Tips and Tricks for Investing in the Stock Market

The stock market can be a great way to ease yourself into the world of investments. Many stocks can be bought cheaply and therefore, can be used to help you learn investing without risking everything. Take the time to learn how to invest in the stock market and use the tips from this article to help you along. The time you take to arm yourself with knowledge is an investment that will pay off.

Keep it simple. Trading stocks too often and focusing on the minutia of every point of data can cause you to lose sight of the bigger picture, especially if you are just getting started in the stock market. Instead, focus on tried-and-true companies with strong track records and a reliable history.

Many people think that they must be able to afford a financial advisor if they want to invest in the stock market. This is not necessarily true. If you wish to invest in the stock market, but don’t want to do any research, then a financial advisor or a mutual fund is your game. However, if you are willing to do your research and enjoy that part of investing, then there is no need to fork over the money for a financial advisor.

Before investing in a certain stock, be sure to check their rating. Many big-name companies actually have questionable ratings. Some have been found guilty in the public’s eye in the past of falsifying their earnings, while others are just unstable financially. Look into the credibility of a company before you choose to invest in them to keep yourself safe.

Consider getting some good software that specializes in investment management. It really does not cost that much and it will help save you a ton of time trying to learn how to properly do things. Look into getting one that can help you with profits and losses and one for tracking prices.

Learn how to balance risks and rewards. The more successful investors spend a bunch of time studying market trends and current news about the economy. They don’t gamble and they put their money into an ETF, stock, or mutual fund following some careful analysis. This helps keep their balance on an upswing, even when they take a hit.

Understanding the stock market isn’t something anyone can do in a single day. It takes time and lots of effort to start the learn how the market works. Make sure that you are dedicating enough time each day to expand your knowledge so that you can become better prepared to make sound investing decisions.

Stay away from investments that a large crowd of people have claimed to be a great opportunity. Although the majority usually rules in most instances, this isn’t the case. When people agree that an opportunity is great, then things are likely to change really soon. When people make investments, they shouldn’t be making, you should stay away.

As you have probably already learned, the stock market can be a great place to become a beginning investors. You don’t need massive amounts of money to buy a few stocks to get some experience in the stock market. Apply the advice from this article, to help guide you, as you learn about the stock market.

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Benefits of Home Equity Loan Vancouver

Home equity loan Vancouver is a type of mortgage where the house of an individual is used as collateral by banks and other money lending bodies as security in securing financial aids for the owner of the dwelling. As of such, an assurance is provided for and all the necessary paperwork is taken care of.
Major drawbacks are the ones that cannot be addressed to the satisfaction of customers and this translates into one having to cope up with them and try as much as possible to minimize them at whatever cost they may incur. Being smart is what will take you through all these and drive your ego to greater heights.
When taking up such a risky step of having your house be used as a form of collateral, a conscious mind and thorough brainstorming within the family needs to be done. All the views of other people living in that house must fully be incorporated for a viable agreement to be reached.
On application for one, the procedure of acquisition is an easy one. With all the documents required for processing, one simply needs to walk into a financial provider of choice and table your grievances. Documents for filing will be required and within a few days your request will be approved and all the money needed deposited into your bank account.
The documents of ownership will be required once the true value and assessment of the worth of the house has been established. At this stage, the necessary forms will be completed and fully signed into an agreement by both parties to form a binding agreement that is enforceable by law if either party fails to honor it.
In addition to this, Home equity loan Vancouver have a draw period of up to ten years of service. A draw period is one that allows you to take money out of account in adequate preparation of full amortization of the remainder. Hence, the urge to ensure sufficient funds in bank account is quite a huge pressure to bear.

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How Personal Loans Might Help People Financially

Banks and financial institutions are able to borrow money at rates of interest that are lower than those available to the general public. |Some of the borrowed money is lent out again the private individuals in the form of personal loans. Banks profit from the interest rate differential.

People who are urgently in need of a cash injection to simply cope with the exigencies of life might approach banks with wide eyes and a hand outstretched, very grateful to receive assistance. However, they are merely part of a money making process. They need not be grateful because they are simply part of a financial process that helps to keep economies flowing.

They need to lend because that is their business, but the need for efficiency counter balances the need to lend. Risk is evident when borrowers are likely to be people urgently in need of funds, possibly to repay other debts that have already been run up.

Aside from the need to consolidate debt there are probably as many other reasons for personal loans as there are applicants for them. In many cases the needs may be urgent, arising from unforeseen events such as accidents or sudden demands that were not expected.

Collateral security is often not a requirement for a personal loan. Lenders bank on personal information on the borrower to shore up the risk of making loans to a variety of lenders. The information required usually has to do with records that reveal some kind of personal reliability. Required documents may include payslips, tax records and creditworthiness. Essentially lenders will look for a reliable revenue stream from which they may take a small share.

Shylock’s decision to lend on penalty of a pound of flesh from the borrower demonstrates that these financial instruments have a long history in human affairs. However, the use of the Internet as a means of advancing and receiving is very recent since it has nit existed for more than a few decades. Online platforms allow one to find a range of lenders who will respond to an online application form. From the opposite perspective lenders can make their services available to many more aspirant borrowers.

Personal loans may be obtained inline from agents who act as conduits between lenders and borrowers. They earn commissions, by bringing lenders and borrowers together in much the same way as estate agents bring buyers and sellers together. The advantage in this is that transactions are facilitated. It is easy for borrowers to apply online and lenders can benefit from a steady stream of applications that may have already been screened, making business easier.

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Pine Tables Look Good in Any Setting

One of the most recommended types of furniture, for any home is the pine furniture. This is because of a number of reasons, that have increased the popularity, of pine furniture. One of the reasons why pine furniture, is still the best for your home, includes the fact that pine has a brilliant natural color, that easily complement other items in the home. Pine is light in color, therefore you can be sure of a great appeal, that it will brighten your home.

The potential of every item, to mix together is essential because it provides your home, a terrific appear. Furthermore, it’s straightforward to mix wooden furnishings, with other accessories giving your house, a distinct feel. Usually do not forget why pine furniture, is the best for the home as you are going to not have to be concerned, in regards to the affordability of pine furniture, due to the fact it truly is not expensive. Also, you are able to simply preserve, your furnishings searching good.

Thirdly, pine wooden furnishings will always be good, for your house simply because it truly is really effectively created. This can be simply because within the distinct looks that could be shaped from pine wood, pine makes wardrobes, pine tables and pine tables as well as a lot more. The a variety of types of pine furniture, will constantly amaze you. And naturally, it’s attainable to style each and every area of one’s house, with wood furnishings although keeping such great appeal, of every room. Keep in mind also why pine furniture is most suitable, for the property is due to the fact it’s straightforward to buy , this indicates you are able to source all of the different varieties you call for , for the house when you want it. In particular, pine furnishings makes your home, possess a great comfortable feeling.

You may also want to consider going for, the unfinished pine furniture. This is offers you the flexibility of staining, so that you have furniture that is in different shade of color. The use of various stains for your pine furniture, allows you to easily give your house a finish, that is well thought out. Moreover this also helps to transform the heavy and stuffy look, of your furniture into treasured, stylish and comfortable possessions. Lastly, pine furniture is mostly preferred, in high humidity areas. Unfinished pine is particularly handy, when it comes to doing the interior decor, of your home as it tends to accentuate the final appeal.

Ultimately, pine furniture will usually be available and be the most suitable furnishings,this can be because it really is not just reasonably priced but also offers your house a chic and trendy finish. Moreover, pine furniture is simple to buy, and is appropriate for almost all kinds of individual furnishings ,this means you don’t have to rely on cheap imports to furnish your home. Finally, pine furnishings comes in colors that are effortless to mix in with your home color scheme, and with your other household pieces that you have. This signifies you are going to not want to invest a lot more cash, for interior design when make a decision to make use of pine furniture. However, you should feel clearly and wisely pick, the top pine furniture for the house to be able to make, that fantastic appeal for your house.

