Investment http://www.wisebread.com/taxonomy/term/4808/all en-US A Simple Guide to Socially Responsible Investing http://www.wisebread.com/a-simple-guide-to-socially-responsible-investing <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/a-simple-guide-to-socially-responsible-investing" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/piggy_bank_terrarium_000085064581.jpg" alt="Learning the simple guide to socially responsible investing" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>You may have heard that Stanford, Harvard, and other universities have divested certain stocks from their endowments, such as coal and oil companies. The idea is to make an anti-climate-change statement and deprive such industries of capital.</p> <p>Increasingly, individuals are also realizing that their investments aren't just a way to <a href="http://www.wisebread.com/one-smart-thing-you-can-do-for-your-retirement-today" target="_blank">save for retirement</a> &mdash; but a way to boost companies we like, and withhold support from companies we don't.</p> <p>But can you afford to think about the social impact of your investments? Before you decide whether socially responsible investing is for you, learn what it's about.</p> <h2>It's Not New</h2> <p>Socially responsible investing, also referred to as &quot;green investing,&quot; &quot;sustainable, responsible, and impact investing,&quot; or just plain &quot;sustainable investing,&quot; was around long before we had these names for it. As far back as 1700s, some American churches urged their parishioners not to invest in <a href="http://sustainability.thomsonreuters.com/2013/08/09/history-of-socially-responsible-investing-in-the-u-s/">slavery, alcohol, or war</a>. During the Vietnam War, thousands divested from Dow Chemical after seeing a <a href="http://www.theguardian.com/us-news/2015/oct/26/vietnam-wars-napalm-girl-kim-phuc-has-laser-treatment-to-heal-wounds">horrifying image</a> of a Vietnamese child being burned by napalm. In the 1980s, investor pressure was a major force in ending South African apartheid.</p> <h2>It's Growing</h2> <p>Since the 1980s, socially responsible investing has become a greater part of mainstream investing, with mutual funds, index funds, and other vehicles available to the average investor. From 2012 to 2014, the number of assets managed using these strategies <a href="http://www.ussif.org/Files/Publications/SIF_Trends_14.F.ES.pdf">increased by 75% to $6.57 trillion</a>, according to The Forum for Sustainable and Responsible Investment. That's about a buck out of every $6 invested in the United States.</p> <h2>It Screens Out Companies Based on Set Principles</h2> <p>An SRI fund manager doesn't simply decide what constitutes a &quot;good&quot; company based on their personal values. Based on a few main categories &mdash; such as environmental impact, social behavior, corporate governance, and the type of product or service offered &mdash; managers screen out companies that don't measure up to predetermined standards.</p> <p>For instance, the <a href="https://www.tiaa.org/public/pdf/ffs/87244W300.pdf">TIAA-CREF Social Choice Equity Fund</a> favors &quot;companies that are strong stewards of the environment; devoted to serving local communities; committed to higher labor standards; dedicated to producing high-quality and safe products; and those managed in an exemplary or ethical manner.&quot; The <a href="http://trilliummutualfunds.com/mutual-funds/portfolio21-global-equity-fund/">Portfolio 21 Global Equity Fund</a> &quot;excludes companies directly engaged in fossil fuel exploration and production, weapons manufacturing, egregious labor practices,&quot; and other behaviors.</p> <h2>SRI Doesn't Mean Sacrificing Returns</h2> <p>&quot;You do not have to assume you are making a financial sacrifice if you use mutual funds that do socially responsible investing screening,&quot; said J. Patrick Costello, founder of Green River Financial Services.</p> <p>Socially responsible funds apply similar strategies to those of mainstream funds, with the same goal of maximizing returns. The only difference is that the SRI funds are picking their winners out of a pre-screened pool of companies they consider to be more responsible than the rest.</p> <p>&quot;Sustainable investing does not attempt to select just a few obscure companies that get a perfect record. We just try to narrow the group of companies, exclude the companies with the worst behaviors, and emphasize the companies with the better behaviors, within realistic bounds,&quot; Costello said.</p> <p>In fact, there is evidence that some socially responsible moves, such as including more women in the corporate ranks, make for better returns, Costello said.</p> <h2>You Probably Don't Need to Change Investment Providers to Try It</h2> <p>If your retirement fund is with Vanguard, TIAA-CREF, or another large investment firm, they probably have one or more socially responsible funds to choose from.</p> <h2>It May Not Be for You</h2> <p>Despite the win-win appeal of doing good without giving up financial returns, not every investor buys into the promise of socially responsible investing. One problem with such funds is that the definition of socially responsible can vary, and any fund available may well include some companies that you personally find objectionable. For example, some funds <a href="http://time.com/money/3951822/socially-responsible-investing-mutual-funds-problem/">include McDonald's</a>, a company whose labor practices and history of pushing high-calorie, low-nutrient foods on children turn many socially conscious folks off.</p> <p>If you choose to pursue socially responsible investing, you still have to do the standard due diligence that you would do before investing in any fund. Ultimately, the decision of how and where to invest remains yours alone.</p> <p><em>Are you a socially responsible investor? How do you choose your investments?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/carrie-kirby">Carrie Kirby</a> of <a href="http://www.wisebread.com/a-simple-guide-to-socially-responsible-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/socially-responsible-investing-goes-green">Socially Responsible Investing Goes Green</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/15-investing-tips-from-a-1-wall-street-stock-picker">15 Investing Tips From A #1 Wall Street Stock Picker</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/investing-with-your-values">Investing With Your Values</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-8-rules-of-investing-you-need-to-know">The Only 8 Rules of Investing You Need to 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/9-investing-questions-youre-too-embarrassed-to-ask">9 Investing Questions You&#039;re Too Embarrassed to Ask</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Investment climate change environmental impact personal values social impact socially responsible investing SRI Wed, 25 May 2016 09:30:26 +0000 Carrie Kirby 1717159 at http://www.wisebread.com The Only 8 Rules of Investing You Need to Know http://www.wisebread.com/the-only-8-rules-of-investing-you-need-to-know <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/the-only-8-rules-of-investing-you-need-to-know" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/money_tree_change_000067145743.jpg" alt="Learning the only rules of investing you need to know" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Investing may seem complicated. But it really isn't once you realize that most of what you need to know can fit on a fairly small list.</p> <p>No matter what your investing goal, you can make money just by following some simple rules. Here are eight rules that will get you on the path to investing success.</p> <h2>1. Invest as Much as You Can</h2> <p>It's very simple. The more you invest, the more you end up with over time. The stock market's S&amp;P 500, which tracks the performance of the largest American companies, <a href="http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/histretSP.html">averaged a 7.25% annual return</a> between 2006 and 2015, according to figures tracked by New York University's Stern School of Business. And it's averaged more than 9% annually since 1928. You won't get better returns on your money <em>anywhere </em>else. Even small increases in your investment contributions can make a big difference. A $5,000 annual investment would turn into $74,000 in 10 years, based on a 7% return. A $6,000 annual investment would be worth $88,000. A $7,000 investment would become $103,000.</p> <h2>2. Start Early</h2> <p>One of the most important things to know about investing is that the earlier you start, the more you'll end up with in the long run. There are many people who don't start investing for retirement until very late in life, and they end up with a far smaller nest egg than they first imagined. That's because they were unable to take advantage of the phenomenon of compounded returns. Let's say that you begin saving for retirement at age 40, putting aside $1,500 monthly. Assuming a 7% annual return, by age 60, you'll have about $789,000. But if you started at age 30, you'd end up with $1.8 million after the same period. Start at age 20, and it's a very comfortable $3.84 million.</p> <h2>3. Look Long Term</h2> <p>The stock market is volatile by nature, but as we indicated above, it generally trends upward over time. If you invest with a short time horizon of less than three years, you may not make any money at all. In fact, you might lose quite a bit. But if you extend your horizon to 10, 20, or 40 years into the future, you'll enjoy solid gains on an average annual basis <em>and</em> see the volatility smooth out.</p> <h2>4. Invest in Similar Amounts Frequently Rather Than in a Lump Sum</h2> <p>You may think you have a good sense of precisely when the markets will go up and when they'll go down. But chances are, you're guessing just like everyone else. &quot;Timing the market&quot; is not something the average investor can successfully do on a regular basis. It makes much more sense to invest a set dollar amount during regular periods, usually monthly or quarterly. This is called &quot;dollar cost averaging,&quot; and it works for investors because you end up buying more shares when prices are low and fewer shares when prices are high.</p> <h2>5. Use Tax-Advantaged Accounts, and Max Them Out</h2> <p>If you're focused on retirement &mdash; and you should be &mdash; there are great advantages to opening 401K and individual retirement accounts, due to tax laws that encourage people to save and invest. With 401K plans offered by your employer, any contributions you make are deducted from your taxable income. With a Roth IRA, your investments grow and you pay no capital gains tax when you withdraw your money when you retire.</p> <p>A 401K lets you deposit up to $17,500 annually. A Roth IRA allows up to $5,500 in annual contributions. If you can max these out, you'll be in great shape.</p> <p>There are other tax-advantaged vehicles, including 529 college savings plans and Coverdell accounts, which allow you to invest money without giving as much to the Internal Revenue Service. In some cases, money can grow tax free and you get a tax credit on top of that. Use these accounts, and your overall investment returns will be higher.</p> <h2>6. Be Aggressive When You're Young, More Conservative When Older</h2> <p>There's no exact consensus on the ideal investment mix, but most financial advisors suggest investing in nearly all stocks and index funds when you're young, because you're a long way from retirement and can make up and money you lose during down years. As you get closer to retirement, gradually shift your portfolio to include less volatile investments like cash and bonds.</p> <h2>7. Focus on Index Funds, Not Individual Stocks</h2> <p>It's fun to own shares of individual companies, and buying a few shares of a company you like is a good way to get started in investing. But trying to <a href="http://www.wisebread.com/stabilize-your-portfolio-with-these-11-dividend-stocks" target="_blank">build a balanced portfolio</a> of companies is very hard, and there's very little evidence that human beings are capable of &quot;beating the market&quot; on a regular basis. That's why for most investors, it's sensible to invest in mutual funds or exchange traded funds that mirror the performance of the overall stock market. This is called &quot;indexing,&quot; and it's a surefire way to make money over time without the volatility of owning individual company shares.</p> <h2>8. Pay Attention to Fees and Commissions</h2> <p>When investing in mutual funds or exchange traded funds, take a hard look a something called an &quot;expense ratio.&quot; That's the amount of money that the mutual fund company takes before you even see a dime in returns. These expenses range from well above 1% to a minuscule .05% by some brokerage houses. One percent may not seem like much, but it can definitely cut into your returns and cost you thousands of dollars over time. Mutual funds that are actively managed, rather than those that simply track an index, generally have higher expense ratios.</p> <p>Keep in mind also that there may be fees every time you buy and sell. Discount brokerage companies will charge between $6&ndash;$10 for every transaction. That can add up if you do a lot of trading.</p> <p><em>Any rules we've overlooked? Share with us in comments!</em></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/the-only-8-rules-of-investing-you-need-to-know">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/7-investment-accounts-all-30-somethings-should-have">7 Investment Accounts All 30-Somethings Should Have</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/is-this-hidden-cost-sapping-your-retirement-savings">Is This Hidden Cost Sapping Your Retirement Savings?