Investment Playground.NET

In an age of tightening credit and high gas prices, we the consumer are looking for shortcuts where we can. We want to ensure that we can still have access to credit when an emergency surfaces. Further, anywhere we can cut costs and save a few dollars are desperately sought after. Sites like bankrate.com are great for credit card reviews as they provide a holistic view of what rates are the best and where. But as I’m looking for something more detailed, I came across creditcardbest.com and was impressed with the breadth of detail this site goes into.

Before going on - I have to give this disclaimer. Paying interest on a credit card is a surefire dangerous and dumb thing to do. If you can’t afford the item - don’t buy it! If it’s of a necessity, then make sure you are disciplined enough to pay a regular amount of money, paying off your balance soon. And above all - don’t increase your balance by putting more on the card than you’re paying down. I have an alert on my Citi Premier Pass card to email me the moment my balance is over $500 - this is where it is bordering on becoming unmanageable. I know that a $500 balance, although high, can be paid off without much change in my personal habits. So keep your balances low, and check out this site review to decide which card is best for you.

Creditcardbest.com essentially just finds the top credit cards based on a myriad of options so you can find the best card for your needs. Right off the bat on the home page, you’ll find choices to decide the card that’s best for balance transfers, purchases, or those with bad credit. Clicking an option such as “bad credit” will even give you further “best choice” picks such as bad credit to get back on track cards, or low-credit cards and the like. Once you click DETAILS - you find out just what you need to know. APR, monthly/annual fees,
grace period, available rewards, flexible payment date, etc. Unfortunately there are no detailed text-based entries on the cards, which is something that I would’ve liked to see.

The site goes into detail to the point where you can select the best card for Foreign banks, best card by Issuer (Visa, MC, etc), best card by credit status, or best card by desired need (balance transfers, etc). My favorite is the best card by rewards section. Here you can actually choose what rewards you’re looking for - gas, cash back, miles, hotel rewards, and the like. So if you want to save on your gas expenses (don’t we all), you’d learn from the site that the Discover Open Road card offers 5% cash back on all gas-related purchases. Useful knowledge.

You can also apply for any of these cards right on the site. Great benefit - but I particularly don’t like this aspect. The reason is because anywhere you click on a card description will lead you to an affiliate page where you can apply. Of course, we are all trying to secure an income for ourselves, so I don’t blame the site creators. The only way to avoid this is by clicking the tiny word DETAILS under the card pic. Other than that, the site also features a great write-up on each page explaining exactly what “credit” is or something else related to the section you’re reading.

All in all - if you’re looking for a good detailed site to review your credit cards, I’d check out www.creditcardbest.com. But again - tread carefully. Credit isn’t always your best friend.

We’ve heard it millions of times before. Isn’t investing in stocks just like gambling?

Oh how I loathe this argument. Personally, I am not a gambler and I further have moral issues with gambling as a general institution. So you can imagine the frustration I feel when people compare the NYSE with the latest Belmont stakes.

Investing involves risks, just like anything else does in life. But comparing investing in solid companies at good prices to a roll-the-dice scenario is unfair and wrong at best. A gamble in the traditional sense is usually set with high stakes, you can win big all at once compared with losing little by little. Although in some traditional types of gambling, you can also lose big in one shot as well, unfortunately. But investing is quite the contrary…

The attraction that people have to the markets is driven on money and riches. It is true that the market has been the primary source for some of the world’s wealthiest people, and media attention to those people simply increases the attraction. Big shot investment bankers, private equity guys, investors, traders, hedge funds, and mutual fund managers - all are some of the world’s richest and they did indeed make their money on investing. But what is the difference between them and casino-rollers? The difference is a methodical and calculated method of finding undervalued companies at good prices and then deciding what to do with those companies after acquiring a part of them. Chance is much less a factor as much as mathematics are.

But traditional gambling throws caution to the skies and there is a chance of winning based on the will of some unknown being. “Winning,” so to speak, in investing is not the result of chance but the result of consistent and ongoing increasing earnings for a company. If a company has been able to demonstrate quarter after quarter and year after year to the Street that they have a stellar product lineup that outperforms their competitors every time - you’re bound to profit from that company’s performance. Is that really a gamble?

