September 9, 2008
There are as many theories on real estate investing as there are people willing to tell you the latest and greatest.
In the past, the market for real estate investing was only open to those with enough capital or credit to afford the properties long enough to turn a profit.
Times have changed. With a new era of socially responsible real estate investing taking hold, people formerly held out of the market can now enjoy its profit potential.
Using their own good credit and/or investment funds from a self-directed IRA, almost anyone can now get in the market of real estate investing with lower risk factors.
There’s no doubt the real estate market is in a state of flux. With prices dropping all over the country, many people are losing not only equity, but many are losing their homes.
As with any market turn, there are two sides of the situation: The side I mentioned above and the side offering investment opportunities.
When prices are down, the opportunity to buy for investment increases. It should be done however with respect to those feeling the negative effects.
This is why socially responsible real estate investing should be a key factor for those looking to benefit from a bad situation.
July 31, 2008
PropertyIndex.com make it easy to find property in Italy, whether you are looking for a villa or an apartment, they can help you find the right property.
Even if the Property Index online service may be considered a newcomer corporation, (they were registered only in March 2007), they were quick to establish themselves. They are actually a very uncomplicated corporation and focus on offering their expert guidance to everyone expecting to rent, buy, sell or let property across the world. They pledge to be of help to you to pinpoint bang-on what’s called for very quickly and, obviously, sans pain. Estate is being offered across the globe nowadays, unquestionably the most exclusive area being property on the market in Italy. It should really be dead easy to tick off the glorious real estate available in Italy, the reason for looking into properties here is the houses and apartments available and the fantastic opportunity of being able to live amid such a welcoming populace.
This is one of the truly fashionable areas nowadays, and considering the gorgeous landscape and wonderful climate surrounding you here, who could say no? Estate in Italy is rich in history, this country has always been home to many indigenous cultures. Only 25 or 30 years ago you would find just a trickle of Englishmen who are looking for real estate in Italy. Ask everyone who has relocated to Italy and they will be certain to substantiate this. There’s many people who would would view it as a simple trend and others would view it as a that’s quite a fetish! Shoppers willing to move to this region generally range from young urban couples keen on a bit of a new life perspective to retirees looking to relax.
There can be hitches when buying real estate overseas: expectably there will be hundreds of heterogeneous, pretty complex, steps be it when working out a plan, calling in or completing. If you miss out on a single minute action that could easily kick up overwhelming hitches and, even more important, money loss. As you will presume with this well-liked destination, real estate may be unbelievably dear in this region and that is unquestionably a consequence of the broad market demand. Regardless of this the buyer is presently fussy in such a location so great in terms of beaming panorama. It’s patently got most everything a real estate buyer might possibly hanker for and lots more.
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July 12, 2008
Both banks and brokers have their strengths and weaknesses. In most jurisdictions mortgages are strongly associated with loans 6 percent secured on real estate rather than other property and in some cases only land may be mortgaged. See which lenders are charging fees 6 percent and for how much. See mortgage loan for residential mortgage lending, and commercial mortgage for lending against commercial property. Different lenders charge different fees. Start with credibility. It’s not easy to know if the prices quoted by lenders are reliable. Get a new home with <a href=”http://www.snel-geld.info/” title=”geldleningen met bkr notering”>geldleningen met bkr notering</a>, 235848 euro in a week.<P> Credibility, dependability, and longevity in the home lending business are good places to begin. So how do you find a lender or broker you can trust’ It is a transfer of an interest in land, from the owner to the mortgage lender, on the condition that this interest will be returned to the owner of the real estate when the terms of the mortgage have been satisfied or performed.<P> Depending on your situation, that may make a bank loan more appealing than a mortgage processed by a broker.<P> And of course, each loan and each borrower are different. Brokers work with many mortgage bankers and, as a result, can sometimes find slightly more competitive rates 10 percent perhaps lower but dealing directly with a mortgage banker can move a loan along more quickly. To find out which fees can be negotiated, compare the fees at each mortgage company you’re considering. Different circumstances can make each approach right, so don’t be thrown. Although most mortgage experts say that rates 11 percent are pretty much the same wherever you go, give or take this tiny 9 percentage. Some will quote you precise, competitive rates 10 percent. Many of these fees are fixed but some can be negotiated.<P> Settlement costs can include everything from broker commissions and loan-origination fees, which cover the lender’s costs in processing the loan, to appraisal and credit-report fees, among others. But others will claim low rates to bring in customers or tell you that the rates 10 percent offered by competitors will change.<P> Arranging a mortgage is seen as the standard method by which individuals and businesses can purchase residential and commercial real estate without the need to pay the full value immediately. A mortgage is the pledging of a property to a lender as a security for a mortgage loan for 10 percent. In other words, the mortgage is a security for the loan that the lender makes to the borrower. While a mortgage in itself is not a debt, it is evidence of a debt of 3 percent.
May 27, 2008
Market timing discipline means controlling impulses and
controlling emotions. When emotions rule our trading, loses are
usually the result.
This is why successful market timers follow a thoroughly tested
timing strategy. One that has been used in all kinds of markets,
including bull, bear and sideways markets.
As many novice market timers can tell you, however, maintaining
discipline is often easier said than done.
Usually the first problem arises when the markets are between
market trends. Possibly you had a nice profit during a rally,
but now the market is trading sideways and has generated several
small false signals. There is now no trend, or one is certainly
not obvious.
You were strong the first couple of signals, making all the
trades, but after a couple of small losses, you are starting to
second guess the timing strategy.
Self-Doubt Arises
Just as the vast majority of market participants are driven by
fear and greed, many new market timers find it difficult to
avoid succumbing to self-doubt and panic.
