Archive for July, 2013

Online Investing in 4 Steps

One of the most popular ways to invest today involves using the internet but, if you’re not experienced, it can actually be an overwhelming experience. Many people who wish to begin investing online actually try to do too much, too quickly and end up getting in way over their head. Indeed, as with any type of investing, the most simple way to ensure that your online investing is successful is to start slowly. Over time your confidence and comfort level will increase and, most importantly, you’ll have a much better idea of exactly what it is that you’re getting yourself (and your money) into.

With that in mind, the following 3 steps should be followed if you’re just getting started so that, as mentioned above, you slowly but surely learn the ins and outs of online investing and protect yourself from getting in over your head and possibly losing quite a bit of your hard-earned money.

The 1st step is to decide what type of online trader that you are going to be. Just like anything else in life that you wish to accomplish, you’re going to need a plan for investing if you want to achieve success. Part of that plan includes deciding what type of investor that you want to be. Are you keen on being an active trader who handles multiple transactions every single day? Maybe you would prefer to be the kind of online investor who is conservative and follows the ‘buy-and-hold route’? The answer to this question is vital to picking an online broker, one that best suits your particular needs and will help you to become one of the other type of investor.

For example, if your keen on becoming an involved day trader you might consider finding and using a qualified discount brokerage firm because they will usually have transaction fees that are much cheaper than a full-service firm. In many cases, these discount brokerage firms offer trade rates as low as $1.00.

Your 2nd step is to choose the right broker for your needs. The simple fact is that no two brokerage firms are the same or offer the same services. If, for example, you want to do mostly your own research, your broker will need to offer tools that help you do that such as analysis software and research reports. Some brokers have physical branches that you can visit or offer round-the-clock support and, if that’s something you need, make sure that you choose a broker that has the resources. Before you make your final choice it’s best to know what type of asset classes that you want to get into such as futures, mutual funds or bonds.

Keep in mind that the average brokerage firm is going to charge you an annual fee and, if you don’t use them regularly enough, inactivity fees as well. In other words, before you choose broker make sure that you read all the fine print their services and know exactly what to expect.

Step 3 is simply to responsibly fund your account. Once the task of finding an online broker has been accomplished, you’ll need to endow your new account with the funds that you’re going to use to make trades. It’s vital that you know exactly where that money is going to come from. Will it be from your savings account? Maybe it’s going to be a check that you’ve just received or even a portion of your weekly paycheck.

Most brokers have requirements about minimum balances so it’s best that you decide beforehand on an exact dollar amount that you might start with. For example, there are some brokerage accounts that will require you to have an initial account balance of $10,000 whereas with other brokers you can actually start with a minimum deposit of $0.00.  That’s a huge difference, obviously, and should be determined with great care.

Finally there’s the 4th step which is simply this; stick to your principles. Once you’ve established your account with your new broker it’s vitally important that you stick to your goals and develop your own personal strategy. Diversification of your investments in your portfolio is also vital as well as focusing on the markets that you find most interesting and, more importantly, the easiest to understand. As with any other type of investment, it also makes sense to carry out detailed and diligent research on any investments that you’re going to make.

Best of luck with your online investing dreams and goals. If you have any questions about online investing or personal finance questions of any kind, please ask us any questions or drop us a line anytime and will be sure to get back to just as quickly as possible.

Teaching Responsible Finances

Teaching our youth about responsible personal finances is an absolute must.  After all, these youngsters will be the ones running the world when we are old and retired.  Not to mention we want the best for our children, so teaching them right from wrong only makes sense.  Unfortunately, when many adults teach their children about proper morality, they often leave out the part about leading a financially responsible lifestyle.  This means that they should live within their means, pay their taxes, work at their job, spend less money than they earn, and be mindful of their finances.  For me, the most basic aspect of leading a financially sound life begins with opening your first bank account.  There are even bank accounts geared toward children now.  As a parent, you can easily compare bank accounts online and find the right one for your child to begin saving.

Parents often don’t understand the importance of the lesson they are teaching when they setup their child’s very first bank account.  This is what taught me the value of saving, and the dangers of spending.  It was fun to earn money and watch my balance grow.  Then when it came time to leave home and go to college, I at least had a little money saved to help get them through those four tumultuous years without having to work full time.  The pain and suffering of saving a little money here and there is much easier than the pain that comes with needing money and not having any available.  There are many options for basic bank accounts so finding one should come with no excuses.

Sit down with you kids today and have them read some reputable finance blogs (even this one if you choose), investing sites, and brokerage sites.  Financial literacy and education is at our very finger tips, and the average consumer can find just about any piece of information they want within minutes.  Who knows, you may be preparing your child to be the next Chairman of the Federal Reserve, or a Wall Street powerbroker, or even a public accountant that will end up doing your taxes a few years down the road. Years from now when your children are leaving college debt free, purchasing their first new car, or putting a down payment on their first home, they will be eager to thank you for instilling financial responsibility and the value of saving a dollar so early in life.

If you’re keen on teaching your children  how finances work and how it’s possible to use money to make money, there are few ways better than introducing them to some of the bigger, solid dividend stocks on the market.

Now, before you start laughing, keep in mind that billionaire investor Warren Buffett actually purchased his first stock at the tender age of 11 years old. I don’t think there’s anyone that could argue that Mr. Buffett has had fabulous success. He built his vast fortune by investing in some of the most famous dividend stocks and stock history.  (And yes, we realize that his father was a stockbroker.)

