invest

Mar

2023

Signs That You Are Ready to Invest

Reading Time: 3 minutes

You are tired of working for money. And you have finally decided to slowly accumulate assets and build your wealth. The question now is are you ready to invest? Here are signs that you are ready to invest:

Investment Prerequisites

Before you enter the world of investing, there are certain conditions that you must meet first:

1. Pay off all your bad debts first

It is highly recommended that you pay off all debts first, most especially the bad debts, if you have any. It does not make sense to invest and earn when the interest that you are paying for your bad debts is higher than the interest that you are earning from your investments.

So, how to know if a debt is considered good or bad?

A good debt is money that you owe to help you generate income. Examples of good debts are debts used to finance your education, business or real estate for rentals.

A bad debt on the other hand, is a debt used to purchase depreciating assets or things that decline in value over time. Examples of bad debts are consumer loans and credit card debts. You need to get rid of your credit card debt first if you have them because out of all the bad debts, they charge you the highest interest rates.

2. Make sure you have adequate cash in your emergency fund.

You should always have enough cash in your emergency fund. Your emergency fund is money set aside for financial surprises in life such as loss of a job, home improvement, car repair or trip to the dentist. The Rule of thumb is that your savings account should be equal to six months of your monthly expenses. Anything in excess of that, you can use for your investments.

3. Make sure you have adequate insurance.

An insurance is your protection for a possible unpleasant and unexpected event that might or might not happen in the future.Thus, you need your insurance to protect your life and your properties and your ability to earn income.

Here are some insurances available in the market today:

Health insurance to pay for your medical bills if you get sick
Life insurance to protect your loved ones just in case something happens to you
Property insurance for your home and vehicle
Disability insurance especially if you are the breadwinner
Travel insurance if you are traveling abroad.

Choose one depending on your needs.

4. Define your financial goals

You need to identify your financial goals or targets. Make them specific and measurable. What are you going to do with the money? When do you need it? How much do you need?

5. Know your investment risk appetite.

Investment risk appetite refers to how much risk you can handle. In investing, the higher the risk, the higher the return. Your emotional tolerance should be able to handle the rise and fall of your investments.

6. Think long term.

Always remember that the purpose of investing is to help you accumulate wealth over time. Long-term investments mean a period of one year or longer. If you are going to be needing the money in a few months time, you are better off just leaving them in your savings account.

7. Understand your investment options.

There are many investment vehicles to choose from. Don’t just jump into investing without having a basic understanding of your chosen investment vehicle. Read a lot and know your options. Choose something that fits your goal, personality and level of involvement. Be careful of investment scams.

If you have satisfied all requirements, then congratulations, you are now ready to make your first investment. Good luck!

First published in Pinoy Smart Living on 12.02.2019.

Feature Image by WOKANDAPIX from Pixabay

Sep

2022

Why You Should Invest In The Stock Market?

Reading Time: 3 minutes

Putting your money in a low interest savings account is not such a good idea especially if you have big financial goals such as buying a house, sending your kids to college or saving for retirement . The only way to get more money is to make money work for you by investing it. Investments will generate more money for you in the future through interests and price appreciation. In other words, you invest to create wealth.

There are numerous ways on how to invest your money. You can invest in bonds, funds, stocks, stock options, antiques, jewelry, luxury watches, artworks, real estate and even luxury handbags. It all depends on your goals, preferences, time, capital and risk tolerance.

Although there are many investment instruments to choose from, the stock market is a good place for long-term growth to invest your hard earned money . Here are the reasons why you should consider investing in stocks:

1. Best Potential for Growth

Stock market investing is risky. The stocks go down a lot. However, there is a pattern that has always stood the test of time. After each major crisis, the value goes up a lot. In other words, if you think long term, the cumulative gains always outpace the cumulative declines.

Although the most volatile, history has proven that stock market investing gave a high return in the long run. Thus, the rewards definitely outweigh the risks.

2. There is More Than One Way to Invest

Depending on your financial goals and investment appetite, there is no single formula in stock investing. You can mix and match everything. You can invest directly or indirectly through mutual funds depending on your time availability. You can do simple investing or you can do trading if you have advanced knowledge. You can play it safe by investing only in blue chip companies or if you have a high risk tolerance, you can venture into small caps companies also. Again, it all depends on you. The key is to diversify.

