Investment http://www.wisebread.com/taxonomy/term/4808/all en-US Bookmark This: A Step-by-Step Guide to Choosing 401(k) Investments http://www.wisebread.com/bookmark-this-a-step-by-step-guide-to-choosing-401k-investments <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/bookmark-this-a-step-by-step-guide-to-choosing-401k-investments" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/real_estate_agent_working_with_client_online.jpg" alt="Real estate agent working with client online" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>It's no secret that 401(k) fund options are notoriously opaque. While target-date funds provide convenience to investors, they often come with higher fees than alternative investment vehicles, have highly variable returns, and aren't a good fit for many retirement savers. Let's simplify things, and review a low-stress strategy for building a solid two-to-three-fund portfolio for your 401(k).</p> <h2>The downsides to target-date funds</h2> <p>Designed to gradually adjust your investment mix as you approach retirement age, target-date funds have exploded in popularity since their designation as qualified default investment alternatives by the 2006 Pension Protection Plan. The upsides of target-date funds are that they're easy to select (96 percent of Vanguard plans make it the default investment option), they automatically rebalance, and they offer appropriate investment diversification. (See also: <a href="http://www.wisebread.com/what-you-need-to-know-about-the-easiest-way-to-save-for-retirement?ref=seealso" target="_blank">What You Need to Know About the Easiest Way to Save for Retirement</a>)</p> <p>However, all that convenience comes at a high price. A 2015 review of over 1,700 target-date funds by FutureAdvisor determined that their average expense ratio (the annual fee charged to shareholders to cover operating expenses) was a relatively high 1.02 percent, meaning that you'd pay $51 every year for every $5,000 in your balance. Assuming an average investment return of 7 percent per year, you would miss out on an extra $4,998 in retirement savings over a 30-year period.</p> <p>On top of high fees, some target-date funds' returns barely cover their high annual expense ratios. The same review of 1,700 target-date funds pointed out that the lowest five-year average annual returns were 2.9 percent. (Returns are expressed net of expense ratios.) As of September 2017, 2.9 percent is not that much higher than the rate of a five-year CD at a credit union.</p> <p>Here's a better alternative to target-date funds.</p> <h2>Your guide to choosing your 401(k) investment options</h2> <p>In his 2013 letter to Berkshire Hathaway shareholders, Warren Buffett (aka The Oracle of Omaha) provided an investment strategy that would &quot;be superior to those attained by most investors who employ high-fee managers.&quot; Buffett recommended putting 90 percent of one's investments in a very low-cost S&amp;P 500 index fund, and the remaining 10 percent in short-term government bonds. This is the same advice that he has set in his will. (See also: <a href="http://www.wisebread.com/the-5-best-pieces-of-financial-wisdom-from-warren-buffett?ref=seealso" target="_blank">The 5 Best Pieces of Financial Wisdom From Warren Buffett</a>)</p> <p>More and more 401(k) plans are offering passively managed index funds that track a benchmark, such as the S&amp;P 500. And for good reason: The Vanguard 500 Index Investor Shares Fund [Nasdaq: VFINX] has an annual expense ratio of 0.14 percent, just a $7 annual fee for a balance of $5,000. That's $44 in annual savings when you compare it to a target-date fund with a 1.02 percent annual expense ratio.</p> <p>Worried that this approach doesn't provide you enough diversification? Think again: An index fund tracking the S&amp;P 500 is investing in 500 large-cap companies. That's as diversified as you can get. (See also: <a href="http://www.wisebread.com/how-too-much-investment-diversity-can-cost-you?ref=seealso" target="_blank">How Too Much Investment Diversity Can Cost You</a>)</p> <p>Let's use Buffett's advice to build your 401(k) plan's portfolio.</p> <h3>Step 1: Check your plan for a U.S. equities index fund</h3> <p>There is a good chance that your 401(k) plan offers a low-cost S&amp;P 500 index fund. Buffett personally recommends an S&amp;P 500 Vanguard index fund. Vanguard is an investment management company known for having very low fees compared to competitors, especially on its index funds. In 2016, close to 60 percent of Vanguard plans offered an index core giving you access to broadly diversified index funds for U.S. stocks. In truth, you can do just as well with other index funds tracking the S&amp;P 500, such as the Fidelity 500 Index Investor [Nasdaq: FUSEX] and the Northern Stock Index [Nasdaq: NOSIX].</p> <p>In the event, that you don't have access to a low-cost index fund tracking the S&amp;P 500 through your workplace 401(k), you have two action items. First, see if your plan offers another large cap index fund (one investing in large U.S. companies based on a market index). This type of fund normally invests at least 80 percent of its assets in securities within its benchmark index, such as the Fidelity Large Cap Stock Fund [Nasdaq: FLCSX] and the Vanguard U.S. Growth Fund [Nasdaq: VWUSX]. Second, contact your plan administrator and request adding a low-cost S&amp;P 500 index fund.</p> <h3>Step 2: Check your plan for a fund of short-term investment-grade bonds</h3> <p>Just like there are index funds for investing in equities, there are also index funds for investing in bonds. For example, there is the Vanguard Short-Term Investment-Grade Fund [Nasdaq: VSFTX], which has an annual expense ratio of 0.20 percent, or $10 in fees for a balance of $5,000.</p> <p>Don't have access to such a fund? Look for a low-cost fund giving you the most exposure to high- and medium-quality, investment-grade bonds with short-term maturities, including corporate bonds, pooled consumer loans, and U.S. government bonds. Why short-term maturities? Short-term bonds tend to have low risk and low yields, ensuring that one portion of your nest egg remains stable at all times &mdash; something you'll really benefit from during any recessions.</p> <p>Then, request that your plan administrator add a low-cost index fund for domestic bonds.</p> <h3>Step 3: Allocate 90 percent to the equities index fund and 10 percent to the bonds index fund</h3> <p>Now you're ready to rebalance your portfolio. Using your online portal, look for an option that says &quot;exchange funds&quot; or &quot;transfer money between funds&quot; to move your nest egg dollars from your existing investments into the equities index fund and bonds index fund. (Note: Depending on your plan rules, including vesting rules, you may not be able to move 100 percent of your balance until a certain date. In that case, move everything that you can and the remaining once it becomes eligible.)</p> <p>Exchange your entire 401(k) balance and allocate 90 percent of that amount to the equities index fund and 10 percent to the bonds index fund. Confirm your transaction.</p> <h3>Step 4: Adjust your future contributions</h3> <p>To keep future contributions going into the right place, adjust your paycheck investment mix so that 90 percent of withholdings go to the equities index fund and 10 percent go into the bonds index fund.</p> <p>If your 401(k) offers an automatic rebalance feature, opt-in for it so that your portfolio is automatically readjusted to the 90/10 without you moving a finger. If your 401(k) doesn't offer that feature, plan to manually rebalance your account once a year.</p> <h3>Step 5: Revisit the 90/10 allocation at important life changes</h3> <p>Marriage. Birth of your first child. Purchase of your first home. Being able to start making catch-up contributions. Reaching age 59 1/2. These and more critical milestones in your life may require you to adjust your 90/10 allocation. As you get closer to retirement age, you should gradually shift from a growth strategy (selecting funds that exhibit signs of above-average growth) to an income strategy (picking funds that provide a steady stream of income) so that you hold fewer stocks and more bonds. The beauty of a target-date fund is that is does all of this for you automatically as you age. Without one, you'll need to stay on top of this occasional rebalancing yourself.</p> <h2>The bottom line</h2> <p>One of the main reasons that your 401(k) will perform better is that you're minimizing fees. If you were to allocate 90 percent of a $5,000 401(k) balance into the Vanguard 500 Index Investor Shares Fund [Nasdaq: VFINX] and 10 percent into the Vanguard Short-Term Investment-Grade Fund [Nasdaq: VSFTX], you would just pay $7.30 in annual fees. That's $43.70 in annual savings over putting the entire $5,000 in a target-date fund with a 1.02 percent annual expense ratio. It doesn't sound like a large amount of savings, but compounded over the years it can add up to thousands of dollars more in your retirement fund.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/damian-davila">Damian Davila</a> of <a href="http://www.wisebread.com/bookmark-this-a-step-by-step-guide-to-choosing-401k-investments">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-3"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/why-warren-buffett-says-you-should-invest-in-index-funds">Why Warren Buffett Says You Should Invest in Index Funds</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-make-sure-you-dont-run-out-of-money-in-retirement">How to Make Sure You Don&#039;t Run Out of Money in Retirement</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-traps-to-avoid-with-your-401k">7 Traps to Avoid With Your 401(k)</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-save-for-retirement-when-you-are-unemployed">How to Save for Retirement When You Are Unemployed</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/what-you-need-to-know-about-the-easiest-way-to-save-for-retirement">What You Need to Know About the Easiest Way to Save for Retirement</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Investment Retirement 401(k) bonds equities expense ratios fees index portfolio rebalancing s&p 500 short-term bonds target-date funds Warren Buffett Thu, 21 Sep 2017 08:31:06 +0000 Damian Davila 2023013 at http://www.wisebread.com 8 Types of Investors — Which One Are You? http://www.wisebread.com/8-types-of-investors-which-one-are-you <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/8-types-of-investors-which-one-are-you" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/businessman_reading_a_newspaper.jpg" alt="which type of investor are you" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Do you tend to invest in a particular way? Identifying which type of investor you are can help you understand the potential pitfalls of your investment approach &mdash; and how to improve your chances for better investment returns. Which type of investor are you?</p> <h2>1. Automatic investor</h2> <p>The automatic investor is all about convenience. Everything related to investing is set on autopilot. Automatic contributions to investment funds come out of every paycheck or are withdrawn from the bank account on a certain day of the month. This type of investor doesn't spend much time or effort thinking about investing, and doesn't need to since everything is automatic. They don't have to remind themselves to invest; it's checked off their financial to-do list.</p> <p>The potential downside for the automatic investor is losing touch with where investment funds are going and how the investment portfolio is performing. If you are not paying attention, you may not have investment selections that meet your current goals, and you may not identify and remove low performing investments or funds with high fees. If you don't check in at least occasionally, this hands-off approach may cost you. Rebalancing your portfolio once or twice a year by transferring funds to maintain your desired proportions of stocks to bonds should be sufficient to keep your investment portfolio on track. (See also: <a href="http://www.wisebread.com/the-most-important-thing-youre-probably-not-doing-with-your-portfolio?ref=seealso" target="_blank">The Most Important Thing You're Probably Not Doing With Your Portfolio</a>)</p> <h2>2. Daily Dow watcher</h2> <p>The Dow watcher is constantly up to speed. They know at any time if the stock market is up or down. The current market price and chart is only a tap away on their smartphone. This type of investor knows how much their portfolio is worth and worries about how much they are losing when the market has a bad day. Nothing goes over the Dow watcher's head.</p> <p>The risk for the Dow watcher is that he or she can easily get stressed out by day-to-day ups and downs in the market. They may even get discouraged when the market is going down and decide to sell stock when the price is low &mdash; the worst time to sell! It's good to be informed, especially when it comes to your investments, but if you find yourself too glued to the Dow's daily performance &mdash; it might be a good idea to <a href="http://www.wisebread.com/want-your-investments-to-do-better-stop-watching-the-news" target="_blank">step away from the news</a> for a bit. Checking in on the stock market and your investment portfolio quarterly is probably more than frequent enough, and you can use the time you save for something more productive and enjoyable.</p> <h2>3. Active trader</h2> <p>The active trader is a studious investor. This type of investor tries to time the market by figuring out that a stock is going up before other investors realize it &mdash; and then selling when it is near the peak price before most investors figure out that it is going down. This type of investor pores over market and economic data, reads business articles, and is well-informed about business trends and news. He or she is willing to take risks for a chance at big returns.