Keeping Calm When The Market Is Falling

keeping calm stock marketLast week, especially Friday, was tough on investors. I looked at the market around 2pm and saw it down about 300 points. Later that night I was surprised to hear it was down over 500 by the close. The market itself is now down over 10%, and the news, as usual, is pulling out all their tricks to get you emotionally charged up and act on those emotions. I am here to provide a little bit of reasoning to the stock market. Read below for 4 tips to stay calm when the market is falling.

4 Reasons to Stay Calm When The Market Is Falling

Corrections Happen All Of The Time

A correction is when the stock market pulls back 10%, which is what has happened after Friday’s drop. How important is this? Not at all. Corrections happen all of the time. In fact, these drops happen on average of once per year! It might seem scarier now because we haven’t had one in close to 4 years. In other words, we have been overdue.

So before you get scared thinking that the sky is falling, just remember this is a routine thing that happens all of the time in the market. [Read more…]

A Little At A Time Or All At Once

moneyA common problem, with many applications. But we’re talking about finance. In the lives of most, money comes in a little at a time. We work X number of hours and get $X on our paycheck or salary. Very occasionally (but in the lives of most), we get a lot of money in one fell swoop. This is typically called a “windfall”, though it can be a court settlement, an inheritance, lottery winnings, or any other several sources of big money fast.

When and if you receive funds like this, you’ll likely wonder to yourself if it’s better for you to be able to access the funds all at once or over time. After all, wouldn’t it be better to tithe it out over months or years? In fact, there are financial products which are structured to give you your money in this way. Annuities are a perfect example.

Annuities – A Little At A Time

Annuities are usually set up by someone on your behalf, though you may create one yourself. Money will be paid, gradually or all at once, into the annuity, then paid out over a set amount of time until the money is gone. That way, there’s no way to spend it all at once. This is a sort of idiot-proof approach to passing along big sums of money to another person. It’s very unlikely to blow up in someone else’s face. (It’s also why some rich parents set up a trust for their kids that only pays them a certain amount each year. It lowers the chances they blow the family fortune in one crazy night of partying.) [Read more…]

Pay Off Debt or Invest?

pay off debt or investOn any given day, you can visit a random personal finance blog and I bet you will find this very question: should I pay off debt or invest in the market? The standard answer that you will find 99% of the time is if your debt is costing you more than you can earn in the market, then yes you should pay off debt.

For example, let’s say you have a credit card that has an 18% interest rate. Given that 8% is a very conservative long-term return assumption for the stock market, you can see that paying off debt makes sense here. After all, why invest to earn $0.08 per dollar when you are paying $0.18 per dollar on your debt? You would be losing $0.10 per dollar if you followed this logic!

But when we move our attention to lower interest rate debt as well as debt that can be deducted on your taxes, the story becomes a bit more confusing. [Read more…]

The Advantages and Disadvantages of Stock Options eTrading

binary optionsThere’s no doubt that stock options eTrading is a fun and profitable approach to investing. Still, if you’re new to it, you’re probably concerned about the advantages and disadvantages involved. Let’s take a look at these now.

Excitement

This probably isn’t the most important advantage to list, but it’s worth mentioning that stock options eTrading is a lot of fun. Unlike other types of trading, you can log on, place a trade and see the results within minutes. [Read more…]

End of June 2015 Update

beach chairsWell it is officially summer and July 4th has come and gone. Most people now are looking forward to summer vacations (if you haven’t taken one yet) and eventually Labor Day. But for now, let’s just focus on enjoying the nice weather!

A lot has happened since I posted my last update the end of April. So much so that I going to get right into things and not keep you waiting!

Personal Updates

Money

My wife and I are in the home stretch with combining all of our accounts. There were some stragglers out there that needed to be taken care of and most of this is done. I then took some time and reviewed all of our investments, making sure our allocation was still on track and then made some trades to balance things out. [Read more…]

The Power Of Dividend Income

power of dividend incomeWould you be interested in getting paid to invest in the stock market? Who wouldn’t? While it might sound far-fetched or even a scam, the reality is that you can get paid to invest in the stock market. In fact, you are probably getting paid and don’t even realize it. The way you get paid to invest is through earning dividends and this post is going to show you all you need to know about the power of dividend income.