3. You don’t Need a Big Capital

Unlike other investment vehicles such as real estate, you don’t need to have a big capital to invest in the stock market. Most brokerage nowadays will let you open an account even with zero dollars. There is also no required frequency nor amount of additional contribution. It all depends on how much you can afford to invest.

4. Trade Anytime and Anywhere

As long as you have an internet connection and a smartphone, you can trade anytime during market hours and anywhere at your convenience. Gone were the days wherein you needed to spend so much time trying to contact your broker on the telephone in order to buy and sell stocks. With technology, you can trade with one click of a button. It only needs a minute or two of your time.

5. Earn Passive Income

Earning from stocks through dividends and price appreciation is the best example of passive income. Imagine yourself earning income even while on vacation with your loved ones. That’s passive income and stock investing can do that for you.

As an investor of a company, you are entitled to receive a portion of a company’s income through dividends despite little or even no effort on your part. Big companies have capable and qualified managers who take care of running the company.

6. Advantage of Compound Interest

Compounding is the process of generating income from your capital’s reinvested earnings. It means you are earning interest on your interest over a period of time. Albert Einstein referred to it as “the greatest invention the world has ever produced” because it is a way to double your money.

If for example you bought Apple shares worth US$10,000 in 1980, in 2017 that initial investment is now worth over US$ 2.7 million through compound interest.

Updated version. First Published in Pinoy Smart Living on 04.09.2019.

Image by Gerd Altmann from Pixabay

Aug

2021

How to Spot Investment Scams

Reading Time: 3 minutes

The only way to grow your money is through investment. Leaving your money in a regular savings account is never enough because of the low interest rate. More often, inflation will take the value of your hard earned savings. But where do you invest your money? There are many types of investments available out there depending on your age, goal, time horizon and risk appetite. While there are legitimate ones, there are also some which are fraudulent in nature. As an investor, it is important that you know how to spot investment scams.

1. Low or No Risk, High Return

If someone offers you an investment that is low risk yet offers high returns, you are most probably getting scammed. Investing is all about risk. Whether you are buying bonds, funds, stocks, stock option, real estate, antique or any other kind of investment; there is always risk involved. The same is true when you are opening a business.

The general rule of investment is that the higher the risk, the higher the potential return. If the investment being offered to you defies this rule, then it is a scam. These kinds of investments are what you call phantom riches. It simply means that they are dangling the prospect of wealth, knowing full wealth that it is something that you want but can’t have.

Always remember, “If it is too good to be true, it is too good to be true.”

2. High Pressure Sales Tactics

Avoid being rushed. Example high pressure sales tactics include:

Limited Time Offers
Available Only to First Few investors
Invest Today and Get Credits

Although high pressure sales tactics are considered legitimate marketing strategies, scammers used this primarily as their persuasion technique. Their goal is to have you commit to the investment right away so that you will have no time to do your research or change your mind. Never entertain those that give you pressures or force you to make a quick decision.

If you are going to invest your hard earned money, you need to have ample time to think about it and do your research. It is one of the investing rules from The Richest Man in Babylon. Know what you are getting yourself into. Yes, do your research even if the one offering you is a close friend or family.

3. Unsolicited Approaches

If they just contacted you out of the blue; chances are it is a scam. How did you learn about the investment? If you learned about it through a phone call, email or text message from someone you don’t know; Some of them will even ring your doorbell. This is what you call cold calling. Their intention is to sell something or make you invest in something. Although it is not illegal, it is best to be wary of them.

If ever you receive an offer, get the following details:

Full name of the person
Company name and address
Telephone number preferably landline not a cellular number

Do not deal with them if they seem hesitant to give their information. Once you get all these details, hang up. Tell them that you think about it and that you will be the one to call them back. Then do your research. Make sure that the company is duly-registered. It is best also to check if the type of investment is regulated by the government.

4. Requirement of Getting New Participants

Multilevel marketing is a sales strategy wherein distributors are encouraged to recruit new distributors. Many big companies use this as their marketing strategy. Although it is legitimate, it is also very controversial. Many people have been scammed with pyramid schemes. How to spot the legitimate ones from not? Simple, the legitimate ones focus on product sales while the scammers focus on recruitment of new members. If the earnings are dependent on how many people you can recruit, then stay away from it. It is a pyramid scam.

