Capital Group Financial Advisor: Active Investing in Japan
Many stock markets around the world offer active managers room to generate superior returns. Among them, Japan stands out. Its equity market appears particularly inefficient. Reforms are also shaking up the once stagnant economy, creating new winners and losers in the corporate sector. That said, stockpicking still demands skill and discipline. We believe that managers will need nothing less than exceptional research and a long-term perspective to come out ahead.
Prime Minister Shinzo Abe’s reflationary policies have brought Japan’s stock market to a level of health not seen in decades. Even with the pullback earlier this year, the TOPIX has gained more than 70% in Japanese yen terms since end-2012, when ‘Abenomics’ started raising hopes for Japan’s economic recovery. Investors are rightly interested in gaining exposure to Japan. But how they do so matters.
Adopting a passive strategy may seem attractive. An exchange-traded fund, for instance, would simply track a stock market index in Japan. But why should investors settle for market returns? Japan has traditionally been a stock picker’s market, and it still is. Active managers that are adept at identifying opportunities and managing risks stand a good chance of beating the index over time. The sheer size of Japan’s stock market makes it a fertile hunting ground. It is the third-largest in the world by market capitalisation (US$5.2 trillion) and comprises more than 3,800 listed companies. But there are more reasons why conditions in Japan favour an active approach.
Information advantage
Japan’s stock market appears highly inefficient. Mispricing opportunities can be captured by active managers armed with superior research and insights. What drives stock market efficiency? Research coverage is key. The more analysts there are following a company, the faster information is likely to be shared. In that respect, Japan trails other developed markets like the US and UK significantly. On average, 12 analysts follow each company in the Nikkei 225 index, compared with 22 for the S&P 500 Composite Index and 21 for the FTSE 100 index.1 Research coverage tends to be even thinner for small- and mid-cap companies in Japan (see Exhibit 1). After the global financial crisis, many securities houses cut their research in this space to focus on larger companies instead. Within the electric appliances industry, for example, as many as 12 major securities houses track conglomerate Hitachi. But just two follow commercial kitchen equipment maker Hoshizaki.
Small firms, big reach
Japan’s small- and mid-cap sector is also home to numerous quality companies with leading positions in niche industries. This means there are ample opportunities for extensive bottom-up research to pay off.
Hoshizaki is a case in point. It receives little analyst coverage, yet it dominates the market for ice makers both domestically and abroad. Its energy-saving technology is a key competitive advantage as it eyes a bigger slice of the market for other appliances like refrigerators.
Likewise, few investors may have heard of Sysmex. But it is the world’s leading supplier of blood tests, ranking above healthcare giants such as Abbott. Over the years, Sysmex has gained market share with its highly efficient medical diagnostic tools and is pursuing further growth across various geographies and product lines.
Many small- and mid-cap companies trade at a discount to the market, making them seem even more attractive. But it pays to be careful. Certainly, some companies are undervalued because the market has overlooked them. But there are also those that simply have poor prospects. Active managers make a real difference when they can separate value finds from value traps.
Abenomics effect
In recent years, Abenomics has become a chief driver of investment opportunities in Japan, across companies large and small. Part of the agenda involves long-term reforms that are difficult to price into the stock market. This makes Japan a prime venue for forward-looking stock pickers that can identify companies poised for change.
Already, new corporate governance measures are starting to have an impact. They take aim at low profitability, ineffective boards, and other forms of poor corporate behaviour that have undermined investor confidence for years. Most companies that pledged to adopt these measures have been rewarded by the stock market. But anticipating which companies will do so is no mean feat.
Local insights are critical. Knowing a company’s financials is one thing, but understanding its culture and focus is quite another. It takes on-the-ground research, including regular meetings with top executives, to discern management’s views on Abenomics and detect potential changes in corporate direction.
Some companies that took steps to shape up were once seen as unlikely reform candidates. Fanuc, a world-leading industrial robot maker known for its reticence, surprised the market when it raised its dividend payout ratio and proposed share buybacks last year.
