Entries Tagged 'Stocks' ↓
July 2nd, 2008 — Banking, Income Streams, Investing, Personal Finance, Stocks, passive income
If you’re trying to make more money, chances are you’ve heard the phrase, multiple income streams. However, there are two main types of income streams that you can use, and they are quite different. The first is known as active – and as the name implies, this is a type of income that you actually have to work for. Examples of active streams of income include running a part time internet business in addition to your work, or something that requires you to actually DO something to earn that money.
Passive streams of income make up the second type. These are the most popular, simply because you don’t have to worry about investing your most important quality – time. If you are already working a full time job, you may not have the kind of time necessary to develop an active stream of income. However, there are numerous kinds of passive streams of income that will reap the same benefits with a lot less effort. Let’s cover just a few examples.
Investments –
This is probably the most common form of passive income. You invest a little money, the stock does well, you cash in. It’s easy, quick and requires no effort on your part. While there is some risk involved, with proper research you can lessen this risk and reap the rewards.
Rental Properties –
This is a bit of a hybrid between the two types and the degree that it trends towards passive will depend on whether or not you have a property management company assisting you. In this event, this is a great form of passive income that is usually quite reliable. If you’ve got someone handling the maintenance, rent collection and other landlord duties, you’ll just have to collect the check every month. While you will have to pay that management company, it’s well worth it since you won’t have to deal with these issues.
Interest Payments –
Whether it’s from a P2P loan, a certificate of deposit or a savings account, interest payments are the easiest form of passive income. They also have some of the lowest rates of return but are generally considered to be quite safe. This is the perfect place to start if you’re completely new to building multiple streams of income and you can pick up a lot of helpful knowledge along the way.
Variations on a Theme –
There are numerous types of non-traditional forms of passive income streams that are variations on the themes mentioned above. Basically, anything that makes you extra money without requiring any work on your part can be considered passive.
When managed correctly, passive income streams are a vital part of your future financial planning. Many will keep returning long after you are retired and can serve as a cushion to keep you living your life the way you want to. The best way to take advantage of the situation is to implement both active and passive income streams so that you can have the best of both worlds and keep building up your bank account.
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June 16th, 2008 — Debt, Leverage, Money, Personal Finance, Stocks, Wealth
How many stories have we all heard about the entrepreneur that came to America with five cents and turned it into an empire? It’s stories like this that make us long for a piece of that American dream. We all wish that we could turn our nickels into big money, but most of us don’t know how to do it. The secret is using debt wisely to leverage more income producing streams. No one can turn five cents into five million dollars overnight, but by taking chances and finding ways to use debt smartly, you can become financially independent, just like the entrepreneurs of old.
The thread that binds all of these success stories together is that somewhere along the way, these entrepreneurs had to go into debt to make more money. Unless you’re Rumplestiltskin and know a way to spin straw into gold, you’re going to have to start taking chances. While it’s perfectly acceptable to put money aside every month or even put it into an interest bearing account, you’re going to nickel and dime yourself for years. You might be able to put aside a nice little nest egg, but what if you want to become really wealthy?
In order to accomplish that, you’re going to have to extend what you already have. It’s pretty frustrating to look at your checkbook and see the cold hard truth that your dreams of wealth are not panning out. It’s even tougher to spot a great opportunity, like a hot stock, and not have enough money to take advantage of it. However, there are ways that you can take advantage of that opportunity, even if you don’t have a lot of money in the bank.
Let’s say that you have the chance to purchase some shares right now. You don’t have the money on hand, but instead of giving up, you go to the bank and you get a loan for the money you need. You buy those shares and in five years, they’ve returned 500% of your initial investment. If you hadn’t taken that risk of going into a small amount of debt, you never would have been able to reap those rewards. Instead, you’d be muttering into your coffee as the news comes in on how well that stock you could have had is doing.