Market timing is challenging in that we often take positions
“against” the prevailing sentiment of most traders. It also has
times when false signals are generated. But a good strategy does
not stick with the false signal. it changes and protects capital
from large losses.
If those small losses are worrying you, don’t let them. Losses
are part of trading with “all” successful strategies. Small
losses are acceptable. Large ones are not.
And remember this, sideways markets are almost always either a
base, or a top, and are followed by the next profitable trend.
If you do not take all the trades, how will be sure to take the
one that generates all the profits?
Invariably, the trade you skip, is the big profit maker. The one
that starts the next huge trend. And there is “always” a next
trend. In fact, 200 years of trading history shows the markets
are in a trend 80% of the time. That 20% in between can be
rough, but soon the next trend will begin.
Discipline is key. It is vital to take whatever steps are
necessary to maintain discipline and take every trade.
Markets Are Unpredictable In Short Timer Frames
The markets are chaotic and unpredictable in short time frames.
The current volatility being a perfect example. When faced with
an uncertain set of circumstances, it is easy to see why market
timers may, at times, feel unsure and unsettled.
Timers follow strategies that provide entry and exit signals
based on timing strategies designed to be profitable over time.
Strategies that are also designed to protect their capital
during the inevitable sideways markets. “The more structure you
have to follow, the less uncertain and unorganized you’ll feel.
You will know what to do and when to do it.”
But no timer can know with certainty how any “one” buy or sell
decision will play out. Some market timers thrive on the
excitement, but many find it disconcerting.
The best way to combat feelings of uncertainty is by following a
trading plan. If one trades with a detailed trading plan, such
as the strategies offered at FibTimer.com, he or she will impose
structure onto an unstructured reality.
The more structure you have to follow, the less uncertain and
unorganized you’ll feel. You will know what to do and when to do
it.
The markets may seem at times like a mass of confusion, but you
can address it by following a strategy that actually uses the
volatility of the markets to generate timing signals.
Optimistic Yet Realistic
One’s mood and attitude is another factor that impacts the
ability to maintain discipline. An optimistic yet realistic
attitude is vital to maintain market timing success.
Market timing often places you at odds with the current market
sentiment. It is understandably hard to feel optimistic when
your position is at odds with the majority.
Many market timers struggle with trying to maintain a positive
or at least neutral mood.
It takes practice.
Emotions And Decision Making
Maintaining discipline is vital for market timing success. It
can be extremely difficult at times, especially in sideways
(non-trending) markets.
The best way to be disciplined is to stick to your timing
strategy and keep your emotions and impulses under control.
Take a look at the trading history of the strategy you are
following. Every timing strategy at FibTimer has a “Trading
History” link. You will see times when it generated losses. On
paper they seem insignificant. But when they occurred,
subscribers had difficulty making the trades.
Now look at the results of the trading strategy after a year.
Two years. Three years. Those small losses did not stop the
strategies from being very profitable. This important fact will
help you to stay the course and make all of the trades.
Only by maintaining discipline can you realize long term success
timing the markets.
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April 23, 2008
The debate rages all over Eastern and Central Europe, in countries in transition as well as in Western Europe. It raged in Britain during the 80s: Is privatization really the robbery in disguise of state assets by a select few, cronies of the political regime? Margaret Thatcher was accuse of it - and so was the Agency of Transformation in the Republic of Macedonia. At what price should the companies owned by the State have been sold? This question is not as simple and straight forward as it sounds.
There is a gigantic stock pricing mechanism known as the Stock Exchange. Willing buyers and willing sellers meet there to freely negotiate deals of stock purchases and sale. Every day new information, macro-economic and micro-economic, determines the value of companies.
Greenspan testifies, the economic figures are too good to be true and the rumour mill starts working: interest rates might go up. The stock market reacts with a frenzy - it crashes. Why?
A top executive is asked how profitable will his firm be this quarter. He winks, he grins - this is interpreted by Wall Street to mean that they WILL go up. The share goes up frantically: no one wants to sell it, everyone want to buy it. The result: a sharp rise in the price. Why?
Moreover: the price of the stock prices of companies A with an identical size, similar financial ratios (and in the same industry) barely budges. Why didn’t it display the same behaviour?
We say that the stocks of the two companies have different elasticity (their prices move up and down differently), probably the result of different sensitivities to changes in interest rates and in earnings estimates. But this is just to rename the problem. The question remains: why? Why do the shares of similar companies react differently?
Economy is a branch of psychology and wherever and whenever humans are involved, answers don’t come easy. A few models have been developed and are in wide use but it is difficult to say that any of them has real predictive or even explanatory value. Some of these models are “technical” in nature: they ignore the fundamentals of the company. Such models assume that all the relevant information is already incorporated in the price of the stock and that changes in expectations, hopes, fears and attitudes will be reflected in the prices immediately. Others are fundamental: these models rely on the company’s performance and assets. The former models are applicable mostly to companies whose shares are traded publicly, in stock exchanges. They are not very useful in trying to attach a value to the stock of a private firm. The latter type (fundamental) models can be applied more broadly.
The value of a stock (a bond, a firm, real estate, or any asset) is the sum of the income (cash flow) that a reasonable investor would expect to get in the future, discounted at the appropriate discount (usually, interest) rates. The discounting reflects the fact that money received in the future has lower (discounted) purchasing power than money received now. Moreover, we can invest money received now and get interest on it (which should normally equal the discount). Put differently: the discount reflects the loss in purchasing power of money not received at present or the interest that we lose by not being able to invest the money currently (because we will receive it only in the future). This is the time value of money. Another problem is the uncertainty of future payments, or the risk that we will not receive them. The longer the period, the higher the risk, of course. A model exists which links the time, the value of the stock, the cash flows expected in the future and the discount (interest) rates.
