stocks https://www.wisebread.com/taxonomy/term/2959/all en-US 4 Golden Rules of Investing in Retirement https://www.wisebread.com/4-golden-rules-of-investing-in-retirement <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/4-golden-rules-of-investing-in-retirement" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="https://wisebread-killeracesmedia.netdna-ssl.com/files/fruganomics/imagecache/250w/blog-images/our_money_is_safe_and_sound.jpg" alt="Our money is safe and sound" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>After you've spent a lifetime investing <em>for </em>retirement, it can feel very different to invest <em>in </em>retirement. Many retirees are hesitant to start withdrawing from the nest eggs they've carefully built over the years. And, they sometimes feel especially nervous about managing that account, knowing it needs to last as long as they do.</p> <p>Thankfully, there are some guidelines that can help. Here are four golden rules for investing in retirement.</p> <h2>1. Don't be too conservative</h2> <p>Longevity is increasing. Your retirement could last for two decades or more. According to the Social Security Administration, a 65-year-old man today can expect to live to nearly age 85. A 65-year-old woman today can expect to live past age 86. And those are just averages. Many people will live well into their 90s.</p> <p>Of course, given a choice, most people would prefer to live a long life. However, the more years you spend in retirement, the longer your nest egg will need to last. That's why it's important to avoid being overly conservative with your investments in your later years. Bond-like returns will only get you so far. (See also: <a href="https://www.wisebread.com/5-ways-longevity-is-changing-retirement-planning-and-what-to-do-about-it?ref=seealso" target="_blank">5 Ways Longevity Is Changing Retirement Planning &mdash; And What to Do About It</a>)</p> <p>This reality is reflected in many of today's target-date funds. For example, Vanguard's Target Retirement 2020 fund, which is designed for people right on the cusp of retirement, currently has 54 percent of its assets invested in stocks. The lowest level of stock exposure Vanguard's target-date funds ever hit is 30 percent, which occurs seven years after each fund's target date. Thereafter, it remains fixed.</p> <p>If you're managing your own portfolio, you would be wise to take a page from these professionally managed portfolios and make sure you're maintaining a healthy exposure to stocks. (See also: <a href="https://www.wisebread.com/7-reasons-youre-never-too-old-to-buy-stocks?ref=seealso" target="_blank">7 Reasons You're Never Too Old to Buy Stocks</a>)</p> <h2>2. Don't be too aggressive</h2> <p>By the same token, you can't afford to get carried away with risk. With the current long-running bull market showing few signs of running out of steam, it may be tempting to take on more risk than you should, especially if you feel somewhat behind on your retirement savings. But that would be dangerous to your portfolio and your peace of mind.</p> <p>Instead, trust the rules of asset allocation. If your optimal asset allocation calls for a 50/50 stock/bond mix, stick with that. One day, the bull market <em>will </em>end and you'll be glad you weren't invested any more aggressively than you should have been. If you're not sure what your optimal mix should be, <a href="https://personal.vanguard.com/us/FundsInvQuestionnaire" target="_blank">Vanguard's asset allocation questionnaire</a> can help you figure it out.</p> <p>Remember, if your nest egg isn't as large as it should be, you have other options besides taking undue risk with your investments. For example, if you're still in the workforce, pushing back your intended retirement date even by a few months or a year can make a noticeable difference in your financial health. (See also: <a href="https://www.wisebread.com/how-one-more-year-of-work-can-transform-your-retirement?ref=seealso" target="_blank">How One More Year of Work Can Transform Your Retirement</a>)</p> <h2>3. Consider maintaining a cash &quot;bucket&quot;</h2> <p>One of the biggest threats to your portfolio in retirement goes by the fancy name of <em>sequence of returns risk. </em>That refers to the possibility that the market could fall just as you enter retirement. While the market naturally ebbs and flows over time, a significant downturn right at the start of retirement can put a strain on your cash flow throughout retirement.</p> <p>Especially if you lean toward the conservative side of the risk spectrum, one way to manage that risk is to implement the bucket strategy &mdash; creating a cash account containing two to three years' worth of essential living expenses. That can help you avoid having to withdraw from your investment account in a bear market.</p> <p>When the market is falling, you draw living expenses from your cash bucket, giving your investment account time to recover. When the market is growing, you draw from your investment account while also using a portion of your gains to refill your cash bucket. (See also: <a href="https://www.wisebread.com/8-ways-to-preserve-your-net-worth-in-retirement?ref=seealso" target="_blank">8 Ways to Preserve Your Net Worth in Retirement</a>)</p> <h2>4. Make sure you're on the same page as your spouse</h2> <p>Within many marriages, there's a division of labor, with each spouse taking the lead in different areas. If one of you has been managing the investments, now is the time to bring the other into the process. Otherwise, when the investment-manager spouse dies, it can leave the surviving spouse ill-equipped to take over.</p> <p>If you handle the investments in your household, start talking about your investments with your spouse. How many accounts do you have and what's the total balance? What are the online passwords? What strategy are you following with your investments? If you were to die first, how would you recommend your spouse manage the account? If you're using a fairly involved approach, is there a simplified alternative? (See also: <a href="https://www.wisebread.com/5-money-conversations-couples-should-have-before-retirement?ref=seealso" target="_blank">5 Money Conversations Couples Should Have Before Retirement</a>)</p> <p>One of the sweetest rewards of a life lived well is peace of mind in your later years. When it comes to experiencing <em>financial </em>peace of mind during retirement, the four steps described above should help.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="https://www.wisebread.com/matt-bell">Matt Bell</a> of <a href="https://www.wisebread.com/4-golden-rules-of-investing-in-retirement">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="https://www.wisebread.com/7-reasons-youre-never-too-old-to-buy-stocks">7 Reasons You&#039;re Never Too Old to Buy 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="https://www.wisebread.com/7-reasons-to-invest-in-stocks-past-age-50">7 Reasons to Invest in Stocks Past Age 50</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="https://www.wisebread.com/what-you-need-to-know-about-the-easiest-way-to-save-for-retirement">What You Need to Know About the Easiest Way to Save for Retirement</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="https://www.wisebread.com/5-ways-longevity-is-changing-retirement-planning-and-what-to-do-about-it">5 Ways Longevity Is Changing Retirement Planning (And What to Do About It)</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="https://www.wisebread.com/how-to-make-sure-you-dont-run-out-of-money-in-retirement">How to Make Sure You Don&#039;t Run Out of Money in Retirement</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Investment Retirement bonds cash bucket conservative gains golden rules longevity nest egg returns risk rules of thumb stocks Thu, 19 Jul 2018 08:00:09 +0000 Matt Bell 2154892 at https://www.wisebread.com 7 Ways to Compare Stock Market Investments https://www.wisebread.com/7-ways-to-compare-stock-market-investments <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/7-ways-to-compare-stock-market-investments" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="https://wisebread-killeracesmedia.netdna-ssl.com/files/fruganomics/imagecache/250w/blog-images/man_uses_a_paper_fortune_teller_to_make_multiple_decisions.jpg" alt="Man uses a paper fortuneteller to make multiple decisions" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>When investing, we are faced with an overwhelming menu of things to choose from. There are tens of thousands of stocks, a mind-boggling number of mutual funds and ETFs, plus a dizzying array of bonds. How can we make sense of any of this to decide what makes a good investment?</p> <p>It helps to know the basic elements of an investment so you know how to compare one product to another. This may require some work, but it can often be fun to dig into the details of why one investment is better than another. Here are some key things to examine.</p> <h2>1. Growth potential</h2> <p>Most people that are far away from retirement age seek investments that will grow over time. Ideally, they're looking for investments that will allow them to build a sizable retirement fund and outpace the returns offered by a basic bank account. There are some investments, such as stocks, that historically rise in value and are great for younger investors. Mutual funds and ETFs can offer solid growth as well. Bonds, however, are more likely to offer lower, but more stable returns.</p> <p>As you become savvier in grasping the inner workings of specific investments, you can become skilled at knowing when an investment is undervalued and perhaps poised for big growth &mdash; or overvalued and ready for a price decline. Understanding the growth potential in certain investments can help you find the right mix for your individual portfolio. (See also: <a href="http://www.wisebread.com/9-ways-to-tell-if-a-stock-is-worth-buying?ref=seealso" target="_blank">9 Ways to Tell If a Stock Is Worth Buying</a>)</p> <h2>2. Sector and industry</h2> <p>If you don't know a lot about a stock investment at first, it helps to learn what the company does to make its money. Companies are grouped into sectors based on the type of business they operate in; within sectors, there are smaller segments called industries. Typically, stocks are grouped into 11 different sectors &mdash; including health care, financials, energy, and consumer staples, to name a few &mdash; and there can be anywhere from two to 15 industries in each sector. A well-balanced stock portfolio will have some exposure to all of these sectors and as many of these industries as possible.</p> <p>When investing, it helps to learn how these sectors perform compared to the broader stock market. Some sectors perform better than the market, while others underperform. Some are resilient in tough economic times, while others are more vulnerable to bad news. Understanding these industries can help you make smart comparisons when evaluating stocks.</p> <h2>3. Market capitalization and asset class</h2> <p>Stocks are usually categorized by size, also referred to as market capitalization. A company's market capitalization, or market cap, refers to the value of all outstanding shares (which is its stock price multiplied by the total number of shares outstanding).</p> <p>There are large-cap stocks, which comprise the largest publicly traded companies. There are mid-cap stocks, which are medium-sized firms. And there are small-cap and even micro-cap stocks, comprising smaller companies. These categories are also called asset classes.</p> <p>Generally speaking, large-cap stocks offer solid, steady growth potential for shareholders. Shares of smaller companies can offer bigger returns, but may also be riskier investments. Understanding the unique characteristics of stocks in each asset class can help you make comparisons between investments and find stocks that make sense for your financial goals.</p> <h2>4. Risk and volatility</h2> <p>Stocks of smaller companies can be riskier than some other investments. Understanding risk &mdash; and your own tolerance for it &mdash; can help you compare investments with confidence.</p> <p>It's important to note that the potential for higher returns comes with the potential for higher risk. Finding that risk-reward sweet spot is the key to successful investing. Too much risk can result in you losing a lot of money. Avoiding risk altogether may prevent you from getting the returns needed to reach your financial goals.</p> <p>Volatility and risk go hand in hand. When an investment goes up and down in value rapidly, we often say it's a volatile investment. There are ways to make money off that volatility, but for most investors, it's best to see steadier, consistent returns. (See also: <a href="http://www.wisebread.com/how-the-risk-averse-can-get-into-the-stock-market?ref=seealso" target="_blank">How the Risk Averse Can Get Into the Stock Market</a>)</p> <h2>5. Earnings, and earnings per share</h2> <p>Companies make money. They also spend it. When companies make more money than they spend, that's usually a good thing for everyone, including investors. This extra money is often referred to as net earnings. And as an investor, you want to see earnings increase over time.</p> <p>When comparing two companies in the same industry, it can help to examine earnings to see which may be doing better financially. But it's also important to look at earnings in the context of a company's size. To do this, simply take the earnings total and divide it by the number of shares outstanding. So, a company with $9 million in earnings and 20 million shares would have earnings per share of 45 cents. (See also: <a href="http://www.wisebread.com/beginners-guide-to-reading-a-stock-table?ref=seealso" target="_blank">Beginner's Guide to Reading a Stock Table</a>)</p> <h2>6. Financial news</h2> <p>Sometimes, just paying attention to the headlines can help you grasp whether an investment is a good one or not. Financial news can let you know of macroeconomic trends that may help or hurt certain investments, and update you on specific news regarding companies or products. When trying to decide between investments, do a quick news search to see if there's anything big you need to know. You don't have to go overboard; you can overwhelm yourself reading financial magazines and watching CNBC all day. But staying generally informed can certainly be helpful.</p> <h2>7. Dividends and dividend yields</h2> <p>Many companies choose to distribute earnings to shareholders on a quarterly basis. This is great if you are a shareholder, because it's free income just for owning shares. When examining dividends, you should look at both the amount of the dividend and the &quot;yield,&quot; which is the amount when compared to the share price.</p> <p>For example, a company may pay shareholders 50 cents per share they own every quarter. That's the dividend yield. If shares of the company are priced at $35, the yield is about 1.4 percent per quarter, or 5.6 percent annually. When examining dividends, look to see if a company has a history of maintaining or even increasing dividends each year. If they do, that's a sign of a company on strong financial footing.</p> <p>Keep in mind that if a company doesn't distribute dividends, that's not necessarily a bad thing. Many fast-growing companies choose to instead reinvest their earnings into business operations, and this can often help boost growth and make the company more valuable over time. Amazon may be the best example of a strong company that does not pay dividends.</p> <h2 style="text-align: center;">Like this article? Pin it!</h2> <div align="center"><a data-pin-do="buttonPin" data-pin-count="above" data-pin-tall="true" href="https://www.pinterest.com/pin/create/button/?url=http%3A%2F%2Fwww.wisebread.com%2F7-ways-to-compare-stock-market-investments&amp;media=http%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2F7%2520Ways%2520to%2520Compare%2520Stock%2520Market%2520Investments.jpg&amp;description=7%20Ways%20to%20Compare%20Stock%20Market%20Investments"></a></p> <script async defer src="//assets.pinterest.com/js/pinit.js"></script></div> <p style="text-align: center;"><img src="https://wisebread-killeracesmedia.netdna-ssl.com/files/fruganomics/u5180/7%20Ways%20to%20Compare%20Stock%20Market%20Investments.jpg" alt="7 Ways to Compare Stock Market Investments" width="250" height="374" /></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="https://www.wisebread.com/tim-lemke">Tim Lemke</a> of <a href="https://www.wisebread.com/7-ways-to-compare-stock-market-investments">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-7"> <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="https://www.wisebread.com/9-ways-to-tell-if-a-stock-is-worth-buying">9 Ways to Tell If a Stock is Worth Buying</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="https://www.wisebread.com/beginners-guide-to-reading-a-stock-table">Beginner&#039;s Guide to Reading a Stock Table</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="https://www.wisebread.com/the-3-rules-every-mediocre-investor-must-know">The 3 Rules Every Mediocre Investor Must Know</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="https://www.wisebread.com/dont-be-fooled-by-an-investments-rate-of-return">Don&#039;t Be Fooled by an Investment&#039;s Rate of Return</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="https://www.wisebread.com/the-best-ways-to-invest-50-500-or-5000">The Best Ways to Invest $50, $500, or $5000</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Investment comparing investments dividends earnings ETFs historical performance market capitalization mutual funds returns stocks volatility Mon, 23 Apr 2018 08:30:09 +0000 Tim Lemke 2130606 at https://www.wisebread.com 8 Startling Facts That Will Make You Want to Invest https://www.wisebread.com/8-startling-facts-that-will-make-you-want-to-invest <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/8-startling-facts-that-will-make-you-want-to-invest" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="https://wisebread-killeracesmedia.netdna-ssl.com/files/fruganomics/imagecache/250w/blog-images/retirement_savings_golden_nest_egg.jpg" alt="Retirement savings golden nest egg" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Sometimes you need to be startled into action when it comes to investing. It's easy to come up with excuses not to begin placing money in the markets and saving for retirement. Armed with the right information, however, most people would likely choose to invest rather than stay on the sidelines.