In the first post on this topic, I introduced the basic differences between the mindset one has for saving and the mindset one has for investing. I realize its gonna take some convincing for a lot of people to want to take on the risk of investing, but in realizing that I should also let the savings minded people know of the options available.
Regular Bank Savings Account
Many people have checking accounts with their banks but according to a MarketWatch article, more than 20% of Americans DO NOT have a savings account. There is an incredible graphic in this article that explains how 22.4% of Young Millennials (ages 18-24) and 18.0% of Older Millennials (ages 25-34) do not have a savings account. And on top of that if people in those same age brackets have an account, 21.8% and 26.3% respectively have a $0 balance in those accounts.
I'm not going to leave the Gen X and Baby Boomers out because for those metrics to be on average 21% without a savings account, is worrisome. For Gen X (Ages 35-54) and Baby Boomers (Ages 55-64) the primary focus should be "what happens when I retire?" Understanding that Social Security and company pensions are sometimes still on the table for these generations, having that emergency fund available is key for any unexpected house, medical or car expense.
Certificate of Deposits
Also known as CD's. These particular products are generally offered through your bank or credit union and you can buy into them given an initial deposit as low as $1,000 (at some credit unions) to $2,500 (at some federal banks). The initial deposit varies based on where you are located, the bank or credit union CD offerings and the time period that you are choosing to hold on to this CD. But bottom line is your money in these CD's is insured and pretty much guaranteed. CD's offer a stable interest rate on the investment and the farther off the maturity date is for the CD, you generally get a higher interest rate to compensate. Now the only thing to this is that you MUST leave your money alone for the duration of the CD. If you don't and you try to pull your funds out, the fee's can be sickening.
Money Market Deposit Accounts
Companies sometimes need help covering monthly expenses or are looking to make a quick transaction. They look to banks who have money market account holders to provide them the quick cash they need. Banks in return provide that cash from the money market accounts, and the company pays interest rates according to the federal prime interest rate back to the bank. The bank then gives the interest back to the money market account holders. The variable interest rate is the biggest difference between CD's and money market accounts, which makes CD's a more appealing offer to many risk averse people.
*FYI* Federal Prime Interest rate is the same rate available to people looking for personal loans, small business loans and mortgages.
529 College Savings Plan
For those of you who have children, this may be a good option for you to jumpstart college saving. Generally all state sponsored plans are available to everyone in the country and can be used at any eligible college or university. The rules vary by state, but since I love North Carolina so much, I'll explain more about that one.
The withdrawals from the NC 529 Plans are federal and state income tax free if they are used for anything related to higher education costs like books and tuition. This plan allows you to chose how much to invest, how often to invest and even allows you to chose a plan based on your risk tolerance.
Of course this is an investment for your family's future and if you have kids that have hopes to pursuing higher education, this can be a good start for them.
Take away from this post is at the least, PLEASE OPEN A SAVINGS ACCOUNT WITH YOUR BANK. This particular account is the most accessible and liquid of the savings options you have. A traditional savings account is best to have to cover any emergency expense. Having even $1,000 in that account can be the difference between having cash to pay for a car repair immediately or having to go take out a high interest personal loan that may take a few hours for you to get the cash to pay for your car. But the issue doesn't end there. You still have to pay back the $1,000 loan, plus interest. So seriously, if you get nothing else from this post, get a savings account.
Until next post folks...
Monday, November 30, 2015
Thursday, November 26, 2015
Company Review Thursday: Verizon Communications
Happy Thanksgiving!! I'm so thankful for so much this year. I'm thankful for everything from my family and their health to my job and this blog. I'm also thankful for the fact that when you invest your money works for you while you sleep, eat, workout and basically all other times of the day. Currently waiting on my pound cake to finish baking in the next hour so I decided I'll post on this popular wireless carrier:
Company Snapshot (Yahoo! Finance Data)
Name: Verizon Communications (as of close of business 11/25/2015)
Ticker: VZ
Current Price: $44.92
52 Week High Price:$50.86
52 Week Low Price: $38.06
Market Capitalization: $183.87B (Large Capital)
Price/Earnings (P/E Ratio): 17.87
Earnings/Share (EPS): $2.5134
Dividend: $2.26/year
Industry: Diversified Telecommunication Services
Primary Business: Communications, Information and Entertainment Products and Services
The Good
Verizon has promoted and grown two services that have had tremendous response from customers:
1) go90 is the new social entertainment platform specifically built for mobile devices. You should be able to share snippets of favorite TV shows and NBA games using this app. It is offered on the Google Play Store and Apple Store and even if you aren't a Verizon Customer, you can download this app for use.
2) Enterprise Cloud Offering has become even more flexible and more requested as companies feel like cloud computing is more secure now. Verizon offers a carrier-agnostic connectivity with high quality cyber-security measures and provide the support and engineers needed to stand the infrastructure up for companies.
Then to top it off VZ offers a huge dividend yield at 5.02% or $2.26/share for the year. Remember dividends = money for owning the company. I'll take it!
The Bad
Verizon and other wireless service providers got hit with a pretty hard lawsuit earlier this year and ended up having to pay out about $90 million. The lawsuit came as a result of carriers allowing companies to charge customers millions of dollars for services that operated through SMS like horoscopes, special mobile updates and ringtones. Carriers would keep as much as 40% of the revenue generated by these companies to use SMS service to communicate with customers. The government caught AT&T, Verizon, T-Mobile and Sprint with this lawsuit.