The point is, if a child is taught about money, how it works and how to handle it at a young age, there is practically no limit to what they can accomplish, especially if they’re taught about one of the potentially best wealth building mediums that is available today. If this is something that interests you you’re in luck because today we’ve put together a short blog about three excellent dividend stocks that your kids will love (because of who issued the stocks) and you will also love (because they’re excellent stocks, d’uh). Enjoy.

1) Nike  (NYSE: NKE). There are very few businesses that have a larger global presence and better brand visibility than shoemaker Nike. With a very healthy 9.2% net profit margin and dividends that are paying 1.4%, Nike brings $4 billion in cash and equivalents to the table with long-term debt of just $161 million.

In the last quarter Nike bought back nearly 5,000,000 of its own shares for an estimated $253 million. What that means is that only 7.4 billion remains on the four-year share repurpose authorization that it now has.

Nike trades at a higher premium than some companies in its class. In our opinion that’s quite fair when you consider that its earnings were boosted by 20% last quarter of 9% revenue growth, something that is practically unheard of for a company that had almost $25 billion in revenue in 2012. At the end of the day, your kids probably love Nike sneakers and you should definitely feel the love for their stock.

2) Disney (NYSE: DIS). Without question Disney is one of the most comprehensive entertainment companies in the world and has successfully grown their brand by leveraging their  vast repertoire of character properties into first-run films, extremely popular video games, excellent theme parks and of course their merchandising. This has allows them to raise their dividend 7 times over the past decade and given their stock a very reasonable 1.2% yield.

One of the biggest coups that Disney has had in the last decade is their triple acquisition of Pixar, Marvel Entertainment group and the Star Wars franchise, three of the most successful entertainment brands on the planet. Without question Disney has more than enough characters, storylines and opportunities to keep their customers happily entertained for the next few decades.

Even more, with record attendance at their theme parks and recent admission price increases along with the buyback of over 38 million of their own shares during the first half of 2013,  their stock value  as well as their entertainment value should continue to perform well into the foreseeable future.  If you have Disney stock both you and your children should be smiling from ear to ear.

3) Apple (NYSE: AAPL) when you consider that 37.4 million iPhones were sold in the last quarter alone, it’s not hard to imagine that any child would want to own a piece of the company that helps them send their hundreds of daily text messages. Add to that the fact that Apple literally created a new market segment when they invented the iPad (which sold nearly 20,000,000 units last quarter, thank you very much) and that millions of people download their games and music from iTunes and you have a brand that kids recognize nearly as easily as McDonald’s.

For mom and dad, all you need to do is simply keep in mind that Apple created $12.5 billion in cash flow last quarter alone and has a ridiculous cash balance of over $145 billion with a balance sheet that carries zero debt. (Yes, those numbers are correct.)

Want even more reasons to buy Apple stock? How about that their shares are currently trading for only 9.5 times that of last year’s earnings and, as far as next year’s estimates, at 9.1 times. The 3% dividend and Apple’s massive $100 billion share repurchase authorization may not, as far as excellent stocks are concerned, this one is about as good as it gets.

All three of these dividend stocks represent extremely strong, successful long-term businesses. All three of them also are probably brands that your children hold near and dear and, if you choose to, can easily be used to teach them about financial matters that may very well help them greatly as adults.

Tips for investing at an early age

When a person starts investing money at an early age, the result is that this individual is sure to have more money for payment of homeowners insurance premiums whenever the individual decides to purchase a house. In fact, starting an investment strategy at a young age can help a person to have $500,000 or even $1,000,000 by retirement age, even if the individual does not earn extremely high wages at a job.

Stock Market Volatility Can Lead to Insanity

Seasoned investors know that money grows over time, and they develop the habit of ignoring constant volatility of the stock market. Besides the fact that paying constant attention to the positive and negative whims of Wall Street can literally drive a person to the brink of insanity, ignoring daily stock market fluctuations helps a person to stay on track with an initial investment plan. Constant buying and selling of shares may reap rewards in the present, but eventually this type of investor may end up losing a substantial amount of money.

The Gentle Art of Investing Money is not a Game of Poker

Investing and gambling are not identical practices. At least, these two concepts used to be different. In today’s world of investing, the fact that many investors own computers makes it extremely easy for them to engage in daily trading of stocks and ETFs. The old adage of holding onto stocks and mutual funds for long periods does not appeal to many modern investors who prefer to take their profits and run for the hills. The problem is that once they sell shares, the gambling fever mentality persuades them to buy shares again on the following day. Since every investor makes mistakes, the likelihood of making a serious error is higher when a person persists in treating investing as though it is a poker game.

The Traditional Viewpoint about Investing

People who know about successful investing advise investors to start when they are young. A twenty-year-old man who starts investing money in a bond fund or equity fund that pays good dividends can add small amounts of money every week or each month. Forty-five years later, when the person is ready to retire, he or she is going to have a surprisingly high amount of money invested in these stocks or funds. Dividends keep reinvesting, and the person does not even need to do anything to earn these dividends. The money simply grows throughout the years. Another benefit that goes along with this type of investing is that the investor spends his or her time participating in meaningful and beneficial activities instead of spending every day reading stock market reports and comments from analysts.

Young Persons Need to Open Up Brokerage or Mutual Fund Accounts

In order to invest money in stocks, bonds or mutual funds over a long period of time, a young person first needs to establish a brokerage or mutual fund account. Opening an account is simple. Once the individual has an established account, he or she can research different investment options. The safest and wisest sway to invest money is to choose quality stocks or funds that pay good dividends. The next step is to add a little bit of extra money on a regular basis. A young person who sticks to this plan is sure to achieve extremely positive results in the future.

This article was written by Bill Johnson, who is the primary writer for, which specializes in home insurance rates and quotes.

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