</p> <p>If you're an active trader, tread carefully; you can easily lose significant money if your timing is off. Trading fees can also get expensive if your investment approach requires making a lot of trades. You are much more likely to make money from buying good stocks and holding them for the long haul.</p> <h2>4. Conscientious investor</h2> <p>Conscientious investors put their money where their morals are. They have limits to what activities and products they are willing to be involved with in order to make a buck. For example, some conscientious investors invest only in socially-responsible or environmentally-responsible companies, and avoid owning shares in companies that promote values or products contrary to their moral principles. This type of investor is likely to exert economic influence through consumer purchasing decisions as well as through their stock picks.</p> <p>This type of ethical investing unfortunately can limit a person's investment options, which may result in lower returns. But some things are worth more than money to conscientious investors. (See also: <a href="http://www.wisebread.com/a-simple-guide-to-socially-responsible-investing?ref=seealso" target="_blank">A Simple Guide to Socially Responsible Investing</a>)</p> <h2>5. Property investor</h2> <p>Not every investor owns stocks. The property investor owns real estate, collectibles, gold, and maybe even bonds. He or she wants to invest in things that they can understand and control to some extent. This type of investor may not trust Wall Street and avoids the volatility of stocks.</p> <p>Historically, however, stocks have had great investment returns compared to other investment types, so property investors who shy away from the stock market could be missing out. Large cap value stocks can be a relatively safe way to start off in stock investing for first-time stock investors.</p> <h2>6. Bargain investor</h2> <p>This is the kind of investor that pounced on GM stock when it was $1 per share in 2009. Of course there is risk that bargain stocks could become worthless, but there is potential for the stock price to bounce back. The bargain investor looks carefully at P/E ratios to check the share price relative to earnings per share when deciding what stock to buy.</p> <p>Bargain hunters should be wary though &mdash; sometimes stocks with low prices are trading at a low price for a good reason. The bigger the bargain, the more research is merited into why the price is so low before you buy.</p> <h2>7. Company loyalist</h2> <p>The company loyalist owns a disproportionate amount of stock from an individual company. This could be a trendy stock that inspires loyalty like Apple or Tesla, or the company loyalist could own a large amount of his or her own employer's stock.</p> <p>Owning a large amount of any single company stock can be risky. The company could <a href="http://www.wisebread.com/how-these-8-company-stocks-fared-following-scandal" target="_blank">experience a major scandal</a> or product failure and the stock price could tank. Remember Enron? Owning a lot of stock in the company you work for is even riskier, because if something goes wrong you'll not only lose value in your stock fund, but you may lose your job at the same time. Some financial advisers suggest that owning more than 10 percent to 15 percent of your company's stock may be too much.</p> <h2>8. Portfolio tweaker</h2> <p>The portfolio tweaker is not really an active trader, but likes to adjust and fine tune his or her portfolio frequently by making transfers between funds to get the desired balance between large cap, mid cap, small cap, foreign, domestic, growth, value, and bond investment categories.</p> <p>While it is good to adjust your portfolio occasionally to meet your investment goals, frequently selling investments that are performing well just to meet an arbitrary &quot;balance&quot; in your portfolio may not be the best move and could hurt your overall return. As we advised the automatic investor, portfolio rebalancing once or twice per year is a good interval for most investors.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dr-penny-pincher">Dr Penny Pincher</a> of <a href="http://www.wisebread.com/8-types-of-investors-which-one-are-you">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-3-rules-every-mediocre-investor-must-know">The 3 Rules Every Mediocre Investor Must Know</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-too-much-investment-diversity-can-cost-you">How Too Much Investment Diversity Can Cost You</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/is-dollar-cost-averaging-the-right-strategy-for-you">Is Dollar Cost Averaging the Right Strategy for You?</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/want-your-investments-to-do-better-stop-watching-the-news">Want Your Investments to Do Better? Stop Watching the News</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/10-questions-to-ask-before-you-sell-a-stock-or-a-fund">10 Questions to Ask Before You Sell a Stock or a Fund</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Investment automatic company stock dow ethical investing portfolio property investors returns risk stock market stocks types Fri, 08 Sep 2017 08:00:05 +0000 Dr Penny Pincher 2017190 at http://www.wisebread.com 5 Times It's OK to Pause Saving and Investing http://www.wisebread.com/5-times-its-ok-to-pause-saving-and-investing <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/5-times-its-ok-to-pause-saving-and-investing" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/paper_boat_with_1_dollar_bill_sail_is_blown_onshore.jpg" alt="Paper boat with $1 bill sail is blown onshore" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>In most circumstances, saving and investing should be a priority &mdash; one of your highest priorities, in fact. And we'd never advise you let short-term situations derail your long-term financial goals. However, there are a few particular times in life when investing shouldn't be at the top of your to-do list.</p> <p>That's not to say you shouldn't invest; just that you should focus on the particular situation, and how to handle it, before you turn your attention back to investing.</p> <h2>1. You don't have an emergency fund</h2> <p>If you haven't yet <a href="http://www.wisebread.com/change-jars-and-8-other-clever-ways-to-build-an-emergency-fund" target="_blank">built up an emergency fund</a>, your savings should go toward doing so before they go to investments or long-term savings plans. An emergency fund is a form of defense, a buffer that keeps a singular financial issue from becoming a big, ongoing financial crisis.</p> <p>With an emergency fund in place, you can handle unexpected expenses &mdash; like that dental work, or car repair, or emergency trip to help a family member &mdash; without depleting your long-term savings or accruing high-interest debt. Before you start investing, save as much as you can each month until you've built up an emergency fund to carry you through those unpredictable times in life. Experts recommend stashing three to six months' worth of salary &mdash; the higher your monthly expenses, the more you should save.</p> <h2>2. You have too much unsecured debt</h2> <p>If you are paying off high-interest, unsecured debt and struggling to make the minimum payments, now is not the time to start investing. Instead, you need to get your debt reduced to a manageable size so you can reduce the amount of interest you're paying. Otherwise you may end up losing money; if you're investing money in something with a 10 percent return, but you're paying a 21 percent interest rate on an equal amount of money, you're losing 11 percent each year.</p> <p>Focus your savings efforts on a <a href="http://www.wisebread.com/the-7-best-credit-card-debt-elimination-strategies" target="_blank">credit card debt reduction plan</a>, such as the snowball or debt ladder method. If you feel that your debt is at crisis level, consider debt consolidation (but <a href="http://www.wisebread.com/beware-of-these-common-debt-consolidation-traps" target="_blank">use caution</a> when considering your consolidation options) to get it under control.</p> <h2>3. You don't have a dependable income</h2> <p>Perhaps you're starting your own business, just starting your career, or you're self-employed and struggling to keep the monthly income steady. If you're unable to predict what your income will be from one month to the next, you may need to wait on those long-term investments.</p> <p>Instead, focus on regulating your income or using some smart strategies &mdash; such as setting up a slush fund, and having a minimum income budget &mdash; to establish stability on a fluctuating income. Once you feel that you have a good financial strategy in place, and can predict the amount you'll be able to save each month, start looking at your investment options.</p> <h2>4. You're in the midst of a financial crisis</h2> <p>It's always better to take a long-term view of the situation, when it comes to finances. However, when you're handling a financial crisis, the most immediate steps are the most important. You need to stop the financial bleeding, so to speak, before you turn your attention to long-term investments. Otherwise, you'll bleed out your financial resources and end up cashing out your investments early, before they can offer you any return.</p> <p>Therefore, if you're facing a <a href="http://www.wisebread.com/how-to-handle-a-sudden-loss-of-income" target="_blank">sudden income loss</a>, a potential layoff, a medical or family crisis, or other life emergency that has triggered a financial crisis, deal with the crisis and focus on stabilizing your day-to-day finances first.</p> <h2>5. You don't have enough information</h2> <p>The final reason to avoid investing is less about your financial situation and more about the investment opportunity itself. If you don't have adequate information, don't invest. Instead, take the time to do your due diligence: examine the risks, the potential return, and what the experts say about each investment opportunity.</p> <p>If it seems like a sure thing, and you're tempted to dump the entire contents of your savings account in, take a step back. Hold a counsel meeting with your financial planner and go over the questions they provide, questions you might not have thought to ask. Once you're confident that you have accurate information and understand the big picture of each potential investment, you're in a position to decide which ones are right for you.</p> <h2 style="text-align: center;">Like this article? Pin it!</h2> <div align="center"><a data-pin-do="buttonPin" data-pin-count="above" data-pin-tall="true" data-pin-save="true" href="https://www.pinterest.com/pin/create/button/?url=http%3A%2F%2Fwww.wisebread.com%2F5-times-its-ok-to-pause-saving-and-investing&amp;media=http%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2F5%2520Times%2520It%2527s%2520OK%2520to%2520Pause%2520Saving%2520and%2520Investing.jpg&amp;description=5%20Times%20It's%20OK%20to%20Pause%20Saving%20and%20Investing"></a></p> <script async defer src="//assets.pinterest.com/js/pinit.js"></script></div> <p style="text-align: center;"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5180/5%20Times%20It%27s%20OK%20to%20Pause%20Saving%20and%20Investing.jpg" alt="5 Times It's OK to Pause Saving and Investing" width="250" height="374" /></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/annie-mueller">Annie Mueller</a> of <a href="http://www.wisebread.com/5-times-its-ok-to-pause-saving-and-investing">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-save-for-retirement-when-you-are-unemployed">How to Save for Retirement When You Are Unemployed</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/9-money-moves-to-make-the-moment-your-credit-cards-are-paid-off">9 Money Moves to Make the Moment Your Credit Cards Are Paid Off</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-smart-places-to-stash-your-kids-college-savings">5 Smart Places to Stash Your Kid&#039;s College Savings</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-strategies-for-paying-off-debt-when-living-on-a-variable-income">7 Strategies for Paying Off Debt When Living on a Variable Income</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/heres-what-i-learned-about-money-after-using-acorns">Here&#039;s What I Learned About Money After Using Acorns</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Investment emergency fund financial crisis high interest debt loss of income money management saving money unsecured debt Wed, 06 Sep 2017 09:00:06 +0000 Annie Mueller 2012631 at http://www.wisebread.com Best Money Tips: 5 Ways to Invest $1,000 http://www.wisebread.com/best-money-tips-5-ways-to-invest-1000 <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/best-money-tips-5-ways-to-invest-1000" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/jar_of_cash_624511276.jpg" alt="Finding ways to invest $1,000" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Welcome to Wise Bread's <a href="http://www.wisebread.com/topic/best-money-tips">Best Money Tips</a> Roundup! Today we found articles on ways to invest $1,000, tips to help you take stock photos like a pro, and how to get through a quarter-life crisis.