401k is the new Social Security. That comment is not a good thing. The reason anyone has a 401k is because we can’t depend on having social security when we retire. We will still be paying for it, but it just won’t be there. The people counting on their 401k to be there when they wanted to retire in 2008-2009 were let down. The recession killed many people’s retirement plan. This is a wakeup call to everyone. DO NOT count on your 401k; take charge of your finances now. Its time for everyone to become personally responsible for their own retirement. Start a savings account, open a CD, and/or get an IRA. Its time! Don’t wait until the next recession to find out that you have to wait on retirement. After working hard your whole life, you deserve some financial security. Create it!
I know everyone has lost money in the stock market due to the recession, but this is the best time to get started. The news has calmed down and found other things to blast us about. Companies appear to have stabilized, unemployment is starting to ease (or at least not making a sky dive into the metaphorical ground). The best part of this is that once things turn around, they go up. Up is good! Getting in the market now means you are getting in the ground floor. Remember the oft and over used saying, “Buy low, sell high”. Its low, time to buy.
Get in and get started. Learn the ropes and make some money. And of course, check back here or subscribe to the RSS for more articles and tips!
Certificate of Deposit (CD) is one of the easiest and safest ways to earn interest. With a little work on your part, small amount of time, and a little cash you can be earning interest with your hard earned money.
1. How much and how long?
These are your first decisions. Depending on how much and how long will determine your APR (annual return of premium). Maturity time can range from 6 months to 60 months. Remember, you will be penalize if you cash in before the maturity date. Only deposit money that you don’t need during your allotted time period.
2. Compare rates
Check your local banks web sites. Most list the current rates and a few have helpful calculators to show how much you can earn. Some have a minimum amount to open an account. You can also use web sites like Bankrate.com or a brokerage service like Scottrade.com.
3. Check the bank for FDIC deposit insurance
The FDIC insures your CD up to $250,000. If the bank is not FDIC insured, DO NOT buy a CD from them. You can LOSE all your money. Check FDIC.gov for more information.
The first time I bought any shares of a company I was terrified. I had no idea what I was doing and if I was doing it right. Believe it or not, it’s not painful and it’s very easy to do.
I use Scottrade, so my steps are more geared toward their service, but its similar for most places.
Step 1:
Log into your brokerage’s web site and click buy. Scottrade’s option is on the left side. Be sure you have enough money deposited into your account. If you do not, deposit the money and proceed to step 2.
Step 2:
Enter the stock ticker symbol. (Example: GE is General Electric and PG is Proctor and Gamble)
Step 3:
Enter the number of shares you are buying. To find this number you take the amount you are investing divided by the current share amount.
$1,000 (amount invested) / $10.00 (the current share price) = 100 shares.
Be sure to leave a little extra available for the commission and price changes.
Step 4:
Market vs. Limit
The “Market” options buys the stock at the current price or close to it when you click buy.
The “Limit” option allows you to enter how much you are willing to pay for the stock.
I used to use a limit on all my buys until I figured out that I was wasting more time chasing a stock within pennies of where I wanted to buy. I now only use the “market” option. Those few penny changes doesn’t worry me as much. If I was trading millions (I wish), it would be different.
Step 5:
Click Review/Buy (wording may vary by service).
Step 6:
Celebrate! You bought stocks and are on your way to accomplishing your financial goals!
In my post, How To Find Companies Worth Investing – Part I, I talked about investing in companies that make the products that you use and love. Now let’s look at companies that help make those products happen.
Let’s say you don’t want to invest in HP or Apple. What about the companies that make the components of their products?
Typical Components Inside a Computer:
CPU – Intel (INTC) or AMD (AMD)
Video card – Nvidia (NVDA), ATI (part of AMD)
Monitor – HP (HPQ), LG (KRX)
There are plenty of excellent companies that you can find that make the bits and pieces of your favorite products. Do a search on google or wikipedia to find who makes what.
Peter Lynch is well known for saying, “Invest in what you know”. With that in mind, one good place to find companies to invest is the grocery store or mega super store that is the size of a small country. The products that you buy, use, consume and generally can’t live without are made by some of the best companies to invest. List your 5 favorite products and do some homework.
Here are my 5:
1. Tide
2. Starbucks coffee (it helps me write)
3. Coke Zero
4. Doritos
5. Cheez-its
What companies make these products?* A quick search on Wikipedia shows:
1. Tide – Proctor & Gamble Co. (PG)
2. Starbucks – Starbucks Corp. (SBUX)
3. Coke Zero – Coca-Cola Company (KO)
4. Doritos – PepsiCo, Inc. (PEP)
5. Cheez-its – Kellogg Company (K)
That was easy! I now have 5 companies to do my investing homework. On your next visit to the grocery store, check out a few of your favorite products. Who makes them? Leave a comment below and have fun trading!
* These stocks are listed for example purposes only and I do not endorse these companies. Remember to always investigate and consider the risk before investing.