We said that the rate that we use to discount future cash flows is the prevailing interest rate and this is partly true in stable, predictable and certain economies. But the discount rate depends on the inflation rate in the country where the firm is (or in all the countries where it operates in case it is a multinational), on the projected supply of the shares and demand for it and on the aforementioned risk of non-payment. In certain places, additional factors must be taken into consideration (for example: country risk or foreign exchange risks).
The supply of a stock and, to a lesser extent, the demand for it determine its distribution (how many shareowners are there) and, as a result, its liquidity. Liquidity means how freely can one buy and sell it and at which quantities sought or sold do prices become rigid. Example: if a lot of shares is sold that gives the buyer the control of a company - the buyer will normally pay a “control premium”. Another example: in thin markets it is easier to manipulate the price of a stock by artificially increasing the demand or decreasing the supply (”cornering” the market).
In a liquid market (no problems to buy and to sell), the discount rate is made up of two elements: one is the risk-free rate (normally, the interest payable on government bonds), the other being the risk related rate (the rate which reflects the risk related to the specific stock).
But: what is this risk rate?
The most widely used model to evaluate specific risks is the Capital Asset Pricing Model (CAPM).
According to it, the discount rate is the risk-free rate plus a coefficient (called beta) multiplied by a risk premium general to all stocks (in the USA it was calculated to be 5.5%). Beta is a measure of the volatility of the return of the stock relative to that of the return of the market. A stock’s Beta can be obtained by calculating the coefficient of the regression line between the weekly returns of the stock and those of the stock market during a selected period of time.
Unfortunately, different betas can be calculated by selecting different parameters (for instance, the length of the period on which the calculation is performed). Another problem is that betas change with every new datum. Professionals resort to sensitivity tests which neutralize the changes that betas undergo with time.
Still, with all its shortcomings and disputed assumptions, the CAPM should be used to determine the discount rate. But to use the discount rate we must have what to discount, future cash flows.
The only relatively certain cash flows are the dividends paid to the shareholders. So, Dividend Discount Models (DDM) were developed.
Other models relate to the projected growth of the company (which is supposed to increase the payable dividends and to cause the stock to appreciate in value).
Still, DDM require, as input, the ultimate value of the stock and growth models are only suitable for mature firms with a stable and not too high dividend growth. Two-stage models are more powerful because they combine both emphases: on dividends and on growth. This is because of the life-cycle of firms: at first, they tend to have a high and unstable dividend growth rate (the DDM tackles this adequately). As the firm matures, it is expected to have a lower and stable growth rate, suitable for the treatment of Growth Models.
But how many years of future income (from dividends) should we use in a our calculations? If a firm is profitable now, is there any guarantee that it will continue to be so in the next year, the next decade? If it does continue to be profitable - who can guarantee that its dividend policy will not change and that the same rate of dividends will continue to be distributed?
The number of periods (normally, years) selected for the calculation is called the “price to earnings (P/E) multiple”. The multiple denotes by how much we multiply the (after tax) earnings of the firm to obtain its value. It depends on the industry (growth or dying), the country (stable or geopolitically perilous), on the ownership structure (family or public), on the management in place (committed or mobile), on the product (new or old technology) and a myriad of other factors. It is almost impossible to objectively quantify or formulate this process of analysis and decision making. In telecommunications, the range of numbers used for valuing stocks oa private firm is between 7 and 10, for instance. If the company is in the public domain, the number can shoot up to 20 times the net earnings.
While some companies pay dividends (some even borrow to do so), others just do not pay. So in stock valuation, dividends are not the only future incomes you expect to get. Capital gains (profits which are the result of the appreciation in the value of the stock) also count. This is the result of expectations regarding the firm’s free cash flow, in particular the free cash flow that goes to the shareholders.
There is no agreement as to what constitutes free cash flow. In general, it is the cash which a firm has after sufficiently investing in its development, research and (predetermined) growth. Cash Flow Statements have become a standard accounting requirement in the 80s (starting with the USA). Because “free” cash flow can be easily extracted from these reports, stock valuation based on free cash flow became increasingly popular and feasible. It is considered independent of the idiosyncratic parameters of different international environments and therefore applicable to multinationals or to national firms which export.
The free cash flow of a firm that is debt-financed solely by its shareholders belongs solely to them. Free cash flow to equity (FCFE) is:
FCFE = Operating Cash Flow MINUS Cash needed for meeting growth targets
Where
Operating Cash Flow = Net Income (NI) PLUS Depreciation and Amortization
Cash needed for meeting growth targets = Capital Expenditures + Change in Working Capital
Working Capital = Total Current Assets - Total Current Liabilities
Change in Working Capital = One Year’s Working Capital MINUS Previous Year’s Working Capital
The complete formula is:
FCFE = Net Income PLUS
Depreciation and Amortization MINUS
Capital Expenditures PLUS
Change in Working Capital.
A leveraged firm that borrowed money from other sources (could also be preferred stockholders) has a different free cash flow to equity. Its CFCE must be adjusted to reflect the preferred dividends and principal repayments of debt (MINUS sign) and the proceeds from new debt and preferred stocks (PLUS sign). If its borrowings are sufficient to pay the dividends to the holders of preference shares and to service its debt - its debt to capital ratio is sound.
