Wealthy people do not just end up wealthy - they develop a successful strategy and stick to it.

Wealth creation is a fundamental objective for most of us and constitutes the desire for the highest possible returns balanced with the lowest possible risk. This is known as the risk return trade-off where low levels of uncertainty (low risk) are associated with low potential returns, whereas high levels of uncertainty (high risk) are associated with high potential returns.

Taking on some risk is the price of achieving above average returns.

The ultimate goal of wealth creation is to find an appropriate balance, i.e. one that generates some profit but still allows you to sleep at night taking into account your own personal risk tolerance.

If what you are doing right now in life is giving you enough wealth to make you happy, that's great. However, for most people working for a salary or running a small business will never provide enough to get them what they want.

Wealth will not just fall in your lap, you have to help yourself. If you choose the Australian Stock Market for your wealth creation, like thousands of Australians do now, you do not need to be a genius or take big risks.

Click here for more information on using the share market to create wealth or attend HomeTrader’s FREE Intro Seminar.

Asset Classes and Risk vs. Return

As part of wealth creation, asset allocation aims to balance risk and reward by apportioning assets according to an individual's goals, risk tolerance and investment horizon.

There are four main asset classes and each has different levels of risk and return, so each will behave differently over time:

• Cash & equivalents - bank accounts and money market instruments (e.g. bank bills) which are highly liquid with low risk
• Fixed interest - interest rate products that provide a steady income stream including government and corporate bonds.
• Property - residential, rural, industrial or commercial property.
• Shares - companies listed on ASX and overseas stock exchanges.

Other assets may include foreign currency, natural resources, precious metals, and luxury collectables such as art, fine wine and automobiles.

Historically, as a long-term investment, share markets around the world have outperformed the other asset classes. However, past performance is not a guarantee of future returns and although the overall value of share markets has increased over the long term this has been punctuated with periods of short term volatility, where share prices can go up or down very quickly.

What effect can compounding have? Click here view how much an increase in your annual return can mean to your earnings.

Direct Investing vs. Managed Funds

As well as direct investing or trading, indirect investments can be made into each asset class by placing money with a fund manager to invest on your behalf.

Indirect investments are often referred to as managed investments because the fund manager makes the investment decisions, removing the control and responsibility from the individual investors.

Managed funds generally charge entry and exit fees which are normally a percentage of the value of your investment, plus an ongoing management fee of usually between 1 per cent and 3 per cent per annum. To compensate for these fees a fund manager has to outperform the returns that could have been achieved by directly investing in the market.

HomeTrader believes individuals can be taught to develop their own trading strategies which outperform both investing directly in the share market or indirectly through fund managers.

The first question we always get asked is, how can I possibly beat the returns from my broker or fund manager? The truth is brokers and fund managers are great at what they do. The issue is that it is very difficult for them to buy and sell quickly to take advantage of quickly changing trends in prices.

If you, as an individual, make quick buy and sell decisions to make or avoid losing money you are unlikely to affect the market. If a giant large fund suddenly buys or sells millions worth of a particular share because it is trending up, they may well change the whole market. They simply cannot do it. But you can.

The second obvious question is what types of returns can I personally expect from trading? Well this all depends on what return is realistic based on your trading float, your time frame, the types of products you have chosen and how much you want to minimise risk? If you do not know the answers to any of these you should find them out.

A little education goes a long way, especially for those who want to be free of the advice of others.

"Most people get interested in stocks when everyone else is. The time to get interested is when no one else is. You can't buy what is popular and do well". Warren Buffett (arguably one of the world’s best investor)

We teach you about the stock market and personally coach you to design your own trading strategy. The strategy developed will assist you in deciding when and which shares to buy and sell. We also teach you the steps to make money in both rising and falling share markets.

View the trading results of some of our HomeTrader clients to prove it can be done. These are real results from real clients!

Investment Advice

While the Capital Intelligence Australian Financial Services licence does not permit HomeTrader to give investment advice (personal financial product advice), it is something we are frequently asked to provide.

HomeTrader provides an alternative to receiving personal advice from a stockbroker or financial planner. We teach you how to develop your own trading system, to make your own decisions, with your own money and be free of investing advice from others. This is called the provision of general advice.

What follows is an explanation of personal advice and where you can go to obtain it if required.

A financial adviser is one who provides personal advice and manages and provides investing advice, for a fee, commission or brokerage. The fee is typically calculated as a percentage of assets under management annually or a fee for each individual transaction.

In Australia, personal advice can only be given by companies who hold an Australian Financial Services licence.

Common examples of financial advisers include financial planners and stockbrokers.

HomeTrader suggests that as part of your research on investment advisers, you investigate all avenues and that you consider getting a stock market education to take control of your own future.

If you do want to take advice from a financial adviser we suggest you read the 7 tips provided from ASIC’s Financial Tips and Safety Checks (www.fido.asic.gov.au)

1. Deal only with a licensed financial services business
2. Pick the adviser with the strongest qualifications, experience and integrity
3. Ask questions until you really understand
4. If you feel uneasy, it's OK to walk away
5. Make sure your financial plan suits your needs and personality
6. When you get a good plan, stick to it
7. Keep all your paperwork

To find out more about HomeTrader attend a FREE Intro Seminar.