Twenty Questions

This article will cover several popular questions first time investors post. To start, here is question number 1:
How much money is enough to retire/invest? Good question, have ever consider this while thinking how you will reach your financial goals.

• If only i could get a raise, or a better paying position, I could invest.
• If only my spouse could get work.
• If only my spouse could get a better paying job or a raise.
• Maybe I should get a second job.
• Life would be so much easier if I had a bit more money.

Haha, I liked the last one best. Frankly, consumerism in western culture has knocked some stupid in peoples heads. More and more advertising, etc., coupled with our own personal appetite for turning 'WANTS' into 'NEEDS', makes the desire for more money without end.

So does having more money make financial planning easier? Let's answer this question with a series of questions.

• Would more money help you change your spending and saving habits?
• Would more money help you distinguish and prioritize between wants and needs?
• If you and/or your family had more money would you know where it would go?
• If it is difficult to wisely mange your current salary, would more money make a positive difference?
• How many lottery winners stay rich?

DiscussEconomics have seen single parents earning an income that fluctuates between $27,000 and $31,000 never more raising��� teens, saving for retirement, and simultaneously taught their kids to focus on long term goals. How is this possible? Quite frankly, smart and responsible money planning. People on the 'average' salary can get ahead. People better than average? You're financial wiggle room increases a hundred fold, don't squander it.

Questions 2: Do I need to invest in mutual funds to achieve financial independence?

How many times have you heard the scheme, "I can do better in the stock market than those professional money managers." Oh really! It is possible that in the short run an individual will outperform certain fund managers, however, that's short term, and that's not an on average stat. The key, however, is not the return, it is volatility. Professionals are much better at using volatility (risk) to their advantage than you. They know the roller coaster stock market upside down and have a portfolio full��� of diversified options to hedge their risks.

Here are some numbers to help the argument. In July 2003, Dalbar released a study on��� investor behavior between 1984 and 2002. During this time the S&P 500 for US equities had an annualized return of 12.2%, and the average US equity fund returned 9.3%. The average US equity investor earned only 2.6% per year not even keeping pact with inflation at 3.1% per year. Mind as well use a GIC! That's only one example, but it's a strong argument, just look at the stats.

Here's some more info to help. Why is it to my advantage (as investor) to get a professional money manager? Well there are some, ask yourself these questions:

• Do you have at your command teams of analysts and researchers who can travel the world in search of information to find the real news behind the news?
• Can you meet with management of companies to ask the hard questions?
• Are you able to visit company sites to study their operations?
• Can you analyze companies' financial reports?

Mutual funds also give investors the opportunity to buy more than a few companies with a smaller amount of money. Individual investors who don't have access to advice tend to make wrong decisions both at the peak and bottom of the market cycle. If you want to play the stock market go ahead, hopefully you have disposable income that can be lost, it's high risk, occasionally pays off big, but more than not leaves you with your pants down.

Next Issue: A question about market value and the price of appreciating shares. All of the information in this newsletter is for your own personal information and is applicable in the US and Canadian regions, however basic concepts work for any money situation in the world.

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