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Apache is functioning normally

June 9, 2023 by Brett Tams

By Peter Anderson 15 Comments – The content of this website often contains affiliate links and I may be compensated if you buy through those links (at no cost to you!). Learn more about how we make money. Last edited February 10, 2020.

When people talk about their investment plans, one of the first topics that invariably comes up is how much they should be investing.

Should they be investing 5%?

15%?

50% of their income?

Today I thought I’d look at the number that comes up most often as being conventional wisdom for most people when it comes to how much to invest – 15% of yearly income.

Investing 15% Of Your Income Into Post-Tax And Pre-Tax Retirement

For many folks the discussion of how much to invest is a moot point as they’re still struggling to get rid of debt, and get to the point where they’re able to start saving for their future.

If you’re beyond that point, congratulations, you should be applauded.

For me getting to the point where you really start to save and build wealth for your future is so exciting! A variety of financial gurus suggest saving 15% of your household income in good solid long term investments in order to have enough for your future.

So why is that number brought up?

Why Should I Save 15%?

To give a visual demonstration of why some folks suggest that you save 15% for your retirement, I went to Dave Ramsey’s website and used his investment calculator. I put some numbers into the calculator based on these factors:

Making $100,000 a year
Saving 15%
Starting at age 30
Saving for 30 years
10% return on the investments

When you put in those numbers above, it comes up with a return of well over 2.8 million dollars by the age of 60.

If you were to keep it going even for 5 more years until the age of 65, the account would grow to over 4.8 million dollars. That’s not half bad!

So how much money would you really need in order to have a comfortable retirement? Assuming that you would want 80% of your pre-retirement income to live on as many suggest, and a withdrawal rate of 4% per year and a 30 year retirement, you would need to have about 2 million dollars.

If you invest 15% of your 100k income, that would allow you to withdraw $112,000 a year for 30 years. (which assumes the money would still continue growing at a rate of at least 8% while you are withdrawing) That is 12% more than your pre-retirement income! 4.8 million would allow for $192,000 per year!

Now if you were to invest 10% using the same assumptions you’d end up with substantially less money, 1.5 million over 30 years, and 2.4 million over 35 years. Still not bad, but maybe not as much as you might want to have that comfortable retirement. At the 30 year point you’d have enough to withdraw 60% of your income, and at 35 years you’d have 96% of your pre-retirement income.

All of these numbers are of course assuming that you don’t have money coming from social security. I have my doubts it will last until my own retirement. That is obviously up for debate, and hopefully the system will be fixed. But why depend on it if it might not be there?

The point of all this to me is that 15% is usually going to be more than adequate to get you to where you need to be. 10% may not be, depending upon how much of your previous income you want to live on, and how much time you have until retirement.

The longer you have until retirement, the bigger the gains you’ll see through compounding interest!

Play it safe and start saving 15%. You won’t be sorry!

Another caveat; if you’re older and have less time until retirement, or if you want to retire early, you may need to be investing a higher percentage than 15%. You started late or want to finish early, so you have some ground to make up!

Starting earlier? You might not need to invest all of the 10%. But why not do it anyway!

What Should I Invest In?

Once you’ve decided on how much you want to invest, the next step is to decide on what types of investments you should be holding. What to invest in will vary greatly on your situation, but here’s what we would do:

Company 401k or other plan up to the match
Roth IRA for you and your spouse (Where to open a Roth IRA)
Back to the 401k or other plan

When choosing what types of funds to invest in I would highly recommend doing your research first, however, for us we prefer investing in low cost index and retirement target funds through companies like Vanguard where the costs remain low (Try a 3 fund portfolio!).

If you want an option that costs a tiny bit more than DIY, but is less work, Betterment or Wealthfront may be good options (after maxing tax preferred investing).

What do you think? Will 15% be enough for your retirement? Do you think you should save more or less?

Source: biblemoneymatters.com

Apache is functioning normally

June 9, 2023 by Brett Tams

Owning a real estate property is a significant investment that can be lucrative compared to other assets, such as owning stocks or bonds. One huge advantage is the concept of leveraging when you want to invest in real estate. One can pay a small portion of the total cost and pay the remaining together with interest over a long period.

For instance, most mortgages require an initial down payment of about 20% of the property and occasionally can be as low as 5%. With this arrangement, you can control. You can invest in different ways in real estate and start making money.

Real Estate Investment Trusts (REITs)

Real Estate Investments Trusts (REIT) are among the best vehicles for investors to get into real estate investment without following the traditional transactions. It is a regulated investment where a trust (corporation) uses finances from investors who pool their funds to buy and operate income-generating properties.

Typically, REIT uses the investor’s funds to build or purchase real estate property, which they sell or rent to gain profits. At the end of the financial year, the income generated is shared among the investors or the shareholders. Some of the real estate properties managed under the REIT may include apartments, shopping malls, office buildings, warehouses, and resorts, among many others.

All along, real estate investment trusts have been among the best-performing set investment portfolios.

For instance, from 2010 to 2020, the FTSE NAREIT Equity REIT index averaged 9.5% in annual returns. Between 2017 and 2020, the index stood at 11.25% and was higher than the S&P 500 or Russell 200 performance that averaged 9.07% and 6.45%. REITs can be bought and sold like any other stock in leading exchanges. Therefore, investors looking for returns on their investments and traditional assets should consider these real estate assets. Republic is a real estate company that can offer you more information on different investment assets in real estate.

There are different types of REITs one can invest in, and they include the following.

Mortgage REITs
Retail REITs
Healthcare REITs
Residential REITs
Office REITs

If you’re interested to know how to invest in any of the above types of REITs, you can get in touch with Republic for guidance and advice on what will suit you best.

Any investor anticipating REITs needs to distinguish between mortgage REITs that offer to finance for properties and Equity REITs that own properties.

Real Estate Crowdfunding

What is real estate crowdfunding ? In many respects, real estate crowdfunding is almost similar to equity crowdfunding because the investors buy the property and become shareholders. It is a relatively new phenomenon in real estate, and like any equity investment, the investor does not have to buy the whole property, but instead, they earn part of the profits generated in the investment. Income obtained from building rentals or proceeds from the sale is shared among the investors.

Crowdfunding is a technique of raising funds for a business or venture capital. Its approach uses Twitter, Facebook, Linkedin, and other social media platforms to attract investors.

The principle of crowdfunding is that many people can invest tiny amounts and because many people are involved, and substantial amounts of funds can be raised so fast. One advantage of real estate crowdfunding is that potential investors can become shareholders in real estate property with as little as $5000.

Before the JOBS Act, investors in real estate could only invest in real estate through REITs or buying the property.

Now, crowdfunding has opened new ways of investing in real estate and will reduce the risks that come with an equity portfolio. This means that it allows the investor to diversify risks in their portfolio because all funds are not exposed to all equity markets’ risks.

Some Regulations in Real Estate Crowdfunding

Like any other investment, a real estate crowdfunding investment comes with its risks. Initially, crowdfunding was only the preserve of the accredited investors. These are the investors such as pension funds, banks, insurance companies, and other large investors. An accredited investor means that one should have a net worth of more than $1million or needs to be earning $200,000. However, according to the Securities Exchange Commission (SEC), non-accredited investors can participate in crowdfunding. There are specific limitations placed on non-accredited investors.

If you’re interested in real estate crowdfunding as an investor Republic can offer all the necessary information to participate in this lucrative industry.

Ben Shepardson is a Realty Biz News Contributing Writer and has a long track record of success in online marketing and web development. While pursuing a bachelor’s degree in Computer Information Systems, he worked doing enterprise-level SEO and started an online business offering web development services to small business customers.

Latest posts by Ben Shepardson (see all)

Source: realtybiznews.com

Apache is functioning normally

June 9, 2023 by Brett Tams

This post may contain affiliate links, which helps us to continue providing relevant content and we receive a small commission at no cost to you. As an Amazon Associate, I earn from qualifying purchases. Please read the full disclosure here.

If you have been trading for a while, then there is a good chance that you have made some trading mistakes along the way.

Unfortunately, it is part of learning how to trade.

After all, trading is a skill that takes time to learn.

Trading mistakes are part of the learning process. I know that sucks to hear, but it is the truth.

The outcome goal is to learn from those trading mistakes.

Then, you can realize what you did wrong so you do not repeat those same mistakes.

However, more than not, it is more common to repeat the same mistake over and over again.

If you are ready to recognize trading errors and learn how to overcome them, then keep digging in. Take notes and adjust your trading plan accordingly.

We will cover emotional trading mistakes, technical trading errors, and option trading mistakes.

Learn how to avoid common trading mistakes. These common mistakes in stock trading can have you lose more than planned. Learn how to improve trades and achieve a higher profitability.

What Are Trading Mistakes?

Trading mistakes are errors made by traders when you enter trades, either to purchase stocks or options.

More than likely, you will see the same type of trading error happening over and over again.

Trading mistakes are very common, but they do not have to lead to complete panic.

In order to minimize the chances of making a costly mistake, traders should adhere to their trading strategy. Additionally, traders should always trade with a clear head and stay disciplined.

There are plenty of trading mistakes you can avoid by being smart and adjusting your trading plan where needed.

Why Understanding Trading Mistakes Is Important for Long-term Success

Trading mistakes are the result of traders taking losing trades, which can result in poor overall performance.

Mistakes that occur during trading often include not paying attention to the market, not understanding risk, not having a well-thought out trading strategy, and being bad at managing the trade.

Whatever the reason, trading errors occur and it is how we react to them that matters.

Long-term success in trading is not a goal that can be accomplished overnight.

Achieving long-term success with active trading requires patience, discipline, and practice.

It is easy to get caught up in day-to-day successes and forget to commit to a long-term plan. As traders, it is important to be able to recognize our mistakes so that we can learn from them and move forward.

Top 5 Trading Mistakes

A picture of crumbled paper to show the top trading mistakes.

As you will see, we compiled a long list of trading mistakes. Each trader will see some of those trading errors in themselves. Some are small trading mistakes while others are detrimental.

First, we are going to focus on the top five trading mistakes first. This will make or break your success as a trader.

The following are five common trading mistakes that traders make and how to avoid them.

#1 – No Trading Plan

Trading without a plan means you enter a trade without knowing your next step.

No trading plan means that traders are not able to set clear goals, establish risk-reward ratios, and avoid common pitfalls that can occur during a trade. This makes it difficult for traders to know when they should be buying, selling, or holding.

Trading without a plan is risky because it can lead to losses that are much higher than they need to be.

When starting out in trading, it is important to remember that we can only focus on what we can control. This means that we should not worry about things we cannot change, such as the past or the behavior of other traders. Instead, we should form a trading plan and stick to it so that we can succeed in the long run.

Creating your trading plan will happen with many revisions. The goal of the trading plan is to set your overall strategy for trading.

Also, you need to have a specific trading strategy for each trade you enter.

Avoid by: Spending time to develop a trading plan. Revise as needed. Stick to it.

#2 – Risk Management Plan is Missing

A picture showing how important a risk management plan is.

A risk management plan is essential for traders and it should be included in any trading plan.

Without a risk management plan, traders are more likely to make emotional decisions that can lead to costly mistakes. For many traders, this is the hardest thing for them to manage.

It is possible to create a risk management plan as your overall trading plan.

In your risk management plan, you must decide (in advance) how much money you are willing to lose based on the amount of profit you perceive to make. For instance, you are willing to risk $300 in order to make $1000.

