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Can investors make money, build wealth? December 17, 2008

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Kinda of a wierd question from my perspective, but it seems to be the fundamental question of today’s investor psychology.  When many are questioning every investment activity, calling for a depression, or just doubting everything, we need to understand the answer to that question.  The answer is absolutely YES

If you can peel your brain away from short term thinking for a moment, you can begin to understand this point.  No matter what your investment strategy is, no matter how much capital you have at risk, if you understand what you are doing and can manage your emotions then the investment world is open to you.

Can you do it with fundamental analysis and a  buy and hold strategy in stocks? Yes (ex. Warren Buffett, Graham, Peter Lynch)

Can you do it with a trading philosophy in stocks?  Yes (Seykota, Selengut)

Can you do it with currency arbitrage, stock options? (Soros, Buffett)

Can you do it with investment real estate (Trump, Zell)

You can do it with as many different strategies as their are.  You choose the risk and the strategy what is right for you.  All I know is that people don’t build real wealth investing in mutual funds or annuities. They don’t build wealth investing in savings account or CDs.  They rarely build wealth being an employee and investing in the company 401K.  So why do the majority of people invest in the above things?  You tell me!

herd-of-cows

The Four Key Financial Behaviors to Building Wealth! November 12, 2008

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I will keep this simple:

1. Cash Flow Management.  Whether you are an employee or commission salesperson or own your own business, this is critical.  There should be a permanent space between cash flow coming in compared to what is going out. Once this difference is an established habit, then you can weather the bad times with the good times.  With this habit, you can understand and use debt as a tool.  All those debt is bad folks miss this point.  Good cash flow management leads to lowered risk leading to successful leverage leading to wealth.

2.  Learn to become an active investor.  No matter what your investing medium (real estate, stocks, options, stamps, etc.) become an expert in that field.  Read everything you can find dealing with that investment.  Learn how others have made money investing.  Learn to ask the questions that amatuers don’t even know enough to ask.  Don’t turn over your investments to anybody else, no matter how well they dress or how nice their office is or how big the companies they work for are.  Only you will have your best interest at heart.  Virtually everybody is intelligent enough to learn how to invest.  No excuses, no fear!

3.  Learn how to reduce your tax liability legally.  I believe we should all pay our fair share of taxes.  However, the key to wealth is to keep as much money as possible.  There are multiple strategies and products that will allow you to avoid overpaying the tax man, use them!

4.  Build a cash flow machine.  Whether you are a life long employee (or plan to be), you need to build a cash flow machine.  This can be a small internet based business or income producing real estate or stock/options trading or investment in a closely held business or consulting.  The possibilities are endless.  But discovering it should be your number 1 wealth building priority.  

  cash-machine

Do you have a plan? October 6, 2008

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Dave, I have a plan it just isn’t working!  That is what a reader said to me this weekend.  So I asked a few questions.  What is the plan?  What are your goals?  What rate of return do you need to reach your goals?

The plan is a buy and hold strategy with mutual funds using dollar cost averaging and a 3% company match.

The goal is to retire comfortably.

He guessed around 10% rate of return.

The problem is his “plan” is not a plan but an investment strategy.  This led to an undefined goal and no clue how much of a rate of return he needed.

Let me repeat again, a plan is very different than an investment strategy.  What makes up a plan?

First you have to know exactly where you are now.  Then you have to decide exactly where you want to be and how long you have in order to get there.  Then you can come up with a rate of return on your capital that you need to obtain.  When you have these numbers, and only when you have these numbers, are you ready to start building the plan and deciding on the investment strategy.  Wall Street has taught people to do it backwards.  How can you decide on an investment strategy before you know what you need to accomplish?

If you have an investment strategy without a fully designed plan, your chances of success are slim.  How can you know if you are making appropriate progress without a plan?

The last decade has not been nice to people without a plan.  It certainly has not been nice to people with only an invest in mutual funds investment strategy.  Can you design a plan on your own?  Certainly.  But will you?  Most people will not take the time it takes even when they tell themselves they really need to do it.  Its like losing those extra pounds.  You know you need to do it, but life intervenes and it never gets done (you need a plan for that too!).

Let me be direct with you.  If you haven’t created a plan by now, the chances of you doing it without outside influence is low.  If you don’t have a plan you will probably fail to reach your goals.  I will help you design that plan, get you psychologically attuned to implement the plan, and coach you as your plan is put into practice.  You will reach your goals with my help.  Is this worth $1950?  What is the cost of failure? Contact me now at dave@shaferwealthacademy.com or 727.804.9271!