How to Handle Investment Fears

A bumpy stock market can provide quite a ride. For many, nothing matches the thrill of knowing you made a bundle investing in a certain stock or fund. But when the stock market begins to drop, investment fears set in. Those fears can take over your capacity to manage your money and investments successfully, unless you confront them head-on.

Warren Buffett's Ideas Regarding Investment Fears

Consider the advice of financier Warren Buffet:

• According to Buffet, people who place money in the stock market should do so with a long-term outlook. You need to be comfortable with short-term losses to reap the rewards of long-term gains.

• Interestingly, Buffet postulates that the two emotions most experienced by those who invest in the stock market are greed and fear.

• Buffet believes that the public has it backwards when it comes to managing their feelings during market fluctuations. Smarter investors do the opposite of what the majority of investors do.

- When "everyone" is saying how great the stock market is doing and discussing the incredible growth of their stocks and funds, this is the time to be leery. In other words, don't follow the crowd when it comes to your investment portfolio.

- On the other hand, when the market is down and everyone's investment fears are on high alert, that's the best time to buy. His reasoning is that, since everything costs less in a down market and we're in the market for the long haul, we're bound to make a profit long-term.

Additional Points to Ponder Regarding Your Investment Fears

1. The stock market will rise and fall. Accept the fact that investing in the stock market is unpredictable. It is what it is. Even if you're a stock analyst, you can't predict with perfect accuracy which stocks and funds will soar and which will tank.

2. A word to the wise. Ask yourself how you can apply Warren Buffet's sage advice to your investment portfolio.

• Take your current situation into consideration: if you're due to retire in 5 years, you might not have enough time to invest in aggressive growth stocks and experience growth. However, if you still have 15 or 20 more years of working and saving, Buffett's logic might work for you.

3. Be vigilant about diversifying your stock portfolio. Diversification provides some built-in protection against suffering major losses in the stock market.

4. Avoid letting your fear run amuck. It's best not to let your fear consume you to the degree that you're withdrawing from opportunities to invest and reap benefits long-term.

Confronting and Handling Your Investment Fears

How can you minimize your investment fears? Try these strategies:

1. Recognize that fear is a normal human emotion. You're bound to experience fear at some points in your life and in varying situations.

• Fear is healthy in the sense that if your gut is telling you something is scary, there may be a good reason for that fear. But if you can reason through the fear - in this case, your investment fear - you stand to experience healthy increases in your stock accounts.

2. Minimize your risks. Remind yourself that if you've diversified your investment portfolio as investment experts suggest, your chances of losing large amounts of money are greatly reduced.

3. Make wise investments in spite of your fear. Thoroughly research your investments and establish "Feel the fear and do it anyway" as your personal mantra. With judicious investments, your money will grow and this, in itself, may lessen your fears.

• Make one or two investments when prices are down, as long as you've got some years to watch your money build.

• As your profits grow, make a few more investments. Getting used to making investments puts this activity into your comfort zone, where it's less scary.

Learning to confront and handle your investment fears are important aspects of your investment life. Gathering information from market experts, such as Warren Buffet, and examining your feelings about investing can make the difference between allowing your fear to consume you and moving through your fear to skillfully manage your portfolio.

Paying Off Your Mortgage Early Can Be Your Ticket to Financial Freedom

A mortgage is a guaranteed monthly expense. Well, at least for now it is. However, you don't have to wait 30 years, or even 15 years, to be mortgage free. If you're willing to put 100% effort into paying off your mortgage early, you can be mortgage-free in less than 10 years.

Below, we'll discuss both the benefits and possible detriments of paying your mortgage off early.

Benefits of Paying Early

If you're like most American families, your mortgage is your costliest monthly expense. But, what would you do if you didn't have to make a mortgage payment each month? How many doors would suddenly open to you?

In essence, being mortgage-free provides you with financial freedom. You can continue to earn your yearly household income, without having to fork over $10,000 to $25,000 of it for a mortgage payment.

Here are just a few of the financial benefits that you'll be able to enjoy without a mortgage:

• Pay off all of your debt in order to truly live debt-free
• Purchase a brand new car with cash
• Become a landlord; invest in the real estate rental market in order to earn passive income
• Purchase a vacation home for your family
• Take exotic vacations
• Purchase a boat for leisure
• Fully invest in your 401k
• Save 100% cash for your children's college tuition
• Renovate your home without the need to incur more debt
• Build a fully stocked emergency fund

These possibilities are just the tip of the iceberg! For example, if you're able to get rid of an $1,800 mortgage payment, that's over $21,000 per year that you can save or spend in any which way you please. By saving up just 5 mortgage payments, you can pay for a $9,000 car outright. Or this can also be used as startup for a small business you can start on the side of your 9-to-5 job.