Many day traders focus on a 2:1 reward-to-risk ratio. Personally, I look for stronger reward-to-risk ratios greater than 3:1.

Avoid by: Understand how risk is a part of making a profit. Set your risk tolerance and do not deviate from it.

#3 – Not Keeping a Trading Journal

One of the most important aspects of successful trading is keeping a journal.

This not only helps you keep track of your trades and performance, but it can also help you remember what worked and what did not. Journaling is so helpful and such an overlooked task.

Your trading journal is the perfect place to take notes, keep track of your wins and losses, and record market movements so that you can learn from past mistakes.

At the end of every trading session, you should take some time to analyze your trades.

What went well?
What didn’t go well?
Why did you make that particular trade?
What was your entry strategy?
What was your exit strategy?
Where was the overall market momentum?
Did you control your emotions?
What grade would you give yourself?

This analysis is important so that you can learn from your mistakes and improve your trading skills. Stay motivated to continue learning about trading and keep more profit.

Avoid by: Start journaling. Spend time after exiting a trade and the market day to understand what happen and why you did a certain trade.

#4 – Watching Too Many Stocks

Watching too many stocks can lead to a decrease in returns and overall confusion on what is happening with your watchlist.

As a result, it is important to be selective.

The same can be said of stock scanners. If you are watching too many variables and possibilities, you can quickly become overwhelmed.

When you develop your trading plan, you need to decide how you find stocks.

Personally, I prefer to focus on a handful of stocks and a few key metrics. Then, watch them closely and trade accordingly.

As a new trader, I would pick about 5-10 stocks to analyze.

Avoid by: Revise your watchlist to half what you are currently watching.

#5 – Actually Exiting Trade as Planned

Above we talked about creating a trading plan and having a trading strategy for each trade taken.

But, the trading mistake happens when you do not exit the trade as planned.

This could be because of “hopemium” that the stock price will recover and you will get back your loss.

Our “hopemium” is that the stock price keeps rising and you will make more money.

Either one can be damaging to your trading account.

You created a plan. As a disciplined trader, you must follow your plan either to maximize your current profit or protect your risk against further losses.

Avoid by: Exiting at your set targets. Period.

12 Typical Emotional Trading Errors

Trading is 80% mental and 20% execution. Okay, I am not sure that there is an official study to back it up. But, I do know as a trader that emotions play heavily into your overall profit.

The typical emotional trading errors that traders make when they are in a trade are overconfidence, jumping into trades before the proper analysis is completed, and inability to take losses.

This is where most of the trading mistakes are made.

When first starting out in trading, it is easy to get caught up in the prospect of making a lot of money quickly. However, most traders find that trading is not easy to do and make common emotional trading errors.

Let’s dig into these emotional mistakes first and then we will follow up on the technical trading mistakes.

1. Letting emotions impair decision making

Emotions are an important part of decision-making, but it can be dangerous to allow them to influence our decisions. We should also take into account that emotions can often lead us astray.

It is clear that emotional trading can lead to bad decision making and, ultimately, financial losses.

When investors let their emotions take over, they are not thinking logically and may make impulsive decisions. For example, they may sell stocks when the market is down in order to avoid further losses, even though the stock may rebound soon after.

In order to be successful traders, it is important to stay calm and rational when making decisions.

Overcome by: Stick to your trading plan and take emotion out of the equation.

2. Unrealistic Profit Expectations

You go into every single trade expecting a home run! Enough money to achieve your dreams overnight!

These types of profit expectations will have you throwing your risk management plan out of the window and set you up for failure with greed, overconfidence, and impatience.

Be realistic about your expectations with trading activity.

Overcome by: Go for base hits. Small consistent wins.

3. Greed

Picture of someone grabbing a wad of cash in greed.

Greed is a deep-seated need for more profit without regard to the chart or market conditions.

The common rationale is hopefully the stock will go up. Typically, you hold your position too long and end up losing some of your gains.

Greed can manifest in many different ways, and people with greed often neglect their own needs in order to attain more.

Overcome by: Set an OCO bracket to exit the trade at your specified level. Take you out of the equation.

4. Fear of Missing Out (FOMO)

You fear that you missed out on a trade, so you decide to jump in. As a result, you are risking more than you should.

This trading mistake is common, especially with online trading communities.

As a result, you may buy at the high and watch the stock reverse.

Overcome by: Realize that there will be missed opportunities. That is part of the game. There will always be another chance.

5. Fear

In many cases, fear is a reaction to why or why not we enter a trade.

For any trader, they may become frozen unable able to make a decision as their mind is wrapped in fear. At the same time, they are either missing out on potential profits or unable to exit a trade due to mounting losses.

Overcome by: This is a real emotion that you must overcome. Take the time and read resources to help you overcome being paralyzed by fear.

6. Overconfidence after a profitable trade

Picture of a guy throwing money after a profitable trade.

The overconfidence that comes with success can lead to a loss of profits.

When a trader has a winning position, they may become overconfident and make bad decisions because of the previously profitable trade.

For example, they may not take their profits off the table when there is an opportunity to do so or increase their position size when they should be taking profits. This could lead to them losing all of their winnings and more.

Overcome by: Take a break from trading for a few days or a week after a big win.

7. Entering a Trade Based on Your Gut

The process of entering a trade based on your gut is, essentially, following your “gut feeling” and buying or selling shares after the market opens. This is seen as a more risky and less profitable strategy than following a more traditional market timing approach.

Trading is all about making calculated decisions and sticking to a plan.

Trading based on your gut feeling or emotions will only lead to costly mistakes.

Overcome by: Before entering into any trade, make sure you have a solid strategy in place and know all the rules. Only then should you start trading.

8. Not reviewing trades

Picture of a notebook to journal trades.

Not reviewing trades is a common problem for many traders. Traders who don’t review their trades tend to be more likely to make mistakes in their trading and over-trade, which can result in losses.

You will make the same mistake over and over again until you realize the root of the problem.

This is how you move from a losing average to a winning percentage.

Overcome by: Let your journal be your friend. Document everything including your emotions.

9. Following the Herd

Many people enjoy following the herd with stock trading, especially online platforms on Reddit, Discord, or Twitter.

You may decide to follow a certain group of people in order to be fed stock picks or updates.

This can be risky because there is no sound foundation to base your trade upon.

Overcome by: Trade your style and let that fit you.

10. The Danger of Over-Confidence

The “beginner’s luck” experienced by some novice traders may lead them to believe that trading is the proverbial road to quick riches.

Over-confidence is the belief that one’s abilities, knowledge, or qualities are better than average.

This over-confidence is a risk factor for certain types of mistakes and other negative outcomes as it leads to complacency, a lack of preparation, and an overestimation of one’s abilities.

Overcome by: Realize your limitations and watch for overconfidence to appear.

11. The Importance of Accepting Losses

Losses are always a part of trading life, but they can be overwhelming when they occur.

It is important to recognize that losses are in fact an inevitable part of growth and development as a trader.

Overcome by: Journal all of your losses. Look for patterns to appear. Adjust your trading strategy as appropriate.

12. Quit Your Job Too Fast

Quitting your job too fast is not a good idea, as it will force you to place trades that may not be the best set-ups.

Day trading can be a very risky venture, and it is possible to lose everything you have invested.

It is important to be aware of the risks before getting started. More importantly, do not quit your job too fast. This can lead to losses in your investments and could potentially put you in a worse financial situation than you were before.

Overcome by: Keep trading as a side hustle. Hone your trading skills and build up a reserve fund that will cover your monthly expenses. You will know when you are prepared to leave your 9-5.

Common Mistakes in Stock Trading

According to a study by the U.S. Securities and Exchange Commission, technical trading mistakes are actually fairly common among individual investors.

Mistakes in technical trading can be two-fold, either due to lack of knowledge or poor execution.

The most common mistakes are buying at the top and selling at the bottom, overtrading, and not taking the time to properly understand how trading works.

Now, let’s dig into all of the common trading mistakes I see.

1. Overtrading

Let’s start by talking about overtrading. This is a mistake that I see many people make. It is also a mistake that could have been easily prevented if you had just done your research before placing the trade.

Overtrading or placing more orders than you should do is the most common mistake.

Many new traders will simply open up their platform, look at the market, and place a trade. They are often chasing after the last couple of candles or they see an opportunity to get in “on the cheap”.

The problem with this approach is that you have no idea if this is a good trade or not. You are simply taking a shot in the dark and hoping for the best.

Overcome by: Only place the A+ setups that you like. Once you have traded so many times per day or week, stop trading.

2. Buying High and Selling Low

We all have heard the saying, “buy high and sell low.” However, too many novice traders do the complete opposite.

This trend happens with one of the emotional mistakes of FOMO; we already dived into that concept earlier.

Overcome by: Follow your trading plan on when to enter and exit the trade. Practice your strategy in a simulated account and master it.

3. Lack of Trading Knowledge

The lack of trading knowledge is a problem for many traders who are not familiar with how the stock market works. This can cause them to make mistakes when buying and selling stocks, which could result in losing a lot of money.

Just because you made a profit once on one stock does not mean that is a repeatable action.

In order to be successful in trading, it is important to have a good understanding of the markets and the strategies involved.

Without proper training, you are likely to make costly mistakes that can cost you money. Trading courses and tutorials are available online and through other resources to help you gain this knowledge and become a successful trader.

Overcome by: Take an investing course. Spend money on your education and not your losses. Here is a review of my favorite day trading course.

4. Following Too Many Strategies

Following too many strategies is a common problem in the investing world, which can lead to poor performance and more costly mistakes.

There are a million and one different approaches on how to trade the stock market, which indicators to use, whose advice you should follow, so on and so forth.

And then, many traders try and couple the strategies together only to quickly learn they may cause more losses than profits.

One way to avoid following too many strategies is by using a set of rules to decide which strategies are appropriate for investing.

Overcome by: Develop your trading plan. Outline the investing strategies you will use. Test any new strategies in SIM first.

5. Do Your Research

The solution to this problem is simple: do your research!

Before you enter a trade, take the time to do some analysis on the asset you are looking at. Look at past price action, news events, and any other relevant information that you can find.

Understand why the market might move in your favor and be able to build a case for it. The more data points you have supporting your position, the better off you will be.

If you are able to build a strong case for why the asset will move in your favor, then you can enter with confidence. This is because if the market does not move in your favor, you will know that it isn’t because of a lack of research on your part.

When you enter with confidence, this will make it easier to hold through the inevitable volatility and price swings.

Overcome by: If you enter without knowing why something is likely to move in your favor, then you are setting yourself up for failure. Do your research.

6. Not Using Stop-Loss Orders

Stop orders come in several varieties and can limit losses due to adverse movement in a stock or the market as a whole.

Tight stop losses generally mean that losses are capped before they become sizeable. However, you may have your stop loss too tight and get stopped out before your stock has room to move.

A corollary to this common trading mistake is when a trader cancels a stop order on a losing trade just before it can be triggered because they believe that the price trend will reverse.

Overcome by: Plan your stop loss in advance. Stick to it as it is part of an overall risk management strategy.

7. Letting Losses Grow

Active traders can be harmed by refusing to take quick action to close a losing trade.

It is important to take small losses quickly and limit your risk in order to stay profitable.

Stop losses can help you avoid larger losses.

While the stock may come back to your buy price, you have increased your risk far beyond what you planned. If your planned loss was $300 and now you are down over $500, it will take that much longer to overcome that growing loss.

