Retirement Capped!

Caps are now set. It's official. You can only retire with 3 million in total IRA's. This includes 401k, 403b, etc. The payout can be 205,000 maximum during your retirement. 10% of citizens will hit the mark. 95% of companies that offer retirement plans match employee contributions.

What does it all mean? The savers have one less spot to save and matching only gets you to the mark quicker. Earlier this year, many Swiss banks were sued for offshoring accounts, denying yet another haven. There are still several worthy places where your wealth will be safe, including but absolutely not limited to:

• Life Insurance
• Closely held Corporations (mitigate tax)
• Real estate and land investments
• Trusts (mitigate tax)
• Securities (maximize return)
• Gifts ($14,000 per year to anyone you choose)
• Private equity/venture capitalism (for the aggressive)

Those are simply a few ways that can save you from worrying about your potential risks, tax bracket, excess money, or guaranteed return. Leave me a comment!

Losing a Key person

Losing a key person can affect a company in at least the following ways

• Loss of focus
• Loss of time from morale adjustment
• Loss of money from morale adjustment
• Loss of time and money completing administrative adjustment
• Loss of time training replacement
• Loss of time finding replacement
• Loss of money training replacement
• Loss of money due to a lesser earning power of a replacement (marginal, over time)
• Loss of money on taxes of new key person
• Loss of money exercising stock options and buy-backs for decedent's family
• Loss of credibility from lenders
• Loss of market share to competitions

When you think about the loss of someone irreplaceable, consider the above problems that can all be covered from your present income instead of liquidated principal if that key person shouldn't show to work tomorrow. Will all of these costs sink your business? Would you rather pay for them out of pocket in full overnight or would you want to pay over years and for pennies on the dollar?

Stay focused on what matters

Stay focused and be more successful. Perhaps the greatest business advice that anyone can offer. Realistically, the two thoughts, focus and success, are interchangeable. How do you stay focused, On what do you focus, and what resources can help you stay focused? Countless speakers and studies have shown that focus can get you exactly what you want, but the discipline that strong focus requires is a skill that is difficult to cultivate.

First, staying focused will require tremendous mental ability and is attainable, but many of us are discouraged by several attributes. Most important are the opportunity costs. Cut out drinking, socializing, reading unnecessary articles, watching television, and basically all forms of play. This discipline is the hardest part of focus. Next, you will want to find a task worthwhile to focus upon. The task should be long-term, massive, and should reflect your strengths, values/virtues, and interests. This will take time to develop, as personal reflection sometimes only comes in moments of clarity. Find a way to combine the task into a career, or create a way to establish a new career doing the task. Make sure you absolutely believe in it, and that you establish broad objectives (streamlined), or constraints to strengthen your focus. Become an expert in the idea and have your life be a reflection of the idea.

You may be distracted, so make sure you realize the opportunity costs associated with each distraction. Many times, distractions can be opportunities. Think about your values and decide if you can convert a distraction into an objective. Again, make sure your objectives are synergized and streamlined. Whether the distraction is a girlfriend, a work opportunity, children, volunteering, a new hobby, or an asset investment, make sure you identify all pros and cons. Have a solid base of peers who want to accomplish the task with you, and bounce ideas off of them. They should reflect your values as well. Protect your interest with insurance policies. Worker's Compensation for personal injuries, health insurance for personal sickness and of course Life insurance for financial or key man loss. Having insurance takes the burden from your thoughts associated with threats that you can control so you can defend against threats that you can't control, like competition, rising costs, changing markets, and other barriers to entry.

In a short glimpse, this is how to set your self up to focus, give yourself something to focus upon, and maintain the focus using tried and true techniques. Focus is a learned skill and this will all become easier and easier to you over many years of development. Make sure you tackle each new obstacle right away, or you can get buried quickly. Discipline will be the most determining factor of whether you achieve excellent focus or you are stuck where you always have been and feeling like you have always felt.

What is LIBOR?

London Inte Bank Offered Rate. This is the rate at which banks charge interest if a consumer borrows money for short term. Calculations are based on 10 currencies and 15 different intervals of time, of at least 30 days. This rating is very nearly 0% always, but has been manipulated in a way similar to collusion.

