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If you have a pension, you are probably invested in some way in hedge funds. They have been described as the gated community of investing in part because they require large amounts of available capital – and I mean millions of dollars worth. Because pension plans need diversity and risk, they often benefit from some of this sort of ‘outside of the mutual fund regulatory world’ type of investment approaches. Twenty-five percent of them do. The individual investor often consider the “average investor”has barely any exposure. Mutual funds would like to tap that marketplace and in all likelihood, your 401(k) will be seen as prime hunting grounds for these newer funds.

Among these investment techniques is the ability to short a stock, use various types of arbitrage and options trading while others simply act as a fund of funds or a mimic fund to a larger successful brethren. Many of these techniques have netted investors huge sums of money in return for this risk. As the market fell 39% in 2008, hedge funds experienced losses of a far less (20%).

So if one of these funds turns up in your 401(k) list of available investments, should you buy it? Yes and no.

If you do not know what shorting a stock is, then probably no. Shorting a stock is a trader technique of borrowing shares of a stock in the belief that the stock will go down in price. When it does, the fund (manager) buys the borrowed shares at the new lower price.

If you are unsure how arbitrage works, then this might be a reason to stay away as well. Arbitrage attempts to capitalize on price disparities. The could come from underpriced mergers that are about to happen or from the difference between a convertible bond and the option to buy the stock. Yes, its complicated and risky.

If you have no clue what it means to neutralize the market, then avoid the pitch that these are essentially conservative funds. They are conservative – by comparison to other hedge fund activity – but they are by no means without risk. In fact, recent numbers show that these types of funds – that use a method of protecting the fund’s holdings, usually stocks that are chosen to outperform, by using short positioning in broader indexes or options to keep the gain within a certain range. The returns on these funds can run from a negative 22% to a positive 13% over the last twelve months.

Should you look at these funds as part of your portfolio? Probably not… unless you have managed to embrace your inner risky person. If that is the case, then owning a ten percent stake in a fund that works like a hedge fund might work. They cost less than a hedge fund but I would be willing to wager, more than twice what you are paying for an average, run-of-the-mill actively managed fund.

Chance are, if you do have access will come to you as 130/30 fund. Although 100% of the money in the fund is invested, an additional 30% is borrowed as a short sale. This gives the illusion of being invested 130%.

Once again, it pays to keep in mind what kind of investor you are, how much risk you can tolerate and when it is you plan on using that retirement investment as income. Keep in mind that these types of funds have only the smallest of track records.

The force of the knock across the financial sector over the past 12 months has exposed the weaknesses in the global financial tectonic plates.

From New York to London to Hong Kong to Tokyo, the newly formed global network cracked under the strains of the economic quake as the ground shook. Some of the institutional pillars of the financial world shook. Iceland fell; Lehman Brothers and Bear Stern crumbled; Merrill Lynch saved itself by securing an all-stock buyout with Bank of America; Goldman Sachs found comfort in Birkshire Hatherway. The financial landscape remodeled itself nearly everyday as Hedge Fund executives observed through pink pages.

The quake also exposed some significant cracks within the financial foundations. Bernie Madoff showed the world how an unregulated sector of the financial ecosystem could be fuelled purely on self-confidence and yet still report colossal gains. The global networks that supported the highs of the FTSE 100 and Dow Jones showed vulnerability as a domino effect fell across the globe. As the seismologists arrived and the Governmental aid and private investment doused out the flames the land looked bleak. The public confidence in institutional governance and reporting became sulfuric and the frustrations into the prohibitive workings of such operations as hedge funds solidified into forms of regulatory reviews.

And now that the land is still and the dust has settled people, companies, markets and economies are looking for learning’s from the past to strengthen their future prospects. And like all scorched land, grass roots are beginning to appear as a newly fertilized financial ground bears opportunity. Within the hedge fund market acquisitions are strengthening the larger firms while newly considered regulation is potentially increasing the accountability and transparency of their every day business. This bodes well for public confidence in fund and asset management.

The regulation of hedge funds, rather like the funds themselves, is a complex matter. Because of their different properties and practices, hedge funds as a group are best understood from a legal, not economic, perspective, as hedge funds typically are exempt from the registration and disclosure requirements of the financial industry. This results in no official hedge funds statistics with little outside knowledge about their financial movements. This is not helped by hedge funds being based in offshore jurisdictions, making them look even more suspicious.

