Tuesday, June 17, 2008

Investing In The Stock Market To Grow Your Wealth

One of the key features of a personal finance plan is the section aimed at building wealth. And investing in the stock market can be a great way to accumulate wealth over the long term. And there are plenty of options to help you get started. You don't need to go out and buy a heap of shares straight away. In this post I'll examine some of the ways you can go about investing in the stock market.

Get A Good Adviser:

First off, find yourself a good adviser. The adviser could be a financial planner or a stock broker or even your accountant. This person must be trusted and must know you current financial situation well and understand what you future financial goals are. Finding the right person is especially important when you're just starting out. A financial planner could be useful if you're looking generally at investments as part of your overall financial plan. A stock broker is more useful when you're looking at making specific stock market investments.

Mutual Funds:

But you don't need to jump straight in. Rather than holding stock of individual companies, you may like to invest via a mutual fund. The managers of these products pool investors' funds together and buy a range of different stocks. One advantage of this approach is that you can achieve a level of diversification even if you don't have much to invest. In fact an investment in one mutual fund may gain you exposure to the stock of 60 to 80 companies or even more.
One thing to be aware of however, is that even though you're spreading the risk across different businesses and industry sectors by using a mutual fund, you are taking on specific risk associated with that mutual fund. Make sure you do your research before choosing a fund and get professional advice if need be. Another way of mitigating the specific risk is to consider buying more than one fund. It's all about eggs and baskets.

Investment Clubs:

This is something I've not yet tried but I'm quite interested in. An investment club is a group of stock market investors (or any sort of investors I guess) who pool their resources - both financial resources and brain power. The idea is that each member of the group contributes funds to the club and the members meet on a regular basis to make investment decisions.
To my way of thinking this has a couple of advantages. By putting your money together with others, you'll collectively have more buying power. This means you can diversify your investments more broadly. Instead of being able to buy stock in one company every one or two months by yourself, you may be able to make two or three purchases each month as part of a club (or even more depending on the number of members).

The other advantage is that you'll be making joint decisions. This means there will be more ideas on what stock you could buy and more people to filter out the poor ideas. Collectively you should be able put together a good stock portfolio over time.

The main disadvantage I can see is that because it's a group thing, you'll need to make sure it's a group of like minded people. Do they all share your investment philosophy? Are they long term investors or short term traders? Will their preference be value stocks or growth investing? And the more people involved, the harder it will be to gain a consensus.

Invest Regularly:

Whatever method (or methods) you choose, my preference is to invest regularly. It's like a regular savings plan. And by spreading your investment activities out over time you can avoid putting all of your money into the market at the very top. Detractors of this approach would argue that you will also avoid buying at the bottom of the cycle as well - thereby not buying as cheaply as you may have. There is some merit in this argument, however, timing the market is notoriously difficult so I'll leave the decision to you.


Tuesday, June 10, 2008

7 Ways To Save Money On Your Fuel Bill

With rising oil prices many of us are feeling the pinch at the pump. And for most of us the cost of running a car is taking up more of that monthly personal finance budget - no doubt eating into our discretionary spending. And discretionary spending is where the fun is after all. So in this post I'm going to share 7 tips to help you cut the cost of running your car.

1. Drive Less

Sounds obvious doesn't it? The less you drive, the less fuel you'll use and the more money you'll save. But how can we achieve this? We don't want to be stuck at home all of the time. The first thing you might consider is cutting out the short trips. I bet many of us could walk to the shops to pick up a few things. By not taking the car we can save money and get exercise at the same time. And if you do need to drive, consider combining trips. Run all of your errands on the one trip instead of making many trips.

2. Car Pool

And speaking of driving less, have you ever considered car pooling? This is not always practical depending on where you live and what your working hours are, but why not give it a try. If you pool with just one other person you'll cut your work travel costs in half. Get more people involved and you'll save even more money.

3. Drive More Smoothly

When you do need to drive, consider your driving habits. Do you accelerate smoothly and evenly applying gentle pressure to the accelerator? Do you move smoothly with the flow of the traffic? Or do you change back and forth between lanes - speeding up to squeeze into a gap then having to brake and slow down once you're there? Try driving more smoothly and you'll use less fuel and save money. My grandfather used to say you should try to drive as though there were an egg between the sole of your foot and the gas pedal.

4. Lighten The Load

How much junk to you cart around in the car with you? Have checked what's in the trunk? You'll be surprised how much stuff you can do without and how much fuel you'll save. So go through your car and make sure you're only carrying what's necessary.

5. Keep Your Tires Fully Inflated

Another great way to use more fuel is to drive around on under inflated tires. I'm a cyclist as well as a motorist and I can tell you it takes much more effort to pedal when there's not enough air in my tires. It's the same with your car. More air in the tires means less rolling resistance and more cash in your pocket at the end of each month.

6. Regular Servicing

A well tuned engine will use less gas as well. Make sure your car is maintained properly. Get it serviced regularly by a good mechanic to make sure the engine is running smoothly. And a well tuned engine not only uses less fuel but produces less pollution as well.

7. Buy A Smaller Car

Now this isn't something we can all do straight away. But next time you're due to upgrade your vehicle, consider a smaller model. It may go against the grain, but I suspect higher oil prices are here to stay. So If you buy a car with a smaller engine you could be laughing all the way to the bank. And if you're willing to invest a little more up front you might even consider a hybrid or something similar - again it's good for the environment.

Bonus Tip - Public Transport

7 tips sounded better than eight, so I've made this one a bonus tip. Public transport - do you use it? I know it's not practical for everybody, but it's well worth consideration. Depending on the quality and efficiency of you local transit system, you may be pleasantly surprised. And if you have to commute any sort of distance it can be a great way to catch up on your reading.

So there we have it. A whole bunch of ways to improve the way you travel. Not only will you be helping the environment in most cases, but you'll be saving money of your fuel bill as well.