On the other hand, businesses use debt to generate profit. They, with the help of huge research team, borrow money and invest in products that would provide guaranteed results. I like this idea. If you know few products that would certainly derive benefits, borrowing money ad investing it is okay.

There are few things you and me can buy borrowing money, which can be used in our day to day life. Let’s check if it proves to be profitable or a loss.

Car

Buying a new car on loan is certainly a wrong decision. Let alone earning profit from your investment, you lose considerable amount as depreciation in initial two years. Besides, you have to pay expenses for maintenance, repair, and fuel for the vehicle. Going into debt simply to buy a car is not wise. Even before paying off your car loan, you would get rid of your car. So, how can it be beneficial? Borrow money to buy car only if it’s very important and urgent.

House

House is considered to be a good investment product. The fact is, however, it appreciates only at par with the inflation. So, the actual profit is not much. Besides, a house is quite similar to a car, wherein you have to spend lots for maintenance, repair, decoration, and so on. But most people don’t have hundred thousands of dollars stashed in their houses. So, we all borrow money to buy a house.

Student Loans

Education is an asset that cannot be measured in terms of ROI (Returns on Investment). When you pay money for tuition, you gain knowledge, generate skills, and build personality, which helps you to get a job, and think things though. Borrowing money for education is certainly a good investment as it help you to earn money in future. You leverage debt to generate higher benefits. So, going into debt to achieve higher education is justifiable, and worthwhile.

Buy a House to Rent

If you borrow money to purchase a new house, only to rent it, it’s a good investment. However, before you come to this conclusion, you will have to ascertain how much you would spend on maintenance and repairs, and how much you would earn. In most cases, this is a good investment.

Stocks and Mutual Funds

Many traders borrow money to invest in stocks and funds, and expect the price to augment, so they can repay the loan and keep the rest. This is probably a very good investment, as you can earn money without using your own money. However, if the price falls, you will have to put your own money to repay the loan. Hence, before you decide to take a loan to invest in stocks, make sure you understand the market, its fundamentals, and current trends.

Leverage must be used if usage of borrowings is done to gain profit, or at least it doesn’t cost you more than repayment of loan including interest. Playing with leverages, however, is quite dangerous. If you get it wrong, you can lose all your belongings including your house. Hence, make sure you don’t borrow big if you are not sure about your investment returns.

One of the most popular things people love in their homes is a proper heating system. Hence, installing latest heating systems would increase the value of your home. Similarly, if you house has a posh kitchen with several automated appliances, it can be easily sold at a higher price.

You don’t have to improve only things that are mentioned in this article. Simply close you eyes, and imagine a kind of house you would like to own someday. What are the amenities you would like to have in your home? How should the interiors look like? I am sure you must have pictured a clean home with attractive furniture, plush bedroom, latest appliances, and so on. You would pay any amount to buy such a dream house. This is exactly what the buyer imagines. If you intend to sell you house at a rate higher than the prevailing prices, work towards making it a dream house.

You can start with repairing existing amenities and keeping your house clean. You would certainly have to incur some expenses, but consider it as a long term investment. Make sure the plumbing and electrical system is always intact and working. Keep a regular check, and replace worn out parts in order to avoid big expenses in future.

Repairing and remodeling your house can seem to be a tedious and expensive activity. However, there are several websites that help you to do it in a better way. You don’t have to consult a plumber, handyman, or an interior decorator for every minor change or replacement. Majority of such things can be done by you easily.

Due to the recent economic crisis, home and home improvement prices have gone down. Home improvement materials can be found cheaply as most suppliers are trying to attract customers through lucrative offers. Besides, many capital investments related your home are tax deductible. Hence, it is possible to improve your home, and augment its value within a small budget.

An individual just out of college, regardless of the inheritance money he has, needs financial investment planning. He doesn’t know what his future would be like. And he has a long life to live which includes his marriage, family, retirement, and so on. If he wouldn’t start investing today, he wouldn’t have enough.

A couple, expecting a child soon, would want to have a secured investment for the future of their children. Moreover, they would need money to enjoy their life after they quit their jobs, later during the old age. If they start planning about their investments today, they would have a happy, sufficient life.

