Connect with us

Investment

5 Investing Tips For Beginners

Avatar

Published

on

If you need help in managing your money wisely, look no further because we have 5 effective investing tips for beginners. Sure, investing may seem like a huge responsibility, but with these tips, you can jump-start your investment in no time.

Investing Tips Beginners Need To Know

1. Assess yourself and your finances

Assess yourself and your finances | Investing Tips For Beginners

While it is good that you want to start investing, it is better to assess you and your finances first. You can start by asking yourself the following questions:

  • Am I ready to commit not only my money but also my time?
  • How much of my salary can I invest?
  • With all my expenses, can I still afford to invest?

Investing is a commitment, so you have to be mentally and financially ready. If you have debts and loans to pay, then it can be a pressure to set aside some money for your investment. And so, it’s best to get rid of them beforehand. In between payments for your debts and loans, you can set up a budget for your expenses, emergency fund and how much you are willing to invest.

Some questions you can ask include:

  • How soon is the return on investment?
  • What type of earnings can I expect?
  • How much risk is involved?
  • Is my investment tax exempt?

 

2. Don’t be afraid to seek help

Investing for the first time can be quite overwhelming because there are so many important details to know, remember and keep track of. If you are unsure in certain aspects like opening an account or where to invest, then it’s best to ask the people who know it better. For example, most brokerage firms would have a customer service who can assist you. You can also use this opportunity to ask questions and address your concerns.

Do not just rely on the financial market news. Seek the advice of a financial professional.

 

3. Know your options

Know your options | Investing Tips For Beginners

People have different financial situations and also, different preferences. So you have to know which will work for you. Some investment options include:

  • 401k plan
  • Annuities
  • Bonds
  • Mutual funds
  • Private equity funds
  • IRA
  • Stocks
  • Treasury securities:
    • Treasury bills
    • Treasury notes
    • Treasury bonds
    • Treasury inflation-protected securities
    • Floating rate notes (FRNs)
  • Trusts

RELATED: Americans Prefer This Investment Opposed To Stocks

4. Do your research

Do your research | Investing Tips For Beginners

Check the news and articles for investment-related updates. Make use of the internet to look for more ways to invest and so, grow your money. However, be wary of scams and fraud. So before signing anything, always do a research beforehand.

Check the Financial Industry Regulatory Authority (FINRA) for the latest market data and information.

 

5. Do not neglect saving money

Do not neglect saving money | Investing Tips For Beginners

Sure, you have an investment which you can use in the future. However, it is still best to have savings you can use for emergency or whenever you need the money to. Remember that some investments, especially long term, cannot be withdrawn or converted to cash immediately.

Tips to save money:

  • Commit yourself to put a part of your paycheck to your savings account
  • Monitor your savings, so you become more motivated to save
  • Consult a qualified and licensed professional

Know the important investing lessons from the expert here.

 

For more investing tips, watch this clip from Project Life Mastery:

 

In conclusion, investing for the first time may be overwhelming. But with commitment, enough knowledge, and advice from financial professionals, it will become easier.

Are there other investing tips you know? Share it with us in the comments below!

 

Continue Reading
Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Business

Many Americans Put Their Stimulus Checks Into The Stock Market

Avatar

Published

on

Many Americans Put Their Stimulus Checks Into The Stock Market

The government sent $1200 stimulus checks to help Americans pay their bills. However, it turns out that many people turned around and put most of that money into the stock market. This is according to research done by Envestnet Yodlee, a data aggregation company.

Bill Parsons, Group President, Data Analytics at Envestnet Yodlee said during a recent CNBC interview, “Covid is causing conversations among family members and family members with their advisors about what to do with their money and were seeing that in the data… Securities trading did see significant lift week-over-week and I suspect that that’s in part due to big changes in the market.”

People Investing in Stocks

In most income brackets, data shows that buying stocks was the second or third most common use for the funds. Fortunately, the most common uses of the stimulus money were increasing savings and cash withdrawals.

The company started tracking the spending habits of 2.5 million Americans in early March. It noticed a divergence in behavior in mid-April when the checks started to arrive in mailboxes. Those that received their check increased their spending by 81% compared to the prior week. Some of that spending went into the stock market.

In the $35,000 – $75,000 income bracket, stock trading increased by 90% in the week the check was received compared to the prior week.

