I have a lot of ideas, therefore I will be rich.

Heard that before? I know many people who think this way. Not many of them are rich – most even have a lot of financial problems. There must be something wrong with that point of view then. But aren’t ideas the most valuable thing in the world, aren’t ideas what drives the progress, technology and innovation? I think yes, in most cases good ideas power the progress. But only some ideas do it, while most go into the trash can.

Photo by Felipe Morin at Flickr

Ideas are cheap

I can generate at least ten promising business ideas per month and maybe another ten ideas how to improve the world or our everyday life (it takes a while to turn these into business ideas). I know people who can generate a lot more ideas than that. I am sure you can also come up with that many or even more ideas – most people who try, can do it. If there are only a million people in the world who can generate ideas with such speed, that means ten million business ideas per month.

It’s wrong to think that ideas are something too valuable. They are cheap. Every intellectual product that can be generated in such quantities is cheap. And it is easy to see the reason behind this – most ideas don’t produce real value, because they never get implemented. You may have the greatest idea in the word but if you don’t implement it, it probably costs $0.02.

So, implementation is what creates the value of the ideas.

How To Appraise Ideas

If you want to invest in ideas, you must tell the good ones from the bad ones. You need to appraise the value of the ideas – and more important, the value of their future implementation. It’s easy to think that an idea is great if you look only at the final outcome that it could produce some day. But there is very little use of such appraisal if you don’t take in mind its implementation.

Implementation simply means how you can turn the idea into something real.

The good ideas are the ideas that can be implemented with reasonable resources and that you know how to implement. You may not need to know all the technical details of the idea’s implementation, but you must know well who can take care for them and how much resources is it going to take.

So, let’s say for example you have the idea to create a flying car. When considering the final outcome, it seems the idea is quite valuable. A flying car must interest a lot of people and probably will sell well. Of course, “probably” is not the best thing to rely on, but at this very early stage of brainstorming it is ok to rely on your guesswork. The idea of a flying car would be great if you could implement it. Maybe you are not an engineer and cannot invent it yourself. Do you know who could do it, how much is it going to cost and how much time is it going to take? Are you sure there is not someone else who is working on the same idea and could implement it faster than you?

The real value of the idea is an equation. On the left side you have the wealth/profits that the idea can generate. On the right side you have the costs of it’s implementation. The more you have at left, the better the idea is.

But even this appraisal is way too simple. Because you need also to consider the probability to turn the business idea into action and to do it better and faster than the competition. So finally the very simplified equation looks like this:

Value = (Possible profit value * Probability to be implemented) – Costs of implementation

If you play with few numbers in the above equation, you will see that the probability factor plays much bigger role in estimating the idea value rather than the costs of implementation.

Let’s get for example a software project that could bring you a million dollars in sales. If you hire a cheap team to develop it, the chances for successful idea implementation yet on the development stage are quite poor. This means that no matter how great the idea is, you will probably not see any profits. On the other hand, hiring a more experienced and talented team will cost you more, but will increase the chances of success and you may actually see the profits.

However, if you simply can not afford to hire the expensive team, then you have only the first option. Which makes the idea much less valuable. If exactly the same idea was owned by someone who could afford hiring a good team, it would have bigger value.

How To Implement Ideas

Since implementation of ideas is so valuable, you must work much harder on your skills for implementing ideas rather than on the skill for generating ideas.

What does it actually take to implement an idea? Said simply, it requires action. When you appraise an idea and feel it could turn into something real, just start action as soon as possible. The first action could be as simple as creating a word document which actually describes the idea. Once you write it down and save the file, you are one step further to actually doing something.

Next good steps are writing a business plan and writing an action plan. An action plan is simply a list of future actions and rough timelines showing when you are going to take them. The action plan will help you get organized and disciplined and actually implement the idea.

Selling Ideas

Unfortunately we cannot afford implementing all the valuable ideas we have. I know for sure that I cannot do it – because I don’t have neither the money nor the time to do it. So if I have ten good ideas, all of them are valuable, and I can implement each of them individually, I still cannot implement them all. This is sad, because we have to let some good ideas die.

One way to solve this problem is to actually try to sell your ideas. Selling an idea in its very first stage makes no sense at all – because if someone wants to buy your idea, they would need first to hear it.

The ideas can be sold at a later stage – at least when there is some business plan created and hopefully even some part of the implementation started. Usually you will not be able to sell your idea in the normal way – like selling some item. Instead of that, selling an idea is done in the form of funding – think about venture capital and angel investing. What angel investors and venture capitalists do is to invest in ideas at the early stages of implementation. They will not be able to give you time, but by giving you money they will let you hire people who can take care for the implementation of your idea.