Cut your losses. Review the chart. See what a better entry point may be.

Overcome by: If the stock moves past your pre-determined stop, then exit the trade. Don’t trade on hope.

8. Chasing After Performance

Many day traders are tempted to chase stocks, which is a bad reputation in the day trading world.

This happens when they see a stock that has had a large price increase and they think that it will continue to go up. In reality, this is not usually the case, and chasing stocks can lead to big losses.

What goes up must come down, right?

Overcome by: Wait for a better time to enter the trade according to your trading plan.

9. Avoiding Your Homework

It is important to do your homework. If you avoid doing your homework, then don’t expect fast results

Many new traders often do not do their homework before making any investment decisions.

This can lead to costly mistakes that can be avoided by doing some basic research. Trading is a complex process and should not be taken lightly – make sure you are fully prepared before risking your hard-earned money.

Overcome by: If you have not enrolled in an investing course, do that. Set daily goals on how to improve your trading performance that is not based on profit or loss.

10. Trading Difficult and Unclear Patterns

It is important to stick with the patterns and indicators that are clear and unmistakable so you don’t get caught up in any ambiguous or unclear trading signals.

With a little bit of research and understanding, these market patterns can become quite clear.

By forcing a chart to fit in what you want, then you are putting your trading capital at risk.

Overcome by: If you cannot read a clear chart or pattern, then quickly move to the next stock.

11. Poor Reward to Risk ratios

The most common mistake made by traders is poor risk management. This usually means taking on too much risk in relation to the potential rewards, which can lead to heavy losses if the trade goes wrong.

It is important to always have a solid plan for how much you are willing to lose on any given trade and never deviate from it.

What is the Reward to Risk ratio you look for:

1:1 Reward to Risk
2:1 Reward to Risk
3:1 Reward to Risk

Many beginner traders do not want to take on as much risk because their appetite for potential rewards may be lower. It is important for beginners to consider their trading strategies and risk management plans so that they can make the most informed decisions possible.

Risk-to-reward ratios are an important part of trading, and experienced traders are typically more open to risk in order to maximize their potential rewards. This means that they may be more likely to make high-risk, high-reward trades.

Overcome by: Stick to Risk to reward ratios that fit your trading plan.

12. Ignoring volatility

Volatility is the fear and unknown in the market.

The most important thing to remember about investing is that the stock market can be volatile.

A measure of volatility is from the VIX.

Overcome by: Decide how you will trade when the VIX is high and the news is negative.

13. Too Many Open Positions

Entering too many positions is one of the most common mistakes investors make. A portfolio should consist of a handful of top-performing investments that have proven to be good bets over time.

It is unwise to open too many positions in a short amount of time because it could lead to confusion.

This can be risky because if one or two of the positions go south, the entire portfolio can suffer. For this reason, it is important to carefully consider each position before opening it and make sure that all positions are contributing positively to the overall goal.

Overcome by: As an active trader, stick to under 5 open positions. As a long-term investor, look to build a portfolio of 25 stocks over time.

14. Buying With Too Much Margin

Most brokers offer 2:1 or 4:1 margin to cash. While this is tempting to use, it can also give you a margin call.

Margin can help you make more money by increasing your position size, but it can also exaggerate your losses.

Exaggerated gains and losses that accompany small movements in price can spell disaster for a new trader using margin excessively.

Overcome by: Use your cash only. Stay away from using margin.

15. Following Meme Stocks

These are the stocks made popular by many Reddit personal finance groups.

You have probably heard of Gamestop, Blackberry, AMC, or Bed Bath and Beyond as a meme stock.

While these stocks have risen to crazy highs, they have also fallen just as fast. Chasing the high may leave you with a big and painful loss.

Overcome by: Stick to your stock watchlist.

16. Buying Stocks With No Volume

Buying stocks with no volume is a risky idea that involves placing an order on a stock without knowing how much interest there will be in the shares. This can result in losing money if there are no buyers for the shares.

It is important to validate the price of a stock by looking at volume. The volume shows how much interest there is in a stock and can be indicative of future price movement.

When volume is low, it’s best to stay away from buying stocks as it could be a sign that the stock price is not stable.

Overcome by: Trade stocks with a volume of at least 500,000 or higher.

17. Ignoring Indicators

Indicators are things that tell us the market is going up or down. Examples of indicators would be the stock market at a particular point in time, a company’s performance with regards to earnings, the price of a product or service.

Every trader has their own set of indicators they use.

If you have outlined indicators you use in your trading, make sure to follow them regardless if it is against the way you want the stock to move.

Overcome by: Stick to your trading plan for each stock individually.

18. Trading Too Large Position Sizes

Trading too large position sizes is a risk that traders may run into when they hold positions in their portfolios for extended periods of time.

Position size is the amount of money placed on a trade, and the risk is that a trader may lose more than their capital on the trade if it does not go well.

Overcome by: Base your position size on the amount you are willing to lose. Not how much you want to make.

19. Inexperienced Day Trading

In order to be successful in trading, it is important to have a good understanding of the markets and the strategies you are using. Without proper training, it is easy to make costly mistakes.

Too many day traders turn trading into an unnecessary risky game.

To be successful, a day trader must have a solid foundation in how to invest in stocks for beginners.

Overcome by: Practice in a simulated account and make all of your mistakes there before moving to live money.

20. Inconsistent trading size

Inconsistent trading size is when traders are unable to predict what their position size should be in order to meet the trader’s desired profit goal.

Trading size is one of the most crucial aspects of a trading strategy and should be considered carefully. Larger trade sizes come with an increased risk, so it’s important to be aware of your position size when making trades.

Overcome by: Don’t risk too much on one trade. Stick to your risk management plan.

21. Trading on numerous markets

Trading on numerous markets is when a trader invests in stocks, bonds, commodities, crypto, and other securities.

Every type of market moves differently and takes time to understand how to be profitable.

Overcome by: Find your niche and stick to it.

22. Over-leveraging

Leverage is a powerful tool that can be used to magnify gains and losses in a trade. It is important to be aware of the amount of leverage being used in order to effectively manage risk.

Brokers play an important role in protecting their customers by providing margin calls and other risk management tools.

Overcome by: If you feel over-leveraged, sell some positions before your broker gets involved.

23. Overexposing a position

Overexposure is a term used in the investment world to describe the risk that comes with exposing your position too much in the market. When you have overexposed your position, you are putting yourself at risk of losing money if the stock or security you are invested in falls in value.

You are taking on too much risk.

Overcome by: Stick to your risk management plan. Always have cash reverse on hand in case the market reverses.

24. Lack of time horizon

There are different time horizons for various types of trading strategies. It is important to think about the time horizon you are comfortable with before investing in any type of investment.

If you are a day trader, you plan to close your trades before the end of the trading session. As a swing trader, you typically hold trades for a couple of days maybe up to a month. As a long-term investor, you plan to hold your stocks for longer than a year.

Overcome by: Match the time horizon of that investment purchase with your investing goals.

25. Over-reliance on software

Although some trading software can be highly beneficial to traders, it is important not to over-rely on it.

Automated trading systems are becoming so advanced that they could revolutionize the markets. As a result, human traders need to be aware of the potential for these systems to make mistakes and use them in conjunction with their own judgment.

Overcome by: Set alerts before you want to enter or exit a trade. Then, review if the move still follows your trading strategy.

Top Options Trading Mistakes Beginner Traders Make

These options trading mistakes are specific to option trading.

Trading options is an advanced strategy. If you have losses trading stocks, wait before you start trading options.

1. Not having a Trading Plan

Every trader needs a trading plan that outlines strategies, game plans, and trade metrics.

When you are trading without a plan, you are essentially gambling and hoping for the best.

This is not a recipe for success in the world of stock trading and is especially true for options traders.

A good trading plan should include chart analysis so that you can make informed decisions about when to buy and sell stocks. If you are using HOPE instead of a trading plan, then you need to find out the right way to interpret the chart because that will give you a better idea of what is happening in the market and how likely it is that your investment will succeed.

Overcome by: Create a specific trading plan based on your option strategy.

2. Not properly Researching Option Contracts

Learning to trade options is like going to school for a whole different trade.

There are way too many technical aspects to discuss in this mistake.

Spend time learning what criteria you want from an options contract to be successful.

Overcome by: Learn how options work and practice trading options in the simulator before going live.

3. Trading without an understanding of the underlying asset

Before you start trading options, trade with stocks.

Every stock moves at its own beat. You need to learn how it moves.

Jumping into options prior to knowing the stock can cause extreme losses. Learn how the underlying asset moves first. Be successful in trading stocks before moving to options.

Overcome by: Learn to trade the stock with shares first. Then, practice in a simulator. Once familiar, then trade live with options.

4. Buying Out-of-the-Money (OTM) Call Options

Options trading is a risk-based strategy. It’s important to know which strategies are right for you and what the risks of each option type are before putting on an option trade.

One common mistake that many traders make when it comes to option trades is buying out-of-the-money (OTM) call options.

This is because OTM call options are inexpensive and have a range of around 100,000 to 1 million. To avoid this mistake, it’s important to know what the risks of buying OTM call options are and which option strategies are appropriate for you.

Overcome by: Focus on trading In-the-money (ITM) call contracts. Know your strategy.

5. Not Knowing What to Do When Assigned

When you enter into an options contract, you are essentially agreeing to buy or sell the underlying asset at a specific price on or before a certain date.

If the market moves in a way that benefits the buyer of the option (the person who contracts to buy the asset), they can choose to exercise their option and purchase the asset at the agreed-upon price. However, if the market moves in a way that benefits the seller of the option (the person who contracts to sell), then they may “assign” their contract to someone else – meaning that they no longer want to buy/sell the asset, but would like someone else to take on that responsibility.

This can be jarring if you haven’t factored it into your decision-making when trading options, so it is important to be aware of the possibility.

This is why traders need a higher trading level to sell options contracts or verticals.

Overcome by: Be okay with buying the shares if you are assigned. That is a part of your trading plan.

6. Legging Into Spreads

It is a common mistake for traders to get legged into spreads by entering positions when the market price has moved away from their position. They may have gotten caught up in the belief that they are being a “smart” trader by trying to profit from the spread.

The problem is that they are not taking into account that their cost basis must go up in order to maintain the position. If the market price of the underlying goes up, their cost basis must go up as well.

Overcome by: If you are not comfortable with this advanced strategy, then exit your options contract and place a new one.

7. Trading Illiquid Options

Trading illiquid options is a mistake because traders are taking on too much risk, with potentially disastrous consequences.

Illiquid means that the option cannot be bought or sold at the given time.

In other words, the option is not tradable. When traders trade illiquid options, they are taking a risk that their trades will not be executed because there is no liquidity in the market at that time. They have to hope that the market will become liquid again, and they can then sell their position or buy back their option at a lower price.

Overcome by: Check option volume and open interest at your strike place. Verify you have interest in moving your contract.

8. No Exit Plan

It is important to have a plan in case your trading strategy doesn’t pan out as planned.

This will give you the peace of mind that you won’t be left high and dry without an exit strategy.

With options is it more difficult to limit your risk to reward. As a result, you must decide your exit plan in advance.

Overcome by: Develop your trading strategy and include how and when you will exit the option contract.

Ready to Avoid these Trading Mistakes?

Investors are often their own worst enemy when it comes to trading.

