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Are you taking on to much investment risk?

August 15, 2018 by Jacob Sensiba 4 Comments

Investment risk doesn’t apply to only a select few investments, it applies to everything because every investment has its own sets of risk.

Do you know what they are? Are there ways to avoid them, or at least limit how they affect you?

Let’s dive deep into this topic and learn more.

What is investment risk?

I suppose in its simplest form, investment risk is the chance that your investment will lose value.

If you have a stock or a bond, your investment could lose value. If you have cash, inflation could eat away at your purchasing power.

There are many other types of investment risk.

Types of investment risk

Interest rate risk – The chance that an increase or decrease in interest rates could affect your investment. This specifically pertains to fixed income investments, like bonds. Interest rates and price are inversely correlated, so if rates go up prices go down, and vice versa.
Business risk – This involves a particular security. If you are investing in a company’s stock, the chance of them going out of business and you losing some or all of your investment is the risk.
Industry risk – As you can imagine, this relates to an investment within a particular industry. There are industries that are affected as a whole by certain events. If oil prices drop, the energy industry will suffer. If the economy is booming, the consumer staples sector will underperform. If tariffs are levied on steel and aluminum, the automotive and industrials sectors will be negatively affected.
Credit risk – This relates to a debt issuers ability to make good on their obligations. If you invest in a bond that matures in 10 years, you are supposed to receive two payments per year, plus your principal in the tenth year. The chance that, that debt issuer can’t make those interest payments or pay you back the principal is credit risk. I should mention that there is also a risk to stock investors. When a company goes bankrupt, it has to pay back lenders, investors, and others, but there is an order to which people are paid back, and stockholders are last on that list.
Taxability risk – This refers to a municipal bond. If a muni bond is issued with tax-exempt status, the risk is that it could lose that status before maturity.
Call risk – The chance that an investment is called back. A callable bond is the most common example. More often than not, a company will issue and call back a bond if interest rates have lowered. The issuer is refinancing in a sense. They buy the bonds back in order to reissue them at a lower interest rate, and this will cost them less money in the long run. Fear not, however, because you have the added risk of your investment being called away, you are usually compensated with a higher interest rate.
Inflation risk – Essentially, how severely inflation could eat away at the purchasing power of your investment. Cash is most at risk because you are getting zero return and inflation at any level is costing you money. Stocks, historically, are the best investment to outpace inflation.
Liquidity risk – Your ability to sell your investment when you want to. Some investments trade more frequently, thus have higher liquidity. Stocks are a great example of an investment with high liquidity. An investment with low liquidity, depending on the market environment, is real estate, or physical items, such as precious metals, guns, or art.
Market risk – The risk that at any point in time your particular investment, whether it’s stocks, bonds, real estate, gold, etc. will lose value. Prices in all of those investments can and will fall at one point or another, and no amount of diversification can save you from it.
Geopolitical risk – Think war, terrorist acts, tariffs being levied on certain countries or products, etc. Geopolitical risk happens in your country or in other countries that yours is involved with. When 9/11 occurred, the NYSE and NASDAQ closed in anticipation of panic selling. On the first day of trading, the Dow fell 7.1% and closed the week down 14% (source). Heck, just this year the threat of tariffs has put investors on edge and increased volatility.
Currency risk – This usually affects people who have investments or business operations in other countries. If the value of a currency compared to the USD (U.S. Dollar) goes up, that could negatively affect the bottom line for businesses.
Mortality risk – The chance that you will die before fees, premiums, and payments will have been worth it. This usually revolves around insurance products, but could also relate to social security or money you’ve stashed away for retirement through the years. If you worked and saved for 30 years, but passed away in your sixties, and were unable to enjoy the fruits of your labor, that’s mortality risk.

Three asset classes and associated risks

There are many other asset classes and investments available, but these are the three that most people are associated with.

Stocks – Market risk, business risk, industry risk, credit risk, geopolitical risk.
Bonds – Market risk, business risk, industry risk, credit risk, geopolitical risk, inflation risk, interest rate risk.
Cash – Inflation risk

Diversification

Though not all risk can be diversified away, and you will take on some risk in every investment, no matter how careful you are, it’s important to diversify.

Each asset class and each investment have its own unique risks. In any portfolio, it’s important to diversify between stocks, bonds, real estate, cash, physical assets, and geographic location.

