Kuala Lumpur Stock Index

What are You Investing For?

Much like an exercise program, you'll want to determine your goals before you begin to invest. Your goal might be retiring in 20-30 years, kids college funding or, if you got started a bit late, retirement in the next 5 to 10 years.

It's very important to think through what your goals are and then determine your investment style. I should make it very clear that when I talk about investing, I'm not simply talking about taking chances with your money and hoping for a big return. I'm much more subdued, but at the same time aggressive in obtaining the biggest return for the least amount of risk.

Before we actually talk about that however, I should point out what your situation should look like before you begin doing any kind of investment.

If you've met with us in the past, you'll be familiar with the Financial Freedom Steps. These steps are helpful to anyone who desires to get their life on the right track. The first step is to develop and actually use a spending plan or budget. You should keep track of all of your income (paycheck) as well as all of your outgo (monthly expenses). It's been said that budgeting is telling your money where to go, rather than asking where it went. If you do not have a plan for your income before you receive it, then it will go places where you simply can't even track it down.

Most of the people and businesses we help get set up on a budget tell us that they feel like they've gotten a raise when they start living on a budget. I bet that if you haven't ever done a budget, you can't tell me off hand where all of your money is going. Try it and find out.

While you are developing a spending plan, you should also be striving to save $1,000 for a 'beginner' emergency fund. Once that is complete, Step 2 is to aggressively pay off all of your debt (except for your house) as quickly as possible. Step 3 is to finish your emergency fund with between 3 and 6 months living expenses. Then and only then do we recommend beginning any investment program. The reason is simple... the biggest wealth building tool each of us has is our income. Once your income is freed-up, you can focus more of your time and energy in earning back the money you were formerly paying in interest. After all, if you're paying a credit card 17% in interest and pay that card off, you are now receiving a 17% return for yourself by not paying it to the bank. If you can then earn 10% on your money, that is a 27% spread!

Justin Lukasavige is a Personal & Business Coach and owner of Lukas Coaching. Visit www.lukascoaching.com/resources.htm for a ton of free tools to help you improve your health, finances, business, career & life! For more free columns and articles, visit www.lukascoaching.com/articles.htm

1 Month - Bullion Vault Gold Prices - Multiple Currencies

Monday, April 13, 2009

Dollar Cost Averaging: a Great Strategy for the New Investor

Dollar cost averaging is an investment strategy where regular investments are made into your account or portfolio. Dollar cost averaging can be an ideal plan for the young online investor. It lowers risk, cost and doesn’t require big lump sums to be invested all at once. Despite the fact, that, generally speaking young online investors can afford a bit more risk than those closer to retirement, many of us just don’t want to put the work into it. That’s okay!

If you’re new to online investing here’s what you need to do to:
Determine exactly how much you can afford to invest on a weekly or monthly basis. Sharebuilder.com has an automatic investment plan exactly for this purpose. By developing a dollar cost averaging investment plan and setting that plan in motion through a free, basic account at Sharebuilder.com you’ll only pay $4 each time you invest! Real time trades via Sharebuilder.com can cost you up to $15.95 per trade! You can see how much money you’ll save.

Dollar cost averaging is a long term investment plan; it’s not a good way to make a quick buck. It is a good way to secure your financial future. That leads us to the type of investments you want to make. Like all good investment strategies, a key goal is to diversify your portfolio. You do not want to pour $50 a week into one stock for years, goodness only knows the risk you’d face. However, with $50 a week it’d take some pretty rigid and careful planning to create a diversified stock portfolio on your own.

What are your other options?
Index funds; like the S&P 500, the Wilshire 5000, or the FTSE 100. If we take a closer look at the S&P 500, you’ll see large capitol corporations and a ready made diversified investment. The idea behind an index fund is that you are investing your money along with others; this enables you to take part in a number of investments that would not be plausible for most individual investors, must less the young, newbie, online investor.

Mutual funds; you must purchase shares straight from the fund itself. If you own a mutual fund you can sell your share back to the fund. Some of the nice things about mutual funds are the professional management, their affordability, they are redeemable and like index funds are diversified. However, there is a down side to mutual funds such as the cost, lack of control and price uncertainty. Before you consider involving yourself in a mutual fund, use the mutual fund cost calculator to compare costs.

If you’re new to the world of investing, but dying to get in on the action, dollar cost averaging is a great place for you to start. The most important thing is to have a plan in place before you make your first move. That means, you have to either do the research or pay someone else to. Either way, knowing what you’re putting your money into today is an investment you’ll be glad you made in the future.
Find more information for the online investor here: http://piggybankfinances.blogspot.com/

Author By: Tricia

Dollar Cost Averaging Vs Value Averaging

Both dollar cost averaging (DCA) and value averaging are two popular investing strategies to profit from long-term performance of stocks or similar financial instruments. Both are good ways of systematically building an investment portfolio by adding capital to existing portfolio monthly (or try-monthly or annually).

Dollar cost averaging, also known as Pound Cost Averaging and Constant Dollar Plan, is a simple systematic investment method, in which the investor continuously buys stocks, or mutual fund units or other instruments, of a fixed amount. Thus the portfolio investment is increased with a certain amount every month and the trader profits, buy selling off the instruments he holding at a desired time.

The basic idea of Dollar cost averaging is to profit from long-term performances of stocks and markets (around 11% per year for US markets) irrespective of short-term market ups and downs. DCA investors easily overcome market up and downs. When markets are down, investors can buy more number of stocks/units for a certain amount and when markets are up they can buy lesser number of stocks/unit for the same amount.

Value averaging is a more evolved investing strategy with an added value factor. Investors following value average buy stocks each month to attain a targeted portfolio value. For example if the target portfolio growth rate is $500 per month and the investor buys stocks of value $500 for the first month. In the second month if the original value has increased from $500 to $600, he invests less ($400) for current month to achieve the portfolio value target of $1000 for the second month. Likely if the portfolio value has dropped from $1000 to $900 in third month, he invests more ($600) to achieve the portfolio value of $1,500 for third month.

Advantages of Dollar cost averaging are (1) it is independent of market timings other than the selling time, (2) steady growth of portfolio, (3) minimum need of trading/investing experience and education, and (4) best for persons with steady monthly income. But this strategy does not ensure good profits.

Advantages of value averaging are (1) generally better profits than DCA, (2) active management of portfolio investments, and (3) best for persons with investing experiences, (4) good when investors want to take short-term profits. But the strategy may become difficult to follow in long-term. For example the above mentioned portfolio value target after 2 years will be $12,000. But because of a bullish trend it can decrease to $8,000; then one must need to invest $4500 ($12,000 – $8000 + $500 of monthly target) for the next month. Similarly there may be months in which no investments are needed.

Author By: NobleTrading