They make emotional decisions instead of logical ones, and this leads to them making costly mistakes. Plus there are many technical errors new and seasoned traders are still making.

In order to be successful in the markets, investors must first learn to accept their losses and move on. Only then can they put that mistake behind them and focus on making profitable trades in the future.

In this post, I shared some of the more common trading mistakes that people make and how to avoid them.

Now, you have to work to avoid these trading mistakes and be profitable.

Source: moneybliss.org

Apache is functioning normally

June 9, 2023 by Brett Tams

We at The Motley Fool have always been champions of the individual investor, encouraging each person to take control of her or his financial destiny. In theory, the transition of America’s retirement apparatus from defined-benefit plans — i.e., pensions that pay a monthly amount — to defined-contribution plans — such as 401(k)s and 403(b)s — is consistent with this Foolish philosophy. The individual makes all the contribution, investment, distribution, and inheritance decisions, whereas with a defined-benefit pension, the worker has very little control.

However, for the majority of Americans, the transition away from defined-benefit has not been to their benefit. It requires each person to become an investing expert and financial planner in their spare time, and too many Americans don’t seem to have the time, interest, inclination, or skills.

According to the Employee Benefit Research Institute, the average 401(k) account is a tad over $60,000; those within a decade of retirement have a bit more, with an average balance of $78,000, but more than a third have less than $25,000. Almost half of workers (43%) between the ages of 45 and 54 reported they weren’t saving anything for retirement.

Not that traditional defined-benefit pensions don’t have their own problems. Many are underfunded, and the benefits accrue mostly to workers who stay with the same employer for many years, which is less common in today’s mobile workplace. But it’s clear that 401(k)-based retirement planning will result in not much of a retirement for many workers.

We can chalk a good deal of this up to people not taking responsibility for their finances, but the problem also lies with the 401(k) system itself. Employees are stuck with the plan and the investments that have been chosen by the employer and/or HR department (who may be fine people, but not necessarily investment experts). Too often, the fund choices are mediocre or worse, and the costs are high.

Get Ready to Look Under the Hood
Unfortunately, you likely don’t know the true costs of your 401(k). They’re hidden in boring legal filings or embedded in the expense ratios of the mutual funds within the plan. But that’s all about to change.

Beginning later this year, 401(k) plans will be required to disclose how much the administration of the plan and the investments is costing participants. This is important information, since — according to human resources consultant Towers Watson — an increase of 0.5% of expenses (i.e., $50 for every $10,000 invested) could consume eight years’ worth of savings for an above-average earner. After all, the $30 billion to $60 billion the financial-services industry makes from 401(k)s each year doesn’t grow on trees; it’s usually taken directly from investors’ accounts.

The amount of fees being extracted from 401(k) accounts may be shocking to some investors. Indeed, many might be surprised they’re paying fees at all, if an AARP survey is to be believed, which found that 70% of worker didn’t know they were paying fees. Alas, that is just not the case.

With the new disclosures, it will be easier to see what you’re paying, and whether that’s too much.

Generally, smaller plans pay higher costs — “smaller” meaning both the number of plan participants as well as total assets in the plan. According to a study [PDF] conducted by Deloitte for the Investment Company Institute (a trade organization for the mutual fund industry, so not necessarily an unbiased crew), the median all-in cost — which includes administrative costs as well as investment expenses — to plan participants in 2011 was 0.78%. But the numbers vary widely, with plan size being the primary factor.

The median cost for a plan with more than $1 billion in assets was 0.38%, whereas the median cost for a plan with less than $1 million was 1.41%. Similarly (and relatedly), the median cost for a plan with fewer than 100 participants was 1.29%, compared to 0.43% for those with more than 10,000 participants.

You can use those figures as a benchmark to determine where your fees fall in relation to other plans. Then, figure out who’s paying those fees — you or your employer. Chances are, it’s the person you see in the mirror (unless your boss follows you into the bathroom, which is kinda weird). According to the Deloitte study:

[P]articipants bear the majority of 401(k) expenses. Similar to any other employee benefit (e.g., health insurance), the employer determines whether the employee, employer, or both will pay for the benefit. According to the Survey, on average, participants pay 91% of total plan fees while employers pay 5% and the plans cover 4%. This compares with participants paying 78%, employers paying 18% and plans paying 4% in the 2009 Fee Study.

In other words, employees are paying the majority of fees, and the share that they’re paying is going up.

Are you getting your money’s worth from your 401(k)? Here’s how to find out, and what to do about it:

Evaluate your investment choices. See if the funds in your plan, over the past five years, have beaten a relevant index fund as well as the majority of other funds with a similar investing objective. This information may be found in your quarterly statements or on the website of your plan provider. Important note: Your funds’ mileage may vary from the information on Morningstar or other fund-info sites since funds in 401(k)s often have additional costs.
Use the side brokerage account, if offered. Approximately 20% of 401(k)s allow participants to open an account with a discount brokerage within the plan. This will let you buy individual stocks, bonds, ETFs, and other mutual funds. However, compare the benefits to the costs, since these accounts often have higher maintenance fees.
Advocate for a better plan. Talk to the folks in your HR department and raise your concerns. After all, their retirement is on the line, too, and they should also be motivated to have the best possible plan. Here’s an example of a letter you can write to ask for a better plan.
Don’t ignore other accounts. If your 401(k) is stin(k)y, contribute just enough to take full advantage of the employer match, and then max out an IRA with the discount brokerage of your choice. You might pay lower costs and have more investment options. However, if you are in a higher tax bracket — and thus ineligible for the Roth IRA, and your contributions to a traditional IRA wouldn’t be deductible — then it might make sense to invest in non-dividend-paying stocks you’ll hold for many, many years. You don’t get a tax break up front, but you’ll pay long-term capital gains when you do sell, which (at least according to current laws) are lower than the taxation rate on ordinary income (the rate at which your paycheck and traditional 401(k) and IRA distributions are taxed).
Move your money. You generally can’t transfer the money in your 401(k) to another account while you’re still working for the employer sponsoring the plan, but some companies allow it, especially for older workers. If your plan is sub-par, ask if your employer allows “in-service distributions.” If so, or once you leave that employer, transfer the money to an IRA. But do not just get a check and cash it; that is considered a distribution, which will be subject to taxes and a 10% penalty if you’re not 59 ½ years old. Instead, get the money to an IRA, ideally through a “trustee-to-trustee transfer,” in which the money is sent directly from your 401(k) to the IRA.
Get help. If you’re looking for professional advice with your investment choices, look for a fee-only planner who charges by the hour, such as the Certified Financial Planners at the Garrett Planning Network or the National Association of Personal Financial Advisors. She or he can also estimate whether you’re saving enough to retire when and how you want.

Hug Your Boss, Then Make the Request
Employers deserve credit for sponsoring retirement plans. They don’t have to do it, it consumes the HR department’s time, and it might even cost them actual money. I’m on the 401(k) committee of The Motley Fool (where the company covers all administrative costs, thank you very much), and I can tell you that it’s more work than most people would think.

But don’t be bashful about politely asking for a better plan. No one is planning your retirement for you, and no one cares more about your retirement more than you do. The more your retirement will rely on your own contribution and investment decisions, the more you must take charge.

Source: getrichslowly.org

Apache is functioning normally

June 9, 2023 by Brett Tams

By Contributing Author 10 Comments – The content of this website often contains affiliate links and I may be compensated if you buy through those links (at no cost to you!). Learn more about how we make money. Last edited May 20, 2013.

The Roth IRA (and its cousin, the Roth 401k) are getting press lately and with good reason. There is a fear that taxes will need to rise over time and we will all find ourselves retiring in a higher tax bracket than we are in today.

Let’s first take a step back to understand what these account are and how they work.

What Is An IRA, And How Does It Work?

A traditional IRA account or 401(k) account allows you to deposit money into an account prior to having it taxed. If you are in the 25% bracket ($67,900 taxable for married filing joint or $33,950 filing single) you can put $5000 into the IRA ($6,000 if you’re over 50 this year) or you can pay $1,250 in taxes and clear $3,750.

With the introduction of Roth a number of years ago, you have a new choice, to pay the taxes now, clearing that $3,750 and after depositing into the Roth account (or Roth 401(k) where the limits are $16,500 or $22,000 if 50 or older) and not paying any taxes when you withdraw these funds at retirement.

At some level this is a simple choice, pay tax now or pay it later. Let’s think about this a moment. Do you know your current marginal rate? Do you know what “marginal rate” means? A simple way to look at this is that your marginal rate is the (federal) tax you’ll pay on the next $100 of taxable income. You may make over $80,000 and see that your taxes aren’t quite $10,000, but the next $100 is taxed at 25% or $25. An important distinction to understand. Fairmark offers a nicely presented chart to see marginal rates, it’s important that you understand this concept before making any decisions. Knowing your current marginal rate is easy, projecting what it will be at retirement, not so easy. It’s this ‘not knowing’ that may prompt you to go one way or the other, but there are steps you can take to improve your decision process.

When To Put Into A Roth IRA

At the beginning of your career (and younger, if you are working as a teen), there’s a good chance you are in the 15% bracket. Now is a good time to put some money away in Roth accounts.

As your salary increases, you are likely to take on a mortgage, and perhaps start a family. This gives you deductions for the mortgage as well as the additional exemption (and perhaps earnings) of your spouse. If despite that, you are in the 25% bracket or higher, I’d suggest using pretax savings, the traditional 401(k) and IRA accounts. Now is the time in your life to learn to project out what your retirement will look like. Are you on track to have $2 million dollars in pretax accounts? If not, continue to save pretax. Why $2 million? A conservative withdrawal rate is about 4%/yr. This results in $80,000/yr upon retiring, and right now that will put you toward the top of the 15% bracket. Also, keep in mind that few people work 40 years with no break or disruption to their income. Use these disruptions (times you will drop into a lower bracket) to convert funds from a traditional IRA to a Roth, in essence “filling up the bracket” just enough to top it off but not go into the next.

Last, toward the end of your working career, the decision becomes very simple. With retirement only a few years away, you should be able to calculate what your marginal rate will be after you retire. If the same or higher, go with Roth, if it will be lower, go with traditional.

Once retired, continue to take advantage of the Roth conversion option. In 2009 a married couple can have $86,600 in gross income and still be in the 15% bracket. If they are withdrawing say $40,000 per year from pretax accounts, they should consider converting right up to the $86,600 figure and pay the 15%. This money will never be subject to RMDs (required minimum distributions) and when you pass, your heirs will not have to pay income tax on the withdrawals as they would from a traditional account. This also will help you avoid that higher 25% bracket as the equation to calculate your RMD continues to force you to take a larger portion of your account out each year.

Are you currently taking advantage of a Roth IRA? Why or why not? What types of retirement accounts are you investing in and why? Let us know in the comments!

This is an article by Joe from JoeTaxpayer.com. Stop by his site and subscribe to his feed for more great articles!

Source: biblemoneymatters.com

Apache is functioning normally

June 8, 2023 by Brett Tams

This post may contain affiliate links, which helps us to continue providing relevant content and we receive a small commission at no cost to you. As an Amazon Associate, I earn from qualifying purchases. Please read the full disclosure here.

Investing in stocks can seem like a daunting task.

There are so many things to consider when it comes to investing, and the stock market is constantly moving.

Stock market investing is a popular option to increase net worth and make money.

Many people are looking for ways to invest their money, with the number of individual investors increasing rapidly in recent years.

