So, you find the lazy way to invest very appealing: You like the simplicity and the long-term results. But you don’t want to bother with building your own lazy portfolio of index funds and adjusting it as you get older (same as creating your own target-date fund). At this point in your life, you just want a set-it-and-forget-it solution, at least until you feel more comfortable building your own investment portfolio. Target-date funds seem perfect for the job, but which one is right for you? Let’s walk through choosing a target date fund.
Related >> Investing 101: An Introduction to Index Funds and Passive Investing
Choosing the Fund Family
The first step is to choose the fund family (Fidelity, Vanguard, etc.). This decision cannot be overlooked since each company manages its funds differently; a 2040 target-date fund from T. Rowe Price will be different from a 2040 target-date fund at Fidelity. Each company has its own philosophy and methodology. Let’s compare the three biggest players in this market: Fidelity Freedom Funds, T Rowe Price Retirement Funds, and Vanguard Target Retirement Funds.
Related >> a href=”https://www.getrichslowly.org/the-lazy-way-to-investment-success/”>The Passive Way to Investment Success
The first criteria you can use to compare the fund families is cost, specifically the expense ratio (the total annual cost for things like advertising and managing the fund). As an example, let’s look at the 2040 funds:
Fund Family
Expense Ratio
Fidelity
0.79%
T Rowe Price
0.79%
Vanguard
0.20%
Amazingly, Vanguard’s expenses are roughly a quarter of the other two. This is largely due to the use of actively-managed mutual funds by Fidelity and T Rowe Price; Vanguard only uses low-cost index funds in their target-date funds. If you think 0.59% a year is a pretty small difference, remember that the rough rule-of-thumb for withdrawing money in retirement is only 4% a year. That “small” difference in expense ratios is almost 15% of your potential retirement income!
Another important criteria to consider is the asset allocation used by the target-date fund — how much is invested in stocks, and how much is invested in bonds and other instruments. In particular, you want to look at how that allocation is expected to change as you get older. Investing geeks like me call that the “glide path.”
Choosing Your Target Date
Once you select the fund family, you need to decide on the specific fund to buy. Target-date funds are labeled by retirement year, generally assumed to be when you turn 65. So the 2040 fund is designed for the “typical” person who’s currently 35 and is expected to retire in 2040.
Obviously, no one is forcing you to buy the fund that corresponds to the year you turn 65. There are at least two very good reasons to adjust your target date:
If you plan on retiring much earlier or later than 65, you should consider adjusting your target date. Let’s say you’re 35 and want to retire at 55. Should you buy the target-date fund for 2030, since that’s when you’d retire? Not necessarily. Although the 2030 fund fits your retirement plans, it also assumes people retire around age 65, so your life expectancy is probably much longer than the target audience for the fund. A good compromise might be the 2035 fund, which respects both your early retirement plans and your longer life expectancy relative to others you retire with.
Even if you expect to retire at 65, the amount of risk you want to take is probably not “typical”. An easy way to reduce risk is by selecting a fund with a target date that is five to ten years before when you turn 65. (So, if you plan to retire near 2040, you might choose a 2030 target-date fund.) This lowers the level of risk by holding less in stocks while still considering your investment horizon. And if you want more risk, you can select a target date that is five to ten years past when you turn 65. (If you plan to retire around 2030, you could increase risk by choosing a 2040 target-date fund.)
Even though they’ve received some bad press lately due to their poor performance during the recent stock market crash, target-date funds are still useful investments for many people. They’re certainly better than other strategies commonly used by beginning investors: equal-weighting all funds within a 401(k) plan, picking stocks, or just leaving everything in a money market fund.
If you already use target-date funds, which funds do you own and how did you choose?
Investing requires resolve and a long-term vision, but it doesn’t actually have to involve the stock market. Here’s a guide to non-stock investing options:
Precious Metals
During the Great Recession, precious metal commodities like gold and silver were all the rage. As the stock market lost more than 50 percent of its value, gold and silver started a monumental rise in price. Gold went from around $600 per ounce in 2007 to peak at $1,900 per ounce in 2011.
The prices of the most popular commodities have since fallen from their peak; but had you invested in precious metals for that period of time (and others like it in history), you would have netted a healthy profit for your portfolio.
Relying solely on precious metals for your portfolio is extremely risky, though, and I wouldn’t suggest it. However, commodities do tend to act in an opposite manner to the stock market, and using precious metals as a hedge against volatility can be a great strategy.
Related >> Beginners’ Guide to Investing
Peer-to-Peer Lending
Peer-to-peer lending is one of my favorite alternative investments. It is the ultimate win-win for consumers. Consumer “A” gets a loan from Consumer “B” (and typically a large group of other investing consumers). Then Consumer A gets to pay off high-interest-rate credit card debt that stands at 20 percent with a personal loan that has a fixed term and a fixed interest rate of, say, 10 percent. This also means a fixed payment each month.
For their part, Consumer B and his friends get to enjoy a much higher rate of return than they would be able to reach with cash sitting in the bank. Both sides win: The borrower gets a lower rate and a fixed term to pay off the loan while the lender enjoys a healthy rate of return.
It’s true that some see peer-to-peer lending as a risky asset class because you are relying on strangers to pay the loan back. As with any type of investing, you don’t want to put all your eggs into one basket. Diversifying your portfolio of loans helps tremendously when you do experience a loan that goes unpaid. (Plus, P2P websites like Lending Club and Prosper have collection methods that kick in on borrowers who miss payments.)
I’ve become so enamored with peer-to-peer lending that I decided to embark on a little experiment. I divvied up about half of my Solo 401(k )contribution into both Lending Club and Prosper. The goal of the experiment was two-fold:
See how much interest I could make with this investment strategy.
Compare the two companies to see which one provided better earnings.
Overall, I was pleased with the results. Both companies netted double-digit returns for me, and I plan to add more money into these investments.
Owning a Business
Hands down, I think the alternative investment with the highest potential rate of return is running your own business. This isn’t without risk — the vast majority of small businesses die within five years — but if you can outlast the statistics, it can be extremely rewarding.
I used to work for a company providing financial advisory services. I took a huge leap of faith, started a business, and started blogging. My financial planning business has thrived and my blog has earned well over six figures since I started.
The beautiful thing about running a small business is not only are you the boss, but you can grow and maintain it as much as you want. Maybe you love your full-time job but you want to try out a new skill. Spend your nights and weekends trying it out, earn some extra dough, and keep working full time. Even a little side income can make a huge difference in your financial life, and when you don’t have time to maintain it, then slow down and focus on other priorities.
Related >> Best side jobs for extra cash
Real Estate
If you’re interested in…
-significant cash flow
-leveraging other people’s money
-enjoying large tax write-offs
…then real estate can be a great choice.
Let me be clear so I don’t sound like a late-night infomercial: Real estate investing is difficult. The learning curve is significant. When you first start, you *are* putting all of your eggs in one basket because you will only have one property to rent out or flip. A previous GRS writer shared his experience of rushing into real estate investing.
Many people have lost their shirts trying to get rich with real estate. Even Dave Ramsey went bankrupt based on a series of really poor real estate investments at the start of his career.
