The Online Investing AI Blog

Automated Trading seems to be gaining popularity on a daily basis. One common question is,

Can Automated Trading be used to generate passive income?

The answer is a resounding yes. However, that does not mean that you can set it and forget it.

Many people meet with a financial advisor, buy some mutual funds, and then forget about their entire investment portfolio for months or years. This is not a good idea.

Millions of would-be retirees got an unpleasant surprise when they checked their retirement accounts three months ago. It’s true that the markets have come back quite a bit in the last few months, but it does not mean that an important lesson can be learned: we need to manage and keep track of our investments. They cannot be offloaded and forgotten about like housework.

I saw a news show that featured an middle aged woman crying because she had lost 50% of her life savings. She lamented, “I was afraid to check my statements so I didn’t open them. But then when I finally checked, they were down by half.”

This is not a good strategy for retirement. If we are going to be successful money managers and retire wealthy, we need to actively manage our finances, and our retirement accounts.

And Automated Trading systems require monitoring in the exact same way. It does not take a lot of time or effort. Just a few minutes per day is probably enough. The important part is to commit to managing our finances so that we can achieve the financial freedom that we have earned.

This is true of nearly all forms of passive income. Contrary to popular belief, most passive income is not 100% passive. It normally takes at least a few hours per month to manage most forms of passive income. This includes mutual and index funds, real estate and stocks. We need to monitor what is going on with our investment, and make sure that we are receiving the income that we are supposed to receive.

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Many investors have breathed a sigh of relief because the stock market has made a significant rebound. But there is one small problem.

What is driving the massive rally of the last few months?

Consider the graph below:

This is a chart of the NASDAQ leading up to the crash of 2000. It’s been nearly 10 years now, so most people have forgotten what happened. Perhaps it is precisely that we forget that causes history to repeat itself.

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Investing, Success, US Economy depression, indexes, NASDAQ, real estate, recession, stock market, tech boom

During a recent talk with a real estate lawyer, I received some surprising news.

According to the lawyer, with interest rates at historic lows, business has been buzzing. In fact, he and his assistants are working seven days a week and the closings are still backlogged. That’s the good news.

Here’s the bad: the industry went through massive layoffs during the recent downturn. Some former employees have drifted into new jobs and it’s almost impossible to re-train new workers in time.

And, it’s not just refinancing (that I was in the midst of). About 60 percent of the closings are acquisitions.

This is more good news, right?

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Investing can be a complex art, with many nuances and possibilities. You can invest in real estate, stocks, currencies, businesses and oil and gas. There are as many ways to invest as there are people selling investments. How can you know what will work for you?

As with most things in life, we really don’t know until we try. Personally, I have invested in stocks, options, real estate, oil and gas, and businesses. Each one is different and has its pros and cons. Real estate is quite simple, and does not require a lot of time and effort over the long term. But it also can be problematic because you have to deal with tenants and fix things. For some people, real estate requires far too much maintenance and therefore not right for them.

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As people gain investing experience, they will have some wins and some losses. If they are buying stocks, they will have some trades that made money and others that lost money. If they bought real estate, they have some properties that are profitable and problem-free, and others that have little cash flow but provide an endless supply of headaches and problems.

Once people have some wins on their record they tend to do something very strange. Often they choose not to do what has worked for them in the past. Sound crazy? It is. But it is also part of human nature. We tend to get bored easily, and doing the same thing over and over, eating the same food each meal, and cooking the same recipe each day is a great way to become incredibly bored. So, people like to experiment and try new ideas and strategies.

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Business Strategy, Investing, Money, Success do what works, Investing, mistakes, Money, real estate, stocks, Success

It might be a tough sell today, but the fact remains, most people gain wealth through real estate.

One way to earn wealth in the real estate business–without losing your day job–is to buy a property and sell it at a higher price. Another way is to buy a home and rent it out.

Real estate is still a good way to make money on a part-time basis, for a couple reasons. You can gradually attain wealth. Understanding the real estate market isn’t that difficult. Researching opportunities, similarly, isn’t that time consuming, either.

And if you’re good with your hands (and maybe a wrench and screw driver) you can eliminate much of the costs associated with home owning and renting.

A recent drop in home prices and increase in foreclosures has people less certain about all of this, though. They fear that the days where you can buy a property, make some money, and then sell it for a higher price are gone forever.

But, is this a foregone conclusion?

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One of the things that many investors don’t consider is their level of risk. Each investment deal has a risk associated with it, and to some degree that risk can be measured. Sometimes people invest without knowing what they are doing, and these people typically do not consider risk. And sometimes people invest because it is exciting, and these investors often ignore their risk level as well.

Risk can be measured in different ways, depending on the particular investment. Sometimes just asking, “What’s the worst that can happen?” is a good start. And then, “What are the chances that this will happen?” Although these questions do not have precise answers, they begin to quantify the risk involved. Even if we do not arrive at an exact number, just going through the process and considering the risks is important.

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Entrepreneurs are trail-blazers, right?

They risk all to gain all. Forsaking all the traditional routes to wealth, they carve out new roads through the solid rock mountains of market opposition.

Right?

Well, if you read some of the bios of famous startup leaders, you’ll notice they spent their times in the nine-to-five trenches, too, while they were building their businesses.

Actually, if you’re not ready to go into business for yourself, or aren’t quite where you need to be to take your start-up live, there is a solution. You can be what Early to Rise calls a Chicken Entrepreneur.

Hey, it’s not as mean as it sounds. It simply means you can hold onto your regular job while you explore other entrepreneurial options part-time.

Here are a few ways you can start:

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In this country, and perhaps throughout the world, there are people who love to give advice. Unfortunately it seems that most of the people who give out a lot of advice have no experience in what they are talking about. Why? Because it is very easy to appear knowledgeable about a subject by repeating the same things that everyone else says. I suppose it’s part of being human. Being “right” is often the same thing as repeating commonly held beliefs.

Investing advice is no exception. Many people love to give out investing advice, and often they have zero investing experience. I was at a family dinner and mentioned purchasing rental property. A family member said, “Oh, don’t do that. You’ll get calls in the middle of the night about a stopped up toilet!”

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Most people who start out investing are interested in learning about specific strategies. They learn about the details of rates of return, and the differences between mutual funds and buying individual stocks. They find out about the requirements for getting a mortgage, and how to deal with the issues related to rental property.

There is one small challenge to this approach. Before we can succeed with any of these individual strategies we have to have the right mindset. It’s like planning a long road trip before making sure our car will make it. Before we get in our car and start driving, we need to make sure that there is enough oil and coolant, and that the brakes are OK. We wouldn’t want to get stuck in the middle of the desert because there wasn’t enough coolant.

Yet this is exactly what most people do when they start investing. Without having the right mindset, we just start out by buying stocks or mutual funds. The problem is that our mindset is the ultimate source of all of our decisions. We will not be able to successfully make investment decisions until we set our brains up for financial success.

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