In the $100,000 – $150,000 income bracket, trading increased 82% in the week the stimulus check arrived. Meanwhile, in the $150,000 or higher income bracket, stock trading only increased by 50%. The $150,000 or higher bracket would not have been eligible for a stimulus check. Therefore, it acts as a good baseline.

New Online Trading Accounts

All of this stock buying meant a whole lot of new online trading accounts were opened in the last month or so. However, the brokerage houses aren’t sure if that is due to the stimulus checks, or the opportunity to buy stocks cheaply as the market fell.

Charles Schwab reported “monumental volumes” as it opened 609,000 new accounts in the first quarter. Additionally, the stock trading app Robinhood reported daily trade volume was up 300% in March compared to the previous year. The company co-CEO also said during an interview with CNBC that over 50% of its customers are first-time investors.

You may believe the brand new investors were wise enough to buy stocks because they recognized they were cheap and the markets would rebound. Either way, it seems they have very good timing.

Since the market bottomed in late-March, stocks have staged a tremendous rally in the last two months, with the Dow Jones Industrial Average and S&P 500 climbing nearly 35% from their March lows, and the Nasdaq gaining more than 40% over the same time period.

It’s better than spending the money on weed, sneakers and video games.

Up Next:

Continue Reading

Business

Unemployment Rate Soars Despite States, Economy Reopening

Avatar

Published

on

Unemployment Rate Soars Despite States, Economy Reopening

The slow reopening of the economy has done little to boost the job market and stall the unemployment rate.

Another 2.4 million Americans filed initial jobless claims for the week ending May 16. This brings the total since late March to an incredible 38.6 million.

Continuing unemployment claims, those who file to receive ongoing benefits, added another 2.5 million through May 9. This brings the total to 25.1 million.

Observers were hoping that they would see the number of continuing claims to begin to decrease. This comes after last week’s report only showed an increase of 500,000 claims, the smallest increase since March.

With that figure jumping by 2.5 million, it dashed those hopes.

“It is looking like May is shaping up to be worse for the labor market than we had initially thought,” economists at Jefferies said in a recent note. “We noted in our response to the April employment data that we expected that we would see another drop in payrolls in May of about 1 million, followed by a strong rebound in June. However, the stubbornly high levels of both initial and continuing claims suggest that we are actually in store for another historic drop in payrolls in May.”

Hoping for a Drop

Diane Swonk, chief economist at Grant Thornton, was also hoping to see a decrease in continuing claims. However, she says we may see some improvement soon. It’s possible as companies use money from the Payroll Protection Program to bring back workers.

“I’d love to see a big drop in continuing claims because that would really be a sign of rehiring,” she said, but also cautions that May is shaping up to be a terrible month for workers, who may find that their temporary unemployment may not be so temporary. “This is the week of the survey. … It tells us May is going to be another bloody month, with a lot of downward revisions for an even worse month of April,” said Swonk. “May will be a much worse unemployment rate because people will be looking for jobs again and their layoffs weren’t as temporary as they had hoped.”

Current Concerns

Very real concerns exist that the unemployment figures fare worse than the actually reported ones. These concerns come as states are still overwhelmed by the sheer number of claims and still haven’t processed the backlog.

It’s hard to imagine what the real unemployment rate would be if a backlog of initial filings does exist.

Chris Rupkey, chief financial economist at MUFG Union Bank, said if you add in the initial claims from last week’s report, “That would put the unemployment rate at about 25.4%”

Some states are seeing relatively little impact on employment due to the pandemic. Utah and South Dakota are seeing unemployment rates remain below 10%, while other states have been crippled by job losses.

Georgia and Kentucky have the highest unemployment rates in the country, where the jobless rates are approaching 40 percent. Other states seeing unemployment rates at or near 30 percent include Washington and Louisiana. Also included are Michigan, Rhode Island, Nevada and Pennsylvania, as per Deutsche Bank Research.

Up Next:

Continue Reading

Business

Buffett Recommending S&P Index Fund A Mistake, Says Berkshire Shareholder

Avatar

Published

on

Buffett Recommending S&P Index Fund A Mistake, Says Berkshire Shareholder

In an article earlier this week, we posed a simple question: has Warren Buffett lost his touch?