An individual with a secured job, high or low salary, would have his set of financial problems, if proper planning is not done. He would have to pay high taxes, if financial investment planning is not done. Even if he decides to invest, it cannot be possible without proper knowledge of investment and appropriate plan.

Nothing bothers old people more than retirement and illness. Ignore investment planning means ignoring medicines and treatment even if they are ill. They don’t know how many years they would live after retirement. If they don’t have a proper retirement fund, they would certainly not have happy golden years.

An individual with his own business needs financial investment planning more than anyone else due to the level of risk involved in it. If he has a proper investment fund, he would have to worry about future uncertainties.

A dependent too would require some security. How long would he or she would be dependent on others?

We can see that almost every person living in this world requires financial investment planning. And investment is definitely not only for rich. In fact, the ones who require this kind of planning are the ones strive and work hard to meet their ends. It’s not too late yet. Select any of the category above, and start planning today.

At the end of the day it’s not actually the deal that you have bagged but the strategy that you’ve used to buy the deal along with your portfolio and how you manage it that actually determines your success as an investor. By focusing and improving your investment strategy, you can expect to perform consistently in the investment market. Even if the market is shaky and indicates uncertainity you still can make profitable investments if you are equipped with a sound investment strategy. In other words you are a survivor in any kind of market adversity.

Successful investments give you a sense of achievement just like any other job. But when your investment motives are influenced by external factors like the current economic state, and government policies etc your sense of achievement may or may not be fully realized.

Since investment plan is of more importance than the selection of an investment option it pays to know how to make a good investment plan. The investment plan should be made with utmost care because this is the basic blueprint on which all your other investment work is based. The investment plan that you make is also known as investment policy statement. While making an investment plan, you are stating the reasons as to why you would want to invest, how you would want to go about the task, the proportion of money you’d want to put into investments. This gives you a clear picture of how much you are investing and the returns that you are expecting out of it. Hence it gives you an estimate of how profitable an investment is going to be for you. If you follow it strictly, there are fewer chances of your taking the wrong steps towards profitable investments.

These are the major components of your investment plans:

• Your investment portfolio which contains details on how much risk you are able to tolerate and if there are any personal limitations and restrictions you have for investments and how these affect your investment choices and goals.
• The investment plan should include what you intend to do and what you don’t intend to. The plan should be inclusive of the guidelines for ideal investment according for your portfolio so that you don’t blunder in the process of making investments.

They started with a discussion of our government’s incapability to handle the recession and its unenthusiastic approach to limit the spending. Bush didn’t do much to control the overall spending nor is Obama able to correct the market situation. I agreed with the old guy on the show. Now I was more interested in the discussion because you know, you feel good when someone is smacking the politicians.

However, they further revealed that the existing debt of our federal government is about $12 trillion and according to the projections, it will reach $22 trillion within next 10 years.

I realized that the young guy was the interviewer and the old guy seemed to be some financial expert. See, even I can derive conclusions. When the interviewer asked him what a common guy could do to help himself getting affected by the economy, the old guy said “Nothing much. Keeping voting every November, listen to some jingoistic speech, and write to them if you have something to say. And yes, you can also silently watch them drag our country deeper into this financial heap of debt.’

Hey, was I wasting my time listening to this stupid guy who was no better than a politician? Within seconds his face turned serious and he asked to viewers to note down 4 important ways by which they can profit from the falling economy. Ok, I thought, let’s see what crap he has to offer now. This is what he said:

1. Foreign Investments

   The depreciation in value of U.S. dollar means it is losing value compared to foreign currencies. So, to gain profits, you can invest in those foreign currencies. This can be done through Forex (Foreign Exchange). However, investing in Forex is quite risky, especially if you are a starter, as the market is extremely volatile. It’s better to invest in foreign stocks rather than Forex as it has numerous other advantages.

   Majority of 401(k) plans and many other retirement plans provided by the employers will include funds with good foreign stocks. Investing in these stocks can reduce your risk of losing money due to poor market conditions and can help you to have a balanced and broad exposure.