This guide covers many important factors for how to invest in stocks for beginners.

Starting out as a newbie trader can be scary and overwhelming… don’t worry, all seasoned traders had to start at the beginning too!

Let’s take away that quell those thoughts and focus on why you want to learn to invest in stocks.

This guide will give you everything you need to know about how to invest in stocks as a beginner investor!

Investing in stocks is a popular way to make money, but you need a solid investment strategy first. Get plenty of tips on investing in stocks for beginners.

What Are Stocks?

In the most basic form, stocks are a form of investment. When you own a stock, you have a piece of ownership in the company’s equity.

The stock market is a real-time financial market in which investors buy and sell stocks and other securites. The stock market is made up of many companies and individuals who are actively investing in stocks.

Stocks are an excellent way for companies and individuals to invest in a company and receive a share of the company’s profits.

Many of the growth stocks (FAANG stocks) are those who investors want their stock price to increase over time. Thus, increasing their overall portfolio’s net worth.

FAANG Stocks is an acronym for: Meta (formerly known as Facebook), Amazon, Apple, Netflix, and Alphabet (formerly known as Google).

Some companies like Chevron (CVX) pay out a dividend each quarter to their investors.

There are thousands of stocks available to trade.

What Can You Invest In The Stock Market?

There are many investment opportunities in the financial market, so it is important to be informed about what you can invest in. Below are some of the places where you can invest your money:

Stocks
Bonds
Mutual funds
ETFs
Commodities
Futures
Options

Now, we are going to look at the most common.

Individual stocks

Individual stocks are a type of investment that you can make yourself.

You can choose how many shares of a certain company you want to purchase.

For example, you like Tesla for how they are innovative in the electric car space. You can choose to invest 20 shares of their stock.

As a long-term investor, you want to hold a portfolio of 10-25 stocks. Find a list of beginning stocks to build your portfolio.

Individual stocks can be bought or sold as a way to dip your toe into the stock-trading waters.

As a short-term investor, you are looking to make money as the stock price increases or decreases.

Mutual Funds

Mutual funds are managed portfolios of stocks.

As a result, mutual funds typically have load fees equal to 1% to 3% of the value of the fund.

One of the most popular mutual funds is VTSAX because of its expense ratio is .04%

Mutual funds are a clear choice for most investors because of the simplicity to invest in the market. This can be a good investment for both novice and experienced investors, as they offer decent returns with lower risk.

They tend to rise more slowly than individual stocks and have less potential for high returns. Mutual funds are a great way to diversify your portfolio and gain exposure to a variety of different securities.

All mutual funds must disclose their fees and performance information so that you can make an informed decision about whether or not to invest.

Exchange traded funds (ETFs)

Exchange traded funds (ETFs) are a type of exchange-traded investment product that must register with the SEC and allows investors to pool money and invest in stocks, bonds, or assets that are traded on the US stock exchange.

They are inherently diversified, which reduces your risk.

This is a good option for beginner investors because they offer a large selection of stocks in one go.

ETFs have a lower minimum to start investing, which is a draw for many investors starting out with little funds. Plus there are many different types of ETFs to choose from.

ETFs are similar to mutual funds, but trade more similarly to individual stocks. With ETFs and Index Funds, you can purchase them yourself and may have lower fees.

Why Stock Prices Fluctuate

Picture of a bull market vs bear market on why stock prices flucate.

Stock prices fluctuate because the financial markets are a complex system. There are many factors that can affect the price of a stock,

There are a number of factors that can influence stock prices, including:

Economic indicators like GDP growth, inflation, and unemployment rates
Company earnings reports
The overall health of the economy
Political and social instability
Changes in interest rates
War or natural disasters
Supply and demand,
Actions of the company’s management
Short squeezings like what happened with GME or AMC

The volatility in the stock market is the #1 reason most people stay out of investments. However, on average, the stock market has moved up 8-10% a year.

What is the best thing to invest in as a beginner?

The best thing to invest in as a beginner is your time.

You need to learn how the stock market works. Just like you would get a certification or degree, you should highly consider an investing course.

Learn and devote as much time as you can to investing in stocks.

How To Invest In Stocks For Beginners?

Picture of a stock market gains to show how to invest in stock for beginners.

Investing in the stock market can be a great way to make money! If you’re looking for ways to make money or grow net worth, investing in a stock is a smart choice.

With online access and trading being easier now than ever, it can be easier than ever to start buying stocks.

Let’s dig into how to invest in stocks like a pro.

FYI…You should do your own research before investing.

Step #1: Figure out your goals

Figure out your goals to help with setting an investing strategy.

What are you trying to achieve with stock market investing? Is it supplemental income? A certain level of wealth for retirement? Are you looking for short-term or long-term gains?

Once you know what you’re aiming for, it will be easier to find the right stocks and make wise investment decisions.

Your reason to invest in stocks will be different than everyone around you.

Some people want to supplement their weekly income.
Others want to invest in companies for the long term.

My goal is to make weekly income from the stock market. That is my investment strategy for non-retirement accounts.

You need to spend time understanding WHY you want to buy stocks.

Knowing this answer will help you define what type of trader you will be.

Step #2. Decide how you want to invest in the stock market

When you decide to invest in the stock market, you need to choose what you want to invest in.

You can invest in stocks, which are shares of ownership in a company, or you can invest in bonds, which are loans that a company makes. There are also other options like mutual funds and exchange-traded funds (ETFs), which are collections of stocks or bonds.

Also, you can expand this to what types of investments will you have in various retirement or brokerage accounts. For example, you may invest in mutual funds with your 401k, ETFs with your Roth IRA, and stick with individual stocks for your taxable account.

This is a personal decision.

Many people when they are first starting to trade stocks choose to limit purchasing stocks with a limited percentage of their overall portfolio.

Step #3. Are you invest in stocks for the short term or long term?

The buy and hold investor is more comfortable with taking a long-term approach, while the short-term speculator is more focused on the day-to-day price fluctuations.

Once again, this is a personal preference.

One of the most common themes of many investing gurus is, “Remember that stock prices can go down as well as up, so it’s important to stay invested for the long term.”

However, this full-time trader wants to make money on those highs and lows.

Knowing your overall investment horizon will help you decide how much time you plan to hold onto your investments to reach your financial goal.

Also, you can choose different time horizons for different accounts.

Step #4: Determine your investing approach

Passive and active investing are two main approaches to stock market investing.

Passive investing does not involve significant trading and is associated with index funds.

Passive investing is a way to DIY your investments for maximum efficiency over time.
Thus, you would contribute to your investment account on the xx day of the month with $xx amount of money.
This happens with consistency regardless of where the market stands on that day.
You are less warry of where the stock market will go and focused on overtime it will continue to go up.

Active investing takes the opposite approach, hoping to maximize gains by buying and selling more frequently and at specific times.

Active investing is when an investor is actively acquiring, selling, or holding bought stocks.
This could be with day trading or swing trading.
You may hold stocks for less than a day, a few days, or a couple of weeks.
The purpose of having active investing is to make profits.

In the stock market, investors make efforts to increase their net worth over time or to make income off the market.

Step #5: Define your investment strategy

When it comes to investing in the stock market, there are a few key factors you need to take into account: your time horizon, financial goals, risk tolerance, and tax bracket.

Do you want to be an active trader or stick with passive investing? What kind of investor am I?

There is no right or wrong answer as this is a personal preference.

Ultimately, you want returns to be greater than the overall S&P 500 index for the year.

Once you’ve figured these out, you can start focusing on specific investment strategies that will work best for you.

Be aware of any fees or related costs when investing. Fees can take a bite out of your investments, so compare costs and fees.

Step #6: Determine the amount of money willing to lose on stocks.

Trading stocks online is inherently risky.

You want to consider what your “risk tolerance” is. Simply put, how much are you willing to lose in stocks before you want to quit?

The biggest reason most people quit trading stocks is that they do not know their risk tolerance and fail with risk management.

You will lose on trading stocks. The goal is to lose a small amount on some of the trades and gain a greater amount of more of your trades.

How much risk you can reasonably take on given your financial situation?
What are your feelings about risk?
What happens when your favorite stock drops 25%?

Understanding your risk tolerance and how much you are willing to lose will help you keep your losses small.

Start with a small amount of money when investing in stocks. Also, make sure you have enough money saved up so you can handle any losses that may occur.

How to Start Investing in Stocks

Picture of a pig and not for how to start invest in stocks.

There are a variety of ways to start investing in stocks. Some methods include getting a small account balance and then buying shares, creating an investing club with friends, or researching the companies you want to invest in.

Now, that you have determined how and why you want to invest in stocks. Let’s dig into the nitty gritty of how to manage a stock portfolio.

On the other hand, if you don’t invest enough, you could miss out on potential profits. Try starting with an amount you’re comfortable losing if the stock market does go down.

1. Open an investment account

There are a few things you need to do in order to start investing in the stock market.

The first is to open an investment account with a broker or an online brokerage firm.

There are different types of accounts you can open:

Taxable accounts like an individual or joint brokerage
Retirement accounts like IRA or Roth IRA
These are the most basic investment accounts, here is a list of types of investment accounts.

If you plan to hold EFTs or mutual funds, Vanguard is a great place to start.

If you plan to be an active trader, I would look at TD Ameritrade or Fidelity. Be wary of Robinhood or WeBull.

2. Saturate yourself in Stock Market Knowledge

On the simplest level, it can be incredibly easy to begin your investing career with little-to-no knowledge, research, and expertise.

If you have even a remote understanding of stocks, then learn what you need from an easy-to-find YouTube video, followed by watching some of your favorite TV shows to learn more about the market and its secrets.

With that said, you need to be digesting the basics from start to end of getting your first investment started.

As the title reveals, investing can seem intimidating and complicated. Thus, stock market knowledge is invaluable.

3. Consider an Investing Course

A typical investing course would teach how to invest in stocks (and possibly other investments).

As a beginner trader, it is unlikely you will know the full extent of how the stock market works. There are many intricacies you must learn and understand.

Beginners should learn about stock investing basics, such as diversification and investment criteria.

Many investing courses offer a platform on how to make money by trading stocks.

Personally, I highly recommend buying this investing course.

If you choose not to follow my advice, that is fine. Come back when you have lost more money in the stock market than the price of the courses.

I CAN NOT STRESS ENOUGH… how important it is to have a solid foundation and practice in a simulated account before you use your real money.

4. Research the companies you want to invest in

When you’re ready to start investing in stocks, it is important that you do your due diligence and research the companies you want to invest in.

Look for trends and for companies that are in positions to benefit you.

Consider stocks across a wide range of industries, from technology to health care. It’s also important to remember that stock prices can go up or down, so always consider this before making any investment decisions.

5. Choose your stocks, ETFs, or mutual funds

Picture of a stock chart to show how to start invest in stocks.

Next, you have to decide what fits your investing strategy. Are you looking to buy:

Stocks
ETFs
Mutual Funds

Regardless of which type of investment you make, you must look for companies that have attractive valuations and growth prospects. In the case of index funds or ETFs, which fund has the companies you find attractive.

Most importantly, you should also take into account the company’s financial health and its prospects for future growth.

Make sure you understand the risks associated with holding a particular stock, including possible price fluctuations and loss of value.

7. Take the Trade

This is the hardest step for most people is to take their first trade.

Thus, why learning to trade stocks is great to learn a simulated account using fake money. Then, move to a LIVE account using your real money.