Common Arguments

Not everyone believes that paying off your mortgage early is a smart idea. And truthfully, for some people, paying off a mortgage early isn't the best option. This includes those with astronomically low interest rates and those with an already tight budget.

Here are some of the most common arguments for opting to keep your mortgage payment:

1. Tax credits. When you hold a mortgage, you're able to use the amount you pay in interest as a tax deduction. However, deducting $15,000 would save a mere $3,750 in taxes.

• Would you rather have $15,000 in the bank (plus the payment that is applied to your principal) or save $3,750 on taxes? $15,000 could buy you a new car, while $3,750 might only pay for your family vacation.

2. Diversification. Some people believe that diversifying your investments is the most secure route to ensuring the highest return. If you spend all of your extra money each month to pay off your mortgage payment early, you won't be able to partake in other investments or build a hefty nest egg in case of a rainy day.

• A good rule of successful investing is certainly diversification, as it minimizes risk.

When it comes down to it, eliminating your mortgage payment provides you with the security of knowing that you'll always have a roof over your head, whether you lose your job or not. Plus, you also gain financial freedom - and wealth - by being able to invest in opportunities which otherwise wouldn't have been available to you when paying a mortgage payment.

Paying off your mortgage early will take hard work and dedication. And for several years, you'll need to pour a great portion of your available cash into increasing the power of your payments. But the sooner you pay off the mortgage, the sooner you can have the life you've always dreamed of.

Low Cost Investments for Beginners

The best way for a beginner to get their feet wet in investing is to start slowly. Investing only a small amount of cash when you haven't yet learned the ropes is a very smart idea. It allows you to learn as you go and potentially make money without forfeiting tens of thousands of dollars due to a newbie mistake.

Try starting out with these investments that require a lower bar of entry and are some of the simplest investments to grasp:

1. Stocks. Beginners should stick with the safer, seasoned stocks that have proven to be stable moneymakers over a period of time. Of course, the appreciation of the stock won't skyrocket overnight, but then again, it is very unlikely to plummet overnight as well.

• Generally, the "safe" stocks are with well-established businesses that sell everyday items that people will purchase whether or not an economic crisis is in place. Businesses that sell moderately priced personal care items, food, and cleaning products fit nicely within this category.

• When choosing a hot stock, the chances of earning money quickly are higher. However, the stock can lose value easily just as fast. However, if you buy low and sell high and can do so quickly, there's money to be made.

• Choose an online broker, such as www.etrade.com or www.optionshouse.com as the startup cost is low - generally less than $10 - to gain access to the members area which will give you all of the tools, advice and buying power necessary to make a successful buy or trade.

2. CD. A certificate of deposit holds no risk; however, the return is minimal. Another caveat is that you're unlikely to see your money or any return for a while, as the general CD terms are 6 months, 12 months, 1 year, 3 years and 5 years.

• Essentially, when you open a CD, you're loaning the bank your money. In return, you're repaid with interest, which is generally low.

• Most seasoned CD investors like to have three CDs at a time: one for a 12 month term, another for a 2 year term, and a third for a 3 year term. When the first CD has matured, they're able to cash out, yet still have two CDs accruing a higher interest.

• The startup cost for a CD varies widely and depends on the funds you have available and are willing to put forth. Some CDs can require as little as $500, while others can have a minimum of $10,000 or more.

3. Mutual funds. Rather than the investment and all of its earnings being solely yours to claim (and fund), a mutual fund has thousands of investors contributing their own monetary investments into the funds of the investment as a whole; hence the term mutual fund.

• Mutual funds are attractive to beginners because the fund is managed by a seasoned investment professional that calls the shots - and because of this, he is often able to generate more money for the investors as a whole, rather than if they were to go it alone.

• You can start a mutual fund with very little cash - in some cases as little as $500 to $1,000 in a lump sum or even $25 per month on a regular basis.

As you can see, investing can be very lucrative. While you may not be able to buy a house using your proceeds, everyone has to start somewhere. By utilizing the investment methods mentioned above, you'll be off to a great start.

How to Pay Off a Mortgage Faster

Owning a home is clearly number one on the wish list for many of us. However, owning a home outright is a close second. From a financial perspective, paying off your mortgage faster is a smart move.

Being mortgage-free allows you to decrease your monthly expenses dramatically and enables you to finally give your retirement, children's college fund, and day-to-day savings account the attention they deserve.

Throughout the first few years of your mortgage, the majority of your payment will go towards interest.

These tips can help you avoid the interest-trap and work towards living the mortgage-free life you deserve:

1. Choose a 15-year fixed rate mortgage. Most homebuyers choose a 30-year fixed rate mortgage because it allows them to pocket several hundred dollars more than a 15-year term each month. While this may be a sensible option, if you're able to forgo the extra $400 or so in your bank account, choose a 15-year fixed rate.

