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DISCLOSURES


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Some lawyers stay up at night trying to ruin free society and create new rules. Therefore, here are the disclosures I must have that you probably won't read.

INVESTMENTS | What you really need to know about Stocks, Bonds, & Mutual Funds... Oh My!


Celestine Chua What the Rich Invests In “The rich invest in time, the poor invest in money.” ~ Warren Buffett



In addition to Savings and CD’s, financial institutions also offer investment products. 


There are 3 basic products investment firms offer. There are many more products than these; however these are the three most common types. 

Other investment products usually take more experience and money. There are many books written on these, and as I am not a licensed investment specialist, I will sum up the basics. 

If you find this area interesting I encourage you to look into it more on your own. I would start by reading anything by Dave Ramsey[1]

The 3 basic areas are:

  • Stocks
  • Bonds
  • Mutual Funds.

~Stocks~


Stocks are partial ownership in a company. You earn money two ways:

A. The company pays you when it makes profit; this pay is called a dividend. This could be higher or lower than standard interest.

B. You can sell stocks at a price higher than you paid for them. You buy a share at $6 and sell at $8 you make $2.

            
The more shares you buy the more dividends are paid to you and the more you make when selling them. Stocks are the more risky investment because you can also buy a share for $20 and see the value drop to $6. You only really lose money if the company goes out of business or if you sell your shares when the value of your shares is low. Otherwise, if you wait long enough the value will go back up eventually, as long as it is a good company.

~Bonds~


Bonds are loans. Basically you lend money to companies (or the government) and the company (or government) pays you back plus interest.
            
It’s like you become the bank. The longer the bond is kept the more you earn. The bonds risk is limited by the ability of the institution to pay you back. You can buy from the Federal Government, State Governments, and even private companies. Obviously a relatively shaky company is much more risky then the federal or state government when it comes to the ability of that bond to be paid back to you.

~Mutual Funds~


Mutual Funds are a combination of investments. These make the most sense for most people.

A mutual fund is where an investor buys many products which vary in type and degree of risk. The funds adviser then sells a share of that group of products. This is called a Mutual Fund. These funds may include CD’s, Stocks, Bonds, and other investments.

There are different risk levels and therefore some are more stable while others have higher return potential.

~Starting Out~

            
These products and much more are offered through investment firms. The easiest way to get started investing is to either meet with an adviser, also known as a consultant, or do some research and start trading on your own.

You could meet with a financial consultant to review your opportunities. A meeting with an adviser usually requires that you have at least $500 – $1000 that you are willing, even if not yet committed, to invest, but not always.

Another way to start your investing would be to open an online trading account and play with stocks on your own.

If you’re just starting out you could buy one or two shares at a time, just to see where it goes. It’s like playing a strategy game at that point. As you get used to how things work you can put more money into it. I really enjoy penny stocks (Stocks Valued for less than $1 per share). It’s an easy way to put just a few dollars, $10-$20, into the market and watch it grow or shrink without really risking anything important.

~Playing it Safe~

            
You should always keep in mind that the money you invest in non-FDIC products can lose value or even be lost.

However, that money can also earn you a lot more returns than a simple savings account.

Use money you are willing to loose. 

This sounds like a silly thing to say.

Why would I want to lose money?

It is a silly thing to say.

Then again you spend money on games, TV, Movies or other entertainment without any monetary return all the time. You do this because there is a return of enjoyment.

Consider this your entertainment money.  So you aren't losing money you are spending it. I say anything I would spend on disposable products can also be trading money. If you can spend $25, $100, or even a $1000 to eat or watch movies or go on trips then you can spend it to trade.
            
Especially when you’re first starting out consider trading money as your excess money. Don’t use the money that you’ve saved to live on or that 6-9 month income money. You can, however, budget in trading money to your savings plan, just like you budget in play money. By taking a few dollars here or there and putting them aside to trade you can start playing with the market while you’re building your savings.
            
Again this should only be money your willing to spend, just as if you had bought food or fun with it. Consider playing the market like playing an arcade game. You may win coins back, or it may eat your coins. It can be fun even just to buy one share to watch and track it. No emotional based decisions here. You buy shares based on good research and a lot of prayer.
            
The good news is that investment firms can often help you with more secure products if you’re not ready for the market yet. Many can help you buy FDIC and non-FDIC CD’s, called “brokered CD’s”. They either base these CD’s on various market factors or buy them from other banks.

By buying FDIC CD’s through investment firms you can often obtain better rates of return than just using the bank down the street. The investment firm researches the best rates at all banks large and small. By having them buy more CD’s through several smaller banks you can spread your FDIC coverage. Since all are maintained and managed by one institution and one investment adviser, you have the benefit of more earning power without having to drive yourself to multiple institutions.
            
That is the quickest run down I can give you about investments. You can learn more with a little research, I recommend starting with any materials by Dave Ramsey. He has a special suggestion, putting all of your investment money into four types of funds. More on there (HERE).

Dave feels more secure with Mutual Funds than I do. Then again, I have a negative outlook on the future of the USA, whereas, he feels things will continue to be the same in 10-20 years. 

For the money I do invest, I use his four fund approach (HERE).

Ultimately remember these points about investing:


  1. Investments CAN lose money…
  2. Do not buy anything until you have prayed it through thoroughly! Make sure that God said: “Yes!”
  3. Consider that your money should be working for you, not you working for your money.

*Given the changes occurring in the world today, it could also be wise to seek other things to invest in. 
Property, Gold, Silver, Farm/Produce production, and other things of tangible value. 
When the markets do someday collapse and the world goes through change having debt free commodities that are innately valuable, such as those used in the barter days I spoke of in the beginning of this book (HERE), could be a great thing to have on hand. 
Gold and Silver, if just bought for value should be bought in bulk sizes. However if bought for the potential of trading in a pinch should be bought in small sizes such as 1/4 or even 1/8 of an ounce. 
My bet would be on agriculture (farming). Food is always barter-able.

The Insider



[1] http://www.daveramsey.com


The Insider is a BIG fan of Dave Ramsey:

  • Go read/listen/watch Dave Ramsey and he'll teach you how to do it right!
  • Listen to The Dave Ramsey Show (HERE)

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DISCLOSURES

DISCLOSURES

Some lawyers stay up at night trying to ruin free society and create new rules. Therefore, here are the disclosures I must have that you probably won't read.

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Darrell's Reading List


Here are some books I've been reading lately:
  • Hacker: The Outlaw Chronicles (here) by Ted Dekker (Author). The story of a young Hacker girl, who went on a wild adventure into the supernatural realm beyond trying to save her mom, but saved her self too in the process.
  • Saint: A Paradise Novel (here) by Ted Dekker (Author). He's an assassin, or is he? He finds a secret to his past that unlocks supernatural abilities, at a cost.
  • For a full list of all my book suggestions, see my Amazon Store.

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