At some point, in your investing in stocks journey, you must press the buy button.

For many the investment platform may be overwhelming to use, so check out your brokerage’s YouTube videos to help you out.

8: Manage your portfolio

Managing your portfolio is important to keep your investments in good shape.

If you are a long-term investor, diversify your portfolio by investing in different types of investment vehicles and industries.

If you prefer to swing trade or day trade, then you want to make sure you always have cash on hand and are rotating your portfolio to take profit.

Investing can be difficult for beginners who often lack knowledge about the stock market.

It is important to remember to keep investing money and rebalance your portfolio on a regular basis. This will help ensure that you stay on top of your investments and achieve the desired result.

9. Selling Stocks

For most investors, it is harder to sell their stocks than to purchase them. There are a variety of factors for that. But, you must sell your stocks at some time to realize your gain.

Don’t panic if the market crashes or corrects – these events usually don’t last very long and history has shown that the market will eventually rebound. Most people tend to panic sell when stocks are low and FOMO buy when the market is at highs.

When you are ready to sell, aim to achieve a percentage return on your investment.

This will require some focus on your time horizon and the stocks you want to invest in.

Also, you need to consider any taxes that may be owed on the sale of stock.

If you’re new to stock investing, consider using index funds instead of individual stocks to gain broad market exposure.

10. Journal & Analyze your Trades

Journaling is a way of recording the important decisions you make during trading to help yourself remember what happened in your trades. It can be used as a tool for reflection, learning from mistakes, and reviewing your strategy.

Analyzing your trades means looking back on your trading history with the goal of improving it.

This is the most overlooked step of the investing process.

When it comes to buying and selling stocks, journalling what is happening in the market is an important part of being a successful investor.

Stock Market Investing Tips for Beginners

Ask any seasoned trader, and they will have a list of investing tips for beginners.

They have made plenty of trading mistakes they do not want to see newbies do the same thing.

When starting to invest in the stock market, beginner investors often seek out consistent and reliable investments.

This allows them to slowly learn about the stock market and take calculated risks while also earning a return on their investment. Over time, as they gain experience, they can expand their portfolio to include riskier but potentially more rewarding stocks.

1. Invest in Companies That You Understand

An investor should know the company they are investing in and have an idea of what type of return they expect.

When you are starting out, it is best to invest in stocks of companies that are easy to understand and have a proven track record.

Do NOT invest in stocks based on the advice of friends, what you read in the news, or on a whim – these can be risky moves. Be wary of the popular stocks you can find on the Reddit Personal Finance threads.

2. Don’t Time the Market

In the world of investing, there is one rule that no investors should ever break: do not time the market.

By following this rule, you will always be on top of your investments and will be able to reap the rewards.

There are times to buy stocks and sell stocks. This is something you will learn when investing in a high-quality investing course.

As an average investor, trying to time the market will leave you frustrated by your minimal returns or great losses.

3. Avoid Penny Stocks

Penny stocks are the lowest-priced securities on the market, and they don’t offer any significant upside potential to their investors. While you may hit a home run return on some, many penny stocks tend to trend sideways.

The risk is not worth the return.

If you plan to invest in stocks, avoid penny stocks and focus on healthy companies.

4. Consider Buying Fractional Shares

Fractional share investing lets investors buy less than a full share at one time. Many times, you may not be able to afford the price of a full share.

For example, buying a share of Amazon (AMZN) may cost you upwards of $2800 or more. Thus, you can invest a smaller amount with a fractional share.

You would have to check if your brokerage company allows the purchase of fractional shares.

5. Stay the Course

In order to be successful, a trader must stay the course and maintain their focus. By staying focused, they will have less chance of making mistakes that may lead to big losses or overtrading.

When you’re starting out in the stock market, it’s important to be disciplined with your buying. Don’t try to time the market, because you’re likely to fail. Instead, buy shares over time and stay the course.

That way, you’ll be more likely to see a profit in the long run.

6. Avoid Emotional Trading

In order to be successful in the stock market, you have to maintain a level head.

Responding emotionally will only lead to bad decision making. Instead, stay the course and trust your research and analysis.

Know your weaknesses as well as your strengths.

7. Do Your Research

When you’re ready to start investing in the stock market, it is important to do your research so you can make informed decisions.

There are a lot of stocks to choose from, and it can be tempting to invest in them all.

But remember, you don’t want to spread yourself too thin. Invest in stocks that you believe in and that have a good chance of making you money.

8. Build Wealth

Stock market investing is one of the best ways to grow your money over time.

For long-term investing, you buy stocks in companies and hold them for a period of time, typically years. Over time, as the company grows and makes more money, so does your stock. This is one of the most common ways to build wealth over time.

The other way with short-term investing is to consistently take profit and grow your account over time.

Stock investing FAQs

Here is a list of the most common questions and answers on stock investing.

Q: What is the difference between investing and trading?

Trading is buying or selling financial products with the goal of making a profit. This is normally a day trader or swing trader.

Investing, on the other hand, refers to the process of putting money into an investment with the hope that it will grow. Someone who is focused on the long-term.

Q: Do you have to live in the U.S. to open a stock brokerage account?

No, you do not have to live in the U.S. to open a stock brokerage account. You must find a brokerage company in your area of residence abroad.

Q: How much money do I need to start investing?

The very common question of, “How much should you invest in stocks first time?”

It is recommended to start investing with $500 or more. However, you can start with Acorns with as little as $5.

Check out this investor’s story by starting with a small account of $500 and growing it over $35k in less than 6 months.

It is best to grow your account with your growth or profit.

Q: Do I have to pay taxes on the money I earn from stocks?

Yes, you will be required to pay taxes on the money you earn from stocks.

Q: What are the best stocks for beginners to invest in?

The best stocks for beginners to invest in are those that have a history of staying consistently on an uptrend. These companies’ stock prices have typically risen over the course of the year.

Find a list of beginning stocks to build your portfolio.

Q: How do beginners buy stocks?

Above, we outlined this in detail. In order to buy stocks, there are a few different steps that you should follow in order to maximize your chances of success.

The first step is making sure you have an account. Once you have an account, the next step is to decide which stocks you want to invest in. Then, you must buy your stock. Finally, you must decide when you want to sell your stock for a realized gain or loss.

Q: How many stocks should you own?

The best answer is it depends on your investing strategy.

As a short-term investor, you can only manage a smaller number of trades.
As a long-term investor, you need a more well-rounded portfolio. of15-25 stocks.

More likely than not, the short answer is “as many as you can afford.”

Q: What is the best thing to invest in as a beginner?

The best thing to invest in as a beginner is an index fund.

Indexes are great because they diversify across many different types of investments and don’t require much effort on the part of the investor to maintain. Index funds are also less risky than other investments, especially in the beginning stages of an individual’s investing career.

Q: How do we make money?

Traders make money in many ways. They can trade stocks, bonds, futures, and options on equities. They can go long when the market goes up and short when the market goes down.

Traders also use trading systems that are usually automated to manage the trades they make to maximize profit.

Trading is a risky investment and it’s not uncommon for traders to lose money. In order to keep losses small, many traders use the trading strategy based on minimizing risk in order to get the desired return.

Learn how fast you can make money in stocks.

Q: Why is Youtube Option Trading So Popular?

Video on how to trade options is very popular on Youtube. This is because of the high volume of interest on this topic.

For many people, learning options is an advanced strategy that takes more time and knowledge to learn.

This is my favorite youtube option trading channel as well as an overall investing strategy.

Additionally, traders are able to get a much higher return on motion trading versus going long or short on stocks.

Q: What is volume in stocks?

Volume is a measure of the number of shares traded in a given period, usually trading days.

This is an important metric if you plan to exit your trade to know there are enough buyers to buy your stock.

Q: How to invest in penny stocks for beginners?

Penny stocks are shares of a company that typically trade for less than $5 per share, which is also known as penny stock trading.

Investing in penny stocks can be a lot of fun and the highest risk, and there are many ways to get involved. For anyone who is new to the world of investing in penny stocks, it can be intimidating to know where to start.

However, there are a few things that you should keep in mind before diving into the world of penny stocks. One of these is researching what types of companies you want to invest in. Many of these penny stocks are not healthy companies and burning through cash.

It is important to always be careful when investing in penny stocks. Keep in mind that the risk of losing money is high and you should invest only what you are willing to lose.

Q: How to invest in stocks for beginners robinhood?

Robinhood is a stock brokerage company that allows users to invest in stocks without paying any fees. It also provides real-time quotes and charts. To invest, the user must have an account with Robinhood that holds at least $0.

Most major brokerage companies have zero commission fees on trading stocks as well.

Beware, Robinhood is known for stopping to trade various stocks during times of volatility whereas other’s brokers do not.

Q: What is a good price to buy at?

This is a hotly debated question as every investor sees the market from their view.

More often than not, people wonder the best time to buy stocks.

As such, you can read is now a good time to buy stocks?

Ready for Stock Market Investing?

If you are new to investing in stocks, there are a few things you take into consideration before diving into the market.

For starters, it is important to understand how stock markets work. You should also know the difference between a stock and an investment.

Investing in stocks can be a bit complicated, but this guide walked you through the basics of how to invest.

Before you invest in stocks, it is important that you understand your investment strategy. That way, you can make informed decisions about where to put your money and how much risk you are willing to take on.

Most people shy away from learning how to actively trade stocks because of the movies about Wall Street they have watched.

You will get a deeper understanding of investing in stocks the longer you educate yourself on the concept.

Overall, it is wise to diversify your portfolio and don’t put all your eggs in one basket.

So, what is your next move to start investing?

One of the best ways to improve your personal finance situation is to increase your income.

Here are the best investing courses to guide your path. With time and effort, you can start enjoying the lifestyle you want.

Learn how to supplement your daily, weekly, or monthly income with trading so that you can live your best life! This is a lifestyle trading style you need to learn.

Honestly, this course is a must for anyone who invests. You will lose more in the market than you will spend this quality education – guaranteed.

Read my Invest with Teri Review.

Photo Credit:
studentloanplannercourse.com

Learn how to reach a six figure net worth in 5 to 10 years, even if you have a massive amount of student loans.

This beginning investment course will help you pay off debt and start your path to six figures.

After taking a second job as a driver for Amazon to make ends meet, this former teacher pivoted to be a successful stock trader.

Leaving behind the stress of teaching, now he sets his own schedule and makes more money than he ever imagined. He grew his account from $500 to $38000 in 8 months.

Check out this interview.

Source: moneybliss.org

Apache is functioning normally

June 8, 2023 by Brett Tams

Whether you can retire, and whether your money will last after you retire, starts with a very simple maxim: spend less than you have. However, once you start actually crunching some numbers, you find that the equation of retirement is actually quite complicated, with many variables that have different consequences. And that’s a good thing, because it gives you options — different levers you can pull to shore up your retirement security.

What are those levers, and which will have the biggest impact on your retirement? As with many things regarding financial planning, the answers depend partially on your unique circumstances. However, in this article we’ll discuss the factors common to most retiree-wannabes, and quantify their results for two hypothetical workers – one 35-year-old and one 50-year-old — using the “Am I saving enough? What can I change?” calculator found on Fool.com. That calculator produces results in terms of the number of months your retirement will be fully funded. As the tool estimates the impact each variable has on our test subjects, we will report the results in terms of additional years of a fully funded retirement, just so you don’t have to divide the results by 12 in your head (not that we don’t trust your math skills — we just think it makes more sense to think in terms of years).

