Photo Credit: Darren Hester

Looking at your life 30, 40, or 50 years from now, you can hardly be sure of what’s really in store for you. You may have some idea of what it’s gonna be, but you can’t really be certain about retirement. What are you going to do when your hard earned assets have lost their value in time? This dilemma is not solely caused by market downturns or other problems such as the Social Security System.

The culprit that we’re referring to here is no other than inflation. Yes, inflation is much larger than you think. It can ruin everything you’ve worked hard for, if you’re not prepared.

Well, for starters, let us examine what inflation can do. Inflation can wreck havoc on the value of your property or wealth for that matter - little by little, year in and year out. Surely as the Earth revolves around the sun, prices will continue to rise; as time goes by, what money you have will afford you less and less.

However, you need to understand that the Consumer Price Index, being the usual gauge of domestic inflation actually warps the whole picture of inflation and its real impact. In the United States, the level of inflation is really not that far from the 7% level the rest of the world is experiencing.

If you’re the type of investor who prefers to play it safe, you will most likely invest in bonds just to escape the chaotic situation in the market. You might even put your money in Treasury Inflation-Protected Securities, but still, as inflation worsens, you will find your money leaking out each year at an alarming pace.

Unfortunately, in investment, there is such a thing as being too safe. If you put your hard earned cash in “safe” money-making securities, by the time you’re about to retire, you may find that you’ve lost the value of your investment, at a rate faster than what you thought can be the worst thing that can happen to your money.

Where then should you place your money?

What you should do is look into stocks that are swinging into the right direction, such as stocks that are closely tied to the developing economies of China, India Brazil, and Russia. This can involve investing in companies that are foreign commodities-based as well as foreign banks.

The wise investor must always be prepared to take advantage of the opportunities offered by international growth.

This just goes to show that in order to be able to curb the effects inflation you must have foreign holdings. Aside from the benefits of a diversified portfolio, there’s an even greater benefit - the promising returns of foreign stocks.

Photo Credit: chimothy27

With the increase in the number of projected hurricanes this year, investors can profit from them, if they purchase credit-default protection, according to Barclays Capital analysts.

There are markets for two years damage claims for property and casualty insurers for relatively light hurricane, the advisers said.

For this year, meteorologists have predicted a greater than average number of hurricanes as well as an increased probability that a storm of major magnitude will hit the United States. This is how investors can make a profit:

• On the three insurers, purchase credit-default swaps
• fund the trade. You can do this by selling contracts on certain insurers (they must have less exposure to the hazard although they’re in a region prone to storms) or you can get them sold on a benchmark index.

The contracts could easily yield 15 to 20 basis points increase, the analysts added.

Credit-default swaps are financial instruments. These instruments are based on bonds and loans that are utilized as speculative tools as regards a certain company’s ability to make good its debts. They were first and foremost designed to shield bondholders in case of default. In effect, these instruments pay the buyer at face value in return for the underlying securities in the event that the company should fail to comply with debt agreements.

It’s a great opportunity for investors to grab and take advantage of the credit markets’ volatility as the looming threat of storm activity increases. Remember that these are all based on predictions, but if a major storm does in fact happen, the contracts could go wider even more.

Having a large amount in debt can feel like having the sword of Damocles hovering above your head. If you don’t pay off your debt, you know that sooner rather than later, it’s going to strike you.

If you’re in debt, like most people nowadays are, the only way to get out of it is by having a systematic and rational approach to paying it off. And here are some practical ways to do it:

• Pay above the minimum when your installment becomes due. The longer it takes for you to apply payments to the principal the more the interests will pile up, and the less cash remain with you. Exactly the reason why banks are making money and you’re not. You need to tighten your belt each month when you make your payment, and apply as much as you can to the principal. Overtime, this will greatly reduce the amount you pay in interest.

• If you have several debts, transfer higher interest debts to the one with the lowest interest rate. Many credit cards allow this, and it’s really a good move to trade a high interest debt for one with a much lower rate any time. When your card balance reaches zero, move on to the next card and do the same.

• Take advantage of promotional offers by banks. These are usually attractive offers that will save you a lot of dollars in interest. You can then use the money saved to pay the principal.

• Cash in on your savings account to pay your debts. At first this would seem like a stupid idea, but try comparing how much your savings account earns in interest against that of your debt’s, and you’ll see that this isn’t such a bad idea after all.

• If you have life insurance with cash value, try borrowing against the policy. The interest of this borrowed cash will be way below commercial rates. And transferring your debt to one that charges a much lower rate will bring down the amount you’ll have to pay in interest almost instantly.

These are not the only things you can do. There are other countless ways to minimize your exposure to high interest rates to help pay off your debts. You will learn a lot as you proceed.

