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The pioneering electric car company Tesla Inc (NASDAQ: TSLA) has suffered a number of public challenges since the beginning of 2018. It’s high profile CEO, Elon Musk, calls the period a production hell. He is known for pulling all-nighters on the factory floor and sleeping in the office. There are many things plaguing Tesla these days. But the most important thing on Musk’s mind these days is solving the production delays for the new Tesla model 3 sedan.

The model 3 is the first affordable, mass market electric car. The entire business of Tesla hinges on the success of this new car. Last year Musk was quite confident Tesla could make about 5,000 new cars per week by the end of 2017.

Looks like we can reach 20,000 Model 3 cars per month in Dec

— Elon Musk (@elonmusk) July 3, 2017


However, the reality is far from his expectations. The production pipeline has been experiencing problems which has hindered the company’s output. According to a recent shareholder’s report, there was an average production rate of 830 cars per week in the first quarter of 2018. That’s less than 20% of the goal. In February of 2018 production was even halted for a week. As for the cause of the slow production, “excessive automation at Tesla was a mistake,” Elon Musk mentioned in the CBS morning show which gave a sneak peak into what’s goes on in the factory. “We got complacent about some of the things that are in our technology. We’ve put too much new technology into the Model 3 all at once but this should have been staged,” he clarified. High tech doesn’t just go into the cars, but it also builds them. The Tesla plant is widely regarded as the most robotics driven assembly factory in the world.

The forecast has now been pushed to 5,000 cars by later this summer. But other complications may get in the way of that. Tesla recently has decided to shut down its assembly line again for six days to fix some issues.

As of last month Tesla was making about 2,000 Model 3s per week. So from a big picture point of view, the company would be able to produce and deliver about 220,000 in 2018. That’s not far from 330,000 cars sold by BMW in the us in 2017. But when the Tesla Model 3 was announced, an estimated 400,000 pre-orders were initially made for the car. Even if that number did drop off it’s still a record amount for the auto industry in terms of prospective owners. No other manufactures has had so many advanced vehicle orders. But the question still remains as to just how long Tesla customers will have to wait to get theirs.

Some people may say that Musk is over promising and under delivering. That’s why Tesla stock is often seen as a story stock. Another unknown factor is the rising competition the car maker is facing. Ferrari and Buick are getting into electric cars now as well. How much longer will investors trust Tesla’s story and future promises. Just because it’s the first to enter a new market doesn’t necessarily mean it’ll remain successful in the long run.

Other concerns investors have is the high amount of debt on Tesla’s balance sheet, and how the company seems to be burning through money. One thing is for sure – without Telsa, other car companies wouldn’t be engineering and building electric cars as fast. Musk is paving a path for the future, which is good for society as a whole but in terms of an investment, I would stay away from this stock until the company has proven that it can reliably hit production targets.

This author does not have any shares in TSLA and does not plan to own any within 72 hours of this post.

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ETFs and index funds are all the rage right now. And for good reason.

They provide essentially the same results for a substantially cheaper price than mutual funds, and people are getting fed up with paying their banks for lackluster results.

I am all for that, you should be saving and investing your money where you can get the most out of it. In an age where the cost of living is ridiculously expensive, you just can’t be wasting up to one third of your portfolio in fees.

But I just can’t justify switching my portfolio over from an individual stock picking strategy to ETFs or index funds. Why?

There is more potential in individual stock analysis

This is pretty cut and dry. You’re never going to pick lets say, a marketing tracking ETF and get it to nab you a ten bagger in 5 years.

With individual stocks, the potential is definitely there, and that is why I just can’t seem to make the transition.

I’ve purchased two stocks over the last 8 months through thorough analysis and am now sitting on 300 percent in gains on those two stocks. If you’re curious, the stocks are SHOP.TO and WEED.TO.

My portfolio contains over 20 individual stocks. The two biggest holdings in my portfolio were Shopify and Canopy Growth. Why?

Because I knew they had a high potential for growth, and now my portfolio is literally years ahead of someone who tried to focus on an ETF or index fund strategy.

Individual stock picking isn’t without risk, I know this

Now, you may say I got lucky with those two picks. But I can tell you right now they were carefully analyzed and deemed more than likely to go up rather than down.

As a former professional poker player, I can tell you this:

You will not be right every time, you just need to be right more times than you are wrong.

You can establish a strong edge as they like to call it in poker. As long as you dont place all your eggs in one basket and minimize your losses, taking the position that provides you with an edge will in the long run deem to be profitable, regardless of the actual results at the present time.

