Money

Investing:

Life Insurance as an "Investment":

While working for a life and health insurance company I discovered that there is a strategy superior to purchasing what is referred to as "whole life" insurance when seeking to plan for your retirement. Investors are more likely to be able to earn above average rates of return on their initial (and periodic) investments, if they instead: purchase lower priced "term" insurance and then invest the unspent premium savings in to financial constructs that are more likely to be able to provide you with the superior rates of return increasingly necessary in order to be able to experience the quality of life in your retirement that you became accustomed to while working. Such investment constructs are (from the most basic... to the most complex):

Mutual Funds:

Investing in mutual funds can be much more profitable if you are a little more proactive than most in your consideration of available choices when making fund selections. For example, most people allow their employer contracted financial planner to choose their funds for them, and unfortunately many such planners only represent one particular fund company (or "family") and thus most of them are often not very well prepared to effectively engage in proper mutual fund selection on your behalf. Rather than being willing (or able) to select funds that are the best for their clients, too many planners often simply choose funds based up on a limited selection of choices they have knowledge of, or get paid commissions on, as a result of their corporate affiliation.

In order to make superior choices as to which mutual funds to invest in, you should ideally attempt to locate mutual funds with both:

Relatively low expense ratios,

and:

Management who have both:

Exhibited the ability to earn their funds share holders average, to above average, rates of return (when compared with other funds perceived to convey the same level of risk),

and:

Fulfilled a past, long term tenure of administration, and appear likely to continue doing similarly as time advances into the future.

Most mutual funds invest their share holders capital in to one, or more, of a few categories of investments, such as:

Money Markets:

Such mutual funds offer relatively low rates of return, but the benefit is that they expose their share holders to relatively low risk of loss of capital. The benefit of such funds is that those meager rates of return are usually still higher than those earned through the savings, and checking accounts offered through most banks. If you find that you would like to earn higher rates of return, while assuming a little bit more risk, then you may want to consider investing in to:

Bonds:

There are two main types of bonds:

Corporate Bonds,

and:

Government Bonds.

(Government bonds are most frequently issued by federal, state, and municipal entities, in order to finance public facilities improvement projects).

Bonds are generally rated according to their level of risk, on a scale from the safest, to the riskiest, with the following designations (in descending order):

AAA

and so on...

Descending down to other, riskier designations, with the riskiest being frequently (and cyclically) referred to by one of either of two extremist labels, such as: "Junk Bonds" (when the market for such offerings is not profitable) and: "High Yield Bonds" (when the market for them is profitable).

Even though some well known investment fund managers are heavily invested in to bonds, I personally don't spend much time analyzing, or categorizing them, be cause I am of the opinion that investors are much more likely to earn the highest rates of return on their investments through the intelligent purchase, and sale, of corporate:

Stocks:

Investing in stocks can be quite time consuming, and if not done correctly, also uncomfortably risky. Fortunately, there are some techniques and strategies you can rely up on when choosing corporate stocks to invest in, the most basic of which is to purchase shares of previously mentioned "mutual funds" that simultaneously invest your money in to a large number of different corporations, the most common of which are usually passively managed stock "index" funds, such as the:

Dow Jones Industrial Average: through which you would own small amounts of the stock of each of the twenty largest industrial corporations in the United States,

NASDAQ "ETF": through which you would own small amounts of stock of each of the one hundred largest corporations on the "North American Securities Dealers Automated Quotation" market,

or the:

"Standard and Poor's (S&P) 500": through which you would own small amounts of stock of the five hundred largest corporations in the United States.

Such highly diversified investment portfolios are generally considered to be "safer" than investing in to individual stocks, because most investors (and even many "professional" investment fund managers) are too often not able to correctly value corporate stocks, nor to effectively time their purchases, and sales, for maximum profit potential, and so many investment industry professionals have acquiesed to such relying up on such simplistic strategies as "diversifying" their clients investment capital in to such large numbers of stocks, in the hopes that by doing so, they can (theoretically) minimize the risk of loss of client capital, while at the same time still allowing their clients to potentially profit from the anticipated growth, and historical strength, of our nations largest industrial corporations. The rationale behind such an approach is that the probability of more than a small percentage of such a very large number of major, industrial corporations all going bankrupt, all at the same time, is (under normal socioeconomic circumstances) quite low.