It’s always good to have a plan. Without a good solid plan or at least some idea of where you are going, you will get lost on the way through the new year. Be sure to make achievable goals. Here for all to see is my 2010 Financial Goals:
Learn and use swing trading
Open a CD account for youngest son
Continue to work toward my goal of trading to own my van
Read one financial book a month
Review and Readjust my 401k
Take one investing class
Learn and use Long Term Value Investing
In the spirit of goals, I’ll also list my goals for this blog:
2 posts a week (no excuses)
Podcast (later in the year)
Add video
New layout
New affiliates
Ebook (later in the year)
Email list
Requests and Suggestion box
Sound off in the comments and let me know what your financial goals are for 2010. Good luck on your financial goals and HAPPY NEW YEAR!
Don’t risk your money on untested strategies. You will get bitten by the Wall Street sharks. I always test my new strategies on paper for a month. Its fantasy stock trading!
Here are the rules:
1. Pick your dollar amount. Be realistic. If you aren’t trading in the millions, don’t do it on paper. $500 is a good starting point.
2. Write down your rules and stick with them.
3. Your buy amount is the closing amount of the day you buy. Write down the date and amount.
4. When you sell, it’s the closing amount on the day you sell. Write this down as well.
5. After a month check your profit/loss. How did you do?
By doing this, you can decide if the strategy has merit or is a dud! Its better to find this out before you risk money. This is good for short term trading. If you are in the process of saving money (Part 1 – How much money do you need? Investing for only $50 a month) then use this to get more familiar with the market (long term or short term). You can modify the rules a bit to try day trading, but it’s more extreme.
Got a new rule to add, a question to ask or simply want to comment please do so below. I love comments, it brings joy to blogging!
Every Christmas and birthday my kids get many presents. A few weeks later the presents are mostly forgotten or broken. Such a waste! I started brainstorming ideas that could cut down on the clutter and be a long term benefit for them. I considered savings accounts, bonds, cds and the cookie jar. Stocks was the winner!
Here are my reasons for picking stocks:
1. High dividend stocks make money for them.
2. Stocks splits give them more stocks.
3. My teen thinks its cool to have a stock portfolio (my youngest,8, doesn’t care right now).
4. I pick stocks of products that they like. In our case, they get 4 McDonald’s stock a year.
5. If you aren’t into picking stocks, go with an index fund.
Four a year? That’s not much!
True, but take the case of my 8 year old. He will have 40 shares when he turns 18, plus the dividend that gets paid. It doesn’t take long for the stocks to accumulate enough dividend to start buying more stocks. Keep reinvesting the dividend, it adds up!
Risk
I know that the market will go up and down. This is a long term investment for them. I’m not taking too much risk
What about fees?
I use Sharebuilder for my kid’s portfolio. Their service is a bit odd in that you get a $4 fee when you buy on Tuesday (and only on Tuesday), other days it’s $12. Since my kids only buy twice a year and aren’t gaming the market it works out best for them. They also allow custodian accounts which is what you will need.
Action time:
1. Decid how much to buy.
2. Sign up for a service like Sharebuilder.
3. Open a custodian account in your child’s name.
4. Deposit the money.
5. Buy!
If your kids keep the investment going, they could potentially have a million when they retire. Like I said earlier, this is a long term benefit for them!
If you are new to this site you may want to start with part 1 of this series. If you are a returning reader, Welcome Back!
By now you should have created a plan to save money for investing and have several goals in mind. Today it’s time to consider what style of trading you will need to reach your goals.
Long Term Goals (10+ years)
For big long term goals like purchasing a home, you will need a long term investing strategy. Invest in value stocks or any investment that pays a dividend.
Strategies include:
⁃ Dividend paying stocks – usually Big Cap stocks
⁃ Value Investing
⁃ ETF’s
⁃ Mutual Funds
⁃ Index Funds
It’s best to reinvest any dividends paid. Remember, you want less risk with these goals.
Intermediate Goals (5-10 years)
These are goals such as luxury vacations (Paris, Kentucky* in spring?), luxury car**, or any big ticket “want”. The item tends to have the word luxury associated with it.
Strategies include:
⁃ Value stocks
⁃ Small-Cap
⁃ Growth Stocks
Look for companies that are growing their business or good companies whose stocks are undervalued. Your goal is to create a portfolio of stocks you can cash in for a nice profit in the next 5-10 years. You’ll take on more risk for greater reward.
Short Term Goals (1 day – 5 years)
Short term trading is the riskiest, but with the high risk comes a larger reward. Your goal in short term trading is to buy and sell in a short period. You may keep a stock a day or over a year depending on your strategy.
Strategies include:
⁃ Day Trading
⁃ Swing Trading
⁃ Value Stocks
⁃ Penny Stocks
⁃ and many more…
BIG WARNING: SOME OF THESE STRATEGIES WILL LOSE MONEY. Short term trading is VERY risky!
Subscribe to the RSS or return to this site for more information on stock strategies.
* Yes, there is a Paris, Kentucky. Fun fact, the first winery in the United States was in Kentucky. Oddly, it’s not related to Paris, Ky.
** or pickup if that is your thing
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