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On-line information about registered securities broker-dealers and investment advisory firms

Securities firms recommend or manage investments for their clients are sometimes referred to as “Brokers,” “Broker-Dealers,” “Investment Advisors,” or “Registered Investment Advisors.” These firms are required to register either with the states or with the U.S. Securities and Exchange Commission (SEC) (http://www.sec.gov). This article focuses on how to find online information related to these legally required registrations. For additional information on registration and licensing, see the links listed at the bottom of this page.
To register with the SEC and with many of the states, brokers and investment advisory firms use Form ADV. Form ADV contains required disclosure information on these registered investment firms and their operations. According to regulations, Form ADV must be kept up-to-date, and it must contain disciplinary information about the firm and its key personnel.
In most cases, laws and regulations require SEC registered firms to do on-line filing and updating of Form ADV. These completed on-line Form ADVs are maintained by the SEC’s Division of Investment Management in a publicly accessible, on-line electronic filing system called the Investment Adviser Registration Depository (IARD). The IARD is described below.
The states may also utilize the IARD on-line Form ADV registration process to register advisory firms at the state level. If an advisory firm is required to register with a particular state in some format, such as hardcopy, that state may only encourage and not require an advisory firm to utilize on-line registration via the IARD system. Since a state’s IARD registration may be voluntary, you may not find a firm’s registration information online. For such advisory firms, you might obtain a hardcopy of their up-to-date Form ADV directly from the advisory firm itself.
Advisory firms have no good reason not to provide their up-to-date Form ADV to you. They may be legally compelled to do so. Any hesitation on their part could be an indication of the degree of openness they use when they conduct business with their clients and an indication of other potential problems.
The IARD homepage is at http://www.sec.gov/IARD. As of July 2005, the IARD site stated that, “since September 25, 2001, investors have had Internet access to information contained in Form ADV electronic filings made by investment advisers on www.adviserinfo.sec.gov. This new (IAPD) website was launched by the SEC and NASAA (http://www.nasaa.org) to provide clients and prospective clients of advisers with direct access to Form ADV filings made by the approximately 7,800 SEC registered advisers and 8,200 state-registered advisers who file Form ADV through IARD. This electronic database will expand significantly because increasing numbers of state-registered advisers are switching to electronic filing each day."¹
Note that as of July 2005, the IARD provided information on registered investment advisory firms, such as a corporations, sole proprietorships, partnerships, limited liability partnerships, limited liability companies, or other forms of organization. The IARD may contain information about individual principals who file as one of these types of firms.
As of July 2005, the IAPD did not contain information about non-principal employees of these firms. The SEC stated, “in the future investors may be able to access information about "investment adviser representatives."”²  If you are seeking information on individual advisors

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Regulation of financial planners and investment advisors

If you are working with one of the many competent, objective, and ethical financial advisors in business today, you may not need to have more than a general understanding of his or her registrations, licenses, and certifications. However, it is wise to pay close attention to these topics, when you are first selecting an advisor. Doing so can help you evaluate the strengths and weaknesses of various advisors, research their backgrounds, and check their professional standing and disciplinary background. In addition, if for some reason in the future you encounter a problem with an advisor, knowing about these topics can be very useful. Practically anyone can call himself or herself a financial planner or investment advisor. According to the National Association of Securities Dealers, Inc. (NASD), “Financial Analyst, Financial Adviser (Advisor), Financial Consultant, Financial Planner, Investment Consultant or Wealth Manager are generic terms or job titles used to refer to investment professionals. Anyone can use these terms without registering with securities regulators or meeting any educational and experience requirements.”1 (See: http://www.nasd.com then go to: Investor Information > Tools & Calculators > Investment Choices > Understanding Professional Designations) Since these planner and advisor titles may indicate nothing about the competence, ethics, legal standing, or objectivity of an advisor, individuals in search of professional advice need to dig deeper. While often used interchangeably, there is sometimes a difference between the terms ‘licensing’ and ‘registration’. Federal and state securities laws require that certain brokers and advisors register in accordance with various laws and regulations. Individual agents, brokers, and advisors hold various licenses to conduct specific activities, such as selling securities or insurance products. Registration means that a firm or individual has registered at the state or federal level. Registration does not mean that particular individuals are properly educated or have obtained any voluntary certifications. For a firm, registration means the firm completed the prerequisites and requirements for registration and paid the required fees. The registration process requires firm representatives to attest to the accuracy of the information that it provides. To register firms commit that principals and employees will hold necessary licenses. Regarding securities, in general, persons and firms that sell securities must be registered. Persons and firms must also register, if they are compensated for determining specific recommendations, providing specific recommendations and advice on investments, managing client portfolios and accounts, and/or offering or negotiating the sale of investment advisory services. Investment advisory firms must register with either the U.S. Securities and Exchange Commission (SEC) or the states. Larger firms with more assets under management register with the SEC (http://www.sec.gov). A firm “may” register with the SEC, if they manage greater than $25 million in client assets, but they “must” register if the total exceeds $30 million. Other SEC registration rules also apply. Other advisory firms may register only with the states, and they are prohibited from registering with the SEC. In general, financial and investment advisors – particularly those who sell securities, insurance, and other financial products and those who provide specific and actionable recommendations – are subject to various state and federal laws. A firm that buys or sells securities is a broker-dealer, and an individual is a broker or registered representative. Someone who gives advice about securities investments is an investment advisor. Individuals must hold various registrations and licenses to conduct these activities. Regarding insurance and related products such as annuities, the states regulate insurance company sales practices, and they work to ensure that insurance companies remain solvent and can meet claims. Insurance firms and sales personnel are required to hold certain licenses. A “financial planner” may or may not be subject to various laws and regulations, because legal requirements for licensing tend to focus on whether the person or firm engages in sales of securities, insurance, etc. In many cases, persons and their firms calling themselves financial planners are subject to some forms of licensing, because they conduct transactions or facilitate sales. You should simply assume that a financial planner must be licensed in some manner. If a planner or advisor is not licensed, then ask them why they are not. They should be able to point to a clear exemption of their activities in your state’s laws and regulations. When in doubt, check with your state government to verify that what you have been told is true.

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Private certifications of financial planners and investment advisors

No financial planner or investment advisor is required by law to hold any private certifications. Advisors can fulfill regulatory obligations and offer services to the public after successfully completing certain testing, licensing, and other requirements. Many very competent advisors have no private certifications, while others hold more than one. For more information on advisor registration and licensing, see the links at the bottom of this article.

Historically, certain practitioners in the highly fragmented financial services industry have attempted to meet the comprehensive financial and investment planning needs of individuals. In addition, to assist in the sale of its financial products, the industry has increasingly provided personally oriented financial planning and advisory services that have varied widely in quality.

Customers who are more sophisticated, have increasingly demanded a comprehensive understanding of how their needs would be met by the financial and investment products that they are being asked to purchase. Therefore, many industry professionals have increasingly focused on the overall planning needs of their clients, versus just emphasizing the sale of financial products.

The recognition of planning needs on the part of clients and advisors has lead to greater professionalism within the industry. Hand-in-hand has come the rise of private certification organizations that grant certifications to practitioners.

Industry certification organizations meet a variety of professional and customer needs including:

    improving professional education and skills
    promoting ethics and higher standards of business conduct
    providing referral networks
    easing the sale of products and services
    conferring legitimacy in the minds of clients

Industry fragmentation also has given rise to a myriad of certification organizations and the designations they issue. There are so many certifications and designations that The Skilled Investor has published a separate article featuring information on seven of the most frequently encountered certifications. (See: Widely recognized private financial and investment advisor certifications)

The most extensive index of professional certifications that The Skilled Investor has found is on the website of the Financial Industry Regulatory Authority (FINRA)  http://www.finra.org/index.htm This FINRA list will allow you to find the websites of most certifying organizations. It also notes the educational and work experience requirements of certificate holders plus any complaint and disciplinary process. If you cannot locate what you need on an organization’s web pages, look for their contact information and call them.

As of June 2012, the FINRA list contained approximately 140 different designations that you might encounter, when selecting an advisor. Not all of these designations will be of equal interest to the average person. Many cover narrow specialties, and some are granted following only a short course of study and without other prerequisites.

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Can you really get free and objective investment advice

Through intense competition, the investment industry pursues individuals who have money to invest. Industry sales representatives will try very hard to induce you to purchase their investment products and services. The terms "advice," "counsel," "recommendation," "trust," "relationship," etc. are used constantly during this sales process.

Most individual investors have a great need for competent and objective investment advice. At the same time, they are suspicious and do not want to pay directly for advice of uncertain value. The industry has found a way to deal with these contractions. The industry directly compensates its brokers and many “independent” advisors who act as sales agents. Commissioned brokers and commissioned advisors promote their “advisory” services as being free and objective – the best of both worlds. They tell you that you are getting good advice without having to pay anything for this good advice.  (See:  The investment industry is not your investment partner)

In theory, only when you decide to act upon this allegedly good and objective advice will there be any cost. You will pay a supposedly reasonable sales load charge, when you purchase a recommended investment. Sales load charges take several forms: front-end loads, back-end loads, and/or higher expense ratios, including various combinations. (See:  Understanding Mutual Fund Classes, NASD, January 14, 2003)

Ultimately, individual investors are the source of sales load-based investment advisor compensation, but the money flows indirectly. Concerning front-end sales loads, these fees are taken out of your initial investment. Load charge are routed through firms in the industry, and some but not all of your load charge will be paid to the broker or advisor who works directly with you. A substantial portion of sales loads are retained by industry firms to cover their costs and to make a profit.  (See:  Financial planner and investment advisor compensation paid by third parties)

Furthermore, the industry will be gracious enough to offer you a supposed choice in this matter, when you buy mutual fund shares. You can choose between A, B, and C share classes. In doing so, industry sales representatives may suggest that you get to choose what is “best” for yourself. In this faux decision process, which The Skilled Investor has dubbed the "ABC Share Class Shuffle," individual investors choose a share class. In the ABC Share Class Shuffle you really just choose one form sales fee over another. As long as you buy, the sponsoring firm and the sales rep do not care which choice you make. The A, B, and C share classes are priced to be roughly equivalent from the perspective of the firm, and the firm will, in turn, compensate your broker or advisor for making the sale. Many funds offer additional share classes with no load and lower annual expenses for direct consumer purchases, but your advisor not tell you, if such classes exist.

