Procrastination and Its Dangerous Role in Investing

Do you procrastinate? Let’s put it this way – if you’re a human being like me, you probably procrastinate. We all do it from time to time, some of us more often than others. Sometimes it doesn’t do much harm to put things off for another day. However on other occasions it can do a lot of damage – and this applies just as much to your finances as it does with many other areas of your life.

Its effects on compound interest

If you remember a couple of weeks ago I created a post about compound interest. You can click through the link to read more about it if you wish, but the main concern here is that the power of compound interest will be greatly affected if you start procrastinating about your savings.

If you plan to save, say, $100 a month every month for ten years, you’ll have $12,000 by the end of that period of time. However you’ll also have additional cash that has built up through the interest that has been added over the years.

Now if you start by saving money each month but then put off continuing with it for a while, you’ll have a lot less to show for your efforts by the time you get to the end of the ten year period (or however long you’re saving for).

Its effects on your security

Everyone would like to have financial security throughout their lives. However, unless you happen to get lucky and win the lottery, you’re likely to have to invest for it instead.

Again, if you procrastinate and you put off looking for the right investments to suit your needs, you’ll end up saving a lot less over time. This also means you’ll have proportionately less security to fall back on as you get older.

It could even lead you to exercise kneejerk reactions

Who knew procrastination could be so dangerous? This is probably the worst part about putting off your investment decisions. There is bound to come a day when you realize you haven’t yet acted to protect your financial future. When this happens you might end up acting faster than you should. You may cast around for ideas and potential investments, diving into one or more of them without due care and attention. If this occurs you could end up losing money rather than saving it.

As you can see if you turn the occasional bout of procrastination into a serious habit you could be heading for financial trouble. Always make sure you can get the best habits in place now and try not to procrastinate over anything if you can help it. This will improve your life in lots of different ways, both in terms of cementing good habits into daily life and in terms of developing a nest egg for the future you can hopefully rely on. If you know you have a tendency to procrastinate, perhaps now is the time to make changes.

The Potential Dangers of Currency Investing

We’re all familiar with the currency markets in a limited way. For instance you might find out how much your currency is worth when transferred into a foreign currency before you go on vacation. But for many of us this is the limit when it comes to currencies.

For others though, the currency market is a source of potential investments. They try to sell one currency for another in order to make a profit. It sounds easy but as with any investment of this type, it can be incredibly difficult to make it work for you.

What are the risks?

As far as investments go, foreign exchange trading – or Forex, to give it its shortened and better known name – is one of the riskiest forms of trading you can try. This is because so many different variables can affect the outcome of a particular currency exchange. This is certainly not an investment vehicle you can take on casually. You must build your knowledge of the markets and of the news and events around the world that regularly influence them.

This is probably where many people go wrong. They see the big changes in currency markets and think they can make an easy profit in a matter of hours. While this is possible, the people who tend to get these results are experienced in the markets and know which signs to look for. It is very unlikely you would start trading currencies and make a big profit at the first time of asking. It’s much more likely you’d incur losses instead.

Be prepared to lose

According to statistics, the vast majority of people lose money when investing in the currency markets. More than this, the small percentage of people making a good income from it actually make losses more often than they make gains. The hope is that the gains will outweigh the losses when everything is added up over a period of time.

Do you have the skills needed?

This is the big question – and it’s one you need an answer to. You need to know whether you are willing to develop the skills and knowledge required to be one of the small number of people who can actually make some real profits out of this market. We’ve already mentioned there is no easy way to get into this area and start making money straightaway. Even the best investors lose money on their investments, and this market is particularly prone to that.

You have to be ready and able to handle fast changes within the market, so if you’re only able to spend a minimum length of time focusing on your investments, this may not be the area for you.

In short, don’t get caught up in the easy profits you’ll hear lots about when reading information on the currency markets. Profits are there to be made – but there are plenty of challenges to meet and surpass before you can even think about claiming them.

Are You Living By the 3 Month Emergency Rule?