Nabbing these large returns can add up exponentially for when you move your portfolio to a more passive approach in retirement

I advocate individual stock picking over ETFs and Index Funds. But, at a later age or stage of your career, I definitely would advise to move towards a more passive approach to investing.

This could be done via Index Funds, ETFs, or even bonds. But you want to maximize the amount that is in your portfolio at an early age so that you’re better prepared to retire, or even retire early.

To do so you have to take risk, and individually picking smart growth stocks can get you there.

Note the bolded. I’m not advocating you go out and invest 50 percent of your portfolio on some hot penny stock. That’s not the way to go about things.

Intelligent,careful and well thought out investments in high potential growth stocks is the best way to accelerate your portfolio.

Who did I learn all this from?

Well, I can sum it up by saying I’ve read a ton of Peter Lynch books. He had a huge influence on my investment mentality and it’s paying dividends early on in my investing career.

You’re gonna lose some investments you thought were for sure winners. You’re also going to strike oil where you thought the well was completely dry.

The fact is, at a young age a certain amount of your portfolio has to be dedicated to making educated decisions on riskier stocks. For me the magic number was 30 percent. I own 3 stocks I would determine to be speculative growth stocks. SHOP.TO,WEED.TO and PKI.TO.

It all depends on your risk tolerance

I understand some people can’t stomach even marginal risk. Its your money and you’ve worked hard for it. As long as your money is earning something you’re doing it right.

There’s also this. If you don’t know what you’re doing in terms of picking high potential growth stocks, you may as well just head to the casino and play Roulette instead of attempting to purchase them.

I’ve developed a growth stock analysis guide on Stocktrades, and you can head there and sign up to receive it if you wish. Its a 5 part guide developed by us free to you, and it will show you how to navigate through these stocks.

Good luck, and here’s to your next ten bagger!

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There are many possible unforeseen dangers that can threaten an unprotected home. Home security cameras are an effective way to keep your home secure and safe from outside threats. There are many options for installing a home security system. The ever-increasing consumer technology at your disposal allows for a do-it-yourself approach that saves you money. This article will offer advice on how to prepare for and install a security camera system that will provide you the comfort of a safe and protected home environment.

Cost

The cost of a home security system can be greatly reduced by installing it yourself. Most financial advisor companies would agree this is a wise investment. Despite the long-term cost-benefit analysis being positive, purchasing and maintaining the system can be very pricey upfront. The costs of home security cameras may range from as little as $300 to a couple of thousand dollars. The price difference has to do with how advanced the technology of the camera and the number of cameras needed to secure your premises. Professional installation may cost more over time as you may have to pay for monthly monitoring charges.

Preparation and Technological Concerns

There are aspects of your home security system that you do not want to cut corners on to save yourself from bigger troubles down the line. You must ensure that you have the proper number of cameras and length of cable. If you’re wondering where to start, check out a few of the best home security systems online. Another detail is to make sure that you have a great number of megabytes or terabytes for digital storage. A cloud-based storage system will provide you ample space to store your hours of recording.

Another precaution you must plan for is the camera’s power source. Analog powered connections, USB or ethernet cables can be installed any place where you do not mind running wires. Even battery-powered cameras need a power source. Some battery powered security cameras do not have to be placed near wall sockets, while others will have to be plugged into an outlet. Also, with battery-powered cameras, you must be aware of how close they are to the router. A weak connection will overexert the camera’s battery causing it to drain faster.

Camera Placement

Since the ground floor of your home is the most natural entry point, you will need a camera to cover each entranceway including the garage and basement doors. You may want to have more than one camera at central entry points to gather more detail about the possible intruder. When it comes to front doors, backdoors and garages it is wise to place cameras inside and outside of the home to track entry from multiple angles. If budget allows, several night vision cameras are also a great idea when considering home security. You want to ensure that you are covered at all times of the day or night.

When installing your own camera security system, you may have to drill a few holes to ensure they can all be installed in the essential places. You must inspect the area around where you want to drill as thoroughly as possible. Avoid areas that have water pipes and electrical wires. Additionally, try not to run wires through insulation but around it. Shut off electrical power and water in the area of installation in case you unintentionally puncture electrical wire or a water pipe.

After Installation

Most security systems allow for remote viewing through your computer, tablet or smartphone so spend ample time tweaking the system to fit your needs. If help is needed, contact technical support to ensure everything is set up properly. Taking these precautions will ensure a home that is efficiently surveilled and well protected.

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When you’re borrowing money, whatever the reason may be, it is essential to read the fine print and comprehend everything you are signing up for. Many people end up in more trouble than they started in because they failed to take the time to understand what’s required of them.

