Friday, December 31, 2010

Happy New

Happy New Year. Wish you health, wealth and happiness in the new year.

Regards,
Ravinder Tulsiani, Author

Monday, December 27, 2010

Key Research Data to Consider When Evaluating an Area by Ravinder Tulsiani

Key Research Data to Consider When Evaluating an Area by Ravinder Tulsiani

Mortgage Rates:
Are mortgage rates increasing or decreasing? The general level and the direction of interest rates can greatly affect the demand for real estate. As mortgage rates increase, the demand for real estate decreases and vise versa. Higher interest rates translate into higher mortgage payments for single-family home-buyers and inadequate cash flows for income property investors. Falling mortgage rates result in greater demand for real estate and faster appreciation.

Employment:
Is the job base in your community growing or is it declining? The availability of high paying jobs can greatly impact appreciation growth rates. If good job opportunities are available in an area, the demand for real estate will be high. People will move to the area to take advantage of job opportunities. The end result will be increasing real estate prices.

Income:
Look for rising incomes and strong demand for workers. The more money you make, the more you can afford on living expenses including housing payments. (pay attention to the housing affordability index)

Net Migration:
Net internal migration (inter-provincial movement) plus net international migration. The more people coming into a region, the greater the housing demand.

Natural Population:
The natural population (births - deaths) is slowing or increasing? An increase in natural population will eventually increase the demand for additional housing stock in the longer term.

Consumer Confidence:
Confident consumers will support demand for home ownership, while a weak consumer confidence will result in consumers shying away from home ownership.

Resale Market:
A healthy resale market shows lots of transactions. The greater the numbers, the easier it is for you as an investor to quickly sell your property if you need to.

Vacancy Rates:
Over supply of a particular type of income property can result in high vacancy rates and reduced cash flows making it difficult for property owners to meet their financial obligations. The end result is lower prices.

Where can you find the above research information? Just Google the following organizations:

Canadian Mortgage & Housing Corp.
Housing Research Resources
HUDUSER Database
Joint Centre for Housing Studies
The Land Centre
Research Institute for Housing America
Statistics Canada
Your local Real Estate Board.


About the Author

Ravinder Tulsiani is a published author who has written about personal finance, real estate, self-help and online marketing.

Evaluating the Right Property in Your Area by Ravinder Tulsiani

Evaluating the Right Property in Your Area

In the wake of ongoing financial crises and sub prime mortgage affects, it is necessary to go for certain stringent norms that will ideally help you in deciding on the property of your choice and above all making it the most valued.

Following common parameters should be taken into account:

Mortgage Interest Rates: The level of mortgage interest rates are important criteria to watch out how the real estate market is moving in the area. Check and assess whether the mortgage rates are moving up or down. More is the value of mortgage interest rates results in higher mortgage payments, resulting in poor cash inflows for real estate investors. On the other hand, if the mortgage interest rates are going down then it is a positive sign showing demand for real estate and high appreciation rate values.

Employment Opportunities: The real estate properties providing ample of job opportunities in around the locality has more appreciation, than those having property elsewhere. Therefore, it is necessary to do some preliminary homework on finding the real estate property in the regions that offer more employment opportunities.

Income: Concentrate on the housing price index. Opt for the area where there is demand for workers and high rising incomes. As a simple thumb rule, the more you earn, more is your spending on the expenses such as housing payments, electricity, etc.

Migration Rate: The net international migration and the inter-provincial migration plays significant role in increasing the housing demand for the area. More is the migration rate in the area, greater will be the amount of resources available and more will be the prices of the real estate property in the area.

Natural population Growth Rate: Before going for a particular are, it is necessary to see, whether, the birth/death ratio is on the increase or is it slowing down. If any region shows high natural population growth rate, then, there is prospects for greater housing stocks in times to come, and this eventually means, more real estate growth in the area.

Level of Consumer Confidence: Consumers who exhibit more confidence and lust on a property of a particular region will show more demand for the home ownership than those where the consumers show lack in confidence of buying the property. Homeownership rises with confidence and this results in more demand for housing stock in the area.

Movement of Resale Market: The region where there is tremendous movement in Resale market, will show many transactions in terms of high sale and purchase of real estate property. Greater the demand for the resale property, will eventually make it easy for you to buy the property as an investor.

What are the Vacancy Rates: As the rule of economics, if supply increases the demand, the vacancy rates fall. If there is over supply of property taking place in a particular region or area, the vacancy rates tend to move up and thereby extremely reduced cash flows. Now, for the property owners, it becomes a point of concern to meet their financial expenses, which eventually leads to price fall in the real estate property of the region.


About the Author

Ravinder Tulsiani is a published author who has written about personal finance, real estate, self-help and online marketing.

Culling Profits in Down Market Situations by Ravinder Tulsiani

Culling Profits in Down Market Situations by Ravinder Tulsiani

In a Real estate market cycle, new investors try to bring a changed trend by over buying and making the affordability level leap higher. Now, when there's a slump in the market, these very amateur investors pour and lose their hard earned money by selling at low prices, than the prices at what they had bought. One man's loss is other man's gain. The professional investors lurking out there make huge profits by buying this discounted property on their terms.

The professional investors move in counter-cyclical manner, buying from these novice investors and selling at profits. This is an absolute gain.

Role of an Average Investor in North America - An average investor is in state of shock and panic, trying to simply get out of the vicious market cycles. It is important to note that panicky situation in any type of market creates good amount of opportunities for others.

Patience does all the work. Like in a positive market trend, the jobs, deals and profits are also created in panicky situations. Talking in context of real estate market, try every method out to keep the property with you during down market trend, and do not succumb to market pressures by selling the property at complete loss.

Keep the Basics Clear

For example, one can buy a Halloween candy at 50 to 90% off during first week of November itself. The reason being they are almost out of demand by that time. A week previous, the same candy made from same stuff were sold at almost 50 to 90% higher rates. This example also holds good when we talk of real estate market. The real estate properties are located at the same place, and standing upright without any crevices or cracks developed in them, made of same bricks and mortars as found elsewhere or when the market was moving up trend.

It is necessary that you keep your concentration and eye over the market fundamentals,

Market is driven by average consumer's confidence. Any false or panicky exaggerations make the markets move either up or down. As the result of these human exaggerations, when the market makes a dip, it will dip below than the real value of property, and likewise, if the exaggerations are positive, the market will substantially rise higher than its real market price.
Therefore, do some homework, and keep strong on the fundamental research about a property, which includes, employment, interest rates, immigration etc… see end of this report for a detailed breakdown of what you should look for.

Go for Cheap Deals

Take the panic on to its positive side and negotiate on the price as better as you can. Take the popular opinion on to your benefits. Supposing if the investor or home owner is deliberately thinking to make a jump out, because of poor market conditions, then it can be a great deal for you and you can take full advantage in such a situation.

Just acknowledge their fears and buy the property at ideal bargains. Ultimately you are helping the average investor by buying his fears!
Forced Appreciation

Try to manipulate your property on its aesthetic value, interiors, kitchen, bathrooms and light fittings. In this manner, you can have substantial returns on your property even in down market situations.

Concentrate more on Rentals

In a down moving market scenario, people opt for renting a property, rather than buying a property and paying high mortgage interest rates at the end.

Put a Curb on Housing Expenses

In a down market economic trend, the government tends to cut the lending rates substantially, and in the process the banks follow the same process too. As the result, borrowing is available at cheap lending rates. This is the opportune time to make the right judgment on your current mortgage rates. If you are paying high, you can break the mortgage in between and go for the refinance at low rates, and at the end you'll be having extremely reduced carry cost.

Municipal Property Assessment Corporation (MPAC) valuation

MPAC, a non-share capital, not-for-profit corporation whose main responsibility is to provide its customers - property owners, tenants, municipalities, and government and business stakeholders - with consistent and accurate property assessments. By using the assessment on the purchased property for refinancing purposes, you can always challenge property's current value with the local municipal governments, for real estate tax benefits. In this manner, you can really substantiate on annual property taxes.

Invest in No Money down Deals
Real estate markets can vacillate up or down, giving you the opportunity to loose or to gain profits. Remember to invest in no money down deals, because it is in such investments that you are bound to make substantial profit margins.
Conclusion

Invest in declining markets such as US. It represents excellent opportunity to the sophisticated investor. Remember, market opportunities are short-lived; you need to be decisive and cease the opportunity while it's still around. Three mantras out here for all you sophisticated investors - Buy cheap, stick to basics and follow the right strategies.


About the Author

Ravinder Tulsiani is a published author who has written about personal finance, real estate, self-help and online marketing.

Affects of Housing Downturn on Canada’s Economy and Demography by Ravinder Tulsiani

Affects of Housing Downturn on Canada's Economy and Demography

The growth of housing in general has seen a downfall in recent times in Canada. In the affordable housing segment, in the fourth quarter of the 2007 fiscal year, condos remained the most obvious choice requiring only about 30% of pre-tax household income. This was followed by standard townhouse at 34.5%, detached bungalow at 42.5%, with least affordable housing accorded to standard two-storey home, leveled at 48%.
Taking into account the volatile Alberta market, where housing has seen more down turn than elsewhere in Canada, in the fourth quarter of the2007 fiscal year, the price of standard two-storey home was all down by 4.3%, Bungalow prices slumped by 7.3%, town homes dipped by 4% and finally the condo prices went down by almost 5.3%. The economy showed slump in August 2008 as the real GDP fell by 0.3%. The month showed stable retail activity, with finance, insurance and real estate showing marginal 0.1% growth.