Amid all the horror stories about crazy tenants, poor cash flow, and something always breaking, there is some significant income to be had from real estate investing. What’s better is you don’t have to put 100 percent down on a house. You can usually get away with 25 percent to 35 percent as a down payment and let the bank fund the rest of the purchase. This leverage means you can leave more money in reserve for the inevitable issues that pop up or to expand into a larger number of properties faster.
Bonds
Nearing retirement? You’ll want to cut back on your stock allocation and put some of those funds into bonds. You might associate bonds with the stock market because they are so commonly paired with stocks in a portfolio, but technically bonds are traded on the bond market. You won’t generate sky-high returns here, but you will also cut out a majority of the volatility you get from stocks. Very few bond investments have lost 50 percent of their value for two years and then returned 100 percent the next four years.
Related >> Investing 101: How Bonds Work
Investing in individual bonds carries more risk because they are not diversified. If the company that issues the bond goes under, you might not get your principal investment back. However, bond ETFs and mutual funds can provide the non-stock exposure of bonds with the added benefit of diversification.
Certificates of Deposit
The lowly certificate of deposit or CD. Simple. Basic. Low return.
And sometimes. . . just what the doctor ordered.
A CD is a simple financial product where you hand over some cash to a bank or credit union for a set period of time and a set interest rate. If you have less than $250,000 in total assets at that bank or credit union — across *all* accounts — your investment principal is guaranteed by the FDIC. You literally cannot lose the principal balance if you use this method.
The upside of CDs is stability and guarantee. The downside is, at least right now, inflation will be eating away at your principal balance. Certificate of deposit rates are extremely low due to the Federal Reserve’s monetary policies but if rock-solid security is your number one investment driver, this is worth a look.
Related >> Best CD Rates
Annuities
Ewww. . . annuities. Don’t all personal finance bloggers hate annuities?
Listen, I get it. Annuities CAN be bad. Terrible, in fact. Fees, confusing contract terms, and an encyclopedia of fine print.
Most people don’t realize there are several types of annuities: fixed, immediate, variable, equity-indexed, and several more.
Hear me out. The right annuity with the right, sensible, un-scammy terms can be a solid foundation for a retirement portfolio.
In fact, Mike Piper, a previous GRS contributor, shared how you can create retirement income by purchasing the right annuity.
But like any investment, buy with caution. And be wary of commission-hungry, shady advisers just looking to make a sale vs. matching you with an investment that works toward your financial goals.
Yourself
Last but certainly not least, investing in yourself can pay dramatic dividends. I have personally done this in a variety of ways. Besides getting my CFP certification — certified financial planner — another major investment I made in myself was signing up for a coaching program.
I can’t blame you if you’re skeptical about coaching programs. I was too. It’s been more than three years since I signed up for The Strategic Coaching program and it has literally been the best investment I ever made. The mentoring has allowed me to grow my business significantly, and the return on what I paid has been tremendous. It makes a 9 percent return in the stock market look like nothing.
In all, when you think of investing, you don’t have to immediately think of bull or bear markets or even markets at all. There are other avenues to explore. Let us know what’s working for you in the comments section below.
Looking for a quick definition? Keep the one below in mind.
Sharing economy definition
The sharing economy is a peer-to-peer lending system, often facilitated by online platforms, that allows individuals or small companies to share goods and services with one another.
To better understand the sharing economy, it’s helpful to see how it fits into the bigger picture of novel industries that are disrupting traditional ones.
Sharing economy vs on-demand economy
The on-demand economy is a name for the new suite of services most people have available with their phone. “On-demand” refers to the fact that, with just a few taps, swipes, and a credit card, there are many goods and services immediately available to consumers.
For instance, let’s say you need groceries delivered — there’s an app for that. A fleet of gig-working delivery drivers (more on that next) is ready on demand to bring you the bread, almond milk, and kale that you need ASAP.
How does this differ from the sharing economy? When investors, economists, and consumers talk about the sharing economy, they are referring more specifically to services that facilitate sharing goods. It might not even be on-demand; for instance, if you’re part of a group of people who share power tools, you might not have access to the bandsaw you need until the person who has it now is done in 3 days.
The sharing economy and the on-demand economy have a lot in common, though, as they both allow peers to collaborate through the use of a third-party app. That brings us to another buzzword you might be hearing a lot about these days.
Sharing economy vs gig economy
The gig economy focuses more on the workers’ side, rather than the consumer. For instance, both sharing economy services (like Airbnb) and on-demand economy services (like TaskRabbit), and even services that fall into both categories (like Uber), can be considered forms of gig economy work.
The gig economy consists of workers who operate on short-term contracts, performing jobs through an app-based service. When investors and economists talk about the gig economy, they’re usually talking about the transition in many sectors toward this sort of short-contract-based work.
The quintessential example is a service like Uber or Lyft. Rather than a full-time, wage-based job like taxi driver, many people are instead working part-time, contract-based, often precarious positions as ride-share drivers. That’s the gig economy in action.
Examples of the sharing economy
We’ve already discussed a few types of sharing economy services, but what are a few more familiar examples? The answer is that there’s no set definition or criteria for what makes a service a part of the sharing economy. That said, there are a few examples that you’re probably familiar with:
Ride-share: Services like Uber and Lyft are great examples of the sharing economy — a driver shares their car (and time) with a consumer, who gets a lower-cost ride out of the arrangement.
Car-share: Some services also allow you to share your car with peers, not by driving them, but by allowing them to rent it.
Tool-share: Power tools are expensive. Luckily, the sharing economy makes it easy to see who has a tool you can borrow, and pay a small amount to rent it for a day or two while you complete a project.
Clothing sharing: There are sharing sites for expensive designer clothes that you probably won’t wear more than once. Pay for a subscription, then rent for a few days.
Crowd-funding: Have a new business idea or product concept? You can use services online that allow you to crowd-fund the startup costs.
Peer-to-peer lending: Rather than going through a large financial institution or sketchy loan shop when you need cash, peer-to-peer lending allows consumers to seek financing from other individuals who have a little surplus cash they’d like to grow.
As mentioned before, there’s no hard-and-fast definition or criteria — pretty much any service that allows people to help each other out can be considered a part of the sharing economy.
Sharing economy apps
We’ve mentioned that the sharing economy is mostly facilitated by app-based services — but what are these apps? Chances are, you’ve probably already got a lot of them on your phone. Here are a few common sharing economy companies, and what they’re built for:
Ride-sharing and taxi alternatives: Uber, Lyft
This is definitely not a complete list. Chances are, if you need some item or service, but don’t want to purchase it yourself, there’s a sharing economy solution out there for you. A simple Google search of “[What you need]” + “sharing app” will likely bring you tons of interesting options to consider.
Pros and cons of sharing economy
Like anything, the sharing economy comes with plenty of pros and cons to consider. Before going all-in on using sharing apps, let’s take a look at some of the benefits and downsides that come along with the sharing economy.
Pros
Sharing services can help you save money
Sharing apps give you access to things you might not otherwise have (like power tools or a small loan)
They’re often on-demand, too (though not alway), so you can get what you need quickly
They allow owners of assets to make a small, steady stream of passive income
They’re popular. According to PWC, about 19% of people have participated in the sharing economy, and that number is expected to grow.
