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Why Hedge Funds are Bad!

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Understanding the terms and conditions in the corporate world can be quite a challenge especially if you didn’t have an MBA degree. If you’re ready to embrace your financial freedom, you will need to know the basics of investment policies and market. Perhaps you have seen an opportunity through hedge funds but you have read lots of issues about it – some information impose a negative issue, but you don’t really get what it means.

Understanding Hedge Funds
Basically, a hedge fund is a form of investment that profits in a whole different way – performance. It’s a performance based investment that’s only available on a limited number of investors. If you want to belong to that “limited” number of investors, you must comply with the securities and exchange commissions’ requirements – having a net worth of at least $1,000,000 for example.

Why do I have to comply with such strict requirements?
The answer is simple – it’s risky.

Now, the term “hedge” is used to reduce the risks in the investment.

The catch is, even though risks are lesser in hedge funds, the investment will most likely fail if it is mismanaged. In fact, lots of people lost their funds because of hedge funds – losing something instead of lesser risks is quite a catch. Even financial experts say that hedge funds have many pitfalls to offer rather than its benefits. You have to understand that hedge funds have a higher failure rate compared to other types of investment plans.

Deadly Mistakes in Hedge Funds
Before you start investing in hedge funds, it’s very important that you fully understand the disadvantages along the way. Since you can’t predict the future, you should know these deadly mistakes.

  • What is meant by getting into risky investments without any plans?
  • What is meant by–being lured into “to good to be true” offers.
  • What is meant by pushing your luck to an inexperienced fund manager?
  • What is meant by eying on the present, ignoring future possibilities?

 

The big question is – Why do Hedge funds fail?

While there are so many people that are being lured to invest with hedge funds, not many of them succeed in the world of hedge funds. Most tried to cope with the loss in the investment, and very little of them got everything right. There are many factors that can be considered in the failure of a hedge fund. Most of it is considered as human errors and in some instances, the investment is just destined to fail – we don’t know why. Even experts in the financial world can’t really predict what will happen when you invest in a hedge fund – they actually have difficulties in figuring out what to do next when unfortunate events happen.

When assets rise, managers are usually under pressure – this factor often lead to errors in judgment or poor decision making. Sometimes, they might just go for fewer opportunities even though funds are adequate enough for more profit. In some cases, managers may fail to recognize significant factors in investment strategies. Thus, it is very important to have experienced managers who can do the job even under pressure. Since most of these managers still fail in the process – what’s the advantage left in hedge funds?

The Lesser Risk

Often times, people try to target on wealth – who don’t? The problem is, entering the market without the knowledge of everything that’s processed that might look insignificant, but may cause failure if overlooked. The least you can do to lessen the risks of hedge fund is to educate yourself, plan ahead of time, and have an exit strategy.

Since there’s too much issue with regard to hedge funds, you’re better off with other investment plans that impose lesser risks – even though profit isn’t that great. When you come across with “too good to be true” offers in hedge funds, stay away. You can always try to ask someone who can refer fund managers that has been successful in the industry. If you’re lucky, you might be able to find someone who’ll enlighten you about the full potential of hedge funds. Take note that hedge funds are being criticized by many – think about this when you decide to invest in hedge funds. While there are too many risks at hand, why bother having it in the first place?

Who Offers Cheapest Car Insurance?

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Unexpected things happen – we really know why. Some people try to consider it as part of the nature cycle and other think that it could be avoided. Traffic accidents for example, are being aired everyday because of human error or faulty traffic devices. With all of these things, how can you be so sure that you can come home safely after a drive from work? Car insurance policies are great things to have especially if you drive often. This policy allows you to cover up unexpected things like accidents or natural disasters even if you don’t have the finances to cover it.

Understanding Car Insurance Policies
The government imposes a rule for insurance policies when you buy a new car. On the other hand, you will still have to buy or upgrade your insurance policy so you can also have the coverage for you own usage. This is called a fully comprehensive car insurance policy – you can claim for insurance coverage when you and your car got damages from unexpected events. The price of this kind of policy varies from one insurance provider to another. Some focus on sex-related risks, and others provide insurance policies for everyone.