Do not invest in something that you are not familiar with. Do your research first. Take your time. And soon, you will find a legitimate investment vehicle that fits your financial goals.

Feauture Photo by Anna Tarazevich from Pexels

Jul

2021

Investing Rules from The Richest Man in Babylon

Reading Time: 4 minutes

All your life you have been working for money. But did you know that it can be the other way around? Yes, you can make money work for you instead. In order to do this, you need to learn to invest your money. However, investing your money is not as easy as it sounds. There are certain rules that govern investing. In ancient times, the residents of the city of Babylon understood this. They appreciated the value of money and applied some wealth rules. Thus, the city of Babylon was the wealthiest city in the world during that time. So, how to build personal wealth? What are the investing rules from The Richest Man in Babylon?

Best-selling author George Clason narrated the teachings of Arkad, the richest man in ancient Babylon in his book The Richest Man in Babylon. The story is filled with ancient yet timeless wisdom and knowledge. The book contains practical lessons and advice that can still be applicable even in this modern world.

Here are the the investing rules from the Richest Man in Babylon coined as the Five Laws of Gold:

1. Save 10% of Income.

Gold cometh gladly and in increasing quantity to any man who will put by not less than one-tenth of his earnings to create an estate for his future and that of his family.

This is the first step in the road towards financial freedom. That is to save 10% of income. This money will serve as the seed of your money tree. Consistency is the key. By consistently setting aside 10% of your income, you are slowly building your wealth.

Those who do not save will forever find themselves in the rat race, living from paycheck to paycheck. The key is to spend less than you earn. Many people save what is left after expenses. That should not be the case. Rather, as soon as you receive your income, you should automatically set aside 10% for savings first.

2. Invest Your Money

Gold laboreth diligently and contentedly for the wise owner who finds for it profitable employment, multiplying even as the flocks of the field.

The second step is to invest your money. Putting your money under your bed or depositing it on a regular savings account is never a good idea because of inflation. Your money will soon lose its value over time. It is only through investing will you be able to take advantage of the power of compound interest and make money for you instead of you working for money.

There are many investment vehicles available out there. Choose one that will best suit your interest and risk tolerance. You can choose from bonds, funds, stocks, stock options, cryptocurrencies. Fixed properties such as real estate or movable properties such as jewelries, antique and vintage items, artworks and luxury watches are also good options. You can even start your own business.

3. Seek Expert Advice / Have a Mentor

Gold Clingeth to the protection of the cautious owner who invests it under the advise of men wise in its handling.

Who do you ask for advice? This is one area where most people fail, especially when it comes to money. People have the tendency to ask for money advice from people they are familiar and comfortable with. However, that should not be the case. Instead of asking someone that you are comfortable with, learn to seek the advice of financial experts.

Have a mentor. A mentor is someone who has already achieved your goals. For example, you want to learn how to play tennis. Will you get a coach who does not know how to play the sports? Of course not! Another example is if you are failing math in class, will you hire an English tutor to teach you math? It is the same way in life, seek the advice of experts. Be choosy when finding a mentor. Do not ask a friend who is broke for money advice.

4. Only Invest on Something That You Are Familiar With

Gold slippery away from the man who invests it in businesses or purposes with which he is not familiar or which are not approved by those skilled in its keep.

Have you heard of stories of people losing all their investments? Yes, it happens. It is possible to lose all your hard-earned money if you are going to invest on something that you are not familiar with.

This fourth rule of the laws of gold takes investing to the next level. It implies that it is not enough to simply ask advice from other people. It also entails the investors to know, learn and understand what they are getting into. Don’t just blindly trust others. Do your homework too. Study the market. Do research. Enroll in classes. In short, learn, learn, learn.

5. Do Due Diligence

Gold flees the man who would force it to impossible earnings or who followeth the alluring advice of tricksters and schemers or who trusts it to his own inexperience and romantic desires in investment.

Due diligence means investigating, reviewing and checking the facts. Many people lost a lot of money because they did not bother doing a background check on the seller and the investment. For example, in real estate investing, research first before buying a property. Verify the deed on the land registration bureau. Bring an engineer or architect to inspect the property for any unseen damage. Check the surrounding community if it is a safe environment. Ensure that it is not a flood zone. Talk to the neighbors for a brief history or stories of the house. This is what due diligence is all about.