2. TIPS

   TIPS means Treasury Inflation Protected Securities. People can invest in TIPS, which are bonds offered by government. This can work well for you in the inflation because the interest rate rises with the inflation index. It is highly recommended that a part of your investment should cover TIPS. These funds are offered by most of the mutual fund companies.

3. Real Estate

   If you think it’s not a safe bet to invest in real estate after this huge sub-prime crises, you are wrong. In long term, real estate prices will soar very high irrelevant of what price you bought it at. Houses can now be purchased with fewer difficulties due to ease in financing and mortgage policies. Moreover, the housing tax credit will help to garnish your investment.

   However, invest in real estate only if you have a good amount of money to put in. Do not try to test your luck by taking a huge mortgage and living in debts for the rest of your life.

   If you don’t want to physically buy the house, invest in Real Estate Investment Funds or REIT. Again, these funds are generally offered by all the mutual fund companies. And remember, this investment is not for those who are looking for short term gains. It will take years for real estate price to hike again. I am advising it because the prices are too low now.

4. Commodities

   No, we are not investing in gold. I know, the price is mounting every minute and people are going haywire on the skepticism. Some years ago, oil lured everyone. Prior to that, real estate was the talk of the year. Who knows what it would be in coming years. Hedge your investments in this inflationary period by diversifying your portfolio. There a various commodities funds, also known as ETF, available in the market. Go for a fund that includes not only valuable metals but also some other commodities.

President Obama doesn’t seem to be quite successful in influencing the Chinese administration. Moreover, the once considered strongest economy (of course US economy) is not much reliable for investors now. To gain profits in this situation, it wise to invest a huge chunk in foreign investments and futuristic prices of real estate and commodities.

Well done, old guy. These tips (not the treasury something something; I am talking about tips as in ‘useful tips’) were simply great for those who invest regularly. I thought it was a wise advice. Comment and let me know what you think about this useful crap.

However, finance is not about just GDP and economy. It involves something that is very much personal and essential stuff called ‘Personal Finance.’ Though it involves many significant categories like debts, savings, investments, etc., there is something that youths are totally unaware about. It’s called IRA. Ok, you have heard about IRA and know it is related to retirement. That’s it?

I am repeatedly targeting the youths because of three reasons. First, few among them knows about benefits of IRA (many don’t know what it is). Second, they fall under the age group that represents our country’s future. Third: they don’t really want to know about something that is quite boring and information on which requires searching many websites.

Now you know that I don’t have anything in particular against youths, let’s start the session.

I have made the explanation of IRA a bit precise and concise (in 6 points) so that they don’t run away before knowing much about it.

1. An IRA or Individual Retirement Account helps you to gain enormous tax benefits if it is used to save funds for your retirement.
2. It is NOT an investment. It is an ACCOUNT (like your any other account) which stores your investments. These investments can include anything like mutual funds, CDs, stocks, etc.
3. It is quite easy to open an IRA. You can go to any brokerage companies like Edward Jones, Merrill Lynch, etc. Or open it online through brokers like ETrade or Scottrade. Mutual fund companies like Vanguard and many others also offer such accounts. If you don’t have any of these companies nearby, visit any bank.
4. You have the freedom to select the investments that will be in your IRA. Some banks would not allow you to invest in mutual funds and stocks. But I said ‘some’ banks, not all. Many major ones do allow you to do so. So, in the end, it’s you who have to decide the account holdings.
5. You have the right to open more than one IRA. Yes, you can do this. But there is a limit set by IRS on how much you can save in an IRA every year. The limit for 2009 is $5000 for people below the age of 50 and $6000 for 50 and above. Hey, not on every account. You may open 39 IRA’s if you wish. But the combined investment should not exceed the limit mentioned above. However, I know you wouldn’t open more than one because…
6. You have to pay an annual charge of $30 – $40 each IRA to the respective mutual fund company or the bank.

Now that it’s clear what an IRA is, let us try to see what the types of IRA are and which one is beneficial for everyone, including youths.

The two most common types are Roth IRA and Traditional IRA.

Roth IRA

Tax benefit is an essential component of any IRA. But this one has some additional benefit. The investments under Roth IRA are purchased from the funds that is already been taxed. So the benefit is that you don’t have to pay any tax when you withdraw investment during your retirement.

