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Tips on Personal Finance and Investing

The topic of personal finance and investing is a very big one. Most personal investors do not have a lot of money to start with and so it is important to make each cent count. Following are some tips for aspiring investors who need to decide which investments to include in their portfolio.

Choose a Time Frame

Some investments, such as buying bonds or annuities, involve committing the investment principal for a long term period. While a person will receive a small sum of money each month, the principal cannot be withdrawn at will. This means that one will not be able to access these funds even if they are direly needed.

On the other hand, some investments can be sold off at will. These investments include stocks, gold and any investments made in the Forex market. An investor should consider how long he or she can afford to have money tied up before choosing an investment type.

Risk Factor

Some types of investments are very risky. Tilting to small cap and value stocks is a popular trend these days, but it is not a particularly safe investment. There are also certain stocks that are very risky to purchase, as their value can be quite volatile.

The advantage of high risk investments is the prospect of making a lot of money quickly and easily. The riskier the investment, the more money one can potentially earn. However, a first time investor will need to beware of greed and make sure at least a sizable portion of his or her investments are low risk. While low risk investments do not bring in a lot of money right away, they do bring in steady income and the risk of losing a lot of money on these investments is very low.

Choosing a Sum

How much money one wants to put into any type of investment depends on various factors. One should carefully analyze his or her finances and determine how much money can be invested in any given type of fund. If the investment type is high risk, one should make sure that he or she can live without the sum of money being invested should the investment not work out as planned.

A newbie investor should also find out more about investment types before creating an investment portfolio. The website amateurassetallocator.com has a lot of helpful information that can help a person learn the ropes. By taking the time to learn as much as possible, a first time investor can avoid common mistakes and pitfalls and create a successful and profitable portfolio.

The Importance of Asset Allocation in Personal Finance and Investing

When it comes to personal finance and investing there are many things that we need to keep in mind. Naturally there is the personal budget and watching our outgoing expenses. Debt needs to be taken into account as well and hopefully avoided whenever possible. Insurance, expenses for children, taxes, and planning for the future are other areas of concern in personal finance.

One area that seems to confound some personal investors unnecessarily though is asset allocation. This is the idea of dividing your investments in such a way as to take advantage of the diversity of differing asset classes. Stocks, bonds, real estate, cash, and commodities are just some examples of the asset classes available to us as individual investors. Research has shown that asset allocation can be the single most important investment decision, but how does one determine the best way to allocate their limited assets over a seemingly unlimited field of investments?

One thing that needs to be kept firmly in mind is that the research into asset allocation was actually done using data from institutional investment accounts. Because the vast majority of individual investors do not have nearly enough capital to properly diversify over all the major asset classes, this research is not as relevant to the individual as one might hope. We can still take advantage of the research though by utilizing such investment vehicles as mutual funds and exchange traded funds (ETF’s).

The advantage of these investments for the individual investor is that they diversify your assets while allowing for smaller investment amounts. For example, an investor with just $50k in assets would be hard pressed to even develop a sufficiently diversified stock portfolio. This doesn’t even account for all of the other possible asset classes which can provide protection when stock prices are falling.

By utilizing ETF’s for example, an individual investor would be able to split their money across a variety of asset classes. There are often correlations between asset classes that make it possible to protect yourself from the volatility inherent in the markets. When stocks are falling, bonds are often rising. When bonds are falling, commodities may be rising. If commodities are falling, real estate could be on the upswing. By spreading your risk amongst the various asset classes you may limit your upside somewhat, but you are also lowering the volatility of your portfolio, allowing for a much smoother increase in your assets.

While this article has just touched on the importance of asset allocation to personal finance and investing, I think you get the gist. To learn more about the art of asset allocation you should visit the amateurassetallocator.com website, where you can get more detailed information on various asset classes and how diversification can protect your portfolio.

