Category: Investment Logistics

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The Wealth Algorithm (8) – Funding


 

We covered step one of your tasks in the previous article, which was creating a business plan. The post didn’t write the plan for you. It rather gave you the fundamental building blocks of that activity. The rest is yours to do, following those guidelines. If there was interest to give a full example of a business plan, I’d do that, but I’d need to receive such quires from the readers. You could easily post a comment under any article of this series.

Today I’ll continue to step two: Finding your business partner.

Few articles ago, we excluded friends and family, for obvious reasons, as well as banks. So what’s left? Had this question been raised thirty or more years ago, the answer would have been: None!

However, nowadays, investors and entrepreneurs have almost untapped sources of online funding. With the proliferation of social networking, an era of business financing has been emerging.

Your first stop would be your social networks: Facebook, Twitter or Linked-In. The last is more professional-oriented. If you happened to be a member of Linked-In and have good and trusted connections, you might want to start there. Look for someone with a background in business management, investing, financing, etc. On the other hand, this person is honest and trustworthy. How would you know that? The simplest way would be to visit their profile and see what kind of connections they have. You could do more research and “investigation” till you feel satisfied.

The next stop would be to explore the following new resources of online funding. I’m presenting the three most popular here, but you could find more.

One example is referred to as “Crowd-Funding (CF)”.  Another is “Internet-Assisted angel investing (IAAI). A third is “Accelerator Programs (AP)”

Those are online resources, originally inspired (and to some extent created) by social networking. They are interested in funding new, and potentially profitable, ventures, against some guarantees from the investor.

Below are the definitions of the first two, as given by Wikipedia.org:

(1) “Crowd funding or crowdfunding (alternately crowd financing, equity crowdfunding, social funding or hyper funding) describes the collective effort of individuals who network and pool their resources, usually via the Internet, to support efforts initiated by other people or organizations.[1] Crowd funding is used in support of a wide variety of activities, including disaster relief, citizen journalism, support of artists by fans, political campaigns, startup companyfunding,[2] movie[3] or free software development, and scientific research.[4]

Crowd funding can also refer to the funding of a company by selling small amounts of equity to many investors. This form of crowd funding has recently received attention from policymakers in the United States with direct mention in theJOBS Act; legislation that allows for a wider pool of small investors with fewer restrictions. The Act was signed into law by President Obama on April 5, 2012. The U.S. Securities and Exchange Commission has been given approximately 270 days to set forth specific rules and guidelines that enact this legislation, while also ensuring the protection of investors.[5]“

(2) “An angel investor or angel (also known as a business angel or informal investor) is an affluent individual who provides capital for a business start-up, usually in exchange for convertible debt or ownership equity. A small but increasing number of angel investors organize themselves into angel groups or angel networks to share research and pool their investment capital.”

The following website is one of the pioneers in the area of AP: http://globalacceleratornetwork.com. Click on ” about” to get the following definition:

[Note: The definition below is the property of  http://globalacceleratornetwork.com. The author is not promoting or supporting any part of the definition. It’s given here as an example of this kind of online funding. There are other potential options that are worth looking at during your research].

(3) “The Global Accelerator Network consists of independently owned and operated organizations that utilize a mentorship-based startup accelerator model. It provides networking opportunities, training, special perks, and ongoing support for members of the network.

Championed by TechStars, the Global Accelerator Network was created in 2010 under the management of top accelerator programs and alongside the White House’s Startup America Initiative. In the spirit of supporting more entrepreneurs around the world, the Network’s mission is to ensure that 5,000 successful and experienced entrepreneurs and investors will mentor and support 6,000 promising young entrepreneurs. The goal is to increase their success rate tenfold and create 25,000 new jobs by 2015 as well as a sustained engine for growing these figures over time.

Our vision for the Global Accelerator Network is to empower entrepreneurs and accelerators, resulting in an increase in the pace of innovation and the ability for more communities to cultivate entrepreneurial success. We believe the proliferation of this model is very positive for entrepreneurs, investors, and start-up ecosystems. By bringing programs together to create and share best practices, resources and knowledge, we can increase the success of member programs and improve entrepreneurial ecosystems across the globe.