Housing Starts in Canada's Housing Sector
If one sees the housing starts in Canada, it averaged 207,200 in third quarter; certainly a positive growth, but was estimated to be 6% slow as compared to second quarter average rate and 14.9% slow as compared to third quarter of 2007. The housing starts were almost stable if we compare the 217,600 units in September 2008, with that of 217,400 units in August. This trend has been almost constant for the past one and a half year due to steady decline in urban single unit starts has been overturned by increase in urban multiple unit starts. The downward trend of the single-family units is seen, and it fell by 6,200 units which was again masked by an equal increase of 6,400 units in multiple-family dwelling starts.

These figures show that the multiple starts within the urban areas has grown to almost 65% in the month of September, 2008. However, the regional starts were stable, except in Ontario and B.C. Ontario. In Ontario, the housing starts was down by 6.3%, whereas, BC witnessed an appreciable increase of 9.3%.

In generality, with significant falling of Canada's home prices, in particular, in the regions of B.C. and Alberta, the housing starts are likely to come down by almost 15%, if not more.


Canada's Housing Growth and Affordability in Down Market conditions

Down market trend is a part of economical cycle and one does not have to fear from its repercussions. There was a crash seen in the year 1989, but were a people who set the path against the tide and became millionaires in such sluggish market situations. They made the trends, and were actively involved in buying properties at extremely low prices. In the real estate market, the wealth is created when you go and purchase against the tide of slump market.

The housing market in Canada has seen a downfall, after seeing a substantial growth period, wherein, resale home sales hit the highest records, with profits leaping to double-digit figures and the figures of housing starts saw faster run crossing 200,000-unit for six years at a stretch. However, in the recent sub prime crisis, it seen that housing sales and prices have slowed down, but analysis shows that there will be a housing boom in Canada's market, as opposed to US-Style crash.

Though, resale-housing market showed signs of slowing in the second half of last year and decline in second quarter of 2008 Fiscal year, it is still above the average pace of the past two decades, with almost 38,133 units sold in May 2008.

There has also been a slow down in the new house prices from 12.1% in August 2006 to 4.1% in May. Besides, the proportion of household income required financing home ownership (Affordability Index) has dipped by large amounts in 2007 fiscal year, as the affordability levels began weakening in the early 1990s.

Price Gains Adjusted Fairly by Fundamentally Strong Market

The double-digit house sales have provided the impetus inflation-adjusted price of Canadian homes up by a cumulative 46% in the last six and a half years. Considering this percentage increase, International Monetary Fund (IMF) sees Canadian housing market as overvalued, since the price increase in the houses is reasonably justified with the other fundamental factors playing an important role.

The Act Balancing Step

If seen on the supply side, there is high demand for construction activity and it is increasing at faster rate. Figures show that housing starts surpassed 200,000 units each year from 2002 to 2007. The trend continued unabated at 228,000-units during first quarter and second quarter of the fiscal year 2008. As the result, it is seen that the once demanding markets for housing such as Alberta gradually showed the signs of fall, whereas other provincial markets such as Saskatchewan's have began to rise.

Taking the example of Toronto market, the affordability suffered a great down movement in 2008, for bungalows and town homes and stabilized for condos and two-storey.


However, it is estimated that Toronto will see the improving affordability trend due to low new home and resale markets, arising primarily due to substantially lower values of mortgages. Until the present date, the condo market in the region is showing perpetual increase in the house prices, growing @ at a 10% year-over-year. But, with an expected increase in the supply trend in coming two years, the price growth can be thwarted.

The housing affordability in Ontario, there has been substantial rise in house prices, in the late 80's onwards. However, the prices are expected to fall as the result of low mortgage rates, bleak response in price gains and slower economic growth.

This is the reason, why there is less probability of eventuality of real estate bubble in Canada. It is important to understand here that for a bubble to occur, the housing affordability factor should exceed historically tested rates in the marketplace (40%), as shown in the graph to the left.

Summary: There is a least probability to see or expect any bubble arising in Canada's real estate market, though a general slow down cannot be totally ignored. The suggestion at this point of time is to invest in purchases in the areas where the property is totally free from excess saturation and inflated prices. Look for the affordable housing, and you are bound to make some good money in global financial crisis.



About the Author

Ravinder Tulsiani is a published author who has written about personal finance, real estate, self-help and online marketing.

Why Sub Prime is not Likely to Affect Canada by Ravinder Tulsiani

Why Sub Prime is not Likely to Affect Canada

The Canadian housing market is better shaped and more professional than the US housing market. It is because, the housing market in Canada has very little of sub prime mortgage activity, comparatively limited and restricted speculative structure and also the housing stocks are not more than what is desired. The best thing about all this activity is that you have good amount of construction activity on the run in the Canadian housing market.

Moreover, as per the current statistics, the affordability costs in Canada's housing sector are also slated for increase, with Bank of Canada having slashed the rates by 150 basis points since December. The results shall be perceptible in the form of contraction of mortgage spreads and house price gains coming down.

The sub-prime mortgage market in Canada accounts for about 5% of outstanding mortgages, while, in the United States, sub-prime mortgages account for roughly 14% of the outstanding mortgage market. Speculative investing is also much tamer in Canada. Investor-owned mortgages account for roughly
2% of all mortgages in Canada compared to about 10% in the United States and the United Kingdom.

The Government of Canada has also recently taken action by proclaiming that it is all ready to purchase a maximum of $25 billion in pooled mortgage loans from various financial institutions operating in Canada, via reverse auctions. This is based on the research taken by Canadian Mortgage and Housing Corporation (CMHC).

In this manner, the Canadian lenders will have the opportunity to get away with their loan debts in balance sheets for hard cash during imbalanced liquidity. The Government's risk in all this is practically nothing, and moreover, the pooled mortgage loans are limited to ones insured by CMHC, and all the pooled mortgage loans are prime quality loans.

The entire mortgage system is expected to do well, primarily due to streamlined auction process and lower cost borrowings of Government of Canada. These will enough of credit for both, the government as well as banking sector in Canada.

On Oct 16, 2008, the first $5 billion worth of mortgage pool auctions were organized, and on this occasion, the rate average paid by Canadian banks was 132 basis points, which was above the cost of funding for the government of Canada. Moreover, the Canadian banks borrowing rate was 230 basis points.

This clearly showed positive swing in the transaction process, and as the result, the financial institutions received finances at low interest rates much lower than available through normal credit channels. Baring a few financial institutions in Canada, which have incurred losses due to credit crisis, the overall scenario looks healthy and workable altogether. This is the basis of sound Canadian financial system.

About the Author

Ravinder Tulsiani is a published author who has written about personal finance, real estate, self-help and online marketing.

Why You Should Invest by Ravinder Tulsiani

US Sub prime Crisis and Affect on Canada by Ravinder Tulsiani

The global financial system in US, the world's most advanced economy suffered a terrible blow out that substantially led to spread of bankruptcy in major financial institutions in different countries across the globe. This, therefore, called for an immediate intervention of the world's most prosperous nations to get to the very brink of the financial crisis and resolve it as early as possible.

The prime origin for this financial melt down was the result of global credit bubble that started its work during the turn of this decade. There could be seen, what is called a financial Tsunami, witnessed as high inflation rates in real estate as well as financial assets altogether.

US Sub Prime Crisis and the Cause

Many people and economists see the present US financial apocalypse as truly American and very well generated in the US system. The housing bubble situation is caused by the dispensation of mortgage loans and high-risk mortgage products by the financial institutions in US. Following this, through the process of securitization and other means, these so called well-structured mortgage products were delegated to from the balance sheets of lenders to investors, scattered elsewhere in the world.

Now, there came a situation, when the real value of these high-risk mortgage products begins to plunge and crash. As the result, credit crunch occurred; with many financial institutions, becoming bankrupt and still many were on the verge of extinction.




Well, going by the graphs and statistics, you have just one part of story before you. US sub prime crisis had more to it. The financial scruples resulted from credit-bubble, accompanied by under-pricing of the risk, and all this happened when the new financial schemes became much in vogue, blowing out the regulatory measures. The risk management measures were totally ignored.

It was a global event, and not restricted to US alone, but US had to bear the real brunt off late. The precursor of global financial crash was in a way related to recovery made from 2001 economic slump. It was the time, during which there was dramatic growth in the income, and people started to take huge loan amounts and indulged in the investments. During this time, there was also abrupt shift in the trade balances amongst the nations of the world, where surpluses increased in Asian markets, and America saw deficit in surpluses. In most of the countries, the credit bubble meant to be phenomenally high real estate prices, paralleled with high returns in the equity markets.

