All about investment

By Frank Kollar

We are all familiar with the stereotype of the impulsive trader. Traders who are impulsively looking for trading thrills, while telling themselves they are doing it to make a profit.

The rush of adrenalin that comes from making the "big" trade and then watching to see if it is followed by a "big" win.

It is not so different from betting at the race track. It is far removed from what is required for successful market timing.

Impulsive market timers take trades because of emotional responses to news events, market rallies, or market sell offs, because they "feel" they know what is going to happen next in the markets.

They take trades not because the trade is required, but for the thrill of the trade itself. All risk controls are ignored, no logical trading strategy is followed, and no exit strategy is prepared ahead of time.

Of course anyone can act impulsively at times. But in the investing world, impulsive trades are almost always losing trades. Impulsive trading has led to the outright ruin of many traders.

Delaying Gratification

An interesting test was once run to measure a person's impulsive tendencies:

Participants were asked to decide between taking an immediate, small monetary reward (that is, $100 right now) or a larger reward given later, $500 in six months.

Impulsive people tended to take the smaller, immediate reward. They have difficulty delaying gratification. They can't wait for the larger reward. They want what they can get as soon as possible.

Even disciplined people can act impulsively when the conditions are right.

There is little harm in impulsively going for a latte instead of your usual morning coffee, black with two equals.

Yet while some impulsive decisions may have little effect on one's life, impulsive decisions made when trading the stock market can have major negative consequences.

Compulsively Impulsive

Market timing, and all successful trading for that matter, requires that investors clamp down on emotional impulsive behavior. Market timing is possibly "the" perfect example of unemotional, non-impulsive and non-compulsive planning. Timers look far ahead in time, planning for gains that may not be realized for months. If in cash during a bear market, actual profits may be postponed years.

Instant gratification is the exact opposite of what market timers must expect. Those who think that long term buy-and-hold investors hold the edge in long term planning are not correct. It is market timers, following a plan that takes years to unfold but offering gains far in excess of a simple buy-and-hold, who have the real long term strategy.

Conclusion

Impulsive traders will have great difficulty being successful (profitable) market timers. Market timing is the non-impulsive execution of a planned strategy, that can only be successful over time.

Market timing requires adherence to a trading strategy that requires trading not when you feel the urge, but only at specific points in time when your trading strategy tells you to do so. And, those times are often in direct conflict with the prevailing market sentiment.

Impulsive personalities face many difficulties. But in investing, be sure to hold those impulses at bay if you want to successfully beat the markets.

By Dale Busbee

The margins in staffing tend to be smaller than many other industries, and in order to remain competitive in the marketplace, staffing companies must price their services at rates that the market will accept. There are many regional and national companies that will “buy” staffing business in order to gain or keep market share. The independent staffing companies that survive are the ones that have excellent customer service, while keeping their prices in line with the larger firms.

Which brings us to the question of whether factoring is right for your staffing company. Let’s assume you have been self-funding your firm from inception, then you get a job order for, let’s say, 100 new temps. These may be for positions that require highly skilled and very highly compensated professionals. You have the database of readily available candidates, yet your client will only pay your invoice after 5 weeks. If each candidate commands $35 per hour, and you are able to bill $50 per hour, for an average 40 hour week, your payroll for 100 temps would be $140,000. Multiply that by 5 weeks, and the capital needed to pay your employees before you get paid from your client is $700,000. Wow, not many staffing owners can find that amount of change in their sofa cushions!

Let’s examine the options. Assuming you have $700K in the operating account, you accept the job order gladly, send the temps, and wait 5 weeks for payment. Probably the easiest and least expensive option. 2nd option - check availability on bank lines of credit, credit cards, and any other lines of open credit, and hope it is enough to cover payroll for 5 weeks. 3rd option, ask your banker to increase your line of credit, and hope it gets done in the next 3 months. 4th option, take out a second mortgage on your home, car, or any other assets that are not sufficiently encumbered at this point, and pay those notes off when you get paid from your client.

The 5th option to consider is factoring your accounts receivables. This may be a viable option, once considering time value of money and opportunity cost of not taking on a new client. At a $50 bill rate, and a $35 payroll rate, the total margin for 100 employees in a 5 week period is $300,000. That could buy a few hamburgers these days! Let’s say your cost of factoring was 2.5%. Billings for 5 weeks would be $1,000,000. 2% of that amount is $20,000. Would you spend $20,000 to earn $300,000?? Most of us would. And the best part is no loans, no tying up of collateral, no worries about credit lines, no hassles, JUST POSITIVE CASH FLOW.

