April 22, 2018

What Would You Do With An Extra $500

Extra 500

Consider how to get the most benefit from extra cash by looking at short-term investment options.

What if you found yourself with $500 that wasn’t committed to any part of your budget. Could happen. An income tax return, for instance.

Regardless of the source of your windfall, it’s time to consider how to get the most benefit from it by looking at short-term investment options. Having one or more of these in your financial profile is a buffer against the unexpected.

Carefully look at the possibilities before putting your $500 on the line. The most common short-term options

• A term deposit, sometimes referred to as a certificate of deposit, means you put an amount into an account at a financial institution, with a fixed term. Maturity dates can be set for as short a time as six months or extend to five years. Most institutions charge a penalty if you close the account before the term is filled. In most instances, the institution pays a higher dividend on a term deposit than on a traditional savings account. You can increase the value of such a deposit by “laddering,” or opening multiple accounts that mature at different times, anywhere from a year to five years. When a deposit matures, you can flip it into a new term account. Creating a train of short-term deposits allows you to access money when you need it on a regular basis while still earning good dividends.

• Look at mutual funds, an investment program that takes money contributed by many people and putting it into securities. Beginning investors may be particularly interested because mutual funds are easy to understand and to buy. They are affordable and offer a variety of categories and types. Consider where you feel most comfortable placing your $500.

• Peer-to-peer lending puts people with money to invest together with people or organizations that need to borrow that money. These lending platforms operate online, so they have lower overhead and fewer transaction costs. Three- to five-year investments usually earn higher returns. As is usually the case, that means higher risk. It is possible the borrower could default and the debt go to collection, or be lost entirely. Diversity is the best approach. Putting small amounts of money into several loans minimizes the possibility of damage to your portfolio.

Whatever you decide to do with your $500, don’t leap before carefully studying all of the possibilities. Be familiar with the institution in which you intend to invest your money. If you are uncertain, find a financial advisor who is familiar with the answers to your questions.

What Do You Want For Retirement

Retirement

As a rule of thumb, the more you are willing to give up early on, the faster you will reach the goal.

How Much Cash Do You Want In Retirement?

Ever tried to calculate how much money you would like to have to live on in the way you want to in retirement? Fifty thousand a year? $150,000? Maybe $500,000?

If you want to try to figure it out, subtract out income you currently have from your job and any other income sources. Divide the figure by .04 to see what assets it would take to support that level of annual income. Many financial planners use the .04 figure based on experience that says you could withdraw 4 percent of your money each year and put it into an account that would generate enough, over time, to maintain its value after calculating for inflation.

For example, if you think you would need to make $80,000 per year to live as you like. In fact, you only work part-time and make $20,000 per year. You assume that you can expect about $15,000 per year in Social Security. Take the $80,000 and subtract $35,000 and you’ll have $45,000. Divide that by the .04 and you’ll have a figure of $1,125,000. That’s the amount you would need to earn the other $65,000 from your investments if you want never to run out of money.

The next factor you need to decide on is when you will be wanting the money. If you are 30 and want to retire at 65, you have 35 years to get the money lined up. Use an online calculator such as calculators online, to figure it out how much in monthly savings you will need to reach the goal. Such a calculator also can guide you in different scenarios, showing how long it will take to reach your goals under different savings and investing plans.

Assuming an 8 percent return on your investments, you’d have to set aside $754.85 per month until retirement. (If you had started at age 25, the amount would be only $322.26 per month. If you had begun at 18, the monthly cost would have been $181.09. That’s the power of compounding.)

If you aren’t expecting to leave anything to family or friends, a charitable remainder trust could be a great choice. The savings figure would be much lower because this model assumes that you would maintain the $1,125,000 fund in perpetuity.

Many financial planners will estimate your lifespan and create a program that will see your money run out at your 85th birthday, or longer.

You can expedite your goal by saving more each month. Say $300 per month extra could help you arrive at the goal much, much earlier, possibly decades. That may take some sacrifice – a used vehicle instead of new, fewer meals out, less expensive clothing, etc. Your priorities are your own and no one can make this decision except you. But as a rule of thumb, the more you are willing to give up early on, the fast your will reach the goal. Avoiding unnecessary debt is one of the objectives you should set early and stick with.

Try to look ahead as much as you can. If your part of the country appears to be headed for depressed conditions, move to a place where the economic picture is more rosy. If that seems drastic, consider: If you are not willing to be inconvenienced for the chance of a better life, then you must be content to live in poverty.

Making a good beginning toward your retirement goals is wise. Passing up car ownership into your 20s may save you the costs of upkeep, fuel and insurance. Instant gratification can be costly.

