Category Archives for Invest & Retire

5 Ways To Start Investing With Less Than $1,000

The following is a guest post. Enjoy! 

There is a common misconception that you have to have thousands and thousands of dollars to start an investment portfolio, but that couldn’t be further from the truth. There are dozens of ways that you can start investing with $1,000 (or less). It’s important that you start investing for your future, but if you’ve never gotten in the investment waters, it can be a scary jump to make. Luckily, there are several simple ways that you can put your money to use.

Betterment

If you’re looking for a simple investment that you can make, without having to pour over different graphs and reports to decide which investment is the best option, then Betterment could be an excellent choice. Betterment is the better choice for anyone that is looking to set it and forget it.

With Betterment, all you have to do is create an account, set your goals, and start investing. After that, their robo-advisors will invest your money based on your risk preference and goals. They will even continue to reinvest your money as you make it, which means that all you have to do is sit back and watch your money grow. You can easily start investing with $1,000 and not have to worry about making the wrong choice for your money.

Motif

Maybe you want a little more control of how your money is invested, then Motif is another excellent option. Motif is an excellent website that allows you to purchase 30 stocks of companies that all revolve around the same idea. For example, you can buy 30 stocks in business that all deal with medical technology.

There are several advantages to Motif, but the most notable is that the trading fees are going to be drastically lower than any other brokerage that you’ll find. Motif allows you to invest in the industries that you want, without having to pay the massive fees.

Pay off Debt

Most people don’t see paying off debts as a form of investing, but it could be the best option for you $1,000. If you’ve got credit card bills or lingering student loans that have been hanging over your head, it’s vital that you pay those off as quickly as possible.

The amount of money that you’ll pay in interest will hinder the amount of money that you can invest. Use any extra money that you have to pay off those debts, then all the money that you save can be invested.

Save for College

If you have kids, you may not be thinking about sending them off to college yet, but that could be the perfect use for your extra dough. If you didn’t know, college is expensive. Very expensive. It’s important that you start saving as early as possible.

There are several ways that you can start saving for your children’s college, but the best way is to open up a 529 Plan. These are special accounts that you can put the money in, but you’ll get several tax advantages as long as you use the money for any college expenses.

Set it Aside for a Rainy Day

You never know when something is going to break or need replacing. If your water heater were to go out suddenly, or your car broke down, you probably wouldn’t have the money that you needed to pay for that bill, but setting aside the $1,000 is a simple way that you can invest in your future. That’s a great way to have a rainy day fund, which can prevent you from having to use a credit card for any sudden bills that you run into. It’s not the most exciting way that you can “invest” your money, but investing in your future by having a safety net is one of the wisest things that you can do with your money.

Investing $1,000

These are only a few of the hundreds of different ways that you can put your money to work. It’s vital that you make the best decision for you and your money. Investing is going to be the foundation for your future and the security of you and your family.

Take the time to look at all of your different options and decide which one is going to work best for you. It can be scary investing your money because of the horror stories, but thanks to the Internet, investing your hard-earned money has never been easier.

***Photo courtesy of https://www.flickr.com/photos/gotcredit/33502814980/sizes/l

What Are the Golden Rules for Investing in Gold?

The following is a guest post. Enjoy!

To many people, gold is the ultimate safe-haven financial instrument. This is only true if you understand the nature of the financial markets, and how the interactions between elements will impact the gold price. For example, the recent case of the Fed rate hike on March 15, 2017 serves to remind us that traditional theory does not always apply in practice. Typically, a Fed rate hike would increase the interest-rate and drive up demand for the USD. Since gold is a dollar-denominated asset, the demand for gold and the price of gold should decrease accordingly.

We saw a complete reversal taking place. The USD weakened dramatically, hitting 5-month lows against major currency pairs, and the demand for gold skyrocketed. Of course the Fed interest-rate decision does not disprove the correlation between the gold price and the strength of the USD. It is simply the lack of coherence between the Fed rate hike and the USD that let us down in this case. Many people today purchase gold in one form or another to hold as an investment. Some folks purchase gold ETFs such as SPDR (GLD) on the New York Stock Exchange, while others purchase physical gold coins, gold stocks and/or gold jewelry.

Is Gold an Appreciating Asset Over the Long-Term?

One of the things about gold that is almost universally accepted is its safe-haven status. But what exactly does this mean? As we have seen, strong financial markets can also lead to a strengthening of the gold price, despite protestations to the contrary. Many gold ETFs (exchange traded funds) are comprised of multiple businesses such as gold mining companies, physical gold bullion, gold ETFs etcetera. If other investments are falling in value, will the gold price rise in value? Not necessarily. At the height of the financial crisis in 2008, the gold price spiked, and it makes sense because global markets were going into meltdown. But anything other than a financial meltdown should be able to provide direction to gold traders.