Sure if you just place your bets and invest in any company that you just have a “gut feeling” will rise - that can be considered a gamble. But this site and smart investors don’t ever condone that. What do we look for to avoid gambling and decrease risk? Look at the company’s annual report - read and understand what they do. Use your mind and think of what the market forces are and whether the market may be rewarding them in the coming years. Find out what the company’s expected cash flow generation is for the future, and run a discounted cash flow analysis to come to your price target. Find out what the price is today that you’re paying for the company and whether this is at a discount or at a premium - and walk away if it is the latter. What is the competition doing? Read through their reports as well. What about the global trends? Are more people or less people buying into this product/service over time? What about costs which decrease the bottom line? Are material costs rising or falling? Answer a myriad of questions like these and you’ll be sure to invest in solid companies, thereby avoiding any gamble.

Does that mean you’ll always make money? No, of course not. But if and when you do lose money - it means you were simply incorrect in your analysis, as opposed to being exposed on your gamble. The world’s best investors - Warren Buffet, John Bogle, Philip Fisher, Kirk Kerkorian, Peter Lynch - these guys took their time and understand what they were buying. Does gambling and throwing all caution to the wind result in billions of dollars? No. If you’re smart - you’ll understand that investing in the stock market takes time and skill as opposed to mindless gambles. You may be correct, or not in your picks. But you also might be wrong when you try and buy something cheap somewhere in order to sell it higher anywhere else. Sound familiar?

I know you think you’ve got the Golden Ticket. I know that you think you’re going to be set for life with this new idea you have. But let me be the bearer of realism - good ideas happen everyday.

Good ideas, or even fantastic ideas are not the key to having cash come bursting through the door. Its good execution of your oh-so-fantastic ideas.

Just about every day you might hear a friend or colleague say “They should have “, referring to a great invention that would make her life easier. But why don’t “they” have said product? Or what about “You know what would be cool?” That’s my favorite - it’s a clear way of saying ‘let me watch from the sidelines’. The only way “they” create such a “cool” service/product/idea/site is by following through on it. If 10% of my ideas surfaced into a couple thousand dollars, I’d have more money than to know what do with. But my ideas haven’t surfaced quite yet.

• “Once I save up some more cash.”
• “I’m newly married.”
• “Now’s not the time.”
• “It’s better if I wait until I’m in my forties.”
• “The economy won’t let me.”
• “I can’t afford to leave this job.”
• “But my wife is expecting.”

These are all reasons I’ve personally said. I’m sure you have your own list as well.

Enough ranting. A good idea doesn’t make you special. If you want to see how unique you and your ideas are - go visit an elementary school classroom and ask these kids what inventions they want to see when they grow up. You’ll realize that you’re not all that special after all. It’s your execution that makes you special. In order to execute properly, start with a focused and detailed plan that highlights every step that needs to be completed so your idea can turn into reality. Be detailed and provide a realistic timeline to do so. If you’re trying to start a website, for example, Step 2 isn’t going to be “Build site.” That’s not an execution plan. That’s the sign of a wanna-be entrepreneur. Step 1 is “Write out market summary section of business plan.” 2-”Define site map and all interconnected links.” 3-”Find ten capable website designer names and contact info.” 4-”Create interview guide to use for each designer interview.” You get the point.

A successful company, idea, or team isn’t about doing just what you’re told to do, or trying to cut corners and use back doors when you’re late. It’s about exceeding expectations every step of the way. That means constantly trying to improve processes. Or consistently looking for ways to help out the end-user. Or persistently finding ways to bring things to market better and faster than your competition. Execution is raw hard work - with immense rewards.

To execute your ideas and understand what you’re about to undertake, think about the market. Define the market and the sub segments. Are you in technology? If so, what sub sector, and what sub sector beyond that? What is your competitive landscape? Who are the existing prominent competitors and who are the up and coming competitors? What are they doing better than you? What are they investing in for the future growth? What is your investment required? Why? What are your ongoing expenses? What type of activities must be completed for each phase? What investments are required for each phase, and what are the possible bad things that could happen? A good Six Sigma technique that’s used in production companies is to ask why five times. We need to improve shipping - why - because customers are requesting it - why - because competitors are shipping faster - why - because those competitors are shipping at economies of scale - you understand the drift. Simply executing on “improved shipping” doesn’t answer the fundamental question in our hypothetical example. The actual execution should be on large-scale shipping to help drive down costs.

The point is - good ideas don’t account to anything. Find out how to execute your idea using a detailed process plan - and start acting on it. That’s the only way any idea will amount to anything.

As a continuation of the last post - about building a business - the benefits of being an entrepreneur are immense.  I read an article on GOBIGNETWORK.com that actually referred to it as “can you afford to NOT be an entrepreneur”. I found it an interesting take - as the benefits just make it clear sense to venture down this path.

