May 24, 2017

Items in italics are direct quotes from the articles below

Dark pools are an ominous-sounding term for private exchanges or forums for trading securities; unlike stock exchanges, dark pools are not accessible by the investing public. Also known as “dark pools of liquidity,” they are so named for their complete lack of transparency. Dark pools came about primarily to facilitate block trading by institutional investors, who did not wish to impact the markets with their large orders and consequently obtain adverse prices for their trades. While dark pools have been cast in a very unfavorable light in Michael Lewis’ bestseller “Flash Boys: A Wall Street Revolt,” the reality is that they do serve a purpose. However, their lack of transparency makes them vulnerable to potential conflicts of interest by their owners and predatory trading practices by some high-frequency traders. (See also “How IEX is Combating Predatory Types of High-Frequency Trades.”) Dark pools have been around since the 1980s. Since you may not have heard of dark pools before, I’m going to use a lot of quotes from this article. Consider the options available to a large institutional investor who wanted to sell 1 million shares of XYZ stock before the advent of non-exchange trading. This investor could either (a) work the order through a floor trader over the course of a day or two and hope for a decent VWAP (volume weighted average price); (b) split the order up into say five pieces and sell 200,000 shares per day, or (c) sell small amounts until a large buyer could be found who was willing to take up the full amount of the remaining shares. The market impact of a 1-million sale of XYZ shares could still be sizeable, regardless of whether the investor chose (a), (b), or (c), since it was not possible to keep the identity or intention of the investor secret in a stock exchange transaction. With options (b) and (c), the risk of a decline in the period while the investor was waiting to sell the remaining shares was also significant. Dark pools were one solution to these issues. There are more than 40 dark pools registered with the SEC, made up of three types: broker-dealer owned, agency broker or exchange-owned, and electronic market makers. There are pros and cons of dark pools. The advantages are reduced market impact, and lower transaction costs. The disadvantages are exchange prices may not reflect the real market, pool participants may not get the best price, vulnerability to predatory trading by HFTs, and small average trade sizes reduces need for dark pools. The recent HFT controversy has drawn significant regulatory attention to dark pools. Regulators have generally viewed dark pools with suspicion because of their lack of transparency, and the controversy may lead to renewed efforts to curb their appeal. One measure which may help exchanges reclaim market share from dark pools and other off-exchange venues could be a pilot proposal from the Securities and Exchange Commission (SEC) to introduce a “trade-at” rule. The rule would require brokerages to send client trades to exchanges rather than dark pools unless they can execute the trades at a meaningfully better price than that available in the public market. If implemented, this rule could present a serious challenge to the long-term viability of dark pools. Dark pools provide pricing and cost advantages to buy-side institutions such as mutual funds and pension funds, and these benefits ultimately accrue to the retail investors who own these funds. However, dark pools’ lack of transparency makes them susceptible to conflicts of interest by their owners and predatory trading practices by HFT firms. The recent HFT controversy has drawn increasing regulatory attention to dark pools, and implementation of the proposed “trade-at” rule could pose a threat to their long-term viability.

Big ideas can come in small packages. Take TED Talks, the beloved lectures on technology, entertainment, and design. Some of the most insightful talks take up less than 10 minutes of the viewer’s time. They’re perfect for when you want to expand your horizons and still get to that thing you’ve been meaning to do. Here are some talks to turn to if you want to get smarter in a hurry. “How to speak so that people want to listen” by Julian Treasure. Julian gives six tools to consider when speaking, including pitch, and other factors. Anyone can use the power of words
if he does it intentionally. “Get ready for hybrid thinking” by Ray Kurzweil. Ray Kurzweil, a futurist and inventor, argues that in two decades, human thought will be a mixture of biological and nonbiological processes. According to Kurzweil, the brain would operate the same as it does today, but if you needed some extra juice you’d be able to connect to the cloud for external neural connections — all thanks to nanobots that would live in your brain and connect to that cloud. The remaining suggested TED Talks are: “I listen to color” by Neil Harbisson, “5 dangerous things you should let your kids do” by Gever Tulley, “The next outbreak? We’re not ready” by Bill Gates, “The hidden power of smiling” by Ron Gutman, “Grit: The power of passion and perseverance” by Angela Duckworth, “Let’s try emotional correctness” by Sally Kohn, “Forget multitasking, try monotasking” by Paolo Cardini. Each suggested video is only ten minutes long, but it provides a wealth of information. I suggest that each day you should try to watch or read something new to constantly challenge your mind. Your mind is a muscle too, and it needs to be exercised.