</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/9-financial-moves-you-will-always-regret">9 Financial Moves You Will Always Regret</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/11-investing-tips-you-wish-you-could-tell-your-younger-self">11 Investing Tips You Wish You Could Tell Your Younger Self</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/9-best-free-financial-learning-tools">9 Best Free Financial Learning Tools</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Investment investing mutual funds retirement rules stocks Mon, 23 May 2016 10:30:12 +0000 Tim Lemke 1713144 at http://www.wisebread.com 7 Cool Things Bonds Tell You About the Economy http://www.wisebread.com/7-cool-things-bonds-tell-you-about-the-economy <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/7-cool-things-bonds-tell-you-about-the-economy" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/kid_investing_happy_000065886749.jpg" alt="Learning cool things bonds teach us about the economy" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Bonds are often cast as the boring stepchild of investments, but they can actually offer some great insights into the machinations of our economy. Their yields and interest rates that are affected by overall economic conditions, so you can learn a lot by owning them. And they may even predict how certain aspects of the economy will evolve. (See also:&nbsp;<a href="http://www.wisebread.com/5-crucial-things-you-should-know-about-bonds?ref=seealso" target="_blank">5 Crucial Things You Should Know About Bonds</a>)</p> <p>Here are seven things that bonds can tell us.</p> <h2>1. They Can Tell You If the Economy Is Healthy (or Not)</h2> <p>Some bonds perform well when the overall economy is in good shape. Others perform better when times are tough. High-yield bonds, emerging market bonds, and corporate bonds with low ratings tend to perform best when the economy is strong. But U.S. Treasuries &mdash; which are seen as less risky &mdash; don't perform as well when the economy is doing well.</p> <p>So, if you want to get a general sense of how the national or world economy is doing, pay attention to the types of bonds people are investing in. Generally speaking, a rush to riskier bonds means things are going well. But when times are tough, Treasuries are often the place investors flock to. Here's a <a href="http://bonds.about.com/od/bonds101/a/The-Economy-And-Bonds.htm">helpful chart</a> that shows how different bonds perform in various economic conditions.</p> <h2>2. They Can Predict a Recession</h2> <p>In the 1980s, economists began to realize that they could predict economic activity by looking at something called the bond &quot;yield curve.&quot; In simple terms, this is the difference in the interest rates between three-month and 10-year Treasury notes. If the interest rates on 10-year notes are higher than the shorter-term rates, then the <a href="https://www.clevelandfed.org/our-research/indicators-and-data/yield-curve-and-gdp-growth.aspx">chances of a recession</a> in the next 18 months are not very high, according to information published by the Federal Reserve. When the yield curve is inverted &mdash; meaning long-term interest rates are lower &mdash; then look out. This was the case in 2006, and America was in a recession within two years.</p> <h2>3. They Can Predict If You'll Pay More for Stuff</h2> <p>One of the downsides to investing in Treasury bonds is that they can lose value due to inflation. That's why the government introduced something called Treasury Inflation Protected Securities (TIPS). These are like bonds, in that they have a fixed-rate yield and regular interest payments, but the principal is adjusted according to the Consumer Price Index.</p> <p>Generally speaking, you can determine the possible rate of future inflation by examining the spread between the yield in a bond and a TIPS with a similar maturity date. So for instance, if a three-year Treasury note has a yield of 4% and a three-year TIPS note has a yield of 2%, then the expected rate of inflation over the next two years is 2%. This is not an exact science, however, as there are a multitude of factors that can drive inflation.</p> <h2>4. They Can Tell You If Stock Investors Are Skittish</h2> <p>When investors flock to bonds, it's often because they are feeling less confident about riskier investments, such as stocks. Bonds are popular investments among those close to retirement, but when all investors are drawn to bonds, it could be a sign that the stock market has taken a dive or is underperforming. Conversely, less interest in bonds could be a sign that the stock market is doing well.</p> <h2>5. They Can Tell You If Companies Are Investing in Themselves</h2> <p>Corporate bonds can give you a glimpse of what companies are doing with their money, especially whether they are looking to expand. Even large companies with a lot of cash will issue bonds in order to make big capital improvements, fund an acquisition, or invest in research and development. (Even Apple, which reported $55 billion in cash in the last quarter, also reported $10 billion in bond debt.)</p> <p>Be careful, however, as many companies go into debt simply to stay afloat. Pay attention to the ratings on corporate bonds to get a better understanding of how companies may be using debt. A company with a strong credit rating is more likely to be raising funds for investment or expansion rather than to simply fund operations.</p> <h2>6. They Can Impact What You Might Pay for Your House</h2> <p>The government does not set mortgage rates. Banks do that. But banks will often keep mortgage rates in line with those of long-term Treasury notes. That's because Treasuries and mortgages are offered for similar terms, usually in the 10- to 30-year time frame. So when Treasury notes rise, mortgage rates usually rise, as well.</p> <h2>7. They Can Let You Know if Your City Is in Trouble</h2> <p>Municipal bonds can offer insight into the economies of cities and states. Municipalities will sell bonds in order to raise money for capital projects. The size and quality of these bonds are clues into whether a city is investing properly or has too much debt. Bonds with high interest rates may come from cities with less-than-stellar credit &mdash; a sign of a city that has been struggling. (For an example, take a look at Atlantic City, which is struggling to make debt payments after years of declining tax revenue.) Moreover, bonds will tell you whether a municipality is selling bonds just to fund normal operations, or for investments in things like infrastructure that will benefit the city's financial health over the long term.</p> <p><em>Still bored by bonds?</em></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/7-cool-things-bonds-tell-you-about-the-economy">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/10-stocks-and-bonds-that-will-profit-from-the-fed-rate-hike">10 Stocks and Bonds That Will Profit From the Fed Rate Hike</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-ways-bonds-can-hurt-your-portfolio">10 Ways Bonds Can Hurt Your Portfolio</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-latin-american-markets-to-watch">5 Latin American Markets to Watch</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/a-simple-guide-to-series-i-savings-bonds-i-bonds">A Simple Guide to Series I Savings Bonds (I-Bonds)</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Investment bonds Economy inflation interest rates predictions recessions Thu, 12 May 2016 09:00:05 +0000 Tim Lemke 1705414 at http://www.wisebread.com You're Wasting Up to $42,532 by Not Investing Your Gasoline Savings http://www.wisebread.com/youre-wasting-up-to-42532-by-not-investing-your-gasoline-savings <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/youre-wasting-up-to-42532-by-not-investing-your-gasoline-savings" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock_000074872237_Large.jpg" alt="she can invest the money she saves at the pump" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Gas prices are as low as they have been in a long time. In April 2016, the U.S. Energy Information Administration (EIA) forecasted that the average full price of regular grade gasoline will be lower in July 2016 (<a href="http://www.eia.gov/forecasts/steo/">$2.07 per gallon</a>) than at the same time last year ($2.79 per gallon).</p> <p>That means the average American will <a href="http://money.cnn.com/2016/02/10/news/economy/gas-savings/">save about $1,000</a> on gas this year. But unless you're banking those gas savings, you're wasting an opportunity to improve your financial situation. That's because money saved and invested compounds over time, and a mere $1000 could turn into tens of thousands, instead.</p> <p>Here is why you're wasting up to $42,532 by not making smart use of your gas savings.</p> <h2>Make an Investment</h2> <p>Among the best pieces of <a href="http://www.wisebread.com/the-5-best-pieces-of-financial-wisdom-from-warren-buffett">financial wisdom from Warren Buffett</a> is, &quot;someone's sitting in the shade today because someone planted a tree a long time ago.&quot; Whether it's by dining out more often or buying more clothes, spending that extra $1,000 per year instead of saving or investing it is a decision that your future self will regret dearly.</p> <p>Today is the best day to start an investment, even if it's with a small amount. If you were to invest $83.33 every month (about $1,000 a year) for 20 years in an online high-yield savings account with a 1% annual interest rate, you would have a total of $22,137.21 at the end of the 20-year period.</p> <p>With such a long-term investing period, you would do even better with alternate forms of investment. For example, if you were to make the same string of deposits in an investment account paying a 4% annual rate of return, your investment would be worth $30,418.19 at the end of the 20-year period.</p> <p>Of course, you would do best by putting that series of monthly $83.33 deposits in an exchange-traded fund (ETF), which is a marketable security tracking a market index, such as the S&amp;P 500 or Russell 2000 indexes. The <a href="http://www.investopedia.com/ask/answers/042415/what-average-annual-return-sp-500.asp">historical average annual return</a> for the S&amp;P 500, adjusted for inflation is around 7%. So, if you were to put $83.33 every month in an ETF tracking the S&amp;P 500 for 20 years, you would end up with $42,532.14 after 20 years before applicable fees or taxes.</p> <p>Making a consistent monthly deposit over a long period of time allows you to leverage the power of interest compounding, making the most of your gas savings.</p> <h2>Pay Down High-Interest Debt</h2> <p>Of course, you may want more immediate gratification with your gas savings. By using your gas savings to pay more than your minimum monthly payment on high interest credit cards, you can potentially save up to a few thousands of dollars every year.</p> <p>Let's assume that you have a total balance of $4,534 on a credit card with a 25.24% annual percentage rate (APR) and that your monthly minimum payment is $140.56. By making only the minimum payment, you wouldn't pay off the total card balance for 18 years, and would end up paying an estimated total of $12,592!</p> <p>By just increasing your monthly payment an extra $40.44 (about half of the estimated gas savings), you would pay off the credit card in only three years and save an estimated $6,081.</p> <p>Another reason to pay down those high-interest credit cards is that those interest payments aren't tax deductible. Unlike your interest payments on mortgages, home equity loans, and student loans, your interest payments on credit cards or auto loans offer no tax advantage.</p> <p>See also: <a href="http://www.wisebread.com/when-to-do-a-balance-transfer-to-pay-off-credit-card-debt?ref=seealso">How to Use a Balance Transfer to Save on Credit Card Interest</a></p> <h2>The Bottom Line</h2> <p>Gas prices will eventually go back up. For now, the EIA predicts that the average retail price for U.S. regular grade gas will be around the $2 mark until December 2017. Make the most out of your gas savings for the next year by investing the extra cash or paying down your high-interest debt.</p> <p><em>What are other ways to make the most of your gasoline savings?</em></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/youre-wasting-up-to-42532-by-not-investing-your-gasoline-savings">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-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-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/a-beginner-s-guide-to-investing-in-frontier-markets">A Beginner’s Guide to Investing in Frontier 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/2010-predictions-from-wall-street-and-main-street-whos-smarter">2010 Predictions from Wall Street and Main Street: Who&#039;s Smarter?</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/are-you-wasting-68000-on-gas">Are You Wasting $68,000 on Gas?</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/etfs-offer-incredible-benefitswith-a-dark-side">ETFs Offer Incredible Benefits...with a Dark Side</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Investment compound interest debt ETFs gas prices price per gallon savings stock market Mon, 02 May 2016 09:30:25 +0000 Damian Davila 1700679 at http://www.wisebread.com 11 Food and Beverage Stocks That Are Having a Good Year http://www.wisebread.com/11-food-and-beverage-stocks-that-are-having-a-good-year <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/11-food-and-beverage-stocks-that-are-having-a-good-year" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/coca_cola_soda_000020559356.jpg" alt="Finding food and beverage stocks that are having a good year" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Food and drink. They are necessities, and if we invest in companies that produce them, there's a good chance we'll make money.</p> <p>There are a number of companies whose shares have been off to a great start this year. Here's a list of food and beverage firms that have already delivered positive growth for shareholders in 2016.</p> <h2>1. Coca-Cola [<a href="http://finance.yahoo.com/q?s=KO">NYSE: KO</a>]</h2> <p>Coke has historically been a great stock to own, due to its long history of steady growth. But in recent years, it's underperformed the market as consumers have shifted to healthier food and beverage options. That said, its investors have made out well so far in 2016, as the company has started a major restructuring. Shares are up more than 9% this year and hit a 52-week high on April 11.