So usually you can profit from idea by starting a startup. With a promising startup you can seek early stage funding and at a later moment get bought. This is probably the shortest way to selling an idea that you don’t want or can afford to fully develop yourself.

I was on two week visit in South India (a very nice place). That’s my second travel in this area, but now for the first time I paid special attention to the financial habits of the people there. The majority of Indian people have never been too rich but seem to manage living a healthy and happy life. I’ll share few of the most probable “secrets” that they use for that.

People in South India eat rice

I know many frugal bloggers suggest eating more rice since it is a cheap and healthy food. People here take it to the extreme – they eat rice every day. The typical meal of the locals consists of plain rice, gravies and chillies. In the casual restaurants it’s called exactly like that – just “meal”. The people are given a big plate and one guy walks around the tables and gives rice to everyone who has paid for a “meal”. You can get as much rice as you want. The price of the meal in most places is 35 rupees (currently $0.8).
I was not very keen on their everyday meal, but due to the huge variety of other rice based meals I was able to eat rice each other day without getting bored. In most cheap restaurants you’ll find all kinds of rice:

• Fried rice which can be fried with chicken, egg, ginger, vegetables, spinach, fish or prowns
• “Biryani” rice – a spicy rice meal usually veg or with whole boiled eggs, chicken, mutton, paneer (Indian cheese) or fish
• Typical Indian rice – ghee rice, curd rice etc…

Just plain boiled rice is sold everywhere on kiosks so you can get it home and use with your own gravies. In the stores people can find 20kg sacks of rice for about 700 rupees ($16-$17).

Now on the video below you can see how they cook the rice in one “dhaba” (a cheap restaurant).

People eat mostly vegetarian food

A large part of Indian population are vegetarians. Usually their diet includes diary products, but there are many vegans as well. On top of that even the non-vegetarian eating people usually eat the typical veg “meal” described above at least once per day. So the overall consumption of meat is not high at all. Obviously along with the low food price that makes feeding a typical Indian family an affordable task even for these who receive really low income.

It seems that this diet is quite healthy because you rare see overweight people.

The families live together

The typical Indian family does not consist just of a couple and their kids. Many Indians live together with their parents and their brother’s and sister’s families. This means that most homes are inhabited by 8-10 people.

Most of us may not feel comfortable living like that, so am not advocating this. But it’s yet another way for Indians to cut their cost of living. However the primary reason for them doing it is not to save money. It’s just that their culture keeps healthy relations within the family members which use to support each other.

People ride bikes

One motor bike usually can go 50km (31 miles) with a litter of fuel. This is 3 or more times better than what most cars do. People in India ride motor bikes everywhere and as you can imagine their transportation costs are much lower than yours if you drive a car.

Here is a typical parking in Hyderabad, South India

Don’t forget that one bike can transport two people (well, in India it can handle a lot more than that), so even if you are carpooling you are not as frugal in transportation as them. Their use of bikes also reduces the traffic jams although that doesn’t seem to help enough at all. Watch this short video to get more idea how their roads look like:

Indians just live simple

Along with all that was said above, Indians just live simple life without feeling it as frugal. They just don’t seem to need much more than their everyday rice, “tiffins”, a piece of banana, a tap water (you should never drink it unless you are an Indian too), and a place to sleep. When we were going to the supermarket together with some Indians, I noticed they don’t have our European habit to hang around the rows and wonder what else to buy. Most of them just go inside, buy whatever they have planned to buy, pay and go out. Most of them don’t even go to the supermarkets often that’s why most of the stores there are much smaller and supplied with less variety of products than what we are used to see in Europe and USA.

If that draws too rural picture in your imagination, I need to add that they go to the malls and movies from time to time, play PC games etc. normal things that people in the West do. But most Indians don’t go to bars or expensive restaurants and don’t drink alcohol which of course is another way to save a lot of money.

The lifestyle of people in India may or may not fully suit you but nevertheless you can learn from them to manage a simpler life with less stress, less consumption and, it seems that, more joy.

Do you know what is the wholly grail of investing and financial freedom? It’s the thing that everyone is seeking and very few are able to find and obtain. Well, except the owners of few million scam websites which offer you the secrets to it for only $97 (if they can be believed). The wholly grail is automated income of course. Who refuses to make money while lying on the beach? (Not me for sure).

Photo by Dan Pupek at Flickr

Unless you believe the $97-super-secret-wonder-e-books, creating something that brings an automated income is hard. It requires a lot of work, ideas and/or money. Most people never obtain an automated income generator in their life so I can not promise that you’ll do it either. But I have at least some good news – there are no hidden secrets of automated income (not even the ones that you get for 97 bucks). The essential elements of an automated income generator are well known and they are just five.

