Are You Missing The Point Of Bond Investing?

Posted on May 29, 2007
Filed Under Stock Market | Leave a Comment

Bad Ian Fleming reference aside, the prime function of a bond is that you’re lending money to a corporation for a fixed term, and getting a fixed rate of return, called the coupon rate, based on the original capital invested, out of it. The trick is figuring out how much of your investment portfolio should be in bonds versus other investment vehicles.

Each bond is rated by their risks, and the reward is provided accordingly. Too bad stocks arent rated the same way! This provides a unique advantage over stocks. Also, bonds have a fixed term (2 years, 5 years and 10 years are common terms), at which time, you will get your initial investment back. Another great advantage of investing in bonds is that you will be paid a steady income equal to the return rate. For example, if you were to invest $100 000 in a bond that has a coupon rate of 4% each year, you will receive $4 000 worth of interest payments. During the duration of the term, you get a steady income and you get back your initial investment at the end of it.

Sounds simple, right? Here’s where it gets a bit more complicated, but, more profitable. The key is in establishing what is the best strategy when it comes to investing in bonds. The answer of course, is it depends! What types of bonds are you looking at buying? Short term (which are less than 5 years in length of term) usually have a low coupon rate, however, your investment isn’t tied up for a longer duration.

This may prove helpful if there is a chance that you may need access to your funds in the case of an emergency, as odds are, you will have a bond maturing around the time you’ll need it most. Medium bonds can tie up your money for 5-10 years, while long term bonds can enjoy a term of 10-30 years.

The coupon rate will also vary depending on the credit worthiness. A lower credit rating often means a higher coupon rate (to match the higher risk involved), while a high credit rating is rewarded with a lower coupon rate (and less volatility and risk).

There’s more to bond investing than the coupon rate. Since bonds can be bought or sold at any time, very few people hold bonds to their full maturity, and bond funds keep portfolios of bonds with different maturity rates. In general, when the interest rate goes up, the price of an existing bond goes down, because buying a new bond at the higher rate gives a higher rate of return. When the interest rates go down, the bond price of an existing bond goes up, because it gives a higher rate of return than a newly purchased bond would.

The last element of bond investing to look at is the yield of the bond. While its more involved, it is simple to calculate. The yield rate is calculated as the ratio of the annual return of the coupon rate, divided by the current purchase price of the bond. Wow. How about an example: remember our $100 000 bond that was paying us $4000 a year, which gives us a yield of 4%. That of course is presuming its been bought at $100 000. What if it were purchased at $90 000 (due to an increase in the interest rate)? It would still return $4000 per year, however, the yield would be 4.44% ($4 000 / $90 000). Just as the purchase price varies inversely with the interest rates, so will the yield.

Share This

Pre-Construction Investment Opportunities with IRA or 401k

Posted on May 28, 2007
Filed Under Real Estate | Leave a Comment

Real Estate IRA - Nearly everyone has seen the “fix and flip” house remodeling shows that fill the airwaves these days or may have even heard of a friend of a friend making money at it. But who’s really seeing a bulky return on their investment? New construction and Pre-construction investors are.

You don’t have to be a millionaire to invest in pre-construction. All you need is free investment capital, someone with the ability to tie up good property, and someone who understands how to build a quality real estate product.

Many would say ‘yes’ to that kind of offer, but don’t have free capital available to do so. But, what if they could use the capital locked up in their IRA or 401k plan?

Your IRA or 401k was meant for your future, right? It probably isn’t growing at a rate that will maintain your current standard of living for 20 years. If you don’t want to re-enter the workforce after you retire, consider alternative funding for your future.

An Real Estate IRA - a type of self directed IRA - converts the funds in your current retirement plan to an independently owned and operated entity. You control how the money is invested and which pre-construction projects you want to be a part of.

Buying Power

A new home that hits the market with a price tag of $300,000 requires financing of about $235,000 to build, depending on the region. The remaining $65,000 is the profit split among the investors and the builder. If you could turn $235,000 into $270,000 in 9 months (typical time from first permit application to “Home for Sale”), you’d be realizing a return rate of nearly 19% annually.

Don’t have $235,000 sitting in the bank or your IRA and 401k combined? One of the great benefits of pre-construction investments is that multiple investors can join funds and realize the same rate of return. As your money grows exponentially with each investment, you’ll soon find yourself able to invest in even larger projects.

More money to invest equals more access to pre-public releases of land deals, investments in high-end exclusive projects with an even greater profit margin and the power to get in at the ground level of emerging markets.

Choices Beyond Homes

How many “fix and flip” shows have you seen that start an office building or resort hotel? How many retirement condominium complexes? There are plenty of these types of buildings that need repair and may be able to turn a profit, but the typical fix and flipper must find the funding. Now that you know you can join your funds with others, you should also understand that the options don’t end at homes in Anywhere, USA.

What Hawaii was thirty years ago, some say the coast of Mexico is today - a destination where your investment can see unbelievable returns in just a few short years. There will always be some new great vacation hot spot in the world that needs shopping centers, marinas, hotel resorts and, of course, homes to house the resident population. You can help fund these types of projects before construction begins and see your profits roll in as tourists flock.

