The Bull Hunters Guide

Welcome back to the bullhunter blog. This entry continues our series on Asset Allocation, and introduces an all new way to ensure that your investment portfolio consists of diverse investments from a broad range of categories and industries.

By having a balanced assortment of investments, you’re safeguarding yourself against unforeseen losses in the future, and working to make sure that you always have a safety net in case things take a negative turn.

As you know by now, a properly allocated portfolio consists of both long and short term investments. In other words, it has a nice mix of long term “safe” investments such as bonds and mutual funds next to an assortment of short term high risks investments such as “hot stocks”. But how do you decide just what that mixture should be?

What Is A Properly Allocated Portfolio

First of all, there is a “magic formula” that some analysts offer: subtract your age from 100. The number you end up with is the percentage of your money that should be put into long term investments, whereas your age represents the percentage of your money that should put into short term investments.

But beyond that, we recommend taking a hard look at your actual goals in life. Most likely, your goals are a mix of long and short term investments, just like your portfolio should be. Therefore, for each goal you have, it should be backed up by a certain fraction of the investments in your portfolio.

After all, if your goals are largely long term, you don’t need to worry very much about short term fluctuations and can continue to try your hand at risky investments.

However, if you need money in the next few years for some short term goals, it might pay to reallocate your assets such that more of them are situated in the “safe” types of investments.

See you next week for part 5 of Asset Allocation.

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

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Greetings and welcome back to our ongoing blog on the stock market and all related topics. In the course of reading this blog, you’ve learned quite a bit about how investments work, but over the next few installments we’re going to look at something we haven’t really touched on yet.

What we’re going to be discussing is called Asset Allocation and it refers to the technique by which one builds a full portfolio of investments. You have probably heard that term before, but have you ever stopped to think about what it really means?

What Is Asset Allocation

Simply put, your portfolio will represent the sum total of your investing career, the big picture of everything you’ve accomplished by investing… or lost. What kind of picture will it paint for you?

In order to ensure that you have the healthiest portfolio possible, we’re going to discuss this technique known as Asset Allocation. The whole purpose of it is to balance out the risk that one takes with certain high risk investments against the other “sure thing” types of investments such as bonds.

Diversification Is The Key

You’ve probably caught on by now that each type of investment carries with it a certain level of risk, as well as a certain potential for return.

Therefore, the idea behind asset allocation is to not put all your eggs into one basket. Because you have a solid foundation of long term low risk investments such as bonds and derivatives, you can afford to take the occasional gamble on a high risk stock. Conversely, those high risk ventures will help to diversify your investments so that you’re not totally dependant upon any one class of investment.

There are five major tips to proper Asset Allocation, and it’s those tips that we’re going to be discussing as we follow along in this blog.

See you next week, where we get stuck into part 2 of Asset Allocation.

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

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Last week in the investment series, we were on the subject of unit investment trusts, however, this is the end of the road as far as our alternative investment series goes. This is the last type of alternative investment strategies we’ll be looking at!

We’re going to end today by looking at one particular type of security that is popular because of its safety and predictability – the Zero Coupon Security.

Zero Coupon Securities - Safe And Predictable

Often referred to as a stripped bond, the zero coupon security is, as the name suggests, a bond that has had the regular paying coupons removed. Essentially, regular bonds are “zeroed out”, and then these zeroed out bonds are traded as their own individual securities.

Think of it this way, a bond is already split into two parts – the principal, and the interest, or “coupons”. When a Zero Coupon Security is sold, it’s essentially just the various coupons on a bond being bundled together with that bond’s residual and then sold as its own unit.

The reason this is a secure investment strategy is because you’re essentially paying a certain amount in exchange for the security of receiving a certain amount at a later date. In other words, like a bond or treasury bill, you know up front what you’ll be getting at the maturity date, which makes this a great investment type for those who like to play it safe.

The one risk with a Zero Coupon Security, however, is that the accruing interest is considered income. This means that while you won’t receive a pay out until maturity, you’ll have to pay income tax every year of the life of the security, on whatever interest it happens to gain.

We hope you have enjoyed this 18 part series on alternative investments, we will see you next week for a new 7 part series, where we look at some of the worst and most common mistakes that people make when dealing with stocks.

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

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I hope you had a chance to read last weeks edition of the investment series, where we touched on an investment strategy called REIT, which stands for real estate investment trusts. In this entry, we’re going to discuss the treasuries.

Most people know about bonds as a form of investing in federal capital and gains. However, there is another similar commodity that many stand to benefit from which is not as frequently advertised.

What Is Investing In Treasuries?

Investing in treasuries is also known as investing in government securities, and that’s exactly what it is. Most national governments owe a debt of some sort. Investing in that obligation is essentially loaning money to the government on the assurance that it will be paid back with interest. It’s as simple as that, and considered to be extraordinarily safe because of the credit power backing the loan.

There are many different ways to invest in Treasuries, depending on the length of time you want your investment to mature.

There are Treasury Bills, which tend to mature in under one year. They don’t pay a fixed interest rate usually, but they do tend to be sold at something of a discount. Overall, a fairly attractive option.

Treasury Notes, on the other hand, do offer a fixed interest rate. The trade off for this is that they tend to mature over a much longer time: one to ten years.

Treasury Bonds, the longest term investment of all at more than ten years, are a fixed interest security as well and tend to enjoy much growth.

A Safe Investment Strategy

Of all the investment methods we’ve covered, this is widely considered to be one of the safest by far. The only thing that could prevent the payoff of a treasury investment would be the total and complete collapse and dissolution of the government involved. For this reason, it’s often a popular place to put money whenever the market itself is looking bad, especially if you get a fixed interest rate.

Just keep in mind that the price of Treasuries fluctuate with the federal interest rate, so for wealth creation, it’s best to buy when rates are high.

See you next week for part 17 of Investing.

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

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I trust you enjoyed our post last week on mortgage backed securities. At the moment we’re a little over halfway through our series on the wide world of investing. So far, we’ve focused on covering those types of investment opportunities that are too often overlooked by those who deal in stocks, or are concerned too complex or risky for the amateur to get involved with. Hopefully, we’ve been able to demonstrate that that’s not always the case.

Municipal Institutions And Bonds

This time we’ll discuss the ever popular municipal bond. Municipal bonds are essentially an investment that involves you loaning money to a municipal institution, from one of the many levels of government. In order to draw in money to engage in their necessary ventures, many municipal organizations sell municipal bonds, with the intent to pay them back later, after having received profit from the venture in question.

Municipal bonds are very popular among investors because they allow for a unique opportunity to make investments that are very often free from taxation. Most are free from federal taxes, and as if that wasn’t draw enough in and of itself, the majority have no liability towards state taxes either. Essentially, any income you make off of a municipal bond is tax free.

Low Risk Investing

Municipal bonds are another form of investment where the main purpose is to establish a continuous income of sorts rather than to accrue a lot of money all at once in a lump sum burst.

There is a very minimal risk involved with buying and profiting from municipal bonds. Basically the only way to lose your investment is if the municipal organization in question goes belly up. This happens very, very rarely. However, it pays to learn a little bit about the organizations you’re dealing with. Whereas big city municipal organizations might sell more expensive bonds, they’re also much more likely to stick around for the long term, allowing you to profit with greater confidence.

See you next week for part 11 of Investments.

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

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