While most of us think of the word debt and blanch, when used properly and managed well, it is the key to becoming wealthy. Do you think billionaires spend their own money when they want to buy a new building? No, that would be silly. They put together a plan and get financing to pay for it. Then, when the rents for the building come in, they pay off that loan and go find another property. That is leveraging debt at its finest. You’ve got to have money to make money and unless you’ve already got it, you’re going to need to go into debt, at least at first, to make those big dreams a reality.
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June 12th, 2008 — Bankruptcy, Debt, Personal Finance, Stocks, credit score
This really sounds like the ultimate oxymoron, but one of the best ways to get out of debt is to go a little bit further in. What’s that? First, to help this make more sense, let’s clarify – if you need to get out of bad debt, going into good debt will help you pay off those credit cards and make more money. It’s important to understand that there is a huge difference between good debt and bad debt. Going into good debt has some risks, but when managed correctly, you can end up making enough money to quit your job, pay off your bills and save for retirement.
Let’s take a look at one example of how going into good debt can get you out of bad debt. For this example, let’s say that we have a person who has $10,000 in credit card debt. They’re overextended with too many cards and paying way too much interest. It’s getting harder and harder to make those monthly minimum payments and it seems as though it will take decades to get out of this mess.
Instead of declaring bankruptcy and just giving up, let’s say that this person goes and gets a loan for $2000. Since their credit is still pretty much intact, this isn’t an issue. They take than $2000 and invest it into ten shares of a stock that sold for $200 a piece. Within the first month, the price of that stock triples. They now have $6000 and it’s only been one month. They take $2000 out of that amount to pay off the loan, and are left with $4000.
Over the next month, the stock once again goes up. That $4000 is now $8000. The person cashes out the stock, pays down their credit cards and is left with a manageable $2000 in debt. Why not pay it all off? The secret to great credit is leaving some debt that you continue to make payments on – this builds up your credit score. In two months, the person was able to go from $10000 in debt to paying off all but a small portion of it.
Compare that to getting a consolidation loan. In two months, the person would not have made a dent in what they owed. If the stock market isn’t your thing however, there are many other ways that you can use good debt as leverage to create multiple streams of income. Whether you deposit it in a high interest bank, buy a CD or purchase a rental property, a leveraged loan can help you get out of debt much faster than a consolidation loan.
The key is picking the right opportunities and managing your money. Once you’ve paid down your bad debt, keep using good debt to create more income streams. This is the secret that thousands of millionaires use every year to keep bringing in tons of cash and it will work the same for you.
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June 5th, 2008 — Debt, Diversification, Financial Security, Income Streams, Leverage, Money, Personal Finance, Stocks, credit cards
Many of us have the wrong idea when it comes to debt. After years of being told that it is a bad thing and should be avoided, most of us never want to get into the problem of having to deal with debt. Millions more are in over their heads with bad debt and facing the consequences. However, there are ways that you can actually use debt to improve your credit.
The is a good kind of debt that everyone can use. This is the kind of debt that you use to secure your future, not the purchase of something you really don’t need. Instead of going into hock over the latest and greatest gadgets, you can go into debt as a way of leveraging it to create more money and thereby, improving your overall credit rating.
Let’s go back to when you first tried to get your credit cards. It was probably pretty frustrating, since you have to have a little debt if you’re going to get any new company to give you a chance. You’ve got to have a track record so that the company feels secure lending you more money. This is the best lesson you can have when it comes to debt. A little debt, properly managed, improves your credit rating. Bad debt, improperly managed will ruin it.
In order to make more money, you’re going to have to spend more. This doesn’t mean blowing your money on useless things. This means spending money on stocks or new opportunities that are going to pay off in the future. Since most of us don’t have a lot of excess cash buried in the back yard, this means that we’re going to have to go into debt to start making more money.
If there is one thing that most self starter stories have in common, it’s the fact that in order to get their big break, the entrepreneur had to get a loan from the bank or even a friend. They had to go into debt in order to be successful. Even if you’re dealing with your personal finances, you’ve got to look at them as though you are a business. You need to make those smart decisions that will create more income for you both now and in the future.
