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Money Making Tips

Money Making Tips

What are some of the best Money Making Tips you can give from experience?

NOTE: Please do not introduce any pyramid schemes.

Tips Making Money

A way that has worked for me (albeit a slow way) is through buying investment property. If you're young you should buy something while you're still living at home, and then rent it out. If you're older it's probably better to buy something to live in yourself (with your family) and build up equity. Either way, after a couple of years you should have enough equity in your property (I.e. the difference between market value and what you owe on the place) to use it as a deposit on another house or apartment. From then on just repeat the cycle every few years. After a decade you should have around 8 to 10 properties, and be worth around $3 million (by 2006 standards).

I know people might be saying "I don't want to carry all that debt", but that's just the way it is. The banks are there for your benefit if you know how to use them. The important thing is to start building a good credit rating early so that the banks are happy to lend you their money.

So let's now make a comparison between saving cash and investing in property. Let's say you earn $1000 per week, and after food and other expenses you are able to save $100 per week. In a year you could save $5,200 (which isn't bad).

However, with property, if you bought an apartment for $300,000 the interest repayments would be around $450 per week (at around 7% interest). If you were able to rent it for $350 per week you would have to put in $100 per week to cover the shortfall (just like you would if you were saving cash). Now properties usually appreciate at anywhere between 3% to 8% per year, so if we use 5% then your property would increase in value by $15,000 per year. As you can see this is a lot better than what you could save by stashing away $100 every week.

But the good news with property is that you can often get really good deals. Assume, for example, that the you got the (above) apartment for only $240,000. By waiting for a year and getting it revalued (still at $315,000) you have just made $65,000 instead of only $15,000.

I love property. If you buy well and take care of them they will set you up for an early and comfortable retirement (if that's what you want).

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Tonester, although that is great advice and Real Estate is the way to go, I have only one problem with it... that is the fact that most people cannot look at buying their own home unless they come from a background that allows them a good handout / loan or they have a really great job. Also, many do not inherit any Real Estate either because their parents are poor. In my country one needs 10% of the value of the home in cash before they can even think about buying. Then they have to approach a bank who will give them a loan only if they are working at the level of a company manager or higher (due to the salary), so it is near impossible to look at Real Estate in the first instance.

Tips Making Money

Hey JB, you are right in many respects. Getting into property takes a lot of preparation by saving with discipline. I also admit that this is very hard for a lot of young people to do as their lifestyle tends to be counterproductive to saving (by partying, seeing live bands, etc). Once you are into property, however, it is quite easy to build from their.

OK, so let's look at another way of making money that is a lot easier to get into - buying and selling shares. "Oh no", I hear you say, but please hear me out.

Many people buy shares for the wrong reasons. One of the most common is that they see the share price of a large and successful company slowly declining over a period of time, so they think "these shares must be worth more than that - they must be a bargain so let's buy some" - WRONG! A share price is not necessarily determined by how that company is actually performing financially or how much market share they have. If the share's price is trending downwards that is bad, do not buy into it.

What you need to do is find a stock which has been slowly growing over (say) the past 12 to 24 months (this is also called Technical Analysis). If the trend is upwards, then why wouldn't it continue that way? If you can get a stock that is increasing at 15% per year isn't that a lot better than putting your money in a bank earning only 5% interest. Furthermore, interest on bank savings in taxed every year; capital gains on shares are only taxed when you sell them, and if you shop around you don't even need to sell them, but can use them as security on a home therefore avoiding tax completely.

Alternatively, once you are known to be into stocks, you may hear a rumour about a stock and how someone (either the person you are talking to or someone they know) are making good money. Go online and do some research: is it a good news company, are their financial statements looking good (you need to learn how to read these - want to know more? ask me) - this is called Fundamental Analysis.

So if you don't have much money and want to get started then try this strategy:

1. Save Money. Over a few months try to save enough money that is equal to one weeks wages (ie. if you earn $500 per week then try to save $500 over a couple of months).