This is a very simplified example, yet the concept would apply to most staffing situations. Payroll funding and factoring can be a very easy solution that will allow you as a staffing owner to take on new business and maintain a positive cash flow while waiting for clients to pay your invoices.

It seems that everyone wants to bombard you with his or her favorite Forex trading these days. There is obviously some need for a systematic method of evaluating these various systems. The alternative would be rather chaotic and expensive.

There are ways to technically evaluate a Forex trading system, but these often go beyond the skills of many beginning traders. How does someone with limited technical experience go about evaluating the claims and/or effectiveness of the various systems that are presented?

While not entirely conclusive, I believe that a useful evaluation of a trading system can be done on a non-technical basis. And in fact, it is the first evaluation that I do, before I look more closely at the technical aspects of the system. After all, I don't want to waste my time if there are obvious problems that show up in this initial evaluation.

The first thing I look at is the presentation of the trading system. If it is presented through a web site, does the site have a professional appearance, or does it look like an amateur who couldn't be bothered to pay attention to details threw it together? I also pay attention to the grammar and spelling on the website as well as any other advertising materials.

Now that may seem petty and unfair. But if the grammar is poor, and there are misspelled words, it is another indication that there was not a lot of attention paid to detail. That fact could indicate problems with the actual system being presented.

Next, I evaluate the credibility of the claims that are made concerning the system. One of the ways I do that is by looking for any disclaimer or admission of fallibility on the part of the system designer. It is not only the presence of a disclaimer that is important. The quality of the disclaimer is important as well.

I saw one web site that claimed I could make 20% or more per day, and they all but guaranteed that fact. There was no sign of a disclaimer. There obviously was a credibility problem, and I never gave their offer a second look. Evaluating credibility is definitely an important step in the overall evaluation process.

After all that, I look for something that indicates the basic premise that the system is founded on. I don't expect a developer or vendor to give away their whole secret at this point. But if a system developer or vendor is willing to reveal their basic premise in even a limited fashion, that is a good sign, in my opinion. And then I ask myself if their premise makes logical sense. If it is something that makes logical sense to me, then I am willing to look even closer.

I once saw a trading system that was based on the premise that the markets move up and down along with the cycles of the moon. Now that is an example of a system that makes no logical sense to me. I do not mean to offend you, if you believe that the moon has anything to do with the movements of financial markets. But I would not be comfortable trading a system like that, because the underlying premise is not logical to me.

Those are some of the ways that I evaluate a Forex trading system on a non-technical basis. While this method of evaluation is not 100% conclusive, I find that I generally do not go wrong if I follow my gut instincts with those questions in mind.

By Tim Bennett

First the bad news – none of us are saving enough money. In the US last year the proportion of household income stashed away, known as the “savings ratio” plummeted to a level last seen during the Great Depression. In a recent survey, Sainsbury’s revealed that in the UK, one in five people claim not to have enough saved to last even a month if they lost their jobs and 12% of us have no cash savings at all. In fairness some would argue that with interest rates hitting rock bottom over the last five years no one, on either side of the Atlantic, has had much of an incentive to squirrel money away. However times are now changing - the UK base rate has risen sharply in the last 12 months and banks and building societies have, in most cases, responded by offering some pretty juicy savings rates. In any event it makes sense to have the equivalent of at least three months gross salary tucked away just in case. After all no one knows what lies around the corner – redundancy, marriage, an accident or just some time off. All a lot easier to deal with if you have a savings buffer. Given the vast number of savings accounts around, what features should you look for?

A decent interest rate

As a rule of thumb, if a bank’s savings account isn’t paying at least the Bank of England base rate then sign up with someone else because there is plenty of choice. The best rates tend to be for accounts operated either over the internet or by post as this saves the provider administration costs. Also, if you are aged 50 or above make sure you are getting the slightly enhanced rates often available for “silver savers”. At moneysupermarket.com you can compare rates at a glance. Having opened an account, it pays to monitor the interest rate periodically as some banks offer a great introductory deal but don’t then keep up with competitors as the base rate rises. Also watch out for hidden interest penalties for making multiple withdrawals - even on an instant access account, some providers will dock that month’s interest for example.