It’s understandable, as many people find themselves in a situation where they need cash right away (learn more about getcashnow.net). To best protect yourself as a borrower, you want to ensure the lender you are working with adheres to the Federally mandated Truth in Lending Act (TILA). What is this law and how will it help you? Here’s what you need to know:

What is the Truth in Lending Act

The Truth in Lending Act was passed in the late 1960s to oversee borrowing situations between lenders and consumers. The law is intended to protect borrowers by mandating that lenders share key information regarding a loan before the borrower is contractually obligated to paying it. This means that while there may be small print, there is nothing explicitly hidden that could damage the borrower down the road. In a nutshell, it’s the difference between getting a loan from a recognized institution and signing up for a mob loan that you’ll regret for the rest of your life.

The Truth in Lending Act mandates that lenders must share the:

  • annual percentage rate (APR);
  • term of the loan; and
  • total costs the borrower will incur.

The information must be shared in an upfront, noticeable way on documentation presented to the potential borrower before they sign anything. Depending on the loan and organization, they may also be required to have the information repeated on subsequent statements and correspondence to keep it fresh in the borrower’s mind.

So, regarding small print, if the information governed by the Truth in Lending Act is hard to see on a document, you could make an argument that the lender is not adhering to the law. Regardless, it’s important to be aware of your rights and use this knowledge when evaluating a potential lender.

Types of Loans Covered by TILA

The Truth in Lending Act covers both open-ended revolving credit and closed-end credit agreements. For example, your credit card would be an example of open-ended credit. Before receiving your card, you should have been presented with paperwork outlining all the information listed above. Closed-end credit would be something like an installment loan or mortgage. Essentially, it’s something you pay back by a certain date with a scheduled payment plan.

What TILA Doesn’t Cover

The Truth in Lending Act covers almost everything, but not quite. For example, interest rates charged by a lender as a part of their service offering are not regulated by TILA. Furthermore, beyond the basics of discriminatory practices, TILA does not dictate to whom a lender approves or declines for credit. As long as they can prove they aren’t breaking any laws surrounding discrimination, they may lend to whoever they wish.

Other Things to Know

In addition to being presented with information about the loan itself, you are also entitled to receiving a documented explanation of the type of loan you are getting and how it works. Lenders are legally not allowed to show you only one option that would best benefit them. While they may make a recommendation, they must also show you all loan options available that suit your needs.

The Truth in Lending Act also gives borrowers the right of rescission, meaning if you decide within three days that the loan was a mistake, you can back out of the contract without penalty. All of these rules are to help protect a consumer from predatory practices and give them room to correct their actions if they felt pressured into taking a loan.

Now that you know your rights as a borrower, you can move forward with your plans and take comfort in the fact that there are rules in place to keep you safe.

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You probably haven’t heard of Fleetcor Technologies (NYSE: FLT) stock and for good reason. It is in a boring space that doesn’t get much press coverage. After all, it isn’t involved with building spaceships to go to Mars, nor is it buying companies in the hope to dominate the world.

Instead, Fleetcor Technologies does what it is best at doing, which is managing fuel cards for corporate customers. And smart investors are buying this stock for good reason. In this post, I’ll walk you through these reasons so you too can see the benefit of adding this stock to your portfolio.

Who is Fleetcor Technologies?

As I mentioned, Fleetcor Technologies manages fuel cards for corporate customers. What this means is that they offer credit cards for companies to give to employees when fuel is needed for a company vehicle.

The most popular example would be with transportation companies. A truck company would give its drivers access to a card that allows them to swipe it at a gas station and be on their way. No worrying about carrying money to pay for the fuel and no worrying about submitting an expense report for reimbursement.

And it isn’t just truck companies that can benefit from this service either. When I worked for a rental car company in college, we used a credit card like this as well. I would simply drive to the gas station, swipe the card and be on my way. Instead of myself or my local branch dealing with fuel costs, we let corporate headquarters handle it all.

The bottom line is, partnering with Fleetcor Technologies makes a transportation companies life much simpler.

You might be wondering how exactly Fleetcor Technologies makes money. They do so in two ways.

  • First, they collect processing fees for every card swipe
  • Second, they get a cut of the gas sale too

So not only do they benefit from the processing fee, but they also benefit from the fuel sale too. And as gas prices rise, so too does the revenue Fleetcor earns.

Why Smart Investors Are Buying This Stock

Now that you know what Fleetcor Technologies does, why are smart investors buying this stock? First, they have many clients not only with transportation companies, but also with gas station chains too. Three of their larger partners are Speedway, BP, and Arco.

