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School of Hard Knocks

Learning by Experience is Tough and the Tuition is High

Being a beginner in any endeavor is always challenging. The beginning note investor has many important decisions to consider and evaluate. Investing in mortgage notes and promissory notes is profitable when done correctly. Learning to do it right, the first time, is safer and cheaper than learning by making your own mistakes. The school of hard knocks charges a high tuition.

Just like every serious activity, note investing requires preparation, education, training and experience. Obtaining these essential requirements can be cost if not done carefully. Since investing involves putting money at risk, it should be done with care and caution. It should not be done without experienced guidance. It is not recommended that it be done as "on-the-job-training" or "earn-while-you-learn".

Investment Account Types-Tax Deferred, Tax Free and Ordinary Plans

There are many types of investment account available; each one has benefits and drawbacks. Let's take a quick look of some of the most popular types. In the retirement account group there are:

  • Traditional IRAs (Individual Retirement Account) were specified deposits are allowed annually that are tax-deductable. These are invested in publicly traded assets-stocks and bonds. The distributions and withdrawals from the account are subject to taxation.
  • Self-Directed IRAs that invest in non-publicly traded assets such as real estate and promissory notes. The tax consequences are the same as for the traditional IRA account.
  • Roth IRAs can be invested in publicly traded assets or non-publicly traded assets. The tax is paid when the investment is financed; withdrawals and dividends are tax-free.
  • Rollover IRAs are IRA accounts receiving assets from another IRA account.
  • 401 (k) Plans are company retirement plans having government and company rules.
  • 403 (b) Tax-Sheltered Annuity Plans (TSA plan) is a retirement…

Source by Lawrence Tepper

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