While we all know savings give us peace of mind and something to fall back on if ever we need them, few of us actually live up to that knowledge. However if we don’t focus on providing enough for an emergency we could find ourselves in dire straits if that emergency ever made itself known.

The 3 month rule applies to the amount of money you need to get by for that period of time. The idea is you write down the net amount you receive from your job each month and multiply it by 3 so you know how much emergency cash you have to have on you. Most experts agree you should have at least three times your monthly salary tucked away just in case that source of income should suddenly be taken away from you. Since the stability of many jobs and industries is dubious at the moment to say the least, you never know how secure your own job might be.

This isn’t meant to alarm you, but it is wise to be prepared for anything. The question you need to ask yourself is this: how would you be able to cope financially if you lost your job tomorrow? Would you have at least 3 months worth of income saved up to see you through the next 3 months while you look for other work? If you can say yes, work on making that sum a little bigger if you can, to provide a bigger cushion. If the answer is no, make sure you work out how much you need to save and start saving, as soon as you can. Even if you cannot save the full amount before you need to start drawing on it (which hopefully won’t happen) at least you’ll have more than you would have had otherwise.

As you can see it makes good sense to prepare for the unexpected in case it does actually happen. It provides some breathing space in case you do lose your job, and therefore means you don’t have instant worries about bills or falling behind on your mortgage. The sooner you put these plans into place the easier it will be to get the peace of mind you want.

Of course, the other great thing about doing this is that it gives you an opportunity to sit down and take a closer look at the rest of your finances. How much do you currently spend each month on bills? Could you reduce this a little by looking for better deals elsewhere? If you could, you can put away a little less each month to cover those essential 3 months. Checking through all your finances means you can get a better picture of where you stand as well as preparing for the worst case scenario in the future. This will give you more security and make you feel calmer on a daily basis, even if your job does remain secure.

Is it Possible to Save TOO Much?

We are constantly reading about how important it is to save money – for our children, for our homes and needs and for our future. But can this worthy habit become too much for some people to cope with? Are there times when saving money can become a hindrance rather than a help?

It shouldn’t come as a surprise to learn this is indeed the case. A lot depends on your own habits and whether you are naturally a spender or a saver. However it is possible for some people to go too far and save to extremes, leaving little if anything to actually enjoy as they live their lives.

Saving for tomorrow

It is admirable and indeed necessary to set up good savings habits so you have some money in the bank for the future. This could be for a vacation, your child’s university days or perhaps for your retirement. There are a million and one worthy reasons why you can and should save money.

However there are also plenty of reasons why you should guard against saving to extremes. Let’s look at a hypothetical situation that describes the difference between normal saving and extreme saving. The latter may involve you wanting to save every single cent instead of actually enjoying any of it. For example, you might be tempted to treat yourself to a coffee and a donut while you’re out one morning, but you decide to save that cash instead. If you do this in every situation you’re in, you could end up spending nothing and becoming overtly thrifty. There is nothing wrong with being thrifty but if you never spend anything you won’t enjoy your life either.

Goals are important

The above example shows you just how important it is to set goals for saving a certain amount of money in a certain period of time. This not only ensures you have a better chance of saving the amount you want, it also ensures you have a little left over to enjoy as you move through life. It’s all about getting the right balance and if you can’t manage that you could move into becoming an extreme saver.

Of course some people love looking for bargains and saving as much money as they can. This is an admirable way to live but you do have to be careful you don’t move into the situation described above. If this should occur you will end up finding you save to the detriment of all else – instead of enjoying your life a little as well.

This should give you something to think about if you are trying to focus on saving without going over the top. Striking the right balance can be tricky. While many would say erring on the side of caution is better, it is possible to overdo it, as we have seen above. Think about this when you are saving and investing money, so you can see whether you are striking the right balance or not.

The Benefits of Locking Up Your Money for Longer

We all know how important it is to manage our money in the best possible way. Ideally this means building up an emergency fund to cover three months’ worth of outgoings in case we should need it, and then maximizing the rest of the available cash we have.