Still, overhauling corporate mindsets across Japan will take time. Its corporate governance still lags behind other developed countries. The discovery of accounting irregularities at electronics group Toshiba last year is a reminder of the gaps that exist. Active managers that can harness research to spot – and avoid – questionable firms have a valuable role to play.
Risk management
Indeed, limiting losses matters. But a passive approach provides no protection in this regard: investors tracking an index fully capture the market’s decline.
Passive investors are also vulnerable to unintended exposures. In February 2011, for example, investors mirroring the MSCI Japan Index would have had a 1.43% exposure to Tokyo Electric Power (TEPCO), whether they were positive about the electricity provider or not. It was then the ninth-largest company in the index. In March 2011, a massive earthquake set off a nuclear disaster at TEPCO’s power plant in Fukushima. As the company sank into the red, its share price plummeted. Today, TEPCO makes up just about 0.19% of the index.
In contrast, an active strategy can better protect against downside. The most successful managers consciously manage their exposures and invest according to their strongest convictions – not the index. They have the flexibility to avoid companies in the index with lofty valuations, or invest in non-index companies that show resilience. They can also hold cash to preserve capital during downturns. In fact, it is often during broad market declines that these managers deliver exceptional value.
Selecting an active manager
Historical data present a compelling case for long-term active investing in Japan. Over five-, 10- and 15-year periods, the median return from Japanese equity active managers handily outpaced the TOPIX (see Exhibit 2). Capital Group’s Japan Equity strategy also beat the TOPIX to rank within the top quartile of the universe over its lifetime.
Of course, not all active managers beat the index in the long term. It is therefore crucial for investors to identify those with the qualities to come out ahead.
Strong research skills are a prerequisite for success, especially in Japan. Given the stock market’s inefficiency, quality research goes a long way towards uncovering attractive opportunities.
This is why we commit huge resources to mine for insights on the ground. Our industry analysts research companies from the bottom up and maintain frequent communication with managements. They monitor not just companies based in Tokyo, but also lesser known firms in other parts of Japan.
The Capital Group Inc Singapore: A tale of two US economies
For the US, the second half of 2016 was a tale of two economies, with a strong domestic economy and weaker industrial sector. These trends are largely unchanged, but are now set against a very different political backdrop. While the impact of Donald Trump’s election as US president remains unclear, the improving economy should be supportive of US equities in 2017.
One economy, two inflation levels
Robust US consumer spending continues, with indicators showing encouraging data for areas such as retail, housing and auto sales. However, this sits alongside a relatively lacklustre industrial sector, driven by two factors:
- Weak export growth because of sluggish non-US economic activity and a strong US dollar.
- The collapse of the US energy sector, which followed the sharp decline in energy prices.
This split economy subsequently led to different levels of inflation in services and goods. As shown in the first chart below, service prices (which are largely determined by domestic economic conditions) have been rising around 3%, while goods prices (which are more a function of global economic conditions) have been flat or falling.
What this means for the Fed
The bifurcated nature of the US economy presented the US Federal Reserve (Fed) with a challenge: how to account for the fact that one half was growing at a rate better than expected while the other was showing the opposite trend. In response, the Fed chose to raise interest rates in December, while its rate-setters forecast further rises in 2017, contingent upon positive incoming economic data. We anticipate, however, that if additional rate rises do take place in 2017, these will be small and the ‘lower for longer’ scenario will remain intact.
Strengthening macroeconomic conditions
In a positive development, the two headwinds facing the industrial sector in 2016 have abated. Energy prices have rebounded, bolstered by the agreement between OPEC and other oil-producing nations to cut oil production. At the same time, the US dollar has weakened since the beginning of the year. This should lead to the industrial sector posting stronger growth rates in 2017, and in turn allow overall US economic growth to reaccelerate to a rate of 2%-2.5%, which we saw after the recession ended in mid-2009.
The Trump factor and policy uncertainty
The big change for the US has been in the political arena. President Trump’s bold proposed policies have already affected markets in anticipation of their implementation, but much remains uncertain.