Following are some price indices displaying the most recent closing prices of some of the most popular national (and international) stock markets (as well as some: prices {and [interest]: rates of: return} for some of the {least risky [and <thus>]}: most: popular: investment vehicles {such as: 10 year U.S. Treasury bonds} and: "spot" {current} prices for: some {popular}: investment commodities {as well as: for: some:[general <United States of: American>]: economic statistics}):

While purchasing shares of mutual funds that invest in stock market indices can be an effective approach to earning money through your investments during times of predictable macroeconomic activity, during times of social, political, or economic change, you may feel compelled to transcend ownership of such basic constructs, and instead investigate (and consider the adoption of) the more complex strategy of concentrating your investment capital in to the purchase of one, or small number, of individual corporate stocks. How ever, such an approach requires the implementation of more complex strategies, most of which rely up on the rigorous, mathematical analysis of the financial fundamentals of the individual corporate stocks that you are considering purchasing.

The two best ways to do that are to either:

Recruit the help of a stock analyst, which you can do by clicking on to the "More..." tab at the far, right hand side of the horizontal array of such tabs at the top of each page,

or:

Acquire the ability to identify potentially profitable individual corporate stocks your self, by:

Scrolling down to the section of this page titled "Advanced Stock Investing",

and then:

Clicking on to some of the links to books and periodicals you should read in order to be able to acquire the intellectual ability to manage your own investments effectively.

If you only have a very small amount of money to invest (but you'd like to try to multiply your investment profit potential by a factor of five to ten) and you are prepared to tolerate a proportionally increased risk of loss of capital, then you might want to consider the purchase, and sale, of corporate stock:

Options:

The most basic options are known as "calls" and "puts", which give investors the right to buy, or sell, a certain number of shares of a particular stock at a future date, while only having to invest a small percentage of the purchase price of those stocks. Such strategies can allow you to magnify (or: "leverage") your initial investment of just $250 to $500 in to potential profits much greater than you would be able to realize through the traditional purchase of actual shares of the underlying stocks up on which the option to buy, or sell, is relevanced. Such an approach could allow you to profit from the upward (or downward) price movement of many more shares of stock than you would be able to actually purchase through the same amount of initial, capital expenditure.

If you think that you are interested (and more ideally: prepared) to invest in to financial constructs that can return to you the same, possibly high rates of return that good corporate stocks can return to you, and you are prepared to be come more deeply involved in the day to day operational management of the company (or companies) which you would own, then you may want to consider investing your money in to:

Buying and Selling Businesses:

Businesses are valued the same way that corporate stocks are valued, by conceiving of them as bonds with a fixed rate of return over the life of their investment term. For example, if an investor buys a corporate bond with a 5% fixed rate of return over the life of the bond, then that investor can reasonably calculate the value of that bond using "present value" mathematical techniques.

To accurately price corporate stocks (or the underlying businesses they prove partial ownership of), one must imagine that the companies yearly profits will extend into the future in some sort of stable pattern, and then discount those future revenues into a present day value, discounted by the expected rate of inflation.

So, if you can expect a company to earn a 10% profit on the dollar amount of it's net worth, year after year, for a reasonably assumed number of years, then you can then discount those anticipated future profits into a present day dollar amount (and then add all those values up), to arrive at a present day value of what that company is likely worth. If the value of the sum total of all the future profits (after discounting for inflation) is greater than the current net worth of the company, then that companies stock is worth more than it's current market price, and thus, it represents a good investment.

Another investment that has proven to be quite stable, and which many owners of which seem to experience a lot of present benefit while owning, is:

Real Estate:

I am of the opinion that as time goes on, purchasing real estate in southern California is going to prove to have been a wise investment decision for a few reasons:

The climate here is great,

A large number of huge U.S. based corporations with multinational operations are headquartered here,

and

This regions proximity to China (and other east Asian manufacturing superpowers) is very helpful in completing the mass manufacture of many of the electronics products that are, in large part, designed and engineered here, and close to here.