With the 9/11 incident in 2001, there was high rate of spending and investment, and at the same time, the need for more and more yield, provided the impetus to institutional and retail investors to invest in higher risk financial products. They were confident of taking more and more risks and eventually, record low
commercial and corporate spreads over government yields.

This also provided the momentum in non-traditional financial products, such as financial derivatives and complex structured products, met the demands of investors by providing higher returns at a time of low traditional yields. As the result, calculating market risks became more difficult than ever. The financial innovation further resulted in leveraging the balance sheets of financial firms, and finally, with changing times, it outshined the power of regulators to move up.

Credit Crunch

On one hand, though the traditional regulatory environment had all the protocols to put a check on conventional retail banking, there were major discrepancies in other aspects of financial system, The new innovatively styled financial products witnessed coming up of a parallel shadow banking system, wherein investment banks, hedge funds, pension funds, and other non-retail bank entities provided credit to households and businesses. Many warnings were made about these trends, but none were heeded and the much popular credit crunch is just before you.

The US housing bubble burst took place as the prices reached their record levels in June 2006. However, the present credit crunch came into being just 15 months ago. As the result, even the world's biggest financial markets in the prosperous nations have been significantly on a roller coaster ride.

The financial losses resulted in completely distorted balance sheets, with capital assets nose-diving and the liabilities remaining almost at constant levels. A natural shift towards the cash hoardings was seen as the relief to provide balance to financial institutions balance sheets.

Furthermore, due to high probabilities of not having financial assets with the institutions, there was a sense of unfaith prevailing on lending between different financial institutions. All this market trends resulted in high funding cost to financial institutions to create an artificial increase in credit rates, as seen in London Interbank Offer Rate (LIBOR). This rate was much higher than the government rates, and eventually, credit became less available and more costly to bear.


About the Author

Ravinder Tulsiani is a published author who has written about personal finance, real estate, self-help and online marketing.

Why You Should Invest by Ravinder Tulsiani

Why You Should Invest

Investing has become increasingly important over the years, as the future of social security benefits becomes unknown.

People want to insure their futures, and they know that if they are depending on Social Security benefits, and in some cases retirement plans, that they may be in for a rude awakening when they no longer have the ability to earn a steady income. Investing is the answer to the unknowns of the future.

You may have been saving money in a low interest savings account over the years. Now, you want to see that money grow at a faster pace. Perhaps you've inherited money or realized some other type of windfall, and you need a way to make that money grow. Again, investing is the answer.

Investing is also a way of attaining the things that you want, such as a new home, a college education for your children, or expensive 'toys.' Of course, your financial goals will determine what type of investing you do.

If you want or need to make a lot of money fast, you would be more interested in higher risk investing, which will give you a larger return in a shorter amount of time. If you are saving for something in the far off future, such as retirement, you would want to make safer investments that grow over a longer period of time.

The overall purpose in investing is to create wealth and security, over a period of time. It is important to remember that you will not always be able to earn an income… you will eventually want to retire.

You also cannot count on the social security system to do what you expect it to do. As we have seen with Enron, you also cannot necessarily depend on your company's retirement plan either. So, again, investing is the key to insuring your own financial future, but you must make smart investments!

The information and resources found in this article is provided and intended for informational and entertainment purposes only and does not constitute financial, legal, or other advice of any kind. Before making a major financial decision you should consult a qualified professional.

About the Author

Ravinder Tulsiani is a published author who has written about personal finance, real estate, self-help and online marketing.

Let’s assume you have $20,000 to invest and have 15 years to retirement. by Ravinder Tulsiani

Let's assume you have $20,000 to invest and have 15 years to retirement.

You take your savings and invest it into the stock market directly
or through mutual funds and make no further payments. What
is the chance that your $20,000 will grow to $200,000 in 15
years? Let's just say, you would need over 16% return annually!
But for the purpose of this illustration, let's assume you are able
to achieve this.

Now that you're retired, you start to draw on these funds (for
example $1,000 monthly), this asset begins to deplete. Because
it's a depleting asset, most retirees hope that their funds will last longer than they will; if anything is left over, they can give to their children etc…

Alternatively, you take your $20,000 initial savings and use that
as a downpayment to buy a $200,000 rental property today.
Over the same 15-year period, the tenant pays off your mortgage.
Without factoring in appreciation or any positive cash flow (which
is highly likely), you still end up with a $200,000 property fully
paid off.

Now, the rental income produced from the property (let's say
$1,000 net of holding costs monthly) goes in your pocket and
you don't touch the asset… it does not deplete, in fact, it will
likely appreciate during your retirement years as well.
So what can you do with this appreciating asset after you're gone…
I suggest a trust that prevents the beneficiary from ever touching
the asset and have only access to the revenue the property generates, that way, your children or grand-children will be virtually guaranteed a monthly income of $1,000 for life generated from the rental property.

Imagine, what you would have done differently in your life if
someone had left you with guaranteed monthly funds? Would
you have made the same choices in your job, finances etc… that's
the legacy you can leave to your children through real estate rather
than the usual left-overs most people leave through depleting
assets.

This goes back to one our fundamental philosophies; every
Canadian should have two properties:

The property they live in.

A rental property to achieve financial freedom.
If you do that, the question remains, what should you do with
your own property once you pass on? Simply provide a provision
where your property is also put out for rent and your beneficiaries
only have access to the cash flow and not the asset. Now, your
beneficiaries have $2,000 per month coming in guaranteed. How
would that change their life?

Note: For most people $1,000 per month will not nearly be
enough to retire on. The numbers used in this example are not
important; it's the idea that I want to get across. Buy assets
that will provide you with the cash flow at retirement without
depleting the assets. If you need higher cash flow, buy more than
one property over time.

About the Author

Ravinder Tulsiani is a published author who has written about personal finance, real estate, self-help and online marketing.

The Upcoming Financial Security Crisis by Ravinder Tulsiani

In a previous article titled "Reasons Not To Invest In Real Estate", we mentioned that corporate pensions are seriously under-funded. In this article, I will point out how big business and the government have responded to this quiet crisis.

In essence, they haven't.

In fact, to avoid this problem, over the past few decades big businesses have moved away from defined benefit plan (DBP) to defined contributions plan (DCP) or to Group RRSPs. So what does that mean? While in the past, upon retirement the employer was on the hook for any shortfalls between your pension savings and your benefit payout during retirement; this liability was quietly transferred over to individual in the form of group RSP or DCP. The spin doctors sold this bag of goods by suggesting that DCP & Group RSPs offer greater choice, certainty, product selection and ultimately better control by the individual over his or her retirement money.

The reality is, that the big businesses have now capped their maximum exposure up-front, they are now only offering to match employee contributions on a percentage basis, and have no obligation in the event of a short fall at retirement; guess who is now responsible...? Us!

So, where is the government on this? Well, do you really expect the Canada Pension Plan to bail out all the baby boom generations expected to retire over the next 15 to 20 years? The shortfall is expected to be in the billions. Who would pay for it... taxpayers? Here is good way to know if a government plan is in trouble... if the leader of the ruling party promises to keep it alive during an election promise... you know it's in trouble. I hope it stays too, but relying on the government for a bailout is a poor retirement plan.

As mentioned in the above article, we mentioned that a study commissioned by TD Waterhouse found that two-thirds of people polled who have not retired are stressed-out about retirement investing, mainly because of uncertainty or a lack of money.

If you're in the two-thirds category who are concerned about out-living your savings at retirement... what are you doing to avoid being another statistic? Do you feel secure that your current investments will give you the returns needed to secure the financial future for you and your family?

If not, you should strongly consider investing in real estate. Why? Today's term deposits and market obligations offer minimal growth, which are insufficient to creating a successful wealth accumulation investment plan. Furthermore, the stock market's meager results and fluctuations do not offer the stability and profitability required to solidify these types of earnings. On the other hand, real estate has proven over time to be the primary choice of the wealthy for investing their money. In fact, over 90% of the wealthy became so through real estate.

You now have a choice...

You can choose to follow the remaining 10% who became wealthy through other investment vehicles, or you can put the odds in your favour and follow the path of least resistance by investing in real estate.

About the Author

Ravinder Tulsiani is a published author who has written about personal finance, real estate, self-help and online marketing.

Real Estate Market Due for a Correction? by Ravinder Tulsiani

There is a lot of speculation and fear about the bubble in the marketplace. While bubble concerns are visible in some marketplaces in the US and perhaps Vancouver, is there a cause for concern for the rest of Canada?

The Normal Market

Similar to the stock market, real estate market also has a cycle. First, there is the annual cycle of certain months being slower months than others - winter is slow time, summer is usually more active time for buyers and sellers. Second, demand & supply, interest rates will cause occasional adjustments in the marketplace.

It is important to note that a "Bubble" is not part of the normal market cycle. It is an artificial rise in demand - which is unjustified by fundamentals usually fueled by speculation, misinformation and greed.

What is a Bubble?

