Two indicators to stay out stock equity market

While everyone of us want to make the big return in stock market, sometimes, it's more advantageous to stay out the market when market become unfavorable and decline. Two great indications to signals I use are :
1) stay out market when interest rate is rising. When rate go up, business will have higher cost to expand and growth is slowed. Also, think of stock and bond competing money from investor. When bond rate increase, more people will buy bond instead of stock. This could means stock's demands is less and price tend to fall. I usually compare the interest rate in the beginning of each month and compare its with six months ago. If the current interest rate is slower, I'd be more cautious to get into stock market
2) stay out market when 6 months treasury bond is higher than 10 year treasury bond. This is called inverted yield curve. Normally, the longer the bond period, the higher interest rate investor is supposed to receive. However, in some unusual situation, short term bond rate happens to be higher than long term bond rate. This phenomena could indicate that recession is around the corner. It'd be not a bad idea to leave the money in money market or saving account until the 6months treasury bond is lower
These 2 signal applied only to U.S market. If you 're investing in international market, these 2 signal does not has much correlation and not applied. Interest rate is dropping, yield curve is normal, so I'm investing more into stock market these periods.

Full force into equity market in next 2-3months

With FED reducing the rate by 0.5%, stock market has soared last two trading days. My portfolio has took the biggest increase of the year, rising almost 7% in last two trading days. It's exciting! I 'm going to put in more capital into stock market to capture the growth. Few area I will be focusing are ETF, Value Stock, Stocks that pay dividend, and using option to turbo-charge the return. I'm aiming to make another 10% (min) gain in my overall portfolio. I will give you update from time to time.

5 tricks to reduce your tax auditing chance.

No matter you like it or not, tax will be the biggest financial burden everyone could face. While we all have to report an honest and accurate tax filing every year, it 'd be nice to reduce the chance of seeing ourselves being audited by IRS. It's stressful to deal with and likely you end up paying penalty if they found you've missed reporting some income here or there. So how do we reduce our tax auditing chance? Few weeks ago, I have a dinner with a friend who is a certified tax consultant. He share with me 5 great tricks everyone can do to reduce audited chance. Check it out
1)No rounding number. EX: You have item X want to claim as expense. If you report this item X cost you 100 dollar, IRS know you're most likely just estimating. But if you put 97.32 for the item X, IRS will believer more this is the true cost you pay
2)Get extension. The rational is IRS assigned majority of their tax auditors for the regular tax season. Only quite few limited auditors are assigned for the extension period. And therefore, your chance being picked is reduced
3)Make it as a biz. Most auditors are familiar with personal 1040, the most basic tax form employee fill out. Not all auditors (especially the newbie) are not familiar with LLC, LP, S-crop or whatever complicated business structure you've. Auditors are just human, they won't bother to look at stuff that they not know very well
4)Keep number in line with national average. EX: you bought a desk for your office, and want to claim it as itemized expense. It's pretty normal to say this cost $89 bucks, but not $890 dollar
5)Keep all your receipt. In case you do get audited, when auditor see you've such a complete receipt and record, he knows that you're most likely honest with your tax filing and move on to next less organized target.
It makes sense to me, does it make sense to you?

I finally did my cash out refinance.

Few weeks ago, I mention in on of my post I have a difficult time getting refinance of my condo. I bought this condo with 20% down pay. After few repairs and remodel, I put the condo back on market for sale, aiming to flip it in short period of time. However, market turns and demand affected quite badly by the sub prime turmoil. After 2 months of listing, I wasn't able to sell it the price I wanted. I decide to take it back and get a refinance to get back my original investment as cash so I can move on the next investment projects. It was very difficult, most bank refuse to lend me money since the house was just listed on market. The bank's underwriting guideline was very stricted. After countless attempt of visiting banks and mortgage brokers, I finally found a broker who found the Bank willing to loan me money. This is ING lending. After all the process (which take about 1 months), tonight I finally get the refi done and able to pull out most of my original investment. My interest was 6.875%, fixed for 5 yr ARM, interest plus principle payment, with 90% Loan to Value ratio, one loan. Not bad.

FXI . A simple way to capture the CHINA growth

If you ask me which stock I'd buy today to has the highest possibility growth in the next 6 months, I'd definitely tell you to consider FXI. It is an index fund designed to represent the performance of the mainland China equity market that is available to international investors. The price YTD (Yield to date) increase is just SPECULAR!40% in 9 months. A lot of people say China stocks has gone up too much, and bubble soon. But my feeling is that the party is still far from over. With strong GDP growth China experiencing, and the bullish environment in the overall economy, China stocks is continuing to grow. 529pm prediction: this growth will continue until the summer next year, which china will hold the Olympic game. After Olympic game 's over, FXI may have major price correction. So, my strategy now? Jump in and enjoy the ride!