The FCFE of a leveraged firm is:
FCFE = Net Income PLUS
Depreciation and Amortization MINUS
Principal Repayment of Debt MINUS
Preferred Dividends PLUS
Proceeds from New Debt and Preferred MINUS
Capital Expenditures MINUS
Changes in Working Capital.
A sound debt ratio means:
FCFE = Net Income MINUS
(1 - Debt Ratio)*(Capital Expenditures MINUS
Depreciation and Amortization PLUS
Change in Working Capital).
About The Author
Sam Vaknin is the author of “Malignant Self Love - Narcissism Revisited” and “After the Rain - How the West Lost the East”. He is a columnist in “Central Europe Review”, United Press International (UPI) and ebookweb.org and the editor of mental health and Central East Europe categories in The Open Directory, Suite101 and searcheurope.com. Until recently, he served as the Economic Advisor to the Government of Macedonia.
His web site: http://samvak.tripod.com
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March 29, 2008
First, understand that this is more than an intellectual question. It is a highly charged emotional issue. Considering the consequences for many people retired, or close to it, these decisions can have life changing impact.
The logical place to go for help is to the person who made the initial recommendations; however, if not that person, then someone with similar experience and credentials. But, before you can speak with any financial advisor about your portfolio, first be aware of your attitude towards the situation - are you angry, fearful, sick to your stomach, or indifferent?
If you are desperate to gain back the losses, you are liable to make emotional decisions that may or may not be appropriate. If you blame the advisor (or your spouse or other acquaintance) for the recommendations then you will be open to almost anyone else’s advice - whether appropriate or not. If you are hesitant to make a “wrong” decision, sometimes you don’t take any action - even when action is appropriate.
Once you start to become aware of your own attitude and emotions, consider the responsibilities of an investment advisor? What have you shared with them about your personal financial situation and investment preferences? Have you told them “I can’t afford to lose anything” or “I trust you” or “do what you like - just make me a lot of money”? Their obligation is to understand you and to make appropriate investment recommendations. They are not expected to guarantee high returns on your money, or to have all the answers about making money.
Ultimately, it is your money and your life; therefore, some of the responsibility will fall back on you - the investor. If the material circumstances of your life are negatively impacted because of investment losses (assuming no fraud) then some of that responsibility is yours.
So, what is the client’s responsibility? To provide all the necessary information for your advisor, keep your advisor informed of your circumstances and your feelings about your investments, and to read the information that is sent to you - including your statements.
When you start to feel uncomfortable, you need to recognize that emotional response and work with your advisor to make adjustments that keep you emotionally comfortable. Investing has been described as 80% emotional and 20% intellectual.
How can you reduce the emotional impact of market fluctuations?
At the beginning of the transaction, there is an opportunity for advisor and client to make the sell decision before any money has been invested - you don’t need to be an investment expert. Consider the following loss protection strategy, and then understand how the same concept can help you decide what to do after a drop.
Mr. and Mrs. No-Risk, Hi-Return decide to invest in a mutual fund currently valued at $10 per unit. Their advisor expects that based on past performance, it “should” provide 10%ish returns per year, but this of course, isn’t guaranteed. Mr. and Mrs. Return say they are only comfortable with 10% risk. So, if they invest $10,000. This means that of their $10,000 investment they are only prepared to risk losing $1,000.
They then agree with their advisor on the following key values for their investment:
$10 PER UNIT $10,000 INITIAL INVESTMENT
10% ACCEPTABLE LOSS $9000 INVESTMENT VALUE
$9.25 BE ON ALERT (They call their advisor and watch the value of their investment more closely)
$9 They ask to SELL THE INVESTMENT
$12 OR MORE NEW VALUE $10.8 NEW SELL PRICE ($11 ALERT)
$15 OR MORE $13.5 NEW SELL PRICE ($14 ALERT, ETC.)
It’s not physically possible for an advisor to promise 300 or more clients that they are able to do this type of monitoring. Everyone will have different price points and risk factors. If it’s that important to you, then learn to monitor investment values and call your advisor if you feel concerned.
Now, what if your portfolio has already dropped below your comfort level?
First, calculate both the dollar lost if you sold the investment today and the percentage. When you are making decisions, focus on the value that is most easily accepted. For example, if the dollar value drop is $10,000 and represents a drop in your total portfolio of 8%, perhaps the 8% is easier to accept.
Second, ask whether you would buy your investment(s) today? If yes, then discuss the expected returns and apply the loss protection strategy above. If no, then why are you still holding on?
Finally, ask what would you invest in today and use the same loss protection strategy as described above. Then your only real concern is the challenge of making investment decisions that are not based on greed and fear because your life has been impacted due to your current investment losses.
It can be very tempting to take even greater risk hoping for greater returns to make up for the lost money. If the losses have that much of an impact on your life, you need to re-evaluate your investment criteria and start learning about other ways to earn income (besides another job and by growing a huge investment portfolio) so you learn and carry on from here.
MoneyMinding Inc. and Tracy Piercy accept no liability for the content of this article, or for the results of any actions taken or not taken on the basis of the information provided. The content is intended for informational purposes only and is not a substitute for professional, personal financial advice.
Tracy Piercy, a Certified Financial Planner, offers step by step proven success principles, tools, ideas and strategies integrated with practical financial planning strategies. She has worked in the financial industry, in insurance, banking, and as a well respected investment advisor with CIBC Wood Gundy, for more than 15 years. Tracy is the author of Enlightened Wealth, a personal money journal http://www.moneyminding.com.