You Need A System

The key characteristic of any asset that brings automated income is that it is a system that you are not a part of. A system is something that runs on its own and requires (almost) no maintenance. If we get one grocery shop as an example, it is a system. It has key elements like selling, supplying with grocery, accounting etc. If you sell yourself in your shop, or you keep the accounting yourself, or you supply it yourself or even if you plan yourself what to do with the shop each and every month, you are a part of the system. You may own the shop, but you don’t own the system. Such a shop is not an automated income generator.

People often talk about making money online with blogs and websites as an automated income. I’ll also talk about websites because this is what I know best. The web based business can easier be turned into an automated income generator than other business because it runs on software. Each software essentially is a system and once created bug free it runs without any maintenance. The software does not amortize (at least not physically). It can work over and over again literally forever. If you own a site which generates residual income entirely through its software, you have a perfect system and a real automated income generator.

Sounds great but most websites are not real systems. This blog is not a system because I have to write in it if I want it to work. Even if you own a site that makes income directly from its software, you may still be a part of the system – because eventually you work on promoting the site all the time.

To own an automated income generator you need to own a real system which runs without you. This may mean you need to own machines, software, licenses, patents, buildings and have people who take care for everything.

Your Asset Must Bring Some Real Value To People

This rule is valid for all spheres of business. If you want to make money you must provide real value to people. Of course you can make money by lying and stealing or take it by force, but that rare leads to good long term outcome.

So, if you want to create an automated income generator, you need to provide some real value. If I get back to the websites example, a good programmer can easily create a fully automated system. For example he or she can code a web based website creator for other people to use. He could also write an automated script to spam emails, search engines and directories so his service gets automated promotion. This is a real system owned by the programmer, but it hardly is going to produce automated income. Spamming does not work well as a promotion method because it does not provide real value to the people who are spammed. The website creator probably will not sell well, because there are thousands of them.

However if you own a second home and let it out for rent, you are providing value to those who rent it, because they need a home. By the way your second home is also a system, because it doesn’t really require you to do almost anything. That’s why real estate investing can really bring an automated income (If you wonder why does it usually suck then, it’s because its profit ratio is usually too low).

Your Asset Must Be Unique Or Hard To Duplicate

If you own an automated income generator that everyone can build themselves in 5 minutes, your automated income will stop in 5 days or so. No one will pay you for something that they can do themselves easy and quick. Even if there are people who would pay for it, there will be even more who will do the same thing like you and give it out for lower price.

If you write a good book or e-book you can sell it many times. A good book and a contract with a publishing house is a good system because the book is sold over and over and brings you income. Once written you don’t need to do anything (assuming your publishing house does the promotion). But if writing a good book was easy, everyone would take your idea and write a similar book. Then your automated income would decrease and eventually stop.

You Need Timeless System Not Tied To Specific Events

Let’s talk about websites again. With some creativity or sense of humor you could create very successful blog post or website discussing Barak Obama’s latest speech (whichever it is). If your articles hit the front page of Digg and similar sites, you can eventually make good money by selling advertising. The problems is that Obama’s speech will be interesting topic just for a while. Few days later people will move to the next thing and your income will stop.

On the other hand take the article that you are reading right now. It will be useful one year later, 5 years later and probably even 25 years later. The ideas and concepts shared here are not related to any specific events – they will be valid as long as business exists and works in the way we know now. So if I was making money with this article now, I could make money with the same article 25 years later.

If you create a system solving the traffic jam in Paris today, you can make some good money. But if you create a system generic enough to solve the traffic in Paris in any day, you can have a real automated income generator.

An automated income generator should not depend on actual burning problems of the day. It should solve timeless problems.

You Need To Protect Your System

Finally, your system for automated income must be well protected. If someone steals it, you no longer will be able to use it. What does that mean in practice? If your system is based on software, you need to protect the source code so no one else can reproduce it. Fortunately there is a law protecting authorship all over the world which takes care for that in most cases. But you must protect your business system from easy duplication as there is no law to do it for you.

So, if you dream about receiving automated income, you’ll need to invest plenty of creativity, money, time and hard work. The ideal automated income generator is a system that you own but you are not a part of. This system must provide some real value to the other people – otherwise no one will give you money for what you offer. Your automated income generator must be unique or hard to duplicate, otherwise the market will get over saturated in short time. It has to produce timeless value not related to topical events. Finally, you need to protect your income generator well, so people can’t steal it from you.

All of this may sound like too much of a hassle, but the outcome is well worth it. And if you wonder if such automated income generators exists – yes, they do. The companies whose owners don’t work in them, many intellectual products, some web based businesses, unique properties are all automated income generators. Do you own or plan to develop/obtain one for yourself?