Just like a great chess player, you should learn to think several steps ahead of your opponent. Think, think, think, and think hard. Try not to let creditors outsmart you, if they haven’t done that already. Good luck.

Trading the markets makes one a winner and another loser. As my mentor used to tell me, “Markets are summarized by greed, hope, fear and desperation”, all mistakes traders commit including me are always related to the four market moods. I have listed 5 of the most common mistakes we traders make and feel free to choose your own weakness.  

1.       Failing to cut losses

We have to admit that we are humans and we are susceptible in making mistakes. Failing to cut losses not only is expensive for your portfolio, but also a way to wipe it clean.

2.       Adding up to a Losing Position

Cutting loses is bad. Adding up to a losing position is even worse. Some people use this measure to bail out on a position. Simply put you bought 10 shares of XYZ at $50.00 and it fell to $45.00. Some people would buy another 10 shares at $45.00 and sell the whole position at $47.50. Sounds great right? Not really. It is not only getting riskier, but it also gives you more tension in your trading knowing that you are averaging down and might wipe your portfolio clean.

3.       Trading with Emotions

Remember what my mentor told me a while ago? Greed, Hope, Fear and Desperation is the way to go in telling what the current mood of the market is. We have to admit that we traders are motivated with greed, but we also need to understand that in order to be successful in this field, we have to operate like a system, operating without our emotions. Emotions cloud our judgement and logic.

4.       Loving A Position

Yes we understand you made a lot of money in that trade. Even if that issue made you a lot of money previously, you have to take into consideration that past performance is not an indication of future results. No shortcuts are to be made in trading. We really have to do our homework.

5.       Trading the Board and the News

Some trading hours could be boring. And when boredom and impatience strikes traders, all they do is look at the board or the Newswire and stare. Now here comes the fun part, you’ve been staring at ticker symbol ABC for quite some time and you see that it steadily rises to 7%. Sounds great right? You type a buy order at your terminal and the trade is executed. Minutes before closing, you see the ABC correcting and those people who are buying it 2 hours ago are now dumping it. Now you are forced to liquidate and cut your losses. Sounds familiar? Never enter a trade without a trading plan and without doing your homework. What separates gamblers from traders is that traders have systems and plans to follow while gamblers throw their darts at the board.

We have to admit that we cannot remove these overnight. It entails discipline and determination. After all, sometimes you have to get hurt in order to learn, and learning is required if you dream of beating the street.

Credit Suisse Group declared a $2.1 billion net loss for the first quarter as the global effects of the U.S. subprime mortgage crisis continued to spread. This is a first in the history of Switzerland’s second largest bank.

The company also disclosed net writedowns of $5.3 billion for big buyout loans and mortgage securities.

Although other operations of the bank did well, “[o]ur first-quarter results are clearly unsatisfactory,” said Chief Executive Officer Brady Dougan.

Credit Suisse is the first of the major European investment banks to report the quarter, but others have warned investors to brace for more write-downs.

The bank posted a net profit of $2.7 billion in the first quarter of 2007; however, Credit Suisse shares slid 43% in the last 12 months, despite efforts to reduce exposure to risk in the market.

“Other than the areas affected directly by the credit crisis, most of our businesses performed well, with revenues near, or in some cases above, those in the first quarter of 2007,” CEO Dougan said.

He said the bank “remains well positioned in an extremely challenging environment.”

Credit Suisse’s capital position is strong, Dougan said, adding that the bank would continue to manage its liquidity conservatively.

“I am confident that we will continue to serve as a safe haven for clients in uncertain and volatile markets, and to seize the opportunities that arise in times of market dislocation to create long-term value,” Dougan said.

Credit Suisse took the bulk of its writedowns - $2.64 billion - for collateralized debt obligations.

But it also marked down $1.67 billion for buyout loans granted but failed to sell to investors and $937 million for mortgage securities.

Credit Suisse trimmed its exposures to the troubled areas during the quarter. Leveraged loans outstanding fell to $20.6 billion. Subprime CDOs shrank to $695 million from $1.6 billion.

These are hard times, and like the rest of us you are struggling with your finances. “If only I could earn more,” you think, so you devise a plan and thought of a dozen ways to augment your income. That’s good; you should put your plan to action real soon. But before anything else, there’s something you need to do - a vital but often overlooked strategy - you need to change your lifestyle.

Saving your money is almost as important as earning them. What is being targeted here is your lifestyle. Do you live within your means? If so, you’re almost there. Actually, the most important way to generate wealth is to live below your means.

Resist the temptation of trying to compete with your friends or neighbors. Never spend more than what you are earning. If you have mortgages and credit card debts, pay them off as soon as possible. These debts could have been avoided if only you lived within your means. Avoid adding more debts on top of your existing ones.

Invest your money. If you don’t know how to pick stocks or do something like that, then put it in a bank. Ask your local banker for products and services they’re offering to help maximize the growth of your money.