2. Open an online share trading account IN YOUR LOCAL STOCKMARKET! Keep away from US shares unless you live there (for now - I'll explain why if you want to know), and put your money in that account. Make sure the account's brokerage fees are as low as possible. Some banks offer online share trading - these are a good idea to look into.

3. Look for five different stocks that you like, that are trending upwards. I would also recommend that you have a fair understanding of what business those stocks are in and how those industries work (eg. most people know what a supermarket chain does, but what about biotechnology?); stick to what you understand (for now). Try to find stocks whose share price is low enough so that you can buy 20 or more, given what I say in the next step. (If you want to know why I recommend you buy five different stocks then pls ask).

4. Buy equal proportions of each of these stocks (ie. if you have $500 buy $100 of each). You will have to pay a brokerage fee for each "buy" transaction. Make sure that after you buy them you instruct the company to pay dividends to you straight into your bank account (which you will then use to buy more share - maybe of a different stock). This normally happens via the mail, so just be patient and relax and the forms should come.

5. Decide on an exit strategy. If any of the stock prices drop by more than 20% then sell the shares straight away. If any of the stock prices increase by more than 100% then sell half of them and put them into another stock (maybe). Most times it's better to hang on the winning stocks. I could go on for hours about exit strategies - if you want to know more then please ask.

6. Wait and watch. This is what I find one of the most exiting things. Horse races are over in a couple of minutes, football games in a couple of hours, but shares take (at least) a couple of months before you can see a clear increase in profit. Share prices tend to fluctuate quite a bit from hour to hour, and day to day, but if you bought a definitely upward trending stock then you will be pleasantly surprised. If the conditions for one of your exit strategies is met then enact if - don't let emotion stop you from decisive action!

So remember:
* The trend is your friend
* Buy on the rumour and sell on the fact
* Ride the winners, cut your losses short.

I hope this helps you get started.

Tips Making Money

Tonester, I appreciate your tips and advice and your expertise in these areas. However, I have to add that most people have no idea how to implement your advice on stocks and shares. I also feel that you are not giving enough caution to folks with little or no experience in trading. You're promoting gambling, in my opinion.

Just because a stock has had consistent performance over a period of time doesn't guarantee future performance of any kind whatsoever. And borrowing against your shares to purchase anything can backfire on a person if that stock suddenly plummets. Any value you have borrowed upon will be deducted as the value of the shares slide -- you can end up *owing* money to the broker!

Disasters like floods, hurricanes, earthquakes, war; shifts in business paradigms, poor business practices, changes in management, etc. There are plenty of ways that businesses can (and do) falter and fail.

Sure, there is money to be made if you know what you're doing. There's also plenty to lose, and if a person is already in a short cash situation, putting anything at risk is risky business.

In my opinion, of course.
Roz

Money Making Tips

I agree with JB and the Real Estate you do need some sizeable amount of capital .

I also agree the Stock Market is not for eveyone and can be very difficulty making decisions to buy or sell. You basically have to surround yourself with every type of information, be it Techinical or Fundamental you also need to make you own decisions since most analyst charge for their information and are more wrong that right but they have tons of money to invest and can afford to diversify, the difference between you and them.

Find out about loans and grants provided by the Government or Private Organisations which may give you access to money you can use to start a business.

Have a Business Plan and someone said an EXIT STRATEGY

This is what I would do, you need to invest in yourself.

If you want sucess you must be willing to work hard, and harder than you have ever worked.

Either a part time job, along with you regular job and begin to save money to a point where you can actually start a business you may want to think small scale at first but a stratergy on growth must be part of you business plan, since not everyone is lucky to have a business which grows itself. So if you are more interested in hanging out and parting well this may not be the right approch.

You can also invest into a hobbie or skill which interest you which has some benefit of money making. Such as DJing, Baking, cooking, arts, are all great hobbies which can make money but you have to be good at what it is you are doing, also creativity helps. If you can give a new look to something old is good.

You also must be motivated and follow through with whatever it is you want to do, and even if you fail you must keep trying but also keep track of your mistake you have made and do not repeat. PLAN and Have and EXIT STRATEGY

Always have a plan B and never invest what you cannot afford to loose.