Rather than worrying about whether gold is the perfect safe-haven investment when equities markets sour, it’s important to have gold as part and parcel of a balanced financial portfolio. It can be thought of as a hedge against uncertainty and equities weakness. The gold price is extremely volatile, even at the best of times. 10 years ago, the price of gold was approximately $650 per ounce, and it has doubled in price since then. Overall though, the gold price is subject to massive fluctuations.

Back in 2011, gold peaked at $1,900 per ounce, but now it’s trading around $1,250 per ounce. One of the ways to capitalize on gold price movements is with CFD Trading. If you’re not adept at trading the financial markets with institutional brokerages, it behooves you to consider contracts for difference as a better way to dabble in gold trading. CFDs are fully regulated by the FCA (Financial Conduct Authority) in the United Kingdom, and elsewhere across Europe. Rather than actually owning stocks of gold, traders are speculating on future price movements and generating profit accordingly.

A Fascinating Look at the Performance of Gold in 2016

Gold is one of the most interesting financial instruments to trade. It is revered for its safe-haven status, and it is the go-to investment option when equities markets sour. In 2016, some interesting trends were evident in gold demand. For starters, gold demand increased by 2% (year-on-year) in 2016 and reached a 3-year high figure of 4,308.7 metric tonnes. One of the biggest drivers of gold – exchange traded funds – saw annual inflows of 531.9 metric tonnes, the second best reading ever. However, there were some negatives in gold demand in 2016.

For example, central bank purchases of gold bullion dropped markedly and demand for gold jewelry also plummeted. As far as ETFs are concerned, the recent performance (2016) showed an uptick of 532 metric tonnes of gold, marking the second highest figure ever. For the year ending December 31, 2016, the gold price inched up 8%, largely due to capital inflows. On the flip side, gold jewelry demand plunged to a 7-year low and this offset many of the gains enjoyed by gold.

The Bottom Line – Making Gold Trades Count

CFD trading, ETFs, mutual funds, physical gold bullion, gold shares and other investment options are available to traders looking to capitalize off this precious metal. Gold should certainly be considered as part of a balanced financial portfolio, as it has tremendous resilience over the long-term. However, traders should be cautious not to go all-in with gold as it has proven itself highly volatile over time. Be advised that the performance of gold ETFs does not always mirror the performance of gold itself. Once you’re ready to invest in gold, consider your options accordingly.

Gold Investments for IRA Accounts

The following is a guest post. Enjoy! 

There’s a growing trend where many people are adding precious metals, mainly gold, to their IRAs. It’s quite a literal way to turn your retirement nest egg into gold. The IRS does allow so-called “gold IRAs,” where owners can include precious metals in place of assets like stocks or bonds. Gold is, of course, included along with cash assets.

Not all gold is eligible to be included in IRAs. For example, if you come by a very rare gold coin, it may be considered precious among collectors, but is rather useless when it comes to being included in an IRA. The IRS has a strict category for types of gold that can be included in the forms of bars or coins. There are many other requirements as well.

Reasons to Add Gold to Your IRA

Before getting onto the intricacies of adding gold to an IRA, it’s important to consider why. If you have ever paid attention to gold prices, you would know that it’s extremely volatile. It may not make sense to include gold in an IRA right away. But, it’s important to consider how gold is valued. The value of gold is measured in an inversely proportional manner to paper currency. Meaning, when the price of the dollar goes up, price of gold comes down. But when the price of the dollar stumbles, gold value picks up.

Think about this scenario: In 2001, an ounce of gold cost $271. In 2010, the same ounce was worth $1,896, which is an increase of about 700 percent. That remarkable value can be attributed to the Great Recession. Assets like gold are most important during time of economic crises. When the dollar plunges as it did during the recession in 2008, physical gold can hedge an investment portfolio against devastating losses. In this sense, many people add gold to diversify their retirement investment portfolios.  No one can predict what the market will be like in decades when you retire. So, gold assets can protect your lifelong savings in case of an economic calamity.

Add Gold with a Self-Directed IRA

You can only add gold to your IRA if it is self-directed. Investments in traditional IRAs are usually made up of currency-based assets like stocks, mutual funds, and certificates of deposits. If you want to diverge from such assets and add gold, then you need to exercise a certain amount of control over your account. This is what a self-directed IRA is. The owner of a self-directed IRA can tell the bank or another trustee what to invest in. Trustees do not usually say no to gold investments as long as there are plenty of cash investments as well.

You cannot have an entirely gold IRA. That makes little financial sense. Rather, you can add a small amount of gold to your IRA to protect cash assets in case of another economic downturn. When you have gold in your IRA, you will have to keep up with gold news and price charts. It’s very important to check gold prices today on a daily basis when adding this precious metal to your IRA.