Step one is to go for tax free investments, followed by ones that are taxed by the government. However, beyond this you should think about how long you want to tie up your money for, and that’s the subject of this article.

Why is it worth tying up your money?

The most basic kind of account you can get is an instant access account. This means you can withdraw money whenever you have the need to. It’s a good idea to have one of these; indeed your emergency fund should be in this type of account.

However, any additional savings above and beyond this should be put into another type of savings vehicle. For the purposes of this article we’re not talking about stocks, shares or anything similar. We’re focusing on savings accounts – specifically those that lock in your money for one or more years.

The main benefit of doing this is that you’ll get more interest. In return for giving the bank your cash for the specified period of time, they’ll give you more interest. Generally speaking, you can find accounts that give you fixed interest for a period of between one and five years. If you want to tie up your money for five years you’ll get a rate of interest that is far better than that offered for a two year account.

Points to remember before choosing an account

There are a couple of points to remember here. Firstly, make sure you are willing to tie up your money for a specific period of time. You might be happier agreeing to a two year period instead of a five year period. It may also depend on which other accounts you have and how much cash you are happy to have available for instant access. You may prefer to have six months’ cash put away for emergencies before you tie up some cash for a higher interest rate.

Most of these accounts do allow access if you really need to get at the money, but there is usually a penalty involved. This is typically a number of days’ worth of interest lost. For example, you might lose 200 days interest. As you can see this could amount to a significant sum, depending on how much money you have in the account and what the attached interest rate happens to be.

Thus it is worth thinking carefully about the options available to you and the best accounts to get if you want to spread your money around and tie it up for a better return. Remember – there is nothing to stop you getting more than one account of this type if you want to hedge your bets over several different lengths of time.

The Importance of Planning and Saving for the Future

Most of us realize we should put some regular effort into saving money for our futures. However in reality we don’t all manage to do it. One report just released by HSBC says people in the US have only managed to save for around two thirds of their retirement years (on average). Of course none of us knows how long we will have to enjoy retirement, but according to the study the average length of time we have finances to cover is 14 years. The study also found the average retirement stretches out for 21 years.

The figure does not become any more promising if we take a look around the globe. Other countries find themselves in a similar position, with far less in savings on average than the number of years people have left to live.

How can you make sure you don’t become one of these statistics?

There is a lot to be said for living for the moment. But we also have to look ahead and ensure we can live comfortably in the future too. After all we spend so much of our lives working: it seems a shame not to enjoy our retirement and have a reasonable amount of money to see us through this period of time.

So it is a delicate balance we must strike: to spend money today and also to save for the future. If we can make sure we are able to do both, we should avoid becoming one of the statistics mentioned above.

How can we plan for the future?

The real task is to ensure we live properly today while freeing up some cash to invest in our futures. The current period of time is challenging for many people, with wages stagnant and many goods and services shooting up in price. This means many people are struggling to save anything at all. Many do not even have the luxury of a financial cushion to rely on in case anything should happen.

So you can see the task is to take a serious look at your finances now to see where you could possibly make savings. Many people can free up some cash in one way or another, depending on their situation. Even if it means giving up one or two so called luxuries, wouldn’t you rather have something to invest in your future? After all once your retirement arrives you will have no more time to build a nest egg to survive on.

They say the longest journey starts with one small step. This is true, and so is the need to focus on your desire to plan for the future. Even if you only start in the smallest of ways, you will be heading in the right direction. And once you get started you may gather pace and find new ways to save for your retirement.

The figures do not lie, and if you want to be able to fund your retirement the best time to start is now.

Tips for Choosing High Yield Mutual Funds

If you are considering investing some cash in mutual funds, it makes sense that you’d want to invest in the best ones you can find. So called high yield funds are the best ones to look for, since they provide you with the opportunity to enjoy the highest possible yield you can.