LIBOR is completely unregulated, no authorities outside the British Banking Authority can manipulate or constrain it. That means that traders arbitrarily have the ability to manipulate it. A higher libor will cost borrowers more for things like car loans or mortgages, while other consumers earn more money if they have pension or a 401K. The most important ramification is that loans are influenced by LIBOR, which is why higher libor means less home sales.

Your financial health

Your financial health is gauged by a few measures; cash flow, balance sheet, and credit rating. In my opinion, these are the most important measures, and these are often misunderstood by the average consumer.
Cash flow is a very strong indicator of health because it shows where your money is earned and spent. Operating, investing, and financing activities are all covered.

• Operations (think primary income and bills)
• Sales revenues
• Equity/debt sales as derivatives
• Loan interest
• Vendor and employee payments
• Investing (think savings and passive interest)
• Asset purchases (buildings, securities, land, etc.)
• Loans received from customers
• Merger payments
• Financing (generally only for business purposes)
• Proceeds from issuance of short/long debt
• Dividend payments
• Stock buybacks
• Principal repayments (debt)
• Sale of company shares of stock

It's clear that without a strong balance sheet, your cash flow would be misguiding, since the balance sheet shows the historical totals of each asset as opposed to the changes made this year alone. The balance sheet shows the total number of assets equaling the combination of liability and equity. Assets make the money for your company, so they should outweigh liabilities alone, and the difference is the profit the company realizes (retained earnings). The balance sheet describes how liquid or indebted a company is, giving year over year comparisons also.

If both of these are in tune, you should have a strong credit rating. Every entity and person in America and throughout the world is required to have a credit rating. Entities are rated by such agencies as Moody's and Standard and Poor's, while consumers are rated by Equifax, Experian, and Trans Union. The score is scaled from 150-900 and spans 7 years. The factors representing your score are difficult to enumerate, but in general they are employment, credit and payment history, outstanding debt, and amount of Credit inquiries. Bankruptcies and foreclosures take 10 years to come off. Maintain a balance of credit that is less than 30% of your total limit. Higher than 30% may incur a penalty.Every 12 months, you can request a copy of your report under the FCRA.

So you see how important staying organized can be when you decide to become financially competent. You may find these boring, overwhelming or both, but your cash flow statement, blanace sheet, and credit rating can dramatically change your habits and improve your savvy, making them investments in themselves.

The future of Freddie Mac/Fannie Mae and CDO's

Hard to imagine how far the world of finance has come. 150 years ago, we had just established a national currency, and now we have thousands of securities and derivatives to select from. In particular, CDO's catch my eye and though they were at the helm of the most recent recession, the fall of Lehman Brothers and A.I.G., these mortgage backed securities can teach us where finance is heading next. The hardest part of the equation is factoring out Freddie Mac and Fannie Mae, who package the CDOs and sell to investors.

CDO's are investment vehicles that begin with banks, which encompass many asset-backed securities, but predominately Mortgage Backed securities (MBS). Banks provide a loan for the amount of a mortgage, and place an account receivable on the books. Fannie Mae and Freddie Mac buy the loans (including principal and interest) from the banks and package them to be sold to investment banks, typically to be pooled in a mutual fund. Now, the cash that the homeowner pays flows through to the investment bank and it's mutual fund owners. Additionally, credit default swaps, a derivative, were created as a way for speculators to bet against CDO's they didn't own (which defaulted AIG).

The problems occur where banks write the loan and also where the investment banks buy the MBS. Banks should ultimately review a credit score and only loan money if their risk is mitigated. Since they are immediately guaranteed a sale of the loan, no matter what quality, subprime lending can occur. After packaging, little controls are in place with ratings agencies like Moody's and S&P. Ideally, the ratings agencies will look at each case specifically and classify into multiple categories. This did not happen during our most recent recession and many investors were fooled into thinking they had quality investments. Another problem was the lack of regulation on derivatives, which meant that no reserves were required to back credit default swaps, and proceeds were taken as bonuses.