The Ugly
With Apple now offering their own "Upgrade your device" options to their loyal iPhone customers and news that Samsung is soon to follow, the spaces for wireless carriers has gotten a little ugly to say the least. Having the option to pay off the phone in two years or upgrade every year is super convenient to people who like having the newest device on the market.Then on top of that this opens the door for people to shop around more for their preferred carrier. Although Verizon has one of the most extensive and fastest networks in the market, its still a service offered at a premium. People are looking for less expensive and no contract options. Verizon recently came out with the various plan options for new customers, but they'll really need to step up their game to compete on the device and wireless service end.
Hope you enjoy this day of thanksgiving with family and friends!!
Until next post <3
Company Snapshot (Yahoo! Finance Data)
Name: Verizon Communications (as of close of business 11/25/2015)
Ticker: VZ
Current Price: $44.92
52 Week High Price:$50.86
52 Week Low Price: $38.06
Market Capitalization: $183.87B (Large Capital)
Price/Earnings (P/E Ratio): 17.87
Earnings/Share (EPS): $2.5134
Dividend: $2.26/year
Industry: Diversified Telecommunication Services
Primary Business: Communications, Information and Entertainment Products and Services
The Good
Verizon has promoted and grown two services that have had tremendous response from customers:
1) go90 is the new social entertainment platform specifically built for mobile devices. You should be able to share snippets of favorite TV shows and NBA games using this app. It is offered on the Google Play Store and Apple Store and even if you aren't a Verizon Customer, you can download this app for use.
2) Enterprise Cloud Offering has become even more flexible and more requested as companies feel like cloud computing is more secure now. Verizon offers a carrier-agnostic connectivity with high quality cyber-security measures and provide the support and engineers needed to stand the infrastructure up for companies.
Then to top it off VZ offers a huge dividend yield at 5.02% or $2.26/share for the year. Remember dividends = money for owning the company. I'll take it!
The Bad
Verizon and other wireless service providers got hit with a pretty hard lawsuit earlier this year and ended up having to pay out about $90 million. The lawsuit came as a result of carriers allowing companies to charge customers millions of dollars for services that operated through SMS like horoscopes, special mobile updates and ringtones. Carriers would keep as much as 40% of the revenue generated by these companies to use SMS service to communicate with customers. The government caught AT&T, Verizon, T-Mobile and Sprint with this lawsuit.
The Ugly
With Apple now offering their own "Upgrade your device" options to their loyal iPhone customers and news that Samsung is soon to follow, the spaces for wireless carriers has gotten a little ugly to say the least. Having the option to pay off the phone in two years or upgrade every year is super convenient to people who like having the newest device on the market.Then on top of that this opens the door for people to shop around more for their preferred carrier. Although Verizon has one of the most extensive and fastest networks in the market, its still a service offered at a premium. People are looking for less expensive and no contract options. Verizon recently came out with the various plan options for new customers, but they'll really need to step up their game to compete on the device and wireless service end.
Hope you enjoy this day of thanksgiving with family and friends!!
Until next post <3
Wednesday, November 25, 2015
Stock Market Basics: Share Classes and Dividends
Last week I discussed stocks that were income-generating and how they pay dividends, but I didn't explain that these companies sometimes have different levels of shares you can hold. I also didn't explain what a dividend was. I'll use today's post to fill in those gaps.
You know that feeling you get when you find a $5 bill in your pocket or find a $20 bill in your winter coat from last winter? Getting dividends from a company gives me that exact same feeling. Companies declare that a portion of their net income be paid to shareholders on an annual, semi-annual or quarterly basis as a reward for making the investment in the company. So basically a company is paying you to own it. *queue Just Got Paid by Johnny Kemp*
I dont expect some of you 90's babies to know who Johnny Kemp is, but I know you know that there are fast lines for American Airline preferred members? Just like there are a select few who get to board the plane first, there are also preferred shares of companies that get their dividends first. Companies that offer preferred stocks are sometimes called fixed income equities because companies that offer preferred shares are guaranteeing that particular group gets a share of the profits. Common shareholders are at the mercy of the Board of Directors because common share dividends are only announced and paid if the board votes for profits to be distributed to the common shareholder. Hence how preferred shareholders get their dividends before common shareholders.
But not all companies offer preferred shares. For those that do, it is sometimes a good idea to be among the preferred shareholders ranks. Especially for the risk averse that prefer some stability in income and aren't really bothered with voting for the Board of Directors, preferred shares are ideal. However, the majority of the companies on the stock market only offer common shares. Being a shareholder of a company that pays a consistent dividend is sometimes just as good as being a preferred share holder. As a common shareholder you get to vote on who serves on the board of directors, how much they get paid and other pressing issues like what company will serve as the auditor each year.
To find out if a company pays out any kind of dividend, you would need to check out the Income Statement. But because an income statement is probably not the best to include here, I'll simply include how to find out if a company pays a dividend to its common shareholders. I did a company review of Cisco last week so I'll use that as my snapshot this week:
In conclusion, dividends are good for all portfolios regardless of your risk tolerance level. Be sure to target those when you're first building your portfolio. I pray everyone has a safe trip to and from your Thanksgiving destination!!
You know that feeling you get when you find a $5 bill in your pocket or find a $20 bill in your winter coat from last winter? Getting dividends from a company gives me that exact same feeling. Companies declare that a portion of their net income be paid to shareholders on an annual, semi-annual or quarterly basis as a reward for making the investment in the company. So basically a company is paying you to own it. *queue Just Got Paid by Johnny Kemp*
I dont expect some of you 90's babies to know who Johnny Kemp is, but I know you know that there are fast lines for American Airline preferred members? Just like there are a select few who get to board the plane first, there are also preferred shares of companies that get their dividends first. Companies that offer preferred stocks are sometimes called fixed income equities because companies that offer preferred shares are guaranteeing that particular group gets a share of the profits. Common shareholders are at the mercy of the Board of Directors because common share dividends are only announced and paid if the board votes for profits to be distributed to the common shareholder. Hence how preferred shareholders get their dividends before common shareholders.