</p> <p>&quot;Even as they brace for another year of shrinking revenue and sluggish earnings from the beverage giant, a growing number are encouraged by an <a href="https://eresearch.fidelity.com/eresearch/evaluate/news/basicNewsStory.jhtml?symbols=KO&amp;storyid=201604160544DOWJONESDJONLINE000306&amp;provider=DOWJONES&amp;product=DJONLINE&amp;sb=1">accelerated restructuring</a> that many saw as overdue,&quot; Dow Jones reported.</p> <h2>2. Campbell's Soup Co. [<a href="http://finance.yahoo.com/q?s=CPB">NYSE: CPB</a>]</h2> <p>Investing in chicken noodle soup and SpaghettiOs can help your portfolio: Campbell's shares are up nearly 20% this year, powered by a 26% rise in earnings during the last quarter. The company has enjoyed strong results from an aggressive cost-cutting initiative, and investors are expecting to see positive impact from last year's acquisition of Garden Fresh Gourmet. Campbell's also got some good press when it announced all of its cans would be free of BPA by 2017.</p> <h2>3. McDonald's [<a href="http://finance.yahoo.com/q?s=MCD">NYSE: MCD</a>]</h2> <p>It's been tough going for McDonald's in the last couple years, but patient investors are finally being rewarded. Shares are up more than 9.5% this year, as both investors and analysts seem to agree that the company has its operating fundamentals in good order. The stock also responded positively to the news of plans for 1,300 new stores in China.</p> <h2>4. General Mills [<a href="http://finance.yahoo.com/q?s=GIS">NYSE: GIS</a>]</h2> <p>This massive food conglomerate has a market cap of more than $37 billion, making General Mills a veritable blue chip of the food industry. But investors should be especially happy with General Mills' recent performance, which has seen shares rise nearly 9% this year alone. In its last quarterly earnings report, the company announced progress on cost-cutting plans, and a 5% increase in profits.</p> <h2>5. Tyson Foods [<a href="http://finance.yahoo.com/q?s=TSN">NYSE: TSN</a>]</h2> <p>Shares of this massive food processor and marketer are up 22% this year, which is a big jump for a company worth nearly $24 billion. The company's first quarter earnings rose 49%, making analysts bullish on the stock.</p> <p>&quot;Fiscal 2016 is off to a very strong start in what we expect to be another record year,&quot; said Donnie Smith, Tyson's president and chief executive officer in February.</p> <h2>6. Marine Harvest [<a href="http://www.nasdaq.com/symbol/mhg">NASDAQ: MHG</a>]</h2> <p>We know that salmon fight to swim upstream, but there's been no struggle for this Norwegian company, which sells farmed salmon products all over the world. Shares are up 24% in 2016, and the company announced in early April that its first quarter salmon harvest of 97,000 tons exceeded expectations.</p> <h2>7. Molson Coors Brewing [<a href="http://finance.yahoo.com/q?s=TAP">NYSE: TAP</a>]</h2> <p>Shares of the Denver-based brewer began rising in the second half of last year and the momentum has continued, with a 52-week high in early April. The good stock movement is largely the result of last year's announcement that the company would seek to buy the other half of the MillerCoors Joint Venture and the entire Miller brand portfolio for $12 billion. That's a lot of beer brands under one corporate umbrella, and a lot of revenue for investors to salivate over.</p> <h2>8. MGP Ingredients [<a href="http://finance.yahoo.com/q?s=MGPI">NASDAQ: MGPI</a>]</h2> <p>It's been a hot couple of months for this producer and supplier of distilled spirits. Recently, the company reported a 7% increase in revenue year over year, and the stock price quickly responded, rising 20% within a month. MGP also got some good press when company officials rang the closing bell of the NASDAQ to celebrate the company's 75th Anniversary in March.</p> <h2>9. National Beverage Corp. [<a href="http://www.google.com/finance?cid=656083">NYSE: FIZZ</a>]</h2> <p>Coke isn't the only soda stock that's hot. National Beverage Corp., the maker of Faygo, Shasta, and other soda brands is also having a great run that began last summer and has continued through 2016. The Florida-based company reported in March that sales from the previous three months rose from $143 million to $162 million. Shares are up nearly 7% in 2016 and more than 80% in the last year.</p> <p>CNBC's <em>Mad Money</em> host Jim Cramer took note of National Beverage's performance.</p> <p>&quot;That is an <a href="http://www.cnbc.com/2016/04/18/cramer-remix-what-to-expect-from-netflix-now.html">astonishing move</a> for a little-known soft drink maker, and it is really just the tip of the iceberg,&quot; Cramer said.</p> <h2>10. Constellation Brands [<a href="http://finance.yahoo.com/q?s=STZ">NYSE: STZ</a>]</h2> <p>This producer and distributor of some of the most popular wine brands has been on a tear in 2016. Shares hit a 52-week high above $160 in early April, and are up more than 12% this year alone. Constellation reported revenues of more than $6.5 billion in the last quarter, beating analysts' estimates, with a 26% increase in net income. Investors are bullish on 2017, as Constellation is expected to make some forays into the profitable craft beer market.</p> <h2>11. Primo Water [<a href="http://finance.yahoo.com/q?s=PRMW">NASDAQ: PRMW</a>]</h2> <p>This smallcap stock has had a nice year, with shares up more than 30%. Revenues in the most recent quarter beat analysts' estimates and rose from $29.6 million to $31.5 million. Primo Water is expected to have double-digit earnings growth this year, and that should bode well for the stock.</p> <p><em>Do you own any of these food and beverage stocks? Do you have any of their products on your fridge or pantry? </em></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/11-food-and-beverage-stocks-that-are-having-a-good-year">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/10-boring-investments-that-are-surprisingly-profitable">10 Boring Investments That Are Surprisingly Profitable</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/youre-wasting-up-to-42532-by-not-investing-your-gasoline-savings">You&#039;re Wasting Up to $42,532 by Not Investing Your Gasoline Savings</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/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-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-6-best-financial-news-sites-for-investors-in-a-hurry">The 6 Best Financial News Sites for Investors in a Hurry</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/stabilize-your-portfolio-with-these-11-dividend-stocks">Stabilize Your Portfolio With These 11 Dividend Stocks</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Investment food and beverages good year shares stock market Fri, 29 Apr 2016 09:00:08 +0000 Tim Lemke 1699423 at http://www.wisebread.com 9 Investing Questions You're Too Embarrassed to Ask http://www.wisebread.com/9-investing-questions-youre-too-embarrassed-to-ask <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/9-investing-questions-youre-too-embarrassed-to-ask" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/man_confused_work_000036148092.jpg" alt="Man with investment questions he&#039;s too embarrassed to ask" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>You can't build wealth through investing if you never get started. And sometimes, getting started is just a matter of overcoming your fear of asking a stupid question.</p> <p>When it comes to understanding how to buy and sell stocks, invest in a mutual fund, or open a retirement account, it may seem like people are talking a different language. It sometimes feels embarrassing to ask basic questions about investing, but you're not alone in wanting to know how to get started.</p> <p>&quot;I get questions that are very simple,&quot; said Craig Ferrantino of Craig James Financial Services in New York.</p> <p>Ferrantino and other financial advisers say there are no bad questions when it comes to investing, and that your fear of embarrassment should be more than offset by your fear of making money and achieving financial freedom.</p> <p>Here are some common investment questions that you might be too embarrassed to ask (but shouldn't be).</p> <h2>1. I Have Some Money &mdash; What Do I Do With It?</h2> <p>Sometimes, you don't even know where to begin.</p> <p>Chris McMahon, a financial adviser in Pittsburgh, said he advised a man who got a sizable royalty check from a new natural gas operation in Western Pennsylvania. McMahon said the man began with one simple question: &quot;What do I do with the check?&quot;</p> <p>If you're fortunate to have some money that you'd like to invest, simply asking &quot;What now?&quot; is not a dumb question. It's certainly better than doing nothing. If you're in this situation, most financial advisers suggest first assessing whether you have paid off any high-interest debt and have a sizable emergency fund. After that, it makes sense to open an individual retirement account (IRA) and begin making regular deposits, investing primarily in index funds that mirror the performance of the broader stock market. Do this, and you're off to a great start.</p> <h2>2. Okay, But How Do I Open an Account?</h2> <p>A lot of people never get started in investing because they are unfamiliar with the actual mechanics of investing. So understanding how to open a brokerage account and how to buy and sell stocks or mutual funds is crucial.</p> <p>The good news is that it's easier than ever to get started. Anyone can open a brokerage account online at places like Fidelity, E-Trade, or TD Ameritrade. There's plenty of step-by-step advice you can find on these sites, and if you're ever confused, there is usually someone to call.</p> <p>&quot;There are friendly people who are employed to help you with this,&quot; McMahon said.</p> <h2>3. What Is a Stock?</h2> <p>When we first start learning about investing, the lingo and terminology can be confusing. But we're too embarrassed to stop someone mid-conversation and ask them some basic questions. There's no shame in asking people to back up and explain themselves. After all, this is all about you and your financial future.</p> <p>One of the basic concepts in investing is owning shares of stock. In this situation, you literally have an actual share of ownership of a company. So the value of your shares can go up and down just as the value of the company does. This knowledge can serve as the basis for understanding mutual funds and exchange-traded funds, in which money from investors is pooled and then invested a variety of securities.</p> <h2>4. What Is a Bond?</h2> <p>Bonds, like stocks, make up a key component of most investment portfolios. And they are also a big driver of the economy, as companies and governments use them to finance big projects.</p> <p>With bonds, an investor is essentially loaning money to a company or a government. An investor makes money by receiving interest payments from the borrower.</p> <p>So for example, let's say the city of Duluth wants to build a new bridge. The government will issue bonds, which investors can then buy, thus financing the bridge construction. Investors make money on interest from the bonds. Interest rates depend on how likely the company or government is to repay the bonds.</p> <p>Bonds don't increase or decrease in value like stocks, so they are commonly used by older investors who still want some income but have less tolerance for risk.</p> <h2>5. Can I Buy Just a Few Shares?</h2> <p>One of the biggest misconceptions about investing is that you need a lot of money to get started. Thus, people wait too long to get started.</p> <p>Believe it or not, most discount brokerage firms will let you buy just a single share of stock. Don't be embarrassed! A single share of McDonald's stock is going to be worth more in the long run than that quarter pounder you just bought. And while some brokerages do require sizable minimum balances in your account, there are many that don't.</p> <p>There is one important caveat to this, which is that you usually have to pay some fee each time you make a transaction. At discount brokerage firms, this is about $7&ndash;$10. So it does make sense to save up and buy larger quantities of stock if you can, otherwise transaction fees can cut into your returns. To avoid this, explore whether your broker offers some investments without transaction fees. Fidelity, for example, allows customers to trade most iShares ETFs for free.</p> <h2>6. What's the Difference Between a Roth and a Traditional IRA?</h2> <p>We hear these terms thrown around so much that you may feel little dumb for not knowing the answer. But don't. Ferrantino said he gets this question most of all, and he's glad that people ask it.</p> <p>Individual retirement accounts allow people to invest in stocks, bonds, and other securities and see the money grow, without paying a lot of taxes along the way. Individuals can contribute up to $5,500 per year (or more if you're closer to retirement age). With a traditional IRA, the money you deposit is subtracted from your taxable income. (Savings up front!) With a Roth IRA, you pay tax up front but will not have to pay tax on any gains when you withdraw money when you retire. (Savings later!)</p> <p>A financial adviser can help you decide which account is right for you, and may even advise you to have one one of each. Ferrantino said that one you understand the basics of IRAs, you can start to grasp more complex maneuvers, like converting a traditional account into a Roth. So it never hurts to ask.</p> <h2>7. My Company Offers a 401K. What Is It? How Do I Sign Up?</h2> <p>There are many workers who have a vague awareness that their company offers a retirement plan. But they often don't understand how plans work, and are too embarrassed to ask.</p> <p>&quot;The foreign language is scary,&quot; McMahon said.</p> <p>McMahon said the good news is that most companies offer enrollment periods for their retirement plans, where employees can meet with plan representatives and ask any questions.