What Is an Investment?

One of the reasons many people fail, even very woefully, in the game of investing is that they play it without understanding the rules that regulate it. It is an obvious truth that you cannot win a game if you violate its rules. However, you must know the rules before you will be able to avoid violating them. Another reason people fail in investing is that they play the game without understanding what it is all about. This is why it is important to unmask the meaning of the term, 'investment'. What is an investment? An investment is an income-generating valuable. It is very important that you take note of every word in the definition because they are important in understanding the real meaning of investment.
From the definition above, there are two key features of an investment. Every possession, belonging or property (of yours) must satisfy both conditions before it can qualify to become (or be called) an investment. Otherwise, it will be something other than an investment. The first feature of an investment is that it is a valuable - something that is very useful or important. Hence, any possession, belonging or property (of yours) that has no value is not, and cannot be, an investment. By the standard of this definition, a worthless, useless or insignificant possession, belonging or property is not an investment. Every investment has value that can be quantified monetarily. In other words, every investment has a monetary worth.
The second feature of an investment is that, in addition to being a valuable, it must be income-generating. This means that it must be able to make money for the owner, or at least, help the owner in the money-making process. Every investment has wealth-creating capacity, obligation, responsibility and function. This is an inalienable feature of an investment. Any possession, belonging or property that cannot generate income for the owner, or at least help the owner in generating income, is not, and cannot be, an investment, irrespective of how valuable or precious it may be. In addition, any belonging that cannot play any of these financial roles is not an investment, irrespective of how expensive or costly it may be.
There is another feature of an investment that is very closely related to the second feature described above which you should be very mindful of. This will also help you realise if a valuable is an investment or not. An investment that does not generate money in the strict sense, or help in generating income, saves money. Such an investment saves the owner from some expenses he would have been making in its absence, though it may lack the capacity to attract some money to the pocket of the investor. By so doing, the investment generates money for the owner, though not in the strict sense. In other words, the investment still performs a wealth-creating function for the owner/investor.
As a rule, every valuable, in addition to being something that is very useful and important, must have the capacity to generate income for the owner, or save money for him, before it can qualify to be called an investment. It is very important to emphasize the second feature of an investment (i.e. an investment as being income-generating). The reason for this claim is that most people consider only the first feature in their judgments on what constitutes an investment. They understand an investment simply as a valuable, even if the valuable is income-devouring. Such a misconception usually has serious long-term financial consequences. Such people often make costly financial mistakes that cost them fortunes in life.
Perhaps, one of the causes of this misconception is that it is acceptable in the academic world. In financial studies in conventional educational institutions and academic publications, investments - otherwise called assets - refer to valuables or properties. This is why business organisations regard all their valuables and properties as their assets, even if they do not generate any income for them. This notion of investment is unacceptable among financially literate people because it is not only incorrect, but also misleading and deceptive. This is why some organisations ignorantly consider their liabilities as their assets. This is also why some people also consider their liabilities as their assets/investments.
It is a pity that many people, especially financially ignorant people, consider valuables that consume their incomes, but do not generate any income for them, as investments. Such people record their income-consuming valuables on the list of their investments. People who do so are financial illiterates. This is why they have no future in their finances. What financially literate people describe as income-consuming valuables are considered as investments by financial illiterates. This shows a difference in perception, reasoning and mindset between financially literate people and financially illiterate and ignorant people. This is why financially literate people have future in their finances while financial illiterates do not.
From the definition above, the first thing you should consider in investing is, "How valuable is what you want to acquire with your money as an investment?" The higher the value, all things being equal, the better the investment (though the higher the cost of the acquisition will likely be). The second factor is, "How much can it generate for you?" If it is a valuable but non income-generating, then it is not (and cannot be) an investment, needless to say that it cannot be income-generating if it is not a valuable. Hence, if you cannot answer both questions in the affirmative, then what you are doing cannot be investing and what you are acquiring cannot be an investment. At best, you may be acquiring a liability.

Eugene C. Onyibo is a motivational speaker, trainer, business coach, personal financial management expert, entrepreneur, philosopher and prolific writer. He is the publisher of Inspiration Express ( http://inspirationexpress.com.ng ), an online inspirational magazine. He is also the author of The Secrets of Successful Investors: Guides To Investing ( https://www.amazon.com/dp/B01AW5M7J4 ), a best-selling inspirational publication that has helped numerous workers (employers/entrepreneurs and employees) across the globe. Eugene C. Onyibo (a wildly traveled, and also a much sought after, speaker at seminars, workshops, conferences, etc) is also a consultant of private and public organisations.