Flexibility

The point about saving is easy access – why set up an emergency fund that you can’t access for say three months? Although you may (though this is by no means guaranteed) get a little more interest on a notice account or a fixed term deposit there are often penalties for making withdrawals and we think the extra flexibility of being able to get to your money immediately, with a “no notice” account, more than compensates. The other problem with fixed rate accounts is that if interest rates rise while your money is locked away you won’t be able to take advantage.

Tax efficiency

Make sure that you use your individual savings account allowance, as the money earned is tax free up to the government’s limit – currently £3,000 per year - whereas interest in a normal account is taxed. Again, shop around as there are many Isa providers and interest rates and charges on these accounts can vary.

Offsetting – do your homework

Given that many budding savers also have mortgages, an account that lets you offset any balance in your savings account against your mortgage can look tempting and save some tax. The idea is that say you had £10 of savings and a £100 mortgage, with this type of account you would only get charged mortgage interest on the net balance of £90. Whether this is a good idea depends on several things – the offset mortgage rate you pay may be higher than for a standard mortgage for example, and the savings rate you could achieve somewhere else might be better too. Nonetheless worth investigating.

By John Roney

If we apply the covered call strategy to the stagnant stock scenario, we take a negative return scenario and turn it into a positive. Remember, when we sell an option, we receive a premium for doing so.

When the stock does not move during the option's life, the extrinsic value of the option goes to zero. The money paid for the option goes to the seller. We'll take a look at how this sets up.

Let's go back to our previous example with the stock trading at exactly $9.50. We sell the front month, at-the-money call, which would be the 10 strike call. We sell the front month 10 strike calls at $.50. As time goes by, there is less chance for the option to become "in-the-money". As this happens, the extrinsic value lessens and finally, after Friday expiration, the option is worthless.

The stock finishes at $10.00 and you have received no capital appreciation but you have received the full $.50 of extrinsic value from the option sale. If the studies are correct and selling the premium works 80% of the time, then you will collect approximately $4.00 per contract sold over a year.

As the examples demonstrate, writing covered calls against a stagnant stock can provide you with an acceptable return instead of frustration, wasted time and capital.

The "Down" Scenario

In the final scenario, where your stock purchase is headed down into negative territory, the covered call strategy can help minimize your losses. Although picking losers and incurring losses is inescapable, it can be minimized and controlled. Let's take a look at how the buy-write can help us do that.

For example, let's say you bought a stock for $9.50 and at the end of the month the stock had traded down to $8.50, you would have a $1.00 loss on our investment.

However, if you had sold the 10 strike calls for $.50, you would only have a $.50 loss. You would have a $1.00 capital loss in the stock, but a $.50 option gain from selling the option, which would expire worthless.

If you were going to buy the stock anyway and incur a possible loss, it is better to take a $.50 loss than a $1.00 loss. In this down scenario, the option premium received helped to offset the capital loss.

If the stock is down more than the amount you received for selling the call, then the option premium serves as an offset to the loss of the stock.

However, you can still make money in the "down scenario" using the covered strategy if the stock is only down a small amount. There is a scenario in the buy-write strategy where you can profit from owning a stock that is lower than where you bought it.

Going back to the previous example, you bought a stock for $9.50 and you sold the front month 10 strike calls for $.50. At expiration, the stock finishes down $.20 at $9.30 You would have incurred a $.20 loss on your stock.

However, with the stock at $9.30, the 10 strike call that you sold for $.50 is now worthless. So, you have a $.20 loss on the stock and a $.50 gain from the option premium sold. This leaves you with a gain of $.30 on a stock that is down $.20 since the time you purchased it.

To recap: in our third scenario, the "down scenario," your loss will be offset by the option premium you received, hence your loss will not be as severe. You still may incur a loss, but it will be minimized, and minimizing losses is a key to successful investing.

In the World of Finance, A CD does not mean a compact disc; it stands for a certificate of deposit. Thus, if you manage to buy a CD through savings and loans or through banks that is worth a certain amount of money, then the bank will be paying you in return a specific interest rate for a certain time. Consequently, if you buy a thirty-month CD, you may get a 3%, which is equivalent to $5000. Although a bank might not issue CDs for less than $1000, this is not the case all the time. Usually there are no requirements for issuing CDs.