</p> <p>In simple terms, a 401K is a retirement plan that allows workers to set aside a portion of their salary and invest it in a variety of stocks, bonds, and mutual funds. The deposits are subtracted from taxable income, and most companies will match contributions up to a certain level. In other words, your company is <em>giving </em>you free money for signing up. So don't be embarrassed to get the ball rolling!</p> <h2>8. What Is an Asset?</h2> <p>Financial advisers say this question comes up a lot when people are applying for loans. Lenders will often want information on a borrower's &quot;asset-to-debt&quot; ratio. Meaning, how much you own versus how much you owe.</p> <p>Young people, especially, are often baffled by the asset question because they are much more focused on reducing debt. In short, an asset is something that a person or company can own that counts towards their net worth. The equity in your home is an asset. Cash in the bank is an asset. Stocks and bonds are assets. Once you understand the definition of an asset, you can learn about the role they play in building wealth and helping you achieve financial freedom.</p> <h2>9. Do I Need a Financial Adviser?</h2> <p>At what point do you need outside help with your money? Well, that depends on your goals and the complexity of your investment portfolio. But by asking yourself this question, you can at least examine whether your situation would benefit from professional advice.</p> <p>&quot;If you're at a point where you think you need a plan, you probably need somebody,&quot; McMahon said.</p> <p>Of course, financial advisers are biased here. But professionals like McMahon also said that it's easier than ever now for individuals to invest on their own using discount brokerage firms, and get great advice along the way. Sites like Fidelity, Charles Schwab, and E-Trade have a wealth of online tools and people to call if you you have questions.</p> <p>&quot;There are so many resources now, you almost can't screw it up,&quot; McMahon said.</p> <p><em>Got any embarrassing questions? Go ahead and ask!</em></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/9-investing-questions-youre-too-embarrassed-to-ask">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/should-you-trust-your-money-with-these-4-popular-financial-robo-advisers">Should You Trust Your Money With These 4 Popular Financial Robo-Advisers?</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/5-reasons-to-fire-your-financial-adviser-soon">5 Reasons to Fire Your Financial Adviser Soon</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/the-only-8-rules-of-investing-you-need-to-know">The Only 8 Rules of Investing You Need to Know</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-everyday-things-that-are-surprisingly-awesome-investments">7 Everyday Things That Are Surprisingly Awesome Investments</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-boring-investments-that-are-surprisingly-profitable">10 Boring Investments That Are Surprisingly Profitable</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Investment basics embarrassed financial adviser stupid questions Tue, 26 Apr 2016 10:30:05 +0000 Tim Lemke 1695513 at http://www.wisebread.com Should You Invest in Start-Ups? http://www.wisebread.com/should-you-invest-in-start-ups <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/should-you-invest-in-start-ups" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/people_working_together_000061670306.jpg" alt="Learning the risks and rewards of investing in startups" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Can regular people even invest in those high-flying startups? Should they?</p> <p>Some of the biggest and most valuable companies today were startup businesses in someone&rsquo;s garage or dorm room not that long ago. Apple, Google, Facebook, and eBay are spectacular startup success stories that come to mind. A small investment in a startup in its early stages can quickly grow to be worth millions of dollars. How can a regular person invest in a startup? And is it worth the risk? (See also:&nbsp;<a href="http://www.wisebread.com/starting-your-dream-business-is-easier-than-you-think-heres-how?ref=seealso" target="_blank">Starting Your Dream Business Is Easier Than You Think &mdash; Here's How</a>)</p> <h2>How Startups Grow &mdash; And When to Invest</h2> <p>Initial funding for most startups comes from the founders of the business themselves. A brand new startup has no product, no customers, and usually lacks a detailed business plan. You can see why it is hard to find anyone besides the founders who are interested in investing in a brand new business.</p> <p>As the startup gets rolling, additional investments to get the company growing may come from friends and family. By this time, the founders have clarified their business plan at least enough to be able to explain their business concept to others and are making progress toward launching a profitable product or business. This stage of startup financing is often the best opportunity for a small investor to get involved, since the startup is often strapped for cash. A little bit of investment can buy a lot of equity in a startup at this point.</p> <p>The next funding stage for startups is typically &ldquo;angel&rdquo; investors. Angel investors are successful local business people familiar with the business area of the startup. They have significant assets, are willing to take a risk with some of their money in exchange for a big potential payoff. Investing in a startup as an angel investor is another opportunity for a regular person to invest in a startup, although the level of investment required at this stage of development is significantly higher than in the earlier days of the startup.</p> <p>As the startup grows, the next step up for financing is venture capital. The venture capital stage of funding often involves millions of dollars of investment in exchange for a substantial amount of equity in the startup. Venture capitalists require extensive documentation of financial records and intellectual property ownership in addition to a rock solid business plan and time commitments from key personnel.</p> <p>After one or more rounds of venture capital investment, the startup may sell stock through an initial public offering (IPO), raising more capital to support growth and business development. At this point, the business is no longer a startup, but is an established corporation. If you invested in a startup that reaches IPO, you are going to be rich!</p> <h2>How Risky Is Investing in a Startup?</h2> <p>An unfortunate fact is that most startups fail within a few years, for a number of reasons. Sometimes startups simply run out of cash and have to close shop because they can&rsquo;t pay their bills. A key contributor may decide to pursue another opportunity and effectively pull the plug on any chance for the startup to survive. The anticipated market can fail to materialize. Technical issues can derail a key product launch and doom a startup to failure.</p> <p>Many personal finance advisors do not recommend holding individual company stock and instead recommend to diversify by holding funds consisting of many stocks. This strategy reduces the risk that your investment in an individual stock will be ruined by an Enron-style meltdown. Investing in a startup is much more risky than holding individual company stock in an established company.</p> <p>If you invest in a startup, there is a good chance will lose your money. The startup may fail before you have a chance to sell your equity and make a return on your investment, or even get your principal back. However, there is a small chance you could make a lot of money if the startup you invest in is successful. If you are interested in a high risk, high reward investment opportunity, then investing in a startup may be right for you.</p> <h2>How to Find a Startup for Investment</h2> <p>Investing in a startup takes a lot of work to find the right business opportunity. You need to find a startup that has a good chance to succeed based on the people involved and the business opportunity.</p> <p>Some people who invest in startups have a motto: &ldquo;Bet on the jockey, not the horse.&rdquo; This means to look for company founders who have experience working in the type of business they are trying to start and have a track record of success rather than focusing on the details of the business plan of a startup. The business plan will likely change a lot in the early days as obstacles pop up, and talented people will have a better chance to find a way to succeed anyway.</p> <p>Look for connections with startups at business development centers or business incubators in your community or at nearby universities. Another place to learn about local startups is to watch for stories about inventors developing a new product or startup businesses in your local newspapers or on TV news reports. Once you start meeting entrepreneurs, they can often introduce you to others who may be a good match for the startup investment opportunity for you are seeking.</p> <h2>How to Invest in a Startup Without Risking Your Money</h2> <p>If you are interested in getting the upside potential of a startup investment but the high risk makes you uncomfortable, consider contributing sweat equity to the startup instead of money. You may be able to convert your time and skills into equity in a startup, keeping your cash safe.</p> <p>Most startups have tons of work to do as they launch initial products and seek sales, but not enough cash to hire many workers. A cash-strapped startup may be interested in taking your labor in exchange for some equity in the business. You might be able to commit to working a certain number of hours per week for a year in exchange for ownership of a percentage of the startup. If you have relevant experience or connections with potential investors, the founders will be more interested in taking you on as a partner to help the startup grow.</p> <p><em>Would you be willing to invest time or money in a startup for a chance at a big reward?</em></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/should-you-invest-in-start-ups">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/stabilize-your-portfolio-with-these-11-dividend-stocks">Stabilize Your Portfolio With These 11 Dividend Stocks</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/tesla-six-flags-and-9-other-adventure-stocks-worth-investing-in">Tesla, Six Flags and 9 Other Adventure Stocks Worth Investing In</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-stocks-warren-buffett-loves-and-you-should-too">7 Stocks Warren Buffett Loves — And You Should, Too</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-easy-ways-to-start-green-investing">5 Easy Ways to Start Green Investing</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/5-reasons-july-is-a-great-month-for-stocks">5 Reasons July Is a Great Month for Stocks</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Investment entrepreneurs high reward high risk investors new businesses portfolio small businesses startups stocks Mon, 25 Apr 2016 10:30:06 +0000 Dr Penny Pincher 1691585 at http://www.wisebread.com Does Your Kid Need an IRA? http://www.wisebread.com/does-your-kid-need-an-ira <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/does-your-kid-need-an-ira" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/child_piggy_bank_000073782665.jpg" alt="Child needs an IRA and here&#039;s how to set one up" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>It's a big day when you open a savings account for your child, but opening an investment account on their behalf takes the financial conversation to a whole new level &mdash; especially when you <a href="http://www.wisebread.com/4-reasons-why-a-roth-ira-may-be-better-than-your-401k" target="_blank">invest through a Roth IRA</a>. Here are a few reasons why your kid needs one.</p> <h2>1. They'll Learn About Investing &mdash; And More</h2> <p>Investing is arguably the most complicated and intimidating aspect of money management, so the earlier you get your kids acclimated to the process, the better.</p> <p>You could open a plain old investment account for them, but investing through a Roth IRA provides powerful additional benefits by teaching them about (and saving them) taxes.</p> <h2>2. They Start Saving for Big Purchases &mdash; Like College or a House</h2> <p>A Roth IRA is a flexible, tax-efficient way to invest. Contributions can be withdrawn at any time without taxes or penalties. Earnings can be withdrawn on the same basis as well if the account has been open for at least five years and the money is used for qualified college expenses or a first-time home purchase (up to $10,000).</p> <p>Of course, the Roth really shines as a retirement savings vehicle. All of the money &mdash; contributions and earnings &mdash; can be withdrawn tax- and penalty-free after age 59&frac12;, and the benefit of those tax-free earnings really adds up over time. So, if your child has another way to pay for college and a house, all the better to keep adding to the account and let it build for later life. But it's nice to have the flexibility to pull money out earlier if needed for college or a house.</p> <h2>3. They'll Still Be Eligible for Financial Aid</h2> <p>Money held in an IRA, whether owned by a parent or a child, does <em>not</em> impact the financial aid calculation, at least not <em>initially. </em>By contrast, 20% of the money a student holds in a taxable investment account will reduce the financial aid they're eligible for.</p> <p>However, if money is withdrawn from an IRA to pay for college, that money <em>will </em>reduce financial aid. It's treated as income, 50% of which is considered to be available to pay for school. One workaround is to use such money only to pay for the last year of school since no aid will be required the following year.</p> <h2>How to Set Up an IRA for a Minor</h2> <p>Setting up a Roth for a kid is as straightforward as setting one up for yourself, but there are a couple of wrinkles to be aware of.</p> <h3>Qualifying for an Account</h3> <p>A child has to have earned income in order to qualify for an IRA, which can come from a job or their own self-employment efforts, such as babysitting, mowing lawns, shoveling snow, pet walking, and more.