Leverage - Is This A Strategy For You?

By Gnifrus Urquart

Leverage is a term used in investment circles to explain a type of borrowing. Its investment jargon, so it may sound complex. Its simply describes the process of borrowing to invest, where there is some kind of security underpinning the borrowing. This could be a house in a property loan, or stocks in a margin loan.

This article covers the general principles of leveraging your investments. If it is something you are considering but have never done before, discuss your ideas with a licensed financial adviser. They will ensure you are structured correctly and can minimise your risk and exposure.

Before I understood money, my debt profile looked very similar to most peoples. I had a credit card which I always struggled to get back to zero, I had a large personal loan for a car I bought and a smaller loan for some furniture.

There are 2 problems with this type of borrowing. Firstly, all the assets I bought with the borrowed money were depreciating assets. This means that as I paid off the debt, the value of the things I bought decreased. Secondly, as I purchased "consumables", the interest I paid on these loans was not tax deductible. This makes for a very expensive borrowing.

Today, due to the many benefits I found you get when you borrowing to invest, my debt profile is anything but typical. I now have much more debt, but I have borrowed to buy appreciating and income generating assets. For example, I have a massive debt on a property in Victoria, Australia. I also have a reasonable size margin loan helping me make money in a successful stock trading strategy. And finally, as per all foreign exchange trading accounts, I have an account which is leveraged out (and heavily too, at 400:1 - so every $1 I put in allows me to invest $400). My debt on consumables on the other hand is negligible.

What is the logic then of borrowing to invest?

Firstly, when you borrow to invest, you are "using other people's money" to earn more money in the investment markets. A great example of this is in our FX Trading strategy. If I invest $10,000.00 and leverage it out at 400:1 that means I have $4,000,000 invested. This above example describes very well the first benefit of leverage. By accessing more money to invest, you can earn way higher returns on your investments than you otherwise would have been able to.

Generally speaking also, interest payments on investment borrowing are tax deductible (get advice from your accountant on this point). As the borrowings have been made to increase your income, the interest payments on the loans are a direct cost of your income production. This typically makes the interest payments a tax deduction. For example, as my investment property creates a rental income, the borrowing are a cost associated with producing that rental income.

This works exactly the same in the margin loan I am using to help with my stock market investments. I have borrowed some money in a margin loan (I usuall try and keep the leverage here at about 1:1, so every dollar of my own I invest gives me another to invest) and pay interest every month on that loan. My stock market strategy pays me my consistent income every month, which is more than the interest on the margin loan. And then, at the end of the tax year, I deduct the interest payments from the money I earned, gaining a tax advantage.

Those are some of the benefits you can gain by borrowing to invest. There are risks too though, so it is very important to get independent financial advice if you are thinking about leverage.

So what are the risks associated with borrowing for investment purposes? One of the obvious risks relates to your financial capacity. There is the risk you over-extend yourself and cannot meet the repayment obligations on your loans. When taking out a loan, you need to be sure you can pay the loan repayments.

In a margin loan situation, it is a little different. If you borrow too much here, you may breach the allowable % of assets to debt you are given and if this happens, you will be expected to put more money in to put the loan back in "good order". This can be quite difficult if the market swings strongly against you. So you need to know that in extremely adverse market conditions (2007 - 2009 are a good example of this) you can generate enough income to cover such margin calls.

There is alway also the possibility that your trading strategy loses money. If this happens, because you borrowed so you could invest more, you lose more money.

All risks with investing can be mitigated with strategy. That is why it is so important to speak to a licensed financial adviser before you invest and especially before you borrow to invest. So if you are considering leverage, speak to an adviser about risk mitigation. Leveraging your investments can definitely be financially rewarding, but only when you properly understand and manage your risk and when it is backed up by a consistently high performing investment strategy. - 23223

About the Author:

Gnifrus Urquart has enjoyed significant success investing over the years. As such, he likes reviewing investment strategies and offering trading tips to anyone interested in investing

DIY Superannuation - How Much Control Do You Want?

By Gnifrus Urquart

The retirement industry in Australia is second to none in the world. It forces us to save money in a very comfortable way, a way that doesn't impact our disposable income, so we all have a big pool of money to live off in retirement.

One of the things I don't like though is the way you lose control of you money in the Australian Superannuation Industry. It is getting better, but for me there is still a very big issue here. You generally do not have a big say in how your money is invested. This is why I set up my own DIY Super fund.

