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Investing

How to Create an Automatic Investing Plan

This post is sponsored by Fidelity Investments. All thoughts and opinions are my own. Fidelity does not adopt, endorse or sponsor any other content on this website, including links to other third-party websites and is not responsible for any views expressed outside of this sponsored post.

Let’s face it, learning to invest can be scary. The thought of investing can often seem like giving away your money with no idea when that money will return. On the other extreme, it could feel exciting, like you are on the verge of earning a large payday. While it’s natural to be apprehensive when you’re just learning to invest, letting your emotions get the best of you could cause you to withdraw your money from the markets before you have a chance to earn anything. On the flip side, becoming overly-excited or confident could cause you to make irrational decisions as well. As a general rule, it’s best to leave emotions out of the equation when it comes to investing. One way to do it involves a strategy called automatic investing.

Automatic Investing Like an Intelligent Investor

A few years ago, I read a book and it has shaped the way that I invest ever since. In the book, the author Benjamin Graham, recommends a diligent, steady approach to investing. For example, income investors diligently consider future dividends when looking for dividend paying stocks. Choosing to automate your investment plan following a diligent, steady approach can help to remove emotions from your investment strategy, and help you become a more intelligent investor.

How To Invest on a Regular Schedule

Investing on a regular schedule makes the process of investing an automatic activity. As measured by the S&P 500, over the last ten years, the broad market index has returned 6.8% on an annual basis, including dividends. While past performance is no indicator of future results, and all investing involves risk of loss, this example can help paint the picture. An investor that chooses to buy and sell based on concern and excitement, might see investment returns different from the broad market index; especially since the market has seen some significant highs and lows over the last ten years. Let’s take a look at how a monthly deposit could change things.

Depositing on a Regular Basis

Depositing just $100 per month on a consistent basis is better than sporadic deposits. Here’s why. Automatic investing removes the human element. The easiest way to create a monthly deposit plan is to use the percentage system. With this system, you portion out your necessary expenses, rent, utilities, etc, and then you take a percentage of the remaining income for goals. If you have $500 per month remaining after your bills are covered, then a twenty percent investing goal would allow you to put $100 away each month for investing.

Take Advantage of Free Money

Your employer can also help you invest on a regular basis. If your employer offers a retirement plan such as a 401(k), check to determine if they also offer a matching contribution. A matching contribution works like this: when you choose to put away a portion of your salary into an employer sponsored 401(k) plan, the employer will choose to contribute as well. The "match" depends on the specifics of the plan. Some employers will contribute dollar for dollar while others may contribute 50 cents for each dollar you contribute. Then, check to see what funds are offered as options in that 401(k). Each time you receive a paycheck, your choice of contribution percentage is automatically deducted from your paycheck and allocated to the funds that you choose. And if your employer matches your contribution, then you are getting additional free money towards your retirement fund.

Emotions can cause you to make irrational decisions when it comes to money. But learning to invest without those emotions is possible. An automatic investment plan can help you begin building your confidence and a nest egg as well.

Learn more about MyMoney, a website created by Fidelity Investments to help you make sense of your personal finances. Fidelity Brokerage Services Member NYSE, SIPC.

Originally posted 2015-12-16 10:00:02.

Categories
Investing

How You Can Start Investing Now, Before the Next Year Starts

Even though it's almost the end of the year, it's never to late to start investing!
If you'd like to start investing this year, there are a few things to keep in mind. Depending on how involved you want to get, investing can take up a lot of time or very little time. It's easy to start investing, especially if your company offers a 401(k). If you want to 'go big', you can get as involved in investing as you want. There's plenty to read out there about investing.
Consider your age, too. The younger you are, the more aggressive you probably want to be when you start investing. People in their twenties and thirties have many years to let their portfolios grow and change. They can weather some of the typical market ups and downs that happen over decades.
If you want to start investing, here are ways you can get started now:

Contributing to Your 401(k)