However, securing adequate quantities of clean, unsalinated water is the primary concern of commodification here, as this region of our country in situated atop an arid, semidesert environment, and so choosing cities, counties, towns or subdivisions to live in that confer guaranteed water rights upon property owners for many decades to come into the future would probably be wise.

With regard to economic prospects in, and of, the United States of America (as of: June 5, 2015):

I am of the opinion that the profitability of this nations economy has peaked in many ways. Gold prices are almost certainly going to decrease (likely slowly) over time, but sudden price decreases are possible. Prices of silver are also likely to decrease over time because of the fact that the predominant source of industrial demand for that metal has been almost entirely derived from (increasingly steadily disappearing) prior need from the photographic and videographic film industry, which appears to be steadily converting it's technology to rely, not upon silver backed physical films as in the past, but increasingly upon electronic digitally encoded formats.

Prices of other (non jewelry related) precious metals that have industrial uses will fluctuate with normal market demand in correspondence with levels of general, macroeconomic activity. For example, the market for copper will likely exhibit significantly strong demand (and thus stable, or slowly increasing prices over time) due to the fact that many priorly designated "third world" nations are increasingly industrializing their nations productive activities, and I am skeptical that those developing economies will make an immediate leap to the digital, fiber optic era, but rather will likely advance through a transition period during which their various nations technological infrastructures may, for a time, be at least partially reliant upon older, copper wire based technologies, and so I am of the preliminary perception that demand for that particular metal will likely stay stable, and possibly even rise, over time.

However, to formulate a more definitive opinion more analysis is required, and so here is a chart displaying the most recent closing prices for various, commonly utilized:

Advanced Stock Investing:

(a.k.a.: "How did multibillionaire investor Warren Buffet become so wealthy?")

Mister Buffet became a billionaire over a hundred times over by following an investment strategy called "Value Investing". Such investing strategy relies upon the fact that a businesses yearly projected profits can be mathematically discounted backwards, and then added up, resulting in a total that represents the dollar value of the company.

That dollar value of the company is then divided by the number of shares the company has in circulation, resulting in a true value per share for that company. If that calculated value per share of the company is less than the current market price per share for its stock, then that stock is said to be "undervalued", and represents a good investment.

However, there are a few drawbacks to relying solely on Value Investing techniques:

A lot of people don't have the patience to apply the rigorous mathematical analysis necessary to properly value a company,

and

Many investors are not patient enough for the millions of potential buyers in the stock market to realize that the stock of the particular company determined to be "undervalued" is, in fact, undervalued, and then buy shares of it to hold on to for future sale at a higher price, thus giving them their profit.

Fortunately there are a few shortcuts that can be taken:

Certain disproportionately revelatory financial ratios can be relied upon as a shortcut to bypass the normally rigorous process of mathematically analyzing a companies financial statements in depth,

and:

Buying and selling "momentum indicators" can be used to determine when a good stock is actually going to rise in price, so one is not left holding a stock that one knows is fundamentally sound for years and years, waiting impatiently for its' price to rise.

Instead, one can locate undervalued stocks by relying on certain financial ratios, and then determining when to buy it, by examining the momentum indicators calculated by automated analysis of buyers and sellers activity for that stock on the various stock markets.

If you would prefer to learn more about investing on your own, you may want to consider exploring the following books and resources that can help you acquire the necessary mathematical, financial, and intuitive analysis techniques that most successful investors rely up on when attempting to correctly value corporate stocks for their profitable purchase and sale:

"The Warren Buffet Way"

by: Robert Hagstrom

This book outlines the methods that Mister Buffet relied upon to correctly mathematically value corporate stocks, and in the process amass himself a more than one hundred billion dollar fortune.

"How to Make Money in Stocks"

by: William J. O'Neill

Describes his "CANSLIM" method of stock analysis, which combines features of both the "value" and "momentum" styles of investing described in the "Financial Management 102" section above:

Specifically, the acronym C.A.N.S.L.I.M. can be explained as follows:

C: the companies Current earnings-per-share (E.P.S.) should be increasing quarterly.
A: it is helpful if the companies earnings are also increasing Annually.
N: the company should offer New products, management, or stock price highs.
S: Supply for the companies stock should be less than buyers demand.
L: the company should be a Leader, not a Laggard, in it's industry.
I: it is helpful if the companies stock has "Institutional sponsorship".
M: what is the Market direction?, and how will it influence the future price of the companies stock?