The Main question still being: Who offers the cheapest car insurance policy?
Answering this question is quite a challenge since there are thousands of insurance providers in the industry. There will be some that will provide cheap premiums but you will have to pay for added fees in the process – this makes the policy more expensive. Before you start deciding who offers the cheapest car insurance policy – and have your car insured from them, it’s very important to know these factors that affect premiums in car insurance policies.

Insurance Policies for Women
Who says women can’t drive? In fact, research says that women are most like to have lesser car repairs due to traffic accidents. They also have the least police reports due to traffic violations. These things are often valued by insurance policies because they tend to have lesser risks compared to men. This allows them to have cheaper insurance policies compared to men.

Insurance Policy for Young Professionals and Teenagers
These days, young ones who go to school (especially those who go to high school and universities) use cars every day. Parent’s will most like have the car insured so simple fender benders can be covered without causing too many problems. On the other hand, insurance policies providers offer cheap insurance policies for students.

Why?
You might think that students are impulsive and they will most likely commit traffic violations or have accidents on the road. The catch is – students only use cars to go to school and go home most of the time. This is valued by insurance providers since driving in short and limited routes pose lesser risks than an average driver who drives to work, travels out of town, and so on.

Looking for Cheap Insurance Policies
Whether you’re a student, woman, or a man, you will always try to look for cheaper insurance policies just to save some money for your monthly dues. When you look for insurance providers online, you will definitely see hundred of insurance providers that will guarantee safe transactions and cheaper premiums in the process. So, how do you look for the cheapest one?

The best way to do this is to compare quotes – you can look for 3 – 5 providers in the industry, ask them about their policies, and compare their quotes. If you have seen a very cheap insurance policy online, try to ask about charges or fees that might not be included in the quote. When you notice that the hidden fees make the insurance policy more expensive, look for another one. It’s best to opt for a provider that will be honest enough to give you the complete (detailed) information about their premiums.

Going back to the question on who offers the cheapest car insurance policy – it will really depend on you. To lessen your risk factor when you’re being assessed by the insurance provider, provide them the information about your driving experience (especially if you never had a violation ticket before). This will let them know that you’re a less risky driver that might open up a cheaper insurance policy for you.

Is Home Insurance Tax Deductible?

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While you worry about many things in your life – the safety of your well-being, house, car and other valued properties, you will most like to have insurance policies for each. Usually, people look for cheap insurance policies so they can save money for their monthly dues and responsibilities. One thing that can help you save more money on insurance policies is to lessen premiums by tax-deductibles.

Since there are many insurance policies, there are many different factors that affect its tax deductibility. If you can qualify for each tax deductibility requirement, you will definitely save more money in the long run. On the other hand, there are some insurance premiums that aren’t tax-deductibles. To give you the idea, here are some of the insurance policies that are tax-deductible.

-          Medical Insurance
There are many factors that affect your qualification in this policy. If you are self-employed, you are fully qualified to tax-deductibles – unless your spouse or your dependents are already covered by a health insurance of another employer. If you are employed, your health insurance savings account is also tax deductible. When you not self employed and you don’t work for an employer with health insurance benefits, you annual gross income will be adjusted to take out parts of your expenses on medical bills.

-          Car insurance
For business – yes (if you are the car insurance provider). If you have a personal car insurance policy, you don’t get tax deductions on premiums.

Are home insurance policies tax deductible?

You have to understand that home mortgage interests can be tax deductible – not your home insurance. Since you are already reducing the interest in your home mortgage, the government will never allow you to have multiple tax deductibles on one specific expense. Although, there are some instances that you could lessen the costs on home insurance premiums – this is when a part of your residence is a set for business purposes.

Yes – you can have tax deductions for your home insurance if part of the property is used for business.

Of course, not everything is tax-deductible – only a percentage (it may be because of the size of the room for business purposes) of your home insurance may be deductible. As the government departments are concerned, there no one is allowed to have multiple tax benefits for a single cause.

Here are some of the factors that may affect the tax deductibility of your home insurance:

-          Home business
You will be able to deduct premiums for your home business. Let’s put it like this – if you use half of your house for business purposes, you can also have a 50% home insurance tax deduction.

