Whoever says that fashion is not a real investment has probably been living under a rock for the last half century. Designer clothes, designer hair products, sports cars, luxury cars, and all of those other things we purchase are definitely investments. Sometimes we find our investment in the Shea Moisture leave in conditioner is worth it because our edges are extra laid and our color pops. Sometimes our freshly washed and waxed Chevrolet Camaro brings us so much joy, especially when we hear the engine roar in 3rd gear under a tunnel. Other times we try on an outfit that looks so-so at first, but when we take it up a notch and add in hair, makeup and accessories, your whole look will snatch edges.
The way you make decisions on your car, clothes or hair, is the same way you should make stock, ETF and mutual fund investment decisions. Because reality is: the items you spend money on, someone else is making money as a result. Why not invest in the things you buy regularly?
Take Coach for example. Coach is publicly traded under the ticker symbol COH and it actually pays a really great dividend. Coach has been a well known global luxury brand over the last century along with Prada, Michael Kors and Louis Vuitton. The New York City based company sells everything from shoes and purses to suitcases and perfumes and they guide fashion trends annually. However, the profits they generate are heavily dependent upon the strength of the consumers dollar. When all is well in a country's economy and consumers have buying power, they will spend a little more to have the Coach name brand in their closet. But, if the economy is under a strain, people won't be flooding the malls to buy luxury brand items. This tendency leads to somewhat cyclical revenue/earnings patterns that reflect a country's economy.
Similarly there are GQ Men and Trendsetting Fashionistas that frequently hit the racks at Macy's. With more variety to choose from and frequent sales, Macy's positions itself to serve people regardless of the economic fluctuations. When people are pinched for a dollar, but still need that outfit for an interview, or dress for the company Christmas party, Macy's is a place people turn to for quality clothes at a reasonable price.
All in all, money talks. Consumer spending drives investing. You can see this not just in fashion, but also in technology with the likes of Apple and Google. And this is true even in the food retail industry with Trader Joe's and Whole Foods leading the wave of healthy food options. Reality is the place to start looking for opportunities to invest is in your own home, in your purse or even in your car.
Until next post folks...
Tuesday, December 8, 2015
Thursday, December 3, 2015
Company Review Thursday: Under Armour Inc.
Having signed the likes of Misty Copeland, Tom Brady, Stephen Curry, Cam Newton, Natasha Hastings and Eddie Lacy, it seems like Under Armour definitely has a long list of champions and greats on its team roster. Providing high end athletic gear is the core of Under Armour's business and they do pretty good job of delivering quality gear to both their athletes and their customers. But as with all textile/apparel companies, they are at the mercy of keeping up with customer trends and preferences, a test that few in the industry regularly pass over time. In a sector where they compete with Nike, Lululemon and Addidas, is Under Armour in a position to drive customer spending in the athletic apparel sector in the upcoming years? I hope so. I bought it in hopes that it would.
Company Snapshot (Yahoo! Finance Data)
Name: Under Armour Inc.(as of close of business 12/2/2015)
Ticker: UA
Current Price: $87.25
52 Week High Price:$105.89
52 Week Low Price: $63.77
Market Capitalization: $18.8B (Large Capital)
Price/Earnings (P/E Ratio): 90.04
Earnings/Share (EPS): $0.9654
Dividend: No Dividend Paid
Industry: Textiles, Apparel and Luxury Goods
Primary Business: Athletic Apparel Sales
The Good
With a catch phrase "We must protect this house" Under Armour was started in Kevin Plank's grandmothers garage in 1996. He was a former football player looking to design clothes that would provide an alternative to the cotton tshirts worn that absorbed and carried sweat. The goal was to design gear that kept athletes light, cool, warm, dry and capable of performing at their best at all times. The company has not strayed from that goal.
And by the sales that the company generates each year, its obvious people are enjoying the products. Over the last 5 years revenue has almost tripled from $1.06 billion in 2010 to $3.08 billion in 2014 (~189% growth). And with a price/earnings ratio of about $90.04 it seems that there is plenty of upside for UA to establish itself in a similar way Nike did early on in its public offering.
The Bad
Plain and simple...Under Armour doesn't pay a dividend. I don't get free money.
The Ugly
Think of it like comparing LeBron James with Stephen Curry. Ironically, Nike and UA are their respective sponsors. Nike is the established "King" of the industry and Under Armour stays "Cookin' up" new things that shake the industry up on regular basis. That type of competition is wonderful for the consumer, but both companies have to literally put their all out on the table to be able to keep their consumer base and nab a few from the other side. Nike is in the position that they can provide a steady dividend for their investors because they have significantly more cash to pull from to operate. Nike has an advantage in the market with investors looking for stability and establishment in companies they invest in especially after recent market volitility. Under Armour on the other hand is still somewhat the new kid on the block. It's growing fast and the company is climbing the maturity curve. In the next few years, investors are looking to see some of Under Armour products maintain their traction with consumers.
