I first interviewed David Loughnan a while back now (i believe it was 2009) at the “Think and Grow Rich” seminar in Auckland. Since then he’s made some radical changes to his trading and the trading of others!
One of his students made a whopping $34,000 in a day through his platinum program, which is a phenomenal amount for any trader, let alone a student that’s been trading such a short period of time.
You can take a look at the first part of the interview that I did with him back then:
Almost everyone will own at least one home in their lifetime, and for most people it’s one of the most exciting times of their life. You spend a few months searching for a property, you sign the pile of paperwork, and you are the proud owner of your own residence. After thirty days have passed, you receive your first mortgage payment and the excitement soon turns to a frightening reality, as you comprehend you have to pay 30 years worth of payments, without any promise of job security for the life of your loan.
Why pay off your Mortgage?
Obviously paying off your mortgage in the specified time is a requirement for your bank, however, paying off your mortgage sooner can save you thousands of dollars, just have a look at your amortisation schedule.
If you don’t know what your amortisation schedule is; it’s the report that states how much of your mortgage payment is dedicated to each component of PITI (principal, interest, taxes and insurance). As you are probably aware, most of the mortgage payments you pay in the first few years of your loan is interest, and as the loan gets closer to it’s end the mortgage repayments gradually contain more principal. Take an example of a basic amortisation schedule of a $100,000 loan over 30 years (consisting of 360 payments).
*Please note these figures may not be accurate according to your personal loan structures. These figures are only given as education purposes ONLY. Before making any decision or action towards your financial situation, seek professional financial Advice.
required payment: $599.55
Payment number: Principal: Interest: Principal Balance:
1 $99.55 $500.00 $99,900.45
12 $105.16 $494.39 $98,772.00
180 $243.09 $356.46 $71,048.96
360 $597.00 $2.99 $0.00
As you can see, the mortgage payments have gradual increases in principal installments, and decreased interest payments, even though the required payment stays the same. Because of the scaling relationship between principal and interest paid in the beginning of your mortgage, the rate at which you gain equity in your home is much slower.
This means that by making principal payments at the start of your loan you can potentially dramatically decrease the amount of interest paid over the life of the loan, as the interest is charged accordingly to the amount of principal you owe.
Tips to Paying off your Mortgage quickly and saving thousands in interest payments
Many people like to look around for a loan, and once they find one, sit back and relax for the next 25-30 years paying the same regular payment. However if you put in a little effort, and check your mortgage regularly, you can save thousands over the life of the loan.
Make sure you check out other loans available and see if you can change loans etc. If you have a clean credit record, banks might even be competing for you, rather than you trying to convince the banks to give you a loan. A small reduction in the interest rate, or the style or length of the loan can make a significant impact to your loan.
Bi-monthly payments
A simply way to pay off your mortgage quickly is to pay bi-monthly payments rather than monthly. By doing this, you are paying one additional payment per year, and in most cases, you probably wouldn’t even notice the money going out of your pocket. Be aware that some lenders will incur a fee, but if they do, you can simply put the money aside, and make extra payments yourself. It’s important to consult an educated finance broker to find out the details of this method, however there are cases in which banks will prefer you to be in a certain structure because they make more money from it.
Career advancements
If you advance in your career over the years of your loan, you might want to add part, or all of your raise into your mortgage payments. Often we live above our means, and as soon as we receive more money we raise our living standard. Instead of raising your living standard, consider putting those raises to work in your mortgage. If you put it into your mortgage before you get used to spending it, and stick to your original budget, you won’t even miss it, and you’ll dramatically reduce your mortgage.
Pay your mortgage now
When you look at your amortisation schedule and see how much interest you’re really paying over the life of your loan, you will realise that every dollar you pay off your mortgage is worth more than one dollar in savings. Even if you put $50 a month away towards your mortgage, you will be surprised at how much you can save over the long term. for example if you had a mortgage payment of $900 and divided that payment by 12 ($75), and paid that amount each month, you will have paid for an extra mortgage payment for a little under $19 a week, and reduced your mortgage making a big difference on the amount of interest you pay.
For instance, lets take a look at a loan of $200,000 with an interest rate of 6.5% over a 30 year term. Your monthly payment would be a little over $1,264 a month for principal and interest. If you were to add an extra $100 a month ($1,200 per year) you would pay off your mortgage in just over 23 years, cutting your loan back by almost 7 years and saving over $73,000 in interest! Not bad considering $100 a month only works out to be a little under $24 a week.
A practical Example of Saving on your Mortgage
Lets take a look at a few different examples of some ways to reduce your mortgage. If we start with a house of $450,000 house with a deposit of $45,000, a mortgage of $405,000 over 25 years and an interest rate of 7.5%, the monthly repayments would be $2,993 with a total interest payment of $492,874
1. Increase your Deposit
By increasing your deposit by $35,000, from $45,000 to $80,000 you only need to borrow $370,000 over 25 years at 7.5% interest, and monthly payments of $2,734. The total interest paid over the term of the loan would be $450,280, and the total interest saved over the life of the loan would be $45,594. With a monthly saving of $259.
1. Reduce the length of your mortgage to 15 years
By having a $80,000 deposit, borrowing $370,000 over 15 years at 7.5% interest the monthly repayments would be $3,340, and the total interest over the term of the loan would be $247,390. Meaning you would save $202,890 in interest.
3. Increase your payments
Another way to reduce your mortgage would be to increase your payments. For example, if you were able to increase your monthly repayment by $300 (less that $70 a week) in the original example, from $2,993 to $3,293 per month, you would reduce the length of your mortgage by almost 5 years and 6 months, resulting in a saving of $124,148 in interest costs.
4. Reduce your interest rate by 0.25%
With your loan of $405,000 and a deposit of $45,000, an interest rate of 7.5% and a 25 year term, your interest payment would be $2,927 a month. By reducing your interest rate by 0.25%, you would have saved $19,664 in interest.
