Tuesday, May 22, 2012

Intelligently Investing Your Money

Most people are more than well aware of the usual ideas for getting the cost side of your money house in order – manage your credit cards wisely, pay off the higher interest credit cards first, don’t take on more debt than you can afford, etc. What about investing on the income side? If you spend every dollar that comes in every month on essentials like food and shelter, then advice on where to invest is not particularly helpful. But if you have extra cash sitting stranded in your bank account (making little interest) or at your home (making no interest), what do you do?

Naturally, there are plenty of companies and people wanting to hold your money and invest it for a fee. Unfortunately, in this volatile economy, the risk/reward ratio has been turned on its head.

Most banks currently pay you next to nothing on accounts that you have open with them. If you leave your cash there, you could actually lose money as inflation grows faster than your returns. Occasionally, there are ways to increase the interest rate that you’re getting. For example, a credit union in my city pays 2.5% interest if you conduct a minimum number of debit transactions each month.

Because of the poor economy and global instability, the stock market feels more like speculating than investing in these times. If you are able to choose a solid company stock, it can be volatile due to seemingly unrelated activities like a debt crisis in Europe or quantitative easing programs by the U.S. Federal Reserve. Avoid listening too much to stockbrokers or finance writers who have a vested interest in how you manage your money.

There have always been alternative investments like art, collectibles, and precious metals such as gold and silver, though these tend to be even more volatile than stocks. I happen to believe that gold and silver will rise in value as our government continues to rack up debt, but even I wouldn’t bet all of my savings here.

My personal portfolio is loaded with real estate notes, both in my regular accounts and in my Roth IRA. A real estate note, also called a mortgage note, is used to promise payment when owner financing is offered to buy or sell a property. If you want more information on this, please visit my website. Suffice it to say that I’m a mortgage note buyer as a profession and so know what I am doing, but would never recommend that you buy a real estate note unless you’re experienced in this area and are financially astute.

Before deciding where to invest your money, be certain that you understand how much risk that you (and your spouse) are willing to take. If you’re at retirement age or want to invest conservatively, then putting your money in bank accounts and low-yield bonds may make the most sense in the short term. A slightly risker approach would be to invest in blue chip stocks, mutual funds, and bond funds. And finally, those who are younger and/or can afford to take extra risks should consider gold, real estate, and higher yielding stocks as possible answers. Whatever you choose, make your decision now, create budgets and retirement plans, and move forward with your implementation.

Alan Noblitt is the owner of Seascape Capital Inc., which buys real estate notes from individuals and provides commercial invoice factoring and medical factoring to businesses. Mr. Noblitt may be reached at (858) 672-4678 or toll-free at 1-800-634-4697. If you would like to learn more about these topics and read informational articles, visit www.seascapecapital.com .



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