Do you think there will be another LBJ vs The Chef finals? Nike and UA probably hope so. Last year was the year of The Chef and Under Armour has benefited. This year seems to be following suit especially now that the only undefeated NFL team has an Under Armour Sponsored QB dabbin' on the world and the reigning NFL champions are lead by a Under Armour sponsored QB too. With the Panthers and Patriots being favorites to have a showdown in February, Under Armour is sure to win in 2016.
And so am I :-)
Company Snapshot (Yahoo! Finance Data)
Name: Under Armour Inc.(as of close of business 12/2/2015)
Ticker: UA
Current Price: $87.25
52 Week High Price:$105.89
52 Week Low Price: $63.77
Market Capitalization: $18.8B (Large Capital)
Price/Earnings (P/E Ratio): 90.04
Earnings/Share (EPS): $0.9654
Dividend: No Dividend Paid
Industry: Textiles, Apparel and Luxury Goods
Primary Business: Athletic Apparel Sales
The Good
With a catch phrase "We must protect this house" Under Armour was started in Kevin Plank's grandmothers garage in 1996. He was a former football player looking to design clothes that would provide an alternative to the cotton tshirts worn that absorbed and carried sweat. The goal was to design gear that kept athletes light, cool, warm, dry and capable of performing at their best at all times. The company has not strayed from that goal.
And by the sales that the company generates each year, its obvious people are enjoying the products. Over the last 5 years revenue has almost tripled from $1.06 billion in 2010 to $3.08 billion in 2014 (~189% growth). And with a price/earnings ratio of about $90.04 it seems that there is plenty of upside for UA to establish itself in a similar way Nike did early on in its public offering.
The Bad
Plain and simple...Under Armour doesn't pay a dividend. I don't get free money.
The Ugly
Think of it like comparing LeBron James with Stephen Curry. Ironically, Nike and UA are their respective sponsors. Nike is the established "King" of the industry and Under Armour stays "Cookin' up" new things that shake the industry up on regular basis. That type of competition is wonderful for the consumer, but both companies have to literally put their all out on the table to be able to keep their consumer base and nab a few from the other side. Nike is in the position that they can provide a steady dividend for their investors because they have significantly more cash to pull from to operate. Nike has an advantage in the market with investors looking for stability and establishment in companies they invest in especially after recent market volitility. Under Armour on the other hand is still somewhat the new kid on the block. It's growing fast and the company is climbing the maturity curve. In the next few years, investors are looking to see some of Under Armour products maintain their traction with consumers.
Do you think there will be another LBJ vs The Chef finals? Nike and UA probably hope so. Last year was the year of The Chef and Under Armour has benefited. This year seems to be following suit especially now that the only undefeated NFL team has an Under Armour Sponsored QB dabbin' on the world and the reigning NFL champions are lead by a Under Armour sponsored QB too. With the Panthers and Patriots being favorites to have a showdown in February, Under Armour is sure to win in 2016.
And so am I :-)
Wednesday, December 2, 2015
Stock Market Basics: Picking Your Broker
So we've gone through general basics of investing and the stock market. Now its time to start practicing what you preach. I know you're probably thinking:
Tasia, I get these concepts on investing, but exactly how do I actually buy a stock?
Well thanks to a blog suggestion from my gorgeous line sister Sarah Bowers, I'll explain how to do that here.
In order to participate in the market you must have some form of a brokerage account. A brokerage account is held with an investment company in which you can manage yourself or allow someone else to manage. Like any other account, you must have an initial deposit of anywhere between $500 and $2,500. That amount you initially need varies by broker, and this is one key thing to take note of when researching a broker. Another point to look for while researching a broker are the transaction fees. If you plan to manage your own portfolio, generally you'll have a transaction fee from $4.00 to $9.00/trade. Should you let someone else manage your portfolio, they allow you to do research and call them to discuss your goals and make purchases on your behalf. But this type of transaction will cost you the upwards of $25.00/trade. Technology and services is also a key metric to use when deciding on a broker. Does the broker have a mobile platform that is easy to use? Do they make the online trading platform easy to use? Do they offer you online customer support so you can ask questions and is this service free of charge? Are the charts and graphs provided for your research clear to understand? Just a few things to look at when it comes the tech and services.
Tasia's Recommendation: Be smart. Be confident. Make your own decisions from the broker you chose to the stocks you buy.
The broker's job is to work on your behalf. They have to make sure you are successful so that you will be comfortable continuing business with them. They need to provide you the best brokerage account environment so that you can make clear minded and important decisions using the tools they provide.