You are free to choose when to get your interest, whether annually, quarterly or monthly, or even with the maturity of the CD. Just take care that whatever your interest is, it will never be added to your original amount of the CD. This stands in open contrast to a normal savings account. Nevertheless, you can choose to be paid by check or to have your earned interest deposited in a new account.

It is preferable not to redeem your CD before the maturity date agreed upon. If you cash earlier than agreed upon, you might lose 3 to 6 months of interest payments; such a penalty is known as the “penalty for early withdrawal”.

One of the advantages of CDs is their being insured by the government (usually the FDIC program) and this is because they are certificates issued by banks. In other words, buying CDs is a risk-free investment.

Another advantage is the freedom to buy and sell your CDs just like any bond or stock, for example, through a brokerage house. By selling your CD this way, you will avoid the penalty payment.

You should also put into your consideration that CDs usually come with a minimum, mostly $5000 and they must have round numbers (multiples of 1000).

Emma Snow

Living beyond financial means and incurring large amounts of consumer debt are increasing among individuals and families. Whether your income is large or small, creating a budget and adhering to it, will allow you to avoid debt and make better choices about needs and wants. When you create a family budget it is not so much the size of your income that determines success, but the way it is spent. The first step is to identify payments and bills and start to allocate your monthly income accordingly. Make categories for each item such as; rent/mortgage, car payment, utilities, food, household items, entertainment, vacation, household repairs, personal spending, savings.

Budgets can be customized to fit individual and family means, as well as needs and wants. As it is identified where money is being spent, evaluating purchases and what can be cut, changed or eliminated will allow for more conscience and effective spending. Many people do not realize how much they spend on eating out, unnecessary household items or clothes. The money is gone and they can't account for where it went. This is not only damaging financially by spending more than one has, but it is less fulfilling because it is thoughtless purchasing. For many, immediate gratification in purchasing has led to a plague of debt and bankruptcy. Avoid the trap of interest and wastefulness by making clear decisions about money. Here are some suggestions to help make a successful budget.

Counsel with partner/family on a regular basis about spending Regular communication and goal setting allows for financial success because all parties are on the same page and work together to make decisions for the family. By talking about goals it identifies concretely what the needs and wants are for the home and family and helps eliminate the power that impulse can have when shopping. Make decisions together including gifts, eating out, home improvements and personal spending amounts. Setting a limited amount allocated for each person to do with what they want without reporting gives freedom of choice, but controlled. Depending on your financial status that amount will vary and could be as little as $50 a month. It is important to keep it within an amount that can be afforded.

Use it up, wear it out, make it do, or do without It seems as though the more people have, the more they want. Just getting more money is not the solution for most financial struggles. Learning to evaluate needs and what can last and what needs to be replaced is the first step to putting money in the best places and making what ever your income is, be enough. Although it is tempting to "keep up with the Jones' " comparing possessions to others and trying to have what they do will not allow for a successful budget. If items are bought on borrowed money then possessions are not a true reflection of finances anyway. Making due with what one already has will eliminate a lot of unnecessary spending and free up money for more wise purchases.

Give thought to purchases Planning for purchases and saving before something is bought will prevent unnecessary debt and the consequences associated with it. Mindless spending has as negative of impact on the household as mindless eating does for the body. You end up with more than you need in the wrong places. Plan for what you want by making a list of most important or most desired to least important. Identifying your needs and wants will give focus and direction for spending and help prevent impulse buying. Shop around and see what is out there, what the going rate is for an item, and what a good deal would be. Watch for sales and coupons to make the best purchase.

Include savings in a budget Living within financial means is not living on the maximum made, but planning for a rainy day. Because unexpected events can and do happen planning for such situations will prevent the debt that would have to be incurred to pay for them. The more a person saves, the better, set aside as much as possible in this area for security and protection. Regret of purchasing is much for common than regret of not purchasing.

Creating a budget will reduce financial stress. Making conscience spending choices, well thought out and followed through with will create financial freedom and power for individuals and families. Wise choices will increase the quality of life, even if the quantity of possessions is not, and greater peace of mind will be found, and that is success.

By Nick Hunter

So you think you might want to be a stockbroker?

Perhaps the most popular area of the investment industry is that of a stockbroker. Although some of you might think that breaking into the business is difficult, but it actually is pretty easy. That of course depends somewhat on where you would be willing to work and what you would be dealing in. If you are a young person out of high school or college and can accept less guaranteed money for the potential to make a lot, then the options are limitless. Unlimited income and freedom to control your destiny.

