Cirrovista - Investing Principles for Men

INVESTING PRINCIPLES

Here are some reliable principles for ALTERNATIVE INVESTING that have served me very well over the years, and they can work for you too.

Diversify! Put assets into seven (7) different, unique areas because we never know what is going to happen. (Don't put all your eggs in one basket)

Seven different stock mutual funds is NOT diversification, but counts as one (1) area - Stocks.

Examples of diverse areas include stocks, real estate, insurance, cash, bonds, commodities, a home business, and antiques. However, the 1929 stock crash also impacted banks (cash) and real estate (homes).

The media tends to say somthing is down when it's down, and up when its up, but we should think "When it's down it could be a investment." "When it's up and everybody love is, be afraid and consider selling. Be contrarian.

Don't lose money, ride out the ups and downs and stick to the plan as long as the fundamental reason for getting in hasn't changed. (i.e. diversify into gold if money isn't a safe haven and purchasing power is decaying.)

Study, read, and work hard to learn all you can, and get expert advice. This knowledge reduces risk and separates investing from gambling, which leaves it all to chance.

Don't try to 'get rich quick' because it can and will burn you.

Invest only after you've got cash to live on for 6 months should you lose your job.

Pay off all debts (excluding the house) before you start investing.

"Big 7" - the 7th Diversification - Someday it all burns up, but the bible says investing in God's work gives rewards here and now as well as for eternity. No one want's to take zero with them. www.cirrovista.com

Investment Diversification # 1 Commodities, Uranium

This is only an example of one investment area. In 2002 it was beaten down, but it has risen back sharply, and continues to move upward. Stocks, Bonds, and Cash recommendations flood all news and media outlets, has anyone touted uranium? Not back in 2002. Let's look at some different investments which truly diversify your portfolio. Wisdom (Ecclesiastes 11:2) would dictate at least 7 or 8 independent areas for our wealth - because you never know what will happen in the world!

Let's look at uranium for investment. It is only one commodity investment area, of many. It's price has risen from a $7/lb low in 2002, to about $68 at the end of 2006. It spiked up to $137/lb in 2008, and is now back to about $40/lb as of 2009. Needless to say this is a wild ride. Though it has already had a decent run-up, it may double again before a global recession hits. Over 120 new reactors are planned worldwide, mostly in China, India, and developing countries hungry for cheap electricity to fuel economic expansion. Uranium is used in nuclear fuel to power civilian nuclear reactors. An article on uranium can be found at:

http://uraniumrecovery.homestead.com/index.html

This article discusses some of the reasons why I recommend at least some exposure to commodities, and uranium, in every portfolio. Shown below is a sample of uranium yellowcake, or U3O8.

Remember, before you invest in anything, read up and learn as much as you can about it. This knowledge will reduce the risk. Knowledge can help convert a gamble into a successful investment. Putting your investments to pure chance or the pure unknown, is gambling, not investing.

Investment Diversification # 7

Home Finances - Diversification to Seven Areas

As the story goes, ancient Chinese merchants would ship their products down the river to the next town as part of normal trade. Farmers would ship their produce and livestock as well. The problem, however, was that accidents were waiting to happen and could strike any ship at any time. An entire season's harvest could be ruined all at once. Merchants became wise and split their goods between 10 ships. This obviously increased the chances that a ship carrying some of their goods could sink, or be stolen, or ruined somehow. But, the rest of the ships would make it, and the small loss was part of doing business in order to ensure that most of the goods reached their destination. This is insurance in it's basic form. It is also an example of diversification.

