Text Message

GET YOUR FREE COPY OF 10 WAYS TO MOTIVATE YOURSELF INTO TAKING ACTION ON YOUR FINANCES. MAKE THIS YEAR YOUR BEST! Subscribe at the Follow By Email gadget.

Wednesday, February 21, 2018

What to Do with Extra Disposable Income?

Today I have a great guest post for you.  More awesome ideas on what to do with any disposable income you come into.  Enjoy!


If you've recently come by some disposable income, you may not be sure what to do with it.  You can spend it all right away, but some people will agree that it's not the best idea.  Of course, the next option is to put it into a savings account.  However, with interest rates being what they are, you may not be enticed by the prospective gains.

Fortunately, in our modern world, you are not limited to a single course of action.  There are plenty of options for a person who is willing to do a bit of research and put some trust into alternative sources of income.




Invest In Gold Or Other Precious Metals

Not only is gold one of the oldest and most trusted currencies in the world, but it's also among the most stable ones.  Many people turn to gold in times of crisis because it's tangible and valuable.  However, if you decide to invest in gold, you don't even have to have gold in your immediate possession.  You can store your gold safely in the specialized vaults of financial institutions and just reap the benefits.

However, you need to know when and how to invest in gold, since it has its peaks and nadirs.  You should consult with experts if you want to invest in precious metals.

Peer To Peer Lending

One of the most intriguing and novel approaches to money lending is P2P or peer-to-peer lending.  In essence, people can put their money at the disposal of others through a platform such as Silverbullion.com.  The return you can expect from this type of investment is much higher than your standard savings account.

These loans are protected because you're never lending a full sum to a borrower, just a fraction.  If the borrower defaults, you only ever lose a fraction of your money, which can be easily recuperated.  If you're interested in learning more about P2P lending, go here: About Loans For Lenders Guide.

Buy A Car Park

If you have a longer investing time frame, you should invest in real estate to let.  Things like flats and offices are great investments, but they do come with high maintenance costs as well.  Car parks, on the other hand, require very little in the form of maintenance, AND they're a necessary part of modern civilization.

Car parks in city centers, as well as airports and large sporting venues tend to be the most lucrative, but any car park is certain to generate steady income, and recover your initial investment several times over if you hold it long enough.

Vintage Items

Buying a vintage classic car may seem to many like a mid-life crisis thing to do, but it can actually be a really smart investment.  Not only can you drive it and show off, but you may be able to sell it for a lot more money than you paid for it whenever you decide to sell.  However, you should consult with a classic car expert before you sink a considerable amount of money into this endeavor.  Some vintage cars may not have the necessary allure to be considered a "classic" so your money may be wasted.

You may also try investing in fine wines and spirits.  There are some producers whose wines are surprisingly a stable and opportune investment option if you know where to look.  Just make sure you aren't tempted to drink your investment!

Cryptocurrency

Whether you feel tempted to actually mine it, or you're more interested in trading them, cryptocurrencies are the big new thing in the financial world.  However, not everyone trusts these unregulated currencies, which is one reason their prices fluctuates so wildly.  The recent drop in the value of Bitcoin is perhaps a cautionary tale to be mindful when you put your trust into something so new and untested.

On the other hand, there are numerous other cryptocurrencies being created, which seems to tell us that this phenomenon is here to stay.  Putting your trust in these investments may be a big risk, but it could also bring a huge reward.

Invest In A Hotel

Finding the right kind of investment for yourself can be difficult, but hotels never go out of fashion.  Particularly in towns that attract many tourists.  You can have a hotel built, but there is a lot of paperwork to be done and permits to be issued.  The easier way of going about this is to buy an existing hotel or at minimum having a stake in one.  You'll get a portion of the profits each month, and you can stay at your own hotel any time you want!

Conclusion

As you can see, you don't have to be limited by banks and boring paperwork if you want to put your money to good use.  All you need is sound information and a willingness to take the plunge.

--Jaye Krause    

Monday, February 5, 2018

Neither Obama's Nor Trump's Stock Market

I find it somewhat amusing that people, devout members of either political party here in the U.S., attribute the success or failure of the stock market to the President.  They're obviously misinformed.  They have fallen for the partisan propaganda machine that each party can wield at any time whenever suitable.  The media fans the flame of this misconception to get ratings, clicks, subscriptions, and so on.

