Why Index Investing is an excellent investing strategy

Index funds, at their most basic, are mutual funds that copy a specific market. For example, some index funds copy the US stock market, others the US bond market and some copy the international stock markets. There are quite a few different index funds tracking different markets all over the world but they all have the same basic goal; match their return to that particular market.

While some might believe that index investing, which is a type of passive investing, only allows someone to achieve average returns, the fact is that index investing has been shown to outperform many active investing strategies.

One of the reasons for that is simply that active investing is extremely difficult, especially for someone who isn’t a professional investor. In fact, even the majority of professional investors aren’t able to beat the market and are inconsistent in their performance at best. By using a passive investing strategy, the smaller investor is able to achieve better returns in the long run with index investing.

By simply seeking to achieve market returns, index investing is more effective than many active investment strategies. Here are 2 of the most important reasons why;

1) Index funds are well diversified. Since they invest in an entire market, diversification is guaranteed. Any financial expert worth their salt will tell you that diversification is one of the biggest keys to investing success.

2) Index funds are extremely consistent. Consistency has been shown time and again to be vitally important in the long term for investors looking for excellent returns. Investing in indexes is an easy way to stay consistent.

Yes, index investing is a passive form of investing and, in most cases, you will simply get the market return on your investments. When you consider however that most active investing strategies don’t achieve this, it makes investing in indexes a solid choice for smaller investors who are looking for excellent long-term returns.

Top Reasons to Choose an Accounting Career

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Choosing a career in accounting is like propelling oneself towards a broader world of opportunities. To be a good accounting professional one must have the aptitude for mathematics, be able to comprehend and analyse facts and figures quickly and interpret the results into business decisions and strategies.

In the last couple of decades the field of accounting has changed drastically in response to trends such as government regulations, changes in tax laws, the globalization of business and the restructuring of small and large corporations.

Here are the top four reasons that justify how accounting jobs available in Hong Kong will positively impact your career.

Increasing demand for accountants

The increasingly aggressive business climate today has amplified the demand for accounting skills across the world. Accountants are no more projected as the “stodgy nerds with big-rimmed glasses”. Accounting has grown into a robust career and accountants have grown to assume more coveted roles such as management consultants, financial experts, tax professionals and so on. The Bureau of Labor Statistics in the United States has projected an increase of 13% in accounting and related fields by 2020.

Choice of career areas

Accountants are never tied to one location or interest area. The diversity of the accounting needs in almost every country allows accountants to choose from a wide variety of job opportunities. Accountants can choose to work in an accounting firm, a corporate management firm, in the government, become an entrepreneur or work as a freelancer.

Rapid Growth

The growth tangent in an accounting career moves up quickly when compared to other fields. Graduates who start out as trainees showcasing their flair for the field move up the ladder as managers, directors and sometimes start their own accounting firm. Exclusive portals like eFinancialCareers help accountants and finance professionals to stay updated about the various new courses and trends dominating the growth path in the industry.

High compensation levels

High job security and high levels of compensation are the most often cited reasons for taking up an accounting career. A recent research has stated that top accountants in the US earn nothing less than $100,000 dollars per year.

The mobility and flexibility associated with an accounting career makes it the most sought after profession. Accounting professionals are in demand everywhere and therefore with the right kind of skill set accountants can hail a job anywhere in the world. Accounting is not everyone’s cup of tea but for the right person, it is one of the best career choices.

Best Investment Techniques for Home Loans

Investment properties have long been a tightly-kept secret for increasing one’s wealth. Now investing in property has become almost a normality, with many opting to buy a property and use it as security for another loan or just as a rental property. While an investment property may seem like a fast-track to big bucks, it’s important to be fully informed of all the financial risks associated with purchasing a property for investment purposes. In other words, it’s important to know you’re really getting the best investment and the best investment loans.

Don’t just buy any Property

The whole point about an investment property is its capital growth. If you’re looking at a particular property to purchase, be sure to think about whether it is likely to increase in value. This is one of the most important parts of the buying process, so be sure to do your market research on its location and surrounding suburbs. This research data is often made available by lenders and mortgage insurers, so try to access this information to better help you make a knowledgeable decision. Don’t let the tax deductions be the only reason you make the purchase.

