Anthony Limon, HB Editor

Welcome to Hispanic Business LiveChat. We would like to welcome our guest, Louis Barajas of Louis Barajas & Associates in Los Angeles, taking your questions on investment.

The key word is SAVE. But what if you are in your 40s and just starting to get money together? What do you do?

Louis Barajas

The first thing you need to do is clarify your most important goals. Are you concerned about retirement, purchasing a home, saving for an emergency reserve. You need to know what your time horizon and risk tolerance is to align your investment with your goals. You also need to know how much money you will need to accomplish your financial goals. This will help you plan and strategize your intial steps.

Please biefly explain the advantage of the equity loan vs the re-fi, is this the best way to go to now? Why?

Louis Barajas

An equity loan is just, a loan on the equity of your home. The bank or lender will appraise your home and let you know how much you can borrow from your home in addition to what you already own. Once you have been approved, you will get something like a checking account which will let you borrow up to the amount you have agreed upon. You will only pay interest on the amount you use, not on the amount you borrow.

A re-fi is just a new loan in which you will pay interest on the entire amount of the loan whether you use all the money or not.

I am 42 yrs old and do not have a retirement plan. Where do I begin?

Louis Barajas

If you are self-employed you can invest in a Simplified Employee Pension Plan (SEP)or even a an Individual 401k Plan. If you are not self-employed you can start with a (deductible) IRA or a (non-deductible) Roth IRA. Which plan is best for you depends on your current tax situation, whether you are married (if you wife is participating in a plan), and your cash flow needs. You should really sit down with a Financial Planner to help guide you to get started.

What can you do with a family that has only a hundred dollars a month to invest?

Louis Barajas

Again, clarity is the key? What is your goal? Is it for retirement? Is it to help put the kids through college, etc.

What is your time frame and risk tolerance. I have always said that there are no such thing as good or bad investments. Once you have identified what your goal is you can then proceed to identify your most appropriate financial tool, whether it be a certificate of deposit, money market account, mutual fund, or even a stock.

We are a small Company that is interested in building our companies financial situation. Do you have any suggestion? DM

Louis Barajas

To help build your company's financial situation, you will really need a thorough business analysis. With such little information, it is difficult to tell you where the problem might be. You might try looking at several things though;

Ask yourself;
How is my pricing compared to my competition?
How much am I investing in marketing or advertising?
How often am I reviewing costs in my firm? Is someone focused on cost containment?

How can i get a bussiness grant or loan to expand my bussiness? Thanks.

Louis Barajas

Please go to www.sba.gov for information on business loans. This is the best site I know for getting information on small business loans. The site is the Small Business Administration web page, and there is lots of great stuff on business loans.

Everybody considers investing in real estate very safe and conservative. Will it still be safe in 2005, even with interest rates going up ? What is your opinion?

Louis Barajas

I would have to tell you that not everyone considers investing in real estate very safe and conservative. I have been in the investment world almost two decades now and have seen every kind of investment do great and also do poorly. I think real estate is a great investment if you also diversify your investments with other asset classes, such as stocks, bonds, and money (cash) type instruments.

Also, read as much as you can about real estate in your local area. Each city is going through different growth rates.

I am a small business owner and would like to know what retirement programs I can invest in, specially IRA or Roth IRA. Also I have 20 employees and would like to know what, if any, pre-tax investment programs I can offer to them.

Louis Barajas

You have different retirment plans in which you can choose for your company and for your self.

I would definitely sit down with a financial planner who is an expert in retirement plans and ask her (or him) to explain to you the pros and cons of the following plans for your specific situation.

Consider the following plans

SEP Plan
SIMPLE Plan
401K Plan

These plans work great for small companies such as yours.

Hello. What kind of investing do you recommend for young professionals? I'm 25 and would like to start a portfolio. Thanks.

Louis Barajas

I would recommend the following:

First make sure you fund an emergency reserve first. Fund this with a savings account, money market fund, or short term (less than 6 months)c.d. Put away at least 3 months of living expenses.

Next, contribute to your employer pension plan. Invest as much as you can in the plan. You can put away as much as 14,000 this year. Select a diversified portfolio of different asset class investments (ie, growth mutual fund, small cap, international, short-term bond fund, value fund.

I am a Hispanic professional and have all my investments (home, 401k) in US Dollars, should I diversify my currency holdings and have some investments in Euros or Mexican Pesos. 20 years down the road I am planning to retire in either Mexico or Europe. Will an international mutual fund be the best investment? Which other options would you recommend? Thanks.

Louis Barajas

Great question. Because investing in actual currency is highly risky, I would consider investing in a foreign index fund (EAFE). This will allow you to spread the risk and give you the exposure you need or may want in the international markets.

I'm young, outgoing and struggling to 1)get my career off the ground and 2)manage my debt resulting from college (including student loans and credit card). I want to begin to plan for the long term and get myself on the right track. Should I get an advisor?

Louis Barajas

This is a great question. I truly believe everyone should hire an advisor.

Most people tell me that they will use me after they make a lot of money. It's like saying you will join a gym after you lose 20 pounds.

Be careful with who you hire though. There are a lot of people who call themselves financial planners when all they are is a salesperson. Ask for referrals. I would also want to work with someone who is a Ceritfied Financial Planner (CFP) who has at least 5 or more years experience.