Recently, each bank has been sued and the government (i.e. taxpayers) bailed out Freddie Mac and Fannie Mae. Fannie and Freddie, like each and every other financial institution of the time, leveraged in excess of 20 times their capital, courtesy of the SEC's April 28, 2004 vote to lift leverage limits. If they lost capital, the entire portfolio of obligations would be lost (i.e. investors lose money). 60% of the money lost came from risky investments, the remaining losses were mostly due to the lull in residential mortgages. Since many pensions and investments worldwide depend on Fannie Mae and Freddie Mac, their failure would paralyze much of the global economy.

Incredibly, Fannie and Freddie have come back in conservatorship from Sept. 2008 to now. Obama thinks the reliance on taxpayers has empowered these two to make poor judgments and have little consequence. These are For-Profit companies whose losses are repaid by the government. If backed privately, the mortgage industry would have free enterprise companies scrutinizing activities, making for an honest financial environment. In agreement with Obama, I believe more controls need to be in place. $10 Trillion in mortgages will take time to ease away from these two companies.

Currently, bi-partisan bills are being drawn for the 5 year depletion of Freddie and Fannie. Bank of America settled to pay Freddie 2.6 Billion, Citigroup settled at 400 Million, Suntrust settled at 65 Million, and Wells Fargo settled at 0.87 Billion. In any event, Dodd-Frank will keep the companies from walking the plank yet again.

The future of monetary policy

Interesting enough, as I study more and more of the economy, the only thing I seem to learn is how little I know. After the documentary, "Inequality for All" by Robert Reich, I realized a few striking phenomenons in the economy and politics. In short, our country is becoming too disconnected.

The creation of paper money occurred during the Civil War and followed the Panic of 1857. When Europe enlisted farmers for wartime just 5 years prior to our widespread cash printing, two significant changes took place. Europeans imported agricultural products from American farmers which caused a boom, and when war subsided there, their workers went back and our products took a massive hit in value. The Ohio Life Insurance and Mutual company, at the time a huge investor in agriculture, failed and caused thousands to lose the money they had invested. This caused the panic of 1857 where citizens did not trust spending on items that would lose value, so they saved their gold and silver coins. Commerce was halted even though the country continued to grow.

Thus, many banks began issuing their own currencies, but made loans in good faith. Banks went broke in hard times because of defaulted loans. Fundamentally, there was no central bank; each bank had its own currency, and many consumers lost money because of the same substandard risks. Just prior to the Civil War, circulation of the gold and silver was paltry, so the government saw national currency was needed. July 17, 1861: paper was printed to pay the military, purchase supplies, and to altogether stimulate the economy. With little precious metals, the government circulated paper purely on faith that it would be good, giving the paper very little value. National income taxes, national debt, and this new money all were remedies to our lack of economy, but inflation gave another hurdle. Any denomination under $5 was useless. Central Banks were created in 1863 (Lincoln) to give more substance to the national currency, which had high default risks through private banks. Inflation gave the dollar less value and continues to weaken purchasing power by 2% on average each year, with the strength of the economy to counter. Today, $541 million is printed daily (95% goes to replace money already in circulation).

Keynes said that when people hoard, terrible things happen, including depressions and wars. The Great Depression stemmed largely from an outdated inflexible currency. Hoarding also took place, since while investing was highest in the roaring 20s, consumption was low. Loans were taken out to invest in businesses at 10% down. Soon the banks ran out of money and normal accounts could not be withdrawn from. Panic ensues and everyone simultaneously makes a bank run to get cash out. Banks subsequently defaulted and spending was nonexistent. Deflation occurred because the economy suffered, which led to a higher need to save, since money was appreciating by being kept under the bed. GDP fell. Disparity of wealth is also believed to have caused the Great Depression, which is seen on a larger magnitude today.

Never a democracy before, people are in it for themselves, that's our gift and curse
Lobbyists
Internet causes laziness and disconnect
Inflation is increasing, but wages aren't
Human nature to hoard
Value is worthless and they should give back
Pay taxes on all money, not 11% on investments.

Life Insurance Strategy

Life insurance comes down to Term, whole, universal, or Endowments. Annuities have no protection, only cash value, but are long-term investments that you contribute to monthly or according to a schedule of your choosing. You can serve two needs at once, since you can take loans out along the way to retirement completely at your discretion! Always go for the higher number in the range, because the difference is worth the extra leverage. Sell Packages. Merchandise. Never policies.

