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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Last week was the first week in my new Investment Series, and we kicked it off with a post on Closed End Funds.

We’ve spent a lot of time in the Bullhunter blog talking about all the different types of Investment Strategies that every investor should at least know about. The idea behind this is to expand your concept of investing beyond just the stock market, and at the same time, gain a greater understanding of that market by analyzing its competitors and alternatives.

Investing In Collectibles

In this particular entry, we’re going to talk about something of significant interest to many people, which is investing in collectibles. This is something that’s not only potentially profitable, but also a lot of fun for many people because it entails the acquisition of physical objects rather than electronic shares.

Simply put, investing in collectibles is the process of putting your money into the acquisition of some physical goods that are predicted to increase in value over time. Then, at a later date, you’ll be able to sell them for more than you paid for them.

Whether you’re investing in fine art, stamps, or antiques, there is one clear advantage here, which is that the value of these objects will always be tied to inflation. Therefore, unless an object actually depreciates in value, you’ll always be getting, at the very least, a fair price.

Disadvantages Of Collectible Investment

That said, there are a number of disadvantages as well. The most obvious is that you don’t “earn interest” on collectible investments, and you can’t collect dividends on them either. There’s also the matter that you’ll need somewhere to store these physical objects which can be a big expenditure in and of itself. Furthermore, there is always the potential that these items could be damaged by various circumstances, and if this happens, your investments could be totally destroyed.

If you’re going to make an Investment in collectibles, be sure that you know all the risks and benefits that are present. It can be a very rewarding experience, if you know what you’re getting into.

See you next week for part 3 of Investments.

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

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Today I’m posting from Hong Kong. I’ll keep this one short and to the point.

Lately, we’ve been talking about the Federal Reserve. We mentioned how the group is structured, and what their primary responsibility is, as well as their inherent similarities to a bank. You might be asking, however, just why this information is useful to an investor. The reason is simple. It’s because, eight times a year, the Federal Reserve holds a meeting that is the primary motive force in determining financial policy, and thus the movements of the market.

Federal Open Market Commission

The Federal Open Market Commission holds their meeting as we said, eight times a year for the purpose of decided whether to increase or lower the federal funds rate. This isn’t an arbitrary decision though; they are greatly influenced by the market forces. Of course, it’s in their long term best interest to set rates that reflect the reality of the market, and this is exactly why it’s useful to pay attention.

The Federal Reserve has at their disposal a colossal amount of information relating to the market; far more than the average investor has at his or her disposal. While they don’t necessarily share this information itself, the way that they react to it can give one a really good idea of what’s going on behind the scenes and what is about to happen in the near future.

Increase Economic Growth

For example, if the Federal Reserve is trying to increase economic growth, it will reduce the overall funds rate, which may be a sign of an impending downturn that they’re trying to forestall. Likewise, if they need to stabilize too-rapid growth, they’ll increase the rate. In that instance, it might be a good time to put an eye towards selling as growth begins to level off.

Whatever the case, the Federal Reserve is something that is very much worth paying attention to for any serious investor. It’s not exactly necessary to understand each and every little detail of how they operate, but it will likely be of immense help to you if you can at least learn to monitor their policy decisions and know what those decisions predict for the movement of the market at large. It’s like having a team of committed professional analysts at your disposal, if you only know where to look!

As I’ll be away in Hong Kong all this week, I’ll do my best to post next weeks article on time. Bear with me as I might still be in holiday mode.

Sean Rasmussen
The Bullhunters Guide
Universal Wealth Creation © 2004 - 2008

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Lately, we’ve been talking about the Federal Reserve. In particular, we’ve discussed how it’s set up as a governing body, and why knowing about them should be of real interest to each conscientious investor out there. In this entry, however, we’re going to begin to discuss the particular actions that are said to be the duties and obligations of the Federal Reserve. In other words, their very reason for existence.

Balancing the Economy

In the Federal Reserve’s own words, their job is to “promote sustainable growth, high levels of employment, stability of prices to help preserve the purchasing power of the dollar and moderate long term interest rates”. What this means, essentially, is that their main mission is to regulate the banking system itself in order to ensure that the economy remains fair, balanced, and healthy. They prevent interest rates from climbing too quickly or moving too far out of accordance with how much people are actually earning.

( And during a Global Economic Meltdown, they seem to be running for the hills! )

The Federal Reserve also acts as a bank that other banks can make the use of. Just as you make use of your local bank, odds are that your local bank then makes use of the Federal Reserve in order to conduct the exact same type of business: making withdrawals, making deposits, and sometimes even taking out loans.

United States Treasury Account

Another distinguishing feature is that they also act as a bank to the government itself. The United States Treasury has an account with the Federal Reserve for the business of handling money transfers such as income from taxes, or making necessary government payments. In addition, the Federal Reserve also handles the issuing and redemption of government securities such as savings bonds and other such securities that you might be familiar with as an investor.

In addition, they issue all of the paper and coin currency that most of us make use of every single day. As you can see, if it’s related to the management and transfer of money, the Federal Reserve has their hand in it at some point along the process.

Next time, we’re going to discuss one of the Federal Reserve’s most important functions: the regulation of monetary policy.

See you next week for part 4 of Federal Reserve.

Sean Rasmussen
The Bullhunters Guide
Universal Wealth Creation © 2004 - 2008

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