Every day we hear success stories of those who made a killing in the markets, and at the same time, we hear about those who lost everything they owned in the markets. What makes one person succeed and another fail? While there are thousands of answers to this question, let’s focus on the fundamentals of smart investing. Granted, you can never invest without at least some risk, but there are ways that you can minimize that risk, make smart choices and become one of the success stories instead of one of the failures.
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Trust
First, there’s the premise of going with your gut. Our instincts are very powerful and usually do not lead us astray. Usually – but not always. Smart and successful investors learn to go with their guts, but they also learn to separate what their heads, hearts and guts are saying to find the answer they need. This isn’t some strange spirituality, it’s actually common sense. We can convince ourselves of almost anything, but it’s hard to get rid of that little pit in your stomach that is warning you.
In order to become a smart investor, you need to learn how to hone your gut instincts. Listen to that little voice that says, “Are you sure?” before automatically defaulting to what your head is telling you. This is the easiest way to save yourself a lot of trauma, but it’s only one of the components that you’ll need to become a smart investor. There are a few others that are just as important.
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Due Diligence
Next, you’ll need to learn how to research and do your own due diligence on an opportunity. The Internet has made this easier than ever and you can learn quite a few things with just a simple search. If you’re thinking about investing in a new company, do background searches on all of the principles. You’ll learn a lot about what they’ve done in the past and if they have been involved in anything untoward or overly risky. Check the company with the Better Business Bureau and see if other people have had issues with it in the past.
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Balance
Due diligence is the key to becoming a smart investor, but it’s not the only one. The last piece of information that will separate the success stories from the failures is that you need to know how to balance your risks. Would you put your entire family into a car and head them toward a cliff, trusting that the breaks will not fail? You should never put your home, family or livelihood in jeopardy with an investment, no matter how solid you think it may be. It’s just not worth it.
Smart investors learn how to combine all three of these keys into one main philosophy that keeps providing them with winners, over and over again. Your best bet is to start small to test your instincts. Never get in over your head and always remember your instincts.
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If you’re interested in leveraging your credit in a safer environment, credit card arbitrage is one of the best ways. In order to succeed, you need to make more interest than your low interest balance transfer offer and for that you need to invest your money in a high interest bearing account. However, there are many different high interest banks out there and it can be difficult to know which one is right for you. Here are some guidelines to help make your choice easier and help you get the best deal for your investment.
1. Are there any fees?
Numerous high interest banks charge account fees that can gradually chip away at your funds. If possible, look for a bank that does not charge these fees so that you won’t be out anything. If you can’t find one that you like, look for the banks that charge minimal fees and guarantee that they won’t go up. There are numerous scams out there that involve getting you in a low fee rate and then suddenly raising the costs.
2. How reliable are they?
Just because a bank sounds good on paper doesn’t mean that they are. You’re going to need to do some due diligence to protect your investment. If you’re dealing with a pretty well known bank than this isn’t such a large concern. Keep in mind however, that even big banks can fold suddenly, as evidenced by the fallout in the current housing markets. While US banks are insured up to $100K, getting access to your money in such an event is a potential issue in the short term and more than likely the high interest paid will convert to a substantially lower amount paid after the closure.
3. What is the minimum amount required to open an account?
If you are only placing a limited amount of funds in a high interest bank you need to be aware that some of them have limits as to how little you’ll be able to put in. For some larger banks, like ING, the minimum is only a dollar. For others, the minimums may be higher than $10,000. This can really help narrow the field, especially if your investment is very limited.
4. How good are the rates?
Although most high interest banks offer similar rates, keep in mind that even a tiny little point or percentage can make a big difference when it comes to the amount of your return. Make sure that you do your homework to find the right bank that not only meets the criteria above but also offers you the best interest rate.
5. Will the rate fluctuate?
It goes without saying that it is much smarter to put your money into a fixed account. Sure, if the rates go up suddenly you may be out a few bucks, or even a lot of bucks. But it’s a lot better than facing the music when the rates plummet down.
It is also a good idea to consider opening more than one high interest bearing account with different banks. Diversity is always key when it comes to smart investments. It’s never a good idea to put all of your eggs into one basket. As we mentioned earlier, even the best banks can fail. You won’t be hit quite as hard if you’ve got your money spread around with different banks.
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