Term:

• Good for any amount of years
• Can have increasing or decreasing premium, but always a level premium
• Pure protection like auto insurance: Pay for protection without getting your investment (CSV) back.
• Pay each month, 6 months, year; different grace periods apply
• Renewable or convertible at the expiration date
• Higher premium since the new policy is issued at your new current age
• No insurability required (aka Medical tests)
• Can get more term or convert to whole life
• Investments are not tax deductible
• Can be a rider that offers pure protection on other life policies
• Highest death benefit (DB) per dollar paid
• No proof of insurability at renewal or conversion (outside of extenuating circumstances)
• Conversion has a deadline and must be a convertible policy
• Again, the new policies are based on your age at renewal/conversion

Whole:

• Premiums paid:
• For the rest of your life
• Once up front
• In 10, 20, or 30 years
• Until age 65
• Graded or modified
• Modified has 50% discount for first 5 years then level
• Multiple increases and then level
• Current Assumption (Interest rates affect premium) Has max premium built-in
• Indexed premium (based on CPI)
• Indeterminate 
• 3 years fixed then you choose to a max threshold
• Nonparticipating (no dividends), but premiums are discounted based on company performance.
• Difference in premiums will:
• Increase CSV or DB if you pay prior premium though it asks lower premium
• Decrease CSV or DB if required to pay higher but pay prior premium
• May be required to pay premiums after income earning days (retirement)
• Not tax deductible, and any growth is taxed when you surrender
• Cash value must equal death benefit at age 121
• Can get a policy loan, which is reflected at death or surrendervand requires a small fee
• Death proceeds are only taxed as part of an estate if estate is in excess of $5 Million
• Cash Value built in:
• 6-7% interest tax deferred
• Insurance aspect is Death benefit minus Cash Value

Universal:

• Pay how much you want each month (no tresholds)
• After a few premiums, you can skip payments
• If CSV=0, contract expires.
• Based on Current Assumption and Market Conditions
• Used most for buy/sell and other business policies.
• Includes mortality charges and interest debits at each payment date.
• Higher DB would require proof of insurability
• Can make a withdraw or a loan, withdraws have penalties in first 10 years.
• Can get Death benefit = Face amount (more premium for CSV)
• Can get Death benefit = Face amount + Cash Value (more premium for protection)
• Includes a balance statement at year end

Variable Universal:

• You buy units with different investment objectives (asset classes)
• Can Allocate premium to several different units
• Can switch money to other units 1-4 times per year
• 45 day money back period
• Have voting rights (one vote for each $100)
• Can convert to whole life within 24 months
• Fixed premium
• Guaranteed Minimum Benefit, but no CSV guarantee

When taking a loan out, the money is taken from your death benefit, not your cash value. The money accrues the same interest but the loan (which is taken from reserves) also accrues negative interest. The interest, if unpaid, will also be taken from your DB. When you make payments to the loan, you are replenishing money that you withdrew from the reserves. This loan, then is the same as paying with cash: if you pay with cash, you lose the interest that you could have earned on that cash until you get the cash back. If you pay with a loan, you lose interest that you had to pay on that loan. In the end, you finance in both cases, but be smart and mitigate the loss of capital where possible. The money is taken from your primary fund and placed into the guaranteed fund, which earns a lower interest. The loan accrues interest also. The interest must be paid off or your policy can lapse, which isn't terrible and doesn't affect your credit, but defeats the purpose of the insurance. The dividends your policy accrues can cover some or all of your interest payment, which is ideal, since dividends are pre-tax dollars.

Loans from 401K are tough; highly regulated since they are qualified investments and controlled by your employer. You must liquidate your other investments before you will be allowed to take a loan from your account, which sometimes defeats the purpose of 401K since it is to increase investments. 401K has been described as a jail for your money! Get life insurance so you can die without regret and rest in peace.