</p> <p>Perhaps it's time to digest these eye-opening facts and realize that waiting to invest could be a big mistake.</p> <h2>1. The average retirement savings is measly</h2> <p>According to a 2016 survey from the Transamerica Center for Retirement Studies, baby boomers have an average retirement savings of $147,000. Those from Generation X have an average $69,000, while millennials have $31,000 saved. Those figures have probably risen slightly in the last two years, but are still well shy of the totals necessary for a comfortable retirement.</p> <p>Older people approaching retirement age may have held off investing in their earlier years and are now playing catch up. Younger people have more time to invest and get to where they need to be &mdash; but the longer they wait, the harder it gets. (See also: <a href="http://www.wisebread.com/7-retirement-planning-steps-late-starters-must-make?ref=seealso" target="_blank">7 Retirement Planning Steps Late Starters Must Make</a>)</p> <h2>2. You may be retired longer than you worked</h2> <p>Imagine starting work at 21 and retiring at 60. That's 39 years in the workforce. If you live to 100, that's an additional 40 years &mdash; longer than the time you spent working! People are living longer these days, so it's not uncommon to see retirees still kicking it well into their 90s and beyond. In some cases, retirements are stretching past 40 years. Are you doing all you can to allow your money to last that long? Smart investing may be the only way to accumulate enough cash to support a retirement of that length. (See also: <a href="http://www.wisebread.com/5-ways-longevity-is-changing-retirement-planning-and-what-to-do-about-it?ref=seealso" target="_blank">5 Ways Longevity Is Changing Retirement Planning (And What to Do About It)</a>)</p> <h2>3. Very few people get a pension these days</h2> <p>Defined benefit plans, in which a company guarantees workers a specific amount of money each year in their retirement, have been going away fast. Today, only 13 percent of nonunion private sector workers have access to a defined benefit plan, according to the Bureau of Labor Statistics.</p> <p>Instead, most companies now only offer defined contribution plans, such as a 401(k). With these plans, workers must invest their own money, and companies may offer to match a certain percentage of contributions (some don't). If you're in the workforce, it's likely incumbent upon you to take charge of your own retirement savings. (See also: <a href="http://www.wisebread.com/if-youre-lucky-enough-to-receive-a-pension-here-are-6-things-you-need-to-do?ref=seealso" target="_blank">If You're Lucky Enough to Receive a Pension, Here Are 6 Things You Need to Do</a>)</p> <h2>4. Half of workers say they'll probably work during retirement</h2> <p>Isn't the entire idea of retirement to stop working? For many people, ceasing to work entirely just isn't in the cards. The Transamerica survey revealed that about half of all workers &mdash; including baby boomers, Gen Xers, and millennials &mdash; expect to work at least part-time during retirement. Working is fine if you want to, but if you dread the idea of punching a clock in your old age, invest now.</p> <h2>5. About 20 percent of seniors rely on Social Security for nearly everything</h2> <p>Social Security is certainly better than nothing if you're retired, but it's not a lot of money. The maximum Social Security benefit for 2018 is $2,788 per month, or about $33,500 a year, if you retire at age 66. You could get up to $3,698 monthly if you are willing to wait until age 70 begin accepting payments.</p> <p>You won't starve, but you're not going to be cruising the Mediterranean, either. And yet, roughly one in five Americans over 65 rely on Social Security for 90 percent or more of their income, according to a 2015 study from AARP. There are some states where this figure rises to more than one in three older residents. This is a startling figure when you consider that Social Security is currently running a deficit. Invest now, so that Social Security can be like icing on your retirement cake. (See also: <a href="http://www.wisebread.com/5-questions-to-ask-before-you-start-claiming-your-social-security-benefits?ref=seealso" target="_blank">5 Questions to Ask Before You Start Claiming Your Social Security Benefits</a>)</p> <h2>6. The market rarely has bad years</h2> <p>Everyone remembers when the market crashed about a decade ago during the financial crisis. And there have been some high-profile bad years in the past. But consider this: Since the end of World War II, the S&amp;P 500 has <a href="http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/histretSP.html" target="_blank">recorded a negative annual return</a> just 15 times. That's 15 bad years out of 72. The New York Yankees have won 17 World Series titles during the same period! Only once since World War II &mdash; from 2000 to 2002 &mdash; has the market had three bad years in a row, and there's only one other instance of back-to-back negative annual returns. So even if you had no idea what year it was and still chose not to invest, you'd likely be missing out on positive returns. (See also: <a href="http://www.wisebread.com/how-the-risk-averse-can-get-into-the-stock-market?Ref=seealso" target="_blank">How the Risk Averse Can Get Into the Stock Market</a>)</p> <h2>7. Almost as many people own dogs as stocks</h2> <p>About 54 percent of Americans own stocks, according to research from Gallup. Meanwhile, the American Pet Products Association reports that 48 percent of Americans own dogs. Dogs are nice. Dogs can be enjoyable. Dogs are good to have in retirement as companions, but they won't appreciate in value or help pay the bills as you get older.</p> <p>Invest now, and you can have a comfortable retirement, complete with as many canine friends as you want.</p> <h2>8. If you invested $100 in Amazon 20 years ago, you'd have $50,000</h2> <p>When Amazon went public in 1997, its shares were trading at about $18. As of this writing, the company is now trading at more than $1,300 per share. A simple $100 investment 20 years ago would be worth tens of thousands today. Of course, Amazon's stock returns aren't typical. But it goes to show how even a modest investment over time can prove to be enormously lucrative.</p> <h2 style="text-align: center;">Like this article? Pin it!</h2> <div align="center"><a data-pin-do="buttonPin" data-pin-count="above" data-pin-tall="true" href="https://www.pinterest.com/pin/create/button/?url=http%3A%2F%2Fwww.wisebread.com%2F8-startling-facts-that-will-make-you-want-to-invest&amp;media=http%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2F8%2520Startling%2520Facts%2520That%2520Will%2520Make%2520You%2520Want%2520to%2520Invest.jpg&amp;description=8%20Startling%20Facts%20That%20Will%20Make%20You%20Want%20to%20Invest"></a></p> <script async defer src="//assets.pinterest.com/js/pinit.js"></script></div> <p style="text-align: center;"><img src="https://wisebread-killeracesmedia.netdna-ssl.com/files/fruganomics/u5180/8%20Startling%20Facts%20That%20Will%20Make%20You%20Want%20to%20Invest.jpg" alt="8 Startling Facts That Will Make You Want to Invest" width="250" height="374" /></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="https://www.wisebread.com/tim-lemke">Tim Lemke</a> of <a href="https://www.wisebread.com/8-startling-facts-that-will-make-you-want-to-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-13"> <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="https://www.wisebread.com/how-to-make-sure-you-dont-run-out-of-money-in-retirement">How to Make Sure You Don&#039;t Run Out of Money in Retirement</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="https://www.wisebread.com/8-signs-its-time-to-retire">8 Signs It&#039;s Time to Retire</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="https://www.wisebread.com/7-reasons-youre-never-too-old-to-buy-stocks">7 Reasons You&#039;re Never Too Old to Buy Stocks</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="https://www.wisebread.com/4-foolproof-ways-to-protect-your-money-from-inflation">4 Foolproof Ways to Protect Your Money From Inflation</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="https://www.wisebread.com/what-you-need-to-know-about-the-easiest-way-to-save-for-retirement">What You Need to Know About the Easiest Way to Save for Retirement</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Investment Retirement 401(k) fun facts late retirement pensions returns s&p 500 social security startling facts stocks working Wed, 14 Mar 2018 09:01:08 +0000 Tim Lemke 2106620 at https://www.wisebread.com 7 Reasons You're Never Too Old to Buy Stocks https://www.wisebread.com/7-reasons-youre-never-too-old-to-buy-stocks <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/7-reasons-youre-never-too-old-to-buy-stocks" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="https://wisebread-killeracesmedia.netdna-ssl.com/files/fruganomics/imagecache/250w/blog-images/grandfather_and_grandson_play_lying_on_grass.jpg" alt="Grandfather and grandson play lying on grass" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>One common rule of thumb for investors is to move away from stocks into more conservative investments as you get older. The thinking behind this is that stocks always carry the risk of losing value, and that's not something you want to see with your retirement fund.</p> <p>But completely abandoning stocks may not be the right strategy, either. Holding some stocks in your portfolio can be a hedge against inflation, and can help ensure that your retirement money lasts as long as you do.</p> <p>Here's a look at some reasons why, even for older investors, stocks are always a good buy.</p> <h2>1. You may live longer than you think</h2> <p>Many people assume that once you approach retirement age, all of your efforts should be focused on protecting your assets rather than growing them. But the reality is that many retirees will need their money to last 30 years or more, and the only way to make money last that long is to continue to accumulate it.</p> <p>Having some money in stocks will, in most years, allow you to replenish money that you spend from your portfolio. Consider this: If you have a nest egg of $1 million and spend $50,000 annually, your savings will be gone in about 20 years. But if you are able to add 4 percent to your portfolio each year from stocks, your savings could last another decade or more. (See also: <a href="http://www.wisebread.com/5-ways-longevity-is-changing-retirement-planning-and-what-to-do-about-it?ref=seealso" target="_blank">5 Ways Longevity Is Changing Retirement Planning (And What to Do About It)</a>)</p> <h2>2. Many stocks can be safe investments</h2> <p>We tend think of stocks as risky and volatile investments, but that's not always the case. Many stocks are actually very common and useful investments for people looking to bring stability to their portfolio.</p> <p>Dividend stocks are a common component of retiree accounts, because they generate income for the investor and generally don't rise and fall dramatically in price. There are also some industries, such as consumer goods, that have offered steady returns year in and year out. Some stocks, such as Wal-Mart, are good bets even during bad economic times. You don't have to lay off stocks entirely as you get close to retirement age. It's just a matter of finding stable, income-producing stocks that can serve you well as you get older.</p> <h2>3. Markets rebound fairly quickly</h2> <p>No one likes to see the stock market take a big dive, but the good news is that it always goes back up. There are only a handful of times in history when the stock market has had consecutive down years. Moreover, years with negative returns are often followed up with positive returns of greater magnitude. History shows that if you lose money in the markets one year, you'll likely make that money and more back within a few years. In other words, even if you are well into your senior years, you're unlikely to see your entire savings gone in a single swoop. (See also: <a href="http://www.wisebread.com/6-confidence-inspiring-facts-about-the-stock-market?ref=seealso" target="_blank">6 Confidence-Inspiring Facts About the Stock Market</a>)</p> <h2>4. Stocks don't need to comprise your whole portfolio</h2> <p>Buying stocks when you are at or near retirement age is only a bad idea if you're not also invested in more stable things like bonds and cash. Stocks don't have to make up 100 percent of your retirement fund. They don't even have to make up 50 or 25 percent. But having stocks as a relatively small percentage of your portfolio can help make your money last longer without adding much risk.</p> <p>For example, let's say you have $1 million in your retirement fund. And let's say 10 percent of that ($100,000) is in stocks, with the rest in bonds and cash. If the stock market were to take a dive of 30 percent in one year, you might lose $30,000 from the stock portion of the portfolio. That's $30,000 out of a total of $1 million saved, or just 3 percent of your total savings. You'd still have $970,000 left. Given that the market historically goes up more than it goes down, this is a reasonable risk to take. (See also: <a href="http://www.wisebread.com/how-the-risk-averse-can-get-into-the-stock-market?ref=seealso" target="_blank">How the Risk Averse Can Get Into the Stock Market</a>)</p> <h2>5. Returns from bonds and cash are lousy these days</h2> <p>For many years, it was common for Americans to get good returns on government and municipal bonds, as well as normal savings accounts and certificates of deposit. Thus, retirement accounts were constantly being replenished with new money.</p> <p>Nowadays, interest rates are still at some of their lowest rates in history, so it's easy to see how your personal spending rate will outpace the returns from your retirement funds. In fact, there is some risk that your returns may not even outpace the rate of inflation. Only with stocks will you be able to see the types of gains once seen from bonds and cash in the past, and you'll never be at risk of seeing inflation eat away at your nest egg.</p> <h2>6. Transgenerational wealth is a powerful thing</h2> <p>Have you ever wondered how massively wealthy people got their money? It's often because they inherited it. In fact, many younger Americans say they are expecting a sizable inheritance. According to a recent survey from Natixis, 60 percent of millennials believe they will inherit some money from their parents.</p> <p>If you want to ensure financial security for your children and even generations beyond, your own personal retirement time horizon is irrelevant. Only through stocks can you continue to accumulate returns that generate the kind of wealth that will transform the lives of your heirs.</p> <h2>7. Stocks are just more fun</h2> <p>Cash is safe. Bonds are safe. But they are boring as heck. And it's downright wrong to assume that older people can't have some excitement in their lives.</p> <p>Placing money in the stock market and watching it grow is fun. Being a shareholder of a company is fun. And if you are retired, you actually now have time to pay attention to your investments. Of course, you never want to let a desire for fun force you into a silly investment decision. Stocks should comprise a relatively small section of retirement funds for older people. But I'm not about to tell our seniors they can't let loose a little bit. (See also: <a href="http://www.wisebread.com/7-reasons-to-invest-in-stocks-past-age-50?ref=seealso" target="_blank">7 Reasons to Invest in Stocks Past Age 50</a>)</p> <h2 style="text-align: center;">Like this article? Pin it!