Quick Intro to ETF’s – My Favorite Topic – Lesson #8

ETF’s are the greatest invention when it comes to investing! Since they started trading on  the open market they have grown to insane proporations so it can be a bit complicated to pick the best ones. With a bit of research you will find the best for you.

5 Exceptional Reasons and Benefits to Buy ETF’s over Mutual Funds

1. ETF’s are baskets of different stocks in anything you want: Indexes, sectors, industries, bonds, dividend stocks, REIT’s, precious metals, commodities, foreign markets, foreign currencies and so much more!

2. You can trade ETF’s in real time just like a stock during market hours. Unlike Mutual funds, you can only close out the deal at the end of the day. Plus, if you’re mutual fund has a certain time period if you get out early you can either pay a fine or a bigger management fee.

3. No front load, back load or any fees that aren’t already built into the price of each ETF like you can get with mutual funds some of which are surprise fees.

4. Super low expense fee! You do have to pay for the trade commission.

5. They are more tax efficient than mutual funds.

These are just some of the reasons that ETF’s are a must have for each investor in their portfolio!


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4 Financial Markets to Look For When Investing – Lesson #7

When beginning to analyze the market for where you want to focus your investments, it’s important to understand the different financial markets.

Diversification is key to a strong portfolio and it begins with the Top-Down formula which has Markets as the main first step.

4 Financial Markets to Understand, Dissect and Invest In

1. Sector Funds – most stocks will be found in sector funds that can range from technology to schools to healthcare and more.

2. Real Estate Funds – or better known as REIT’s focus specifically on all things in real estate. A huge benefit/bonus of owning in this sector is that they normally pay a higher than normal dividend yield.

3. Precious Metal Fund – the Gold and Silver market, considered to be one of the most volatile mainly go up and down with the inflation % and information.

4. Index Funds – the safer way to invest. This is used mainly by beginner investors since they seem, like me, to be told – ‘You Can’t beat the market!’ – We’ll see about that.

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Lesson # 6 – Investing Plan for Buying Stocks

Planning can be broken down into parts to help figure out exactly how to begin the stock buying process.

6 Rules of Preparation for Buying Stocks

1. Objective – before buying into a company or purchasing an ETF consider your objectives. How much are you willing to pay. How much do you want to sell for or to stay until you feel you’ve earned enough.

2. Watch List Criteria – what to look for when purchasing stocks

  • Identify the trends of the market
  • Find the best sector and industry
  • Find the best stocks and ETF’s for these trends

3. Entry Rules - Analyze the stock’s time period between 6 months to 5 years to help you see the trends before committing.

4. Allocation – How much are you willing to buy. A good rule of them is never buy more than 10% of a single stock in your portfolio.

5. Exit Rules – When to get out – set your limit to sell at 3% below what you bought this way you’re not sweating that you lost too much money!

6. Routines – weekly check on new stocks to buy. And always continue your education!



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My Financial Plan

No matter how hard you avoid it, everything in life needs a plan – a goal. Otherwise you’re just kind of swerving from one side to the next like a drunk leaving the bar and not having any idea where to go next.

This holds true, as I’m told over and over again, with financial planning and investing.

What are Financial Plans and Goals for your Investment Strategy?

This is a question you must answer. It doesn’t have to be in full detail, but a good idea so that you can start taking the correct moves to your ultimate goals.

My Financial Planning Goals:

Aggressive Growth!

Yes, that’s right. I want to risk and I want to risk big – well almost.

My goals for my portfolio is growth. As I mentioned earlier I don’t believe in financial formulas. To me they are hopeful gadgets that don’t really work well in the real world. It’s all to deceiving to stick in a few numbers and say my goal is to make 12-20% on my investments for the year. If it was that easy, we’d all be doing it.

The challenge is obviously figuring out how to do it well.

So how am I going to be an aggressive investor rather than a buy and hold investor over long periods of time? 