If Trump’s fiscal policies were to be fully implemented, we could see stimulus reaching a level of around 3% of GDP, which may be problematic in the longer term. US unemployment is now below 5%, which is what most economists consider to be the economy’s natural rate. As the unemployment rate has moved further below 5%, wage growth has accelerated in a typical way. In past cycles, wage growth has accelerated every time the unemployment rate has fallen below 4%. If the economy does 3 indeed reach the 2%-2.5% growth rate, and there is a further 1%-1.5% of additional stimulus in 2017, the unemployment rate would likely continue to fall further, triggering a further acceleration in wage growth. This would result in a stronger economy in 2017 as consumers benefit from wage growth, but it may also cause the Fed to respond more aggressively than what the markets have currently priced in, by raising interest rates higher and faster.
Higher US interest rates would likely lead to higher bond yields, albeit within limits. Despite rising since the election, real yields have remained very low, at just above zero. This seems inconsistent with an expected economic growth rate of 2%-2.5% plus additional stimulus. These low yields are likely a by-product of policies implemented by other central banks around the world. Quantitative easing, by which central banks create money to purchase bonds, has directed vast volumes of money to the US Treasury market, driving bond prices higher and yields lower. While the US may have ceased its bond-buying programme, other markets, including the EU, have continued theirs. So while we can expect higher US Treasury yields, there will probably be a limit to how high they go, making them unlikely to pose a risk to the economic activity of 2017.
The costs of economic stimulus
Before the presidential election, the Congressional Budget Office had forecast that the federal debt-to-GDP ratio would increase over the next decade, reaching around 80% by 20251. However, if Trump’s proposals were fully implemented, that ratio would exceed 100% during that period2, reaching the same levels as in countries affected by the European debt crisis countries. If the growth in US debt continues along this trajectory, concerns about debt sustainability could increase over the next decade. This, coupled with a less favourable supply-and-demand balance within the Treasury market, could ultimately put upward pressure on yields. However, these are potential areas of concern that will have an impact beyond 2017.
The other key area of concern for the US economy is Trump’s policies on trade. There are currently trillions of dollars of goods that flow into and out of the US economy on an annual basis. Should significant tariffs on imports be levied, US consumers would lose purchasing power, while other countries could implement tariffs in retaliation. The result would be much higher prices for US consumers and so reduced consumer spending, as well as dampened export growth. Finally, there are well-entrenched global supply chains that rely on the relatively free movement of goods between countries. To disrupt those supply chains would no doubt have a negative impact on economic activity. Again, however, none of these outcomes are likely to play out in 2017, but rather in 2019 or 2020.
Realistic expectations
There are significant obstacles that President Trump would have to face should he push for his full proposed stimulus and policies. Firstly, many of the policies would require congressional approval, which is not guaranteed. Even if they were approved, it would then take time to implement them. For example, a large infrastructure spending package would take a significant amount of time to execute as projects have to be identified and resources mobilised. The same goes for trade policies.
A supportive backdrop for US equities remains despite uncertainties
The US equity market currently appears fully valued, with the price-to-earnings ratio at a level that has rarely been exceeded. As a result, we believe a reasonable expectation is for total return over the next 12 to 18 months to be driven by a combination of earnings growth and dividend yield.
Fortunately, with an economy that is improving, an industrial sector that is recovering and the possibility of corporate tax cuts, the outlook for US earnings is positive. In our view, it is also reasonable to expect solid earnings growth over the next 12 to 18 months and, if you factor in dividend yield on top of that, there is the potential for positive equity market returns as we go through 2017 and into 2018.
Galveston Financial Capital: Success Stories
GCSBDC Helps Make Local Take-Out Delivery A Possibility
Anthony Vela, CEO of Space City Takeout, LLC located in the Clear Lake area started his business in April 2012. A popular business industry on the West Coast, his idea has taken off very well. Space City Takeout provides meal delivery from local restaurants to hotels, businesses, and residential customers. He has expanded his catering services to local corporations in the area. His company is continually adding more restaurants providing more variety for his customers. His residential customers say, “Space City Takeout is a fantastic service for after you get home from work and just don't want to drive anymore. Their prompt courteous drivers are a great alternative. Give them a try and I am sure you will be hooked like us.”