</h2> <div align="center"><a data-pin-do="buttonPin" data-pin-count="above" data-pin-tall="true" href="https://www.pinterest.com/pin/create/button/?url=http%3A%2F%2Fwww.wisebread.com%2Fhow-to-talk-about-a-previous-job-in-an-interview&amp;media=http%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2F7%2520Reasons%2520Youre%2520Never%2520Too%2520Old%2520to%2520Buy%2520Stocks.jpg&amp;description=7%20Reasons%20Youre%20Never%20Too%20Old%20to%20Buy%20Stocks"></a></p> <script async defer src="//assets.pinterest.com/js/pinit.js"></script></div> <p style="text-align: center;"><img src="https://wisebread-killeracesmedia.netdna-ssl.com/files/fruganomics/u5180/7%20Reasons%20Youre%20Never%20Too%20Old%20to%20Buy%20Stocks.jpg" alt="7 Reasons You're Never Too Old to Buy Stocks" width="250" height="374" /></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="https://www.wisebread.com/tim-lemke">Tim Lemke</a> of <a href="https://www.wisebread.com/7-reasons-youre-never-too-old-to-buy-stocks">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-15"> <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="https://www.wisebread.com/5-ways-longevity-is-changing-retirement-planning-and-what-to-do-about-it">5 Ways Longevity Is Changing Retirement Planning (And What to Do About It)</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="https://www.wisebread.com/8-types-of-investors-which-one-are-you">8 Types of Investors — Which One Are You?</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="https://www.wisebread.com/the-3-rules-every-mediocre-investor-must-know">The 3 Rules Every Mediocre Investor Must Know</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="https://www.wisebread.com/7-reasons-to-invest-in-stocks-past-age-50">7 Reasons to Invest in Stocks Past Age 50</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="https://www.wisebread.com/4-simple-ways-to-conquer-your-fear-of-investing">4 Simple Ways to Conquer Your Fear of Investing</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Investment Retirement bonds inflation longevity market crash old age returns risk stock market stocks Mon, 12 Mar 2018 09:00:06 +0000 Tim Lemke 2114064 at https://www.wisebread.com 8 Questions to Ask Before Buying Any Stock https://www.wisebread.com/8-questions-to-ask-before-buying-any-stock <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/8-questions-to-ask-before-buying-any-stock" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="https://wisebread-killeracesmedia.netdna-ssl.com/files/fruganomics/imagecache/250w/blog-images/hand_holding_smartphone_with_stock_graph.jpg" alt="Hand holding smartphone with stock graph" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>At last count, there were nearly 4,000 publicly traded companies in the United States. That's a lot to choose from if you are an investor, so figuring out what stocks to buy can feel overwhelming.</p> <p>Before investing your hard-earned money into shares of a company, it's best to ask the right questions. Doing so could be the difference between owning a profitable investment or a bust. Here are some key questions to ask before making a stock purchase.</p> <h2>1. What does the company do?</h2> <p>This should be your very first question when buying a stock. It seems obvious, but sometimes people are so wowed by the buzz surrounding a company that they don't figure out the basics. if you plan to own shares of a company, you should have an idea of how it makes its money. If you don't have a good sense of the company's business model, how can you evaluate whether it's a good investment or not?</p> <p>Usually, you can get a solid understanding of a company by doing a modest amount of research. But there are some companies that are extraordinarily complex, and others that are even cagey about how they get revenue. If faced with one of these companies, it's probably best to hold off on buying shares.</p> <p>In fact, companies that have been opaque about how they earn money have proved to be some of the biggest busts in stock market history. Enron is perhaps the best example of this. (See also: <a href="http://www.wisebread.com/4-quick-ways-to-decide-if-a-company-is-worth-your-investment?ref=seealso" target="_blank">4 Quick Ways to Decide If a Company Is Worth Your Investment</a>)</p> <h2>2. What are the company's revenues and earnings?</h2> <p>There are many factors that drive a company's stock price, but one of the most important things is its financial performance. The two key figures to know are revenue &mdash; how much money the company brings in &mdash; and earnings, which is another term for profit. The higher these numbers, the better, but it's important to not analyze revenues and earnings in a vacuum. Compare these numbers to figures from the previous quarter and the same quarter a year prior. Also compare their performance to competitors in the industry.</p> <p>Additionally, investors should not only look at total earnings, but earnings per share, or EPS. So for example, if a company had $20 million in earnings and has 10 million shares, the earnings per share would be $2. Again, look at what's normal for the industry, and compare that to the EPS of the company you're considering investing in.</p> <p>Examining revenues and earnings will give you a good sense of the financial health of the company, and whether it's worth investing in.</p> <h2>3. What is its historical performance?</h2> <p>While it is true that past performance does not necessarily predict future returns, a long track record of good returns is a positive indicator for most stocks. If you come across a stock that has decades of consistent, solid returns, you can buy shares with some degree of confidence. A stock with a shorter track record of success may bring greater risk and uncertainty to investors.</p> <p>When evaluating a stock, take a look at the returns over the previous five- and 10-year periods. Go back even further if possible. Anything less than three years is not a large enough sample size to draw a good conclusion. (See also: <a href="http://www.wisebread.com/9-ways-to-tell-if-a-stock-is-worth-buying?ref=seealso" target="_blank">9 Ways to Tell If a Stock is Worth Buying</a>)</p> <h2>4. Does it pay a dividend?</h2> <p>Many companies choose to distribute a portion of their earnings to shareholders each quarter. These quarterly payments are called dividends, and they can be a powerful source of passive income for many investors. Healthy companies are able and willing to pay sizable dividends to shareholders, though some choose to keep their cash and reinvest it instead. Amazon is one example of a strong company that chooses to focus on growth rather than pay dividends.</p> <p>Generally speaking, companies that pay out hefty dividends tend to be more stable but don't grow as quickly. Utility companies usually fall into this category. If you are closer to retirement, you may wish to have more dividend stocks in your portfolio to protect your savings and replace income when you retire. If you are further away from retirement, you may be more inclined to eschew dividend stocks in favor of those that are more focused on growth.</p> <h2>5. What is its price-to-earnings ratio?</h2> <p>It's not easy to figure out whether a company's stock price is too high or too low. One helpful indicator, however, is the ratio of the stock price relative to its earnings per share. There is no magic ratio to look for, but you ideally want to avoid price-to-earnings ratios that are too high, because it could mean a stock is overpriced. Good P/E ratios can vary by industry; a growing tech company can have a P/E ratio over 20 and be sensibly priced, while a manufacturer may be overpriced with a ratio of 10.</p> <p>If you are researching a stock, take a look the P/E ratios of competitors in the same industry and the market overall. You may find a bargain stock, or determine that the shares you were poised to buy are too pricey. (See also: <a href="http://www.wisebread.com/make-smarter-investments-by-mastering-this-simple-ratio?ref=seealso" target="_blank">Make Smarter Investments by Mastering This Simple Ratio</a>)</p> <h2>6. What is its market capitalization?</h2> <p>Market capitalization is just a fancy term for size. It's the value of all the company's outstanding shares multiplied by the share price. So, a company with 10 million shares that sell for $100 each would have a market capitalization of $1 billion.</p> <p>Large-cap companies generally have market capitalizations of $10 billion or more. Mid-cap stocks have market capitalizations of $2 billion to $10 billion and small caps have market capitalizations of $300,000 to $2 billion.</p> <p>A well-rounded stock portfolio should have a good mix of larger companies with small and medium-sized firms as well. Larger companies tend to have more stable stocks, which are good for longer-term investing. Small companies, particularly in sectors like technology, can have higher returns in the short-term but may be more volatile. Understanding a company's size will help you grasp a stock's growth potential.</p> <h2>7. Does it operate domestically and internationally?</h2> <p>When researching a stock, it's helpful to get an understanding of where, geographically, the company gets its revenues. If a company has growing overseas operations, this can give you an idea of whether there is room for growth. After all, the U.S. makes up only about 5 percent of the world's population.</p> <p>A well-diversified portfolio should include some exposure to international markets. And if you own shares of U.S.-based companies with big overseas operations, you may not need to invest directly into international firms that you may not be as familiar with.</p> <h2>8. Does the company have a &quot;moat?&quot;</h2> <p>Warren Buffett, one of the world's most successful investors, often speaks of a company's &quot;moat.&quot; What is a moat? Well, we think of it as a body of water that protects a medieval castle, but in investing terms, it's anything that gives a company a competitive advantage and cushion to survive challenging times. A company like Walmart, for example, can thrive in both good economic times and in bad because it sells products with low prices. Facebook is another company with a wide moat, due to its massive edge in users over other social media companies.</p> <p>When considering a stock, understand that the larger the moat, the more resilient the company. And that's great for investors.</p> <h2 style="text-align: center;">Like this article? Pin it!</h2> <div align="center"><a data-pin-do="buttonPin" data-pin-count="above" data-pin-tall="true" href="https://www.pinterest.com/pin/create/button/?url=http%3A%2F%2Fwww.wisebread.com%2F8-questions-to-ask-before-buying-any-stock&amp;media=http%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2F8%2520Questions%2520to%2520Ask%2520Before%2520Buying%2520Any%2520Stock.jpg&amp;description=8%20Questions%20to%20Ask%20Before%20Buying%20Any%20Stock"></a></p> <script async defer src="//assets.pinterest.com/js/pinit.js"></script></div> <p style="text-align: center;"><img src="https://wisebread-killeracesmedia.netdna-ssl.com/files/fruganomics/u5180/8%20Questions%20to%20Ask%20Before%20Buying%20Any%20Stock.jpg" alt="8 Questions to Ask Before Buying Any Stock" width="250" height="374" /></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="https://www.wisebread.com/tim-lemke">Tim Lemke</a> of <a href="https://www.wisebread.com/8-questions-to-ask-before-buying-any-stock">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="https://www.wisebread.com/9-ways-to-tell-if-a-stock-is-worth-buying">9 Ways to Tell If a Stock is Worth Buying</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="https://www.wisebread.com/7-ways-to-compare-stock-market-investments">7 Ways to Compare Stock Market Investments</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="https://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-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="https://www.wisebread.com/beginners-guide-to-reading-a-stock-table">Beginner&#039;s Guide to Reading a Stock Table</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="https://www.wisebread.com/how-to-save-for-retirement-when-you-are-unemployed">How to Save for Retirement When You Are Unemployed</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Investment dividends market capitalization moat performance p/e ratio price to earnings revenue shares stocks Tue, 30 Jan 2018 09:30:08 +0000 Tim Lemke 2090874 at https://www.wisebread.com 5 Ways Longevity Is Changing Retirement Planning (And What to Do About It) https://www.wisebread.com/5-ways-longevity-is-changing-retirement-planning-and-what-to-do-about-it <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/5-ways-longevity-is-changing-retirement-planning-and-what-to-do-about-it" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="https://wisebread-killeracesmedia.netdna-ssl.com/files/fruganomics/imagecache/250w/blog-images/iStock-680410686.jpg" alt="how longevity is changing retirement planning" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>There's no doubt about it: People are living longer and need more money to support their extended life spans. In the U.S. alone, the average life expectancy has reached the mid-80s for people turning 65 today, though it's not unusual for someone to live well into their 100s.</p> <p>Longer life spans should be a reason to rejoice &mdash; after all, it means additional memories and experiences that come with having more time on earth. However, living longer also brings legitimate concerns about saving enough money to support such a long stay.</p> <p>If you're uncertain that you'll have enough money to enjoy a retirement of 30 or 40 years, you should start planning now. Take a look at how living longer could affect your retirement income and what you can do to prepare for it.</p> <h2>1. You need to save more money</h2> <p>Much of the financial advice for retirement hasn't considered a retirement period that could last 30 or 40 years. If people aren't advised to save enough during their career, they'll likely have a smaller nest egg that will be depleted much faster. In the case of a long life span, saving the typical 10 to 15 percent of income traditionally recommended for retirement probably won't be enough.</p> <p>You should consider working with a financial planner to discuss the prospects of a longer retirement. Get solid numbers on your potential cost of living to cover various scenarios. Calculate what you could need 20, 30, and even 40 years after you leave the working world, and figure out the amount of money you should be saving to cover those scenarios. (See also: <a href="http://www.wisebread.com/how-to-face-these-7-scary-facts-about-retirement-saving?ref=seealso" target="_blank">How to Face These 7 Scary Facts About Retirement Saving</a>)</p> <h2>2. Your investments may need longer exposure to risk</h2> <p>There are a couple of ways your investing strategy may change with a longer life span. For one, you may find yourself using catch-up contributions and may opt to max out every retirement vehicle you can as early as your 40s and 50s.</p> <p>Then, there's the idea of allocation and risk. Morgan Ranstrom, CFA of Trailhead Planners, says that moving away from equities into bonds may no longer be a good strategy. &quot;It may be necessary to maintain more stock and/or risk exposure in a retiree's investment portfolio to reduce the risk of outliving their money,&quot; he says.</p> <p>An investment adviser can help you create a reasonable asset allocation plan that considers a longer retirement period. Make sure you have a rebalancing plan for each stage of your life, from pre-retirement through 20 or 30 years post-retirement. Seeing these scenarios, with possible outcomes, will give you an idea of how to adjust your investment strategy both now and later on in life. (See also: <a href="http://www.wisebread.com/7-reasons-to-invest-in-stocks-past-age-50?ref=seealso" target="_blank">7 Reasons to Invest in Stocks Past Age 50</a>)</p> <h2>3. You'll need more insurance</h2> <p>Michael Dinich, professional estate and tax planner, points out that, &quot;Many universal life policies were funded at a level that would only guarantee coverage until mid-80s.&quot; Extending policies for older retirees can be extremely costly, leaving people without coverage when they need it most.</p> <p>In addition to life insurance, longer life spans could increase the need for long term care insurance. This type of insurance can help cover nursing home costs. Getting this insurance in your 50s or 60s can be expensive, but it will be significantly cheaper than if you wait until you're older. (See also: <a href="http://www.wisebread.com/the-best-age-to-buy-long-term-care-insurance?ref=seealso" target="_blank">The Best Age to Buy Long-Term Care Insurance</a>)</p> <p>Check your existing insurance policies to find additional products that may cover your needs. For example, some policies can be converted partially or completely once the term expires so they last longer. There may also be hybrid products that cover a combination of life, burial, and long term care. The key is to check into these options early to prevent being ineligible at an older age.</p> <h2>4. You may need to work longer</h2> <p>Living longer means you may need to keep working longer to continue growing your retirement savings. Kevin Langman, financial planner at Finovo, says he sees clients with a more fluid concept of their working careers. &quot;Instead of working to a set date and stopping,&quot; he explains, &quot;we see careers going through stages, with a few decades of full-time work followed by a shift to more part-time and passion-fueled work.