Liquidity is the ability to quickly convert your investment into cash with little or no loss in value. This is important if there is a possibility that you will need cash in the near future. For example, a down payment on a new home means that you can sell the house later and turn it into cash. But a property like that can take a while to convert. However, assets like bonds or stocks can be turned into cash fairly quickly. Cash is the most liquid asset, while investments such as land or other sorts of real estate are less [...]

If you are one of the 947 companies that rely on us (taxpayers) for a free ride, this newsletter is not for you; if you are a taxpayer without the bailout luxury read on and learn about two types of risk, tolerance and capacity.  Risk tolerance is behavioral based and risk capacity is goal based, each type is different but equally important in the process to knowing your investment goals. Risk Tolerance Risk tolerance is the degree in variability of investment returns that you, the investor, are willing to accept.  Anytime you invest, whether in large or small amounts, the [...]

This week we will continue on the path to knowing your investment goals by discussing what is my time horizon. Your answer to last newsletter's question, why am I investing?, will directly relate to how you answer this week’s question, what is my time horizon?. Time horizon is the period of time from when the investment is made to when it is liquidated or sold.  If your answer to why am I investing was to fund your retirement, then your time horizon is from now to sometime between the day you retire and the day you kick the bucket.  If your [...]

The next chapter in the investment fund series is "Know your investment goals".  I'll take you through an easy and repeatable process to help clarify how to choose the right investment goal(s). It is difficult to become a successful investor if you don't know your investment goals, thus we ask our-self.  Why do I invest? All our situations are unique, as no one investment goal is right for everyone.  If your goal is to purchase a home and your neighbor’s is to prepare for retirement, the specific investments will likely differ.  Thus the first step to knowing your investment goal(s) [...]

When investing in your retirement one of the questions you’ll need to answer is.... Should I invest in a Roth or Traditional investment vehicle?  Another way of asking the same question is, do I want to be taxed now or later?  The best retirement vehicle is tough to predict unless you know your financial future and tax rates.  Knowing the future may not be feasible, but becoming familiar with a range of potential outcomes is.  Bankrate created a Traditional vs. Roth Calculator for us to do just this.   If you think tax rates will increase into the future, then increase them in the calculator. [...]