So with that in mind, here are some tips on choosing the best high yield mutual funds on the market today.

Do your homework

It should go without saying, but it is surprising how many people are so eager to invest in these funds they’ll slap their money down on anything that looks good. They do this without researching it properly first, so it makes sense to ensure you don’t fall into this group.

Start looking online to see how many mutual funds are out there that fall into this type. Of course you shouldn’t just trust everything you read. Everyone is keen to stress the positives without focusing too much on the negatives. This means it’s your job to do both.

There are plenty of well known and reliable websites that are long established online that can be relied upon to give out good information. If you search for the phrase ‘high yield mutual funds’ you will find lots of these sites popping up on the first page of Google. Use these results to help you find the companies you need to look at more closely.

Choose a fund that fits in with your investment plans

It goes without saying that most mutual funds will perform better over the long term as opposed to the shorter term. But there can be a difference between investing for five years and fifteen years. Think about the goal you have in mind and how long you want to save for, and consider which funds most closely match your ideal.

You may find some perform better over the period of time you want to save for, in which case you should add these to your shortlist. Now it is time to delve into each individual fund more closely. Find out everything you can about each one – get the literature and speak to those managing the funds if you can.

You should also bear in mind that while looking at the most successful mutual funds for this year will help in some ways, it doesn’t necessarily mean those same funds will perform just as well next year. Be sure to look back over a longer period, say five years or more, to get a more accurate pattern.

As you can see, it is wise to focus on the details of all the high yield mutual funds you have come across that you are thinking about sinking money into. Choose the one that appeals to you the most. While you cannot get rid of the risks inherent in investing in this type of fund, you can vastly reduce them and hopefully get the highest yields in the process.

Really Know Your Target Market

There’s simply nothing more important for business owners and sales managers than to know their target market. After all, you can’t expect to focus your efforts in the right direction if you have no frame of reference to work off of. Knowing your target market is something that often doesn’t come easy, however, and typically requires a great deal of time, effort and research. Consider the following aspects of learning more about your target market, all of which are applicable in the world of modern business.

Conduct Market Research

The most important thing you can do in order to learn more about the market that you are targeting is to conduct market research. Doing so doesn’t have to be as difficult as one might think; there are a great deal of data analysis services that can help you to learn more about your audience. Often times, however, there is more to market research than simply working with a company to analyze the data you’ve collected. You’ve got to employ creative thinking to get down to the basics of who you are trying to pitch to. Try to think the way they might think, and put yourself in their shoes.

Consider Unconventional Methods

Running a business can indeed be rather time-consuming, and many people feel as if they don’t have time to carry out their own market research. This attitude will not help you in the long run, however, as you’ve got to consider unconventional research methods and carry them out yourself if you wish to really get to know your target market. Perhaps spend an afternoon making phone calls to businesses that you might target in other parts of the country (outside of your demographic) and conduct a short interview with questions about what they’d look for in a service such as that which you could provide. You’ll be amazed how much such a simple, technically free method can impact your knowledge of the market you’re targeting.

Don’t Get Lazy Over Time

Target markets can shift dramatically in even a short period of time, and you’ve got to stay on top of the trends in order for your pitches to be worthwhile. Many business owners and sales managers who have nailed a lead consider that to be the end of the road, whereas keeping up with the client is really the most important thing to consider here.

So the alternative is getting comfortable, familiar, and therefore lazy with potential clients. Don’t end up losing countless leads by assuming what you have is enough, or assuming that the state of clients will remain static. Staying ahead of the game – and yourself – is really the key to winning here.

With the above tips on your side, you can really get to know your target market and increase your chances of finding success. Conduct the necessary research, be creative, and work with excellence – you’ll soon see the effectiveness of such an approach, and the numbers will come rolling in.

How to Find Top Performing Mutual Funds

If you want to invest in mutual funds, it makes sense that you’d want to invest in the ones that bring in the best performance. But how do you find them?