Let’s take the sum of the whole and break it down first:

60% will go to the aggressive growth portfolio and 40% more tamed yet still high growth

Aggressive Growth Portfolio broken down:

25% Emerging Markets ETFs

25% Commodities

25% Stocks – mainly small cap

15% Dividend stocks with higher yields

10% Penny stocks

The other 40% for growth

25%  Dividend stocks – with a lower yield between 4-6%

25% Stocks – large caps

25% Emerging Markets – ETF’s – the more secure markets

25% Commodities – ETF’s – the more secure resources that are definitely on the rise

Yes, the do resemble one another. However, it’s all in the way you do it that counts! Basically, what I’m buying and how long I’m buying them for.

This is my route, I definitely dont’ recommend any one do the same. We each have our own goals – which must be defined. If you’re in the position where you can risk more, than develop a goal that will give you the best returns. If you’re more in the lower risk – slow and safe growth – then that’s what you need to decide and break it down for you.

The main purpose of this article is to show you that you must come up with some sort of a plan to get you started.

You will also see, with time, your plans and goals will change- that’s called being flexible and going with what is necessary at the time. But if you don’t have an initial idea, you won’t be able to head in the right direction.  


1. I am not including my cash and easily liquidated funds. I know that many people include this into their portfolio, which I don’t think is a good idea since it’s sooo low risk of gaining anything, it’s just part of my holdings.

2. This is not my Roth IRA account which I plan on having a much more tamed outlook and more diversification such as bonds, emerging markets (I don’t believe these are as risky as many people think they are – for the most part), dividends with lower yields, and stocks (both small and large caps), ETF’s (my absolute favorite for both emerging markets and commodities – another investment that I feel isn’t as high risk as many like to think).

3. I will be doing a totally different portfolio for my Roth IRA.


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Why Financial Planning Formulas Suck!

As the lessons for investing and planning my financial future progress, I am constantly amazed that the ‘experts’ push all these formulas that must be used for bettering my financial goals.

No offense experts – but let’s get real!

Rule of 72

Let’s take any number and apply the formula.

The way the formula works is like this – 72 divided by any % of return equals the amount of years it will take you to achieve your goal.

72 ÷ 12 = 6

What is that? Can you tell me? Who knows that they will earn 12%?  That is one of the most unpredictable things in the world.

If we all knew that we would earn 12% on our investments, we’d all be doing it!

Another formula is based on your age and stocks proportions.

110 – Current Age = Stocks Allocation

The older you are the less stock investing you’ll be doing.

This may be true, but how about taking into account:

  1. You don’t want to invest in stocks at all
  2. What if you want to invest in a lot more than what the formula tells you
  3. Everyone has different interests – why follow formulas!

My solution is this – take everything with a grain of salt. Do your due diligence, but work out what is best for your needs, interests and amount of money you have invested!


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Lesson #5 What are Bonds

What is a bond?

Bonds are considered to be the less risky of the two choices: Stocks and Bonds.

However, understanding exactly how bonds work is an interesting concept. Unlike stocks which you buy into the company, with a bond you actually are lending the money – you are the bank!

3 Types of Bonds:

1. Corporate bonds – this is when businesses and corporations are looking for lenders. They don’t want to go public and sell their shares or parts of their company publicly, but the do need money to borrow. Mostly it’s when they can’t get money from banks, they hire financial professionals to help with this public lending.

Corporations will borrow for a certain period of time and then pay a yearly interest rate on the loan until the bond matures.

This is considered the most risky of them all because you don’t know if the company will pay you back or they can fold. As with all higher risks, the rewards can be much higher.

2. US treasury bonds – this is when the United States Government is borrowing money from people. Considered to be the safest investment out there.  There are a few benefits to this bond purchase – the greatest of all is that it’s tax exempt. You don’t pay any taxes on it’s gains.

The way these are purchased are usually in par value denominations ($1,000 bulk)

3. Municipal bonds – this is local governments asking for IOU’s with interest rates. Normally this is paid via the tax payers money that comes into the local areas.

The downside is that they are not guaranteed by the local government. The main benefit of this purchase is that they are tax exempt.

Plus, if you’re buying into a certain project let’s say money is needed for a new toll road, you are pretty much guaranteed you will get that money back since it’s a toll road and will not lose the money.