One solution to this scepticism is to introduce better regulation. This would produce more accountable hedge fund managers in future and the investors would be able to simply research the background of a hedge fund manager before entrusting their money into his or her hands. The result is beneficial for both investor and hedge fund as regulation would produce a safer hedge fund market that would attract a larger number of investors.

So, though the once scorched landscape may currently look barren, with it brings re-fertilized opportunity and prosperity where public confidence and fund management accountability will fuel green shoots and provide sustainable and stable growth throughout the sector.

This debate will never end. Actively managed mutual funds are not the easiest of animals to tame. Performance relies on a series of variables that few of us could deal with on a day-to-day basis. And in their defense, I want to offer some alternative thoughts to what you might be forming as an opinion.

Not all Index Funds or their counterparts, the ETF, are created equal.

I cringe every time I hear the description of who you are as ‘the average investor’. To achieve average, you must have some comparative tool by which to determine better or best, and on the flip side, worse and worst. And of course, index funds have risen to the challenge. They pose a poor comparative tool at best. In Ruth Chang’s “Making Comparisons Count” she begins with the philosophical difference between incomparability and incommensurability.

They are in fact, one in the same. These terms are often used when describing different values. In truth though, it is not the value but items that bear value. The problem is, how do you compare alternatives when you need to make a choice only to find out that the comparison of these alternatives, say Fund A, B, and C are not really comparable at all. This would leave you with no tool to make the decision.

When comparing two funds, which is more often the case – more than that and the differences become diluted – investors unwittingly employ the Trichotomy Thesis. Ms. Chang offers the following when making a comparison, “the first must be better than the second, worse than it, or the items must be equally good”.

She also suggests that all comparisons may have an element of bidirectionality, a feature that allows some [of the mutual fund] to be better and some of it to be worse.

Comparing Likes

Index funds and the numerous ETFs or Exchange Traded Funds that plumb every corner of the invest-able marketplace with their version of indexing are not worthy comparisons for actively managed mutual funds.

Index funds essentially are trade-less platforms in theory and adjustable ones when the index creator decides to alter the make-up of the index. This keeps the costs down and fund in a passive state. When the whole of the market goes down, the index follows in lock-step. Sometimes. And this is where you compare likes. If the index falls and your index mutual funds falls more, you do not have the index you thought you did. If it costs more than next to zero, you do not have an index fund. If it costs more than $100 to gain access, it is not worth buying. (Note on this last item: Vanguard Group will charge you a fee if your fund falls below $3,000 in value and will continue to do so until the balance has regained that threshold.)

This is how you compare likes – similar products with near-identical traits and in the case of funds, underlying investments.

Since indexes are, for lack of a better term, alike, comparing actively managed funds to them is not only foolhardy, but a waste of time. No actively managed fund is identical to any other fund. Each is a species unto itself with the only similarities that they possess to other mutual funds is where they exist. Both humans and geckos share the same planet, but the comparisons more or less end right there.

The problems facing actively managed funds come from numerous directions. And most, if not all of these problems are a result of shareholder involvement.

Consider this problem specific to actively managed funds: The market goes up and the value of the companies in your portfolio does likewise, and because you have positioned your shareholder’s money well, it does better than the whole of the market or any index. Now what? Chances are, the amount of money invested in your fund will increase, coming from current investors looking to make more than they already have and from new money. And the question might seem simple enough to answer: buy more stocks. But where?

Buying more of your winners will only propel the winner’s higher. Buying an undervalued stock will also have the same effect and may, in the short-term distract your new investors when the cost of buying-in seems to be higher than they anticipated. These investors will squawk when they do not get the same returns from the previous quarter, received by the investors who were there at the beginning.

The fund has a charter and that should be followed. It is an outline of the fund’s strategy and if it is a growth fund, they must find undervalued growth stocks in order to continue to… grow. What happens when they have no real good prospects? They often drift and purchase a value play or simply begin to become an index. Both are lazy moves on the manager’s part but it is the investor who is forcing him in those directions.

The SEC does limit the amount of cash a fund can hold. So, it must be invested. This also generates costs in trading and research. Is it bad? Not if the fund has beat its peers. It is against similar type funds that we should compare actively managed funds.

Until that is done, the comparison between actively managed funds and index funds in simply incomparable.

Like all investments, mutual funds have risk. You could lose money on your investment. Depending on the fund, the value could change frequently and will fluctuate. You can lose money depending on changes in the marketplace.