• If you take out a loan for $200,000 at an interest rate of 6% for 30 years, your monthly mortgage payment will be $1,199 and you'll pay over $231,000 in interest throughout the course of your mortgage.

• If you take out a loan for $200,000 at an interest rate of 6% for 15 years, your monthly mortgage payment will be $1,688 and you'll pay just over $103,000 in interest throughout the course of your mortgage.

• Though a 15-year term will force you to pay a higher amount each month, you'll be free from paying a mortgage in just 180 months and you'll save $100,000 or more in interest payments.

• 15 year fixed rate mortgages boast lower interest rates because the lender assumes a lesser risk than a 30-year mortgage term.

2. Make regular lump sum payments. At the start of every year, make an extra lump sum payment towards your principal. When writing the check, specify that this payment should be applied to "principal only" as most lenders will simply apply the extra payment to interest, if given the opportunity.

• Apply your Christmas bonus towards making this extra lump sum payment. Or, if your employer is less generous, simply set aside $25 per week throughout the year and send in an extra check of $1,300 in addition to that month's mortgage payment.

• Lump sum payments can be made at any time of the year you choose. However, most lenders set restrictions as to how many times per year you can make lump sum payments.

3. Send a second check each month. As stated above, the majority of your mortgage payment goes towards interest; in many cases up to 75% of your payment is applied towards interest. But, you can beat this catch 22 by sending an extra check to be applied only towards your principal in addition to your monthly mortgage.

• By doing this, you continue to pay your interest and heavily decrease the amount you owe on principal over the course of just a few years.

• Only send as much as you can afford. It can be anywhere from $50 to $300 or more. Though paying off your mortgage faster is a priority, it makes little sense to unnecessarily dig yourself into a financial hole.

• Many people opt to send biweekly payments towards the principal (you must arrange this with your broker), but there is security in taking this approach. If your income decreases, or if other expenses increase, you can stop making extra payments towards your principal at any time without penalty.


Other conventional options of paying off your mortgage faster include arranging biweekly mortgage payments, refinancing your home, or opting for a balloon mortgage. But you can avoid the hassle of these more complicated processes by simply working strategically with your existing mortgage.

How to Invest in Foreign Markets

The world is a big place, yet relatively few people expand their investments beyond the United States. When the U.S. economy is struggling, it really makes sense to investigate foreign markets. Things are always going well somewhere!

Use these strategies to profit from growing economies worldwide:

1. Find an economy that's really hopping. Do some research and find an economy that's growing strongly. There are countless sources of economic information available for review. The internet has more information than you'll ever need; just ensure you trust the source.

• A simple measurement like the change of a country's GDP over recent history is a good starting point.

• Recent news reports of popular, growing, or successful industries in other countries can also give you some valuable information. For example, recently, there has been heightened interest in gold and silver, so you could research growing gold mining companies. New areas recently discovered by tourists can boost local economies.

• Likewise, keeping an eye on the world news can also alert you to areas you might want to avoid, such as areas that have been hard-hit by natural disasters or political uprisings. These areas' economies may be positioned for a great fall.

2. Find mutual funds that invest heavily in that country. There are mutual funds for nearly anything you can think of. It shouldn't be difficult to find a fund that focuses on the region of the world that interests you. There are countless search-engines that will help you narrow down the list of contenders.

3. Assess your risk tolerance. With investments anywhere - here or in other countries - higher returns equal higher risk. That rule stays the same regardless of where you invest. Could you afford to lose the money? If not, you may prefer more of a sure thing; the risk would be lower, but so would the return. In the end, you could come out ahead with a lower return.

• Would you like to be invested in small companies with a lot of potential for growth, but also a lot of downside risk?

• Or would you prefer to invest in large, well-established companies? (Lower risk)

• Perhaps something more like an index fund, which will closely follow the overall economy growth, is the best option for you.

• Consider your timeframe and risk comfort level.

4. Choose one or more funds for your money. Look at the track record of the funds that meet all your criteria. Be sure to dig a little - it's possible for a fund to look extremely good just because of a couple of homeruns on the part of the fund manager. Examine the returns on each of the stocks bought and sold by the fund for a real picture of the success of the fund management.

5. Watch that economy. When your foreign market economy starts to tank, the stocks will eventually follow suit, and so will your mutual fund. Keep on top of things so you can get out at the appropriate time.

Above is a simplified, but effective way to invest in foreign markets without investing a lot of time or requiring a lot of expertise. The financial world extends far beyond the United States, and you - as an intelligent and industrious investor - can take advantage of all the world has to offer.