Edited: Trini808 on 3rd Nov, 2006 - 10:07pm

Money Making Tips

Thank you Roz (Farseer) and Trini808 for your thoughts on my comments.

My experience has been that life is all about probability and risk. What is the probability that some "thing" will occur and what am I prepared to risk that it will. Obviously the more that you are prepared to risk the greater probability we seek for a successful outcome. The only problem is that the "bigger outcomes" usually require greater risk.

For example, if you want to put your savings in a long term bank deposit then you will get a 99.99% probability that you will receive your interest and the end of the period. However, banks only pay low rates of interest on savings (around 5% at the moment in a lot of countries). So if you're happy with a small return then sure, go ahead and deposit your money in a bank. You can deposit $5,000 and pretty be sure that you wont lose a cent. In fact you'll surely make yourself a $250 profit at the end of the year (on which you will have to pay tax between).

Alternatively, if you want really big returns then why not by a lottery ticket? For a $1 "investment" you could get a return of a 1,000,000%. Of course the probability of getting a successful outcome is ridiculously low (1 chance in 8,145,060 in a 6/45 lottery) so you would be foolish to spend all of your $5,000 savings in lottery tickets.

So how do we address Brandon's question:

Well, my experience has been that both property and shares have made me a lot of money without having to work too hard. I don't have time to start businesses in my spare time - I want to enjoy my life and my family. I want to work smarter, not harder.

The most salient point in this whole thing is the question of risk. By doing some research and due diligence you can substantially reduce your risk. For example, if I was to buy shares in a mining company there is a lot that I would like to know about the company - its directors, its current financial position, where its mines are, what commodities (e.g. metals, etc) it extracts, and so on - before I part with a single cent of my money. By getting an education about that company I reduce the risk of buying shares in that company.

In step three (3) of my strategy I said look at five stocks, and buy equal amounts (money value, not number of shares) of each of them (e.g. $1,000 in each). This idea is designed to further reduce the risk by not putting all your "eggs in one basket", so to speak. You select five stocks that all look good, both fundamentally and technically, and then you take a position in them. Now probability dictates (as Roz so rightly pointed out) that at least one of those stocks may go really bad and collapse - hence you lose $1,000. Two of those companies may do nothing and your 2 x $1,000 investments don't grow at all. But the other two should do OK, one of which might do exceptionally well. So let's show this more graphically (assuming this takes place over a one year period: EOY = End Of Year):

Stock A. Buy for $1,000 - EOY Value $0 (lose everything)
Stock B. Buy for $1,000 - EOY Value $1,000 (make nothing, lose nothing)
Stock C. Buy for $1,000 - EOY Value $1,000 (make nothing, lose nothing)
Stock D. Buy for $1,000 - EOY Value $1,500 (make a 50% return)
Stock E. Buy for $1,000 - EOY Value $4,000 (make a 400% return)

So my net result is that I lose $1,000 but I gain $3,500, which is equal to a $2,500, or 50%, return on my initial $5,000 investment. It's NOT gambling as I took the time to research each of those five stocks in great depth and was comfortable with the risk that I was taking. I only had to spend around 8 hours on each stock in the decision to buy it, and around 1 hour per week in the monitoring of it - so I didn't really have to work harder. (between, if I had implemented my exit strategy (see step 3 in my original posting) I would have only lost $200, thus my return would actually have been $3,300, or 66%). Also, I don't actually need to sell my shares so that I do not have to pay tax on the profits - although I may dump the non-performers for new stock selections.

One final comment in response to Roz's comment:

Sure - these things happen. I'm not going to deny that. But natural disasters are just a part of life and I'm not going to stop taking risks just because some (low probability) Act-of-God might happen. In regards to business practices, etc - if you do your research and take multiple stocks then the risk is sufficiently reduced to give me enough confidence to give it a go. There are no guarantees in life, but if you want to wrap yourself in cotton wool and work 80 hours per week, then be my guest.

Edited: Tonester on 13th Nov, 2006 - 3:55am

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