And while they have a solid book of business, they continue to grow. For example they recently added Walmart as a customer. This means not only will the company process fuel payments for Walmart employees, but also offer Walmart and Sam’s Club filling stations as their partner chains as well.

In addition to adding customers, they are expanding into other markets too. These include lodging, travel booking and building supplies. The possibilities in these industries are unlimited and adds a lot of potential income to the bottom line.

Finally, the company announced that 33% of its earnings come from overseas business and this area is growing rapidly. I can see how in the coming years international business will make up a bulk of Fleetcor Technologies business.

As these economies continue to grow and develop, the need will be there for Fleetcor’s services.

And don’t think for a minute that driverless cars will have a negative impact on the bottom line either. Quite the opposite in fact. This is because its cards are accepted at charging stations in Europe. In fact, most of the revenue in Netherlands comes from charging stations.

Earnings And Outlook

When the company recently announced earnings, they beat on both earnings per share and revenues. Revenues were up over 17% compared to the prior year.

With all of the great points about Fleetcor, there is one negative. The company is experiencing weak cash flows. The result is a stock price that has been having trouble pushing past its 52 week high.

But weak cash flows shouldn’t be a reason to avoid this stock. The company and the business have a lot of momentum and a bright future.

Final Thoughts

At the end of the day, smart investors are putting their money into Fleetcor Technologies. With a solid balance sheet and strong earnings, the stock price is only expected to go higher. As a result, smart money is getting into this stock now, before it breaks through its 52 week high. In fact, this might be the best buying opportunity for the stock for some time.

This author has no positions in any stock mentioned and does not plan to open any positions in any stocks mentioned for at least 72 hours after publication of this article.

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In the current market we are in, it is getting harder and harder to find stocks that are good values for the money. Most stocks are priced a full valuation or even more. And for those investors looking for a truly great deal, finding a bargain stock is even tougher. But today I am going to share with you Cooper Companies, whose stock truly is a bargain.

Let’s look at this under the radar stock and see why it is one of the few bargains out there for investors.

Who Is Cooper Companies?

Just who is Cooper Companies (NYSE: COO)? They operate primarily as a contact lens supplier that sells direct to consumers. They also operate a surgical devices and instruments division as well.

As of this writing, the contact lens side of the company makes up the majority of the revenues, while the surgical side makes up a small percent.

For the contact lens business, Cooper owns 23% of the market share and is quickly growing its presence. Its specialty lens segment is rapidly growing, and two of their offerings are really taking off with consumers.

  • Multi-focals: These are lenses for people with both near and farsightedness
  • Digital Zone Optics: These are lenses for long wear in front of a computer screen

As of this writing, 61% of the company’s contact lens sales come from overseas. This is important to note at these countries, like China, India, and Brazil have a fast growing middle class. As more people enter the middle class, they have more income to spend on things like daily wear contact lenses.

As for the surgical side of the business, Cooper Companies sells surgical instruments and devices for women’s heath and fertility. In 2017 they bought Teva’s Paragard and now offer the only hormone free intra-uterine device approved in United States.

Why Cooper Companies Is A Bargain

Now that you know about what the company does, let’s look at why this stock is a bargain. To begin, the contact lens market is expected to grow 4-6% annually over the next decade. This allows Cooper Companies to earn steady, consistent revenues from the contact lens side of the business.

As it ramps up its surgical side of the business, this revenue would be icing on the cake as they say. If they can simply increase sales by another 4-6% from this side of the business, you are looking at 10% annual growth easily.

And now is a great time to buy this stock. The company recently reported earnings that showed revenues were up 18%, but they missed badly on earnings per share. This was due to execution issues with the acquisition of Paragard.

As a result, the stock price dropped by 10% and is now trading at just 19 times earnings versus 24 times earnings for the market as a whole. I am confident that the company will be able to correct their execution issues with the purchase of Paragard and that the stock price will easily move higher in the coming months.

Final Thoughts

Given how the market as a whole has nicely gained over the years, it is tough for investors to find good deals. When you do come across a deal, you have to act fast in order to scoop it up at a bargain price.

The time to buy Cooper Companies is right now. They are firing on all cylinders with their contact lens business but investors have hurt the stock with the company’s short term issues surrounding Paragard.

But over the long term, this stock should be able to consistently offer 10% growth or more.

This author has no positions in any stock mentioned and does not plan to open any positions in any stocks mentioned for at least 72 hours after publication of this article.