</p> <p>As long as the child meets the income qualification, they don't have to contribute their own money; parents or others could make IRA contributions on their behalf. Either way, annual deposits to the account cannot exceed the amount of income earned by the child, and is currently capped at $5,500 per year.</p> <h3>Opening an Account</h3> <p>The account must be set up as a custodial account since you need to be the &quot;age of majority&quot; (18&ndash;21, depending on your state) to have such an account in your own name. Any adult can open a custodial account on behalf of a minor &mdash; a parent, grandparent, other relative, or just a friend of the child. The assets transfer to the young person when he or she reaches the age of majority.</p> <p>Many brokers, including Fidelity, TD Ameritrade, and Schwab, offer custodial IRA accounts with no or very low minimum opening balance requirements.</p> <h3>Funding an Account</h3> <p>As for specific investments to consider after opening an account, mutual funds may not be the best choice since they often require $1,000 or higher minimum investment amounts. You might consider exchange-traded funds (ETFs) instead. They can be purchased one share at a time, offer great diversification, and many brokers, including the ones mentioned above, offer plenty of commission-free ETFs.</p> <p>Opening a Roth IRA for your child is one of the best financial moves you could make. Just be sure to involve them in the process of choosing investments and understanding the tax benefits. That combination of education and hands-on experience will set them on a path toward becoming a knowledgeable, confident, successful investor.</p> <p><em>Have you opened an IRA for a child?</em></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/does-your-kid-need-an-ira">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-5"> <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-unexpected-ways-stay-at-home-parents-save-big">7 Unexpected Ways Stay-at-Home Parents Save Big</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/6-ways-the-sandwich-generation-can-get-ahead">6 Ways the Sandwich Generation Can Get Ahead</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-tax-mistakes-new-parents-make">4 Tax Mistakes New Parents Make</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-set-up-an-ira-to-build-wealth">How to Set Up an IRA to Build Wealth</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-sibling-discounts-that-can-save-you-big">6 Sibling Discounts That Can Save You Big</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Family Investment dependents kids retirement accounts Roth IRA saving money taxes Fri, 22 Apr 2016 10:30:06 +0000 Matt Bell 1693266 at http://www.wisebread.com A Beginner’s Guide to Investing in Frontier Markets http://www.wisebread.com/a-beginner-s-guide-to-investing-in-frontier-markets <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/a-beginner-s-guide-to-investing-in-frontier-markets" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/man_reading_newspaper_000090680889.jpg" alt="Man learning about frontier markets and how to invest" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>For many years, investors were able to capitalize in the accelerated growth of emerging markets, such as Brazil and China. However, the <a href="http://www.wisebread.com/5-ways-greece-and-chinas-economic-problems-might-impact-you">economic problems in Greece and China</a> have demonstrated that some emerging market economies are experiencing a slower rate of growth and, in some cases, facing substantial economic roadblocks.</p> <p>Seeking alternatives for emerging markets, some investors are turning to so-called &quot;frontier markets.&quot; While less developed than emerging nations, frontier market nations are experiencing such accelerated growth that they may provide aggressive returns to investors willing to take on the risk.</p> <h2>What Are Frontier Markets?</h2> <p>While there are many lists detailing what countries are considered frontier markets, the <a href="http://www.msci.com/market-classification">MSCI market classification</a> is the most widely accepted. The MSCI Frontier Markets Index is made of 120 stocks from 23 frontier economies, including Argentina, Lithuania, Nigeria, and Sri Lanka. With 500 stocks from 34 frontier markets, the <a href="http://us.spindices.com/indices/equity/sp-frontier-bmi-us-dollar">S&amp;P Frontier BMI</a> is another index that provides a comprehensive benchmark of the frontier market economy as a whole.</p> <p>Frontier markets are characterized by their high volatility. For example, the MSCI Frontier Markets Index had a 72.74% annual gain in 2005 &mdash; and a 54.10% annual loss in 2008. Investors seeking potentially high returns in frontier markets need to understand that they will be facing higher risks, such as large currency fluctuations, political instability, and unfamiliar &mdash; or relaxed &mdash; regulatory systems.</p> <h2>Why Frontier Markets Matter</h2> <p>Despite the higher risks, many companies are investing in these markets for the long run. One example is the Coca-Cola Company.</p> <p>Coca-Cola has substantial investments in heavy soda-drinking nations in developed markets, such as the United States and Belgium, and emerging ones, such as Mexico and Brazil. However, frontier nations are the ones promising the most growth for the beverage company.</p> <p>In 2014, Argentinians consumed the most soft drinks per capita in the world, a whopping <a href="http://www.npr.org/sections/goatsandsoda/2015/06/19/415223346/guess-which-country-has-the-biggest-increase-in-soda-drinking">154.6 liters</a>. That's one liter per person more and 18 liters per capita more than U.S. drinkers (#2 on the list) and Mexican drinkers (#4 on the list) purchased in the same year. This explains why Coca-Cola's CEO pledged to <a href="http://www.bloomberg.com/news/articles/2016-01-22/argentina-may-lure-20-billion-in-investment-in-2016-macri-says">invest $1 billion in Argentina</a> over a four-year period starting in 2016.</p> <p>Vietnam is another frontier market of interest to Coca-Cola. Over the 2013&ndash;2015 period, the southeast Asian nation was one of the <a href="http://www.coca-colacompany.com/stories/share-a-coke-in-vietnam-continues-the-momentum-with-emoticons/">world's fastest growing markets</a> for the brand. It has been estimated that the consumption of soft drink liters per capita in Vietnam increased by over 105% over the 2009&ndash;2014 period.</p> <p>Just like Coca-Cola, many other domestic and international companies are interested in frontier market nations. Even governments recognize the importance of increasing trade relations with up-and-raising developing nations. For example, the Trans-Pacific Partnership (TPP) trade agreement signed in February 2016 aims to lower trade barriers between 12 nations, including Vietnam.</p> <h2>How to Invest in Frontier Markets</h2> <p>For the average individual investor, buying stocks in individual companies trading in frontier market stock exchanges may prove impractical for several reasons.</p> <ul> <li>Trading volume for frontier market stocks is generally lower than that for U.S. stocks, which produces more volatility and prevents efficient market transactions.<br /> &nbsp;</li> <li>Finding &quot;winners&quot; is very challenging for individual investors without connections in those markets. Many investors can track the price of Bao Viet Holdings, the largest insurance company in Vietnam and the seventh largest listed company by market capitalization in that nation, but very few can name stocks in Estonia or Kenya.<br /> &nbsp;</li> <li>Less-developed nations are still working on implementing international financial accounting standards, putting investors in the dark about the latest developments.</li> </ul> <p>Therefore, the average investor has three main ways to invest in frontier markets.</p> <h3>1. U.S Companies Focusing on Frontier Markets</h3> <p>First, an investor could invest in U.S.-traded companies that have strong interests in frontier markets. Besides Coca-Cola [<a href="http://finance.yahoo.com/q?d=t&amp;s=KO">NYSE:KO</a>], Facebook, Inc. [<a href="http://finance.yahoo.com/q?s=FB">NASDAQ:FB</a>], and Apple, Inc. [<a href="http://finance.yahoo.com/q?d=t&amp;s=AAPL">NASDAQ:AAPL</a>] are other companies eyeing those fast-growing nations.</p> <ul> <li>Facebook is working hard on increasing its presence in frontier nations. Through its <a href="https://code.facebook.com/posts/1556407321275493/building-for-emerging-markets-the-story-behind-2g-tuesdays/">2G Tuesdays initiative</a>, Facebook engineers are learning how to adapt the features of the social network app to work seamlessly even on a 2G Internet network. Also, Facebook is offering <a href="https://info.internet.org/en/story/free-basics-from-internet-org/">free Internet access</a> to cellphone users in Kenya, Bangladesh, and Pakistan and working on reaching similar agreements with cellphone carriers in other frontier markets.<br /> &nbsp;</li> <li>Trying to diversify its Asian portfolio, Apple opened a subsidiary company in Vietnam back in 2015 with an investment of <a href="http://www.reuters.com/article/us-apple-vietnam-idUSKCN0SU1UZ20151105">15 billion Vietnamese dong</a> (over $670,000). In 2014, sales of Apple's products in Vietnam grew five times faster than in India. Beyond Vietnam, Apple is looking to expand in other frontier markets.</li> </ul> <h3>2. Frontier Market Exchange-Traded Funds (ETFs)</h3> <p>Frontier market ETFs allow investors to include frontier stocks in their investment portfolios. For example, the iShares MSCI Frontier 100 [<a href="http://quotes.wsj.com/etf/FM">NYSE Arca:FM</a>] tracks the MSCI Frontier Markets 100 Index and holds over $408.70 million in net assets as of March 2016. By meeting minimum liquidity standards, ETFs allow investors to liquidate their positions with more ease when necessary. (See also: <a href="http://www.wisebread.com/10-questions-to-ask-before-you-sell-a-stock-or-a-fund?ref=seealso">10 Questions to Ask Before You Sell a Stock or a Fund</a>)</p> <h3>3. Mutual Funds Focusing on Frontier Markets</h3> <p>Structured and maintained to meet the demand of investors interested in frontier markets, mutual funds focusing on frontier markets seek to produce capital gains from stocks traded in less developed exchanges. Some examples are the Templeton Frontier Markets [<a href="http://finance.yahoo.com/q?s=TFMAX">MUTF:TFMAX</a>] and the Wasatch Frontier Emerging Small Countries Fund [<a href="http://finance.yahoo.com/q?d=t&amp;s=WAFMX">MUTF:WAFMX</a>].</p> <p>Investors who are particularly bullish in individual nations should consider ETFs and mutual funds focusing on specific frontier nations.</p> <h2>The Bottom Line</h2> <p>To compensate for slower growth in developed and emerging markets, investors can look into frontier markets. By investing in U.S. publicly traded companies, ETFs, and mutual funds focusing on frontier markets, individual investors can access these markets with better liquidity and more diversification. However, an individual investor should assess applicable fees for such investment vehicles, understand the higher risk involved in such investments, and limit the exposure to a number that is consistent with the investor's overall objective.</p> <p><em>How are you investing in frontier markets?</em></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/a-beginner-s-guide-to-investing-in-frontier-markets">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/youre-wasting-up-to-42532-by-not-investing-your-gasoline-savings">You&#039;re Wasting Up to $42,532 by Not Investing Your Gasoline Savings</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/the-10-weirdest-etfs-you-can-buy">The 10 Weirdest ETFs You Can Buy</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/etfs-offer-incredible-benefitswith-a-dark-side">ETFs Offer Incredible Benefits...with a Dark Side</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-boring-investments-that-are-surprisingly-profitable">10 Boring Investments That Are Surprisingly Profitable</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Investment emerging nations ETFs frontier markets global economies high risk stock market Thu, 21 Apr 2016 09:01:08 +0000 Damian Davila 1691584 at http://www.wisebread.com 8 Things Everyone Should Know About the Commodities Markets http://www.wisebread.com/8-things-everyone-should-know-about-the-commodities-markets <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/8-things-everyone-should-know-about-the-commodities-markets" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/cows_000066842465.jpg" alt="Everyone learning things about commodities markets" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>It's common in the investment world to hear a lot about commodities. These are things like oil, soybeans, gold, and even cattle, which can be bought and sold on exchanges, similar to stocks.</p> <p>The price of commodities plays a big role in our economy, from how much it costs to fuel our cars, to the price of a gallon of milk. It's possible to earn money trying to predict how the price of these commodities will move, although it can be risky.</p> <p>Investing in commodities is not for beginners, but it's helpful to know some of the basics of how they work and how they may impact other parts of your portfolio &mdash; and even your day-to-day life.</p> <h2>1. There Are Four (or Three) Basic Groups of Commodities</h2> <p>Commodities can be lumped together in an infinite number of ways, but are generally placed in four groups:</p> <ul> <li>Energy (Things like oil and natural gas)</li> <li>Metals (Gold, silver, platinum, zinc, etc.)</li> <li>Livestock and meat (Cattle, pork bellies, hogs, etc.)</li> <li>Agricultural (Corn, soybeans, coffee, and so forth)</li> </ul> <p>Some people like to group agricultural and livestock together. But no matter how they are categorized, it's possible to invest in certain groups of commodities through funds and ETFs that track specific commodity exchanges.