Money & Budgeting

The investment markets are providing a very effective minefield for people hoping to make money. The stock market indices have been like bungee jumping, bonds are so flat you could iron with them, and commodities futures are like a raffle more often than not. The name of the game now is survival, and there are still some ways of making a profit while you’re at it. Even debt collection is an investment strategy, if you know how.

1. Basic survival

The real risks for investors are over- commitments. What happens is that the capital base takes a huge hit when over-exposed to a market or a stock. That situation must be avoided at all costs. It’s also a good way of getting very choosey and much better informed about your investments.

Remember also that the investment markets are neurotic by nature. Real trends are often obscured by euphoria and panics. Trust nothing but hard figures.

2. Market performance

Track market performance before you spend a cent. Nothing is proven about any investment until you see a quarter or two with good core business to back it up. Take a good look at securities, commodities, Exchange Traded Funds, and other solid base investments on their merits, then take these steps:

1. Do some modeling of a trial investment in each area you’ve decided is worth following. Put a notional figure to each investment, like a simulation. Try a hypothetical 1000 units.
2. Track the investment. How did you do? Which investments worked? Did you make a net profit or loss on a portfolio, and over what sort of timeframe?

These figures are important, because they show you how a particular investment performs. Some are good short term investments, others do much better over longer terms, like ETFs.

This isn’t a disingenuous exercise. In any portfolio, performance is very mixed, and that’s a true obstacle to real profits. The idea is to weed out the non-  performers before they cost you money. You owe it to yourself to be careful, and this process is a sort of “debt recovery program for yourself” in advance.

3. Avoiding market disinformation

The markets themselves are a hazard. The financials provide endless bits of string, and expect you to guess how long they are. Forget it. The information you need is available, if you know where to find it.

The basic parameters are:

• Consider ROI, first and foremost: Returns On Investments are basic management parameters, but they’re also good bases for healthy skepticism that can save you a fortune. Check the numbers, run the investment model, then make a decision.
• Ignore hype and spruikers: The financial markets are notorious for doing beat ups on investments which are basically garbage. There are real experts in the market, and they won’t touch these things. If you see anything interesting, check out the top people, not the bottom feeders.
• Compare analyses for any investment. These analyses are based on annual reports, financial statements, and other information you can track and check for yourself. The right figures will be consistent and verifiable.