Quotes to sell by:

• The best investment in the world is the one that pays the most when you need it the most, and that's life insurance. BF
• Life insurance is important but not urgent. When it becomes urgent, it's too late. MF
• People don't care how much you know until they know how much you care. TM
• The stock market is where money makes money, but life insurance creates cash where none had existed. A piece of paper, drop of ink, and a few pennies on the dollar... and we can create more than most people can accumulate. BF
• Anyone can accumulate the money life insurance promises, you have the ability. What you don't have is time. Life insurance underwrites time. If I could guarantee that you live 10, 20, 10 years more, how much would you be willing to pay for that time? If you need time, you need life insurance. BF
• Life insurance costs pennies and guarantees dollars. Hedge your estate against taxes at death by buying life insurance. There is no substitute for the certainty of life insurance.
• What would you say if I told you I want 30 percent of everything you have in this world, and I want it now, in cash?" Tax burden in an estate pass. BF
• The price you pay not to do something is usually greater than the price you pay to do it. BF
• No one has a lease on life. BF
• The mechanics are simple. You set up a special account and put in $800 per month. My company sets up a special account and puts $578,000 in it. Should something happen to you tomorrow, next week, next year, we simply trade accounts. And mine will always be worth more than yours. [accompany with two actual checks and ask him to sign] BF
• When you walk out of this company, I'll walk in to buy it, and I'll buy for cash. You set your own price (since you are the majority investor), and we'll promise to pay it. I'll give your company a guaranteed market. Insuring key people insures profits. BF
• You insure your machines, but Key people are machines- money making machines. No one is indispensable and neither is your equipment, but it's all insured. Could you get a loan without insuring it? The banks feel the same way about your key people. The day your key people walk out, the lenders do too. The value of a key person is 5-8 times more than money's interest value. BF
• Ben doesn't put his hand down the prospect's pocket, he puts it in the tax-collector's pocket. Legitimately. BF
• He left unfinished business for his family to solve. He bought a new car with the money. There's nothing wrong with a new car, but it shouldn't come first. What should come first? I say your family has a right to go on living. That comes first. Saving money for retirement & purchases comes 2nd. BF
• Let me pay your tax for you. It'll be easier to pay out of income than principal. Principal is another way of saying liquidation. The first thing they take will be cash.
• I want to leave something to take care of your family, not something they must take care of. Make you worth the most when you should be worth the least.
• He was a one-man company, and he found that creditors began to worry what would happen when he was gone. The policy creates its own credit.
• Your estate is simply time. Time you have traded for assets. Would you be willing to give the government almost half your time?
• How much time would it take to repay everything you owe?
• Do you have a loan? You pay 9% for a debt. Pay us 3% for an asset!

Quantitative Easing, A Summary

Quantitative Easing is both the dread and savior of the economy as of late. I personally will never understand the far reach of this policy, and I'm sure 99% of Americans are in the same boat. From my standpoint, I want you all to know that right now is a terrible time to save money in cash; you must invest because a dollar today may be $0.90 in a couple of years. Quantitative Easing (QE) has a history as long as civilization, with effects seen in CPI (inflation), banking, global economy, and finally consumers. While this policy is ubiquitous and effective, many economists have alternatives more effective in theory.

The easiest way to begin would be a description of the policy. The goal of an economy is to control inflation by any means (normally by manipulating short term interest rates). QE attempts to control high borrowing rates and inflation by creating new money for the central banks. This is carried out by purchase of assets, whether it be municipal bonds, T-bonds, or other low risk assets. Such assets are purchased with freshly printed money in large quantity. Money and interest rates typically have an inverse correlation. More money begets a lower interest rate and thus more economical growth and employment.

In the beginning of 2009, banks lowered rates nearly to the zero lower bound to entice growth, which still eluded our economy, as did employment. Our economy faced the real possibility of deflation. We soon began QE and the Fed is currently printing $85 Billion each month, which will diversify bank portfolios with various investments, increasing the worth therein, thereby causing lower interest rates. QE also forecasts inflations, since, all other things being equal, more money will lower its value. The effect would be that consumers spend more now in anticipation of the same money being worth less in the near future. Occasionally this guidance does not involve any new money printing at all, but is simply an affront to consumer psychology. The effects are either caused by consumers believing that short-term rates are lower and then rates will fall (good effect), or if consumers read between the lines and see a weak economy that can't stand for new loans or investments and the rates fall temporarily (poor effect).