Sound to good to be true? Maybe, but the fact is many people have changed their lives by becoming a Stockbroker or any Investment Professional. Brokerage firms that pay their brokers mostly on commission are always hiring. The idea that an unlicensed or inexperienced person will not be able to find a lot of openings is false. The risk that a stock brokerage firm takes when hiring new brokers in minimal.

A stock firm does not pay much in salary. $250-$500 weekly during training is the average. So, if a firm hires someone at $350 a week, the upside to the firm is high. You have to consider the initial loss of income when entering this business. If you are 20 years old, you might not consider that pay in the beginning as that low. Older workers with more personal and financial responsibilities have to consider it a little more.

Finding a job with a firm in this industry is different from others. Your choices are broad and the way you go about it can enhance your chances. Don’t just look for job ads in the newspaper or the Internet. Call up the firms themselves and inquire about openings even if they are not advertising. Look in your local phone book and call them. You may have an office of a terrific firm in your town that might hire you. Do not ask the receptionist if they are hiring. Ask to speak to the Sales Manager in particular. The Sales Manager of a firm is paid largely on the production of the brokers he’s managing. So, if you sound eager enough and come across well on the phone, I guarantee he will at least take your name and give it consideration if not bring you in that same day!

The Series 7 and the Series 63 licenses will be required before you can begin working with customers. Your firm will sponsor you for those exams. Other licenses may be needed depending on the firm and the securities they deal in.

Not an easy job for sure. It will take long hours, the ability and willingness to cold call effectively, and the drive to be the best. Only then, will you earn your worth.

Good Luck!

By David Bardon

Offshore investing is often portrayed in the media, as the practice of sending your hard earned money to some Caribbean Island in order to evade tax or to find a hole for your ill gotten gains. Of course there are some jurisdictions that may fit into this bracket and we know that there are those whose nefarious activities have to result in ill gotten gains, and these people have to bank too. However, offshore investing as a strategy for some investors has its place in any planned portfolio.

What Is Offshore Investing?

Offshore Investment is essentially the strategy of investing outside the investors home country for the purposes of tax planning, privacy or gaining higher returns from investment vehicles not available to the investor in his home country. There is no shortage of money-market, bond and equity assets offered by reputable offshore companies that are fiscally sound, time-tested and, most importantly, legal.

Advantages

There are several reasons why people invest offshore:

Tax Reduction -When discussing investing offshore with your friends down the local watering hole this is the one area that comes up most frequently and, one would assume, would be the first reason that investors look offshore. Plenty of jurisdictions offer tax breaks of many kinds to encourage investments by foreigners. For small countries with little resources and not much tax income from its citizens there is an incentive to increase the countries economic activities by offering a safe, legal, tax efficient structure for companies to base themselves for investment purposes either as holdings companies or investment vehicles.

To put it in simple terms an individual or corporation can set up a company in an offshore jurisdiction where that corporation does not have any operational facilities or business (in fact most of these types of company are prohibited from operating in the host country) and as such it attracts little or no tax in that jurisdiction for investments made. This makes it very attractive as part of an investment strategy to route investments rather than doing this individually or corporately in the home state.

In recent years, however, the U.S. and UK governments has become increasingly aware of the tax revenue lost to offshore investing, and has created more defined and restrictive laws that close tax loopholes. Investment revenue earned through offshore investment is now a focus of regulators and the tax man alike. According to the U.S. Internal Revenue Service (IRS), U.S. citizens and residents are now taxed on their worldwide income. As a result, investors who use offshore entities to evade U.S. federal income tax on capital gains can be prosecuted for tax evasion. Therefore, although the lower corporate expenses of offshore companies can translate into better gains for investors, the IRS maintains that U.S. taxpayers are not to be allowed to evade taxes by shifting their individual tax liability to some foreign entity. In the UK the European Savings Directive was intended to be an anonymous way of a European country paying withholding tax on interest on foreign held accounts directly to the home state of the account holder. Unfortunately this has recently been usurped by the UK government to gather information on offshore accounts. They then gave an amnesty called 'The Offshore Disclosure Facility' which gave UK taxpayers until the 22nd of June 2007 to tell the tax man about their accounts, pay taxes due and a 10% fine. 50,000 people did so.