Believe it or not though, interest rate is not the most important part when it comes to property investing.
If you’re looking to purchase multiple properties, it’s important to look at the STRUCTURE of the loan. If it’s structured correctly, over the long term, you could potentially save yourself thousands of dollars with a mortgage that is structured correctly despite it being higher.
5. Consider using an offset account
Using an offset account can half your mortgage and save you thousands if you use it wisely. An offset account is where your salary is placed in an account attached to your mortgage. The interest is calculated on the amount you owe minus the amount in your account. This means that your salary works to pay off your loan. All-in-one offset accounts include a credit card, which you use for your expenses and pay off in one hit at the end of the month. This means you can maximise the amount of time your salary is being deducted from your principal. The downside to this is that if you are not strict and disciplined, you can get yourself into trouble.
Lets look at 4 different scenarios for loans; two regular loans, and two with offset accounts.
Scenario 1.
$500,000 home loan, 30 years, P&I at 8.0%
Interest over the term of the loan: $837,484
Scenario 2.
$500,000 home loan, 30 years, P&I at 9.5% -with an offset account.
Interest over the term of the loan: $426,608
Interest saved with an offset account: $407,876
Time period saved off the loan: 15 years
Scenario 3.
$500,000 home loan, 30 years, P&I at 6.5%
Interest over the term of the loan: $645,813
Scenario 4.
$500,000 home loan, 30 years, P&I at 11.5% -with an offset account.
Interest over the term of the loan: $503,974
Interest saved with an offset account: $141,839
Time period saved off the loan: 16 years
Even despite the fact that the interest rate for the regular home loan was much higher in both scenarios, the offset account still saved more time and interest over the life of the loan. Often people will pay so much attention to the interest rate they get for their mortgage, that they neglect the structure. Structuring a loan correctly can save your thousands over the long term, and also save you years off the life of the loan.
Of course, paying off such a large amount does take time, so keep in mind that it’s the constant little things you do to reduce your mortgage that will benefit you over the long term. Obviously there are ways you can reduce your mortgage, so don’t think that once you are in a mortgage that you are set to pay that specific amortisation schedule. Although it might take a little extra effort now, the rewards will pay off in the long term.
Even if you think you’re a bit of a pleb, everyone has a million-dollar idea at least once in his or her lifetime. But how many people actually turn that million-dollar idea into a million dollars? Well, the obvious answer is not many. But here are a few tips from our millionaire mentors to take that million dollar idea and turn it into a million dollars.
Well, for most people, they couldn’t care less whether the idea is good or great, as long as it makes them a million dollars! But it’s been proven time and time again, the million-dollar ideas that have the highest rate of success are those that solve a problem. Everyone has some sort of problem, and if you can provide a solution to their problem, most people are willing to pay for it.
How much are they willing to pay for it? Well that depends if that problem is a must for people, or simply a want. Oddly enough, people have paid millions of dollars for something that isn’t a “must” such as a piece of art, and that’s because we’re emotional creatures. We want to meet our needs, and if you’re good at sales, you can influence people to meet their needs through your product or service, but for most of us, the simple way to turn your idea to success is to have an idea that’s a little more needed.
Obviously if you have an idea, product or service that can cure cancer it will be on people’s must list, as it’s vitally important to them, so they’ll be coughing up the big bucks for it. (excuse the pun) But that doesn’t necessarily mean you’ve got to be the ‘wiz kid’ who builds some sort of contraption or studies for years in biomedical science or something, the whole point is to have something that adds value.
Ok, so you reckon you might have a million-dollar idea, but is there actually a market for it? Do people really want it or need it? Apparently there’s a market for colourful springs and keeping rats as pets, so if your idea is anything like that there’s probably a market for it, but doing your market research is vital to figuring out how much demand there is for your idea and whether you can turn that into a business.
A lot of entrepreneurs simply find out what demands there are in the market place and tailor a product or service to suit that market. Although you might love having rats as pets, I guarantee you others might not, so make sure you choose a market that has demand.
The first step is to get feedback from friends or people in the industry, as to whether they think the idea is great. This will give you some honest feedback, as it’s often the people closest to us, or those that know the market best who are the most critical. Just remember that even if your friends think it is a bad idea, to research further and get other opinions. There have been many entrepreneurs that have had hundreds, if not thousands of rejections for their idea, but have become extremely successful.
Obviously if your million-dollar idea is a completely new idea, there isn’t going to be any specific data for your to research, however you can still research the industry or sector that your million-dollar idea falls into, and determine what the overall demand will be.
Most people go to the length of thinking that they have to do something radically different in order for their idea to become successful. It’s not true. Think about how many different types of toilet paper you can buy. Seriously, I didn’t know I needed to choose between a piece of paper to wipe my butt with? The same goes for milk. IT COMES FROM A COW, what difference does it make if the label is blue or green? But that’s the key, being able to market yourself well.
An easy way to conduct your market research is with free services provided by Google. Almost everything that is offline, is online, and this is a fantastic avenue for you to conduct concise and free market research. Google trends, and keywords will allow you to determine what people are searching for, how many people are searching for it, where the majority of the searches come from (specific to a particular city or suburb) and how much competition there is for that industry or sector.
Along with determining whether your idea will be popular or profitable, you have to take competition into consideration. You might have a fantastic idea for a search engine, but do you really think that you can compete against a billion dollar company like Google?
Protect your Million-Dollar Idea
Robert Kiyosaki the author of “Rich Dad, Poor Dad” shares his experience with a ‘surfers wallet’ he created in his earlier years of being an entrepreneur. This wallet made him plenty of money, however because he neglected to protect the idea, competitors soon took the idea and used it for themselves, causing Robert Kiyosaki’s business to fall apart.