Mark Hulbert, of the Hulbert Financial Digest, says skeptics are being “unfair” on Buffet. Hulbert adds that anyone suggesting he’s lost his touch should cool their heels. He says Buffett hasn’t lost money in the last 10 years. He also mentions that nobody beats the market all the time.

Others, like Howard Gold, a columnist at Marketwatch, points out that Buffett has been “profoundly underperforming” against the S&P 500 and most of his recent deals have been duds.

Buffet Gives Advice

But what irks one investor, in particular, was Buffett’s advice that the average investor should just buy an S&P index fund.

Buffett’s comment came during the Berkshire Hathaway conference call, when he stated “In my view, for most people, the best thing to do is to own the S&P 500 index fund.”

That may be practical advice for the vast majority of Americans. However, Tony Scherrer, a CFA at Smead Capital Management, says that Buffett’s comment completely goes against his own advice.

Scherrer believes that by recommending an S&P index fund, Buffett is telling investors to buy the exact type of companies that he himself has spent his career avoiding.

Specifically, a quote from the 2007 Berkshire Hathaway shareholder letter, where Buffett says:

“The worst sort of business is one that grows rapidly, requires significant capital to engender the growth, and then earns little or no money.”

Scherrer takes each part of the statement and points out where Buffett contradicts or simply ignores his own advice. He starts with:

“The worst sort of business is one that grows rapidly…”

The S&P 500 has 21% of its weighting in just five stocks: Microsoft, Apple, Amazon, Facebook and Alphabet. Scherrer points to research by David Kostin at Goldman Sachs that shows these top five names have an expectation of revenue growth of 14% over the next two years, and trade at 28x the forward two-year earnings average. The other 495 stocks in the index are expected to grow revenue much slower, at 4% over the next two years, but also trade at a much lower 14x the forward two-year earnings average. In other words, buying the S&P index fund means paying twice as much (28x vs. 14x) for a handful of stocks that are growing rapidly.

“…requires significant capital to engender the growth…”

Netflix, Amazon and Facebook are among the heavily weighted stocks in the index, and Scherrer says they are all burning through significant amounts of money to keep growing.

“Netflix’s cost for its content has mushroomed from $4.5bn five years ago to an expected $15bn in 2020 and will have to continue to expand to operate its business. Amazon… recently announced a $4bn increase in costs associated with safety of its workers and protection in its warehouses on the heels of its deficiencies… Facebook’s recent quarter included a 34% increase in expenses year-over-year to a whopping $46.7bn, as its cost to acquire new customers and increased regulatory expenses spiked.”

“…then earns little or no money”

Looking at the numbers, Scherrer says ”Netflix burned $3.1bn in free cash flow last year and must persistently ramp that up to attract and retain subscribers. Amazon’s flywheel generated an eye watering $280bn revenue number in 2019, but operating profits for everything outside its cloud business came in at a measly $5.3bn. You currently pay 68x forward price-to-earnings for Netflix, 126x for Amazon, and 28x for Facebook.”

Buffett of the Past v.s. Buffett of the Present

Scherrer believes that if 2007 Warren Buffett met today’s Warren Buffett, there’s no way he would allow him to buy an S&P index fund that is highly concentrated into a handful of stocks that are high growth, capital incinerators that earn very little money.

But 2007 Warren Buffett would probably be most appalled that 2020 Warren Buffett would be selling airlines stocks. That means at some point, Warren Buffett thought investing in airline stocks was a good idea.

In the same 2007 shareholder letter, Buffett outlined what “The Great, the Good and the Gruesome” businesses look like. Buffett described a “gruesome” business by using airlines as an example.

Incredibly, he described them as “The worst sort of business is one that grows rapidly, requires significant capital to engender the growth, and then earns little or no money.”

Up Next:

Continue Reading
Advertisement

Facebook

Trending

Copyright © 2019 The Capitalist. his copyrighted material may not be republished without express permission. The information presented here is for general educational purposes only. MATERIAL CONNECTION DISCLOSURE: You should assume that this website has an affiliate relationship and/or another material connection to the persons or businesses mentioned in or linked to from this page and may receive commissions from purchases you make on subsequent web sites. You should not rely solely on information contained in this email to evaluate the product or service being endorsed. Always exercise due diligence before purchasing any product or service. This website contains advertisements.