The Global Accelerator Network is a proud supporter and partner of The Startup America Initiative, the White House’s program to celebrate, inspire, and accelerate high-growth entrepreneurship.”

–End of definitions—

The above are only definitions, although they offer a good amount of details to start from. You need to research each one enough to see the full picture, then decide on the one that’s best for you and your selected venture.

Please post your questions and comments below.

All the best,

The Wealth Maker

 

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The Wealth Algorithm (5) – Financing Your Dream!


 

We’re now ready to tackle the process that will take you from your current financial state (networth) to your dream (the clear intention you set few posts ago).

I’m not going to use any assumptions concerning your work status. So whether you were employed, self-employed, unemployed, running a small business, etc, our discussion would start from the networth we calculated in article (3) of this series.

There are so many ways to make money. I’ve covered a number of them in this blog. You could go back and pick the one that suits you. We’ve talked a great deal about value investing, making money online. I touched on HYIP’s. Then finally spent few articles exploring online trading, including binary options trading.

Any one of those requires an initial investment, a capital, a principal. Each method employes a certain technique to grow that capital, while preserving it (this is quite important).

The question now is this: How would you go about securing that principal?

In general, there are two ways: You could either borrow the money, or create a partnership.

The first route includes banks, friends, family, government funds, etc.

The second is a sort of business deal between two equal parties: One party provides the capital, the second provides the time, energy and expertise to grow that capital.

The first option could be difficult these days. Requesting a business loan from a financial institution (like a bank) presents two major hurdles: a) you must provide enough evidence that you’re capable, financially, of returning that loan, at the end of the term. The bank doesn’t care whether you succeed or fail!

The second issue is interest. You might end up paying 50% on top of the original loan in interest. If the loan was $100K, you would be required to pay back $150K at the end of the loan term. Those 50K would come out of your net profit. In some cases, the percentage could be more, depending on how convinced the bank would be of your eligibility for that loan.

Asking friends or family members for financial support to start a business or enter an investment adventure, would raise many eyebrows, and would put you under the spotlight for the duration of your journey. This would add to the pressure, and would exhaust a good deal of your energy.

In the next article, we’ll explore the second option, as I believe it’s the path you should take.

The Wealth Maker

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Online Investment – Binary Options


 

Binary Options (BO) trading is probably the furthest from Value Investing (VI), when it comes to investment fundamentals. While in VI we focus on the business behind the symbol, A BO trader is almost completely concerned with current price movements. Some BO platforms offer options with a 15-minute life span!

BO is a relatively new version of day trading. Most BO transactions finish within an hour. Recently, some platforms started giving the trader the option to choose longer expiration periods.

The basic concept behind BO trading is to “predict” if the “asset’s” price is going to move up or down relative to the entry price.

Here’s an example: Let’s assume the trader is interested in crude oil’s price movements. The trading platform offers crude as one of the available BO assets. The trader needs to have some funds in his or her account in order to trade. The minimum amount per BO trade varies from one platform to another. Usually between $10 and $50.

Let’s say the platform in this example requires $30 to trade one BO asset. The trader selects crude, enters the minimum trading value, which is $30, then he or she has to decide, or “predict”, whether crude price will go up or down from the current price, say at the top of the hour.

From looking at the charts; trying to forecast price movement trends, reading the latest news, and using his/her best judgement and “gut feeling”, the trader decides to choose the “UP” option. Once he hits “Buy” or “Submit”, the platform registers the price at which the trader “entered” the trade. Let’s say the price was $91.5 per barrel, and the entry time was 10:15 AM.

The trader can either wait, or look for other trades, if he or she still has funds in his/her trading account (because the $30 for the crude trade has already been deducted from the available trading balance).