Choose a Good Trustee

You are required to entrust your IRA to a custodian or a trustee you can rely on. There are certain federal requirements these trustees have to meet. You can get a bank, an investment firm or a certified gold dealer company to be the trustee of your IRA as long as legal requirements are met. You may have to spend some time searching for a firm that allows gold in IRAs.

Once you get through all the requirements, having gold in your IRA will protect your future wealth no matter what the political climate is.

Secure Your Future Retirement By Avoiding These Missteps in Your 40s

The following post is by MPFJ staff writer, Melissa Batai.  Melissa is a freelance writer who covers topics ranging from personal finance to business to organics to food.  She blogs at Mom’s Plans where she shares her family’s journey to healthier living and paying down debt.

When you’re in your 40s, you may begin to feel a great deal of financial pressure.  Your children are growing up, and the expenses associated with that begin to pile up.  You may find yourself shelling out money for more expensive extracurricular activities, higher grocery bills thanks to your children’s endless appetites, car payments so your children can begin driving themselves, car insurance payments, and college tuition.

As if that is not enough to put a strain on your budget, this may also be the time when your aging parents need more support, both financially and physically.  You may be helping them out monetarily or helping them out physically, which may mean less time at work for you as well as less income.

This decade, more than any other, is the one where your choices can make or break your future retirement.  This is partly because if you make a mistake financially in your 40s, there is not much time to recover financially, unlike mistakes you may make in your 20s when you have four or five decades to recover before retirement.

In your 40s, be careful to avoid these financial mistakes:

Refinancing Your Home and Extending the Life of Your Mortgage

Refinancing your home for a significantly lower interest rate is a smart money move.  However, too often, people refinance to lower their interest rate, but then they also extend the life of the mortgage.  True, this can reduce your monthly payment, which may offer you financial relief now, but it can later wreak havoc with your finances and your target retirement date.

Let’s say you bought a house when you were 35, and you pay on the loan for 10 years.  You are now 45 and have just 20 years left on your loan; you would own the home free and clear at age 65.  This works out rather nicely as 65 is a time when many people retire.  However, if you refinance at 45 and extend the loan back to the original 30 year term to lower your payment and create some financial breathing room in your budget, your home won’t be paid off until your 75.  This can cause quite a strain in retirement.

Many people do not have enough money set aside in their retirement account to comfortably cover a house payment, especially as medical expenses typically increase as you age.

You may say that you won’t retire until the home is paid off, but you can’t always control that.  Sometimes medical issues make retirement come earlier than planned.

Taking Out a Home Equity Loan

When you feel a financial crunch, your first thought may be to tap the equity in your house by taking out a home equity loan.  After all, the interest rates are usually much lower than a loan you can take out at your bank or a credit card.  You can also extend repayment time, often to 10 or even 15 years, which is typically not available on a loan that you get from the bank.

However, if you’re unable to make your home equity loan payments, you can lose your house just as you could if you weren’t able to make your mortgage payment.  In addition, if your home loses value during the time you’re repaying your home equity loan, you may find yourself underwater, meaning you owe more on the house than the house is worth.  If you need to sell during this time, you would need to pay the difference between the current value of the house and what you still owe between the mortgage and the home equity loan, which is often tens of thousands of dollars.  Too often, people who are underwater are unable to even put their home on the market because they know they won’t be able to generate the money needed to pay off the house loan when they sell their house.

Taking Out a Student Loan for Your Child

When your child is ready to attend college, you may feel a natural instinct to help him.  College is expensive, and you may not want your child saddled with student loan debt.  However, there are plenty of alternatives to taking out student loans for your child.

First, let your children know, from the time they are in upper elementary school, that you will not be able to help pay for their college education.  (Does this sound too harsh?  Trust me, your children will be glad when you’re retirement age and have enough money to take care of yourself because you made saving for your own retirement a priority.  Your children will be glad that you are not their financial responsibility, especially when they’re just starting out.)

By letting your children know this early, they can pick local colleges that will be cheaper, they can apply for scholarships and grants, and they can save money themselves for college.

Yes, if you don’t take out loans for your children, they will probably have to take out student loans themselves.  Remember, they are the ones who may qualify for loan forgiveness based on their career.  That will never be an option when a parent holds student loans.  Also, children with student loans can choose an income-contingent based repayment plan; parents can’t.

The government takes very seriously defaulting on student loans and will recoup their money if you stop paying.  “Federal payments to borrowers who have not made scheduled loan repayments can be withheld to repay the loan, including tax refunds and Social Security retirement or disability benefits” (US News).

Finally, if you don’t take out student loans for your children and you’re doing well financially and saving enough for retirement, you can always choose to help your children pay down their student loans faster.

Simply put—don’t take out student loans for your children.  Just don’t do it.  You and your child will be glad you didn’t twenty years from now.

Raiding Your Retirement Account

Once you start to amass a fair amount in your retirement account, you may be tempted to tap into that account when you hit a financial bind, which is likely in your forties.  However, there are significant drawbacks to raiding your retirement fund.