Take Dow Drops Seriously

Dow Drops

Market corrections are common, healthy occurrences that should be embraced as long-term opportunities

In recent weeks, the Down Jones Industrial Average, one of the indicators of how well the country’s investing is going, has dropped twice by more than 1,000 points in a single week.

What should you, as an investor, do? It’s natural to be nervous when it is possible more dips are in store. Mistakes in this kind of market could lead to even bigger mistakes in the future.

Take a lead from multi-millionaire Warren Buffett, whose holdings have declined in value by an 11-figure amount over the past week. He isn’t unhappy about it and sees it as the normal rise and fall of the market. He anticipates more attractive entry points to stock investments and a better chance to find a reasonably priced acquisition, a “more palatable stock price to consider implementing a buyback.”

If you aren’t as knowledgeable as Buffett, rely on past history. Market corrections are common, healthy occurrences that should be embraced as long-term opportunities.

Here are three approaches that will keep your investments safe while the market readjusts:

Use dollar-cost averaging. Many people do this routinely. You invest a fixed amount of money on a regular basis into shares of stock or a mutual fund. Your 401(k) contributions, for instance, are an automatic form of dollar-cost averaging. Making regular deposits to a mutual fund or brokerage account is another way to dollar-cost average. Under this scenario, when stock prices fall, your fixed dollar amount buys more shares. It automatically helps you take greater advantage of corrections by purchasing more shares than you could have before the price drop.

Invest some now and some later. During the recent bull market, many people grew their amounts of cash. Not being able to predict if the current down-trend will than lead to a full bear market, be wary of investing everything now. You may get it wrong. One solution is to invest only a portion of your available money now, depending on your risk tolerance. Consider investing a third now, another third six months from now and retain the rest until you see how the market is trending by then.

Give your savings a bump. Though its emotionally easier to put your money to work in the market, it may pay during the term of a down-time to increase savings while stock prices are weakening so that you can begin to invest again when the time is right.

Market downturns can allow you to forget the reason you’re investing in the first place – to have enough money to meet long-term goals such as retirement. Get past the panic and stay focused on the future. Things will change.

Investment Advice? It’s As Old As The Hills

Investment Advice From The Experts

Investment Advice From The Experts

It probably began right after the Garden of Eden deal fell through. Swapping success stories has been part of the human condition since there were two entrepreneurs to swap tales. And some very good advice has survived for generations.

Forbes Magazine winnowed down the list to share with readers. Their pool of gurus includes five billionaires, a miser, a Nobel laureate, a founding father and assorted and sundry people whose names rise to the top whenever success is the topic.

Examples include:

Warren Buffet, whose $65 billion empire was built on buying businesses that he was certain were worth more than the sellers envisioned: “Whether socks or stocks, I like buying quality merchandise when it is marked down.”

Sir John Templeton, founder of Templeton Funds, who made a killing by defying the conventional wisdom about the stock market, buying when others were selling: “If you buy the same securities everyone else is buying, you will have the same results as everyone else. . . Buy at the point of maximum pessimism, sell at the point of maximum optimism.”

Nathan Mayer Rothschild, 1776-1836, founder of N. M. Rothschild & Sons. “Information is money.” Thanks to his extensive network of carrier pigeons, and the careful placing of his sons in strategic European cities, Rothschild knew that England had defeated France in the Battle of Waterloo before anyone else in London. As other traders on the stock exchange braced for a British loss, he capitalized on his early information to build a fortune.

Peter Lynch, manager, Fidelity Magellan Fund. “Buy what you know.” He applied his knowledge of wise money management to generate an annual return of 29 percent. His secret to profitable investing: Don’t buy Twitter or Amazon, but do buy those suggested by A.All .com and Validea.com, NetApp, Barrett Business Services, Honda, Publis and Alliance Fiber Optic.

Alexander Hamilton, first U.S. Secretary of the Treasury, who earned the nickname Little Lion. His bestseller: the $10 bill. During the country’s formative years, he tirelessly advocated for responsible federal finances. His lesson: Don’t buy securities in developing countries with dodgy rulers. “A nation which can prefer disgrace to danger is prepared for a master and deserves one.”

David Tepper, founder Appaloosa Management. During the panic of early 2009, he bet heavily on Bank of America, Citigroup and AIG. Quit Goldman Sachs in 1992 to build his own hedge fund. Reputation for clearheaded moves in environments of fear and misinformation. His quote: “I am the animal at the head of the pack. I either get eaten or I get the good grass.” He advises paying careful heed to central bankers and fiscal policymakers.

Hetty Green, 1834-1916: Description, miser; nicknamed “The Witch of Wall Street.” She inherited $5 million at age 30 and had multiplied it into $100 million by the time she died in 1916 by ferreting out investments that would earn her 6 percent annually, doubling her fortune every 12 years. The richest woman in the United States, she saved pennies by refusing to use hot water, wash her clothes or provide her son with decent medical care. “All you have to do is buy cheap and sell dear, act with thrift and shrewdness and be persistent.”