Funding for the Future

Do you have a friend or family member in the construction business looking for funding for a custom home project? You can invest your retirement funds in the project. Profits are returned to the IRA LLC tax-deferred, where you can reinvest the profits and watch them grow even more.

Interested in investing in pre-construction real estate ventures, then visit http://www.PrimePuertoVallartaRealEstate.com. With market conditions similar to California in the early 1960s, Puerto Vallarta is becoming the “Epicenter of Mexican Real Estate Development.”

Share This

Penny Stock Exchanges OTCBB and Pink Sheets

Posted on May 22, 2007
Filed Under Stock Market | Leave a Comment

Most people think of the major stock exchanges when trading stocks comes to mind. The New York Stock Exchange (NYSE), the National Association of Securities Dealers Automated Quotations (NASDAQ), and the American Stock Exchange (AMEX) are among those that first come to mind. A penny stock is a low ticket security for companies that are valued at under five hundred million dollars and often trade in low volumes. These stocks also trade on ‘Over the Counter’ exchanges such as the OTCBB or Pink Sheets.

The very fact that penny stocks trade at such low volumes increases the risks involved in investing in them. The Securities and Exchange Commission urges potential investors in penny stocks to be aware of the fact that the low trading volume of these stocks make it likely that in times of needs buyers will be rare if not impossible to find. Finding accurate quotes for pries is also difficult which increases the possibility of the investor losing his entire investment.

Despite the risks involved, penny stocks are often attractive investments to investors for various reasons. If you are new to investing and looking for the chance to return a high yield for a relatively low investment you are likely to come across some penny stocks. The attraction often lies in the fact that at such low prices any changes are often measured by the hundreds of percent this means that your investment can literally double in one or two days time.

On the other hand, the price of penny stocks can drop just as drastically and equally fast. Those who are inexperienced investors would do well to avoid penny stocks until they have a better understanding of how things work. It is also important to note that because of the relatively low ‘worth’ of the companies that are often listed on the OCTBB or Pink Sheets they are often considered questionable investments. Some of these companies have such a limited financial history that no accurate determination of their actual value can be made. Many of these companies are either very new or dangerously close to bankruptcy.

There is also a strong potential for fraud with some buyers artificially ‘enhancing’ or driving the costs by buying large amounts of stocks and raising the perceived value of essentially worthless stocks. Most investors who fall for this loose many when it comes time to sell.

It is important to remember when stock market investing that not all of these companies are frauds and many of them have a great deal of potential. Some are new businesses that are working hard towards their goal of earning a spot on the larger exchanges.

Do your research in order to decrease your risks of landing with a declining or dishonest company. Investors are often convinced that one good investment can make them a nice tidy profit. While this is true it is better to invest in a company that is showing slow and steady growth than one you are hoping will sky rocket over night. Take the time and do your research rather than gambling with your investment.

Share This

Tips for Small Business Costs

Posted on May 20, 2007
Filed Under Forex | Leave a Comment

Small business costs are often the reason that a business either fails or does not begin in the first place. For many entrepreneurs, the home business startup cost can be so intimidating that they lose their motivation before they even get started. For other small business owners, small business costs can put a strain on the finances set aside for the business. Between paying employees, stocking inventory and finding the time to manage a business, small business costs can cause a Home Business to fail rather quickly. Fortunately, entrepreneurs have access to various options to relieve some of the stress of small business costs.

A business plan is an essential component of any successful business. Without a business plan, you are less likely to obtain business startup loans from banks and investors. With a professional business plan, you have a blueprint for success that you can show people who might potentially provide business startup funding for your business. To instill confidence in others, your business plan must sound convincing and demonstrate your abilities to start and operate a successful business venture.

A business plan for purposes of receiving a small business startup loan contains several components. The first few pages include the Executive Summary and the Table of Contents. After this is the company description. This is one of the most important sections of a business plan. The company description gives potential investors a short history of your small business as well as the future you are planning for it. It also describes any plans you might have to expand your business. For purposes of getting small business startup loans, this is one of the sections that loan providers and investors are most interested in.

In the company description, you will want to steer clear of mentioning that your business is a startup business. Startup businesses are considered risky investments by many investors. Instead, discuss what you have contributed to the industry that you are currently in or plan on entering. Without bragging, mention some things that you have changed or something you have done differently than others that has proved to be successful. Also, talk about how your business has grown in recent months or years and show your predicted growth. Make sure your excitement and passion regarding your new business shows in your business plan to increase your chances of getting a business startup loan.

One of the last parts of a well-written business plan is your marketing plan analysis. This is an explanation of your demographics and a study done about your potential customers and clients. This section also explains how you plan to advertise and target your target market. In addition, this section will show that you have done extensive research to ensure that your product or service has a large demand. In order to obtain small business startup loans, you will also need to include a sound financial plan for your new business.

Small business costs can be a large concern for entrepreneurs and first-time business owners. Fortunately, small business owners have access to business startup loans as well as other forms of business startup funding to help them overcome their financial stress. A business plan is an ideal way to show investors that you are serious about your new venture and that you know how to make it a success. With a little extra financial help, many small businesses can pull through the tough times and remain in operation.

Share This

keep looking »

Recently


Categories


Archives

Close
E-mail It