:::::::::WELCOME TO KERFORD INVESTMENTS:::::::::

What motivates a person or an organization to buy securities, rather than spending their money immediately?
The most common answer is the desire to increase wealth, i.e. make money grow.

Sometimes, the desire to become wealthy in the future can make you willing to take big risks. The purchase of a lottery ticket, for instance only increases the probability of becoming very wealthy, but sometimes a small chance at a big payoff, even if it costs a dollar or two, is better than none at all.

Another motivation is savings -- the desire to pass money from the present into the future. People and organizations anticipate future cash needs, and expect that their earnings in the future will not meet those needs.

There are other motives for investment, of course. Charity for instance. You may be willing to invest to make something happen that might not, otherwise -- you could invest to build a museum, to finance low-income housing, or to re-claim urban neighbourhoods. The dividends from these kinds of investments may not be economic, and thus they are difficult to compare and evaluate. For most investors, charitable goals aside, the key measure of benefit derived from a security is the rate of return.

One other class of investors deserves some attention as they are significant in the economy, and represent financial institutions such as banks or other financing operations in the economy. This is the class of risk neutral investors who can be identified by utility functions of the linear form. Whether measured as a proportion of wealth or as an absolute amount of money at risk, such investors do not demand better than even odds when considering risky investments. They are indifferent to risk, and are only concerned with the asset’s expected payoff.

This section is the part where you write down what it is you want in your life. Each individual and family is unique. Therefore, the specific goals you want to achieve in your life are unique to you. However, there are some specific goals, which apply to just about everyone. These are the ones we deal with here. Your list will probably be more detailed and longer. However, this is a good start.

The first thing one has to do is to protect them against risk. This is done two ways. The first is to create an emergency fund. The emergency fund will protect the individual or family against unexpected situations. These unexpected situations might be unemployment, health care costs not covered by insurance, or property losses not covered by insurance. The second thing to do is to purchase adequate insurance. The best mix of insurance will cover: disability, health, life, property and casualty, and your automobile.

The next thing is to provide for the financial security of yourself and your family. Many people have other dependents like elderly parents they have to take care of. As time passes, many people want to be able to fund in part or in full the tuition needs of their children and special things for their children such as first homes, cars, etc.

Another goal many people have is a comfortable standard of living. By this, we mean travel, vacations, relaxation, a second home, membership in a country club, entertainment, a new home or improvements to your existing home etc.

A fourth goal almost all people have is a comfortable retirement. People want to maintain the same standard of living in retirement that they had while they were working. They want to maintain their financial independence during retirement and if possible retire early. It is also important to shield your assets in retirement against a medical emergency.

The last goal most people have is estate planning. Regardless of circumstances, almost all people want to provide for an orderly transition of their assets. The fallacy is that only people with large estates need to plan. The reality is that almost all people need some type of estate planning.

It's not enough to establish these broad goals without specific time frames, amounts, and other details. For instance, with regard to the emergency fund, one would want to put down how much money to put into it and when it will be fully funded (e.g. I'll establish an emergency fund with $15,000 in it two years from now).

Investors need to know the time horizon available to reach their investment goal, be it retirement, saving for college or a house, or something else. In other words, you should calculate the amount of time you have to get from point A to point B. You should also examine how quickly you will spend your accumulated wealth once you reach your goal. As an example, many people can expect to live 20, 30, even 40 years beyond retirement age. This means most people will continue investing during retirement, and this should be factored into their time horizon assessment. The more time you have to achieve your goals, the more time you have to save and ride out adverse conditions. Time horizons also influence your portfolio choices.

A goal that takes 20 years or longer to achieve can permit different investments than a goal with only three years to achieve. Longer time horizons allow you to consider asset classes with higher return potential, but which may carry more risk in the form of volatility. Shorter time horizons usually necessitate lower-risk asset classes that may have more limited return potential.

Finally, put yourself in some "what if" scenarios and think about how you might react (be honest!).

Expected returns

The third step in the investor profile process is to evaluate your expected returns. What rate of return would you like to achieve in your portfolio? Remember, higher returns usually mean higher risk—odds are you will not be able to design a portfolio that achieves 100 percent returns each year and still matches your personal risk tolerance. You should also consider what rate of return you need to achieve in order to reach your investment goals within your time horizon.

Investment vehicles

Here, you want to assess your understanding of and exposure to the various Investment vehicles. You should also examine any individual preferences or restrictions you may place on your portfolio. Answering a few questions will help clarify these issues.