And more...

That book led me to subscribe to that Mister O'Neills comprehensive daily statistical spreadsheet investment newspaper, the "Investors Business Daily":

While the "Wall Street Journal" daily and "Barrons" weekly newspapers can be helpful to investors seeking to comprehend the general trends in the corporate sector of the United States of Americas economy, I am of the perception that the "I.B.D." is better than either of them, as it can help one engage in a cursory (or detailed) examination of the financial fundamentals of corporate stocks. It is printed in a great, traditional "dual-full-paged" newspaper format, making it helpful for those who don't want to have to stare at the lights of a computer screen all the time (or who may just want to curl up with a good newspaper once in a while).

Another highly successful investment manager whose techniques I've studied are those of Peter Lynch, the former manager of the legendary Fidelity "Magellan" mutual fund. He wrote the following book to explain to aspiring stock investors how he successfully chose corporate stocks that consistently rose in value, and helped him establish a reputation as one of the Mutual Fund industries most insightful minds:

"One Up on Wall Street: How to Use What You Already Know to Make Money in the Stock Market."

by: Peter Lynch

Another topic that has to be discussed when contemplating anyones desire to become financially independent is that of college student loans and the multiple traps and pitfalls that await many student borrowers while they are haplessly studying, or simply psychosocially preparing for their impending independent lives as full adults in our notoriously "dog eat dog" domestic business culture.

While borrowing money to pay college tuition may appear to be a wise financial choice, there are a few major problems with student loans as they are currently structured and adjudicated under United States federal law:

Some student loans are "unsubsidized", meaning that the interest on the borrowed amount will multiply while the borrower is still in school. The interest is calculated on, not only the borrowed ("principal" amount), but also periodically on the new, higher total, a financially crippling phenomenon known as "compounding".

(Such compounding leads to exponential increases in the amount of money owed, and while that unanticipated accumulation occurs, student debt levels can often reach much higher than anticipated levels, making the eventual repayment of their debts excessively burdensome, and all too often, impossible).

After the student graduates, if he or she happens to fall ill, or be hurt in a serious motorvehicle (or other kind) of accident, and can not keep up with the monthly payments on his, or her, loans, then the "servicing" companies (which can, and may, change frequently) will add penalties, and additional interest, causing ones total owed to quickly double over time.

(Unfortunately, the small print clauses in the loan agreements which outline the conditions under which such penalties and fees will be levied (and exactly how they will be calculated) are often buried in many pages of nebulously worded paragraphs of difficult to decipher "legalese", often confusing the borrower.)

and:

Unlike most other forms of personal debt, student loans are not cancellable through personal bankruptcy filings, and as a result they are one of the most dangerous forms of personal debt, and are in my opinion, riskier than most college financial aid counselors know, or will admit.

For more information on student loans, and the dangers they represent to your financial solvency and future, feel free to consult the following book:

"The Student Loan Scam: The Most Oppressive Debt in U.S. History and How We Can Fight Back."

by: Alan Collinge

The "Rich Dad, Poor Dad" series of books and other products has attained a level of popularity in the United States of America that has reached cult-like proportions. The only book in that series of books I can recommend in good conscience, is:

"Rich Dads Cash Flow Quadrant"

by: Robert Kiyosaki

In it, he discusses the four progressive classifications of income earners in a free enterprise economy:

Employee,

Self Employed Individual,

Business Owner,

and:

Investor.

He also illustrates that in order for someone to become financially rich, they need to find a way to progress from the role of an Employee, to someone who works for themselves in Self Employment, to a Business Owner (who hires others to work for him or her), and then to an Investor (who is financially savvy enough to be able to pay all of their bills from the income derived from his or her investments in other peoples businesses). It's a good book, and a great place for beginners to learn how to progress financially in our nations free enterprise economy.

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