Category Archives: Finance

Tips for Lifelong Saving

Tips for Lifelong Saving

Teenagers

  • Pay yourself first Teenagers get money for birthdays, allowance and jobs. Learn early to “pay yourself first” and put some money into a savings or investment account. This is one of the best habits you can develop. Stick to this and you will be surprised how even small sums of money can grow. You can even collect loose change and add to this; every little bit adds up.
  • Make a budget If you don’t keep track of your spending, you will not understand where your money goes. Keep a list of every expense, no matter how small. This will make you think twice about the importance of each purchase.

Young adults

  • Save money If you are single or married without kids, this is the least expensive time of your life. You finally have control of your own money, and it may even feel like a lot. You can spend it all on clothes, cars, furniture and entertainment, or you can spend smartly and save for the future. You may have just graduated from school, but this is best time to plan for retirement. Maximize your retirement accounts, because even though the stock market is volatile, time and compounding growth are on your side.
  • Build up your credit score Test scores are behind you and now is the time to focus on your credit score. This score is more important than any exam because it is how lenders judge you. Your credit score affects the terms and interest rates for all loans — credit card, mortgage and auto. The higher your credit score, the lower your interest rates, resulting in more money you can keep.

Your payment history and how you handle money is so important that employers may even look at your credit report during the interview process to help screen applicants who may be unreliable or a risk of theft.

Newlyweds

  • Full disclosure of debt and financial obligations Tell your partner before the wedding about all of your debt. It is not fair to wait until the first bills come in. Make a list of all student loans, car loans, credit card debt, even loans to friends and parents. Get copies of credit reports to verify all open accounts. One or both of you may enter the partnership with debt, and debt payments drain away money you could be saving to help you reach financial goals. If either partner has problems with credit, your rental or mortgage pplication may be denied, or you may have to pay more money on loans with higher rates.
  • Joint or individual bank accounts Will you have one bank account for all income and expenses, or will you start with three accounts — yours, mine and ours? A joint account is easier to manage and will prevent some disagreements over dividing bills, but decisions need to be shared. It gives each partner some control over their own spending. Couples tend to gravitate toward joint accounts once they add children and major expenses; if you choose to have separate accounts, develop a plan outlining which account pays each bill before the first bills arrive.

Midlife

  • Save for college The best time to begin saving for you kids’ college is the day you bring the baby home. There are college savings plans with tax benefits. Look at state-sponsored 529 plans and educational savings accounts.
  • Inheritance and windfalls You may get money from a home sale, inheritance or insurance payment. This is a great chance to pay off high-interest debt, such as from credit cards or auto loans. It is also a good time to fully fund an emergency fund (six months of household income) and put more money into your retirement account.
  • Teach children about finances You can set a good example for your children on saving, spending wisely and charitable giving. It is easier for them to understand when they watch you do it. Take them shopping with you and show them how to compare prices and find good deals. Let them see you put something back because it cost too much.

Open a bank account for them and let them make deposits into their own account. Show them the interest and balance growing on their monthly statement. Give them an allowance and let them make their own decisions about this money. Let them save and pay for the toys and games they really want. This also gives them a chance to make mistakes with money and experience the emotions and understanding that once money is spent, it is gone.

Preparing for retirement

  • Max out your retirement savings You may still be paying for your children’s college education, but it is just as important that you save all you can for your retirement. If you retire at 65, will your retirement savings sustain you for 20 years or more? It is a good idea to save 10% to 20% of your annual income for retirement. Max out your employer’s retirement plans and your individual retirement accounts.
  • Pay off your debt It is easier to pay off credit card and other debt now, while you have income. Start with the card with the highest interest rate and pay as much as you can above the minimum balance. You can even skip dinner at a restaurant and immediately log in to your account to apply that money to your credit card.
  • Have a plan to make your savings last Today, seniors have a longer life and their retirement savings has to last longer. This may difficult if your investments are still recovering from the recent financial turmoil. Developing a plan and a budget may require the help of a financial adviser. The FDIC provides some good information on how to help your money last after your final paycheck.

Tips to Prioritize Your Student Loan Payments

Tips to Prioritize Your Student Loan Payments

Years later when people are moving to the more “balanced” stage of their lives, their 30s, loan repayments still are not always top of mind. When you have a robust social life, savings goals, vacation plans, rent payments and a bad Seamless orUber habit, it’s easy to forget that student loan payments should remain a financial priority.

As someone who has learned the hard way but managed to turn it around, below are five tips to help you stay on track when paying back your college debt.

1. Research the Best 401(k) Option for You

Upon landing your first job, there are a lot financial decisions to be made, including signing up for medical insurance through your employer and joining your company’s 401(k) program. Depending on your situation — your total loan balance, monthly payment, and overall income and expenses — it may make sense to hold off contributing to your 401(k). This choice isn’t for everyone as it depends on a variety of factors.

For example, it depends on your tax bracket. If you invest in your 401(k), you can often lower your tax bracket. In addition, if your employer offers a matching contribution, it may make sense to invest in your 401(k), otherwise you’re throwing away free money.

Alternatively, you may want to ask your employer if they are willing to contribute to your student loan payments in replacement of a 401(k) contribution. It’s important to evaluate whether your investments earn more than your debt. However, if you’re really strapped for cash, putting that money towards your monthly student loan payment can help provide a bit of financial wiggle room and help pay off that debt quicker.

Whatever your situation, it’s important to consult your financial advisor before making this decision.

2. Don’t Fear the “B-Word”

A lot of recent college graduates flinch when they hear the word “budget,” but creating a budget to help you manage your finances is the opposite of scary.

It’s easy to push important financial obligations to the back of your head when you’re first out of school. According to research from Student Loan Hero (where I am CEO), a quarter of Americans would prefer to pay for Netflix than student loans, and 23% would prioritize social activities.

Outlining a budget that not only accounts for your bills and loan payments, but social activities such as movies, concerts, and going out to eat with friends, can help make sure you’re still paying down your debt each month. With great free services like Moven, Mint and Digit out there that help you to do this automatically by tracking spending, creating a budget has never been easier.