Do you understand the distinguishing traits of the different investment vehicles?
Are you familiar with their risk/return characteristics?
What is your investing experience among the different investment vehicles? Have you been exposed to only one area?
If you currently own investments, which are the vehicles you have used?
Lastly, do you have particular preferences or restrictions?

Tax status
Finally, we come to the last step in the investor profile process, tax status. Two factors should be considered here.

In which combined (federal, state and local) tax bracket are you?
Will you be investing in tax-deferred or taxable accounts (or both)?

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FINDING OUT YOUR NETT WORTH

There are two financial stages in a person’s life:

The first stage is the accumulation period.
The second stage is the distribution, which comes at retirement.

All the writing in this section and the following sections is relevant to the accumulation stage.

People who are accumulating assets are also broken down into other stages of their life. That is, is you single, married, divorced, have children, etc.? What is your career? When one chooses a career path, to some extent your earning potential is somewhat determined. For instance, a teacher, a doctor, an engineer, and a computer programmer, are all going to have different limits on their earning potential. Are you the type of person who seeks immediate or deferred gratification in your spending habits? Do you live for today or plan for tomorrow? And what do you spend your money on? Do you want a newer and bigger home or a vacation home; these are all play a role in your lifestyle.

Lifestyle decisions are personal decisions. They are yours alone. They involve confidence, or lack of confidence in the future. How you spend your money is your business. The main thing is to know yourself and not try to fit into another person’s idea of how you should live your life. What is important, however, is not how you spend your money, but rather, how you allocate your money.

The first step in this process is to figure out your net worth:

To do this, a Net Worth Worksheet should be used. This Net Worth Worksheet will be used to list all your assets and liabilities. You will then be able to calculate how much you're worth. The Net Worth Worksheet is a crucial step in constructing a good financial plan. You must know all of your financial resources and how you have allocated them.

People tend to accumulate assets in a couple of places. And this may not be the best way to allocate your resources. People can usually tell you all kinds of minuscule facts about themselves and their families. However, ask them what their net worth is, and they can only give you a 'ballpark' figure. And usually, they're not very close.

The second step in creating your financial profile is to determine your cash flow. To do this, we use a Cash Flow Worksheet. The purpose of this Cash Flow Worksheet is to determine where your money is going and to see if you're running at a surplus or a deficit. You will then be able to see how much money is available to reach your financial goals.

One thing that many people have found handy in determining their every day type of expenses is to keep a journal and use it to record all expenses on a daily basis like dry cleaning, laundry, lunch, taxi's, tips and all those other 'little' expenses. These 'little' expenses add up to a considerable amount over the course of a year. Most people are quite surprised at how much they actually spend on these things.

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Investment Methodology

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1. Idea Generation

Focus on the ownership of corporate assets, in particular equities, which you consider as small parts of a business that happen to be for sale.

Through a wide array of information sources and screening tools continuously look for companies with a measurable worth that might represent good to great value.

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2. Idea Valuation

Subsequently do intensive research and disciplined financial analysis to come up with reasonable estimates of intrinsic value.

If the intrinsic value of a company is above – ideally substantially above – its market price, it becomes a candidate for ownership.

This valuation exercise has to be done again and again – in fact permanently – to continually judge whether a company should be owned or not.

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3. Portfolio Composition
Never allocate all the money to a single investment but rather to a diversified portfolio of high quality but undervalued companies.
Diversification across companies and industries is of paramount importance to reduce unnecessary risk.

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4. Time at work
The idea of investing in companies at prices below intrinsic value to benefit from the inevitable reappraisal is very simple to understand but substantially more difficult to put into practice.

The problem is the reappraisal often happens slowly, even glacially. While your capital is slowly but surely at work, the above strategy requires you to go against gut reactions, the prevailing beliefs in the marketplace, the experts you respect and to ignore the inevitable and often severe market downturns.

Such are the obstacles on the road to superior investment returns.

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Risk profiles:

Conservative
This range is designed for the conservative investor, one with a low risk tolerance and/or a short time horizon. It is targeted toward the investor seeking investment stability and liquidity from his/her investable assets. The main objective of this range is to preserve capital while providing income. Fluctuations in the value of these portfolios are minor.

Moderately Conservative
Appropriate for the investor who seeks both modest capital appreciation and income from his/her portfolio. This investor will have either a moderate time horizon or a slightly higher risk tolerance than the most conservative investor in the conservative range. While this range is still designed to preserve the investor's capital, fluctuations in value may occur from year to year.