And always remember before you invest in anything, if something is too good to be true, chances are it is. Don’t let others fool you.

Apply the investing rules from the Richest Man in Babylon and soon you will be on your way to building your personal wealth.

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Jun

2021

Use The Power of Compound Interest to Get Rich

Reading Time: 3 minutes

Have you ever been to any of the seven wonders of the world? They are so-called the wonders of the world because of their beauty and perfection. They were created by mankind in the past that are now revered in the modern world. In the world of investing, there is a principle that is dubbed as the 8th Wonder of the World. Albert Einstein called it “the most powerful force in the universe”, and that is compound interest. Anyone can use the power of compound interest to get rich.

Compound interest is the eighth wonder of the world. He who understands it, earns it. He who doesn’t, pays it.
– Albert Einstein

What is so nice about it is that anyone can use it to their advantage, regardless of age, gender, social status and educational background. It can create millionaires even for ordinary people.

What is Compound Interest?

Compound interest is the interest on loan or deposit. The interest is then added to the principal amount and accumulated through a period of time. Simply put, it is interest on interest.

To illustrate, for example you start saving $100 a month from the time you are 20 years old until you become 65 years old for your retirement fund. Let us say the fund gives 6% interest per annum compounded annually. By the time you retire at 65, you will have $475,471.46 in your account.

Compare the $475,471.46 with $66,000 which is the total amount you would have saved after 55 years of saving if you have decided to put your money under the mattress. That is the power of compound interest. Use it to your advantage, and it will work wonders for you. It is the key to wealth.

To take advantage of this principle, you need two things.

1. Investment

The first one is investment. For your money to earn interest, you need to invest first. Your piggy bank or your mattress will not give you compound interest.

There are many kinds of investment vehicles available out there from stocks, bonds, options, real estate, mutual funds, insurance, jewelries, antiques and many others. You just need to find one that best suits your personality and risk tolerance.

2.Time

The second thing that you need is time. As a general rule, the longer you have been saving, the more money you can expect to make. In short, more time means more opportunity for compounding.

Two-Edged Sword

However, compound interest is a two-edged sword. True, it can help you get richer but it can also help you get poorer; or worse it can even lead to bankruptcy. How? Through bad debts most especially credit card debts.

Most credit card companies use the power of compound interest to their advantage. This means that the interest incurred is applied to your principal amount each time you decide not to pay your total credit card amount due in time. What is more alarming is that compound interest is not added annually but rather to the balance amount to the end of each day.

Thus, compound interest is very beneficial but at the same time very damaging for you. In order to avoid this, make sure to pay the total amount due of your credit card on time. If you don’t have enough budget for it, practice delayed gratification.

Make compound interest your best friend not your worst enemy!

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Jan

2021

Why I Stopped Investing in Stocks

Reading Time: 3 minutes

When I first got into the stock market I was always looking for the blue chip stock or the undervalued stock with the dream of thinking one day it will make me rich. After 2 years of getting 10%-15% returns; I realized it would take me many years to achieve my dreams. When I found Stock Options and a system that works with it, that’s when all my dreams of being financially free finally came true. In fact, if you asked me to buy shares on the stock market, it would feel like watching grass grow. That’s why I stopped investing in stocks.

Here’s 5 Reasons Why I Never Touch Stocks Anymore:

1. The Multiplier Effect

Options are a leveraged tool…when a stock goes up 5% it might make you happy but NOT wealthy unless you have a lot of money invested in that stock. For new investors with only a few thousand dollars, this is not going to make much of a positive impact on their financial situation.

But with Stock Options, a mere 5% increase in the share price can result in a 30%-50% increase in your investment. And if you can do that once or twice a month, the compounding effect over a year can be life-changing.

2. I Can Bet On Any Horse

Imagine going to the races and trying to pick the winning horse. Changes of you betting on the winning horse is very low. But what if you can bet on any horse and still, win?

Stock options investing is similar. if you know how to, you can bet on any ‘horse’ and make money. Whether the market goes up, down or sideways; you can still make money.

Whereas when buying shares, you generally can only make money if the stock goes one way…UP.

