How to Avoid Major Losses in Equity Investing?

It is quite easy to fall prey to market fluctuations and make unprecedented losses in investment. Wealth building is important for everybody; it is not enough if we have sufficient money today, the future counts as well. Investing in the equity market is perhaps one of the most lucrative ways of going about this. It is a fact that there are several avenues of making money, but investing in equity is considered best among them. Following some simple tips will help you steer clear of losses and maximize your gains over the long run.

  • Never rush into an investment. Always make informed decisions. If you are looking at short term investments (where you want to retrieve your money in less than a year) then choose debt products (such as debt mutual funds). In this case, the risk is less but so are the returns.
  • If you want higher returns, then choose a long term investment such as the stock market.
  • Beware of fraudulent companies. Not all the “upcoming” companies you come across are genuine.
  • Buying high and selling low are the most commonly made mistakes. Do not Panic; in fact you just need to do the opposite.
  • Do not believe superstitions or word of mouth when it comes to investing.
  • One fundamental rule to remember: never borrow money or take a loan to invest. The surplus you have left after all your expenditures is what you should use for investing instead of splurging it unnecessarily.
  • Stock market is not a game of gambling- it is very much an investment to fulfill your financial goals
  • Avoid day trading, use your common sense and don’t get too greedy.
  • It is always advisable to seek professional help, provided they are reliable.
  • Go in for a systematic investment plan [SIP] – which helps you save regularly and with discipline.

You can definitely control your investments, but you can’t control their performance. Once you understand that, you are well on your way to wealth generation. It isn’t just about increasing the value of your finances, it is also about improving your credit score and credit records so as to be able to avail loans easily and secure your financial future.

No amount of speculation can help you get more gains, it is only a tentative calculation you will have to go by. But, the advantage is that the more patient you are and the longer you invest – you will be rewarded well and be able to achieve all your financial goals.

Intra-Family Loans – Promissory Notes – Appraisal and Valuation

Basic Information

Definition
An intra-family loan is an estate-planning technique using a promissory note. The Internal Revenue Service sets forth rules that allow family members to make loans to other family members at lower interest rates than those charged by commercial lenders, without it being deemed a gift. The lender, usually a parent or grandparent, must charge interest to avoid making a gift to the borrower, but this interest rate may be very low (below market rate), with annual payments of interest only, as contrasted to monthly principal and interest payments. The loan can be structured as a “balloon balance note”, meaning the borrower pays interest only during the term of the loan, and then repays the entire principal at the end of the term.

From a cash-flow point of view, an intra-family loan, using this structure can be beneficial for the borrower. Because it benefits the borrower, it is detrimental to the value of the lenders promissory note.

Types of Intra-Family Notes
• Loans to family members
• Installment sales to family members
• Self-canceling installment notes to family members

Benefits
Intra-family loans create wealth shifting opportunities; wealth can be shifted from one family member to another family member, usually a child or grandchild, without incurring a tax liability. If the child or grandchild can earn a greater return on the amount borrowed than the low interest rate charged on the loan, he or she can keep the excess income with no gift taxes being paid. Wealth is transferred tax-free.

The required interest rate is set by the government monthly; it is called “AFR”–Applicable Federal Interest Rate. The actual interest rate used depends on the length of the loan; all of the current AFRs are very low compared to market interest rates.

Another benefit of intra-family loans is keeping the interest dollars paid within the family rather than paid to an outside party. The loan terms can be tailored to the specific needs of the family-member borrower; the repayment timing of the loan can be tailored to suit the borrower’s needs.

Valuation and Discount Facts
The goal of “arm-length” promissory note investing is income generation and income maximization; the lower a promissory note’s interests rate, the lower its market value. The appraised value of an intra-family loan note, using the IRS’s Fair Market Value guidelines, is less than note’s unpaid balance, or its face amount. The Fair Market Value of the note is a discounted value. The reason for this discount is the “AFR”-Applicable Federal Interest Rate, is a below market interest rate. To increase that rate to a market interest rate requires applying a discount to the note’s value.

Conclusion: The (AFR) Applicable Federal Rate is a below market rate that devalues the note.

Benefits of a Fair Market Value Appraisal
You, your family, or an estate may own a private party promissory note that is not worth its face value. You may not be aware the note can provide a tax deduction. Depending on the size and the complexity of the individual note, the cost of the appraisal report will typically be between $400.00 and $1,800.00. Paying for an appraisal report may initially seem costly, but, it may result in a very meaningful tax savings. The cost of the appraisal can be viewed as an excellent investment; the tax saving can far exceeds the cost of the appraisal.

Conclusion
The value of a promissory note using the Applicable Federal Interest Rates (AFR) must be discounted to make its yield comparable to a similar promissory note having a market interest rate.

Disclaimer: Information is not advice. This article is for your information; it is not financial, legal or tax advice. The information and opinions provided are based on my own research and experience. Always consult a tax expert and valuation expert for your advice

Finding The Best Auto Loans For Bad Credit

There are options including auto loans for bad credit for individuals who need them. When you walk into a dealership to purchase a car, you may get the feeling that they are doing a service to you by even giving you the opportunity to get a loan through them. The fact is, you can and should qualify for finance if you can meet a certain criteria. And, you don’t have to obtain it through the car dealership either. For those who need help obtaining auto loans for bad credit, here are some of the things you can do to find solutions to your problem.

Get The Scoop

Your first reaction to needing a car is to head out to the dealership and start looking. It takes only seconds for a salesman to be on to you, probing you with questions about what you want, how much you can afford and what your credit is like. Here’s the bottom line. You should never start looking for a car in an auto dealership. As mentioned, these individuals are looking to make a quick dollar and will have you feeling as if you don’t qualify for anything but what they can offer. This is in fact false. More than likely, you’ll find options much better than theirs if you take the time to look for them.

Money, Here?

Instead of heading to the lot to get your financing, it makes sense to go to the people that specialize in financing options, doesn’t it? That isn’t the small little office at the dealership where you are likely to spend time waiting for them to tell you that they can give you a loan for virtually half of your paycheck. Instead, check out some other options.

You may think that you can be guaranteed to find some better rates at your bank. While they may do better than the car dealership, they too will often charge you more than you should be charged. Instead, consider the opportunity of getting the money that you need through the web. Online, you can find a number of financial institutions that specialize in lending money to those who don’t always have the best credit in the world. You will see that they can often beat the prices that you’ll get elsewhere by quite a margin.

For people who need some extra help, these internet institutions can be a saving grace. But, don’t think that just the first one you stumble upon is the only one out there. You still have options to consider. Start by getting quotes and looking for the best rate. This is easy when you do it through the web. You can easily go from one lender to the next to check out their rates. But, you may not qualify for the lowest rate that they advertise. Often, a poor score on the credit report will increase your rates. So, request quotes from several lenders to see which is the very best for you.

Getting the car that you need just shouldn’t be this hard!