Although we like to think the world is a lovely and supporting place, it doesn’t mean that people wont steal or copy your idea. You need to protect your idea from others and this can be done in a number of ways depending on your idea/product. It might cost you a fair bit now, but it’s going to cost you a whole lot more if you don’t protect your idea. The best way to do this is to talk to a good solicitor.
Raising capital for your Million-Dollar Idea
If you have a new idea that needs a lot of money, and you really want your million-dollar idea to take off the ground, you’re going to need to raise some capital. The key to raising capital from investors is not to simply show them your idea, but to show them a business model.
Investors are not concerned with an idea. Ideas are plentiful. Investors want to know that they’re going to receive a return on their money, and whether the business is going to support that idea. If you are going to show investors your million-dollar idea, you need to provide them with a structured system, (or business model) which will not only make the product sell, but create a strong business, that will continue to develop and expand, with further assets and profitability.
Outsourcing your work
If you are going to create a business, you need to learn how to delegate and outsource your work. You can’t expect to do everything yourself, as you will quickly run out of time. A great way to do this is to create a system. By creating a system you can rely on other people to do work for you, because you know that what they are doing is according to the system you have built. Like I have said in other articles: many people can make a hamburger better than McDonalds, but what McDonalds has; is one of the world’s best systems.
When you walk into McDonalds, what do you see? You see a bunch of teenagers, working behind the counter. This is because McDonalds has created a system that is easy to follow. They aren’t stressed out thinking that teenagers are running their business, because they know they have a system in place.
You might be thinking that “sure that’s all well and good, but I can’t afford to employ people”. If this is the case, then there is an alternative to getting work done for a fraction of the cost. There are online services such as www.elance.com or www.freelancer.com, which will actually bid in a reverse auction for your work, allowing you to get work done much cheaper than you would by employing someone at an hourly rate in your home country. (assuming you’re not from India or the Philippines)
Market your Million-Dollar Idea
You might have a great product, service or idea, but unless you are able to market it, you’ll never make any money. Marketing is like the heart of the body; unless you can get that heart to pump the blood throughout the body, you’re not going to survive.
The biggest part to marketing is being able to sell. I know that some people cringe when they hear the word sell, but the truth is that everyone sells every day. You sell to your friends, family and strangers, but instead of selling a product, you are selling your ideas, opinions and motives. Everyone is only really concerned about himself or herself –even if they are giving to charity, as giving to charity makes them feel a certain way. We constantly sell to each other and ourselves; we just call it something else because we have a negative connection to the word ‘sell’ which was brought on by snake oil salesmen trying to push something onto us that we really don’t want.
Selling is about creating a ‘win with you’ scenario and allowing the customer see the benefits in your product or service. You don’t have to be a rottweiler that goes straight for the jugular when it comes to selling. You can be like a Labrador who is happy every time they see you, and by being friendly, and giving you what you want, they are getting what they want.
The essence of being able to sell is having adequate people skills and being able to develop relationships. If you have not already read the book, I would like to introduce you to a book written by Dale Carnegie (first published in 1936) called “How to win friends and influence people”. Despite being first published in 1936, “How to win friends and influence people” is still on the top of the list of books to read for people interested in self-development, communication, relationship building, or business.
Although the name of this book sounding rather manipulative, the content is quite the opposite and Dale shows us how to build real, solid and meaningful relationships with anyone that will last for years.
Network with people
No one has ever become a millionaire without the help of others, and networking will allow you to find the leads and people to make your million-dollar idea into a million dollars. Networking is vital to getting things done and meeting the right people. Often it is not what you know, but who you know, and you never know who can help you in some way, so be mindful when meeting new people and network with as many people as you can.
A great place to start networking is with social media sites such as Linkedin, Facebook, Myspace, Twitter, Digg and Flickr. There are many more social networking sites, but these are a few of the most popular.
Turning your million-dollar idea into a million dollars might sound like a lot of work, but that’s why you’ll get a million dollars for it. Most people never achieve it because they never actually get started. As long as you’re taking action and constantly asking yourself how you can improve, you’ll eventually achieve success. Just remember that if you want to get more than the average person, you have to do more than the average person. So take massive action on your million-dollar idea, and turn it into a million dollars.
ok, so property investing isn’t something you typically see on a trading website. In fact it’s almost the opposite of what you see on a trading website because people are constantly trying to convince you that one thing is better than the other due to their own interests, but we consider property investing as a means to becoming financially independent because it’s important to diversify and have asset allocation.
So, if you’re considering expanding your portfolio, you might want to consider buying some investment properties and we thought we’d put together a series of tips to help you.
As the saying goes “you make your money when you buy, not when you sell.” Anyone can go out and purchase a property, but if you really want to make money from investing in property you have to be able to make your money when you buy the property, rather than when you sell.
What does this mean? It means that by buying cheap property, you are already one step ahead of the market. Instead of trying to get the market to agree with your price (when you sell), you can simply sell the property at an average market price and turn your properties over quicker or get a better return on your investment through the ratio of income versus the loan you have. As I have said in previous articles and blogs, your most valuable asset is time, and if are trading property and you sit on a property for too long trying to get the best price, you are losing a valuable asset –your time. You could be using the money you have made from that deal, and put it into another deal making you more money and compounding your investments.
So what are the tips for buying cheap property? I have outlined 5 key areas that you need to consider when buying any property.
1. Research the Area
Doing your research for the area is vital to property investing. It is what determines a good buy, from a bad buy. Before you go out and buy your property, do some research in the following areas:
Population: Find the population of the city/town. As a general rule of thumb you want to keep the population above 20,000. Anything below that and there wont be enough demand for the property when you sell it. Find the average age of the population in the town and target your property towards that. If the average age of the population indicates that it is elderly, you know not to buy a two-storey house. You can find the population of your chosen city/town by looking at government or council websites such as the Australian Bureau Of Statistics.
