Category: Investment Strategies

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Go Slow


Rushing is a form of greed. We can’t squeeze in a moment more than what it unfolds to offer. What does that mean? You might ask.

Each and every moment is a medium of expression and interaction. Our attitudes determine the way we interact with those moments, but nothing can “change” the nature of a moment, and what it has come to offer.

When it comes to investing, this is so rewarding, even if you can’t observe its effect immediately.

“Go slow” is not a synonym of “be lazy”. It’s an invitation to be mindful of your vision, objectives and actions.

Take your time researching a potential business; read, analyze, and discuss, but never rush to a decision under the pressure of timing the market. That strategy has proven to be misleading, at best…

Once you reach a decision, and you become ready to act, then go for it, do not delay. Here you can be bold and swift.

Now you have planted the seed. You can’t sit next to it and repeat: “Grow, grow, …”. Can you do that on a farm? Can you speed up natural processes, skip a season, harvest in February and plant in September?

The same principles apply across the board, in each and every human endeavor.

Your seed is the “wonderful business” you’ve mindfully invested in. Go slow! Learn to wait. Cultivate patience. It pays in droves at the right time.

How do you know if it is time to harvest? When the business ceases to be “wonderful”, or when it has already produced a handsome return. Before you sell, though, you should have already completed the same research process on another business, in which you intend to reinvest the profits from selling the first business. You need to have liquidity as part of your portfolio, but don’t leave too much sitting around, doing nothing (actually un-invested money becomes a burden, over time, as it loses some of its original value due to inflation and other factors).

Is that boring? You bet it is! But boring is better than losing, isn’t it?

Refrain from buying and selling for the sake of having fun and excitement. Find another venue to satisfy that desire. Investing isn’t a game to be played. It is a discipline to be followed…

Good Investing!

The Wealth Maker

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The Velocity of Wealth Creation


 

What’s the difference between speed and velocity? Speed has only a magnitude, while velocity has a magnitude and a direction. In other words, it’s a “vector” physical/mathematical quantity.

What does velocity have to do with wealth? A lot!

Like it or not, time is an essential variable in the wealth equation. We’ve seen in several places how we could use time to our advantage, as intelligent investors. For example, once you find a “wonderful business”, you don’t pay the “sticker price”. You “wait” till the share price of that business drops low enough to give you a Margin Of Safety (MOS). Please review the first few articles.

The velocity of wealth is the pace and direction at which you move towards achieving your wealth objectives.

There are several factors that affect that pace. Your age, the stage of life you’re currently at (a student, an employee, a family man  a retired person, etc), the geopolitical environment you happen to be in, the influence of your family, friends, co-workers, your upbringing, the level of your self-esteem, the amount and quality of the financial knowledge you have.

At some stages, it’s wise to focus a considerable portion of your time and energy on wealth creation. This would give you the freedom to slow down at other stages, and focus on other priorities.

So your wealth creation velocity changes speed, and sometimes direction, as you move from one stage to another, or as you change any of the factors mentioned above (the list is not inclusive, you could come up with other factors relevant to you).

You could also derive from the above that your financial wealth creation, is but one of your priorities. Hence, it’s essential to have a vision of your life that encompasses all your priorities, values and roles. And a mission statement, which maps out the distribution of all of these elements across your life.

A question may arise here: Can one increase or decrease his/her wealth creation velocity, without negatively affecting other areas of their lives?

Yes they can, but not randomly or abruptly. For example, when your family responsibilities are at their minimum, you can dedicate yourself much more to wealth building (instead of wasting your resources on meaningless activities). This would pay dividends later on, when you don’t have the same amount of free time.

As a rule of thumb, the earlier you start the better. I know people who started investing in their teens. Don’t wait till before retirement to think about your financial future. It would be late, but not impossible. There are always ways to start all over again, and as the saying goes: It’s never too late!

The Wealth Maker

 

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The Wealth Algorithm (7) – Business Plan


 

In the last post, we concluded by listing few steps you’d need to take, in order to finance your dream via a partnership.

Before you can engage a potential business partner in the process, you must be ready in terms of your plan and strategy of developing the capital to reach the intended result.

According to Wikipedia.org, “A business plan is a formal statement of a set of business goals, the reasons they are believed attainable, and the plan for reaching those goals. It may also contain background information about the organization or team attempting to reach those goals.”

In our case, there’s only one “goal”, which is the intention we clearly defined. Next, you need to explain “the reasons you believe that intention is attainable”.

There could be different reasons to different people. Imagine your potential partner asking you this question: “Why do you believe that you are able to grow this “X” amount of money into, say, one million, over the course of the plan”?