Article Source: http://EzineArticles.com/9424864

Being Ready to Buy When the Market Drops

The markets often crash. Yes, this is nothing new. This happens more often than we realize, if only for a day or two.
The question is: were you prepared?

• Ready to sell marginal positions
• Ready to buy

It is one thing to jettison marginal positions. They are the easy ones to spot - barely making any gains or sliding backwards slowly but surely. When the market hits a bump or sell-off, why not throw these out.
On the other hand, the tough one is being ready to take advantage of a downturn in the markets and but when the prices are low.
Here are a few ideas on how to take advantage of sell-offs to grab new positions:

1. Look at the equity curve of the ticker symbols in your groups or groups in your investment software to see which ones have had the most upward momentum.
2. If you are using a trading strategy, check the rankings of the symbols in your groups to see which ones have been at the top the past few weeks or months.
3. Compare your ticker symbols against a benchmark like the S&P 500 in either a combo chart or in a ranking to discover those symbols out-performing the market.

Note of caution, many big market drops last only a few days. This means:

• It may not be necessary to sell any positions.
• The opportunity to buy at a lower price is limited - time is short.

If your investment software has a number of trading strategies then abrupt market changes can be a good time to evaluate your strategies.

1. Compare your strategies performances in a combination chart to see if one is out-performing the others
2. Examine the equity curve of your strategies to make sure you are using one that is performing well and not in decline.

Keep a positive outlook. The market always rebounds. The only question is how quickly. But apply these ideas with some investment software and you can find safe profitable investments.

Author Raymond Dominick is the designer of Dynamic Investor Pro investment software for stocks, ETFs and mutual funds. He is the author of the book, "Invest Safely and Profitably." He began investing in the markets in his teenage years. An experienced business manager and journalist, he has been a registered investment advisor representative, also a professional photographer who loves escaping to the wonders of Glacier National Park in Montana.

Article Source: http://EzineArticles.com/9457822

Best Investment Advice: Be Careful With The Financial Media

When it comes to making investment decisions, the "talking heads" on television financial shows really don't know much more than you do if any more than you do.
They do have more immediate ongoing research and information delivery in the background, but much of the time they're parroting dialogue via their earpiece.
Here is what you really need to know.
The only reliable talking heads were the Talking Heads, an American rock band formed in 1975 in New York City and active until 1991, composed of David Byrne, Chris Frantz, Tina Weymouth, and Jerry Harrison.
Given raw data from a corporate balance sheet, income statement, or more comprehensive 10K, many of the media journalists couldn't do a good job of evaluating a company. It's possible the Talking Heads could do as well.
This sounds like I'm knocking the media pundits, but I'm not. They're doing a job and following a script prepared in producer/director staff meetings. But, I am saying buyer beware when it comes to making stock share purchase decisions based upon anything heard on cable business shows.
A personal case in point involves Annaly Capital (NYSE: NLY). Annaly is a mortgage real estate investment trust - REIT - that owns a portfolio of real estate-related investments in the United States.
Annaly invests in various types of agency mortgage-backed securities and related derivatives to use as an investment hedge. It also invests in residential credit investments, such as credit risk transfer securities and non-agency mortgage-backed securities.
I recall a well-known person on a prominent cable financial show talking up Annaly as a great business model with strong, competent management. And, best of all, the stock was a buy, buy, buy! Less than six months later the stock was a sell, sell, sell.
Why? The reason given was that the company was not fully transparent and "we don't know what's in their mortgage portfolio".
Did management become less competent within six months time? Did their portfolio change materially? Did macroeconomic concerns or other conditions change? Not as I could tell.
I owned shares in Annaly during the period related to above and didn't sell on the strong advice of the show host. I did eventually sell Annaly, and for my own reasons. During my multi-year holding period, the stock and its dividends also rewarded me very well.
Now, my point is not to get you to consider shares in Annaly Capital. In fact, it is a risky investment if you don't understand and keep a sharp eye on U.S. interest rates and Libor changes. Nor would I want you to consider the financial pundit wrong in what he was saying.
My point is I made a that was right for me based upon my own due diligence.
My very best point is that you have to buy shares in good companies with sound management when the stock sells at fair value or less. This is the true path to personal financial security. And, you have to consider long-term holding as part of the wealth building plan.
You also must always conduct your own due diligence because too often financial show hosts have their own agendas or those of the producer. The business that they're in is all about talk-talk and ratings. You may pick up a few tips or tidbits, but ultimately it's your money you're spending.
As an alternative to "talking heads", the internet is full of good information covering any publicly traded stock on all market exchanges. Informative beginning sources include Morningstar, Seeking Alpha, and Google Finance.
With some basic financial knowledge and applied practice, you can learn to make good personal decisions before spending hard-earned cash.
My best advice: do your own research keeping with your own personal goals. At all costs, beware the pundits and talking-heads.