Industry: Check for industry in the city/town. Where do people go to work? What is keeping the town alive? What is making the town grow? Sure, you can buy property cheap in a town that is not growing, but if your going to invest your money and time into something you want to make sure that you’re going to get money out of it through capital growth or rental return.
Transport: Don’t buy in a town that doesn’t have easy access to public transport. Major roads and railways will always keep a town alive, as there will be people using and working in and around them.
Services: Try to buy in a town where there is a hospital, school, and plenty of shops. If there is no hospital, make sure there is at least a GP or a hospital in a nearby town.
2. Check for Demographics
Make sure you take the time to check the demographics of the area you wish to purchase in. Don’t make a decision based on your hunch; make it on the statistics and data that you have seen. It’s especially important if you’re renovating property, because you want to know how to tailor the renovations to the market that’s going to pay the most and has the most demand.
Infrastructure: Look for new roads, or roads that are being (or going to be) widened or developed. This is a key indication that the government believes the town needs better access, as the town will have an increase in population.
Distance from the City: Try to buy properties that are on the fringes of the urban sprawl with easy access to the city. These areas will still be cheap, and provided there is industry and infrastructure, then the town is likely to grow. If you see McDonalds or the like being built, you know that the town is growing because large companies like McDonalds will only buy in growing towns which will supply their business.
Council ideas: Check out the council planning maps, and see what the council has in mind for the town. Make sure you take into account of the building zones and buy your property accordingly. Look for gaps in the urban sprawl where two towns will soon be joined, or under developed areas. If you’re in Australia you can check out: Planning Maps Online or simply look for your councils name in Google.
3. Location
Location, location, location. It’s said to be the most important part to finding the right property and it is. Once you have researched the area; i.e. the town or city, you want to make sure the particular part of that town is a good place to buy.
Buy the worst house in the best street: Check out the houses around the house you want to buy. Make sure that you aren’t buying the best house in the worst street. Preferably, you want to buy the worst house, in the best street (provided it’s not a dump). That way the value of your house will rise because of the surrounding properties. You don’t necessarily have to go to the house to do this –you can use Google maps with street view to see what the surrounding area is like. Just remember that Google maps is not always up to date, so be sure to check your street directory, as well as council maps to make sure there are no drastic changes to the area. If you feel that what you see from Google etc, might be a little old, then it’s probably worth checking out the house for yourself.
Look for Nearby Services: Check to see that the house is near a hospital, shops, schools, and transport. The closer it is to these the better (It’s preferable to have two or more of these). Ask the locals or the police where the bad areas are of the town and try to keep clear of them. Usually they will be the commission areas, however that does not mean there aren’t any good deals in these areas. Keep your eyes peeled for opportunities –you might just have to be a little more creative.
4. Buy with your Head, not your Heart.
Buying property with your heart is probably the most common mistake for the average property investor. Don’t get emotionally attached to the house you buy; you’re buying an investment, not your dream home. You need to have a clear objective of what the house is for: an investment or a place for you to live. DON’T MIX BOTH.
Buy a TLC house: Look for a house that needs work or TLC (Tender Loving Care) but not ELC (Extreme Loving Care). If the garden is messy and there is rubbish everywhere, but the house is in good condition (apart from maybe a paint job and a bit of plaster damage) then it might be a fantastic opportunity to spruce up the place and put it back on the market quickly. Often people will get shy when they see that they have to do a little work, and if the area consists of clean and tidy houses with a great community, then you can make some fantastic profits with a little effort on your behalf. Just make sure you don’t spend too much money on the areas of the house, which aren’t important and won’t improve the value. Stick to the bathroom and kitchen as the vital areas and living rooms as the point of flair.
Don’t buy a house you like: When you buy a house, don’t think what you would like in a property, think of what your target market is going to like in the property. You’re not the person who is going to buy it when you put it back on the market, so think of what the future purchaser would want rather than what you would want. Just because you like the walls to be bright orange, does not mean that the purchaser will. Try to accommodate for your market and keep things widely acceptable or tailored towards your highest bidder or largest demand.
5. Bargain Prices:
Make sure you know what a bargain is. If you are going to invest in property, you’re going to have to know if you find a bargain or not. Don’t be hasty in buying a property, there will always be another bargain or opportunity just around the corner, so do your research and make sure you know the prices of the surrounding areas.
Mortgagee Auctions: Keep your eyes peeled for mortgagee auctions. These can be great opportunities to buy cheap property, and are often sold below market averages.
Overdue Rates: Check for any overdue rates on the land. If there are rates that are way overdue, then they might be keen to sell the property and you can negotiate price better. You can do this by looking up council websites. It might cost you anywhere from $20 to $80 to find information about the land and rates etc.
Private Sellers: Sometimes you will come across some private sellers that are willing to sell their property for less. You can negotiate with them more because they don’t have to pay agent fees (which are usually around 3-5% of the purchase price in Australia). Don’t neglect an opportunity from a private seller because you are afraid there is no agent involved, or that you might not be a good negotiator.
Previous selling properties: If you can afford it, you might want to use services such as RP data, which give you information such as the owners name, phone number, the average prices of the area, how much they paid for the property etc. This is rather expensive, however if you are investing in property all the time, it’s probably worth having. If you can’t afford to pay for RP Data and the like, you can do your own market research by keeping a keen eye on what houses are selling for in the area and you’ll soon get to know if there is a bargain or not.
The key to becoming a successful property investor is to separate your personal emotions of buying a “pretty” house and look at the numbers and facts. If you can do that, you might just increase your portfolio in a shorter period of time.
Setting goals isn’t something that everyone very accustomed to. Sure you might have written them down once, but do you really look at them and focus your efforts towards them?
Chances are you don’t. It’s cool, we all do it some times. You get a little closer to the date when you’re supposed to have achieved the goal and you get stressed.
At this point, most people either give up or stop setting goals and sadly, they never achieve what they were so passionate to when they started. But what’s the whole point in setting goals anyway if they just end up making you feel like crap?