Mr. Vela started his company with his own capital and has grown very rapidly for the last two years with a profit so far for 2014, largely due to his keen sense of business and a determination to succeed. The company has a growth of 706% from 2012 to 2013. As of 2013 to 2014, it is currently about a 200% growth rate. The residential database was 274 people in 2012, 1754 in 2013 and 2955 as of today. His company works with 18 restaurants and services 28 Hotels and approximately 200 businesses. Vela says, “Restaurants that partner with Space City Takeout benefit by receiving incremental sales that positively affect their bottom lines. It is simple takeout orders for the restaurants. These sales are generated through Space City Takeout's marketing utilizing a variety of print and digital methods targeting busy professionals who have a need to have their food delivered. The marketing methods used to generate sales to restaurants include targeted mailed menu guides, postcards, SEO/SEM, social media and newspaper inserts etc..."
Due to his rapid growth, he has recently obtained his first business loan for working capital to assist with expansion. He has gone from 5 employees to 13 at this time and continues to grow.
When Anthony first became a client of Galveston County Small Business Development Center in Texas City his successful business was only in the “idea stage”. The SBDC has helped him since conception to prepare a business plan, set up QuickBooks for his bookkeeping records, offer him management guidance, marketing, strategic planning advice, and assistance with the search for and request funding for growth. Anthony knows the SBDC Business Advisors are here for him every step of the way in his business.
GCSBDC Assists Local Business Woman in New Venture
Janice Weatherspoon has worked with the GCSBDC since the start of her business when the GCSBDC assisted her in getting a business loan to start her day care business with 6 employees. She has continued to work with the GCSBDC to acquire the business management skills she needed to continue in business and to create 19 new jobs.
Janice being the entrepreneur that she is decided that the vacant space next to her daycare was the perfect place for her new venture. Janice opened A Brighter Day Arts & Event Center in 2014. The event center boasts private meeting rooms, full kitchen, state-of-the art sound system, dance floor and much more.
Janice knew that the GCSBDC was with her every step of the way. From utilizing Quickbooks to obtaining loans Janice knew that the GCSBDC would help her to get where she wanted to go.
Online Fraud Detection: SMS verification codes at risk of fraud
People’s use of authentication codes to regain access to their online accounts can be exploited by criminals. Researchers at New York University Abu Dhabi have released a study of how such attacks work and the ways to prevent them.
The proliferation of online services for banking, social media, shopping and just about everything else certainly makes life easier.
Buying things, checking account balances and staying in touch with friends involves little more than a few taps of a keyboard and the click of a mouse.
But remembering the passwords for our myriad online accounts can prove difficult, and often we need help to get into our accounts when our memory fails us.
With some accounts, users who forget their password can ask for a verification code to be sent to their mobile phone. The code can be used to regain access to the account.
However, a study by Prof Nasir Memon, who set up the Centre for Cyber Security at New York University Abu Dhabi, and his doctoral student Hossein Siadati has shown that this system is prone to abuse.
The work indicates that there is a significant risk of fraudsters obtaining verification codes – allowing them to gain access to accounts.
A fraudster looking to hack into an account can, relatively easily, activate the mechanism that leads to a verification code being sent to the mobile phone of the person to whom the account is registered. To do this, the fraudster needs to know only the email address associated with the account.
If they also know the user’s mobile phone number, and there are several ways of obtaining a person’s mobile number, they can contact them to try to get hold of the code. Doing this is known as a social engineering attack.
In their study, the researchers investigated what types of messages from fraudsters are most likely to get users to hand over a verification code.
Published in the Elsevier journal Computers and Security, their work also looked at how the messages that contain verification codes can be designed to minimise the risk of fraud.
"We wanted to explore this scientifically. What’s going on in the user’s mind. We sent them different messages," said Prof Memon.
