Dec 04

A Guest Post from Samantha -

Eighty percent of smartphone users check their phones before getting out of bed. Before we get into work, most of us have checked our email and flipped through our social media channels. That time on social media shouldn’t be spent retweeting memes and liking Facebook photos; these networks are goldmines for finance news. Start following these six accounts to get your morning dose of finance and investment news. 

money-investing

Scroll Through Twitter

If you’re new to the world of investing, the first thing to do is feel out what people are saying on Twitter. This social network can be intimidating at first, so begin with these two accounts. 

StockTwits (@StockTwits) is a social network for investors and traders. More than 300,000 users share updates in 140 characters blurbs. Think of it as finance training wheels for the Twitter-challenged. The StockTwit Twitter account has posted almost 40,000 tweets and covers everything that’s buzzing around Wall Street. Joining this massive community (either as a member or Twitter follow) is a must for anyone looking keep their eyes on stock news.

Charles Rotblut (@CharlesRotblut) is the current vice president of the American Association of Individual Investors. Not only does he tweet helpful articles from his contributions to the Wall Street Journal, but he also gives association updates to members.

What do these two Twitter handles have in common? They’re more than news sources; they’re the social media arms of larger communities. Joining a professional organization is a must for anyone who is committed to their field. 

Bonus Pro Tip:

When tweeting about a particular stock, skip the hashtag and use the dollar sign. Tweeting with $TWTR will bring you to a better discussion about Twitter than using #TWTR or #Twitter. 

Watch Videos on YouTube 

Media in the Internet age is fast. No one has time to peruse the Wall Street Journal or curl up with CNBC to get caught up with news. People want to get briefed on what’s going on in five minutes or less. Enter YouTube. 

Personally, I recommend watching MarketMinder Minute by Fisher Investments. They do weekly roundups of the news in 2-4 minutes blurbs. Do you think you can make it past the five-minute mark? They also have quarterly round tables where four or five experts debate hot topics like recent elections and laws. 

If you’re just starting to build out your YouTube subscriber list, start with Fisher Investments videos and grow from there. 

Like Pages on Facebook

If you don’t get distracted by the baby pictures of your nephew or the new relationship status of your ex-girlfriend, then Facebook can be a great tool to stay caught up on news and best financial practices. Why? You’re already there. Thirty-four percent of women check Facebook first thing in the morning – before checking their email – and you can bet that men do the same thing.  

Finance and Development magazine has a thriving presence on Facebook with more than 119,000 likes. Its focus is on global financial news: Eastern Europe, Sub-Saharn Africa, etc. This is where you want to start when you’re expanding your investments globally. 

Daily Finance is another “must-like” page for investors looking to grow their knowledge. They focus on news that affects popular consumer retailers, as opposed to F&D’s global news. Do you have an opinion on the Toys R Us Black Friday hours? Sound off in this forum. 

Network on LinkedIn

You didn’t think we were going to talk about finance on social media without bringing up LinkedIn, did you? 

Finance Club is one of the largest finance groups on LinkedIn and has more followers than any of the above pages. Boasting more than 382,000 members, this private group is a haven for anyone in the finance industry. From insurance to real estate to private equity, this is the place to network with industry professionals and educate yourself. 

These are just a few suggestions to begin your social education and is by no means is a complete list of all the great resources out there. What finance pages do you frequent? Leave a comment below. 

Author Bio: Samantha Ducati is a loving wife and a mother of 2. She loves reading and writing so much that during her free time she writes about anything and believes that a pen is mightier than a sword.

written by Joe \\ tags: ,

Oct 01

If you have a teenager in the house, you’re likely to hear the expression,”that’s the stupidest thing I’ve heard in my life.” A few things come to mind, “I guess you haven’t listened to some of the people I worked with,” is one, but I can’t keep from saying,”make a list and see if the next stupid thing you hear actually tops it, and so on.”

When it comes to the mistakes investors make, I’m sure the list is long. It probably starts with spending more than you make which results in simply not saving at all. Then comes not saving nearly enough because most people don’t actually go through the exercise of calculating their retirement needs. For those actually investing, a major error is the propensity to buy high and sell low. I wrote about this in Disappointing Returns sometime ago and described how for the 20 years ended Dec. 31, 2006, the average stock fund investor earned a paltry 4.3 average annual compounded return compared to 11.8 percent for the Standard & Poor’s 500 index.