First, you lose the ability for the money you withdraw to continue generating interest and growing your nest egg further.

Second, you’ll need to pay a 10% penalty for withdrawing the money if you’re under the allowable age.

Third, the money that you withdraw will count as taxable income on your tax returns, so you’ll also need to pay taxes in addition to the 10% penalty.

Your 40s can be the time when you secure your retirement funding and can begin to plan for a relaxing, enjoyable retirement.  However, as you face dual financial stress in your 40s from increased financial needs from your growing children and your aging parents, you may feel pressure to find more money to infuse in the budget.  This pressure can lead to any of the above unwise financial decisions that can derail your retirement plans and lead you to a difficult financial position in your 60s and 70s.

How about you all? What financial moves do you suggest people in their 40s avoid to keep their future retirement secure?

How You Could Be Saving 33 Percent More This Year

The following post comes from DJ over at My Money Design, a blog that is completely dedicated to the idea of living a better life through finding financial freedom. You can also check out DJ at his new website, 1,000 Ways to Save. Enjoy!

If you’re looking for something truly powerful to do differently with your money this year, and you really want to ramp up your savings, then look no further than your 401(k) (or whatever tax-deferred savings plan you use)

Follow this simple advice: Max it out!

I’m serious.  Though it won’t necessarily be easy, by maxing out your savings, you could be pocketing an extra $4,500 this year.  ($9,000 if you’re married).

Here’s how it all works.

How Tax-Avoidance Saves You More

One of the things that is hard for people to really wrap their heads around is the idea of just how much money they are actually saving by using a tax-deferred retirement account such as a 401(k).

When taken to the extremes, the results are phenomenal! Let me illustrate.

The classic way to save money is to simply do the following:

1. Earn money.
2. Pay taxes.
3. Get a paycheck for whatever is left over.
4. Save some percentage of that paycheck.

Let’s say for simplicity that your gross (before taxes) bi-weekly pay is $3,000.  This means that:

1. Earn money: $3,000 gross
2. Pay taxes: If you’re in the 25% tax bracket, then roughly $750 of your money goes to the tax man.
3. Get a paycheck for whatever is left over: $3,000 – $750 = $2,250
4. Save some percentage of that paycheck: Let’s say you save 10%. That means that $2,250 x 10% = $225 goes into your after-tax account.  This leaves you with $2,250 – $225 = $2,025 to do with as you please for your normal, everyday living expenses.

Good effort!  But you’re missing out on an opportunity; a 33% more savings opportunity to be exact!

How so?

Follow the same math but use a 401(k) plan this time.  Here’s how it’s different:

1. Earn money: $3,000 gross
2. Save some percentage of those earnings. THIS TIME, because of how a 401(k) works, we get to save our 10% up-front!  Now, instead of saving $225, our same 10% savings works out to $3,000 x 10% = $300!
3. Pay taxes: With only $3,000 – $300 = $2,700 leftover, now your 25% taxes drops down to $675.
4. Get a paycheck for whatever is left over. Look at that!  Your net paycheck works out to $2,700 – $675 = $2,025 just as it did in the first example.

Do you see how that works?  You net the SAME amount of spending money in the end, but your savings went way up!

By how much? 

($300 – $225) / $225 = 33% more!

How is that possible? 

It’s simple.  You paid yourself instead of the tax-man.  By taking full advantage of a tax-deferred savings account, for every dollar you save, you’re NOT sending off 25 cents of it to the IRS.  You’re hanging on to it; keeping the full dollar for yourself.

Though that may not sound like a big accomplishment, when you really take advantage of this opportunity to the fullest extent, its true potential is revealed.

The IRS will allow you to save all the way up to $18,000 this year in your 401(k).  Using the same numbers as before, that could end up being a total of $4,500 MORE that you save for yourself (instead of handing over to the government).  If both you and your spouse do the same thing, then it doubles to $9,000 more for the two you!  That’s an incredible amount of savings!

How do I get there?

First off: I completely understand that deferring $18,000 into your 401(k) is not something that is going to happen over-night.  For most people it’s a struggle, and it certainly was for us.

However, once you recognize how powerful this savings tool is, it can become like a deal that is too good to pass up.  Over time, you’ll want to make every attempt imaginable to save money where you can so that you can take advantage of this opportunity more and more.

More Ways to Squeeze More Out of Your Savings

As if taking full advantage of your 401(k) and getting 33% more savings wasn’t cool enough, you should also know that tax-avoidance doesn’t have to stop there.  There are plenty of other tricks at your disposal to use as well.

IRA’s.  IRA’s are great because they are like a 401(k) but you have a lot more control over where the money gets invested and how you handle it.  No matter whether you prefer a traditional or a Roth, make every effort available to try to max out these accounts as well.