If you are interested in creating a budget, then contact me for a financial checkup in the contact me section. Also, learn more about the self-lending principle in the mustard seed section.

For this week, I’ve included Warren Buffett – How to Stay Out of Debt Forever from Truly Rich Noypi YouTube channel.

“If you think you know it all, you’re a fool for sure; real survivors learn wisdom from others.”

Proverbs 28:26 MSG‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬

April 12, 2017

Items in italics are direct quotes from the articles below

Investors often want to compare how the share price of one company compares to that of another. But just looking at the stock price is like comparing apples to oranges since companies have different numbers of shares outstanding, and even if they had the same share float, companies operate in different industry segments or are at different stages in the corporate life cycle. Fortunately, financial analysts have developed a number of tools for such purposes of comparison. The price-to-earnings ratio, or P/E, the most widely used metric. Although it is quite a simple indicator to calculate, the P/E can be difficult to interpret. It can be extremely informative in some situations, while at other times it is difficult to parse. As a result, investors often misuse this ratio and place more evaluative power in the P/E than is sometimes warranted. This ratio measures the company’s stock vs its earnings, which can be measured against other companies. As a basic rule of thumb, a high P/E means the stock price is high compared to earnings which means the company is overvalued and the opposite is true. The link above is an introduction into an in-depth look at the P/E ratio and if you’re interested in learning about how to calculate it and how to and how not to use it in stock price analysis then please follow the link at the bottom of the article. For the sake of brevity, I included just the introduction.

“If you don’t know where you are going, you might wind up someplace else.” – Yogi Berra If you build a house without a plan, what sort of results would you expect? Theoretically, you could get lucky and end up with the house of your dreams. What’s more likely, however, is that the house wouldn’t be anything like what you had wanted. You might need to move the doors and windows, build new walls and take down others – or worse. Investing isn’t any different. Without a plan, you could (again, theoretically) get lucky, but the odds are against it. Without goals – and a well-thought-out plan for meeting those goals – you probably won’t end up where you want to be financially, in either the short- or long-term. You have to make goals to meet goals. Historically investors have tried to beat the market or tried to get the highest rate of return possible. A new approach is goal based investing. This type of investing involves achieving certain life events such as saving for your retirement or buying your first house. The theory is that:

  • Setting goals makes it more likely that you’ll save for – and achieve – every goal.
  • You’ll be more motivated to reach a goal since you can gauge its progress.
  • You can consider the time horizon and risk level separately for each goal, and invest accordingly

Most people work with financial advisors to help achieve their financial goals, but the author advocates that you can be your own financial advisor if you are willing to put in the time and work. Due to the content of this article, I suggest you read the article in its entirety, and I’ve included some more content from the article:

Next, arrange your goals by the time horizon for achieving them:

Short-Term Goals Mid-Term Goals Long-Term Goals
Pay for a wedding Buy a vacation home Build a nest egg for retirement
Take a vacation Have the funds to start a new business Income stream for retirement
Save a down payment for a home Leave a financial legacy to your family
Save for your children’s education

Rather than just doing all this in your head – write it down. Putting your goals on paper makes them more “real” and you’ll be more likely to think about them. Plus, you can share your goals with your spouse, family or friends – which can give you a little motivational push.

The next step is to attach a dollar figure to each goal. With some goals, it’s easy to say how much you’ll need: for example, you plan on giving your daughter $5,000 (and no more!) to help pay for her wedding, or you want to save $10,000 for a trip to Antarctica. With other goals, it’s a bit trickier to nail down a specific amount, so you’ll have to spend some time crunching the numbers. There are lots of online calculators that can help – just search for the type of calculator you need, such as “retirement calculator” or “college savings calculator” to get started.

Once you have a list of goals and financial objectives for each, it’s easier to plan, budget and choose the right investments. In the next chapter, we’ll look at different retirement and tax-advantaged accounts you can use to meet your goals.

Like anything in life, if you want to become an expert at something, you need to practice your skill and learn from others better than you. Personally, I wouldn’t call myself a financial expert. I’m someone that cares about the financial health of myself and others and I share what I know in the hopes for a better future generation. What is your why?

If you need are interested in creating a budget, then contact me for a financial checkup in the contact me section. Also, learn more about the self-lending principle in the mustard seed section.

For this week, I’ve included FIRE WITHIN – Motivational Speech On Success from Motivation Archive YouTube channel.

