What Is an Investment?

One of the reasons many people fail, even very woefully, in the game of investing is that they play it without understanding the rules that regulate it. It is an obvious truth that you cannot win a game if you violate its rules. However, you must know the rules before you will be able to avoid violating them. Another reason people fail in investing is that they play the game without understanding what it is all about. This is why it is important to unmask the meaning of the term, ‘investment’. What is an investment? An investment is an income-generating valuable. It is very important that you take note of every word in the definition because they are important in understanding the real meaning of investment.

From the definition above, there are two key features of an investment. Every possession, belonging or property (of yours) must satisfy both conditions before it can qualify to become (or be called) an investment. Otherwise, it will be something other than an investment. The first feature of an investment is that it is a valuable – something that is very useful or important. Hence, any possession, belonging or property (of yours) that has no value is not, and cannot be, an investment. By the standard of this definition, a worthless, useless or insignificant possession, belonging or property is not an investment. Every investment has value that can be quantified monetarily. In other words, every investment has a monetary worth.

The second feature of an investment is that, in addition to being a valuable, it must be income-generating. This means that it must be able to make money for the owner, or at least, help the owner in the money-making process. Every investment has wealth-creating capacity, obligation, responsibility and function. This is an inalienable feature of an investment. Any possession, belonging or property that cannot generate income for the owner, or at least help the owner in generating income, is not, and cannot be, an investment, irrespective of how valuable or precious it may be. In addition, any belonging that cannot play any of these financial roles is not an investment, irrespective of how expensive or costly it may be.

There is another feature of an investment that is very closely related to the second feature described above which you should be very mindful of. This will also help you realise if a valuable is an investment or not. An investment that does not generate money in the strict sense, or help in generating income, saves money. Such an investment saves the owner from some expenses he would have been making in its absence, though it may lack the capacity to attract some money to the pocket of the investor. By so doing, the investment generates money for the owner, though not in the strict sense. In other words, the investment still performs a wealth-creating function for the owner/investor.

As a rule, every valuable, in addition to being something that is very useful and important, must have the capacity to generate income for the owner, or save money for him, before it can qualify to be called an investment. It is very important to emphasize the second feature of an investment (i.e. an investment as being income-generating). The reason for this claim is that most people consider only the first feature in their judgments on what constitutes an investment. They understand an investment simply as a valuable, even if the valuable is income-devouring. Such a misconception usually has serious long-term financial consequences. Such people often make costly financial mistakes that cost them fortunes in life.

Perhaps, one of the causes of this misconception is that it is acceptable in the academic world. In financial studies in conventional educational institutions and academic publications, investments – otherwise called assets – refer to valuables or properties. This is why business organisations regard all their valuables and properties as their assets, even if they do not generate any income for them. This notion of investment is unacceptable among financially literate people because it is not only incorrect, but also misleading and deceptive. This is why some organisations ignorantly consider their liabilities as their assets. This is also why some people also consider their liabilities as their assets/investments.

It is a pity that many people, especially financially ignorant people, consider valuables that consume their incomes, but do not generate any income for them, as investments. Such people record their income-consuming valuables on the list of their investments. People who do so are financial illiterates. This is why they have no future in their finances. What financially literate people describe as income-consuming valuables are considered as investments by financial illiterates. This shows a difference in perception, reasoning and mindset between financially literate people and financially illiterate and ignorant people. This is why financially literate people have future in their finances while financial illiterates do not.

From the definition above, the first thing you should consider in investing is, “How valuable is what you want to acquire with your money as an investment?” The higher the value, all things being equal, the better the investment (though the higher the cost of the acquisition will likely be). The second factor is, “How much can it generate for you?” If it is a valuable but non income-generating, then it is not (and cannot be) an investment, needless to say that it cannot be income-generating if it is not a valuable. Hence, if you cannot answer both questions in the affirmative, then what you are doing cannot be investing and what you are acquiring cannot be an investment. At best, you may be acquiring a liability.