In the dot com era, technology stocks were trading at extremely high price-earning ratios, which were not supported by market fundamentals - that is, the stock valuation had a weak correlation to the profitability of the company; rather it was based on expectation (speculation). People expected dot com companies to be the waive of the future and were willing to finance it, these companies had no real income or collateral to back up the equity loans they were taking out. While some dot com companies made it big, like Amazon and Google, the vast majority failed. The technology bubble burst due to one simple reason, all of these companies came out at the same time causing an excess of supply with no corresponding rise in demand for the products it offered. Buying and trading was being done almost solely on dreams of future cash. That is the basis of almost all, if not all, "bubbles".

What about Real Estate Bubble?

In contrast, real estate is a basic need - everyone needs a place to stay. It has a finite supply - land is scarce since no one is making anymore of it. In addition, artificial barriers introduced by government (greenbelt, conservation land, farm land) cause land to be even more scarce and push the demand up for other available land for development purposes.

Population is on the rise largely due to immigration, demand is boosted for real estate around business hubs (like Toronto, Vancouver, Edmonton, Montreal). Since land is more expensive in these areas, developers will likely address the higher density issue by building up (high rise condos) in these areas. And since the vast majority of people prefer a single family home and builder's are expected to build less of it in these areas, these types of homes will also see a rise in price.

To sum up so far, a bubble is fueled by artificial demand unjustified by fundamentals (normal supply and demand) - people begin to buy and sell based purely on speculation with no current market justifications for the higher demand. Real estate has a consistent rising demand and a limited supply which is unexpected to change anytime soon.

It's all up for Real Estate?

Does this mean that the housing prices will not fall, absolutely not. As part of normal real estate cycle, prices will occasionally adjust to reflect the current supply and demand situation of the market.

Let's first look at the crash of the 90's to see if similar fundamentals are visible in today's market place.

Crash of the 90's

Over 30% of the people buying in the Toronto area in the 90's were investors, with consistently rising interest rates, these investors could no longer afford the financing costs which caused them to either sell or be foreclosed on by the banks, which caused an excess supply of properties (especially condos) in the marketplace; the excess supply caused the prices to fall. The falling in prices caused investors who had crystallized their losses recently to stay away from the market place (further lowering demand). And end buyers noticed the falling trend and decided to wait a little longer hoping that the property values would drop further and properties could be picked up for a bargain. This waiting game lasted years.

Last year, only 19% of the condos in Toronto were rental units (according to CMHC's Housing Market Outlook from the second half of 2005) and vacancy rates are dropping. This is because more people are buying for themselves and not on speculation. So even if the rental markets slowed and vacancy rates started to rise, the real estate market is not likely to be flooded like they were in the early 90's.

Affordability

A major factor that caused the adjustment in the early 90's was the interest rates. In May of 1990 the interest rates were a whopping 14.21% (according it CMHC), making mortgage payments $11.89 for every thousand dollars of your mortgage. This would make a $400,000 mortgage cost $4,755.97 per month. You can currently get a 5-year mortgage at a rate of about 5.25% or $5.96 per thousand dollars on your mortgage. This means that a $400,000 mortgage today will cost you $2,383.67 per month. That means that the effective cost of owning a house is half the amount that you would pay back in 1990 and yet the average price is only 5%-10% higher now than it was in 1989.

Conclusion

The adjustment in the early 1990s was a response to too many speculators and excessively high interest rates. In the late 90s and until now there has been another adjustment to account for the housing markets being under valued in the 90s and consumer attitudes changing to acknowledge that homes were affordable again. Now as prices are starting to reach a level where affordable houses are affordable, we are likely to see prices moderate with slower increases in price and the occasional peaks and valleys that represent a normal market.


About the Author

Ravinder Tulsiani is a published author who has written about personal finance, real estate, self-help and online marketing.

Saturday, December 25, 2010

Quality to Win

"There is one quality that one must possess to win, and that is definiteness of purpose, the knowledge of what one wants, and a burning desire to possess it."
— Napoleon Hill

About the Author: Ravinder Tulsiani is a published author who has written about personal finance, real estate, self-help and online marketing.Disclaimer: The information and resources found in this blog is provided and intended for informational and entertainment purposes only and does not constitute financial, legal, or other advice of any kind. Before making a major financial decision you should consult a qualified professional.

Friday, December 24, 2010

About Online Trading by Ravinder Tulsiani

About Online Trading by Ravinder Tulsiani

The invention of the Internet has brought about many changes in the
way that we conduct our lives and our personal business. We can pay
our bills online, shop online, bank online, and even date online!


We can even buy and sell stocks online. Traders love having the
ability to look at their accounts whenever they want to, and brokers
like having the ability to take orders over the Internet, as opposed
to the telephone.


Most brokers and brokerage houses now offer online trading to their
clients. Another great thing about trading online is that fees and
commissions are often lower. While online trading is great, there are
some drawbacks.


If you are new to investing, having the ability to actually speak with
a broker can be quite beneficial. If you aren’t stock market savvy,
online trading may be a dangerous thing for you. If this is the case,
make sure that you learn as much as you can about trading stocks
before you start trading online.


You should also be aware that you don’t have a computer with Internet
access attached to you. You won’t always have the ability to get
online to make a trade. You need to be sure that you can call and
speak with a broker if this is the case, using the online broker. This
is true whether you are an advanced trader or a beginner.


It is also a good idea to go with an online brokerage company that has
been around for a while. You won’t find one that has been in business
for fifty years of course, but you can find a company that has been in
business that long and now offers online trading.


Again, online trading is a beautiful thing – but it isn’t for
everyone. Think carefully before you decide to do your trading online,
and make sure that you really know what you are doing!




About the Author: Ravinder Tulsiani is a published author who has written about personal finance, real estate, self-help and online marketing.Disclaimer: The information and resources found in this blog is provided and intended for informational and entertainment purposes only and does not constitute financial, legal, or other advice of any kind. Before making a major financial decision you should consult a qualified professional.

Choosing a Broker by Ravinder Tulsiani

Choosing a Broker by Ravinder Tulsiani

Depending on the type of investing that you plan to do, you may need
to hire a broker to handle your investments for you. Brokers work for
brokerage houses and have the ability to buy and sell stock on the
stock exchange. You may wonder if you really need a broker. The answer
is yes. If you intend to buy or sell stocks on the stock exchange, you
must have a broker.


Stockbrokers are required to pass two different tests in order to
obtain their license. These tests are very difficult, and most brokers
have a background in business or finance, with a Bachelors or Masters
Degree.


It is very important to understand the difference between a broker and
a stock market analyst. An analyst literally analyzes the stock
market, and predicts what it will or will not do, or how specific
stocks will perform. A stock broker is only there to follow your
instructions to either buy or sell stock… not to analyze stocks.


Brokers earn their money from commissions on sales in most cases. When
you instruct your broker to buy or sell a stock, they earn a set
percentage of the transaction. Many brokers charge a flat ‘per
transaction’ fee.


There are two types of brokers: Full service brokers and discount
brokers. Full service brokers can usually offer more types of
investments, may provide you with investment advice, and is usually
paid in commissions.


Discount brokers typically do not offer any advice and do no research
– they just do as you ask them to do, without all of the bells and
whistles.


So, the biggest decision you must make when it come to brokers is
whether you want a full service broker or a discount broker.


If you are new to investing, you may need to go with a full service
broker to ensure that you are making wise investments. They can offer
you the skill that you lack at this point. However, if you are already
knowledgeable about the stock market, all you really need is a
discount broker to make your trades for you.




About the Author: Ravinder Tulsiani is a published author who has written about personal finance, real estate, self-help and online marketing.Disclaimer: The information and resources found in this blog is provided and intended for informational and entertainment purposes only and does not constitute financial, legal, or other advice of any kind. Before making a major financial decision you should consult a qualified professional.

Determine Your Risk Tolerance by Ravinder Tulsiani

Determine Your Risk Tolerance by Ravinder Tulsiani

Each individual has a risk tolerance that should not be ignored. Any
good stock broker or financial planner knows this, and they should
make the effort to help you determine what your risk tolerance is.
Then, they should work with you to find investments that do not exceed
your risk tolerance.


Determining one’s risk tolerance involves several different things.
First, you need to know how much money you have to invest, and what
your investment and financial goals are.


For instance, if you plan to retire in ten years, and you’ve not saved
a single penny towards that end, you need to have a high risk
tolerance – because you will need to do some aggressive – risky –
investing in order to reach your financial goal.


On the other side of the coin, if you are in your early twenties and
you want to start investing for your retirement, your risk tolerance
will be low. You can afford to watch your money grow slowly over time.


Realize of course, that your need for a high risk tolerance or your
need for a low risk tolerance really has no bearing on how you feel
about risk. Again, there is a lot in determining your tolerance.


For instance, if you invested in the stock market and you watched the
movement of that stock daily and saw that it was dropping slightly,
what would you do?


Would you sell out or would you let your money ride? If you have a low
tolerance for risk, you would want to sell out… if you have a high
tolerance, you would let your money ride and see what happens. This is
not based on what your financial goals are. This tolerance is based on
how you feel about your money!


Again, a good financial planner or stock broker should help you
determine the level of risk that you are comfortable with, and help
you choose your investments accordingly.


Your risk tolerance should be based on what your financial goals are
and how you feel about the possibility of losing your money. It’s all
tied in together.