&quot;</p> <p>Just because you may need to work later in life doesn't mean it has to be stressful or you have to languish in a job you dislike. Investigate ways to extend your career in a way you don't dread &mdash; maybe turn a passion or hobby into a side gig. Langman encourages his entrepreneurial clients to explore residual income options like, &quot;products and services that can continue to generate income even once they are not working on them full-time anymore.&quot; (See also: <a href="http://www.wisebread.com/6-great-retirement-jobs?ref=seealso" target="_blank">6 Great Retirement Jobs</a>)</p> <h2>5. You'll need to account for inflation</h2> <p>Brian Saranovitz, of Your Retirement Advisor, says that planning for inflation can be tricky such a long way out. He says, &quot;In some cases, retirees will need to create an inflation-adjusted retirement income for 25, 35, or possibly more years.&quot; With such a far-out horizon, it can be hard to pinpoint exactly how much inflation will affect an asset base.</p> <p>Work closely with your retirement planner or investment adviser to control the effects of not only inflation, but other forces that can erode assets quickly like taxes and market volatility. Some options include exploring alternative investments and insurance products to increase the effectiveness of your portfolio. (See also: <a href="http://www.wisebread.com/4-ways-to-protect-your-retirement-from-inflation?ref=seealso" target="_blank">4 Ways to Protect Your Retirement From Inflation</a>)</p> <p>Roger Whitney has been a financial adviser for 27 years. He sums up the idea of a longer retirement in this way: &quot;Traditional retirement planning worked for our parents. They lived retirement on the park bench of life. The modern retiree will likely live longer, be more active, and spend more in retirement. They'll still be on the playground.&quot;</p> <h2 style="text-align: center;">Like this article? Pin it!</h2> <div align="center"><a data-pin-do="buttonPin" data-pin-count="above" data-pin-tall="true" href="https://www.pinterest.com/pin/create/button/?url=http%3A%2F%2Fwww.wisebread.com%2F5-ways-longevity-is-changing-retirement-planning-and-what-to-do-about-it&amp;media=http%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2F5%2520Ways%2520Longevity%2520Is%2520Changing%2520Retirement%2520Planning%2520%2528And%2520What%2520to%2520Do%2520About%2520It%2529.jpg&amp;description=5%20Ways%20Longevity%20Is%20Changing%20Retirement%20Planning%20(And%20What%20to%20Do%20About%20It)"></a></p> <script async defer src="//assets.pinterest.com/js/pinit.js"></script></div> <p style="text-align: center;"><img src="https://wisebread-killeracesmedia.netdna-ssl.com/files/fruganomics/u5180/5%20Ways%20Longevity%20Is%20Changing%20Retirement%20Planning%20%28And%20What%20to%20Do%20About%20It%29.jpg" alt="5 Ways Longevity Is Changing Retirement Planning (And What to Do About It)" width="250" height="374" /></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="https://www.wisebread.com/aja-mcclanahan">Aja McClanahan</a> of <a href="https://www.wisebread.com/5-ways-longevity-is-changing-retirement-planning-and-what-to-do-about-it">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="https://www.wisebread.com/7-reasons-youre-never-too-old-to-buy-stocks">7 Reasons You&#039;re Never Too Old to Buy 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="https://www.wisebread.com/4-ways-to-protect-your-retirement-from-inflation">4 Ways to Protect Your Retirement From Inflation</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="https://www.wisebread.com/7-reasons-to-invest-in-stocks-past-age-50">7 Reasons to Invest in Stocks Past Age 50</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="https://www.wisebread.com/7-easiest-ways-to-catch-up-on-retirement-savings-later-in-life">7 Easiest Ways to Catch Up on Retirement Savings Later in Life</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="https://www.wisebread.com/9-threats-to-a-secure-retirement">9 Threats to a Secure Retirement</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Retirement inflation insurance long term care longer life span longer retirement longevity nest egg old age risk saving money stocks Mon, 22 Jan 2018 09:30:09 +0000 Aja McClanahan 2091126 at https://www.wisebread.com 7 Things You Should Know About Your 401(k) Match https://www.wisebread.com/7-things-you-should-know-about-your-401k-match <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/7-things-you-should-know-about-your-401k-match" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="https://wisebread-killeracesmedia.netdna-ssl.com/files/fruganomics/imagecache/250w/blog-images/piggy_bank_with_401k_nest_egg.jpg" alt="Piggy bank with 401(k) nest egg" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>If you are working and have access to a 401(k) plan from your employer, you may have heard references to a &quot;company match&quot; on contributions. What does this mean? It means that your employer is helping you save for retirement by matching the money you contribute, up to a certain amount.</p> <p>These matching funds can be a very powerful way to save money over time, and it's important take advantage of a company's full 401(k) match if you can. Every company has different policies regarding these matching funds, and things can often be confusing for new investors. Here are some key things to know.</p> <h2>1. The match is free money</h2> <p>A 401(k) match is not a bonus based on your job performance. It's not a payment made in lieu of your salary. It's truly a contribution from your company to help you save for your retirement, which you can use to invest in a variety of mutual funds and other investments.</p> <p>There's only one catch, which is that you need to direct a portion of your own money into the 401(k) plan first. That's why they call it a match. Some employers will automatically sign you up for the 401(k) plan and set aside a certain percentage of your salary as a contribution each pay period. (Don't worry &mdash; you can always adjust that amount.) If you are unclear on how much you should contribute to your 401(k), try to at least put aside enough to get the maximum company match. If you miss out on the full match, you are missing out on free cash that could add up to tens of thousands of dollars or more over time. (See also: <a href="http://www.wisebread.com/how-to-tell-if-your-401k-is-a-good-or-a-bad-one?ref=seealso" target="_blank">How to Tell if Your 401K Is a Good or a Bad One</a>)</p> <h2>2. Companies match differently</h2> <p>There is no standard or required way for employers to match 401(k) contributions. Some companies are very generous and match every dollar you contribute, no matter how much you put in. Others will match only a very small percentage. Matching contributions can change if a company is doing better or worse financially. When searching for a job, learning about a company's matching policy can help you decide whether you want to work there. Think of the 401(k) plan as part of a company's overall benefits package.</p> <p>A company's match may also offer some insight into the overall health of the firm. If a company recently stopped matching contributions, that's a red flag that the company may be in trouble.</p> <h2>3. There is often a &quot;vesting&quot; period</h2> <p>Many employers will begin matching contributions as soon as you begin working there, but you may have to give back those matching funds if you leave the company after a specific time. For example, if you've been setting aside 5 percent of your salary into your 401(k) and your company is matching that, you don't necessarily get to keep the company's contributions right away. You may have to wait one year, three years, or even longer to keep that money permanently. This is called a <em>vesting period</em>.</p> <p>About half of employers offer immediate vesting, according to one Vanguard survey. But others have different vesting schedules. Some will allow you to keep a portion of company contributions after a certain amount of time, and increase that total annually until you are fully vested. (Example: 20 percent vested in year one, 40 percent vested in year two, etc.)</p> <p>Vesting schedules and policies can be confusing and can change, so be sure to read your 401(k) plan documents carefully. And if your company does have a vesting period for its 401(k) match, try to avoid leaving before that time is up, as doing so could result in you forfeiting thousands of dollars plus any future investment gains. (See also: <a href="http://www.wisebread.com/8-critical-401k-questions-you-need-to-ask-your-employer?ref=seealso" target="_blank">8 Critical 401(k) Questions You Need to Ask Your Employer</a>)</p> <h2>4. Contribute more, get more</h2> <p>Here's a brain teaser for you: If Company A makes a dollar-for-dollar match on all employee contributions up to 4 percent, and Company B matches contributions up to 8 percent at 50 cents on the dollar, which company is contributing more?</p> <p>The answer is that they are both contributing the same amount. The difference, however, is that Company B is using its matching funds to incentivize workers to contribute more of their own money. If you take advantage of Company B's full match, you will have more money in total because your own contribution will be higher. Contributing more yourself will also save you money because those funds are deducted from your taxable income.</p> <h2>5. Matching money doesn't count against contribution limits</h2> <p>The IRS places a limit on the amount of money you can contribute to a 401(k) each year. For 2018, that limit will be $18,500. It's important to note that this limit only applies to money that the <em>individual </em>contributes. Money from the company match does not count against this total. Thus, the total amount of money from all sources going into your 401(k) each year could be much more than the IRS limit. Feel free to contribute as much as you can, take advantage of the full company match, and watch your savings grow. (See also: <a href="http://www.wisebread.com/6-ways-meeting-the-2018-401k-contribution-limits-will-brighten-your-future?ref=seealso" target="_blank">6 Ways Meeting the 2018 401(k) Contribution Limits Will Brighten Your Future</a>)</p> <h2>6. Sometimes the match comes as company stock</h2> <p>In some cases, employers will contribute all or part of a 401(k) match in the form of company stock. While free company stock is better than nothing, it's risky to have it comprise too much of your savings. Your employer already pays your salary, so your financial security is already tied to the company's success. Past employees of Enron and other failed companies can attest to the risk of having too much of their savings tied up in company stock.</p> <p>If you receive company stock in your retirement plan, consider adjusting your investment mix so company stock doesn't comprise more than 5 to 10 percent of your portfolio. (See also: <a href="http://www.wisebread.com/7-things-you-need-to-know-about-investing-in-company-stock?ref=seealso" target="_blank">7 Things You Need to Know About Investing in Company Stock</a>)</p> <h2>7. It doesn't pay to front load your contributions</h2> <p>Let's say it's January and you just got a big pay raise, a bonus, or both. You may be tempted to throw as much money as you can into your 401(k) at that point. If your employer matches based on pay period, you may miss out on matching funds if you max out your contributions early.</p> <p>So for example: Let's say you earn $200,000 annually and choose to set aside 30 percent of your income per month in the first few months of the year. And let's say your company matches all contributions up to 5 percent of your salary per pay period. Under this scenario, you will have maxed out your contributions by April and won't be able to contribute any more for the rest of the year. Meanwhile, your employer has only contributed up to the maximum company match for those first few months. In this case, your company will have put in about $3,332 when you would have received $10,000 in matching funds if you had spread the contributions out.</p> <h2 style="text-align: center;">Like this article? Pin it!</h2> <div align="center"><a data-pin-do="buttonPin" data-pin-count="above" data-pin-tall="true" href="https://www.pinterest.com/pin/create/button/?url=http%3A%2F%2Fwww.wisebread.com%2F7-things-you-should-know-about-your-401k-match&amp;media=http%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2F7%2520Things%2520You%2520Should%2520Know%2520About%2520Your%2520401%2528k%2529%2520Match.jpg&amp;description=7%20Things%20You%20Should%20Know%20About%20Your%20401(k)%20Match"></a></p> <script async defer src="//assets.pinterest.com/js/pinit.js"></script></div> <p style="text-align: center;"><img src="https://wisebread-killeracesmedia.netdna-ssl.com/files/fruganomics/u5180/7%20Things%20You%20Should%20Know%20About%20Your%20401%28k%29%20Match.jpg" alt="7 Things You Should Know About Your 401(k) Match" width="250" height="374" /></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="https://www.wisebread.com/tim-lemke">Tim Lemke</a> of <a href="https://www.wisebread.com/7-things-you-should-know-about-your-401k-match">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="https://www.wisebread.com/6-reasons-every-millennial-needs-a-roth-ira">6 Reasons Every Millennial Needs a Roth IRA</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="https://www.wisebread.com/7-easiest-ways-to-catch-up-on-retirement-savings-later-in-life">7 Easiest Ways to Catch Up on Retirement Savings Later in Life</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="https://www.wisebread.com/how-to-save-for-retirement-when-you-are-unemployed">How to Save for Retirement When You Are Unemployed</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="https://www.wisebread.com/8-signs-your-retirement-is-on-track">8 Signs Your Retirement Is on Track</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="https://www.wisebread.com/your-401k-in-2017-heres-whats-new-for-you">Your 401K in 2017: Here&#039;s What&#039;s New for You</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Retirement 401(k) contributions employers investing matching stocks vesting periods Wed, 17 Jan 2018 09:30:05 +0000 Tim Lemke 2085770 at https://www.wisebread.com 7 Easiest Ways to Catch Up on Retirement Savings Later in Life https://www.wisebread.com/7-easiest-ways-to-catch-up-on-retirement-savings-later-in-life <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/7-easiest-ways-to-catch-up-on-retirement-savings-later-in-life" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="https://wisebread-killeracesmedia.netdna-ssl.com/files/fruganomics/imagecache/250w/blog-images/investing_money_for_retirement_in_piggy_bank.jpg" alt="Investing money for retirement in piggy bank" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>According to a survey by the Employee Benefit Research Institute, three in 10 workers report that preparing for retirement causes them emotional distress. Why? Well, because most people feel they are sorely behind when it comes to retirement savings.</p> <p>The Economic Policy Institute reports that baby boomer families, on average, have just a little over $160,000 saved for retirement. With longer life spans, inflation, and increasing health care costs, it's possible that many retirees won't have enough to comfortably sustain their retirements.</p> <p>If you feel behind with your retirement savings, you may be panicking. However, there's hope for you. If you're open to suggestions, a few smart moves will help you catch up on savings even late in the game. (See also: <a href="http://www.wisebread.com/7-retirement-planning-steps-late-starters-must-make?ref=seealso" target="_blank">7 Retirement Planning Steps Late Starters Must Make</a>)</p> <h2>1. Change your mindset</h2> <p>One of the best ways to take the pressure off catching up with retirement savings is to change your mindset.</p> <p>Rob Hill, owner of financial advisory firm R. Hill Enterprises, Inc., helps people plan for retirement and other stages of life. He says that in order to catch up with your savings, you need to first be more flexible with your idea of retirement. &quot;The first thing I would suggest is not looking at retirement as an age, but rather a financial position,&quot; he says.</p> <p>Hill explains that focus can ease anxiety and make a catch-up goal more feasible for some. He explains, &quot;The goal of retirement is not a pile of assets, it is cash flow that makes retirement possible.&quot;</p> <p>If you look at retirement in this light, you may discover you have more retirement runway than you thought and that building up your nest egg is a little more possible.</p> <h2>2. Make catch-up contributions</h2> <p>If you're over 50 years old, you can contribute more than usual to your 401(k). For 2018, employees within the age guidelines can contribute $18,500 plus a catch-up contribution of $6,000, for a total of $24,500. This approach can be even more helpful if your employer offers a match.