Be conservative in your spending. It is better to buy in cash rather than borrow and be in debt. Remember, if you can’t afford it, don’t buy it.

If as a young adult you find yourself still living with your parents, here are a few simple steps you can take to become independent and have a bright financial future:

• Pay off debts that are keeping you from being independent.
• Invest as heavily as you can for your retirement while your costs of living are low.
• Don’t touch your retirement cash until you’re ready to retire.

If you follow this advice, it will be most certain that you will become self-reliant and will have plenty to retire on at age 60.

However, the sad fact is most Americans nearing retirement (around age 61) are facing a pretty gruesome retirement fate.

That’s why it’s important that you kick your retirement plan into high gear. If you’re young, living at home, and have many years ahead of you, be steadfast with your savings and take advantage of the powers of 401(k)s, IRAs, and compounding interest.

If you’re well into your working years — or even if you’re in your early 60s — the most important thing you can do is develop a game plan. Don’t lament the late start or plan to just work for the rest of your life. Figure out what you have, what you need, and how to get there.

There are three major factors that we can blame for the week economy, but top among these is the escalating crude prices, which have increased by about two-thirds in just the past year, after essentially doubling during the prior few years. They relate to everything from a weak U.S. dollar, to steadily increasing global demand, on to concerns about output declining in a variety of producing venues across the world.

Escalating crude prices eventually lead to both higher gasoline charges and increased levies for a range of products manufactured from hydrocarbons and for the transportation that inevitably links producers to consumer for all products and many services. And when we substitute synthetic fuel made from corn for a portion of our oil-based gasoline, the food chain similarly receives an inflationary jolt.

Experts believe that we’ll be paying $200 a barrel by 2010, our economy and the markets collectively will be gravely affected. But perhaps the most amazing element of this set of circumstances is that they’re occurring almost without any meaningful US national energy policy.

The next in line to take the blame is housing. The resetting of adjustable rate mortgages that can trigger foreclosures has yet to reach its peak. With as many as a million bank-owned houses likely to hit the market this year, we see a bloated inventory of new and pre-owned homes for sale.

The third but not least is general inflation. The inflationary trends were precipitated by increasing fuel and food costs. Whichever came first, the egg or the chicken is hard to figure out, but all of these factors: the rise in crude prices, bloated housing inventory and inflation, all contributed to our sagging economy.

The best time to start estate planning is while you have legal capacity to do so.

If you wait until you are seriously ill, or suffering from other disabilities, it could affect your legal capacity, and your plan will be effectively challenged by those who assert that you lacked legal capacity, or were subjected to fraud, coercion or undue influence. All of these are requisites for the invalidation of a will or estate plan.

What is the purpose of estate planning?

The purpose of estate planning is to avoid dying intestate.

Dying intestate means dying without a will or a trust. It exposes your property to hazards, making it difficult for your heirs to claim. These hazards come in the guise of probate, creditors, con-artists, lawsuits, judgments, lawyers, and death taxes and can damage much or most of the value of your estate.

Without a will or a trust, the inheritance laws of your state will determine how your property will pass to your heirs. If you have no heirs that fit the state’s formula, the assets will be taken by the state.

Often times the state’s formula and rules for moving assets to your heirs will not be what you would have chosen if you had done some planning.

Therefore, there is no better time to start an estate plan than now.

So you think you’re ready to buy your first stock, and you’re all geared up, ready to go to the stock exchange. But hey, wait a minute, you forgot something. You need a broker.

No sir, you can’t buy shares of stocks without a broker. You need a stockbroker to help you with the transaction.

Photo Credit: lumaxart

So what does a broker do?

• A stockbroker is first and foremost a salesperson;
• he works for a stock brokerage house; and
• carries out your transactions.

There are generally two types of stockbrokers:

• those who deal directly with their clients (regular brokers),
• and those who act as intermediaries between the client and a larger broker (broker-resellers).

Regular brokers typically are considered more reputable than broker-resellers.

Brokers are further subdivided into full-service brokers and discount-brokers.

Full-service brokers usually offer financial products, investment advice and research, and charge relatively high fees. They may offer stocks, bonds, derivatives, annuities, and insurance. A full-service broker is paid mostly by commissions.

This means that the full-service broker is paid not according to how well your portfolio is doing, but by how often you trade.

Discount brokers do not offer advice or research, but simply transact your business. Because of the limited services they render, discount brokers charge considerably lower fees. They also often offer online computer order entry services.

These brokers are usually paid a fixed salary to execute your trades. They don’t solicit, and they aren’t paid commissions.

So which type of broker should you choose? If you’re going to become a good investor then you should do your homework. Learn how to make your own decisions. Go for the discount-broker, and stay away from the full-service broker whose only interest lies in the commission he gets every time you trade.