The Bull Hunters Guide

Welcome back once again to our blog series on Asset Allocation. In this section, we’re going to cover the last of our tips on how to properly allocate your assets to ensure that your portfolio can survive anything the uncertain future might throw at it. In addition to a diverse selection of investments simply being safer, it also increases your potential for profits.

Remember, having a mix of safe investments gives you the buffer you need to really go out on a limb with those high risk ventures when the desire strikes you. Never be unprepared!

Take Action On Your Investment Plan

Our last tip for ensuring that you have a strongly diversified portfolio of investments is pretty straightforward: Act on your plan for investment.

Too many people who decide to diversify their portfolio get caught up in the analytical game. Because they’re suddenly looking at so many different types of investments (whereas previously they might have only been following one or two), they’re overwhelmed with a flood of information that they might not be quite equipped to process.

As a result, some people find themselves endlessly speculating as to which safe investments like bonds and mutual funds they want to take part in, looking at the charts for their interest and long term performance, as well as analyzing the five year growths for the stocks they have their eye on. This is practically a full time job in itself and many people never get around to acting on the investment strategies that they’re trying to build up for themselves.

So, be sure that you act as an investor! Take a look at the current state of your portfolio, and see how it’s split up between long and short term investments. Furthermore, make sure you take note of the real potential of each of those investments to make sure that everything is allocated appropriately. Then, once the plan is in place, act on it! If it’s failing, you can always change it later. But you’ll never know unless you try.

Next time, we’re taking to take a quick look back at all of these investing principles and summarize all we’ve learned about Asset Allocation.

See you next week for part 7 of Asset Allocation.

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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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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If we view interest rates as being the cost of credit (which is for all intents and purposes the truth), then it’s easier to understand just what the Federal Reserve’s role is in setting United States monetary policy. As the governing body for affiliated banks, they help to determine what consumer credit policies should be, and the ensuing effect that that action is likely to have upon the economy.

In order to regulate things thusly, the Federal Reserve makes use of three main principles.

Open Market Operations

The first is open market operations. The Fed handles the transfer (buying and selling) of government securities, which of course directly affects the level of reserves that they have in the banking system at any given moment. This has a direct effect upon the price of credit (interest rates), so it’s a very effective means of monetary control.

Discount Rate

Next is the discount rate. We spoke already about how banks use the Federal Reserve as their own bank. The discount rate is simply the interest rate that the Federal Reserve sets on their short term loans to these banks. This is important because it’s a good indicator of what the Fed is thinking about the state of the economy and allows for insight into their plans for the future.

Reserve Requirement

Lastly, we have reserve requirements. As we all know, banks are only required to physically hold a percentage of the money that they actually have on deposit with customers. Which percentage they have to have is a matter that is closely regulated by the Fed. This fluctuates with how likely it is that customers will be making major withdrawals, and also with the cost of credit itself (and consequently how much physical banks need to have on hand).

Next time, we’re going to take a look at how all of these principles come together in the Federal Open Market Committee’s periodic meetings and directly determine the overall state of the economy as well as which monetary policies the Fed is going to enact next. This is the aspect of the Reserve that should be of most interest to investors, so we hope to see you then!

See you next week for part 5 of The Federal Reserve.

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

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As we mentioned last time, we’re going to talk about the various kinds of scams that you might run into the world of investing; scams designed to separate you from your hard earned cash with false promises. The internet has given the people who perpetrate these scams a new lease on life by providing them with the anonymity needed to operate in secret and the technological means to target a much wider number of people than ever before.

However, just because the technology has advanced, the basic scams themselves are still fairly old. That’s the one thing that we have going for us when it comes to spotting investment scams: there are really only a few basic types of scam out there, and they just tend to get repeated over and over. Here are the most frequently seen:

The Pyramid Scheme

This is a scheme wherein money is solicited from investors in order to pay off previous investors who are now expecting to receive a return. Of course, such a scheme will eventually implode when the money coming in from new investors is insufficient to cover what is owed to the old investors.

Pump and Dump

This is a practical wherein a group of people purchase a stock, almost at random. They buy a large number of shares, and then they go about recommending that stock to as many as they can, usually thousands of other investors. When those people buy the stock, there is a sudden spike in the value of the stock. The duped investors will lose when the spike is followed by the inevitable fall, but those in the know will sell their holdings during the high point of the stock, thus making off with lots of profit.

In general, one should also beware of trades that take place in off shore accounts, because this is usually done to avoid operating in the jurisdiction of local law enforcement. They almost always are looking to hide something.

Next time, we’ll begin to take a look at some of the schemes in greater detail, beginning with the bulletin board scheme.

See you next week for part 3 of Investment Scams.

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

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