3. Protecting My Downside

The #1 greatest fear for every stock investor is that if the market has a big correction or crashes. I, on the other hand, have no such worries.

If the market crashes, my investments are well protected. Many times, I’ve made the most money when there’s a sudden huge market dip. That’s the beauty of using stock options rather than buying the actual stock.

4. Time Can be My Friend

For stock investors, if a stock goes sideways for a long period of time; they end up making no money or lose out on other investment opportunities. But for me, sideway stocks can be great. Every month I can make a good sum of money as the stock goes sideways.

That’s another benefit of using Options.

5. A Great Tool to Compliment Your Investment in Shares

Ok, so maybe you want to stick to investing in regular shares.

Options are actually a fantastic tool to compliment your investments in shares and help you get better returns.

Here’s just a few examples:

You can buy shares at a ‘discount’ to the current market price, usually at a 2% to 5% discount.
You can get ‘rent’ from your shares every single month of around 2%-5% of the value of your shares.
Protect your stock’s value. Imagine that for a small price, you can ‘lock-in’ the profits of your stock and not worry about waking up to a market crash…and still profit if the stock goes up further

But a word of caution…Options, like any leveraged tool, is like a double-edged sword. It can help you cut things but you can also cut yourself.

While Investing in Options can help you get incredible gains. There are many dangers:

Many people end up losing all their investment capital
Many people take risks that professionals would never make
You need a good system to invest otherwise you will be constantly stressed.
Time can be your enemy…the value of your Option can erode very quickly and be worthless.

That’s why you need proper education and a system that works…

PS. Warning! Once you discover the power of Options investing, you may not ever want to invest in anything else ever again.

Interested in knowing more about stock options trading? Register for a free webinar now.

Mirriam MacWilliams is a recipient of the “World’s Leading Trading Couch and Trainer” by Brand Laureate. She is the former National Director of Education of the largest investment club in the US.

A corporate high-flyer at the peak of her career, Miriam gave up a jet-setting job as the former Vice-President of Investor Relations of a large bottling company outside of the US, and a six-figure annual salary for a little known and predominantly male-dominated world of stock options trading.

Feature Image by Burak K from Pexels

Jan

2021

10 Symptoms of a Poverty Mindset

Reading Time: 6 minutes

Do you have a rich or a poverty mindset? Did you know that a poverty mindset can lead to financial scarcity? Yes, our belief about things can influence our decisions and behavior about money. Thus, if you want to have financial abundance, you need to start with your mindset. So, how do you know if you are suffering from a poverty mindset. What are the 10 symptoms of a poverty mindset?

Half Full or Half Empty

Look at the featured image above. Do you see the glass as half full or half empty?

Some of you will probably say it is half full while some will say it is half empty. Your answer will depend on your attitude and perception of reality.

It is amazing how a single photo can be perceived in two completely opposite points of views. This simple test is actually used by psychologists to determine whether a person is an optimist or a pessimist.

Why is our perception so important? It is important because it will affect how you live your life.

Our life is shaped by our mind; we become what we think.
– Gautama Buddha

Our mindset greatly affects the direction of our lives. It influences our happiness, health, relationships and yes, even our finances. The financial gap between the rich and the poor is not because of the money, neither is it because of level of education, nor any other external factors; but rather it is all because of the difference in mindset.

So, if you feel like you have been working so hard all these years and yet you are being held back, maybe you are suffering from a poverty mindset.

10 Symptoms of A Poverty Mindset

To verify if you really have a poverty mindset, take a look at the following symptoms and ask yourself if you have it in you or not:

1.You Complain A Lot

You complain, complain, complain and complain. Did you know that complaining is the worst possible thing that you can do to yourself? When you complain, this means you focus on the negative aspects of your life. You focus on your problems when there are in fact a lot of things to be grateful for.

Be thankful for what you have; you’ll end up having more. If you concentrate on what you don’t have, you will never, ever have enough.
– Oprah Winfrey

Your mind is like a magnet. What you focus on expands. If you focus on the negative, more bad things will happen in your life.

2.You Play The Blame Game

You blame your parents. Sometimes, you blame your siblings. At work, you blame your boss or your employers. You also blame the government. At home, you blame your spouse. Some even blame their genes. You practically blame anything and everything around you. It is always somebody else’s fault but you. You refuse to take responsibility for the undesirable things. That’s a poverty mindset.