</p> <h2>2. The Chicago Mercantile Exchange Is the Place</h2> <p>We all know the New York Stock Exchange and NASDAQ as the places to buy and sell traditional stocks. But for commodities, the world's largest exchange is the Chicago Merc or CME, located on Wacker Drive. About 80% of the trades on the CME are done electronically, but a portion still come from &quot;open outcry&quot; in which traders stand in a &quot;pit&quot; and call out orders, prices, and quantities.</p> <h2>3. They Are Volatile</h2> <p>If you're looking for slow and steady growth, commodities aren't for you. In fact, volatility is pretty much the norm, and it's gotten worse in recent years. A report from consulting firm Deloitte said that several commodity groups including oil, natural gas, coffee, and copper, have seen price increases of 30% to 60% over a three to six month period. And between 1997 and 2012, there were far more extreme price changes than the previous 15 years.</p> <h2>4. Commodities Are Impacted by the Dollar</h2> <p>Just about every aspect of the world economy is impacted by currency values in some way, but commodity prices are especially sensitive. That's because commodities are often priced in dollars around the world due to faith in the American economy. In the U.S., a strong dollar usually means low prices for commodities. And the inverse is true; it will take more dollars to buy commodities when the value of the dollar goes down, so commodity prices go up as well.</p> <h2>5. Weather and World Events Can Affect Commodity Prices</h2> <p>Commodity investors often find themselves becoming experts in meteorology and world affairs, because of the various things that can impact commodity prices. Maybe it's a drought in the Southeast United States that has taken out soybean crops. Or perhaps the threat of a hurricane that could temporarily shut down oil refineries. Everything from floods to flies to civil war can impact the supply of certain goods, thus impacting prices.</p> <h2>6. It's Okay for Your Portfolio to Have Commodities, But Not Too Many</h2> <p>Many financial advisers suggest holding commodities along with stocks, bonds, and real estate as part of a diverse portfolio, particularly if your nest egg is large. But keep in mind that commodities don't pay dividends or interest, and very few have a terrific track record of gains over the long term. Charles Rotblut of the American Association of Individual Investors told the Wall Street Journal that most investors should only consider investing in commodities after having the basic allocations down. In the same publication, Rick Ferri, an advocate of low-cost index fund and ETF investing, called commodities &quot;dead money&quot; and said most people would be better off without them.</p> <h2>7. You Can Invest in the Future With Commodities (Sort Of)</h2> <p>Investors who want to avoid some of the risk of commodity price fluctuations can buy something called a &quot;futures contract,&quot; which is essentially an agreement to buy or sell a commodity at a certain price at a certain date. Investors who are sellers get to lock in prices this way. Investing with commodities futures is not for inexperienced investors, as it requires a certain amount of cash up front and often involves the borrowing of money, or leverage. It is easy to lose a lot of money in a short amount of time this way.</p> <h2>8. It's Possible to Have Commodities Exposure Without Owning Commodities</h2> <p>If you don't feel comfortable trading commodities futures or owning commodity ETFs, you can buy shares of stock in companies that work with those commodities. For instance, an investor can buy shares of a company involved in gold mining, or in producing equipment for oil fields. By going this route, it's possible to diversify your portfolio with exposure to commodities, but avoid some of the volatility.</p> <p><em>Are there any commodities in your portfolio?</em></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-things-everyone-should-know-about-the-commodities-markets">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/the-4-greatest-stock-reversals-in-the-last-decade">The 4 Greatest Stock Reversals in the Last Decade</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/the-10-weirdest-etfs-you-can-buy">The 10 Weirdest ETFs You Can Buy</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/a-beginner-s-guide-to-investing-in-frontier-markets">A Beginner’s Guide to Investing in Frontier Markets</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/save-your-retirement-by-avoiding-these-10-risky-investments">Save Your Retirement by Avoiding These 10 Risky Investments</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/youre-wasting-up-to-42532-by-not-investing-your-gasoline-savings">You&#039;re Wasting Up to $42,532 by Not Investing Your Gasoline Savings</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Investment agriculture commodities ETFs Food futures gold oil stock market volatility Thu, 14 Apr 2016 10:01:03 +0000 Tim Lemke 1687440 at http://www.wisebread.com Here's What I Learned About Money After Using Acorns http://www.wisebread.com/heres-what-i-learned-about-money-after-using-acorns <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/heres-what-i-learned-about-money-after-using-acorns" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/woman _holding_cash_000088024827.jpg" alt="Woman learning money lessons using acorns " title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>I have a rich history of being broke. I've always struggled with managing my money properly, and being able to resist the urge to buy things I don't need, rather than saving for my future. The problem with the future is that it's <em>the future.</em> It's off in the distance, a haze that I can't even see. There's no immediate reward in investing or saving. When faced with a new book, a flowy frock, or a delicious meal, the peace of mind that comes with planning for the future has always seemed like the boring, undesirable option. Until now.</p> <p>Now, I'm actually an adult. I've got big plans that go beyond what I'll be doing this coming Saturday night, and they involve retiring comfortably with lots of cash in the bank and lots of grandkids running around my yard. And what caused this shift in mindset was not only age, but also, <a href="https://www.acorns.com/">Acorns</a>.</p> <h2>How It Works</h2> <p>Acorns is a service that takes your electronic spare change, and invests it into a diversified portfolio. A team of experts, including mathematicians, financial experts, and top investors work behind the scenes to make sure your chump change grows into a brilliant little nest egg. You connect your bank account to your Acorns account, and the &quot;spare change&quot; from each transaction in that bank account gets automatically transferred into your Acorns account.</p> <p>So, for example, with the bank I use, I have a checking account with a debit card, a savings account, and a credit card. Acorns sees the transactions of all these accounts, and rounds up the total of each purchase to the next dollar. If I buy something on Amazon and spend $19.60 &mdash; whether I use my debit card or credit card to pay &mdash; Acorns will round that transaction up to $20.00, and invest the remaining $.40. Once the round ups reach $5.00, the funds will be automatically deducted from my checking account, and Acorns will invest it.</p> <p>The investments are spread over large company stocks, small company stocks, emerging market stocks, real estate, corporate bonds, and government bonds. Based on your investing goal and general time frame, you can change your investing style from conservative to aggressive whenever you want.</p> <p>It's easy, convenient, and it really teaches you a lot about money &mdash; especially if you're prone to recklessly spending all your dough. Here's what I learned about money after using Acorns for just three months. (See also: <a href="http://www.wisebread.com/5-microsaving-tools-to-help-you-start-saving-now?ref=seealso">5 MicroSaving Tools to Help You Start Saving Now</a>)</p> <h2>Investing Doesn't Need to Be Complicated</h2> <p>I've had a few investment accounts through previous employers, and it always seemed like such a complex and intimidating process to make the right investment decisions. It was like learning a new language, and I can't even remember most of the French I learned in high school, so I felt utterly left out.</p> <p>But Acorns breaks it down and lets you see any changes to your investments in real time. You can also make changes to your portfolio at any time, depending on your goals. It could not be a more painless process.</p> <h2>Patience Is Money</h2> <p>They say, &quot;Time is money&quot; but I'd argue that patience, specifically, is way more valuable. Because you can't get anywhere in saving money or investing money without patience. Safeguarding your financial future takes a long time, and you need to be in it for the long haul, if you're going to do it right. Luckily, by using Acorns, and playing with their projection tools, that hazy future is a whole lot clearer.</p> <h2>Saving Is Surprisingly Thrilling</h2> <p>Getting any joy out of spending money used to mean purchasing a tangible thing that I could look at, wear, or play with like a shiny new toy. But Acorns has flipped that habit on its head, by giving me a substantial peek into just how cozy I can be if I save regularly and invest wisely. Being smart is way more fun than being spendy.</p> <p>Since I started using acorns three months ago, I've invested about $300, between round ups, weekly automatic transfers, and occasionally sending over an extra $20 when I'm feeling particularly money-motivated. My total gain is $4.48. It doesn't seem like much, right? But that money was working hard for me over the course of 90 days. And if I hadn't used Acorns, I probably wouldn't have saved that much, and I <em>definitely </em>would not have made any extra. I'm proud of that baby gain, and I'm excited to see where I'll be in six months. (See also: <a href="http://www.wisebread.com/the-5-millennial-money-apps-everyone-should-use?ref=seealso">The 5 Millennial Money Apps Everyone Should Use</a>)</p> <h2>The More You Earn, the More You Learn</h2> <p>With Acorns, once you start seeing your account grow, you feel a sense of accomplishment that often leads to a hunger for more knowledge. You don't want to worry about losing it all, or your &quot;luck&quot; wearing out. So you want to know more, to become more informed, so you can maybe take what you've learned from Acorns and find other ways to invest in your future.</p> <h2>Your Money Should Never Get a Day Off</h2> <p>You work hard. And your money should always be working hard, too. Acorns makes monitoring your investments so easy that you can check in on everything while on a tropical vacation, sipping blended cocktails in the sun, while your moola is still on the 9-5 grind.</p> <h2>An Automated Life Is a Happy Life</h2> <p>The best part of Acorns, by far, is the automation. You link your bank account to Acorns to get it set up, and then you can also set up recurring deposits, track upcoming round-ups, and make checking on your investments as quick and easy as checking your Twitter notifications. This is now a quick part of your daily routine that leads to zero headaches, and only profitable progress in the right direction. Does it really get any better than that?</p> <p><em>Have you tried Acorns? Has it worked for you? Share with us in the comments!</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/chrissa-hardy">Chrissa Hardy</a> of <a href="http://www.wisebread.com/heres-what-i-learned-about-money-after-using-acorns">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/zen-and-the-art-of-hiding-money">Zen and the Art of Hiding Money</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/6-money-lessons-you-can-learn-from-your-pets">6 Money Lessons You Can Learn From Your Pets</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/flashback-friday-the-95-best-ways-to-get-fit-for-free">Flashback Friday: The 95 Best Ways to Get Fit for Free</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/does-your-kid-need-an-ira">Does Your Kid Need an IRA?</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/12-ways-to-save-and-make-money-while-traveling">12 Ways to Save and Make Money While Traveling</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Budgeting Investment acorns life lessons money lessons rounding up saving money Thu, 14 Apr 2016 09:30:19 +0000 Chrissa Hardy 1687439 at http://www.wisebread.com 10 Boring Investments That Are Surprisingly Profitable http://www.wisebread.com/10-boring-investments-that-are-surprisingly-profitable <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/10-boring-investments-that-are-surprisingly-profitable" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/man_reading_newspaper_000076745113.jpg" alt="Man buying boring investments that are surprisingly profitable" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>It may seem fun to invest in companies that excite you. But there are few things more exciting than seeing share prices rise, even if the companies themselves are a real bore.</p> <p>If you want to make money in investing, it helps to forget about the sizzle factor. Because some of the weirdest or most boring investments are often the most profitable. Consider these 10 investments that aren't too exciting, but have shown great returns over time, or have recent good results worth watching. (See also:&nbsp;<a href="http://www.wisebread.com/4-ways-boring-investments-make-life-exciting?ref=seealso">4 Ways &quot;Boring&quot; Investments Make Life Exciting</a>)</p> <h2>1. Office Buildings</h2> <p>Is there anything less exciting than large square buildings or shopping centers? Think of the big malls or huge office parks that you'll often drive past in the suburbs. Boring, right? Well, if you invest in this type of real estate, you'll do okay &mdash; or better. There are many real estate investment trusts (REITs) that allow investors to buy shares, and they often pay some of the highest dividends on the market. Consider stocks like Federal Realty Investment Trust, now trading near its 52-week high and with a five-year return of nearly 90%.