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March 28, 2008
U.S. Supreme Justice Louis D. Brandeis
“I live in Alexandria Virginia. Near the Supreme Court Chambers is a toll bridge across the Potomac. When in a rush, I pay the dollar toll and get home early. However, I usually drive outside the downtown section of the city and cross the Potomac on a free bridge. This bridge was placed outside the downtown Washington, DC area to serve a useful social service, getting drivers to drive the extra mile and to help alleviate congestion during the rush hour.
If I went over the toll bridge and through the barrier without paying the toll, I would be committing tax evasion. If, however, I drive the extra mile and drive outside the city of Washington to the free bridge, I am using a legitimate, logical, and suitable method of tax avoidance, and I am performing a useful social service by doing so.
For my tax evasion, I should be punished. For my tax avoidance, I should be commended. The tragedy of life today is that so few people know that the free bridge even exists.”
Our progressive tax system in the United States facilitates the redistribution of wealth from the more fortunate to the less fortunate. Now, the U.S. judicial system is also being used to redistribute wealth through litigation. Entrepreneurs, business owners, retirees and others who have accumulated any significant amount of wealth are often financially devastated by the U.S. judicial system.
With that in mind, it is easy to see why even a person of average wealth with assets at risk would benefit from implementing a wealth management plan to protect assets from the claims - especially the frivolous claims - of unknown future judgment creditors. Among many other exceptions to liability insurance coverage, most insurance policies do not cover punitive damages or employment-related claims.
Insurance against the most common source of judgments and settlements over $1 million, automobile accidents, is only very rarely maintained at the level necessary to cover such claims. In fact, it may be prohibitively expensive or impossible to insure at such a high level of coverage. While insurance is the first line of defense against legal claims for damages, it is impossible to insure against many sources of significant potential liability.
It is essential to implement an asset protection plan integrated with your estate plan. Your asset protection plan will greatly enhance your estate plan by providing additional assurance that you and your family will be able to reap the fruits of your labor, and often, by providing the means to make gifts of interests in protected assets to family members - gifts which are protected from your unknown future creditors and from all of the creditors of your family members. Simply put, the objective of legitimate offshore asset protection planning is to avoid litigation altogether by using a structure involving the prudent use of professional advice and foreign law; it is not intended to protect dishonest or incompetent persons from creditors. Legitimate tax-neutral, flexible offshore asset protection and investment vehicle are available.
International variable life insurance and international variable annuities with reputable companies in secure offshore jurisdictions can be attractive investment vehicles. In addition to being well protected, because they have different commission structures they are not subject to certain U.S. taxes, offshore life insurance policies and annuities can be significantly less expensive than comparable products offered in the United States.
►What Asset Protection Planning Is Not
Asset protection planning and proper tax planning do not involve tax evasion or anti-IRS theories. All solid well designed asset protection planning is done with full IRS compliance and disclosure.
Asset protection advice is not “cookie-cutter” planning. Avoid cheap asset protection “kits” promoted by dozens of providers via seminars or the Internet. Good asset protection advice is formulated on a case-by-case basis. Neither does legitimate asset protection planning does not involve hiding money offshore and using offshore credit card accounts. While it is a bit more difficult to track protected assets offshore than in the U.S., if you rely mainly on offshore secrecy to protect assets, you will likely soon find you and your assets parted.
►Offshore Planning
Offshore business structures and offshore estate planning structures, including offshore trusts and offshore insurance policies can often offer an excellent solution to asset protection problems. Variable life insurance policies and variable annuity contracts which are compliant with U.S. tax laws, offer a wider range of investment opportunities, and are often available at lower costs than comparable U.S. policies for policies with total aggregate premiums of over $100,000.
Be careful in choosing an Offshore Planning and Asset Protection Planning Consultant.
A Web search will reveal hundreds of offshore service providers offering various offshore tax planning and asset protection schemes, as well as company formation services. How do you choose one out of all of these?
First, look for a consultant with extensive tax experience who can provide competent and comprehensive U.S. tax advice. Most reputable offshore service providers specifically disclaim the U.S. tax consequences of their structures and suggest that you seek the advice of U.S. tax counsel. Less reputable offshore service providers will claim that their plans are set up in jurisdictions where there are no income taxes, no capital gains taxes and no death taxes. While true - for that jurisdiction - the U.S. tax consequences are entirely different.
There is no simple way to avoid taxes offshore that cannot be done onshore. There are sophisticated means that work for legitimate businesses, but there are not “offshore only” ways for the average investor, holding marketable securities and acting alone, to avoid income taxes on investment income. The most predatory offshore service providers will simply lie and tell you that for whatever reason, there are no U.S. taxes due on their preferred type of offshore vehicle (”you don’t own the company - you’re just the manager;” “you don’t owe taxes on offshore trust income;” “the Panamanian foundation is a separate legal entity without any owners, so you don’t pay taxes on its income,” etc.). Bad tax advice can have grave consequences. Willful tax evasion and willful failure to file required information returns are, of course, serious crimes that can and do result in massive fines and imprisonment. Even worse, for some, may be the fact that relying on the tax advice of an incompetent advisor may not even keep you out of serious trouble - at best, it can result in the imposition of hundreds of thousands of dollars or more in fines and interest, and at worst, fines and imprisonment.
The hiring of a lawyer is an important decision that should not be based solely upon brochures, advertising or other promotional materials. Before you decide, ask for written information about qualifications and experience.
A sophisticated and creative tax planner can:
* Transform tax plans from methods of cost-containment to integrated systems of advanced tax risk management and value creation;
* Transform asset protection plans from ineffective collections of legal odds and ends to integrated systems of advanced legal risk management and security enhancement; and
* Transform individual financial plans and company treasuries from piecemeal jumbles to integrated systems of financial management and wealth preservation.