“If you think you know it all, you’re a fool for sure; real survivors learn wisdom from others.” Proverbs
28:26 MSG‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬

April 5, 2017

Items in italics are direct quotes from the articles below

In December 2016, the Federal Open Market Committee (FOMC) raised interest rates for the first time in a year, and then raised them again in March 2017. Federal Reserve Chair Janet Yellen indicated that the Fed could raise interest rates even further later this year. But what do rate hikes mean for advisors, their clients and investment portfolios? When interest rates increase, bond prices decrease. And while many analysts expect equities to suffer when interest rates go up – which is what many had predicted for markets in 2016 – these more recent rate hikes have not taken the wind out of the U.S. stock market’s sails. Lately, it seems that when rates rise, the value of equities doesn’t take a hit. But there’s no telling how long this trend will last. (For more, see: Fed Increases Interest Rates at March Meeting.) It’s important to keep in mind that when the market suddenly increases or decreases due to the influence of political, civil, or economic forces, then a market correction will happen soon. Due to the high probability of this event occurring, the author encourages the investor to have a financial advisor to consult with to make sure that his or her investment strategy and portfolio is ready to handle this change. Although advisors can’t predict what is going to happen in the stock market and how it will react to future interest rate hikes, they can take measures to ensure their clients benefit from rising interest rates while taking all potential risks into account. In a simplified example, let’s say a client is a balanced investor which usually means a portfolio is a 60/40 mix of equities and fixed-income investments (such as bonds). In a declining interest rate environment, the asset allocation may be 60% fixed income and 40% equity to take advantage of rising bond prices. In a, rising interest rate environment, the allocation can flip to 60% equities and 40% fixed income to benefit from bullish equities. The client’s risk tolerance always remains intact and slight adjustments are made to take advantage of stock market movements. (For more, see: The 4 Most Important Effects of Rising Interest Rates.) A well-diversified portfolio can hold both domestic as well as foreign investments, but how do rising interest rates affect foreign exchange? If $1 USD equals $1.35 Canadian dollars, the U.S. dollar is stronger. This means it’s not a good time to exchange Canadian money into U.S. currency because Canadians will only receive $0.65 USD for every Canadian dollar exchanged. However, it would be a good time for Americans who want to invest in Canadian currency to take advantage of the foreign exchange while the dollar is strong. When investing in any foreign currency, it’s important to remember to buy low and sell high. This basic strategy doesn’t consider a continuous cash flow, so you must balance this strategy against your cash flow principles. Even the author doesn’t recommend trying to time the market to make a quick return, because what you’re doing is basically gambling.

For many, a six-figure salary is the endgame, the true sign that you’ve made it in life. But, among those who top lists like the Forbes 100, a six- or even seven-figure salary is pocket change, just another step toward true riches. If you’re raring to dial up your earnings and be among the world’s richest, you’ll need to emulate the habits and accomplishments of the wealthy. Here’s how you can get started. The seven steps are: start and commit to your business, make smart investments, invent a solution, pursue your passion, take action, collaborate, and adopt a billionaire mentality. On the Forbes list, most of the billionaires are business owners that scaled their business to make a global imprint. It’s important to take risks, but with a full commitment to your business model and philosophy. You must have a vision that will help as many people as possible for as many generations as possible. It’s important to make smart investments not only in assets but also in the greatest asset you have, yourself. Sometimes, the best inventions are not original but instead innovations or improvements on existing products. A prime example of innovation comes from billionaire businessman Sam Walton, who opened the first Walmart in 1962. What made Walmart an innovation was the idea that the business could expand enough to sell products to consumers at lower prices than other retailers, saving them money on basic necessities. This basic premise transformed the way America shopped, while making Walmart one of the biggest retailers in the world — and Walton one of the richest men. It’s important to pursue your passion, but it’s even more important to put that passion into action. I’ve talked to some aspiring business owners and they can’t seem to gain any traction in their business because they don’t have the necessary commitment to act on their passion. It’s important to collaborate, because essentially no man is an island. You’ll need a team to build a business, so why not have a co-founder? A co-founder who both compliments and challenges your points of view but ultimately has your vision at heart. Rich people have a rich mentality, according to Steve Siebold, author of “How Rich People Think.” He has interviewed over 1,200 of the world’s wealthiest people to uncover the secrets to becoming rich. “While the masses believe becoming wealthy is out of their control, rich people know that making money is really an inside job. It’s a cause and effect relationship,” he wrote on Business Insider. “Anyone can become wealthy. It has nothing to do with your education or where you come from. It’s not what you do that guarantees wealth, it’s what you are.” So, focus on making things and crafting solutions. Create new products, improve current products and help people. But most importantly, be resilient and keep pushing forward

If you need are interested in creating a budget, then contact me for a financial checkup in the contact me section. Also, learn more about the self-lending principle in the mustard seed section.