3. Focus on Making the Right Decisions on “The Big Stuff”

There are many large expenses that are often on the horizon as you move through your 20s and beyond. From marriage, to real estate, to starting a family, these are all big financial undertakings. In order to really make these big financial decisions a priority, try to cut out the small, frivolous purchases and focus on the big-ticket items. Saving for a down payment on a home is obviously more financially important than spending $6 a day at Starbucks.

Typical housing expenses (rent, utilities etc.) should never account for more than 35% of your monthly income, according to financial expert Jean Chatzky. If you’re paying more than this, you may want to consider making a change. If you live alone, consider getting a roommate to cut your rent in half or even Airbnb your room when you are out of town. Though it may be easier said than done, it may also be worth thinking about moving, whether it is to a smaller apartment, or even another city.

If you’re living in an expensive area, like New York City, for example, think about how your expenses may decrease if you change locations. I personally did this and left New York for Austin so I could focus more on my student loan repayments. This, of course, is all dependent on work and your personal flexibility. It could, however, be a huge factor in helping to prioritize your student loan repayments.

In addition, it makes sense not to get in over your head. If you are saving for a down payment on a home it makes more sense to purchase one that is in your price range rather than purchasing a home that has a mortgage payment that will cause you to drown financially. This means, don’t buy the most expensive home or product. If you’re looking for a new car, it’s best to purchase a used vehicle instead of that new BMW.

Prioritizing the most important financial decisions is a key to staying on track with your budget and loan repayments.

4. Keep Saving

It’s tempting to take extra money you may have each month and put it towards something else — whether it’s for something fun like a weekend away or something more responsible, like continuing to paying down your loan balance. However, it’s important not to forget to contribute to your savings account or emergency fund.

Most Americans cannot even afford a $400 emergency fund. According to Dave Ramsey — the first step toward paying off consumer debt is building a $1000 safety net. Other experts recommend saving 5%-to-10% of your net income.

Next, focus on paying off any consumer debt — credit cards and student loans. Following that, save a few months of expenses up, just in case. There are even tools that can help you do this. For example, Acorns, an app that takes pennies off your purchases and rolls them into an investment account that’s easily liquidated. Having these emergency pockets of money set up can ultimately ensure you don’t miss a loan payment due to an unexpected emergency.

5. Pick a Student Loan Repayment Plan

In order to prioritize paying down your student debt, payments must remain a top priority. Utilizing strategies such as the “debt avalanche” strategy — where borrowers pay off their most high interest loan first, allowing them to potentially save thousands of dollars on interest — or the “debt snowball” strategy that is known as the most psychologically rewarding strategy by paying off the smallest principle loans first. Whichever plan is right for you, pick one and stick with it.

You’ll feel a sense of gratification as you continue to see your total loan balance decrease. Beyond that, it may be worth considering refinancing or consolidating your student loans. Companies like Common Bond, SoFi and Earnest all have options to help refinance, if it is the right decision for you.

Ways To Invest Money

Ways To Invest Money

unduhan-1Anybody can earn money, it’s the savings and investments that count, an adage that rings true in these times of economic unrest and uncertainty. Careful investments can go a long way in securing ones future, after all, whether we call them stocks, bonds, term deposits or even simple savings accounts, a comfortable retirement is the ultimate goal of all personal finance. For the employed, investment often means putting away money for a rainy day, in stocks or funds which can be counted on, during times of economic downturn or personal requirements. Yet, for an amateur investor, just beginning his journey into the realms of finance, it may be a challenge to manage his resources according to his investment goals. Before we start discussing some investment channels, it would be prudent to glance at some tips for sensible investing.

Tips for Intelligent Investing

Goal – Setting
Goals can be short or long term, your eye may be on a beautiful Porsche in a dealership downtown, or maybe, your aspirations are more familial and it’s a home that’s on your mind. A college loan, a formidable-looking mortgage, or even a trip to one of those picture postcard tropical paradises you see so often, plastered across the centerfold of some coffee table travelogue, without a planned investment strategy spread over a number of years, one cannot hope to ever generate the amount of money required to bring any of these dreams to fruition.
All investment goals are invariably influenced by factors such as age, income, marital status and work opportunities. Setting yourself goals for investment can be a very personal, introspective look at ones stage in life, and is different for every individual. A middle-level manager in an accounting firm in his early forties, may decide to take lesser risks and not invest in funds that have a greater composition of volatile stocks, on the other hand this may be the exact opposite of what a young executive in his first or second job would do – go where the returns are the best. A more senior investor, retired or on the verge of it, would probably hold more government bonds than mutual funds or pure stocks, as he needs the assurance that a federally backed financial instrument can give him.

The Risk Quotient
There is no gain without some measure of pain, so the saying goes, and the element of risk is omnipresent once your hard-earned money is on the line, fluctuating with the market and the prevailing economic conditions. It is best to have a margin of safety while investing, so as to keep a buffer between you and these fluctuations, thereby keeping your money safe. The other side of this argument, is that it’s often the risk-takers who stand to gain the most from these corrections in the market, if they have sound reasoning to back their investment decisions. The stock market has made and unmade many good people, it doesn’t mean you have a defeatist attitude and no risk appetite, however, for those who don’t have a taste for the mood swings of the market, there are several investment options in the form of bonds and certificate deposits which will do the job, albeit at a lower rate of return.

Diversification
It is advisable not to keep more than 75% of your investment confined to a particular asset class. By asset class we mean the investment vehicles like stocks and bonds. Diversification is a way to tone down the risk of losing money when the market is overcome by the forces of demand and supply, or at times, speculation and rumors, resulting in a drop in prices of stocks and the devaluation of personal holdings. One can invest in different types of securities and in funds which spread their portfolio over a range of companies, operating in different sectors of the economy.

Liquidity
Investing is also tying up your money in the form of a financial instrument, and liquidity is important when you want to make changes to your investment portfolio. Investing in stocks, bonds and other types of security comes in handy here, as these can be readily sold or redeemed in case of such requirements. Investing money in real estate, or in a business having a limited liability clause, may tie it up for a considerable amount of time, as there are certain legal formalities involved in the sale and purchase of such assets.

