Financial Diversification

The following is a guest post from Rudy from Smart Money Today. You can follow Rudy on Twitter @SmartMoney00.

Hi, my name is Rudy and my blog is Smart Money Today.

Sabeel and I have a similar†story; we had a hard time during the 2008 financial crisis, and we got screw from the so-called “financial experts” by paying too many fees. We realized is better invest in our financial education first and take the matter into our own hands to avoid paying “silly” fees and get better ROI (Return On Investment). But this isn’t what the article is about.

This article is about how you can use diversification to reduce your risks associated with investing. As a result, you can preserve your wealth but still be able to take advantage of the market stock high returns.

NOTE;†One thing you should know: I was born and raised in Italy, so English isn’t my native language. This is the reason why my English sometimes might sound “funny”, but I had the deep desire to help others to achieve more with their finances and English is the best language to spread my knowledge in the world.

I’m constantly working on my portfolio diversification to improve the bottom line; over the years, I went from a single digit growth to a double-digit not by taking extra risks but by diversifying my portfolio strategically.

I was reading Sabeel’s blog and found interesting his way to diversify†investments geographically, you can read his recent post; Geographical Revenue Diversification of My Holdings.

What is Diversification? Diversification†is the process†of allocating capital in a way with the goal to reduce risks.†

Well hereís the truth: investing is†risky.

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Disruptive Technologies & Exponential Growth

Lately, I’ve been thinking a lot about disruptive technologies & exponential growth. Over the course of past few weeks, discussions have been abound between fellow bloggers Jay from FI Fighter, Bryan from Income Surfer, and yours truly discussing investment themes. In trying to identify good investing options, we keep directing our focus towards technology and its disruptive nature. It is no secret that the ‘green’ movement is not a niche anymore and is now mainstream.

Jay from FI Fighter recently posted this article: Disruptive Technology – Always Underestimated, which I highly recommend readers to read and follow the thought process and also follow up on the links posted (there’s a lot there). It presents a great picture of how things are changing. Fast.

We humans are terrible at understanding exponential growth. Due to the way we evolved, we humans always think in linear terms or incremental changes. We don’t expect things to change fast and almost always get the timelines wrong. Even the ‘green’-oriented media gets most timelines wrong. When making predictions, they always predict that things will look better for the solar and renewable energy space by 2040 or 2050. That timeline is completely off-base. When you truly understand exponential growth, you realize that its going to come much faster than that.

linear-vs-exponential-41

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Multipronged Approach to Investing

I love Dividend Growth Investing. The main focus of my investing approach over the course of past few years has been Dividend Growth Investing. I am happy to subscribe to this model and still highly recommend it for investors looking for a reliable method of generating passive income. However, over the course of last year or so – as the bull market rages on in old age, valuations have been pushed to stratospheric levels amid the falling profits from strong blue chip companies. It is for this reason, I have decided to pursue a more multi-pronged approach to investing.

Regular readers of this blog may have noticed the change in my tone of the course of the past few months…I do not feel so hot about this market and the amount of purchases have dried up and my cash position has been building up steadily. Apart from a few pockets of companies, its become very hard to find compelling buys in this market as the debt-fueled share repurchase programs have made me question investing in certain companies.

Multipronged Approach to Investing

Strategy Falling in love with one single investment (or even an investment strategy) is not a very prudent behavior as an investor. Readers may be aware that we are already using a couple of different investing strategies in our portfolios. My wife’s portfolio uses a more passive approach to investing – using broad index funds via ETFs. My portfolio, on the other hand, focuses mainly on dividend growth investing and starting this month, a part of it will also be invested in index funds. This is a good diversification model. With dividend growth companies, I target some companies which I think will do well compared to its peers and let the investments compound over time. With the index funds, I let the market do what it does best; and allows me to instantly diversify providing me with a safety net, in case I had made a terrible mistake with my individual stock picks.

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Are Petrol Stocks Still A Good Investment?

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The following is a guest post by Elvie Mason

As the price of oil plunges to its lowest in 12-years, dropping below $27 a barrel at the start of the year, investors are fearing for the stability of their petrol stocks. Although its market has gained some momentum recently, it’s still hasn’t returned to its normal state.

Consumers may have enjoyed the bargains brought about by the low prices of petrol, but is it an indicator that oil stocks will also likely be reduced to bargain prices in the near future? And if so, should we fill our portfolio with petrol investments while it’s at its lowest price point?

Oil stocks that matter
If you are in search of stocks that you can “buy low,” then the petrol sector warrants some attention. Many companies have seen a significant decline and rise in stocks over the past six months, such as:

  • Energy Select Sector SPDR – declined about 21%
  • S&P 500 – increased by nearly 5%
  • Exxon Mobil
  • Chevron
  • Schlumberger
  • SPDR S&P Oil & Gas Exploration Production ETF – fell by over 41%

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How do Trust Deeds Work?

This is a guest post by Deets LaMoss at freedom595.com.  His blog documents the methods and strategies he is using to generate passive income to replace his salary and become financially free by November 15, 2017.

One of the core investments that I use in my passive income machine are trust deeds (aka notes or mortgages).  If this is a new topic to you, then please read on as I will share the mechanics of how this works and why I like them.

A trust deed is like mailbox money

Trust deeds or mortgages are one of the best passive income investments I have found.  These short term loans, secured by real property, are made to contractor/investors who purchase undervalued homes in desirable areas, rehab them, and then quickly resell them.  By acting as the private lender or “banker” you get to participate in the real estate market and earn high returns without worrying about tenants who don’t pay their rent or fixing their leaky toilets. Also, it is really cool to get checks in the mail every month for doing nothing!

How they work

These contractor/investors do not have time to wait on a bank to approve and fund a loan. When they find a property they have to move quickly before someone else gets it.  That is why they use private lenders who can fund the project in less than two weeks.  They pay a higher interest rate for the convenience of this service because they are borrowing the money for a short period of time (6-18 months) and their anticipated resale price will offset the rehab costs and interest payments yet still produce a handsome profit.

One of the things I really like about this business is the transparency. I work with a team of licensed brokers, attorneys, and title and escrow companies to make sure the paper work is complete and everyone is protected.  It’s clean, easy, and secured by real estate.

The other thing I really like is the fact that everybody wins. The borrower is able to close more deals and make more profit.  The private lender makes a spread on the interest and sometimes a share of the borrower’s profit.  The trust deed investor earns excellent interest (8-10%) and sometimes a back end profit. The service providers (broker, loan servicing, escrow, title, etc.) all benefit from the transaction too. It’s a great business model!

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