To test what are the most effective "attack messages", the researchers recruited a team of adult participants.
So that the experiment mirrored as closely as possible what could happen in the real world, these volunteers did not know that they were going to be targeted in a simulated verification code forwarding attack.
The researchers sent, from their own mobile phones, a verification code to the mobile phones of the participants, none of whom had requested such a code. This first message was followed up with one of a number of "attack messages", such as, "We have received a complaint of abuse of your Gmail account. Please reply with the verification code we just sent you to receive the details privately", or, "You have a voicemail on Google Voice. To listen, please reply with the message code we just sent to you".
Sixteen attack messages were tested and the response rates compared. The attack message that was most effective at getting participants to send the verification code was: "Did you request a password reset for your Gmail account? Delete this message if you did. Otherwise, send "Cancel + the verification code we just sent to you".
Half of participants responded to this message by sending the verification code, an action which would have put their account at risk of being compromised had the attack been real.
Online Security Review: Identity Theft Takes a New Turn
If you think your finances are safer now that you use a chip card, think again. The latest Javelin Identity Fraud Study reports the number of identity fraud victims increased by 16 percent in 2016 to more than 15 million consumers. And the amount the thieves took grew by $1 billion to more than $16 billion in the past year.
A large part of the increase came from “card not present” fraud in the first year since chip cards became widely used. Fraudsters are resorting to more invasive ways of getting your identity details than simply counterfeiting mag stripe cards.
So-called “phishing” schemes have become far more sophisticated. Gone are the days of the misspellings and clumsy grammar that made fraud emails obvious. Fraudsters have gotten better at tricking you into clicking on a link in one of these emails. Once you do that on your computer or smartphone, these links deploy malware called “bots” to collect all your data, including PIN and CV authentication numbers as you shop online.
There’s also a growing trend of identity fraud crimes enabled by victims’ social media posts. Harmless items on your pages, including celebrations of your birthday, or a college graduation or reunion, give thieves information they use open new accounts in your name. Fraudulent new credit accounts for more than half the increase in identity theft crime last year.
So what should you be doing to guard your identity? Here are some suggestions, which mostly involve common sense and a commitment to regularly review your finances.
—Check online accounts regularly. Visit your bank or credit card website at least once a week to make sure that no withdrawals or unauthorized charges have been made. Yes, you’re protected from fraud, but there’s no way to avoid the hassle of getting a new account number when you’ve been attacked. At least you can minimize the trauma by catching fraudulent purchases immediately.
—Check your credit report at least quarterly. These days, it’s not so much to check your credit status as to make sure no one has opened a new account in your name. Consider freezing your credit to avoid this problem. That’s easy to do, especially if you don’t plan to open new accounts or make a major purchase that requires new credit. A freeze can easily and temporarily be lifted.
—Guard your personal information. Don’t store passwords in browsers, even though it makes online shopping easier. In fact, don’t store passwords unprotected on your smart phone where they are easily accessed. Instead, subscribe to an encrypted password protection service.
—Create two-factor authentication (2FA) for your banking and credit and brokerage accounts. That means you can’t simply sign in with your password. Instead, the bank will send you a one-time code via either email or text to a different device than the one you are using to sign in. That guarantees an extra degree of protection. Most financial companies will let you set parameters so you can use your credit or debit card to buy a latte without any trouble but a purchase over a certain set amount will trigger the 2FA requirement.
—Be aware of your vulnerabilities. Regard all unsolicited emails suspiciously, and never click on a link. Simply hang up on phone callers who ask you for personal information. And examine the security of WiFi links you may use to get online for banking or shopping.
I have always thought that if you took the steps described above, you would be reasonably safe — or at least would catch fraud quickly. But experts at Lifelock, which cosponsored the Javelin study, opened my eyes to new forms of identity theft that might not be so quickly revealed.
These include identity theft via payday loans, peer-to-peer lending platforms, and new cell phone account originations. These are not likely to be picked up — at least quickly — by credit bureaus. But they are a focus of protection at Lifelock.