However, as the taxman becomes more sophisticated at finding ways to reel in the offshore loopholes, the practitioners will find ever more complicated ways of helping clients plan for their taxes in an efficient manner and investing in the right offshore jurisdiction is still the place to do this.

Asset Protection - Offshore centers are popular locations for restructuring ownership of assets. Through trusts, foundations or through an existing corporation, individual wealth ownership can be transferred from people to other legal entities. Many individuals who are concerned about lawsuits, or lenders foreclosing on outstanding debts elect to transfer a portion of their assets from their personal estates to an entity that holds it outside of their home country. By making these on paper ownership transfers, individuals are no longer susceptible to seizure or other domestic troubles. If the trustor is a U.S. resident, their trustor status allows them to make contributions to their offshore trust free of income tax. However, the trustor of an offshore asset-protection fund will still be taxed on the trust’s income (the revenue made from investments under the trust entity), even if that income has not been distributed.

The use of bearer shares, for example is a classic strategy of exchanging ownership of companies without a paper trail of transfer, and therefore tax. What is a bearer share? If you are in the UK pull out a bank note and you will see "promise to pay the bearer..." The very notes in your pocket are bearer notes meaning that whoever has the ten pound note in their hand owns it and it can be exchanged for goods and services. It is the same with bearer shares. Lets say you own a company that you have built up to be worth ten million Euros and you want to sell it. If it is a UK company, there would be capital gains and stamp duty on the transfer, evidence by a trail of paperwork. If it is an offshore company held with bearer shares, you could simply give the shares to whomever you are selling the company to and there is no trail to follow.

Of course it is not that simple, as there are other considerations, such as the fact that you should declare the sale, but you see where we are coming from.

Confidentiality - Many offshore jurisdictions, such as Switzerland, offer the complimentary benefit of secrecy legislation. These countries have enacted laws establishing strict corporate and banking confidentiality. If this confidentiality is breached, there are serious consequences for the offending party. An example of a breach of banking confidentiality is divulging customer identities; disclosing shareholders is a breach of corporate confidentiality in some jurisdictions. However, this secrecy doesn't mean that offshore investors are criminals with something to hide.

It’s also important to note that offshore laws will allow identity disclosure in clear instances of drug trafficking, money laundering or other illegal activities. From the point of view of a high-profile investor, however, keeping information, such as the investor’s identity, secret while accumulating shares of a public company can offer that investor a significant financial (and legal) advantage. High-profile investors don’t like the public at large knowing what stocks they’re investing in. Multi-millionaire investors don’t want a bunch of little fish buying the same stocks that they have targeted for large volume share purchases - the little guys run up the prices.

Because nations are not required to accept the laws of a foreign government, offshore jurisdictions are, in most cases, immune to the laws that may apply where the investor resides. U.S. courts can assert jurisdiction over any assets that are located within U.S. borders. Therefore, it is prudent to be sure that the assets an investor is attempting to protect not be held physically in the United States.

Diversification of Investment - In some countries, regulations restrict the international investment opportunities of citizens. Many investors feel that such restriction hinders the establishment of a truly diversified investment portfolio. Offshore accounts are much more flexible, giving investors unlimited access to international markets and to all major exchanges. On top of that, there are many opportunities in developing nations, especially in those that are beginning to privatize sectors that were formerly under government control. China’s willingness to privatize some industries has investors drooling over the world’s largest consumer market.

Disadvantages

Tax Laws are Tightening - The UK 'Offshore Disclosure Facility' is just the start of an assault on tax loopholes and the IRS already tax US citizens on their worldwide income. However, where there is a will from investors and fees for the offshore practitioners and jurisdictions, there will be armies of accounts and advisers working on structuring further strategies for clients.

Cost - Although the general myth is that offshore investing is for the very wealthy, this is not necessarily true. In years gone by this may have been the case but with the information age and specifically the Internet, services are becoming more freely available and cheaper. However, services do not come free and the old adage is true "pay peanuts, get monkeys". Many companies offer a quick fix... set up an offshore company for $300 and away you go. Offshore tax planning is simply not this easy, it requires thought and planning, and with that comes fees.

How Safe Is Offshore Investing?

More than half of the worlds assets are held in offshore jurisdictions. If you ever go down to Monaco, have a look at the flags hanging off the super yachts. Ask yourself the question as to why a country such as St Vincent and the Grenadines (with 120,000 population and a low average income) is represented very well by multi million dollar yachts being registered there. St Vincent just happens to be a very tax efficient jurisdiction for such assets.

