Wealth Building Lessons

In our everyday lives we come across investment opportunities very often. Unfortunately most people are blind to them. In his book, One Up On Wall Street : How To Use What You Already Know To Make Money In The Market , Peter Lynch mentioned how easy it was to come across companies that were extremely popular and were doing well.

While I haven’t had any luck finding the next Gap or company that owns Pokemon, I have had decent luck identifying different investments.

Some of the best investment ideas are in your own newspaper!

I just read a report that Morgan Stanley is buying 13 hotels in Japan. They have amongst the brightest minds in the worlds and some of the deepest pockets and have been acquiring properties there for the past year. That definitely tells me that Japan is a good place to invest in right now.

We’re currently experiencing the coldest winter in the mid-western states since 1904. There have been reports of massive fruit crop failures everywhere.

If you understood how the futures market works and how the orange juice production is correlated to the weather, you would know how this might lead to a spike in price of OJ futures. I don’t understand the exact correlation yet, but I know it does exist. If you’d like more info on this, you should read Trading Spreads and Seasonals.

This cold spring also means refineries won’t have enough time to switch from producing heating oil to gasoline. Which means gas is going to be in short supply this summer. And as the countries reserves fall, both oil and gas prices will probably rise. (Or atleast they won’t drop back down to $49/barrel again). If you believe this is a possibility you can invest in companies that profit from high oil prices like Exxon or better still go directly to the source and invest in Canadian Royalty Trusts or US-based Master Lease Partnerships. (Or companies like Tortoise Energy [TYY] that invest in MLPs).

Or even invest in Direct Oil & Gas Drilling programs to take advantage of the tremendous tax benefits.

The Dollar has slid 60% against the Euro over the past several years and if you think this trend is going to continue, you can invest in Everbank’s Currency CDs or even buy Gold. Gold usually has a negative correlation with the strength of the Dollar and acts as a hedge against a depreciating currency. You can either buy the gold coin or invest in a gold ETF like GLD. The Gold mining stocks’ ETF (GDX) would also do well in this scenario.

Sometimes however, if a newspaper or a magazine comes out and specifically identifies a specific sector or stock as a great investment, its probably too late.

An example of this is Californian real estate. NAR’s head cheerleader David Lereah came out with a book called ‘Are You Missing The Real Estate Boom’. (Co-incidentally, it coincided with the peak in Californian house prices). Around the same time, a slew of TV shows like ‘Flip That House’ started airing. You couldn’t watch a movie or go to the grocery store in Southern California without over-hearing someone mention that they quit their job to become a real estate agent or a mortgage broker. Summer of 2005 was definitely the peak in this market.

Similarly, when the popular media (and common sentiment) mentions something as the worst possible investment on the planet, its probably a good time to buy.

In October 2004, the Deseret Times out of Salt Lake City had a story on how Nordstrom might move out of a local mall and how it would spell the death knell for the local economy. Doesn’t that sound like a bit an exaggeration? Well, as it so happened, that was actually the bottom of the market and that same month, real estate prices which had been flat for several years started picking up. That was also the time I started buying in Salt Lake City. Despite my real estate agent’s reservations, Salt Lake City saw a 20% jump in home prices in 2006.

If you educate yourselves on investing psychology and keep your mind open to investment ideas, you’ll find good ideas everywhere. It won’t happen overnight but if you start today, you’ll be an expert in a few years.

Related Products:

1. Investment Madness: How Psychology Affects Your Investing…And What To Do About It

2. Extraordinary Popular Delusions and the Madness of Crowds

3. One Up On Wall Street : How To Use What You Already Know To Make Money In The Market

4. Learn to Earn: A Beginner’s Guide to the Basics of Investing (Audio CD)

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