Sales loads have evolved over time to be one of the major forms of compensation for financial services industry sales personnel. However, investment sales loads are anything but free to the consumer. Investment sales loads do not and cannot improve your investment performance. Instead, investment sales loads could do significant and continuous harm your lifelong financial interests. If you measure the full lifecycle costs of the investment sales loads that you pay, you will find that these investment sales fees can be a huge and increasing drain on your lifetime assets.

The only way to avoid sales loads and other industry investment marketing charges is to proactively search for investments that you can buy either directly or through very low cost discount financial services outlets. Any investment sales person who approaches you will sell you investments that are far more costly. Not only will you pay unnecessary purchase charges when you buy investments with sales loads, your not-so-objective advisor very likely will induce you to buy inferior long-term investments due to their higher ongoing costs. Free advice is one of the most expensive "free lunches" that you will find in personal finance.

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Financial Planner and Investment Advisor Compensation Paid by Third Parties

There are three primary types of third party or commission-based compensation: commission-only, fee-based commission, and fee-offset commission.

How an advisor is compensated can be a very important issue. With commission-only advisors, there is no direct cost to the client for planning and advice. The advice appears to be free, but it is not. Most clients find that 'planning' conversations focus quickly on the purchase of products through a commissioned advisor.

When choosing an advisor, individuals should first decide the type of advisor compensation that makes them most comfortable. How an advisor is compensated can be a very important issue. When you hire a financial planner or investment advisor, 1) you pay directly for his services, 2) a third party pays your adviser for you, or 3) these compensation methods are combined.
This article focuses on third party paid compensation, which is by far the most prevalent method of adviser compensation.

For information on client paid advisor compensation, see: Financial planner and investment advisor compensation paid by clients  For The Skilled Investor’s judgment on preferred advisor compensation arrangements for individual investors, see, Does it matter how financial planners and investment advisors are paid? and Fee-only compensation aligns the interests of clients and their financial advisors.

There are three primary types of third party or commission-based compensation:

    Commission-only: A third party pays commission fees, referral fees, or other fees to your advisor, and you pay nothing directly.
    Fee-based commission: Your advisor accepts commissions and fees from third parties in addition to fees he charges against your assets.
    Fee-offset commission: Your advisor accepts commissions and fees from third parties in addition to fees he charges against your assets. Your advisor rebates to you some or all of the fees he receives.

With commission-only advisors, there is no direct cost to the client for planning and advice. This makes third party compensation appealing to many people – it appears to be free.

Many individuals do not want to pay for directly for advice. By avoiding direct payments to an advisor, they hope that they will get a better deal. In addition, commission-only advisors argue that individuals only pay, when clients choose to follow the advisor’s recommendations.

Since commission-only advisors are not paid unless they sell products, most clients find that ‘planning’ conversations focus quickly on the purchase of specific investment and financial products through the advisor. When the client buys a product, such as an investment security or an insurance contract, fees will either be deducted from the client’s investment funds or will be rebated to the advisor by the financial industry firm that sold the product. The specifics about advisor commission payments may or may not be disclosed.

With the purchase of an insurance product, a commissioned advisor collects a fee, which could range upward to the amount of the first year’s premium. He may also collect a smaller trailing fee each year, as long as the policy remains in effect.
For securities investments, some specific third party compensation may be disclosed.

For example, when one purchases mutual funds through a commissioned advisor, you will pay some combination of a) a front-end load or sales charge, b) a contingent deferred sales charge, and c) annual/periodic 12b-1 marketing fees, which are added to annual management fees. (See: Avoid mutual funds with sales commissions and 12b-1 fees, How much do hidden mutual fund trading expenses cost you?, and Beware of large and hidden mutual fund costs.)

Mutual fund investors, who purchase shares through a commissioned sales advisor, are asked to make choices between Class A, Class B, and Class C mutual fund shares. As clients decide which of these share classes to purchase, the exercise appears to be about how to minimize investment costs. In reality, the client is deciding how their advisor and his firm will be compensated by the mutual fund for selling commissioned mutual fund shares to the client.
These Class A, Class B, and Class C mutual fund shares create an illusion of choice, yet more cost-effective alternatives will probably go unstated.

Were the investor to purchase shares directly from the same mutual fund or chose an equivalent no-load fund, they would purchase a different class and pay none of these fees. [For more background on these mutual fund share classes, see these
Financial Industry Regulatory Authority (FINRA) Investor Alerts: "Understanding Mutual Fund Classes"

http://www.finra.org/InvestorInformation/InvestorAlerts/MutualFunds/UnderstandingMutualFundClasses/index.htm

and "Class B Mutual Fund Shares: Do They Make the Grade?"

http://www.finra.org/InvestorInformation/InvestorAlerts/MutualFunds/ClassBMutualFundSharesDoTheyMaketheGrade/index.htm

Regarding the other two third party compensation methods, fee-based commissions and fee-offset commissions, these involve indirect compensation from the client to the advisor. The client does not pay a check directly, but fees will be charged against his assets and transferred to the advisor.
Regarding fee-based commission compensation, it is reasonably clear why this method is appealing to advisors. They receive payments from multiple sources, including you.

However, you pay an annual percentage fee drawn against assets, and because of commissions, you still could receive biased advice that favors the financial interests of the advisor.

Regarding fee-offset commission compensation, this arrangement is a bit of an oddity. You will pay for the advisor’s services through asset management fees. In addition, your advisor will accept third party commission payments, but will rebate some or all of these third party payments to you. On the surface, this seems appealing, and the advisor may argue that this compensation approach is the best of both worlds. Seemingly, you pay for unbiased advice and, if there is a third party commission, some or all of these commissions may go toward reducing your asset fee payments.

What could be better? Well, there are some inherent difficulties with this approach. To ensure that the advisor remains completely unbiased from a financial conflict-of-interest standpoint, he should rebate 100% of commissions to you. However, advisors can have significant costs in maintaining commissioned sales relationships with financial services companies. These costs include demands to meet sales quotas plus order processing and other administrative costs.

If an advisor does not keep some of these commissions to cover his costs, then he will incur extra overhead without compensation. To cover these costs, the advisor would need to increase the fees that he charges against the client’s assets. This negates the supposed advantages of fee-offset compensation. On the other hand, if he keeps some of the commissions, then how does the client know that the original advice was completely unbiased? (Note also, that an advisor might be legally barred from rebating fees -- see NASD Rule 2420.)

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Financial Advisor and Investment Counselor Compensation Paid by Clients

There are three primary types of client paid advisor compensation: hourly-fee, fixed-fee, and asset-fee.

When choosing an advisor, individuals should first decide the type of advisor compensation that makes them most comfortable. How an advisor is compensated can be a very important issue. When you hire a financial planner or investment advisor, 1) you pay directly for his services, 2) a third party pays your adviser for you, or 3) these compensation methods are combined.

There are also combinations of these two main compensation methods. How an advisor is compensated can be a very important issue. When choosing an advisor, individuals should first decide the type of advisor compensation that makes them most comfortable. The decision to pay directly for planning advice may be prompted by disappointment in prior experiences with commissioned advisers.

This article focuses on client paid compensation. For information on third party paid advisor compensation, see: Financial planner and investment advisor compensation paid by third parties. For The Skilled Investor’s judgment on preferred advisor compensation arrangements for individual investors, see: Does it matter how financial planners and investment advisors are paid?

These bullets summarize the three primary types of client paid advisor compensation:

        Hourly-fee: You pay your advisor an hourly cash fee for services rendered.
        Fixed-fee: You pay your advisor a fixed or negotiated cash fee for an advisory work product.
        Asset-fee: You pay your advisor a percentage of the assets that he manages for you.

Hourly-fee and fixed-fee are the most simple and direct compensation methods. Hourly fees for a competent advisor can vary substantially, usually ranging from $150 to $300, although advisory fees above or below this range can be found. Fixed fees for a truly comprehensive financial and investment plan might range from about $1,000 to well over $5,000.
With asset fee based compensation, the advisor provides a set of services and takes a annual fee, which is a percentage of your assets under the advisor's management.

