It’s not enough that you work every day. If you want to become rich, you also need to invest your money so that it will earn for itself. This is the same concept of putting your money in the bank but the low interest rate that banks give is not enough to combat the rising inflation rates. In fact, if you really want to double or triple your money, experts suggest that you put up a business. However, this is not an option for most people, especially those that are afraid of taking risks. Thatís when asset management comes in.
Asset management is the professional management of your money and other assets like stocks, bonds and even real estate for better profit. This is often done by financial advisors and portfolio managers for a fee or most often a percentage of the earnings in a period of time. This fee is what makes most people, especially retirees, shy away from hiring asset management people.
If you know the economic environment and understand investment terms, you can actually take care of your own assets. Here are some tips on how to manage your money and properties yourself.
1. Ask people
Do not be ashamed to ask people for advice or recommendations. Start with the people that you know. Ask friends or colleagues. If you know people who are good in business, approach them. They will be wells of information. This is because they are probably doing their investing themselves and will know business investments that are really good. Plus, these people in the industry are the first to know about stock news and gossips; so you will have first knowledge of the goings on.
Ask them whatís the latest stock that they bought or what investment opportunities do they know that can yield a lot of money. Even if they are not doing asset management themselves, they can probably mention a couple of companies or investment funds that their managers recommended. This way, you are benefitting from asset managersí wisdom and expertise without having to pay for the fee.
2. Do your research
One reason why a lot of people hire mangers and not do the investing themselves is the fact that the world is filled with people who want to rob you of your money. There are a lot of con artists with schemes that seem picture perfect at first glance. Earn money in 6 months with minimum investment, everything will seem too good. One advice, check it out. If something seems to good to be true, it probably is.
Before you invest in something, make sure that you have done some background checks on the company running it. Looking at their websites or visiting their offices are not enough. You need to look thoroughly at every aspect of the company. Check the transactions that it has made over the years. The number of years that the company has been operating is a pretty good clue too. Stay away from new companies as much as you can. They may be operated by con artists.
3. Diversify
This is actually what most people in asset management do. Do you know the old saying “Don’t put all your eggs in one basket.” Heed that. Put your money in different business investments. That way, when something happens with one, you still have the other one.
4. Keep track of your assets
In the broad view, computer progams are in 3 main categories: (1) word Processing (2) Database and (3) Spreadsheet. Of these, Database and Spreadsheets work well for asset management. Database to keep track of what you have. Spreadsheet (recommended) to list what you have and be able to recalculate values, costs, etc.
5. World view
As of the late 1970’s or early 1980’s the world started to break down into two classes of people: (1) those who are computer literate and (2) those who are unemployed.
Think about that and where you stand in “The Big Picture.”
6. Avoid buying “on margin” and leveraging:
A big factor in the stock market crash of 1929 was buying “on margin.” This is a term meaning that a stock is bought on credit, where the buyer might put up 10% of the price and was actually taking out a loan for the other 90%. After the crash, the US Government passed new laws to limit this practice but it still happens.
Today there is another term, “Leveraging” which means that people use the equity in stocks they own (but may have bought on margin) as collateral for acquiring more stocks.
This is an extremely dangeous practice, especially for the small investor. If they do this, they are no longer risking “money they don’t need” but everything they have.
A true story: In Florida there was a “small” investor whose portfolio had reached a value of one million dollars. He was an active trader and the brokerage firm he was working through gave him his own office and computer setup. But he was leveraged to the hilt and didn’t really own much of anything. When “Black Monday” hit, the brokerage firm gave him a “margin call” of about $20,000. This meant he had to comeup with $20k to cover the full prices of stocks he had bought on margin. They must have known almost to the dollar how much cash he could get. Once he tapped himself out to pay the margin call, they glommed onto the cash and immediately hit him with another margin call which he couldn’t even begin to pay. So he realized that he was going to lose his entire protfolio and there was nothing he could do about it. He brought a gun into the Brokerage firm’s offices and shot as many of them as he could before he shot and killed himself.
It was discovered later that he had been a criminal and was part of the witness protection program. This illustrates the dangers of buying “on margin” and “leveraging.”
7. A saying:
There is a saying, “You make your money when you buy. Not when you sell.” This means that if you buy something cheap enought, you can’t fail to make money later when it appreciates and you decide to sell it.
Another idea is this: “It’s not money until you sell it. Until then, it is only marks on paper.” This is particularly true of stocks.
8. Stock market, if and when to get out
If the market starts to drop, you have 2 basic choices, get out or ride it out. Remember that if you decide to get out, sell orders are not executed until the end of the trading day. So, say, you see a trend you don’t like at 8:05 AM EST and give the “sell” order. During the day your stocks drop, say, 550 points. You will eat that entire loss because your sell order will be executed at the end of the day at the price of the stock at that time. Not at 8:05 AM EST at the price it was when you first gave the sell order.
A lot depends upon world news and how you think the market will do over a period of weeks or months rather than on a single day’s performance. If you are pretty sure there is going to be a long down trend, it is probably best to get out to stop the bleeding and then get back in when it bottoms out.
9. Watch out for signs of Market Wrecking:
Intentional Market Wrecking is done by rich and super-rich stock owners. It starts with the sale of some huge block of stock or portfolio. Such a sale will automatically start the entire market on a downward spiral. The original seller can stop selling after a 5 or 10 point drop, once momentum has been established. If a long term wrecking is decided upon, as in the 1929 crash, each time the market starts to rally, the rich and super-rich wreckers will sell short on other blocks of stock. Their resources are so great that they can keep doing this for years.
After a while, the frequency of attempted rallies will slow down as the market reaches a point of exhaustion. Margin buyers and those leveraged will be wiped out quite early in this process. Add bank failures, foreclosures on mortgages, massive unemployment and other related financial reverses and you can see how a long term depression can be created.
Why would someone do this? (1) because they can (2) this is a way the rich and super-rich can remind everyone of the power they wield (3) The people who start this will stop selling early and “ride out” the crash they have created. Once the market bottoms out they can start buying assets at bargain basement prices and the big losers in the crash are all the small investors. Think of this as “A harvesting of the turkeys.”
Remember the words of John D. Rockefeller: “There’s no such thing as an accident. If something happens, you can bet that somebody made it happen.”