So, who is at fault? Substandard lending and low credit worthiness in our most recent recession of 2007-2009 is the main culprit. Banks became greedy, for lack of a better word, and investors saw junk bonds flood the market. Now, the banks that are left in the economy are finding renewed life because of QE. Some say it's a reward and a slippery slope leading toward the next recession.

Some economists believe that targeting Nominal (gross) GDP rather than future inflation will improve policy both in practice and in consumer confidence. I tend to agree but QE still must take place.

Many consumers wonder why have any monetary policy in the first place, because after all, this is free enterprise society. If the economy simply was let go, interest rates would sky rocket since the banks would have such a low money supply. Less money means a higher cost to obtain loans. The consumer has lost confidence in banks after the recession and banks were sliding into devastation before QE. America needs loans and the government needs banks to assign value to the dollar. What happens when the dollar is not responsible for value? That's another article you can see here: http://techjamesesler.blogspot.com/2013/06/digital-currencies-end-to-conspiracies.html

These days cash is argued as the best investment vehicle since the state of the economy has engendered fear and may confuse investors. This is not in your best interest, since guaranteed inflation will reduce the value of our dollar and thus you are losing money by saving rather than using investments to hedge inflation. Our Central Banks are approaching QE in the amount of $4 Trillion, which theoretically will reduce long-term interest rates almost 1.5%. The Central bank has almost $2 trillion currently in reserve. Since 2009, interest rates have been very near the zero lower bound and the S&P 500 has increased 150%.

The effect of avarice

Well, here it goes. I'm jumping in the flume. The days of stagnation are over. The people that I have met in the last 2 weeks have influenced me. It started August 7 with an innocent meeting with a financial planner, Rob Gascho. I had about $5K that I wanted to invest. I invested my first money in May (4 shares of Tesla @ $85) and was bitten by the bug of return rates. Through that meeting, and when I showed him my financial goals, he set me up with a recruiter, Francisco. It was basic, and a day later, he called me back and set up a meeting with Managing partner Tony Montalvo on August 16. Between August 7 and 16, Northwestern Mutual gave me 3 interviews. I leaned toward them until I met Tony. Organized, positive, and high-strung, I had never met anyone so fervent or precise. His words were calculated and even though he made mistakes, he was completely candid and honest. His experience absolutely glowed. Ben Miller was his partner, who met me after an hour and half with Tony. Ben was also calculating but in a very smart, relaxed way. They both had multiple children, happily married, worth millions. Where I'm from, noone is worth millions, so this was a first. I met responsible, organized, successful adults for the first time in my life that came to me for my abilities. Talk about validation. I signed the contract August 26, 2013. At that time, I knew that I wanted to reach their position, no matter what. That is the task, but how?

I talked to Gary Bleakley (NW Mutual) and he told me my contacts were horrible and said I would never get them to invest money responsibly into their products and I realized that there are thousands of people that want to invest, but they are indeed everyone I don't know. I have to cut the fat out of my life. No more meaningless parties that simply pass time. My new friends will have higher mental abilities, want to do business and teach me, travel, and own clever, useful investments. 9/7/13 came around and I volunteered through Michelangelo Venturella and Cruise 4 Kids. 200+ people with net worths creeping into the billions. I had done all of this myself, and they were all so happy and intelligent; I realized money isn't as bad as my parents taught me! If you are responsible and intelligent, money can make you rich in education and time. I have a lunch scheduled with Leo Hamel Friday, 9/20 and he saw the smile on my face at C4K, we talked about Dale Carnegie. I never thought these people were so smart. He saw something in me, he is worth billions. He owns a business, guns, more than 500, a 115 acre shooting range, and has 3 kids (4,6, and 8). Those are responsibilities, that is time management. Katy thinks I'm crazy for putting emphasis on money, but I am so intrigued that I am meeting these people, it's like studying aliens and finally being asked to visit their planet. And the most enriching part is that I can help them grow their wealth and learn from them and their lives in the process. I will learn what makes them great, what their values are, and what their dreams are. I want to build something like them, I want to develop my passions. The only way I can is to stop worrying about money and start going after it! This is an exciting new chapter of my life and in a year, my friends will all be the focused, driven people that I have craved to be around and that have escaped my grasp due to my lack of self-confidence.