Image result for Trump Stock Market quotes


During the State of the Union Address, President Trump made a typical Presidential error.  I say "typical" because I'm pretty sure President Obama did it too.  Trump took to congratulating himself and the Republican party for the added rise in the stock market since his 1st day in office.  It's a vote getting move, and you use what you have at your disposal to sway feeble minds.  If the market keeps progressively declining all the way to November, when the next elections take place, the Republican party will be hush on the stock market.  That's a guarantee.  Democrats will be loud, blaming the Republicans for the market drop.  Again, it's politics.

The people buy it.  They take to Twitter and Facebook, and everywhere else to talk the state of the stock market as it relates to politics.  If you're a Trump supporter, you defended the 1,100 plus point DOW point bloodshed today, no doubt using stupid arguments like: "It's still well above where Obama had it!"  Or, "It's an up and down market and it will come back!"  If you're anti-Trump, you had a great day, imagining Trump having to eat his words.  The fact is, Presidents have no control over stocks, bonds, and the markets.  But don't just take my word for it.  Let's examine the Obama presidency and compare it to the fledgling Trump presidency.

"Obama was a socialist!"

Republicans and conservatives hated the Obama presidency (Jan 20, 2009- Jan 20, 2017), taking every possible opportunity to critique him.  Similar to what the liberals and Democrats are doing with Trump today, right?  Obama was said to be "anti-business."  He spearheaded Dodd-Frank, and signed it into law on July 21, 2010, regulating the banking industry.  This should've been bearish for stocks, especially the financials.

What about corporate taxes?  During both of Obama's terms, the corporate tax rate was a whopping 35%!  One of the highest in the world.  Companies had to to send their free cash abroad to keep it from such heavy taxation.  Certainly this anti-business, anti-Republican (trickle down) policy should have been bearish for stocks.  I can recall good ol' Larry Kudlow on CNBC tearing Obama a new one almost every evening for his anti-stock market stance.

But what truly happened?  Was Obama's seemingly "socialist" position enough to derail the bull market?  No!  Under Obama, the stock market had a cumulative return of 233% and an annualized return of 16%.  Only President Clinton bested him.  But I'm not here to laud the work of Obama.  On the contrary, I'm here to say that one cannot attribute the rise OR fall of a market to what Presidents do.  Obama was Johnny On The Spot, inheriting from his predecessor one of the worst market conditions since the Great Depression.  And he reaped the benefits of what inevitably happens after a major stock market decline, a stock market rally!

Trump is a Businessman Who Is Pro-Businesses 

There is no debating Trump's 2017 Jobs Act and the Republican tax cut plan that lowered the corporate tax rate to 21% is pro-business.  It should be bullish for stocks.  In fact, the prospect of Trump becoming President and then the actual event of it was enough to produce a bullish signal.  Dubbed the "Trump-trade," many investors made money when Trump took office.  The Trump-trade is no more.  Old as Trump himself.

Companies are flush with cash.  Mad Money host, Jim Kramer, believes that things are not the same as they were immediately following the crash that gave birth to the Great Recession.  No...things are way better!  And he's not wrong about that.  Companies are repatriating their cash and not having to pay insane amounts of taxes doing it.  The economy, for all intents and purposes, is great!  Low unemployment.  Wages are starting to rise in some places.  Inflation is under control.  So what gives?  Why has the stock market tanked the past couple of days?


Image result for history of bull and bear markets since 1926


Trump supporters take note.  Your President inherited a bull market that may be on its last legs, meaning Trump is late to the party.  Through no fault of his own, he was elected at a time when the stock market was on year 7 of gains.  Since 1926, the average bull market  has been 9 years!  The Trump presidency still has three more years to go.  Even if the market should bounce back from this week's and last week's losses, the odds are heavily stacked against Trump.  Screaming "Make America Great Again" (MAGA) won't protect Trump or the Republicans from the whims of the market or its bear cycles.  If a Democrat was in office today, Hillary or whoever, they too would be at the mercy of stock market factors and cycles.

The Factors That Dictate Market Performance

There are certain factors that dictate how the market performs overall over time.  Economic markers are by far the greatest contributors to market performance.  Things like the amount of available cash in the economy, credit opportunity, wage growth or lack there of, employment, inflation, asset price appreciation, and so on.

The policy of the Fed in response to changes in the economy also dictate how the market will (or should) perform.  For example, when the Fed lowered the Feds Fund Rate to spur the economy after the crash of 2007, this was a bullish signal for the stock market.  And indeed, the market went on an epic tear.  The money went from safety (Bonds) to stocks in droves.  Nobody wanted a 10-year T-bill that was offering less than a 2% yield back then!