Moderate
Best suits the investor who seeks relatively stable growth from his/her investable assets offset by a low level of income. An investor in this range will have a higher tolerance for risk and/or a longer time horizon than either of the previous investors. The main objective of this portfolio is to provide steady growth while limiting fluctuations to less than those of the overall stock market.

Moderately Aggressive
Designed for investors with a high tolerance for risk and a longer time horizon. This investor has little need for current income and seeks above-average growth from his/her investable assets. The main objective of this range is capital appreciation, and these investors should be able to tolerate moderate fluctuations in their portfolio values.

Aggressive
Appropriate for investors who have both a high tolerance for risk and a long investment time horizon. The main objective of this portfolio is to provide high growth for the investor's assets without providing current income. This range may have substantial fluctuations in its value from year to year, making these portfolios unsuitable for those who do not have an extended investment horizon.

Brother-in-law investor
Your brother-in-law phones, or perhaps your stockbroker or the investment writer for the regional newspaper. He has the scoop on a great stock but you will have to act quickly. If you are likely to buy in this situation, then you are a "brother-in-law investor. "Brother-in-law investors rely on the advice of other people to make their decisions.

Technical investor
Moving averages, candlestick patterns, Gann charts and resistance levels are the sort of things the technical investor deals with. Technical investors were once called chartists because their central activity was making and studying charts of stock prices. Nowadays this is usually done on a computer where advanced mathematics combines with grunt power to unlock past patterns and correlations. The hope is that they will carry into the future.

Economist investor
This type of investor bases his decisions on forecasts of economic parameters. A typical statement is "The dollar will strengthen over the next six months, unemployment will decrease, interest rates will climb -- a great time to get into bank stocks".

Random walk investor
This is the area of the academic investor and is part of what is called Modern Portfolio Theory. "I have no idea whether stock XYZ will go up or down, but it has a high beta. Since I don’t mind the risk, I’ll buy it since I will, on the average, be compensated for this risk." At the core of this strategy is the Efficient Market Hypothesis EMH. There are a number of versions of it but they all end up at the same point: the current price of a stock is what you should buy, or sell, it for. This is the fair price and no amount of analysis will enable you to do any better, says the EMH. With the Efficient Market Hypothesis, stock prices are assumed to follow paths that can be described by tosses of a coin.

Scuttlebutt investor
This approach to investing was pioneered by Philip Fisher and consists of piecing together information on companies obtained informally through wide-ranging conversations, interviews, press-reports and, simply, gossip. In his book Common Stocks and Uncommon Profits, Fisher wrote: Go to five companies in an industry, ask each of them intelligent questions about the points of strength and weakness of the other four, and nine times out of ten a surprisingly detailed and accurate picture of all five will emerge. Fisher also suggests that useful information can be obtained from vendors, customers, research scientists and executives of trade associations.

Value Investor
In the fourth edition of the investment classic _Security Analysis_, the authors Benjamin Graham, David Dodd, and Sydney Cottle speak of the "attempts to value a stock independently of its current market price". This independent value has many names such as `intrinsic value,’ `investment value,’ `reasonable value,’ `fair value,’ and `appraised value.

Conscious Investor
This type of investor overlaps the six types just mentioned. Increasingly investors are respecting their own beliefs and values when making investment decisions. For many, quarterly earnings are no longer enough. For example, so many people are investing in socially responsible mutual funds that the total investment is now over one trillion dollars. Many others are following their own paths to clarify their investment values and act on them. The process of bringing as much honesty as possible into investment decisions we call conscious investing.

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Common Investment Frauds

Ponzi schemes: These are a type of illegal pyramid schemes named after Charles Ponzi. In the 1920s, Mr. Ponzi convinced thousands of New England residents to invest in a postage stamp speculation scheme. He tried to take advantage of the differences between U.S and foreign currencies used to buy and sell international mail coupons. He told his investors that he could provide a 40% return in just 90 days, compared to a 5% return offered with bank savings accounts. Mr. Ponzi was overwhelmed with money from potential investors. During one 3-hour period, he took in $1,000,000…and this was in 1921! To make the scheme look legitimate, some of the earlier investors received payment. However, many people who invested later lost some or all of their money. An investigation showed that Mr. Ponzi had only purchased about $30 worth of mail coupons with the millions he received from investors. Decades later, the Ponzi scheme continues to work on the "rob-Peter-to-pay-Paul" principle. They still can be found today in scams where money from new investors is used to pay off earlier investors until the whole scheme collapses.

Prime Bank Notes schemes: In these scams, con artists tell investors they have access to "secret" trading programs. They say these programs are approved by agencies such as the Federal Reserve Bank, the Treasury Department, the World Bank, the International Chamber of Commerce, or the International Monetary Fund.