Fortunately you don’t have to resort to closing your eyes and sticking a pin in a list you have in front of you. There are ways you can make the job easier. Here are some suggestions.

Check out the fund manager

This is the most important aspect of all. If you only pick one thing to do, make it this. It is better to choose a good fund manager with a company you’ve never heard of than to choose a fund manager with no track record who works with a company that is a household name. In short, go with the fund manager and not the company.

Find the benchmark for the funds you are interested in

You need a benchmark in order to gauge how well – or badly – a particular fund is doing. The benchmark can vary depending on the specific funds you are looking at. For instance, if you want to invest in a stock mutual fund you would look closely at the S&P 500 Index.

Look for consistent returns

This is a good way to find funds that perform well over a longer period of time. This points to funds that can be relied upon to do well even when times are not as good as they might be. Of course you will have periods when any fund will do better or worse than it may do at other times. But you want to pick something that is more consistent than its counterparts. You want to avoid the funds that have a tendency to dip further than others do, in order to make the most of your investments.

Look for no load funds

This is another important aspect to consider. A ‘load’ is basically another word for a charge made for entering into a mutual fund. Hence where there is no load, there is no fee. This is good news for you because it means you will pay less over the long term. This automatically means you get a better performing mutual fund, simply because you will pay less than you would otherwise. Just imagine the difference when compared to a fund that requires you to pay fees and charges every year.

As you can see there are a number of ways to help you find top performing mutual funds. While the fund manager is the most important element of all, adding in the other elements certainly helps to narrow down the possibilities. This will leave you with only the best mutual funds to consider.

One final point – don’t assume you will find the top performing funds in a matter of minutes. This process can take some time to go through if you want to do it properly. Spending a little more time now will mean better profits later on.

What Kind of Average Returns Can You Expect on Mutual Funds?

If you’re thinking about investing in mutual funds it makes sense you’d want to look into the potential returns you could expect first. Diving in with no knowledge of what to expect is a great route to disaster.

So what can you expect? Here are some points to remember.

Remember the word ‘average’ means just that

You must understand this. An average mutual fund return is gauged over a period of time. This means one year might bring a return of 10% (this is over the entire mutual fund market, rather than one in particular). It also means another year might bring an average return of just 2% or even less. It all depends on the market conditions and how well or badly the stock market is doing.

The word ‘average’ covers the entire market. So while one mutual fund might be doing really well and achieving, say, 20% compared to that 10% average example above, another mutual fund might only clear 5%.

So do average returns really mean anything at all?

They do – but you have to know in what context they are applied to. You could be looking at the market as a whole or the mutual funds created by a particular company, like Standard and Poor for example. The trick is always to set your boundaries before you start looking into averages. They are only useful up to a certain point.

What factors can affect the average returns achievable?

This is a good question to ask. Clearly a company that is good at managing its mutual funds will produce a better than average return than a company that isn’t historically as good at managing theirs. This is despite the fact they are both trading in exactly the same marketplace at exactly the same period in time.

Another factor to consider is the fees you will be charged annually to be part of a particular fund. There could be two funds with the same average return when compared to the market as a whole, but if one company has higher fees than the other, the lower fee mutual fund will perform better overall.

Does it help to gauge average returns?

Providing you know what you are looking for and you ensure two or more funds are compared on a level playing field, averages can indeed be useful. You obviously want to earn as good a return as you can from your chosen fund. A spot of research can go a long way towards helping you do this.

The more specific you can be the better. History can only show you how the market has performed over a specific period of time. Don’t just look at the past year or two for a particular fund – go back further to get a better average.

Holding mutual funds for a longer period of time is the best way to ensure you can get the best average return available, no matter which fund you invest in.

What to Do When an Investment Pays Out

Many investments are created with a specific time frame in mind. For example you might start investing in a particular financial product so you have some cash to spend on the vacation of a lifetime when you hit a certain age in life. You might have an investment come to fruition when your child reaches the age of eighteen, or when you reach a certain age in your working life. There are as many deadlines and goals for investments as there are people saving for them.