Checking for Tax Advantages
Investing can offer tax advantages too. Bonds carry certain tax benefits, an example is the US Savings Bonds which offers tax exemption at the State and local levels. Municipal bonds also offer certain tax reliefs, however, investing in stocks may incur you a tax liability as the gains from them are taxable.

Return on Investment
What are we investing for but profits, an amount gained that is in excess of the one we parted with, reducing or eliminating the opportunity costs involved in investment plans. Once again you must assess your requirements, what portion of savings are you willing, and able to invest? Which investment route should you choose? If you are a student paying off an education loan, high-stakes stock trading will not be your cup of tea, it may even lose you the few thousands leftover from the loan. It is a good idea to go for a short term Treasury Bill (6 months) or deposit your money into a savings account that has an attractive rate of interest. If you decide to indulge in some stock trading, it is best to stay with money market funds which invest in government securities and not on the open market. This investment plan will undergo changes according to the requirement of the investor, a successful software engineer may want to go for more aggressive trading, investing in a mix of blue-chip and mid-size companies that show promise. However, in all cases, the ultimate result is the generation of profit which makes all the trouble worthwhile.
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Ways to Invest Your Money

Investment methods can be classified in two ways – according to the degree of risk or the time period over which the yield may be derived from them. So you have to choose between high, medium and low-risk investments, keeping in mind the time frame too. Imagine a pyramid of your hard-earned money; ideally, the base of the pyramid should be invested in low risk, long-term investments (after accounting for your day-to-day expenses), the middle pile in short-term investments, with moderate risk and the smallest portion of the pyramid peak, into high-risk, high-return investments. Here are some of the best ways to invest in the long and short term, to ensure financial freedom in the years to come.

Open a Savings Bank Account

A safe method of investing is the savings bank account. Banks offer you a set interest for the amount of money you deposit with them. The current market, however, is still recovering from the disasters of 2008 and the Federal Reserve has decided to keep the target rate near zero until 2015, in an attempt to keep mortgage interest rates under control. So, although homeowners have something to cheer about, interest rates on savings accounts will not be very high, as banks use the Federal Reserve target rates to decide their own rates if interest. This does not mean that there are no banks out there with attractive interest rates and a little analysis can help you decide where to open an account and invest your cash. Bank accounts are known to be the safest and most flexible, if not the best way to invest money. Though the yield is low, the advantage of investing in savings accounts is the freedom to withdraw money anytime, as long as a minimum amount is maintained.
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Investing in Bonds

Another great investment option is that of a bond. Bonds are issued by private companies and governments. When you buy a bond, you essentially provide a loan to the private enterprise or the government issuing it. In return, you earn a fixed monetary interest, according to the coupon (interest rate of the bond), after a fixed maturity period. Treasury bonds or notes issued by the government are the safest investment options, with low but guaranteed yields in the long term. Bonds come in various types. A riskier, but high yield option is buying bonds offered by private companies, which are traded on the bond market. The returns on these bond instruments are subject to the performance of the issuing company. Carefully research the bond market and study the risks involved before investing. A treasury bond is always a good investment, but it has a long maturity period.

Corporate Bonds
Such bonds are issued by private and public companies as a quick method of raising capital.

Pros

  • Higher yield than government bonds.

Cons

  • There can be a risk of default if the company suffers losses or the prevailing market conditions force it to defer payment.
  • Liquidity can sometimes be an issue as secondary markets may not always accept sale of corporate bonds.
  • Inflation, that many-headed monster, is always a threat as it tends to reduce the value of the bonds in the long term.

Municipal Bonds
Local governments and their affiliated institutions also issue bonds, known as Municipal Bonds or Munis, these bonds are often released by cities, redevelopment agencies, school districts or any other governmental agency beneath the central government.

Pros

  • Municipal bonds are tax-free, this is by and large their greatest advantage. Even though the interest rates on municipal bonds are low, they offset this by giving you a tax-advantage which closes the gap between them and other taxable bonds.
  • Municipal bonds have negligible default risk as they are backed by government agencies which promise return of principal and interest.

Cons

  • The biggest drawback of bond investing is the low interest rates, however, if you are looking a risk-free and long-term investment solution, municipal bonds are the way to go.

US Treasuries
The US Treasury Department issues various debt instruments which can be a good way to invest and earn interest income. These instruments are backed by the federal government and are therefore a safe and reliable mode of investing money. There are several types of such debt instruments namely:

  • Treasury Bills: A popular short-term security, also called a T-Bill, which matures within a few days to about 52 weeks.
  • Treasury Notes: Known as T-Notes, they mature within two to ten years and pay interest (coupon payments) every six months. They are available in denominations of $1000.
  • Treasury Bonds: T-Bonds are true long-term investment vehicles, they have the longest maturity period, extending from twenty to thirty years and similar to T-Notes they offer coupon payments at six-month intervals. However, the T-Bonds are losing popularity, having been taken over by the 10-year T-Note which also works well as a long-term investment option.
  • Treasury Inflation-Protected Securities (TIPS): The TIPS securities offer inflation protection by virtue of being tied to the movement of the Consumer Price Index (CPI). The simple act of increase or decrease in the index prices causes an appropriate adjustment in the principal amount invested in TIPS, to tackle the loss caused by inflation. TIPS come in 5, 10 and 30-year maturity classes.Investing through the 401(k)

    You can also opt for salary contribution plans like the 401(k), a subsection of the Internal Revenue Code. This is a type of retirement contribution plan, where certain amounts are offered as contribution towards the 401(k) fund, the annual limit being $17,500. These contributions are deducted from the employees paycheck, before any tax-deductions are made, however, the 401(k) is taxable if the money is withdrawn before 59½ years of age, the age of retirement. Many employers also undertake to contribute toward 401(k), which adds to the fund over the years.

Pros

  • Tax-free deductions added to a fund you can claim after retirement, a handy sum which will go a long way in contributing to your financial security in your twilight years.
  • Employers that match the contribution often ensure a profit-sharing option, enabling better returns in the long run.

