The Bull Hunters Guide

In last weeks post, we discussed investing in the Money Market and hopefully you’ve been learning a lot from our recent series intended to introduce you to all the other types of investment opportunities out there besides just investing in stocks.

The more options you’re aware of when it comes to investing your money, the wiser the decisions that you can make, and that leads to a happier, more secure future.

Talking Mortgage Backed Securities

Today we’re going to be talking about Mortgage Backed Securities. To put it simply, a mortgage backed security refers to an investment plan whereby you loan money to a homeowner or more frequently, to a corporation, with the promise that you are then entitled to a percentage of the interest that they are obligated to pay on their mortgage.

This is a type of investment that many banks are keen on making, because it allows them to act as a middle man, so to speak, without the responsibility of handling funds directly themselves.

Mortgage Backed Securities are usually secured by government institutions, so there is a minimal risk involved in their buying and selling. They are considered to be a very safe investment for the most part, with a payoff that is actually slightly better than that of treasuries, another popular option.

Monthly Income

Mortgage backed securities are a popular form of investment for those who want to be able to draw a monthly income from their investments, rather than selling for a lump sum of value. The amount of the monthly payment received is usually directly in line with the present interest rates driving the market.

The only drawback to Mortgage Backed Securities is simple: mortgages are expensive. That means that these securities are usually traded in large denominations, sometimes only going as low as 25,000 dollars a share. However, much like money market funds, there are some collaborative efforts available to allow amateur investors to get into mortgage backed securities. If you’re interested, it’s best to start out with these.

See you next week for part 10 of Investments.

Sean Rasmussen
The Bullhunters Guide
Universal Wealth Creation © 2004 - 2009

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Over the last several installments, this blog has focused on other types of investments such as Life Insurance in last weeks article. This differs to what we usually focus on: stocks. The truth of the matter is simply that stocks, as much press as they get, are only one small type of investment.

There are dozens of other things you can do with your money. In order to help you decide which are best for you, we’ve been examining each type of investment in turn.

Money Market Securities

This time we’re going to be discussing money market securities. Much like bonds, money market securities are based on fixed income. Unlike bonds, however, money market securities are intended as short term investments and typically mature after only a year or so.

The only drawback really to Money Market Securities is that they typically are only available in high denominations. This puts them fairly beyond the reach of the majority of amateur investors. However, there is a way that many people have started investing in money market securities who would not otherwise be able to do so.

With the advent of money market mutual funds and money market bank accounts, investors can put money into these types of investments, which is then combined with the contributions of hundreds or thousands of other investors and used to purchased money market securities straight out. Obviously, the proceeds are then split up.

Low Risk And Short Term

Money market investments are usually considered to be very low risk because they’re such short term, and because they’re founded in secure enterprises such as government institutions.

You can buy and sell money market securities through most regular stock brokers. However, as we mentioned, you’ll most likely need to start out by investing in a money market mutual fund, which can be done for just a few hundred dollars. In addition to being more affordable, it will also give you a taste of the behavior of Money Market Securities to let you know whether or not you’ll be interested in pursuing them in the future.

See you next week for part 9 of Investments.

Sean Rasmussen
The Bullhunters Guide
Universal Wealth Creation © 2004 - 2009

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In last weeks edition, we were on the topic of Futures Contracts and recently, this blog has centered around the idea of introducing the reader to many different types of investing. The central idea here was that by doing so, we could begin to dispel the notions of investing being a “professional’s game” that all too often prevent people like you and I from doing wise things with our money. By looking at these topics, we can hopefully get a better idea of how to invest wisely, in any given scenario.

What Is Life Insurance Exactly?

Life insurance is a type of investment that differs wildly from every other type of investment we’ve covered so far. Namely, it’s the one type of investment where you’re guaranteed to never personally see the payoff. However, as every good investor knows, making money is only part of the point of investing. It’s also about preparing for the future and making a better life for our families. It’s in this area that life insurance is seen as a popular investment.

Life insurance is basically a type of income protection for your family that kicks in in the event of your untimely death. After you die, you’re obviously no longer drawing an income. However, the bills in your name, including mortgages aren’t just written off; you’re still accountable for them. If you’re not around, your family will shoulder the blame. Therefore, people buy life insurance policies so that their families will receive an amount of money upon their passing that will help them deal with these financial adversities.

Payout Decreases Over Time

The only real risk to purchasing life insurance is that if you’re fortunate enough to live a long life, the reward payout will decrease over time. Financially speaking, it’s a better investment if you die early, as morbid as that sounds.

Life insurance can be purchased from a variety of dedicated companies, all of which are carefully regulated and supported by the government, making for a very safe and secure investment.

See you next week for part 8 of Investments.

Sean Rasmussen
The Bullhunters Guide
Universal Wealth Creation © 2004 - 2009

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I hope you enjoyed last weeks post on Corporate Bonds. This week, we’re going to expand our discussion of alternate investment strategies to discuss futures contracts. This is an important topic to discuss because futures is one area where investors are particularly reluctant to tread, feeling that the process is “too advanced” for them, or that futures carry too high a risk.

Futures Can Be Risky

This is largely a misconception. Futures Contracts can indeed be risky, but if they are used wisely, they can also be used to guard against excessive risks! Let’s look at it this way. Suppose that you were to buy a futures contract on a stock for one year from today at $5 a share.

When the day comes, if the stock is valued under $5 a share, then you’re stuck with purchasing them and will have to suffer the loss. However, there’s also a chance that the stock could be valued at more than $5 a share, and you would have the unique opportunity to purchase it at a discount.

Minimizing this risk

In order to minimize risk on a futures contract, you need to understand the difference between hedging a risk and speculating. When you purchase a futures contract, or sell one, with the intention of minimizing a downside risk by locking in the current price on a particular commodity, then you are making a very common and wise use of the futures contract.

On the other hand, if you’re buying on the speculation that the commodity will soon soar and make you rich, then you’re taking quite a gamble. As you can see, futures can be an excellent source of investment, but it does require some thorough knowledge of the market before hand. However, if you possess that experience, you should not be unduly reluctant.

If you take the notion to purchase a futures contract, note that it can be done through most full service brokers. These same stock brokers can get you involved in futures trading, which is essentially the same concept, but applied to the trading that you’re already familiar with.

See you next week for part 7 of Investments.

Sean Rasmussen
The Bullhunters Guide
Universal Wealth Creation © 2004 - 2009

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