The allocation to each set of assets will vary depending on your risk tolerance. Traditionally, stocks are the riskiest of these but offer the most reward, then bonds, and then cash. Holding real estate and physical assets, like gold is just another way to diversify your assets. Gold, however, is usually a good investment to have when the market tanks, as it’s often referred to as a safe haven asset.

With regard to geographic location, the U.S. is only one-quarter of global GDP (source) and the U.S. stock market is only 43% of global market value (source) so you’d be silly not to invest money in other countries. Besides, if the U.S. market/economy tanks, not every country will follow.

Ways to Increase your Wealth

August 8, 2018 by Jacob Sensiba Leave a Comment

Wealth, what is it? In a sense, it’s your net worth. Net worth is your assets minus your liabilities.

For a comfortable retirement, you’ll want to see that number tick upwards over the course of your working career.

But how to do you increase your wealth? Are there certain strategies that work better than others?

Let’s take a deep dive into some strategies for growing your wealth.

Decrease Expenses

You want to increase your wealth, decrease your expenses. I can probably list several things you’re wasting money on.

Restaurant food
Drinks at the bar
Cable
Movies at the theater
Interest rate charges
Transportation
Clothing
Frivolous purchases

It’s easy to reduce costs here. Restaurant food and bars – stop going out so much. Cable – cut the cord and sign up for Netflix, Hulu, or go to the library.

Movies at the theater – buy the movie or rent it from the library. Interest rate charges – negotiate your rate, use a balance transfer, or eliminate your debt.

Transportation – use public transport, walk, or ride your bike. Frivolous purchases – wait at least a day before you decide to buy.

Earn More

Ask for a raise, bust your butt to earn a promotion, which usually translates to higher pay, start a side hustle, become a freelancer, etc. There are several ways available to increase your earning power:

Drive for Uber or Lyft
Become a Tasker on TaskRabbit
Get paid for your skills – UpWork or Fiverr
Here’s a list of the most popular side hustles – Budgets are Sexy.

Real Estate

Real estate is a great way to increase your wealth. One of the more popular ways to do this is through rental properties.

Do your homework when looking for properties, you’ll want to look at:

Location
School district
Real estate valuation
Property taxes
Community amenities
Current listings and vacancies
Natural disasters

If you find a good property, plan for a 20% down payment to avoid PMI. Once the rent starts flowing, you’ll find your wealth will climb. As you pay down the mortgage, the equity will increase, giving you more assets than liabilities.

Pay down debt

Debt is the number 1 detractor from building wealth. Not only does it prevent you from saving, investing, and/or acquiring assets, but you’re probably wasting money on interest payments.

You need to do what you can to get rid of your debt so you can start building wealth. As you pay off your debt, your wealth will increase because you will reduce your liabilities, which makes your net worth (aka wealth) go up.

In a general sense, there are five ways to help reduce your debt

Debt snowball – Payoff your lowest balance first. Pay the minimum to all of your other balances and pay the most you can towards your smallest balance. Once that balance is paid off, redirect that money to the next lowest balance, and so on.
Debt avalanche – Pay down your highest interest debt first. Pay the minimum to all of your other balances and pay the most you can towards your highest interest debt. Once that is paid off, redirect that money to your next highest balance.
Balance transfer – There are many credit card companies that will offer an interest-free balance transfer. Take advantage of this if you have a credit card balance with a very high interest rate. This will save a lot of money on interest payments.
Personal loan – Usually for credit card consolidation. Most credit card interest rates are crazy high. You get a personal loan to effectively lower your average interest rate. This will only work for you if you have decent credit, however, so do your homework.
Refinance – This applies to students loan and mortgages (well really any loan, but these are the most common). You refinance to lower your interest rate, and sometimes (as is the case with student loans) to consolidate.

Increase your savings rate

A very common problem in this country is that people aren’t saving enough. The average savings rate in the U.S. is around 3% (source). That is a far cry from what people really need to save.

So what we have to do is increase our savings incrementally. Start with the highest percentage of your income you can possibly save. If that 1% that’s fine. If it’s 10%, that’s fine too. Just do what you can.

From there, we will take a few months to get used to that extra 1% or 10% not being there. Once you are familiar with less money, bump that percentage up 1. And once you get used to that, bump it up again.