More recently, we discussed Frontline’s The Retirement Gamble, a PBS broadcast that focused on cost, how a 2% fee in one’s 401(k) would wipe out nearly 2/3 of your returns over time. If you use an advisor and find that his (or her) personal advice is worth a fee, that’s a different story. I’m strictly talking about ETF or mutual fund expenses. That said, I present you with the stupidest thing I’ve heard a financial author say. Ever. This may change, of course, but it’s the benchmark against which I’ll hold other foolish quotes I find for the rest of my life.

davidfees

This is from David Ramsey’s Financial Peace Revisited. And I’m a bit taken aback. There are two implications here. First, that there’s a positive correlation between expenses and returns, as if to say “you get what you pay for.” This was disproved years if not decades ago. The second, and even more dangerous implication is that 16% is a number that one can ever see long term. The 80′s and 90′s (remember those years?) brought us a whopping true compound return of 17.99%/yr. But, of course the next decade’s fiasco brought the 3 decade average down to 11.29%. A look further back brings us closer to an even 10% CAGR. 10%. Not 12%. And certainly not 16%. Consider, at 16%, investments double in 4.5 years. 45 years would result in 10 doubles or your investment growing 1000 fold. Imagine putting $1000 away each year for your 10 year old knowing that starting at 55, she’d be able to withdraw $1,000,000 each year. Sorry, not going to happen. And when it comes to finance, hyperbole has no place in the discussion.

Sorry, Dave, expenses matter, .5% per year over one’s investing lifetime adds up to a sizable fraction of their account. Hopefully, you’ll have the patience to understand this and withdraw these remarks that can damage your followers’ hard earned savings.

written by Joe \\ tags: ,

Sep 20

A Guest Post Today -

When trying to find which Certificate of Deposit (CD) is best for you, there’s really no right answer as to which one is the best. However, there are ones that may be more advantageous for you when compared to others.

As it stands, more people continue to opt for the traditional CD, but there are newer ones that have been rolled out by banks and credit unions that are much different. Here is a look at the different type of CDs offered right now:

Traditional

The traditional remains popular because it is so straightforward. You place a predetermined amount of cash in the CD for a predetermined amount of time and interest. Once the time span has ended (matured), you can either take out the cash that is owed to you, or roll it back into another CD.

For most banks, you can deposit more money while the CD is still in its term. However, if you want to take the money out, there’s likely going to be a large penalty for doing so. There aren’t laws in place to stop a bank from penalizing you, but they do have to tell you what it will be before you can get the CD.

Make sure to find out what the interest is going to be before jumping in and look at the best best 6 month CD rates at banks being offered right now.

Zero Coupon

When it comes to CDs, zero coupon ones aren’t very well known by most investors. It is very similar to that of a zero coupon bond, in the fact that you can get it discounted to the maturity value.

As a quick scenario, a 12 year CD of $100k can be bought for $50k at 6% interest. During the first decade, you would not get any interest. However, after the 12 years have passed, you will collect $100k which makes for a great investment.

Bump Up

What makes bump up CDs appealing is the ability to use a variable rate that continues to rise. As an example, you can buy a CD that lasts for two years. If the bank were to offer a CD for a higher rate to new customers after a certain time frame, then you can get your rate to match the new one.

There are a couple of things to consider with this. The first is that you are likely to have the ability to raise your rate just once. The other is that the beginning rate is possibly going to be lower than that of a more traditional CD.

Liquid CD

A liquid CD grants you the ability to take out money from your CD without being charged any penalty amount. There is likely going to be a minimum amount set as your balance to take advantage of this, but that shouldn’t be a problem.

Traditional CDs typically have higher rates than liquid CDs, but you get the flexibility and freedom that the traditional can not offer. You will want to find out how soon you can take money out of your CD first, as law states that it must be at least seven days. The last thing you need to know about liquid CDs is that there may be a set amount of times you can withdraw money.

Now that you know which types of CDs are offered to customers, it’s time to shop around. There is a lot to consider but if you find one that fits your financial interests the closest, it is sure to be a good investment. Do your homework and you will see some solid returns down the road.

written by Joe \\ tags: ,

Aug 17

Today, a guest post from Ryan.