About Construction Loans and Building Your Dream House

Building your Dream house

Many People who buy Land often have a hard time financing the purchase of a piece of property with no existing structure on it . Often time Banks and lending institutions don’t want to loan money for Land only without an exiting house or on the actual property.

I recently bought a piece of Property in New England and started calling around trying to find loans for the purchase of Land. At the Time I was a Wells Fargo Customer. I asked the local branch if it was possible to get a loan from wells Fargo for land only. At that particular time Wells Fargo was not strong on the Eastern United States so they did not finance land only or at least the person I spoke with regards to my situation said it was not possible.

After some searching I was able to come up with a list of local banks in the new England Area who would finance the land only purchase as they understood the local market and said it would require a down payment of 30-40% depending on the bank.

After working out financing for the land I realized it was also somewhat challenging to find a bank or financing for a Construction only loan as well. Meaning If I owned the Land already but there was no house on it, which banks would lend me money to put Many banks only lend money for a property la with an existing structure on it. I realized this after calling some of the leading institutions around the US whom did not loan money for Construction only. I found out that there was a wide variety of difference between financing in this area. Many of the websites which allow you to go through a sample calculation of Loan terms assume it already has a house on it worth a certain value. You will see that not many are built for financing construction loans only.

The best advice I can give you is to look in the local area you are looking for a loan and also scower the internet for reputable sources of financing given your situation . Often self employed people have an even more difficult time receiving financing however there are many institutions who offer mortgage products for people of all different backgrounds.

When you build your own hose its also important to decide how much of the construction cost do you want to finance. Do you want to finance the building of the roads, drilling of the well, electricity? Some people may prefer take care of these costs outside of the loan to minimize their debt. In the case of construction loans its possible to organize some things on your own but the lender may require you have a general contractors license depending on the state you are from. As always you should seek professional advice and a second opinion before committing or signing anything. With a little planning and diligence you can organize the financing for a land only or construction only loan to help you build the home of your dreams.

Questions First Time Investors Should Ask Before Investing

It is easy to find people’s opinion on how to invest in the stock market as everyone has a different angle on what to expect in the stock market at every point in time, but most of the time people’s opinion may be very confusing. The most common problem that new investors do have is how to determine good investments from the bad ones, what to invest on, what time to invest among others. Some of the questions that you need to answer so as to make a good decision when you want to invest are highlighted below.

Is This a Good Time to Invest in Stocks?

On the off chance that you are taking a gander at money markets amid a lofty decrease, you may think it is a terrible time to begin investing. On the off chance that you are taking a gander at it when stocks are reviving, you may think it is a decent time.

Neither one of the times is fundamentally great or terrible in the event that you are investing for the long haul (10 years or more). Nobody can anticipate with any level of assurance which way the share trading system will move at any given time; yet over the long haul, stock markets has constantly moved higher. Each bear advertises is trailed by a buyer market (when stock costs rise). Verifiably, positively trending markets have endured any longer than bear markets, and the additions of buyer markets have more than counterbalance the misfortunes in bear markets

How Much Risk Should I Take?

A standout amongst the most essential fundamentals of investing is the cozy relationship amongst risk and returns. Without risk, there can be no profits. You ought to will to accept more risk on the off chance that you are looking for more noteworthy returns. In that regard, risk can be something to be thankful for, yet just in the event that you take into consideration adequate time to let the inescapable market cycles happen. By and large, in the event that you have a more drawn out venture time skyline, you ought to will to expect a more noteworthy measure of risk, on the grounds that there will be more opportunity for the market to work through the here and there cycles. Generally, understanding financial specialists have been compensated with positive long haul returns.

New investors are regularly encouraged to put fundamentally in common money, which can give moment enhancement, offering the most ideal approach to lessen risk. By putting resources into a couple of various shared assets speaking to various resource classes, (for example, expansive development stocks, global stocks or bonds), you can lessen unpredictability significantly promote without yielding long haul returns.

On the off chance that you are beginning an investment program by investing incremental measures of cash on a month to month basis, you will profit by dollar cost averaging. When you invest an altered measure of cash on a month to month premise, you get some share costs at a higher cost and some at a lower cost because of market changes. At the point when the market decreases, your settled dollar sum will purchase more shares. After some time, the normal cost of your shares ought to be lower than the present market cost. By utilizing dollar cost averaging, your drawback risk will be alleviated after some time.