Most people have their retirement funds in stocks and bonds. Much is heard about mutual funds as the pathway for diversification. But the stock market, while divided up into different sectors, still consists of stocks. They are part of the stock universe. Some may disagree, and say that a variety of stocks is all you need. At any rate, the entire stock market can fall in the aggregate. Electronic trading can accelerate this, as selling spills over from one sector to another. Some sectors are more stable than others, some more volatile than others. The market can get disturbed easily, and there are numerous examples of very large drops in the stock market, slow and fast, such as occurred in 1929, 1973, 1980, 1987, and 2000. Drops in the 20 - 60% range, which have occurred routinely, correspond to the sinking of 2 to 6 out of 10 boats! After the 1929 crash it took 28 years before the market recovered to its pre-crash high. In 2000, popular stocks inevitably filled the portfolio of popular mutual funds. Stock market 'gurus' led the choir in unison as they sang of the wonders of technology stocks. Fundamentals were ignored. The technology boom of the 1990s, cheered on by stock analysts, ended with wild stock overvaluations and subsequent 80% collapse, especially in the NASDAQ. The ridicule is still fresh in my memory as a few of us had the nerve to warn others of the frothiness in the stock market, and pulled out to greener, safer pastures.

However, let's look at "Big 7" diversification principle. The stock market is one area for your retirement funds or nest egg. This means we need at least 6 more. Ecclesiastes 11:2, written by King Solomon thousands of years ago, says "Divide your wealth into 7 (or 8) portions, because you do not know what risks lie ahead." The verse carries the meaning that we should divide our nest egg into many portions because we don't know what will happen in the world. Wouldn't that be nice if we could tell the future! Perhaps Warren Buffet is an exception, and is qualified to mock those who diversify as ignorant, but time will tell. Even if we diligently read every annual report, and understood them, there is still a significant amount of information that the individual investor does not have access to, nor is he likely to get it in a timely manner to act. Many markets are interconnected and a crash in one can cascade into others as seen in 1929. At that time the drop in the stock market caused a both bank closures and a real estate price collapse, amid unemployment over 40%. Aside from stocks, 5 other areas to invest in, after due diligence of study, include bonds, real estate, home business, commodities, and insurance. The 7th investment is a radical investment area to consider, which is tithing.

Why tithing? If we can't take anything with us, it would be like having all ships sink with nothing to show for our hard work. This area of investment takes a step of faith in reconciling with God, but in the bible, Malachi says in Malachi 3:10b, "If you do, says the Lord Almighty, I will open the windows of heaven for you. I will pour out a blessing so great that you won't have enough room to take it in! Try it! Let me prove it to you!" This would indicate that God Himself knows we are programmed to love a profit, and challenges us to invest in Him. That is one big promise too. Well, the proverbial Hearst never pulled the proverbial U-Haul out of this world, delivering the belongings of the deceased to the next location, as King Tut found out. So this promised wealth would have to be durable and transportable out of this world, a promise only God could make good on.

Best wishes for your prosperity! CIRROVISTA

The Importance of Setting Investing Goals

If you want your investments to be successful, you need to set a few goals. Without your goals, how do you know what you are investing for? Your goals will not only give you motivation, but they will help you assess if you are heading on the correct investment path.

By setting investment goals, you are defining why you are investing. You are establishing a time frame for your investments. By doing this, you are able to see what investments are appropriate for your goals. You are also able to check the progress of your investments to make sure that they are on track towards your investment goals.

Most people have two major investment goals. They want to have enough money to send their children to college and they are looking for a comfortable retirement in the future.

While the college educations will come before retirement, you shouldn't put off saving for retirement until last. And you shouldn't use your retirement investments for college costs. There are options for college costs, such as student loans, while retirement options are limited.

If an employer-sponsored retirement plan, such as a 401(k), is available to you, you need to be taking advantage of it. Contribute as much as possible to your plan. If you employer matches part of your contribution, it is basically free money for your future.

However, you will also need additional investments in order to have a comfortable retirement, and to meet additional goals.

Sit down and look at your goals. We will consider that you have the two main goals -- college educations and retirement. You need to look at each goal and ask yourself some questions. Can you expect any financial aid? Are student loans an option? Will the student work? Are grants and scholarships possible? These answers could lower the amount of money you would need to work towards in your education investments. Look at where you currently are and how much time you have left. How much more will you need?