I grew up stealing.. Getting government handouts all of my childhood, sneaking around rules and constantly being let down by not having money. I never had the confidence to talk to people who had money because we had this entitlement to things that didn't belong to us. Also my passions were left out because of this block that I don't deserve having money. We were scum. I despise my mother for taking and taking, but I love her for giving me the motivation and this absurd vision that I need money to overcome a struggle.

Indices and Platforms: The Big 4 at the top

Etf: Exchange traded Funds:
The long history of the stock market has been changed most notably by 5 men and a tree: Henry Varnum Poor (Standard and Poor's: 1868 with his books on railroad company statistics), Charles Dow, Edward Jones, and Charles Bergstresser (DJIA: 1882, charting 9 railroads, a steamship company, and a communications company), and Bernard Madoff (the most notable forefather of the NASDAQ). The Buttonwood Tree on Wall Street in the 1700s noted the beginning of the NYSE. While you could delve into the colorful history, here are some differences of the power indices and platforms, e.g. stocks included, gain/loss calculations, and what my instincts tell me:

Standard and Poor's: "Standard Services Remove the Doubt"

• Comprised of 500 large stocks in most industries. The S&P weights based on both capitalization and also has an equal weight index. The S&P also factors in how the respective industry is performing.
• Has several prerequisites:
• Market Cap over $5 Billion
• 4 consecutive qtrs profit where: income - discontinued Ops > 0
• Dollar Trades at least 30% of the Market Cap
• The publically available stocks (read: float) greater than 50%.
• Equal Weight Index is calculated: % increase of company (1/#stocks in index) = contribution
• Great exposure for small cap stocks and speculations
• Market Cap Weighted Index is calculated: % increase of company (MCap of company/MCap all companies) = daily contribution
• I believe this system of MCap weights is more telling of the actual performance of the index, especially since industry performance is factored.

DJIA:

• A PRICE-Weighted average of 30 stocks picked by the editors of The Wall Street Journal (owned by the DJIA). The companies are industry leaders (though transportation is not an included industry)
• Calculates $ value of the DJIA by the total $ value of stocks divided by a constantly modified number, which is modified (and ultimately diluted) by stock splits and many other fluctuations but in spite of weight of capitalization
• Calculates gains irrespective of the price point


• A stock gains $2 in one day, the DJIA gains 60 points total (for all 30 stocks). The gain is $2/0.14418073 (the divisor) = roughly 14 points. This is 14 points for the whole if the original price is $10 or $200

NYSE:

• Nearly 2,800 stocks (tracking stocks, ADR's and REIT's) traded in the composite at an $18 trillion market cap. $250K entry fee for a company to be traded on the floor, annual fee of $46,150. Auction type, only trade between 9:30am and 4pm EST. Under 1,200 seats open to stock brokers (auctioneers). Must issue over 1 million shares ($100 Million worth), with revenues over $10 Million in last 3 years
• Calculations use free-float capitalization and are weighted on both price and Return, and are updated in real time throughout the trading day with each trade of included stocks. The DJIA maintains calculations. However, the caps used only reflect the floated shares, rather than full caps.
• The final index value = adjusted market cap/next day's divisor. Where next day's divisor = Current day's divisor x (next day's adjusted market cap/current market cap)
• This exchange is clearly the biggest contributor to the productivity of the stock market and the American economy. Find more detail here: http://www.nyse.com/pdfs/methodology_nya.pdf

NASDAQ (National Association of Securites Dealers Automated Quote):

• The composite covers more than 5,000 companies. $125K entry fee for a company to be traded, yearly fee of $37,500. Dealer (aka market maker, Madoff's title) must be present in the transaction to facilitate trading. Companies must issue 1.25 Million shares ($70 Million worth), with revenues over $11 million in last 3 years.
• Calculated by aggregating the individual weights (constantly adjusted for each company) multiplied by the latest respective prices per share and dividing the aggregate by a divisor.
• Divisor = Divisor before adjustments x (Market value after adjustments/Market value before adjustments)
• Adjustments to decrease the divisor: Cash dividends, Other security dividend (i.e. not a stock dividend, but a security that changes the float), return of capital, repurchases, and spin-offs
• Adjustments to not affect the divisor: Stock dividends, splits, and reverse splits
• Adjustments to increase the divisor: Rights Offerings
• I think the NASDAQ holds the future of stocks, but that future may be decades if not centuries away. Better for mid-cap companies and penny stocks with mid-range upside. The exposure of this market is limited. 