Understanding risk and cost

The risks and costs associated with mutual fund investing are two important factors to consider.  Before investing in any mutual fund, it is important to obtain and read the fund’s prospectus. Mutual funds are required by law to provide prospectuses.

Prospectus is an informational document provided by each mutual fund that contains a wealth of information, including a description of the fund’s investment objectives and strategies, risks and costs, which you should understand before investing money. Most include a summary of the financial structure and operation, description of fund assets, the management structure, salaries of officers, the expenses of the offering, specific uses of the fund proceeds.

As a mutual fund investor, you will also be paying, through management expenses and commissions, for management services and for various administrative and sales costs.

Those fees and commissions reduce the return on your investment and are charged, in almost all cases, whether the fund performs well or not. Sales commissions and redemption fees can have a very significant impact on your return if you decide to redeem your mutual fund investment  in the short-term.

Most mutual funds are not guaranteed. You could lose money on your investment. The level of risk in a mutual fund depends on what it invests in. Keep in mind that all investments have risk. The key is to understand the risk involved and decide if you’re comfortable with it.

How to invest wisely in mutual funds?

1. Mutual funds are no different from any other investment. Two of the biggest mistakes people make are failing to match their goals, and failing to inquire into the performance and reputation of the fund manager. Before you choose a fund, establish your own financial goals, decide how much risk you can afford to take and consider the cost, services and track records of the mutual fund.

2. Do you need regular income or need to buy a home? or finance a project or educate your children? Your financial goals will vary, based on your age, lifestyle, financial independence, family commitments, level of income and expenses among many other factors. Therefore, the first step is to assess your needs.

3. How much risk are you willing to take? How risky is the fund? Can you only take a minimum amount of risk or are you willing to accept the fact that your investment value may fluctuate or that there may be a short term loss in order to achieve a long term potential gain.? Are you comfortable with the level of risk associated with the fund? If you have other investments, would this fund tend to increase or decrease your overall risk exposure? Remember that you can make or lose money on a mutual fund.

4. Check the fund manager’s track record over a period of time when choosing a fund.

When you invest in a mutual fund you place your money in the hands of a professional manager. The return on your investment will depend heavily on that manager’s skill and judgement.

5. Know the types of funds available, know the fund’s performance, study the fund’s fee table, consider the fund’s objective and your investment objectives, Read other financial information about funds you are considering.

6. What is the fund’s goal? Make sure the fund’s goal fits with your investment goals. Does the fund provide regular income? Does it provide the level of return you’re looking for? Does it fit with your time horizon? Does it work with your other investments?

7. Expected Return: Does the fund have the potential to provide the returns you need to meet your goals? Remember, predicting the return of any mutual fund requires that you predict the future. Past performance will tell you about the fund’s historical volatility and its performance relative to competing funds, but it is not a reliable indicator of future performance.

The return you can expect from a mutual fund is closely related to its risk. The lower the risk of the fund, the lower the return you should expect. Be realistic in your expectations.

How can you make money money from a mutual fund investment?

As a mutual fund investor, you may make money on a mutual fund if the value of its investments goes up and you sell the fund for more than you paid for it. This is called a capital gain. If you sell the fund for less than you paid for it, this is called a capital loss.

Depending on the fund, you may also receive distributions of dividends, interest, capital gains or other income the fund earns on its investments, any net increase in the value of your fund shares or units. However, unless you ask for the distributions to be paid in cash, the fund will usually reinvest them for you.

Summary

Mutual funds are an excellent first investment. Since there are thousands of mutual funds, careful examination before purchasing. Therefore, read the prospectuses and select a fund very carefully before investing.

RESOURCE BOX

Juste Gnimavo is an Infopreneur. To have more advice about no load mutual funds, or about investing generally and build Wealth wisely visit: www.howtoinvestwisely.us

If you are fed up with early redemption charges and ever increasing mutual fund management fees on top of bad-performing fund managers, read on. There is a quiet revolution going on in the no-load mutual fund industry and you, the individual investor, may benefit from it greatly.

I am referring to Exchange Traded Funds (ETFs), which have been around for years, but have grown tremendously since their inception. There are currently over 100 choices with around $10 billion in assets.

In a nutshell, an ETF is a specific kind of no-load mutual fund that you might consider to be a basket of stocks. ETFs are diversified like mutual funds, only they trade like stocks. They are cheap to trade (as low as $8.00) and don’t hit you with any short-term redemption fees. And they offer investing opportunities across the board.