Even if all you qualify for is a non-deductible traditional IRA, remember that you can always convert it over to a Roth at a later time.  Then you’ll enjoy tax-free spending on the back end!

Employer Contributions.  Does your employer contribute money to your 401(k)?  If so, that’s ALSO tax-deferred money that you get to keep!  Find out from your HR exactly what the rules are and do whatever you have to in order to max this out.  If not, you’re leaving free money on the table!

FSA’s.  If your employer offers a flexible spending account (FSA) for dependent care or health care expenses, this is another golden opportunity for you to save hundreds of dollars in the process.  FSA’s allow you to save a portion of your gross income for special needs before the taxes are taken out.   Here’s an article from the IRS about how they work.

For years, my wife and I would contribute the IRS maximum of $5,000 into our FSA .  That money would simply be turned around and used to pay off our daycare expenses.  But like the example above with the 401(k), had we NOT used the FSA, then after taxes that $5,000 would have really only been $3,750.  The FSA effectively gave us an extra $1,250 to use on our kids.

Now that the kids are older, we still use the FSA for our health care needs.  Though the IRS maximum is lower, we still end up getting hundreds of extra dollars to use on our medical bills that would have normally went away to the IRS.

529 Savings.  If you’ve got kids and would like to set money aside for them to use for college, then a 529 savings plan is one of the better ways to go.  A 529 savings is similar to a IRA, but instead of the end goal being retirement, you use the money to help pay for higher education needs like tuition, room and board, etc.  You can see what kind of 529 plans are available in your state with this website here.

We’ve been contributing a very small amount of money to our children’s 529 funds for years.  Every year when I receive our statements, I’m amazed by how much the money has grown up to in just a few short years.  Thank you compounding returns!

Readers – What are some of the ways that you take full advantage of tax-deferred savings?

***Photo courtesy of https://www.flickr.com/photos/68751915@N05/6355261479/in/

Finding the Perfect Mortgage the First Time 

The following is a guest post. Enjoy! 

Every year, millions of first-time homebuyers set out on a search for the perfect piece of property. They scour advertisements; they search through real estate apps; they go on countless tours and stop by untold open houses. Then, when they finally find the home of their dreams, they are utterly unprepared to make an offer.

Buying a home is more than comparing cabinet styles and deciding whether a pool is worthwhile. You must understand your mortgage options before you even consider whether you need or want granite countertops. This guide will help you determine what features you need from your home loan, so you can find and afford your dream home in no time.

Fixed vs. Adjustable

Mortgages last a long time ― typically between 15 and 30 years. Since that is such a significant amount of time for a loan, most lenders offer two options to help you manage your interest rate: fixed or adjustable. Which option you choose depends on your current income, your credit score, and a few other factors.

Fixed Rate

Fixed-rate mortgages are the most common. With these, you can expect the same interest rate for the entire duration of the mortgage loan. The primary benefit of having a fixed rate is knowing exactly what your mortgage payment will be each and every month; your home payment will never be a financial surprise. However, fixed-rate mortgages tend to have a higher interest rate ― at least initially.

Adjustable Rate

Adjustable-rate mortgages are less common but more accessible if you have poor credit. The opposite of fixed rates, adjustable rates will change over time. Most often, adjustable-rate mortgages (ARMs) are actually a hybrid product, as lenders will promise a brief fixed period before adjusting your rate.

Some buyers find ARMs preferable because they seem to have lower interest rates. However, over time, those interest rates will rise, and you likely won’t be able to predict when or how much. Therefore, you can expect financial irregularity for the duration of your loan.

Jumbo vs. Conforming

The cost of your home will also determine the type of mortgage you can obtain. Though you might not realize it, most home loans have a size cap, and not all lenders offer conforming loans, which are the standard size, and jumbo loans, which are substantially larger.

Conforming loans earn their name because they conform to the guidelines of the appropriate government-sponsored enterprise (GSE), Fanny Mae and Freddy Mac.

In 2013, these enterprises determined that the size of home loans should be limited to $417,000 for a single-family home in the United States. The GSE can do this because it purchases and sells mortgage-backed securities, which form the foundation of the housing market. In 2007, the unreliability of these securities incited the Great Recession, so adhering to the size cap for home loans should keep the economy more stable.

Conversely, jumbo loans are available from some lenders for those looking to purchase a home worth more than $417,000. However, such sizeable loans represent a marked increase in a lender’s risk, which means you must have impeccable credit, high income, and a large down payment to qualify. As long as you are prepared for the financial responsibilities of a more expensive home, a jumbo loan is an excellent mortgage option.

Conventional vs. Government-Insured

Finally, not all potential homebuyers have the credit history or liquid assets to purchase a home. Fortunately, the government offers unconventional, government-insured loan programs to help less-advantaged citizens buy property.