But not all companies offer preferred shares. For those that do, it is sometimes a good idea to be among the preferred shareholders ranks. Especially for the risk averse that prefer some stability in income and aren't really bothered with voting for the Board of Directors, preferred shares are ideal. However, the majority of the companies on the stock market only offer common shares. Being a shareholder of a company that pays a consistent dividend is sometimes just as good as being a preferred share holder. As a common shareholder you get to vote on who serves on the board of directors, how much they get paid and other pressing issues like what company will serve as the auditor each year.
To find out if a company pays out any kind of dividend, you would need to check out the Income Statement. But because an income statement is probably not the best to include here, I'll simply include how to find out if a company pays a dividend to its common shareholders. I did a company review of Cisco last week so I'll use that as my snapshot this week:
In conclusion, dividends are good for all portfolios regardless of your risk tolerance level. Be sure to target those when you're first building your portfolio. I pray everyone has a safe trip to and from your Thanksgiving destination!!
Monday, November 23, 2015
So you're eligible for the retirement program at work...now what?
After your first 90 days at your new job, you received an extensive email explaining the details of the Retirement Investment Program that is now available to you. Other times you'll get a large packet of information in the mail from the investment company on behalf of your place of employment with information on the 401k or 403b accounts you can open. Regardless of how you receive that information, it is filled with a truck load of information that is hard to digest. Then to top it all off they only give you 30 days to read through all of it, understand it and make selections. If you fail to make that deadline, you have to wait until the next eligibility period arises and that can be anywhere between 90 and 365 days away.
That process can be exhausting and overwhelming...
I know. I've been there. But I was fortunate enough to walk into that situation knowing exactly what my plan was going to be. When I received that lengthy email, I noticed that my company had a matching program. At 21, I knew I was going to contribute the minimum percentage necessary so that I would be able to get my company to match 50% my contribution each pay period. Here was my thought process:
If I contributed 6% of my pay check every month to my account, my company would contribute 3% of my paycheck amount to my account. And that money is not coming out of my pocket, but my company's pocket?
THAT, MY FRIENDS, IS WHAT I CALL FREE MONEY...NEEDLESS TO SAY, I TOOK IT!!
Should your company have a matching policy for the retirement account, take your company up on that policy. Matching policies are there for you to take advantage of and if you don't, you're leaving money on the table that could add up to being that trip to Italy at age 62.
I also knew I needed an account that was going to benefit me with taxes now versus down the line because I didn't make a lot of money right out of college. I needed all the tax help I could get because my main goal was to have more money now to invest so by the time I get to retirement I have my retirement plus money in my own brokerage account as pocket change. So the kind of account I chose was a traditional 401k, which took money out of my pay check pre-tax, lowered my taxable income and gave me a good tax return that I was then able to invest.
I was relentlessly researching these topics in college, long before I knew I was going to have a job once I graduated. Retirement planning probably wasn't a pressing issue for you when you were in college, but it is now and that's why we are talking about this here. If you haven't opened up your retirement account and you have the ability to do so, I say do it now!
The kind of retirement account you open should be dependent on your personal money habits.
If you're like me and really like the idea of an upfront tax break because you have plans to invest or save your tax returns, I say go for a traditional 401k or 403b. Just know that when you do take that money out at your retirement, you will be taxed according to your income tax bracket at retirement.
If you think you'll be making significantly more at retirement than you make now, putting your income in a higher tax bracket AND you dont intend to save or invest your tax returns, I'd consider the Roth 401k or 403b. Money that is put into these accounts are taken out of your monthly pay after taxes have been applied. You are paying taxes on that money now versus when you enter retirement.
Now who is to say you can't have the best of both world though? You actually can have both. The only thing with that is that the sum of your contributions to both accounts cant go over the annual dollar limit. Those dollar limits vary each year and by how old you are at the end of a particular year.
The goal here was to help you navigate the financial gray cloud of company sponsored retirement investment plans. Hope some of this helps clear the air. As usual if you have any questions leave them below.
Until next post folks...
That process can be exhausting and overwhelming...
I know. I've been there. But I was fortunate enough to walk into that situation knowing exactly what my plan was going to be. When I received that lengthy email, I noticed that my company had a matching program. At 21, I knew I was going to contribute the minimum percentage necessary so that I would be able to get my company to match 50% my contribution each pay period. Here was my thought process:
If I contributed 6% of my pay check every month to my account, my company would contribute 3% of my paycheck amount to my account. And that money is not coming out of my pocket, but my company's pocket?
THAT, MY FRIENDS, IS WHAT I CALL FREE MONEY...NEEDLESS TO SAY, I TOOK IT!!
Should your company have a matching policy for the retirement account, take your company up on that policy. Matching policies are there for you to take advantage of and if you don't, you're leaving money on the table that could add up to being that trip to Italy at age 62.
I also knew I needed an account that was going to benefit me with taxes now versus down the line because I didn't make a lot of money right out of college. I needed all the tax help I could get because my main goal was to have more money now to invest so by the time I get to retirement I have my retirement plus money in my own brokerage account as pocket change. So the kind of account I chose was a traditional 401k, which took money out of my pay check pre-tax, lowered my taxable income and gave me a good tax return that I was then able to invest.