-          Home Rental
Since not everyone has a house for their business, others rent houses or rooms. This is also tax-deductible.

Cheaper Insurance Options with Tax Deductions

Since tax deductions can be very useful in saving money, it’s pretty ideal to have cheaper insurance policies along the way. With these two things, you will be able to afford your monthly payments – and if you’re lucky, you might be able to buy a new property. Always remember that shopping for insurance policies takes time – there are hundreds of insurance providers out there that will guarantee you with cheaper premiums (although not everyone is true to their words.

The first thing you need to do is to compare quotes that you can use to identify the cheapest insurance policy. Of course, all details must be presented in the quotes. This is because some insurance providers might have cheaper premiums, but with hidden fees that can make it more expensive. The best thing you can do is to ask for the total price in the quotes – plus the hidden charges or fees (if ever the insurance provider isn’t honest enough to inform you about it).

It’s very important to be informed about the updates regarding the rules in tax deduction. This is because policies are changed regularly to prevent someone to take advantage of the some overlooked flaws that need revisions. You can always check out the IRS about the rules and regulations about tax deductions and how can you qualify for one. If you think your insurance policy is qualified, prepare the necessary requirements and proceed with the application.

What are Bonds in the Stock Market?

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The stock and bond market are financing systems that issues shares in the process. These shares represent the part of the investor’s ownership from one   corporation to another. Shares are made because of business expansion or projects based on the economic trends today. When the corporation makes profit out of the investment, the share holders will benefit as well. Most people try to think of the stock market as a form of gambling. When you get lucky, you’ll definitely get rich – losing will definitely cost you a fortune. When you try to understand the how the market works, you will most like have monetary gains from your investments.

Basically, a bond is another term for a loan – the bond buyer is guaranteed of payments made on a certain maturity date. Bonds work in a different way – most of the time, the value of bonds go up if stocks go up. It’s possible for both systems to have the same directions but it doesn’t happen very often. Bond holders or borrowers sell bonds in the bond market.

Types of Bond Markets
Although bonds are just simple loans made by borrowers, the process in which buying and selling bonds take place varies from these different types.

Municipal Securities
This is issued by cities, states, and counties to construct infrastructures. The best thing about this is that it’s not subject to income taxes.

Mortgage and Asset Backed Securities
Loans issued by financial institutions are often used to buy properties. When these loans are being paid off, the bond buyer receives the profit from interests.

Corporate Securities
This is issued by corporations to finance operations and make more profit in the long run. The profits will be shared to the investors.

Government and Agency Securities
This is issued by government sponsored enterprises to finance operations. When profits are made, the investors will take their shares from it.

The Advantages of Bond Market

Since bonds operate differently from stocks, these things may also have different advantages and disadvantages. In the bond market for example, the bond holder doesn’t get affected when the company fails or succeeds in the industry. What happens is that you won’t be able to get more profit or lose everything – you earn with the interest from the principal that you can get back in its maturity date. On the other hand, the price of bonds gets higher or lower when a company fails or earns more profit. There will also be changes with the bond’s interest rates – it may be caused by a political event or disaster.

One of the major advantages of bonds is that it’s a more stable investment – especially in government securities. You can also get a higher interest rate from bonds compared to a simple bank account. It’s steady, safe, and convenient – features that interests a lot of investors. The only thing that you have to worry about is when the bond issuer defaults. When this happens, you won’t be able to get your money and the interests back.

Being a Bond Holder
Although investing in bonds is a far safer than stocks, you need to think about the risks along with it – especially if you’re going for a corporate bond. Unlike government bonds (which are considered the safest investment), you may be forced to sell out your investment even before its maturity rate – you lose in the process.

Here are the things that you have to consider before buying or selling bonds:

Interest rates
This will tell you how much you are going to earn. If you’re holding a bond that pays less than the present interest rate, selling it will be a challenge.

Risks and returns
The longer maturity period, the higher returns it will provide. However, you have to make sure that you can stick with its maturity period without having to sell it in the process.