Investors are told only a few privileged people will be invited to take part in the trading of certain bank securities such as bank guarantees, notes, stocks, or debentures. The promoter will explain that this is a chance for small investors to pool their money, buy these securities at a discount price and sell them at a premium.

In some variations of this scam, the investor is instructed to send money to a foreign bank, for example in the Bahamas, the Cayman Islands, or the Isle of Man. The money will later be transferred to an offshore account controlled by the con artist.

Investing Off Shore: Some con artists persuade investors to invest their money "off shore". This involves sending money to a company operated by the con in some foreign country that does not have the same reporting standards as USA. The country, often located in the Caribbean, will be described as a "tax haven". Investors are tempted by the prospect of not having to pay income tax or estate fees. The pitch usually appeals to the investor's desire to leave as much money as possible to his or her loved ones.

With some of these schemes, the off shore company may periodically send out a statement telling how much money is invested. In the case of very elderly investors, some companies will even pay interest. When the victim dies, the executor is left with a worthless piece of paper that lists an off shore post office box. The executor writes but never receives a reply. The con has disappeared with the victim's money.

Many people are interested in reducing their taxes. It can be risky if the temptation is so great that they put money into anything that claims to be a "tax shelter" without really investigating the merit of the claim. Complex tax shelters usually require the advice of an accountant, a lawyer, or both.

Obstacles such as conflicting time zones, different currencies, and the high cost of long distance phone calls and overnight mailings once made off shore schemes expensive and hard to carry out. Technology such as the Internet makes it much easier for these con artists to prey on foreign investors.

Investors should be very careful when considering investment opportunities that come from other countries. Many foreign countries do not offer investors the same protections as those available in Canada. It is practically impossible for Canadian law enforcement agencies to investigate and prosecute foreign investment frauds. Once these monies are lost it is almost impossible to find them again.

Investing On-Line:
The Internet is a valuable tool for gathering information about potential investment opportunities. Con artists to advertise their illegal scams can also use it. Here are three ways the Internet is used to fool investors:

1. On-Line Investment Newsletters:
Hundreds of investment newsletters can be found on the internet. Many offer unbiased investment advice, free of charge. Some even promote "stock picks of the month". While legitimate newsletters offer valuable advice, investors should be on the lookout for those that provide false or misleading information. They may be part of a scam!

2. Bulletin Boards:
Online bulletin boards are a popular way for investors to share information and tips. There are different kinds of bulletin boards such as newsgroups, Usenet, or web-based bulletin boards. They typically feature "threads" made up of numerous messages on different investment opportunities.

You can never be sure with whom you are dealing with on these message boards or how credible they are. Some bulletin boards make it easy for users to hide their real identity behind multiple aliases. "Unbiased" observers could actually be company insiders, large shareholders, or even paid promoters.

Some of these messages may be true, but some may be part of a scam. Con artists often promote a particular company or pretend to reveal "inside" information about upcoming announcements, new products, or profitable contracts. A single person could create the illusion of widespread interest in a questionable investment opportunity by writing many messages under several different names.

3. E-Mail Spam:
"Spam", or junk e-mail, is very easy and cheap to create. It is a popular tool with swindlers who use it to find investors for fraudulent schemes or to spread false information about a company. Spam e-mail allows con artists to target millions of Internet users at a time. This is a much bigger audience than they would get with cold-calling or mass mail-outs.

Affinity Frauds

Affinity frauds are investment scams that prey upon members of identifiable groups, such as religious, elderly, ethnic, or professional groups. The swindlers who promote these scams are group members, or they claim to be group members, or they convince respected leaders within the group to spread the word about an investment deal.

These scams exploit the trust and friendship that exist in a group of people who share something in common. It is often difficult for the police or regulators to detect affinity scams because these groups are often very close and tight-knit. Victims of such scams typically fail to notify authorities, but are more likely to try to work things out within the group.

Many affinity scams involve "Ponzi" or pyramid schemes where the money from new investors is used to make payments to earlier investors. This gives the false illusion that the investment is successful. The ploy is used to "trick" new investors into depositing money in the scheme and to make existing investors believe their investments are safe and secure. In reality, con artists almost always steal the money for their personal use. Both types of schemes depend on an unending supply of new investors. When the supply of investors dries up, the whole scheme collapses and investors lose most, if not all, of their money.

In addition, con artists are increasingly using the Internet to target affinity groups with e-mail spams.

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