This fluctuating economy necessitates a change in investment strategy. Consider the typical investor's strategy: buy and sell during periods of inflation and go into hiding during recessions. Although a common, this strategy may not be the best. The cycle of recession and inflation is a fact of life in a free economy…one follows the other systematically. If you are a successful investor who has met your investment goals during an inflation period, then moving to Hawaii may be a great way to spend the on-coming recession. However, if you have not been so successful, then waiting for the recession to pass may seriously damage your investment program.
CHARACTERISTICS OF A RECESSION
We are seeing the characteristics of a recession now as the economy drastically slows down.
* Loans are hard to find.
* Unemployment rises as businesses reduce their work force in preparation for a reduction in demand for their goods or services.
* Salaries are frozen or increased in small amounts.
* Tenants cannot pay rent increases easily.
* Businesses will not expand to fill vacant space.
* Buildings that cannot give an investor a decent return based upon current conditions will not sell.
WHY INVEST NOW
Many property owners with break-even or positive cash flows will choose to wait out the recession, but the relationship between time and the value of money strongly indicates a different approach.
For instance, if an investor has $200,000 net equity in a building and the recession lasts two years, the investor may lose two years' worth of equity growth. He may have to retire two years later or live on a reduced income at retirement. If the investor sold his property instead and took a reduction in price leaving only $185,000 in net cash equity, he would be free to look for bargains that will make up the $15,000 loss plus produce profits far greater than his current property will generate. Holding a property may be the least profitable path to increasing wealth during a recession.
You must have cash or its equivalent to take advantage of a recession. From a tax perspective, if you sell, then offset capital gains with suspended losses. Otherwise, be prepared to use a 1031 real estate exchange to preserve the equity remaining. By using the 1031 exchange, you can reduce your sale price below street value and still preserve the bulk of your equity for reinvestment.
RECESSION STRATEGIES
Recession investing requires that you solve someone else's problem by reducing their. Many strategies that would not work during an inflation period are very effective during recessions. Using equity and third party notes as a down payment, employing creative seller financing, consolidating or diversifying through exchanging, equity participation, lease options, etc. are only a few of the many ways investors can take advantage of the difficulties recessions create for other owners.
The underlying principle to all recession strategies is not to invest on the basis of anticipated growth. Rather invest with the following in mind:
* Buy a positive cash flow
* Pay less than the property is worth
* Arrange transferable financing that increases value
* Buy in areas that have a strong, diversified economy that will grow as the recession ends
* Buy a property that will survive the recession, no matter how long it lasts.
~D. Moore, 2009
Investment Strategies Stock Market
First of all you must spend less than you earn – Then you must invest the difference.
But don't stop there – You then need to re-invest the profits that your initial investment created as well as the original investment. In time this will create a big enough resource that you will be able to comfortably live of the income that your investments create.
Does this sound a little bit scary or like too much hard work? Well don't worry because all you need to do is to create some savings and investment strategies and the rest will fall into place.
The first step is to create a Savings plan that works for you. When it comes to saving money there are generally two different types of people.
The first type are people who are somehow able to save money without any great difficulty. They have good restraint when it comes to purchases and they always have a sock full of money somewhere. When they are ordered around and given strict rules to abide by they tend to want to rebel and do the opposite.
The second type of person needs strict rules and regulations to achieve most things. Left to their own devices they would happily spend all their spare money on a new pair of jeans or car. When these people are given clear rules they seem to be able to save money with much more success.
Which type of person are you? Do you need strict Savings and Investment Strategies to save money or are you at your best when you are given more freedom. To be completely honest I think that everybody could become a better at saving money if they applied a few simple ideas.
One of the best savings and investment strategies that I have come across is this.
Reward Based Savings System
The first step of this system is to actually create a savings plan. For instance you need to focus on some areas in your life where you think you could save some money eg.
Bring your lunch from home
Quit smoking
Less alcohol from expensive bars
Cook your own meals
Public transport
Cut down on snacks
Isn't it fumy how most of the things that I have just mentioned would be beneficial to your life in more ways than just saving you money? The problem is that all of the above things are actions and pastimes that you really enjoy.
So is it realistic to try and cut these activities out of your life and expect to be happy just because you are saving some money?
No, I don't think it is. What about if every time you saved money you simply rewarded yourself? Then you might actually enjoy saving money rather than growing to resent it.
For example if you were to give up smoking then I would suggest that you keep a tally of the money that you are saving and use a portion of it to reward yourself with something that you love but don't usually get, for instance a massage or a night at the movies. This way you are creating a savings plan that will actually work. Why? Because you want it to work so that you can get your rewards. Too many people create Savings and Investment strategies that don't have inbuilt reward systems. The best thing about a reward based saving system is that you really enjoy the feeling of saving money. Then if you are smart enough to invest the extra money that you are saving you will have begum your journey towards financial freedom.
Both David Moore & Banjo Smyth are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
David Moore has sinced written about articles on various topics from Abdominal, Cars and Fat Loss. David Moore is the CEO of Equity Advantage, Inc., a nationally recognized 1031 Exchange facilitation leader.Learn how a can. David Moore's top article generates over 6600 views. to your Favourites.
Banjo Smyth has sinced written about articles on various topics from Stock, Finances and Investments. FREE DVD - Easy, Free and High Quality Information. Learn how everyday people are making over $5,000 per month from. Banjo Smyth's top article generates over 33100 views. to your Favourites.
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