The most common interest rate in bonds is fixed – although you can also have a changing rate based on economic situations. Some bonds are also sold at a discounted price that reaches its full value in its maturity. Your decision of having bonds must be based on your assessment – if you think that the company can pull it through and earn more profits in the future, keep the bond.

Are Stocks a Good Investment?

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Still, investment in the stock market is a great way to earn profit these days. This is because the benefits along with it haven’t changed – although the risks are much greater due to economic or political concerns. While most people think about it as a form of gambling, you can still change this perception and get started with your financial freedom. Of course, succeeding in the stock market isn’t rocket science – you may have wrong decisions at first, but you’ll get to where you want as you learn in the process.

One great thing of investing in the stock market is that it doesn’t really care about your goals or future plans. It allows you to work on a system that’s unbiased although it may feel like you’re being targeted for breakdowns. This is the reality of investment – you won’t be able to equate the risks and rewards accurately that may lead to losses in the future.

The Stock Market Cycle

This is a popular saying – what goes up, goes down. This is evident in the stock market scenario when priced of stocks go up may attract a lot of investors along the way. When investors aren’t confident enough to buy more stocks – the cycle is already at its peak. After that, it falls down as investors sell stocks for profit or cut their losses. As the price of stocks fall down, investors will start purchasing again and the cycle continues its pattern.

Understanding the trend in the stock market will let you know when to buy or sell stocks. It usually follows a zigzag line that will help you identify a period of time when it’s best to sell stocks. This is another reason why the stock market can still be considered as good investment – stocks are always subject to growth. You just have to have an effective strategy in which you can cut more losses and earn more profit.

Practical Tips in Buying Shares

The stock market has gone through many ups and downs – the disasters were mostly done by corporations who took advantage of faulty regulations. Since most people in the stock market before believed in the existence of a “free market”, concerns about inaccurate economic details were ever present. As a result, millions of people lost their jobs. Nowadays, new regulations were implemented to stop economic disasters from happening.

Before investing in the stock market, it’s very important to have specific guidelines that to avoid situations like buying overpriced shares. Here are some helpful reminders to help you along the way.

The only reason why you buy shares from a corporation or company is because of its market value, management, reputation, and profits. You don’t buy shares because you like the company or you love their products – you might appreciate their products, but you’re not very sure about the company’s financial status.

The last thing you want to do is to buy shares from a company and forget about it – manage your stocks!

When the company is buying back stocks, it only means that your stake in the company is getting bigger.

The market capitalization is the total cost of a company along with its shares. A company with 10 million outstanding shares and stock price of 10 cents per share will have a market cap of $100 000. Now use this information to compare the costs of shares in the stock market – this will allow you to avoid overpriced stocks.

Common Investment Mistakes

Investing in the stock market will make or break you – financially or emotionally. You can avoid problems along the way if you start setting the standards of good investment practices and understanding how everything works in it. Knowing these mistakes will keep your chances high enough in your financial freedom.

Ignoring Trends

What are these graph lines for and how will it help me invest wisely? When you ignore trends, you are simply doing a blind investment – you’re just pushing your luck or gambling your way to success.

Investing in the company that you are working for

Your employer may encourage you to invest in the company you are working for. You can do this unless you don’t want to lose your money and your job at the same time – when your company goes bust.

 

Are Stock Dividends Taxable?

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The stock market is one of the greatest inventions of building wealth. Through the years, it played a major role in financial institutions and investors. Building your portfolio is quite a challenge, but you’ll be able to reap the fruits of your right decisions in the future. Imagine this – earning profit just by watching your company succeed and get dividends in the process. Yes – it is considered your company because you’re already sharing its ownership. When the company earns, you get the benefits as well.

The last thing that you don’t want to do is to sell your shares when the company is at its peak. You have to understand that succeeding in the stock market requires a lot of decision making – it’s best to get the right ones. This road to financial freedom has built an empire of trading system that’s considered by many as gambling. It may have the risks, but pushing your luck won’t get you any further to success.

What are Dividends?