Cons

  • Liquidity takes a hit as most employers enforce severe restrictions on withdrawals from 401(k) accounts.
  • There is an excise tax of up to 10% levied on withdrawals, not to mention the tax deductions which would invariably apply.

Certificate of Deposit

Apart from savings accounts to put money in, banks in the US also offer a financial product called a Certificate of Deposit. A Certificate of Deposit or CD as they are commonly called, is a time deposit much like a savings bank account in that it is guaranteed to be risk-free. CDs are also offered by Credit Unions, insured by the National Credit Union Administration (NCUA), the ones offered by banks are guaranteed by the Federal Deposit Insurance Corporation (FDIC). CDs offer a fixed interest rate for the amount of money you deposit with them for a particular period of time. The time-span varies from case to case, but the general span is six months to two years. The banks offer decent compounded interest on your deposits. A Certificate of Deposit is a time-honored and time-tested way of investing money.

Pros

  • Interest rates offered are higher than average savings banks account rates.
  • Risk-free investment as it is basically depositing money in the bank, albeit for a shorter duration of time.
  • Larger deposits are often offered higher interest rates too.

Cons

  • CD interest rates are closely linked to the inflation rate of the economy. This is turn causes a problem when the real rate of return is calculated. If the inflation in the economy is tagging at 7%, the CD rates will be very similar to this, as the inflation cancels out the interest income.
  • Taxes are liable to decrease the real return of a CD even further.Individual Retirement Accounts (IRAs)

    A form of a retirement plan, IRAs are a popular form of investment, which give you a healthy sum to bank on after retirement. The IRA is a tax-saving tool as the money you contribute to it is tax-deferred, only when you withdraw from it at the time of retirement is there a tax component, treating the income as capital gains. However, since the tax rates are lower after retirement there is not much tax burden on IRA withdrawals. The funds in the IRA account can be then directed by the contributor toward investing in different types of securities which are deemed permissible. There are different types of IRAs depending on the eligibility and requirements of the investor.

  • Traditional IRA: Tax-deferred contributions over time, withdrawals are taxed after retirement.
  • Roth IRA: The opposite of a traditional IRA plan, here the taxes are deducted from the contribution before it is put in the IRA and all withdrawals are tax-free at the time of retirement.
  • SEP IRA : An employer can make contributions to a traditional IRA, instead of a pension fund, in the name of an employee.
  • SIMPLE IRA: The employer in this case matches the contribution made by the employee towards IRA. SIMPLE stands for Savings Incentive Match Plan for Employees.
  • Self-Directed IRA: This is an IRA where the investor makes investments on behalf of the retirement fund.

Investing in the Stock Market

Another way of investing money is the stock market. This is the riskiest option, though it has the potential for highest returns. Stocks are unit of shares which signify holding in companies which can be bought by individuals or other institutions. For example, a person can buy stocks in a company for $5 and the next day, the cost of the shares could be as high as $8 per share. Selling, it, he will make a profit of $3. The stock market may give returns of as much as ten to twelve percent annually, however, it is governed by the forces of demand and supply and affected by various factors, from national and international events to the minute economic changes that occur when the government tweaks financial policy. It is, therefore, not surprising that one may book profits in excess of 300% in a week’s worth of trading, or maybe lose the whole investment even quicker.
There are various options available for an investor in the stock market, some have been listed here according to their relevance for different types of investors.

Stock Trading

The purest form of trading there is, trading stocks on the exchange requires skill, patience, insight and sheer guts. This is not for the faint at heart, or armchair investors who may not be serious about investing. If you have decided to take the traditional route to investment, by launching yourself onto the trading floor, it is best to have at least a few months salary safe in the bank. Always invest what you won’t immediately need, spread your risk but not too much, stick to blue-chip stocks if you want long-term returns and maintain a margin of safety while purchasing, whereas a chance to book profits while selling. Stocks are classified according to a variety of distinctions, each with its own advantages and disadvantages.

  • Domestic stocks
  • Sector based stocks
  • Strategy based stocks
  • International stocks
  • Commodity stocks
  • There are also stocks which may not be listed on the exchange such as Private equity and Venture capital stocks.

Pros

  • There is immense flexibility; You can buy and sell stocks as you wish, or get a broker to carry out your transactions for you.
  • The stock market gives better returns than most other forms of investment. When on a bull run, the returns can be many times your original investment, that too in a short period of time. During the bearish phase stocks can be bought cheap and held onto, till times change and the market moves upwards again.
  • Stocks of companies from all over the world can be traded at the click of a button, this gives the investor a chance to diversify his investment and sniff out new sectors which are ripe for investment. The economic scenario in Asia might be better suited for certain companies than the recession hit economies of the West and it may be sensible to invest in companies that have Asia as a primary market.

Cons

  • The stock market is a great leveler, it can change quickly and without warning wiping out big and little guys alike. As an investor, one must conduct meticulous research before going ahead and investing money, there should be a clear understanding of market conditions and an ability to forecast future movements with some certainty.
  • There is an element of speculation present which can throw the best laid investment plans out of focus. The trading floor is abuzz with exchange of information and news, many times the general sentiment is influenced by the speculative activities of a few individuals and snowballs into affecting the whole market. At times like this, prices can fluctuate wildly causing serious harm to investors.
  • You cannot sit back and relax once you begin investing in the stock market. Although brokers and commission agents will work for you, it does not mean one can leave the trading in their hands, after all, the decision to invest in particular sectors or stocks must be made by you.

Best picks for 2013
Qualcomm
With a market cap of around $110 billion, Qualcomm is an attractive option these days. The financials of the company are robust too, with sales in the region of $20 billion and an asset base of $43 billion, it looks poised to perform well in 2013. It is trading upwards of $64 a share on NASDAQ.

Intel
The largest semi-conductor manufacturer in the world may be struggling to come to term with smartphones invading its PC space, however, a market cap of nearly $140 billion and revenues of $54 billion make this one heavyweight you shouldn’t miss out on. It is trading at about $21 on NASDAQ

Apple
The company that has innovation as its middle name, although many would argue otherwise in the post-Steve Jobs era, is an obvious contender for a bedrock investment. It is one of the largest companies in the world with $550 billion in market cap, $125 billion in revenue and the first position on the Forbes list of the World’s most powerful brand. It is trading in the range of $450 a share on NASDAQ.