The proper use and leveraging of debt can turn you into a millionaire. It probably won’t happen overnight, unless you luck upon a stellar opportunity, but with time and patience, that leverage debt is going to return much more to you than any gadget ever could. It’s going to return your financial future and it will look a lot better than you ever though possible.
Debt doesn’t have to be bad, but it does need to be managed properly. Before you get involved in using debt for new opportunities, it is a good idea to make sure that you have at least a working knowledge of good financial practices.
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June 2nd, 2008 — Debt, Diversification, Investing, Leverage, Money, Personal Finance, Stocks
If you’re already leveraging your debt to produce more than one stream of income, you’re pretty familiar with how the process works. However, it’s really easy to get complacent when you’re leveraging debt and you may be missing out on other opportunities if you’re not looking outside your current comfort zone. While it is perfectly fine to focus on one area, it is riskier and you could be losing a chance to make even more money by diversifying.
Let’s say that you’ve already gone into debt for one opportunity. It’s doing quite well and now you’re at a crossroads. You can either invest more money into that particular program, invest in a similar program that you think will be similar in returns, or you can invest in something brand new that is in an entirely different market. While the first two are fine, they can be just as risky as the third.
Without proper diversification, you can be held at the behest of market whims and sometimes they are anything by kind. Sure, everything may look terrific right now, but what about tomorrow? If all of your holdings are in one industry or even one company, something as small as one event has the potential to induce financial ruin. That’s a pretty scary thought, isn’t it?
Diversification is the mantra for many successful businesspeople, simply because it works and it is very smart. Let’s look at this way. You leveraged your debt to invest in wheat futurities. Everything has been going great guns, you’re making plenty of money and then one day, a brand new wheat demolishing beetle appears and devours all the crops. All that money that you sank into that market will be for naught.
Now, let’s say that in addition to the wheat futures, you also invested in corn futures. Since wheat suddenly became unavailable, the demand for corn has skyrocketed. Now, you’re making even more money simply because you took that chance and spread around your investments. Instead of losing everything, you’re now better off than you were before.
This is just one example and it can be applied to virtually any industry. There is always a risk in sinking your money into one area. By spreading that risk around to several different companies or industries, you are actually reducing your own personal risk and playing a wide enough field that you’re bound to hit it big with at least one of the investments.
Diversity has saved numerous investors since the stock market opened. On the same token, failing to diversify has made millions of paupers. It’s simply good business and smart investing to spread out your investments over several areas so that all of your bases are covered. It may cost a little more initially, but you’re getting the security of knowing that if one fails, you’re going to have the backup of all of the others. This is the key to smart investing and to making more money with your investments.
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May 28th, 2008 — Debt, Leverage, Money, Personal Finance, Stocks, Wealth
If you’ve ever had a chance to invest in a great stock but didn’t have enough money put aside to take advantage of the opportunity, you know too well the agony of defeat. Most of us are under the impression that it takes money in the bank to start investing. If you’re not financially stable or independently wealthy, that means that you’re going to have to watch a lot of opportunities pass you by. Or does it?
There is a way that you can start taking those opportunities by the horns right now, before you have money put aside. Debt leveraging, when used properly, is an incredibly powerful tool that can really make the difference in your financial future. In most of us however the word debt conjures up some pretty unpleasant images. We’re all trained to think that debt is bad, that debt will ruin you and that debt should be avoided at all costs.
What if you were to change your way of thinking and embrace the fact that debt can be a very powerful tool? What if you stopped thinking of debt in only one light and realized that there are many different kinds of debt? We’re not here to tell you to run out and buy everything your heart desires, racking up all sorts of debt. That is why debt has such a bad reputation. The temptation to buy things we don’t need or can’t afford is pretty strong and millions of people end up falling into debt traps every single year.