The key is to make small positive changes for a lifetime. A small change each day or week for the rest of your life? You’ll see HUGE results from this.

Utilize retirement accounts

Retirement accounts are awesome. It’s a very effective way to save for retirement.

Plans for individuals – Traditional IRA and Roth IRA (Here to learn more about these)

Plans for businesses – 401(k) and SIMPLE IRA are the two most common. (Learn more here and here).

All four of these vehicles give your retirement savings the ability to grow tax-deferred. Meaning you don’t pay taxes while the money is inside the account. Additionally, three of these four could help lower your taxable income.

The two business plans are contributed to with pre-tax money. More money in the retirement account means less being taxes. The traditional IRA is contributed to with post-tax money, but you could receive a tax-deduction IF you qualify.

Roth IRA you use post-tax money, don’t receive a deduction or a reduction in taxable income, BUT your withdrawals will be tax-free.

Please look at those links for all the information and rules for each plan.

Develop a “delayed gratification” mindset

Having a delayed gratification mindset is so important when planning for your future. Our default behavior is to do the things that make us feel good right now, but it’s almost always in our best interest to delay that good feeling for a better one down the road.

You want that ice cream cone, but it will be more beneficial to your future self if you forego it and eat something healthy instead. You’d like to buy a new video game, but it would behoove you to buy a book, a course, or invest it.

Improve Financial Literacy

If you want to grow your wealth, you have to know what you are doing. Learn about budgets, retirement plans, and investing. Learn about assets and liabilities, and the various ways you can make money work for you.

If you know how things work, it’ll make it easier for you to follow through.

Automate

Automation can play a vital role in your quest for growing your wealth. Set your bills to auto-pay. This allows you to focus on more important things.

Also, automate your savings. Have it done right away so you don’t have the opportunity to spend it. Go next level with this and set your savings to automatically increase every so often. You’ll save more without even having to think about it.

Invest in yourself

Ben Franklin once said, “An investment in knowledge pays the best interest.” If you want to get promoted at work, get paid more for your skills, or just want to improve your life, invest in yourself.

Read books, take courses, listen to podcasts, watch YouTube videos, or find a mentor.

There is so much knowledge out there and there are so many opportunities to improve your life. Take the initiative and go get it!

Conclusion

Growing your wealth can be a challenging endeavor, but by using many of these tips, you can be on your way to making some very positive changes.

To learn more about growing your wealth and for our disclosures, visit www.crgfinancailservices.com.

If reading this blog post makes you want to try your hand at blogging, we have good news for you; you can do exactly that on Saving Advice. Just click here to get started.

Jacob Sensiba

www.crgfinancialservices.com/

How does Investment Strategy Change with Age?

July 4, 2018 by Jacob Sensiba Leave a Comment

As we all know, as we age and our lives change. Our financial responsibilities and investment strategies change along with it.

In most cases, there are two truths to abide by. You have saved as much as you can and invest according to your risk tolerance, time horizon, and goals.

But what else is there? How do my financial life and my investment strategy change with time?

Starting career

Either you are just out of school or have been in the workforce for a few years. Regardless of which path you came from, there are two things on your list. Get rid of debt, or at least get it under control, and save for retirement.

There are several ways to plan for debt repayment.

Debt Snowball
Debt Avalanche
Balance transfers (credit cards)
Personal Loan (loan consolidation)
Refinance (student loans)

Check out this post on paying off your debt, here.

Step two is saving for retirement. If the company you work for offers a retirement plan, sign up for it. Max out your contributions if you can, but at the very least, contribute enough to get the employer match (if it’s offered).

Also, open a Roth IRA. If you have a little extra, contribute some to a Roth IRA in addition to your workplace plan.

Your investments. Time is your best friend at this point. Most of your investment allocation should be focused towards growth. Don’t put all of your eggs in one basket, diversify among stocks and bonds.

Again, the majority (at least 70%) of your portfolio should be in stocks, in some form or another.

Starting family

If you’re like the average American, your family starts to form around your 30th birthday. Hopefully, you’ve got a good head start on paying down your debt and saving for your retirement. Continue on that path.

