Archive | November, 2012

Build Your Pyramid

15 Nov

The ancient Egyptians knew how to build.  5000 years later millions of people gaze in wonder at the still standing Sphinx and Pyramids of Giza.  Building a solid financial base is similar to building a pyramid customised to your own design. 

Foundation – In the foundation of my pyramid I have commodities.  The commodities I currently hold are Gold, Silver and Copper.  You can add other commodities (such as platinum, palladium, nickel, oil, gas etc.) or reduce them depending on their position in their investment cycle.  Another part of the foundation is life insurance.  I hold mortgage repayment insurance, inheritance tax insurance and endowment policies which will provide lump sum income in later years. 

Security – In this section I hold cash deposits and have money invested in ISA, SIPP and government bonds.  These are all fairly stable types of investments that have government guarantee if anything goes wrong with the organisation the money is held with.  Banks now have £85,000 government guarantee per banking institution.  You can hold up to one million in government bonds and are guaranteed the return of your money should there be any problems.

Income – This is the section that creates my income for the year and includes:

  • wages or dividends from business that I own 100%.
  • Business in which I am a silent partner and receive a dividend from the investment. 
  • Residual income which is generated through a network marketing business. 
  • Royalties which are paid from books.  
  • Rental income from residential properties.
  • Dividends from shares
  • Interest from a lending portfolio.

Growth – In the growth section investments are aimed at producing capital growth in the future rather than a regular income.  So in this section includes investments in companies that qualify through the governments Enterprise Investment Scheme (EIS).  Investments in small companies listed on the stock exchange which are reinvesting all their money back into the business for future growth. 

Angel Investing is another growth potential but does carry higher risk.

Property forms part of the growth section with the hope property will over a long period of time rise in value.   

Speculation – This section is dedicated to Spreadbetting, Forex, Futures and Options in this section.  Until you have built most of your pyramid I would not consider this section as it is very volatile and high risk.

Building your Financial Pyramid helps provide security in the ups and downs of the economy.  Start yours today.

More information on Financial Pyramids is available in my latest book ‘Surviving 2013’ available worldwide in digital format or paperback through Amazon books.

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Investment Cycles

9 Nov

The investment world works in cycles. The best way to imagine a cycle is like a circle. At the top of the circle is the high for the investment. At the bottom of the circle is the low for the investment. The left and right hand sides of the circle tell you if are in an upward or downward cycle. The trick to investing is getting into the investment at the bottom of the cycle and getting out at the top of the cycle.
To give an example of a cycle lets look at property. In the year 2000 you could purchase a nice 3 bedroom house for £30,000 in South Wales. House prices were steadily rising and by 2007 the same house was selling for £115,000. Today house prices are going down and the house is worth about £90,000.
If you had purchased the house for £30,000 and sold for £115,000 you would be very pleased with the profit you had made. You would have bought at the low of the cycle and sold at the high.
The story would be totally different if you bought at the high of £115,000 and were now wanting to sell at today’s price of £90,000. Unfortunately, this is a situation many property owners find themselves in at present. The value of their houses has dropped to below the price they purchased the property for and due to the size of the mortgage they have they find themselves in negative equity. There are many property owners now waiting for house prices to go up so they can sell.
There are different cycles for different investments. Take Gold as another example, if you had purchased Gold at $400 USD and it is currently at $1700 USD you would be making a good profit on your investment. The big question is ‘Has Gold reached the cycle high yet?’ Nobody knows the answer to that. We all like to think we have a crystal ball and can predict the rise and falls but we don’t and we just do the best we can with the information available.
When trying to identify the next investment to move into research investments that seem to be out of favour. Think of Warren Buffett’s words ‘be fearful when others are greedy and be greedy when others are fearful’. Keep your own records, a simple spread sheet will do the trick, and look for investments that seem to have reached the bottom and are starting to move upwards. When an investment becomes popular in the newspapers you know it is almost time to get out of it and move on to the next investment.

More information on investing is available from my latest book Surviving 2013 available worldwid from Amazon Books