Note that all of these are publicly traded companies since 2006. The DJIA typically outperforms the S&P by 1.3% annually. I believe the ETF for this index would be slightly misleading, but not to the point of affecting your bottom line. Occasionally a stock will move from another index into the DJIA (TSLA in 2013, for example), which tells me that the companies on the DJIA are the power houses in the market. I like the history of the NYSE and it is clearly more established (NASDAQ is only 40 years old compared to 220 years), with more rigid criteria and a more coveted model. 

Sector Groups

This list is as rudimentary as it gets, but as I learn more about the industries, I will add more and more until I surpass Jim Cramer.

Oil and Gas - products, equipment, and distribution thereof

• This industry has another 20-30 years in developed companies. Will always be utilized and 'refined'.

Basic Materials - Metals, Chemicals, Mining products

Industrials - Construction, aerospace/defense, railroad, commercial vehicles, electronics, Business supports

Conglomerates - Large parent corporations that manage subsidiaries. i.e. Siemens and General Electic

Consumer Services - Food/drug, apparel, and broadline retailers; Media/ent, Travel/leisure, gambling, restaurants, hotels

Health Care - Pharmaceuticals, equipment, biotechnology

• Huge potential and many start ups enter the market and cause too much supply for demand and only the fittest survive. Safe for long-term investing, and also for penny stocks.

Telecommunications (Phone technologies)

• Big business here; Cell phones are the future, unfortunately price points are daunting.

Utilities

Financials - Banks, insurance, financial services, real estate and REITs

• Insurance fuels the government and financial services fuel the economy, but scandals plague this industry so long term investing can be perilous. Great for the intermediate term (less than one year).

Technology - Computer, internet, hardware, semiconductors.

• An exciting field to invest in, but almost always speculative. Huge risks for moderate rewards

Also, derivatives and options is a field I am currently learning of. Call options are buys in the future that you may or may not exercise in exchange for a premium. You'll want to have a call option if you believe the security (i.e. stock) will be at a trough in the future (and then rise after the date of exercise). A put is a sale of a stock at a certain time (think shorting a security). Futures are obligations to buy or sell at a certain price.

Paper investments

Paper investing, as opposed to real estate or venture capitalism, only requires a load of cash and a routing number. Here is a quick list of investing platforms and more detail is to come very soon.
My personal choices are Equity securities (i.e. Stocks), Real Estate Investment Trusts, Bonds, Mutual Funds/ETF's

Stocks

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ETFs (exchange traded funds)

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Mutual funds

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Cash alternatives

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Bonds (known in many countries as debentures)

• Auction rate investments - Municipal Bonds, corporate bonds, and preferred stock that have Returns reset periodically through auction. 
• Invest money in a company (normally minimum $1,000) and get a guaranteed coupon (normally 8%). Both of these are guaranteed cash flows. Bonds are intrinsically long term and have various small risks:
• Inflation (at maturity will the USD depreciate?)
• Interest rate (if you plan to sell before maturity)
• The face value and coupon are guaranteed, so if you buy at $10K and 10%, and 1 month later the bond is at $9K and 10%, your stock will be worth more, since you make $100 more per year (semi-annually $50). If interest rates decline after purchase, you will also have a more attractive bond to sell before maturity.
• Bankruptcy (bond owners are paid first)
• Overpayment of Broker Fees (http://www.cbsnews.com/8301-505123_162-37840993/you-may-be-paying-hundreds-in-hidden-bond-fees/) Make sure you know what it's worth!

Certificates of deposit

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College savings plans

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Dividend reinvestment

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Margin

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Options

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Futures