However you choose to protect yourself, don’t be deluded by the latest card security measures. Identity theft is growing. And you could be next. That’s the Savage Truth.
Investing Review: Entering the World of Investment
Why people invest? Investing creates more money, which in turn, helps you to fund your lifestyle and plan for financial hardships. When you invest, you devote your time, resources or effort to some specific endeavor with the expectation that it will generate a return in the future.
Entering the world of investment isn’t easy, you need to have a certain level of knowledge and skill because taking your first step in the market without knowing what you’re doing and where you’re heading is a very dangerous move. Be sure that you are well-informed, there’s a huge amount of information available on the Internet to make yourself equipped before investing in an institution.
There are various ways to invest – stocks, bonds, certificate of deposit and mutual funds are some form investments you can choose from, just be careful of investment scams. But before venturing your way down the road of investing, consider learning the basics here.
Your debts, remove them first.
Before starting to invest, make sure that you don’t have high-interest debt existing. Why? Because all the effort you’ll put in investing will be useless if you don’t take necessary action about it. It would be better paying your debt first as such would negate all your efforts in investing.
There’s an active and passive management in investing.
There are two main methods you’ll encounter when you are stock investing – active and passive management. Active investing involves choosing your desired investment type while a passive investing involves a third party. Stock investing is commonly referred as active investing, but this type of investing strategy doesn’t have favorable outcomes at all times.
Analyze the situation before investing.
Remember, investing isn’t a casino slot machine lever where you can magically gain a huge amount of money once you get lucky. When you are investing, years of patience and discreet assessment of a company are required before you can finally reap a good harvest.
In line with this, when you commit your money to something you don’t understand then you are gambling with the possibility of losing the money you invested. It is necessary that you do research before investing in a specific company and do not immediately believe the opinions and speculations of another person. If your friend told you that a certain company will definitely boom in the following years, make sure to do a little research about the company first and its performance before throwing your hard-earned cash at it.
Planning and setting financial goals.
Investing is a long careful process and you need to ask yourself a lot of questions before undertaking the road to investing.
- What are your financial goals?
- How long is your time frame in investing?
- What type of investment will you choose?
- How much money are you willing to invest to achieve your financial goals
- What short-term financial expenses do you have?
- Will you have to retire using your investment?
Learn how the stock trading works.
After establishing concrete financial goals, you can now learn how to start making your investments. In mutual funds, call a fund company and request to open an account for you. In dealing with stocks, New York Stock Exchange (NYSE), the American Stock Exchange (AMEX), and the Nasdaq Stock Market are the major US exchanges. Stocks are traded on various stock exchanges, they all have a different mode of trading but the process of buying and selling shares are all the same.
Buyers and sellers connect during stock exchanges. The buyer will make a “bid” (the share price they are willing to buy), while seller “ask” (the price of the share they are willing to sell). The “spread” is the difference between the two, which are often goes to the professional who handled the trade exchange.
The most common way to buy a stock is through brokerage accounts. There are full-service workers and there are discount brokers who offer their service at a not too expensive price.
Cash account and margin account and where you should be.
In using a brokerage account, you can use cash account or a margin account. In a cash account, all transactions are done by using the only money you actually have. While a margin account, let’s you buy a stock with borrowed money from other people’s cash. The latter can be quite appealing but there’s risk taking that road.
Brokers will usually endorse margin accounts, as those will create more commissions for them. Though borrowing money will increase your chances of buying more stocks, it will also take you to risk because you’ll have to pay all that margin money at some point. Therefore, margin accounts are great if your investments are soaring high in value but can cause uncertainty if it isn’t. This type of investment is not advisable for beginners like you.
Direct Investment Plans (DIPs) and Dividend Reinvestment Plans (DRPs)
If you aren’t ready for a brokerage account then consider one steadier way to buy stock. Investors call it as Drips. DRP’s and DIPs are offered by corporations that allow shareholders to buy stock directly from them at low cost or fees. Not every company offers this kind of opportunity but they are great for beginners who can only invest small amounts of money.