What Is A Dividend?

In order to show you the power of dividend income, we first have to make sure that we all understand what a dividend is. A dividend is simply a payment that a company makes to its shareholders from the net income it makes in a given year.

For example, let’s say I run a company and you are an investor. My company makes $100 this year in net income. I decide to pay out $1 of the profits to each of my shareholders. When this happens, I give you $1 of my earnings. This is what a dividend is.

It’s important to understand that not all companies pay a dividend. Also of note is that each company decides how much to pay out each year in total and they can increase or even decrease that amount when they see fit. [Read more…]

Financial News Updates

financial newsThere are a ton of new features, products and services all of the time in the personal finance world. I decided to take today to highlight some of the things that I find really cool and interesting in hopes that some of you can apply some (or all) of them to your financial lives to help you reach your goals.

I have no idea how frequently I will post updates like this, as it all depends on how often new things come along that catch my attention. So with that said, let’s dive in!

Personal Capital Retirement Planner

It was just the other week that I posted about knowing how much you need to retirement and here is Personal Capital with a crazy awesome update to their service.

What is so great about their new Retirement Planner? It runs a monte carlo simulation to analyze your probability of success (meaning how much you can afford to spend in retirement and not run out of money based on your investments and income). Now, I might be a little biased here, but what they are providing here is the exact same thing we provided when I worked at a high net worth financial planning firm. We charged clients around 1% of their assets under management as a fee for this. And here Personal Capital is giving it to you for nothing. Nada. Zilch. Talk about a game changer! [Read more…]

Investment Strategies For The College Investor

investment strategiesThere are thousands and thousands of investment strategies that cover the internet today. Anything from extremely specific percentages going to each stock to something crazy like investing only in one sector. Having access to so much data and articles on the internet, it’s hard to know what to trust and distrust or even know what to read and not read.

Once you have assessed yourself as ready to invest in college, you will need to next devise a strategy. Many college students do not have a lot of time to think about and research complex investing strategies. This article is here to help the college investor with simple and effective investment strategies.

3 Investment Strategies For The College Investor

Low Cost Domestic Index Fund

Low cost domestic index funds are funds that purchase stocks in U.S. indexes that have low yearly costs and add great diversification to your portfolio. Think of it as investing in a stock that invests and diversifies for you. You buy one stock in SPY and you own a fraction of 500 companies that make up the ETF. [Read more…]

Tax Efficient Investing – How To Keep More Of Your Money

tax efficient investingMost of us know that we need to invest our money in the stock market to grow our money. Even when interest rates weren’t close to zero like they are now, the stock market was a good place to be. In fact, over time, the stock market is a useful tool in building wealth, so long as you stay the course and invest for the long-term. But there is more you can do than just invest your money to grow it, you can use tax efficient investing to keep more of your money too.

By being smart about your investing strategy and keeping tax efficiency in mind, you can keep more of your money from Uncle Sam. I know I can’t be the only one who isn’t a fan of forking over my hard earned dollars. So below is an outline of how you can get started with tax efficient investing. Don’t worry, it’s a lot easier than it might sound.

What Is Tax Efficient Investing?

First off, we need to make sure everyone understands what tax efficient investing is all about. In a nutshell (help, I’m in a nutshell! Sorry, couldn’t resist), it means strategically investing in a way that ensures you pay the least amount of tax possible.

To do this, you fund certain types of accounts before others and you place certain investments in each of these accounts strategically so that you can take advantage of the tax code. And taking advantage of the tax code is our ultimate goal. [Read more…]

Moments In Your Financial Life When It’s OK To Splurge

money management skillsThere are a lot of us who have been taught financial conservatism. Being careful with your money isn’t a bad thing. But if you’re never willing to take a risk, you’ll never get anywhere in your financial life. This has long-reaching implications.

  • It will determine where and how you’ll live for the rest of your life.
  • It will have a big impact on your future health and happiness.
  • It will affect the way your children grow up.

Unchecked, financial conservatism can be almost as bad as financial wastefulness. In order to get ahead, you’ve got to be able to control debt and build savings. But you’ve also got to be willing to take on good debt and use your savings for purposes that will build you more wealth in the future. So how do you do this? [Read more…]