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2006-04-03T11:48:00.000-07:00

Why Residual Income ( Mutual Funds )..Why its better to have residual income and not solely depend on paycheck income? Residual income by definition is income earned by an individual that are generally coming from his assets at hand. It allows aperson not to worry anymore spending 8 hours aday in the office working as his personal assets are now earning money for him.

The current practice for people in earning aliving is by getting ajob and work either on an hour or annual basis. They have salaries or paychecks that they receive usually on amonthly basis and this allows them to buy the things they wanttravel to places they want to travel or simply buy anything that their paychecks allows them to buy but the happy story ends where the money has been spent already and people have to continuously report back for work and continue on with their current jobs again and again. Their paychecks do arrive again and again but so does the effort for them to continue working for that hardearned money.

People can aspire for higher salaries by getting promoted in their current companies or they can opt to aspire for higher paying salaries with other companies. They can get ahigher educationmaybe an MBadegree and be assigned to higher management positions like asupervisor or amanager in acompany. Their salaries become higher and their lifestyles can become higher too. Stillat the end of the daythey still have to report for work the next dayget more worries and pressure from work as they still have to continuously work their way on adaily basis in order for them continuously enjoy the paychecks they are receiving that will allow them enjoy and sustain the lifestyle that they want to enjoy.

This is technically the rat race and its acycle in most peoples lives that goes on and on. The cycle of coming to work doesnt end. This is because people will always have obligations to pay the billsto put the food on the table and to simply enjoy agood weekend doesnt end too.

So how will it be possible for anybody to get out of the rat race of working 8 hours aday? How will it be possible to simply just have the money that can sustain the lifestyle one would like to have and go on with life with the expectations of still being able to receive continuous income in the bank?

The answer basically lies with being able to create wealth for oneself not solely on the basis of becoming an employee and receive apaycheck continuously but simply by being able to have income coming in the bank without necessarily working for it on an hourly basis.

This is what we call residual income. Residual incomealso what we call passive income generates income for aperson thru his assets. These assets can be in aform of realestate properties that returns rental income. Shares of stock in ablue chip company that consistently returns back dividends is also away to earn residual income. This is also true for mutual fund shares that consistently return earnings to the fund owners from the funds investments.

The process of switching from alifestyle funded by earned income from ajob to alifestyle funded by residual income generated from apersons established assets will be the challenge for anybody whos currently tied up in the rat race cycle. Being able to save enough money or capitalize on apersons talents and skills in order to bring in income consistently without him returning back to work for good is the process towards financial independence.

People who have capitalized on their talents and skills and have settled down towards financial independence are those who have maximized their residual income potential. Songwriters for example may only need to write just afew songs that will make it big on the MTV or Billboard charts that will consistently sell out record sales for alifetime will have residual income by earning royalties for every song they wrote that is played in the radio or sold in record stores.

Entrepreneurs or successful businessmen that started their business and capitalized on their business ideas that have taken off towards success can expect consistent profits from their businesses. Theyll just need to hire effective managers and people that will continue to run their businesses for them and they can just expect their businesses to grow and receive profits from their business operations.

Why residual income is better than all sources of income? Its because it allows anybody who has initially capitalized on his efforts to plant his seeds on business ideasartistic talentsor investment strategies regardless of his family backgroundeducationageor even career background. Residual income allows financial stability and freedom without the need to be back at the office the next working day again and simply enjoy the free time to devote it on their love ones or on the things that theyve always wanted to do in life.

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2006-03-19T08:07:00.000-08:00

How to Maximize Your 401k Mutual Fund Returns ( Mutual Funds )..
When it comes to 401ks there is an overabundance of sad stories. Here is one that at least has a happy endingand its getting happier all the time.
Last year (in 2002) a friend of minelets call him Jackphoned and asked if I could help him with his 401k. Jack works for a large company as Senior VP of lending and is financially pretty astute. However, when it came to his 401k mutual fund decisions, he had repeatedly made the same mistake most people were making. As a result, he saw his account drop in value substantially.
At the time we were in the midst of the 2000 bear market, which showed no sign of letting up. Jack had purchased into a Lifestyle fund because someone recommended it. By the time he finally bailed out, it cost him dearly. However, he continued to make the same mistake by reinvesting.
He checked with the 401k representative and subsequently switched to a variety of mutual funds ranging from World Stock to Domestic Hybrids, Large and Small Value as well as Growth. But nothing worked and his portfolio value headed further south.
By the time we met to discuss his 401k Jack was pretty disgusted by the canned advice he had received and the continued losses he was sustaining.
Jack knew that I had pretty much eluded the bear market of 2000 by having sold all of my clients positions on 10/13/2000. We were safely in our money market accounts weathering out the storm (see my article How we eluded the bear in 2000 at .....successful-investment.com/articles12.htm). target=new>.....successful-investment.com/articles12.htm).
Thinking about this, Jack could only shake his head because at no point in the market slide had he ever been given what I believe was the right advice. That is, no one suggested that, since we were in a bear market, he might want to step aside and remain in the safety of his money market account. So he stayed invested, hoping against the evidence all around him to find something that was not crashing. That was his mistake, and one shared by many.
The advice that he consistently and continually received was that the market was close to a bottom, stocks have toMutual Fund move up from these levels, and, my personal money losing favorite, the market cant go any lower.Mutual Fund Thats what people wanted to hear and believe. But my tracking system said otherwise, and I followed its indicatorsmuch to the delight of my clients.
Jack wanted to know how I could help. Looking at his mutual fund choices I realized that they were actually pretty decent, and he had a variety of some 13 funds. So, what was the problem and how could we solve it? In a way, the answer was simple. But people were having to get pretty beat up before they would see it.
My first step was, with Jacks permission, to log on to his 401k web site. Then I started making some adjustments. Since my trend tracking model was still in a Sell mode, I liquidated all of his positions and moved the proceeds into money market. This accomplished one thing right away: He stopped losing money. When you stop moving backward, in relation to everyone else you are moving forward!
Second, as my trend index moved into a Buy mode on April 29, 2003, I researched his funds again. Based on strong momentum figures, I invested in two of his mutual fund choices. The result was very gratifying: the funds I chose moved up around 10% in the two months after my Buy. (Other funds I had tracked and selected for other types of investment programs moved up as much as 26% in that period.)
Jacks been happy ever since. While the 10% appreciation is not as great as I was able to do with assets outside his 401k, it still confirms that the key to successful investing is methodology and discipline. Our disciplined approach relies on objective information. It disregards Wall Street hype designed to perpetuate commission-rich buy now while its low, or buy and hold strategies.
If you have been in a situation similar to Jacks, or you want to avoid being in one, find an investment advisor who bases his decisions on a measured and objective approach. That will give you the edge no matter whether the market is going up or down and will give you the greatest protection from sad stories with your 401k.
© by Ulli G. Niemann

About The Author

Ulli Niemann is an investment advisor and has written about methodical approaches to investing for over 10 years. He avoided the bear market of 2000 and has helped countless people make better investment decisions. Subscribe to his free newsletter: .....successful-investment.com target=new>www.successful-investment.com
mailto:ulli@successful-investment.com ulli@successful-investment.com

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2006-03-16T13:35:00.000-08:00

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2006-03-12T16:57:00.000-08:00

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