Cons
They might be riskier than a traditional business because you’re renting items (like a car) from an individual rather than a company
While they might allow for a new income stream, some sharing economy jobs (like rideshare drivers) might not allow you to make a full living
Some app companies might inflate prices or take a large commission in order to increase their own profits — be sure to do your research on an app before using it as either a buyer or seller
Overall, for most people, deciding whether using the sharing economy makes sense will be an individual process. For some people, making money with side hustle apps might be a great way to spend some time and earn a little cash. For others, it might not make as much sense.
If you have a vacation home you don’t use often, it could totally make sense to rent it out to travelers who need a place to stay. Others might not want the hassle associated with cleaning the home and preparing it for the next guests — ultimately, it’s up to you whether participating in the sharing economy makes sense.
Sharing economy: the takeaways
The sharing economy is a great way for peers to connect and share goods and services they have access to with people who are looking for access at a bargain price. It can include anything from sharing cars and power tools to peer-to-peer lending and crowdfunding.
Here’s what to remember:
The sharing economy uses apps to allow individuals to connect with each other, sharing their goods and services.
It’s closely related to the on-demand economy and gig economy; in fact, there’s tons of overlap when it comes to the apps used in each.
You can use the sharing economy to access things like car rentals, fashionable clothes, power tools, personal loans, and seed money for your ingenious ideas.
Apps like Uber, Vrbo, DailyLook, and Prosper are all popular sharing economy options.
There are pros and cons
Pros: Usually inexpensive, a great way to find extra income, and convenient
Cons: You have to trust peer lenders and borrowers, and some companies pay workers less than other options, or charge fees that make lending not worthwhile
What options can the sharing economy open up for you? Research the ways that you can start using sharing apps today, and start saving (or making!) money.
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The Millennial’s Guide to Buying a Home: Budgeting and Insurance
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Side Hustle 101: What You Need to Know About Renting Your Car
A wash sale occurs when an investor sells a security at a loss, and buys a very similar security within a 30-day window of the sale (30 days before or after). The wash-sale rule is an Internal Revenue Service (IRS) regulation that states an investor can’t receive tax deduction benefits if they sell an investment for a loss, then purchase the same or a “substantially identical” asset within 30 days before or after the sale.
While investors may find themselves in a position in which it may be beneficial to sell securities to harvest losses, it’s important to know the wash-sale rule in and out to avoid triggering penalties.
Which Investments are Subject to the Wash-Sale Rule?
The wash-sale rule applies to most common investments, including:
• Stocks
• Bonds
• Mutual funds
• Options
• Exchange-traded funds (ETFs)
• Stock futures contracts
Transactions in an individual retirement account (IRA) can also fall under the wash-sale rule. The wash-sale rule does not apply to commodity futures or foreign currency trades. The rule also applies if an investor sells a security that has increased in value and within 30 days buys an identical security. They will need to pay capital gains taxes on the proceeds.
What Happens When You Trigger a Wash Sale?
Investors commonly choose to sell assets at a loss as part of their tax or day trading strategy, or they may regret selling an asset while the market was down, and decide to buy back in.
The intent of the wash-sale rule is to prevent investors from abusing the tax benefits of selling at a loss, and claiming artificial losses.
In the event that an investor does trigger a wash sale, they will not be allowed to write off the loss when they do their tax reporting to the IRS. This means the investor won’t receive any tax benefit for selling at a loss. The rule still applies if an investor sells an investment in a taxable account and buys it back in a tax-advantaged account, or if one spouse sells an asset and then the other spouse purchases it that also counts as a wash sale.
It’s important for investors to understand the wash-sale rule so that they account for it in their investment and tax strategy. If investors have specific questions, they might want to ask their tax advisor for help.
Recommended: Investing 101 for Beginners
Avoiding a Wash Sale
Unfortunately, the guidelines regarding what a “substantially identical” security is are not very specific. The easiest way to avoid wash sales is to create a long-term investing strategy involving few asset sales and not trying to time the market. Creating a diversified portfolio is generally a good strategy for investors.
Another important thing to keep in mind is the wash-sale rule applies across an investor’s accounts. As such, investors need to keep track of their sales and purchases across their entire portfolio to try and make sure that the wash-sale rule doesn’t affect any investment choices.
What to Do After Selling an Asset at a Loss
The safest option is to wait more than 30 days to purchase an asset after selling a similar one at a loss. An investor can also invest funds into a different asset–a different enough asset, that is–for 30 days or more and then move the funds back into the original security after the wash sale window has passed.
There are benefits to selling an asset at either a profit or a loss. If an investor sells at a profit, they make money. If they sell at a loss, they can declare it on their taxes to help offset their capital gains or income. If an investor has significant capital gains to report, they may decide to sell an asset that has decreased in value to help lower their tax bill. However, if they hoped to reinvest in an asset later, a wash sale can ruin those plans.
In some cases, simply selling a stock from one corporation and purchasing one from another, different corporation is fine. Even selling a stock and buying a bond from the same company may not trigger a wash sale.
Investing in ETFs or Mutual Funds Instead
If an investor wants to reinvest funds in a similar industry while avoiding a wash sale, one option would be to switch to an ETF or mutual fund. There are ETFs and mutual funds made up of investments in particular industries, but they are often diversified enough that they wouldn’t be considered to be too similar to an individual stock or bond. It’s possible that an investor could sell an individual stock and reinvest the money into a mutual fund or ETF within a similar market segment without violating the wash-sale rule.
However, if an investor wants to sell an ETF and buy another ETF, or switch to a mutual fund, this can be more challenging. It may be difficult to figure out which ETF or mutual fund swaps will count as wash sales, and which won’t.
Wash-Sale Penalties and Benefits
If the IRS decides that a transaction counts as a wash sale, the investor can’t use the loss to reduce their taxable income or offset capital gains on their taxes for that year.
However, there can be an upside to wash sales. Investors can end up with a higher cost basis for their new investment, because the loss from the sale is added to the cost basis of the new purchase. In addition, the holding period of the sold investment is added to the holding period of the new investment.
The benefit of having a higher cost basis is that an investor can choose to sell the new investment at a loss and have a greater loss for tax reporting than they would have. Conversely, if the investment increases in value and the investor sells, they will have a smaller capital gain to report. Having a longer holding period means an investor may be able to pay long-term capital gains taxes on a sale rather than short-term gains, which have a higher rate.
The Takeaway
The wash-sale rule is triggered when an investor sells a security at a loss, but then turns around and buys a similar security within 30 days–either before, or after. It’s a bit of an opaque rule, but there can be consequences for triggering wash sales. That’s why understanding regulations like the wash-sale rule is an important part of being an informed investor.
Part of making solid investing decisions is planning for taxes and understanding what the benefits and downsides may be for any particular transaction. This is just one aspect of tax-efficient investing that investors might want to consider.
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.