Here are a few key notable brokers with individual brokerage accounts that are available to you:
*FolioInvesting doesnt have an initial deposit but they do have annual service fees between $60-$290/year
Know that the above companies have various account options, including variety of IRA accounts, joint brokerage accounts, 529 College savings plans, checking accounts and so many more services. I've linked all the websites to those companies so you can explore each of them for yourself because each of them has special offerings that may speak to what you need from a broker. And this list is far from exhaustive. There are so many companies and so many ways to start investing I can't address them all in one post.
If you don't think you're ready to have a self managed/co-managed brokerage account, there is also a mobile app called Acorns that you can download on your phone that automatically invests the pennies on a dollar each transaction you make into diversified mutual fund like portfolios. Its only $1/month for accounts with less than $5,000 and 0.25%/year of the account value after that limit. If you're looking just to start and not have to manage the investments, Acorns may be a good idea to start.
One of the best teachers is experience and I can say with all honesty that the longer I've been researching and building my actual portfolios, the more I know and more comfortable I am with my decision making. Trust me, I haven't always made profitable purchases and plenty times I've been able to get the max from an investment and sell just in time. I know this post could (hopefully and prayerfully) generate a lot of questions. Please leave them in the comments here, on the Facebook Like page or on my personal page. Just make sure you ask the question because someone else may have the exact same question and be able to learn from the response.
Til next post folks.
Tasia, I get these concepts on investing, but exactly how do I actually buy a stock?
Well thanks to a blog suggestion from my gorgeous line sister Sarah Bowers, I'll explain how to do that here.
In order to participate in the market you must have some form of a brokerage account. A brokerage account is held with an investment company in which you can manage yourself or allow someone else to manage. Like any other account, you must have an initial deposit of anywhere between $500 and $2,500. That amount you initially need varies by broker, and this is one key thing to take note of when researching a broker. Another point to look for while researching a broker are the transaction fees. If you plan to manage your own portfolio, generally you'll have a transaction fee from $4.00 to $9.00/trade. Should you let someone else manage your portfolio, they allow you to do research and call them to discuss your goals and make purchases on your behalf. But this type of transaction will cost you the upwards of $25.00/trade. Technology and services is also a key metric to use when deciding on a broker. Does the broker have a mobile platform that is easy to use? Do they make the online trading platform easy to use? Do they offer you online customer support so you can ask questions and is this service free of charge? Are the charts and graphs provided for your research clear to understand? Just a few things to look at when it comes the tech and services.
Tasia's Recommendation: Be smart. Be confident. Make your own decisions from the broker you chose to the stocks you buy.
The broker's job is to work on your behalf. They have to make sure you are successful so that you will be comfortable continuing business with them. They need to provide you the best brokerage account environment so that you can make clear minded and important decisions using the tools they provide.
Here are a few key notable brokers with individual brokerage accounts that are available to you:
| Name | Initial Deposit | Equity Transaction Fees | Link to Website |
|---|---|---|---|
| Charles Schwab | $1,000 | $8.95/trade | Website |
| Fidelity | $2,500 | $7.95/trade | Website |
| eTrade | $500 | $9.99/trade | Website |
| ScotTrade | $2,500 | $7.00/trade | Website |
| FolioInvesting | None* | $4-10/trade | Website |
*FolioInvesting doesnt have an initial deposit but they do have annual service fees between $60-$290/year
Know that the above companies have various account options, including variety of IRA accounts, joint brokerage accounts, 529 College savings plans, checking accounts and so many more services. I've linked all the websites to those companies so you can explore each of them for yourself because each of them has special offerings that may speak to what you need from a broker. And this list is far from exhaustive. There are so many companies and so many ways to start investing I can't address them all in one post.
If you don't think you're ready to have a self managed/co-managed brokerage account, there is also a mobile app called Acorns that you can download on your phone that automatically invests the pennies on a dollar each transaction you make into diversified mutual fund like portfolios. Its only $1/month for accounts with less than $5,000 and 0.25%/year of the account value after that limit. If you're looking just to start and not have to manage the investments, Acorns may be a good idea to start.
One of the best teachers is experience and I can say with all honesty that the longer I've been researching and building my actual portfolios, the more I know and more comfortable I am with my decision making. Trust me, I haven't always made profitable purchases and plenty times I've been able to get the max from an investment and sell just in time. I know this post could (hopefully and prayerfully) generate a lot of questions. Please leave them in the comments here, on the Facebook Like page or on my personal page. Just make sure you ask the question because someone else may have the exact same question and be able to learn from the response.
Til next post folks.
Monday, November 30, 2015
Saving vs Investing Part 2
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...
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...
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...
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