Many employers offer some type of investment plan for their employees. Most offer a variation of the 401(k). Public school employees and some who work at non-profits may have 403(b) plans. They are similar to 401(k) plans. Either of these plans are great for people who want to start investing but don't know how.
The best part about 401(k)s is that some employers offer matches! This means if you invest in your company's 401(k), your employer will match your contribution up to a certain point. That's free money!
Contribution limits to a 401(k) are high: you can save $18,000 in your 401(k). The federal government's Thrift Savings Plan also falls under this contribution cap.
Even if you can't afford to contribute the maximum to your 401(k) this year, consider investing enough to get your employer's match. Not every employer offers this perk, so check with your Human Resources department to make sure it's an option. If it isn't, consider some of the additional investing resources below.
For the self-employed and freelancers out there, the IRS offers several investment and retirement options for you, too! Check out the Simplified Employee Pension (SEP) plan here, as well as other options for self-employed people to start investing.
Find your investing style with this investing compatibility quiz.

Start Investing in an IRA

Traditional IRAs and Roth IRAs are extremely popular investment vehicles, particularly for those whose companies don't offer a 401(k) or match. IRA stands for Individual Retirement Account. IRAs are easier to max out, as the contribution limit is $5,500 per person.
The main difference between a Traditional and Roth IRA is when you're taxed - and yes, you will be taxed. With a Traditional IRA, you don't pay taxes up front, but you do pay taxes when you take out your money at 59 1/2 years old. Note: you don't have to start withdrawing that early, but you must start withdrawing at age 70 1/2 or else you will face a penalty. One benefit to a Traditional IRA is that by contributing to it now, you reduce your taxable income immediately.
A Roth IRA, on the other hand, does not reduce your taxable income. You invest in a Roth IRA with after tax income. However, when you withdraw from your Roth IRA, at 59 1/2 years old or older, you won't pay any taxes on the amounts you withdraw. If you expect to be in a higher tax bracket when you're older, a Roth IRA makes sense. A Roth IRA also makes sense for those who owe little to no money at tax time and don't need to reduce their taxable income now.
There are some limitations to investing in both a Traditional and Roth IRA. Visit the IRS website on IRAs to determine if they're right for you.
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Start Investing in Your Health Savings Account

Health Savings Accounts (HSAs) are quite possibly my favorite investment vehicle. I recently got started investing in my HSA. It's a great way for those who want to start investing to begin and not be overwhelmed.
In order to get an HSA, you must be enrolled in a high deductible health plan (HDHP). HDHPs do have higher deductibles than typical insurance plans, so it's something to keep in mind if you're considering an HSA. For example, depending on the type of HDHP offered by your employer or through self-employment, your deductible could be $1,500. This means you have to spend $1,500 out of your own pocket before your health insurance kicks in.
Some people have the funds to cover that deductible from their emergency savings. If, on the other hand, you wouldn't be able to cover your deductible amount, you may want to reconsider an HDHP for now.
If you choose an HDHP plan with an HSA, you'll quickly find out how useful and awesome Health Savings Accounts can be. With an HSA, you can pay for many medical expenses, found here, from your HSA. Contributions are also tax free, meaning they come from pre-tax income and reduce your taxable income.
The maximum you can contribute to your HSA, as a single person, is $3,350. If you have family coverage, you can contribute up to $6,650 per year. You can also invest your HSA contributions and take your HSA with you, no matter if you switch jobs or quit to start your own business. Your HSA, and its investment profits, are all yours!
As long as you spend your HSA funds on qualified medical expenses, you won't be taxed, making this investment one of the best out there. Medical expenses continue to increase every year, and you're likely to find your HSA will come in handy as you spend money on regular medical expenses.
With all of these options, you're sure to find something that interests you to start investing now. You can contribute to all of these accounts right now, before 2016 even starts. If you don't yet have an HSA account, you will have to wait to enroll in an HDHP, but you can plan for it until then!
Want to start investing now, but not sure where to start? Find your investing style with this investing compatibility quiz.

Originally posted 2015-12-09 10:00:21.

Categories
Investing

Simple Steps to Become a Millionaire

“I want to be a millionaire, so freaking bad.” You might have been thinking it, but Bruno Mars sang it first. Many people strive to become a millionaire. In fact, there is even a day dedicated to those people. This year Be a Millionaire Day is May 20th. On this day we answer the question, “Who wants to be a millionaire?” with a resounding shout, “Me! I do!” While it may seem difficult to save a million dollars, there are a few tips you can use today to make it to millionaire status sooner rather than later.