UPS
United Parcel Service is set for a good year ahead as it has seen rising cash flows and its dividends have expanded, allowing the company to repurchase shares too. UPS has a market cap of $78 billion and is trading in the region of $82 a share on NASDAQ.
*As on 1/24/2013

Mutual Funds

Touted as the best investment solution for small investors, mutual funds are a collective investment tool, managed by professionals who invest in the stock market, creating portfolios of stocks, called funds, that are then sold to the general public as units. The Net Asset Value of a mutual fund changes according to the volume of units held by it at the end of every trading day. This is the figure at which one unit of the mutual fund can be bought by the public. Mutual funds can be either corporations or trusts, managed by a board of directors in the first instance and by a board of trustees in the second. Corporations are registered entities under the Securities and Exchange Commission (SEC) and managed by a fund manager. There are several types of mutual funds, they operate with different investment strategies and target different classes of investors.
Open-ended Funds: Such funds sell and buy shares from investors at all times, without any conditions. The securities held by the fund are also traded openly by the fund manager according to the market conditions.

  • Closed-ended Funds: Such funds sell their units to the public only once and then the fund is closed. Selling back to the fund is not allowed and can only be traded with other investors on the market.
  • Unit Investment Trusts: UITs also issue shares to investors once, however, they do allow the shares to be sold on the open market. They have a limited life-span and can be redeemed by the investor at the end of this term or sold earlier.
  • Exchange Traded Funds: ETFs are set up as investment companies and are traded on the stock exchange like shares. Most ETFs today are index funds which track various equity or commodity indexes.
  • Money market funds: A type of mutual fund that invests exclusively in US Treasury Bills and commercial papers, they are safer than normal open ended funds which trade on the market and since they are invested in short-term debt, they also have a measure of liquidity. The returns on money market funds is relatively higher than that from bank savings accounts.

Pros

  • Collective investment lowers risk of abnormal losses.
  • Professional advice and management of finances.
  • Government regulation of investment practices reduces the risk of fraud.
  • Easy monitoring of investment and liquidity.

Cons

  • Investment in funds may require the payment of additional fees to advisors or the fund itself.
  • Risk factor remains as the money is ultimately subjected to the vagaries of the stock market.
  • No guarantee of returns, as prior performance is the only tool to judge the future performance of the fund, a fact which is by itself a disclaimer for such investment vehicles.

Best Picks for 2013
Vanguard International Growth
A good fund for investors looking overseas in turbulent markets, the Vanguard International Growth fund is a good option, with a Year-To-Date (YTD) return of 3.79%. The Net Asset Value (NAV) is $20.03 and the fund focus is on companies expanding globally and in markets which promise high returns in the coming years.

Fidelity Contrafund
Contra funds typically invest in undervalued companies, with an aim to book profits when the share prices rise. The Fidelity Contrafund is a good performer with a YTD of 4.16% and a high NAV of $80.53.

American Funds American Balanced A
A large cap growth and income fund the American Funds American Balanced A, invests in blue-chip stocks which promise the growth of capital and good dividend income. It has an NAV of $21.18 and a YTD of 3.53%.
*As on 1/24/2013

Real Estate Investment Trust – REIT

Another popular investment vehicle for investors keen on getting into the real estate market are Real Estate Investment Trust (REIT) stocks. They are traded like normal stocks on the exchange but they invest their funds exclusively in real estate properties and mortgages. They are categorized as follows.

  • Equity REITs: Investment is made in physical properties, either owned or via a mode of investment. The income is given to the holders of REITs from the rent they receive from these properties.
  • Mortgage REITs: The primary investment happens in property mortgages, purchase of mortgaged securities and even loaning money to mortgage-holders. Income is earned through mortgage interest.

Pros

  • The REITs offer high returns to investors.
  • Tax-treatment for REIT income is fairly straightforward
  • Adding REITs to your portfolio can help in diversification.

Cons

  • Real estate as a sector goes through various ups and downs, this may translate to fluctuations in the dividend income REITs can offer.

    Gold and Precious Metals

    Gold is proving to be a very healthy investing option these days. Even historically, bullion prices have always appreciated with time. Gold and other precious metals like silver and platinum are safe harbors where you can park your money and ensure its growth, even during an economic recession. You may invest in gold directly or indirectly through exchange traded funds and other instruments.

    Best Picks for 2013

    Newmont Mining Corp

    Newmont owns gold mines in various parts of the world, from New Zealand to Ghana. They are one of the big gold producers and buying stock will definitely help you enter the gold bullion segment. It has revenues touching $10 billion and is the only company mining gold, to remain in the Standard & Poor’s 500 Index. It is trading at around $44 on the NYSE.

    SPDR Gold Trust (ETF)

    An exchange traded gold fund, the SPDR Gold Trust is also a good option for investors who may be wary of investing in straight stocks of mining companies. It has a market price of around $161 on the NYSE Arca.

    *As on 1/24/2013

    This was a look at some of the best ways to invest this year, there are of course other avenues of investments such as derivatives and venture capital, which can be explored by mature investors, although they have much higher elements of risk involved. One can also invest in oneself, by joining a course on a subject of choice, or maybe enrolling for a degree program. Investing can also be done by putting up money for a fledgling business enterprise, helping it grow and reaping the rewards later. However, before going ahead with your investment plans, take some time to establish your long-term financial goals, assess the degree of risk you are willing to take and then chart an investment route for the future.

Financial Consultant Salary Tips

Financial Consultant Salary Tips

Every person craves for financial stability. Nobody wants to suffer at the hands of some poor financial decision, taken either by themselves or by their financial advisers. It applies not just to individuals but also to all the firms and organizations, small and large.

In this scenario, the job of a financial adviser takes center-stage. If the financial adviser is a certified professional like a chartered financial consultant (ChFC), then our job of keeping the financial health strong becomes easier and trustworthy. Many individuals are, nowadays, opting to get certified as ChFC for better career prospects, and to have a detailed knowledge of the financial world. Before getting into the details of his salary, let’s have a look at what it means.