Do you trade forex? Do you consider trading forex? Do you consider learning how to trade forex? Don’t do it. I like the profit opportunities that currency trading carries. I like also the risks involved, it wouldn’t be fun otherwise. But I don’t like the idea to trade myself. Where is why:

Photo by amalthya at Flickr

1. Trading forex is work

If you want to make your money work for you, trading forex is not an option. You will have to work for your money. Day trading may look exciting for someone who never tried it, but once the initial excitement is gone you’ll realize it’s just a computer based work like any other.

2. Trading forex is too risky

This sounds paradoxical from the keyboard of a high risk investor but I really think forex is too risky. There are thousands of websites offering forex trading strategies. Have you heard for any super-successful one? Sure, some make it for a while, but no strategy guarantees long term success. This is because forex is unpredictable. There is too much probability and too much volatility in it. That’s why you are unlikely to see serious hedge fund to invest in forex ever.

3. Trading forex does not add wealth to the world

If you want to make money, you need to create wealth. What exactly is the wealth that a forex trader creates? What is the value he adds to the world? I can’t think of any.

Forex trading is a zero-sum game. If you make money, this is because someone else is losing it. If the intellectual energy put into currency speculation was put into something else, this could make the world a better place.

4. You don’t grow

I am sure many professional forex traders will be mad to hear this, but seriously, how exactly does day trading helps your personal or professional development? Sure, you’ll learn some strategies, maybe build some self-discipline and… what else?

5. You need money to make money

Let’s imagine after few years of investing your time, money and hard work you finally become a highly successful forex trader who achieves consistent 5% monthly ROI. This is quite unlikely considering that probably 95% of the new forex traders fail miserably, but I know you are smart, so let’s hope it will happen.

Since forex trading is work, like explained in point 1, you will probably do it all the day and will rely entirely on it for your income. So if you want to earn $5,000 monthly you’ll need $100,000 startup capital. Uh.

6. Trading forex is addictive

Just like gambling, day trading is highly addictive activity. Each small success leads you to believe that you can do better and better trades. Each bad trade forces you to trade more so you can make up for the loss.

Gamblers and forex traders often sell or bet their homes to feed their passion and hopes. If you lack self discipline, forex trading is one of the worst professions you could ever take.

7. Day trading is stressful

Do you really want to watch the computer screen all the day, to worry about your open positions when you go out for lunch and to wake up in the night because an important even happens on the other side of the globe and you can not miss the currency fluctuations produced by it? Think seriously about this because this is what the life of a professional forex trader is.

If you dream about lifestyle of freedom and leisure and are picturing yourself with a laptop on the beach, trading forex is most probably not for you. It’s an activity for people who like to live in stress and risk.

8. The forex trading knowledge is useless in other professions

Seriously, do you think the years you spend in studying forex can be useful if one day you decide to do something else? It won’t help you even for similar activity like stock trading because the systems and strategies are completely different.

In most professions whatever you learn during your experience can be extremely useful if you switch to a related (and sometimes totally unrelated) field. This is not the case with forex trading knowledge and experience.

9. There is too much fraud

Not all Forex brokers are as honest as we would like. Every professional trader has heard about big Forex brokers scamming away. See for example how several brokers were shut down in 2007.

When trading Forex you don’t have full control over your money. A dishonest broker can close down and run away or just deny you to withdraw your money.

10. You can have others trade for you at almost no costs

Why trade forex yourself, when you can get professionals trade your money? The managed forex accounts give you access to expert’s knowledge for a share of the profits. You don’t have to pay anything upfront. Isn’t that cool?

Yes, most managed forex account suck in performance and that is because of the reasons given in points 2, 6 and 7. Chances are if you trade yourself you’ll also achieve the same pathetic results but will lose not only money, but time and intellectual power too. Besides that, some managed trading accounts do well and actually make money.

Regardless of anything, I think forex investing is something to be considered. But if you plan to trade yourself, you must be very sure that you want it. The life of the forex trader is not romantic or carefree. At least this is not the life of most forex traders.

If you are not familiar with the concept of growing assets, I strongly recommend you to read Passive Investing vs Growing Assets first.

Photo by inju at Flickr

Growing assets beats passive investing for many reasons – like the ones pointed here – but is not an easy thing to do. While many of us are just fine with putting in some work to do the magic, you may be one of the people who have enough free money and are looking how to invest them in valuable assets without having to work for months. Regardless in which category you fall, a bit of leverage on your efforts can have significant impact on the final result.

To say it simpler, if you want to create an asset yourself, it may take let’s say six months of hard work. If you outsource part of the hard work to someone else, or to a team, it can take 1 or 3 months. Of course that will cost you money.

Why Outsource And How Is That Different By Passive Investing

Outsourcing to create a valuable asset is as close to passive investing as much of the work you transfer to someone else. In this strategy you never transfer 100% of the work – this would mean just to purchase some item that is already offered for sale. You goal is to combine your work with the work of the one that you hired in order to achieve the best result.