</p> <p>Kevin Ward, of Park Elm Investment Advisors, notes another way to save: an IRA &mdash; either a traditional IRA or a Roth IRA. &quot;Aside from your employer-sponsored plan, you can save $5,500 in an IRA,&quot; he says. &quot;For those over 50, there is an additional catch-up contribution of $1,000, for a total of $6,500.&quot; (See also: <a href="http://www.wisebread.com/6-ways-meeting-the-2018-401k-contribution-limits-will-brighten-your-future?ref=seealso" target="_blank">6 Ways Meeting the 2018 401(k) Contribution Limits Will Brighten Your Future</a>)</p> <h2>3. Contribute to a health savings account (HSA)</h2> <p>Though HSAs were created as savings vehicles for health care expenses, there are some tax advantages and treatments that can make this type of account a supplemental retirement option. In order for you to open an HSA, you must have a qualified health care plan, like a high deductible health plan (HDHP).</p> <p>Shobin Uralil, founder of HSA management platform Lively, says placing money in an HSA has many benefits and &quot;loopholes&quot; that make this a great addition for retirement savings.</p> <p>&quot;You can save pretax money and then use pretax dollars to pay for qualified out-of-pocket medical expenses,&quot; he says. &quot;After the age of 65, you can use HSA funds for anything you want, not just qualified out-of-pocket medical expenses.&quot;</p> <p>It's also worth noting that HSAs have no mandatory distributions in retirement so you can save into your 70s, 80s, and beyond. This is helpful for anyone behind on retirement saving and needing more time to save. (See also: <a href="http://www.wisebread.com/how-an-hsa-could-help-your-retirement?ref=seealso" target="_blank">How an HSA Could Help Your Retirement</a>)</p> <h2>4. Be frugal</h2> <p>You might be excited about the idea of saving more money, but wondering how you'll actually achieve those higher savings rates. Your best bet is to reduce your current lifestyle expenses. Of course, you'll want to adjust your spending to a level that is comfortable for you. But keep in mind the ultimate goal of having enough money to support your retirement.</p> <p>The options for saving money are unlimited. With some creativity and motivation, you should be able to find some frugal habits that will help you make your savings goals &mdash; everything from downsizing your home, to eating out only once per month. (See also: <a href="http://www.wisebread.com/6-ways-you-can-cut-costs-right-before-you-retire-0?Ref=seealso" target="_blank">6 Ways You Can Cut Costs Right Before You Retire</a>)</p> <h2>5. Postpone collecting Social Security</h2> <p>This is another strategy that can help you earn more income during retirement. The Social Security Administration reports that postponing Social Security benefits past your full retirement age can boost future payments by up to 8 percent for every year the income is deferred until age 70.</p> <p>Tom Foster, national spokesperson at MassMutual, works with financial advisers and employers to educate them about 401(k) plans. He recommends postponing Social Security benefits because the returns are pretty significant if you can hold off. He notes, &quot;Few investment strategies net such a return, never mind one with a guarantee.&quot; (See also: <a href="http://www.wisebread.com/6-smart-ways-to-boost-your-social-security-payout-before-retirement?ref=seealso" target="_blank">6 Smart Ways to Boost Your Social Security Payout Before Retirement</a>)</p> <h2>6. Keep working</h2> <p>A 2013 Georgetown University study estimates that there will be as many as 55 million job openings by 2020 due to baby boomers retiring and leaving the workforce. So the chances are, there will be plenty of demand for those who want to stick around and work longer.</p> <p>Fortunately, we live in a wonderful time where the internet allows people to work longer, under flexible conditions from almost anywhere in the world. If you can keep working longer, it will add to your potential to save up even more money. (See also: <a href="http://www.wisebread.com/4-creative-remote-jobs-that-can-supplement-your-retirement-income?ref=seealso" target="_blank">4 Creative Remote Jobs That Can Supplement Your Retirement Income</a>)</p> <h2>7. Keep investing</h2> <p>It used to be that people drastically reduced their investment portfolios in anticipation of their &quot;golden years.&quot; In order to reduce the risk of losing the principal amount of their savings, a retiree might be prompted to go with a very conservative investing strategy by keeping their assets in cash, bonds, or a combination of both.</p> <p>Nowadays, people are living and working longer and may be able to invest and save more aggressively for longer periods of time.</p> <p>Cliff Caplan, CFP at Neponset Valley Financial Partners, suggests that people needing to save more should continue to invest for growth. &quot;Establish and continually fund a growth-oriented account that can benefit from lower long-term capital gains treatment,&quot; he says. &quot;Dollar cost averaging can also be used to reduce volatility in a portfolio.&quot; (See also: <a href="http://www.wisebread.com/7-reasons-to-invest-in-stocks-past-age-50?ref=seealso" target="_blank">7 Reasons to Invest in Stocks Past Age 50</a>)</p> <h2 style="text-align: center;">Like this article? Pin it!</h2> <div align="center"><a data-pin-do="buttonPin" data-pin-count="above" data-pin-tall="true" href="https://www.pinterest.com/pin/create/button/?url=http%3A%2F%2Fwww.wisebread.com%2F7-easiest-ways-to-catch-up-on-retirement-savings-later-in-life&amp;media=http%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2FHow%2520To%2520Travel%2520More%2520With%2520a%2520Full-Time%2520Job.jpg&amp;description=7%20Easiest%20Ways%20to%20Catch%20Up%20on%20Retirement%20Savings%20Later%20in%20Life"></a></p> <script async defer src="//assets.pinterest.com/js/pinit.js"></script></div> <p style="text-align: center;"><img src="https://wisebread-killeracesmedia.netdna-ssl.com/files/fruganomics/u5180/How%20To%20Travel%20More%20With%20a%20Full-Time%20Job.jpg" alt="7 Easiest Ways to Catch Up on Retirement Savings Later in Life" width="250" height="374" /></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="https://www.wisebread.com/aja-mcclanahan">Aja McClanahan</a> of <a href="https://www.wisebread.com/7-easiest-ways-to-catch-up-on-retirement-savings-later-in-life">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-8"> <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="https://www.wisebread.com/7-reasons-to-invest-in-stocks-past-age-50">7 Reasons to Invest in Stocks Past Age 50</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="https://www.wisebread.com/where-to-invest-your-money-after-youve-maxed-out-your-retirement-account">Where to Invest Your Money After You&#039;ve Maxed Out Your Retirement Account</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="https://www.wisebread.com/how-to-save-for-retirement-when-you-are-unemployed">How to Save for Retirement When You Are Unemployed</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="https://www.wisebread.com/8-signs-youre-making-all-the-right-moves-for-retirement">8 Signs You&#039;re Making All the Right Moves for Retirement</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="https://www.wisebread.com/7-roadblocks-to-retirement-and-how-to-clear-them">7 Roadblocks to Retirement (And How to Clear Them)</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Retirement 401(k) catching up contributions cutting expenses HSA IRA late starters risk saving money social security stocks Tue, 16 Jan 2018 10:00:06 +0000 Aja McClanahan 2085769 at https://www.wisebread.com You Can Start Investing With a Lot Less Money Than You Think https://www.wisebread.com/you-can-start-investing-with-a-lot-less-money-than-you-think <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/you-can-start-investing-with-a-lot-less-money-than-you-think" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="https://wisebread-killeracesmedia.netdna-ssl.com/files/fruganomics/imagecache/250w/blog-images/paper_pie_chart_on_a_plate.jpg" alt="Paper pie chart on a plate" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Getting started in investing often presents a chicken or egg scenario. Investment companies don't make it easy on new investors because they charge fees on most transactions and they have high minimum purchase requirements for many mutual funds. How can you start investing if you have very little money to begin with?</p> <p>There <em>are </em>good options for new investors. If you are just getting started with investing and only have a small amount of cash to spare, you can get involved in the stock market in a number of ways. (See also: <a href="http://www.wisebread.com/8-money-moves-to-make-before-you-start-investing?ref=seealso" target="_blank">8 Money Moves to Make Before You Start Investing</a>)</p> <h2>Find commission-free investments</h2> <p>One of the tough things about investing when you have a small amount of money is that fees often take out a sizable chunk of your purchasing power. For example, if you want to buy two shares of Coca-Cola for $100 total, eTrade charges $6.95 for each trade. That means you're losing nearly 7 percent of your money right off the bat.</p> <p>Fortunately, many discount brokerage firms, including eTrade, Fidelity Investments, and others, offer many investments without a commission. Often, these commission-free investments are exchange-traded funds that allow you to gain ownership of a specific stock sector or class.</p> <h2>Seek funds with low minimum requirements</h2> <p>There is a perception out there that the best-performing mutual funds are only open to people willing to invest tens of thousands of dollars. But this isn't necessarily true. Most major mutual fund companies offer scores of great funds that are available to people with relatively small minimums. Charles Schwab has several funds that allow you to get started for $100, and there are others out there with minimums of under $1,000.</p> <p>Keep in mind, too, that even a minimum of $3,000 could be in reach for you with the right kind of planning. If you can put aside $250 a month, an entire world of mutual funds will be available to you by the end of the year.</p> <h2>Use your 401(k)</h2> <p>If you have a 401(k) or similar plan from your employer, you can direct as little as 1 percent of your paycheck into that account. So if you're making, say, $30,000 annually, that amounts to barely more than $12 each paycheck. It's not much, but it gets you started and may even be subject to a matching contribution from your company. We encourage you to contribute enough to get the maximum in matching funds, but every little bit helps. (See also: <a href="http://www.wisebread.com/bookmark-this-a-step-by-step-guide-to-choosing-401k-investments?ref=seealso" target="_blank">A Step-by-Step Guide to Choosing 401(k) Investments</a>)</p> <h2>Buy fractional shares</h2> <p>Believe it or not, there are now ways to buy less than a full share of stock, using smartphone apps. <a href="https://www.stockpile.com/" target="_blank">Stockpile</a> allows you to spend as little as $5 and buy fractional shares of more than 1,000 ETFs and mutual funds. Another app called <a href="https://divy.com/" target="_blank">Divy</a> lets you buy partial shares for $10, with commissions of just 10 cents; and <a href="https://www.stashinvest.com/" target="_blank">Stash</a> has 40 ETFs available for a minimum investment of just $5. So for the price of just a couple cups of coffee, you can get started investing. And it's a great way to learn the basics of the stock market with little risk.</p> <h2>Try a subscription service</h2> <p>Another new area of investing comes from digital platforms that allow you to own shares, but through a monthly subscription model. <a href="https://www.motifinvesting.com/" target="_blank">Motif</a> is an online investment adviser that charges as little as $9.95 per month to automatically invest your money into a personalized portfolio centered around a theme, such as &quot;healthy and tasty&quot; (companies that sell organic and farm-raised food). <a href="https://www.folioinvesting.com/" target="_blank">Folio Investing</a> is a competitor that charges $29 per month and allows unlimited trading into as many portfolios as the investor wants.</p> <p>This subscription model eliminates unwanted fees and allows investors to get started with a relatively small amount of money. (See also: <a href="http://www.wisebread.com/everyones-using-spare-change-apps-are-they-really-worth-it?ref=seealso" target="_blank">Everyone's Using Spare Change Apps &mdash; Are They Really Worth It?</a>)</p> <h2>Seek low-priced stocks</h2> <p>Just because a stock is trading at a low price doesn't mean it's not a solid purchase. There are many good companies out there that consistently trade at under $15. In some cases, these companies have simply performed stock splits in order to give shareholders more shares at lower prices. (Companies will often do this to attract new investors.) In other cases, shares are low due to some bad news, but may be due for a rebound. Under Armour is one example of a big company with shares available for cheap; the athletic apparel company has struggled recently, with shares falling below $13, but shares were has high as $29 just one year ago.</p> <p>If you don't have a lot of money to invest, consider looking into shares of companies with low share prices. Just be sure to research the company's financials to see if it's a good investment.</p> <h2>Save to invest</h2> <p>If you don't have money to hit a minimum investment requirement, consider taking a two-step approach. Try to set aside as much money as you can into a special savings account, then once that account has accrued enough, go ahead and invest in that mutual fund. So for example, if you need $3,000 to invest in a certain Vanguard mutual fund, work to set aside $250 a month and see if you can accrue enough to get started investing by the end of the year.</p> <p>The drawback to this approach is that you are essentially delaying investing for a year or more. But, it's better to do this than become discouraged and do nothing at all. (See also: <a href="http://www.wisebread.com/the-only-8-rules-of-investing-you-need-to-know?ref=seealso" target="_blank">The Only 8 Rules of Investing You Need to Know</a>)</p> <h2 style="text-align: center;">Like this article? Pin it!</h2> <div align="center"><a data-pin-do="buttonPin" data-pin-count="above" data-pin-tall="true" href="https://www.pinterest.com/pin/create/button/?url=http%3A%2F%2Fwww.wisebread.com%2Fyou-can-start-investing-with-a-lot-less-money-than-you-think&amp;media=http%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2FYou%2520Can%2520Start%2520Investing%2520With%2520a%2520Lot%2520Less%2520Money%2520Than%2520You%2520Think.jpg&amp;description=You%20Can%20Start%20Investing%20With%20a%20Lot%20Less%20Money%20Than%20You%20Think"></a></p> <script async defer src="//assets.pinterest.com/js/pinit.js"></script></div> <p style="text-align: center;"><img src="https://wisebread-killeracesmedia.netdna-ssl.com/files/fruganomics/u5180/You%20Can%20Start%20Investing%20With%20a%20Lot%20Less%20Money%20Than%20You%20Think.jpg" alt="You Can Start Investing With a Lot Less Money Than You Think" width="250" height="374" /></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="https://www.wisebread.com/tim-lemke">Tim Lemke</a> of <a href="https://www.wisebread.com/you-can-start-investing-with-a-lot-less-money-than-you-think">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="https://www.wisebread.com/how-the-risk-averse-can-get-into-the-stock-market">How the Risk Averse Can Get Into the Stock Market</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="https://www.wisebread.com/158-free-investment-classes-from-morningstar-earn-rewards-while-you-learn">158 Free Investment Classes From Morningstar: Earn Rewards While You Learn</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="https://www.wisebread.com/8-types-of-investors-which-one-are-you">8 Types of Investors — Which One Are You?</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="https://www.wisebread.com/9-ways-to-tell-if-a-stock-is-worth-buying">9 Ways to Tell If a Stock is Worth Buying</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="https://www.wisebread.com/how-to-make-sure-you-dont-run-out-of-money-in-retirement">How to Make Sure You Don&#039;t Run Out of Money in Retirement</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Investment commission-free fractional shares funds 401(k) new to investing stocks subscription services Tue, 09 Jan 2018 10:00:06 +0000 Tim Lemke 2083783 at https://www.wisebread.com How an Exit Strategy Can Make You a Better Investor https://www.wisebread.com/how-an-exit-strategy-can-make-you-a-better-investor <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/how-an-exit-strategy-can-make-you-a-better-investor" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="https://wisebread-killeracesmedia.netdna-ssl.com/files/fruganomics/imagecache/250w/blog-images/negative_business_chart_with_a_businessman.jpg" alt="Negative business chart with a businessman" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>While I am generally a big fan of buy and hold investing, I'm well aware that sometimes it makes sense to unload a bad investment. Similarly, there are times when it&rsquo;s smart to take some profits from an investment that has done well.