The Finance Blog

Every investment decision involves some form of risk.

Even hiding money in a mattress or a safe deposit box entails the potential for loss of buying power through inflation or even theft.

Risk is the anticipation of loss.

What if the business succeeded? Therefore, risk should be equated with reward.

The lower the risk, the lower the reward. The higher the risk, the reward should be higher.

In the "Investment and Resource Pyramid" that I always refer to in financial planning, the top in the pyramid is the High Risk category.

It includes long options, commodities, raw land, and venture capital.

The first 2 are for the sophisticated investors that you can become later.

The purpose of this article is to discuss how to manage your risk in going into business or providing capital to promising business ventures.

Business risk management can be a combination of the ff:

1. Minimize your investment allocation, usually 5-10% of your investable funds, while the bulk of your fund allocation goes to Safety and Long-term Growth and Income categories.

When you lose the 10%, you still have the 80% tucked in safety investments. What if the business venture prospered? You can get your money back (exit from the business) and reap a high reward.

Labels: business, course, finance, finance course online, manage, online

Before you make another major purchase, do some calculating.

So you've just bought your dream car. And you're still making the monthly mortgage payments on your dream house.

Now, you hear the latest model of the home theatre equipment you've been dreaming about is being old at a special introductory price at the mall.

Before you rush off to the mall and whip out your already overused credit card, sit down at your desk, do some thinking and start calculating.

Do you know how much you currently owe - on your credit cards, to your bank, your mother, your friend? Do you know how much your debt is costing you?

If you are like most people, chances are you don't know.

It's also likely that you're underestimating the interest rates you are paying.

The first step to preventing your debts from weighing you down is to learn how to prioritize them.

To do so, compile a list of your credit card, mortgage, auto, and other loans along with their balances, interest rates, and monthly payments.

Add up the minimum monthly payments on all your loans and figure out how much more you can afford to pay each month.

Apply that additional payment to the highest-rate debt on your list; when it's paid off, choose the second highest-rate as your next target.

It's smart to have your personal budget at the start of the year to project how much debt you can carry.

Unless you have offsetting assets and savings, your mortgage payment shouldn't be more than 25% of your total pre-tax income, with another 5% from taxes, insurance, and routine maintenance.

Your car payment shouldn't be more than 15% of after-tax income, with another 5% for insurance and routine maintenance.

By then, you've already used up half your income.

Of the other half, try to set aside 10%. Some, but not all, of that can go toward onetime purchases.

If emergencies arise, you can use the money for that purpose; what's left at the end of the year should be put into a tax-deferred savings plan.

If you don't have that kind of discipline, at least restrict the amount you spend on non-routine items to 10%, which will sharply increase your chances of staying out of ruinous debt in the future.

If you have done all your calculations and honestly found your debt still at manageable level, go ahead and rush off to the mall before someone else beats you to your dream home theatre equipment.

Labels: course, credit card, finance, finance course online, online

Hi! I'm Ave Ramel, your Coach for this Personal Investing & Financial Planning module.

Do you need a Financial Planner? Here are a few good reasons to get one.

A seemingly endless stream of bankers, brokers, and investment advisers are bombing you with ads, junk mails, or calls, all offering to grow your money faster than your waistline.

Then there is that relative or friend who touts his or her "hot tip" or "sure thing" investment.

Confused? You probably need a professional financial planner.

There are, however, a few considerations to keep in mind before getting one.

To begin with, you need to decide whether you need a financial planner. The ultimate answer to this question is a personal matter.

A few basic reasons that would justify hiring a planner, are that you:

1. Have specific financial goals in mind but aren't sure of how to achieve them.

2. Don't have the time or desire to plan your own investment strategy.

3. Are not saving or investing as much money as you think you should be.

4. Recently received a financial windfall from an early retirement incentive package, an inheritance, the sale of real estate, or some other source.

Labels: course, finance, finance course online, financial, need, online, planner

I have always told my students in business school and Entrepreneurship seminar-participants to "earn from what they enjoy doing."

That's until I got a similar but different perspective a month ago from Rich Schefren.