Usually your work will be 10% – 20% of the entire amount but that would be the most important part of the work involved in creating and growing an asset. In most cases that would be the idea phase, planning and organization. It’s not a coincidence that even in the corporate world people who work in the organization, planning and ideas are very well paid. The success of any business depends on these pillars.

Of course, if you are not good in one of these stages, you can outsource them too in favor of something, that you are good in.

The power of outsourcing is realized best when you do the things you are doing best and outsource the rest to people who do those things best. If for example you can create a website and you are good at the idea and accounting stage, you should hire a designer and programmer to do the rest. Even if you have acceptable level of skills in design, it would probably take you 3 times more to produce 3 times worse result than a professional designer.

Assets That Can Be Grown By Outsourcing

Every job in the world can be outsourced and I recommend you to outsource everything that you suck at and can afford to hire an expert for.

Do you need ideas for assets that you can create by outsourcing? I’ll give you some:

• Writing a book or e-book. The books and especially e-books are created once and then sold over and over again. They are perfect assets to grow. If you have no cash, you can write, pre-press and edit the book yourself – many people do that. Most would probably outsource the pre-press and publishing process. But if you are not a writer, you can even hire someone to write the book by given by you topic and guidelines. This way you do only the research for a topic in demand and participate in the idea phase, then let someone else do the writing. (Note: this works better for non-fiction books!)
• Creating other intellectual product. The online marketers are crazy about “info products” for a reason. Just like the e-book, a video, membership site or training program is created once and sold many times. You can take one or more of the most leveraged parts in such a work – the idea creation, the market research, the marketing and planning – and outsource design, programming, content creation and SEO
• Software. Essentially, the software is not different than the other info products. It you have a good idea or can market well, you can hire programmers to do the tough job.
• Services outsourcing. All kind of services can be outsourced. This is how the business world works – the boss provides service to clients, but he does not do the service himself. He hires people, i.e. outsources to them the un-leveraged work and often participates only in the deal-making which is the most leveraged activity in the company. How can you use service outsourcing? No difference than the previous items – pick the leveraged work for yourself – and one that you are good at – and outsource the rest. A company providing services is not exactly an asset bringing passive income, but can be taken pretty close to such.
• “Real world” outsourcing. Not only services or IT can be outsourced. If you buy a piece of land, you can pay someone to grow vegetables on it. If well planned, this will ensure you have cheaper vegetables than you can buy on the market. You can hire someone to build a house for you – this way you will “grow” a real estate asset by outsourcing.

Where And How To Outsource

If the asset you want to grow is some kind of information product (book, video, training program, software), the answer is one – outsource online. There are several approaches you can take:

• Search engines. Search your favorite engine for “outsource +activity”, for example “outsource C++ programming” or “outsource CAD/CAM design” etc. You are likely to find many companies who offer outsourcing
• Blogs. If you pick any blog directory like Technorati you will find out that plenty of professionals publish blogs. Search the “About” or “Services” pages to see if the blogger provides service. The advantage is that based on their blog you may get some first impression about the quality of their services.
• Freelance boards. Sites like Elance, Guru or RentACoder give you access to professionals in many categories worldwide
• Word of mouth. If you know people who have hired professional for a similar job as them for impressions and contact information. The first-hand impressions are the best testimonials for someone’s professionality

If you want to create “real world” assets you may want to search your local yellow pages or again use the word of mouth.

There are many fine points which make outsourcing successful or disastrous. Many people do the mistake to look for the lowest price possible or just to find someone who will do a job cheaper than they would do themselves. Such approach will not take you far away. Remember, you are looking for leverage, so saving few bucks and receiving low quality work is not the way to go. I’ll write soon more about successful outsourcing because this is one of the greatest way to do semi-passive investing with remarkable results.

If you have not read The Basics of Domain Investing better do so first, as that will help you to understand this post better

Photo by LightFusionStudio.com at Flickr

There are several keys to successful domain investing:

• Finding good domains which can bring profit
• Buying the domains at good price
• Getting the most profits of the domain names
• Flipping the domains at good price (optional)

This article concentrates on the first item and especially on buying existing domain names. (Registering new domains is a topic that has to be discussed separately) You can’t make good profits if you don’t obtain good domain names. It’s like expecting to make money by real estate investing when buying overpriced hotel in a crowded sea resort.