Many people who always blame the government for their situation. Yes, that may be true. After all, governments are far from perfect. However, how come there are people who became very successful in the same environment? The difference lies in the mindset. You can either play the blame game all you want or you can begin to take responsibility in your life and do something to change your situation.

3.You Believe You Are Always Right

Do you love saying “I told you so“? Do you always have to have the last word? If you answer yes, then you are a narrow-minded person. A narrow-minded person is a person who is not open to new ideas. They believe that their opinion is always right. You will never win an argument against this kind of person. If you are this kind of person, then that is another symptom of a poverty mindset.

To become successful, you need to accept that you don’t know everything. You need to be open to new ideas and embrace new ways of thinking.

The only true wisdom is in knowing that you know nothing.

– Socrates

4. You Won’t Invest in Yourself

You have money to spend on travels, gadgets, clothes and entertainment but you don’t have a budget to spend on further studies, seminars or even to buy a book. Some argued that they simply have no time. All those things are just mere excuses. What people do not realise is that the greatest investment that they can do is to invest in themselves. Your future is largely dependent on your willingness and ability to invest in yourself.

For example, if you work in a company and you think that your salary is very small, then ask yourself this question, is there someone else in your organization that is earning more than you do? Then why do you think the company is paying that person more? The answer is simple, most of the time, your compensation is based on your knowledge and skills. You want to earn more? Then invest in yourself.

5. You Believe is That Money is the Root of All Evil

If you believe that money is the root of all evil and all rich people are greedy, then you are already unconsciously derailing your way to success. These negative beliefs about money are products of your environment. If people around you believe in this idea, then your belief and value systems were definitely influenced.

For the record the bible verse where this belief system originated did not state that money is the root of all evil.

For the love of money is a root of all kinds of evil. Some people, eager for money, have wandered from the faith and pierced themselves with many griefs.
– 1 Timothy 6:10

The verse clearly states that it is not money per se that is evil but rather it is the love of money that is the root of all evil. Money is nothing but a tool. Money can also be use for the good of others.

6. You Avoid Your Finances

Do you know your personal net worth? Your net worth is the amount of everything that you own minus everything that you owe.

People who have a poverty mindset avoid looking at their finances or they simply don’t bother at all. Some people are even scared of looking at their monthly credit card statements. If you are scared to take a closer look and examine your finances, then that’s a symptom that you have a poverty mindset. You are scared to face reality. You keep on buying stuff you do not need and you don’t want to pay attention to where your money is going.

You need to keep track of your personal cash flow. You can only improve your financial situation if you are fully aware of your present financial situation to begin with.

7.You Focus on the Now

What are your plans 5 years from now? How about 10 to 20 years from now? If you have no idea how to answer these questions, then that is another symptom that you have a poverty mindset.

You put importance on the short-term rather than the long-term. You want everything now without considering the future consequences. You have no plan for the future. A financial goa l should be a must for everyone.

8.You Have All the Latest Trends on Credit

Take a look at all your possessions. Do you own the latest gadget? Are you a walking advertisement of signature brands? If you can afford it, then that’s a different story. However, if you have been using your credit card to pay for the purchases in monthly installments, then you have a problem. If you are this person, then that’s another symptom of a poverty mindset.

Spending on things will only make you feel better temporarily. Remember, you have nothing to prove to anyone. Don’t be so concerned in showcasing your wealth to people you don’t even like.

9.You Focused on Me, Myself and I

A poverty mentality focuses on getting rather than giving. If you are not willing to do anything for anybody without receiving anything in return, then it is a sign that you have a poverty mindset. You always think of yourself first. You always look into what’s in it for you.

For example, in business, are you more concerned about how much profit can you make rather than how much value you can add to your product or service? In a relationship, are you focused on what your partner can do for you rather than what you can do for your partner?

You need to give first before you can receive. That is the law of the universe. The most successful businesses in the world gave value to consumers first before their businesses grew.

10.You are A Consumer Rather Than An Investor

A few days before your salary, you are already thinking about what you will buy. You prioritise spending rather than investing. You spend first and save whatever is left behind. Most of the time, there is nothing left to save. So basically, you work to spend. All wealthy people save first before spending.

If you score 0 to 2, congratulations! You have a wealth mindset. It is just a matter of time before you become wealthy, if you are not one yet.