I was relentlessly researching these topics in college, long before I knew I was going to have a job once I graduated. Retirement planning probably wasn't a pressing issue for you when you were in college, but it is now and that's why we are talking about this here. If you haven't opened up your retirement account and you have the ability to do so, I say do it now!
The kind of retirement account you open should be dependent on your personal money habits.
If you're like me and really like the idea of an upfront tax break because you have plans to invest or save your tax returns, I say go for a traditional 401k or 403b. Just know that when you do take that money out at your retirement, you will be taxed according to your income tax bracket at retirement.
If you think you'll be making significantly more at retirement than you make now, putting your income in a higher tax bracket AND you dont intend to save or invest your tax returns, I'd consider the Roth 401k or 403b. Money that is put into these accounts are taken out of your monthly pay after taxes have been applied. You are paying taxes on that money now versus when you enter retirement.
Now who is to say you can't have the best of both world though? You actually can have both. The only thing with that is that the sum of your contributions to both accounts cant go over the annual dollar limit. Those dollar limits vary each year and by how old you are at the end of a particular year.
The goal here was to help you navigate the financial gray cloud of company sponsored retirement investment plans. Hope some of this helps clear the air. As usual if you have any questions leave them below.
Until next post folks...
Thursday, November 19, 2015
Company Review Thursday: Cisco Systems
With this being the first time I'm doing a review, I'll go over one of the very first stocks I purchased back in January 2012, Cisco Systems, Inc. Working in technology and having a dad that worked in technology my whole life, the technology sector of the market was the very first place I looked for investment opportunities.
Company Snapshot (Yahoo! Finance Data)
Name: Cisco Systems, Inc. (as of close of business 11/18/2015)
Ticker: CSCO
Current Price: $27.12
52 Week High Price: $30.31
52 Week Low Price: $23.03
Market Capitalization: 139.96 B (Large Cap)
Price/Earnings (P/E Ratio): 14.43
Earnings/Share (EPS): 1.88
Dividend: $0.84/share/year
Industry: Technology
Primary Business: Network and Communications Equipment and Software
The Good
- Cisco has a wonderful dividend yield at 3.14%. When you're looking for stocks that will help generate income for you to reinvest passively, you're looking for dividend paying stocks and Cisco would definitely be a good one.
- Cisco just announced a partnership with Ericsson to provide to customers a larger portfolio of services and products as well as pursuing increase use for the Internet of Things capabilities. If you haven't heard about the Internet of Things, think of how a Fitbit communicates through Bluetooth on your phone. Or how you can connect your iPhone 6S Plus to practically every other Apple device you own. Basically you can have the convenience of many of your tools and appliances play well with each other and communicate with each other to make your life easier...This can be creepy or very exciting news for you. As an investor, I'm hoping that the predicted $1 billion in revenues generated in 2018 actually comes to fruition.
You can find the press release for this partnership here
The Bad
- Over the last 3 years of me holding this company, the price hasn't really gone too much further out of the 52 week range. Seems like growth is stagnant. They are able to keep their customers happy, but generating new revenue each year seems to have alluded Cisco the last couple years. In 2013, they reported $48.6 billion, in 2014 they reported $47.1 billion and this year they reported $49.2 billion (as reported by schwab.com). That is only a 1.23% growth from 2013 to 2015. As an investor, I want more here.
The Ugly
-Under the management of Chuck Robbins, Cisco is making a big push to create partnerships (with Apple and Ericsson to name a couple) and acquisitions quickly in search of ways to revolutionize the company. Although for the long term these partnerships look promising, in the short term that looks like a lot of cash going out the door and into other pockets not my own as a shareholder. Am I willing to take these short term lows for long term highs?
And the answer is yes. That type of risk is okay for me right now.
Hope you have a great weekend!! Feel free to leave comments and questions for me if you have any!!
Company Snapshot (Yahoo! Finance Data)
Name: Cisco Systems, Inc. (as of close of business 11/18/2015)
Ticker: CSCO
Current Price: $27.12
52 Week High Price: $30.31
52 Week Low Price: $23.03
Market Capitalization: 139.96 B (Large Cap)
Price/Earnings (P/E Ratio): 14.43
Earnings/Share (EPS): 1.88
Dividend: $0.84/share/year
Industry: Technology
Primary Business: Network and Communications Equipment and Software
The Good
- Cisco has a wonderful dividend yield at 3.14%. When you're looking for stocks that will help generate income for you to reinvest passively, you're looking for dividend paying stocks and Cisco would definitely be a good one.
- Cisco just announced a partnership with Ericsson to provide to customers a larger portfolio of services and products as well as pursuing increase use for the Internet of Things capabilities. If you haven't heard about the Internet of Things, think of how a Fitbit communicates through Bluetooth on your phone. Or how you can connect your iPhone 6S Plus to practically every other Apple device you own. Basically you can have the convenience of many of your tools and appliances play well with each other and communicate with each other to make your life easier...This can be creepy or very exciting news for you. As an investor, I'm hoping that the predicted $1 billion in revenues generated in 2018 actually comes to fruition.
You can find the press release for this partnership here
The Bad
- Over the last 3 years of me holding this company, the price hasn't really gone too much further out of the 52 week range. Seems like growth is stagnant. They are able to keep their customers happy, but generating new revenue each year seems to have alluded Cisco the last couple years. In 2013, they reported $48.6 billion, in 2014 they reported $47.1 billion and this year they reported $49.2 billion (as reported by schwab.com). That is only a 1.23% growth from 2013 to 2015. As an investor, I want more here.
The Ugly
-Under the management of Chuck Robbins, Cisco is making a big push to create partnerships (with Apple and Ericsson to name a couple) and acquisitions quickly in search of ways to revolutionize the company. Although for the long term these partnerships look promising, in the short term that looks like a lot of cash going out the door and into other pockets not my own as a shareholder. Am I willing to take these short term lows for long term highs?