The Characteristics Of A Good Domain Name

Most of the things that make a domain name or a website a good investment can’t be faked which is the good news for you. A good domain is:

• Old. In the Web the older adomain is, the better, because the search engines consider older domains to be more trusted. Use the Web Archive to check what has been hosted on the domain in the past and ensure there has not been some spam or illegal site
• Short. The shorter the domain name is, the easier people will remember it. This means more returning visitors and more traffic. All 3 – letter .com domains are now taken for this reason.
• .Com Whatever people say, .com is best. When you recall a domain name but can’t remember the extension, you usually try with .com first. A .com domain means more type-in traffic. A .com domain can be sold easier than any other domain name. After .com, prefer .net, .org and country specific domains like co.uk. The least value have the less popular extensions like .info, .name, .mobi, .biz etc.
• Keyword Rich. A keyword rich domain is a domain which contain related keywords in it. This helps the domain to rank better in search results. For example sharkinvestor.com is a keyword rich domain containing the words “shark” and “investor” and ranks very well when you search for shark investor (some will argue that the search engines can’t recognize the 2 words because there is no dash, but my experiments show the opposite). If a domain can be both keyword-rich and short, then cool. If you have to choose between short and keyword-rich, prefer short, memorable and brand-able domain name.
• High PR and more links. Prefer domains with Google PR 3 or more. Get SEO For Firefox to check these things easier
• With existing traffic and revenue. It’s much better if the domain you are buying already hosts a site and that site already makes money. This of course makes the price of the domain higher.

Finding Good Domains or Websites

If you publish an ad “I am buying domains and websites” you are likely to receive a lot of offers for low quality domains. People who respond to such ads often can’t sell their domains to anyone else or are too squeezed to publish their “domain/website for sale” ad. Instead of waiting sellers to contact you, try the following ways of finding good domains:

• Online marketplaces. These are auction sites where webmasters list their domains and sites for sale. Other investors like you bid on them and try to win the auction. The marketplaces are an easy way to find domains and have a couple of disadvantages. First, you compete with many other buyers which makes it hard to make a good deal. Second, the people who go there to sell are usually people in the business. They know how much their website or domain costs and want to get the best price possible. Often there are cheaters who try to fake traffic and revenue details. My favorite marketplaces are Site Point and SeDo.
• Search engines. If you have chosen a niche in which to invest you can search for sites in that niche. Look for ones that rank between 3rd and 10th page for your selected keywords and see if they are well SE optimized and monetized (you may need to study SEO or ask an expert to evaluate for you). Some sites may have great content but not be optimized or monetized well, which gives you the chance to buy them at low price, improve their SEO and monetization strategies and make very high ROI. Then you can either keep such sites for revenue or flip them for much better price. By searching in the engines you will find only developed sites – not empty domain names. This strategy is involved and time consuming.
• Topical Directories. Do you want to buy a domain about mortgage credits? Search the web for “financial directory” and you will find the top directories with many sites listed. Use the previous strategy to pick good deals. The directory search is easier to do and has one advantage – some of the sites may be just expired domains which can be bough or registered for pennies. As the domain have been already listed, you’ll not need to re-list and it will have some SE value
• Social networks. Join a social network like Facebook and browse the groups or networks for the topic you are interested in. Many of the members of the group have website URLs in their profiles. Some of these domains will be of good quality, but under-monetized or under-optimized. Make a private offer and buy.
• Link pages of good sites. Find good sites (ranking in the 1st page of Google for competitive keywords) and find their pages with links to other sites. These links may have very good value, so the sites linked there are potential good deals – especially (again) if you can improve their monetization/SEO practices.

So many people are buying tons of books on “Making money online” and try to build web business from scratch. This requires a lot of work, happens slowly and very often does not happen at all. Most of these books suck anyway. It is so much better, faster and smarter to find existing domains, improve them and make profits. You’ll need to learn some internet marketing and SEO for that, but it’s less that you need to learn how to make it from scratch.

When was the last time you regret about investing your money somewhere? And when was the last time when you regret for not investing them? To me the first happens very rare, but the second – every day. Missing good opportunities is not the only mistake that small investors make.

Photo by pshutterbug at Flickr

Keep your eye on any of the following:

1. Investing more than you can afford
Any chance that you have not done that ever? I do this mistake all the time. I see a good investment opportunity and am ready to arrange funds for it even if I am not in the best financial situation at that moment.

If you can’t evaluate your financial assets and foresee your future expenses and income, you won’t be able to do good financial planning. As a result of this you’ll often miss investment opportunities or will get opportunities that you can’t really afford. Know your financial situation.

2. Not following a strategy
It’s easy to start jumping from opportunity to opportunity. The reality is always giving us more opportunities that we can handle and it’s very hard to evaluate them all and choose the best.

There are two ways to solve this problem – the first is always to take the right investment decisions. For most of us this is not achievable.

The second way is to have a strategy. This is what I do. I have set specific goals, amounts that should be invested, target ROI and limits. When I see an opportunity I know does it fit my strategy or not. If it doesn’t fit, usually I’ll skip it without regret.