</p> <h2>Top 5 Articles</h2> <p><a href="https://wellkeptwallet.com/ways-to-invest-1000/">5 Ways to Invest $1000</a> &mdash; Don't assume you can't invest in real estate with only $1000. Crowdfunded real estate is one way to do just that! [Well Kept Wallet]</p> <p><a href="http://walletsquirrel.com/take-stock-photos/">Want to Take Stock Photos like a Pro? 7 Tips You Must Know</a> &mdash; You want your photos to stand out. With each subject matter you choose, check out the competition and see how you can make your photo unique. [Wallet Squirrel]</p> <p><a href="http://yourmoneyyourfreedom.com/quarter-life-crisis/">3 Things To Get You Through A Quarter-Life Crisis</a> &mdash; Over 86% of Millennials feel pressure to reach their money, relationship, and career goals by the age of 30. [FreeUp]</p> <p><a href="http://www.currentoncurrency.com/4-money-goals-hit-before-start-family/">4 Money Goals to Hit Before You Start a Family</a> &mdash; Set up a retirement fund so that you aren't financially dependent on your future kids in your old age. [Current on Currency]</p> <p><a href="https://www.csmonitor.com/Technology/2017/0831/Bridging-the-skills-gap-one-solar-panel-at-a-time">Bridging the skills gap, one solar panel at a time</a> &mdash; The rooftop solar industry can equip youths from underserved communities with the skills to build a career while helping low-income residents save money on energy. [The Christian Science Monitor]</p> <h2>Other Essential Reading</h2> <p><a href="https://fitzvillafuerte.com/27-quick-tips-improve-finances-every-day.html">27 Quick Tips on How Improve Your Finances Every Day</a> &mdash; Check the pressure on your car tires. Properly-inflated tires can improve your gas mileage by 3%. [Ready To Be Rich]</p> <p><a href="https://www.popsugar.com/smart-living/Bedroom-Organization-Tips-22309085">11 Simple Tips For Bedroom Organization</a> &mdash; Invest in tall storage to save space and make room for other furniture. [PopSugar Smart Living]</p> <p><a href="https://www.goodfinancialcents.com/best-renters-insurance">Everything You Need to Know About Renters Insurance</a> &mdash; Renters insurance is no less important to a renter than homeowner&rsquo;s insurance is to a homeowner. [Good Financial Cents]</p> <p><a href="https://www.thepennyhoarder.com/life/home/diy-kitchen-upgrades/">5 Easy Kitchen Upgrades That Look Way More Expensive Than They Actually Are</a> &mdash; Get new textiles, like dish towels and window treatments, is a cheap and easy way to freshen up your kitchen. [The Penny Hoarder]</p> <p><a href="https://www.dontpayfull.com/blog/12-cheap-ways-to-welcome-fall-this-year">12 Cheap Ways to Welcome Fall This Year</a> &mdash; Set your dining table with fall-themed decorations. You can fill a couple bowls with pine cones, acorns and candles, or pick up cheap seasonal linens at a thrift store.&nbsp; [Don't Pay Full]</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/amy-lu">Amy Lu</a> of <a href="http://www.wisebread.com/best-money-tips-5-ways-to-invest-1000">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-2"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/bookmark-this-a-step-by-step-guide-to-choosing-401k-investments">Bookmark This: A Step-by-Step Guide to Choosing 401(k) Investments</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/treasury-bills-for-ordinary-folks">Treasury bills for ordinary folks</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/why-you-don-t-need-mortgage-life-insurance">Why You Don’t Need Mortgage Life Insurance</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-worst-investments-you-can-make">The Worst Investments You Can Make</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/getting-fired-ask-one-question-to-get-free-money">Getting Fired? Ask One Question to Get Free Money</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Investment best money tips invest Wed, 06 Sep 2017 08:30:06 +0000 Amy Lu 2015983 at http://www.wisebread.com Best Money Tips: Become an Educated Investor in 8 Simple Steps http://www.wisebread.com/best-money-tips-become-an-educated-investor-in-8-simple-steps <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/best-money-tips-become-an-educated-investor-in-8-simple-steps" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/woman_counting_coins_584001990.jpg" alt="Woman becoming an educated investor" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Welcome to Wise Bread's <a href="http://www.wisebread.com/topic/best-money-tips">Best Money Tips</a> Roundup! Today we found articles on how to become an educated investor, expert secrets to sleeping better, and practical advice for millennials who want to get on the property ladder.</p> <h2>Top 5 Articles</h2> <p><a href="http://www.richdad.com/Resources/Rich-Dad-Financial-Education-Blog/August-2017/8-Steps-to-Becoming-an-Educated-Investor.aspx">8 Steps to Becoming an Educated Investor</a> &mdash; Learn the lingo. Whenever you come across a new word, look it up instead of glossing over it. [Rich Dad]</p> <p><a href="https://www.popsugar.com/smart-living/Sleep-Expert-Secrets-43964430">A Sleep Physician Reveals 20 Expert Secrets to a Better Night's Rest</a> &mdash; Waking up from a deeper stage of sleep when you nap can make you feel groggy. Set your alarm for 10-15 minutes when you lay down to avoid that groggy feeling. [PopSugar Smart Living]</p> <p><a href="https://shoppingkim.com/solid-practical-advice-millennials-get-property-ladder/">Solid, Practical Advice For Millennials To Get On The Property Ladder</a> &mdash; Don't expect to be able to buy your dream home right away. Consider buying a cheaper property that you can renovate and rent out (or sell) while you continue saving for a larger, better home. [Shopping Kim]</p> <p><a href="http://www.oneincomedollar.com/2017/08/making-moving-cheaper-in-10-easy-steps.html">Making Moving Cheaper in 10 Easy Steps</a> &mdash; Use items you already have around the house to transport your stuff. Laundry baskets, suitcases, and (clean) trash cans make great containers, and you can use towels, blankets, and clothing for cushioning. [Stretching The One Income Dollar]</p> <p><a href="https://www.thesimpledollar.com/stopping-online-boredom-shopping/">Stopping Online &lsquo;Boredom&rsquo; Shopping</a> &mdash;Keep worthwhile entertainment on your phone so that you have something to do besides browsing retail sites and apps when you're bored. [The Simple Dollar]</p> <h2>Other Essential Reading</h2> <p><a href="https://www.cashthechecks.com/6-steps-starting-blog-30-minutes/">6 Steps To Starting A Blog In Under 30 Minutes</a> &mdash; You don't need technological knowledge to create a blog &mdash; and make money from it. [Cash The Checks]</p> <p><a href="http://productivitytheory.com/7-practical-self-confidence-tips/">7 Practical Self Confidence Tips</a> &mdash; Be your own best friend. Cultivating a healthy inner dialogue will help you make decisions more effectively, move past mistakes, and tackle new goals with confidence. [Productivity Theory]</p> <p><a href="http://www.frugalvillage.com/2017/08/31/inexpensive-date-ideas-for-the-fall/">Inexpensive Date Ideas for the Fall</a> &mdash; Sure, you can simply go out for drinks, but a brewery tour is sure to be more memorable. [Frugal Village]</p> <p><a href="http://www.experian.com/blogs/news/about/ways-combat-reduce-debt-shame/">Ways to Combat and Reduce Money Shame</a> &mdash; Join Experian's #CreditChat tomorrow at 3 p.m. ET for a discussion on ways to combat and reduce debt shame. [Experian]</p> <p><a href="https://www.csmonitor.com/Environment/2017/0901/Beyond-Harvey-Does-the-US-need-to-rethink-flood-management">Beyond Harvey: Does the US need to rethink flood management?</a> &mdash; Experts say that our ideas about flood risk may be based on an obsolete assumption. [The Christian Science Monitor]</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/amy-lu">Amy Lu</a> of <a href="http://www.wisebread.com/best-money-tips-become-an-educated-investor-in-8-simple-steps">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/bookmark-this-a-step-by-step-guide-to-choosing-401k-investments">Bookmark This: A Step-by-Step Guide to Choosing 401(k) Investments</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/did-your-parents-give-you-a-whole-life-insurance-policy-heres-what-to-do-with-it">Did Your Parents Give You a Whole Life Insurance Policy? Here&#039;s What to Do With It.</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-ways-to-buy-a-house-without-a-mortgage">4 Ways to Buy a House Without a Mortgage</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-investors-with-better-returns-than-warren-buffett">5 Investors With Better Returns Than Warren Buffett</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-surprising-truth-of-investing-mediocre-advice-is-best">The Surprising Truth of Investing: Mediocre Advice Is Best</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Investment best money tips investor Tue, 05 Sep 2017 08:00:06 +0000 Amy Lu 2014089 at http://www.wisebread.com 4 Ways to Add Gold to Your Portfolio http://www.wisebread.com/4-ways-to-add-gold-to-your-portfolio <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/4-ways-to-add-gold-to-your-portfolio" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock-165418687.jpg" alt="Learning ways to add gold to your portfolio" title="" class="imagecache imagecache-250w" width="250" height="141" /></a> </div> </div> </div> <p>Owning gold can be an attractive insurance policy in case of stock market turmoil or a decline in currency valuation. In times of economic uncertainty, gold prices tend to increase even when the value of other investments goes down.</p> <p>If you are looking to reduce your exposure to stock market investments, or simply want to have something of value to trade in case of a zombie apocalypse, here are four ways you can invest in gold today.</p> <h2>1. Gold coins and bullion</h2> <p>The U.S. Mint issues American Eagle gold bullion coins in the following denominations:</p> <ul> <li>1/10 ounce</li> <li>&frac14; ounce</li> <li>&frac12; ounce</li> <li>1 ounce</li> </ul> <p>The selling price of these coins floats with the price of gold, plus you will pay a few percent premium for getting a minted coin instead of a plain piece of gold. With the current price of gold at over $1,200 an ounce, you can find 1/10 ounce American Eagles selling from dealers for under $150. Gold coins produced by the U.S. Mint are not sold directly to the public, but may be purchased from a network of <a href="https://catalog.usmint.gov/bullion-dealer-locator?_ga=2.66368809.627583906.1498523906-142188866.1498523906" target="_blank">authorized bullion dealers</a> who buy the coins from the mint for resale.</p> <p>Another option is the American Buffalo gold coin that comes in a 1 ounce denomination. This is a legal tender coin whose gold content is guaranteed by the U.S. Government. These coins are available at coin dealers and participating banks. The South African Krugerrand, Canadian Gold Maple Leaf, Australian Gold Nugget, Chinese Gold Panda, and British Gold Britannia are other popular gold coins from around the world.</p> <p>A less expensive alternative to gold coins is to buy gold bars or gold rounds. These are not as impressive to look at, but are priced near the current trading price, or &quot;spot price,&quot; for gold. This form of bullion may have simple markings with the weight and purity of the gold.</p> <p>If the thought of keeping gold hidden in your closet or safe makes you nervous, consider using a bullion trading and storage platform. You can buy and sell physical gold bullion and it never has to leave the secure vault where it is stored unless you want to take it out. This gives you the benefit of directly owning gold without the hassle of transporting and storing it.</p> <h2>2. Gold jewelry</h2> <p>An advantage of buying gold in the form of jewelry is that you can wear and enjoy your investment, and it is highly transportable. A smart way to invest in gold is to give gold jewelry as a gift. A gift of precious metal jewelry will hold its value and possibly grow in value while most other gifts depreciate and eventually end up in a landfill.</p> <p>When buying gold jewelry, you need to pay attention not only to the weight of the jewelry, but also the purity of the gold. Pure gold is designated as 24 karat gold. But pure gold is too soft and malleable for jewelry, so it is often mixed with other metals to make the jewelry harder and stronger. For example, jewelry that is 18 karat gold is 18/24, or 75 percent gold and 25 percent other metals. You can divide the karat rating of jewelry by 24 to determine the fraction of gold that it contains.</p> <p>Sometimes you can find broken, tangled, or damaged gold jewelry for sale at a pawnshop for less than the spot price of gold. Just make sure you are buying solid gold, and not just gold plated items.</p> <h2>3. Gold exchange traded funds (ETFs)</h2> <p>A gold ETF is a fund that aims to track the price of gold. Some funds actually hold gold, while others do not own gold, but use derivative contracts instead. Gold ETFs allow a quick and easy way to get an investment that tracks the price of gold, and are convenient for large transactions since you do not need to move or store a lot of gold.</p> <p>There are a couple of potential downsides to investing in a gold ETF. When you buy shares in a gold ETF, you might not actually own any gold &mdash; in some cases, you will own only shares in the fund. Since the fund tracks the price of gold, you may not have a problem with this. But if you are trying to reduce your exposure to large financial institutions by investing in gold, buying shares in a fund run by a large financial institution might not meet your goal. Also, some gold ETFs sell some of the gold that they hold to cover expenses, so the amount of gold per share that you own can be reduced over time.</p> <h2>4. Gold industry stocks and mutual funds</h2> <p>Another way to get a piece of the gold market is to buy stock of companies involved in gold mining and gold production. When gold prices go up, the stock prices of these companies can also go way up. Conversely, when gold prices go down, the stock prices of these companies can go way down.</p> <p>You can buy individual company stocks or mutual funds that provide holdings in a number of companies in the gold industry. This market segment is especially volatile, but may provide a hedge against other types of investments in your portfolio.</p> <h2 style="text-align: center;">Like This Article? Pin it!