About the Author: Ravinder Tulsiani is a published author who has written about personal finance, real estate, self-help and online marketing.Disclaimer: The information and resources found in this blog is provided and intended for informational and entertainment purposes only and does not constitute financial, legal, or other advice of any kind. Before making a major financial decision you should consult a qualified professional.

There are several different types of investments, and there are many

There are several different types of investments, and there are many
factors in determining where you should invest your funds.


Of course, determining where you will invest begins with researching
the various available types of investments, determining your risk
tolerance, and determining your investment style – along with your
financial goals.


If you were going to purchase a new car, you would do quite a bit of
research before making a final decision and a purchase. You would
never consider purchasing a car that you had not fully looked over and
taken for a test drive. Investing works much the same way.


You will of course learn as much about the investment as possible, and
you would want to see how past investors have done as well. It’s
common sense!


Learning about the stock market and investments takes a lot of time…
but it is time well spent. There are numerous books and websites on
the topic, and you can even take college level courses on the topic –
which is what stock brokers do. With access to the Internet, you can
actually play the stock market – with fake money – to get a feel for
how it works.


You can make pretend investments, and see how they do. Do a search
with any search engine for ‘Stock Market Games’ or ‘Stock Market
Simulations.’ This is a great way to start learning about investing in
the stock market.


Other types of investments – outside of the stock market – do not have
simulators. You must learn about those types of investments the hard
way – by reading.


As a potential investor, you should read anything you can get your
hands on about investing…but start with the beginning investment books
and websites first. Otherwise, you will quickly find that you are
lost.


Finally, speak with a financial planner. Tell them your goals, and ask
them for their suggestions – this is what they do! A good financial
planner can easily help you determine where to invest your funds, and
help you set up a plan to reach all of your financial goals. Many will
even teach you about investing along the way – make sure you pay
attention to what they are telling you!




About the Author: Ravinder Tulsiani is a published author who has written about personal finance, real estate, self-help and online marketing.Disclaimer: The information and resources found in this blog is provided and intended for informational and entertainment purposes only and does not constitute financial, legal, or other advice of any kind. Before making a major financial decision you should consult a qualified professional.

Different Types of Bonds by Ravinder Tulsiani

Different Types of Bonds by Ravinder Tulsiani

Investing in bonds is very safe, and the returns are usually very
good. There are four basic types of bonds available and they are sold
through the Government, through corporations, state and local
governments, and foreign governments.


The greatest thing about bonds is that you will get your initial
investment back. This makes bonds the perfect investment vehicle for
those who are new to investing, or for those who have a low risk
tolerance.


The United States Government sells Treasury Bonds through the Treasury
Department. You can purchase Treasury Bonds with maturity dates
ranging from three months to thirty years.


Treasury bonds include Treasury Notes (T-Notes), Treasury Bills (T-
Bills), and Treasury Bonds. All Treasury bonds are backed by the
United States Government, and tax is only charged on the interest that
the bonds earn.


Corporate bonds are sold through public securities markets. A
corporate bond is essentially a company selling its debt. Corporate
bonds usually have high interest rates, but they are a bit risky. If
the company goes belly-up, the bond is worthless.


State and local Governments also sell bonds. Unlike bonds issued by
the federal government, these bonds usually have higher interest
rates. This is because State and Local Governments can indeed go
bankrupt – unlike the federal government.


State and Local Government bonds are free from income taxes – even on
the interest. State and local taxes may also be waived. Tax-free
Municipal Bonds are common State and Local Government Bonds.


Purchasing foreign bonds is actually very difficult, and is often done
as part of a mutual fund. It is often very risky to invest in foreign
countries. The safest type of bond to buy is one that is issued by the
US Government.


The interest may be a bit lower, but again, there is little or no risk
involved. For best results, when a bond reaches maturity, reinvest it
into another bond.


About the Author: Ravinder Tulsiani is a published author who has
written about personal finance, real estate, self-help and online
marketing. For details visit: www.ravinder.ca

Different Types of Investments by Ravinder Tulsiani

Different Types of Investments by Ravinder Tulsiani

Overall, there are three different kinds of investments. These include
stocks, bonds, and cash. Sounds simple, right? Well, unfortunately, it
gets very complicated from there. You see, each type of investment has
numerous types of investments that fall under it.


There is quite a bit to learn about each different investment type.
The stock market can be a big scary place for those who know little or
nothing about investing. Fortunately, the amount of information that
you need to learn has a direct relation to the type of investor that
you are. There are also three types of investors: conservative,
moderate, and aggressive. The different types of investments also
cater to the two levels of risk tolerance: high risk and low risk.


Conservative investors often invest in cash. This means that they put
their money in interest bearing savings accounts, money market
accounts, mutual funds, US Treasury bills, and Certificates of
Deposit. These are very safe investments that grow over a long period
of time. These are also low risk investments.


Moderate investors often invest in cash and bonds, and may dabble in
the stock market. Moderate investing may be low or moderate risks.
Moderate investors often also invest in real estate, providing that it
is low risk real estate.


Aggressive investors commonly do most of their investing in the stock
market, which is higher risk. They also tend to invest in business
ventures as well as higher risk real estate. For instance, if an
aggressive investor puts his or her money into an older apartment
building, then invests more money renovating the property, they are
running a risk. They expect to be able to rent the apartments out for
more money than the apartments are currently worth – or to sell the
entire property for a profit on their initial investments. In some
cases, this works out just fine, and in other cases, it doesn’t. It’s
a risk.


Before you start investing, it is very important that you learn about
the different types of investments, and what those investments can do
for you. Understand the risks involved, and pay attention to past
trends as well. History does indeed repeat itself, and investors know
this first hand!


About the Author: Ravinder Tulsiani is a published author who has
written about personal finance, real estate, self-help and online
marketing. For details visit: www.ravinder.ca

Different Types of Stock by Ravinder Tulsiani

Different Types of Stock by Ravinder Tulsiani

The different types of stock are what confuse most first time
investors. That confusion causes people to turn away from the stock
market altogether, or to make unwise investments. If you are going to
play the stock market, you must know what types of stock are available
and what it all means!


Common Stock is a term that you will hear quite often. Anyone can
purchase common stock, regardless of age, income, age, or financial
standing. Common stock is essentially part ownership in the business
you are investing in. As the company grows and earns money, the value
of your stock rises. On the other hand, if the company does poorly or
goes bankrupt, the value of your stock falls. Common stock holders do
not participate in the day to day operations of a business, but they
do have the power to elect the board of directors.


Along with common stock, there are also different classes of stock.
The different classes of stock in one company are often called Class A
and Class B. The first class, class A, essentially gives the stock
owner more votes per share of stock than the owners of class B stock.
The ability to create different classes of stock in a corporation has
existed since 1987. Many investors avoid stock that has more than one
class, and stocks that have more than one class are not called common
stock.


The most upscale type of stock is of course Preferred Stock. Preferred
stock isn’t exactly a stock. It is a mix of a stock and a bond. The
owner’s of preferred stock can lay claim to the assets of the company
in the case of bankruptcy, and preferred stock holders get the
proceeds of the profits from a company before the common stock owners.
If you think that you may prefer this preferred stock, be aware that
the company typically has the right to buy the stock back from the
stock owner and stop paying dividends.


About the Author: Ravinder Tulsiani is a published author who has
written about personal finance, real estate, self-help and online
marketing. For details visit: www.ravinder.ca

Getting Your Feet Wet – Begin Investing by Ravinder Tulsiani

Getting Your Feet Wet – Begin Investing by Ravinder Tulsiani

If you are anxious to get your investments started, you can get
started right away without having a lot of knowledge about the stock
market. Start by being a conservative investor with a low risk
tolerance. This will give you a way to making your money grow while
you learn more about investing.


Start with an interest bearing savings account. You may already have
one. If you don’t, you should. A savings account can be opened at the
same bank that you do your checking at – or at any other bank. A
savings account should pay 2 – 4% on the money that you have in the
account.


It’s not a lot of money – unless you have a million dollars in that
account – but it is a start, and it is money making money.


Next, invest in money market funds. This can often be done through
your bank. These funds have higher interest payouts than typical
savings accounts, but they work much the same way. These are short
term investments, so your money won’t be tied up for a long period of
time – but again, it is money making money.


Certificates of Deposit are also sound investments with no risk. The
interest rates on CD’s are typically higher than those of savings
accounts or Money Market Funds.


You can select the duration of your investment, and interest is paid
regularly until the CD reaches maturity. CD’s can be purchased at your
bank, and your bank will insure them against loss. When the CD reaches
maturity, you receive your original investment, plus the interest that
the CD has earned.


If you are just starting out, one or all of these three types of
investments is the best starting point. Again, this will allow your
money to start making money for you while you learn more about
investing in other places.


About the Author: Ravinder Tulsiani is a published author who has
written about personal finance, real estate, self-help and online
marketing. For details visit: www.ravinder.ca

How Much Money Should You Invest? by Ravinder Tulsiani

How Much Money Should You Invest? by Ravinder Tulsiani

Many first time investors think that they should invest all of their
savings. This isn’t necessarily true. To determine how much money you
should invest, you must first determine how much you actually can
afford to invest, and what your financial goals are.


