How much should you be saving? Consider your Needs & Wants Needs – Think of the costs you incur each month to cover your basic necessities…shelter, food, electricity, transportation, clothing, debt payments. The cost of your needs can be adjusted, but they tend to be less flexible than your Wants. Wants – Think of the costs you incur each month to cover items that satisfy your life-style, hobbies, other activities. Wants tend to be more
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Using commodities to hedge against inflation. If you’re worried about the impact inflation will have on your portfolio in the future, investing in commodities can be a good defensive strategy. Commodities are typically the first area to experience inflation when it hits an economy. Commodities are made up of a number of raw materials – most of these materials serve as the first step in the production process. Thus, they are often where we see
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Real Estate Investment Trusts (REITs) Companies that invest directly in real estate and trade on exchanges as a stock. Enable you to invest in various types of commercial and residential real estate without having to actually purchase a property. REITs by law must pay 90% of all taxable earnings out to shareholders. Thus, you typically will find REITs paying sizable dividends. REITs typically aren’t thought of as growth stocks, which means you should not expect
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Where do I often find good information about potential investments? Publications Kiplinger’s monthly personal finance magazine. The Kiplinger Letter – published weekly Smart Money – The Wall Street Journal’s monthly personal finance magazine Forbes – Business bi-weekly with an emphasis on investing Barron’s – Ended finance/investing publication published by the Wall Street Journal A number of other great newsletters and magazines exist, but the above list are the ones I’m most familiar with and have
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Bond Pricing Par Value – Initial offering price of the bond (typically $1,000 for corporate, $5,000 for municipal and $10,000 for federal) Coupon Rate – This is the interest rate you expect to receive annually over the life of the bond. Typically made in semi-annual payments (2 times a year). Maturity Date – The date when the bond will come due. You no longer are receiving any coupon payments and your initial investment is paid
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Bonds Bonds are debt notes issued to the public/investors. As a bond holder you receive a premium (coupon rate – think interest rate) for lending your money to a company or government. At the end of the bond’s life you expect to receive your principle (initial investment back). Companies and governments that issue bonds receive a credit rating. Based on the credit rating, the company/government will have to pay a higher or lower premium to
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Penny Stocks Often times investors are drawn to penny stocks because, “If they only go up a few cents, I will make a 50% return on my investment.” Penny stocks are almost always growth companies that are young and/or have a very narrow area of business. Risks Many penny stocks have a low level of trading volume, which can cause large price fluctuations (for better or worse). Small and young companies often have a difficult
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Initial Public Offering (IPO) The first instance of a private company going public. Anyone access to the stock market can now be an owner of the company. IPOs raise money for the corporation. By selling shares, the company gains funds to do X, Y or Z. Though money is gained the current owners have a reduced share of ownership in the company. IPOs are typically most plentiful during bull markets. The owners who have decided
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2010 contribution limits to both IRA accounts is $5k. If you’re over 50 in 2010, then it’s $6k. Click here for the IRS Rules. IRA Enables you to save money for retirement tax free. Example – I make $50k and put $2k towards my IRA account. The IRS evaluates my taxes based on income of $48k, not $50k. Money withdrawn before 59.5 years of age is subject to early withdrawal penalties. When you begin withdrawing
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Trends & Investing Identify a new or upcoming trend and consider what companies will be impacting by this trend. Consider how this trend will impact other industries/businesses. Take the companies and/or sectors you identify and investigate to see if they’re positioned best to profit from the trend. A company that is positioned well to benefit from a trend is less dependent upon ultra-successful management decisions. A boat in a swift moving river does not need
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