Create a strategy and follow it.

3. Not using other people’s money (OPM)
If your income is not very high, it’s unlikely that you’ll reach huge profits from your investments. Many good investment deals have higher threshold and may never be accessible to you… unless you use other people’s money. Most small investors are afraid to do that and can never grow.

If you think the only way to do this is to create an investment club, you are wrong. The banks, your friends and relatives, leasing, other credit institutions – this all OPM. Most people think it’s wrong to buy things on credit but they are only half right. If you have something to do with your money – something which brings higher ROI than the credit card interest – then don’t hesitate to buy everyday things on credit.

Use OPM for better results.

4. Following the crowd
When the mass media start screaming about a financial crisis it’s already too late. If you read in the newspapers that the home prices or stock market is falling, it’s already too late to act. Many small investors follow the crowd and become a part of all the disappointed people who lose a lot in bear markets.

Avoiding this is actually simple. If everyone is doing the same thing on the market that same thing will get devalued sooner rather than later. So when everyone start buying houses, you beg to differ.

Watch closely what the masses do. And then do the opposite.

5. “Investing” in strangers. Many small investors get disappointed by the results of their conventional investments. That’s good because disappointment is the first step to taking action. But very often when you start looking for alternative opportunities you will be presented with fake offers. They come from strangers and in most cases you will be asked just to wire money somewhere (or worse – to send e-currency) and wait for the profits. In most cases you’ll get involved in a pyramid/ponzi scheme.

Don’t invest in strangers. Always know whom you are giving your money to and have full control over it

6. Bad diversification In every single guide about investing you’ll read “diversification is the key”. But do you really follow the advice? Most small investors have enormous share of their assets invested in real estate. Others heavily put their money on index funds or other mutual funds. How bad the things can go when a recession start? The falling home prices drag the stock exchange and funds with them. So even if you diversify between real estate and funds you are still at huge risk.

Diversify in different classes of assets. If you diversify in real estate, stocks, precious metals, foreign currency, education, brick and mortar or web business, CDs and commodities you will always be protected. (The downside of such diversification is that you’ll rare achieve high returns though)

7. Buying liabilities instead of assets Many people confuse assets with liabilities. Some buy new car thinking it’s an asset, other move to a larger home or buy a vacation house thinking it’s an asset. Really, sometimes buying a car or vacation home is an asset, sometimes it’s a liability – it all depends on the purpose of using. Just because someone else makes money from an asset, doesn’t mean you’ll be making money from the same.

It’s really simple: assets put money in your pocket, liabilities cost you money. Don’t mess both.

8. Procrastination How much money do you keep scattered in debit cards and bank accounts and doing nothing? Many small investors keep unused money waiting to collect bigger amount so they can invest in something big.

What stops you buying highly liquid assets with this money? You can always sell the assets when you have enough for the “big deal”.

Don’t be passive waiting for the “big deal”. Always invest your free money (or you are very likely to spend it for junk)

9. Accepting investment advice and referrals from amateurs. This may sound like “don’t read this blog”, but fortunately I am not giving you investment advice *grin*. Many investors will read blogs and review sites online and blindly follow the advice given. But there is no such thing as generic financial advice – what is appropriate for my financial situation and goals may be absolutely inappropriate for yours. Another problem is that many internet advisers recommend investment opportunities for financial gain – they may receive commission if they refer you as client, so such publishers are not always objective.

Don’t accept advice where and how much to invest. Take the decisions based on your specific monetary goals

10. Missing opportunities We all do this. We miss opportunities because we are afraid not to lose money. But losing money is not such a big problem, if you gain a lesson. Don’t miss good opportunity because of fear.

Train your investment courage not to miss good deals.

Real estate investing is dumb. Really, see what happens after a mortgage crisis. If you just buy real estate because everyone says it’s cool you are making a stupid mistake. Real estate investing is dumb when done in the way everyone does it.

Photo by lumaxart at Flickr

If you put some thought into it however it might turn into a tool offering one of the best risk/ROI ratios in the investment world. I have two general strategies which work in almost every real estate market and almost independently on the current market conditions. The strategies are simple and not secret and they are quite involved. This is what makes them so good – no matter how many people know them, very few are those who use them well, so there is plenty place for you if you wish to try.