What Is My Investment Goal?

The most vital question to consider before making any invest is, “What Is My Investment Goal?” Your ventures will contrast boundlessly if, for instance, you are attempting to spare cash for retirement as opposed to attempting to spare cash for an up front installment on the house. Things being what they are, ask yourself, “Is this venture prone to help me meet my objective?”

What Is My Risk Tolerance?

If your investment objective is to profit as would be prudent and you can endure any hazard, then you ought to invest in the National Lottery. Putting resources into lotteries, be that as it may, practically promises you won’t achieve your venture objective. There are speculations for each level of risk resilience. But if you are not a high-risk taker, investing in long-term investment is the key.

What Happens if This Investment Goes to Zero?

Among the 12 stocks in 1896 stock list, only General Electric is still in operation, the other eleven firms in the first record have either gone bankrupt or have been gobbled up. There is a genuine plausibility that any investment you make could go to zero while you claim it. Ask yourself, “Will I be monetarily crushed if this speculation goes to zero?” If the answer is yes, don’t make that venture.

What Is My Investment Time Frame?

As a rule, the more extended your investment time allotment, the more risk you can take in your investment portfolio since you have more opportunity to recuperate from a mix-up. Likewise, in case you’re putting something aside for retirement, and you’re decades from resigning, putting resources into something illiquid (like an investment property) may bode well. “Does this venture bode well from a planning perspective?”

When and Why Will I Sell This Investment?

If you know why you are putting resources into something, you ought to have an entirely smart thought of when to sell it. On the off chance that you purchased a stock since you were expecting 20 percent income development for each year, you ought to anticipate offering the stock if income development doesn’t live up to your desires. On the off chance that you purchased a stock since you enjoyed the dividend yield, offer the stock if the profit yield falls.

Who Am I Investing With?

It is extremely hard to judge the character and capacity of anybody in light of a two-passage portrayal accessible in an organization’s yearly report or a common store outline. However, you ought to at any rate know with whom you are entrusting your money. What is their past record? Things to hope for are long fruitful track records and good dividend and turnover.

Do I Have Special Knowledge?

A celebrated investment expert feels that normal individuals have a tremendous favorable position over investment experts in fields where they work in light of the fact that no investment professional will ever know more around an industry than somebody who works in it. Ask yourself, “Am I putting resources into something I know something about, or am I putting resources into something that some specialist know something about?”

I couldn’t care less how great something sounds. In the event that I don’t totally see how it functions, I won’t put resources into it.

In the event that an investment can’t be clarified obviously, it implies one of two things:

The individual clarifying it doesn’t comprehend it either, or there’s something about the investment that the individual is attempting to stow away.

On top of that, one of the greatest keys to investing admirably is adhering to your arrangement through the good and bad times.

That is difficult. Indeed, even the best investment methodologies have enormous down periods that make you reconsider. Adhering to your arrangement in those extreme times requires a practically religious-like conviction that things will pivot.

Furthermore, the best way to have that sort of conviction is to comprehend why you’re investing the way you are and what every bit of your arrangement is accomplishing for you. Without a solid comprehension, you’ll more likely than not safeguard at the main indication of inconvenience.

Why Do I Still Own That Investment?

It is a smart thought to intermittently look through your investment portfolio to ensure regardless you need to claim your stock. Offering an investment for a misfortune or offering a major champ is exceptionally troublesome. Be that as it may, the greatest distinction amongst beginner and professional investors is that professional investors don’t have passionate ensnarement with their investment and can strip themselves of their investment without kicking themselves if the investment keeps on picking up esteem.

Should I Be Managing My Own Investments?

It is extremely difficult for beginner investor to perform well than a professional investment expert. If you don’t have sufficient energy or slant to deal with your investment, you ought to think about paying an expert to do it for you. Every investor wants to make profit, so there is no harm in trusting your investment in good hand.