Now let’s fast forward to 11:00 AM. It’s the time when the BO trade expires. If the price was above 91.5, say 91.51, or more, then the transaction is said to be “In the Money”, and the trader would gain a percentage on top of the original $30. That percentage ranges between 70% and 85%. Let’s use 80%. This means: 30 *1.8 = $54, would be returned to the trader’s BO account balance, with a net profit of $24.

On the other hand, if the price was below the entry price at the expiration (11:00 AM in our example), say 91.49, or less, the transaction is said to be “Out of the Money”. The trader would lose the trading deposit ($30), but some platforms return between 5% to 15% to the account balance. If the trader had started with a balance of $100, he or she would end up with $74.5 (assuming the returned percentage was 15%).

In rare cases, the transaction expires “At the Money”, which is exactly $91.5. In that case, the trader gets back the $30, without any gain or loss.

From the above example, we can see why this kind of short-term investment is called binary. Because it has only two possible outcomes at the expiry of the trading transaction.

BO trading is stressful. Although the potential of making huge returns rapidly is obviously there, so many traders lose all their capital, especially when they get emotional, and try to retaliate, by investing even more to recover their loses.

There is also a factor of luck, and another of speculation here. That’s why experienced traders enter several transactions simultaneously, with the hope that more than half of the trades would end in the money.

Another aspect of BO trading is its heavy reliance on technical analysis. If you lack that skill, the process becomes closer to gambling than trading.

Most, if not all, BO platforms require a minimum deposit of $100, or more, just to start trading (this is different from the amount required per trade). They also run strict verification procedures, before a trader can withdraw any profits, especially if the platform was regulated.

Before engaging in this risky investment, you should research the provider (the BO platform) extensively. Read the FAQ. Evaluate your technical analysis capability, and only use money which you’re prepared to lose! Never use your milk or bread money…

I strongly suggest that if you’re a novice trader, you should steer away from BO trading.

All the best,

The Wealth Maker

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Making Money Online – part 2


 

In this post, I’ll start presenting few online, money-making methods, focusing on how they work, how they would generate money (or became monetized), and some of their pros and cons.

  1. Advertisement

Every year, businesses spend billions of dollars on advertisement. The online portion of that expenditure is getting larger and larger. The most common online advertisement instrument is the banner. A banner gives a flashy, brief sales message, that highlights the two or three biggest and most attractive attributes of the business.

Technically, the banner is but the nice face of few lines of HTML code. If you have an idea about programming, the banner is the execution of the HTML code behind it.

Once the banner is created and tested, it has to be promoted. Online promotion boils down to a single word: Traffic. For  the banner to reach as many potential buyers or subscribers as possible, it has to attract online traffic. So what does that mean? It means that the banner needs to be spread around, so that online surfers would see it, and be interested enough to click on it. Every click is called a visit, a hit, or a view. The more the hits, the better.

Since the banner  is “click-able”, once clicked, a webpage gets launched, and the surfer who has clicked the banner, would be shown a whole lot more details about the business. The hope is that the surfer would get more interested and “convert”. Conversion takes place when a surfer, who has initiated the “hit”, becomes a buyer of the business’s products or services. If the business needs subscribers only, conversion takes place when that surfer signs up, providing enough details, especially name and email address. That allows marketing/sales people to follow-up, in order to offer that subscriber a service, a product, or more information, for the time being. Another term that describes this process is “opt-in”. The surfer is said to be “opted in”, when he or she provides his/her name, email address, and sometimes, phone number, by filling out a special form on the sales webpage.

How would you make money out of all of that? The easiest way would be to sign up as an affiliate of an online business of your choice, and promote that business banner(s). The banners you promote, have in their HTML code your unique ID. So if they got clicked, the business (usually the admin) would know that it was you who had made that hit possible. The majority of businesses won’t pay you anything for hits only. But they do pay once the person who has clicked, converts. In other words, generates money for the business now, or in  the near future. As an affiliate, you would receive a percentage of that money, or an “Affiliate Commission”

To summarize: First you need to find a business you’re interested in promoting. Then you sign up as an affiliate. You get your special banner code and promote it, aiming at driving as much traffic as possible to that banner. The higher the traffic, the greater the probability that someone would click on your banner. The more the “clickers”, or the hits, the higher the probability of conversion, i.e. commissions.