U.S. citizens should always consult a competent tax attorney or CPA before implementing any planning involving domestic or foreign structures. Windward Harbor’s principals are experienced tax planning, wealth management, insurance, investment, tax, and asset protection professionals. We specialize in providing the most effective, legal tax planning available for entrepreneurs and high net worth clients. Windward Harbor will offer asset protection and offshore planning services only to clients who are committed to full U.S. tax compliance.
The materials found in this article, including these comments on asset protection planning and offshore planning, are for general informational purposes only. The information provided herein is not warranted to be accurate or current and must not be regarded as legal advice. All legal and tax planning is very fact- and circumstance-specific, asset protection planning and offshore planning, in particular. Internet subscribers and online readers should not act upon this information without seeking professional advice. You should consult a lawyer if you have a legal matter requiring attention.
© Windward Harbor LLC 2004
Wayne Walker & Christopher Riser, Esq.
Windward Harbor LLC
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March 13, 2008
This is a very simple Real Estate Investment Plan that anyone can do. In fact, because it’s so simple most people won’t do it. There are only three simple steps.
>> STEP 1. Go out and borrow one million dollars.
>> STEP 2. Use the million dollars and buy one million dollars worth of well-selected real estate.
>> STEP 3. Get other people to agree to pay off the million dollar loan for you.
Sounds easy. Right? Well it is. Think about this.
In the next year, I want you to go into your real estate marketplace and see if you can find two single-family houses, townhouses or condos in a starter price range. The price range will vary depending on the area of the county that you are in. For my example, I’m going to use a range of $150,000 to $200,000 per property.
I want you to buy these two properties and you should be able to borrow most of the money needed (in some cases all the money needed) from banks, mortgage companies, sellers and other investors.
I want you to repeat the same process for a minimum of five years. At the end of the five year period you would know own ten properties worth one million or more dollars and you will owe one million or more dollars on those properties.
Now the only thing left is to find people willing to pay off your loans on those properties. Those people are all over the place and they are called RENTERS!
At the end of ten to twenty years, what will you have?
You Will Have More Than A Million Dollars Worth Of Real Estate That Somebody Else Bought You!
And not only will you have a million dollars worth of real estate you will have an income of $100,000 + from renting them out because they are all paid for.. and your income will increase as your rents increase.
If you’re saying to yourself that a million dollars isn’t enough and 100, 000 + of annual income isn’t enough, the solution is simple…. BUY MORE!
Learn how to get the money
The first step to get started is that you should learn the rules of the lenders and their programs that they have available for rental properties. To do this you should spend a few hours or more on the phone calling different lenders and asking them these questions:
What type of loan programs do they have available for rental properties? What are the down payment requirements? What is the least amount of down payment required? What does the person have to do to qualify? Do they have any creative financing options to help you buy? Do they have a maximum amount of loans that they will do with one investor? If their program doesn’t fit what your trying to do, do they know of any other lenders who have loan money on rental properties. What are their fees, interest rates, loan terms, closing costs and any other costs of the loan? Once you talk to several lenders you will develop other questions that you should ask and will get a good feel of what you need to do to get qualified to borrow the money. Don’t get frustrated! Many lenders will tell you that you can’t do it or you won’t qualify. Just keep calling more lenders and remember that lender are in the business to lend you money. If they don’t lend money they are out of business.
The other source and I believe the best source is Seller’s financing (In the form of a Contact for Deed, Installment Contract, Seller’s Mortgage). Why is this the best? Because you don’t have all the costs of a traditional lender. There are generally no loan origination fees, appraisal fees, etc. and the best part of seller financing is that everything is negotiable between you and the seller.
How do you get seller financing?… You ask the seller if they are open to it?… You ask the seller if they would like to earn more on their money than if they put it in the bank?
Learn to find the properties
Now that we have an idea about financing we have to start looking for the right properties and analyze the numbers. You want to start by trying to find smaller starter home that a young family or couple would like to live in. Here are some ideas where to look and how to find properties.
Newspaper ads Real Estate MLS system Driving through neighborhoods Advertise yourself Tell people that you are looking to buy houses.. get the word out Get business cards that tell people that you are interest in buying real estate Ask real estate agents to look for you (if you are an agent, ask other real estate agent to let you know if they know of any properties) This is a short list, but you only need to find a couple of properties a year to make this plan work and this short list will do the job. If you want to find more than a few properties a year you should expand your marketing efforts.
Ok, You have now found a property. You have ran the numbers. (Use an Investment Property Worksheet or Real Estate Analyzer Software) and it all make sense. Now is the time to make an offer to buy.
Once the offer is accepted you now want to start the third step… Find a renter who will rent out the property.
Learn to get good renters
Get permission from the seller to allow you to show the property to prospective renters before the day of closing. You should start by advertising in you local paper and contact real estate offices to let them know you have a property available for rent.
Select the best renter based on the criteria that you set up and learn to manage the property.
Repeat the process to buy more and more houses until you reach your goal.
The fastest way to learn is by doing it. This report is short and to the point and doesn’t have every single detail in it. The details you will learn as you go…The key to this is to GO and get started.
Copyright 2006 David Schneider
Dave Schneider has been investing in real estate for over 25 years and is devoting to helping landlords make more money!. For free audio seminars, tools and information on real estate investing and being a landlord, visit this site now: http://landlordtools.com
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February 26, 2008
This article describes the model of a natural relationship between trading system performance, trade position size, stop loss settings and profit goals. The model consists of algebraic equations that specify the trade size and stop loss settings needed to meet profit goals over a specified time period for any consistently used trading system for which historical performance data is available.
