May 2, 2008, 6:53 am

Take The Power Back Part 2

by: The Financial Blogger    Category: Leveraging Strategies,Personal Finance
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Yesterday, I wrote about how you can be smarter with your debts as interest rates are going down the hill. The simple act of dropping the interest rates has a much bigger impact than only affecting consumer behaviors. Rate changes are often justified by market fluctuations. When markets are sliding down the banana split, somebody has to do something to keep investor in the sundae cup.

rage against the machine

Unfortunately for them, those who decided to stop eating because the ice cream was not as great as usual are the one you will miss the delicious chocolate sauce sitting at the bottom of the cup (man, I feel I’m in the middle of a Dairy Queen’s commercial!).

If you don’t have much debt, I would strongly suggest using your extra cash flow in order to setup a systematic investment strategy. This will boost your investment portfolio as you will have the possibility to buy more shares for the same price. Once it is set, you will simply have to let the power of compounding interest do its magic.

Another great thing about systematic investments is that you don’t feel market fluctuation that much. The reason is fairly simple. If you invest $500 per month and your portfolio lost $1000 last trimester, you will see your global investment increasing by $500 when you receive your statement.

Of course it is not real growth; it’s the money that you put in during 3 months! However, even though you still loss a $1000, you are not feeling it that much as the global overview seems positive. This will only help you out managing your emotion in times of high market fluctuation.

This is a right timing for leveraging strategies

If you didn’t have stroke recently, you may want to dive into the banana split cup like it’s your last meal by borrowing to invest. The next year might be a bit rough as nobody knows when the madness will stop. However, one thing is for sure; the madness will come to an end. I saw people who leverage at the beginning of 2003. A year before, we had Enron, Worldcom, Tyco and friends that were forging their financial statements. Investors were totally depressed and still, some people leveraged in 2003. Guess what, they are laughing today as they are +80%, +100% 😀

So the bottom line is that we are in a perfect moment for investing and even better for leveraging!



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