise return of principal and interest.
The biggest drawback of bond investing is the low interest rates, however, if you are looking a risk-free and long-term investment solution, municipal bonds are the way to go.
The US Treasury Department issues various debt instruments which can be a good way to invest and earn interest income. These instruments are backed by the federal government and are therefore a safe and reliable mode of investing money. There are several types of such debt instruments namely:
Treasury Bills: A popular short-term security, also called a T-Bill, which matures within a few days to about 52 weeks.
Treasury Notes: Known as T-Notes, they mature within two to ten years and pay interest (coupon payments) every six months. They are available in denominations of $1000.
Treasury Bonds: T-Bonds are true long-term investment vehicles, they have the longest maturity period, extending from twenty to thirty years and similar to T-Notes they offer coupon payments at six-month intervals. However, the T-Bonds are losing popularity, having been taken over by the 10-year T-Note which also works well as a long-term investment option.
Treasury Inflation-Protected Securities (TIPS): The TIPS securities offer inflation protection by virtue of being tied to the movement of the Consumer Price Index (CPI). The simple act of increase or decrease in the index prices causes an appropriate adjustment in the principal amount invested in TIPS, to tackle the loss caused by inflation. TIPS come in 5, 10 and 30-year maturity classes.
Investing through the 401(k)
You can also opt for salary contribution plans like the 401(k), a subsection of the Internal Revenue Code. This is a type of retirement contribution plan, where certain amounts are offered as contribution towards the 401(k) fund, the annual limit being $17,500. These contributions are deducted from the employees paycheck, before any tax-deductions are made, however, the 401(k) is taxable if the money is withdrawn before 59½ years of age, the age of retirement. Many employers also undertake to contribute toward 401(k), which adds to the fund over the years.
Tax-free deductions added to a fund you can claim after retirement, a handy sum which will go a long way in contributing to your financial security in your twilight years.
Employers that match the contribution often ensure a profit-sharing option, enabling better returns in the long run.
Liquidity takes a hit as most employers enforce severe restrictions on withdrawals from 401(k) accounts.
There is an excise tax of up to 10% levied on withdrawals, not to mention the tax deductions which would invariably apply.
Certificate of Deposit
Apart from savings accounts to put money in, banks in the US also offer a financial product called a Certificate of Deposit. A Certificate of Deposit or CD as they are commonly called, is a time deposit much like a savings bank account in that it is guaranteed to be risk-free. CDs are also offered by Credit Unions, insured by the National Credit Union Administration (NCUA), the ones offered by banks are guaranteed by the Federal Deposit Insurance Corporation (FDIC). CDs offer a fixed interest rate for the amount of money you deposit with them for a particular period of time. The time-span varies from case to case, but the general span is six months to two years. The banks offer decent compounded interest on your deposits. A Certificate of Deposit is a time-honored and time-tested way of investing money.
Interest rates offered are higher than average savings banks account rates.
Risk-free investment as it is basically depositing money in the bank, albeit for a shorter duration of time.
Larger deposits are often offered higher interest rates too.
CD interest rates are closely linked to the inflation rate of the economy. This is turn causes a problem when the real rate of return is calculated. If the inflation in the economy is tagging at 7%, the CD rates will be very similar to this, as the inflation cancels out the interest income.
Taxes are liable to decrease the real return of a CD even further.
Individual Retirement Accounts (IRAs)
A form of a retirement plan, IRAs are a popular form of investment, which give you a healthy sum to bank on after retirement. The IRA is a tax-saving tool as the money you contribute to it is tax-deferred, only when you withdraw from it at the time of retirement is there a tax component, treating the income as capital gains. However, since the tax rates are lower after retirement there is not much tax burden on IRA withdrawals. The funds in the IRA account can be then directed by the contributor toward investing in different types of securities which are deemed permissible. There are different types of IRAs depending on the eligibility and requirements of the investor.