SoFi Invest® The information provided is not meant to provide investment or financial advice. Also, past performance is no guarantee of future results. Investment decisions should be based on an individual’s specific financial needs, goals, and risk profile. SoFi can’t guarantee future financial performance. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member FINRA / SIPC . SoFi Invest refers to the three investment and trading platforms operated by Social Finance, Inc. and its affiliates (described below). Individual customer accounts may be subject to the terms applicable to one or more of the platforms below. 1) Automated Investing—The Automated Investing platform is owned by SoFi Wealth LLC, an SEC registered investment advisor (“Sofi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC, an affiliated SEC registered broker dealer and member FINRA/SIPC, (“Sofi Securities).
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For additional disclosures related to the SoFi Invest platforms described above, including state licensure of Sofi Digital Assets, LLC, please visit www.sofi.com/legal.
Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform. Information related to lending products contained herein should not be construed as an offer or prequalification for any loan product offered by SoFi Bank, N.A. Investment Risk: Diversification can help reduce some investment risk. It cannot guarantee profit, or fully protect in a down market. Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances. Claw Promotion: Customer must fund their Active Invest account with at least $10 within 30 days of opening the account. Probability of customer receiving $1,000 is 0.028%. See full terms and conditions. SOIN0523034
Investing in the stock market has never been easier. Many of the best online brokerages are designed for beginner investors and offer unique incentives for signing up. The good news is that you can enjoy free stocks just for signing up.
Investing in the stock market, real estate, or crypto has never been easier. Gone are the days when you had to be an expert or work with a stock broker to buy company shares or invest your money. You can invest your money in several ways, with options for every level of risk tolerance and investment understanding.
Many of the best online brokerages are designed for beginner investors and offer unique incentives for signing up. The good news is that you can enjoy free stocks just for signing up.
Table of Contents
How to Get Free Stocks
You have so many options today for investing in stocks, real estate, or crypto that investing platforms must work harder to gain your business. This means you can find many new discount brokerages and established investment platforms offering free stocks or financial bonuses to lure in investors.
We decided to look up the best free stock offers for those looking to take advantage of this opportunity.
Ready? Let’s dive in!
1. Public
Public is an investing platform offering commission-free stock trades, and it’s become a hit with young investors just starting. The platform is also a social online stock brokerage that lets you see how others invest so that you don’t feel alone in your financial journey. Public allows you to track the trade activity of verified investors with proven track records, so you’re always learning about investing options.
Another feature that makes Public attractive to young investors is that you can purchase fractional shares, meaning that you can start investing in more prominent companies even if you’re not in the financial position to buy whole shares.
Public’s platform also gives you access and exposure to asset classes like ETFs, crypto, luxury goods, and artwork. They plan to add real estate and music royalties to this list of asset classes soon.
We should note that Public doesn’t participate in payment for order flow like many other brokers do. This means that the company doesn’t sell your trades to third parties.
How do you get free stocks with Public?
Open an approved brokerage account with Open to the Public Investing.
Deposit at least $20 in your account.
Claim your reward from the top right of your home screen.
The reward, in this case, is a fractional share of a specific stock, ETF, or crypto token (you must open an account with Apex Crypto LLC for a crypto asset reward). The cash value of the reward you receive will vary from $1 to $300, with about 95% of participants receiving a reward valued at $1. According to Public, about 4.9% of participants will earn a reward valued at $5, and only 0.1% will earn a reward valued at $300.
2. moomoo
Moomoo claims that you can trade like a pro on their platform. There are no commissions, account minimums, hidden fees, or trade minimums with moomoo. The platform offers free investing tools with real-time data and AI support, plus you have access to global markets (US, Hong Kong, and China-A-shares) under one account. It also has US-based licensed specialists who are available for professional support.
How do you get free stocks with moomoo?
The moomoo home page states that you can get up to 15 free stocks valued between $3 to $2,000 each when you sign up. The offer is subject to change at any time.
Here are the different ways to get free stocks with moomoo:
Open a brokerage account and draw for a chance to earn one free stock worth between $3 and $2,000.
Deposit $100 into your account during the promotional period, and you will be entered into a draw four times to earn one free stock worth between $3 and $2,000.
Deposit $1,000 into your account during the promotional period, and you will get ten chances to draw for free stock worth between $3 and $2,000.
According to moomoo’s current promotional page, the free stock is completely random based on a specific probability distribution. There’s a 95% chance you’ll get a free stock worth $3 to $9.99, a 4.9% chance of getting a stock worth $10-$99.99, and a 0.1% chance of getting a stock worth $100 or more.
3. M1 Finance
M1 Finance is a free investment platform with a wide variety of professionally chosen portfolios for you to invest in. M1 Finance also offers various brokerage accounts, so there’s likely an account that will match your investing preferences.
The company refers to its platform as the “Finance Super App” since you can manage all of your financial tasks, like investing, spending, and borrowing, in one place to simplify your life. The platform comes with a checking account and lending services, and you can earn 1% cash back as a Plus user of the M1 Finance checking account.
M1 Finance is known for letting users invest in pies, which means that you can invest in different securities that make up slices of the whole pie. You can create a custom pie of stocks and ETFs based on your investment strategy. If you want to leave the guesswork to the professionals, you can use one of the expert pies created for different investors.
How do you get free stocks with M1 Finance?
M1 currently offers up to $500 for free if you deposit at least $10,000 within 14 days of opening a new brokerage account.
When you deposit $10,000 to $29,999.99 to your account, you get a $75 bonus. When you deposit $30,000 to $49,999.99, you get a bonus of $150. When you deposit $50,000 to $99,999.99, you get a $250 bonus. To earn a cash bonus amount of $500, you have to deposit over $100,000.
You can also use the M1 referral program to get $10 for free. When you sign up for an account through a friend’s link, you both get $10. You can then use this money to invest how you wish through the platform.
* Account Minimum $100
* Build custom portfolios (or)
* Choose expert portfolios
* Stocks, ETFs, REITs
Open an account
4. Robinhood
This investing platform was a game changer during the pandemic as many young folks turned to Robinhood to begin their investment journey. While there were some controversies related to Robinhood that came along with the 2021 meme stock rallies, you can’t ignore this easy-to-use app that has changed investing.
Robinhood’s popular commission-free app is designed for investors of all levels. You can invest in stocks and crypto through Robinhood, and it also provides ETFs, margin trading, and options trading for those looking to level up their investments. With 24/7 professional support, educational resources, and the ability to purchase fractional shares, it’s clear why many young investors have turned to Robinhood and its straightforward mobile app.
How do you get free stocks with Robinhood?
To get free stocks with Robinhood, you must open an account. Once you’ve linked your bank account, you’ll be given a specific dollar amount and will pick your gift stock from a list of America’s top 20 leading companies, based on market cap, in their respective industries. You can use the cash value you’re gifted to purchase fractional shares of the companies offered on the list in case you don’t earn enough to buy a total share.
The Robinhood website doesn’t specify the exact cash value you’ll receive, though it ranges from $5 to $200, with about 98% of the new account holders being granted a reward running from $5 to $10. You can use whatever amount you’re gifted to purchase stocks or fractional shares of a company.
You do have to keep the stock for three days from the day you claim it. When you sell the shares, you can use the money to purchase other stocks. If you want to withdraw this money from your account, you must keep the share’s cash value in your account for at least 30 days. Once the 30-day window is up, you can withdraw your funds without restrictions.