I have been an active investor for over 35 years. My lifelong interest in personal finance has led to teaching community classes to a variety of groups. My investment experience is in Equities, REITS, Oil & Gas Royalties, Utilities, and Varied Fixed Income. JG is not a registered investment representative. The opinions of the author are not recommendations to either buy or sell any security. Prior to investing, please conduct your own due diligence and talk to your financial advisor or security professional.

Article Source: http://EzineArticles.com/9463461

Savings and Investments - How Are They Different?

Savings and Investments are absolutely important for every citizen. They can be used in various ways to meet expenses but it must be understood that there are some major differences between the two.
Economists and bankers always advise that 'savings' as a habit has to be learned at a very young age; this essentially teaches the value of money in a small way and helps to understand macroeconomics at a later stage. Saving money and investing money are two completely different concepts altogether; savings is part of the money left over after monthly or annual bills and expenses have been met or keeping aside a certain portion of the income. Savings are generally used to deal with unexpected expenditure like an illness or unforeseen accident, home repairs, educational expenses etc. It can be a pre-fixed percentage of total earnings like 10 percent or 20 percent. In other words, savings is hard cash 'saved' from expenditure by being cautious or avoiding an expenditure altogether. Investments on the other hand pertain to that certain sum of money put aside in financial products or systems to generate returns and increase incomes.
The three prime factors where savings and investments differ are:
• Time - savings usually cater to short-term needs unlike investments that need longer durations of time from a few months to a few years to generate returns.
• Liquidity - savings are the most liquid of assets as they are accessible at any time. Investments however cannot be liquidated immediately and may take from a few days or a few weeks to attain liquid status.
• Risk and reward - the risk factor with regard to savings is almost negligible but do not see much return as compared to investments, which may be fraught with risks. But investments that are done wisely - for e.g. in gold, mutual funds, shares and stocks etc. - can help fetch manifold returns over a period of time.
That said, we find that many a time when savings is easily accessible, the tendency is to dip into it and take money when the need arises - a celebration dinner or graduation party, automobile repairs, a sudden trip etc. Financial planners are of the view that those who set aside a portion of their monthly income aside before chalking out expenses are better able to meet unforeseen expenses because they are able to build savings and reduce debts. To help prevent depletion of savings funds, the best strategy is to set up an automatic transfer to a savings or investment account that has a lock-in period which makes it rather difficult to liquidate the money even if a need arises.