But sometimes you may not have any specific goal at all. You may just see the potential of saving a certain amount every month for, say, ten to fifteen years, in a particular savings plan. These plans tend to offer more potential for earnings than a standard savings account because they are often tied into the stock market. They’re one of the easiest ways to save for those people who dislike a lot of risk.

So what do you do when your investment pays out? There are several options worth considering.

#1: reinvest the money somewhere else

This is a good idea as you will have a lump sum to put into any new investment pool. Look around for potential opportunities and decide what level of risk you are content with.

Consider also whether you will continue adding money to your investment in future, rather than leaving the capital to hopefully appreciate over time.

#2: spend the profits but reinvest the capital

This is another option you could consider that will give you the best of both worlds. Let’s say you invested $5,000 over a period of time and you’ve earned $300 on that investment. You could use the $300 to spend on something while reinvesting the capital into something else.

Of course a lot depends on the plans you have for the future. Take your time – ideally in the run up to the investment reaching fruition you should think about your options. Even if the bank or organization you have your investment with offers you something else you should always look around and see what other options there are for you.

#3: spend the lot – after all we all have to splurge once in a while

Investing is important. But so is enjoying life and if you’ve been saving consistently for a long period of time it would be fair enough to feel as if you’ve earned a reward.

The important thing is to make sure you don’t just fritter the cash away. Think about how you could use it to improve your life. Maybe a new car is a good idea. Perhaps you’d like to renovate your home. There are lots of options here.

As you can see it is worth spending some time considering these three courses of action. This will enable you to figure out which one is best for you given your current situation – which may be very different from when you originally entered into the original investment.

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Ideas to Get Rich Quick When Investing

Everyone always tells you that investing takes time, and if you’re going to “go all in”, then you need to do it for the long haul. Still, many people have that small voice inside their heads that tells them there may be a way to “get rich quick” through investing in the right things. So, is it actually possible to get rich in a hurry through investing?

For some, the answer is yes. But this makes up a very small percentage of the population, and if you choose to try “get rich quick” schemes to make money fast, you may find yourself in over your head. Here are a few ways to make quick money investing without becoming a day trader.

Sock More Money Away

Sounds ridiculously simple, right? Well, believe it or not, setting aside a large chunk of your income (if you can afford it) is the first step to growing investments quickly. Think of it as seed money – sock away 25% of your income as soon as you get your paycheck and watch it pile up. Then, when you pass the $5000 mark, make an investment.

Don’t add it to an investment you already have; try something new instead. Think CD laddering, stocks, gold or silver, or even a mutual fund. Once you’ve done it, repeat the process with a different kind of investment. Before you know it, you’ll have a diverse portfolio of investments.

Try P2P Lending

One lesser-known (and slightly more risky) investment vehicle out there is online Peer-to-Peer (P2P) lending. Websites like Lending Club and Prosper use a bidding system in which multiple lenders (you and others) throw in money to fund loans for people who have created listings on the sites. People use these sites because they may have had trouble in the past qualifying for traditional bank loans like those offered by net loans. If you spread your money over many different loans, you will reduce your risk and still enjoy a high rate of return in a relatively short period of time.

Think About the Foreclosure Market

Don’t try this one cold. If you have a bit of real estate experience under your belt, then this is one way to grow investments fast. You’ll need a good amount of money saved to get into this market, and once you have it, you can attend bank or tax sales to score a property in need of a little TLC.

Before you try this method out, make sure you do your homework. It’s important to know the laws in your state of residence, the true costs of fixing up a property, and the money you’ll need to spend to get it re-sold. This includes any money you may need to spend on the mortgage while you’re waiting for a qualified buyer to come along. You can make more money by adding more space in your investment property and save money by doing it yourself. 

Remember, getting rich quickly is still a process. There are ways to make money faster than traditional long-term investments, but the risk is higher and you’ll need to watch your money like a hawk when you go all in.