Principles Of The Psychology Of Wealth And Investments

Most of our decisions in life are motivated by whether they give us pleasure or pain. The pleasure versus pain principle can be transforming or destructive to our wellbeing depending on our understanding of how we allow it to affect our decision making. Once we understand this principle, (that is our constant avoidance of pain and our desire for pleasure) and how it works we can make choices that will transform our lives for the better.Discipline and willpower are the only tools most of us were introduced to in the schoolroom to assist us in the creation of our lives and fulfillment of our dreams. I argue that once we understand the pleasure/pain principle we realise why we make the choices we do we – and therefore become free to create the futures of our dreams.
Humans operate with a stronger desire to avoid pain than to gain pleasure. Therefore our desire to create wealth and have financial abundance is limited by our fear of experiencing pain should we falter on our path to a lucrative future.
We associate activities such as saving and investing our money with pain because we are denying ourselves the instant gratification of what makes us feel good. Reframing our picture of pain to spending money can help us transform our futures! Denying some immediate material pleasures such as a new car, and instead investing in the stock market will ultimately cause us pleasure.
We associate the steps of wealth creation such as using the equity in our homes to create a more secure financial future with pain because of our fear of potential failure. This fear of failure (pain) stops us even trying. Our constant avoidance of pain makes things harder for us in the long run, and we do not live our lives to the fullest. These lost opportunities could have given us the ultimate pleasure of financial freedom and success in the longer term if our fear of pain had not shackled us in non-action.
We associate work with pain. Most of us are in 9-5 jobs and slaves to our mortgage and struggling to pay our bills yet we continue to do this as we think we are avoiding the pain of risk. We think that by diligently working at our jobs we have security.We are able to change what we link pain and pleasure to and therefore re-frame our perspectives, such as linking pleasure with saving money and pain with spending money, enabling a more lucrative and independent life ahead. You can take actions to create the results you want for your future and that of your family it is all about deciding to have different emotions (pain or pleasure) about your actions like spending or saving.

How to Control Your Personal Finances and Increase Your Wealth

Do you put off making money decisions because your finances feel out of control? If so are you like most of us including myself that we do not know where our money is going. In money decisions, we at times delay or procrastinate because we are too busy. But often we are not busy since just dealing with money makes us anxious. When it comes to money decisions are we unsure of what to do, or possibly do we feel safer just letting things stand as they are. Not doing anything to gain control over your finances may be one of the most lacks decision that you can possibly make. As we know, no one can predict the future in the way of finances so with great opportunity; take a few steps not only to take control of your finances but also lead you to a wealthier life.Is online shopping a good choice to increase your wealth? One of the best opportunities that you may have to increase your bank account and grow wealthier is to take the advantage of shopping online with the use of coupons. Like most of us, do you shop online without looking for coupons first? You know any money saved while shopping online means more for your savings account. When I shop online I feel somewhat disappointed at the online checkout page without a coupon or a coupon code. To get in on these saving search the Internet and visit the numerous web sites that list online coupons and discounts. If you have a favorite shopping site take advantage of the bargains that are being offered but always look for any coupons or codes to capture more savings for your purchase. One advantage is all online retailers promote with coupons to gain you as a return customer.How will your home equity increase your wealth? Borrowing against you house not only decreases your family’s wealth but also increases your debt. If you use your home’s equity to pay off high credit cards debt, it may be good and you will be paying less interest, but you will still have the debt. Good advice, stop using you home as an ATM Machine. There are other ways how to pay off your credit card debt or any high interest debt. Let the equity increase throughout the years. Letting your home’s equity build over time, without taking out a loan against it will add to your family’s wealth. As long as you leave the housing wealth alone, you will grow wealthier in the near future. If you need to borrow from your home make sure that you are borrowing for items or a venture that will appreciate in value over the years. Individuals borrow from their homes to purchase income properties. It is a very good option today because the home borrowing interest rates is very low. Borrow money from your home if you are going to start a home business or you are going into a business enterprise.Do you ever think of your 401K account regularly? If you do not you may be losing money saving opportunities that in turn can make you wealthier. If you have not visited your 401K account lately, there is a good chance you have not changed your plan’s investment choices since you signed up. Also with that in mind, not making any recent changes to your 401K, you are almost certainly not getting all the worth you should. First thing to do to add value to your 401K is to increase the amount you contribute from each paycheck by a comfortable and agreeable amount annually, 2 to 4 percent is the norm. When you increase your 401K annually, you are aiming to save at least 15 percent or more of your gross pay. If your 401K provider offers to increase your contribution automatically every year, sign up for that option and by all means use it. Every dollar you invest in your 401K saves you money on taxes because it comes off your taxable income and it grows each year, free of any state and federal tax. This is one of your best solutions to control your finances and grow modestly wealthier However, when you withdraw your money, it becomes taxable income.Toughest part about fixing your finances is to take the first step. Rightsizing your finances are not your idea of something you want to do, but needs to be done immediately. There are hundreds of ways that you can perform to control your finances and grow wealthier but here are only three. It is advisable to always look for ways to increase your wealth and make you richer. For more information about Personal Finances, please visit; http://www.expenditureofmoney.com.