Sunday, June 14, 2009

Investing Ways

After being appart from the most important project of my life which is to have one million € in less than 5 years, I´m finally back and happy because one of my short term projects was realized succesfully.

I won the Loosing weight competition. As you all might remember I started the competition of loosing weight weighting 79 kilos and I finished it after three months weighting 60 kilos. The prize from this sacrifice was of course some good cash that is already invested and a future trip to Sweden. see the videos of this crazy journey at the end of this post.

On the same monetary line I´m decided to start writing on How to invest wisely even better How to start INVESTING, a subject that on theory any educated person must know but on practice so complex that it seems to be out of the general knowledge.

Fisrt I have to share with you a NEW CONCEPT that I´m trying to develop as a theory, it might sound crazy but here is the idea: The best things in life are FREE. In this new world order the access to Internet and information has been showing that things that used to be "expensive"like books and music now with some reasearch you can have it all for free in the net. So the whole idea of Capitalism, profit and earnings is changing i predict that the ones that realize this simple idea will be the winners of this new model, if we see and undestand the market this way we will be able to undestand the collapse of the financial Institutions globally I will write more about it with some future extra research.

And then let´s get to undestand the process of Investing, there's more to successful portfolio building than picking good investments.

Putting together a portfolio of securities is like building a wardrobe. Even if your closet is filled with top-of-the-line attire, that may not be enough actually for me is never enough: All those components need to work together as outfits. Investment portfolios are the same way.

This track of the Investing lesson will show you how to design a successful portfolio of investments that work together to help you reach your goals. I will try to introduce the five essential steps to tailoring your portfolio and keeping it in good shape. I will expand on these steps in subsequent posts.

Design a pattern

Just as a tailor making a suit starts with a pattern, you need a pattern for your portfolio. The tailor's pattern fits an individual of a particular size and shape. Similarly, your portfolio should fit you.

A good fit starts with your investing goal. Maybe you're investing for retirement, for your child's education, or for a vacation home. Whatever your goal, it gives you vital information. It tells you how long you'll be investing (your time horizon) and how much of your investment you can put at risk. The closer your goal or the less you can afford to lose, the more you should focus on preserving what you've made rather than on generating additional gains (a good example could be learned by following this blog)

How much should you put into cash, bonds, and various types of stocks? One rule of thumb is to use your age as a guide. For instance, if you're 33 years old, put 33% of your portfolio into cash and bonds and the rest into stocks. Some of my latest picks as I live in Finland are of course Nordea, the strongest bank in Finland, Raisio V. A forerunner in the food Industry, Alma Media specialized in newspapers, online media and other internet services, leading the way in the industry. I have also a diversified portfolio of Mutual funds on the energy sector and east European economies that I prevent all are going up after the falldown. I ean there is not other way, I see a sea of opportunities on difficult times.

Some investors would find that portfolio awfully conservative, though. Others might find that it's too aggressive for their particular goal. Such rules are like a one-size-fits-all shirt: Sure, you can wear it, but does it really suit you? Probably not.

Organize what you already own

Maybe you can name all of your stocks and mutual funds off the top of your head and detail how each one performed last week. Good for you. But can you explain how they work together? Which are your core investments? Are you diversified? Do you have a lot of overlap? You must be able to answer those questions before you can see how (or even if) your portfolio fits your pattern.

To figure out exactly what you own, you could get a financial calculator or investing spreadsheet, haul out the latest shareholder reports for your funds and account statements for your stocks, and calculate how much you have in cash, bonds, and various types of stocks. What a job! No wonder people don't know what's in their portfolios see all this possibilities wihout paying any extra fee at your bank

Simply enter the tickers of all of your investments and how much you have invested in each, either in € or percentage terms. Then see if it is really profitable.

You'll discover your portfolio's asset mix, style-box breakdown, sector weightings, regional exposure, and much more.

One importan rule of Investing is Make your portfolio fit your Pattern.

Now that you know what you have, it's time to find out whether your current portfolio fits your pattern.

Begin by checking your portfolio's asset allocation. If that doesn't match your pattern, shift assets among funds and stocks to tailor the mix. If your investments are in taxable accounts, however, you might not want to sell any of them--the tax repercussions could be enormous, specially in Finland.

Next, weed out redundant investments. If you have three large-cap growth funds, for example, they probably aren't all equally good. Refer to some International Fund Reports like CNN, Wall steet, Kaupalehti to see which fund has the best category ratings and lowest expenses.

Be sure that your portfolio includes core holdings, those investments on which you're relying most to help you meet your goals. Core investments should be the biggest part of your portfolio. We'll discuss how to choose them later on.

Finally, fill any portfolio holes, such as a lack of value or foreign exposure, with new investments.

Schedule a time to rebalance

By following the first three steps, you've tailored a portfolio that suits you to a T. You'll want to make sure that it continues to fit, though. That requires occasionally rebalancing, or restoring the original pattern.

Stocks often gain more than bonds or cash. As a result, stocks will probably take up more of your portfolio over time than in your original pattern. Because stocks are riskier investments than bonds, your portfolio is becoming riskier as your stock position rises. That's why it's important to rebalance and restore your portfolio to its original pattern.

Similarly, not all stocks do well at the same time. Maybe your value stocks are outpacing your growth investments. If you don't restore your portfolio's original balance between the two styles, your investment success will become increasingly dependent on your value investments.

When you rebalance, keep your goal in mind. As you get closer to needing the money you've invested, the pattern you originally drew should change. Your portfolio should become more conservative as you approach your goal.

Follow your investments

In addition to rebalancing your portfolio, you'll want to keep tabs on your individual investments. You need to make sure they're still filling their original roles in your portfolio.

Let's say you're monitoring your mutual funds. What types of things should you look for? Make sure your funds stay in the same category; if a fund's style has changed dramatically, the fund may no longer meet your needs. Examine the fund's category rating. Is it still competitive? Watch out for manager changes, too.

With stocks, you'll want to keep tabs on price, and where that price is relative to the sell target you've established. Changes at the top also matter, as new management can mean a new strategy. Profitability, financial health and growth prospects are likewise important. Profitability, financial health, and growth prospects all matter, too.

And now that you read all my post you desrve to see my physical evolution