The advisor will take custody of your assets, and periodically he will charge a management fee against your assets. This fee is usually based upon an annual percentage agreed to by contract. Annual percentages vary greatly by advisor and by the services rendered. TIAA-CREF estimated that fee-only asset management charges typically range from 1% to 3% of managed assets annually.1

In addition, asset management fees are usually charged as a declining percentage as the amount of assets under management rises. A sampling of fee-only investment adviser websites indicates that listed percentages typically range from 1% to 1.5% for smaller asset balances and may decline significantly in percentage terms as assets under management increase to $1 million and beyond. Most asset fee based advisors require a minimum asset balance, often in the $100,000 range. Because asset management fees vary substantially, shopping around may be advantageous.
Whether any direct payment method is right for you will depend upon the value you expect to receive.

If you pay hourly or for a fixed-fee deliverable, you also need to consider whether you have sufficient assets to amortize the cost of the advice. Will the advantages of the advice, such as lower financial product costs and/or improved personal investment performance, be substantial enough to offset the cost?

Direct adviser payments are a visible, current expense. Many people hesitate to pay directly for professional advice, because they do not know how to value it. Even if real advisory value is there, it could take a long period to manifest itself.
The decision to pay directly for planning advice is sometimes prompted by disappointment in prior experiences with commissioned advisers.

Any competent and helpful financial advisor – fee-only or commissioned – deserves reasonable pay. Advisors have business and personal costs and profit objectives. Competent advisors will not work without compensation, when there is no charitable reason to do so. Often individuals will work with a variety of “free” commissioned advisors, before they decide that paying for advice might be a better alternative.

Of course, with direct advisor compensation the question remains whether the fees charged are reasonable. Some fee-only planners and advisors deliver superior price/performance compared to others. You advisor must set the quality standard for his value to you. Excessively priced advice warrants seeking assistance elsewhere.
Many people get comfortable with the personal relationship that they develop with an advisor, and they neglect to question the value delivered by the advisor.

Investors should never lose sight of the fact that a paid client adviser relationship is still a business relationship. Clients also have ongoing ways to manage costs, when they work with an advisor. These methods include:

        controlling the number of hours billed by obtaining prior estimates of how much time a particular task will take
        negotiating the price and other parameters for a particular work product
        doing some of the work yourself

Do not to be bashful about managing your financial relationship with a paid adviser.

The subject of the relationship is your money, and your future assets are at stake. It is not impolite to ask about and expect straight answers about compensation, expense control, and the value of an advisor’s services.

A quotation from a letter written by Abraham Lincoln seems appropriate here. Corresponding with a legal client regarding a bill that had been paid, Honest Abe wrote, “Dear Sir, I have just received yours of 16th, with check on Flagg & Savage for twenty-five dollars. You must think I am a high-priced man. You are too liberal with your money. Fifteen dollars is enough for the job. I send you a receipt for fifteen dollars, and return to you a ten-dollar bill. A. Lincoln

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how financial planners and investment

Yes, it can matter significantly how a financial advisor is paid.

The heart of the compensation issue is an advisor’s potential "conflict of interest" with respect to payments from third parties. Does third party compensation change the quality of the recommendations that the advisers make? If an advisor works on sales commissions or accepts other third party payments, will he still provide the best recommendations based solely on the client’s best interests?

The Skilled Investor believes that the great majority of advisors are ethical. They work to manage properly the conflicts of interest associated with third party compensation that most advisors receive. Many objective, competent, and ethical practitioners are doing excellent jobs for their clients – no matter what their source of compensation.

Fee-only advisors, receive compensation directly and solely from their clients. Other advisors receive compensation from third parties. Some may receive both. When choosing an advisor, individuals should first decide the type of advisor compensation that makes them most comfortable. (For information on the different types of advisor compensation, see: Financial planner and investment advisor compensation paid by clients and Financial planner and investment advisor compensation paid by third parties)
However, the problem for individual investors is not the ethical majority of practitioners. The problem is the ethically challenged minority.

The heart of the conflict of interest issue is whether a client can tell the difference between an ethical practitioner who “just happens to be paid by third parties” versus an unethical advisor to whom the client’s interests are secondary.

As you might expect, substantial controversy exists within the advisory industry about which forms of advisor payment are better for the client. Fee-only advisors argue that they have absolutely no conflict of interest in their obligation toward their clients. Assuming that a fee-only advisor is competent and diligent, a client can reasonably expect that the advisor’s recommendations will be objective and in the client’s best interests. Fee-only advisors say that commissioned advisors are just disguised salespersons.
Advisors who accept various forms of third party compensation insist that they can be objective. They also contend that they still can and do offer the best products to their clients.

Some commissioned advisors suggest that they are more motivated to meet clients’ needs. They say that their advice costs nothing, unless the client acts on a recommendation. Commissioned advisors may say that fee-only advisors are too disinterested, because they are paid whether or not a client acts upon their advice. They also argue that a client will still have to pay a transaction charge, if he were to go elsewhere to make the recommended purchase. Note that the size of the transaction charge is the crux of the issue, as well as the ongoing charges. See: Excessive investment costs are a huge problem for individual investors

Note also that conflict of interest relates only to suboptimal advisor recommendations and to associated actions that confuse fiduciary priorities. Clients will still receive legitimate financial products for their money. These products just might not be the best or the most cost effective product available.

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The Economics of the Financial Advisory Industry

Everyone has similar, yet distinct, financial planning needs regarding their families' financial futures.

While more wealthy people (think millions of dollars) have greater complexity to their financial affairs (caused largely by our incredibly convoluted U.S. personal tax codes), everyone needs sophisticated financial lifecycle planning. Whether wealthy or not yet wealthy, families need a personalized way to understand how their current financial behaviors could affect their families in the future.

However, few people already own enough assets to justify the high cost of a competent and objective advisor. Only those who are already wealthy now can afford to pay directly for highly personalized, professional financial planning assistance. Direct client payments help to avoid the conflicts-of-interest that are inherent and pervasive in the structure of the financial services industry.
The financial services and advisory industry is almost exclusively focused on the interests of those who already have substantial financial assets and not on the mass of Americans who were trying to become more secure financially.

Using many hundreds of thousands of what the securities industry calls "producer" employees, the brokerage industry sells investment products and services to clients for transactional fees, asset holding charges, and many other more or less visible investment costs. Governed by the Securities and Exchange Act of 1934, as amended, and state laws, the legal standard of client care by these brokers is the "suitability" of an investment to a client.

However, there is huge latitude in what a suitable investment is and how much it costs a client. From the brokerage industry's perspective, the wealthier the client is the better. Greater assets yield more revenue and high profit per hour spent with clients.

For example, Morgan Stanley's 2007 compensation plan for their personnel serving retail clients eliminated all compensation for household accounts below $50,000, and it reduced compensation on household accounts under $75,000, unless these client accounts are being charged a percent of assets fee. Clearly, the message to Morgan Stanley sales personnel is to chase wealthier fish. Similar messages are given to broker producer employees in all brokerage firms across the industry.
Another large segment of the financial services industry that serves the public consists of about 100,000 independent planning advisors, who are regulated at the federal and/or state levels.

Governed by the Investment Advisers Act of 1940, as amended, and by state laws, these advisors have a seemingly more stringent fiduciary standard of client care. However, again there is huge latitude in what constitutes fiduciary care and how much advisory services will cost a client. Most registered investment advisors deliver services that are charged as a percent of client assets under management. However, very often these same advisors also obtain additional revenues from the securities and insurance industry, when they sell commissioned financial products to their clients. Again, the wealthier the advisory client the better it is for the advisory practice. The greater the client assets under management, then the more revenue for the advisory practice and the higher the profit per hour of client service will be.
Whether served by a broker or by an independent financial advisor, the economics of the industry are clear. If an individual wants personal professional attention, that individual must already have substantial assets that can generate revenue to compensate the advisor.

If clients are to be given personalized attention and the valuable time of the advisor, each client must generate several thousand dollars in fees annually one way or another. The math is simple. For example, if average client servicing requires 20 total hours of attention yearly and a profitable hourly rate is $150 per hour, then the required average revenue per client is $3,000 per year. If $3,000/per year is the client revenue minimum for a practice, then the client needs to have $300,000, if the fee is 1% of assets per year. The lower the assets, then the higher the percentage necessarily must be.

Since clients usually balk at much higher fees, the revenue requirements of advisory practices mean that people with less assets will not get personalized services. Clearly, the vast majority of Americans do not fit the industry's economic profile of a profitable advisory client on an hourly basis. This is why there is so much effort to obscure and hide the financial and investment costs that clients actually pay. The more the true cost can be hidden and the services offered as supposedly "free," then the easier it is to profit from the client, but not necessarily serve his or her best interests.

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Can you really get free and objective investment advice, when you pay investment sales loads?

The investment advice you get from commissioned advisors is often anything but “objective.” The scientific investment literature has demonstrated repeatedly and consistently that lowering your investment costs is one of the most important factors toward increasing the performance of your investment portfolio. The quality and objectivity of the advice that you get from commissioned “advisors” becomes more suspect, when you consider that advisors who promote investment products with sales loads will not mention or suggest much cheaper, no-load products as an investment alternative. When you consider that the recommended funds that emerge from this “free and objective” advisory process will typically have significantly higher annual expense charges, then you have even more reason to be suspicious.