Without making this article too complex, all an SMSF is, is a structure which enables you to manage your own superannuation money. There are a number of responsibilities which come with running your own super fund, you can manage these yourself or outsource them as you see fit. Most of these responsibilities follow:

1. Trustee - The trustee is the legal owner of the assets of the fund. Basically it is the trustee who takes legal responsibility for the fund. If anything goes wrong, it is the trustee who gets the blame.

2. Administration - The administrator looks after all the book keeping and accounting responsibilities. They will prepare and lodge the annual tax returns and documents and ensure all the accounts balance at the end of each financial year.

Thirdly the fund needs to be audited. Each year, it needs to be checked by an independent auditor to ensure you are keeping within the superannuation regulations. This is what will ensure you get to keep receiving your superannuation tax concessions.

Finally, you need to invest the money in a way that responsibly improves the pool of funds for your retirement. The investment decisions have to be within the superannuation regulations as well as the investment strategy as outlined in the SMSF trust deed.

In my situation, all I wanted was control over the investments. I wanted to manage where my money was invested and how much was invested. That way I always knew how much I had in my accounts (as opposed to waiting for the big surprise when my annual statement arrived) and I could feel comfortable knowing that my returns were well earned. They were my responsibility, so in the bad years when my investments fell, at least I wouldn't get frustrated that I had no control. It also afforded me the luxury of managing my superannuation investment as part of my estate rather than as a separate entity. This meant my entire portfolio was significantly more balanced, which is crucial for long term financial success.

All other responsibilities I outsourced. To me, they were time consuming tasks which were better undertaken by experts in the relative fields. This left me with more time to research and make investment decisions. - 23223

About the Author:

Gnifrus Urquart enjoys controlling his retirement savings, as well as the leisure time outsourcing his DIY Super Administration affords him.

Foreclosure Scams: What You Need to Know

By Doc Schmyz

Home foreclosure is a common problem that people face today. More often than not it starts from one missed payment which the spirals out of control. Before you know it you have missed three or four payments and the mortgage lender or bank wants you to pay everything you owe all at once. When the homeowners realize that they have made a grave mistake they resort to anything they can to get out of a tight situation.

This is when the swindlers and crooks find their way into your mailbox or give you a call. Foreclosure scams are as common as the problem itself. Since homeowners believe that they have no choice they fall for these traps and make their situation much worse than it was before. It is not uncommon for these scams to lead to even greater financial problems then the homeowner faced in the first place. In some cases the homeowner ends up becoming a identity theft case as well.

Scam operators also distribute flyers,advertise online, publish advertisements in the local newspaper, and call homes which are included on the foreclosure list. They call themselves mortgage consultants who offer foreclosure services or advertise with "We buy houses" slogans and signs.

Common scams:

Bankruptcy Foreclosure Scam

This scam operates by promising the homeowner that their house will be saved. In return they will either ask for the homeowner to pay their mortgage directly to them, hand over their deed and pay rent, or obtain refinancing. Of course these crooks never do anything for you...they contact NO ONE on your behalf. They keep all the money and file bankruptcy without your knowledge. Eventually they just skip out on you.

Since the homeowner is not aware that bankruptcy has been filed, they fail to participate in the case. The case is dismissed and the house continues onto foreclosure. Apart from loosing money and your home, you will also have a bankruptcy on your record.

Equity skimming

The scam artist poses as a buyer. They then promise the homeowner to pay the mortgage or given them a sum of money once the property has been sold. The operator then convinces the homeowner to sign over the deed and move out. The homeowner can stay but they have to pay rent. If they opt to move out the operator lets a third party rent the property. The operator does not pay the mortgage and lets the mortgage lender foreclose. and of course they skip town and are never seen/heard from again.

If the house has equity, the operator sells the property and pays off the debt. Then the operator keeps the equity that the homeowner could have had if they sold it. In few cases, the scam operator actually finds a buyer or sells the house. Normally they just set up a p.o.box with a forwarding address for the "rent check". - 23223

About the Author:

Doc Schmyz has worked with investors all over the US. His free website shares Real estate investing information for all over the US. Find real estate information by state

You Too Can Make Money Investing With Microcap Millionaires

By Stephan Bonnar

If you are looking to profit from today's market, then you will want to look into Microcap Millionaires. By utilizing this system, you'll be able to eliminate the guessing game that often occurs when approaching stock investments. With Microcap Millionaires, MM, you will be given the exact times to buy and sell your investments. Every stock pick is designed to give you incredible amounts of growth in the value of your investment quickly. You don't even need to know anything about stock markets or investing to profit from this program.