Here, one should look closely at his/her skills and talents related to managing money, and financial assets in general.

If you feel you don’t have what it takes to succeed at this task, don’t be disappointed, you’re not alone. That’s why lifelong learning is so important, not only for our bank accounts, but also for our physical and mental health.

Keep things simple, pick one or two methods from the ones we’ve covered here. Make sure you understand the ins and outs of each one, then use that in answering the above question.

Let’s assume you were interested in building an online store. After reading and fully understanding the article, expand your knowledge further. Do more research. Try to actually build a simple online store and see if your interest was still the same, more or maybe less. Take all of that into consideration while writing your business plan.

Once you’ve answered that question, the rest is much easier. You want to do your best to prepare a plan that is precise, presentable and convincing. Include a step-by-step action plan that specifies the activities, the desired accomplishment from each activity, the time-frame, and the resources you may need (financial, human, etc).

A good way to start would be to use a “template”. This is available online. Pick one that you understand and can fill out effectively, in light of our discussion above.

The following points cover major areas of a business plan as described on the BDC™ site (Reference: http://www.bdc.ca/EN/articles-tools/entrepreneur-toolkit/templates-business-guides/Pages/business-plan-template.aspx):

  • Business overview: A brief description of your company and where it stands in the marketplace;
  • Sales & marketing plan: The sales & marketing strategies that will be used to target your customers;
  • Operating plan: A description of the physical aspect of your business operations;
  • Human resources plan: Details on your key staff, HR policies & procedures;
  • Action plan: The planned actions of the business over the next 2 to 3 years;
  • Executive summary: A summary of the reasons you are seeking financing, together with a summary of your business operations;
  • Financial appendix: The facts and figures that back up what you say in your plan.

 

All the best,

The Wealth Maker

 

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The Wealth Algorithm (6) – Partnerships


 

Since the beginning of this series, we’ve been on a journey. No hurry, no rush. It’s a journey of a lifetime. Most of us have spent their days under pressure, trying to do several things concurrently. It’s different here. When you come to this blog, I want you to set everything else aside. Read, focus, apply, enjoy the dream of eventually reaching abundance. Through these articles, your reading and application, together, we shall make that dream your reality!

Today, I’m going to talk about the second option of financing that dream, which is partnerships.

I had written an article titled “Investment Partnership (TM)“. It would be helpful to go back and have a look at it before you continue reading.

According to the online Merriam-Webster Dictionary (TM), a partnership is “a relationship resembling a legal partnership and usually involving close cooperation between parties having specified and joint rights and responsibilities”

The keywords in that definition are: Relationship, legal, cooperation, parties, specified rights and responsibilities.

How does that relate to our discussion?

Your intention is to reach a certain sum of money by a certain date. In order to do that, you need a capital to grow. Obtaining that capital requires some sort of financing. An investment partnership (TM), is the option we decided to pursue to secure that financing.

As I mentioned in the article referred to above, this partnership takes place between two parties: One party provides the capital, the second party provides the time, energy and expertise to grow that capital, over a specified period of time. The two partners are equal. They share profit and loss on a 50/50 basis.

The partnership agreement “specifies” the details of the “relationship”: The legal aspects, the type of cooperation, the involved parties, and the rights and responsibilities of each party. It also specifies the capital, the timeframe, and the way any outcome shall be shared between the parties.

From your perspective, here is what you need to do:

  1. Prepare a convincing business plan, that outlines your strategy of how you intend to grow the capital
  2. Find an interested party, who has that capital, and who is willing to consider a partnership with you
  3. Present your plan, and hopefully, win the approval of your potential partner
  4. Work with your new partner on the partnership agreement
  5. Get the funds and start working!

In the next article, I’ll shed more light on each of the above steps. Please spend some time on this post, and let me know if you have any questions or comments.

The Wealth Maker

 

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Trading Secrets: When to Enter and When to Exit


 

Those are the two most important decisions a trader has to take. They sort out the winners from the losers, in this tough activity.

So how would you make these two calls?

First, let’s focus on the decision to enter a trade. Once you choose whether it’s going to be a “Buy” or “Sell” call (as explained in the previous article), you now need to pick the right entry point. For Buy trades, you need the lowest possible price. On the other hand, for Sell trades, you look for the highest possible price of the asset you intend to trade.

Let’s use an example. Suppose you wanted to trade gold on the upside (a Buy Call). You look at the price chart, and you notice that gold has been trading between $1595.00 and $1610.00 an ounce over the last 24 hours. Then you go through the latest financial news. The stock markets, say in  North America, have been going down for the last five sessions. You also look at world news: There’s a conflict in Syria, an earthquake in Japan, and the Russian army has just entered Georgia to aid the local government in its struggle against the rebels.