When you buy a share of a dividend stock, you are going to be paid a portion of the corporation’s profit. To put it simple, you will be paid just by owning stocks. For example, a company may pay an annual dividend of 40 cents per share. If the company pays quarterly, you will be able to receive 10 cents every quarter. Now, imagine owning 100 000 shares in a corporation – given the annual dividend of 40 cents, you will be able to get at least $40 000 annually.

Dividends are classified into two categories – the cash dividends and special dividends. Cash dividends are paid out of a company’s profit while the special dividends are additional dividends (that happens rarely) from winning a major litigation or liquidation of investments. So, when do you get paid from your shares?

Here are two of the most important things that you have to remember in dividend pay outs:

Declaration date
This is the day the board of directors intends to pay dividends. The company will create a liability – that they owe money to their stock holders, and announce the record and payment date.

Date of Record
This is the time when a company reviews its record identify the people (the investors/share holders) that will receive the pay out. The issue that lies in this process is the ex-dividend date or the second business day before the record date – if you have bought the shares of a company on or after the ex-dividend date, you won’t be able to receive its upcoming pay out. Thus, you have to remember this date and make sure to purchase shares before the ex-dividend date.

Understanding Dividend Tax

It must be great to own a part of a corporation or business and earn profit from it, but you have to understand that dividends are subject to government tax. It’s every investor’s responsibility to pay for investment taxes whether you own an insignificant amount of shares. It is commonly paid on distributions of regular corporations to their stock holders. The only dividends that are not tax-deductible are those of the corporation.

There are two types of dividend tax rates:

Qualified Dividends
The qualified dividend tax rate is set in a bracket given for ordinary dividends – these are stocks held more than 60 days during a 121-day period. Investors in a lower income tax bracket will pay 5% dividend tax and those with 25% income tax bracket will pay 15% dividend tax.

Non-Qualified Dividends
The non-qualified dividend is any dividend that doesn’t meet the standards of a qualified dividend. In this case, investors who are most likely in the 35% tax bracket will pay 35% dividend tax.

If you are going for a long-term investment, the DRIP or Dividend Reinvestment plan is a great tool that you can use. This allows you to buy more shares in the company with the use of interests. It is an automated procedure that’s easily administered upon the enrollment of the plan. Of course, this plan requires fees that are relatively small compared to the benefits along with it.  Just remember that your dividend tax qualification might change in this process.

 

Welcome to FinanceBliss.com

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I am living my bliss ~ and I started this site as a resource for my own links and favorites and my love for all things financial.  After years of living well beyond my means I sat down and worked out a budget….and it was not pretty!  So I made spreadsheet after spreadsheet.  Documenting my income, my expenses and everything in between.  Then I had to work out where I would make cuts, adjustments and what I would treat myself to.  My goal was to save more for my retirement (so I wasn’t working until I am 80!!!), not spend $$ where I don’t need to, and still be able to enjoy life and my monthly pedicure (OK, so now it’s bi-monthly.  See, I saved 50% on that one and she does such a great job and I get a light polish so it lasts for TWO MONTHS!).  Hey even this web site is frugal ~ free web hosting at Netfirms.com is an awesome way to go, and if you really have to get rid of the banners it’s still EXTREMELY affordable.

See, one quick visit and you’ve already found a great way to save!

. .

I also had to take a good long look at my kitchen.  Don’t we all have cupboards and pantries full of “stuff”?  As I was working on my budget I really took stock of my accumulated wealth of canned goods and my well stocked freezer!  So as part of my new budget I made some changes in my grocery shopping.  First I drew up a creative shopping list and then I vowed to only buy fresh products ~ dairy, produce, breads and meat ~ and groceries I really needed but didn’t have (the goal, realistic or not, was to never have to buy more than 50% of any ingredients needed for cooking).  Everything else had to come from my freezer or my cupboards.  More on this later!  Check the Blog for updates!

I tend to organize my bookmarks on my personal web site.  Because of the extent of the links it soon turned into such a great resource for me that I decided I had to share it  I am in the process of building it to make it more public-friendly.  This site will be unique ~ I view it as a living experiment: as I learn so will you!

We will soon be adding links and resources of all kinds ~ everything we can get our hands on!  So check back soon and often

Suggestions, comments and contributions?  Let us know!!