5. SoFi Invest
SoFi Invest is a part of the SoFi family of products. Their mission is to help people reach financial independence and realize their ambitions. SoFi Invest is an app designed to let you track and trade money. The investment platform lets you trade stocks and ETFs with no commissions, invest in IPOs before they hit the public market, invest in crypto, and even set up simplified automated investing.
The platform also offers educational resources to help you learn more about investing if you’re not comfortable with it yet. SoFi has many other personal finance products, including student loans, credit cards, banking, credit score monitoring, and personal loans. You can essentially use SoFi to handle all of your personal finance needs.
How do you get free stocks with SoFi Invest?
You must open an Active SoFi Invest Brokerage Account with SoFi Invest and deposit $10. Then you become eligible for a signup bonus that ranges from $5 to $1,000. The promotional offer gives a 0.028% probability of earning $1,000 and an 85.488% chance of gaining the $5 reward.
6. Webull
Webull is one of the new players in the stock broker space, offering zero commissions and no deposit minimums. Every member gets smart tools for smart investing. Webull allows you to diversify your portfolio with various investment products like stocks, fractional shares, options, ETFs, ADRs, and OTC.
Webull also attracts more sophisticated investors by offering innovative tools like advanced charting and comprehensive financial analysis. When you become a member, you get access to a community with millions of folks discussing investment strategies, so you’re not alone during your investment journey.
How do you get free stocks with Webull?
According to their website, Webull’s process is fairly simple, and you can get up to 12 free fractional shares with a value ranging from $3 to $3,000. This promotional offer ends on January 4, 2023.
Here are the two ways you can get free stocks with Webull:
Open an account with Webull to get two free fractional shares.
Deposit any amount of money in your new account and get up to 10 free fractional shares.
The free stocks, which include NYSE or NASDAQ-listed companies with a minimum market cap of $2 billion and a share price ranging from $3 to $300, are chosen randomly. The odds of being rewarded a stock ranging between $151 and $300 is approximately 1:10000.
7. Groundfloor
Groundfloor is a real estate crowdsourcing app aimed at debt investments, so you can get into real estate without allocating a significant portion of your savings. Real estate investing platforms have become more popular over the last few years, with more apps like Groundfloor popping up.
You can invest with Groundfloor in two ways:
The “Stairs” saving account: This is essentially a high-interest savings account with a 4% APR, no fees, and no minimum balance. You can leave your money there and let it grow until you’re ready to start investing.
Groundfloor real estate crowdsourcing: You can invest in individual renovation loans or use automatic investing tools to find projects you can fund based on your chosen criteria.
Groundfloor claims to be the only investing platform where you can securely earn up to 10% on your money with investments backed by real assets. The platform is known for “savesting” since they try to combine saving with investing.
Groundfloor has grown to about 200,000 users and over $240 million in assets under management. Groundfloor generally repays all investments every 4-12 months, which is rare considering that real assets back your investments.
How do you get free stocks with Groundfloor?
When you invest $100 into your new Groundfloor account, you get a $50 credit within 30 days. All you need to do is link your bank account, pick your investments (or let Groundfloor do it for you), and collect your interest. You and a friend can also earn a $50 referral bonus when you get them to sign up for Groundfloor using your referral link.
8. Plynk
Plynk is an app designed to make investing easy for beginners, helping you learn about financial investments as you go. You can start investing for as little as $1, so you don’t have to be intimidated by the investment process or by setting aside a large chunk of capital.
Plynk uses simple language that’s easy to understand and teaches you about investing concepts as you work on growing your money. They offer many tips and how-tos to guide you through the process. Plynk will ask you some questions that it will use to narrow down investment opportunities based on your interests.
How do you get free stock with Plynk?
You create an account, then link your bank account to earn the $10 signup incentive. You can also get up to a $100 deposit match as a bonus for a limited time.
9. Fundrise
Fundrise helps you start real estate investing with only $10. This real estate crowdsourcing app is focused on long-term investments. The best part of investing with Fundrise is adding real estate exposure to your portfolio without dealing with any of the hassles typically involved in owning and renting out properties.
Fundrise has multiple investment options depending on how much capital you have to work with. There’s a Starter level for those who want to begin with as little as $10 and packages that go in tiers up to $100,000 for accredited investors.
Fundrise also recently launched the Innovation Fund for those who want additional diversification. This investment is focused on high-growth private tech companies that could provide lucrative returns in the future.
How do you get free stocks with Fundrise?
Fundrise will automatically deposit $10 as a bonus when you open your new account and link your bank account via its promotional page. Several terms and conditions apply as to who qualifies for this offer. You can use the bonus cash for investing in one of Fundrise’s fund options. For more information on Fundrise, check out our full review.
* Invest in real estate with $10
* Open to all investors
* Online easy to use site and app
Invest now
10. Firstrade
Firstrade is a full-service online brokerage that allows you to invest in stocks, options, and mutual funds while you get access to a full suite of investment products, research, tools, and even customer service. The best part is that you get all of these services for free. Firstrade offers zero-dollar commission trades and $0 options contract fees on its award-winning platform.
Firstrade has an extensive list of services for investors, including some of the following perks:
Extended-hours trading: You can get pre-market news and after-market-hours sessions.
Trade ideas: You get access to premium research from trusted platforms like Morningstar, Benzinga, and Zacks.
Free educational resources: There are free tools and live webinars for investors of all levels.
According to Firstrade’s website, you can get up to $4,000 in cash bonuses when you sign up. While you don’t get paid in stocks, you get the next best thing, cash.
How do you get free stocks with Firstrade?
It’s very easy to earn free stocks with Firstrade, as all you have to do is fund your account to get a cash bonus. This promotion ends on January 17, 2023, and there’s a list of criteria for earning free stocks based on how much you invest. Here’s how much you can earn in cash with Firstrade:
Deposit or transfer amount
Cash bonus
$5,000+
$50
$10,000+
$100
$25,000+
$300
$100,000+
$700
$500,000+
$1,500
$1,000,000+
$3,000
$1,500,000+
$4,000
You can also get up to $200 in transfer fee rebates for account transfers and $25 in wire transfer fee rebates.
11. Acorns
Acorns allows you to save, invest, and learn with one simple app. You can set the Acorns app to save and invest for you automatically. For example, you can turn on the Round-Ups feature to invest your spare change by rounding up your purchases to the next dollar and allocating the difference to your portfolio. According to Acorns, the average new user will invest an extra $166 within four months by just rounding up and investing their spare change.
Acorns also offers diversified portfolios that experts create, including ETFs that professionals from top investment firms manage. With over 10 million sign-ups, Acorns has been helping millennials save money daily.
With Acorns, you can earn bonus rewards by purchasing products from many top brands. Since Acorns works with over 15,000 brands, including Apple, Amazon, and many others, you have multiple opportunities to earn rewards.
How do you get free stocks with Acorns?
To get your $10 sign-up bonus on Acorns, simply create a new account and make your first investment of at least $5. Acorns also offers a $5 investment referral bonus to you and a friend when you get your friend to sign up. Find out more about Acorns in our full review.