In this “free advisory” sales process, you may encounter both direct sales representatives/brokers and “independent” advisory industry professionals. When a broker is employed by and directly compensated by the firm trying to sell an investment to you, is it reasonable or naïve to expect that any recommendation will be in your best interest? Many people are taken in by the terms brokers use to describe themselves, such as "advisor" and "counselor." Be careful and read the fine print in the disclosures you are given by brokers. They have absolutely no legal obligation to act in your best interests.  (See:  SEC's Merrill Lynch Rule Struck Down by the US Court of Appeals)

Often, you will find reasons to question whether supposedly “independent” advisory professionals really are independent. Investment advisors are regulated by the Investment Advisers Act of 1940, and are supposed to act in your interests and not in theirs. Yet, when the industry is paying your advisor – even though your sales load expenses provide the funding, you have good reason to question whether your best interests are paramount. Many independent advisors obtain much of their information about investments to recommend from the securities industry. Industry paid advisor compensation arrangements create significant conflicts of interest between your interests and your advisor's interests. Will these independent advisors really serve your best interests, when they are being paid by the industry? (See:  Does it matter how financial planners and investment advisors are paid?)

The argument that you are getting objective advice that is free because you do not have to act on it, rapidly becomes hollow as the sales process moves forward. Many industry representatives will imply or suggest that the investments they recommend are better investments, while they usually walk a careful semantic line concerning the words they choose. Typically, for example, you will be told that XYZ Fund is a “good” investment, and you will be given glossy brochures and color printed summary sheets with 4 and 5 Morningstar Ratings. The pretty graphics and large text will focus on historical performance, while the legally required small disclosure print tells you not to count on this history. The small print tends to be far more reliable investment advice than the rest of these pretty marketing materials. (See:  How Morningstar Ratings for mutual funds are used as a marketing tool  and  What the instability of mutual fund Morningstar Ratings means for long-term investors – a commentary)

Some less sophisticated advisors and brokers will ignore these semantic niceties and flatly tell you that recommended funds with sales load charges are “better.” Sometimes they will even assert that their recommended investments with sales loads actually are superior investments, when compared to lower cost no-load funds. Given that sales loads create higher costs which tend to result in lower investor returns, there are very significant reasons to wonder about the independence of advisors who sell funds with loads and avoid offering cheaper no load funds.

Many people purchase investments with loads, because they have been advised or have been given historical performance hints that loaded funds will outperform other funds. There is no support in the scientific finance literature at all for this assertion about the superior returns of loaded funds. In fact, the opposite tends to be true. You are not expected to earn more, if you pay a load. You are expected to earn less.  (See:  Pay less to get more (Part 1 of 2)

In fact, the money that you pay for a front-end load or back-end load will not be returned to the investment fund itself for portfolio management purposes. Even if paying more could possibly fund improved investment results, which is not supported by the scientific investment literature, you sales load payment will not be spent to improve investment results. In fact, the dollar amount that you invest in a fund will be reduced exactly by the dollar amount of the load that you pay. You are expected to earn less, because you have less invested at the outset with front-end loads.

With back-end loads, you will pay a percentage of your future asset value, including any subsequent asset appreciation, when you sell. Furthermore, funds with loads tend to have higher annual fees, which will erode your total assets year after year. The sole purpose of a sales load is provide revenue to the firm selling the investment product to you. That firm will in turn compensate the broker or advisor who induced you to make the purchase. Think of the word itself. Does a "load" pulled by an animal, speed up or slow down its progress? There is a reason that investment sales loads are called loads.

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15 Value-Added Individual Investor Activities

Before estimating the investment value that you might add or take away from your portfolio, you first need to determine whether your strategies are or are not likely to lead to optimal risk-adjusted investment returns.

This value estimation is separate from any hourly opportunity cost related to spending time on your investments versus an alternative use of your valuable time. When you combine an estimate of your value-added or value-diminishing investment contribution with the opportunity cost of your time commitment, you derive an estimate of your total investment wage or opportunity cost. For more on this topic, click here >>  Calculating your investment wage and the opportunity cost of your time
Even if an individual investor feels a substantial amount of confusion about investing, he or she usually holds on to the hope that spending more time will increase investment returns.

This is only true if the strategies implemented actually add investment value rather than diminish portfolio value. Value generating strategies can positively offset the opportunity cost of the time you spend. If not, more time spent on poor strategies will just increase your shortfall.
To be value generating, individual investor activities must increase returns, lower costs, reduce taxes, and/or reduce risk. The 15 activities below are more likely to do this for you.

These 15 guidelines summarize personal financial planning and investment management practices that are more likely to benefit you and your family in the long run.

    Spend much more of your time on managing your career and controlling your living expenses. These are the two most powerful levers that any individual controls related to the success of an investment program. The most successful investment programs always involve continuing additions from savings. (Click here >> Step 2 - Set your personal savings, earned income, and other financial goals)
    Become fully diversified (yes, FULLY diversified ALWAYS) by owning the very broad market in your portfolio (Click here >> Why is diversification valuable to individual investors?)
    Drive out all forms of investment activity designed to beat the market. Target a market return and be very happy if you get close to it. Most individual investors fall well short of earning a market return, because they chase past performance that does not repeat, and they pay much higher investment costs as they chase the mirage of superior investment performance. (Click here >> Can you really beat the securities markets?)
    Learn about and adopt optimal risk-adjusted investment strategies. Understand the risks that financial markets tend to reward and those risks that you can take without any likely reward. (Click here >> Investment securities markets do not pay you for the risks of holding individual common stocks and bonds)
    Use rational investment selection criteria that have been validated by the scientific investment literature. Use only these criteria to pick your investments (Click here >> Rational selection of bond mutual funds and equity mutual funds -- overview)
    Look for efficient, long-term investment vehicles, buy them, and hold them. Save your time and money. Stop all this short-term flopping around.
    Track your investment progress periodically, but do not chase performance. Superior past performance is overwhelmingly due to luck rather than skill, and in practice, it is impossible to detect before the fact the tiny minority of professional managers with true skill from among the vast majority who will just be lucky and not so lucky. (Click here >> The illusion of superior professional investment manager performance)
    Understand the incredibly high price to you of excessive investment costs and buy the lowest cost investments through the lowest cost channel consistent with your strategy (Click here >> Step 7 - Reduce investment expenses and control investment taxation)
    Be conscious, rational, and pro-active about taxes related to your investments. Taxes should never be ignored, but at the same time, they should NEVER be the dominant consideration in any investment decision.
    Understand your tolerance for risk in comparison to other investors and make sure that your portfolio asset allocation properly reflects your relative risk tolerance. Avoid being overly conservative or overly aggressive relative to your risk comfort zone. Errors either way are potentially very costly. (Click here >> Step 3 - Assess your personal investment return and risk tolerance preferences)
    Stop twiddling with things, and adhere to your passive strategy. Let it run. Go do something else that is more rewarding financially and/or more emotionally and spiritually fulfilling. Do not listen to people who tell you to twiddle, especially if they are industry professionals who will make money from you, when they do the twiddling for you. (Click here >> Does it matter how financial planners and investment advisors are paid?)
    Develop an understanding of the things that investors tend to do wrong, and monitor yourself so that you do not do the same things.
    Find advisers who will truly put your interests first and who will give you full attention and comprehensive and reasoned advice. Advisers should more than pay for themselves, but many times they are actually a net cost to you. Managing your advisers is the ONLY place in investing where you really should be active rather than passive. (Click here >> Fee-only compensation aligns the interests of clients and their financial advisors)
    Shop around for advisors and be a critical, cost-conscious consumer. If you do not do some independent checking and critical thinking and just follow a friend’s advice about whom to use as an adviser, then you may simply be just as wrong as your friend is. Just because you like and advisor's personality and feel that you can trust an advisor, this does not mean that you are getting enough value to justify his or her cost. Advisers are expensive. Pay attention to their "value to cost" ratio. (Click here >> Step10 - Choose objective and competent investment advisers)
    Understand insurable risks and economical ways to reduce them. Being focused only on investment risk can leave you unnecessarily exposed in other risk areas that could wreck your financial plans. (Click here >> Step 8 - Insure against financial risks economically)

This list of value-added investment factors is not exhaustive. It also does not attempt to list the myriad of things that investors should not do.

For more ideas from The Skilled Investor about what to do and not do, you may wish to Click Here to consult our Financial Articles Index and read more.

In summary, if you have a reasonable sense that you truly understand investing and have kept accurate performance records to verify your prowess versus the appropriate market benchmarks, then you may actually be adding value by spending time on investing. If not or if your practices are contrary to the strategies listed above, then the more time you spend with your investments, the more likely you are to come up short -- very short.

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Passive Personal Investment Strategies are More Time Efficient with Better Returns and Risk Control

The scientific investment literature indicates that passive investment strategies usually are more time efficient, while they also increase returns and add more value to your investment portfolio.