Article Source: http://EzineArticles.com/9475688

Top 5 Value for Money Investments

"An ideal investment is the one which reaps infinite returns for the generations to come!!"
Whenever the idea of investment comes, one of the first questions that pop in our mind is whether it would reap good returns or not. Then we proceed on to probe on the risks involved, investment tenure and other prerequisites before actually investing.
In this short piece, we explore interesting, easy to plan achieve investments that would make you feel content with the returns and have lesser risks in the market with the returns touching the sky and getting more and more with the time.
1. Investing for a Skill/Education: Education is one of the most expensive investment avenues these days. Acquiring a skill, implementing it, getting well versed in it consumes a lot of time, money and concentration. When worked hard and accomplished, the returns can be infinite. This means that you can find work and continue on it for as long as you want to. The gains are not only in terms of monetary returns, which are consistent and are usually on a rise, but also in terms of respect, experience and chance to invest more in your family and assets.
2. Real Estate/House: A lot of old and experienced people regard real estate as a pinnacle of investment or asset creation. Once someone starts transacting in terms of real estate, his outlook towards money is totally changed. An increase in the price of stocks, mutual funds is not as stable as that of a land or a house. Moreover, the emotional worth of an asset created in real estate is remarkable.
Yes, undoubtedly, you need to have some net worth and status before venturing into this investment class, but the returns would make sure that the hard work you have put in to create wealth via real estate is all worth it.
3. People: For any manager or a business owner, the people working under him are his prime assets. Investing wise and well in the people will pay him off enormously, irrespective of the amount invested and time consumed over that investment.
Further, versatility makes it easier to find what kind of investment can suit your people. Complementary insurance, perks, bonuses, trips, education, skill trainings, assets, cheaper loans etc., there are numerous ways in which you can decide how do you want to invest. Investment is people earns you more loyalty (which can never have a price tag), better results, higher efficiency and several such fruits which would enhance your business or get you a promotion.
4. Creating a second income source: When you have multiple uses of the money earned, why can't there be multiple income sources. Often, a second income source seeks some amount of investment, which does annoy people as they fail to realise its need. It is quite simple to analyse it though. The current job or business you are doing has come to you at a cost, which has gradually paid off via income and other tangible/intangible returns. You can create a source such as part time tuitions, blogging, baby sitting, product research etc., which give you a stable income and keep on giving more and more returns once you gain good experience. Second income source gets a further boost when you invest in acquiring a skill that in turn gets you another income source.
5. Planting Trees: Promoting Greenery in your neighbourhood is again an invaluable investment. A seed that nurtures into a plant, and further to a tree has a lot to give for the sunlight, water and care it receives. Interestingly, apart from sowing a seed and occasionally putting a fence around it, you don't have to spend anything at all. The sunlight is free and water requirement, even though being initially crucial, is later managed by the plant itself. Multiple returns that a single fully fledged tree gives include fresh air, fruits, wood, temperature control, shade,

Yes, returns and investments is what that defines our future and future of our children. Making them wisest is our responsibility and it shouldn't be taken lightly at all. Read more about finances and its need at http://www.mint2save.com

Article Source: http://EzineArticles.com/9493340

Helicopter Money - When the Fiction Becomes the Fact

The month of August has seen a lot of discussion on Helicopter Money. While on one hand, China declares that Helicopter Money could bring in the hyperinflation, the US have already gone ahead with this tool for fighting deflation. On the other hand, Japan has to disappoint the market by saying no to the Helicopter Money.
Helicopters dropping Money?
It is precisely this in the theory given by Milton Friedman that says to assume that one day a helicopter flies over a community and drops some additional amount of money in bills from the sky. These bills are hastily collected by the community members, and this entire event is a one-time occurrence. According to his theory, the excited members would rush to spend. Higher money supply with no change in output would lift the inflation. It is more like a steroid shot for the economies for keeping them going.
The term is an old gift of economists which has re-emerged in new packaging. In the terms of Banks and Analysts, Helicopter money is the Central Bank injecting cash directly into the economy by buying Government bonds. The term has been introduced as an alternative to Quantitative Easing when there are negative interest rates.
The term is used to refer to a wide range of policies including permanent monetization of the budget deficit, which, in old term, was called debt-monetization. But, it has an additional element of attempting to shock the beliefs about future inflation.
Another tool, which is all the more closer to the original description of the term and is more innovative, is Central Bank making direct transfers to the private sector by buying the corporate bonds.
Free Money?
Critics have a variety of objections to the theory of Helicopter Money and its implementation. For some critics, Helicopter money is a free lunch or free money in the simplest sense that if the phenomenon works and succeeds in closing the gap, people will not have to repay it through undesired inflation and higher taxes. The idea has been dismissed by many for the reason that it may cause hyper-inflation because it will undermine the trust in the currency. Otmar Issing, a German Economist, said that the whole concept is devastating for it is no better than declaring bankruptcy of the monetary policy. Richard Koo also voiced the similar concern stating that if such bills arrive day after day to the public, the entire country would soon lose all sense of their currency's worth. And this may lead to a panic among the countrymen.
Leading the Horse to water:
Various economies are reacting differently to the theory of Helicopter Money. Analysts say that the phenomenon is more like leading the horse to the water and making it drink. In India, Raghuram Rajan, the Central Banker, along with many economists, is opposed to the theory on the other grounds. They claim that, in the country like India, people would not spend the money due to many reasons. Hence, anything that has to do with infusing free money for their spending will not work. Moreover, the government and RBI are keeping a hawk-like watch on the inflation and deficits in the economy. Hence, the country is not going to see the 'free money' anytime soon.
China, on the other hand, is not ready to apply the theory for it firmly believes that infusing such kind of money will lead to hyper-inflation and would lead to the undermining of the currency. Also, if a developing economy starts printing money, it could mean the end of entire market.
Japan is dead-set against applying the Helicopter Money for the different reason. The tool, for the country, is like a cat chasing its own tail, due to the demography. The country is Buying Exchange Traded Funds to fight the deflation and in the desire to support its market. But, Japan's attempt of supporting the market could be dangerous for it is more like interfering in the market.
But the US has topped the chart by making its horse drink the water. The Federal Bank has bought the bonds from the Government and from corporations for infusing the liquidity in the economy. The bank raised the interest rates gradually and sold the bonds as the economy settled itself on the better side. The process began in 2002 and was closed by 2013.
Bottom-line:
The theory of Helicopter Money is based on the assumption that the people will spend the money if given. But then the saying remains, you can lead the horse to the water, but you cannot make it drink. What if the people do not hoard it?