Buying Land And Homes Around Expanding Cities

In most developed countries like UK people live around the big cities instead in them since years. Same tendency is now seen in East Europe and Asia which opens big opportunity for investing in land around the big cities. There is opportunity in the Western countries as well, but you need to work harder in finding the right places. In the developing countries there is an exact pattern which shows you where and when to invest. Here is how the raise of the land prices happen in most cases:

1. The country economy starts growing fast. People start having more money
2. People move to the big or capital cities and start buying homes. Home prices start increasing quick for 2-3 to 5 years
3. The home prices in the big cities become too high for many citizens, the cities gets crowded. At this stage the people start looking for homes near the cities instead in them and the price of homes and land there increases quickly

So, basically when everyone invest in homes in the big cities because the ROI has been high for several years, it’s time to start looking for property around the cities. In a short period of 2-3 years the prices of the near-big city homes increases more than the home prices in the cities have been raising in the best market time.

This strategy requires careful research and watching the home prices in the big cities of developing countries. You can try to apply it in USA as well but guessing which will be the next expanding city is a tough task.

Buy Land And Change Its Purpose

This strategy is simpler to explain but requires more work on your side. Agricultural land is cheaper than the land for commercial or residential buildings. Often it is much cheaper. And pretty often its purpose can be changed. If the land is around a city or town, has good infrastructure and there is a different (building) purpose around it, most countries laws will allow you to change the land purpose. Most common practice is to buy agricultural land and change its purpose to a land for residential property – this can double or triple the land’s price.

There is a lot of bureaucracy, fees and risk in doing such purpose change. It highly depends on your country and state local laws. But if you are willing to do some work, research and spare no expenses on legal consulting, you can see a return of 100% in an year or less doing this.

Can you share other timeless strategies for real estate investing? Don’t run away from good opportunities only because they require work to implement. If an opportunity requires more work and research this is a sure sign that the lazy investors will be out of the deal making it much better for you.

If you wonder what kind of investments work well for you and suit your character the following quiz should clarify the doubts you have. You may have some fun with the quiz but take the results seriously – many people take wrong investment decisions (as shown in the poll results as well) because they don’t follow the investment style which is most appropriate for them.

Your main target as an investor is to make your money work for you, rather than you working for money. Most of us usually think about owning assets which can bring entirely passive income for years. And that’s fine.

Photo by KUNTA.TOKYO at Flickr

But buying ready asset which brings passive income is not always the best option for you. Here are some reasons for that:

• Such assets have high price. Said in another way, it means the assets which can be bought easily rare bring good yields. The easiest thing you can do is to have a bank deposit, but it will bring you just 3%-4% per year.
• There is a high risk. If you find ready for producing income asset at a good price (i.e. bringing higher ROI), it will go together with a high risk. For example a managed forex account can bring you 100% or more per year, but you can also lose 50% or more of your money.
• Everyone can have same assets. Well, this is not entirely true, because some of the assets are available only after careful research. But in general, everyone can invest in stocks, managed trading accounts or hedge funds. This means that the mentality of the masses can easily change the value of the assets. See what happens with the stock market or the mutual funds at times of mass psychosis.

Create Assets Yourself

If only money is the barrier to most ready assets, how can you expect them to perform great? In today’s world the total amount of money is always higher than the real resources which makes the prices of financial assets fluctuate depending on psychology and mass-media factors.

On the other hand, assets which require more than just money have higher core value. This is the case with growing a business. It requires creativity, ideas, hard work, discipline, concept, people, technologies, relationships, properties and intellectual rights. A business unit has a real value, not only perceived one like many financial assets.

If you own a business the global market crashes are much less painful for you than if you owned stock shares. Even when the global recession hits you, your losses are usually not that bad.

Growing a business or creating an intellectual property is not exactly a passive investment

Unfortunately you can’t just put some money somewhere and watch a business grow (Or you can by angel investing but then the business will not be yours). Your business needs your ideas, capital and creativity to get started. Even if you have all the money growing your business needs at the beginning, you’ll still need to work hard your mind in order to create a valuable and successful company.

But growing a business can still be seen as a passive investment in general. If you only invest your time and hard work at the beginning and create a system which can work and grow without you, you will have an asset bringing you a passive income.

Creating an intellectual property is another and simpler way to grow an asset. Let’s say you write a book or a software program. You have to invest a lot of ideas, time and efforts into creating the product. During this time you will not be an investor, you will be a worker. Even if you outsource the writing or the programming, you will still need to work in the beginning at the idea project and later to keep an eye on what’s going on. Once created however such a property can bring a residual passive income for long time. Then it turns into an asset, so the whole process again can be seen as investing – you invest time, money and work at the beginning as opposed to investing just money.

You may decide just to buy an intellectual asset – for example resell rights for a book. But buying resell rights is easy, everyone with money can do it – so the ROI of such a venture is much lower.

It’s really as simple as that – the cheaper and easier to obtain an asset it, the lower profits it returns. Expect the higher ROI from assets which require the most from you – and that “most” is not always money.

Growing your own unique assets is the best long term strategy for financial success. I believe it’s the only way to survive unpredictable market movements so I’ll cover this topic more and more in the future.