ETFs track every index under the sun including the S&P 500, the Nasdaq 100, The Russell 2000 and many others. Available through any discount broker, they basically fall into one of three categories: broad-based U.S. indexes, sectors and international.

The have esoteric names such as iShares, StreetTracks, HOLDRs and SPYDRs. The difference is in the index they are tracking and the company marketing them. You will see big name companies offering them, like the American Stock Exchange, Barclay’s Global Investors, Vanguard, and State Street Global Investors.

In my newsletter I track the currently most appropriate ETFs for you to consider. For more detailed information you can visit these web sites:

www.nasdaq.com
www.amex.com
www.ishares.com

In addition to inexpensive trades and no short-term redemption fees, how else can ETFs save you money vs. no load mutual funds? One way is on their annual management fees. That fee for ETFs is in the area of 0.45% vs. 1.5% on average for no load mutual funds. The fees charged by discount broker are so low they almost can be disregarded, usually less than 0.1% of the transaction.

For example, I have used ETFs for some managed account clients during my last Buy cycle, which started on 4/29/03, and paid $27 for a $28,000 order — and that wasn’t even with the cheapest discount broker.

So, if these ETFs are so great, why hasn’t your broker or financial planner recommended them to you? Simple! Brokers, and those advisors working on commissions, don’t make money on ETFs; no commissions up front or hidden on the back end. It’s simply not in their interest to promote them.

With all the positives for the investor, there is one disadvantage, which may not be applicable to you unless you are a hot shot no load mutual fund picker. It is that in any given economic environment really super performing mutual funds can outperform the indexes, but an ETF can never outperform the index it’s tied to. You would need to look at your own investment record to know whether this is a downside for you.

Here’s a real life example from my advisory practice. My trend tracking indicator signaled a Buy on 4/29/03. Based on my momentum indicators I chose 5 no load mutual funds and 4 ETFs. Over the following 3 months my ETFs gained anywhere from +10.02% to +22.36%, while my no load mutual funds gained from +9.15% to +36.35%. If you’re fortunate enough to make a superior selection you will outperform an ETF. Of course, that presumes you picked a very successful fund as compared to only a moderately successful ETF.

A word of caution! Just because ETFs are cheap and easy to buy doesn’t mean they will guarantee you a profit. You can lose money with them just as easily as you do with no-load mutual funds. You still need to make sure you have a disciplined methodology in place to help you get into and out of the market. If you don’t, you’re gambling no matter what you invest in.

Having gotten the disclaimer out of the way, hopefully these insights into ETFs will broaden your perspective on ways you can prosper in your investments.

© Ulli G. Niemann

Source: Free Articles from ArticlesFactory.com

ABOUT THE AUTHOR : Ulli Niemann is an investment advisor and has written about methodical approaches to investing for over 10 years. Heavoided the bear market of 2000 and has helped countless people make better investment decisions. Subscribe to his free newsletter: www.successful-investment.com

Filing for personal bankruptcy means that you’ll be
protecting yourself from the creditors that you owe
money to. Bankruptcy, however, is a radical way to
achieve that protection. What bankruptcy does is take
away your debt so that you can make a fresh start when
it comes to your finances. If you’re considering filing
for bankruptcy there are certain things that you’ll need
to do so that it’s done correctly.

The very first thing that you should do is get in touch
with a lawyer who specializes in bankruptcy. You’ll
want to be working with someone who knows exactly
what is required and what steps you need to follow for
bankruptcy. When you first meet with the lawyer make
sure that you take along all of your financial papers,
including bills that you owe, a verification of your
monthly income, and statements from your bank.

You and the lawyer will need to determine exactly how
much money you owe. You’ll be including everything
that you owe so don’t leave anything out just because
you don’t want your debt load to appear too high. The
goal is to make a fresh start, so you don’t want any
forgotten debt to get left behind because you’ll still
owe it.

The lawyer will explain to you the difference between
secured debt and unsecured debt. Secured debt is debt
where your creditor will hold some type of secure
interest on what you owe until the entire amount has
been paid back. If you don’t pay back the amount owed
the creditor can take back what you’ve purchased, such
as your car. Unsecured debt is debt that isn’t secured
with interest and is not tied to property.