Traditional IRA: Tax-deferred contributions over time, withdrawals are taxed after retirement.
Roth IRA: The opposite of a traditional IRA plan, here the taxes are deducted from the contribution before it is put in the IRA and all withdrawals are tax-free at the time of retirement.
SEP IRA : An employer can make contributions to a traditional IRA, instead of a pension fund, in the name of an employee.
SIMPLE IRA: The employer in this case matches the contribution made by the employee towards IRA. SIMPLE stands for Savings Incentive Match Plan for Employees.
Self-Directed IRA: This is an IRA where the investor makes investments on behalf of the retirement fund.
Investing in the Stock Market
Another way of investing money is the stock market. This is the riskiest option, though it has the potential for highest returns. Stocks are unit of shares which signify holding in companies which can be bought by individuals or other institutions. For example, a person can buy stocks in a company for $5 and the next day, the cost of the shares could be as high as $8 per share. Selling, it, he will make a profit of $3. The stock market may give returns of as much as ten to twelve percent annually, however, it is governed by the forces of demand and supply and affected by various factors, from national and international events to the minute economic changes that occur when the government tweaks financial policy. It is, therefore, not surprising that one may book profits in excess of 300% in a week’s worth of trading, or maybe lose the whole investment even quicker.
There are various options available for an investor in the stock market, some have been listed here according to their relevance for different types of investors.
The purest form of trading there is, trading stocks on the exchange requires skill, patience, insight and sheer guts. This is not for the faint at heart, or armchair investors who may not be serious about investing. If you have decided to take the traditional route to investment, by launching yourself onto the trading floor, it is best to have at least a few months salary safe in the bank. Always invest what you won’t immediately need, spread your risk but not too much, stick to blue-chip stocks if you want long-term returns and maintain a margin of safety while purchasing, whereas a chance to book profits while selling. Stocks are classified according to a variety of distinctions, each with its own advantages and disadvantages.
-Sector based stocks
-Strategy based stocks
There are also stocks which may not be listed on the exchange such as Private equity and Venture capital stocks.
There is immense flexibility; You can buy and sell stocks as you wish, or get a broker to carry out your transactions for you.
The stock market gives better returns than most other forms of investment. When on a bull run, the returns can be many times your original investment, that too in a short period of time. During the bearish phase stocks can be bought cheap and held onto, till times change and the market moves upwards again.
Stocks of companies from all over the world can be traded at the click of a button, this gives the investor a chance to diversify his investment and sniff out new sectors which are ripe for investment. The economic scenario in Asia might be better suited for certain companies than the recession hit economies of the West and it may be sensible to invest in companies that have Asia as a primary market.
The stock market is a great leveler, it can change quickly and without warning wiping out big and little guys alike. As an investor, one must conduct meticulous research before going ahead and investing money, there should be a clear understanding of market conditions and an ability to forecast future movements with some certainty.
There is an element of speculation present which can throw the best laid investment plans out of focus. The trading floor is abuzz with exchange of information and news, many times the general sentiment is influenced by the speculative activities of a few individuals and snowballs into affecting the whole market. At times like this, prices can fluctuate wildly causing serious harm to investors.
You cannot sit back and relax once you begin investing in the stock market. Although brokers and commission agents will work for you, it does not mean one can leave the trading in their hands, after all, the decision to invest in particular sectors or stocks must be made by you.
Best picks for 2013
With a market cap of around $110 billion, Qualcomm is an attractive option these days. The financials of the company are robust too, with sales in the region of $20 billion and an asset base of $43 billion, it looks poised to perform well in 2013. It is trading upwards of $64 a share on NASDAQ.
The largest semi-conductor manufacturer in the world may be struggling to come to term with smartphones invading its PC space, however, a market cap of nearly $140 billion and revenues of $54 billion make this one heavyweight you shouldn’t miss out on. It is trading at about $21 on NASDAQ
The company that has innovation as its middle name, although many would argue otherwise in the post-Steve Jobs era, is an obvious contender for a bedrock investment. It is one of the largest companies in the world with $550 billion in market cap, $125 billion in revenue and the first position on the Forbes list of the World’s most powerful brand. It is trading in the range of $450 a share on NASDAQ.