</p> <div align="center"><a data-pin-do="buttonPin" data-pin-count="above" data-pin-tall="true" data-pin-save="true" href="https://www.pinterest.com/pin/create/button/?url=http%3A%2F%2Fwww.wisebread.com%2F4-ways-to-add-gold-to-your-portfolio&amp;media=http%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2F4%2520Ways%2520to%2520Add%2520Gold%2520to%2520Your%2520Investment%2520Portfolio.png&amp;description=4%20Ways%20to%20Add%20Gold%20to%20Your%20Investment%20Portfolio"></a></p> <script async defer src="//assets.pinterest.com/js/pinit.js"></script></div> <p style="text-align: center;"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5180/4%20Ways%20to%20Add%20Gold%20to%20Your%20Investment%20Portfolio.png" alt="4 Ways to Add Gold to Your Investment Portfolio" width="250" height="374" /></p> </h2> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dr-penny-pincher">Dr Penny Pincher</a> of <a href="http://www.wisebread.com/4-ways-to-add-gold-to-your-portfolio">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-10-weirdest-etfs-you-can-buy">The 10 Weirdest ETFs You Can Buy</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-things-everyone-should-know-about-the-commodities-markets">8 Things Everyone Should Know About the Commodities Markets</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/are-you-choosing-the-right-fund-for-your-portfolio">Are You Choosing the Right Fund for Your Portfolio?</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-3-rules-every-mediocre-investor-must-know">The 3 Rules Every Mediocre Investor Must Know</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-money-moves-to-make-as-soon-as-you-conquer-debt">7 Money Moves to Make as Soon as You Conquer Debt</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Investment bullion coins ETFs exchange traded funds gold gold industry jewelry mining stock market u.s. Mint value Mon, 07 Aug 2017 08:00:05 +0000 Dr Penny Pincher 1994330 at http://www.wisebread.com This One Mental Bias Is Harming Your Investments http://www.wisebread.com/this-one-mental-bias-is-harming-your-investments <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/this-one-mental-bias-is-harming-your-investments" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/young_man_holding_his_head_counting_pennies.jpg" alt="Young man holding his head counting pennies" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Are you holding your breath just waiting for the market to fall? If so, you're not alone. Many investors seem to be waiting for the other shoe to drop. That seems logical: After all, today's bull market has been running for more than eight years, and bull markets don't last forever.</p> <p>But is it really logical to think that way? Bull markets don't die of old age. They die from other causes, such as rising inflation or a recession. As of today, inflation is in check and most economy watchers say they see no signs of trouble.</p> <p>Making it far more difficult to decide what, if anything, to do with your investment portfolio are the many cognitive biases that plague us all. One such bias, however, can be especially dangerous in a stock market environment such as the one we're in right now.</p> <h2>A financially dangerous disposition</h2> <p>Think about your portfolio. You probably have several investments that have done very well in recent years. And, if you're well diversified, you may have some that have lost value. Are you thinking about &quot;taking profits&quot; by selling some of your winners? At the same time, are you planning to hang onto those investments that haven't done so well? Perhaps it would be too painful to sell. And besides, they're bound to come back eventually, right?</p> <p>Be careful. You may be under the spell of what behavioral scientists call the <em>disposition effect</em>. That's the tendency to sell winning investments too soon and keep losing investments too long.</p> <h2>The unequal nature of gains and losses</h2> <p>The disposition effect has much to do with a foundational behavioral bias first identified by researchers Daniel Kahneman and Amos Tversky. It theorizes that losses &mdash; whether in the stock market, real estate, or other domains &mdash; have far more emotional impact on us than equivalent gains.</p> <p>Objectively speaking, it's been well documented that the recent past performance of an investment &mdash; its momentum &mdash; tends to persist. We'd be better off keeping our winners longer and selling our losers sooner.</p> <p>But we are not objective beings. For most of us, in the daily battle between facts and feelings, the truth seldom gets in the way of a bad decision.</p> <p>So strong is our subjective, irrational desire to avoid the pain of regret &mdash; in this case, the regret of having made a losing investment in the first place &mdash; that we tend to keep poorly-performing investments longer than we should.</p> <p>Hersh Shefrin, one of the behavioral finance experts who identified the disposition effect, described it as a &quot;predisposition toward get-evenitis.&quot; Rather than cutting our losses, we tend to hang on in the hope of at least getting back to even.</p> <h2>How to beat the disposition effect</h2> <p>Telling yourself to stop trying to avoid the pain of regret is about as effective as telling yourself not to think about an elephant. But that doesn't mean you're destined to spend your life fighting the disposition effect. Three steps can help.</p> <h3>1. Follow a process</h3> <p>First and foremost, don't make investment buy/sell decisions on your own. Find and follow a proven, objective, rules-based investment selection process. That may mean working with an experienced investment adviser, using a target-date fund that's designed according to your optimal asset allocation, or subscribing to an investment newsletter with a solid track record.</p> <h3>2. Stop the daily updates</h3> <p>Prevent yourself from looking at your investments so often. Research by psychologist Paul Andreassen found that people who receive frequent updates about their investment portfolios tend to trade more often and generate poorer returns than those who receive less frequent updates. Watching the daily gyrations of the market is a prescription for heartburn and bad decision-making. Check in with your holdings once a quarter, or once a month if you must. If you signed up for daily or weekly updates on how your portfolio is doing, today's the day to unsubscribe. (See also: <a href="http://www.wisebread.com/want-your-investments-to-do-better-stop-watching-the-news?ref=seealso" target="_blank">Want Your Investments to Do Better? Stop Watching the News</a>)</p> <h3>3. Form a plan</h3> <p>Lastly, create a written investment plan. It should identify your investment goals and time frames, the strategy you're using to accomplish them, the process you're following for choosing specific investments, and perhaps most importantly, what you are committed to doing (or not doing) under various market conditions. Then review it anytime market conditions tempt you to veer from your plan.</p> <h2 style="text-align: center;">Like this article? Pin it!</h2> <div align="center"><a data-pin-do="buttonPin" data-pin-count="above" data-pin-tall="true" data-pin-save="true" href="https://www.pinterest.com/pin/create/button/?url=http%3A%2F%2Fwww.wisebread.com%2Fthis-one-mental-bias-is-harming-your-investments&amp;media=http%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2FThis%2520One%2520Mental%2520Bias%2520Is%2520Harming%2520Your%2520Investments_0.jpg&amp;description=This%20One%20Mental%20Bias%20Is%20Harming%20Your%20Investments"></a></p> <script async defer src="//assets.pinterest.com/js/pinit.js"></script></div> <p style="text-align: center;"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5180/This%20One%20Mental%20Bias%20Is%20Harming%20Your%20Investments_0.jpg" alt="This One Mental Bias Is Harming Your Investments" width="250" height="374" /></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/matt-bell">Matt Bell</a> of <a href="http://www.wisebread.com/this-one-mental-bias-is-harming-your-investments">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/your-loss-aversion-is-costing-you-more-than-your-fomo">Your Loss Aversion Is Costing You More Than Your FOMO</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/learn-how-to-invest-with-these-5-stock-market-games">Learn How to Invest With These 5 Stock Market Games</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-types-of-investors-which-one-are-you">8 Types of Investors — Which One Are You?</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-essentials-for-building-a-profitable-portfolio">5 Essentials for Building a Profitable Portfolio</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/6-stocks-to-buy-before-black-friday">6 Stocks to Buy Before Black Friday</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Investment bull market cognitive bias disposition effect downturn gains losses overthinking risk stock market Fri, 28 Jul 2017 08:01:05 +0000 Matt Bell 1990503 at http://www.wisebread.com 8 Surprising Ways Confidence Can Hurt Your Investments http://www.wisebread.com/8-surprising-ways-confidence-can-hurt-your-investments <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/8-surprising-ways-confidence-can-hurt-your-investments" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/strong_man_self_confident_young_entrepreneur.jpg" alt="Strong man, self confident young entrepreneur" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>There may come a moment when you feel like you have this investing thing all figured out. You've made some great stock picks and your portfolio is going gangbusters. But are you letting your confidence get the best of you and your investments?</p> <p>Being confident is OK. You need some confidence in yourself to invest in the first place. But being too cocky can lead you to make bad investment choices, and have a blind spot to your own weaknesses. Here are some of the ways confidence may actually hurt your investments.</p> <h2>1. You develop a selective memory</h2> <p>Maybe you bought shares of Facebook when they were trading below $25, and have made a killing on the investment since. You like to hold up that one purchase as proof of your genius as an investor. But are you forgetting about the other investments that didn't do so well? On balance, are you really any smarter than anyone else out there?</p> <p>Don't let your memory of one great decision delude you into thinking you have a special gift as an investor. Doing so can make you believe that every stock will eventually turn out to be a winner, even if there's no rational basis for your confidence.</p> <h2>2. You have too much faith in the market</h2> <p>While it's true that history shows the stock market has gone up consistently over time, it's still important to protect your investments against a possible downturn. As you get older and approach retirement age, consider shifting some investments into less volatile instruments, such as bonds, even if you believe the market will continue to go up.</p> <p>It's also important to avoid being too optimistic about markets in the short term. If you're investing money that you need in a year or two, the stock market may not be the best place to put it. Having faith in the market is crucial to building wealth over time, but protecting your investments against a down period is also part of the formula for success.</p> <h2>3. Your portfolio is not properly balanced</h2> <p>So you've had some great success with some of your investments, and decide to buy more shares of those that have done the best. There's nothing wrong with buying a lot of something if it performs well for you, but it's important to keep your overall portfolio from getting out of whack. This means not being too heavily invested in one particular stock or group of stocks.</p> <p>Ideally, your portfolio should have a nice mix of stocks from various industries, sectors, and asset classes. Depending on your retirement age, mixing in some bonds and dividend stocks may also make sense. You may fall in love with a certain investment, but you should not let it dominate your portfolio. Diversification is key to mitigating risk. (See also: <a href="http://www.wisebread.com/the-basics-of-asset-allocation?ref=seealso" target="_blank">The Basics of Asset Allocation</a>)</p> <h2>4. You're taking on too much risk</h2> <p>Investing is not without risk, and you must be comfortable with that if you plan to accumulate wealth over time. But don't be too tempted to take on extra risk just to chase higher returns. It's one thing to invest heavily in stocks, but it can be financial suicide to go after notoriously volatile investments, or to engage in risky practices like trading on margin or buying and selling options.</p> <p>The best approach is to build a portfolio that roughly performs in line with the whole stock market, ensuring that you'll likely make money over time but will avoid catastrophic downturns that wipe out your whole savings.</p> <h2>5. You never check up on your investments</h2> <p>For most people, it's not necessary to check your investments every day and obsess over every movement in the markets. But you don't want to completely ignore your investment accounts, either. Even if you are invested in simple, reliable things like index funds, an occasional check-in is usually a good idea. (See also: <a href="http://www.wisebread.com/the-4-best-investments-for-lazy-investors?ref=seealso" target="_blank">The 4 Best Investments for Lazy Investors</a>)</p> <p>Without a checkup, you may be unaware that certain investments are underperforming. You might allow your portfolio to become unbalanced, leaving you under- or over-invested in some areas. You may be left unaware of company sales or mergers that result in changes to your investment mix. Don't get cocky; the stock market has gone up reliably over time, but your investments still need some tending to from time to time.</p> <h2>6. You trade too often</h2> <p>Let's face it: Buying and selling stocks can be fun. And when you feel confident in your stock picking abilities, you'll feel the urge to trade stocks frequently. You may even feel like you can &quot;time&quot; the market. But trading frequently has financial consequences.</p> <p>First, if your stocks are in a taxable brokerage account, you'll end up paying tax on any gains when you sell. Second, most brokerage firms charge a commission for every trade. These expenses can put a dent in the value of your portfolio.