There are some debts that you may owe that can’t be
cleared by bankruptcy that you’ll have to pay back on
your own. This type of debt includes student loans,
child support, and any back taxes that you owe. Make
sure that the lawyer has all the information needed to
make an accurate application for bankruptcy.

Once you’ve determined all your debt you’ll be filing a
bankruptcy petition with the local courts in your area.
Your creditors will need to be contacted and notified
that you’ve filed for bankruptcy. Once you’ve filed for
bankruptcy your creditors will be unable to contact you
and won’t be able to collect any of the money that you
owe them.

Your debt will be settled by a trustee who is assigned to
your bankruptcy case. The trustee will be responsible
for paying your debt and being in contact with your
creditors. If you have any property it may be sold and
used to pay off your debt and, depending on where you
live, you may be entitled to some of the profit that is
made from the sale of your car, home, or other
property. In some cases you’ll be given an allowance
to live off for a certain period of time.

Filing for personal bankruptcy is a long and lengthy
process that will affect your financial outlook for
many years to come. Make sure that you have all the
information that you need before you decide to file for
bankruptcy.

Ben Fallison is a bankruptcy counselor and owner of
<a href=”http://www.bankruptcyat.com”>Bankruptcy At</a>,
a top Internet directory for bankruptcy information.
Get more great bankruptcy tips and tricks at
http://www.bankruptcyat.com

Personal finance is a scary subject for some people
because it conjures up all sorts of personal fears about
budgeting, managing investments and buying Vs
renting a home. Fear and anxiety are common
responses to the topic of personal finance regardless
of an individuals level of education or experience in
other areas, particularly business. As a result, many
people avoid dealing with their personal finance issues
until they are almost at crisis point and in serious credit
or debt trouble.

But before you can make any decision about your
personal finance or take any action regarding your
finances, you should obtain a firm understanding of
your current financial position. Surprisingly, many
people have only a vague idea how much income they
actually bring in each month and then how much they
actually spend each month and whether there is a
positive difference between these amounts that are in
you favor.

Your first step should be to collect all the documents that
contain information of your financial position. Then make a
list of all your assets such as real estate,
superannuation, monthly income and anything else besides.
Make another list of all your liabilities and compare the
two. Make sure that you add everything in your list
honestly. Don’t forget to add luxury items, like take out,
cosmetics, magazines and movie tickets. That should give
you a fairly accurate picture of your financial position.

While a budget is absolutely the first step to taking
charge of your personal finance, this is by no means
the only step you will need to take. You can investigate
other services in the marketplace, such as electronic
bill pay, investment counseling and seeking out hints
and tips for financial health. Electronic bill pay or BPay
as it is more commonly known, is particularly useful for
people who tend to be disorganized or who
procrastinate on keeping their bill paying in order. You
can even arrange for your bills to arrive by e-mail rather
than through snail mail. You then pay them
electronically, by direct withdrawal from your bank
account and the transaction gets processed straight
away.

Now that you have your budget and bill payment mechanism in
order, you might become courageous enough to venture into
investing some amount of your savings in other area of
personal finance like stocks and shares. The Internet would
be quite useful in this matter, as it would allow you to
explore all the different options and strategies available
to you. Useful references about investment, such as term
deposits, mutual funds, participating in share clubs
available on the Internet would help you a great deal in
making a sound investment decision.

You might like to start simple though and merely open a
short term savings deposit account so that you can deposit
from your pay check each week or month. This way, in no
time at all you will begin saving for your next goal
whether it be for a car, holiday or some minor surgery.

Samantha Flokigge is the owner and webmaster of Fuzzy
a leading Internet portal for finance information. For more finance
information and resources, be sure to visit:
http://www.fuzzyfinance.com

Budgeting money is something of a neglected necessity in the
modern world, with so many people lured into spending
regardless of their financial situation. It has become almost
the norm to spend each month more than is earned, often without
even knowing it. This has led to severe debt problems for
millions of people in the US and UK in particular, and an
encouragement and acceptance of ignorance in personal money
management.

Despite all the bad debt write offs, the banks and other
lenders are happy with the situation. They build the risk
factor of bad debts into their interest rates to ensure overall
profitability, so borrowers are paying for the collective lack
of ability to budget properly. Yet, budgeting is easy, so it is
baffling in some ways that many people are unsure how to budget
money.

Being able to budget your own money is a bit more than listing
your incomings and outgoings each month, quarter, year, or
whatever period you need to budget for. Yes, you must go
through the listing process, and then keep an eye on both sides
of the equation constantly. But there are other factors in home
budgeting, and that is what this article is about.