And the answer is yes. That type of risk is okay for me right now.
Hope you have a great weekend!! Feel free to leave comments and questions for me if you have any!!
Wednesday, November 18, 2015
Stock Market Basics: Market Capitalization
Just like at a fast food restaurant and the new Verizon data plans, you have small, medium and large options in the stock market. More specifically small capital equities, medium capital equities and large capital equities. Each company on the market is classified by the market capitalization.
Market Capitalization = Price/Share * Number of Outstanding Shares
I've referenced Yahoo!Finance a bit on this blog because it's one of my favorite places to look for information. Taking a snapshot of one of my all time favorite companies, Starbucks, you see I've highlighted in pink boxes the key values for finding the market capitalization. You can take the easy route and look in the first picture at the second box which says "Market Cap" and find that it is recorded as $90.1 billion. Or you can be analytical about it and find the current price of Starbucks, which is $60.68/share and multiply that by the 1.48 billion outstanding shares (in the second snapshot) and get approximately $89.9 billion. That's pretty close to what is recorded as the actual market capitalization of $90.1 billion. The reason very close works is because the market price fluctuates all day during the trading day, but the number of shares outstanding stays the same unless the company participates in a buy back, a stock split or puts more of itself on the market.
Now that you know where to find this metric, here are a few general trends these classes of equities/stocks follow:
The annual returns has a star beside it because it is an approximation and just a guideline as to what kind of returns you can expect from the different size companies. Smaller companies carry higher risk because sometimes they do not have the market history to establish them as a stable investment. But with higher risk, you have an opportunity for a higher return. Medium and large capital companies tend to be more stable and safer investments for the more risk averse. Large companies are more likely to pay hefty dividends and generate high rate of returns for their shareholders, that's why the moderate and moderate conservative crowd would be most interested in this category of stocks.
Hopefully you got some good tips from this post on how to check companies for their market capitalization. Tomorrow is Company Review Thursday!! Stay tuned.
Market Capitalization = Price/Share * Number of Outstanding Shares
I've referenced Yahoo!Finance a bit on this blog because it's one of my favorite places to look for information. Taking a snapshot of one of my all time favorite companies, Starbucks, you see I've highlighted in pink boxes the key values for finding the market capitalization. You can take the easy route and look in the first picture at the second box which says "Market Cap" and find that it is recorded as $90.1 billion. Or you can be analytical about it and find the current price of Starbucks, which is $60.68/share and multiply that by the 1.48 billion outstanding shares (in the second snapshot) and get approximately $89.9 billion. That's pretty close to what is recorded as the actual market capitalization of $90.1 billion. The reason very close works is because the market price fluctuates all day during the trading day, but the number of shares outstanding stays the same unless the company participates in a buy back, a stock split or puts more of itself on the market.
 |
| Both snapshots are taken from Yahoo!Finance Starbucks |
Now that you know where to find this metric, here are a few general trends these classes of equities/stocks follow:
| Equity Type | Market Capitalization | Annual Returns* | Perceived Market Risk Rank | Risk Level |
|---|---|---|---|---|
| Small Capital Equities |
Less than $2 billion
|
More that 20% per year
|
High
|
Moderate Aggressive to Aggressive
|
| Medium Capital Equities |
$2 to $10 billion
|
12% to 20% per year
|
Medium
|
Moderate to Moderate Aggressive
|
| Large Capital Equities |
Greater than $10 billion
|
5%to 12% per year
|
Low
|
Moderate Conservative to Moderate
|
The annual returns has a star beside it because it is an approximation and just a guideline as to what kind of returns you can expect from the different size companies. Smaller companies carry higher risk because sometimes they do not have the market history to establish them as a stable investment. But with higher risk, you have an opportunity for a higher return. Medium and large capital companies tend to be more stable and safer investments for the more risk averse. Large companies are more likely to pay hefty dividends and generate high rate of returns for their shareholders, that's why the moderate and moderate conservative crowd would be most interested in this category of stocks.
Hopefully you got some good tips from this post on how to check companies for their market capitalization. Tomorrow is Company Review Thursday!! Stay tuned.
Monday, November 16, 2015
Stock Market Basics: Value to the Shareholders
Yesterday, my heart was palpitating as I watched my Patriots take on its NFC nemesis, the NY Giants. That match up has history that doesn't lend itself in the Patriots favor, but yesterday the Patriots won 27-26 on the foot of the great Steve Gostkowski.
The hardest question for a Pats fan to field over the last 8 years was 'why cant the Patriots beat the Giants?' That question is the equivalent of 'what is the stock market?' to an investment adviser. An emphatic, cut and dry answer still alludes us to this day.
To say that I can try explain to you what the stock market is in its entirety in one post would be a disservice to all that goes on in the market. But primarily what you need to know is that the stock market is the virtual world in which equities (or stocks) are traded.
Companies offer themselves to the public in part or as a whole on the stock market in the form of equities. Equities are then broken down into shares. Shares are the portions of equities that we as investors can buy on the stock market. So basically shares are pieces of a company that shareholders own. By owning a piece of a company, you've decided to allow the company to use your money to grow, build value and/or generate income for you.
Ever heard of return on equity?
The return on equity is a measure of how well a company uses the money that you as a shareholder provide by buying shares of it. When looking for good growth companies, you want to see the company generate more revenue, cut on expenses and run efficiently so that it generates a high rate of return on equity on an annual basis. When looking for good value companies, you're looking for companies that have a stable value but may be under priced for periods of time due to a market correction (like we experienced in late August to the beginning of October), changing leadership or an acquisition/merger. If you are looking for income-generating companies, companies that pay dividends to their shareholders are definitely the target.