United Parcel Service is set for a good year ahead as it has seen rising cash flows and its dividends have expanded, allowing the company to repurchase shares too. UPS has a market cap of $78 billion and is trading in the region of $82 a share on NASDAQ.
*As on 1/24/2013
Touted as the best investment solution for small investors, mutual funds are a collective investment tool, managed by professionals who invest in the stock market, creating portfolios of stocks, called funds, that are then sold to the general public as units. The Net Asset Value of a mutual fund changes according to the volume of units held by it at the end of every trading day. This is the figure at which one unit of the mutual fund can be bought by the public. Mutual funds can be either corporations or trusts, managed by a board of directors in the first instance and by a board of trustees in the second. Corporations are registered entities under the Securities and Exchange Commission (SEC) and managed by a fund manager. There are several types of mutual funds, they operate with different investment strategies and target different classes of investors.
Open-ended Funds: Such funds sell and buy shares from investors at all times, without any conditions. The securities held by the fund are also traded openly by the fund manager according to the market conditions.
Closed-ended Funds: Such funds sell their units to the public only once and then the fund is closed. Selling back to the fund is not allowed and can only be traded with other investors on the market.
Unit Investment Trusts: UITs also issue shares to investors once, however, they do allow the shares to be sold on the open market. They have a limited life-span and can be redeemed by the investor at the end of this term or sold earlier.
Exchange Traded Funds: ETFs are set up as investment companies and are traded on the stock exchange like shares. Most ETFs today are index funds which track various equity or commodity indexes.
Money market funds: A type of mutual fund that invests exclusively in US Treasury Bills and commercial papers, they are safer than normal open ended funds which trade on the market and since they are invested in short-term debt, they also have a measure of liquidity. The returns on money market funds is relatively higher than that from bank savings accounts.
-Collective investment lowers risk of abnormal losses.
-Professional advice and management of finances.
-Government regulation of investment practices reduces the risk of fraud.
-Easy monitoring of investment and liquidity.
Investment in funds may require the payment of additional fees to advisors or the fund itself.
Risk factor remains as the money is ultimately subjected to the vagaries of the stock market.
No guarantee of returns, as prior performance is the only tool to judge the future performance of the fund, a fact which is by itself a disclaimer for such investment vehicles.
Best Picks for 2013
Vanguard International Growth
A good fund for investors looking overseas in turbulent markets, the Vanguard International Growth fund is a good option, with a Year-To-Date (YTD) return of 3.79%. The Net Asset Value (NAV) is $20.03 and the fund focus is on companies expanding globally and in markets which promise high returns in the coming years.
Contra funds typically invest in undervalued companies, with an aim to book profits when the share prices rise. The Fidelity Contrafund is a good performer with a YTD of 4.16% and a high NAV of $80.53.
American Funds American Balanced A
A large cap growth and income fund the American Funds American Balanced A, invests in blue-chip stocks which promise the growth of capital and good dividend income. It has an NAV of $21.18 and a YTD of 3.53%.
*As on 1/24/2013
Real Estate Investment Trust – REIT
Another popular investment vehicle for investors keen on getting into the real estate market are Real Estate Investment Trust (REIT) stocks. They are traded like normal stocks on the exchange but they invest their funds exclusively in real estate properties and mortgages. They are categorized as follows.
Equity REITs: Investment is made in physical properties, either owned or via a mode of investment. The income is given to the holders of REITs from the rent they receive from these properties.
Mortgage REITs: The primary investment happens in property mortgages, purchase of mortgaged securities and even loaning money to mortgage-holders. Income is earned through mortgage interest.
The REITs offer high returns to investors.
Tax-treatment for REIT income is fairly straightforward
Adding REITs to your portfolio can help in diversification.