That is mainly because they don’t use debt to make money. They use it to spend money and end up in way over their head. Instead of looking at debt in the traditional manner, we want you to start realizing that debt has the potential to change your future. You can use debt to start making those smart investments and start reaping their benefits right now.
Let’s say that you have the chance to purchase ten shares of a stock with your own money in the bank. It does well and you get a nice little payday. Wouldn’t it have been nicer to purchase ten thousand shares and retire? By getting a loan to purchase those ten thousand shares, you could have made more than enough to cover the costs of that loan and still retire. You can keep thinking small and making little returns here and there, but over time, they’re going to get eaten up.
If you want to make it big, you’re going to have to start leveraging debt in a smart way. We’re not saying get a loan and blow it on a non-performing risky stock. We’re saying, find the opportunities, research them and when you’re sure you’ve got a winner on your hands, go all in. Don’t waste your time with a few shares here or there. Get that loan, use options, and/or margin your portfolio to get more shares and get the benefits that debt leveraging can bring.
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May 26th, 2008 — Financial Security, Leverage, Money, Personal Finance, Stocks, business, credit card arbitrage, credit cards, margin
When it comes to credit cards, most of us think of them as a way to get things we really want right now. We may not actually “need” these things, but we sure do want them. Whether it’s a new couch, a new stereo or even a new wardrobe, we use our credit cards faithfully at the behest of our wanter. However, there is a common issue affecting most people in today’s societies. Our “wanters” are out of control and they are wanting the wrong things. There is nothing wrong with having some new clothes, but there is a better way to use your credit cards that can actually result in you having more money.
It’s time to take your “wanter” to task and retrain it. Instead of focusing on material things that you cannot do without right now, let’s talk about focusing on your financial future. Credit cards can be, when used properly, a way to secure that future and open up new opportunities. Instead of wanting all of the latest gadgets, isn’t it smarter to start wanting the things that really matter, such as more income coming in? By using your credit cards as leverage, you can actually start making more money with varing degrees of upside, effort, and risk.
There are numerous stories of film makers that used their credit cards to finance their little independent films. The films made it to the big festivals, got picked up by top distributors and went on to earn millions of dollars. Or better yet, how many Internet startups or online marketplaces have started with a found or three pyramiding their credit cards to retain a larger percentage of their company from the eventual venture capital backing… This is perhaps the best illustration of becoming wealthy using a credit card as leverage — boot strapping a business venture.
Although not a sure bet that the films or the Internet companies would make it big time, the founders were confident in their vision, and with dedication to the respective businesses and a luck, it paid off. As with all instances of leverage, there is risk. If the business failed or the film flopped the personal credit of the founder would be on the line (with a business there really is no way around putting your personal credit on the line while your cashflow is negligible.)
We’re not saying run out and run up your cards financing films or buying inventory for an EBay store. What we are saying is that by using that credit limit wisely, you can start taking the steps towards some pretty nice returns. Pick the opportunities that best suit your skill set and risk aversion level.
A low risk opportunity is low interest balance transfer offers from your exiting credit cards or new solicitations. This is called credit card arbitrage. You borrow money from a credit card at a very low interest rate and you store the money in an interest bearing account. When the low interest period draws to a close you withdraw the money and repay the credit card keeping any interest earned. With interest rates lower than in recent times the amount of money to be made this way is negligible unless you have 50K+ in spare credit card capacity.
This is relatively low risk, assuming you pay the credit card back on-time and make the monthly payments. If you forget and miss a payment then you might lose all of your earned interest in a single rate hike and interest charge.
Buying stock on margin is another form of credit leverage. It uses stocks in your portfolio and line of credit to purchase more stock than could be purchased with just the funds on hand.
The key is finding that balance between willful and negligent spending and spending for the right reasons. If you don’t manage your money properly, you’re never going to get ahead. You’ll always be treading water and trying to make ends meet. By being smart about your credit card expenditures, make more money than you spend. That way you can have the spare balance capacity to make money using credit cards.
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