You may be wondering if you can depend on the system with your own money. There are many reasons to believe your own money would be safe when using the investing strategies presented with this program.

There are testimonials claiming this program was able to make many different people thousands of dollars easily and quickly. Some of the testimonials also include descriptions of the circumstances surrounding the trades. Often, these trades could have been even more profitable if the buyer was able to purchase the stock as soon as the signal was given.

There are some stock trading programs available online today that are complete scams. These types of programs have no interest in making you money. The stock picks given are often wrong. There is usually no way to tell the picks will be wrong before you actually buy the product too. Sometimes, the people who run certain trading programs are actually paid to promote stocks. When a person promotes a specific stock trading at a very low price, they are able to make the stock move up in price. This can be very advantageous to anyone who invested before the stock was pumped. After the stock has been pumped sufficiently, the primary holders release their investments. This results in dramatic drops in the value of the holding.

With MM, you can relax in knowing that each of the investments recommended to you through this program are designed specifically to make you as much money as you possibly can. No investment recommendations are never altered to let a third-party make large amounts of money from other people's investments. This program is made to give consistent investment results to all who use it. If you do face any losses, you should be sure to continue to give your best effort to follow the investment strategies provided by the program. This will give you a chance to observe consistent positive results over time.

MM helps you make money in the market by using multiple techniques. One part of the program is called Bottom Bouncers. Bottom Bouncers will give you the exact price points you should be entering and leaving investments.

Quick flip is another technique offered by MM. This technique will allow investors to achieve 100-500 dollars in profit within a few days of the very first trade. The way these work, is through the distribution of detailed buy and sell data for your investments. This can be a very easy way to make a lot of money in a short period of time.

You also get Bankruptcy Billions for stock picks that can increase by as much as 100 percent throughout the life of the investment. To make a successful trade, just follow the instructions and the price range recommendations for buying and selling given to you, then you can profit from a fluctuating market.

There are many tools offered by Microcap Millionaires. Every tool can be powerful in its own way. The testimonials and the free stock picks offered before purchasing, help you achieve confidence in your own ability to profit by using this program. - 23223

About the Author:

If you are looking for a way to earn money at home, you might want to think of investing your cash. However you will need to learn more about Microcap Millionaires. Making a Penny Stock Prophet is easy if you just had the right guidance.

The Key To Guarantee Financial Freedom Is By Investing Wisely

By Ejima Pitt

The last few years have seen many changes in the financial world where many 'perceived' economically dependable areas have show to be insecure however we all must ensure our financial future is protected. It is also not possible for people to be able to work for the rest of their lives either therefore investing is the way to counteract future financial difficulty.

There is nothing wrong with having short term money in a low interest investments account however you would not assume these to grow at a rate that will provide for the future. This is the how most of us plan for the shorter term to purchase things that require preparing for in the immediate to near future and this dictates where the money will be invested for the best financial return.

Large amounts of money could be earned relatively instantly if you are willing to invest in a higher risk area. If you are saving for the far off future, such as retirement, you would want to make safer investments that mature across a longer frame of time.

Long term monetary independence and guarantee needs time and bear in mind that you will not every time be capable to work hence the sooner you start this the better. You as well cannot rely on the Social Security system to do what you expect it to do and as we have seen with Enron, you cannot necessarily depend on your company's retirement benefit either therefore investing is the answer to insuring your own economic future, but you should make prudent investments!

Investing for your future nevertheless has danger which can be reduced just as in a match where the winner is not all the time a sure thing. Provided you know the regulations and have put in place a strategy for your investment you should give yourself a greater prospect of success. If you know precisely how much funds you will require as you retire, it is simply an issue of planning where to invest to meet that need.

Every category of fund has various areas that can be used to go with the needs of the investor and as such makes each fund highly individual. The most well-known of these areas is the stock market with literally hundreds of thousands of companies available to speculate savings in. Wise folks know that this is a complicated game where the system have to to be studied before play commences therefore a good deal of research is essential however that will bring about the difference of losing terribly or winning spectacularly. This is where a plan comes into action but keep in mind your existing circumstances should be stabilized before you thinking of investing for your future. - 23223

About the Author:

For more information about investing opportunities,visit my blog to learn more about mutual funds investing, what are mutual funds, and why mutual funds investing is a great choice to to have in your portfolio