</p> <p>But how do you know when to sell? Trying to find the right timing for the sale of a stock, mutual fund, or other investment is hard, but it helps if you have mapped out an exit strategy &mdash; a set of guidelines to give you a sense of when to sell.</p> <p>The right exit strategy can help you maximize profits from good investments and reduce losses on bad ones. If you are pondering whether to be a seller, ask yourself if any of these things apply to you or your investment.</p> <h2>It&rsquo;s in a bad industry</h2> <p>If you own shares of a company that&rsquo;s struggling, it&rsquo;s fine to wait and see if management can turn things around. But often, the company is in an industry that is in a downward spiral with no signs of recovery. It&rsquo;s hard to admit, but there are some business sectors that are simply dying as a result of changes to technology, consumer habits, or other reasons.</p> <p>Would you invest in a print newspaper chain, or a brick-and-mortar retailer? How about a coal mining operation? If you own shares of a company that&rsquo;s part of a shrinking industry with no signs of renewal, it&rsquo;s probably time to get out. (See also: <a href="http://www.wisebread.com/help-i-bought-a-stock-dud-what-now?ref=seealso" target="_blank">Help, I Bought a Stock Dud! &mdash; What Now?</a>)</p> <h2>It&rsquo;s priced unreasonably high</h2> <p>It&rsquo;s important to know when to sell a stock when it&rsquo;s a loser, but there are times when you should consider unloading a stock when it&rsquo;s performed exceptionally well. The point of owning a stock is to profit, so once a healthy profit has been reached, it&rsquo;s smart to at least consider taking your profits and investing them elsewhere. This is especially true when a stock is overpriced and potentially due for a fall.</p> <p>One way to determine if a stock is too hot is its price-to-earnings ratio. An average price-to-earnings ratio is between 20 and 25, though it can vary depending on industry. Ratios can go higher if investors are betting on future growth. But if the ratio is high and you&rsquo;re not confident of the growth path of the company, consider taking your profits and moving on. (See also: <a href="http://www.wisebread.com/make-smarter-investments-by-mastering-this-simple-ratio?ref=seealso" target="_blank">Make Smarter Investments by Mastering This Simple Ratio</a>)</p> <h2>You wouldn&rsquo;t consider buying the stock now</h2> <p>If you own a struggling stock, it&rsquo;s often important to ask yourself whether you would buy the stock today. It often makes sense to buy stock when it&rsquo;s priced very low if you believe it will rise and make you a profit over time. But if you reflect on a stock you own and realize that you&rsquo;d probably pass on buying if it was presented to you now, that&rsquo;s a sign that it may be time to unload. When crafting an exit strategy, note the lowest price at which you&rsquo;d be willing to buy a stock. Once shares dip to that point, consider selling.</p> <h2>Selling at a loss can help you save on taxes</h2> <p>If you&rsquo;ve been thinking about selling a losing stock but have felt uncertain about when to pull the trigger, consider using the sale to offset your gains and save on taxes. For example, let&rsquo;s say you sold some shares of one company and made $1,000 in profits. That $1,000 is subject to capital gains taxes. But if you sell a different set of shares at a loss, your tax liability will be reduced or even eliminated. This is called tax loss harvesting, and it&rsquo;s one way to feel less bad about the duds in your portfolio.</p> <h2>You&rsquo;re breaking the 10 percent rule</h2> <p>It&rsquo;s not so much a &ldquo;rule&rdquo; but a guideline that many financial planners use to prevent big losses. If you have an investment that has lost 10 percent of its value in a short amount of time, it may be wise to sell before it goes down further. You can even put in place a &ldquo;stop&rdquo; order that automatically sells a security once it hits a certain price.</p> <p>For example, if you buy Facebook stock at $180, consider setting up a stop order to automatically sell it at $162. By using a stop order, you have the peace of mind to know that the investment will sell even if you are not paying close attention. It&rsquo;s also possible to put in a sell order when a stock reaches a predetermined high point, so you can take profits without worry.</p> <h2>You&rsquo;re breaking the 1 percent rule</h2> <p>Under this rule, the idea is that you never want a single investment to cost you more than 1 percent of your total portfolio. So for example, if you have $100,000 saved in a 401(k), you don&rsquo;t want to lose more than $1,000 from a single stock or mutual fund. Having this approach will prevent one dud investment from ruining your overall retirement nest egg.</p> <h2>You&rsquo;re nearing the &ldquo;support&rdquo; and &ldquo;resistance&rdquo; levels</h2> <p>Technical analysts use the term &ldquo;support&rdquo; to refer to the low price that an investment has historically never dropped below. At the &ldquo;support&rdquo; price, investors have generally decided to buy in and have prevented the price from moving lower. However, if a security moves below the historic &ldquo;support&rdquo; level, it&rsquo;s a sign that there is more downward pressure and that things could get even worse for the investment. It&rsquo;s a good idea to sell at this point to avoid further losses.</p> <p>Similarly, the &ldquo;resistance&rdquo; level is the price at which a security has been historically unable to break through. If an investment keeps approaching the resistance line but isn&rsquo;t breaking through, it may be time to take your profits.</p> <h2>There are other good investments available</h2> <p>There are some instances when it&rsquo;s OK to stick with a subpar investment because there are few other good places to put your money. If interest rates are low and the market is performing badly, it might make sense to wait and see if an investment rebounds. But if you find yourself wishing you could put your money in other, better-performing investments, maybe it&rsquo;s time to sell. There is a cost to selling, but if you free up cash to purchase something that is more likely to net you a profit, you may end up doing better in the long run.</p> <h2 style="text-align: center;">Like this article? Pin it!</h2> <div align="center"><a data-pin-do="buttonPin" data-pin-count="above" data-pin-tall="true" href="https://www.pinterest.com/pin/create/button/?url=http%3A%2F%2Fwww.wisebread.com%2Fhow-an-exit-strategy-can-make-you-a-better-investor&amp;media=http%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2FHow%2520an%2520Exit%2520Strategy%2520Can%2520Make%2520You%2520a%2520Better%2520Investor.jpg&amp;description=How%20an%20Exit%20Strategy%20Can%20Make%20You%20a%20Better%20Investor"></a></p> <script async defer src="//assets.pinterest.com/js/pinit.js"></script></div> <p style="text-align: center;"><img src="https://wisebread-killeracesmedia.netdna-ssl.com/files/fruganomics/u5180/How%20an%20Exit%20Strategy%20Can%20Make%20You%20a%20Better%20Investor.jpg" alt="How an Exit Strategy Can Make You a Better Investor" width="250" height="374" /></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="https://www.wisebread.com/tim-lemke">Tim Lemke</a> of <a href="https://www.wisebread.com/how-an-exit-strategy-can-make-you-a-better-investor">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="https://www.wisebread.com/make-smarter-investments-by-mastering-this-simple-ratio">Make Smarter Investments by Mastering This Simple Ratio</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="https://www.wisebread.com/10-questions-to-ask-before-you-sell-a-stock-or-a-fund">10 Questions to Ask Before You Sell a Stock or a Fund</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="https://www.wisebread.com/4-portfolio-blind-spots-that-are-ruining-your-investments">4 Portfolio &quot;Blind Spots&quot; That Are Ruining Your Investments</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="https://www.wisebread.com/how-the-risk-averse-can-get-into-the-stock-market">How the Risk Averse Can Get Into the Stock Market</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="https://www.wisebread.com/8-types-of-investors-which-one-are-you">8 Types of Investors — Which One Are You?</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Investment bad stocks buying duds exit strategy price to earnings ratio profits selling stock market stocks Thu, 04 Jan 2018 09:30:11 +0000 Tim Lemke 2074014 at https://www.wisebread.com Don't Be Fooled by an Investment's Rate of Return https://www.wisebread.com/dont-be-fooled-by-an-investments-rate-of-return <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/dont-be-fooled-by-an-investments-rate-of-return" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="https://wisebread-killeracesmedia.netdna-ssl.com/files/fruganomics/imagecache/250w/blog-images/investor_compares_quotes_from_newspaper_and_tablet.jpg" alt="Investor compares quotes from newspaper and tablet" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>When you invest, you are looking for return. You want your money to grow over time, preferably at a rate that will allow you to achieve your financial goals.</p> <p>An investment's rate of return can be a deceptive thing, however. The amount of money that an investment has made in the past isn't a guarantee of future returns. Moreover, these returns by themselves don't tell you a whole lot about what you are investing in.</p> <p>Learning how to analyze an investment's returns &mdash; and understanding its limitations &mdash; will help you on the path to financial freedom. Just remember these key facts about an investment's return when examining it.</p> <h2>Short time frames don't tell you much</h2> <p>&quot;Hey, this mutual fund went up 29 percent last year! Woo hoo!&quot; That's great, but what did it do the year before? And the year before that? How has it performed over the last decade? Looking at the rate of return for a single year is not particularly useful, as any investment can have a hot 12 months. To get a sense of how an investment may perform in the future, it helps to have a long record of performance to examine. Fortunately, most brokerages and financial websites have comprehensive information on historical returns, so you're not simply looking at the performance of the last year.</p> <h2>It offers no information on the type of investment</h2> <p>It's great if an investment has a solid rate of return, but that should not be the only consideration when looking to buy shares. If you are buying a stock, you need to ask yourself key questions aside from just looking at performance. What industry does the company operate in? How big is the company? Does it operate internationally? If you're talking about a mutual fund, what is the investment mix? Answering these questions will help you understand whether you already own similar investments, and whether it makes sense to add them to your portfolio.</p> <h2>It's almost useless without context</h2> <p>Let's say you come across a mutual fund that earned a 9 percent return last year. You might think that is pretty good, right? Well, it doesn't look so good when you consider the S&amp;P 500 returned 11.96 percent. Information on returns is only meaningful when it is paired with information about the broader stock market, comparable investments, and specific indexes. A small cap ETF, for example, should be examined alongside the Russell 2000 index. A mutual fund focused on technology should be compared to prominent technology indexes. Fortunately, most brokerage firms and financial websites do provide this, so it's important to analyze market returns using that context.</p> <h2>It does not always factor in all costs</h2> <p>If you purchase a mutual fund or ETF, a certain portion of your investment is taken in expenses and fees. While mutual fund returns are usually reported net of expenses, not every cost is included in this calculation. Many funds have sales charges and commissions (also known as loads) that you pay when buying and selling. Your brokerage firm may also charge a commission to execute the trade. This can reduce your overall return. The good news is that there are many good no-load mutual funds out there, and many can be traded without a commission, depending on the broker.</p> <p>One more caveat regarding costs. Capital gains taxes will also reduce your balance when you sell. Be sure to factor in these costs when examining an investment's rate of return.</p> <h2>It does not offer detail on volatility</h2> <p>Let's say you have a stock that rose in value from $50 to $90 in five years. The annualized return on that stock is 16 percent. But that does not tell you whether the stock's performance has been consistent or wildly up and down.</p> <p>For example, during that five-year period, that stock may have risen 20 percent, then dropped 25 percent, then risen 44 percent, dropped 10 percent, and finally rose 53 percent. That's pretty volatile, and may be outside the comfort zone of many investors even though the overall return is good. To get a better picture of the investment's performance, you need to look at the returns from each individual year, but even that offers no insight into price swings within any given year.</p> <h2>It can't answer the question &quot;Why?&quot;</h2> <p>An investment's rate of return may be the crucial piece of information you need to know before investing, but there's a lot that it doesn't tell you. Perhaps most importantly, it does not offer any insight into <em>why </em>an investment's price moved up or doing during a certain period.</p> <p>Investment values go up and down for a variety of reasons, not all of them related to company performance. Perhaps a retailer saw its shares fall sharply during one quarter due to a series of natural disasters. Perhaps another company saw shares rise dramatically because of hype over its Super Bowl commercial. Returns on investment are crucial to know, but if you are an investor, it's important to do your own homework to understand why a price went up or down. Doing so will help you better understand how an investment may perform in the future.</p> <h2>It gives you no information on fundamentals</h2> <p>An investment's historical rate of return can give you insight into how it might perform in the future. But the company's actual financial performance may be even more important. It's not enough to just examine an investment's return. You should also look at company balance sheets, analyze earnings reports, and look at things like cash flow, debt, and price-to-earnings ratio. This will help you understand whether an investment's price is justified. Examples abound of companies that saw share prices skyrocket based on speculation although earnings weren't there to support it.</p> <h2>It tells you nothing about taxes</h2> <p>Let's say you invested $1,000 in a company stock and it earned an annual return of 9 percent a year over five years. That means you'll end up with $1,450 when you sell, right? Well, not exactly. Remember that unless you are investing in a tax-advantaged account such as a Roth IRA, the government takes its share when you sell. Assuming that you'll be taxed at the long-term capital gains rate of 15 percent, suddenly, that 9 percent annual return became something closer to 7 percent. Keep this in mind when trying to calculate how much money you'll actually walk away with.</p> <h2 style="text-align: center;">Like this article? Pin it!</h2> <div align="center"><a data-pin-do="buttonPin" data-pin-count="above" data-pin-tall="true" href="https://www.pinterest.com/pin/create/button/?url=http%3A%2F%2Fwww.wisebread.com%2Fdont-be-fooled-by-an-investments-rate-of-return&amp;media=http%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2FDont%2520Be%2520Fooled%2520by%2520an%2520Investments%2520Rate%2520of%2520Return.jpg&amp;description=Dont%20Be%20Fooled%20by%20an%20Investments%20Rate%20of%20Return"></a></p> <script async defer src="//assets.pinterest.com/js/pinit.js"></script></div> <p style="text-align: center;"><img src="https://wisebread-killeracesmedia.netdna-ssl.com/files/fruganomics/u5180/Dont%20Be%20Fooled%20by%20an%20Investments%20Rate%20of%20Return.jpg" alt="Don't Be Fooled by an Investment's Rate of Return" width="250" height="374" /></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="https://www.wisebread.com/tim-lemke">Tim Lemke</a> of <a href="https://www.wisebread.com/dont-be-fooled-by-an-investments-rate-of-return">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="https://www.wisebread.com/the-3-rules-every-mediocre-investor-must-know">The 3 Rules Every Mediocre Investor Must Know</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="https://www.wisebread.com/7-ways-to-compare-stock-market-investments">7 Ways to Compare Stock Market Investments</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="https://www.wisebread.com/7-reasons-youre-never-too-old-to-buy-stocks">7 Reasons You&#039;re Never Too Old to Buy Stocks</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="https://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="https://www.wisebread.com/heres-how-rate-of-return-can-help-you-invest-smarter">Here&#039;s How Rate of Return Can Help You Invest Smarter</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Investment balance sheet bonds fees mutual funds rate of return returns roi s&p 500 stock market stocks volatility Fri, 08 Dec 2017 10:00:07 +0000 Tim Lemke 2068609 at https://www.wisebread.com 4 Simple Ways to Conquer Your Fear of Investing https://www.wisebread.com/4-simple-ways-to-conquer-your-fear-of-investing <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/4-simple-ways-to-conquer-your-fear-of-investing" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="https://wisebread-killeracesmedia.netdna-ssl.com/files/fruganomics/imagecache/250w/blog-images/businessman_cowering_on_blue_blackboard_background.jpg" alt="Businessman cowering on blue blackboard background" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>If you're nervous about investing in the stock market, you're not alone. Stock ownership in the U.S. is down, and a recent poll indicates that frightening memories of the last bear market may be to blame.