Firstly - bear in mind that for many people - being an entrepreneur or an innovator is not what they’re wired for. Some people can go through life being very content with what they have and not have to change the world or find the next big thing in order to be happy. And God bless them. Me - I always have a new idea that’ll change the world, or at least my checking account balance. If you’re content working a mediocre position at mediocre company that pays the bills and will offer a fat payout after forty years - then more power to you and you do what makes you happy. Meanwhile, the entrepreneurs of the world will create an investment playground and risk it all to give you that framework. If you want a sense of ownership and control, read on…

Starting businesses and being a true entrepreneur is difficult, and carries high risk. Your current day to day job is manageable if not boring, and it’s guaranteed to pay you every two or four weeks. What a great setup. When you build businesses, you’re not counting on any type of a regular paycheck. Although you may be fortunate to get one - what is ideal is being able to sell your business. Getting paid out instead of a paycheck. Either selling a business at a premium given the cash flow it can produce long-term, or ideally IPOing your company and having mega millions on hand.

Another reason to go forward and start your own enterprise is to not have someone else dictate the size of your paycheck. When you have ownership in your company - its your company’s performance that dictates how well you do. Most of us can relate to busting our butt as an employee of a firm, and once the firm takes in immense profits, what do we see as a result? Not much. Our weekly paycheck stays uniform, and any bonus we get is small and distant anyway. I prefer to think that if I own 10% of my company which generates several million a year, I take home about 10% of the profits! Our salaries being employees, on the other hand, are dependent on our age and our experience. How unfair. So a 30 year old makes substantially less than a 45 year old in the same company, but their contribution to the company’s bottom line is absolutely not reflective of their salaries. Having something you own - something you create - avoids this stifling financial position and gives you power over how much you make.

Another reason that you want to go forward with your own venture is something called critical mass - or economies of scale. This is quite simple - instead of having all your income fall on only your own time and capabilities, owning your own company or small business enables you to have employees time and capability contribute to your income. There’s only so much one man or woman can do, no matter how confident you are of yourself. When you own your own establishment, your employees that YOU hire contribute directly to your income. The more employees you take on, the more you leverage economies of scale, and the bigger you can grow your business. Five employees can attack a sales coverage area of a state, perhaps. Fifteen employees can take on a larger region. Perhaps a hundred or a thousand capable employees can take on the nation, and your company’s revenue will mushroom as you all succeed in your common product or service. The better you all do, the more you take home.

As far as risk goes - of course we all understand that every investment carries risk. But I’d like to quote Donald Trump here who speaks about risk taking in his book The Art Of The Deal. If you were to go around and ask every poor person about the risks they’ve taken in life, they’ll almost all say they’ve taken none or very few, with the exception of a couple unfortunate people. But now if you go around and talk to all the ultra wealthy, or ultra free individuals of a society, and ask them about the risks they’ve taken, they all have taken plenty. Risks don’t create misfortune, they create experience, which itself leads to wealth. Fear is what creates misfortune.

So what are you waiting for?

I’ve been perusing through Forbes 2008 Billionaire List the last few days. It’s been quite depressing, but inspiring at the same time. This pipsqueak Mark Zuckerberg of Facebook is worth $1.5 billion at 23 years old. This is the primary source of how this list can be very depressing. He is the world’s youngest billionaire and still needs to pay the extra cash to rent a friggin car, and most of his net worth goes to Proactive and other skin clearing agents. What a dick.

With that out of the way - I’m seeing a pattern across these billionaire lists. Some of these guys got started in investment banks and private equity and eventually took over their firms, others inherited their billions, but what about the rest? The words “self made” pop up more often on this list than any other words.