Qualifications

A chartered financial consultant is, primarily, a financial adviser armed with a vast knowledge of the financial field. They study the most comprehensive syllabus in their certification course with respect to the financial field. The American College of Bryn Mawr, Pennsylvania, confers the chartered financial consultant designation for advanced comprehensive financial planning study. Requirements include experience in the financial industry for at least three years with a bachelor’s degree.

The ChFC program includes completing seven compulsory courses on the fundamentals of financial planning, income taxation, insurance planning, investments, planning for retirement needs, estate planning and financial planning applications. Besides two elective courses out of four have to be completed, which are the financial system in the economy, estate planning applications, executive compensation and financial decisions for retirement.

The average study time for this program is 400 hours and financial advisers spend years obtaining this designation. From the vast coverage of courses, we can understand that a chartered financial consultant has the know-how of the entire financial sector.

Job Description

Chartered financial consultants are expected to do their job with the highest level of professionalism. The Certification Committee of the Board of Trustees of The American College grants the permission to use the ChFC mark to the candidates, who successfully complete their program. They are expected to adhere to strict ethical guidelines, wherein, they are expected to give the same advice to the clients which they would themselves follow in similar circumstances.

Their job includes building a comprehensive financial and investment approach, protecting clients’ assets and managing risk with proper levels of insurance, managing taxes, mortgage-advice, stocks and mutual fund advice, estate-planning and retirement-planning. They ensure that no bad financial decision is taken even at the times of crisis or market fluctuations.

Being a highly interactive job, ChFC requires excellent interpersonal communication and HR skills along with good analytical skills to stand up to any and every query posed. Personal financial advisors are not required to be licensed. But if you plan to be an advisor in stock broking and estate-planning areas, you will need to take the appropriate license.

Salary

Given their excellent skill and knowledge, chartered financial consultants are paid a highly lucrative salary. Their salary is certainly one of the best in the financial field. Their average salary in USA is about $1,10,000 per annum. However, it depends on a number of factors like location, type of employer, experience, etc. Let’s have a look at the salary range based on each of these factors.

Location
This is the single-most important factor which helps in deciding the salary. Their job opportunities are limited to urban areas in majority. The cost of living differs in every state and city. So, it is important to know the cost of living in a particular city before accepting any job offer. There are many websites available, which can help you compare cost of living in different cities. For instance, the average salary in Chicago is $110,000, while in New York it goes up to $125,000. This difference is mainly due to the higher cost of living in New York. Also, we can see that average salaries vary as widely as $80,000 in Omaha to $110,000 in Los Angeles, thus depicting the significance of location.

Employer
Chartered financial consultants can be hired by anyone from a top firm or organization to an individual. The organization’s size and area of functioning has a huge influence on the salary they offer to him. Any self-employed chartered financial consultant has a good scope to earn anything above the average of $110,000 annually, especially if he works in an urban location. Also it’s up to you to choose the number of clients you work for and the fees you take as their financial advisor. If you have confidence in your skills and abilities, then as a self-employed ChFC, you can earn anywhere from $100,000 to $150,000 annually.

Experience
Experience, of course teaches you all the minutest details, which you may have missed when you had started out in your career. The knowledge you gain through experience is rewarded through an increment in salary. As a beginner, ChFC can earn anywhere from $40,000 to $90,000 depending on the experience, he had as a financial advisor before getting certified.

An experienced chartered financial consultant can go on to earn in the range of $100,000 to $150,000, which is a lot higher than the average salary of a financial adviser. In this job, the clients you get depend on the personal referrals from your earlier clients. And as you get the requisite experience, the trust factor in your work increases, which is the most critical factor in a financial consultant job. Once you establish trust in your clients’ minds, be sure, the flow of clients will never stop for hiring your services.

If the financial recommendations you made for your earlier clients worked well for them, then be certain that you will not have to worry about the salary. This job is for those people who wish to know every trick of the trade related to the finance and business world, and want to learn comprehensively about the advanced financial planning approach. If you are one of them, go for the ChFC program. All the best for a successful career ahead!

Tips to Careers in Investment Banking

Tips to Careers in Investment Banking

The lucrative world of investment banking is marked by hefty pay packages and long working hours. Careers in this field are good for qualified individuals, who can deal with high profile clients and perform exceptionally well in the core area. Despite being competitive and time intensive, this job offers an exciting lifestyle for the employees, who can bag huge incentives at the end of the day. The job profile in this field involves extensive traveling and grueling hours but provides the glimpse of a larger-than-life place, where big deals and fortunes are made overnight. It also provides an opportunity to learn the ins and outs of corporate finance and pick up analytical skills, which remain useful for the rest of an individual’s career.

The investment banks provide governments and giant corporations with investment services. These services may include buying, selling, and trading securities or managing assets. They also provide an advisory panel in the form of consultants for big clients, in order to give financial advice and investment ideas. These panels are very helpful for the clients as they suggest how to manage securities for raising finance, take-overs, and mergers and acquisitions. These banks also deal in security trading, bonds, equities, and derivatives, and offer brokerage and distribution facilities. They are very different from commercial banks, which deal with the collection of deposits from clients and provide direct loans to organizations and individuals. They also keep track of the market trends, in order to give profitable advice on making public offerings.

Job Profiles
Following are some of the typical job profiles that are offered to the bright people, looking ahead to make their careers in this field:

Fund Managers
These professionals look after money held by insurance companies, pension funds, and unit trusts. They research markets and apply the knowledge of analysts, in order to invest the client’s money for long-term growth. Fund managers also meet high profile clients and investors to make and discuss investment strategies.

Investment Bankers
They belong to two departments, namely corporate finance and operations. The role of those dealing with corporate finance is to advise companies, institutions, and governments, and help them to achieve their financial goals. They act on behalf of clients and raise money on the capital markets. They also meet CEOs, CFOs, board members, and other high profile candidates of a company and carry out business deals. Those dealing with operations support front-office staff and deal with queries from clients. They help the management of daily processes of clearing and settling transactions made in the front office and supervise the teams of clerks in the office.