Now you may ask: How would I promote that banner? The ideal approach would be to have your own website, where you paste the HTML code, so that the banner appears on your website, preferably the front page. But that’s not enough. You still need to make your site visible. You ought to drive traffic to that site. One way to do that is to list your site’s URL on as many traffic exchanges as  possible.

What is a traffic exchange (TE)? It’s a website that offers a service. When you sign up for that service, the site allows you to post a certain number of URL’s. Once you finish entering the URL’s (one of them is of the site, which contains the banner you wanted to promote), you can start “surfing”. This is a rather boring activity. You have to watch other people’s webpages, who are trying to promote, exactly as you are. Each “view” takes a number of seconds. Usually  between 10 and 30. For every site you watch, or view, you earn one credit. That credit serves as the cost of one view of your own site (sometimes the ratio is not exactly 1:1). You view other people’s sites so they view yours.

You could escape the boring part, to some extent, by joining an auto TE. The upside of that is you don’t have to click every 30 seconds or so to view the next page (and earn another credit). The TE does that for you automatically. The downside, however, is that other promoters would do the same. Which means they won’t actually see your site. Because while the auto TE is cranking, viewing one site after the other, people would minimize it, sending it to the background, and go off doing something else.

One way to know how your site is doing in terms of visibility and popularity would be to perform a Google search on it. The best result you should aim for is to see your site on the first page of the search results. Another technique would be to go to http://www.alexa.com. This free service tells you the rank of your site, globally, and locally, where the site was registered.

As you can see, the process is somewhat complex, and the reward is not that much, unless you became really good at it; something that takes a high overhead of time and energy.

This should be enough about advertisement as a source of online income. Please let me know if you have anything to add to the above, if you’d like to comment, or ask a question. All you have to do is use the form below. And don’t worry, you’re not “opting in” for anything 🙂

Till the next post: Read, think, consult your heart, decide and act…

The Wealth Maker

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Investment Partnership™


The world of investing is full of variables, risks, challenges, surprises, and of course, rewards.

Most people delve into that ocean, preoccupied by the lure of quick riches, overnight fortunes. They turn a blind eye to the other side of the coin; the risks, the great potential of losing one’s money, or part of it.

That’s why, the first rule in mindful investing is: Never Lose Money (Ben Graham). In other words: Preserve your capital, take reasonable, calculated risks.

One way to tackle this paradox is to work with an expert. That won’t be a money or fund manager. It’s a partner, who would go with you into that ocean, and help you reach the island of safety, and prosperity.

An “Investment Partnership™” is not a very common phenomenon. Actually, it’s rather rare, if not unique in the investment world. That’s why I consider it a new and innovative concept. The way it’s presented here is covered by the copyright provisions of this blog.

You and the expert set some terms and conditions. But the key idea is this: The client provides the investing money (principal), and the expert provides the time, the work, and the expertise. They are partners in both profit and loss on a 50/50 basis.

If they made profits, it got divided between them. On the other hand, if they lost, the client would lose his/her money (or part of it), and the expert would lose his time and effort. Most often, they would make profits, since the investment activity is based on careful strategies that take into account the potential risks, and provide safeguards to minimize them as much as possible. Preserving the client’s capital is the highest priority of the partnership.

The big and clear advantage to the client would be peace of mind, and freedom from the complexity and details of the investing process. Additionally, he or she would enjoy high profits without spending any time or effort.

The expert, on the other hand, who brings his expertise, time, and energy into the activity, doesn’t work as an employee. Rather, he is a partner. He only gets paid if he makes a profit. This gives him the right motivation and inspiration to choose the best possible investments. That’s how he generates his income, and at the same time, maintains and improves his credibility as a trustworthy and reliable investment professional.

Happy Investing to All…

The Wealth Maker