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Good, tried-and-tested investment rules enable you to develop effective strategies and tactics. If you want your investment to flourish, internalize the 12 golden rules of investment and make them part of every endeavour.

Before you start investing, it’s good to spend some time on preparation. Investment is kind of like the crown of personal finance management. To better explain it, I have prepared “A pyramid of personal finance management”.

The foundation of all money management is budgeting. A well-prepared budget for every month in the shorter term and then every year, or 2-10 in the medium and longer term respectively is an essential framework for your finances. It enables you to act rationally. It helps to navigate through the complexities of life straight to your key financial goals, whether they be big or small.

The next level of the pyramid is saving. Everyone who wants to be successful in finance, whether personal or corporate, must be able to save money. Saving money needs to be a habit, a default behaviour, being the lion’s share of your financial decisions.

The third level of personal finance is debt management. Because of the nature of modern finance, everyone should know how to deal with debt, how to manage debts well, and of course how to get rid of debt.

When you have experience of budgeting your money, when you have savings, -ideally as an emergency capital equal to 3-6 months of your normal earnings- and you have paid your debt off, you can start planning your investment. This is level 4 of personal finance management.

While preparing for investments, you certainly have to understand the value of delayed gratification If we could imagine an ideal model of an investor mindset, this would be a key feature.

When you invest, you sacrifice your present comfort in order to bring prosperity in the future. It takes faith, patience and self-discipline to do that. Most of us don’t want to even think about it. The majority always want to have something now, and pay for it in future. That is why societies in developed countries are sinking in debt.

I would also strongly recommend taking into account all kind of biases we humans have developed which can stop us from making proper investment decisions.

Wikipedia identifies 104 biases.

There are four categories of cognitive biases.

The first is a result of too much information: you can’t actually make a rational decision if you are not able to process all the available and relevant information.

The second group arises from not enough meaning: even if you gather all the relevant information, most of time you may struggle with assigning them a proper meaning. This the moment when we can use stereotypes, previous experience and preconceived beliefs to aid our decisions.

The next group contains biases which are a result of our memories. The way how we remember things, how we omit some facts and construct reality makes susceptible to another kind of biases.

And the last group contains biases which are a direct consequence of lack of time. If you have to make a decision now and you can’t wait until all research and analysis are made, you will have to act by choosing simpler solutions over the more complex ones. It is easier and faster to comprehend one simple option than an option which is complex and requires more cognitive power.

I want to draw your attention to the 5 dangerous biases in investing.

The “It has always been like this” bias can annihilate your investment if you believe that there is an incontrovertible link between a past and a future. You might have earned money ten times in an identical situation, but it doesn’t give a guarantee that the eleventh time will be the same.

The “Titanic bias” occurs when you start understanding that you’re losing money, however, you were persuaded that your investment is so awesome that it will certainly be worth it in the long run. You don’t want to face reality, so you might ignore it hoping that a bit more time will change something. Some of the passengers on The Titanic believed that the ship was unsinkable. After the ship hit the iceberg, they still behaved as if nothing happened.

The confirmation bias can be a logical consequence of the previous bias – the Titanic one. When you are losing money, you can find hope in socializing with other people who are experiencing exactly the same. It is probably easier to build a collective illusion.

The relativity bias happens when you pay too much attention to what other people’s experiences are. We all have a tendency to make our individual experience objective. If I never earned solid money in the food industry or media industry shares, I might try to persuade someone that it doesn’t make sense to invest in these industries. If I earned my first big money after the two lousy years, I might think that this “how it is”, that everyone should expect the first 24 months to be poor etc, etc.

The “Know-it-all” bias is a characteristic for successful investors. Someone who has made plenty of lucrative deals might think that he or she is an all-knowing, omniscient individual. Be careful, this is an unbelievably dangerous bias.

After a careful and thoughtful research stage, you can move to the preparation stage, when you will start to implement the 12 rules of investment.

#1. Have a good plan.

The financial plan of every investment is the tool that maximizes your potential profit and minimizes risk. Depending on how fast you need make a decision and how complex your investment is, you can elaborate a detailed and accurate plan or simple plan. For instance, when you prepare for your first real estate transaction or make a quick one page calculation while buying shares for a company you’ve been doing business with for ages. But even if things seem to appear easy, it’s good to challenge your preconceived opinion and keep a fresh perspective on every decision you make.

#2. The right time is now.

If you still don’t know when to start – start now. It’s not very wise to prepare until everything is perfect, because conditions are never ideal. Do you want to really invest and multiply your money? Start preparing now. The earlier you start, the faster you will be reaping the benefits.