The Greatest Incentive

To encourage yourself to budget money is important, as without
the motivation, you will probably not budget that well. What
incentive can there be to having a home budget and sticking to
it? The answer is actually quite simple. Nobody becomes rich by
spending more, or even the same, each month than they receive.
Wealth grows from surplus; that is, the surplus left over at
the end of the month after you have completed your spending.

Recognizing this can provide you with a kick start in wanting
to learn how to budget money, and then put that learning into
practice. Once you start to see those surpluses build, your
confidence in wealth building, and incentive in budgeting, will
grow.

Keeping Detached

It is important when budgeting to maintain a detached view of
the figures. Think of yourself as a finance professional
helping a consumer set and manage a home budget, and set
yourself aside from any emotions that may seep out during a
review of your budget. Some parts of the budget can arouse
emotions, and thus distort sensible decisions. Things like
cutting out a family holiday or weekend trips, that new bike
for your son or designer outfit for your daughter, can be
emotional sparks. It is important not to allow those sparks to
set light to your well drafted budget.

Be Open

If you have a family, the household budget affects those
closest to you. The budget is a family affair, and it does help
to talk openly about it with your spouse and children who are
old enough to understand. Children may not like sacrifices, but
they will understand eventually. It can be an important part of
their education if you involve them. If you can give them some
incentive, too, such as building their own savings scheme into
the budget, then they may even start to enjoy it and truly see
the benefits.

Ignore Peer Pressures

Your personal budget is simply that, personal. It is therefore
something you should see in the context of your own
circumstances, not somebody else’s.

To budget your money effectively you really need to be able to
ignore peer pressures that may force you into unnecessary or
unwise spending. Just because your neighbour or best friend is
having two foreign holidays this year does not mean you need to
also. Just because your brother or other relative has a new home
cinema system does not mean it is essential for you too.

If you can let peer pressure run off you, like water off a
duck’s back, then you have made a big breakthrough in learning
how to budget money.

Those are just a few of the other factors that come into play
in learning how to budget at home, but they are all worth
considering as you focus on your incomings and outgoings while
home budgeting.

About The Author: This how to budget money
http://www.eliminate-credit-card-debt-now.com/HomeBudgeting.htm
article was written by Roy Thomsitt. Ease money worries. Learn
and earn your way to success.
http://www.routes-to-self-improvement.com/Su.php

Author: Michael DeVries

Are you searching for a way to true financial independence for
yourself and your family?

Aren’t we all?

Are you tired of being “trapped” in the “rat race”, working day
in and day out to earn a paycheck that just covers your
immediate and short-term expenses?

Do you feel like you just aren’t making any positive progress
in this way towards your true financial independence?

Do you, therefore, believe that there *must* be a better way?
And are you ready to take advantage of this better way when you
see it?

In these articles, I will share with you what we believe is
this “better way” and provide you with a roadmap that you may
customize to your situation and needs and use for yourself to
achieve your true financial independence as soon as possible!

In a “nut shell”, here is what we believe to be the simple
roadmap, listed in order of importance, to your financial
independence:

1) Build and grow a truly passive income stream!

2) Generate additional revenue with commercial-off-the-shelf
(COTS) products (and/or others’ services)

3) Use the money you earn from working, e.g. your “day job”
and/or business(es), to further fuel your investments in and
accelerate the returns on these investment from #1 and #2
above.

In this article, I will address Step #1, which is the one that
we feel is the critical success factor and the most important
“piece in the puzzle” to achieving and sustaining your true
financial independence as soon as possible!

We believe that the “key” to true financial independence is to
have a steady, and preferably growing, source of truly “passive
income”.

So … What is a “passive income”?

A truly passive income is any source of income wherein you
continue to make money without having to expend any further
time or effort to maintain the source or level of this income.

You may probably already see that when you have a truly passive
income that generates sufficient funds to cover your necessary
monthly expenses then you are truly financially independent,
since this means that you no longer have to perform any further
work to earn the money you need to live on, right?!

So … How do you get to a passive income that covers your
expenses?

Well, like Robert T. Kiyosaki, author of the “Rich Dad, Poor
Dad” books, T. Harv Ecker, author of “The Millionaire Mind”,
and so many other “guru’s” will tell you, the key to a truly
passive income is making Your Money Work hard for You! Rather
than you working hard for your money! Right?