Traditional IRA

There is an up-front deduction in tax when you have a traditional IRA. However, you are liable to pay taxes on every withdrawal during retirement.

According to me, Roth IRA is far better than the traditional one because it suits my needs. That doesn’t mean that it will work better for you as well. If you really want to open an IRA, there is much to learn about both the types. Type Roth IRA or Traditional IRA in your search engine and get details about both before opening an account.

Then why don’t I post it for you? Because I want you to learn more about finance at this age as I am doing. Yes, I am just 27. So, why such battering and abhorrence against youths? Nothing personal, it’s just that we, as youths, focus on much less important things than the ones that really matters. Ok, I don’t want to start again. Good luck with your selection with IRA and comment if you want to say something against me, or youths, or ignorance, or retired people, or anything else.

One of the prime steps that you’ve got to take is making the right investment choice. You’ve got to think if you’d want to invest in stocks, bonds or something new. Many make the mistake of thinking that investing wisely means distributing your money between stocks and bonds. But then, in a financial downturn like last year, this might not be a very wise thing to do. A more prudent option would be to make investments in alternative assets that allow for divergence. These are the assets that you can fall back on if your stocks and bonds don’t do well for a while.

So what are these alternative investment options? They are mutual fund investments that you can make on materials and valuable metals which have a reasonably steady market value for a long period of time- let’s say, to the tune of some years. These investments depend on stock prices to hedge alternative investments. Ideally, the present market conditions and opportunities demand that these investments should constitute about 5%-20 % of your portfolio.

It’s not that you invest entirely in mutual funds. You can always invest the rest in stocks and bonds. However, while making investments, the lessons that we learnt from the bull market during the present recession should be used to correct our faulty investment choices and actions. If you are aware, about one –fourth Americans in the age group of 56-64 put 90 percent of their (401) k in stocks, in 2009. The market crashed and the retirement accounts sank down the ocean of economic destruction. So, you are not going to make the same mistake again are you? The younger generation should invest more in stocks if they can sustain the associated market risks. If you are on the wrong side of 50, don’t invest more than 70 % of your retirement funds in stocks.

Your portfolio revamping does not stop there. Ask the new age analysts and they’ll tell you that the economical tsunami has altered the contours of investment choices to be made. The analyst will tell you about which stocks and bonds you should be investing in. The improvement is very sluggish and you’ve got to put forward a careful step. You can invest in stocks that yield good dividends. The ones that are going to give you frequent and consistent cash payouts are the ones that will prove to be pretty beneficial for you. About 30 percent of your stock investments should be diverted towards foreign stocks according to financial planners. Turn your attention to Brazil and India for possible foreign stock investments.

In the present times, if you were to invest in stocks in an S & P 500 index fund you would be gaining by 20 percent on the whole for this year; and especially by 70 percent from the month of March when the economy crashed totally. The government has simulated circulation of money for the benefit of the consumers by the Cash for Clunkers and the First Time home Buyers tax credit programs. The real estate prices have also bounced back in some areas that were hard hit by the recession. Being in very rocky waters this years, many people stopped securing money for their futures. They have learnt to concentrate only on the present as survival has become very difficult for people in the present times. This is evidenced by 89 percent of people not updating their portfolios, at least in the first few months of this year.

But then, just sleeping over businesses is not going to help much. Even if you don’t want to shoulder risk of investing, according to market experts, you are not doing a very wise thing. An average investor cannot expect a lot to happen if he does not take active part in making investments. The stock rally of the current year was one of the largest and you don’t expect to see one such in the next few years. The effects of the recession are expected to be long drawn. Some say its going to last for a decade or two. The taxes are expected to be on the rise for some years to come. This signals that you don’t achieve anything by hanging on to the previous ways. Your success formula in the current and futuristic economy should be based on a new approach which requires you to revamp your current financial portfolio.

If you were to go by the survey conducted by the Employee Benefit Research Institute you will find that only about 13 percent of the working class is actually confident about their financial security after retirement. Most people are aware that they cannot afford to sit inactively, if they desire to have financially secure futures. They know they have to start planning for their retirements and do something about it. One of the first steps of planning is to make a brand new financial portfolio.

