October 1, 2000
Since April 1999 I had been investing in the US
financial markets, so far with mixed results as reported on my section,
The Digging Report. Since I believe that education is a perpetual process
that ends with life itself, I am enrolled in a continuing education
system. There, I started to learn the secrets of the Big Boys. Of
particular use to me was the books "Rich Dad, Poor Dad" and
"The Cash Flow Quadrant", both written by Robert Kiyosaki, and
his tape about corporations, which introduced me to C.W. Allen and Sage
International, and more literature about the advantages of corporations.
The book "Inc. and Grow Rich" is specially enlightening about
the subject. But the more important thing that I learned from these books
and tapes is that these secrets are available to anyone who cares enough
to learn them and more important, practice them. It is not something
reserved only for the rich (although it seems that only they employ these
strategies). One of those secrets is that they use corporations to conduct
business. It is the way to go if you are going to build a business that
you want to last. It is not the intent of this report to explain the
corporate advantage, however if you are curious about it you may want to
visit this site: Sage
International, Inc. Suffice it to say that corporations brings lots of
flexibilities to operate, significant tax savings and the best protection
against litigation. Since I decided to make investing a second career (and
ultimately my primary source of income) I decided to do it right.
Since
early this year I had been mumbling plans to start my own fund and despite
the recent stock market downturn I finally took the leap and on late May I
gave life to Globe
Capital Management, Corp. and shortly thereafter, the corporation
started its first investment fund: Globe US Index Fund, Limited
Partnership. I had to confess that apparently, the timing could not be
worse; after all, on the spring of this year (2000) the NASDAQ crashed 40%
from its March top; and leading stocks crashed even harder. However, I
take hearth of what William O'Neil (founder of Investor's Business Daily)
and most experienced investors say about NOW being the right time to
start.
This chart of the last 80 years of the Dow Jones Industrial Average
clearly shows the long-term upward bias of the market. The historical
average return since 1926 has been around 11%. That includes the ominous
period of 1929-1932 during which the Dow lost 86% of its value! Thinking
of it, an investor who put all his money on the market at the 1929 peak
had to wait more than 2 decades to break even. However an investor
starting at the 1932 bottom enjoyed tremendous gains. Since my approach is
to gradually build the Fund with my hard-earned money (along with my other
investor's money), the risk of having to wait long periods of time just to
break even is diminished. That's not to say that there is no risk of
losses but this is a roller coaster I am willing to ride.
Why incorporate? After all, millions of people
around the world invest money in the stock markets and they do it
personally; and as a matter of fact I started that way. So, why not
continue to do it that way? Well, taxes and litigation, plain and simple.
Plus by running the activities as a corporation, a whole world of options
opens to me. Corporations have more flexibility moving into and out of
countries; while individuals needs visas, difficult-to-obtain foreign
working permits, etc. As I said before, this report is not intended to be
an explanation of how using corporations could save you taxes and legal
troubles but I should say that while some of you may be thinking about
double taxation (no deductions for the corporation and taxable income to
the individual); I actually see double deductions (deduction for the
corporation and no income to the individual). Yes, it is possible to run
into the nasty trap of double tax if you don't know how to properly set-up
and run your operations. That's why I decided to do it the way the Big
Boys do it: The right way with the right advisors.
While I continue to work for my present employer, I
am now building my own company that I hope will support me in the not so
distant future. The Digging Report, a section of this site, will continue
to appear in the same format. Nothing has changed there, as my share on
the corporate investments will replace the capital that I took from my
personal funds to capitalize the entities.
With this new development, I am opening a new
chapter in my life that will change it forever. The ongoing education
process continues, this is just the beginning... What about you?
|