For example, given the diversification imperative, it is highly questionable whether the vast majority of individual investors should own any common stocks or bonds directly. Instead, they can achieve similar expected returns with less time, lower risk, lower cost, and low taxes by owning passively managed index mutual funds or exchange-traded funds.

Most individual investors should not try to mimic the activities of professional portfolio managers of mutual funds and ETFs. Most investors do this quite poorly. They should not try to track and make decisions on a myriad of details about dozens or hundreds of firms. See: What is the cost to individual investors of sub-optimal portfolio diversification?
Improved time efficiency is a side benefit of choosing a broadly diversified, market investment strategy that you implemented through low cost index mutual funds and ETFs.

Index mutual funds and exchange-traded funds require far less personal attention. Selecting and tracking a portfolio of individual equity and fixed income securities is a task that can be more profitably delegated to professionally managed funds. If you chose broadly diversified, cost and tax efficient funds, you can let career professionals do more efficiently, what you pay them to do full-time.

In a similar vein, the scientific investment literature strongly favors strategies that tend to be passive rather than active in nature. Once an investor puts an optimal strategy in place, better results tend to accrue from leaving things alone rather than constantly twiddling with them and driving up costs and taxes. Being active tends to reduce gross returns through tactical errors and higher trading costs. Obviously, being active also takes far more time, as you try to second-guess the markets and other smart investors. This activity has an opportunity cost. The time you spend on investing takes valuable time away from other activities that you might prefer to do.
Monitoring and adjusting your financial plan requires a periodic commitment of your time, but that commitment need not be excessive.

If you choose optimal investment strategies, properly automate financial tracking with computer tools, and set up periodic, automated investing to the degree possible, then spending more time on personal investing becomes a choice and not a necessity.

Despite the great importance of having a personal financial plan and an optimal investment strategy, people have lives to live, work to attend to, and family and friends to love and play with. Financial and investment planning should not impose an excessive time burden, and the personal time expended should be cost-effectively applied. Unless financial planning and investing is an enjoyable hobby, which it is to some, there is a significant personal cost to spending time on investing. It is important to calculate your “investment wage” for the time spent on investment management and to ensure that this wage remains high. See: Calculating your investment wage and the opportunity cost of your time.

Time in life is the most precious and perishable asset anyone has, and it ought to be spent wisely, efficiently, and enjoyably. Scientific strategies combined with relatively efficient financial markets allow people to minimize their time commitments. The can obtain optimal, near-market, risk-adjusted returns after low cost and low taxes are taken into account. See: Passive individual investors are “free riders” who benefit from the higher costs of active traders.

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The Value and Opportunity Cost of Your Personal Investment Management Time

Your time is valuable, and it should be included in calculations about your investment returns.

Whether you add or subtract value from your assets when you spend time on investment activities should also be evaluated. Some investors spend significant time on the wrong strategies. Instead of adding value, their efforts reduce their investment portfolio performance and degrade their financial welfare.

The personal process of financial planning and investing is life long, and is not just a one-time exercise. Personal situations and financial requirements change, as do the economy and the financial markets. Investment plans need to evolve periodically to remain current and appropriate.
When pursuing optimal investment strategies and controlling costs and taxes, you also need to establish a time-efficient system to monitor, adjust, and adhere to your plan.

This article introduces the concepts of an opportunity cost for your time and a value-added or value-diminishing wage for the time you spend on investment activities. It also discusses two other ideas: that more time spent on poor strategies will just cost you more and that scientifically grounded investment strategies tend to take less time to implement.

Other articles in this Personal Efficiency category will develop these ideas in more detail. You will also find a list of these additional personal efficiency articles at the bottom of this page.
The scientific investment literature indicates that many of the activities that individual investors engage in do not produce superior results.

Very often, they have the opposite effect – especially after costs and taxes are considered. Only a relatively small subset of investment activities tends to produce positive value. Valuable strategies tend to be passive and not active, and they usually focus on reducing costs and taxes rather than attempting to beat the market.
When estimating the net contribution that you might make when you spend time on investing, you first need to estimate whether or not your decisions actually add value to your investments.

Because most individuals probably are not adding value with current strategies, they need to change their approaches. When you honestly evaluate your positive or negative value contribution and track your hours, you can calculate your positive or negative value contribution on an annual and hourly basis. The size of your portfolio also influences the size of your positive or negative hourly investment activity wage.
Next, you can calculate your hourly opportunity cost, which quantifies the value of spending your personal investment time on alternative income generating or leisure activities.

By combining your hourly investment value contribution with your hourly opportunity cost, you can estimate the overall value of your personal contribution to your investment affairs. Usually this annual or hourly figure will be negative for an investor.

Finally, to estimate your overall investment efficiency, your personal value contribution and opportunity cost should be added to all the excess industry investment costs and unnecessary taxes that you incur.

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Calculating Your Personal Investment Management Wage and the Opportunity Cost of Your Time

Your personal investment management contribution is the total value that you add to your investment portfolio less the opportunity cost of your time.

When divided by the hours you spend, you can estimate an hourly wage for your personal investment management contribution. Obviously, the objective is to have a high investment wage. Unfortunately, for most people their wage is likely to be negative. The more time they spend, the more they lose, because they do poorly with their strategies and/or they could be doing something else of greater value with their time.
Many people lose money on their investments due to poor strategy and tactics. Moreover, they pay an additional opportunity cost, because they could be doing something more productive with their time.

To determine your investment wage and the opportunity cost of your time, you need first to determine whether you are generating or losing value for the time that you spend. Concerning any value that you may or may not generate, see the article: Value-added and value-diminishing investor activities.

Estimating whether an investor generates positive or negative value for his time is the trickiest part of the calculation. The investor needs 1) to be knowledgeable about optimal investment strategies, 2) to track and benchmark his risk-adjusted performance carefully, and 3) to be rational and honestly self-critical in his self-evaluation. This can be challenging. Individual investors are confused about optimal strategies and usually are not careful about tracking and calculating their risk-adjusted performance against market benchmarks. In addition, rational self-evaluation is always challenging for people – although investing is one realm where it really pays well to be honest with yourself.

Nevertheless, for the motivated investor who wants to be more productive with his investing, he can do a reasonable "ballpark" estimate of his likely hourly investment wage. Here are some ideas about how to make this estimate.
For purposes of illustration in this discussion, we will assume two cases: one where the investor makes a positive value contribution and one where he does not generate value through his efforts.

Assume that the investor spends about two hours a week or 100 hours per year on research, decisions, and actions about his investments. This many hours is probably higher than necessary, and it might indicate some level of unnecessary investment activism. Let us also assume that he has either a $100,000 portfolio or a $1 million dollar investment portfolio. This helps us to understand if his asset base is sufficiently large to make it worth spending time.

A value generating investor would tend to hold passive market index investments in mutual funds and ETFs. He would avoid trying to beat the market. Instead, he would spend most of his time tracking and correcting investment inefficiencies, looking for low cost investments, and minimizing taxes. Overall, his total annual industry costs would typically be in the range of .25% to .5% of assets.
In comparison, investors that are more typical usually have total annual visible and hidden investment costs that range between 1.5% of assets to 5% or even more of assets.

Where their costs fall within this wide range depends upon their strategies, the channels through which they acquire investments, and how much they pay advisors who have custody of their assets. Average total visible and hidden investment costs are probably about 2.5% annually for the average investor. See: Excessive investment costs are a huge problem for individual investors.

Compared to the average investor with 2.5% total annual investment expenses, this value generating investor improves his net return on assets by about 2% each year. He would generate $2,000 more a year on a $100,000 portfolio. Because he spends 100 hours, his hourly investment wage would be $20/hour. On a $1 million portfolio, this wage would be $200/hour.
The other amateur investor is much more active, favors hot individual securities over funds, and spends his 100 hours trying to pick stocks to beat the market.

He does not focus on cost savings or tax reduction and trades frequently because of media stories, tips, and rumors. On average, the prognosis for this approach is not positive. Data from a study performed by Professors Kumar and Goetzmann indicates that self-directed individual investors using discount brokerage accounts probably lose about 2.5% per year due to lack of diversification and active investment mistakes. This figure does not include tax inefficiencies. See: What is the cost to individual investors of sub-optimal portfolio diversification?  Costs of investors buying individual stocks and bonds through “full service” retail brokers are probably significantly higher due to higher trading costs and custody charges.
The outcomes of active strategies are highly variable with a range that is far wider than for those who adopt a passive index strategy.

Of course, that is the siren song of active strategies. Those who pursue them always hope to come out on top, when in reality, most will trail the market return even before costs and taxes are considered. See: Can a limited number of stocks provide complete portfolio diversification?