A few months ago we talked about the benefits of DIY investing vs. hiring a financial planner. There are definitely reasons to go both routes. Maybe you thought that the DIY approach was your best option but after six months of trying to go it alone (albeit with the help of sites like 1Wealth Trading to help you master the basics) you’ve decided you’d feel safer hiring a financial planner to help you get your portfolio (and financial future!) on track.

So how do you do that?

1. Beware the Commission

Before you even meet with a financial advisor or planner, find out whether or not that person is working on salary or commission. It is always better to work with someone on salary. Why? Because commission based financial planners and advisors only make money on what they sell you for your portfolio. This makes it harder for them to resist taking risks with your investments. You don’t want to have to worry about your planner’s motivation.

Note: Obviously not every commissioned financial planner is going to sell bad stuff to make a commission! Most commissioned advisers and planners are highly honorable people. But do you really want to have to wonder about the person’s motivation?

2. Look for the CFP Certification

Believe it or not, most financial planners only have to pass two tests to be considered “qualified” to sell investments and insurance. From there, they can go on to purchase a lot of other certifications to help them add credibility to their reputations. Sorting through all of the certification initials after a planner’s name can be difficult and confusing. The certification you want to see the most is CFP®. In order to obtain this certification, the planner is required to go through extensive training, testing, pass a background test and have three years of full time experience to their names.

3. Experience Matters

CFP certification requires a minimum of three years experience, but it’s good to go with a planner who has been on the job for a while. The lengthier your potential planner’s history, the more experience he or she has with finance as an industry. The “greener” your planner or advisor, the more likely it is that he or she is relying on sales training than any sort of practically built financial experience. A good rule of thumb is ten years. Ten years is the average length of a market cycle.

4. References Matter

Always always always check a potential planner or advisor’s references. Get these references from multiple sources as well. You don’t want to rely solely on the references given to you by the planner you’re interviewing. Ask around to see who your friends and colleagues choose to work with. Run your potential advisor or planner’s name up the proverbial flagpole to see if your friends or colleagues have heard of him or her before and to find out what sort of impression they got. Do an actual background and reputation check on every potential candidate. This includes double checking certifications, checking with the BBB, etc. It’s better to be safe than sorry. After all, it’s your money, right?

Finding and choosing the right financial planner or advisor isn’t something you can do with a quick Google search. This isn’t online dating (though it can feel that way sometimes). You need to actually spend time with and thoroughly vet every potential candidate before you trust anybody with your money and your financial future.

written by Joe \\ tags:

Apr 18

I wrote about this five years ago, in my pre-blog days, time to revisit and share with new readers.

Today, we’re going to look at a complex topic, how diversification helps reduce your risk when investing in stocks. I’m going to use an analogy, coin flipping, to simulate stock returns in a way that should help simplify the concept. We’re going to start with a simple idea, a game in which you flip a dollar coin and if you bet right, you gain 30 cents, if wrong, you lose 10 cents. It’s an exaggerated way to simulate the stock market, either +30% or -10% on a dollar bet.

flip1

The above summarizes the results for one flip. For sake of easy math, -10% is listed as .9, and +30% is 1.3. The average is 1.1, a 10% return, not too far from reality, and a simple standard deviation calculation shows .283 quite a bit higher than the S&P standard deviation. For annualized return I take the geometric mean, the square root of .9 *1.3. Bear with me. It gets better. The next step is to split the bet. After all, the odds are in your favor, right?

flip2

You can see that a loss requires two heads, a one in four event. Half the time you will get the average 10% return, and a one in four chance at 30%. The important thing to note is that while the average didn’t rise, the standard deviation dropped quite a bit. And the geometric mean of the 4 results gives us an annual return of 9.1%. We can continue this process following the pattern of Pascal’s Triangle

pascal

The third row here helps us understand the three coin scenario, of 8 possible outcomes, one is all heads, three is two heads one tail, etc, a pretty cools chart to understand the odds involved.

flip3

The math gets a bit more complex with each added coin, but it’s easy to see that the more flips the bets are spread across, the lower the standard deviation, in other words the results cluster more closely to the average, and the geometric mean also improves in the process. That’s my thought for today, the math of stock diversification is similar, yet far more complex to explain as each stock has its own set of risks. I hope this made the process a bit easier to understand.

written by Joe \\ tags: ,