For this week, I’ve included Advice From The Most Successful People On The Planet – Episode 7 from Absolute Motivation YouTube channel.

“If you think you know it all, you’re a fool for sure; real survivors learn wisdom from others.” Proverbs
28:26 MSG‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬

March 22, 2017

Estate planning is complicated, which is why it’s highly recommended that investors seek an experienced financial advisor and/or attorney to help sort everything out. The three estate planning secrets below will help investors stay on the right path. (For more, see: Estate Planning: Introduction. The three secrets to know is avoid disinheriting children, divorce inheritance protection, and trust beats probate. If you have children from a previous marriage and want to pass your assets to them, then it’s possible that the stepfather or stepmother could pass those assets on to their children or even new spouse. A good way to prevent this event is using a living trust instead of a beneficiary designation or joint ownership. If you have a six-year-old child, then you’re not going to be very concerned with that child getting divorced at some point down the road. However, it’s never too early to start planning, and the divorce rate is currently around 50% in the United States. If you don’t take the correct actions, your child’s inheritance could end up in the hands of his or her ex. This is surely not what you have in mind for an inheritance, especially if your child is currently married and you’re not fond of the spouse. The solution is a specially designed trust. With this approach, trust shares are created when you pass, and each share will remain in the trust so the trustee can handle the shares. As a trustee, the child will be able to handle those funds as he or she desires, and this trust is protected from creditors and bankruptcy. An exception to the previous statement is if the trust is used to guaranty a loan, in which case the creditor can look for repayment from the trust. Finally, if your estate is planned through a will then it must go through the probate court system which often involves fees, taxes, and legal fees. An important note is that having a living trust doesn’t guarantee that you will avoid probate. In order to avoid probate, all assets must be titled in your name. This includes bank accounts, certificates of deposit (CDs), stocks, bonds, real estate, etc. (For more, see: 6 Ways to Lose Your Estate.) It’s important to consider the benefits of a living trust vs. a will. Trusts take a little more money to create, however as the author states in the long term, there is more money that can be left to your children. It’s important to be able to provide for your children’s children. If you’re interested in learning more about how I can help you with setting up a living trust contact me, and I’ll be glad to offer a direction.

Most people think of investing as buying stocks and bonds. The more adventurous might think about a real estate investment trust (REIT). Also, some people consider buying stocks of mining companies or investing in a metals exchange-traded fund (ETF) as a way to invest in gold, silver, platinum and other metals. But what if you want to avoid anything that trades through a broker or online discount broker? There are alternative investment opportunities. Some of them can make you a lot of money, and some of them may make you a little money. Either way, you are not trapped into choosing stocks, bonds and ETFs that are traded publicly. When you start thinking about alternative places to put your money, you need to stay away from scams and get-rich-quick schemes. You need some legitimate investment vehicles that may help you prosper. (See also: Should Your Retirement Portfolio Include Alternative Investments?). The author made sure that all facts and figures were current as of February 15, 2017. The four alternative investments are peer to peer lending, real estate, gold, and owning your own business. With Peer to Peer Lending, your money is invested with a pool of other investors to loan money to people for either personal or business purposes. Your rate of returns is typically, however the risk is also higher, because these borrowers are typically not able to get loans through traditional lending institutions. I’ve discussed gold, real estate, and business in previous blogs, but it should be noted that the author recommends that an allocation of five to 10 percent in gold is considered healthy for an individual’s portfolio. It’s important to have a knowledge of each asset class. The question you should ask yourself is am I investing for capital gains or cash flow? Have I properly protected my assets? How liquid am I? Are my assets creating wealth? My strategy may not work for you because my wants, needs, goals and vision is different. Create a foundation for yourself and build from it.

Items in italics are direct quotes from the articles above

If you need are interested in creating a budget, then contact me for a financial checkup in the contact me section. Also, learn more about the self-lending principle in the mustard seed section.

For this week, I’ve included Don’t Allow Them to Doubt You – best motivational video from the Motivation Archive YouTube channel.

“If you think you know it all, you’re a fool for sure; real survivors learn wisdom from others.” Proverbs
28:26 MSG‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