</p> <h2>2. Gambling Stocks</h2> <p>For a few years, casino stocks were getting crushed, in part due to problems with the gaming industry in China. But there is evidence that the industry has bottomed out and may be on the verge of rebounding. New resorts are planned in Las Vegas, Macau, and elsewhere that are expected to boost revenues for companies like Wynn [NASDAQ: WYNN], Las Vegas Sands [NYSE: LVS] and MGM Resorts [NYSE: MGM]. So if you don't have a moral objection to investing in these stocks, now may be the time to get in on the action.</p> <h2>3. Baking Soda and Condoms</h2> <p>Church &amp; Dwight [NYSE: CHD] may not be the sexiest investment out there. Or maybe it is. After all, it owns Trojan, which makes more condoms than anyone else. And it makes First Response, the popular pregnancy test (in case you forgot to use the Trojans). Church and Dwight also makes a lot of household products that Americans use every day, including Arm &amp; Hammer baking soda and OxiClean. Church &amp; Dwight reported record sales and profits in 2015. Shares are trading near a 52-week high and are up 10% in 2016.</p> <h2>4. An Old Newspaper</h2> <p>What? Investing in a newspaper? Okay, let's be clear. No one is getting rich quick by investing in the New York Times [NYSE: NYT]. But perhaps no news organization has done a better job of shifting its business model from print to digital, and its revenues show the results. The company reported $444 million in revenue during its most recent financial quarter, with a 48% increase in profit.</p> <h2>5. Botox and Viagra</h2> <p>Hey, it's easy to get rich on older people trying to stay young. Pfizer, the maker of Viagra, said last year it would merge with Allergan, the maker of Botox, to form the world's largest pharmaceutical firm. The merger has yet to be approved and has some critics, but the combined company could see a boost from efficiencies and a lower corporate tax rate (it would be based in Ireland).</p> <h2>6. Cigarettes</h2> <p>It's hard to believe that people still smoke, but Altria [NYSE: MO], the owner of Philip Morris and other tobacco-related companies, has offered strong returns to investors even as people became more aware of their product's risks. Altria has been a leader in developing e-cigarettes and other new products, and has reported growing sales and profits of more than $11 billion last year. Shares of the company are trading near a 52-week high.</p> <h2>7. Dollar Tree</h2> <p>How can you make huge profits, one dollar at a time? This company knows how. Dollar Tree [NYSE: DLTR] splurged and bought competitor Family Dollar last year, so it now owns nearly 14,000 stores in North America and is predicting more than $20 billion in sales in 2016. Investors were initially skeptical about the merger, but the company's stock price is now about $80, and some analysts think it will go above $90 by year's end as the benefits of the merger take shape.</p> <h2>8. Boxes and Packages</h2> <p>When was the last time you thought about the package an item comes in? Maybe never, right? Bemis Company has quietly served as one of the world leaders in packaging for food, electronics, and pharmaceuticals throughout North America, Central America, and Asia. It reported sales of more than $4 billion last year. Shares are up 17% to date and are trading near a 52-week high.</p> <h2>9. Paint</h2> <p>Investing in paint may seem as exciting as watching paint dry. But shares of companies that produce paint are actually quite profitable. Consider Valspar [NYSE: VAL] which just hit its highest price in a year and has been one of the stock market's most consistent performers for decades. Or Axalta, which recently got a $500 million investment from Warren Buffett's Berkshire Hathaway. (Berkshire also owns Benjamin Moore paints.) Meanwhile, Sherwin Williams shares are up nearly 30% since last fall.</p> <h2>10. Environmental Testing Equipment and... Dental Technology</h2> <p>You will never hear much about what Danaher Corp. [NYSE: DHR] does, except generate good returns for investors. The company produces a wide array of industrial products including testing instruments, technology solutions for dentists, and even laser marking for product packaging. Despite a product line that won't make headlines, Danaher has been a consistently solid performer &mdash; $1,000 invested in Danaher stock 20 years ago would be worth $21,000 today.</p> <p><em>Are any of these dull, but winning, stocks in your portfolio? </em></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/10-boring-investments-that-are-surprisingly-profitable">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-4"> <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/10-stocks-that-are-actually-having-a-good-year">10 Stocks That Are Actually Having a Good Year</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/the-9-best-performing-mutual-funds-of-the-2000s">The 9 Best Performing Mutual Funds of the 2000s</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/youre-wasting-up-to-42532-by-not-investing-your-gasoline-savings">You&#039;re Wasting Up to $42,532 by Not Investing Your Gasoline 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/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-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-6-best-financial-news-sites-for-investors-in-a-hurry">The 6 Best Financial News Sites for Investors in a Hurry</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Investment boring stocks returns share prices stock market Tue, 12 Apr 2016 10:00:11 +0000 Tim Lemke 1686648 at http://www.wisebread.com Are You Wasting $68,000 on Gas? http://www.wisebread.com/are-you-wasting-68000-on-gas <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/are-you-wasting-68000-on-gas" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock_000048349718_Large.jpg" alt="wasting money on his commute" title="" class="imagecache imagecache-250w" width="250" height="126" /></a> </div> </div> </div> <p>Commuting to work can be a real hassle, but have you ever added up what it's costing you financially?</p> <p>With gas prices on the low side right now, it's easy to lose sight of the cost of driving. But if you have a commute and choose to drive, you may be losing out on hundreds of dollars a year and potentially <em>hundreds of thousands of dollars</em> over the course of your working life.</p> <p>How is that possible? Well, let's crunch some numbers.</p> <p>According to the U.S. Census Bureau, the mean <a href="https://www.census.gov/hhes/commuting/files/2012/Paper-Poster_Megacommuting%20in%20the%20US.pdf">commuting distance in America</a> is about 38 miles. There are some parts of the country where commuters travel much further, and some mega commuters are known to average more than 200 miles each day.</p> <p>Let's assume you're an average person driving that average 38 miles to and from work each day. And let's also assume you're paying an average amount for gas, which is currently about $2 per gallon. If you drive a car that gets 30 miles per gallon, you're spending about $2.50 a day on gas, or about $12.50 a week. (See also: <a href="http://www.wisebread.com/this-is-how-the-high-cost-of-cheap-gas-hurts-you?ref=seealso">This Is How the High Cost of Cheap Gas Hurts You</a>)</p> <p>Assuming you may take a couple weeks off throughout the year from driving, this adds up to $625 annually.</p> <p>That's a nice chunk of change, but it's not the end of the story.</p> <h2>Compound Interest Is Your Friend</h2> <p>Having an extra $625 in your pocket at the end of the year is great. But you could actually end up with a lot more, without doing a thing.</p> <p>If you put that extra money away in a run-of-the-mill savings account with a 1% interest rate, that could be $631 by year's end. Okay, so just $6. No big deal. But extrapolate that out to 30 years and you end up with $842. And if you put in $625 every year during that period, it's a whopping $22,000, thanks in large part to interest compounding on itself.</p> <h2>Invest and Build True Wealth</h2> <p>So now we're at $22,000. That seems like a nice addition to the nest egg. But imagine tripling that total.</p> <p>If you take $625 annually and place it in an index fund or another investment that mirrors the broader stock market, you can boost your savings significantly. Assuming a typical annual return of 7% from the S&amp;P 500, <em>you'll end up with nearly $68,000 at the end of 30 years</em><strong>. </strong></p> <p>That's $68,000 by not spending money on gas, even with prices as low as they are now. And that's just for an average commuter. Someone who drives 60 miles round trip for work could save $108,000 over 30 years. A long-distance commuter who goes 90 miles a day could save $163,000.</p> <h2>Total Commuting Costs</h2> <p>Keep in mind, too, that gas is not the only expenditure when you commute. The Citi ThankYou Commuter Index last year said the average American <a href="http://www.prnewswire.com/news-releases/citi-thankyou-premier-commuter-index-reveals-us-consumers-spend-an-average-of-2600-per-year-on-their-commute-300095179.html?tc=eml_cleartime">spent $2,600 a year commuting</a>. This includes people who might pay for public transit, and also factors in the cost of repairs and depreciation on your car.</p> <p>Using the same calculations as above, that $2,600 could turn into $3,504 over 30 years if placed in a savings account. And $2,600 placed annually in an index fund could turn into $281,000 within three decades.</p> <p>Keep all of this in mind when figuring out how you'll get to work, what job to take, and whether you can get away with working from home or even being self-employed.</p> <p><em>How much are you spending on a daily commute to work? Share with us in the comments!</em></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/are-you-wasting-68000-on-gas">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/heres-how-rich-youd-be-if-you-stopped-driving">Here&#039;s How Rich You&#039;d Be If You Stopped Driving</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/the-benefits-of-a-walkable-neighborhood">The Benefits of a Walkable Neighborhood</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/6-steps-for-a-womans-financial-self-defense">6 Steps for a Woman&#039;s Financial Self-Defense</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/common-currency-a-primer">Common Currency: A Primer</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/behind-the-times-i-learn-about-keep-the-change">Behind the Times - I learn about Keep the Change</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Frugal Living Cars and Transportation Investment compound interest gas index funds interest savings Mon, 11 Apr 2016 09:30:25 +0000 Tim Lemke 1687442 at http://www.wisebread.com 4 Ways to Spring-Clean Your Investment Portfolio http://www.wisebread.com/4-ways-to-spring-clean-your-investment-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-spring-clean-your-investment-portfolio" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/spare_chage_plant_000083910621.jpg" alt="Learning ways to spring clean your investment portfolio" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Your garage isn't the only thing that could use a once-over this time of year. Your investments may be in need of some tidying up as well. Here's how to give them a good spring cleaning.</p> <h2>1. Double-Check Your Risk Tolerance</h2> <p>Since bottoming out in March of 2009, the stock market has been on a tear. It's been one of the greatest bull markets ever. But bull markets don't last forever. Eventually, the tide will turn. Will you be ready?</p> <p>I'm not predicting an imminent bear market, nor am I suggesting you try to time the market. That's a fool's errand. But I <em>do</em> believe this is a good time to review the assumptions you've used to guide your investments to date.</p> <p>Especially important here is a review of your risk tolerance. When the market is moving in a positive direction, it's easy to think of yourself as being fairly risk-tolerant. It's only when the markets turn negative that you really discover how strong a stomach you have.</p> <p>Instead of finding out the hard way that you're not as comfortable with risk as you thought you were, and setting yourself up for panic-selling in a downturn, reassess how much risk you can really handle. Vanguard has an <a href="https://personal.vanguard.com/us/FundsInvQuestionnaire">asset allocation questionnaire</a> that can help. It'll gauge your appetite for risk, factor in your investing time frame, and recommend an optimal asset allocation for you.</p> <h2>2. Double-Check Your Allocations</h2> <p>If your risk tolerance has changed, how your investments should be allocated has changed as well, and that means you probably have some work to do. First you'll need to change how your current portfolio is allocated across specific investments &mdash; mostly, what percentage of your portfolio is invested in stocks and what percentage in bonds (or stock-based mutual funds and bond-based mutual funds). Then you'll need to change how your monthly contributions are allocated as well.</p> <p>Whether your investment account is a 401K, an IRA, or a taxable account, you should be able to make these changes online, or call the broker where you have your account for assistance.</p> <h2>3. Rebalance Your Portfolio</h2> <p>Even if you're not planning to change your asset allocation, your asset allocation may have changed on its own.</p> <p>A year ago, your portfolio might have contained an 80/20 mix of stock funds and bond funds, but what does it look like now? If your stock investments have grown since you first implemented your plan and your bonds have fallen, your actual allocation may now be 90/10. Bring your portfolio back in line with what's optimal for you, given your risk tolerance and investment time horizon, by selling some of your stock holdings and buying bonds.</p> <p>It's generally a good idea to <a href="http://www.wisebread.com/the-most-important-thing-youre-probably-not-doing-with-your-portfolio">rebalance your portfolio</a> once a year. If it's been a year or so since you last took care of this chore, add it to your investment spring cleaning to-do list.