So now is the time you’ve got to decide upon how you are going to refresh your portfolio. As usual don’t distribute your investments entirely on stocks and bonds. Instead concentrate on funds that diverge.

Even though the economic crisis might appear a temporary thing, it has deep-rooted impact on the psyche of the common man. In the past, during the Great Depression, people developed a habit of being thrifty and they continued that throughout their lives. Misers, you get a chance to pass off your hoarding nature under the guise of frugality learned during economic stress!

Experiences in the formative years are very important in shaping one’s attitude and those youth who’ve been a part of this depression are understandably a less confident lot.  According to a study done by Paola Giuliano and Antonio Spilimbergo published in the National Bureau of Economic research, the youth who have faced tough economic times tend to depend more on luck than on their own abilities for success in life. They believe more on Government redistribution and are hesitant about making investments in public institutions. Interestingly, this result held true for only those who were between 17-25 years of age. Older people had already formed their strategies and the outside economic conditions did not have any effect on them. Younger people were unaffected as they were still under parental cover and had not started their independent financial establishments. Another study done by Berkley and Stefan Nagel of Standford University showed that only 13 % of the people who had suffered the Great Depression had invested in stock markets. This showed that the vast majority of them were so very prejudiced by their past experience that they did not want to take the risk of investing money in any venture that ran a fair chance of putting their money at stake. Instead those who had passed through better economic times had a better participation percentage in the stock market investments. Obviously, it’s understandable that when you burn your finger once, you are more cautious with your investment.

Its not only about great depression we are talking about folks, even lesser financial crises had a lot to teach people. People who suffered badly due to plummeting stock marketing values are seen to be less willing to stake their bucks once more. Young people who were a part of the 1980 depression in stock markets are now participating less in stock market investments. But older people who had seen the boom in 1960s and 1970s had taken the 1980s low as a passing phase and are participating more.

Statistically, the present recession should not scare us into non-participation in investment schemes, but biases formed due to our personal experiences, media information and experiences of friends shape our decisions. My advice to the young generation is- free yourself from all biases, think from an original perspective, take the help of a financial expert if necessary and make worthy investments.

Market bulls feel that the recovery is for real. But you ask the bears and they’ll tell you that its not actually recovery in the true sense of the word, but a temporary bubble that is created by the government’s stimulation of money. According to them many investors might not be able to distinguish between the genuine and the stimulated at this point of time. So investors, beware, lest you make investments in haste now and regret later if the condition worsens again!

Ed Yardeni, lead economist, Yardeni Researcher, who was a pro-bull once upon a time, opines that the situation is somewhat in between.  So, the recovery has both elements of real recovery as well as the stimulated one. Programs like the ‘Cash for Clunkers’ and the ‘$8000 tax credit for first time home buyers’ might have stimulated the economy and helped the auto and housing industry with their financial lows and has motivated the spending powers in consumers, this should be taken as a real or permanent solution to the monetary dearth the country’s been subject to since the last couple of years. But nevertheless this stimulation of money has initiated a GDP growth which though modest at 2 % signifies a true improvement in the economy of the country.

Whenever we talk about a recovery we are mostly concerned with its survival and how long its going to survive. But according to Yardeni, recoveries sustain on their own, and you really don’t need any deliberate stimulus programs to sustain the recovery. According to him, muddling along is a more probable thing that is going to happen to the current economy. As many of us might be predicting, Petering Out doesn’t seem to be a probable thing to happen, Mudding Along seems to be

For the last six months small investors don’t seem to have been active at all. However, the big investors have kept buying the rising stocks to keep themselves surviving and also to compensate for the economic losses that have been faced last year. According to Matthew Rothman, Barclay’s Quantitative planner, this recovery is a junk rally poor quality one.

According to Satya Pradhuman, Quantitative Strategist, Cirrus Research this is the best time to sell as the government’s stimulation of the economy has actually made the economy go beyond recovery. According to him the optimism built up shows a big risk of being shattered with disappointments as the recovery fails in the coming months.