This post only covers one way to categorize equities (or pieces of companies available to the public) by the value they generate to the shareholders. Whether a company is a growth company, value company or income-generating can be a fluctuating metric and hard to really pin down, but still an important decision when looking to invest in companies. Here are some good key ways to tell which of the three categories a stock falls under:
So those three categories again are growth, value and income-generating. Fortunately, those categories don't have to be mutually exclusive. There are several great value stocks that are also income-generating stocks because not only are they sometime below fair price, but they pay hefty dividends and consistently make their revenue and net income targets.The growth/income-generating and growth/value combinations are a powerful combo because not only can the company create revenue for itself while innovating new products or services, they pay out dividends to their shareholders.
Companies like Apple and Amazon are companies that cross the growth/income generating lines.
Cognizant and Monsanto are examples of middle of the road companies between growth and value.
Examples of value/income generating companies include Pfizer and Cisco Systems.
The next post we will discuss how to categorize a company more objectively by the dollar value of the company that is traded on the market.
The hardest question for a Pats fan to field over the last 8 years was 'why cant the Patriots beat the Giants?' That question is the equivalent of 'what is the stock market?' to an investment adviser. An emphatic, cut and dry answer still alludes us to this day.
To say that I can try explain to you what the stock market is in its entirety in one post would be a disservice to all that goes on in the market. But primarily what you need to know is that the stock market is the virtual world in which equities (or stocks) are traded.
Companies offer themselves to the public in part or as a whole on the stock market in the form of equities. Equities are then broken down into shares. Shares are the portions of equities that we as investors can buy on the stock market. So basically shares are pieces of a company that shareholders own. By owning a piece of a company, you've decided to allow the company to use your money to grow, build value and/or generate income for you.
Ever heard of return on equity?
The return on equity is a measure of how well a company uses the money that you as a shareholder provide by buying shares of it. When looking for good growth companies, you want to see the company generate more revenue, cut on expenses and run efficiently so that it generates a high rate of return on equity on an annual basis. When looking for good value companies, you're looking for companies that have a stable value but may be under priced for periods of time due to a market correction (like we experienced in late August to the beginning of October), changing leadership or an acquisition/merger. If you are looking for income-generating companies, companies that pay dividends to their shareholders are definitely the target.
This post only covers one way to categorize equities (or pieces of companies available to the public) by the value they generate to the shareholders. Whether a company is a growth company, value company or income-generating can be a fluctuating metric and hard to really pin down, but still an important decision when looking to invest in companies. Here are some good key ways to tell which of the three categories a stock falls under:
Companies like Apple and Amazon are companies that cross the growth/income generating lines.
Cognizant and Monsanto are examples of middle of the road companies between growth and value.
Examples of value/income generating companies include Pfizer and Cisco Systems.
The next post we will discuss how to categorize a company more objectively by the dollar value of the company that is traded on the market.
Friday, November 13, 2015
Risk Talk - Pop Quiz
HAPPY FRIDAY!!!!
In my post on Wednesday, I talked about the risk involved in investing and that we needed to use a methodology to measure our personal tolerance for risk. So here is a quiz I created to help get a sense of where you stand on the investor risk tolerance spectrum
If you feel comfortable sharing your risk tolerance level in the comments below, please do! I'd love to know!
For me, I am a long term investor and I have a high risk tolerance level so I have built my portfolio to reflect a more aggressive style of investing by including a large number of equities, fewer ETFs/mutual funds and very few CD's/Bonds. Why am I willing to take these risks now? Because I have time to contribute to my investment portfolios over the next 30 to 35 years before retirement. Compare that to my parents, who have portfolios of their own, they have a more conservative way of investing. Their portfolios have higher concentrations in the CD's, ETFs and mutual funds than I do.
Now that you know what your risk tolerance is, what should you invest in? We'll talk all about it next week. Don't forget to comment what you think a good hashtag will be for my Thursday Company Review blog posts. Still accepting suggestions.
HAVE A GREAT WEEKEND!
In my post on Wednesday, I talked about the risk involved in investing and that we needed to use a methodology to measure our personal tolerance for risk. So here is a quiz I created to help get a sense of where you stand on the investor risk tolerance spectrum
If you feel comfortable sharing your risk tolerance level in the comments below, please do! I'd love to know!
For me, I am a long term investor and I have a high risk tolerance level so I have built my portfolio to reflect a more aggressive style of investing by including a large number of equities, fewer ETFs/mutual funds and very few CD's/Bonds. Why am I willing to take these risks now? Because I have time to contribute to my investment portfolios over the next 30 to 35 years before retirement. Compare that to my parents, who have portfolios of their own, they have a more conservative way of investing. Their portfolios have higher concentrations in the CD's, ETFs and mutual funds than I do.
Now that you know what your risk tolerance is, what should you invest in? We'll talk all about it next week. Don't forget to comment what you think a good hashtag will be for my Thursday Company Review blog posts. Still accepting suggestions.
HAVE A GREAT WEEKEND!
Company Review Thursday: The Introduction
After my first couple of posts, I decided Thursdays are a good day to try to highlight a single company just to bring in actual stock market happenings. The point of this blog is to teach and make people aware, but the principles you learn here can actually be applied in life. I think this type of exercise will help you see what I look for in investments so you can figure out what you want to look for when you're doing your own research for investment opportunities.