12. Stash
Stash is an investing app tailored for beginners, allowing users to start investing with very little cash. With only a $5 investment minimum, Stash allows new investors to start small until they’re more comfortable.
Stash offers banking and investing tools to its ten million-plus users. You can automate your investing, put your money into stocks, or let Stash create a customized investment based on your financial preferences. If you’re unsure which investment option to choose, the Smart Portfolio will automatically expose you to stocks, bonds, and cryptocurrency.
Among other unique features, Stash can work with parents or guardians who want to open a custodial account for their children to invest in their future. Stash also offers a Stock-Back debit card that lets you earn 1% in stock on all of your purchases. The Stock-Back card rewards you with stocks of the companies you shop with.
In addition to no hidden fees, Stash offers a Stock Round-Up feature where you can round up your purchases to the nearest dollar and invest your spare change in stocks. This platform is an easy, educational, and convenient way to invest in stocks.
How do you get free stocks with Stash?
Stash is currently offering $5 to anyone who signs up for a Stash Invest account which you can use to spend on more investments.
Stash also has weekly stock parties, where investors can earn bonus stock in a well-known company for participating in the party and sharing a referral code with friends.
13. Charles Schwab
Charles Schwab is one of the country’s biggest, most well-known banks and brokerages, with many physical locations available nationwide.
The Schwab digital platform offers various financial tools and accounts for investors of every level. You can find different brokerage accounts depending on your investing goals. The Schwab brokerage account features options trading, margin trading, and checking account features like paper checks and debit cards.
You can utilize the robo-advisor investing tool for a more hands-off approach to investing your money. You can also visit a physical branch near you if you have any pressing issues. There’s also 24/7 access to investment professionals if you have questions.
How do you get free stocks with Charles Schwab?
Charles Schwab touts that new investors will get its investing 101 course and a $101 cash bonus. You have to open up a Schwab Starter Kit, which includes $101 of Schwab Stock Slices, investing education, and other financial tools (like budget planners, for example).
To get free stocks with Schwab, you must open your account and fund it with $50 within the first 30 days. Then you’ll receive $101 to split equally between the top five stocks in the S&P 500.
Which is the Best Online Broker For Free Stocks?
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If you’re looking for free stocks while opening up a new investment account, the good news is there are plenty of options. Those newer to investing will want to explore the various choices to see which broker works best for their unique financial situations. Every app offers distinct features and benefits that will hold different values depending on your current financial situation.
The investing app you go with will also depend on what you’re looking to invest in, as you can choose between different assets like stocks, ETFs, real estate, crypto, and so on. The best part of investing in 2023 is finding a platform that will match your investment strategy, so you can shop around until you’re satisfied.
As always, we urge you to carefully read the fine print to ensure that you qualify for free stocks if you’re solely signing up for the financial incentives.
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Stock markets and major commodities such as oil and gold seem to get most of the mainstream financial market headlines these days. Despite being the largest and most liquid trading markets in the world, the global currency markets do not nearly get the same attention.
There are a few key reasons for this – the lack of a true central currency exchange, the relatively small daily price changes and the seemingly opaque reasons for changes in currencies.
However, the value of our nation’s currency can have a strong affect on the stock market and the commodities markets as well as have a real affect on our lives. Our currency’s value is a basic fundamental component of our wealth and our ability to purchase goods – especially in this age of globalization. If we pay attention to the currency market trends, we can benefit by using this information to plan ahead for a vacation, search out deals on foreign products or take this knowledge into account when making our investment decisions.
For businesses, the value of a local currency can be even more important. A strong currency will make our exports more expensive to foreign buyers while possibly making imports downright cheap for us to buy.
As a currency trader, I can tell you that there are many economic factors to take into consideration when it comes to evaluating a currency’s strength. Some economic factors can have more influence at different times and for different countries.
Below, I touch upon four factors that I believe to be among the most important economic indicators anyone can follow by reading the news.
1. Interest Rates
The first factor contributing to the general strength or weakness of a currency is a country’s interest rate. Simply, interest rates are the amount it costs to borrow money. The interest rate level is moved higher or lower by a country’s central bank to either stimulate or slow down an economy. Higher interest rates impose a more costly fee to borrow money while lower interest rates lessen the fee and usually spur more borrowing (or access to cheap credit) in an economy.
When it comes to demand for a particular currency, however, the higher the interest rate usually means the higher the demand for that currency. Lower interest rates usually decrease the demand for a currency. The reason investors look to buy currencies with higher interest rates is it creates an additional rate of return on their currency exchange. A trader is compensated by the interest rate differential when the trader buys the currency with the higher interest rate compared to the lower interest rate currency. There is a popular currency trading strategy called the “carry trade” that seeks to exploit the differences in country’s interest rates (see more on the carry trade here).
The mechanics behind this can take some time and effort to fully comprehend, but the general take away is: Higher interest rates make a currency more attractive.
2. Inflation
Inflation is next in our economic factors list and is defined by the rise in prices of goods and services. When a product rises in price, it signals that there is an underlying demand for that product. Higher prices may not seem good to a consumer, but it is generally considered healthy for a country to have a moderate increase in inflation in a growing economy. Many central banks have a target inflation rate for their economy of around 2 percent a year.
When an economy sees too much inflation, the central bank will try to cool off rising prices and access to cheap credit with an increase in interest rates. This brings us back to number one in our list, where we see that higher interest rates make a currency more attractive. So in a growing economic environment, rising inflation rates will tend to increase expectations that interest rates will rise, which will in turn make traders have a positive outlook for the rise of the currency.
There are also downsides to inflation when not accompanied by a growing economy called stagflation (high unemployment, low growth, high inflation) and the dreaded deflation, which is when prices are in decline. This is usually a drag on an economy as prices of goods are falling, leading to declining wages in worker paychecks and less money workers will have to buy goods.
3. Economic Growth
The strength of an economy can go a long way to boosting the strength of the nation’s currency. A strong growth rate in a country will see a growing demand for products and services with better job prospects for workers as well as being an attractive destination for capital and investments.
The easiest way to watch a country’s economic standing is to pay attention to the gross domestic product (GDP). A strong GDP reading is growth of 3 percent or more in many cases, while growth close to zero percent or a negative reading shows that the economy could be headed for a recession. A typical definition of a recession is two consecutive quarters of negative GDP growth.
In an economy like the United States, which is driven by consumer spending, expanding growth that produces more jobs and better wages will allow workers to feel wealthier and help to further stimulate the economy through domestic consumption. More growth can bring higher inflation rates and the expectations for interest rate increases. Foreign investment and demand from companies abroad can also play an important factor in boosting the local currency of a strong economy.
4. Current Account Balance
The last on our list is the current account balance. It is considered to be the most extensive gauge of cross-border transactions of a country. Simply put, it is the total amount of goods, services, income and current transfers of a country against all of its trading partners. A positive current account balance signals that a country lends more to its trading partners than it borrows, and a deficit current account balance shows that the country borrows more from its trading partners than it lends.
This total amount of trade can influence the country’s exchange rate positively if there is more demand for that country’s goods (and currency) from other countries. A deficit or borrower country will see less demand for its own local goods and currency overall.