Given this active investor’s approach, we will assume that his total visible and hidden costs and unnecessary taxes are 3.5% annually. Compared to average investor’s costs of 2.5%, he would lose 1% or $1,000 per year on a $100,000 portfolio. Therefore, compared to the average investor, his hourly value-diminishing wage is a negative $10/hour. On a million dollar portfolio, the hourly value-diminishing wage would be negative $100/hour.
Instead of contrasting the costs of each of these investors with the 2.5% annual costs of an average investor, we can instead compare these two investors directly.

With the assumptions above, if this rather active investor were to adopt the low cost, low tax, passive market strategy of the other investor, he could potentially reduce his expenses by 3% or $3,000 annually on a $100,000 portfolio. His hourly value-added wage would be $30/hour compared to his previous active strategy. With a $1 million portfolio, his value-added wage would be $300/hour.

Next, we need to place a value on the opportunity cost of the personal time of these investors. Whether or not his value-added investment wage was positive or negative, his time also may have an alternative value. How should this individual investor value his time? The net hourly wage from his compensated work provides a reference point. If the investor makes $100,000 per year, this would translate into about a $50/hour gross wage, or about $32.50/hour net with an assumed 35% combined federal and state marginal income tax rate.
If the investor has the opportunity to make more money by working more hours, then it would be appropriate to use his full hourly net earned income wage to value any time he spends on investment portfolio self-management.

Instead of spending time on investing, he could earn more money to invest. For this example, the annual net opportunity cost on 100 hours would be negative $3,250 per year. This investor would need a large portfolio and quite superior performance to offset this labor opportunity cost. For an investor with the opportunity to earn more income, the relative ease of selecting and holding mutual funds or ETFs should be a very appealing alternative because of the much lower time commitment.

Conversely, the investor who absolutely loves studying businesses, industries, companies, and securities analysis and who would have no other hobby might wish to apply a much lower or even zero opportunity cost for his labor.

However, The Skilled Investor suspects that the average individual investor would have an opportunity cost that is closer to his personal net earned income wage. Becoming skilled and efficient at investing is important to many people, but it does not rank high among the alternative pleasures and preferred hobbies of most people.
Combining the hourly value-added wage with the hourly labor opportunity cost, allows us to estimate what the total benefit or cost of an investor’s effort might be.

Compared to the 2.5% annual costs of the average investor, the cost efficient investor with a $100,000 portfolio had an investment value-added wage of $20/hour and an opportunity cost of $32.50/hour. His net self-investment wage is negative $12.50/hour. His portfolio is too small for his investment skill to outweigh his labor cost.

Nevertheless, his effort to optimize his investments is only modestly costly, but certainly is very worthwhile compared to the much greater costs of an average or high cost investor. If his portfolio were $1 million dollars, then his total self-investment wage would be $167.50/hour. (A $200/hour value-added investment wage minus the $32.50/hour opportunity cost.) Obviously, if assets are managed well, then the more assets the better.
Regarding the more active, but inefficient investor, his strategy is both investment value and labor opportunity cost inefficient.

Compared to the 2.5% costs of the average investor, on a $100,000 portfolio, his value-added wage is negative $10/hour and his net earned income opportunity cost wage is negative $32.50/hour. The total is a negative $42.50/hour. We assume that he is active, because he is trying to make more money. However, he might prefer to do something else with his time, if he realized that his efforts were really diminishing his assets.

If this investor had a $1 million portfolio, then his total self-investment wage would be negative $132.50/hour. (Negative $100/hour in investment value minus his $32.50/hour opportunity cost.) The greater this investor’s assets the less valuable it is for him to manage them with a poor strategy. The more time he spends, the worse it gets.

To summarize, if this active and inefficient investor switched completely over to a passive cost conscious strategy, his total hourly wage could be a more tolerable negative $2.50/hour on a $100,000 portfolio. (A $30 hourly value contribution less a $32.50 hourly opportunity cost.) On a $1 million portfolio, his total investment wage could be a positive $267.50/hour. (A $300 hourly value contribution less a $32.50 hourly opportunity cost.) He is handsomely rewarded for being more efficient, especially when his assets are greater. 

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Improve the Need for Your House Using These Useful Home Remodeling Ideas

Creating renovations a very good idea to increase the need for your house and creating your house a far more enjoyable location, but it is also a catastrophe if completed incorrect. Needing to repair your house enhancements with additional enhancements could be prevented with some believed and energy. Make use of the listed below suggestions to exercise the best mindset to ensure all of your renovations are effective.

Does a tree in front of your house look unkempt? Why not give your home a nice breath of fresh air by getting this tree shaped properly. If you do this, your front yard will change forever. There is no comparison between a trimmed tree and an unkempt one.

Should you don’t desire to refinish your outdated and weathered solid wood flooring surfaces, it is possible to as an alternative, give your property a bungalow type enhance. Get some oils centered fresh paint and judge some cost-effective stencils. Utilize the stencils and fresh paint to re-design and style your solid wood flooring surfaces. Include some sweet models in various styles, to offer an entire on-bungalow appearance to your property.

Among the newest developments for home remodeling is artwork the ceilings in every space. Rather than a common white-colored, it really is extremely advantageous, calming, and very ornamental to color the ceilings of every space a couple of colors lighter in weight of the identical colour because the wall surfaces. Accomplishing this provides the space much more with each other and creates a far more calming and calming environment.

If you are working with a very small (less than eight feet wide) section of kitchen counter space, consider visiting a few local granite dealers in search of remnants. Larger dealers often discard these remnants and only charge a small amount for cutting and installing a small counter top. This is an excellent way to add high style to a small surface, and at a great deal no less.

The above mentioned wise ideas can get you taking a look at renovations just like a expert, so that your jobs will all cruise directly for achievement rather than having a more costly, roundabout method to obtaining in which you eventually wish to be. Using the right point of view and psychological planning, you are able to change your house right into a fantasy house.

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The Basics of Trading in the Foreign Exchange Market

You can always be willing to try new things, but being willing and
being ready are two separate worlds. Take the Bonds market, for example.
 You can be more than willing to trade on this platform, but you are far
 from ready. Here’s some info that will aid you prepare for the road
ahead.Do not dive into your bonds market too quickly. Once you have
plenty of experience under your holiday belt, you may be able to analyze
 indicators and make trades all day long. So when you are just beginning
 out, though, your trip capacities are limited. Remember that the
quality of your holiday decisions and analyses will drop your longer you
 trade, and limit your holiday initial bond experience to a few hours a
day.

Try to take all of your money that you’re going to invest and break it
up between many different parts. This will prevent you from losing too
much money on any single trade and it will increase your likelihood that
 you’ll earn money instead of losing it.Get your vacation experience
with time, not with accidents. Many new traders jump straight in, and
find yourself losing lots of money. The best way to move towards gaining
 experience is to comfortably and safely trade for about three years,
while constantly learning and practicing as they go along. Do not give
up, but do not dive in without learning.

Follow your vacation plan at all times and trade with discipline. No
matter how smart your holiday system is, you won’t make money if you
aren’t strictly following it. Do not ride hunches or hints that you hear
 through the grapevine. Stick to your vacation plan and work it every
day.Choose your trip trades wisely. Your Reward to Risk Ratio should be
at least 2-to-1. If you see a setup that shows high probability, utilize
 confluence and one more indicator to aid you make the decision as to no
 matter if or not you desire to trade it. It’s a lot better to pass a
risky trade by than to jump into it too fast and find yourself losing
money.

Once you have done your holiday risk assessment and have an amount of
money you’re willing to play with in your vacation bonds trading, don’t
add more until you make more! This isn’t poker, but it’s just as bad an
idea to buy back in if you don’t actually have your money to play with.
Wait until you have some more EXTRA money and then dive back in.When
learning to trade bond you desire to research fixed and variable spreads
 and how they affect trading. Knowledge is power when you’re trading.
The more you know about how these spreads work and how to use them to
your trip advantage then the more effectively you will be able to trade.

Have an easy, solid trading strategy based on the market and common
sense. Over complicated, hard to understand trading schemes using
sophisticated formulas can even confuse you, when you need to make quick
 decisions as your market changes. Keep it simple and your vacation
trading experience will be a financially important one.If you’re a new
trader, stick to one time frame, and one pair of trades. You do not want
 to overwhelm yourself your second you put your holiday foot in your
door, so be consistent with your trip new trades. Pick a time where you
know you will be available, and a pair that is easy to track.

Be prepared to spend, and lose, plenty of money. Bonds markets are
highly volatile, meaning at any moment you could lose all you’ve put in.
 The average minimum trade value is widely high, this means you should
be prepared to lose more than that. If you’re not, you may want to
investigate operating a different market.

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Finding the Best Custom Home Builders in Arizona

The Proper Way to Find the Best Scottsdale Arizona Custom Home Builders

If you’ve been looking for the best Scottsdale Arizona customer home builders, you may certainly need to consider a number of crucial factors. For instance, when hiring any contractor or builder, the standard of their work will actually be a primary consideration; nevertheless even if you find Scottsdale Arizona custom home builders who are building homes you like, it’s really important to ensure they are approved to operate in your area.