In each review, I'll be highlighting the good, the bad and the ugly of companies that I follow on a regular basis. Some I have actually invested in, and some I have not. I'll be sure to post what my status is on each company I write about for your information. But to keep track of it all, I really want to use a hashtag and I was hoping maybe you (as the readers) can interact with my blog more by using the hashtag. Here are some of my ideas:
1) #TasiaPickThursday
2) #TopPickThursday
3) #TheTasiaReview
4) #TheXFiles
5) #TasiaReviewThursday
If you have an idea or preference from the ones I've listed, feel free to leave me a comment about it below. Thanks in advance.
In each review, I'll be highlighting the good, the bad and the ugly of companies that I follow on a regular basis. Some I have actually invested in, and some I have not. I'll be sure to post what my status is on each company I write about for your information. But to keep track of it all, I really want to use a hashtag and I was hoping maybe you (as the readers) can interact with my blog more by using the hashtag. Here are some of my ideas:
1) #TasiaPickThursday
2) #TopPickThursday
3) #TheTasiaReview
4) #TheXFiles
5) #TasiaReviewThursday
If you have an idea or preference from the ones I've listed, feel free to leave me a comment about it below. Thanks in advance.
Wednesday, November 11, 2015
Saving vs. Investing
As we were growing up, we were probably exposed to ways to save money more than we were exposed to ways to invest our money. Parents buy their kids piggy banks to put coins in at a young age. Banks advertise incentives for opening a savings account with them and provide interest rates for letting your money sit there long term. Retail stores look to consumers and provide deals to save money on various items. There are even people who participate in “bedside saving” or the adult level of piggy bank banking and they stuff money in a mattress. Whatever the method you use, you’ve known about it for years and pretty clear on how it works.
But what about investing? What exactly is investing?
In all honesty, I call it glorified gambling.
On Wall Street, you take risks. You look at a company given as much historical information, news and analyst predictions that's available through various sites like Yahoo! Finance or Google Finance and you make a prediction on the future success of a company. If you think it will do well you invest, otherwise you may pass up that company or short sell it (future blog post).
But whether you invest in the stock market, your child's education, real estate or pursue venture capitalism, there is a level of risk that you take on as an investor similar to the way a bank does when someone asks for a loan. When banks are deciding to give an entrepreneur a loan, they are analyzing how much of a risk that person is and how risky the business that the person is trying to conduct is. And based on the risk tolerance the bank has, they can chose to accept it by taking on the loan with an appropriate interest rate assigned. For example, if I was trying to get a loan to start a smoothie stand, the banks would consider the location I'll be working in, the fact that I wont need any deep frying or heavy duty kitchen appliances and the fact that this stand is mobile so I can move to different locations for new business if necessary. They are more likely to give me a loan for that than giving me a loan for a business that was less stable and unproven to succeed or if my business plan was not well written.
This general concept of perceived risk and risk tolerance are two factors that are very important when deciding to invest. A third consideration is the duration of time in which you want to invest. When analyzing companies to invest in you have to know the type of risk you are willing to take and understand the business of the company that you are investing in. It also helps if you have a time horizon in which you intend to actively or passively invest.
Just in a nutshell, here are a few key differences between saving and investing.
In my Friday post, we'll be diving in deeper into how to measure your personal risk tolerance.
On Wall Street, you take risks. You look at a company given as much historical information, news and analyst predictions that's available through various sites like Yahoo! Finance or Google Finance and you make a prediction on the future success of a company. If you think it will do well you invest, otherwise you may pass up that company or short sell it (future blog post).
But whether you invest in the stock market, your child's education, real estate or pursue venture capitalism, there is a level of risk that you take on as an investor similar to the way a bank does when someone asks for a loan. When banks are deciding to give an entrepreneur a loan, they are analyzing how much of a risk that person is and how risky the business that the person is trying to conduct is. And based on the risk tolerance the bank has, they can chose to accept it by taking on the loan with an appropriate interest rate assigned. For example, if I was trying to get a loan to start a smoothie stand, the banks would consider the location I'll be working in, the fact that I wont need any deep frying or heavy duty kitchen appliances and the fact that this stand is mobile so I can move to different locations for new business if necessary. They are more likely to give me a loan for that than giving me a loan for a business that was less stable and unproven to succeed or if my business plan was not well written.
This general concept of perceived risk and risk tolerance are two factors that are very important when deciding to invest. A third consideration is the duration of time in which you want to invest. When analyzing companies to invest in you have to know the type of risk you are willing to take and understand the business of the company that you are investing in. It also helps if you have a time horizon in which you intend to actively or passively invest.
Just in a nutshell, here are a few key differences between saving and investing.
| SAVING | INVESTING |
|---|---|
| Saving is what you do so that you’ll have money at a moments notice. (Rainy day/emergency funds) | We invest with the mindset that we wont be needing that money for the next couple years. |
| Savings account reflect what you put in them, along with low interest rates. (generally < 1%) | A portfolio of stocks may lose value. |
| Safe bet you’ll get what you put in. | Potential for higher rate of returns and dividends, but higher risk of losing money |
In my Friday post, we'll be diving in deeper into how to measure your personal risk tolerance.
Tuesday, November 10, 2015
Why is this important?
Why is this important?
Why is this important?
Why is this important...to me?
Have you ever asked yourself those questions? I know as I'm at the age of trying to create memories, have great experiences and live life to its fullest while following God's plan for my life, those questions seem to have an ever evolving answer. But me being the analytical type, I tend to break problems and questions down, piece by piece to find a bit of clarity in the gray zones of life. So lets take this question by question.
Why is this important?