Most of us think of a trailing stop loss when the term money management is mentioned. William O’Neil in his book, “How to Make Money in Stocks”, used a value from 7 to 8%. Many stock advisories, including Stansberry and Associates, Outstanding Investments and the Oxford Club, typically use a 25% trailing stop loss. Option advisories use still higher values in the 35% range, as is done by Michael Lombardi, and up to as high as 50%, as used by Dr. Stephen Cooper. Trailing stops are typically used along with a maximum percentage of capital per trade to avoid large portfolio draw-downs in the event that a given trade goes badly.
Beyond this precaution, there is little theory to explain how position size and trailing stop losses should be arrived at, leaving the impression that they can be arbitrarily chosen based on one’s risk comfort level. However, this is not the case. Too narrow a stop loss setting can eat into profits by exiting volatile trades too early. Too wide a stop loss setting can eat into trading profits by consuming too much capital. A systematic way is needed to choose an optimum position size and stop loss setting to achieve a precise level of money management.
Intuitively, the higher the success rate in correctly choosing the direction of trade and the higher the average gain per trade, the looser one can afford to set his stop loss. However, when one has a specific earnings goal, this relationship needs to be more precise. Fortunately, the availability of consistent trading system performance data allows the use of an engineering approach. This approach enables us to define a very precise relationship between the average return for a series of trades, the percentage of correct choices in the direction of a trade, the size of each trade, profit goals and the appropriate stop loss settings.
The model introduced here for precision money management is based on average values of historical trading system performance and is only applicable when a trading system is consistently followed. The model should not be applied to unstructured trading across a variety of instruments requiring varying trading techniques. Each trading system or technique generates a unique set of statistics to which this methodology can be applied on an individual basis.
The model is derived based on fractional averages from information readily available to anyone that uses a trading system consistently. A pair of concise algebraic relationships evolves in the process. Finally, examples are provided to show the roles of position size and stop loss settings in meeting profit goals.
FP is defined as the average fractional profit for all historical trades being taken into consideration. FP is equal to the sum of the fractional gains and losses for all trades divided by the total number of trades N,
FP = (sum of fractional gains + sum of fractional loses) / N
In order for this to be valid, each trade must involve very close to the same amount of capital that we will assign an average value C. For example, if there were 3 historical trades resulting in +25%, -15% and +30% gains, the average fractional profit would be (0.25 - 0.15 + 0.30)/3 = 0.133. Of course, a much larger statistically significant number of trades would be used in practice.
Since the sum of fractional gains is equal to the number of gains NG times the average fractional gain FG, and the sum of fractional loses is equal to the number of loses NL times the average fractional loss FL, the definition can be expressed as,
FP = (NG FG + NL FL)/ N
It is understood that NG + NL = N. The value of NG divided by N equals FC, the fraction of trades chosen in the correct direction. NL divided by N equals (1 - FC), the fraction of trades chosen in the wrong direction. So N divided into NG and NL leaves the following form.
FP = FC FG + (1 - FC) FL . . . . . . . . . .(1)
Where,
FP is the average fractional profit for N trades that each uses an average amount of capital C
FC is the fraction of trades chosen in the correct direction
FG is the average fractional gain for NG winning trades
FL is the average fractional loss for NL losing trades
The fractional quantities can each be expressed individually as percentages but they should be expressed as decimal fractions in the equation.
In order to use equation (1), a profit goal must be established over a definite period of time. The profit per trade needed to meet a specific profit goal in a given amount of time depends on the number of promising trades likely to be identified by the trading system over that time period. The number of promising trades that become available within a given time period must be estimated judiciously because the last thing we want to do is force a trade under less than ideal conditions. In other words, we need to remain true to whatever system we are using.
For N trades each valued at an average capital amount C, the average fractional profit can also be defined by the total dollar profit goal DG divided by the dollar sum of all N trades DS,
FP = DG / DS
Since DS is equal to the average capital amount C times the number of trades N, this becomes,
FP = DG / (C N) . . . . . . . . . .(2)
Example 1:
Let us suppose that we have done a sufficient number of trades using our system to determine that the average fractional profit is 10%, the average gain per trade has been 29% and the fraction of times we chose the correct trading direction was 70%. Further let us set a goal to earn $3,000 per month. By our estimate, we figure that we can safely enter an average of 3 trades a week and remain within trading system guidelines. This equates to 3 trades per week times 4.33 weeks per month or an average of 13 trades per month.
Variables: FP = 0.1
N = 13
DG = $3,000
FC = 0.7
FG = 0.29
Solving equation (2) for C gives us the average size of each trade,
C = DG / (FP N) = $3,000 / [(0.1) (13)] = $2307.69 for the average size of each trade
Rearranging equation (1), the average stop loss setting FL must be,
FL = (FP - FC FG) / (1 - FC)
= [0.1 - (0.7) (0.29)] / (1 - 0.7) = - 0.3433 or -34.33%
Example 2:
Using essentially the same situation, we can look at what the effect of certain improvements in trading would have on the profits. Say we habitually exit winning trades too early and could possibly increase the average fractional gain FG from 29% to 36%. From the same relationship used for example 1, the resulting stop loss setting FL could then be widened to,
FL = (FP - FC FG) / (1 - FC)
= [0.1 - (0.7) (0.36)] / (1 - 0.7) = - 0.5066 or -50.66%
Example 3:
Let’s suppose that for a series of potentially high yielding trades we know that an extra wide stop loss setting of -60% is needed and we want to know what the effect will be.