Real estate as a sector goes through various ups and downs, this may translate to fluctuations in the dividend income REITs can offer.
Gold and Precious Metals
Gold is proving to be a very healthy investing option these days. Even historically, bullion prices have always appreciated with time. Gold and other precious metals like silver and platinum are safe harbors where you can park your money and ensure its growth, even during an economic recession. You may invest in gold directly or indirectly through exchange traded funds and other instruments.
Best Picks for 2013
Newmont Mining Corp
Newmont owns gold mines in various parts of the world, from New Zealand to Ghana. They are one of the big gold producers and buying stock will definitely help you enter the gold bullion segment. It has revenues touching $10 billion and is the only company mining gold, to remain in the Standard & Poor’s 500 Index. It is trading at around $44 on the NYSE.
SPDR Gold Trust (ETF)
An exchange traded gold fund, the SPDR Gold Trust is also a good option for investors who may be wary of investing in straight stocks of mining companies. It has a market price of around $161 on the NYSE Arca.
*As on 1/24/2013
This was a look at some of the best ways to invest this year, there are of course other avenues of investments such as derivatives and venture capital, which can be explored by mature investors, although they have much higher elements of risk involved. One can also invest in oneself, by joining a course on a subject of choice, or maybe enrolling for a degree program. Investing can also be done by putting up money for a fledgling business enterprise, helping it grow and reaping the rewards later. However, before going ahead with your investment plans, take some time to establish your long-term financial goals, assess the degree of risk you are willing to take and then chart an investment route for the future.
Inculcate the habit of making a budget every month, listing all your expenses and incomes. During budgeting, ensure that you save at least fifteen percent of all your income. This way, you will know that you have only an X amount of money to spend, as the rest has to be saved for the future.
If plastic money has made shopping convenient and safe, its biggest drawback is that we do not think twice before buying something which is way beyond our means. To save more money, it is suggested that you make most of your payments through cash. This will ensure that you do not buy something for which you don’t have immediate cash available, thus saving a lot of money for you, which you would have otherwise paid as interest on credit card installments.
One of the ways to save extra money is to cook and eat food at home. If you ever calculate the amount that you spend on eating out, you will be amazed that collectively it runs in thousands of dollars per month. So one of the tips for saving money and also for a healthier and hygienic diet, start cooking on your own at home!
Another money saving tip is to shop from places where you get discounts and good deals. You can buy grocery in bulk and look out for discounts when you buy clothes. You can even get good deals in thrift stores, yard sales, stock clearance, garage sales, second-hand goods shops, end-of-season sales. Websites such as e-bay offer a cheaper and convenient alternative for buying stuff. Also, stop impulsive shopping; do not buy stuff you want but don’t need.
By conserving energy, you are cutting your expenses and at the same time contributing to save the environment from global warming. Make sure you switch off the lights, fans, TV and all other electric appliances when not in use. Buy energy efficient electrical appliances, use devices which operate on solar energy, lower the thermostat in your house by two degrees during winter season, and raise it by two degrees during the summer season.
A good idea is to travel by public transport. If the distance to be covered is less, you can even walk down, instead of spending money on filling gas in your vehicle.
If you feel that you need to save much more than what you are doing right now, supplement your current income by taking a part-time job. You can even think of making more money by starting your own home based business.
Investing wisely is very important so that the money does not lie wasted in bank accounts. Cut down on your expenses and increase your avenues of income generation, and invest wisely in real estate and long-term schemes for a safer future.
Most of us do not have the knowledge of what some of the most simple and effective money management skills are. So to help you out, this article shall provide you with just that.
Money management skills are not difficult to learn once you get the hang of how to go about it. Given below is a step by step plan that you can follow in order to nurture some of these skills.