How the bond is paid off:

The company, government or municipality pays back in different time frames. This is called coupon rate or coupon yield.

Some can pay monthly, by-yearly, yearly or at the end of it’s maturity.

This information is known to the public when you purchase and you make the decision.

Benefits of buying bonds:

The risk is much lower, thus the rewards are lower. But if you buy well, you will always make your money back!

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Lesson #4 – Brief Intro on Stocks

What is a Stock?

The easiest answer to this is a piece of the company’s ownership. It can be teeny tiny part or relatively big depending on your investment criteria.

For instance, you’ve always wanted to own a McDonald’s store, but can’t afford to get the real deal. You certainly can afford to buy 10, 100, 1000 shares. You might not be doing the frying, but you do have a say in the corporate aspect of it. You are technically part owner and can participate in the shareholders meetings as well.

There are two ways to buy stocks:

1. IPO – initial public offering. This is when the company first goes public. Not always is getting in on this level is as great as some people believe they are. For one thing, you have to have a certain amount to enter – sometimes up to several million $. And there have been times that the IPO price was way overvalued and after the IPO period was over the prices fell down. This is done only on the primary market.

2. Open market –  Secondary market. Once the company goes through the IPO and it’s complete it goes to the secondary market where it’s life continues to thrive through active buying and selling. This is how most investors work with stocks.

Once it’s on the secondary market you can trade on one of these stock market exchanges:

  • New York Stock Exchange (NYSE)
  • American Stock Exchange (AMEX)
  • National Association of Securities Dealers Automated Quotations (NASDAQ)
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Lesson #3 Common Financial and Investing Mistakes Made by Investors

Avoiding mistakes is an art that we all wish we can master. But with all things in life, we have to experience or at least be extremely aware of the mistakes that are common and can/will be made when starting out something new and even if we’re pros.

What are the most common Financial, Investing Mistakes to Avoid:

Diversification- or lack of it. This can be a mistake in both ways:

1. Not enough diversification – keeping your investments too limited and not broadening your money so that if one fails, you don’t lose it all

2. Too much diversification – this can happen to the best of us. It’s called over excitement and should be watched. It’s very easy to be tempted to buy everything that sounds good. But you also don’t want to be spending most of your money on commissions to brokers and not having enough in each area to really earn any money.

Unrealistic goals – who hasn’t fallen victim to this one? I mean, come on, I know I want to earn 50% on my returns each year. But even the best in the biz have yet to exceed 24%! Know your limitations and know that you have to learn and educate yourself before you can play with the big boys. However, having 8-12% return yearly isn’t at all a far fetched figure.

Tax advantage accounts – this mainly falls into the Roth Ira and 401k’s for retirement funds. Why have anything that you pay taxes on when you take it out?

Financial plan – Like I said before, I’m not big on having a very detailed plan. There is no such thing. But you certainly can and should have an outline of where you want to invest and as you start the plan will fill in on it’s own.


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Quick Tip – Rewards and Risks

The bottom line:

The more you risk (chances of higher losses) the greater your rewards will be!

What does this mean in financial and investing terms?

1. If you have checking and savings accounts – they are very liquid – with very low risk which also have very low return!

2. Higher risk usually, as in life, brings back much higher rewards – however, the losses can be even higher! And as they say – You just have to take the risk if you want to achieve big!

Are you ready to take the risk? I am!

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Lesson #2 Budgeting for Investing!

This is a biggie. Not everyone can send in $1000-$5000 a month to their brokerage firms. I certainly know I can’t do that!

But it is important to figure out what you can invest and how often:

  1. Are you starting out with a lump sum? From my experience, this seems to be the way most investors start out. It can either be $5,000 or $25,000 but something that will help you start and also learn from.
  2. Are you in the position to delegate a certain amount of your monthly salary to be sent directly to your investment funds?
  3. How about your tax returns? This could be a good addition.
  4. Inheritances – not that many of us are privy to this little bonus, but if done properly, your inheritances can be invested or reinvested with high tax exemption payoffs.

Decide what you can do. Even if it’s a small amount, the big deal is to simply start investing today!

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