Rich Schefren who?

He is the Coach of most top internet marketers that you can encounter today. The students became popular but the Master always stays in the background.

A lot of the members of this egroup have asked me about starting a business to add to their income.

But before you start your own business, download first Rich's free ebook titled The Missing Chapter

You must have an Adobe Acrobat Reader. When downloading and the ebook shows in your browser, click Save A Copy at the top left.

Then, click here for 1101 Businesses You Can Start From Home

If you have decided to launch your ebusiness, don't forget to download his Internet Business Manifesto.

To gauge the effect of the Manifesto on me, I have reviewed my strategic plan these past weeks along his line of thinking and have even applied it to my co-venture with New York Golf Shuttle and Royal Seas Travel - The Manila Golf Shuttle

Follow the link in the Missing Chapter or download here the Manifesto

But read first the Missing Chapter.

Labels: business, course, finance, finance course online, find, online

NEW YORK - It's an addiction. Every day, the United States sucks in more and more of it from abroad, just to keep the nation going. We speak, of course, about foreign money.

At our current rate of trade and budget deficits, foreigners need to purchase $2 billion in dollar-denominated assets each day just to keep the dollar stable, said Axel Merk, who manages $60 million at Merk Investments and runs the Merk Hard Currency Fund.

Over half the national debt is now financed by foreigners, according to Roger Ibbotson, chairman of the financial consulting firm Ibbotson Associates in Chicago and a professor at Yale School of Management. That's been true since 1980, but the difference now, he says, "is the scale of the game."

"I guess everyone wants to keep this game going," Ibbotson said. But if one of the countries we're most dependent on drops out, it could be "like a bank run."

David Wyss, chief economist at Standard & Poor's, is also concerned. "If this money stopped coming, the dollar would take a dive and U.S. bond yields would have to come up. That would constrain capital spending and housing and slow down the U.S. economy."

Foreign investments in U.S. bonds and equities set a record in September, the last month for which data is available. Foreigners bought $1.01 trillion in U.S. securities in the 12 months ending in September, up from $866.6 billion for the same period in 2004, according to U.S. Treasury International Capital, which tracks foreign purchases of U.S. securities.

Why did foreign investors' interest in the U.S. intensify?

For one thing, investors can get a better return on U.S. bonds than they can in their home countries. Yields in the United States have been near 4.5 percent, while yields on Euro bonds are closer to 3.2 percent and yields on Japanese bonds are near 1.5 percent.

Second, our massive trade deficit has sent tens of billions of dollars abroad, as imports increased while exports declined, which has helped foreign business owners sock away plenty of dollars. And our budget deficit means the federal government keeps issuing more debt.

Labels: course, finance, finance course online, foreign, money, online

I'd like to teach you some simple principles that will keep you from falling prey to the vultures who would rip you off.

A few simple rules will help you overcome the potential victim's three worst enemies: greed, fear of missing the boat, and ignorance.

These are the real reasons why people lose millions every year to hucksters.

Greed is so blinding that some otherwise sophisticated people who really should know better often get sucked into these deals and end up with their names on the victim list in the newspaper.

The desire to get rich quick, or get something for nothing, totally smothers their critical faculties.

Next comes the fear of missing the boat.

People are often pressured into making a decision before they've had a chance to cool off and think it over, just because a salesman has told them "tomorrow will be too late."

Victims are also ignorant of how to manage risk. Every investor should constantly analyze his portfolio for ways to reduce risk and increase the possibility of reward.

It is possible to eliminate from your portfolio all risks except market risk. - the possibility that the market will move in a different direction from the one you thought it would.

Market risk is quite enough risk to accept. Unfortunately, however, people who lose money to scams have exposed themselves to non-market risks, making serious risk-management errors.

They may do business with a firm in such a way that they are ripe for plucking by crooks or, if the company goes broke, they are reduced to picking through the ashes, trying to get back some small portion of their investment.

Making Money: Winning the Battle for Middle-Class Financial Success by Howard Ruff

Labels: course, finance, finance course online, get, how, not, online, ripped off