How to Build a CD Ladder – And Why You Should

A simple fact that is hard to learn is that the time to save money is when you have some. - Joe Moore

A simple fact that is hard to learn is that the time to save money is when you have some.
– Joe Moore

With the stock market hovering in record territory, certificates of deposit (CDs) aren’t getting a whole lot of respect these days. After last year’s amazing 32% return in stocks, convincing people to put money into CDs that often pay less than 1% is a tough sell. But if the stock market should start reversing course, CDs could be one of the best investments in town, and a CD ladder will be one of the best ways to hold them.

What is a CD ladder?

At its most basic level, a CD ladder is a portfolio of certificates of deposit that you arrange much the same way you would any other type of investment portfolio. The idea is to create a portfolio of CDs that includes both different interest rates and different maturity dates.

In a real way, this is something like building your own money market fund. And while putting your money into a money market fund would certainly be simpler than creating a CD ladder, the returns on those accounts are close to zero right now. CD rates are low by historic standards as well, but by building a CD ladder you’ll have an opportunity to earn a better return on your money, certainly better than money market funds.

You can always put all of your money into a single CD that pays the highest rate. You might decide for example, to put all of your money in a five year CD as a way of maximizing your return on investment. But what happens if sometime during the five-year period interest rates rise, and rise substantially? Your money will be tied up in your five year CD while better rates can be had in other CDs. Sure, you can usually terminate the CD early, but that will result in early withdrawal penalties that will reduce the rate of return on future investments.

You can avoid that fate with a CD ladder. Let’s say that you have $30,000 that you plan to invest in fixed income assets, like CDs. Rather than putting all of the money into a single CD, you can invest smaller amounts in various CDs, either at different intervals or with CDs of different maturities. We’ll discuss both methods in a minute.

Why would you want to build a CD ladder?

Before we get into CD ladder strategies, let’s spend a little bit of time considering why you should put some of your money into CDs in the first place. There are several reasons:

  • When equity investments, like stocks, begin to fall – and they will sooner or later – there’s nothing like the safety of cash-type assets, especially those that pay interest. Though you may not make a fortune with CDs, you won’t lose any money either. That’s a winning investment in a bear market.
  • You should always have at least some of your money sitting in fixed rate investments, even if you are an aggressive investor.
  • CDs will preserve your capital during a market downturn, so that you will have cash to buy stocks when the market turns up again. CDs are the perfect place to park your money.
  • In the current market environment, CDs pay higher interest rates than money market funds. Many money market funds are currently paying less than 1/10 of 1% in interest.
  • Non-bank money market funds are not insured by the FDIC the way CDs are.

Now that you know why you should invest in CDs, let’s talk about some CD ladder strategies…

Building a CD ladder – it’s not complicated

Building a CD ladder will probably be one of the less complicated investment ventures you will ever enter. It’s certainly easier than either the stock market, where you have to worry about unstable asset prices, or real estate, where you incur a large number of transaction fees.

CDs are completely stable assets with guaranteed returns, and there are no fees to set them up directly with a bank. And you can do this either online or, if you’re not tech savvy, you can do it through a local bank where bank personnel will handle all the paperwork for you. They’ll even create and maintain a CD renewal schedule based on your preferences.

Building the actual CD ladder will simply be a matter of deciding upon the right mix of CD maturities, or the sequence of CDs purchased.

Laddering for interest rate return

Generally speaking, the longer the term of the CD, the higher the interest rate it will pay. If you are laddering for maximum interest return, you may want to create a portfolio of CDs with various maturities – which is where the term “ladder” comes into the picture.

Your ladder may consist CDs maturing in six months, one year, 18 months, two years, 30 months, five years, and so on. In this way, the staggering of maturities will provide you with the maximum rate of return on the portfolio. The certificates with longer maturities will give your ladder a higher rate of return than if you were invested entirely short-term CDs.

The staggering of maturities will also give you the option to participate in higher-paying CDs in the event that interest rates rise. So for example, while you’ll be locked into longer terms with certificates maturing in 18 months to five years, those of shorter duration can be rolled over into higher-paying certificates as they mature.

Laddering for maximum liquidity

Maximum interest rates are not the only reason why people invest in CDs, and certainly not CD ladders. For many investors, liquidity is more important than return on investment, particularly in a low interest rate environment. If this describes you, then you can also ladder your CDs for maximum liquidity.

You can do this by investing your money in short-term certificates, and do it in such a way that while you are investing in one CD, another one is coming due. With this type of ladder, you’ll always have cash available for any purpose needed.