Of course you can also count on the fact that after each bear there will be a bull, and after each bull, there will be a bear.  So pay attention to the (roller coaster) ride!

Nobody Knows...

Nobody knows when a bull market will come to an end, or vice versa, when one will begin.  Nobody knows when a bear market will come to an end, or when one will begin.  Trump may be the greatest President whoever lived to some of you, but even he is no match for Mr. Market.  If you don't invest in the stock market, do yourself a favor and leave talk of the stock market out of your everyday conversation, especially if you are listening to talk radio or your favorite news channel.  Know that no President can help you make money in stocks.  It all falls on what you know, what you don't know, and what nobody knows.    

*If it seems to you liked I bashed on either Obama or Trump, you didn't get it.  Please re-read.

Friday, February 2, 2018

How Should Newbies Approach A Declining Stock Market?

What's happening everyone?  The stock market has had the worst weeks since before Trump's election.  It's a good thing the State of the Union was a couple of days ago, huh?  The DOW is down over 1000 points!  The S & P 500 is down over 100 points.  And the worldwide "growth" thesis is severely under pressure.  Stocks have just been slammed worse than a WWE wrestler going through a wooden table.

Image result for WWE wrestler going through a table


Is this the beginning of a worldwide bear market OR is it simply a speed bump, a time to catch one's breath so to speak?  Obviously it's too early to tell, but for market veterans, making money will require lots of Alpha so your stock picking game better be on point!

Declines like this gather particularly more scary energy when they come after years of seeing nothing but growth.  People who are risk averse will have a hard time staying in the market.  Many of them high-tailed it out already.  This isn't a time to panic though my peeps.  Keep your head!  This particular "dip" in the market is a great time to buy some stocks, and indeed, even the entire market via an ETF or mutual fund albeit in small increments.  So today, I have a way market newbies, those that have never invested in stocks, can lose their virginity and finally get in the game!

Image result for Market is tanking

5% At A Time

This approach is based on how much money you have saved for investing purposes, i.e., discretionary money.  Don't go pulling cash out of your credit card!  Let's say you have $10K to invest.  If I were you, I'd take 5% of this amount and buy every time the market loses a total of 300 or more (DOW) points.  First, you don't ever go "all-in" with your money.  This approach allows you to buy the dips.  Imagine a mile long road with multiple speed bumps.  You don't know when the speed bumps are coming, but when they do you have to be ready to plow ahead and not slow down.  Plow ahead means hitting the "Buy" button in this metaphor.

Listen, there is a 100% chance that the market will drop and go bearish after damn near 10 years of a bull-run.  It may not all happen in one fell-swoop.  Over the course of 2018, you can expect more market drops.  Heck, the market may even recover from this horrible week and get back to its epic tear.  But it will go bearish overall; it's just a matter of time.

Newbies who therefore buy-in systematically, 5% of their total available investing cash, will gradually lower their "cost-basis" and not be in "too early."  If the market goes up from here and you only plucked in 5% once, that's okay, you made some money...but don't buy in again until another major dip.  The bull is running on fumes!  Is this timing the market?  Yes, duh!  But it protects you from major losses if you invest a higher percentage of your money at one time.

Periodic Investing via Mutual Fund

Making periodic purchases of a mutual fund is the traditional approach to being in the market long-term.  Mutual funds allow you to make lump-sum share purchases, or to buy shares once a month on the designated date.  You have to authorize the mutual fund company (or your custodian) to withdraw funds from a linked bank account of your choice.  You get to decide how much you want to invest every month.

Drawbacks to this approach is that you first have to buy a minimum amount of shares to get into the fund.  Some mutual funds require a minimum purchase amount between $3K and $5K.  So already you're stuck putting in more money at one time than you may want.  If you're going to buy a mutual or exchange traded fund that tracks the overall stock market (an Index fund), get one that comes with the lowest possible fees at least.  Vanguard is a leader of low fees.  Their Total Stock Market Index Fund (ticker: VTSMX) has an expense ratio of only 0.15%.  Also look for "Low Turnover."  Turnover is how often managers are trading (buying and selling) the individual stocks they hold in the fund.  The more they "turnover" the more they charge!

Alright, it looks like the bloodshed has begun my peeps.  This is no time to panic or get skittish.  Have a game plan and plenty of patience.  This may just be the start to the downturn so don't put in all of your money at once and too frequently or you'll run out of capital to invest with.  Good luck!