The first thing you need to do is calculate how much you are earning. Add in all the resources. Once you have this figure, calculate how much money you need to spend every month. To learn how much you spend every month, the best method is to write down each and everything that you spend for a couple of days. The amount will most generally exceed the amount that you had in mind―that’s because we don’t realize how much we end up spending on small things. Keep in mind that you need this spending figure to learn the basic skills. It is also important to note that the figures of two months will never be the same, there will be more expenditures incurred in a particular month and not so many in the next. But an average figure can be definitely arrived at.
Now that you know an average amount of the money that you need to spend for a month, it’ll be easier to allot amounts to different things. Make a list of all the things that you need to spend on―rent, tuition, bills (newspaper, Internet etc.) groceries, emergency (very important), and miscellaneous. You can make a long term-short term list as well. Like monthly/weekly/daily, and segregate the items accordingly. Now calculate the amount that you need for each and allot the money accordingly.
Many people use the envelope method for household items and it seems to work for them. For this, use different envelopes and mark them―for example ‘vegetables’, ‘toiletries’, ‘groceries’ etc, and at the beginning of the month fill the envelop with the amount that you need. Stick to that amount no matter what. When you put it down on paper like that, you are constantly reminded of it and the tendency to overspend is curbed.
Take Care of Debts
Never ever keep a debt. Pay a debt off as soon as you can, because if you keep on piling it, it’ll just keep getting bigger and bigger and cut into your regular saving plan. Find out how much you owe and what you need to pay off―that is the first step in managing your debt. Credit cards, surplus bills―everything needs to be paid off. Make a plan for the same. How? Along with the other envelopes, make another one for the debts so that you have a clear segregation made. It might be difficult in the beginning, but once you start physically putting in the money, you’ll deal with the problem head on and with continued efforts, the amount will be paid off.
Plan the Future
Now that the preliminary stage is taken care of, you’ll need to save for the future. The most important thing to do here is draw up a goal. What do you want to save for? Retirement? Children’s education? A house? Car? Or even small plans like a music system, a new phone etc. Calculate the amount you’ll need to save for it. This is your first step. The next steps will be how to get that money in a stipulated period of time.
Having a budget is really important. One way of budgeting is the envelope way, so that you don’t end up spending more when you have already allotted a fixed amount to yourself. The second method of making a budget, and this is somewhat of a conscious change in attitude, is that you get it in your head to budget things. Consciously decide that you want to budget. Do not spend recklessly. Other than that, planning for the future and drawing up plans of the things you need to save for will help you to budget well. This is because you’ll know what and how much you need to save up on to get that amount.
After paying all the bills, the surplus amount that lasts needs to be invested well. There is nothing worse than stagnant money. So consult a financial adviser or an investment adviser who will calculate how much you can afford to save per month, after deducting the expenditure and surplus. After this he will draw up a scheme that suits you best. It could be anything from a fixed deposit account to investing in mutual funds or buying property as assets.
Easy Saving Tips
Along with budgeting and drawing up plans, you can also consciously decide to save. Here are some money saving tips that you can use:
-Buy things in wholesale.
-Instead of buying books, join a library or start a club. Use this same formula for different things.
-Car pool to work, that will save on money for gas AND is good for the environment.
-Buy things on sale.
-Go through your daily expenditure sheet, you will find that there are several things in there that you can easily give up. Like a very expensive brand of hair product.
-Turn off the power when you don’t need it.
It has been found that we never tap the full potential when it comes to expending our talents or finding other means of earning some extra money. This is one of the more indirect money management skills that we need to learn. Here are some of the easiest ways to make money―taking on freelancing jobs, giving tuition, making use of your hobbies and talents like singing or dancing (giving classes, singing in a club) or cooking (providing snacks for a establishment or making a fixed amount for a bakery). Other methods include, selling things for scrap, holding garage sales etc.
Acquiring money management skills allows you to live better. It secures your future and helps you gain control over your life rather than the debts and money problems controlling you. It should therefore be our prerogative to learn and practice the several money management skills to lead a more fulfilling and comfortable life.