Let’s say that you have $30,000 that you want to invest in certificates of deposit. Instead of putting the entire amount into a 180 day CD, or even a 90 day CD, you can break up the portfolio into 12 equal parts of $2,500, and invest in a new CD each month. Each chunk can be invested in a 12 month CD, and you do so at regular monthly intervals.

Over the course of one year, you will have built a CD ladder 12 CDs of $2,500 each, with one maturing and one renewing each month of the year. When a CD matures, you will have the option to either roll it over into another CD, or take the cash for an unrelated purpose.

This can be a perfect strategy if you are an active investor with an ongoing need for cash. And at the same time, it’s a way to add safety and predictability to an otherwise high risk portfolio.

If the stock market is starting to give you a nose bleeds, look in to CDs – and CD ladders in particular. They’re a great place to be when the stock market starts tossing and turning.

Asking Better Business Questions

Flowers, Social, Shopping, Banking or Staples?

Flowers, Social, Shopping, Banking or Staples?

The Right Questions

How does a business owner know if they have asked themselves the “right questions” to start a business or make their business grow? To answer that question, let’s take a look at some successful businesses.

Facebook, Amazon, Bank of America and 1-800-flowers.com are recognizable companies to most people. People are also familiar with the DJIA, Dow Jones Industrial Average. Whether you own stocks in any of these companies or not, they command attention even from you. We have examined company growth of their stock prices for the last eight months for Facebook, Amazon, 1-800flowers, Bank of America and the DJIA. Results from this data show that In the last eight months, there has been considerable growth in Flowers and Facebook. You can also see that the biggest improvement during this time period is at 1800flowers.com.

What is the bigger question you need answers to?

14 Year Stock Watch

14 Year Stock Watch

It seems that one question begets another question. So how have the companies performed over a long period of time? Like since 1999? That might give us better information. We found that Amazon.com grew by over 502%. The Dow Jones Industrial Average had a 43% growth. Facebook maintained minimal loses of 2.29%. Bank of America lost ground by 52% and 1-800-flowers by 73.29%. Now that might paint a different picture about the companies.

So What Questions Do You Ask?

Sometimes business owners ask themselves the wrong questions and focus on the wrong areas. What questions can you ask yourself that will help take your business to it’s next growth spurt? Not sure what to ask?

Here are five questions you may want to think about.

1. If you are buying a previously owned business do you know all the details of what made it work?

2. If you are creating a new product, have you Provisional Patent Application to protect your idea from being copied for up to a year?

3. Do I have the best suppliers for my niche? Thomas Register of Manufacturers, offers the largest directory of direct industrial suppliers, while your local library has listings of manufacturers listed by state.

4. What does my competition look like? Research online and offline.

5. What is my market potential?

There are many questions that businesses need answers to. Make sure you have asked the most relevant questions for your particular business.

What questions do you ask yourself about your business?

Bank of America In Utah

In the latest Bank of America Merrill Lynch CFO Outlook survey, U.S. financial officers gave the economy its highest score in five years and were “significantly more confident about economic growth in 2013.” This new economic outlook may bring consumers to the investment table.

Have you considered investing in the Bank of America? You may want to do some research to find out about the bank’s assets, investing philosophy and what they are doing in your own backyard.

In a report published by the bank on January 1, 2013, small businesses in the state of Utah were granted $61.7 million in new credit. That figure is up from 2011 by 35%.

What about home loans for people in Utah? In 2012, Bank of America has provided 9,381 Utah customers with home mortgages. This figure includes 1,267 home loan modifications.
bank-of-america
What about helping communities in Utah? During 2012, $292,980 was given in grants and matching gifts to help local nonprofit community
organizations develop and grow.

What about donating to Utah charities? The Bank of America Charitable Foundation has donated $91,980 to match employee contributions to their favorite Utah charities. Employees pledged $19,342 to the local chapter of the United Way, which helps provide people with food and shelter as well as aid in financial education. Local employees also donated 1,388 volunteer hours to local communities.

What about helping the environment? During the years between 2007 through 2012, Bank of America contributed more than $37 million dollars to help renewable energy and energy efficiency projects as well as supporting nonprofits trying to focus on climate change.
As of January 1, 2013, one of their objectives is to provide financing of $50 billion for environmental improvements.

What about helping our American troops? They have a program that donates $1 for each written or photo contribution you make to them. Officially the money goes to the “Wounded Warrior Project.”

What about their debt? Recent quarterly reports say that their long-term debt has decreased by $18 billion dollars.

What about their expenses and spending? Expenses declined by $13 billion dollars in the first quarter of 2013.

Gather the information you need before investing in any company. Hopefully this article will give you some idea of what Bank of America is doing in Utah. What are they doing in your state?