The benefit of having a government-insured home loan is that the government promises to pay your mortgage if you default, so lenders see the loan as no-risk. There are three main types of government-insured mortgages:

VA Loans

Typically available only to veterans or their partners, VA loans require no down payment, offer competitively low interest rates, and do not require mortgage insurance. These loans do conform to GSE guidelines, but they are incredibly easy to qualify if you or your spouse served in the Armed Forces.

FHA Loans

The Federal Housing Administration (FHA) also offers a mortgage program to low-income, low-credit homebuyers. Unlike VA loans, FHA loans require a down payment ― though it can be as low as 3.5 percent ― and mortgage insurance. However, interest rates are low.

USDA Loans

If you are willing to move to a rural community, the United States Department of Agriculture will help you secure a mortgage. Your qualification for this program depends on your income; it can be no more than 115 percent of the regional average. However, by participating, you earn exceedingly low interest rates and the opportunity to bypass a down payment, as long as you pay mortgage insurance.

Strategies to Trade Forex Online

The following is a guest post. Enjoy! 

The 2016 US Presidential elections have come and gone. To a proportion of the world’s surprise, Donald Trump won the elections. This news sent the financial markets into a tailspin, causing traders to move their investments into safe-haven funds as well as hedge stocks. The markets then recovered some of their losses; however, they continue to be very volatile and strongly influenced by any global political murmurings.

As time passed, investment brokers and the world at large calmed down allowing the financial markets to recover some of their losses; nonetheless, the volatility remains. Added to this, because of the inherent liquidity of cash, the foreign exchange trading markets remain the most volatile of all the financial markets, resulting in the need for caution when considering the option to trade Forex online.

How wise is it to trade Forex online?

This beg the question: How wise is it to trade Forex online in our current politically and economically unstable climate? Unfortunately, this is not a challenge unique to a single currency or country. Because of the rise of the internet and online trading, the global volatility affects all currencies. The only difference is that it affects some currencies positively and others negatively.

What is foreign exchange trading?

Before we answer this question, let’s take a look at trading online entails. According to the Investopedia University, this market “is one of the most exciting, fast-paced markets around. Until recently, forex trading in the currency market had been the domain of large financial institutions, corporations, central banks, hedge funds and extremely wealthy individuals… now it is possible for.. investors to buy and sell currencies easily with the click of a mouse through online brokerage accounts.”

Trading strategies

If online traders read the current volatility in the markets correctly, it is possible to trade successfully; however, caution is required. Experts recommend that you develop a solid trading strategy before you start trading and then it is imperative to stick to it. Here are three tips in order to help you work out your trading strategy:

• Decide which position you are going to take

A trader can take three positions – short-term, medium-term, or long-term. In a nutshell, this essentially means that a trader needs to decide whether he is going to buy a certain currency and at what point he/she is going to sell it.

• Decide which currency pairs you are going to trade in

You need to sell one currency to buy another currency. Currencies are always divided up into pairs. For example, the GBP-USD is a currency pair. In this case, the British Pound is the commodity and the US dollar is the currency that you will use to buy the GBP.

• Establish your exit point

You need to decide at what point you are going to sell your commodity. For example, if your position is gaining ground or making money, at what rate will you sell or cash out? On the other hand, if your position is losing money, at what rate will you sell and cut your losses?

Final Thoughts

These three tips are just a start to help you develop a solid trading strategy, as they will help you safeguard your investments and prevent you from losing money. In order to successfully trade Forex online, you can improve your trading strategy by adding well thought-out stop losses and limits

Opportunity Funds

The following is a guest post by Akash Sky. Akash writes articles that teach people about investing using intuitive graphics and simple, plain English over at akashsky.com. Enjoy! 

I’m sure you have all heard of emergency funds, and I’m sure that many of you have them as well. But, have you heard of an opportunity fund? It’s similar to an emergency fund, except the purpose behind its use is different. In this article, we will discuss following:

• what an opportunity fund’s purpose is
• how large an opportunity fund should be
• who stands to benefit most from an opportunity fund
• where an opportunity fund should be stored
• how an opportunity fund should be used

Alright, let’s start by discussing the purpose an opportunity fund.

What’s the purpose of an opportunity fund?

To better understand the purpose of an opportunity fund, let’s examine the purpose of an emergency fund. According to Investopedia, the purpose of an emergency fund is to improve financial security. In other words, the emergency fund is there to limit your downside potential (i.e. bad things like debt, homelessness, hunger, etc.). Now, take that purpose and reverse it.

The purpose of an opportunity fund is to maximize your upside potential. Basically, an opportunity fund’s purpose is to give you the financial fuel to make the most of an opportunity that comes across your way.

What type of person benefits most from an opportunity fund?

First off, I want to explicitly state that an opportunity fund is not for everyone. If you are simply looking to remove risk from your life and remain financially comfortable, an emergency fund is more than enough for you.