Conclusion
Economics and currency forecasting are both very much inexact sciences. Price movements can seem volatile and hard to understand, but for those seeking basic insight into currency trends, these important economic factors can go a long way.
Zachary Storella is the CEO of currency news website CountingPips.com.
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Save more, spend smarter, and make your money go further We all know about supply and demand in relation to the economy, but have you heard of a housing bubble? Perhaps you’ve heard the term as it relates to the 2008 market crash, or perhaps you’ve heard whispers that we’re in another housing bubble again. … [Read more…]
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Let’s do a little investment simulation. Don’t worry—I’ll do the math.
Jane has a $5000 consumer loan and a $20,000 stock portfolio. Her net worth is $15,000. (Ah, the simple life of a person in a word problem.)
If the stock market goes up 10%, Jane makes $2,000 and her net worth goes up to $17,000 ($22,000 in the portfolio, minus the $5000 loan).
If the market goes down 10%, Jane loses $2000. Are you with me so far?
Jane decides to pay off the loan. Her net worth is still $15,000, but now it’s $15,000 in stocks and no debt. Then the stock market goes down 10%, and Jane only loses $1500. By paying off the loan (a financial nerd would call it “deleveraging”), Jane’s portfolio got less risky: The same change in the market caused a smaller change in her portfolio, even though her net worth stayed the same.
It doesn’t matter that Jane borrowed the money for a dining room set. As long as she owes the money, she’s taking on more investment risk than if she didn’t owe it. Her net worth fluctuates more with each day’s stock returns because of the debt. That’s not necessarily good or bad (maybe Jane wants to take on more risk in the hope of getting a bigger return) but it’s a mathematical fact.
This is all grade school math, right? But if we replace “consumer loan” with “mortgage,” somehow it makes otherwise intelligent people, investors and financial planners alike, forget basic arithmetic.
“Investing on mortgage”
I’ll include myself among the mathematical amnesiacs, because I only came to understand this principle because of a recent blog post by Michael Kitces, director of research for Pinnacle Advisory Group, who writes the Nerd’s Eye View blog.
The post is written with financial planners in mind, not consumers, so I’m going to summarize it as follows: If you have both a mortgage and an investment portfolio, you’re probably making a big mistake. A big, fat, Greek default-style mistake.
Let’s go back to Jane. Now she has a $100,000 mortgage, a $100,000 house, and a $200,000 stock portfolio. Her net worth is $200,000 (the portfolio plus the house, minus the mortgage). When the stock market goes up 10%, Jane makes $20,000. When it goes down 10%, she loses $20,000.
Say Jane takes $100,000 from her portfolio and pays off the house. Her net worth is still $200,000, but her portfolio has dropped to $100,000. Now when the stock market goes down 10%, Jane only loses $10,000. Her portfolio got less risky, but her net worth stayed the same. (Yes, we’re assuming remarkable stability in the real estate market.)
Jane would tell you that she wasn’t borrowing money to invest in stocks, she was borrowing money to buy a house. Well, her portfolio and her bank don’t give a hoot. As long as she owes money, her investment performance has a bigger effect on her bottom line than if she didn’t owe.
After paying off her mortgage, Jane comes to you for financial advice. She’s thinking of taking out a new fixed-rate home equity loan to plump her portfolio back up to $200,000. What is she, insane? If she’d decided not pay off her mortgage in the first place, she’d be in exactly the same position, with the blessing of most financial planners and, until recently, me.
Whether Jane knows it or not, she is borrowing against her house to invest in the stock market, and she should understand the risks.
So what?
That sounded like a lot of academic drivel, I know. But if you’re a homeowner with a mortgage, it has real implications for your financial health. Assuming you’re in a position to save money beyond your mortgage payment, you are making a scaled down version of Jane’s decision every month: Pay down the mortgage, invest for retirement, or both?
“Each and every year I get to make a conscious decision about whether I want to implicitly buy stocks on mortgage by keeping the mortgage and buying stocks,” says Kitces. Or bonds, for that matter. Look at what you’re really doing:
Using borrowed money to buy bonds is stupid. Sure, mortgage rates are low. Bond rates are lower. Would you take out a 4% mortgage to buy bonds paying 2%? Me neither.
Using borrowed money to buy stocks is dangerous. Stocks are risky. Stocks bought with borrowed money are more risky. If you walk into a reputable financial planner’s office and tell them your financial plan is to borrow a bunch of money to invest in stocks, they will sit you down and give you a parental lecture about imprudent risk-taking. But if you’re using mortgage money to juice up your portfolio, somehow that’s okay?
Implicit in the idea that it’s okay to buy stocks “on mortgage,” as Kitces puts it, is the belief that stocks will definitely outperform in the long run. Jorie Johnson, a certified financial planner in Manasquan, New Jersey, doesn’t take a client’s mortgage into account when setting up their investment portfolio for this reason. “As long as you have a reasonable expectation of doing better in the market than your mortgage interest rate, you should be putting the money in the market,” she says.
However, this a point both technical and practical. If your goal is to shoot for the moon in your retirement portfolio by ratcheting up the risk with borrowed money, there’s a cheaper way to do the same thing by maintaining a smaller, but riskier, portfolio: Pay down the mortgage, but own more stocks and fewer bonds. You’ll lower your risk of ending up with negative home equity, save on mortgage interest, and achieve the same level of portfolio risk, with the same expected returns.
“Taking on more portfolio risk is the equivalent of having less portfolio risk but more leverage,” says Don St. Clair, a certified financial planner in Roseville, California. “If you’re not willing to take some of your portfolio and pay off your debt and jack the risk of your portfolio back up, then you shouldn’t be willing to keep the same portfolio and not pay off your debt.”
The good old days
So, if you shouldn’t use borrowed money to buy stocks or bonds, what should you use it for?
Kitces just bought a house, and here’s his answer. “I’m really going to spend the bulk of the next ten years knocking this mortgage down to zero,” he says. “We are radically ratcheting down savings into investment accounts and really ratcheting up payments toward the mortgage.”
This feels intuitively wrong, doesn’t it? Everybody knows you should make retirement saving a habit and do it faithfully, month after month. Accelerating mortgage payments so you end up with a paid-off house and very little in other assets beyond an emergency fund and your 401(k) match can’t be a good idea, can it?
Just a couple of decades ago, it wasn’t just a good idea; it was conventional wisdom. “It was really straightforward: You built a giant down payment, you took on as little debt as possible, and whatever you did take on in debt, you knocked it out as quickly as possible,” says Kitces. “And when you actually got it done, you literally held a party and burned the mortgage note in your fireplace.”
Can anyone really say that isn’t still good advice? Oh, don’t explain it to me. Explain it to the Las Vegas homeowner who is $100,000 underwater. Nobody needs to be told how toxic negative equity is in 2011, right? If anything, positive home equity offers more flexibility than a 401(k) balance. “They have home equity line of credit options, the ability to move, the ability to relocate, and the financial freedom to make decisions,” says Kitces.
My money is trapped!
Now, wait a minute. Presumably, your investment portfolio is inside a 401(k) or IRA or some other box with “do not open until retirement” stamped on it. It would be crazy to pay the 10% penalty and a huge wad of taxes just to knock off a chunk of your mortgage.