#3. Start with something small.

There is one great strategy to start with. Start with a simple investment. Treat it as a testing ground. See how your rules work. Draw conclusions. Make adjustments. Improve. And then prepare for bigger profits.

#4. Understand what you do.

You can’t manage or improve something that you don’t fully understand. So before you start, gain knowledge about the subject of your investment. Speak with other investors. Read articles and books. Attend networking meetings. Ask a lot of questions.

#5. Determine your acceptable level of risk.

Check your previous life decisions to find out what kind of person are you. Do you like challenges and feel comfortable with high risk, or do you shy away from risk, always pursuing a safe environment? It’s worth making some simulations and asking someone to give you a few coaching sessions.

#6. Find out what to invest in.

Do you like real estate? Maybe you always dreamed about gold and precious metals? And how about art, investing in those great Renaissance and Baroque geniuses or even the masterpieces of contemporary artists? And how about financial instruments? Do you feel your pulse is increasing when watching business news and financial charts? There are also startup companies who created their own industries with a specific language, and even dress code. Every type of investment requires a different approach. Discover what you really enjoy and what you can study with enthusiasm.

#7. Keep it simple.

When you write a book or make a movie about investment, you can intentionally complicate things to make them more attractive to an audience. But when you act, you must implement clear and simple rules. Always seek clarity on everything you do. Clarity will help you make quick and simple decisions.

#8. Automate.

You have to be productive in your investment works and effective. Automation is of the best answers for complexities of modern financial markets and businesses. Use smart software to analyse data. Use automation software to make your decision process more efficient.

#9. To diversify or not to diversify?

This is an absolutely essential question you need to find a good answer to. The general rule is to diversify but moderately, with a sense of proportion. For instance, Warren Buffet has a few favourite industries he invests in, like insurance, banking, media, and consumer goods. If you focus in your investment on a few industries, at the same time you make your business diverse enough to gain more & protect against losses, as well as always being able to understand what’s going on in areas of your choice.

#10. Go against the herd.

If someone is giving you investment advice in a popular newspaper or on TV, just ignore it! The real gain is for a small minority only. Rely rather on expert knowledge, not popular tip-offs.

#11. Never invest money that you can’t afford to lose.

This parameter of your investment protects your business against losses too big to handle. Your business should run smoothly and be managed evenly and rationally. Investment business is certainly not about gambling. It is about gradually multiplying your assets.

#12. Focus on value, not price.

Prices are temporary, but values are eternal. Prices usually depend on values. If you are able to recognize the real value of your investment, then you will never pay too much or too less. Prices are often a matter of speculation, while values are built on passion and dreams to make a difference. Most of the time it’s good to ignore facades, diligently prepared by PR agencies and know what goes on backstage.

In addition to these 12 rules, there is another priceless rule: Invest in yourself; in your knowledge, experience, skills and emotional IQ.

And you know what? There is one more thing: sometimes in order to succeed you will have to break rules. Life, just like business and finance, is complex and sometimes requires a totally fresh approach.

This article was written by Andrzej Manka, founder of The Financial Manifesto – a project dedicated to making your money work for you

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As an investor, you want to make sure anyone you hire to help you handle and grow your wealth is competent enough to do so. Sadly when it comes to financial advisors, it is harder than you might think to find a competent one. This is because so few had been acting as a fiduciary.

But this changed when a law was passed in 2016 that requires investment professionals to act in their client’s best interest. As of this writing, many people and firms are fighting this rule, but as for now, investment professionals must follow the law.

You may be wondering what exactly is a fiduciary and why is it important that your investment professional is one. In this post, I will walk you through what a fiduciary is and 3 reasons why you need to make sure you are dealing with one.

What Is A Fiduciary?

A fiduciary is a person or a business that acts in another’s best interest. In all situations relating to their relationship, there needs to be complete trust, faith and honesty.

When it comes to your investments, you give your investment professional the ability to make trades on your behalf, without your consent. They do this by first sitting down with you and creating an investment plan based on your goals, time horizon, and risk tolerance.

Because a fiduciary works for you without you first consenting, you can rest assured that they are working in your best interest at all times.

3 Reasons You Need A Fiduciary #1. Must Act In Your Best Interest

As a fiduciary, an investment professional has to act in your best interest at all times. This means putting you first over their own potential profit. For example, when you create an investment plan with an investment professional, they have to follow this plan exactly as it is laid out.

If your plan says you are to be invested in 100% fixed income, they have to follow this. If they are paid based on assets under management, they cannot put you in equities so your balance rises faster and they can earn a higher fee off of you.