A person well-suited for an opportunity fund would have the following attributes:

1. Is actively looking to increase their wealth / net-worth, even at the cost of accepting risk
2. Can lock away / save additional money without negatively impacting their life

How much money should I set aside for an opportunity fund?

There are no hard rules for the amount of cash you need to have in your opportunity fund – you just need enough to make the most of an opportunity that is likely to come your way. In order to do that, you are going to have to do some introspection. You should try and answer the following question: what are some of the best opportunities that I have come across in the last 5 years?

Then. ask yourself: “How much capital / money would I have needed to take advantage of those opportunities?”. Of course, its hard to give an exact figure. For example, if you happen upon a killer real estate deal, your “opportunity fund” would need to be large enough for a down-payment, whereas if you come across a smaller opportunity like a correction in the stock market, you would only need a few thousand dollars.

In my case, I’ve got $5,000 in my opportunity fund. The opportunities that I’m expecting to capitalize on at the moment are corrections in the stock market, my personal blog, and small business ventures. In order to find out the dollar amount you need in an opportunity fund, you need to clearly define the opportunities that you want to take advantage of. Once you’ve done that, all you need to do is calculate the financial fuel you would need to make the most of those opportunities and then save that amount in the form of an opportunity fund.

Where should I place my opportunity fund?

Just like an emergency fund, an opportunity fund needs to be liquid. That means that you can’t store your opportunity fund in an investment that is difficult to convert to cash.

This means that savings accounts, CDs (if you are willing to take a slight penalty), and money market accounts are great places to store your opportunity fund. However, the best place (in my opinion) to store an opportunity fund is inside of a 1 year old I-Bond.

I-Bonds are a hybrid between CDs and savings accounts. After you lock away your money for 1 year, you are free to access it at any time. In addition, I-bonds carry less risk than savings accounts because they are immune to inflation and interest rates. To top it off, I-bonds often pay higher rates.

How should I use an opportunity fund?

Before we talk about how to use an opportunity fund, lets quickly talk about how to NOT use an opportunity fund. An opportunity fund is NOT extra spending money for when things go on sale. If you truly want to make the most of an opportunity fund, you need to spend it on opportunities that will provide long term benefit to you.

In order to properly use an opportunity fund, you need to be able to identify worthwhile opportunities when you come across them. In order to do so, you should ask yourself the following questions:

• Is this opportunity likely to benefit me far into the future?
• When is next time I can reasonably expect something like this opportunity to pop up again?

If you are not likely to come across the opportunity again and it is likely to benefit you far into the future, it may be a worthwhile endeavor to use your opportunity funds on. Ultimately, deciding if the opportunity is right for you is a personal choice. However, having an opportunity fund allows you to have a choice to begin with. It’s up to you whether or not to use your financial fuel to take up an opportunity to change your life for the better.

Finishing thoughts

In the end, whether or not an opportunity fund is a good fit for you depends on your financial goals. If you want to actively grow your net-worth instead of cruise along, I highly recommend starting an opportunity fund. In the investment world, cash is king, and you’ll always need to have some of it on hand to pounce on any wonderful opportunity that comes your way. After all, fortune favors the bold, and it is much easier to be bold with an opportunity fund.

How about you all? What do you think about opportunity funds, and are they right for you?

Share your experiences by commenting below! 

Why More Practical Money Skills Should Be Taught In School

The following is a guest post. Enjoy!

Younger people have to make significant financial decisions these days, and acquire financial facilities such as bank accounts and debit cards at an earlier stage than previous generations did. With likely trends continuing into future years of increased life expectancy, uncertain economic and job prospects, and the already present need for students to manage their living costs and student loans when in further education, the need for youngsters to be financially aware is increasing.

A desire for financial education

Research undertaken by bodies such as the Personal Finance Education Group (pfeg), a body helping younger people gain financial skills, has revealed that over 60% of youngsters open a bank account before starting secondary school, and some 75% of 15 year olds with a bank account have a debit card. The pfeg also found an overwhelming number of parents and teachers, and young people themselves, thought financial education should be taught in schools.

The need for financial education

Along with managing savings and bank accounts from a tender age, young people very soon have to get to grips with heavier financial aspects such as managing a budget when studying away from home and dealing with student loans.

Judging aspects such as the best way to finance their mobile phone by understanding contracts and commitments, deciding when to borrow money, how much they can afford to borrow, and assessing the most appropriate loan sources for their needs are just some of the required financial skills.

The possibility of having to leave home at a young age for the right job, and organising what may be tight finances when renting and paying bills on a starter salary, are very real circumstances younger people have to face with career-specific jobs less likely to be found closer to home.

There are claims that consumers lose on average nearly £430 per year simply through misunderstanding financial terms and conditions or not studying them properly, and this could be at least in part blamed on lack of sound financial education at a younger age.