Well there’s an old saying that pessimists are almost always right, but optimists, despite being wrong, achieve more.
By setting goals you are saying that you must achieve something by a certain point in time, and what’s super cool is that your brain will actually look for opportunities to make that happen. When you set a goal you think about (and hopefully act on) the thing you want. In other words, you focus. What happens when you focus? You kick ass.
Creating Luck through Preparation
You’ll always hear the jealous people say “they were lucky”. Yeah… bullshit. More like they worked their ass off and focussed on what they want that their head nearly exploded and they managed to get what they want! Luck isn’t something that you just have, it’s something that you create. Why is it that two people can be presented with the same opportunity, but one person takes it and the other doesn’t? It’s called preparation. Those who prepare for stuff are ready to take the opportunity when it comes, which means they act on it and they get a result. It’s not rocket science, you’ve just gotta DO stuff.
Learn stuff!
If you want take advantage of an opportunity you have to educate yourself about the thing you want to have. If you want more money, you’ve got to educate yourself on ways of getting money such as: stocks, real estate and business. The more aware you are to ways of making money the more opportunities you will find. You might be driving past a block of land every day, and until you know how to invest in property you will have no idea that it is an opportunity, so take the time to educate yourself on how to make more money or whatever you want to achieve.
Get Creative
Ask yourself the question: “What opportunities can I take advantage of that surround me in my life right now?” If you ask yourself a quality question, you’ll get a quality answer. If you ask yourself a shit question, you’ll get a shit answer, so remember to ask yourself good questions and you’ll have a good life.
You’d be surprised at how many people forget to ask how to solve a problem. Most of the time when people come across a problem their habitual way of thinking is to complain that there is a problem. If you want to earn more money and be happy, you just need to think about asking the right questions and how you can solve your problems.
Get creative in the way you solve problems and get your work done. Think outside the box. Ask yourself questions that will spark you to think of things in a different way, “what if” questions are great. Just because everyone else does something a certain way, doesn’t mean that it’s the only way.
Instinct baby!
Listen to your gut, not the little voice in your head. The voice in your head is telling you that it’s afraid of something; it’s fearful. Your gut is your subconscious telling you that something is either good or bad. If you feel bad in your gut you need to step back and assess the situation. Most of the time when we feel bad in our gut it’s because what we are doing is not in line with our goals or values.
If you have assed your situation and you still feel bad in your gut, then you know to follow your gut instinct. If your gut says yes, but the little voice in you head says no, then you know that it’s just the voice telling you that it’s afraid of something. In other words you need to prepare more for what you are about to do. Educate yourself more and ask someone who has done what you are about to do before.
Take MASSIVE Action
The most important aspect of setting goals is to take action. Without action you are just sitting on a bunch of great opportunities. You will never progress and reach your goals. You need to build momentum and keep that momentum going. The harder you work, the luckier you will get. But remember to work hard doesn’t mean to drain yourself out. It’s much wiser to work smart and get someone else to do the things that you don’t know how to do, or don’t want to do. Don’t be afraid to ask people questions and draw upon the resources that you have available.
“Praise the lord” -Have Faith
I’m not a religious person myself, but having faith in yourself is important. If you find an opportunity and take action on it, it doesn’t mean that you are going to see the results straight away. Be patient and know that your results you see now are a reflection of past actions, so if you act in a positive way now you will eventually see the positive results. You just need to have faith that you will achieve your goals and look forward to seeing the results of your current actions in the future.
Although this might sound like a lot of work, I assure you that it’s not. The more you do these things the easier they will get. It’s just a matter of getting the ball rolling, once the ball is rolling you will find that you don’t have to find luck, luck will find you.
Remember that people aren’t just lucky for no apparent reason; there are always similarities between those that are lucky and achieve success, and provided you follow the rules, you can achieve the same success too.
Words are amazing aren’t they? A couple of words like “Thank you” can inspire you, make you happy, make you grateful or make you feel loved.
It’s funny how we often do more for others than we’ll do for ourselves. I bet you, you say “thank you” to people fairly often. But how often do you say it to yourself?
It might sound like a bit of a weird concept to thank yourself, but so often, people will rely on things outside of themselves to make them feel a certain way. Why?? Why not make yourself feel awesome? I know I do. Think about this: When you feel like shit, what do you feel like doing? NOTHING. When you feel amazing, what do you feel like doing? EVERYTHING.
What’s the secret to success? DO STUFF. What’s gonna make you do stuff? IF YOU’RE HAPPY. So take some time to say “Thank You” to yourself and be grateful where you’ve come from in your journey to success.
The founder of IBM was asked what was the largest contributor towards his success? His response was that he thought of at least 5 things he could be grateful for every day.
If you want more success in your life, it’s easy just be more grateful and you’ll feel good, leading you to do more stuff, which will make you more successful. It’s a pretty simple formula hey?
Think of 5 things every day that you are grateful for and I guarantee that your life will change dramatically.
It really does amaze me at how many people invest in stocks without any proper education or training. It makes trading almost the equivalent of gambling: “hmm I think i’ll put $5,000 on red”. In case you’ve ever been one to put money in the markets without sim trading, (simulation trading or paper trading), here’s the top 10 reasons why you should paper trade before investing in stocks.
But first up, let’s clear up a few things:
What is paper trading anyway?
Paper trading simply means to “pretend” to trade using real market data (and fake money) in order to practice trading before you begin. Another way you might put it is simulation trading. It’s like you are trading with ‘paper’ money or monopoly money. In most cases you will follow your charts (if you’re using technical analysis) exactly as you would if you were trading with real money, or if you’re using fundamental analysis (like a sucker), you will follow your strategy and research the company the same as if you were going to invest your money in them, only you are using ‘paper’ money.