Steps to Become a Millionaire

Start a Savings Account

If you plan to reach the Millionaire’s Club by saving money, then you must first open a savings account. In order to accumulate one million dollars within 30 years, you will need to save around $750 per month at a 4% interest rate.

Use this calculator to determine your required savings rate.

Lately, interest rates have been pretty low on traditional savings accounts. Instead of simply shopping at your local bank, try an online bank. Then, look into a certificate of deposit. A certificate of deposit or CD is a way for your money to earn more. CD’s sometimes have higher rates than traditional savings accounts. A Discover Certificate of Deposit is great option with flexible terms from 3 months to 10 years and you can open your FDIC insured CD account with as little as $2,500.

Begin Investing

Let your money work for you. Investing your dollars gives each dollar a job and that job is to earn more money. When you invest, each dollar has the ability to earn a return. If you decide to invest by purchasing 100 shares of stock in a company, and those shares rise in value, your money just earned more money!

However, you have to be careful because if those shares drop in value, then so does your investment and you could lose money. Investing is not as safe as saving in an FDIC insured savings account. However, over the last ten years, investments in the broad market index, as measured by the S&P 500 have averaged 8.3% per year.

Mind the Gap

The gap separates a potential millionaire from a person that will never make it. What’s the gap? The gap is the difference between how much you earn and how much you spend. That unspent portion is available for saving and investing. Growing the gap will allow you to accelerate your millionaire status. How large should that gap be? Well that depends on how soon you want to become a millionaire. A larger gap means faster millionaire status.

“The amount of money you have has got nothing to do with what you earn... people earning a million dollars a year can have no money and... People earning $35,000 a year can be quite well off. It’s not what you earn, it’s what you spend.” -Paul Clitheroe

Here are a few examples.

Patrick and Jenny are 25 and both earn $50,000 per year. After taxes they each earn a take home pay of $3,000 per month.

Patrick keeps his expenses low and saves $1,500 per month or 50% of his take home pay.

Jenny enjoys shopping, dinners out, traveling, and attending concerts. She saves $300 per month or 10% of her take home pay.

In ten years, Patrick has saved a total of $220,876 with an interest rate of 4%. If he maintains the same saving rate he will become a millionaire by the time he is 55.

In the same ten years, Jenny has saved a $44,176 at a rate of 4%. If Jenny lives long enough, she will become a millionaire by the time she is 88.

Ultimately, becoming a millionaire is a simple process that requires diligence and persistence. Ready to become a millionaire? Open a savings account, begin investing, and create a budget that allows you to spend less and save more.

This post was created as part of the Discover partnership program.

Originally posted 2015-05-20 10:00:28.

Categories
Investing

What You Don’t Know About Scottrade

You may think you know all about the online discount broker Scottrade from the plethora of Scottrade review posts that are out there, but there's always something you don't know.

Don't believe me?

Well, you don't know what you don't know. 😛

Inexpensive Trades for Young Adults

You might already know that Scottrade offers $7 trades online and advertises that you can open an account with just as little as $2,500 dollars.

But did you know that you can maintain an account with $2,499 dollars? Yes, with Scottrade there is no minimum balance and no fee on balances below 2,500 dollars.

So open an account and start your automatic deposits.

You'll build it up to 2,500 dollars in no time.

  • iPhone, Android and Blackberry mobile trading
  • No transaction fee IRAs
  • No account maintenance fees
  • No inactivity fees
  • Watch lists
  • Real Time Streaming Quotes
  • Local Branches so you can talk to a human in person
  • Over 3,000 no transaction fee mutual funds

Referral Program

Did you know that you can earn free trades when you refer your friends?

Once you have opened an account with Scottrade, click on the "Refer Someone You Know" link to automatically send an email to a friend.

When they open an account you and your friend get three free trades.

No Transaction Fee Mutual Funds

Are you looking for a broker where you can trade mutual funds without paying a fee?

Scottrade offers over 3,100 mutual funds with no transaction fee. Not sure which mutual fund to choose?

Use their mutual fund screener to explore your choices, including load funds, no-load funds, no transaction fee funds (NTF) and more.

Gain Loss Tax Center

The tax center was put into place to help you when it is time to file your taxes.