</p> <h2>7. You miss out on popular, but well-performing investments</h2> <p>Imagine there's a hot stock that everyone is buying. But you stay away, because you think everyone else is dumber than you. Your confidence got in the way of rationally examining an investment on its merits rather than being influenced by the decisions of others. Buying a stock just because it's popular is silly, but so is refusing to buy it for the same reason. (See also: <a href="http://www.wisebread.com/7-everyday-things-that-are-surprisingly-awesome-investments?ref=seealso" target="_blank">7 Everyday Things That Are Surprisingly Awesome Investments</a>)</p> <h2>8. You hold on to investments too long</h2> <p>Years ago, you bought 100 shares of OmniCorp and it netted you a massive return in the first year. You still have some of those shares, but the company has since been struggling, and may even declare bankruptcy. But still, you refuse to cut your losses and sell, because you made so much money from this stock early on. You are utterly convinced the company will turn things around, despite all evidence to the contrary. This is a dangerous mentality to have, and can cost you plenty in the long run.</p> <h2 style="text-align: center;">Like this article? Pin it!</h2> <div align="center"><a data-pin-do="buttonPin" data-pin-count="above" data-pin-tall="true" data-pin-save="true" href="https://www.pinterest.com/pin/create/button/?url=http%3A%2F%2Fwww.wisebread.com%2F8-surprising-ways-confidence-can-hurt-your-investments&amp;media=http%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2F8%2520Surprising%2520Ways%2520Confidence%2520Can%2520Hurt%2520Your%2520Investments.jpg&amp;description=8%20Surprising%20Ways%20Confidence%20Can%20Hurt%20Your%20Investments"></a></p> <script async defer src="//assets.pinterest.com/js/pinit.js"></script></div> <p style="text-align: center;"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5180/8%20Surprising%20Ways%20Confidence%20Can%20Hurt%20Your%20Investments.jpg" alt="8 Surprising Ways Confidence Can Hurt Your Investments" width="250" height="374" /></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/tim-lemke">Tim Lemke</a> of <a href="http://www.wisebread.com/8-surprising-ways-confidence-can-hurt-your-investments">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-too-much-investment-diversity-can-cost-you">How Too Much Investment Diversity Can Cost You</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/9-costly-mistakes-diy-investors-make">9 Costly Mistakes DIY Investors Make</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-signs-an-etf-isnt-right-for-you">8 Signs an ETF Isn&#039;t Right for You</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-make-sure-you-dont-run-out-of-money-in-retirement">How to Make Sure You Don&#039;t Run Out of Money in Retirement</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-types-of-investors-which-one-are-you">8 Types of Investors — Which One Are You?</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Investment arrogance confidence fees rebalancing risk stock markets stocks taxes trading Wed, 26 Jul 2017 08:00:17 +0000 Tim Lemke 1988261 at http://www.wisebread.com Is Dollar Cost Averaging the Right Strategy for You? http://www.wisebread.com/is-dollar-cost-averaging-the-right-strategy-for-you <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/is-dollar-cost-averaging-the-right-strategy-for-you" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/saving_money_and_banking_for_finance_concept.jpg" alt="Saving money and banking for finance concept" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>You've just received a bonus or an inheritance, and you know that investing your money in stocks and bonds is one of the best ways to create long-term wealth. But you're also worried that your investments might lose value instead of gaining it.</p> <p>It's a common struggle: You want the financial rewards that can come with investing, but the potential risk of losing money nags at you. (See also: <a href="http://www.wisebread.com/how-to-get-over-these-5-scary-things-about-investing?ref=seealso" target="_blank">How to Get Over These 5 Scary Things About Investing</a>)</p> <p>An investing strategy known as dollar cost averaging might be the answer.</p> <h2>What is dollar cost averaging?</h2> <p>In dollar cost averaging, you invest just a small chunk of money at a time. This differs from the more traditional approach to investing, in which you'd invest all the money that you've targeted for stocks, bonds, or real estate at the same time.</p> <p>Say you've inherited $6,000. You'd like to invest that money in the stock market so that it will grow over time. If you were investing in the traditional way, you'd invest that money all at once. With dollar cost averaging, though, you would invest more gradually, perhaps investing $500 each month throughout the course of a year. That way, you'd buy more stocks when prices are low, and fewer stocks when they're high. (See also: <a href="http://www.wisebread.com/9-investing-questions-youre-too-embarrassed-to-ask?ref=seealso" target="_blank">9 Investing Questions You're Too Embarrassed to Ask</a>)</p> <p>The main benefit of dollar cost averaging is that it reduces your financial risk. Say you invested all that money in stocks at once. A market crash three months later would then impact all your money. But if you'd just invested, say, $1,500 before the market crashed, you'd still have $4,500 of your original $6,000 left untouched by the financial turbulence.</p> <h2>Paycheck contributions versus lump sum investing</h2> <p>If you contribute the same amount to your 401(k) every paycheck, that's equivalent to dollar cost averaging. By default, most people have the same amount deducted from their paycheck each month, so there is no choice to make. Dollar cost averaging, however, usually refers to a choice the investor makes when they've got a lump sum of money, such as an inheritance, royalty check, or bonus. If you don't have a windfall of some sort, you usually don't have to worry about whether or not to do dollar cost averaging.</p> <h2>Pros and cons</h2> <p>The main advantage of dollar cost averaging is the reduced risk of losing as much money in a market downturn. But there's another advantage, too: Dollar cost averaging makes it easier for reluctant investors to enter the market.</p> <p>If you're hesitant about investing, you might find it easier to take the jump if you are investing a smaller amount of money. And that's a good thing: Over time, the stock market has tended to increase in value. If you don't invest, you won't get the chance to take advantage of this.</p> <p>Anything that encourages you to invest &mdash; such as dollar cost averaging &mdash; is a positive.</p> <p>There is a drawback, though, to this approach: By limiting your risk, you are also limiting the potential size of your financial rewards.</p> <p>Because the stock market has historically increased in value over time, the odds are that you'll make more money if you invest a larger sum all at once. The sooner you invest the money, the more time it has to grow. By contrast, if you invest smaller bits of money over time, you will tend to see smaller returns in what has historically been an upward-trending market.</p> <p>A recent study by Vanguard illustrates this. Vanguard studied whether people would see higher returns by <a href="https://personal.vanguard.com/pdf/ISGDCA.pdf" target="_blank">investing a large sum of cash</a> all at once or in smaller doses over a six-month period into a portfolio of 60 percent stocks and 40 percent bonds. They found that investing the lump sum of cash all at once produced higher returns about two-thirds of the time. The longer the investment period, the higher the chance that the lump sum investment would outperform the dollar cost averaging strategy. (See also: <a href="http://www.wisebread.com/the-basics-of-asset-allocation?ref=seealso" target="_blank">The Basics of Asset Allocation</a>)</p> <p>You'll have to decide whether the reduced risk outweighs the potential of losing out on bigger returns.</p> <p>Of course, it's most important that you do invest your money over the long term. And if dollar cost averaging, and the reduced risk that comes with it, is what encourages you to do this, then it might be the best approach for you.</p> <h2 style="text-align: center;">Like this article? Pin it!</h2> <div align="center"><a data-pin-do="buttonPin" data-pin-count="above" data-pin-tall="true" data-pin-save="true" href="https://www.pinterest.com/pin/create/button/?url=http%3A%2F%2Fwww.wisebread.com%2Fis-dollar-cost-averaging-the-right-strategy-for-you&amp;media=http%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2FIs%2520Dollar%2520Cost%2520Averaging%2520the%2520Right%2520Strategy%2520for%2520You-.jpg&amp;description=Is%20Dollar%20Cost%20Averaging%20the%20Right%20Strategy%20for%20You%3F"></a></p> <script async defer src="//assets.pinterest.com/js/pinit.js"></script></div> <p style="text-align: center;"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5180/Is%20Dollar%20Cost%20Averaging%20the%20Right%20Strategy%20for%20You-.jpg" alt="Is Dollar Cost Averaging the Right Strategy for You?" width="250" height="374" /></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dan-rafter">Dan Rafter</a> of <a href="http://www.wisebread.com/is-dollar-cost-averaging-the-right-strategy-for-you">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-2"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-types-of-investors-which-one-are-you">8 Types of Investors — Which One Are You?</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/want-your-investments-to-do-better-stop-watching-the-news">Want Your Investments to Do Better? Stop Watching the News</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-reasons-millennials-should-stop-being-afraid-of-the-stock-market">7 Reasons Millennials Should Stop Being Afraid of the Stock Market</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-too-much-investment-diversity-can-cost-you">How Too Much Investment Diversity Can Cost You</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/10-stocks-that-are-actually-having-a-good-year">10 Stocks That Are Actually Having a Good Year</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Investment dollar cost averaging growth inheritances lump sums returns risk stock market Mon, 24 Jul 2017 08:30:14 +0000 Dan Rafter 1986884 at http://www.wisebread.com Here's How Boomers and Millennials Are Creating Winners on the Stock Market http://www.wisebread.com/heres-how-boomers-and-millennials-are-creating-winners-on-the-stock-market <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/heres-how-boomers-and-millennials-are-creating-winners-on-the-stock-market" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/mother_with_adult_daughter_in_park_together.jpg" alt="Mother With Adult Daughter In Park Together" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>It may not seem like millennials and baby boomers have a lot in common, aside from the fact that they make up a huge chunk of the U.S. population. But the two generations do share some similar traits when it comes to spending and investing. This is already having a significant impact on the economy and the stock market, and will continue to do so.</p> <p>Here are some key ways that baby boomers and millennials are impacting business and the markets.</p> <h2>Health care will be huge</h2> <p>There's a lot of noise related to the Affordable Care Act and a possible replacement. How things will shake out on Capitol Hill is anyone's guess, but there's no doubt that Americans will be spending more on health care. Baby boomers make up an increasing percentage of the U.S. population, and will require more medical attention as they age. This means big profits for pharmaceutical firms, but also biotech companies, hospitals, and manufacturers of medical equipment. The S&amp;P 500 Health Care Index has seen annualized returns of more than 16 percent over the last five years, and is up nearly 12 percent in 2017. Expect the upward trend to continue.</p> <h2>Health consciousness is also big</h2> <p>Millennials are aware of the obesity problem in America, and many of them are making lifestyle choices to counteract that. We've seen a push for more natural and organic food items, and a desire for less sugar and fat. This also means a continued expansion of fast-casual restaurants that offer healthier options, perhaps at the expense of traditional fast food chains. Baby boomers will help fuel this push to health as well simply by following doctor's orders to eat healthy as they age.</p> <h2>Investing costs will go down</h2> <p>Boomers have no interest in seeing their retirement savings cut down by high expense ratios and commissions, and millennials are becoming more savvy about the impact these costs have on their portfolios. These two demographics have led the charge against fees, and we've seen some brokerages respond. In February, Charles Schwab and Fidelity cut their online trade commissions to a mere $4.95, and many brokerage firms have expanded their offerings of commission-free exchange-traded funds (ETFs).</p> <p>Meanwhile, investing in low-cost index funds has ballooned; nearly half of all assets placed in mutual funds and ETFs are indexed rather than in actively-managed accounts, according to Morningstar.</p> <h2>Investing in individual stocks will decline</h2> <p>Aging baby boomers can be expected to withdraw their investments or at least shift their portfolios to more conservative investments like bonds and cash. Meanwhile, millennials are wary of the markets in general after living through the stock market declines of the early 2000s and 2008. Millennials have also learned that trying to beat the market by investing in individual stocks is generally a fool's game. This shying away from individual stocks could impact the overall returns in the stock market over time.</p> <h2>Popular brands aren't a sure thing</h2> <p>There has long been a common thought among investors that big, popular brands will always be surefire investments. Investors have long banked on the notion of brand loyalty as a driver of investment returns. But there have been several recent reports that millennials are not as brand-loyal as their predecessor generations. Millennials will go for value and quality, and aren't going to stick with a single brand out of stubbornness. This may have implications for stocks that have performed well over the years in part due to brand recognition.