If you score 3 to 5, you are not yet there but you are on your way to overcoming your poverty mindset. Having the correct mindset is your first step towards financial freedom.

If you score 6 and above, that is a clear indication that you have a poverty mindset. Fortunately, mindsets can change. You need to deliberately immerse yourself on a growth mindset on a daily basis. That’s the only way for you to change your financial situation.

Edited Version. First Published in Pinoy Smart Living on 08.07.2018

Feature Image by Image by Gerd Altmann from Pixabay.

Dec

2020

Can Stock Options Trading Make You Rich?

Reading Time: 2 minutes

If you know what you are doing, yes, stock options trading can make you rich.

But if you are thinking that it is some form of a get rich quick scheme, then you are wrong. Sorry to disappoint you but there is no such thing.

Don’t fall for get rich quick schemes. It takes time and effort to build wealth properly.
– Dave Ramsey

Like any other investment vehicles, stock options trading carries its own degree of risk. When you invest in something, you are always exposing yourself to the uncertainty of the situation. There is always a chance that the result will not turn out to be the way you expect them to be. In fact, if you are not careful, you might end up losing a lot of money trading options.

The good news is that there is actually a way to minimize risk. But first, you must get rid of the get rich quick mindset. Success and wealth does not happen overnight. It takes a lot of time and effort. Once you realized this, then you are now ready to make your investment.

However, going into trading without knowledge is akin to gambling. It is no longer investing.

Without wisdom, gold is quickly lost by those who have it, but with wisdom, gold can be secured by those who have it not.
– George S. Clason

Financial literacy is always the first step in achieving your financial goals. Since stock options trading requires technical knowledge, it helps to have mentors that can teach you about stock options, especially for beginners.

Mentors are people who are experts in that particular field. Stock option trading mentors are seasoned traders. They have deep understanding, knowledge, skills and expertise on the trade. They don’t just make predictions. because they have used proven and tested strategies for years. Moreover, they read company profiles and financial statements, analyze data and study chart patterns. They use algorithmic trading programs and fundamental analysis. Then, they come up with sound and efficient strategies using the knowledge and information that they have.

Yes, you can read and study about stock options trading on your own. But having the guidance of mentors can make your journey towards wealth easier and faster.

Good luck!

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Dec

2020

Start-up Terms That Every New Entrepreneur Should Know

Reading Time: 2 minutes

Starting a new business? Here is a list of start-up terms that every new entrepreneur should know:

1. Angel Investor

Also known as a seed investor, an angel investor is a high net worth individual who invests money in a start-up. This person can be a family or friend of the business owner. in return for the money invested, the investor will then become a shareholder of the company.

2. Business-to-Business (B2B)

A B2B business means that your product or service is being offered to other businesses.

3. Business-to-Consumers (B2C)

A B2C business means that your product or service is being offered directly to consumers.

4. Beta Test

Beta testing is the final testing of a product before it gets released to the market. This allows the company to receive direct feedback from its target customer. It is the same as a soft opening soft or soft launch. In short, it is a trial run. By doing this, a company gets a chance to improve the product or service.

5. Bootstrapping

Bootstrapping is building a company from scratch with limited resources using your own personal savings.

6. Burn Rate

Also known as the run rate, it is amount of cash that is being used by the company to finance its operation. In a way, it is the rate of money that the company is losing each month because the company is not yet earning. In short, it is the negative cash flow.

7. Minimum Viable Product (MVP)

The minimum viable product is a version of the product with just the basic features. This version is just enough for the product to be usable to its target customers. Releasing a minimum viable product is cost-effective. It also shortens the product development phase. In addition, the business can start receiving feedbacks from the customers that they can use to further improve the product.

8. Pivot

A pivot is a shift of business strategy when the initial product or service failed.

9. Return-on-Investment (ROI)

The return on investment is the measure of whether a business is profitable or not in a given fiscal year. To calculate the ROI, simply divide the net profit with the total investment made then multiply by 100. Generally, an average return of 5-12% is good.

10.Venture Capital

Venture capital are private firms that offer financing to start-up companies. These firms can be pension funds, financial institutions, investment banks or even universities. They see potential long-term growth in the start-up. These firms will buy a stake in the company for a certain period of time and then exit once they are already profitable.