When you begin to paper trade you will be given a fake monetary value in a ‘sim account’ which to trade with. If you have your own trading software it’s best to trade with a realistic amount of money (i.e. the same amount of money as you will when you use real money). The reason you do this is because if you trade with a realistic amount, you are more likely to make decisions as if you were trading with your real money.
Another point, which you might like to take, is to treat your paper trading money like you borrowed it off your grandmother and you’re terrified of losing it (Seriously, she’s going to be eating bread and won’t be able to afford medication if you lose this).
Now you don’t want to focus on being fearful of losing your money, but that is probably the closest example of the feeling you get when you trade with real money. I assure you there will be nothing that will prepare you for the feeling of trading with real money; that is something that you will develop when you get to it.
That having been said, breaking through that fear is rather rewarding and the fear itself shouldn’t put you off trading.
The second thing we need to clear up is that:
Paper trading should be taken serious.
Every trade that you make must be made as if you were risking your real money. If you wouldn’t buy “XYZ” (a fabulous stock that I made up) with your real money, but you have a hunch that it’s going to go up, then you’re not paper trading you’re just having some fun.
There’s no problem with that, you’re just never going to make money. Ever.
Everything you do should be exactly as you would do it if you were trading real money, except you are using paper money.
1. Learn the Markets: The number one reason why you should paper trade before investing in stocks is to give yourself a chance to learn the markets. I don’t care how good you think you are, trading live (with real money) without paper trading first is suicide. You need to be able to get an understanding of the markets and how they operate. Trading is not gambling; it is an analysis of probability and speculation.
2. Find your Strategy: Before you trade with real money, you need to be able to paper trade to find your strategy. How can you possibly know if your trading strategy works until you try it out for yourself with real market conditions? EVEN IF IT’S SAID TO BE A PROVEN STRATEGY.
3. Make Mistakes: The benefit of paper trading is having the ability to make mistakes. Every new trader makes mistakes, and I assure you, you won’t be happy about making mistakes when you trade with real money. If you paper trade first, you are less likely to make mistakes that will cost you money and you will be able to control your trading much more.
4. Find your Habits: Every one of us has habits. Some of those habits can be detrimental to trading. If you paper trade before trading with live money, you can find your bad habits and iron them out. It’s much easier to change your behaviour and habits when you’re not risking real money.
5. Test and Measure: Trading requires you to constantly test and measure not only your trading strategy, but your mindset. The markets are always changing, and what works today, might not work in 6 months time. Likewise you need to test and measure your behaviour as a trader. 80% of a trader’s success is due to their mindset. If you can learn how to test and measure, and develop your skills to change quickly then you’re going to be much more astute in the real marketplace.
6. Master your Mindset: Like I mentioned above; trading is 80% mindset and 20% strategy. There is more to trading than picking stocks, it is a mind game that you have to master, and unless you master it (or at least learn the basics) while you paper trade (before you trade with real money); you’re almost guaranteed to lose money in the marketplace, and in case you haven’t realised it yet, LOSING MONEY SUCKS!
7. Learn new Strategies: The markets are never the same; they are constantly changing and require you to develop new techniques and strategies regularly. Even experienced traders will never trade their real money until they have developed their new strategy by paper trading it. Every time you create a new strategy or technique you should paper trade it first to make sure it works.
8. Lose money: Part of being a successful trader is having the ability to lose money. Yep lose money. Not every trade you make will be a winning trade, and this is one of the hardest parts to trading. Paper trading gives you the ability to learn that you will have losing trades without affecting your real results. You need to be able to deal with losing money, and know that another trade will be just around the corner.
9. Make Money: Although it might sound odd, some people have some pretty bizarre associations to making money. Often people feel guilty if they make too much money, or they have a buffer where it becomes too uncomfortable. You need to learn to accept more money in your life and paper trading lets you do that without risking any money of your own.
10. Get Consistency: Finally, the last reason why you should paper trade before investing in stocks is to get consistent results for your trading. Anyone can make money in the markets, but only successful traders will make money consistently. Once you can make money consistently in the marketplace you know that you can take it to the next step and make real money in the markets.
Our concept of money has changed pretty rapidly in the past century. We started off with gold coins and now most of us hardly use cash. We use “pay-wave” credit cards or our iPhones wirelessly. It’s like money is just an invisible thing is transferred from one person to another, but how did it get to this, and what can you do to get a shit-load more now?
First up, I’ll explain a little bit about the history of money:
The dictionary meaning for money is “A current medium for exchange in the form of coins and banknotes.” What does this mean? It means that money is a universally accepted wayto exchange value; nothing more, nothing less.
People have a variety of different meanings for money, which often depend on their experience with it, and their parents’ experience with money. Some people believe that money is hard to come by; “money doesn’t grow on trees”, or that having too much money will make you evil; “money is the root of all evil”. -Some pretty limiting stuff if you ever wanted to have more of it.
But despite what some people believe, money is merely and exchange of value. It is a means of being able to agree on a uniformly accepted tool to exchange value between two people.
Before money was created people would barter to obtain the goods and services they needed. Basically if someone wanted to trade something e.g. a cow for some grains they would need to find someone who wanted a cow, and had grains. They might find someone who has grains, but instead of a cow they want some chickens.
They might also find someone who wants a cow, but they only have metals or a service to trade. This meant that if you owned a cow and wanted grains it was a pain in the ass. You would have to find someone who wanted a cow and had grains. If you couldn’t find anyone, then you would have to exchange your cow for some chickens and then exchange those chickens for some grains, and who want’s to go to the effort of doing all that?
What all this meant was that every time someone wanted to exchange something they had to first of all find someone who wanted their commodity, and second of all haggle (or negotiate) with them until they reached an agreement.
If they had to trade twice to obtain the commodity that they originally wanted (i.e. grains instead of chickens) they would have to haggle twice meaning that if they weren’t good at haggling they could lose some of the value of their commodity (a cow in this case) during the process.