Get the Right Type of Home Loan

Everyone’s investment property needs are different, and as such there is a wide variety of home loan products available. A good home loan structure is critical for ensuring your property keeps you in the green. Separate your home loan and investment property loan to ensure you maximise your tax benefits. It’s been found that interest-only loans are more suited for investors as these increase taxation benefits that can be claimed each year. It’s always best to talk to an experienced lender or mortgage broker for more in-depth information regarding different home loan options and which will provide best results for your needs.

Look into Negative Gearing

While considering an investment property, it’s best to look at all your options. Negative gearing has become increasingly popular with investors as it comes with certain tax benefits (if your property costs and expenses exceed the income you gain). This can be incredibly useful for those who earn other taxable income, however it is unadvisable to invest in property just for the taxation payoffs. Always talk to an accountant, mortgage broker or financial institution before making any decisions.

Make the Property Attractive for Potential Tenants

Remember to factor in a period where your property is likely to be empty and therefore not making any returns on rent. To help minimise these down periods, make the property as appealing as possible for potential renters. Go for basic, neutral tones and make sure the main areas of the home (the kitchen and bathroom/s) are always kept in good condition. Also make the most of your outdoor areas; a well-landscaped backyard is a huge asset for any home, while your front lawn is the first thing prospective tenants will see.

Prior to making your purchase, always be fully informed of what you’re signing into. An investment property is a long-term investment, so be sure to manage your risks. The longer you can afford to stay in the investment property market, the better your financial outcomes will be.

 

Stock Investing Myths and Truths Part 4 of 4

Welcome back and thanks for joining us for the final Part in our 4 Part blog series about investing myths. We have two final stock investing myths for you today that will shed some light on misconceptions that people have about stock investing and, hopefully, help you to avoid them yourself. So without further ado, let’s get started. Enjoy.

Myth #7: Dividend stocks don’t deliver high returns.

Many growth investors view dividend stocks as stable (which is a good thing) but also as having slower growth and thus having an inability to bring high returns. Research performed by Ned Davis Research shows that the reality is much different however, and that the total returns for dividend paying stocks are higher than for non-dividend payers.

Let’s look at the difference. Between January of 1972 and January 2013, the annualized returns for companies that initiated or increased their dividends was 9.7%. The stocks from companies that didn’t pay dividends during that same time period returned 1.8%. If we look at this from the perspective of someone who invested $1000 dollars back in 1972, it would mean a $42,000 difference in wealth for the person who invested that money into dividend paying stocks rather than non-dividend stocks.

Myth #8: It’s not difficult to beat the S&P 500.

If you listen to the vast majority of marketing done by investment companies, you’ll soon be convinced that you can beat the market. Frankly, the data suggests the opposite, showing that nearly 60% of the 258 large-cap mutual funds in AAII’s Guide to the Top Mutual Funds (AAII Journal, February 2013) did not beat the S&P 500 return rate.

Considering that these funds are run by the graduates of the very best business schools, investing professionals who use teams of analysts to do their research and analysis, it’s not really surprising.

When you further consider that the average individual investor  often buys and sells at the wrong time, as well as making other common investing errors, it becomes rather obvious why the average return achieved by an individual mutual fund investor is less than 50% of what the S&P 500 realizes.

In other words, it actually is quite difficult to beat the S&P 500.

Frankly, even the great Warren Buffett believes that investors who have the time and inclination to select and purchase individual stocks can do well over time, meaning that yes it’s possible to make money selecting individual stocks. The only way to do it correctly however is to be extremely disciplined and rational, focusing on research and avoiding the 8 Myths that we have talked about in this blog series.

We truly hope that you learned a lot during the course of this 4 Part series, and that you now have  more, and better, information than you did when you started. If you have any questions about investing in the stock market, or would like to leave some comments, please do and we’ll make sure to get back to you with any answers that you might be seeking. Thanks so much for joining us and make sure to bookmark us and come back for more excellent investing information in the future.

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