When you sell your stocks, you will have a gain or a loss. The tax center helps you figure out your tax basis for the trade so you can file your taxes easily.

The drawback

Everything is not all stars and roses. Here is the one drawback to having a Scottrade account. They do not offer dividend reinvestment. Dividend reinvestment is when your dividends are automatically put back in to the stock you own. There is no trading fee to purchase these incremental shares. But unfortunately, Scottrade does not offer this. In my opinion, all of the good outweighs this one negative.

Update: 6/30/2013

Scottrade recently announced a major improvement in their services.

They now offer a Flexible Reinvestment Program.

In this program, you can use dividends to buy other stocks and exchange-traded funds commission free!

A lot of brokerage firms have dividend reinvestment programs for their clients, but Scottrade’s program takes it one step further. In a typical DRIP, dividend-paying equities can only be reinvested back into that equity.

As mentioned earlier, with Scottrade’s Flexible Reinvestment Program, dividends flow into a program balance, or pool.

You can then tap that pool to buy up to five securities – none of which have to be the securities that contributed the dividends – commission free.

Most stocks and ETFs are eligible in the program.

From Scottrade..

The added element of flexibility is something our clients were looking for, and it gives clients the choice to reinvest their dividends however they want.

AWESOMENESS

Ok, now we are down to the best part of becoming a Scottrade customer.

The knowledge base.

They have live local events so you can learn how to place a trade, how to get started with options and more. All of these events are taught by a licensed representative.

Here is what you can expect to see once you login to your account.

How to Open a Scottrade Account

  1. Open your Scottrade account online or by faxing in the paperwork.
  2. Fund your account via ACH, check, brokerage account or wire transfer.
  3. Print, sign, and mail the account agreement.
  4. Choose stocks, mutual funds, or other assets to purchase.

Originally posted 2015-05-05 10:00:26.

Categories
Investing

December Investing Challenge Results and 2015 Challenge Begins!

It's January! And time for the final update on my Grow Your Dough Throwdown portfolio. You may remember that at the beginning of 2014 I entered a challenge to grow $1,000 in the markets. I decided to take a combined approach using passive and active methods.

For my active portfolio, I invested $400 with Loyal3. For my passive portfolio, I invested $600 with Betterment. Here is my post that details the stocks that I purchased.

Even though it is not an even split, I decided to call my portfolio the Gemini Portfolio. It's a little of this and a little of that. Sometimes balanced and sometimes not as we Gemini's can be.

The passive side lagged a bit during the year because I had some bond funds in the ETF portfolio. After I updated my allocation, the passive portfolio started keeping up with the markets nicely.

The active side performed poorly for the first few months of the year but then it started kicking butt and taking names! Choosing the right individual stocks helped boost my portfolio performance and I finished the year up 9.71%. If you are an email list subscriber then you know what my annual return goals are. And I'm happy to say that in 2014 I made it!

December & Year-End Portfolio Results

December Investing Challenge Results- Gemini Portfolio | Young Finances

What's Next?

Up next is the 2015 Grow Your Dough Throwdown! This year I'm adding a $500 dollar portfolio with Motif Investing. I also moved all of the cash from last year into my Loyal3 account and I purchased a few more stocks.

What is Motif?

Motif Investing is an online brokerage firm offering an intuitive platform that empowers individuals to invest in real-world ideas through motifs. A motif is a carefully researched and balanced portfolio of up to 30 stocks reflecting a specific idea or trend. Examples include Renter Nation, Caffeine Fix and Seven Deadly Sins. Motifs are fully customizable—you can add and delete stocks, and change their weightings. You’ll pay just one low commission – and no management fees. And, you’ll get important diversification both within a motif and across motifs.

Motif Investing offers brokerage accounts as well as no-fee retirement accounts, including Roth IRAs, Traditional IRAs, and Rollover IRAs.

Motif Investing also provides a social network where its members share and discuss investing ideas. Ask for feedback. Find out what other investors have to say about the motifs that may interest you. You can invite people you trust most to join your own investing circle. Share only what you want, with the people you’ve chosen, or share nothing at all. It’s all up to you. And you’re always in control.