First, let’s take a look at how much money you can currently afford to
invest. Do you have savings that you can use? If so, great! However,
you don’t want to cut yourself short when you tie your money up in an
investment. What were your savings originally for?


It is important to keep three to six months of living expenses in a
readily accessible savings account – don’t invest that money! Don’t
invest any money that you may need to lay your hands on in a hurry in
the future.


So, begin by determining how much of your savings should remain in
your savings account, and how much can be used for investments. Unless
you have funds from another source, such as an inheritance that you’ve
recently received, this will probably be all that you currently have
to invest.


Next, determine how much you can add to your investments in the
future. If you are employed, you will continue to receive an income,
and you can plan to use a portion of that income to build your
investment portfolio over time. Speak with a qualified financial
planner to set up a budget and determine how much of your future
income you will be able to invest.


With the help of a financial planner, you can be sure that you are not
investing more than you should – or less than you should in order to
reach your investment goals.


For many types of investments, a certain initial investment amount
will be required. Hopefully, you’ve done your research, and you have
found an investment that will prove to be sound. If this is the case,
you probably already know what the required initial investment is.


If the money that you have available for investments does not meet the
required initial investment, you may have to look at other
investments. Never borrow money to invest, and never use money that
you have not set aside for investing!


About the Author: Ravinder Tulsiani is a published author who has
written about personal finance, real estate, self-help and online
marketing. For details visit: www.ravinder.ca

How to Know When to Sell Your Stocks by Ravinder Tulsiani

How to Know When to Sell Your Stocks by Ravinder Tulsiani

While quite a bit of time and research goes into selecting stocks, it
is often hard to know when to pull out – especially for first time
investors. The good news is that if you have chosen your stocks
carefully, you won’t need to pull out for a very long time, such as
when you are ready to retire. But there are specific instances when
you will need to sell your stocks before you have reached your
financial goals.


You may think that the time to sell is when the stock value is about
to drop – and you may even be advised by your broker to do this. But
this isn’t necessarily the right course of action.


Stocks go up and down all the time, depending on the economy…and of
course the economy depends on the stock market as well. This is why it
is so hard to determine whether you should sell your stock or not.
Stocks go down, but they also tend to go back up.


You have to do more research, and you have to keep up with the
stability of the companies that you invest in. Changes in corporations
have a profound impact on the value of the stock. For instance, a new
CEO can affect the value of stock. A plummet in the industry can
affect a stock. Many things – all combined – affect the value of
stock. But there are really only three good reasons to sell a stock.


The first reason is having reached your financial goals. Once you’ve
reached retirement, you may wish to sell your stocks and put your
money in safer financial vehicles, such as a savings account.


This is a common practice for those who have invested for the purpose
of financing their retirement. The second reason to sell a stock is if
there are major changes in the business you are investing in that
cause, or will cause, the value of the stock to drop, with little or
no possibility of the value rising again. Ideally, you would sell your
stock in this situation before the value starts to drop.


If the value of the stock spikes, this is the third reason you may
want to sell. If your stock is valued at $100 per share today, but
drastically rises to $200 per share next week, it is a great time to
sell – especially if the outlook is that the value will drop back down
to $100 per share soon. You would sell when the stock was worth $200
per share.


As a beginner, you definitely want to consult with a broker or a
financial advisor before buying or selling stocks. They will work with
you to help you make the right decisions to reach your financial
goals.


About the Author: Ravinder Tulsiani is a published author who has
written about personal finance, real estate, self-help and online
marketing. For details visit: www.ravinder.ca

Investing Basics – What Are Your Investment Goals by Ravinder Tulsiani

Investing Basics – What Are Your Investment Goals by Ravinder Tulsiani

When it comes to investing, many first time investors want to jump
right in with both feet. Unfortunately, very few of those investors
are successful. Investing in anything requires some degree of skill.
It is important to remember that few investments are a sure thing –
there is the risk of losing your money!


Before you jump right in, it is better to not only find out more about
investing and how it all works, but also to determine what your goals
are. What do you hope to achieve with your investments? Will you be
funding a college education? Buying a home? Retiring? Before you
invest a single penny, really think about what you hope to achieve
with that investment. Knowing what your goal is will help you make
smarter investment decisions along the way!


Too often, people invest money with dreams of becoming rich overnight.
This is possible – but it is also rare. It is usually a very bad idea
to start investing with hopes of becoming rich overnight. It is safer
to invest your money in such a way that it will grow slowly over time,
and be used for retirement or a child’s education. However, if your
investment goal is to get rich quick, you should learn as much about
high-yield, short term investing as you possibly can before you
invest.


You should strongly consider talking to a financial planner before
making any investments. Your financial planner can help you determine
what type of investing you must do to reach the financial goals that
you have set. He or she can give you realistic information as to what
kind of returns you can expect and how long it will take to reach your
specific goals.


Again, remember that investing requires more than calling a broker and
telling them that you want to buy stocks or bonds. It takes a certain
amount of research and knowledge about the market if you hope to
invest successfully.


About the Author: Ravinder Tulsiani is a published author who has
written about personal finance, real estate, self-help and online
marketing. For details visit: www.ravinder.ca

Investing for Retirement by Ravinder Tulsiani

Investing for Retirement by Ravinder Tulsiani

Retirement may be a long way off for you – or it might be right around
the corner. No matter how near or far it is, you’ve absolutely got to
start saving for it now. However, saving for retirement isn’t what it
used to be with the increase in cost of living and the instability of
social security. You have to invest for your retirement, as opposed to
saving for it!


Let’s start by taking a look at the retirement plan offered by your
company. Once upon a time, these plans were quite sound. However,
after the Enron upset and all that followed, people aren’t as secure
in their company retirement plans anymore. If you choose not to invest
in your company’s retirement plan, you do have other options.


First, you can invest in stocks, bonds, mutual funds, certificates of
deposit, and money market accounts. You do not have to state to
anybody that the returns on these investments are to be used for
retirement. Just simply let your money grow overtime, and when certain
investments reach their maturity, reinvest them and continue to let
your money grow.


You can also open an Individual Retirement Account (IRA). IRA’s are
quite popular because the money is not taxed until you withdraw the
funds. You may also be able to deduct your IRA contributions from the
taxes that you owe. An IRA can be opened at most banks. A ROTH IRA is
a newer type of retirement account. With a Roth, you pay taxes on the
money that you are investing in your account, but when you cash out,
no federal taxes are owed. Roth IRA’s can also be opened at a
financial institution.


Another popular type of retirement account is the 401(k). 401(k’s) are
typically offered through employers, but you may be able to open a
401(k) on your own. You should speak with a financial planner or
accountant to help you with this. The Keogh plan is another type of
IRA that is suitable for self employed people. Self-employed small
business owners may also be interested in Simplified Employee Pension
Plans (SEP). This is another type of Keogh plan that people typically
find easier to administer than a regular Keogh plan.


Whichever retirement investment you choose, just make sure you choose
one! Again, do not depend on social security, company retirement
plans, or even an inheritance that may or may not come through! Take
care of your financial future by investing in it today.


About the Author: Ravinder Tulsiani is a published author who has
written about personal finance, real estate, self-help and online
marketing. For details visit: www.ravinder.ca

Investing Mistakes to Avoid by Ravinder Tulsiani

Investing Mistakes to Avoid by Ravinder Tulsiani

Along the way, you may make a few investing mistakes, however there
are big mistakes that you absolutely must avoid if you are to be a
successful investor. For instance, the biggest investing mistake that
you could ever make is to not invest at all, or to put off investing
until later. Make your money work for you – even if all you can spare
is $20 a week to invest!


While not investing at all or putting off investing until later are
big mistakes, investing before you are in the financial position to do
so is another big mistake. Get your current financial situation in
order first, and then start investing. Get your credit cleaned up, pay
off high interest loans and credit cards, and put at least three
months of living expenses in savings. Once this is done, you are ready
to start letting your money work for you.


Don’t invest to get rich quick. That is the riskiest type of investing
that there is, and you will more than likely lose. If it was easy,
everyone would be doing it! Instead, invest for the long term, and
have the patience to weather the storms and allow your money to grow.
Only invest for the short term when you know you will need the money
in a short amount of time, and then stick with safe investments, such
as certificates of deposit.


Don’t put all of your eggs into one basket. Scatter it around various
types of investments for the best returns. Also, don’t move your money
around too much. Let it ride. Pick your investments carefully, invest
your money, and allow it to grow – don’t panic if the stock drops a
few dollars. If the stock is a stable stock, it will go back up.


A common mistake that a lot of people make is thinking that their
investments in collectibles will really pay off. Again, if this were
true, everyone would do it. Don’t count on your Coke collection or
your book collection to pay for your retirement years! Count on
investments made with cold hard cash instead.


About the Author: Ravinder Tulsiani is a published author who has
written about personal finance, real estate, self-help and online
marketing.