Likewise, if they hear a hot stock tip, they cannot just invest your money into this stock, regardless of how sure they are it will make you money. If it is not a fit for you, they cannot do it.

#2. Clear Fee Structure

As a fiduciary, an investment professional has to clearly show and explain how they are compensated. So if they take a percentage of assets under management as their fee from you, they have to explain how much the fee is and how and when they get paid.

In addition, if they earn commissions on products they sell, they need to disclose this to you upfront. This is important because many investment professionals who are not fiduciary’s don’t disclose this information to you.

The result is you not knowing if they are recommending an investment to you because it is a good fit for you, or if they simply earn a commission by selling it to you.

By working with a fiduciary, you can rest assured that you will never be surprised at how much you are paying and when and how you pay.

If you decide to work with an investment professional that is not a fiduciary, you need to make certain you question every recommendation they make as it might only be recommended so the professional can make extra money.

#3. Avoid Conflicts Of Interest

Another way an investment professional acts as a fiduciary is by avoiding conflicts of interest. In many cases, this simply means to not offer products to clients that the professional earns commission on.

Another example would be to invest some of your money into bonds that support a new real estate venture that your financial professional has a stake in.

This is critical because clients can fully trust that their investment professional is acting on behalf of them and is only offering them a product or service that they truly need.

Of course, there might be instances where the bonds from the real estate venture are a good fit for you. In this case, your investment professional needs to disclose this to you upfront and you then decide if you want to invest or not.

If your investment professional was not a fiduciary, they could just invest your money into the bonds and you would never know they are doing so because they have a stake in it. If you were to find out, chances are you would begin to question the motivation behind your investment.

Final Thoughts

As you can see, working with an investment professional that is a fiduciary can make your experience much easier and more trustful. You know that any recommendation being made is in your best interest and you know how much you are paying for their advice and services.

Additionally, any conflict of interest that does come up, you will be notified before any action is taken so that you can decide if you want to move forward. This simply strengthens the trust between client and advisor.

While it is not a requirement for you to work with someone who is a fiduciary, your life will be much easier by doing so.

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It was around 10 years ago that the wheels fell off the housing boom in the United States and the Great Recession took its toll on the country. For many, this was the first time in their lives where they were impacted so harshly from an array of financial fronts.

Not only was it near impossible to buy a new home during this time, but as a result of a lack of buyers, housing prices stalled and then began to drop. The effects of the Great Recession didn’t end there. The stock market lost over 50% of its value and tens of millions lost their jobs.

With a loss in savings and income, even fewer people were interested in buying a home and the result was housing prices falling off a cliff.

In this post, I am going to look at why the stock market lost over 50% of its value during this time and look at what has happened since. How has government responded to protect investors? How have investors fared in the 10 years since?

Let’s get started looking into these questions.

Why The Stock Market Dropped During The Great Recession

The reason the stock market dropped began out of uncertainty. At the time, banks were underwriting mortgages and then packaging these mortgages into pools and selling them to investors. On the surface, this looked like a nice fixed income investment.

But the problem was that the banks were mixing mortgages from various credited buyers. In many cases, you had mortgages that were going to easily be repaid by the homeowner because they could afford their house.

Mixed in with these mortgages were loans of homeowners who could not afford their monthly payments and were highly likely to default on their loan. Because investors had no idea what mortgages made up the security pools they were buying, fear set in.

When you add in job layoffs, loss of income, and a slowing economy with fear, it is not a surprise that the market dropped as though it did.

What We’ve Done To Protect Investors

Since the Great Recession, there have been numerous laws enacted to protect investors. Some laws have gone into effect to ensure that money market funds cannot break the buck. For investors the biggest impact has been the Dodd-Frank Act.

This law is vast in its scope and protects investors in various ways. To see the many ways it protects investors, you can read here.

The result of these regulations have helped or hurt investors depending on who you talk to. But for the most part, they have been beneficial to investors in ensuring a safer trading environment.

How Investors Have Fared

When it comes to investors and the Great Recession, there are two distinct camps. On the one hand, you have investors who did not jump off the ledge and remained invested. For these investors, they earned back their losses by late 2011 or early 2012.

The other group of investors, those who fled the market, lost a lot of their wealth. Many were so scarred by the incident that many are still not investing to this day. This is a shame because we have experienced the greatest bull run in the history of the stock market since 2009.

As of this writing, the market is up over 230% from the lows. In other words, had you stayed invested during this time, you would have not only earned your money back, but more than doubled what you originally had.