Analysts
They keep track of vital market information for clients and provide them when investment decisions are made. Their major job is to research different aspects of share prices and companies’ abilities to pay back their debts.

Stockbrokers and Traders
Stockbrokers advise clients on investment strategies and risk management. Their main job is to purchase and sell securities on behalf of the clients and obtain a best possible deal for them. For this purpose, they interview clients and assess their requirements in terms of investments they want to make. Traders deal in financial products or commodities and read the market to get maximum benefits for their clients. They keep in touch with their own research and sales teams, in order to come up with a good and flexible stock-trading strategy.

The high-energy, hardworking, and dynamic professionals in this field are the ones who draw big salaries for their work. Needless to say, their success totally depends on the ability to provide efficient and round-the-clock financial services for clients, and to demonstrate flexibility and innovativeness in their work.

Tips to Buy a Property If You Have a Bad Credit Score

Tips to Buy a Property If You Have a Bad Credit Score

A lot of people think that a low credit score puts an end to property buying. But in fact there’s no need to despair if your credit score doesn’t quite cut it. If you look like a risky borrower your loan will generally cost you more. So what can you do to change that? To boost your credit score you need to pay your bills on time. That makes up 35% of your score. Decrease your credit card debt and that’s another 30%. Don’t open a load of credit accounts in a short period of time as that will count against you. If you haven’t been able to come up with a 20% down payment for your property, look into an Adjustable Rate mortgage or a Federal Housing Administration mortgage. They require smaller down payments and have lower interest rates, though you will also need to pay for private mortgage insurance each month. State and local housing agencies can offer several home affordability programs. Another option is to get your mortgage from your local community bank or credit union. They often accept lower credit scores depending on the local real estate situation. So make sure you’ve checked out all the potential options before you start your property hunt.

Business Debt Collection Ideas

Business Debt Collection Ideas

business-ideaMany a time, business owners face the problem of customers not paying up the amount for goods sold. Phone calls, reminder letters, etc., are of no use as the customer is in dire financial conditions. In such a case, you can’t wait indefinitely to receive the money; this is where debt collection comes into play. It’s a very tedious and long drawn process, especially in case of business-to-business debt. Hence, it needs to be tackled with great care, as you don’t want to lose the customer. It’s not that they don’t understand the importance of paying up, it’s just that they could be in some kind of financial trouble. Moreover, there are several laws which punish malpractices in debt collection, so you need to be careful of that as well.

For Small Businesses

Small business owners find it quite challenging to collect money from their customers. But with some preparation and homework, late payments can be minimized, besides you will also know when to refer a customer to collections. You need to communicate with these debtors effectively and work with them, in their times of financial need, and who knows, they may become your lifetime clients. People who pay late can be categorized into three types – those who would like to pay but are unable to do so, those who intentionally delay so that they can simultaneously deal with several payments, and those who avoid payments intentionally.

The first two types of people genuinely want to pay, so you need to work with them and convince them to make a full or part payment. It’s important that you recognize the third category soon enough and take appropriate action including turning their accounts to a collection agency.

One rule of thumb which you should always apply is that you need to continuously communicate with your customers, till the time you are paid. Keep sending them the bills and re-bill them every month. It’s not necessary for you to wait till the month-end, instead make sure that you send notices whenever an amount is overdue.

Business-to-Business Debt

There are several important points which you should remember while going for debt collection. The first and the most important point is that you should never be rude and you must never seem to be harassing your customers. You need to make them aware that you are pursuing their case. Never call them more than once a day. Moreover, never ever threaten the person who owes you money or state anything which leaves a bad taste.

It’s important that you are direct in whatever you say. You need to also listen to what the customer has to say and make sure you never get personal with him. Your goal is not only to make the customer pay, but to retain him as well. So you should never make a call seem to be personally degrading and demeaning. The trick here is to remain calm, but maintain a sense of urgency.

If you find that a customer has a financial problem and is speaking the truth, then you can try and negotiate for the amount he or she can pay. You can consider an extended payment period, if the debtor agrees to make the payment by that time. Besides making phone calls, you can also send letters, so that you convey a sense of urgency. Make sure you save copies of correspondence which you have had with the customer. You can also opt to offer a discount so that you are able to recover some amount instead of losing all. You can do this if the amount accumulated is large enough and is not paid over a long duration.

Hence, there are several ways to recover your dues. But while making a call or sending a letter, make sure that you are polite and have an emphatic attitude so that you seem to care for the customer.

Guide to Liquidate a Business

Guide to Liquidate a Business

When you plan for starting and running any kind of business, along with the profit making strategies, you also need to think about what is to be done, if the business unfortunately goes into a substantial loss and there arises a need for dissolution. In such cases, liquidating a business may seem to be the last option left for disposing off the business formally and safely, without having any liabilities to be paid to the creditors.

In corporate terms, business liquidation is referred to as an exit strategy. However, the need for liquidation can even arise in a situation when the company is nearing bankruptcy or is going in heavy losses. In this process, all the company assets are sold, and the cash that is received is utilized in repaying corporate debts and liabilities of the creditors or capital providers. This debt repayment is done on the basis of priority with considering several factors. The assets that are to be sold include plant, machinery, real estate, equipment and tools, and inventory (if available).

Considerations for Liquidating a Business

It is not a process that can be thought of overnight. It needs a proper plan and considerations from all the parties involved in the management and running of the business. It is a last step to be followed in the dissolution of a company. It can only happen when the appropriate members and owners decide to close down the operations of the company.

After all the debs are paid off, if any cash remains; it is distributed among the members, owners, and shareholders. There are two types of liquidation, voluntary and compulsory; with the former one being initiated by the owners and shareholders, whereas the latter one is processed by any legal entity like the court of law.

Executing the Business Liquidation Process

To make the business liquidation process hassle-free, it is very essential that you take advice from a liquidator, an attorney, an appraiser, or may be also an accountant. These professionals will assist you to carry out the process smoothly. Then you will have to conduct a meeting with the top management, shareholders, capital investors, and other important members of the company to prepare a proper business liquidation plan.