The other problem was that if you owned a cow, you would have to buy a large amount of grains to reach the same value of your cow (unless you divided your cow, which was much harder to preserve back then) and if they wanted a live cow, it wasn’t really going to happen.
For the reasons above, it was decided to form a universally accepted commodity to trade with, which everyone considered valuable. This commodity was most commonly gold or silver. For years people traded gold and silver in exchange for other commodities, however it still left the problem that gold and silver was hard to transport and when purchasing large items (it wasn’t very convenient).
There was obviously the risk of having your gold stolen especially when it’s such a large and heavy object to carry around. So people started to store gold that they didn’t need at the time in the equivalent of today’s banks. In return for placing their money into the “bank” they would receive a receipt acknowledging that they had placed gold in the bank and how much gold they had deposited. When people wanted to trade something they would go to the “bank” and claim their gold, then trade with it for other commodities, however this still didn’t solve the problem of gold being an inconvenient method of trade.
After a while people realised that the ‘receipt’ they received (which was a clay tablet at the time in many countries stated how much gold they had deposited into the ‘bank’) had the same value as the gold itself because it was only a measure of what real commodities were stored in the ‘bank’ and they began to trade the receipts rather than the gold itself. This was the first type of paper money and initiated the use of paper money that we still use today.
At this point some of the ‘bankers’ realised that many people were not withdrawing their gold from the bank and simply trading the receipts instead. This led some ‘bankers’ doing a bit of a dodgy and lending out receipts which accounted for more gold that what they had available in their reserves. The ‘bankers’ realised that they could obtain interest for the fake receipts without having the gold to back up the receipts and the idea of fiat money was born. That is why you’ll find banks still today are able to loan out up to 17 times the money that’s available.
Fiat money is money without the backing (or replacement) of a physical commodity such as gold or silver. In some cases fiat money is backed by taxes however the main problem with fiat money is that; because it is not tied to a commodity it can be printed at a rate in which can cause inflation, and the only thing that regulates the value of it is it’s supply.
Obviously when money is not backed up by a commodity and is printed at one’s leisure, it becomes too readily available and loses it’s value. This has been proven to be the case many times over through out history around the world and one of the earliest signs of this was in China around 1023.
The Problems of Fiat Money
Before the early 1930’s money was backed up by gold and this helped with inflation (although banks could still lend out more money than they had in reserve, which is why when the public makes a ‘rush’ on the bank some people cannot get their money).
However, as countries began to get themselves in more and more debt with banks and other countries, the temptation to create a fiat monetary system; where they would not have to provide the physical commodity became more inviting due to the fact that they would not have to mine or provide real commodities and simply print money to pay off their debts. The only problem with this is that it made things worse. The country no longer has to encourage people to work in order to boost the economy to pay back debts, the country can now just print more money.
This however causes problems in the economy in relation to the value of money, the supply of lending and the demand of work, which then causes people to lose jobs and default on their mortgages causing more financial problems.
If the confidence of money is low, then it can be considered worthless, as it has no physical commodity to give it merit, which people can use in their daily life. If money was backed by gold (or other commodities which don’t have an endless supply), then the value of it would be increased as not everyone could obtain it, allowing you to trade it for things which you could use to live i.e. food, clothes etc. Creating a worldwide monetary system, which relies on fiat money, is the single largest contributor to financial instability and inflation worldwide causing massive social, economic and political problems.
How to get a shit load more money now.
Now that you understand what money is (an exchange of value) and you know why and how money was created, you can now understand how to get more money. As obvious as this section may sound, getting money still puzzles some people. If money is simply an exchange of value all you have to do is exchange something that you have of value for money.
Most people exchange their time for money, however if you exchange your time for money, you are limited by your time, which means that you can only receive as much money as you can give out in time. Most people will work in a job whereby they sell their time. It’s true, that to gain a job you must have some sort of skills, however most people are paid by the hour rather than their results.
This leads us to an interesting concept: If you are limited by your time (because lets face it, everyone is going to die one day) then how can you receive money for services that don’t use your time? And that’s exactly the answer we are looking for. In order to get money, we must exchange some sort of value, and because we are limited by time we must find a way to sell something worth more than our time; and that is our services, ideas or products.
In the article ‘Using Leverage’ I explained that; in order to become wealthy you need to leverage your time. This can be done through investing your money in stocks, real estate or business. By doing this, you use leverage to exchange something of greater value in order to gain a monetary return.
So what does that all mean? Simply put; in order to get more money, you must provide a greater value in which you can exchange. The greater the value of your product or service the more money you will receive. If people perceive your product to give them more value, then they will be happy to exchange money for that transaction.
That is why having a business or investing allows people to become so rich. It is not because they are stealing from others or anything like that (although some unlawful people will try to do so) it is because they are giving a greater value to the people whom they provide the product or service. If you sell an eskimo a painting for $500, you might well have given him some value as he will enjoy the painting. However, if you sell the eskimo a gun for $500 with which he can hunt for his own food, you have given him much more value because it is something that he can use repeatedly to not only gain food, but skins in which he can sell for a profit. He’s likely to kill his other eskimo friends and you’ll most likely sell more guns. This is a clear example of giving more to someone than they had before through an exchange of value.
Investing is much the same. If you invest in your education and it costs you $5,000 whether that be through university, college, seminars, books or courses and that education enables you to make $50,000 or saves you years in time, then the person who has educated you has given you great value for the monetary exchange.
What is the best way to get Money?
If you strive to have more money in your life; a general rule you have to have is to give more and charge for it. Do it in a way, which gives the person whom you have dealt with more than they had previously and you’ll always be in demand. This is a simple rule to becoming rich that many people overlook or forget. The best way to give the most is to create a product or service, which helps people and/or solves their problem. The world is full of problems and there will always be a need for something to be solved. That is why so many become rich simply through their ideas. An idea, which then turns into a product or service that solves a problem is of great value and will give back in monetary value if you know how to receive it.