</p> <h2>Brick-and-mortar retail will go south</h2> <p>We're already seeing retail chains struggling, with H.G. Gregg, Gymboree, Rue 21, and several other brick-and-mortar outlets declaring bankruptcy in recent months. Meanwhile, online retailing giant Amazon just reported a 23 percent increase in sales, to $35.7 billion. Millennials don't mind shopping online, and baby boomers are less likely to go out on long shopping trips as they get older.</p> <h2>Experiences over objects</h2> <p>Millennials don't really care about owning things. Instead, they get satisfaction from experiences like fitness classes, travel, or eating well. To the extent that they need items such as music or movies, they prefer to obtain them through streaming services such as Netflix (one of the hottest tech stocks in America) or Spotify. Meanwhile, baby boomers are getting older and aren't in the habit of acquiring more &quot;stuff,&quot; either.</p> <h2 style="text-align: center;">Like this article? Pin it!</h2> <div align="center"><a data-pin-do="buttonPin" data-pin-count="above" data-pin-tall="true" data-pin-save="true" href="https://www.pinterest.com/pin/create/button/?url=http%3A%2F%2Fwww.wisebread.com%2Fheres-how-boomers-and-millennials-are-creating-winners-on-the-stock-market&amp;media=http%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2FHeres%2520How%2520Boomers%2520and%2520Millennials%2520Are%2520Creating%2520Winners%2520on%2520the%2520Stock%2520Market.jpg&amp;description=Heres%20How%20Boomers%20and%20Millennials%20Are%20Creating%20Winners%20on%20the%20Stock%20Market"></a></p> <script async defer src="//assets.pinterest.com/js/pinit.js"></script></div> <p style="text-align: center;"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5180/Heres%20How%20Boomers%20and%20Millennials%20Are%20Creating%20Winners%20on%20the%20Stock%20Market.jpg" alt="Here's How Boomers and Millennials Are Creating Winners on the Stock Market" width="250" height="374" /></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/tim-lemke">Tim Lemke</a> of <a href="http://www.wisebread.com/heres-how-boomers-and-millennials-are-creating-winners-on-the-stock-market">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/with-micro-investing-your-smartphone-pays-you">With Micro-Investing, Your Smartphone Pays YOU</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-reasons-millennials-should-stop-being-afraid-of-the-stock-market">7 Reasons Millennials Should Stop Being Afraid of the Stock Market</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/are-you-making-the-biggest-investment-risk-of-all">Are You Making the Biggest Investment Risk of All?</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-things-everyone-should-know-about-the-commodities-markets">8 Things Everyone Should Know About the Commodities Markets</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/learn-how-to-invest-with-these-5-stock-market-games">Learn How to Invest With These 5 Stock Market Games</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Investment baby boomers brand loyalty eating well Food Health health care millennials retail stock market Mon, 24 Jul 2017 08:00:10 +0000 Tim Lemke 1986883 at http://www.wisebread.com Here's How Rate of Return Can Help You Invest Smarter http://www.wisebread.com/heres-how-rate-of-return-can-help-you-invest-smarter <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/heres-how-rate-of-return-can-help-you-invest-smarter" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/bussiness_growth_new_life_growing_before_blackboard.jpg" alt="Business growth:new life growing before blackboard" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>At first glance, judging an investment's past performance would seem to be a fairly simple exercise. For most stock market investments, such as individual stocks, mutual funds, and exchange-traded funds, a lot of performance information is readily available online.</p> <p>However, the sheer quantity of information that's out there can make understanding it all somewhat overwhelming. And some of the terminology can be confusing.</p> <p>So, let's make sure you understand a couple of key metrics and how to put them to use &mdash; whether you're evaluating the performance of an investment you already own, or you're thinking about making a new investment.</p> <h2>Annual return and average annual return</h2> <p>Two of the most fundamental ways of looking at an investment's results are how well it performed in a specific year and what its average annual return has been over multiple years.</p> <h3>Annual return</h3> <p>This is how an investment performed in one particular year. Let's use Vanguard's 2030 target-date mutual fund [VTHRX] as an example. If you go to Yahoo Finance, enter that ticker symbol in the search box, and then click on the fund's Performance tab, you can see how the fund performed each year going back to 2006. For example, in 2016, it generated a return of 7.85 percent.</p> <h3>Average annual return</h3> <p>To see an investment's average annual return over multiple years, look on the same Yahoo Finance page under Trailing Returns (%) vs. Benchmark&quot; (&quot;trailing&quot; just means &quot;looking back&quot; &mdash; we'll get to the &quot;benchmark&quot; reference in a minute). You can see that VTHRX's average annual return for the past five years was 9.9 percent.</p> <p>On their own, such metrics aren't very useful. However, when used together, they can provide helpful insight. For example, a 9.9 percent average annual return may seem attractive. But when you examine the past five years individually, you can see how unrealistic it is to expect that return each and every year. In 2015, the fund even suffered a loss.</p> <p>When looking for meaning in performance numbers, context is king.</p> <h2>What's a &quot;good&quot; return?</h2> <p>To properly judge how well an investment has performed, you have to choose the right benchmark. Many investors make the mistake of comparing a specific investment or their entire portfolio to &quot;the market.&quot;</p> <p>It's fine to do that if you're investing in an S&amp;P 500 index fund, which is designed to mirror the market. However, sticking with our previous example, VTHRX isn't designed to perform like the market.</p> <p>It's designed for people who have less than 15 years until retirement. According to the basic rules of asset allocation, as you get older, the percentage of your portfolio that's invested in stocks should decrease and the portion invested in bonds should increase.</p> <p>That's exactly how target-date funds, such as VTHRX, are designed. This particular fund holds a 72 percent/28 percent mix of stocks and bonds. Plus, it's diversified across U.S. and foreign stocks and bonds.</p> <p>If you compared VTHRX's performance over the past five years to the S&amp;P 500 (through the end of June), you might be disappointed. The S&amp;P 500 has delivered an average annual return over that time period of 14.6 percent whereas VTHRX has averaged 9.9 percent.</p> <p>But again, that's an apples-to-oranges comparison. A better comparison would be how VTHRX has performed against <em>other </em>2030 target-date funds, and the same Yahoo Finance page referenced earlier tells you that as well.</p> <p>The table showing the fund's average annual returns over various time periods also shows how its performance has compared with the &quot;category&quot; &mdash; in this case, the average 2030 target-date fund. As you can see, it has done a good job of outperforming its category.</p> <h2>Should past performance impact which investments you choose?</h2> <p>The prominent display of historical performance information can give the impression that it's what's most important in choosing investments. However, how an investment has performed in past years has virtually nothing to do with how it'll perform in future years.</p> <p>What's more important is designing a portfolio around your optimal asset allocation &mdash; the mix of stocks and bonds that's appropriate for your investment time frame and risk tolerance. Then, if you're using a target-date fund, choose one with that asset allocation, keeping mind that funds with the same target date may be designed with very different asset allocations.</p> <p>Even more importantly, use an online calculator to develop an investment plan &mdash; how much you need to have in your investment accounts by the time you retire, how much money you need to invest each month, and the average annual rate of return you need to achieve.</p> <p>Such a plan would serve as the best possible benchmark because it's based on what you need to achieve in order to meet your long-term investing goal.</p> <p>On its own, investment performance data isn't very helpful. But with the proper context &mdash; how an investment performed versus other similar investments, and most importantly, how your investments performed compared to the rate of return you're trying to achieve &mdash; can be very helpful indeed.</p> <h2 style="text-align: center;">Like this article? Pin it!</h2> <div align="center"><a data-pin-do="buttonPin" data-pin-count="above" data-pin-tall="true" data-pin-save="true" href="https://www.pinterest.com/pin/create/button/?url=http%3A%2F%2Fwww.wisebread.com%2Fheres-how-rate-of-return-can-help-you-invest-smarter&amp;media=http%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2FHeres%2520How%2520Rate%2520of%2520Return%2520Can%2520Help%2520You%2520Invest%2520Smarter.jpg&amp;description=Heres%20How%20Rate%20of%20Return%20Can%20Help%20You%20Invest%20Smarter"></a></p> <script async defer src="//assets.pinterest.com/js/pinit.js"></script></div> <p style="text-align: center;"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5180/Heres%20How%20Rate%20of%20Return%20Can%20Help%20You%20Invest%20Smarter.jpg" alt="Here's How Rate of Return Can Help You Invest Smarter" width="250" height="374" /></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/matt-bell">Matt Bell</a> of <a href="http://www.wisebread.com/heres-how-rate-of-return-can-help-you-invest-smarter">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-3-rules-every-mediocre-investor-must-know">The 3 Rules Every Mediocre Investor Must Know</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/why-does-the-stock-market-keep-going-up">Why Does the Stock Market Keep Going Up?</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-one-mediocre-investor-prospered-after-the-market-crash">How One Mediocre Investor Prospered After the Market Crash</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/is-it-finally-time-to-invest-in-marijuana-stocks">Is It Finally Time to Invest in Marijuana Stocks?</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/what-are-income-stocks">What Are Income Stocks?</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Investment asset allocation ETF financial news mutual funds performances rate of return stock market target date funds Wed, 19 Jul 2017 08:30:18 +0000 Matt Bell 1985090 at http://www.wisebread.com Cash Might Make You Happier, But Investments Will Make You Richer http://www.wisebread.com/cash-might-make-you-happier-but-investments-will-make-you-richer <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/cash-might-make-you-happier-but-investments-will-make-you-richer" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/woman_glasses_piggybank_125143864.jpg" alt="Woman getting richer with investments" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Having a stash of cash feels great. Liquid wealth makes you feel more secure, because you can predict how you will handle whatever life throws your way. The feeling of satisfaction is real, but ultimately, the rewards of keeping your wealth in your checking or savings account are much less satisfying. If it's long-term wealth you're after, you need to start investing.</p> <h2>You're losing money</h2> <p>In the battle between interest and inflation, inflation wins when you keep your cash in a typical savings or checking account. You'll get very little in interest from a bank account intended for day-to-day use: typically, 0.01 percent to 0.03 percent for a checking account, and up to 1 percent for a savings account. Meanwhile, the average annual inflation rate is 3 percent. So your stash is losing value every year, as inflation climbs faster than interest grows your money.</p> <p>The numbers work out pretty grimly in that scenario. Imagine you put $100,000 in a savings account with a 1 percent interest rate, and add $500 every month. Every year, you'll gain that 1 percent interest but lose 3 percent of the value, due to inflation &mdash; meaning you come out 2 percent <em>behind </em>annually. In 10 years, you'll have $173,522 but it will only be worth $129,117.17.</p> <p>On the other hand, the return on stock and real estate investments is staying stable at 7 percent. That's the real rate of return, meaning it's adjusted for inflation. After 10 years, your $100,000 investment, with the monthly $500 addition, will have an actual value of $267,357.54.</p> <p>Why wouldn't you immediately put your money into a higher-yield investment? For most people, the hesitation comes from fear of taking a big risk with money.</p> <h2>What's the big risk?</h2> <p>Humans tend to be risk averse. This risk aversion has done a lot for us, in an evolutionary sense.</p> <p>Risk aversion is also helpful in finances in many instances. When it comes to getting high-interest return on your savings, however, risk aversion can hinder you. To maximize your savings, you need a high return that will outrun inflation and exponentially add financial value to your nest egg.</p> <p>High-return investments, unfortunately, are also higher risk investments. If you're unfamiliar with the stock market, investment portfolios, and the like, these types of high-return investments can feel terrifying. But you can overcome that fear.