Next, you have to work with the accountant and liquidator in accessing all the available assets, and ask the accountant to generate the necessary records and reports. Then, consult with the appraiser who will help you in determining a suitable value for your assets.

Also take advice from the attorney, in case there are any legal formalities involved. Prepare a list of the business debts and liabilities, and the creditors who are to be paid. Sell off the assets and keep a record of the finances available. The next step would be to discuss with the liquidator and prioritize the creditors.

Get in touch with the creditors in an appropriate order, and pay off your debts. If there are financial resources remaining after the repayment, the liquidator will then distribute the amount to the shareholders and owners. At this point, the business can be said to be formally dissolved.

If you do not want to hire individual professional advisers such as liquidators, attorneys, accountants; the best option is to take help from a liquidation company who specializes in dealing with such issues.

Tips to Become a Licensed Stock Broker

Tips to Become a Licensed Stock Broker

If you are keen for a career in finance and specifically, in the stock market, then working as a licensed stock broker can be one of the best options. It has to be noted that without proper license, indulging in broking activities is illegal. Though the requirements for a license can vary a bit from one place to another, most things required remain the same. Before we go through the education and training requirements of a licensed stock broker, let us know of their basic duties.

The job of a stock broker basically involves carrying out transactions of stocks for their retail as well as institutional clients. They earn brokerage on all buy and sell transactions which is their source of income. Most reputed stock brokers also provide good advice on investments and trading calls in the stock market which helps common investors make money. Many stock broking firms, lately, have diversified their business model by providing portfolio management/wealth management solutions to the clients. They also assist their clients while applying for initial public offerings of companies.

Get a Degree
The first step is to get your graduation/bachelor’s degree in a relevant subject. Candidates with a degree in fields such as accounting, finance, economics or business administration are most preferred by top employers. For this, you need to start preparations right from high school by doing well in subjects such as mathematics, physics, English and getting good scores in entrance test for graduate school.

Work as an Intern
In order to become a licensed stock broker, you need to be in constant touch with the world of stock broking, So, while in college, working part-time for a stock broking firm would be a good option. This will give you the much required practical exposure and more knowledge of your subject. If you do an internship at a reputed firm, you can get sponsorship for the Series 7 Exam which is a must for all stock brokers.

Take the Series 7 Exam
National Association of Securities Dealers is the authority which handles the Series 7 Exam. The Series 7 exam is also referred to as General Securities Registered Representative Exam. The exam consists of a total of 125 questions which you have to answer in two parts of the duration of three hours each. After clearing this exam, you can become a registered representative.

Take the Series 63/Series 66 Exam
After the Series 7 Exam, you need to pass either the Series 63 exam which is also known a Uniform Securities Agent State Law Examination or the Series 66 exam which is known as Uniform Combined State Law Examination. After clearing this examination, you can realize your dream of becoming a stock broker.

History of the Person
Educational qualifications, previous work experience and character of an individual are thoroughly assessed before granting a license to a stock broker. Character and criminal background check is extremely important because any unlawful activity done by stock broking professionals can affect the entire stock market and financial services industry. So, it is very important for these professionals to be honest and sincere towards their job.

License Fee
The license fee is $25 in the state of California. So, it is quite affordable, but the main point is that the fees need to be paid on time to be eligible for the license.

Initially, most stock brokers work in broking firms to gain expertise in the field. Later on, they can work as independent brokers by acting as a franchise for top broking companies. The salary largely depends on the educational qualifications, place of job and type of employer of the candidates. Salaries for stock brokers can range between $60,000 to $120,000 per year depending on their experience.

Stock broking is a good field for those who have good mathematical and analytical skills, decision-making ability and presence of mind. So, if you think that you have these qualities, then this job will help you achieve your life goals.

Alternative Careers for Lawyers

Alternative Careers for Lawyers

Lawyers are professionals who are considered best for handling various types of alternative jobs. This is due to the fact that the complexity of law and its various intricacies equip the m with skills that can be used for handling various types of jobs. The depth of knowledge and expertise are some of the most important factors that helps them succeed in other fields.

Legal Writing and Publishing Houses
Being a law graduate/post-graduate, you have great option for working in magazines, publishing houses, and research institutions as law writers. wherein, you have to research and write on subject matters related to law. Being a legal writer presents a host of career opportunities for those who are willing to work full-time as legal writers. You can contribute articles for freelance websites and work on an hourly basis on specific days. You also have the option for becoming a columnist in newspapers, journals, and magazines. Various law institutes also hire legal writers and editors, and so if you have some aptitude and passion for writing, this can be a creative job, testing your knowledge and writing prowess.

Consultancy Works
Knowledge in the field of law is used in almost every sphere of life, and being law consultants are great alternative jobs for lawyers. For those who have been working as lawyers for years, and wish to take break from their work, they can become legal consultants for corporate firms, offices, and marketing companies. As legal consultants, you can also advice lawyers on various cases and proceedings. Many lawyers take advice of expert legal consultants, and pay them decently for their views and legal advice. You can also create a website and offer online legal solutions to people’s queries and problems. With internet marketing becoming the norm of the day, there is immense potential for online consultancy, as it gives you a wider audience. Consultancy services are brilliant alternative jobs for attorneys who have some rich experience of the state laws and procedures.

Banking and Financial Laws
There is no dearth of jobs for lawyers in the banking and financial sectors, especially, if the lawyer has worked in income tax related assignments. Mutual fund, private equity, and various other fields, where there is scope for a large number of legal works, offer options for other careers. In the field of banking and finance, lawyers can work as risk managers, estate planning advisers, trust officers, financial planners, commercial loans officers, and mutual fund administrators.

Educational Field
There are opportunities in paralegal colleges and law institutes, where experienced law practitioners are hired for guiding students on career related matters, working in admission processes, and maintaining alumni relations. Being a law lecturer gives you the opportunity to share your knowledge and experiences with prospective law students.

The field of law is diverse, and every specialization has its own sub-branches and sub-specialties. This gives law graduates the freedom to exercise various options in many fields. Besides the above mentioned jobs, they can work in federal and provincial governments, arbitration, mediation, mergers and acquisition fields, where the need for legal experts is extremely crucial.