With a family, comes saving for your kid’s college education, as well as other expenses (house, car, etc.). Contribute a little every month to a 529 College Savings Plan. The funds within this account can be invested aggressively, similar to your allocation in your twenties.

Your retirement savings is still in a good spot. Similar to your twenties, regarding the stock and bond allocation.

One last thing, get some disability and life insurance. If you have people that count on you, you need to protect them.

High earning years

More than likely, this will be your forties and fifties. At this point in your life, the average American is in their peak earning years, so take advantage of that and increase your retirement savings.

This will also be the time that your kids either go off to college or enter the workforce. Congratulations (kind of) you are empty nesters. You no longer have a college education to save for. More can go towards your retirement.

More than likely, though, you will have miscellaneous expenses from your kids that you will continue to pay for.

Your investment strategy will change slightly. You are getting closer to retirement so it’s time to start protecting what you’ve saved. A little less in stocks and a little more in bonds. Think 60/40 or 50/50.

Near retirement

You are in the home stretch! At this point, your debts (including your house, hopefully) should be paid off. All assets and your retirement savings should be looking healthy.

Your investment allocation will be similar to the last section. Definitely 50/50 if not 40/60, stocks to bonds.

Retirement

Congratulations, you’ve made it to your retirement. This can be liberating for some, but for others, this is an emotional challenge.

You’ve spent the last 40 or so years saving for retirement and now you are expected to start spending it. This is very tough for a lot of people.

From my experience and in my opinion, you should retain some sort of activity. Something that gets you out of the house, something that forces you to socialize, and something that makes you use your brain.

Staying social and sharp mentally could add some extra time to your life.

Your investments should be conservative. At least 40/60, but the more conservative the better. And it’s usually not a bad idea to keep some of your savings in cash, for emergencies such as health expenses (which will certainly go up at this point).

You don’t have many or any, more chances to earn more money, so it’s very important that you protect what you’ve saved.

Conclusion

The above information can be very useful to the average person. Paying off your debt and making your retirement savings a priority is very important.

Unfortunately, there is a retirement savings crisis in America. People aren’t saving nearly enough for retirement. They are counting on other sources, like Social Security or pensions to fund their retirement.

This isn’t enough. You won’t receive enough from Social Security to support yourself and pensions are few and far between, nowadays. We all need to do a better job of saving.

This article was created for informational purposes only. The above items are not to be taken for personal financial advice. Please consult with a professional about your personal situation.

To learn more about retirement savings and investing, and for our disclosures, visit our website: www.crgfinancialservices.com.

If reading this blog post makes you want to try your hand at blogging, we have good news for you; you can do exactly that on Saving Advice. Just click here to get started.

Jacob Sensiba

www.crgfinancialservices.com/

4 ICO Scams in 2018 and How to Avoid Becoming a Victim

March 26, 2018 by Tamila McDonald Leave a Comment

Interest in cryptocurrencies skyrocketed after the stunning rise of Bitcoin during late 2017. It also led new companies to join the game, creating new altcoins to attract investors.

[Read more…]

Tamila McDonald

Tamila McDonald is a U.S. Army veteran with 20 years of service, including five years as a military financial advisor. After retiring from the Army, she spent eight years as an AFCPE-certified personal financial advisor for wounded warriors and their families. Now she writes about personal finance and benefits programs for numerous financial websites.

5 Great DIY Investor Apps You Need to Know About

March 21, 2018 by Tamila McDonald Leave a Comment

It wasn’t long ago that you had to find a broker if you wanted to invest. Now, there are plenty of DIY Investor Apps that can let you control your portfolio from just about anywhere. [Read more…]

Tamila McDonald

Investing Your Way to Retirement

September 27, 2017 by Ashley Leave a Comment

One of the best reasons for people to invest is so that they won’t have to work for their entire lives. There really are only two ways for you to make money: you work for it or you get your assets to do the work for you.

If you are the type of person who prefers keeping your money in your wallet as opposed to investing it, that money will not work for you and you will never have any more than what you save. If you invest that money, you will be getting more because you will be earning interest on what you either put away or when you buy and sell assets that have the potential to increase in value.

It doesn’t really even matter the method in which you invest. You might invest in things like:

Cryptocurrencies
Bonds
Stocks
Mutual Funds
Retirement Funds

The objective will always be the same – to make smart investments that can earn more money for you down the road. You can do better though when you find investments that offer a big return or let you earn money without much of an investment.