So … How do you get your money working hard for you?

Well, firstly, you have to have some money that you can put to
work for yourself, right?

And unless you are lucky enough to win the lottery or happen to
inherit (or find ) a large sum of money, then the chances are
that you will have to start with what you can afford out of
what you currently have saved and/or from your earnings and
grow it from there, right?

Then, there are many, many ways in which you may earn a passive
income, from stocks and bonds, CD’s, mutual funds, money market
accounts, real estate, commodities, investing in businesses,
etc. etc., right?

And each of these has their Pro’s and their Con’s relative to
all of the rest.

Which of these is best for you and your particular needs and
situation is somewhat beyond the scope of this article, and may
be addressed in more detail in a future article, but herein the
*point* we wish to have you take away with you is …

Pick whichever passive income generation methods are best for
you, start growing your passive income stream(s) and start
getting your money working for you Today! Right?

Please see the resource box below for more information
regarding the passive income generation method(s) which we
prefer, use for ourselves, and therefore recommend.

And although I know that I just stated that we were not going
to go into a detailed analysis and comparison of each of these
passive income generation techniques, which we are not, here
are a few of the factors that you may wish to consider and
questions you may wish to answer for yourself in your selection
of which of these are the best passive income generation methods
for you, ok?

1) What are the true investment requirements?

What are the initial investment requirements? / How much money
do you have to have to get started?

What if any recurring investment requirements are there?
Do you need to continue to invest more money into this
instrument in order for it to maintain the level of passive
income generation you need?

2) What is the real net rate of return e.g. 1% a year, 10% a
year, 1% a day, etc.?

How much passive income is this technique going to generate for
you, each day / month / year, based on how much you invest in
it?

Do these earnings compound upon themselves, and if so at what
rate and frequency?

3) How accessible are the earnings generated?

Can you really access the money generated when you need it,
e.g. to pay the mortgage and the monthly bills, etc. or do you
have to wait and plan ahead to withdraw your earnings?

What do you have to do to access the earnings generated, and
how easy to do is this for you?

4) How truly passive is it?

Do you have to constantly “watch the markets” and/or your
investments to avoid losing money and/or your potential
earnings in them?

Do these investments require some continuing level of effort to
manage and/or maintain, e.g. real estate?

If so, then is this something you really want to do with your
time in order to “guard” or maintain your investments?

5) How long will it take for this method to generate the
passive income you need to cover your expenses such that you
may achieve true financial independence?

Will this generate enough for you to live on in a matter of
months or years or not until you are retirement age? This makes
a Big Difference, doesn’t it!

Will this method generate barely enough for you to get by or
will it continue to grow and provide you with added financial
security?

6) What are the risks?

Could you lose your initial investment and/or your earnings if
you aren’t vigilant or careful?

Compare the risks to the potential rewards and decide if the
risks are outweighed by the rewards and whether or not you are
willing and able to take these risks.

Your answers to each of these questions relative to the passive
income generation methods which you consider for your own
financial independence strategy and plan should help you chose
those that are right for you and your current needs and
situation at the time, right?

Again, the objective is just to chose those that are best for
you right now, and get started generating a passive income,
Today! Right?

The sooner you start generating a passive income and getting
your money working for you, the sooner and more likely you are
to achieve true financial independence as soon as possible!

In Part 2 of this series of articles, we will explore the
various ways in which you may generate additional revenue with
commercial-off-the-shelf (COTS) products (and/or others’
services) and how you may use the revenue generated from these
sales to further fuel and grow your passive income stream(s).

And then, in Part 3, of this series of articles, we will
explore how you may use the money you earn from working, e.g.
your “day job” and/or business(es), to further fuel your
investments in and accelerate the returns on these investment
from both Step 1 and Step 2 above

I hope that you have found this article helpful and beneficial
to you!

Please feel free to pass it along to your friends and family
who may also be interested in achieving their own financial
independence and whom may benefit from it.

To Your Financial Independence,

- Michael S. DeVries

About The Author: Michael S. DeVries is the Moderator of The
Virtual Consulting Discussion List
(http://www.TheVCF.com/vcdl.phtml) and Principal of The Virtual
Consulting Firm (http://www.TheVCF.com). Learn more about how
You may Make Money online with No Selling, No Recruiting, and
No Risk! at: http://www.thevcf.com/CurrencyExchange/ECEP.phtml