</p> <p>First, start a relationship with a financial investment professional. Ask for recommendations from people you know and trust, who are not struggling financially. Second, don't invest all your money in one high-yield investment. Diversify; if one investment doesn't grow as predicted, it won't topple your entire savings plan. Third, you don't have to invest all your money in what feels riskiest. You can <a href="http://www.wisebread.com/the-basics-of-cd-laddering" target="_blank">set up a CD</a>, <a href="http://www.wisebread.com/stabilize-your-portfolio-with-these-5-bond-funds" target="_blank">invest in bonds</a>, or <a href="http://www.wisebread.com/the-only-5-rules-you-need-to-know-about-investing-in-real-estate" target="_blank">invest in real estate</a>. All require some investigation to understand the risk and potential return.</p> <p>Get professional insight on the options that appeal to you and make a well-informed decision. It's never about eliminating risk; that's not quite possible. It is about minimizing risk and maximizing return. You do both by investigating, seeking <a href="http://www.wisebread.com/who-to-hire-a-financial-planner-or-a-financial-adviser" target="_blank">expert insight</a>, and diversifying the way you save your money.</p> <h2>Save yourself from hasty decisions</h2> <p>Keeping your wealth in a less-liquid state helps you financially by delaying your financial decisions. If your main funds are tied up, for example, you can't immediately invest in Cousin Jimmy's startup. Even if you really, really want to.</p> <p>Maybe Cousin Jimmy is a genius, and you do want to invest; still, it's good to have to think and compare numbers. Can an investment in a family business give the same high-interest return on investment? What's the risk, compared with the risk you're already taking? How long before you'll see a return?</p> <p>Having time to think will help you avoid hasty decisions you might regret. Whether it's investing in a family member's venture or purchasing that dilapidated house in an up-and-coming area, time is on your side.</p> <h2>But I still want to feel happy</h2> <p>A recent National Center for Biotechnology Information study shows that higher levels of happiness are linked to <a href="https://www.ncbi.nlm.nih.gov/pubmed/27064287" target="_blank">keeping cash on hand</a>. Happiness is great! We all want more of it. But you can get the happiness that cash brings while also setting yourself up for long-term financial rewards.</p> <p>Having money at the ready contributes to feeling secure. You can get that financial security by <a href="http://www.wisebread.com/6-secrets-to-mastering-the-debt-snowball" target="_blank">reducing high-interest debt</a>&nbsp;and&nbsp;setting up <a href="http://www.wisebread.com/7-easy-ways-to-automate-your-savings" target="_blank">automated savings </a>so that you can&nbsp;keep a reasonable amount of cash at the ready. Experts recommend having three to six months' worth of living expenses; but you can be smart about how you save that cash reserve, as well, by keeping it in an interest-bearing savings account or a short-term CD. When your reserve grows over your emergency-fund amount, invest it rather than hoard it.</p> <p>Remember, you'll want to feel financially secure later in life, too. Smart financial moves now contribute to your happiness in the present and the future.</p> <h2 style="text-align: center;">Like this article? Pin it!</h2> <div align="center"><a data-pin-do="buttonPin" data-pin-count="above" data-pin-tall="true" data-pin-save="true" href="https://www.pinterest.com/pin/create/button/?url=http%3A%2F%2Fwww.wisebread.com%2Fcash-might-make-you-happier-but-investments-will-make-you-richer&amp;media=http%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2FCash%2520Might%2520Make%2520You%2520Happier%252C%2520But%2520Investments%2520Will%2520Make%2520You%2520Richer.jpg&amp;description=Cash%20Might%20Make%20You%20Happier%2C%20But%20Investments%20Will%20Make%20You%20Richer"></a></p> <script async defer src="//assets.pinterest.com/js/pinit.js"></script></div> <p style="text-align: center;"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5180/Cash%20Might%20Make%20You%20Happier%2C%20But%20Investments%20Will%20Make%20You%20Richer.jpg" alt="Cash Might Make You Happier, But Investments Will Make You Richer" width="250" height="374" /></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/annie-mueller">Annie Mueller</a> of <a href="http://www.wisebread.com/cash-might-make-you-happier-but-investments-will-make-you-richer">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-2"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-investments-that-may-soar-during-trumps-term">8 Investments That May Soar During Trump&#039;s Term</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-reasons-millennials-should-stop-being-afraid-of-the-stock-market">7 Reasons Millennials Should Stop Being Afraid of the Stock Market</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-foolproof-ways-to-protect-your-money-from-inflation">4 Foolproof Ways to Protect Your Money From Inflation</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/while-waiting-for-rates-i-bonds">While Waiting for Rates: I-Bonds</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-cool-things-bonds-tell-you-about-the-economy">7 Cool Things Bonds Tell You About the Economy</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Investment cash inflation interest rates liquid savings money goals returns rich risk aversion wealth building Tue, 18 Jul 2017 08:30:17 +0000 Annie Mueller 1986108 at http://www.wisebread.com How to Save for Retirement When You Are Unemployed http://www.wisebread.com/how-to-save-for-retirement-when-you-are-unemployed <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/how-to-save-for-retirement-when-you-are-unemployed" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/latin_american_woman_saving_in_a_piggybank.jpg" alt="Latin American woman saving in a piggy bank" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>When you're unemployed, saving for retirement may be the last thing on your mind. It may seem impossible to save for the future when you have no steady income to even pay basic bills.</p> <p>But depending on your situation, it may still be possible to build your nest egg even if you're not working full-time. Here are some tools and suggestions for keeping an eye on the future during a period of joblessness.</p> <h2>Familiarize yourself with IRAs</h2> <p>Individual retirement accounts (IRAs) are great for people who don't have access to employer-sponsored retirement plans like 401(k) accounts. A traditional IRA is similar to a 401(k), in that any contributions are deducted from whatever taxable income you have. With a Roth IRA, on the other hand, earnings are taxed up front, but any gains you have won't be taxed when you withdraw money at retirement age.</p> <p>IRAs are useful for people who are self-employed, or who earn money inconsistently through part-time or freelance work. So if you're not employed full-time but still have some earned income, these accounts can help you save.</p> <h2>Think of retirement savings as a necessary expense</h2> <p>When you're unemployed, it's important to get a handle on all of your expenses so that you know where you need to cut. You may find that there are a lot of costs (luxury purchases, eating out, cable TV) that can be taken out of your household budget, while other expenses (food, electricity, debt payments) are more necessary. If you think of retirement savings as a necessity, you will be forced to cut spending elsewhere.</p> <h2>Roll over your old 401(k)</h2> <p>If you've been laid off from a job, you will no longer be able to contribute to the 401(k) you may have had from your employer. But the account will still exist and the money is still yours. You can let the old 401(k) account sit, but it's better to roll it into a traditional individual retirement account (IRA). The IRA will give you more flexibility and investment options, and may also have lower fees. And you can begin contributing to it once you have any earned income at all.</p> <h2>Focus on rebalancing</h2> <p>You may not be able to add much to your retirement accounts, but you can work to make sure they are optimized. This means making sure you have the right mix of investments based on your retirement date, and getting the optimal blend of stocks in various industries and asset classes. It's always smart to examine your portfolio to ensure you are not over- or underinvested in any one area.</p> <h2>Look for higher bank interest rates</h2> <p>If you're not taking in much income for the time being, you need to have your cash savings working for you. That means any cash savings you have should generate as much income as possible. Interest rates are still quite low, but many online banks offer interest rates on CDs and savings accounts that are higher than average.</p> <h2>Avoid the temptation to cash out</h2> <p>It may be tempting to take money out of your retirement funds, but you should avoid it if at all possible. One of the best ways to see your retirement savings grow is to let your investments do their thing. You can see a meaningful increase in your retirement savings just from market gains, even if you're not contributing for the time being.</p> <p>Withdrawing from retirement accounts, however, has consequences. First, any money you take out has no chance to grow and help you expand your overall retirement savings. Second, there are penalties and taxes associated with taking money out of retirement accounts early. (See also: <a href="http://www.wisebread.com/5-questions-to-ask-before-you-borrow-from-your-retirement-account?ref=seealso" target="_blank">5 Questions to Ask Before You Borrow From Your Retirement Account</a>)</p> <h2>Continue to focus on growth, if you can</h2> <p>If you are unemployed and have some investments in a taxable brokerage account, you may be tempted to shift them to dividend stocks or other income-producing investments. This can give you extra income at a time when you may need it. But making this kind of adjustment could have a long-term negative impact on the overall growth of your portfolio. If dividends, bonds, or other income-focused investments will help you keep the lights on, fine. But it's best to focus on finding other sources of income, or reduce your spending first before going this route.</p> <h2>Reinvest dividends, if you can</h2> <p>If you do have dividend stocks already, you can still contribute to your retirement portfolio by reinvesting any dividend income you get from stocks. You may be tempted to use that investment income to pay bills and help get through your unemployed period, but if you can get by without it, direct the dividends to buy more stocks and other investments instead. Even small contributions added to your retirement accounts can add up to considerable savings over time.</p> <h2>Get your spouse involved</h2> <p>Perhaps you never thought to include your spouse in retirement planning because you felt it wasn't necessary while you were working. Now his or her income can be directed to help you save. This may be a challenge, since they are now also working to help pay more of the bills. But there are some ways to use your spouse's income for your own retirement accounts. If you have a traditional or Roth IRA, your spouse's earned income can go toward your account. (Note: This is only allowed if you file your taxes jointly.)</p> <h2>Plan to pay into accounts later</h2> <p>If you are unemployed but expect to be working in short order, you can postpone contributions to your IRA and add money later, even if it's after the end of the year. In fact, you can contribute to an IRA all the way up until April 15 of the following year. So for example, let's say you planned to max out your IRA by making monthly payments. (This would be about $458 monthly for a total of $5,500 for the year &mdash; the maximum amount allowed by the IRS for people under 50.) But let's say you are out of work from August through October of that year. You can hold off on contributing during that time and make up the difference in later months, even the first few months of the following year, if necessary.</p> <h2 style="text-align: center;">Like this article? Pin it!</h2> <div align="center"><a data-pin-do="buttonPin" data-pin-count="above" data-pin-tall="true" data-pin-save="true" href="https://www.pinterest.com/pin/create/button/?url=http%3A%2F%2Fwww.wisebread.com%2Fhow-to-save-for-retirement-when-you-are-unemployed&amp;media=http%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2FHow%2520to%2520Save%2520for%2520Retirement%2520When%2520You%2520Are%2520Unemployed.jpg&amp;description=How%20to%20Save%20for%20Retirement%20When%20You%20Are%20Unemployed"></a></p> <script async defer src="//assets.pinterest.com/js/pinit.js"></script></div> <p style="text-align: center;"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5180/How%20to%20Save%20for%20Retirement%20When%20You%20Are%20Unemployed.jpg" alt="How to Save for Retirement When You Are Unemployed" width="250" height="374" /></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/tim-lemke">Tim Lemke</a> of <a href="http://www.wisebread.com/how-to-save-for-retirement-when-you-are-unemployed">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-make-sure-you-dont-run-out-of-money-in-retirement">How to Make Sure You Don&#039;t Run Out of Money in Retirement</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-traps-to-avoid-with-your-401k">7 Traps to Avoid With Your 401(k)</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/which-retirement-account-is-right-for-you">Which Retirement Account Is Right for You?