And now, let’s lay out the starting point for each of our guinea pigs, whom we’ll call Fergie and Madonna.

Name	Fergie	Madonna
Current Age	35	50
Income	50,000	75,000
Age at retirement	65	65
Monthly retirement income	$4,167	$4,688
Current value of 401(k)	$50,000	$250,000
Annual savings	$5,000	$7,500
Years retirement is funded	11.4	16.9
Age at which savings is depleted	76.4	81.9

As we go through this exercise, don’t focus too much on their particular numbers or how much those profiles are similar to yours. What we’re investigating is how many years of fully funded retirement are added due to various changes. The magnitude of those effects will be similar regardless of where Fergie, Madonna, or you are starting.

And now, let’s pull some levers.

Strategy 1: Increase savings rate from 10 percent to 15 percent
Years added to Fergie’s retirement: 4.8
Years added to Madonna’s retirement: 3.0

Let’s start with the no-brainer: Saving more will boost your retirement security. The younger you are, the bigger the impact. Remember that your savings rate is the combination of your contributions to your investment accounts as well as an employer match, if you get one. So someone who saves 10 percent but also receives a match of 50 cents on the dollar up to a saving rate of 6 percent is actually saving a total of 13 percent.

Strategy 2: Retire later
Years added to Fergie’s retirement: 2.8 at age 67, 10.0 at age 70
Years added to Madonna’s retirement: 5.0 at age 67, 8.1 at age 70

Retiring later can be very powerful, for three reasons: additional years of saving, additional years for portfolio to grow, and higher Social Security benefits. Also, while not captured in our analysis, another factor in your retirement security is how long your retirement will last, which is determined by when you’ll retire and when you’ll expire. You can control only one (assuming we don’t want to get macabre here), and the later you retire, the shorter your retirement will be. The benefits of retiring later also apply — though not as large — to working part-time in the first few years of retirement. All that said, a strategy of working a few years later is contingent upon being physically able to keep punching the clock.

Strategy 3: Require less retirement income
Years added to Fergie’s retirement: 10.3
Years added to Madonna’s retirement: 6.9

Our original scenario assumed that Madonna could live on 75 percent of her preretirement income, and Fergie would require 100 percent (since she’s not reached the ideally higher income she’ll have right before retirement). If we Strategy 4: Get a lump sum due to downsizing, inheritance or other source
Years added to Fergie’s retirement: 1.8
Years added to Madonna’s retirement: 3.2

This is tricky to quantify since the benefit depends on the size of the lump sum and when it’s invested. For our calculations, we assumed each Fergie and Madonna received a $50,000 windfall at age 50. The most likely source of such a chunk of change would be downsizing, which might be a good strategy for those who bought a big house many years ago in order to raise kids who have since left the nest. As for inheritances, they are big question marks since you don’t know what someone else’s estate will be worth or how much of it you’ll inherit. But those who are confident they’ll get something from someone might include a conservative estimate in their calculations.

Many other important factors

While those four are significant variables in your retirement equation that you might be able to control, several other factors will play a part. Here are just a few:

Investment returns: We assumed a 6 percent annual return for our calculations. Whether that turns out too pessimistic (as we hope) or optimistic, time will tell. But had Fergie and Madonna earned 8 percent a year, their retirements would essentially be fully funded. While that sounds oh-so-promising, don’t bet on getting bailed out by markets.
When to take Social Security, and what the program will look like: The decision about when to begin receiving benefits is not simple, especially if you’re married. Choosing the right strategy for your situation can provide higher benefits for the rest of your life. Of course, given the financial challenges facing the program and the country as a whole, it makes sense for younger workers to assume they’ll get three-quarters or less of what they’re currently projected to receive.
Income growth: Our analysis assumed that Fergie’s and Madonna’s income would grow at the rate of inflation, yet for most professionals, income actually grows faster. If our hypothetical workers were real go-getters and earned raises that exceeded inflation by two percentage points, that would fund another one to three years of retirement, due to bigger contributions to investment accounts and higher Social Security benefits.

Calculate, monitor, repeat

As you can see, your retirement has a lot of moving parts — some you can control, many you cannot. The good news is that a few tweaks here and there can have a large collective impact – and the sooner you begin tweaking, the better. No financial tool can predict the future, but some number-crunching can determine if you’re headed in the right direction, and the potential consequences of changing one or a few variables. Once you’ve done the analysis and taken action, monitor regularly — at least once a year. The road to retirement will take many twists and turns, but keeping your hand on the steering wheel and checking the map every once in a while will increase the chances that you’ll get there safe and sound.

Source: getrichslowly.org

Apache is functioning normally

June 8, 2023 by Brett Tams

By Peter Anderson 7 Comments – The content of this website often contains affiliate links and I may be compensated if you buy through those links (at no cost to you!). Learn more about how we make money. Last edited January 22, 2010.

A couple of months back the IRS released their 2010 Traditional and Roth IRA contribution limits. It’s important to keep an eye on those limits year to year if you’re contributing to one of these account types. As was expected the 2010 Traditional and Roth IRA contribution limits remain the same for the coming tax year.

2010 Traditional And Roth IRA Contribution Limits

The Traditional and Roth IRA contribution limits for the 2010 tax year are $5,000 for those under the age of 50. If you’re over 50 you have the option of making catch up contributions to your account, which brings your limit to $6,000.

It’s important to remember that you can contribute to both a Roth IRA and a traditional IRA in the same year, but you can’t go over your limit ($5,000-$6000) when you combine the two accounts. So if you were under 50, and contributed $2500 to a Roth IRA, you would only be able to contribute up to $2500 to your Traditional IRA.

Here’s a table showing the 2010 Traditional and Roth IRA contribution limits, along with the limits in years past.

Year	Age 49 and Below	Age 50 and Above
2002-2004	$3,000	$3,500
2005	$4,000	$4,500
2006-2007	$4,000	$5,000
2008-2012	$5,000	$6,000
2013-2018	$5,500	$6,500
2019-2022	$6,000	$7,000
2023	$6,500	$7,500

2010 Traditional And Roth IRA Phase Outs Based On AGI

Traditional and Roth IRAs have phase outs if you reach certain compensation limits. Single filers with an annual Modified Adjusted Gross Income (MAGI) over $105,000 begin to see their contribution limit drop until at $120,000 it goes away completely. The limits for Married Filing Jointly investors are $167,000-$176,000.

IRA Type	Single	Married Filing Jointly
Roth IRA	$105,000 – $120,000	$167,000 – $177,000
Traditional IRA	$55,000 – $65,000	$89,000 – $109,000

Contribute To Your Traditional Or Roth IRA Until April 15th

If you haven’t already contributed the full amount to your Traditional IRA or Roth IRA for the 2009 tax year, keep in mind that you can still open a Roth IRA and contribute to the accounts up until tax day, April 15th, 2010. If you do make a contribution in 2010 before tax day, be sure to specify which tax year the contribution is being made for.

Differences Between Roth IRA And Traditional IRA Accounts

The main difference between Traditional IRA and Roth IRA accounts is how they are looked at for tax purposes. Traditional IRA account contributions are made with pre-tax money. Because of that your distributions will be taxed in retirement. Roth IRA contributions, however, are made with dollars that have already been taxed. Because of that the money will grow and not be taxed at withdrawal. For a complete look at choosing between retirement accounts, check out this article: Choosing Between 401k, Traditional IRA, Roth IRA.

Do you currently have a Traditional IRA or Roth IRA? Are you contributing to the limit? Which account type do you prefer? Tell us your thoughts in the details.

Source: biblemoneymatters.com

Apache is functioning normally

June 8, 2023 by Brett Tams

The dividend payout ratio is the ratio of total dividends paid to shareholders relative to the net income of the company. Investors can use the dividend payout formula to gauge what fraction of a company’s net income they could receive in the form of dividends.

While a company will want to retain some earnings to reinvest or pay down debt, the extra profit may be paid out to investors as dividends. As such, investors will want a way to calculate what they can expect if they’re a shareholder.

Understanding Dividends and How They Work

Before calculating potential dividends, investors will want to familiarize themselves with what dividends are, exactly.

A dividend is when a company periodically gives its shareholders a payment in cash, or additional shares of stock, or property. The size of that dividend payment depends on the company’s dividend yield and how many shares you own.

Many investors look to buy stock in companies that pay them as a way to generate regular income in addition to stock price appreciation. A dividend investing strategy is one way many investors look to make money from stocks and build wealth.

Investors can take their dividend payments in cash or reinvest them into their stock holdings. Not all companies pay dividends, and those that do tend to be large, established companies with predictable profits — blue chip stocks, for example. If an investor owns a stock or fund that pays dividends, they can expect a regular payment from that company — typically, each quarter. Some companies may pay dividends more frequently.

Pros and Cons of Investing in Dividend Stocks

Since dividend income can help augment investing returns, investing in dividend stocks — or, stocks that tend to pay higher than average dividends — is popular among some investors. But engaging in a strategy of purchasing dividend stocks has its pros and cons.

As for the advantages, the most obvious is that investors will receive dividend payments and see bigger potential returns from their holdings. Those dividends, in addition to stock appreciation, allow for two potential ways to generate returns. Another benefit is that investors can set up their dividends to automatically reinvest, meaning that they’re holdings grow with no extra effort.

Potential drawbacks, however, are that dividend stocks may generate a higher tax burden, depending on the specific stocks. You’ll need to look more closely at whether your dividends are “ordinary” or “qualified,” and dig a little deeper into qualified dividend tax rates to get a better idea of what you might end up owing.

Also, stocks that pay higher dividends often don’t see as much appreciation as some other growth stocks — but investors do reap the benefit of a steady, if small, payout.

What Is the Dividend Payout Ratio?

The dividend payout ratio expresses the percentage of income that a company pays to shareholders. Ratios vary widely by company. Some may pay out all of their net income, while others may hang on to a portion to reinvest in the company or pay off debt.

Generally speaking, a healthy range for payout ratios is from 35% to 55%. There are certain circumstances in which a lower ratio might make sense for a company. For example, a relatively young company that plans to expand might reinvest a larger portion of its profits into growth.

How to Calculate a Dividend Payout

Calculating your potential dividend payout is fairly simple: It requires that you know the dividend payout ratio formula, and simply plug in some numbers.

Dividend Payout Ratio Formula

The simplest dividend payout ratio formula divides the total annual dividends by net income, or earnings, from the same period. The equation looks like this:

Dividend payout ratio = Dividends paid / Net income

Again, figuring out the payout ratio is only a matter of doing some plug-and-play with the appropriate figures.

Dividend Payout Ratio Calculation Example

Here’s an example of how to calculate dividend payout using the dividend payout ratio.

If a company reported net income of $120 million and paid out a total of $50 million in dividends, the dividend payout ratio would be $50 million/$120 million, or about 42%. That means that the company retained about 58% of its profits.

Or, to plug those numbers into the formula, it would look like this:

~42% = 50,000,000 / 120,000,000

An alternative dividend payout ratio calculation uses dividends per share and earnings per share as variables:

Dividend payout ratio = Dividends per share / Earnings per share

A third formula uses retention ratio, which tells us how much of a company’s profits are being retained for reinvestment, rather than paid out in dividends.

Dividend payout ratio = 1 – Retention ratio

You can determine the retention ratio with the following formula:

Retention ratio = (Net income – Dividends paid) / Net income

You can find figures including total dividends paid and a company’s net income in a company’s financial statements, such as its earnings report or annual report.

