Financial Planning and Investing 

What exactly is financial planning, and why is it so important?

Financial planning is the process of determining how to manage money, investing, present and future financial goals, and the strategy that should be undertaken to obtain them.

Because our goals and desires change as we do, financial planning and investing is a task that is never finished. How we are financially able to reach these goals, and the risk we are willing to take to get there, necessarily means that any financial plan must be specifically tailored for an individual or family.

Financial planning begins by taking into account each individual's assets and liabilities at that particular point in time.

The asset category includes life insurance and monetary investments of all kinds, along with physical assets such as a home, automobiles and other items.

Liabilities may range from personal loans, credit card debt, and loans taken to obtain hard assets, such as mortgages.

Next is where sources of ongoing income and increases in hard asset wealth enter into the equation. Income most usually is earned by employment, but other sources, such as possible inheritances, must also be considered. Increases in hard asset wealth, such as rising home prices, will be affected by general economic conditions as well as owner enhancements.

From here, things get trickier, and this is where the true planning begins!

Our particular stage in life -- whether we are young, old, or somewhere in the middle -- will usually lead us to desire a particular set of goals. Financial planners often break down our life cycles into distinct phases. Which phase we are in is often determined by age but will also be dictated by how much risk we are willing to assume.

Younger people are most often described as being in an accumulation phase. Their earnings have not yet hit their peak, but at the same time they are striving to obtain both hard and soft assets.

Examples here include saving for a new home or a child's education. Risk assumed here will be tempered by the time constraints of these goals as well as individual risk tolerance. In general, the longer the time frame, the more investments in the aggressive category may be considered.

The other phases extend to middle age and beyond to retirement. Our middle age years often find us at the peak of our earning power, with many of our former goals satisfied. This will mean greater savings are possible, and as time progresses towards retirement, our tolerance for risk will necessarily diminish.

Financial planning takes all of this into account and more. Other factors, including planning for health care and other insurance needs, preparation for emergency expenditures, tax and estate planning and the like will all be part of the strategy.

Unexpected windfalls may also enter into the picture. Saving for retirement becomes increasingly important as the time earned income will end draws nearer.

All of these variables add to the importance of financially planning across all stages of one's life. It is a concept that encompasses your total financial picture -- both in the present and for the future.

Copyright © 2005 I.E.C. Haramis haramis@greekshares.com http://www.greekshares.com

Ioannis - Evangelos C. Haramis was born in Greece in 1951. Studied Business Administration, Marketing and Economics in Greece, USA and in Belgium.

He has been active in the stock markets since 1972. Since 2002 he is New Business Development Managing Director at an Investment Bank

12 Basic Stock Investing Rules Every Successful Investor Should Follow

There are many important things you need to know to trade and invest successfully in the stock market or any other market. 12 of the most important things that I can share with you based on many years of trading experience are enumerated below.

1. Buy low-sell high. As simple as this concept appears to be, the vast majority of investors do the exact opposite. Your ability to consistently buy low and sell high, will determine the success, or failure, of your investments. Your rate of return is determined 100% by when you enter the stock market.

2. The stock market is always right and price is the only reality in trading. If you want to make money in any market, you need to mirror what the market is doing. If the market is going down and you are long, the market is right and you are wrong. If the stock market is going up and you are short, the market is right and you are wrong.

Other things being equal, the longer you stay right with the stock market, the more money you will make. The longer you stay wrong with the stock market, the more money you will lose.

3. Every market or stock that goes up will go down and most markets or stocks that have gone down, will go up. The more extreme the move up or down, the more extreme the movement in the opposite direction once the trend changes. This is also known as "the trend always changes rule."

4. If you are looking for "reasons" that stocks or markets make large directional moves, you will probably never know for certain. Since we are dealing with perception of markets-not necessarily reality, you are wasting your time looking for the many reasons markets move.

A huge mistake most investors make is assuming that stock markets are rational or that they are capable of ascertaining why markets do anything. To make a profit trading, it is only necessary to know that markets are moving - not why they are moving. Stock market winners only care about direction and duration, while market losers are obsessed with the whys.

5. Stock markets generally move in advance of news or supportive fundamentals - sometimes months in advance. If you wait to invest until it is totally clear to you why a stock or a market is moving, you have to assume that others have done the same thing and you may be too late.

You need to get positioned before the largest directional trend move takes place. The market reaction to good or bad news in a bull market will be positive more often than not. The market reaction to good or bad news in a bear market will be negative more often than not.

6. The trend is your friend. Since the trend is the basis of all profit, we need long term trends to make sizeable money. The key is to know when to get aboard a trend and stick with it for a long period of time to maximize profits. Contrary to the short term perspective of most investors today, all the big money is made by catching large market moves - not by day trading or short term stock investing.

7. You must let your profits run and cut your losses quickly if you are to have any chance of being successful. Trading discipline is not a sufficient condition to make money in the markets, but it is a necessary condition. If you do not practice highly disciplined trading, you will not make money over the long term. This is a stock trading "system" in itself.

8. The Efficient Market Hypothesis is fallacious and is actually a derivative of the perfect competition model of capitalism. The Efficient Market Hypothesis at root shares many of the same false premises as the perfect competition paradigm as described by a well known economist.

The perfect competition model is not based on anything that exists on this earth. Consistently profitable professional traders simply have better information - and they act on it. Most non-professionals trade strictly on emotion, and lose much more money than they earn.

The combination of superior information for some investors and the usual panic as losses mount caused by buying high and selling low for others, creates inefficient markets.

9. Traditional technical and fundamental analysis alone may not enable you to consistently make money in the markets. Successful market timing is possible but not with the tools of analysis that most people employ.

If you eliminate optimization, data mining, subjectivism, and other such statistical tricks and data manipulation, most trading ideas are losers.

10. Never trust the advice and/or ideas of trading software vendors, stock trading system sellers, market commentators, financial analysts, brokers, newsletter publishers, trading authors, etc., unless they trade their own money and have traded successfully for years.

Note those that have traded successfully over very long periods of time are very few in number. Keep in mind that Wall Street and other financial firms make money by selling you something - not instilling wisdom in you. You should make your own trading decisions based on a rational analysis of all the facts.

11. The worst thing an investor can do is take a large loss on their position or portfolio. Market timing can help avert this much too common experience.

You can avoid making that huge mistake by avoiding buying things when they are high. It should be obvious that you should only buy when stocks are low and only sell when stocks are high.

Since your starting point is critical in determining your total return, if you buy low, your long term investment results are irrefutably better than someone that bought high.

12. The most successful investing methods should take most individuals no more than four or five hours per week and, for the majority of us, only one or two hours per week with little to no stress involved

C.C. Collins is a Financial Planning Advisor and Author of "Scientific Wealth Strategies" at http://www.wealthscientist.com Find more information at http://www.stockinfo4u.com

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