I agree. So while you have a mortgage, what do you do with this money? You invest it in a way that reflects the fact that you’re playing with borrowed money. In other words, Johnny Mortgage’s portfolio should be invested heavily in bonds and cash. Remember that they’re not really bonds and cash. They’re stocks wearing disguises, because a portfolio of low-risk assets bought on leverage is still high-risk.
Even though it doesn’t often feel like it, a mortgage has an end. Later, when the mortgage is nothing but fireplace ashes, you can direct 100% of your former mortgage payment into your retirement savings.
But mortgages are special
Mortgages are weird. Nowhere else in the world of finance can you get a 30-year fixed-rate loan with tax-deductible interest and the option to refinance if rates drop. Of all the kinds of debt, I’d probably agree that this is the best one to use to invest on leverage.
That still doesn’t make mortgage debt cute and cuddly. As the 23% of homeowners who are underwater know, mortgage debt can still bite you right where it hurts. Nearly all of those homeowners would have been better off paying down the mortgage rather than investing, or just keeping their investments in cash. (Yes, I know plenty of them did neither, which compounds the injury.)
Oh, there is one last wrinkle. In most states, you can walk away from a mortgage. The bank will take your house but can’t come after your other assets. As a forward-looking strategy, however, strategic default sucks. (Sorry for the parent lecture.) “Is your strategy for wealth creation really that you should buy real estate with as much debt as you can, because if it goes badly you can stick it to the bank?” says Kitces. “I don’t think that’s really how we’re telling people to build wealth.”
What do you think? Is there any defensible reason to buy stocks or bonds “on mortgage”? Or has everyone already forgotten 2008?
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Is Facebook the IPO of a generation? The much-anticipated initial public offering of the world’s most popular social networking site, Facebook, took place this morning on the NASDAQ. With it, the dreams and technologies of the millenial generation have taken root as a core part not only of American society – but of its formal economy.
Already, Facebook bears the distinction of having the largest market valuation of any US company at IPO at $104.1 Bn. That’s no small feat for a company that didn’t even exist eight years ago. The offering, which was originally priced at $38 per share, has “popped” to over $42/share as of the time of writing, creating over $16 Bn in value for the company. That could grow to $18.4 Bn, making it also the largest initial share offering in US history.
But all these big numbers aside, the Facebook IPO is also the hallmark of the new economy. Facebook doesn’t make anything, and its users aren’t even buying any products or servics (with the exception of some gaming functions), but most people still believe it has great value. The power of connectedness – and the technologies that enable us to share and display information across our network – has now taken root.
That, some analysts say, explains in part the $1 Bn Facebook paid for photo-sharing startup, Instagram last month: Sure, Facebook could’ve created a competitor, but Instagram was already growing to be hugely popular – and it’s a bit harder to convince an existing social network to migrate. It also helps explain the company’s big gains in advertising revenue (and its price to earnings value). It’s the network itself, that has value. Advertisers can use it to pinpoint people based on preferences in a more targeted fashion. It’s also a place where people are more tuned in; people care more about their friends’ lives than tv, and the power of social networking holds values for individuals and companies, alike. Ever heard of the term “going viral”?
In the end, we’re all part of social networks, whether we use applications like Facebook, or not. But it took a Harvard student in his dorm room to harness that power for the market.
What’s your take? Is Facebook the IPO of a generation? Will you “like” the social network by investing in its stock?
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Recently on the mint.com Facebook page, a reader asked a common question:
Any investments for people with very little money to invest?
Normally, my response to this is the one nobody wants to hear: put the money in a savings account or savings bond, check out a book about investing from the library, save more money while you read the book, and start investing once you have the $1000 minimum to open an account at a big mutual fund house like Schwab or Vanguard.
I stand by that advice. (My favorite introductory investing book is Elements of Investing, by Malkiel and Ellis.) But it doesn’t actually answer the question, does it? Maybe a kid wants to invest a $100 birthday check from Grandma, or maybe you want to get started on retirement savings right this second, before you change your mind.
Those are good reasons. Twenty years ago, the answer would have been depressing: you could buy a couple of shares of stock in a company or two, and pay a hefty brokerage fee for the privilege. You’d be down a few bucks from day one (thanks to the fee) and dangerously undiversified.
Technology and years of brokerage price wars have changed all that, to the point where, for less than fifty bucks, you can buy a fully diversified portfolio of thousands of stocks and pay pennies in expenses. So I went looking for an online brokerage that treats the low-dollar investor right. These were my criteria:
No minimum opening balance—in fact, no minimum balance, period.
Access to diversified, low-cost, commission-free stock and bond ETFs. (“Commission-free” means you can buy and sell them without paying a fee.)
No other fees. If you’re investing $100 and get slapped with an $8 fee, you’ve just lost 8% of your portfolio.
Choice of IRA, Roth IRA, or taxable account.
This is a pretty strict list of demands. There are a lot of discount brokerages out there, but this narrows them down to two. This is not to say these are the best brokerages overall, just that they’ll take you in and treat you right if you only have a single Benjamin.
Let’s go investment shopping
The two finalists are:
TD Ameritrade. Offers over 100 commission-free ETFs including top brands like iShares and Vanguard. For $100 you can buy two shares of Vanguard Total World StockETF (VT). When you buy a share of this ETF, you literally own a tiny slice of over 3500 stocks from companies the world over.
Want to add bonds? TD offers plenty of good bond funds, too, like iShares Treasury Inflation-Protected Securities ETF (TIP) and Vanguard Total Bond ETF (BND). Bond funds tend to cost a little more per share than stock funds, but still, for under $200, you could buy (prices as of May 2, 2012):
It would be hard to come up with a much better portfolio than that, even if you were investing a million dollars.
Firstrade. Offers 10 commission-free ETFs. Sure, TD has ten times as many free ETFs. But it only takes a couple of good ETFs to build a solid starter portfolio. Among Firstrade’s offerings, I like the iShares S&P 500 ETF (IVV), which holds the 500 biggest US companies, and the Vanguard Intermediate-Term Bond ETF (BIV), which invests in high-quality corporate and US government bonds.
Unfortunately, the iShares ETF breaks the bank: its share price is over $100. My second choice is the Vanguard Dividend Appreciation ETF (VIG). At only 134 stocks, it’s not as diversified as the iShares fund, but your portfolio isn’t going to be stuck at $100 forever, and VIG is a perfectly respectable introduction to the ups and downs of stock market investing.
One warning: when you buy a commission-free ETF at TD or Firstrade, you have to hold it for 30 days before selling or pay a hefty fee. Since you’re putting this money away for the future, and “the future” isn’t going to be here two weeks from now, I trust this won’t be a problem.
What are you waiting for?
You hear people complain that the deck is stacked against the small individual investor. Well, there has never before been a time when the small investor could get into a fully diversified portfolio for under $200 without paying a dime in brokerage fees. Plus, you can do it all in a few minutes in your pajamas.
Guess it’s time for me to update my advice.
Do you have a question for one of the MintLife experts? Head over to the mint.com Facebook page and ask away!
Matthew Amster-Burton is a personal finance columnist at Mint.com. Find him on Twitter @Mint_Mamster.
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