I take interest in so many things from finance and food, to football, fashion and fitness, but above all of those is God. That's what I find interesting. I prioritize learning more about finance everyday and exploring new dishes to cook for my family and friends. I make sure I spend time reading my Bible and praying so I can draw closer to The One who gave me life. So the first question brings me to this answer: This is important because this is what I find interesting.
Why is this important?
There is a thing called inflection and it basically is how we as people can have a conversation and distinguish the words that others emphasize to decipher the message and intent of a question or statement. This question may look the same, but they definitely sound different if you emphasize the is versus the this. This question is loaded, despite being only four words. It's like asking someone "what is the point?"
Things that interest you spark that little match that lives in each person called desire and passion. Its not all the time that all your interests ignite the passion match, but definitely there is at least one that will start a fire you cannot contain. For me, finance is that one thing besides God.
What you are passionate about sometimes comes out in the most obvious ways. For example if anyone was to ask me a question about investing, I could talk for 20 minutes straight without breathing. That's super obvious, but there are less than obvious ways that show I'm passionate about investing. And that's how much time I spend researching, building my own portfolio and trying to encourage others to invest too. So why is this important? Because this is my passion.
Why is this important...to me?
I've always found interest in stock market investing. My dad introduced me to this concept at a pretty young age. I was reporting the close of the Dow Jones Industrial and the S&P 500 on a day to day basis to my dad during the 5:00pm news at ages 7 or 8. That was the fuel...the spark came the day I graduated from the University of Richmond.
At age 21, I opened my personal brokerage account with a $0 balance. I was so excited and I knew exactly what I was going to buy when I could afford to make my first purchase. January 2012, I dropped my first little bit of cash on the market and bought exactly what I wanted, but that wasn't enough. I joined my dad's investment group and quickly became "that member" that does way too much research and was spit fire with the latest on some of the companies that the group had shares of, and other companies I thought we should buy. My dad was proud, but that still wasn't enough for me.
January 2014, The Voluntary Exchange, L.L.C. was formed from a simple Facebook post to my friends about anyone interested in joining an investment group. I wanted to share what I knew with people my own age. My friends. My family. But as you would suspect, this still isn't enough for me. Why is this not enough? Because I believe this is my purpose.
As the daughter of an educator, I know the value of an education. As the daughter of a man who built the "American Dream" for his family pulling himself up from the country side of SC, to becoming one of the highest IT managers at a Fortune 500 company, I know the importance of opportunity. I want to provide both education and opportunity to any and everyone who will listen to me about investing and personal finance in general. I don't claim to know it all, but I do have a little bit of experience, education and a passion to continuously learn and grow on my side. I just want to share it.
Welcome to Tasia's Corner of the World
Why is this important?
Why is this important...to me?
Have you ever asked yourself those questions? I know as I'm at the age of trying to create memories, have great experiences and live life to its fullest while following God's plan for my life, those questions seem to have an ever evolving answer. But me being the analytical type, I tend to break problems and questions down, piece by piece to find a bit of clarity in the gray zones of life. So lets take this question by question.
Why is this important?
I take interest in so many things from finance and food, to football, fashion and fitness, but above all of those is God. That's what I find interesting. I prioritize learning more about finance everyday and exploring new dishes to cook for my family and friends. I make sure I spend time reading my Bible and praying so I can draw closer to The One who gave me life. So the first question brings me to this answer: This is important because this is what I find interesting.
Why is this important?
There is a thing called inflection and it basically is how we as people can have a conversation and distinguish the words that others emphasize to decipher the message and intent of a question or statement. This question may look the same, but they definitely sound different if you emphasize the is versus the this. This question is loaded, despite being only four words. It's like asking someone "what is the point?"
Things that interest you spark that little match that lives in each person called desire and passion. Its not all the time that all your interests ignite the passion match, but definitely there is at least one that will start a fire you cannot contain. For me, finance is that one thing besides God.
What you are passionate about sometimes comes out in the most obvious ways. For example if anyone was to ask me a question about investing, I could talk for 20 minutes straight without breathing. That's super obvious, but there are less than obvious ways that show I'm passionate about investing. And that's how much time I spend researching, building my own portfolio and trying to encourage others to invest too. So why is this important? Because this is my passion.
Why is this important...to me?
I've always found interest in stock market investing. My dad introduced me to this concept at a pretty young age. I was reporting the close of the Dow Jones Industrial and the S&P 500 on a day to day basis to my dad during the 5:00pm news at ages 7 or 8. That was the fuel...the spark came the day I graduated from the University of Richmond.
At age 21, I opened my personal brokerage account with a $0 balance. I was so excited and I knew exactly what I was going to buy when I could afford to make my first purchase. January 2012, I dropped my first little bit of cash on the market and bought exactly what I wanted, but that wasn't enough. I joined my dad's investment group and quickly became "that member" that does way too much research and was spit fire with the latest on some of the companies that the group had shares of, and other companies I thought we should buy. My dad was proud, but that still wasn't enough for me.
January 2014, The Voluntary Exchange, L.L.C. was formed from a simple Facebook post to my friends about anyone interested in joining an investment group. I wanted to share what I knew with people my own age. My friends. My family. But as you would suspect, this still isn't enough for me. Why is this not enough? Because I believe this is my purpose.
As the daughter of an educator, I know the value of an education. As the daughter of a man who built the "American Dream" for his family pulling himself up from the country side of SC, to becoming one of the highest IT managers at a Fortune 500 company, I know the importance of opportunity. I want to provide both education and opportunity to any and everyone who will listen to me about investing and personal finance in general. I don't claim to know it all, but I do have a little bit of experience, education and a passion to continuously learn and grow on my side. I just want to share it.
Welcome to Tasia's Corner of the World
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