Devious builders who are unauthorized can swiftly lead straight to an array of extremely serious issues, especially when it comes to the quality of your house. In fact , some issues may not be apparent till long after the builder is gone and you are left to pay the expensive costs of attempting to fix the problems with your house.

One of the best methods to ensure that the Scottsdale Arizona custom home builders you are considering will be able to meet your house building desires is to do your analysis. You can begin by contacting your local licensing board to be sure that the builder is licensed to work in your neighborhood.

The next thing you’ll wish to do is to contact your local BBB or Better Business Bureau. While the result of this search may not tell you all that you need to know, it’s an critical step in at least finding out if anyone else has complained about issues with the builder.

Get Referrals for Scottsdale Arizona Custom Home Builders

If all seems well at this point, you’ll definitely desire to continue with a bit more research. You can try an internet search to determine if you find any complaints about the builder, but one of your first sources of great research will be past customers. If your builder assembled houses in a particular area, you can sometimes see who owns those homes and politely ask the homeowners their impressions and overall recommendations for the Scottsdale Arizona custom home builders that they used.

Thomas Rodgers has been building luxury homes with his family’s business since he used to be a kid. He posts photos of the remodeled custom homes that he works on.

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Can You Make Money Selling Gold Jewelry

The gold value has appreciated to a greater extend that one can make huge profits on margin by buying scrap gold and re-selling them. If this is the case with a middleman, how much profit could one make by selling unwanted gold jewelry that is more than a decade old? If there is a best time to cash out profits from scrap gold, this is it.

People develop affection towards jewelry to an extent that they will spend hundreds of dollars on repair before deciding to sell it. Repairing though expensive does not bring back the originality of the jewelry. So, this becomes an unwanted piece of valuable and the only option could be to sell it.

First timers should have answers for two of the following questions. 1. How to sell scrap gold jewelry? 2. Who is the best buyer? There are so many buyers in the market that once they are aware that you are interested in selling your gold, they will bombard you with rates and offers. The 3 main buyers are jewelers, pawn shop owners and online buyers. Jewelers do not give a good rate as they have no use for the scrap gold. The pawn shop owners usually take major share out of the profits which leaves one with the online buyers.

Selling gold jewelry has become very easy these days since one can sell gold from the comfort of home to an online gold buyer. This is also the most feasible option since, the online buyers being refiners themselves, pay entire profit or in simple terms, maximum cash for gold. The online gold buyers send kits that are insured to post the gold to them which is easy and safe way of shipping.

It is safe to avoid buyers who promise the extraordinary; as they might try to cheat. The best way to stay clear of them is by knowing the worth of gold by valuing it locally from a licensed gold merchant. This will also help in negotiations to get good profits.

The seller has to do an extensive research to find the most reliable online buyer. It is best to check the terms and conditions in the website; check testimonials of existing customers, any complaints about the company and also gain knowledge on payment, shipping and valuing process.

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Finding state regulators of brokers investment advisors and insurance agents and brokers

Summary: Each state may have one or more government organizations that regulate “advisors” who offer securities, insurance, and other services. The various states differ in how their regulatory functions are organized. Some have centralized agencies and some have multiple agencies that split regulatory responsibilities.

To find a particular state securities regulator go to the website of the North American Securities Administrators Association, Inc. (NASAA) at http://www.nasaa.org. On the left hand side of their home page, there is a link, “Contact Your Regulator,” that will provide contact information and websites for securities regulators in each of the fifty United States and the Canadian provinces. See: http://www.nasaa.org/QuickLinks/ContactYourRegulator.cfm. These websites provide information on advisor registration requirements.
The states regulate the sale of insurance contracts and related products such as annuities. Individual agents / brokers and firms that focus on the sale of insurance products often will present themselves as financial planning or investment advisors. The state agency that regulates investment securities advisors may or may also regulate insurance agents.
To locate a state commissioner of insurance, go the website of the National Association of Insurance Commissioners (NAIC) at http://www.naic.org. The NAIC “is the organization of insurance regulators from the 50 states, the District of Columbia and the four U.S. territories.”¹ The NAIC also provides an interactive map of “State Insurance Department Web Sites” at http://www.naic.org/state_web_map.htm. Click on a state on the map to go directly to the appropriate state website. On the left hand panel are other documents with state contact information.
The website of a state’s securities regulator may provide information that individual investors could find useful in working with advisors and in obtaining help to resolve problems that may occur. State securities-related websites also may contain general investor information and advice.
In addition to looking at the investor information and links provided by your own state, you might also look at the websites of certain other states. Some states have invested more resources in on-line public investor education than others have. This information could be useful to persons within and beyond a state’s borders.

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Texas Financial World

As people walk through life everything changes, as well as our financial needs. Banks never get tired of encouraging people by offering their services and products to support our needs. It is best advisable to secure our future by availing the best for our income and in which can give benefits and hassle free on our part. Texas is said to have a consistent development when it comes to business. Which means the market stability is reliable. Banks, businesses, exports are consistently rising.

Nowadays, it is best to grab hassle free banks services for security purposes. That is why most of the people such as those business men and even those ordinary ones who receive and income from their work would really find some security in personal banking services. They have in a way built their future through banking which will give them interest in return.

Because of this consistent development in business in Texas, people continue to invest and engage in business in the areas. Banks within the boundary of Texas like Longview and Tyler have more or less the same banking services such as Savings, Checking, Insurance, Investments and others. They only differ somehow on the way they build their healthy relationship with their customers.

Texas is considered to be the best in business among the so many states in the United States. And this is because of various reasons such as lower rates in mortgage refinance compare to other states which eventually attracted the people and choose Texas banks. More so, it’s not only because of these lower rates but of some advantages on the side of the debtor compared to lender. It is hard to buy expensive things much more if you do not have the money yet but with this great offer in mortgage refinance things will go smoothly.

Mortgage refinance happens when a debtor borrows money to pay its old debts. In this case there are options a borrower can choose it may be Fixed Rate Mortgages or Adjustable Rate Mortgage or Jumbo Loans. People can now choose to buy their dream houses, properties or whatever they want without thinking those worries if this will lead to foreclosure.

Texas’ banks, on the other hand, are not only into refinancing but also mortgage loans. And there are many ways for you to learn this kind of mortgage. You need to know the mortgage loans term, understands well how the payment is applied to your debt and regarding the Annual Percentage Rate (APR). You just really have to inquire regarding the various types of mortgage loan before deciding to engage in.

Doing business in Texas will not only bring enjoyment to their customers but more so higher income returns. It is indeed the right place to do business. So invest in Texas now!

Mark Thompson is a manager in one of the best banks in Texas and has known several services, such as personal banking services Longview, Texas mortgage refinance, loans and the like.

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Using Payday Loans to End an Emergency but Not Cause the Next One

With the current state of the economy, more and more people are facing financial struggles. For example, an emergency or unexpected expense can arise suddenly. This guide will give you great tips on how manage this kind of loan.

If you have made up your mind and are definitely going to get a payday loan, please be sure to get everything in writing before you sign a contract. There are scams that are set up to offer a subscription that you may or may not want, and take the money right out of your checking account without your knowledge.

Avoid affiliate programs that try to get you to borrow money. They may be working in the U.S., while representing lenders that operate in other countries. You may find yourself trapped in an agreement that is costing you more than you had initially thought.

If circumstances require you to seek payday loans, it is important to know that you will have to pay exorbitant rates of interest. It might be more than 2 times what the loan was worth. Payday loan providers find loopholes in laws to get around limits that you can put on loans.

Take the time to do some research. Do not settle for the first lender that you find. Compare different interest rates. Although you need to spend some extra time on this, you will save a lot of money down the road. There are websites out there that will let you compare loan rates for some of the biggest companies.

Make sure you check out several payday loan companies first. Each place will have different policies and attractions to lure you through the door. Furthermore, you may be able to get money instantly or find yourself waiting a few days. If you do your homework, you can determine which loan product is best for your specific set of financial circumstances.

Don’t be afraid to speak up if you experience a problem with your lender. This will allow them the opportunity to right their wrongs and perhaps offer you a more attractive deal. Should that not be what you are satisfied with, make a complaint to their local governing agency.

Cultivate a good nose for scam artists before you go looking for a payday loan. There are those who pose as payday lenders only to rip you off. If there is a specific company you are interested in, check out their credentials on the Better Business Bureau’s(BBB) website.

If you want to apply for payday loans, you just need to go on the Internet. Ask your friends to refer a company, and check the review sites to see how other consumers rate them. Then you will fill out a form on their website and the approval should happen within 24 hours.

Do not take getting a payday loan lightly. Interest rates can vary by lender; therefore, be aware that you may pay high interest. Avoid using a payday loan for things that aren’t absolutely necessary.

The aforementioned tips will help you on your financial journey. Research as much as you can before taking out a payday loan. Your finances should be a top priority.

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