The Lessons For Investors From The Great Recession

For investors, the lessons are the same tried and true lessons that you hear smart money managers talk about often. The biggest being is to not let your emotions make your investment decisions. This can be accomplished by having a well thought out investment plan and picking an asset allocation that fits your risk tolerance.

Another important lesson from the Great Recession is to invest for the long term. Smart investors during the Great Recession were buying stocks as the market trended lower. They know that you buy when stocks are on sale. I’ll admit that this can be tough to do, especially when you look at your 401k plan balance and seeing it dropping in value daily.

But by keeping a long term view on things, you can be a better investor. Throughout history, investors have encountered a lot of turmoil and in time, we have gotten through each event and rose from it. By taking a long term view, it will help you to stay invested, even when the market is dropping.

Final Thoughts

At the end of the day, the Great Recession had a major impact on everyone’s financial lives. Many people are still trying to recover financially today. If there is one thing that this even has taught us, it is to live within our means and save our money.

When we live within our means, we are less impacted when financial crises happen. And by making sure we have money saved, we not only are better able to weather the storm, but also invest when opportunities present themselves.

I encourage you to take some time and look at how the Great Recession impacted you and how you can prepare and protect yourself for not only the next major event, but even with the next bear market. Because truth be told, similar events will happen again.

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When it comes to investing, you need to make sure you have a well diversified portfolio so that you can lower your risk. A great way to add diversification to your portfolio is with small cap stocks. But the benefits of small cap stocks don’t end with just diversification.

There are many great reasons why you should invest a portion of your money in small cap stocks. In this post, I highlight 3 critical reasons why investing in small cap stocks will increase your long term gains. But first, we have to make sure you understand what a small cap stock is.

What Are Small Cap Stocks?

Small cap stocks are stocks of companies that have a market capitalization between $300 million to $2 billion dollars. The smaller the market capitalization, the smaller the company. The smallest of small cap stocks are usually referred to as micro cap stocks. But for the purposes of this post, we will focus on small cap stocks in general.

While reading market capitalization might not make complete sense to new investors, as a comparison as of this writing, the market capitalization of Apple is $937 billion. The market capitalization of Amazon is $770 billion. As you can see, the variance between small and large cap stocks is great.

Now that we know what a small cap stock is, let’s start looking at the benefits.

3 Reasons Small Cap Stocks Are Important To Invest In #1. Diversification

As I stated earlier, small cap stocks allow you to further diversify your portfolio to lower your risk. This is important because the more exposure you have to various sectors and stocks with various market capitalization’s, the lower your overall risk.

Therefore, it makes sense as an investor to invest is not only large cap stocks, but also small cap and international stocks as well. In fact, to have the greatest diversification, when investing overseas, you should be investing in both small and large cap stocks as well. In most cases, small cap international stocks are referred to as emerging market stocks.

#2. Higher Returns

Another great thing about small cap stocks is they tend to earn a higher return. This makes sense as they are growing at a faster rate than large cap stocks. Since small companies are earning higher revenues, investors are willing to pay higher prices for the growth. The result is higher stock returns for investors.

Of course, on the flip side is greater potential loss as well. This makes sense when you think about it. Apple is a large, well established company. It’s revenues are predictable and as a result, its stock price is going to slowly move higher or lower for the most part.

But with a small cap stock, you risk losing a lot of money. This is because it is easier for a small company to have unpredictable revenues and even go out of business in a short period of time.

The good news though, is that by investing in high quality small cap mutual funds and exchange traded funds, you are buying a large number of small companies and diversify the risk of a couple losing revenues or even going out of business.

#3. Long Term Performance

Over the long term, small cap stocks tend to outperform large cap stops by 2.3% annually. Over the course of 10 years, with $10,000 invested, this could result in an additional $5,000.

Taking the above point further, from 1979 through 2015, small cap stocks outperformed large cap stocks 54% of the time. So by investing in small cap stocks, you have a good chance of earning a higher return over the long term compared to large cap stocks and you can do so on a regular basis too.

Final Thoughts

To be a successful investor, you have to make a point to invest a portion of your money in small cap stocks. It will help you to have a better diversified portfolio and earn higher returns.

But you have to take into account your risk tolerance when deciding how large of percent of your portfolio should be invested in small cap stocks. This is because of the point above about these stocks being more risky than larger company stocks. Since they tend to earn higher returns, they also tend to be more volatile as well.

But by finding the correct allocation for you needs, you can invest in small cap stocks, earn a higher return and not worry about risking your money to a greater potential loss.

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