</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/6-valid-reasons-not-to-contribute-to-your-401k">6 Valid Reasons Not to Contribute to Your 401(k)</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/6-reasons-every-millennial-needs-a-roth-ira">6 Reasons Every Millennial Needs a Roth IRA</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Investment Retirement 401(k) contributions dividends interest rates job loss loss of income rebalancing Roth IRA saving money stocks traditional ira unemployment Wed, 12 Jul 2017 09:00:14 +0000 Tim Lemke 1979037 at http://www.wisebread.com How to Buy Berkshire Hathaway and Other Blue Chip Stock for 17% Off http://www.wisebread.com/how-to-buy-berkshire-hathaway-and-other-blue-chip-stock-for-17-off <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/how-to-buy-berkshire-hathaway-and-other-blue-chip-stock-for-17-off" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/business_woman_with_piggy_bank.jpg" alt="Business woman with piggy bank" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Over the years, Warren Buffett has built incredible wealth through the growth of his company Berkshire Hathaway. Berkshire Hathaway is a holding company that includes stock of companies wholly-owned by Berkshire Hathaway, as well as positions in a number of large financial and consumer-oriented companies.</p> <p>You might be interested in buying stock in the company that Warren Buffett manages himself, but shares of Berkshire Hathaway are currently selling for around $250,000 per share [BRK-A] which is out of reach of most small investors.</p> <h2>Berkshire Hathaway for small investors</h2> <p>Fortunately, there is a way to own Berkshire Hathaway with a smaller minimum investment. In 1996, Berkshire Hathaway started issuing Class B shares [BRK-B] with limited voting rights that are currently selling for about $170. Class B shares were offered to protect small investors from pursuing Berkshire Hathaway imitation funds with high fees or other unfavorable terms.</p> <p>But Warren Buffett himself has advised against small investors buying Berkshire Hathaway stock. Berkshire Hathaway stock typically sells at a premium of 20 percent to 50 percent above the net asset value (NAV) of its holdings. Warren Buffett didn't get rich buying things for more that they are worth!</p> <h2>Berkshire Hathaway for 17 percent off</h2> <p>I decided to check out stocks with low price-to-earnings (P/E) ratios trying to find a good value. While investigating, I stumbled upon an interesting fund called Boulder Growth &amp; Income Fund [BIF]. This 1.2 billion dollar fund is composed of about 30 percent Berkshire Hathaway stock (23 percent Class A shares plus 7 percent Class B shares). BIF also includes large, deep value financial and consumer companies that Warren Buffett likes to hold.</p> <p>A relevant fact about this fund is that it is selling for about 17 percent below net asset value. By contrast, Berkshire Hathaway is currently trading for about 40 percent over net asset value.</p> <p>Getting Berkshire Hathaway and other blue chip stock at a deep discount sounds like a great deal, but why is BIF trading for 17 percent less than asset value? BIF is a closed-end fund, which means that no additional shares of the fund will be issued. Only the existing shares of the fund are available to be traded. This is different from open-end funds that are more common, where new shares continue to be issued when investments are received.</p> <p>The trading price for BIF on the New York Stock Exchange (NYSE) is subject to supply from investors wanting to sell and demand from investors wanting to buy. One downside of owning a closed-end fund is that there may not be a large pool of investors interested in buying when you want to sell. Plus, there is no guarantee that closed-end funds bought at a discount to NAV will ever converge to full market price. A drawback of BIF in particular is that the management fee is high: 1.43 percent total expense ratio in 2016.</p> <h2>Find discounted stock funds</h2> <p>If you are looking for value stocks, buying a closed-end fund at a significant discount is an alternative to other bargain-hunting strategies such as looking for stocks with low P/E ratios or following stock tips. As with any other investment, investigate to understand the goals of the fund, expenses and fees, and the financial health of the fund before buying.</p> <h2 style="text-align: center;">Like this article? Pin it!</h2> <div align="center"><a data-pin-do="buttonPin" data-pin-count="above" data-pin-tall="true" data-pin-save="true" href="https://www.pinterest.com/pin/create/button/?url=http%3A%2F%2Fwww.wisebread.com%2Fhow-to-buy-berkshire-hathaway-and-other-blue-chip-stock-for-17-off&amp;media=http%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2FHow%2520to%2520Buy%2520Berkshire%2520Hathaway%2520and%2520Other%2520Blue%2520Chip%2520Stock%2520for%252017%2520Percent%2520Off.jpg&amp;description=How%20to%20Buy%20Berkshire%20Hathaway%20and%20Other%20Blue%20Chip%20Stock%20for%2017%20Percent%20Off"></a></p> <script async defer src="//assets.pinterest.com/js/pinit.js"></script></div> <p style="text-align: center;"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5180/How%20to%20Buy%20Berkshire%20Hathaway%20and%20Other%20Blue%20Chip%20Stock%20for%2017%20Percent%20Off.jpg" alt="How to Buy Berkshire Hathaway and Other Blue Chip Stock for 17% Off" width="250" height="374" /></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dr-penny-pincher">Dr Penny Pincher</a> of <a href="http://www.wisebread.com/how-to-buy-berkshire-hathaway-and-other-blue-chip-stock-for-17-off">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-3"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-reasons-you-shouldnt-invest-like-warren-buffett">7 Reasons You Shouldn&#039;t Invest Like Warren Buffett</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/10-questions-to-ask-before-you-sell-a-stock-or-a-fund">10 Questions to Ask Before You Sell a Stock or a Fund</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/make-smarter-investments-by-mastering-this-simple-ratio">Make Smarter Investments by Mastering This Simple Ratio</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-expensive-stocks-that-are-totally-worth-it">7 Expensive Stocks That Are Totally Worth It</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/11-food-and-beverage-stocks-that-are-having-a-good-year">11 Food and Beverage Stocks That Are Having a Good Year</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Investment Berkshire Hathaway blue chip stocks funds net asset value price to earnings ratio shares stock market Warren Buffett Wed, 12 Jul 2017 08:30:12 +0000 Dr Penny Pincher 1979036 at http://www.wisebread.com Stop Thinking of Your House as an Investment http://www.wisebread.com/heres-why-your-house-is-not-an-investment <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/heres-why-your-house-is-not-an-investment" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/saving_to_buy_a_house_or_home_savings_concept.jpg" alt="Saving to buy a house or home savings concept" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Your house is many things: It's a place to raise your children, hold family parties, relax on weekends and, maybe, rent out for a bit of extra cash.</p> <p>But here's one thing that many economists believe it is not: an investment.</p> <p>That flies in the face of what you might believe. After all, if you buy your home for $200,000 and then sell it 15 years later for $270,000, you've made $70,000, right? That sounds like a good return on investment, but it's actually not.</p> <p>That profit doesn't include all the property taxes you've paid on your home, the interest you've paid on your mortgage loan, or all the money you've spent on maintaining your residence.</p> <p>The fact is, the only time a home might truly be a good investment is when you're downsizing or moving to an apartment after selling it.</p> <h2>Sobering numbers</h2> <p>In a 2014 interview with USA Today, economist and housing expert Robert Shiller explained why consumers should not think of housing as an investment.</p> <p>From 1890 through 2012, <a href="https://www.usatoday.com/story/money/personalfinance/2014/05/10/why-your-home-is-not-a-good-investment/8900911/" target="_blank">home prices adjusted for inflation</a> did not grow at all, according to Shiller's research. During the same period, though, stocks did. Shiller found that the S&amp;P 500 increased by more than 2,000 times during those same years, adjusted for inflation.</p> <p>Shiller found that there have been long periods of time in which housing values when adjusted for inflation fell. He said that from 1890 through 1980, real home prices dropped by about 10 percent.</p> <p>Personal financial blog Observations also looked at inflation-adjusted housing prices from 1900 through 2012. According to these numbers, the average annual price for U.S. homes was just <a href="http://observationsandnotes.blogspot.com/2011/07/housing-prices-inflation-since-1900.html" target="_blank">0.1 percent a year</a> after inflation.</p> <p>These numbers make it clear: You should buy a house because it's a house, you need a place to live, and you don't want to rent. You shouldn't buy a house thinking that you're making a great financial investment. (See also: <a href="http://www.wisebread.com/rent-your-home-or-buy-heres-how-to-decide?ref=seealso" target="_blank">Rent or Buy a Home? Here's How to Decide</a>)</p> <h2>It's not easy to get your cash from an investment in housing</h2> <p>There are other aspects of houses that make them less-than-ideal as investments. The biggest? It's not easy to turn your home into cash.</p> <p>Sure, your home might have risen in value during the 10 years you've owned it. (Even if, as shown above, when adjusted for inflation, that appreciation might be negligible.) But accessing this appreciation isn't easy. You'll have to sell your home to get at whatever money it's made.</p> <p>Selling a home is no simple task. It's time-consuming. It's expensive, too, as you'll probably invest in everything from fresh coats of paint to major appliance repairs before you put your home on the market. And what if you don't want to sell your home? Then you won't be able to nab that cash.</p> <p>You can take out home equity lines of credit or home equity loans to tap the equity in your home. But you'll have to pay back the money you borrow, with interest, each month. If your home should lose value after you take out our home equity loan, you could end up underwater, owing more on your combined mortgage loans than what your home is worth.</p> <h2>If it's an investment, it's an expensive one</h2> <p>It's expensive to own a home. And that, too, makes housing a less attractive investment.</p> <p>Consider homeowners insurance. If you are using a mortgage loan to finance your house, you're required to invest in this insurance. Even if you're not financing your home, you should take out a policy to protect yourself. Realtor.com estimates that the average homeowners insurance premium across the country is $952.</p> <p>Then there are property taxes. The U.S. Census Bureau said that in 2017 the average household was spending $2,149 in property taxes.</p> <p>Finally, there is maintenance. This will vary, of course, but Realtor.com says that you can expect to pay from 1 percent to 4 percent of your home's value in maintenance each year. If your home is worth $200,000, that comes to between $2,000 and $8,000 a year.</p> <p>If you do sell your home for a profit, you need to factor in these costs of ownership when patting yourself on the back for making such a wise investment.</p> <h2>Housing's not bad, though</h2> <p>This doesn't mean that buying a house is a bad financial move. You do have to live somewhere, and depending on where you live, it might be less expensive to own a home than it is to rent an apartment.</p> <p>Owning a home also gives you some financial flexibility. You can rent out a portion of your home, for instance, to earn additional cash. You'll also be able to claim tax write-offs for the interest you pay on your mortgage loan each year and the property taxes you pay.</p> <p>Housing does provide this other benefits, too: shelter for your family, a gathering place for relatives and friends, and a respite at the end of a tough day.</p> <p>It's important to be realistic about housing's investment potential. If you want to invest, buying stocks or investing in mutual funds might be a better choice. Even low-interest, but safe investments such as bonds or CDs make more sense as an investment.</p> <h2 style="text-align: center;">Like this article? Pin it!</h2> <div align="center"><a data-pin-do="buttonPin" data-pin-count="above" data-pin-tall="true" data-pin-save="true" href="https://www.pinterest.com/pin/create/button/?url=http%3A%2F%2Fwww.wisebread.com%2Fheres-why-your-house-is-not-an-investment&amp;media=http%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2FStop%2520Thinking%2520of%2520Your%2520House%2520as%2520an%2520Investment.jpg&amp;description=Stop%20Thinking%20of%20Your%20House%20as%20an%20Investment"></a></p> <script async defer src="//assets.pinterest.com/js/pinit.js"></script></div> <p style="text-align: center;"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5180/Stop%20Thinking%20of%20Your%20House%20as%20an%20Investment.jpg" alt="Stop Thinking of Your House as an Investment" width="250" height="374" /></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dan-rafter">Dan Rafter</a> of <a href="http://www.wisebread.com/heres-why-your-house-is-not-an-investment">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/6-questions-to-ask-before-selling-your-house">6 Questions to Ask Before Selling Your House</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/yes-you-need-home-title-insurance-heres-why">Yes, You Need Home Title Insurance — Here&#039;s Why</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/rent-your-home-or-buy-heres-how-to-decide">Rent Your Home or Buy? Here&#039;s How to Decide</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-only-5-rules-you-need-to-know-about-investing-in-real-estate">The Only 5 Rules You Need to Know About Investing in Real Estate</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-home-buying-habits-we-can-learn-from-millennials">4 Home-Buying Habits We Can Learn From Millennials</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Investment Real Estate and Housing homeownership housing market maintenance mortgages property taxes renting return on investment selling a home Thu, 06 Jul 2017 08:30:16 +0000 Dan Rafter 1976048 at http://www.wisebread.com