It doesn’t matter if the goal you have is to put your children through college or just to retire comfortably, investing is critical if you want to achieve those goals.

Let’s take a quick look at some of those investment vehicles.

Cryptocurrency

If you are looking for an investment that really has growth potential, take a look at some of the cryptocurrencies like Ethereum and Bitcoin. A cryptocurrency is a type of digital currency that isn’t regulated by any type of central bank. It is mined by companies such as Genesis Mining, or you can buy it outright through various means. Because there is a finite amount of each cryptocurrency, the value will continue to grow as they increase in use and popularity. This is also a secure type of currency due to its use of blockchain technology, which keeps track of where it is, who owns it, and each transaction.

Bonds

Bonds can be had in a variety of forms. This is a type of investment that is known as a fixed income security due to the fact that the amount of income generated by them each year is set, or fixed when you purchase the bond. A bond is basically the same as an IOU. When you buy a bond, you are basically loaning money to a government entity or a business. The money you make on it is the interest from that loan. These are not issued by banks.

Stocks

Stocks are basically a part of a business. When you buy shares, you are buying into that business. A share is representative of ownership in the company. Company values fluctuate on a day to day basis. As the value changes, the value of your shares, or stocks, will also rise and fall. Some types of stocks also pay dividends. If you are thinking about investing in stocks, make sure you do your research on the companies you are considering first.

Mutual Funds

Mutual funds can be described as a way for a number of investors to pool their money together with the purpose of purchasing stocks, bonds, or absolutely anything else that the manager of the fund deems a worthwhile investment. With this type of investing, you won’t have the ability to manage your own investments and money, the responsibility will be given to a professional. This makes things a bit riskier in some ways, while in others – like having someone with experience controlling it – can be beneficial.

Retirement Funds

There are quite a few different plans that have been designed to create a savings for your retirement, and a lot of these plans allow for you to deposit money into them straight from your salary before the taxes are even taken out. Most of the time, employers will match what you put into the plans, or at least a percentage of it. You can have either a dollar amount deposited or a percentage of your pay. Some of these types of plans allow you to withdraw the money early for an assortment of reasons while others won’t, but they might allow you to borrow against what you have in them.

The Importance of a Personal Investing Statement

September 25, 2017 by Emilie Burke Leave a Comment

Sometimes, money is just hard. There’s this saying in personal finance: “There’s no right answer. Personal finance is personal.” While there are rules and things that are generally agreed upon my personal finances experts, your life, your context, and your goals are unique to, well, you. Here’s one thing we can agree on, though: Setting financial goals is important to your financial success. In fact, the lock screen on my phone reminds me of this on a daily basis. It says,

A dream written down becomes a goal.

A goal broken down into steps becomes a plan.

A plan backed by actions makes your dreams come true.

Well, no duh.

If you want to make your financial goals happen. You need a personal investing statement to help you get there. A personal investing statement is a specific plan on how to reach your investment goals. Putting it in writing makes it more likely that I will attain my goals. You can tell that I live this way because I blog about my monthly goals and my weekly goals.

Personal investing statements keep you on track to reach your goals, especially in “worst case” scenarios. Many people are tempted to pull all of their investments out at the first sign that the market might be headed downward. Instead of changing your investment strategy based on emotions (which are often fallible), you have already planned for every possible situation and can react appropriately.

How to write a personal investing statement:

Plan for both short-term and long-term goals. Include a timeline of when you want to achieve these goals. Update it as situations arise that would change your investment strategy, such as a birth or death in the family, career change, or other momentous life occasion.

Determine how to allocate your investments and how much risk you’re willing to take. Do you want to invest more aggressively or conservatively? Experts suggest you should invest more aggressively when you’re young. Scott Alan Turner of the Financial Rockstar podcast suggests taking your age from the number 110 to figure out a good allocation strategy across stocks and bonds. For example, I am twenty-three; 110-23 = 87, so I want to be invest 87% in stocks and 13% in bonds. Do you want to invest solely in mutual funds or do you want to branch into rental properties as well?

Determine what your values are. Some investors choose to invest solely in American investments, while others choose to invest in the global market. There are similar dilemmas around company’s that have ecologically friendly policies, among other controversial features. That’s something that your investment advisor (or you, if you are self-advising) need to be aware of when looking at potential investments.