How does all of that affect your trading decisions? Let’s take them one by one. The slump in the stock markets makes most investors flee to safe havens, namely gold and silver, which means the prices of these two precious metals are destined to rise, at least on the short-term. The instability in Syria and Georgia points to threats to oil supply, and higher demand of weapons. Liquid cash is at play here. Again, gold and silver are easier to convert into cash than stocks. This supports the speculation that prices of these two instruments are expected to go up.

Now you are more confident that a Buy Call is the way to go. Your next step is to choose your entry point. This is tricky. If you jumped in immediately, you might lose the chance of entering at a lower price. If you waited too long, you might miss out on the window of opportunity, as prices already started to ascend rapidly.

Your target, as a wise trader, should not be to enter at exactly the lowest point, and leave at the highest possible price. If you insisted on that scenario, you would lose many trades. So what is your target? You want to have a piece of the pie, not the whole thing, in order to avoid the risk of making your pie and eating it!

Going back to the price range, you put an “order” to buy 10 ounces at $1600, and sell them at $1605. Why would you do that? To be as certain as possible that your net would catch some fish in the middle. The price may not go as low as $1595, or as high as $1610 again. But the probability, given all the analysis, of the price moving through the range between $1600 and $1605 is quite high, and that’s what you want.

This kind of trade may look modest, but it would give you $50.00 within a day. Keep in mind that this should not be the only trade you do. You should get involved in two to four trades concurrently. This serves the objective of diversification, which we’d talked about before.

In today’s online trading, all platforms give you the facility to set an entry price, a stop-loss price, and a take-profit price. Your role is to pick the right prices.

Once the trade is executed, you should keep an eye on it. If it behaved in a way that would indicate a bad result, you would need to interfere, by either closing the trade, or adjusting the stop-loss and/or take-profit prices. Your first and most important objective is to preserve your capital, then to make profits.

A wise trader would not discount a small profit if he/she felt that waiting for a higher profit might risk a good portion of his capital. A profit of $2.00 is definitely better than a loss of $10!

Another aspect of trading is repetition. If you couldn’t make the profit you had anticipated, you would go out at a lower profit, preserve your capital, then enter again, using the same asset, or a different one. The bottom line is to create momentum and good income. The kind of asset is irrelevant. It’s only a vehicle. What matters is how you handle the asset in a way that brings the best possible results, under the current circumstances.

To be continued…

The Wealth Maker

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How To Trade?


Trading is different from value investment in several ways. While VI is long-term in nature, trading is short-term by definition. VI focuses on the fundamentals of the business you’re investing in, trading is concerned about price movements and technical analysis.

In the last article, I talked about a special type of trading, called Binary Options (BO) Trading. In this post, I’m going to spend some time elaborating on trading in general.

Trading, as the name implies, is an exchange of two investment aspects, over a short period of time. A trader buys an investment instrument, at an attractive price, hoping that its price will go up (or down) over a certain period of time. This is an exchange between time and money.

If the instrument’s price went up, say after three hours of purchase, the trader could “long” the asset (sell it at a profit), retrieving the principal plus the difference between the original (entry) price, and the current (higher price).

If the instrument’s price went down, below the entry price, the trader would have few options here: He could “short” the trade, meaning he would sell the instrument at a loss, to avoid further loses, he could wait, if his information and best judgement expected the asset to go back up, at least to the entry price. Or he/she could set a “stop-loss” price, at which the trading platform would sell the asset automatically. Usually, the stop-loss and “take profit” prices are set at the inception of the trade. Setting these two price limits is tricky. It takes experience, knowledge of current market conditions, vision, and decisiveness (and a touch of good luck). “Take-profit” is the price at which the platform would sell (or buy) the asset, making a preset profit for the trader.

As you can trade on the way up, you can also trade when prices go down. In this case, you wait till the price reaches a point of saturation. To determine such point, you need to use your technical analysis skills. If you looked at the asset’s price vs time graph, and noticed a clear peak, that might be an indication that a price descend would follow. You would sell the asset at that high price, and then buy it back when it fell down. Your profit would be the difference between the two prices.

Some price peaks are deceiving. The price goes down for a short period of time, then moves up, reaching even a higher peak. In that situation, a trader would lose money if he/she had traded on the speculation of a price downfall.

It’s obvious that the two most important decisions here are: When to enter a trade (buy an asset or sell it), and when to exit (sell an asset or buy it).