Investment Strategy by Ravinder Tulsiani

Investment Strategy by Ravinder Tulsiani

Because investing is not a sure thing in most cases, it is much like a
game – you don’t know the outcome until the game has been played and a
winner has been declared. Anytime you play almost any type of game,
you have a strategy. Investing isn’t any different – you need an
investment strategy.


An investment strategy is basically a plan for investing your money in
various types of investments that will help you meet your financial
goals in a specific amount of time. Each type of investment contains
individual investments that you must choose from. A clothing store
sells clothes – but those clothes consist of shirts, pants, dresses,
skirts, undergarments, etc. The stock market is a type of investment,
but it contains different types of stocks, which all contain different
companies that you can invest in.


If you haven’t done your research, it can quickly become very
confusing – simply because there are so many different types of
investments and individual investments to choose from. This is where
your strategy, combined with your risk tolerance and investment style
all come into play.


If you are new to investments, work closely with a financial planner
before making any investments. They will help you develop an
investment strategy that will not only fall within the bounds of your
risk tolerance and your investment style, but will also help you
achieve your financial goals.


Never invest money without having a goal and a strategy for reaching
that goal! This is essential. Nobody hands their money over to anyone
without knowing what that money is being used for and when they will
get it back! If you don’t have a goal, a plan, or a strategy, that is
essentially what you are doing! Always start with a goal and a
strategy for reaching that goal!


About the Author: Ravinder Tulsiani is a published author who has
written about personal finance, real estate, self-help and online
marketing.

Long Term Investments for the Future by Ravinder Tulsiani

Long Term Investments for the Future by Ravinder Tulsiani

If you are ready to invest money for a future event, such as
retirement or a child’s college education, you have several options.
You do not have to invest in risky stocks or ventures. You can easily
invest your money in ways that are very safe, which will show a decent
return over a long period of time.


First consider bonds. There are various types of bonds that you can
purchase. Bond’s are similar to Certificates of Deposit. Instead of
being issued by banks, however, bonds are issued by the Government.
Depending on the type of bonds that you buy, your initial investment
may double over a specific period of time.


Mutual funds are also relatively safe. Mutual funds exist when a group
of investors put their money together to buy stocks, bonds, or other
investments. A fund manager typically decides how the money will be
invested. All you need to do is find a reputable, qualified broker who
handles mutual funds, and he or she will invest your money, along with
other client’s money. Mutual funds are a bit riskier than bonds.


Stocks are another vehicle for long term investments. Shares of stocks
are essentially shares of ownership in the company you are investing
in. When the company does well financially, the value of your stock
rises. However, if a company is doing poorly, your stock value drops.
Stocks, of course, are even riskier than Mutual funds. Even though
there is a greater amount of risk, you can still purchase stock in
sound companies, such as G & E Electric, and sleep at night knowing
that your money is relatively safe.


The important thing is to do your research before investing your money
for long term gain. When purchasing stocks you should choose stocks
that are well established. When you look for a mutual fund to invest
in, choose a broker that is well established and has a proven track
record. If you aren’t quite ready to take the risks involved with
mutual funds or stocks, at the very least invest in bonds that are
guaranteed by the Government.


About the Author: Ravinder Tulsiani is a published author who has
written about personal finance, real estate, self-help and online
marketing.

Stabilize Your Current Situation Before You Invest by Ravinder

Stabilize Your Current Situation Before You Invest by Ravinder
Tulsiani

Before you consider investing in any type of market, you should really
take a long hard look at your current situation. Investing in the
future is a good thing, but clearing up bad – or potentially bad –
situations in the present is more important.


Pull your credit report. You should do this once each year. It is
important to know what is on your report, and to clear up any negative
items on your credit report as soon as possible. If you’ve set aside
$25,000 to invest, but you have $25,000 worth of bad credit, you are
better off cleaning up the credit first!


Next, look at what you are paying out each month, and get rid of
expenses that are not necessary. For instance, high interest credit
cards are not necessary. Pay them off and get rid of them. If you have
high interest outstanding loans, pay them off as well.


If nothing else, exchange the high interest credit card for one with
lower interest and refinance high interest loans with loans that are
lower interest. You may have to use some of your investment funds to
take care of these matters, but in the long run, you will see that
this is the wisest course of action.


Get yourself into good financial shape – and then enhance your
financial situation with sound investments.


It doesn’t make sense to start investing funds if your bank balance is
always running low or if you are struggling to pay your monthly bills.
Your investment dollars will be better spent to rectify adverse
financial issues that affect you each day.


While you are in the process of clearing up your present financial
situation, make it a point to educate yourself about the various types
of investments.


This way, when you are in a financially sound situation, you will be
armed with the knowledge that you need to make equally sound
investments in your future.


About the Author: Ravinder Tulsiani is a published author who has
written about personal finance, real estate, self-help and online
marketing.

The Importance of Diversification by Ravinder Tulsiani

The Importance of Diversification by Ravinder Tulsiani

“Don’t put all of your eggs in one basket!” You’ve probably heard that
over and over again throughout your life…and when it comes to
investing, it is very true. Diversification is the key to successful
investing. All successful investors build portfolios that are widely
diversified, and you should too!


Diversifying your investments might include purchasing various stocks
in many different industries. It may include purchasing bonds,
investing in money market accounts, or even in some real property. The
key is to invest in several different areas – not just one.


Over time, research has shown that investors who have diversified
portfolios usually see more consistent and stable returns on their
investments than those who just invest in one thing. By investing in
several different markets, you will actually be at less risk also.


For instance, if you have invested all of your money in one stock, and
that stock takes a significant plunge, you will most likely find that
you have lost all of your money. On the other hand, if you have
invested in ten different stocks, and nine are doing well while one
plunges, you are still in reasonably good shape.


A good diversification will usually include stocks, bonds, real
property, and cash. It may take time to diversify your portfolio.
Depending on how much you have to initially invest, you may have to
start with one type of investment, and invest in other areas as time
goes by.


This is okay, but if you can divide your initial investment funds
among various types of investments, you will find that you have a
lower risk of losing your money, and over time, you will see better
returns.


Experts also suggest that you spread your investment money evenly
among your investments. In other words, if you start with $100,000 to
invest, invest $25,000 in stocks, $25,000 in real property, $25,000 in
bonds, and put $25,000 in an interest bearing savings account.


About the Author: Ravinder Tulsiani is a published author who has
written about personal finance, real estate, self-help and online
marketing.

Understanding Bonds by Ravinder Tulsiani

Understanding Bonds by Ravinder Tulsiani

There are certain things you must understand about bonds before you
start investing in them. Not understanding these things may cause you
to purchase the wrong bonds, at the wrong maturity date.


The three most important things that must be considered when
purchasing a bond include the par value, the maturity date, and the
coupon rate.


The par value of a bond refers to the amount of money you will receive
when the bond reaches its maturity date. In other words, you will
receive your initial investment back when the bond reaches maturity.


The maturity date is of course the date that the bond will reach its
full value. On this date, you will receive your initial investment,
plus the interest that your money has earned.


Corporate and State and Local Government bonds can be ‘called’ before
they reach their maturity, at which time the corporation or issuing
Government will return your initial investment, along with the
interest that it has earned thus far. Federal bonds cannot be
‘called.’


The coupon rate is the interest that you will receive when the bond
reaches maturity. This number is written as a percentage, and you must
use other information to find out what the interest will be. A bond
that has a par value of $2000, with a coupon rate of 5% would earn
$100 per year until it reaches maturity.


Because bonds are not issued by banks, many people don’t understand
how to go about buying one. There are two ways this can be done.


You can use a broker or brokerage firm to make the purchase for you or
you can go directly to the Government. If you use a brokerage, you
will more than likely be charged a commission fee. If you want to use
a broker, shop around for the lowest commissions!


Purchasing directly through the Government isn’t nearly as hard as it
once was. There is a program called Treasury Direct which will allow
you to purchase bonds and all of your bonds will be held in one
account, that you will have easy access to. This will allow you to
avoid using a broker or brokerage firm.


About the Author: Ravinder Tulsiani is a published author who has
written about personal finance, real estate, self-help and online
marketing.

What Is Your Investment Style? by Ravinder Tulsiani

What Is Your Investment Style? by Ravinder Tulsiani

Knowing what your risk tolerance and investment style are will help
you choose investments more wisely. While there are many different
types of investments that one can make, there are really only three
specific investment styles – and those three styles tie in with your
risk tolerance. The three investment styles are conservative,
moderate, and aggressive.


Naturally, if you find that you have a low tolerance for risk, your
investment style will most likely be conservative or moderate at best.
If you have a high tolerance for risk, you will most likely be a
moderate or aggressive investor. At the same time, your financial
goals will also determine what style of investing you use.


If you are saving for retirement in your early twenties, you should
use a conservative or moderate style of investing – but if you are
trying to get together the funds to buy a home in the next year or
two, you would want to use an aggressive style.


Conservative investors want to maintain their initial investment. In
other words, if they invest $5000 they want to be sure that they will
get their initial $5000 back. This type of investor usually invests in
common stocks and bonds and short term money market accounts.