In your book, The Latino Journey to Financial Greatness, you emphasize the importance of changing your mindset. Since changing your mindset is seldom talked about in school or at home, why is this important to an individual's success?

Louis Barajas

You are right. My book, "The Latino Journey to Financial Greatness" is all about mind-set. I firmly believe that all wealth first begins in the mind and most financially struggling persons have limiting cultural beliefs about money. It isn't until we become aware of those beliefs and make a conscious decision to change them, we will alway stay in a state of financial struggle. Thanks for the question and I hope you enjoyed the book!

Washington's review at Social Security is a huge issue for Hispanics. What is the best approach to keep our communities informed about social security or investments in general?

Louis Barajas

Another great question! READ, READ, READ. Stay informed. Read this website. I am sure Hispanic Business will keep us up to date. I will be posting information about this on my website as well, www.financialgreatness.com Read the business section of your local newspaper. The social security issue will definitely affect us all.

When does a person need a living trust or trust fund?

Louis Barajas

Typically , you need a living trust when you have assets (like real estate) that are difficult to transfer. If you have young children and a home you definitely need a living trust.

Make sure that when you decide to do a living trust that you have an attorney who is a specialist in trusts do it for you. This is an important document and you don't want to risk it all on someone incompetent just because you want to save a few bucks. Always know that you get what you pay for. I have always believed that the poor know the cost of everything and the value of nothing. Be a smart rich person and hire the best you can find.

Hi. Just wondering, with all this talk of having a goal in mind, is there an actual dollar amount a person should aim for to retire at 65?

Louis Barajas

Absolutely. Another wonderful question. I love this.
Yes, you need to project what type of quality of life you wish to live when you decide to become financial independent (I hate the word retire). As the infamous Steven Covey said, you need to begin with the end in mind. Act as if you were to retire today. What would you do? Where would you live? How much money would you need (in todays dollars). Then project this amount with an inflation rate into the future (with the time that you have remaining to get there). Once you have a projected annual income amount, you can divide that number by an interest rate that you think you can get in a moderate risk investment portfolio. This will then give you the dollar amount of the actual amount of money that you will need.

For example if you will need in the future 50,000 a year in income, you will have to have $1 million invested at 5% to give you this annual income amount.

I want to buy a home but I keep hearing that prices are going to fall and that we are in a bubble, what are your thoughts?

Louis Barajas

Patricia.

To be quite honest, your guess is as good as mine. I have read over 300 books on investment, have been able to have lunch with some of the greatest economists and investors of our time. The great ones will always tell you that they really don't know any better than most of us. That is why I find it quite strange when people tell you when to buy or sell a stock (or real estate) based on some technical analysis or idea.

Now if you want my educated guess. I will tell you that I don't like what I am seeing now. I don't like to see people buying homes like they buy cars --- based on how much they can afford versus what the actual cost of the car or home is. I think that in certain parts of the country, like Southern California, we will be seeing some kind of bubble burst (I don't know how much though) in the very near future (next couple of years).

As a follow up to Melissa’s question from Denver, once you id an advisor, how much is the standard fee, is their performance solely measurable as it compares to the indices, or should I expect better than that? Last, when do I drop an advisor, should I have to? Thank you.

Louis Barajas

First of all here are some tips to finding a great advisor:

1. They should be interested in evaluating your total financial picture.

2. If they are going to give you investment advice (as compared to just sell you an investment product), they should be a Registered Investment Advisor.

3. I believe that they should have at least 5 or more years experience (80% of most investment advisors are out of the industry by their 5th year)

4. I strongly believe that they should also be CFP's. This doesn't guarantee that they are better than others, but it does guarantee that they are committed to their profession.

5. Ask them how they get compensated. Are there any conflicts of interest.

Equity investing is long-term investing, if you judge your advisor based on short-term returns you will be doing her and you a great disservice. If someone promises you specific returns, run. They are gamblers. I don't gamble with my clients money and you shouldn't with yours.

What are the financial componenets one should count on for retirement income?

Louis Barajas

Consider:

Your pension money
Your salary deferred contributions
Social Security
Your own personal investments
Maybe some rental income

I read your book "The Latino Journey to Financial Greatness" and I enjoyed it very much. Do you offer seminars or workshop in the Los Angeles area?

Louis Barajas

I offer workshops all across the country. Just go to my website to get more information www.financialgreatness.com

I am a recent graduate currently trying to get out of debt (student loans, credit cards) as well save. Should I "save" by paying off my credit cards first, or should I pay them and save $ in an account as well?

Louis Barajas

Another wonderful question.

Some people will tell you to pay off your credit cards first. I strongly believe that you need to focus some money on saving as well. You need to start building your savings muscle. Seeing your savings account grow will give you the mental mindset that you can be financially successful.

Louis Barajas

I want to thank everyone for the wonderful questions you have asked today. My purpose in life is committed to seeing people of all income levels obtain their greatest life goals. I wish everyone much prosperity and greatness.

Louis Barajas
Author of The Latino Journey to Financial Greatness

Anthony Limon, HB Editor

This concludes our Hispanic Business LiveChat. A big thanks to Louis Barajas of Louis Barajas and Associates. For more information on Louis Barajas please visit www.financialgreatness.com