If nothing else, the principles of assessing financial products such as bank accounts, credit cards, loans and contracts would stand younger people in good stead. For example, if considering taking out a loan, youngsters would be shown how to assess the lender’s suitability for their requirements such as visiting their website and looking for key information such as their credentials and checking if they’re members of the FCA (Financial Conduct Authority), and how they operate perhaps by reading their ‘FAQ’ page.

Steps being taken

Unfortunately, due to pressures to deliver on other aspects of the ever-changing school curriculum, barely a third of primary schools offer financial education. That said, some headway has been made through the pfeg’s Centres of Excellence programme; as of April 2016, over 50,000 students had benefitted from some type of financial education and over 2,500 teachers had been equipped with skills enabling them to teach financial education.

All-party parliamentary groups have been formed in recent years to instigate financial education; in 2014 the Parliamentary Group on Financial Education for Young People was the largest all party group with over 200 members. Household name financial institutions were involved in providing training materials and actual lessons to young people in over 1,000 secondary schools.

Steps are being taken, but there’s still a long way to go in equipping youngsters with important financial skills.

Compound Interest: Your Friend Or Your Enemy

The following post is by MPFJ staff writer, Laurie Blank.  Laurie is a wife, mother to 4 and homesteader who blogs about personal finance, self-sufficiency and life in general over at The Frugal Farmer. Part witty, part introspective and part silly, her goal in blogging is to help others find their way to financial freedom and to a simpler, more peaceful life.

At the root of many financial failures is the failure to understand the power of compound interest. Depending on which side of the river you’re on, compound interest can be a tool that will catapult your journey to financial independence, or a destructive enemy that will work to destroy your financial world.

Compound Interest: Your Wealth Building Friend

The effects of compound interest in the investing world are almost unbelievable. A commonly used scenario that works to illustrate the benefits of compound interest when used to grow wealth is this one:

At age 19, Joe decides to invest $2,000 per year in a retirement account for a period of eight years until he turns 27. He puts a total of $16,000 of his own money into an investment account, committed to leaving it there until he retires at age sixty-five.

Mike, also 19, decides to put off retirement investing until age 27, right when Joe decides to stop adding his own money to his retirement account. Mike puts $2,000 a year into his retirement account starting at age 27 and every year after that until age 65.  Both men net an average annual return of twelve percent.

Who has more money saved in his retirement account when the men reach age 65?

Joe: $2,288,996

Mike: $1,532,166

(Source: http://www.daveramsey.com/blog/how-teens-can-become-millionaires )

It seems impossible, but any investment calculator will show you that although Mike contributed over $60,000 more of his own money to his retirement account than Joe did, Joe still ends up with nearly double the amount of money in his retirement account that Mike has.

This, my friends, is the wondrous miracle of compound interest.

Compound Interest: Your Financially Destructive Enemy

In the same way as compound interest can help you build enormous wealth, it can also assist you in systematically destroying any opportunity for financial freedom.

How? By continuously carrying high amounts of debt.

For example, if you carry a credit card balance of $15,000 (the average of credit card balance carriers in the U.S.), and your credit card has an interest rate of twelve percent, you could be paying on that credit card forever. If your card has a minimum payment due of one percent of the balance, the payment will match the monthly amount you’ll pay in interest and you’ll never make a dent on the balance, even if you pay on it for forty years. If you pay a minimum payment of 1.5%, it will take you over thirty years and over $40,000 in payments to get to a zero balance, as shown by the chart below.

The longer you hold onto debt – especially high interest consumer debt – the more that compounding credit interest charges will cost you money.

Credit card, mortgage and other loan interest charges not only eat up your monthly income, they take from you money that could be used to make compound interest your friend by using it to grow wealth, as in the first scenario I shared.

How to Turn Compound Interest from Foe to Friend

If you’re stuck on the wheel of compound interest destruction don’t worry; you can turn things around. Here are some tips for minimizing compound interest payments and freeing up more cash for wealth building.

Transfer Credit Balances to Low or Zero Interest Cards

If you’re carrying credit card balances that are too large to be paid off each month, work to transfer the credit card balances to zero interest card offers. Then work hard to get the balance paid off by the time the zero percent interest rate offer expires.

Crush Your Debt Quickly

The sooner you pay off your debt, the less of your money that will go into the profit margins of big banks and the more that will be available to go into your own pocket. Devise a debt payoff plan such as the debt snowball and get to work on crushing your debt.

Start Investing – NOW

Even if you can only afford to invest a little bit each month as you work to get out of debt, invest something. Get the power of compound interest working in your favor now, and increase the amount of money you invest as you are able.

Don’t let compound interest work against you any longer. Instead, use it to help you grow wealth and reach all of your financial goals.

How about you all? How is compound interest working in your life?

Share your experiences by commenting below! 

***Photo courtesy of https://www.flickr.com/photos/torley/7072696591/in/