• #32: Pierre Omidyar worth $8.9 billion - computer programmer launched online auction Ebay in 1995
• #178: Alexander Frolov of Russia, worth $5.5 billion, got a PhD in physics and math and then proceeded to build a steel company named Ervaz Group.
• #176: Henry Kravis worth $5.5 billion, got an MBA from Columbia and then teamed up with some friends to create a little firm called Kohlberg Kravis Roberts in 1976 (leveraged buyout firm). They used junk bonds to buy underperforming companies, rework balance sheets, and then sell for profit.
• #412: Aubrey McClendon worth $2.8 billion cofounded Chesapeake Energy in 1989, company now 3rd-largest natural gas producer in U.S.
• #77 Leonardo Del Vecchio worth $10 billion founded Luxottica in 1961 and started making his own eyeglasses. Luxottica now owns Sunglass Hut, LensCrafters, Ray Ban, and the Oakley line. His yacht has a 16-person dining room.
• #785 Bharat Desai worth $1.5 billion founded info-tech outsourcing firm Syntel with wife while studying for his MBA at Univ of Michigan. Quoted: “I’m genetically not wired to be an employee.”
• #297 Michael Ilitch worth $1.6 billion opened the first Little Caesar’s in 1959, branching into 40 stores within eight years.
• #114 Gary Burrell worth $3.6 billion founded Garmin in 1989 to make navigation devices for aviation, boating, using newfangled Global Positioning System
• Robert Johnson worth $1 billion founded Black Entertainment Television, selling it to Viacom for $3 billion. His story was quite simple - there was no cable entertainment targeting black American culture, so he started BET.
• Lowry Mays worth $1 billion - bought a radio station in 1972 and made it profitable, then sold it for a fortune. Continues doing this today under the name Clear Channel Communications.
• Hasib Sabbagh worth $1 billion - founded Consolidated Contractors International Company (CCC), one of the first Arab construction companies.
• Jim Thompson worth $1 billion - at 23 years old worked in Asia for $250/month in a moving company. Company went under, and within two years he founded Crown Worldwide moving company with $575 million in annual sales.

Take a look at the list yourself and you’ll see that nine out of ten times you’ll read the method of attaining billionaire status was via starting, building, founding, buying, or creating a business.

Essentially - my message is clear - find what you love and find how to turn it into a business. Afterwards - persevere and work hard and you may one day get on this list. I know you’re thinking “no way am I going to be a billionaire anytime soon.” But here’s some insipiration for you: just about NOBODY on this list expected to ever be on it.

I’ve spent some time away from blogging for the last few days. And my recent post about building a website is exactly why.

The point of this whole post is to explain to you all that this process is NOT EASY. My website and new small business is a social driven community. From the social aspect spawns the ability to purchase goods. However, the success of this site is completely dependent on achieving prime search engine optimization and being one of the top ten results under google or yahoo.

So the problems I’ve been having are essentially the fact that I don’t know enough about web design. I’m a business-man, not a computer guy. It seems to be that being a computer guy is quite a profitable business. The website that I could create using the limited HTML knowledge that I have, combined with off the shelf tools such as Dreamweaver would result in a two-bit site with limited functionality. And that’s okay for some people and some websites. If you need some basic web page built for your company - these tools will work perfect. So don’t let me deter you.

But what my site needs is moderation, interactivity, graphical appeal, and above all TOP search engine optimization. This is what I’m finding out… the price for market research is somewhere around $500. This is generally a necessary step for top-notch websites. The company building your site, such as Q-Infotech, WebMotif, or WebBizIdeas, has to run an analysis studying competitor sites and how they rank on the Internet. What keywords are top hits, what type of clicks do they get, and the like. Until you have an idea of traffic generation and keyword optimization, you can’t develop a top website which consistently shows up as the top ten results every time. Once you’ve crossed this step, next comes the actual mapping and building of the site. This is where the real dough comes into play. A very loose estimate is between $3000 and $10,000, the latter for very complicated sites with many layers of pages. Additionally, if you need a regular hired resource or moderators or webmaster, these guys aren’t cheap either. Perhaps $1000 monthly (I haven’t gotten the quote for this yet - consider it a guess).

All in all its a pretty penny. But I want to go through this exercise to explain a concept called RETURN ON INVESTMENT. It’s quite simple. What percentage return can you expect from your website/small business? An investment into the stock market can be 10% if you’re average, 20% if you’re good. Which means $5000 thrown into the market will earn you $1000 per year (if you’re good), or about $83 per month. This is your benchmark.

All investments we make need a benchmark. The easiest thing to do to make money is by throwing it into an index fund, which may make an average 10-20% annually. So if its so “easy” to make $1000 a year, why should you work so hard to make only $900 or so? For all your side-income investments, make sure to compare your returns with a benchmark level. If you’re starting a small part-time business, as I am, a return similar to the stock market is the level I consider “satisfactory”. With that said, I’ve determined that the amount of net income I must receive on this new site, assuming I spend about $5000, is $42 per month. Sounds tiny - but this figure is the borderline minimum I must make to be satisfied with my venture. And this is after all expenses.

So - one thing left to do. Find your minimum return - and achieve it.