Investing Challenge Tracker

To make it easier to keep up with all of the challengers and our portfolio performance, the guys at Motif created a handy widget that will display the leaders. A quick but VERY IMPORTANT note. All investing involves risk and past performance is no indicator of future results. As I always say DO YOUR RESEARCH before investing.

Grow Your Dough 2.0 - Motif Leaderboard | Young Finances

Use this link to open a Betterment account and start investing today.

Disclaimer

All investing involves risk, past performance is not indicative of future results. There is no guarantee that I will make money. I could lose everything. When mentioning how I plan to invest, it should not be taken as a recommendation or investing advice. You should consult your personal financial advisor to determine what type of investing suits your personal situation and risk tolerance level. There can be substantial risk of loss in trading stocks. You should, therefore, carefully consider whether such trading is suitable for you in light of your financial condition. All transactions in the financial markets are risky. No information I present is intended to be used as the sole basis of any investment decisions, nor should it be construed as advice designed to meet the investment needs of any particular investor.

S&P and S&P 500 are registered trademarks of Standard & Poor’s Financial Services LLC (“S&P”), a part of McGraw Hill Financial. Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC (“Dow Jones”). Past performance of an index is not a guarantee of future results.

It is not possible to invest directly in an index. Exposure to an asset class represented by an index is available through investable instruments based on that index.

Per FTC guidelines, this website may be compensated by companies mentioned through advertising, affiliate programs or otherwise.

Originally posted 2015-01-13 06:00:49.

Categories
Investing

TradeKing Review Online Trading

There are numerous options for those looking to begin the process of online trading. Few, however, offer the range of features exhibited by discount brokerage firm, TradeKing – and no other site provides these features at such an affordable cost.

Site Overview

TradeKing is an online broker site that specializes in the online trading of stocks, bonds and other options. The site ranks #1 among online brokers for site usability, so it offers a comfortable starting point for trading beginners. With excellent customer service, managed portfolio options and educational resources, the site is comprehensive in its overall features, as well.

Competitive Pricing

Cost is always a deciding factor when choosing the right brokerage site, and TradeKing offers the most competitive price point in the industry. TradeKing charges only $4.95 per trade, a steal when compared to fees at other well-known brokerage sites. Scottrade costs $7 per trade, while OptionsXpress costs $8.95. Both E*Trade and TD Ameritrade charge $9.99 per trade.

TradeKing's flat-fee trade rate adds to the site’s user-friendliness and simplicity. While regular stock trades cost the flat $4.95, options trades cost $4.95 plus $.65 per contract. The site is not ideal, however, for penny stock traders given than stocks less than $2 per share still cost the flat rate plus a penny per share.

Tools

TradeKing stands out from other sites due to its extensive site features, including research reports, interactive charts and technical analysis tools. The site understandably boasts the fact that Barron’s ranked TradeKing 4 out of 4 stars for a solid eight years in a row in the company’s annual review of online stock and option brokers.

Education Center

TradeKing’s community education center is especially helpful for those starting out in the business of stock trading. Beginners can easily ask questions to more experienced members or choose to scour forum discussions to learn the ropes based on previously posted topics. Either way, a plethora of helpful information and potential mentoring opportunities is found through the site’s forums and available resources.

TradeKing LIVE

TradeKing LIVE is a streaming platform that is readily offered free of charge to TradeKing customers who perform more than one trade per year or maintain a minimum balance of $2,500. The platform features streaming quotes in real time, all customizable to your own unique market preferences.

Customer Service

TradeKing is perhaps best known for two things: affordability and impressive customer service. SmartMoney Magazine even ranked TradeKing #1 for customer service in 2008, 2010, 2011 and 2012. The site also boasts a live chat feature that connects customers immediately with a customer service representative. This feature is available Monday through Friday from 8 A.M. to 6 P.M. Eastern Standard Time. Representatives are also available via email and phone.

Summary of Features

Positives

  • Affordable
  • Flat-rate fees
  • Accessible customer service
  • User-friendly site
  • Resources for beginners
  • Streaming market platform
  • No account minimum

Negatives

  • Penny stock fees
  • Mutual fund fees
  • Limited research options

Overall, TradeKing is an ideal site for newbies in the stock-trading world. With remarkable customer service and lower trade costs than its competitors, TradeKing is a great place to start when venturing into online trades.

Originally posted 2014-12-27 06:00:54.