Just start writing! This will give you someplace to start! Even if your Personal Investing Statement isn’t perfect, getting started is the biggest part of the battle. You can and should refine over time as your financial priorities change!

Do you have a personal investing statement?

Avoid These Common Mistakes While Planning For Retirement

September 11, 2017 by Ashley Leave a Comment

Planning for your future is not always going to be a straightforward process. There will be many twists and turns along the way that might throw you for a loop. This means that you want to have as much advice as possible on how to move forward with your finances. When it comes to your retirement, there is never a bad time to begin the process of saving. Though your actual age of retirement might be many years off, now is the time you want to focus your energy on formulating a solid plan.

One of the best ways to get started is by looking over some of the more basic aspects of the process. There are plenty of mistakes that people make when attempting to focus on their retirements. If you are hoping to see success from the process, take a moment to look over some of the more common mistakes that people make when saving and see what you can avoid along the way.

Delaying the Process

By taking the time to look over these bits of advice, you are already putting yourself ahead of the curve. One of the most common mistakes that people make when planning for the future is waiting too long to begin. There is never a bad time to start saving for your retirement but you definitely want to give yourself as much room as possible. Waiting until the last second to begin saving can make it so that you have absolutely no funds available to you when retirement does finally arrive.

People who fail to save early often wind up having to work throughout their later years. This defeats the entire purpose of retiring. While there are many people who enjoy working and want to find ways to stay busy after retiring, far more people would prefer to just relax and enjoy their later years without fear of financial failure. By starting early, you can give yourself room to learn all of the best options and put your energy into an effort that will yield you the most interesting results.

Going It Alone

Another common mistake that people make when planning for their retirements is attempting to do it all without any assistance. Not everyone is going to be skilled with finances. While you might have some idea of how to save, there is a lot to take into consideration with retirement savings. This means that it will be in your best interest to speak with experts who have a background in this type of financial planning. Advice from investment firms can point you in the right direction for your future.

Being able to turn to a professional when you have a tough question can be a real lifesaver. There are going to come many times when you do not know what the best course of action is for your retirement plan. Taking the time to align with the right financial experts can put you in touch with a large number of fantastic resources that can offer you insight as to how to best secure your finances for when you reach the age of retirement. Getting started early on this task is going to be a wise move.

Employer Assistance

People also tend to make many mistakes when it comes to taking advantage of the retirement benefits offered by their employers. Almost all companies offer their employees various options for retirement. These options can take many forms, like a 401(k), and provide employees with a chance to get started on saving for their future as early as possible. If you have signed up for these services, then you want to be aware of how they will be shaping your finances down the line.

To sort all of this out, take time to speak with the person in charge of your retirement options. Often, this is going to be a person who works in your HR department. Sit down and discuss everything that you are signed up for and what additional options you might have moving forward. Getting your finances in order in this manner can help to focus the rest of your planning moving forward.

Staying Smart

While it might be impossible to see the future, there are some easy ways to get yourself ready for what awaits. Take time to look into how you can begin saving for your retirement now and be sure to avoid the common mistakes that people tend to make along the way.

Is Leverage Considered as a Blessing or Curse

September 11, 2017 by Ashley Leave a Comment

There are lots of traders in Forex who think of leverage as a way of making a big profit in the market like the hotshots. But leverage is nothing but a marketing policy conceived by the brokers. The professional traders in Switzerland always prefer to trade with low leverage since they know that a high leverage trading account can ruin their trading career. If you know the perfect way to place your trade then you will make a decent income by using the low leverage trading account. There is no need to take excess leverage as it will increase your risk exposure in the trading industry. In our article, we are going to explore the history of leverage and tell you, if you should use it or not.

Leverage is a tool to make brokers rich

Do you know that US Dollar is one of the major currency in the currency pairs of Forex? Though the US Dollar is widely used all around the world, you will find that not many major brokers are not offering their services to the United States. It is not that they do not have money to offer their services, it is because they have to offer a lower leverage than the European markets. The U.S administration knows very well that if the trader’s trade with high leverage then their very human nature will force them to take a big risk. Even if you follow strict trading discipline then after a series of losing trades you might try to recover your loss by taking big size trade. Most of the time the traders make their condition much worse in their recovery attempt. But if you trade with a low leverage trading account then you don’t have the freedom to execute a big trade with the small trading account.

