How To Start Investing For Financial Independence, Part 2Written by Chris Anderson, PhD
Last week, we started a multi-part series about how to go from being a beginning investor to being “financially independent” in a steady and predictable way. Many, many people want to overly complicate this process so let's briefly, let's recap that discussion. The bottom line steps that I suggested in last article was: 1) Look for an opportunity that will return at least 150% in 2 yrs or less; 2) Be mentally and financially prepared if investment does not work out; 3) Have VERY good reasons why you don’t think you will lose money…… You may not make as much as expected, but you would rather not lose money at this stage. 4) Be patient. This single result should not either make or break you but it is crucial to a longer term plan. I gave an example where a hypothetical person had gone through this process and ended up with a profit of $43,000 (before taxes) and $36,000 of after tax profit. When this profit was combined with their original investment, they now had around $55,000 of operating capital for Step 2. Before we get to Step 2, let's take a step back. For a lot of people, if I told them that somebody made $43,000 on a quick investment, they would think these people had "struck it rich". Kind of like winning lottery, right? NO! In grand scheme of things, this investment will do very little to impact their financial independence. That is, it will take discipline to now use these profits to go into next investment, and then use those new profits to go into 3rd investment, etc. So, in our opinion, this first investment was merely a stepping stone towards a much bigger objective. In Step 2, most savvy investors will now realize they have just been given some extra monopoly money, or money that was not originally theirs, to work with. In investment and trading world, this is referred to as "market's money"; i.e., money that you got from market that you can then use to generate revenues above and beyond what was possible with your original investment. Quality traders can use this concept to produce huge % returns in a year while risking no more than 10% of their original portfolio. So let's say investor now decides to repeat process and buy two more preconstruction lots in a different development. In two years since first investment was made, suppose now that property has escalated. In addition, investor finds a good deal on two lots and each is $250,000 to purchase. Now, investors visits their check list to see if this makes sense: 1) Look for an opportunity that will return at least 150% in 2 yrs or less -- yes, they have reason to believe this will occur for their down payment amount; 2) Be mentally and financially prepared if investment does not work out--yes, they don't think it will happen but if they lose their entire 10% down payment, they are ok with this.
Euro Tax Haven ThreatWritten by Roger Munns
Media reporting of a new EU savings tax directive has left many people wondering whether European tax havens could soon become obselete.
The July directive requires banks throughout Europe, including low and no tax areas such as Gibraltar, Monaco, Malta and Andorra, to disclose bank account owner information to their home country’s tax authority.
But Roger Munns, Managing Director of tax haven property specialists Tribune Properties, says that some of reporting has been less than accurate. ‘The purpose behind this directive is primarily aimed at those who hold illicit funds, such as drug dealers, who will need to look outside of European banking system to place large cash deposits. The main attraction of Monaco and Andorra is zero per cent income and inheritance taxes, and this remains intact and there are no plans whatsoever to change this’.
Monaco and Andorra have long been favoured destinations for well to do, but with new technology allowing businessmen and women to run their offices from anywhere in world, operating from low tax bases has seen added interest for Europe’s primary tax havens, doubling property prices in last ten years.
Both Monaco and Andorra are outside EU, and their signing of directive voluntarily is often overlooked in media’s analysis of any effects on two small countries long term popularity.
Property prices have risen steadily over last decade, often topping ten per cent a year, but this year has seen a slow down of that increase.