</p> <p>According to a Gallup survey, just 54 percent of U.S. adults own stocks, including those owned through mutual funds that people invest in via their 401(k) or other retirement accounts. That's down from 62 percent who owned stocks before the last bear market. During that devastating downturn, which began at the end of 2007 and ran through early 2009, the market fell by more than 50 percent. In part, Gallup blames the decline in stock ownership on that painful, fearful time.</p> <p>&quot;It appears the financial crisis and recession may have fundamentally changed some Americans' views of stocks as an investment,&quot; the company stated on its website. &quot;The collapse in stock values in 2008 and 2009 seems to have left a greater impression on these people than the ongoing bull market that has followed it, as well as research showing the strong historical performance of stocks as a long-term investment.&quot;</p> <p>If that sounds like you, here are some suggestions for overcoming your concerns. (See also: <a href="http://www.wisebread.com/how-to-get-over-these-5-scary-things-about-investing?ref=seealso" target="_blank">How to Get Over These 5 Scary Things About Investing</a>)</p> <h2>1. Develop a healthy fear of not investing</h2> <p>If it's safety you're after, there are few safer places to put your money than a bank. Because deposits are insured by the Federal Deposit Insurance Corporation, you could put up to $250,000 in a bank account and rest easy knowing that if the bank went out of business, the federal government would make sure you got your money back.</p> <p>While a bank account can be a good place to keep some savings for emergencies, right now many banks are paying just .01 percent interest, making them a horrible place to pursue long-term goals like retirement.</p> <p>For example, let's say you're 30 years old and deposit $10,000 at .01 percent interest. In 40 years, your $10,000 will have turned into &mdash; wait for it &mdash; $10,040. That's right. After 40 years, you will have made just $40 on your 10 grand. And once you factor inflation into the mix, the buying power of your $10,000 will have taken a big step backward.</p> <p>Let's say you earn 7 percent interest instead. In 40 years, your $10,000 will have turned into $150,000. And 7 percent is a very conservative assumption since the stock market's long-term average annual return has been 10 percent.</p> <p>So, instead of being fearful about investing, it is more logical to be fearful about not investing.</p> <h2>2. Learn a little market history</h2> <p>Many of the mistakes investors make are due to their emotions. If the market falls, some people get scared and pull money out of the market, usually to their detriment. A little knowledge of market history can help you stay the course.</p> <p>The longer you keep money in the market, the more likely you are to make money. When Morningstar analyzed the stock market's performance during each one-, five- and 15-year period from 1926 to 2016, it found that 74 percent of the one-year periods showed positive returns, 86 percent of the five-year periods generated gains, and 100 percent of the 15-year periods were up. In other words, based on 90 years of history, if you stay in the market for at least 15 years, it's a virtual certainty that you will make money.</p> <p>Putting time on your side is also the key to surviving a significant market downturn. According to Morningstar, someone with $100,000 invested in the stock market at the beginning of 2007 would have lost nearly half that amount by early 2009. Brutal, right? However, if they had stayed invested, by January 2017 their portfolio would have been worth nearly twice its value on January 2007. Despite that horrible downturn, their average annual return over those 10 years would have been nearly 7 percent. (See also: <a href="http://www.wisebread.com/how-the-risk-averse-can-get-into-the-stock-market?ref=seealso" target="_blank">How the Risk Averse Can Get Into the Stock Market</a>)</p> <h2>3. Start small</h2> <p>If you have a chunk of money to invest but just can't work up the courage to hit &quot;buy,&quot; consider investing a little at a time through dollar-cost averaging. The idea is very simple. Just take the total amount (let's say $12,000), divide by the number of months you plan to invest (let's use 12), and invest that amount at the same time every month ($1,000 per month).</p> <p>If the market has a good month, your money will buy fewer shares. If the market has a bad month, your money will buy more. You never have to worry about getting the timing just right. By spreading your investments over a year a more, you minimize the risk of losing a lot of money through an immediate downturn. (See also: <a href="http://www.wisebread.com/is-dollar-cost-averaging-the-right-strategy-for-you?ref=seealso" target="_blank">Is Dollar Cost Averaging the Right Strategy for You?</a>)</p> <h2>4. Keep it simple</h2> <p>Investment terminology can be confusing. Diversification. Asset allocation. What does it all mean? You can put these helpful concepts to work without qualifying for a job on Wall Street by investing in a super simple target-date fund.</p> <p>Because they are mutual funds, target-date funds are inherently diversified &mdash; that is, the money you invest is spread out among multiple stocks, bonds, or other investments. And they take care of asset allocation decisions for you. That means they are designed with an appropriate mix of stocks and bonds for someone your age. They even automatically adjust that mix as you get older, tilting their stock/bond allocation more toward bonds to make your portfolio appropriately more conservative as you near your intended retirement date.</p> <p>It's understandable that the last bear market may have dampened your enthusiasm for the stock market. However, the market continues to offer most people their best opportunity for building wealth. The steps described above should help you wade back into the investment waters without fear.</p> <h2 style="text-align: center;">Like this article? Pin it!</h2> <div align="center"><a data-pin-do="buttonPin" data-pin-count="above" data-pin-tall="true" href="https://www.pinterest.com/pin/create/button/?url=http%3A%2F%2Fwww.wisebread.com%2F4-simple-ways-to-conquer-your-fear-of-investing&amp;media=http%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2F4%2520Simple%2520Ways%2520to%2520Conquer%2520Your%2520Fear%2520of%2520Investing.jpg&amp;description=4%20Simple%20Ways%20to%20Conquer%20Your%20Fear%20of%20Investing"></a></p> <script async defer src="//assets.pinterest.com/js/pinit.js"></script></div> <p style="text-align: center;"><img src="https://wisebread-killeracesmedia.netdna-ssl.com/files/fruganomics/u5180/4%20Simple%20Ways%20to%20Conquer%20Your%20Fear%20of%20Investing.jpg" alt="4 Simple Ways to Conquer Your Fear of Investing" width="250" height="374" /></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="https://www.wisebread.com/matt-bell">Matt Bell</a> of <a href="https://www.wisebread.com/4-simple-ways-to-conquer-your-fear-of-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="https://www.wisebread.com/7-reasons-youre-never-too-old-to-buy-stocks">7 Reasons You&#039;re Never Too Old to Buy 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="https://www.wisebread.com/how-the-risk-averse-can-get-into-the-stock-market">How the Risk Averse Can Get Into the Stock Market</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="https://www.wisebread.com/8-types-of-investors-which-one-are-you">8 Types of Investors — Which One Are You?</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="https://www.wisebread.com/the-3-rules-every-mediocre-investor-must-know">The 3 Rules Every Mediocre Investor Must Know</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="https://www.wisebread.com/7-reasons-to-invest-in-stocks-past-age-50">7 Reasons to Invest in Stocks Past Age 50</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Investment allocation bonds dollar cost averaging fears losing money not investing risk stock market stocks target date funds Wed, 06 Dec 2017 09:30:11 +0000 Matt Bell 2066563 at https://www.wisebread.com 7 Roadblocks to Retirement (And How to Clear Them) https://www.wisebread.com/7-roadblocks-to-retirement-and-how-to-clear-them <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/7-roadblocks-to-retirement-and-how-to-clear-them" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="https://wisebread-killeracesmedia.netdna-ssl.com/files/fruganomics/imagecache/250w/blog-images/sticky_note_on_notice_board.jpg" alt="Sticky note on notice board" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>How often do you dream about retirement? It's nice to think about the day when you can stop answering to a boss, and instead spend your time relaxing, traveling, and enjoying life to the fullest. Well, if you want that dream to become a reality, you may need to make some significant life changes <em>now</em>. If you're guilty of the following things, you could end up working well past your planned retirement age. (See also: <a href="http://www.wisebread.com/how-much-should-you-have-saved-for-retirement-by-30-40-50?ref=seealso" target="_blank">How Much Should You Have Saved for Retirement by 30? 40? 50?</a>)</p> <h2>1. You simply aren't putting enough money away</h2> <p>Most people vastly underestimate the amount they need to stash away for their golden years. The problem comes from the fact that many financial planners will tell you to put between 10 and 15 percent of your income toward retirement. However, that assumes you started saving in your 20s.</p> <p>If you are now 40, and only started putting money away 10 years ago, you need a higher savings rate in order to make up for those missing years. In fact, you would have to put around 25 percent of your salary away each month and work until you're 70 in order to make up for the shortfall. And as always, compound interest is the real key to saving. By missing out on those years in your 20s, you will have significantly impacted your future nest egg. (See also: <a href="http://www.wisebread.com/how-to-start-saving-for-retirement-at-40?ref=seealso" target="_blank">How to Start Saving for Retirement at 40+</a>)</p> <h2>2. You aren't taking advantage of your employer's 401(k) match</h2> <p>Simply put, any kind of match that your employer gives you is free money, and it would be silly not to take advantage of every cent. The average match out there is 3 percent of your pay, although companies can vary greatly on what they offer. This means that if you only put in 2 percent of your salary, you are leaving 0.7 percent of your income on the table. It may not seem like a lot, but that can really add up over time.</p> <p>If your company offers you 50 percent on the dollar for up to 6 percent of your pay, you should be putting 6 percent away. If it's a dollar amount match, say $2,500 per year, make sure you put in at least that amount. (See also: <a href="http://www.wisebread.com/5-dumb-401k-mistakes-smart-people-make?ref=seealso" target="_blank">5 Dumb 401(k) Mistakes Smart People Make</a>)</p> <h2>3. Your plan is not aggressive enough</h2> <p>Most 401(k) plans have something called a &quot;target date&quot; that is used to figure out what your retirement portfolio will look like. If you have 30 years to go until retirement, you will almost certainly want at least a moderately aggressive portfolio. This will be comprised primarily of stocks, which offer higher gains, but are more volatile and can lose their value quickly. However, the stock market will always recover over time, and if you have that time to spare, this is the plan you should use.</p> <p>If you have less time to go until retirement, your portfolio will have way less stocks in it, opting instead for a larger percentage of bonds. These are much safer, but they don't have the ability to make as much money as stocks. If you came into the retirement savings habit late, you should talk to a professional about how to organize your portfolio. You simply may not have enough time to make money with a conservative plan, but could also risk losing money with a more aggressive one. (See also: <a href="http://www.wisebread.com/start-planning-now-for-when-your-target-date-fund-ends?ref=seealso" target="_blank">Start Planning Now for When Your Target-Date Fund Ends</a>)</p> <h2>4. You're spending too much of your disposable income</h2> <p>A coffee here. A magazine there. Eating out every week. These small expenditures really add up, and instead of saving the money you'll need to survive after you stop working, these frivolous buys are burning holes in your pocket.</p> <p>Yes, life's little luxuries are important for your morale and self-esteem from time to time, but get a handle on those expenses and budget accordingly. You may find that you're spending $40 a month just on coffee. That's $480 a year. Let's say you plan on retiring in 30 years, and you stop getting that morning coffee for one year. A good rate of return on retirement investments is about 8 percent. Thirty years down the road, that $480 will become almost $5,000. If you cut your daily coffee out entirely, it will add over $63,500 to your retirement fund in a 30 year period. Now think about it: Is that &quot;luxury&quot; really worth it? (See also: <a href="http://www.wisebread.com/7-effortless-ways-to-prevent-budget-busting-impulse-buys?ref=seealso" target="_blank">7 Effortless Ways to Prevent Budget-Busting Impulse Buys</a>)</p> <h2>5. Social Security benefits alone will not be enough</h2> <p>It seems unfair that we pay into the system all our working lives, and when it comes time to retire, we get very little back. But, that is simply the result of a population that is living longer, yet retiring at the same age of 65. There just isn't enough money in Social Security to totally support you unless you have almost everything completely bought and paid for by the time you retire, and even then, it will be tough going.</p> <p>Right now, benefits for retired workers average around $1,374 per month, or just over $16,400 annually. When you consider that the federal poverty line is currently $12,060 for a one-person household, that's a little too close for comfort.</p> <p>While it's possible to survive on that, barely, you have to ask yourself: Do you really want to spend the last 20+ years of your life scraping to make ends meet? (See also: <a href="http://www.wisebread.com/6-smart-ways-to-boost-your-social-security-payout-before-retirement?ref=seealso" target="_blank">6 Smart Ways to Boost Your Social Security Payout Before Retirement</a>)</p> <h2>6. You're using your home like a cash machine</h2> <p>It's so tempting to dig into the equity in our homes, especially when the housing market is strong and interest rates are so low. But, every time you refinance your home to take out money, and start another 30-year mortgage, you are seriously impacting the quality of your retirement.</p> <p>Ideally, by the time you retire, you'll want that home to be paid for; no mortgage left, only taxes and maintenance. But if you are 40 years old and just did a 30-year refinance to take out some cash, you've ensured you'll be paying that mortgage until you hit 70. Not only that, but every time you do a cash-out refi, you're spending money on fees.</p> <p>If you must refinance, consider doing a 10 or 15-year fixed rate term instead. Get that mortgage paid off quickly. You'll also pay thousands less in interest over the life of the loan. (See also: <a href="http://www.wisebread.com/3-times-a-refinance-is-the-wrong-move?ref=seealso" target="_blank">3 Times a Refinance Is the Wrong Move</a>)</p> <h2>7. You're not aiming to become a millionaire</h2> <p>When people start tucking away money for retirement, they don't really consider the lump sum they are going to need when they eventually stop working. And ask any average Joe if they will be a millionaire one day, and they will laugh at you and say something like, &quot;Yeah, right!&quot;</p> <p>But, everyone should be doing what they can to become a millionaire in retirement. While it may not be possible to hit that figure exactly, you should still aim as high as you can.