Investment Tips: Escape Plan for Your Debt Problem
Wrestling with debt for years with no success? It certainly is an exhausting thing to struggle and keep your head above water. A debt isn’t something you can brush off. It is like a recurring nightmare where Freddy Krueger keeps on haunting and chasing you even on dreams. And now, it is time to take back your life and follow these debt escape plan I prepared for you.
Seek help from family and friends
This will be my first suggestion. Talk to a friend or relative that has a financial capability to help you pay your debt. But make sure to have a formal agreement on paper regarding payment terms and conditions so that it wouldn’t cause arguments and disputes in the future.
Pay higher than the minimum monthly payment
One of the faster ways to escape your debt is to pay higher than the minimum monthly payment. Paying only the minimum cash required each month will just lengthen your misery so pay as much as you can afford. If you have spare money allotted for your dine-outs then why not try eliminating that luxurious thing and add it up to your debt payment? Sacrificing such luxuries to quickly pay off your debt is not a bad thing.
Sacrificing savings and investments
Why not withdraw your savings and investment in order to slowly pay off your debt? It isn’t a bad thing if you’ll consider it carefully. If your savings and investments are making less than the cost of your debt, it might appear unwise but it isn’t bad to pay off your debt first using any possible source of money you have.
Snowball method for credit card debt
A credit card is such a great help with many benefits. It can help you in buying and save money but the constant uncontrolled use of it can ruin your finances. Here are two credit card debt escape plan recommended for you:
Plan #1: First, pay the required monthly payment on all of your cards except for one. Then pay as much as you can afford on that one card so you could easily settle your balance in there quickly. Don’t settle on paying for the minimum required payment only, it will just prolong the agony. Once the balance in that particular card reaches zero, try the same method for the next credit card balance you have on your list.
Plan #2: Credit card balance transfer is one alternative way you can use to wisely pay your debt and save money. This involves the transfer of the balance from one credit card account to another. Many credit card companies allow this process in most cases. All you have to do is choose the lowest interest rate you have on your cards and transfer the remaining balance from other cards into that one. Transferring a higher interest bill to a low-interest card is one excellent move that will surely save you a lot of money in interest. If the outstanding balance is too large for that low-interest card, consider Plan #1.
Using cash value life insurance
Nowadays, life insurance is a must have especially if you have a family that relies on your income. This will become of great help to you and your family if you accidentally die. However, having a debt can also become a burden to you and your family in the future. If your life insurance company provides cash value, why not borrow from your own money? In this case, you’ll have longer terms to pay for the loan with interest rate to avoid interest scams less than commercial rates.
Apply for a Home Equity Loan
Owning a home is one potential source of extra cash. You can apply for a Home Equity Loan (HEL) to pay off your debts. The maximum loan amount you can acquire will be based on the current market value of your home assessed by an appraiser. Don’t be a reckless borrower and make sure that you’ll repay the loan or else your home could be sold to pay off the remaining debt. Your house is at stake here!
Apply for a loan using your 401(k) retirement savings plan
401(k) plan loans are one of the better ways to pay off your debt. If you have taken part in your company’s 401(k) retirement saving plan then you may benefit from its loan feature where you could borrow roughly half of the accounts value. Consider this carefully though loaning using this plan is much more reasonable as it gives low-interest rate and that every dime in interest paid on this loan goes directly to your 401(k) account, it also has some downsides. Make sure to do some research and raised any questions before applying.
Renegotiate
Nothing works for you on the early escape plans above? Want to file a bankruptcy? No, not yet. There’s one more solution, try to renegotiate terms. Use your ace card which is to threaten them of filing bankruptcy since you don’t have any other solution to repay your debt. This will force them to work things out with you – ask for a lower repayment term or even lower interest rate. Oftentimes, they prefer this kind or settlement rather than filing a bankruptcy.
Bankruptcy is your last resort
File a bankruptcy. This is your last and only resort if renegotiation wasn't become an option and if you really don’t have the resources to pay your debt. However, you should be fully aware that filing a bankruptcy has some drawbacks.