Can a $100,000 single family house really cash flow ?

Tonight, I went to seminar presenting opportunity investing in Dallas single family house (SFH) opportunity. House price of a 3b2b is around $100,000 and the rent is around $1000 dollar a month. At first glance, this look like excellent postive cash flow producing property. This is the breakdown of the calculation
Rent: $1000
Mortgage: $525 (assume 7% interest only, 10% down pay)
Insurance: $50
Tax: $250 (assume 3% of property tax)
Total PITI Expense in this case is $825 per month
So, the positive cash flow we're looking to get is $175. Multiply it by 12 , you get annual income 2100 a month. Dividing 2100 by 10000 to calculate your return of investment (ROI), you get 21%. This seems VERY Impressive. Plus, the potential of the house price appreciation over years in future. Look like a deal!?
But wait, let's look into further, first since I will not be managing it myself, I will need to hire property manager to take care renting. 10% of the rent is deducted. This reduce your annual income to only $900 and ROI to only 9%. Well, it's still ok, at least it's still comparable to stock market average return. But, here comes the BIG BUT, there could be unexpected expense that can pop up once a while and eat up all your cash flow. EX: A roof repair cost 2500, a carpet change needed cost 750, a paint need to be repaint once a while cost 500, heater breakdown cost 300, a window issue cost 350, a foundation problem cost 3000, the list could go on and on and on.... So, I'd say the reason to buy this deal should not be purely for cash flow. The profit is too slim to see them working. We should look more into the equity build up potential as a consideration and investment objective.

Staging is a MUST

Staging is a MUST if you 're looking to get top dollar in your investment property when you're ready to sell and capture the profit. The picture you see is one of my property that my agent decorate before we put on the market. Decorating is like helping a model dress up before presenting to the world. It can turn an average house into fantatistic and high class house. Buyer will like it and hence, you have better bargain power to ask for your price. Staging does not need to be expensive. Negotitate with agent to include it as part of the listing service. Not all agent willing to do that, interview few more until you find the one. Also, check his/her pervious work to see the quality of his staging skill. If you couldn't find an agent can do a quality staging work, consider hiring a staging company to do the professional job for your property. The budget should be kept under US 1000 dollars. It will be worth.

Do you have a PLAN?

In order to build wealth tonight, we must have a PLAN. Let me break it down and I hope you could start Planning your success tonight.
P stands for PASSIONATE. We must love what we do to become successful. One reason I couldn't see myself get a promotion from my job is because I really don't like my job. So, find something you're passionate about, that you really love to do. Money will follow.
L stands for Leverage. Leverage other people's resource (time, money, skills, talent, knowledge, network, creativity, reputation, the list is really endless..) to help them help you. Communicate your vision to inspire other people to join your team to help you achieve things that would otherwise be impossible by doing it yourself. Focus on long term relationship than short term profit. No one can become successful without other people's involvement in one form or other, so use Leverage!
A stands for ACT. Take massive action no matter you're ready or not. The prefect someday will never come, Take Action now.
N stands for Never give up. Never never give up. Winner never quit, quitter never win. Learn from the mistakes we make. Mistake should help us become smarter, not weaker. The only way we lose in build wealth game is we quit, so don't quit.
What's your PLAN right now?

What should we do when we see a gain in a stock?

This is a million dollar question, give it a serious thought for this question will help you make more money in stock market. Usually there are two things people will do.
1)Sell it. But wait, what if the stock price continue to rise? We will be kicking ourselves of "selling it too early" I used to own this one stock NVDA. After I sold it for a small profit, the very next day, the stock jump over 10% in few hours trading session. I just left regret and watching it go up with no stock on hands.
2)Hold onto it. But wait, what if the stock price tumble after reaching some new high. I had an experience which the stock price go from $5 to over $18 in a short period of time. I was so ignorant, thinking the stock will hit 30 dollar soon. So, I didn't sell a single share. Well, the stock crash down after some bad news earning! Now the price is sitting around 3 bucks!
Obviously, the above 2 ways are not very intelligent ways to handle the stock when it has a gain. Now after all my bad experience, I will tell you the 3rd way to help you build wealth.
529pm: sell a portion to lock in the gain gradually. EX:
When stock has risen and reach more than 7-10% of original buying price, you should sell half of the stock to lock in your gain.
When the stock price has reached 12-15% of the original buying price, you should sell a quarter of stock to lock in more gain.
Finally, when the stock has made 20% or more advance, you should sell the remaining quarter to capture the remaining gain.
I do believe that's the best way to answer the questions on topic. What's your thought?