Helicopter money is a tool through which the Central Bank infuses money into the market by giving it to the public for spending. This is just a way for fighting depreciation. But many economies and Analysts have pointed out problems in the implementation of the theory. Though US, being the developed economy have done that successfully.

Article Source: http://EzineArticles.com/9492974

The Market Unfolds Under the GST Mojo

GST has been storming the nation and the market with questions whether the move would turn out to be a game changer or a mere flash in the pan. The answers might be discovered as this article evolves, and if not, wait and watch is always the best way out. The Bill is on the final lap in its race to a unanimous approval by the House and is expected to emerge a winner during this Parliament session.
The romance of the GST and the Market:
Indian Markets have been watching closely, every move of the coveted GST bill even as statistics suggest that the implementation of the bill will boost the business environment of the country. Streamlining the Tax Structure by implementing the GST Bill would invariably offer the much-needed reform fillip the NDA led government was looking for. The failure to pass GST would adversely impact the growth prospects of the Indian markets as the bill holds the key to a steady rise in the inflation guidance of the Indian Economy. The implementation of the bill is also expected to add momentum to Prime Minister Narendra Modi's "Make in India Project" which promises to propel the subcontinent as the growth engine of the Global business fraternity.
While some reports claim that GST is a silver bullet, there are others who believe that the bill needs to be designed with the target of India's long-term growth in the next two decades or so. The actual effect of GST bill will take the time to reflect itself. After the bill is implemented, the bill will boost earnings in the logistics, transportation, and manufacturing sectors.
What's in for the State?
The GST bill merges the service tax levied by the center and the VAT levied by the state into a single tax model. Statics suggest that the implementation of the GST bill would result in 2% GDP growth of the Indian Economy. In the event of states losing out in their earnings pie due to the implementation of the GST bill, the center has promised to compensate the states for their respective losses for the next five years. One of the primary goals of GST is to eradicate the unwanted implementation of double taxation. This, in the long run, would boost the business sentiment of the country by ensuring that consumers are rewarded with value for their money. GST will ensure that the center would share a part of the revenues generated from corporate income tax and customs duties with the states.
Economy under the wings of GST:
GST is seen to be benefiting the economy in more than one ways over a period. The bill is capable of covering all the loopholes in the present tax structure. This will, in turn, trim down the inefficiencies of the trades in India, increasing the productivity of the economy. It will also increase the efficiency by simplifying the supply chain and reducing the logistics cost and tax rates in broad categories. The large number of businesses, which were exempted earlier, will enter into the tax systems. The simplified indirect tax regime will result in easy tax compliance and lower cost.
Conclusion:
The twists and turns in the story of the GST bill have cleared some doubts. But there are some others as well that have been kept on hold. If sincerely implemented, the bill can transform the complete economic landscape of the country. If there is a robust technological platform in place, the dream of a single market can be realized in the next financial year. But it needs the government to work on the war footing. The bill is yet to unfold all its cards on the table.

GST, like a wiz, has taken over the entire nation with a storm. Everyone has their breath stuck while waiting for the Pandora to open and unveil the secrets that it has for the market, businesses, center and states. It has something for everyone; it's just a matter of implementation and time.

Article Source: http://EzineArticles.com/9480662