In the European market, the brokers can offer a leverage of 500:1, where they have to lower their leverage offered to 50:1 in the US. It says their profit is lowered in the United States if they offer Forex services. It is one of the major reasons why many brokers who are offering Forex worldwide do not enter the US market. You will find that US citizens are the lowest number of traders in the market. Though there is no ban on trading in Forex, brokers do not like to offer their service as they get a lower profit because of the low leverage. But when you look at the success rate in options trading industry then you will notice that a big number traders are from the United States. They are making money consistently due to their low leverage trading account. Even if they try to risk big amount of money they will be forced to use a small lot due to low leverage.

It will only larger your loss

Using leverage in trying to make a profit will only make your loss larger. There are many traders who have tried to use leverage when they have lost a trade in the market. They could not accept a loss in the market and to make their loss profitable, leverage was a good idea to them. They take high leverage in their trades, lost the trades and risks their capital. As we have said before leverage is not a great blessing to the traders. It will keep them away from their traders’ mindset. If you are not using leverage, you know what to expect from the market and you will make better trades. If you use leverage, you will expect big from the market and take high risks. This market is volatile and you cannot make it, making your profit larger by using leverage in the trading market.

Summary: Leverage is a double edge sword. If you know how to use it then you are most welcome to take advantage of it in forex trading. But if you are inexperienced then it’s better to trade in the low leverage trading account.

Common Types of Financial Advisers

September 11, 2017 by Emilie Burke 2 Comments

As someone who is passionate about finances, I believe that one of the best investments that anyone can make is in their finances. Although I haven’t yet been to a traditional financial adviser, as my first priority right now is to pay off debt and build my emergency savings, it’s something I definitely want to do in the future. There are many types of financial advisers, so here’s a look at the different types and what makes them different.

Certified Public Accountant (CPA)

Certified Public Accountants’ expertise is taxes, so they offer advice on how to prepare taxes, how to invest for college and retirement so you pay the least amount of taxes, and how to prepare your estate so your survivors pay the least amount of taxes.

Certified Financial Planner (CFP)

Certified Financial Planners offer general financial advice on topics such as insurance, retirement, estate planning, taxes, and investing. They are great resources for anything from learning how to pay off debt to managing an estate. Certified Financial Planners must hold a Bachelor’s degree (in the US), complete a specific coursework of financial planning courses, and sit through an exam. Additionally, they must have 3 years of professional experience (or 2 years of a CFP apprenticeship.)

Broker/registered representatives

Most people use the term broker to describe a person who buys and sells stocks, mutual funds, and other investment products, but that’s not entirely the case; brokers are actually the person or company in charge of buying and selling investment products, while the individuals who do the buying and selling are technically known as registered representatives. Registered representatives are required to register with the Securities and Exchange Commission (SEC).

Investment Adviser

Investment advisers are specialists on all things investing. Some of them charge flat fees or annual fees, while others require a minimum investment. Unlike brokers, who may mention a more expensive product to their clients so they can receive a greater commission, investment advisers have a fiduciary responsibility to offer less expensive products to their clients that meet their needs. Investment advisers who are registered with the SEC are known as Registered Investment Advisers.

Insurance Agent

Insurance agents sell life, auto, property, and other types of insurance and can help clients determine which insurance policy best suits their needs. Some insurance agents exclusively represent one agency, while independent agents sell policies from multiple agencies.

Attorney

Although most people wouldn’t expect to attorneys to be financial advisors (and most aren’t), there are some attorneys who specialize in tax law. Attorneys also prepare important financial documents such as wills and trusts.

Robo-advisor

Since many traditional financial advisors require higher investments and fees, consumers, especially millennial ones, are turning to robo-advisors. Thanks to technology such as developing computer-based algorithms, these websites and apps are able to offer financial advice to users. Examples of robo-advisors are Betterment and Wealthfront.

Financial coach

Coaching is a relatively new phenomenon that is most popular with millennials. They look at the big picture and how their finances fit into their lifestyle. There are a variety of coaching certifications, but they are not required. Many coaches have degrees in fields such as psychology and social work.