An idea might not necessarily mean that you have to start a business or create a new product. An idea might just be to invest your money in someone else’s business to allow them to give more value to people. Just remember that the more value you give to people, the more value you will get in return.
Money is not difficult to come by, nor does it require you to steal, cheat or deceive people in any way. Having more money is not evil, it is merely an exchange of value, and having more money will not make you any less of a person.
In fact by having more money it means that you have given more value to society and you have now received that value back in monetary form (provided you follow the rules spoken of herein). So, if you continue to provide value, leverage your time, and know how to receive that money, you will inevitably become rich. It is a simple rule that follows the logic behind the history money.
Position trading is more of a longer term strategy that aims at holding stocks anywhere from a few days to months, or years. Traders usually look at the bigger picture when making their investment decisions. Fundamental analysis is a tool that is commonly used for longer term investing, however some position traders do use technical analysis also. Position traders that wish to have more stability will usually invest in blue chip companies with more strength, where as position traders that are more short term minded and are looking for quicker profits might go for growth companies such as IPO’s and lower cost stocks with rapid growth.
The benefits of position trading is more suited to the long term investor. The time involved in trading is very low compared with other trading strategies. The majority of the time is spent choosing the market or stock etc in which you are going to invest in. The rest of the time is spent checking on the market and seeing at what point you wish to exit your position.
Many uneducated traders enter the market with a long term view, yet they check their stocks etc daily and become emotional when they see a pull back in the market. Position trading is not a short term strategy in which you would need to check your investment daily. If you do wish to check your investment daily, and make a decision based on that, it would be much wiser to either trade intraday or swing trade rather than position trade.
Position trading offers low emotional stress. The idea behind your position trading strategy is to invest in a company etc that you think is stable and will grow over the long term, or at least have stability to withstand small price fluctuations. Traders that wish to position trade have the view of placing their money into the market and not have to think about it too much. Because position trading is over the long term, small price volatility isn’t as important to the position trader, as they know that their initial decision to invest in that particular stock etc was because the company had financial merit, however this does not denote the fact that traders must be aware of the movements in the market.
By choosing to invest over the long term, traders are most likely to receive dividends. Dividends can sometimes be reinvested into the position to compound the investment, and can provide a means in which you can pay for hedging such as a put option.
Position trading can also be a way to receive a monthly income. Writing covered calls is a strategy in which not many investors know, yet it provides great hedging and income benefits. Leverage can be used in position trading, however the level of leverage, and it’s use, is not as common as in Intraday and Swing trading.
Drawbacks of Position Trading
Position trading does have some drawbacks. Choosing the right stock etc to invest in can be quite challenging and can require a fair amount of financial knowledge. The average investor does not know how to use fundamental analysis or in coincidence with technical analysis to determine which investment to buy. Often position trading requires a large capital to get started as the costs of trading can quickly eat up your initial capital if you start with a small amount, so position trading isn’t such a great vehicle for the novice investor.
There are ways in which novice investors can gain capital to start investing in position trading, however a lot of the time it is financially difficult, and if less capital is used it can increase the risk as the investor has less ability to diversify.
Although there is more financial stability, and less time involved in position trading, the returns are substantially less in comparison with swing and intraday trading over the same period of time. Position trading has the view point of placing your investment in, to draw out at a much later date, and consequently requires a lot more time for the investment to grow because of the strategy used.
Investing in position trading, depending on the strategy used, can also be difficult to determine when is a good time to sell your stock etc. Many position traders wait until they retire to withdraw their investments, however this is not always the most opportune time in which the investment has the greatest result. If the investor wishes to retire around the time of a market downturn, then they may have reduced some of the upside potential of their investment. Often traders are forced to either work for longer or lock in the loss of gain in a market downturn. There are ways to hedge against your position, however some market movement needs to be expected, and this might cause you to leave your investment more open.
Swing trading is the term used for trading usually over a period of days or weeks. For example a trader might open a position on Monday and close the position on the following Thursday. Swing traders usually use technical analysis to trade, however some do use both technical analysis and fundamental analysis to give a broader view. Like Intraday trading, swing trading usually involves a leveraged strategy such as Options or CFD’s to gain greater profits over the shorter term.
Some of the benefits of Swing trading is that profitability can be quite high, due to leverage, and the ability to choose from many different markets to find the best market that suits their trading style and strategy. It enables the investor to take advantage of either upwards or downwards moving markets, and profit in a shorter time span.
The time in which swing trading takes is relatively low, and usually a couple of hours a day or per week (depending on your strategy) will suffice. Swing Trading means that you can have flexibility with the time that you trade. Swing trading usually involves charts that update daily or weekly etc. and trading isn’t fast paced and doesn’t require quick decisions. Instead the trader has time to analyse the market and control their emotional state before they enter a trade. This is often more beneficial for new traders because it gives them time to make sure they are taking the right trade, and that they are in the right frame of mind.
The drawbacks of Swing trading is the commitment required to your trading. If you are in a working position, and you miss a day (or week etc) trading, the markets can turn against you and your profits can turn into a loss. This can be overcome by a placing an order with your broker, however you may not wish to rely on this. The other thing that you need to be aware of in swing trading is that most swing trading typically involves trading a leveraged product, and you can have sizable losses as well as profits, so you must make sure that you have a trading plan and a profitable risk to reward ratio.
Often the biggest problem for swing traders is deciding on what market, or which stocks etc to trade. The availability of so many stocks etc can be an advantage, however it is also a downfall. Trading Forex can simplify things somewhat and also gives the flexibility to trade at different times.
Swing traders need to have a good understanding of their strategy and trading techniques to choose the right market or stock etc. to trade. Depending on the market you trade and the amount you trade, commissions can be a little more expensive than other trading styles, so you usually have to trade with the trend and look for larger market movements.