</p> <h2>4. Consolidate Accounts</h2> <p>It's not uncommon these days for people to have their investments spread out among several brokers. If you've changed jobs two or three times and rolled your 401K accounts into IRAs at different brokerage houses, you may find yourself dealing with an unnecessary amount of paperwork and navigating a confusing array of rules and fees. Consolidating some of these accounts could make managing your portfolio more efficient and less expensive. That's because implementing your strategy of choice at one broker usually requires fewer trades, which lowers your investment costs.</p> <p>Choosing which broker to keep is a matter of seeing which one offers most of the investments you want to own for the lowest commissions.</p> <p>Few people enjoy the process of spring cleaning, but most enjoy the fruits of their labor once the work is done. It's simply more enjoyable to live in a clean, organized house. The same is true for your investments. Taking a few hours to double-check your risk tolerance and asset allocation, rebalance your portfolio, and consolidate accounts should set you up for a more efficient, successful, and enjoyable experience as an investor.</p> <p><em>What are you doing to tidy up your finances this spring?</em></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/4-ways-to-spring-clean-your-investment-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-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/stabilize-your-portfolio-with-these-5-bond-funds">Stabilize Your Portfolio With These 5 Bond 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/4-reasons-why-a-roth-ira-may-be-better-than-your-401k">4 Reasons Why a Roth IRA May be Better Than 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/5-important-things-to-know-about-your-401k-and-ira-in-2016">5 Important Things to Know About Your 401K and IRA in 2016</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/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-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-investment-accounts-all-30-somethings-should-have">7 Investment Accounts All 30-Somethings Should Have</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Investment 401k balancing portfolio IRA money management risk spring cleaning stocks Thu, 07 Apr 2016 10:01:08 +0000 Matt Bell 1683755 at http://www.wisebread.com Should You Pay Down Debt First or Invest? http://www.wisebread.com/should-you-pay-down-debt-first-or-invest <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/should-you-pay-down-debt-first-or-invest" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/woman_thinking_000045365316.jpg" alt="Woman wondering if she should pay down debt or invest" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Should you pay down your debt before you focus on investing? This is one of the most important questions in personal finance, and the decisions you make now can greatly impact your financial future.</p> <p>The sooner you start investing, the more time your investments have to grow. The effect of compound interest creates a big incentive to start investing as soon as possible. Compound interest is responsible for the &quot;snowball effect&quot; that grows your small investment into a substantial sum over time.</p> <p>But what about paying off debt? Debt grows through the same effect of compound interest that fuels investment growth. The longer you take to pay off debt, the more it costs you due to compound interest. High interest credit cards have interest rates that likely exceed the best returns you will get in the stock market. (See also: <a href="http://www.wisebread.com/the-best-low-interest-rate-credit-cards?ref=seealso">Credit Cards with the Lowest Interest Rates</a>)</p> <p>So what is the best money move &mdash; pay off debt or invest?</p> <h2>The Simple Answer</h2> <p>Mathematically, the best choice is to put your money where it gets the best return on investment. For example, if you have credit card debt at 12.9% interest and your stock market investment account that grows at 8%, then you are better off putting as much money as you can toward the higher interest opportunity &mdash; paying off your credit card in this example. (See also: <a href="http://www.wisebread.com/when-to-do-a-balance-transfer-to-pay-off-credit-card-debt?ref=seealso">How to Save Money on Credit Card Interest with a Balance Transfer</a>)</p> <p>However, there is a complication with this simple answer right off the bat. There is no way to know the rate of return from your investment accounts ahead of time! You could get huge investment returns, even higher than your credit card interest rate, or you could even lose money in the stock market and get negative returns.</p> <p>You have to make an assumption about your rate of return to decide where to put your money. The long-term historical average return from the stock market is around 8% including booms, recessions, and even the Great Depression. No one knows what is going to happen in the stock market, so a reasonable assumption is that you will get returns consistent with the long-term average over the long run.</p> <p>So if the interest rate on your debts is higher than about 8%, you are better off paying debts down first rather than investing. If you have low interest debts such as a mortgage or student loans, you are better off making minimum payments on your debts and investing as much as possible to get the maximum return on your money.</p> <p>As I said, this is the simple answer. There are a few details that make the decision of whether to pay debt or invest a little more complicated. Let's look at some of them.</p> <h2>The &ldquo;Life Isn't Simple&rdquo; Answers</h2> <p>Even with the simple assumption that the long-term historical stock market return of around 8% will continue into the future, there are other complexities to consider in the decision between paying off debts or investing.</p> <h3>Incentives to Pay Down Debt</h3> <p>There are negative consequences of carrying debt that go beyond mathematical calculations of return on investment. Carrying debt is stressful. You have payments to make every month and face immediate severe consequences if you can't make them. If your source of income is disrupted while you have a lot of debt, you can lose everything quickly. Paying off your debts can take this sort of risk off the table.</p> <p>There are other advantages to paying off debt as quickly as possible before focusing on investment. For one thing, focusing on paying off debts is a good deterrent to borrowing more money. If you have investments that are growing, you might be more likely to take on additional debt if you have debt already and are not focusing on paying it off quickly. Paying down debt can be a good way to focus on your financial health and develop sustainable spending habits.</p> <p>So the risk of carrying debt tips the decision toward paying down debt first, but as I mentioned, life isn't simple.</p> <h3>Incentives to Invest</h3> <p>If your employer offers a 401K retirement account matching funds program, the balance tips toward investing. Many companies will match employee retirement contributions with 50% matching funds. This is free money! For example, if you contribute $500 to your retirement fund and your company has a 50% matching program, the company will add $250 to your retirement account. This can tip the balance in favor of investing. If you have $500 available per month, the choice effectively becomes $500 for debt payments or $750 for retirement contributions. This makes investing hard to beat.</p> <p>Let's not forget about taxes. Another advantage of investing in a retirement account is that you can invest pre-tax dollars in an investment program such as a 401K. When you pay debt, you are paying it with post-tax dollars. The impact of pre-tax vs. post-tax dollars is that you can effectively put more money in your retirement account at the same cost to you. For example, you could invest $665 before taxes or pay down a debt with the $500 you get after taxes. This results in an advantage for investing instead of paying off debt.</p> <p>It is true that some types of debt such as mortgages and student loans have tax advantages. You can get a tax deduction for mortgage and student loan interest, but this benefit is small compared with the tax advantages offered as incentives to fund retirement accounts.</p> <p>Another variable that you may be able to change to tip the decision toward investing is the interest rate on your debt. If you can refinance your high interest debt with a debt consolidation loan or a <a href="http://www.wisebread.com/the-best-0-balance-transfer-credit-cards">balance transfer</a>, you will save money on interest &mdash; and investing before paying off your debt may make sense if your interest rate is lower than your investment returns.</p> <h2>Example Scenarios: Pay Off Debt vs. Investing</h2> <p>Let's say you have $20,000 of credit card debt at 12.9% interest. Are you better off paying off that debt first as fast as possible before investing, or should you pay the minimum balance on the debt so you can start investing as much as possible right away?</p> <p>If you wait to start investing until you have the debt paid off, you will miss out on years of growth of your investment account. However, the longer you leave the high interest debt around, the more it will cost you to pay back. What should you do in this scenario?</p> <p>Let's say you have $535 per month that you can use to pay a credit card debt <em>or</em> invest for a term of 25 years.</p> <h3>Option 1: Pay Off Debt First</h3> <p>A monthly payment of $535 per month will pay off the $20,000 credit card debt at 12.9% interest in 48 months, or four years. The total cost of paying it off is $25,700 due to compound interest.</p> <p>Now, after four years, you start investing the $535 per month. It grows at the historical average return of 8% for 21 years. You end up with $348,000 in your retirement account. That's pretty good!</p> <h3>Option 2: Make Minimum Payments On Debt, Start Investing Now</h3> <p>In this scenario, we will make a smaller payment on the credit card of $297 so we will be able to invest the rest of the $535 per month that we have available, or $238 per month.</p> <p>With our minimum credit card payment, it will take 10 years to pay off the credit card balance at a total cost of $35,800. It takes much longer to pay off the credit card by making smaller payments, but this move allows us to start investing right away.</p> <p>Our 10 years of investing $238 at the historical average 8% return gets us $43,500 in our investment account. We'll start with this balance and invest the full $535 per month for 15 more years. The final balance: $329,000.</p> <p>In this scenario, the high interest rate on the credit card debt <em>still </em>outweighs the lower rate of return from the investment account. With high interest debt, the best move is to pay it off before starting to invest.</p> <h3>Consider 401K Match, Pre-Tax Investment Dollars</h3> <p>The result above does not include the 401K company match or the use of pre-tax funds. Considering these investment incentives, the balance at the end of 25 years improves, but the choice between investing vs. paying off debt first does not change.</p> <p>Pay Off Debt First: $650,000<br /> Minimum Debt Payment, Start Investing: $630,000</p> <h3>Without the Debt, You Would Almost Be a Millionaire!</h3> <p>So what is the effect of having $20,000 of debt to pay off early in your investment cycle? If you didn't have debt and started investing right away, you would have $951,000 at the end of 25 years!</p> <h2>Final Answer: Should You Pay Off Debt or Invest?</h2> <p>The basic principle of putting your money into the option that gives the best rate of return leads to the best financial results. If your investments yield a higher return than the interest on your debts, then you'll be better off investing right away and making minimum payments on your debts.</p> <p>However, if the interest rate on your debt is higher than the rate of return from your investments, then you should pay off your debt first before investing. The example calculations showed results for a scenario where it would definitely be better to pay off high interest debt before starting to fund an investment account.</p> <p>One big conclusion from this analysis is how much debt impacts your investment growth. In our 25 year investment example, you could have about $300K more in your retirement account if you didn't start with $20K credit card debt. If you have high interest debt, look for opportunities to consolidate the debt or get a balance transfer and end up with a much lower interest rate.</p> <p>Ultimately the choice of whether to pay off debts before starting to invest depends on your tolerance for risk and your assessment of potential rate of return from investments in comparison with the interest rates on your debt.</p> <p><em>Are you investing or paying off debt? </em></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/should-you-pay-down-debt-first-or-invest">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/7-occasions-when-you-should-definitely-hire-a-financial-advisor">7 Occasions When You Should Definitely Hire a Financial Advisor</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/the-10-biggest-myths-about-investing">The 10 Biggest Myths About Investing</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-investment-accounts-all-30-somethings-should-have">7 Investment Accounts All 30-Somethings Should Have</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/9-financial-moves-you-will-always-regret">9 Financial Moves You Will Always Regret</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/when-its-time-to-destroy-debt-start-with-a-goal">When It&#039;s Time to Destroy Debt, Start With a Goal</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Debt Management Investment 401k comparisons compound interest money decisions Paying Off Debt retirement Thu, 24 Mar 2016 09:30:23 +0000 Dr Penny Pincher 1678010 at http://www.wisebread.com