The closer you get to paying for college, the more conservative your investments should become. If you have your college money invested in the stock market, you should begin pulling it out at least five years before your child's freshman year. You should look for investments with less risk during this time, such as bonds, CDs or savings accounts.

Now look at your retirement fund. How much time do you have left? How much are you currently contributing to it monthly? I know that you are probably dedicating a large chunk of your savings towards your college education goals, but you can't forget about retirement. If you can, fund both goals.

When you have to fund more than one major financial goal, it helps to be extra diligent about your spending habits. You need to make your money decisions wisely. It may be that you need to avoid large expenditures that are not necessary. Your house needing a new roof is unavoidable. But a new plasma TV for your home isn't necessary right now. That money could go a long way towards achieving both of your goals. If you are in control of your spending, it is easier to reach your goals.

And it works both ways, oddly enough. Having goals gives you a reason to control your spending. Your investments have direction and purpose. You know how much you will need and when you will need it.

Having more than one goal just means that you need to work a little bit harder. Conflicts may occur, but by managing your goals and investments, you can work them out.

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What Are Your [STOCK] Investing Risks?

It can be a risky business investing in the stock market. There is risk. And all you can do about it is accept that there are some risks that you have control over and some that you can only try to prevent.

The key is to have pre-set risk levels and a management plan in place. When you make thoughtful investment selections that meet your goals you are usually keeping your stock risks at an acceptable level. This is because you are consider risk when making decisions.

However, you have to be aware that there are inherent risks that you cannot control. Most of these risks result in investors having to simply ride out the storm. For the long term investor, many risks are downplayed by the time factor.

There are four major risks that investors face when investing in stocks.

Risk #1: The economy

The most pressing risk of investing in the stock market is that the economy can always take a downturn. A combination of factors can cause the market indexes to lose significant percentages. In fact, we are just now returning to the levels of the pre-September 11 market.

In general, the economy is just going to happen. There is nothing you can do to control it. Most young investors are best off if they just ride out the downturns. Investing for the long run really helps. In fact, many investors use the downturns to pick up stocks that are good solid companies at a slightly lower price.

If you are an older investor, a major downturn of stocks can be devastating if you haven't moved the significant portion of your portfolio from the stock market and into bonds or fixed-income securities. This is where management and risk tolerance really comes into play. Don't put things off. You never know about the economy.

Risk #2: Inflation

Inflation will always be a risk to investors. It hits everyone, no matter their savings or portfolio size. It will destroy the value of your dollar. It is the cause of recessions. We like to believe that we can control inflation, but sometimes the cure is just as bad as the problem. Higher interest rates can help to mitigate inflation, but they can also hit the market in a negative way.

Investors usually retreat to hard assets, such as real estate, when inflation gets high. But in most cases, stocks are usually a pretty fair protection against inflation. the idea is that companies have the ability to adjust prices to the rate of inflation. There are some industries and sectors that adjust more than others, so you should diversify your investments. Investors are hurt by inflation by the erosion of the value of the dollar. Those on a fixed income will suffer the most. That is why it is a good idea to keep a portion of your assets in stocks, even when retired.

Risk #3: Market Value

Market value risk occurs when the market turns against your investment, or even ignores your investment. For example, the market often chases the next hot stock, leaving many good companies behind. Some investors will use this to their advantage -- buying stocks before the market realizes their potential.

However, it can also cause your investment to flat-line while other stocks rise.

Diversification between different sectors of the economy is key. When you spread out your investments, you have a better chance in participating in growth.

Risk #4: Becoming too conservative

There is nothing wrong with being careful. However, you can go too far in how conservative you are. If you never take any risks, it is probably that you will not reach your investment goals. You know that investing in a savings account for the next 20 years isn't going to give you enough of a return to retire. You have to be willing to accept some risk. Just keep it under a close eye.

When you know the risks of investing and research your stock potentials, you make decisions that help you not only mitigate risk, but eliminate a large portion of stress as well.

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