An interest earning savings account is very common for conservative
investors.
A moderate investor usually invests much like a conservative investor,
but will use a portion of their investment funds for higher risk
investments. Many moderate investors invest 50% of their investment
funds in safe or conservative investments, and invest the remainder in
riskier investments.


An aggressive investor is willing to take risks that other investors
won’t take. They invest higher amounts of money in riskier ventures in
the hopes of achieving larger returns – either over time or in a short
amount of time. Aggressive investors often have all or most of their
investment funds tied up in the stock market.


Again, determining what style of investing you will use will be
determined by your financial goals and your risk tolerance. No matter
what type of investing you do, however, you should carefully research
that investment. Never invest without having all of the facts!


About the Author: Ravinder Tulsiani is a published author who has
written about personal finance, real estate, self-help and online
marketing

Why You Should Invest by Ravinder Tulsiani

Why You Should Invest by Ravinder Tulsiani

Investing has become increasingly important over the years, as the
future of social security benefits becomes unknown.


People want to insure their futures, and they know that if they are
depending on Social Security benefits, and in some cases retirement
plans, that they may be in for a rude awakening when they no longer
have the ability to earn a steady income. Investing is the answer to
the unknowns of the future.


You may have been saving money in a low interest savings account over
the years. Now, you want to see that money grow at a faster pace.
Perhaps you’ve inherited money or realized some other type of
windfall, and you need a way to make that money grow. Again, investing
is the answer.


Investing is also a way of attaining the things that you want, such as
a new home, a college education for your children, or expensive
‘toys.’ Of course, your financial goals will determine what type of
investing you do.


If you want or need to make a lot of money fast, you would be more
interested in higher risk investing, which will give you a larger
return in a shorter amount of time. If you are saving for something in
the far off future, such as retirement, you would want to make safer
investments that grow over a longer period of time.


The overall purpose in investing is to create wealth and security,
over a period of time. It is important to remember that you will not
always be able to earn an income… you will eventually want to retire.


You also cannot count on the social security system to do what you
expect it to do. As we have seen with Enron, you also cannot
necessarily depend on your company’s retirement plan either. So,
again, investing is the key to insuring your own financial future, but
you must make smart investments!


About the Author: Ravinder Tulsiani is a published author who has
written about personal finance, real estate, self-help and online
marketing.

Wednesday, December 22, 2010

The Upcoming Financial Security Crisis by Ravinder Tulsiani

In a previous article titled "Reasons Not To Invest In Real Estate", we mentioned that corporate pensions are seriously under-funded. In this article, I will point out how big business and the government have responded to this quiet crisis.

In essence, they haven't.

In fact, to avoid this problem, over the past few decades big businesses have moved away from defined benefit plan (DBP) to defined contributions plan (DCP) or to Group RRSPs. So what does that mean? While in the past, upon retirement the employer was on the hook for any shortfalls between your pension savings and your benefit payout during retirement; this liability was quietly transferred over to individual in the form of group RSP or DCP. The spin doctors sold this bag of goods by suggesting that DCP & Group RSPs offer greater choice, certainty, product selection and ultimately better control by the individual over his or her retirement money.

The reality is, that the big businesses have now capped their maximum exposure up-front, they are now only offering to match employee contributions on a percentage basis, and have no obligation in the event of a short fall at retirement; guess who is now responsible...? Us!

So, where is the government on this? Well, do you really expect the Canada Pension Plan to bail out all the baby boom generations expected to retire over the next 15 to 20 years? The shortfall is expected to be in the billions. Who would pay for it... taxpayers? Here is good way to know if a government plan is in trouble... if the leader of the ruling party promises to keep it alive during an election promise... you know it's in trouble. I hope it stays too, but relying on the government for a bailout is a poor retirement plan.

As mentioned in the above article, we mentioned that a study commissioned by TD Waterhouse found that two-thirds of people polled who have not retired are stressed-out about retirement investing, mainly because of uncertainty or a lack of money.

If you're in the two-thirds category who are concerned about out-living your savings at retirement... what are you doing to avoid being another statistic? Do you feel secure that your current investments will give you the returns needed to secure the financial future for you and your family?

If not, you should strongly consider investing in real estate. Why? Today's term deposits and market obligations offer minimal growth, which are insufficient to creating a successful wealth accumulation investment plan. Furthermore, the stock market's meager results and fluctuations do not offer the stability and profitability required to solidify these types of earnings. On the other hand, real estate has proven over time to be the primary choice of the wealthy for investing their money. In fact, over 90% of the wealthy became so through real estate.

You now have a choice...

You can choose to follow the remaining 10% who became wealthy through other investment vehicles, or you can put the odds in your favour and follow the path of least resistance by investing in real estate.

About the Author

Ravinder Tulsiani is a published author who has written about personal finance, real estate, self-help and online marketing.

Real Estate Market Due for a Correction? by Ravinder Tulsiani

There is a lot of speculation and fear about the bubble in the marketplace. While bubble concerns are visible in some marketplaces in the US and perhaps Vancouver, is there a cause for concern for the rest of Canada?

The Normal Market

Similar to the stock market, real estate market also has a cycle. First, there is the annual cycle of certain months being slower months than others - winter is slow time, summer is usually more active time for buyers and sellers. Second, demand & supply, interest rates will cause occasional adjustments in the marketplace.

It is important to note that a "Bubble" is not part of the normal market cycle. It is an artificial rise in demand - which is unjustified by fundamentals usually fueled by speculation, misinformation and greed.

What is a Bubble?

In the dot com era, technology stocks were trading at extremely high price-earning ratios, which were not supported by market fundamentals - that is, the stock valuation had a weak correlation to the profitability of the company; rather it was based on expectation (speculation). People expected dot com companies to be the waive of the future and were willing to finance it, these companies had no real income or collateral to back up the equity loans they were taking out. While some dot com companies made it big, like Amazon and Google, the vast majority failed. The technology bubble burst due to one simple reason, all of these companies came out at the same time causing an excess of supply with no corresponding rise in demand for the products it offered. Buying and trading was being done almost solely on dreams of future cash. That is the basis of almost all, if not all, "bubbles".

What about Real Estate Bubble?

In contrast, real estate is a basic need - everyone needs a place to stay. It has a finite supply - land is scarce since no one is making anymore of it. In addition, artificial barriers introduced by government (greenbelt, conservation land, farm land) cause land to be even more scarce and push the demand up for other available land for development purposes.

Population is on the rise largely due to immigration, demand is boosted for real estate around business hubs (like Toronto, Vancouver, Edmonton, Montreal). Since land is more expensive in these areas, developers will likely address the higher density issue by building up (high rise condos) in these areas. And since the vast majority of people prefer a single family home and builder's are expected to build less of it in these areas, these types of homes will also see a rise in price.

To sum up so far, a bubble is fueled by artificial demand unjustified by fundamentals (normal supply and demand) - people begin to buy and sell based purely on speculation with no current market justifications for the higher demand. Real estate has a consistent rising demand and a limited supply which is unexpected to change anytime soon.

It's all up for Real Estate?

Does this mean that the housing prices will not fall, absolutely not. As part of normal real estate cycle, prices will occasionally adjust to reflect the current supply and demand situation of the market.

Let's first look at the crash of the 90's to see if similar fundamentals are visible in today's market place.

Crash of the 90's

Over 30% of the people buying in the Toronto area in the 90's were investors, with consistently rising interest rates, these investors could no longer afford the financing costs which caused them to either sell or be foreclosed on by the banks, which caused an excess supply of properties (especially condos) in the marketplace; the excess supply caused the prices to fall. The falling in prices caused investors who had crystallized their losses recently to stay away from the market place (further lowering demand). And end buyers noticed the falling trend and decided to wait a little longer hoping that the property values would drop further and properties could be picked up for a bargain. This waiting game lasted years.

Last year, only 19% of the condos in Toronto were rental units (according to CMHC's Housing Market Outlook from the second half of 2005) and vacancy rates are dropping. This is because more people are buying for themselves and not on speculation. So even if the rental markets slowed and vacancy rates started to rise, the real estate market is not likely to be flooded like they were in the early 90's.

Affordability

A major factor that caused the adjustment in the early 90's was the interest rates. In May of 1990 the interest rates were a whopping 14.21% (according it CMHC), making mortgage payments $11.89 for every thousand dollars of your mortgage. This would make a $400,000 mortgage cost $4,755.97 per month. You can currently get a 5-year mortgage at a rate of about 5.25% or $5.96 per thousand dollars on your mortgage. This means that a $400,000 mortgage today will cost you $2,383.67 per month. That means that the effective cost of owning a house is half the amount that you would pay back in 1990 and yet the average price is only 5%-10% higher now than it was in 1989.

Conclusion

The adjustment in the early 1990s was a response to too many speculators and excessively high interest rates. In the late 90s and until now there has been another adjustment to account for the housing markets being under valued in the 90s and consumer attitudes changing to acknowledge that homes were affordable again. Now as prices are starting to reach a level where affordable houses are affordable, we are likely to see prices moderate with slower increases in price and the occasional peaks and valleys that represent a normal market.


About the Author

Ravinder Tulsiani is a published author who has written about personal finance, real estate, self-help and online marketing.