First we might want to look at the effect of a wider stop loss setting on profits with everything else remaining constant. We do this by equating the right sides of equations (1) and (2) and solving for DG,
DG = (C N) [FC FG + (1 - FC) FL] . . . . . . . . . .(3)
= ($2307.69) (13) [(0.7) (0.29) + (1 - 0.7) (-0.6)] = $689.99
Clearly, our original monthly profit goal of $3,000 can not be met without some additional changes, such as an increase in the number of trades from 13 to 57 over the month period. But this is not feasible since it was already estimated that the maximum number of trades identified by the trading system would be only 13 per month.
Example 4:
Next, since the trades in example 3 are believed to be potentially high yielding trades, we might look at the increase in the fractional gain per trade FG needed to justify the wider stop loss setting of -60% and still meet the original profit goal. By rearranging equation (1),
FG = [FP - (1 - FC) FL] / FC
= [0.1 - (1 - 0.7) (-0.6)] / 0.7 = 0.4 or 40%
So the average fractional gain for winning trades FG would need to increase from 29% to 40% to justify a widening of the stop loss from -34.33% to -60%, keeping everything else the same while meeting the monthly profit goal.
The foregoing examples give insight into trading system characteristics that affect position size and stop loss settings. Narrow stop loss settings imply a smaller fraction of trades chosen in the correct direction or a smaller fractional gain for winning trades. Wider settings imply the opposite. Stop loss settings should not be arbitrarily set independently of position size, trading goals and trading system performance. Stop loss levels more or less define future profits for a given set of trading rules, whether the user realizes it or not. While it is laudable that traders are encouraged by their advisors to adopt money management, the recommendation of a specific stop loss value without knowing the profit goal and average position size can be misleading. When a trading system is used consistently, this model enables precise money management.
James Andrews authors a free newsletter at http://www.wisertrader.com where investment math formulas are developed at little or no cost. The site offers option alerts, free stock picks, an online forum, trading templates and advanced automatic trading systems.
© 2005 Permission is granted to reproduce this article, as long as, this paragraph is included intact.
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January 28, 2008
I want to share an experience I had in common as a child with Dr. Wayne Dyer, author of the bestselling book, The Power of Intention. I’ll bet many of you had similar experiences too.
As a little girl, I would always find money in the streets, pennies, quarters, dimes and sometimes large bills. I would be walking along and happen to look down at the ground or in the snow and there it would be. I would easily find ways to earn money by babysitting, selling unusual things to other kids, collecting pop bottles — they seemed to be everywhere in those days - easy, quick cash for a child. I was a young artist also and always had offers from adults for my paintings and drawings.
Was I just lucky? Coincidence? No, I strongly believe it was because of my state of mind regarding abundance, even as a child. I simply didn’t have a belief in lack even when I knew my parents didn’t intend on giving me an allowance. I just knew I could always get money in other ways. I believe all, if not most children naturally believe in abundance until they are programmed to think and believe differently.
I watched Dr. Wayne Dyer on television when he lectured on PBS in the recent past. He shared his experiences as a child about how he would naturally attract abundance wherever he went. He was raised in foster homes surrounded by people with a poverty consciousness. In spite of that, he still “felt” prosperous and abundant and always “pictured” having money in his pocket. With this image, he then would collect pop bottles, deliver newspapers, cut lawns, etc. These money-making opportunities were coming to him all of the time as a result of his abundance or prosperity consciousness. So as a child, he always had money and abundance and that has continued throughout his life.
Here is one of many things Dr. Dyer has to say about abundance:
“It’s all about having an inner picture of abundance, thinking in unlimited ways, being open to the guidance that intention provides when you’re in a state of rapport with it — then being in a state of ecstatic gratitude and awe for how this whole thing works. Every time I see a coin on the street, I stop, pick it up, put it into my pocket, and say out loud, “Thank you, God, for this symbol of abundance that keeps flowing into my life.” Never once have I asked, “Why only a penny, God? You know I need a lot more than that.”
I agree totally about being in this state of gratitude and I too will joyfully thank God/All That Is/Universe for any amount of money I may find, even if it is a penny. What happens is that more money and abundance will continue to flow into my life, as long as that flow remains open and unblocked.
The other day, for example, I parked and as I got out of my car, I noticed a large pile of coins on the ground - pennies, quarters, dimes and nickels. It made me laugh in appreciation for this rather obvious abundance symbol! I thanked God for showing me that my prosperity consciousness was still going strong.
Try this the next time you see a penny or more in the street. Rather than step over it and keep on walking, see it for what it is, a symbol of abundance that just flowed into your life. Know that picking it up and expressing gratitude will keep that flow of energy open and flowing in your direction. Soon you will see more and more symbols of abundance and prosperity in your life. It really works!
© 2005 Chyrene Pendleton
Chyrene Pendleton, Metaphysician, Numerologist, Dowser, teaches several workshops on topics including prosperity and abundance, numerology and dowsing. Her articles have been featured in many mainstream and spiritual journals over the years and in her free, online Ezine called, The Isle of Light.
Chyrene is the owner of The Isle of Light Inc., a spiritual, metaphysical online spiritual center dedicated to assisting all to become more empowered and enlightened in a wide variety of ways. She is a certified television show producer and co-produced and hosted The Isle of Light television talk show in Denver, Colorado, which continues to air biweekly. Chyrene is also the producer and host of The Isle of Light Internet radio talk show which airs 24 hours each day at Live365.
Chyrene Pendleton’s websites can be found at: The Isle Of Light http://www.theisleoflight.com
Internet Radio Talk Show http://www.live365.com/stations/avalon22
Prosperity is a State of Mind http://theisleoflight.blogspot.com
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