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Why Does the Dividend Payout Ratio Matter?

Dividend stocks often play an important part in individuals’ investment strategies. As noted, dividends are one of the primary ways stock holdings earn money — investors also earn money on stocks by selling holdings that have appreciated in value.

Investors may choose to automatically reinvest the dividends they do earn, increasing the size of their holdings, and therefore, potentially earning even more dividends over time. This can often be done through a dividend reinvestment plan.

But it’s important to be able to know what the ratio results are telling you so that you can make wise decisions related to your investments.

Interpreting Dividend Payout Ratio Results

Learning how to calculate dividend payout and use the payout ratio is one thing. But what does it all mean? What is it telling you?

On a basic level, the dividend payout ratio can help investors gain insight into the health of dividend stocks. For instance, a higher ratio indicates that a company is paying out more of its profits in dividends, and this may be a sign that it is established, or not necessarily looking to expand in the near future. It may also indicate that a company isn’t investing enough in its own growth.

Lower ratios may mean a company is retaining a higher percentage of its earnings to expand its operations or fund research and development, for example. These stocks may still be a good bet, since these activities may help drive up share price or lead to large dividends in the future.

Dividend Sustainability

Paying attention to trends in dividend payout ratios can help you determine a dividend’s sustainability — or, the likelihood a company will continue to pay dividends of a certain size in the future. For example, a steadily rising dividend payout ratio could indicate that a company is on a stable path, while a sudden jump to a higher payout ratio might be harder for a company to sustain.

That’s knowledge that may be put to use when trying to manage your portfolio.

It’s also worth noting that there can be dividend payout ratios that are more than 100%. That means the company is paying out more money in dividends than it is earning — something no company can do for very long. While they may ride out a bad year, they may also have to lower their dividends, or suspend them entirely, if this trend continues.

Dividend Payout Ratio vs Dividend Yield

The dividend yield is the ratio of a stock’s dividend per share to the stock’s current price:

Dividend yield = Annual dividend per share/Current stock price

As an example, if a stock costs $100 and pays an annual dividend of $7 the dividend yield will be $7/$100, or 7%.

Like the dividend payout ratio, dividend yield is a metric investors can use when comparing stocks to understand the health of a company. For example, high dividend yields might be a result of a quickly dropping share price, which may indicate that a stock is in trouble. Dividend yield can also help investors understand whether a stock is valued well and whether it will meet the investor’s income needs or fit with their overall investing strategy.

Dividend Payout Ratio vs Retention Ratio

As discussed, the retention ratio tells investors how much of a company’s profits are being retained to be reinvested, rather than used to pay investors dividends. The formula looks like this:

Retention ratio = (Net income – Dividends paid) / Net income

If we use the same numbers from our initial example, the formula would look like this:

~58% = (120,000,000 – 50,000,000) / 120,000,000

This can be used much in the same way that the dividend payout ratio can, as it calculates the other side of the equation — how much a company is retaining, rather than paying out. In other words, if you can find one, you can easily find the other.

The Takeaway

The dividend payout ratio is a calculation that tells investors how much a company pays out in dividends to investors. Since dividend stocks can be an important component of an investment strategy, this can be useful information to investors who are trying to fine-tune their strategies, especially since different types of dividends have different tax implications.

In addition, the dividend payout ratio can help investors evaluate stocks that pay dividends, often providing clues about company health and long-term sustainability. It’s different from other ratios, like the retention ratio or the dividend yield.

Ready to invest in your goals? It’s easy to get started when you open an Active Invest account with SoFi Invest. You can invest in stocks, exchange-traded funds (ETFs), and more. SoFi doesn’t charge commissions, but other fees apply (full fee disclosure here).

For a limited time, opening and funding an account gives you the opportunity to win up to $1,000 in the stock of your choice.

FAQ

How do you calculate your dividend payment?

To calculate your exact dividend payment, you’d need to know how many shares you own, a company’s net income, and the number of total outstanding shares. From there, you can calculate dividend per share, and multiply it by the number of shares you own.

Are dividends taxed?

Yes, dividends are taxed, as the IRS considers them a form of income. There may be some slight differences in how they’re taxed, but even if you reinvest your dividend income back into a company, you’ll still generate a tax liability by receiving dividend income.

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Source: sofi.com

Apache is functioning normally

June 8, 2023 by Brett Tams

Investing isn’t new to me. I opened my first CD in high school back in the good old days of 5 percent interest, and I started contributing to my 401(k) as soon as I was eligible (at age 21). I did everything right according to the articles I read. I:

Contributed enough to get the maximum employer match
Saved/invested around 10 percent of my income
Opened up an IRA

Before I break my arm patting myself on the back, let me tell you that I made a huge error. I stopped too soon in my investing education. Instead of continuing to learn, I rested on my investing laurels — and who knows how much money I’ve lost out on because I forgot that no one cares more about my money than I do.

And my huge error led me to make many mistakes. For instance, I didn’t realize until (embarrassingly) recently that different funds in your 401(k) have different fees. Selecting funds with low fees can make a huge difference in returns. Or “buy and hold” is not the same as “buy and forget about it.” And then there’s the issue of investing and taxes.

But doing something (even if I didn’t evaluate or understand my choices) is better than nothing, right? So there I stayed, comfortable in my stinky 401(k), letting my financial adviser make fund recommendations for my IRA.

Until this year. This year, I vowed to tackle my investing fear and ignorance. I’ve been reading old posts on Get Rich Slowly, collecting a list of investing books I want to read and perusing investing websites. I’ve created this list (along with my impressions of each resource) to help me learn more about investing, and I hope it helps you, too. It’s not an exhaustive list, of course. Also, in the interest of full disclosure, I get no compensation for including any of these resources.

Get Rich Slowly Blog Posts

For new readers, I dug through the GRS archives to find some solid investing posts. I wanted the posts to highlight different investing strategies and philosophies. I’m sure I missed a few, but this should save you from poking around the Investing archives — at least a few minutes, anyway.

Dividend-paying stocks This is a fairly recent post, focusing on dividend-paying stocks.

Roth IRAs Here is a great post on Roth IRAs.

Developing an investment policy statement – Before starting to invest, analyze why you are investing. What’s the point? Figuring that out first will help you form an investing strategy.

How the stock market works – The day this post ran was the day I understood more about the stock market. Sure, things have changed since this 1952 video, but the basics are still the same.

DRIPs This post succinctly covers dividend reinvestment programs.

Mutual funds Here is a great introduction to mutual funds.

Index funds This post describes why many people (including J.D.) have most of their portfolios in index funds.

Bonds No list would be complete without mentioning bonds.

Mutual fund prospectus Part of becoming an educated investor involves understanding where your money is going. Here’s how to read (and understand) a mutual fund prospectus.

Books

Best books on investing – This post covers eight well-known investing books, but it’s missing some good ones.

One of the good ones it’s missing is Peter Lynch’s “One Up On Wall Street.” It’s old, but I like his focus on simplicity and buying what you know.

“Control Your Cash” by Greg McFarlane and Betty Kincaid is another favorite. This book actually covers all the usual financial topics (credit scores, buying a car and a house, taxes, etc.), but has a couple of chapters on investing and securities. What I like about this book is that it explains investing in a way that I can understand, using a writing style that is funny and still pertains to a wide variety of investors.

Other Blogs and Websites

Bite the Bullet Investing This just-launched blog appears to be created for the investing novice. Posts cover terms such as equity and return and topics like using other people’s money. Great if you’re just starting out.

SEC guide Use this guide to learn how to read financial statements. I think this is a very easy to understand set of terms.

The Oblivious Investor This site is organized well and Mike Piper writes clearly, without a lot of “fluff.” I found his information on index funds to be easy to understand. I haven’t checked out any of his books, but he’s written several on various topics. I think he appeals to a wide variety of investors.

Seeking Alpha This site has been mentioned several times in the comments of various GRS articles, so I thought it was worth checking out. It covers individual stocks and has some great articles. To read the entire article, you must register (though it’s free, I dislike the extra step). If you’re serious, it has a Pro subscription service in addition to the free information. I think there is some great information here, but it’s too advanced for me at this time.

The Motley Fool One of my favorite articles on the site is “13 steps to investing foolishly.” Like Seeking Alpha, they offer a premium subscription service along with their free information. This site has something for a range of investors. (GRS contributor Robert Brokamp is the Fool’s adviser for its Rule Your Retirement service.)

Morningstar has 172 free investment courses. Topics include “Investing for the long run” and “The magic of compounding.” Did I mention they were free?

Guide to Transparent Investing Frankly, I’m overwhelmed reading my own list. But if you pick anything from this list, please read this guide. Published in 2007, this 53-page discusses DIY financial planning, risk tolerance, and how to create a portfolio to minimize the bite of taxes. It explains fundamental concepts well and includes charts. I wish I’d read this guide years ago.

When doing a list like this, it’s so easy to miss lots of great resources. Which ones would you add?

Source: getrichslowly.org

Investing 15% Of Your Income Into Post-Tax And Pre-Tax Retirement

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#1 – No Trading Plan

#2 – Risk Management Plan is Missing

#3 – Not Keeping a Trading Journal

#4 – Watching Too Many Stocks

#5 – Actually Exiting Trade as Planned

12 Typical Emotional Trading Errors

1. Letting emotions impair decision making

2. Unrealistic Profit Expectations

3. Greed

4. Fear of Missing Out (FOMO)

5. Fear

6. Overconfidence after a profitable trade

7. Entering a Trade Based on Your Gut

8. Not reviewing trades

9. Following the Herd

10. The Danger of Over-Confidence

11. The Importance of Accepting Losses

12. Quit Your Job Too Fast

Common Mistakes in Stock Trading

1. Overtrading

2. Buying High and Selling Low

3. Lack of Trading Knowledge

4. Following Too Many Strategies

5. Do Your Research

6. Not Using Stop-Loss Orders

7. Letting Losses Grow

8. Chasing After Performance

9. Avoiding Your Homework

10. Trading Difficult and Unclear Patterns

11. Poor Reward to Risk ratios

12. Ignoring volatility

13. Too Many Open Positions

14. Buying With Too Much Margin

15. Following Meme Stocks

16. Buying Stocks With No Volume

17. Ignoring Indicators

18. Trading Too Large Position Sizes

19. Inexperienced Day Trading

20. Inconsistent trading size

21. Trading on numerous markets

22. Over-leveraging

23. Overexposing a position

24. Lack of time horizon

25. Over-reliance on software

Top Options Trading Mistakes Beginner Traders Make

1. Not having a Trading Plan

2. Not properly Researching Option Contracts

3. Trading without an understanding of the underlying asset

4. Buying Out-of-the-Money (OTM) Call Options

5. Not Knowing What to Do When Assigned

6. Legging Into Spreads

7. Trading Illiquid Options

8. No Exit Plan

Ready to Avoid these Trading Mistakes?

What Is An IRA, And How Does It Work?

When To Put Into A Roth IRA

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What is the best thing to invest in as a beginner?

How To Invest In Stocks For Beginners?

Step #1: Figure out your goals

Step #2. Decide how you want to invest in the stock market

Step #3. Are you invest in stocks for the short term or long term?

Step #4: Determine your investing approach

Step #5: Define your investment strategy

Step #6: Determine the amount of money willing to lose on stocks.

How to Start Investing in Stocks