</p> <p>It's commonly advised that by the time you hit retirement age, you should have <em>at least</em> 10 times your current salary in your retirement account. With the current median income hovering around the $60K mark, that means that you should have just over half a million dollars in your fund if you retire this year. If you're a higher earner, let's say you earn $120K a year, that figure should be over a million. (See also: <a href="http://www.wisebread.com/heres-how-far-1-million-will-actually-go-in-retirement?ref=seealso" target="_blank">Here's How Far $1 Million Will Actually Go in Retirement</a>)</p> <h2 style="text-align: center;">Like this article? Pin it!</h2> <div align="center"><a data-pin-do="buttonPin" data-pin-count="above" data-pin-tall="true" href="https://www.pinterest.com/pin/create/button/?url=http%3A%2F%2Fwww.wisebread.com%2F7-roadblocks-to-retirement-and-how-to-clear-them&amp;media=http%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2F7%2520Roadblocks%2520to%2520Retirement%2520%2528And%2520How%2520to%2520Clear%2520Them%2529.jpg&amp;description=7%20Roadblocks%20to%20Retirement%20(And%20How%20to%20Clear%20Them)"></a></p> <script async defer src="//assets.pinterest.com/js/pinit.js"></script></div> <p style="text-align: center;"><img src="https://wisebread-killeracesmedia.netdna-ssl.com/files/fruganomics/u5180/7%20Roadblocks%20to%20Retirement%20%28And%20How%20to%20Clear%20Them%29.jpg" alt="7 Roadblocks to Retirement (And How to Clear Them)" width="250" height="374" /></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="https://www.wisebread.com/paul-michael">Paul Michael</a> of <a href="https://www.wisebread.com/7-roadblocks-to-retirement-and-how-to-clear-them">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="https://www.wisebread.com/7-easiest-ways-to-catch-up-on-retirement-savings-later-in-life">7 Easiest Ways to Catch Up on Retirement Savings Later in Life</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="https://www.wisebread.com/8-signs-its-time-to-retire">8 Signs It&#039;s Time to Retire</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="https://www.wisebread.com/5-ways-to-build-retirement-stability-in-your-50s">5 Ways to Build Retirement Stability in Your 50s</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="https://www.wisebread.com/4-ways-to-protect-your-retirement-from-inflation">4 Ways to Protect Your Retirement From Inflation</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="https://www.wisebread.com/8-startling-facts-that-will-make-you-want-to-invest">8 Startling Facts That Will Make You Want to Invest</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Retirement 401(k) benefits golden years homeownership nest egg poverty refinance saving money social security stocks Wed, 29 Nov 2017 10:00:06 +0000 Paul Michael 2062578 at https://www.wisebread.com 6 Ways Meeting the 2018 401(k) Contribution Limits Will Brighten Your Future https://www.wisebread.com/6-ways-meeting-the-2018-401k-contribution-limits-will-brighten-your-future <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/6-ways-meeting-the-2018-401k-contribution-limits-will-brighten-your-future" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="https://wisebread-killeracesmedia.netdna-ssl.com/files/fruganomics/imagecache/250w/blog-images/piggy_bank_with_retirement_formula.jpg" alt="Piggy Bank with retirement formula" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Starting next year, investors will be allowed to contribute more money into their 401(k)s. In 2018, the limit on annual contributions to a 401(k) plan will rise from $18,000 to $18,500.</p> <p>That additional $500 may not seem like a lot, but you should try and hit the new maximum if you can. Maxing out your 401(k) is often the best way to accumulate a healthy sum for retirement, and there are great tax benefits as well.</p> <p>If you're on the fence about whether you need to direct another $500 into your 401(k), consider these arguments.</p> <h2>1. It could net you tens of thousands of dollars</h2> <p>It's not easy to contribute $18,500 annually into a retirement account. But if you can do it, that extra $500 each year can really pay off. Let's say you're 30 years old and plan to retire at age 65. Assuming a conservative 7 percent return, that extra $500 annually could mean an additional $74,000 overall. If you start contributing that extra $500 starting at age 25, and keep doing it for 40 years, the difference is $106,000 over time &mdash; more than an entire year's worth of living expenses for many people.</p> <h2>2. It's more money for you and less to taxes</h2> <p>If you have $500 in income available, that's money that the IRS will get a share of, unless you place it in a 401(k) plan or traditional IRA. Any money you contribute to these retirement accounts is deducted from your taxable income. If you are in a high tax bracket, that $500 could actually just represent about $300 in your paycheck. If Uncle Sam would take that much anyway, why not invest the whole amount instead?</p> <h2>3. You can find $42 a month</h2> <p>If you are at the maximum contribution now, you can find a way to hit the new ceiling. Eat out less. Ditch the morning coffee. Quit that gym you never go to. If you break down $500 over the course of a year, it comes out to less than $42 a month &mdash; or barely $10 a week. That's the cost of a mediocre lunch out. Even the smallest amount of belt-tightening can help you hit this goal, and it's probably not money you'll notice. But you'll notice it later at retirement time.</p> <h2>4. You may have already maxed out your IRA</h2> <p>If you've been placing money in an individual retirement account (IRA), you may be aware that contribution limits are lower than 401(k) plans. People under age 50 are permitted to contribute only $5,500 each year to an IRA, and it's not uncommon for people to hit that maximum. If your IRA is maxed out, having permission to place an additional $500 in a 401(k) is a huge bonus.</p> <h2>5. The limit might be decreased in the future</h2> <p>We should be thankful that in 2018, the 401(k) contribution limit is rising. That's because some members of Congress have suggested that the limit could be drastically reduced in the future as part of tax reform. Thankfully, it seems like discussion of such changes has been tabled, but there's no guarantee the idea won't be resurrected in the future. In the meantime, it's a good idea to contribute as much as you can.</p> <h2>6. Where else are you going to put your money?</h2> <p>If you have $500 a year to spare, the stock market may be the smartest place to put it. Interest rates are still very low, so placing it into the bank would only result in a few bucks each year. And very few other investments offer the same kinds of consistent returns as stocks. Unless you plan to use the money to purchase a home or start a business, you likely won't do much better on a consistent basis than &mdash; or get the same tax advantages of &mdash; investing in stocks in a 401(k).</p> <h2 style="text-align: center;">Like this article? Pin it!</h2> <div align="center"><a data-pin-do="buttonPin" data-pin-count="above" data-pin-tall="true" href="https://www.pinterest.com/pin/create/button/?url=http%3A%2F%2Fwww.wisebread.com%2F6-ways-meeting-the-2018-401k-contribution-limits-will-brighten-your-future&amp;media=http%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2F6%2520Ways%2520Meeting%2520the%25202018%2520401%2528k%2529%2520Contribution%2520Limits%2520Will%2520Brighten%2520Your%2520Future.jpg&amp;description=6%20Ways%20Meeting%20the%202018%20401(k)%20Contribution%20Limits%20Will%20Brighten%20Your%20Future"></a></p> <script async defer src="//assets.pinterest.com/js/pinit.js"></script></div> <p style="text-align: center;"><img src="https://wisebread-killeracesmedia.netdna-ssl.com/files/fruganomics/u5180/6%20Ways%20Meeting%20the%202018%20401%28k%29%20Contribution%20Limits%20Will%20Brighten%20Your%20Future.jpg" alt="6 Ways Meeting the 2018 401(k) Contribution Limits Will Brighten Your Future" width="250" height="374" /></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="https://www.wisebread.com/tim-lemke">Tim Lemke</a> of <a href="https://www.wisebread.com/6-ways-meeting-the-2018-401k-contribution-limits-will-brighten-your-future">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="https://www.wisebread.com/3-common-retirement-regrets-you-can-avoid">3 Common Retirement Regrets You Can Avoid</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="https://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-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="https://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="https://www.wisebread.com/5-best-online-brokerages-for-your-ira">5 Best Online Brokerages for Your 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="https://www.wisebread.com/how-to-tell-if-your-401k-is-a-good-or-a-bad-one">How to Tell if Your 401K Is a Good or a Bad One</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Investment Retirement 401(k) limits government investing IRA mutual funds stocks taxes Wed, 29 Nov 2017 09:00:07 +0000 Tim Lemke 2058941 at https://www.wisebread.com First Rule of Financial Wins: Avoid Losses https://www.wisebread.com/first-rule-of-financial-wins-avoid-losses <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/first-rule-of-financial-wins-avoid-losses" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="https://wisebread-killeracesmedia.netdna-ssl.com/files/fruganomics/imagecache/250w/blog-images/business_financial_opportunity.jpg" alt="Business Financial Opportunity" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>The task of accumulating wealth and ensuring long-term financial security is often discussed alongside the idea of winning. And while it's fine to think of financial planning this way, it may be just as important to simply <em>avoid losing</em>. Smart investing involves looking for gains over time, but also escaping costly losses when the market goes down. Let's take a look at some ways we can &quot;win&quot; financially simply by avoiding losses.</p> <h2>1. Avoid overpriced stocks</h2> <p>The last thing you want is to buy a stock and immediately see it take a dive. If you are a young investor with a long time horizon, you can usually get away with putting your money in the market at any time. But it is important for anyone to avoid buying stocks when they are overvalued and perhaps due for a correction.</p> <p>It's tempting to buy a stock if shares have been moving upward, because we all like to invest in companies that are doing well. At a certain point, however, share prices can be too high based on the company's earnings. It's important to learn the basics of how to tell if a stock is fairly valued.</p> <p>A price-to-earnings ratio is an important consideration in valuing a stock. A P/E ratio is the share price divided by earnings-per-share (EPS). A P/E of more than 25 is on the high side, though P/Es vary by industry. Take time to learn what typical P/E ratios are for the sector you're looking to invest in.</p> <p>Another rule of thumb to keep in mind: If a stock has been consistently setting new 52-week highs, it may be due for a pullback.</p> <p>If a company's share prices seem overvalued, it's wise to practice patience or look elsewhere for better value. This will decrease your likelihood of losing money on the investment.</p> <h2>2. Know when to cut your losses</h2> <p>One common piece of investing advice is to stay the course and avoid panicking when shares of stock fall. This is sensible, but it should be balanced with an awareness of when to cut your losses.</p> <p>There's a fine line between being patient and sticking with a dud investment for too long. It's OK to stick with an investment if the company's underlying financials are still strong, but if the company is seeing shrinking profit margins and revenues, or has completely lost its competitive advantage, it may be time to cut and run. In particular, hanging onto investments during major market downturns can result in massive losses that will take years to recover from. Some financial advisers suggest selling an investment if it drops more than 10 percent in a short amount of time. (See also: <a href="http://www.wisebread.com/10-signs-a-stock-is-about-to-tank?ref=seealso" target="_blank">10 Signs a Stock Is About to Tank</a>)</p> <h2>3. Be truly diversified</h2> <p>Most investors know to avoid investing in too much of one thing. Diversification of investments is a key way to avoid a big loss. But sometimes, it's possible to think you are diversified when you aren't. For example, you may think you are diversifying your portfolio by investing in both U.S. based and international stocks. But have you considered that many U.S. companies already have a huge presence internationally? And even if you think you are diversified with various investments and asset classes, many investments still perform similarly, meaning that you're not as diversified as you think.</p> <p>Financial advisers have varying thoughts on the ideal way to diversify. Of course, everyone's portfolio will differ depending on their age, risk tolerance, and projected retirement year. But the basic tenet applies: Don't be too invested in one area.</p> <h2>4. Watch out for investment fees</h2> <p>When you buy and sell stocks and other investments, you'll likely be stuck paying a variety of fees. There are transaction costs for every trade, and maintenance fees and other costs for mutual funds and ETFs. These are costs that are taken out of money you invest, so you not only lose money immediately, but lose out on its potential gains. This can add up to thousands of dollars in the long run.</p> <p>Savvy investors know how to invest well while avoiding high costs. Discount brokerages such as Fidelity and Scottrade allow you to buy and sell stocks for as little as $4.95 per trade. Mutual fund companies including Vanguard, T. Rowe Price, and others have become more cognizant of fees, and are increasingly offering funds with super-low expense ratios. (Generally speaking, it's best look for funds that charge less than 1 percent for expenses.)</p> <p>Keep your costs low when you invest, and you'll find that avoiding these &quot;losses&quot; can boost your gains.</p> <h2>5. Understand when the markets may be due for a dip</h2> <p>It's very difficult to time the stock market, and for young investors, it's a good idea to just invest as soon as you can. But it's also possible to avoid big losses by recognizing when the markets may be due for a correction. If it seems like stocks are priced too high based on their earnings, that's one bad sign. A slowdown in economic growth is another, and you should be wary of a spike in inflation and interest rates, too. It's also worth noting if companies are downgrading their earnings predictions for the upcoming quarter, as that could be a sign that business executives are pessimistic. If you recognize any or all of these signs, it may be worth waiting a while before investing too heavily.</p> <h2 style="text-align: center;">Like this article? Pin it!</h2> <div align="center"><a data-pin-do="buttonPin" data-pin-count="above" data-pin-tall="true" href="https://www.pinterest.com/pin/create/button/?url=http%3A%2F%2Fwww.wisebread.com%2Ffirst-rule-of-financial-wins-avoid-losses&amp;media=http%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2FFirst%2520Rule%2520of%2520Financial%2520Wins_%2520Avoid%2520Losses.jpg&amp;description=First%20Rule%20of%20Financial%20Wins%3A%20Avoid%20Losses"></a></p> <script async defer src="//assets.pinterest.com/js/pinit.js"></script></div> <p style="text-align: center;"><img src="https://wisebread-killeracesmedia.netdna-ssl.com/files/fruganomics/u5180/First%20Rule%20of%20Financial%20Wins_%20Avoid%20Losses.jpg" alt="First Rule of Financial Wins: Avoid Losses" width="250" height="374" /></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="https://www.wisebread.com/tim-lemke">Tim Lemke</a> of <a href="https://www.wisebread.com/first-rule-of-financial-wins-avoid-losses">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-8"> <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="https://www.wisebread.com/9-best-free-financial-learning-tools">9 Best Free Financial Learning Tools</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="https://www.wisebread.com/15-personal-finance-rules-you-should-be-breaking">15 Personal Finance Rules You Should Be Breaking</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="https://www.wisebread.com/9-essential-personal-finance-skills-to-teach-your-kid-before-they-move-out">9 Essential Personal Finance Skills to Teach Your Kid Before They Move Out</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="https://www.wisebread.com/7-financial-differences-between-millennials-and-the-next-generation">7 Financial Differences Between Millennials and the Next Generation</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="https://www.wisebread.com/6-money-moves-to-make-if-your-net-worth-is-negative">6 Money Moves to Make If Your Net Worth Is Negative</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance apps budgeting cutting expenses energy efficient fees insurance investing losing saving spending stocks winning Tue, 14 Nov 2017 09:31:09 +0000 Tim Lemke 2053314 at https://www.wisebread.com