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Nov

2020

Stocks or Stock Options: Which is Better For You?

Reading Time: 4 minutes

One lesson that this pandemic taught us is that we should always have money set aside for future use. However, parking your money in a regular savings account is never a good idea because of inflation. Warren Buffet, one of the world’s most successful investors of our time has this to say about investing in cash:

The one thing I will tell you is the worst investment you can have is cash. Everybody is talking about cash being king and all that sort of thing. Cash is going to become worth less over time… Cash is a bad investment over time.”
– Warren Buffet

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Thus, it is always better to invest your money. But, there are so many investment vehicles available out there. How to know which one is best for you? If you want to stay liquid and are willing to take a little risk to get higher returns; then, you can try investing in stocks or stock options.

Stocks

A stock means a share in a company. As part-owner of a company, you get a claim on the company’s assets and earnings. You cannot make decisions on the management of the company though. As a common shareholder, you do however have the right to vote on major issues such as changes in charter or board of directors during shareholder’s meetings.

How to Profit in Stocks?

There are two possible ways to earn money from stock ownership. First, you can get a share of the company’s earnings through dividends. Second, if you need the money in the future, you can always sell your stocks and earn from price appreciation. Just like in real estate, art works, jewelries and other assets; there is always a possibility of an increase in the value of your stocks over a period of time.

Why Buy Stocks?

Owning a business entails a lot of work especially if you build your business from scratch. You need to oversee not just the day-to-day operations but also other aspects like marketing, human resource and financial management. You may be your own boss but you have a lot of responsibilities. You need to make tough decisions and sometimes work long hours.

Investing in stocks is just like owning a business. The only difference is that you don’t need to go to work at all. You can just sit back, relax, wait for your pay check and let the likes of Bill Gates, Jack Ma, Warren Buffet or Jeff Bezos take care of your money. These business tycoons will be the ones to manage the day-to-day operations of the business while you just wait for your income. Now, how cool is that?!

Furthermore, stock investing is ideal for beginners. There is a way to become a passive investor. The easiest way to invest is through Cost-Averaging. It simply means buying stocks for a set amount each month over a long period of time. There is no need to carefully watch the market.

Stock Options

Stock options are different from stocks. With options, you don’t actually become shareholders of a company. Instead, what you have are contracts. Options are contracts that give the holder the right, but not the obligation, to buy and sell stocks at a predetermined date and price.

How to Profit from Options?

There are two kinds of options: the call and the put. The call option is a contract with the right to buy while the put option is a contract with the right to sell shares at a predetermined date and price. In short, a call option is a good investment if there is an expected increase in future stock prices. A put option on the other hand, is a good investment if there is an expected decrease in future stock prices. To put it simply, stock options empower the holder to potentially profit from a trade regardless of market direction.

Why Buy Stock Options?

For one, compared to stocks, options are more affordable. You can get options for just a fraction of the price of a stock. For example, as of this writing, an Apple Inc. share cost US$119.49 while a stock option price cost only US$1 per contract and even cheaper.

Second, with options there is a way to earn money even if the market goes down. Options allow investors to use a hedging strategy to lower risk. This means that an investor can buy a call option, a put option or both at the same time if the investor is not sure whether the price of stocks will go up or down in the future. This is different from stocks wherein price appreciation only happens when the market goes up.

And lastly, since options are contracts, there are expiration dates. Contracts can either be weekly, monthly or even longer. This is good for short-term investors. It means there is no need to wait for a couple of months or even years to earn. Higher percentage returns are possible in just a few days.

However, unlike stock investing, stock options investors need proper training first. To earn a higher percentage of returns is not without risks. Thus, it is important that stock options traders know what they are doing.

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Stock or Stock Options: Which is Better for You?

Both stock and stock options are good investment vehicles. To know which one is better for you, it all depends on what kind of investor you are. If you are looking for something long-term then go for stocks. If you are a short-term investor, then stock options trading is for you. If you are a passive investor, meaning you don’t want to be bothered with the management of your investment, then you are better off with stocks. However, if you want to be in control of your investments, then go with stock options.

In short, whichever is better for you is totally up to you. It is a personal choice. It all depends on what you want and what will best suit your financial goals, personal interests and lifestyle.

Happy investing!

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