The question of safety is relative to what you are investing and where. Registering your super yacth in St Vincent is safe, because someone there is hardly likely to steal it, Would you invest your multi million portfolio from there? Maybe not. Places such as the Bahamas, BVI and of course, the daddy of all jurisdictions, Switzerland, have first class reputations for safety, privacy and security.

Conclusion

Investing offshore is different for every investor, depending on their home country, their wealth, the assets that they are looking to protect or the kind of investments that are being made, so each person requires a selected strategy. Creating this strategy may take lawyers, accounts and investment advisers to create the right structure. In the end, however, if the correct structure is created the benefits can be very good indeed.

There is, after all, a reason that the wealthy have been doing it for years....

By Richard Stooker

Managing your spending power to meet your needs is more important that "keeping up" with inflation.

Personal finance and investment writers constantly advise and admonish us to make sure that the value of our investments keep rising to match (if not exceed) inflation.

There's a sound reason for this. Inflation has been gradually eroding the value of our currency since the end of World War 2. From 1973 to 1982, the erosion was not even gradual. Everybody who went shopping during that period remembers how the prices of groceries and other goods seemed to go up every week. If the price didn't go up, what you got went down. It was the era of the incredible shrinking candy bars.

That is the period when annual Cost Of Living Allowances (COLAs) were instituted for recipients of Social Security and Veterans Administration benefits, government workers, and many private sector workers covered under union contracts. Of course, this institutionalized annual increases in expenses in the economy, which helps to maintain inflation in the economy.

So if I agree that inflation is a steady, insidious destroyer of the spending value of money, how does my advice differ from other financial writers?

I recognize that spending power should be managed across time.

And what I mean by that, is that it's usually better to defer spending when you don't need it, for times that you do . . . even if the spending power is reduced.

An example will make this clearer.

But first, remember that "saving money" is just another way of saying "postponing consumption." When you have $100 today you can choose to spend it -- or you can choose to save it so that you can use it to buy something later in your life, whether next week or when you're 105 years old.

In the 1970s, in reaction to the high inflation of that time, it became common wisdom to spend the money you had, as soon as you got it -- because it'd buy less in the future.

The most extreme case of this syndrome happened in Germany during the 1920s. Employers had to pay their employees during the middle of the day, then allow them to take their wheelbarrows full of their day's pay home during their lunch hour to buy bread for dinner. That's hyperinflation!

America in the 1970s was not that bad, but it was bad enough to really discourage savings, and to encourage financial writers to advise: "Your investments must keep up with inflation."

The problem is that planning for your retirement requires postponing consumption. You MUST save some of the money you earn during your younger years instead of spend it, so you will have it to spend during your elder years, when you're not bringing home a paycheck.

It's nice if you can find investments that maintain the spending power of that money -- but is it really a disaster if you don't?

Let's say you're now about 35 or 45 or 55 -- and working hard. All your bills are paid. You have a few thousand dollars extra, so you think about how much you'd like to take a Hawaiian cruise.

What if, instead of taking that cruise, you wisely decide to postpone consumption. You place that few thousand dollars into an investment that does NOT keep up with inflation.

Now it's many years later. You're too old and sick to work. You depend on Social Security and a pension, but they aren't enough for the lifestyle of your dreams.

One day you remember that few thousand dollars you put aside in lieu of taking a cruise around Hawaiian.

Inflation has reduced its spending money so that now it takes a few thousand dollars to buy a good meal. So you withdraw that money and buy yourself that meal . . .

THE FIRST MEAL YOU'VE EATEN IN FIVE DAYS!

So when is that few thousand dollars more important to you? When you have an affluent lifestyle and just want to take a Hawaiian cruise? Or when it buys a meal that keeps you from starving?

That's what I mean by managing spending power to meet your needs.

Of course, it's even better to invest that few thousand dollars in a way that will allow you to take as many Hawaiian cruises as you want, once you retire.

But too many people get discouraged by the "keep up with inflation" mantra, especially when they look at what their money earns in savings accounts and certificates of deposit. They fall into the trap of buying risky stocks for "growth," or they allow low yields on bonds and Treasuries to give in to the human impulse to buy now instead of save something for the future.

It's better to have a retirement of savings with reduced spending power -- instead of no savings and therefore no spending power.