In the next post, I’ll shed more light on these two critical calls. The successful trader never takes these two lightly. They actually distinguish a careful and wise trader from a lousy one. Since this is not gambling, lousiness and panic are the trader’s worst enemies.

The Wealth Maker

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Making Money Online – Investment


Value-Investment is the main theme of this blog, especially the first half of the articles. But today I’m going to address the topic of investing as it pertains to the online landscape.

The simplest definition of investment is growing financial assets (the term is broad enough to cover other kinds of investment, like investing in one’s health, family, society, but our topic here is concerned with financial investment only).

Think of it as farming: You implant a good seed, in fertile soil, wait for a certain period of time, while watering, fertilizing and weeding, then you end up with some kind of vegetable or fruit. The seed is a metaphor for the initial capital or “principal” allocated for investment. The fertile soil is the investment instrument or “program”, the period of waiting is the investment term. And finally, watering, weeding and fertilizing represent your follow-up and tracking of your investment, to make sure it’s growing, not shrinking! And of course, the fruit is your profit…

The web has revolutionized many aspects of our lives, including our finances. One of those areas is online investment. Nowadays, you may engage in several investments, from the comfort of your home.

Traditionally, people would invest in businesses directly, or through stock markets. Another type of common investment has been in precious metals, such as silver and gold.

You can still do that and more online. Following are some examples:

  • Investment in silver and/or gold
  • Investment in energy and resources (crude, gas, solar, green, water, forests, etc)
  • Investment in online businesses
  • Investment in off-line businesses via online instruments
  • Investment in advertisement programs
  • Investment in High Yield Programs (HYIP)
  • Investment in stocks
  • Investment in Forex (Foreign Exchange)
  • Investment in commodities (coffee, corn, cotton, copper, etc)
  • Investment in real estate
  • Investment in web space, or buying and selling domain names
  • investment in Binary Options and Futures
  • Investment in online traffic

I’ll give a brief description of most of the above opportunities starting from the next post.

All the Best

The Wealth Maker

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Making Money Online – Online Stores


 

So far, in this series, we’ve talked about advertisement and MLM. The first article sets the stage for the whole discussion. Please read it before reading any other article in the series.

3-Online Stores

Have you ever dreamed about opening your own store? Selling something you’re interested in? I guess most entrepreneurs have.

Creating an off-line store involves licensing, real estate, decoration, shipping, etc..

On the other hand, an online store could be as simple as one page, where you display some digital products. You could even delegate the back-office details to the vendors of the products you display on your e-store.

A very common example is Amazon’s (TM) a-store. First, you need to sign-up as an Amazon affiliate, for free. Then, you design your online store using Amazon’s templates and menus. It’s a fairly simple process. You finally end up with a website that shows Amazon’s digital, or physical, products.

Your next step is to promote your a-store’s URL, following the methods we’ve covered so far. If you managed to drive enough traffic to your store, and hence sales, you would receive commissions from Amazon right into your affiliate account. They would take care of accounting, shipping, handling, and so on. Your job is: First to design the site, using Amazon’s help, then promote it, so it makes sales.

Amazon is not the only online provider of e-stores. If you liked the idea, you could search for other companies that offer products or services you are interested in. Become an affiliate, then create an e-store using their ready-made templates and tools.

Some people prefer to have their own thing, completely independent of any existing business. In that case, the first part of the process becomes harder. You would need to have your own domain name, hosting, and web design (if you lack that skill, or don’t have the time for it). Each one of those costs you money, and time. But the end result would be a custom-made e-store, where you would sell products, services, memberships, programs, whatever, of your own choice. You could even list your own products, things that you’ve created yourself. A common example is an e-book, or a traditional book. Another example would be a service you intend to offer, like training or coaching.

If you went that path, you would be responsible for all the details. Your site should be equipped with online payment forms and buttons. It has to be able to process payments by credit cards or e-currencies, such as PayPal or Alertpay. You would need to take care of your own inventory management, website back-office maintenance and update, etc.

The second step of the process is the same. You still have to promote you custom-made e-store, drive traffic, and make sales. But while an affiliate e-store owner is not responsible for anything once the customer decides to buy, the owner of a custom-made e-store must follow-up the steps of completing the sale, till the money actually lands in his/her account of choice. Not only that. He or she has to perform all after-sales activities. Things like returns, refunds, complains, maintenance, and so on.

Please spend enough time researching both options. There is enough information online. But you may also consider talking to someone who has already started an e-store, of either type. Pick their minds, ask them questions, do your own online research, then prepare your strategies and plans.

All the Best…

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