• ETFs with Mr. Wonderful

    Shark Tank's Mr. Wonderful talks about his rules for investing for the long-term. To preserve wealth for many generations to come, he follows these simple rules:

    1. Buy dividend paying stocks

    2. Diversify--no more than 5% in any one stock

    3. Seek preservation of capital

    To find the investment that does all that, he created O'Shares, a new Exchange Traded Fund or ETF.

    For discussion:

    What is an ETF? What are the benefits and limitations of investing in ETFs?

  • Your Credit Report

    You can check your credit report each year without cost. And you should.

    You never know when you may find an error that will affect your ability to borrow money. Waiting to discover any errors until the time when you are trying to buy a car or a home is a recipe for disaster. You can get errors corrected, but it takes time.

    This video from Bank of America explains what is a credit report and it explains what is your credit score.

  • How to Enhance Your Retirement Savings


    When starting a first job out of college, retirement seems like a lifetime away. And while many young people will take advantage of the retirement accounts available through their employers, many others will not.

    Then middle age hits.

    From a CNNMoney article, (Updegrave, 24 Feb 2016) comes this question:

    I'm almost 50 years old and have virtually nothing saved for retirement. But I plan to start now and would like to build a seven-figure nest egg by the time I retire. Is that goal realistic and what should I do to make it happen?--Steve, Texas


    While this seems like a crazy, hypothetical question, it's perfectly realistic. From a recent CBS Money Watch article (Vernon, 19 Feb 2016):

    People age 60 and over were asked, if, in the past three years, they had retired or done any planning for retirement. "No" was the answer researchers got from 58 percent of people 60 to 69 and 87 percent of people 70 and over.

    ... People who had retired or planned for retirement during the past three years were asked which time period was most important for planning their family's spending and savings. Only 31 percent of those 60 to 69 and 35 percent of those 70-plus answered that they planned their spending and saving over periods longer than 10 years.


    So back to Steve's question above. Here's part of the answer from the CBS article:

    Any viable catch-up plan has got to start with saving, and in your case, the harder you can push yourself the better. Let's return to that hypothetical 50-year-old I mentioned earlier. If he socks away 15% of salary each year (which is what many retirement experts say you should be saving throughout your career) and earns a 6% annual return on what he saves, he would have just over $320,000 by age 65. If he continues that regimen three more years to 68, the tally jumps to nearly $440,000 and if he keeps working and saving to age 70, his nest egg would total roughly $530,000.

    Boost the savings rate to 20%, and the respective figures range from roughly $430,000 to just over $700,000. These figures fall short of $1 million, but you're still talking about serious sums of money that can materially enhance your retirement standard of living.

    What about you? How much are you saving?

  • The History of the Mortgage Loan

    The most recent press release from the U.S. Department of Housing and Urban Development (HUD) showed that home sales in January 2016 slowed down from the month prior and from the same month last year:

    WASHINGTON – Sales of new single-family houses in January 2016 were at a seasonally adjusted annual rate of 494,000, according to estimates released jointly today by the U.S. Department of Housing and Urban Development (HUD) and the U.S. Census Bureau. This is 9.2 percent (±13.5%)* below the revised December rate of 544,000 and is 5.2 percent (±12.6%)* below the January 2015 estimate of 521,000.

    The median sales price of new houses sold in January 2016 was $278,800; the average sales price was $365,700. The seasonally adjusted estimate of new houses for sale at the end of January was 238,000. This represents a supply of 5.8 months at the current sales rate.

    [read the full press release here]

    To pay for a home, most Americans use a mortgage loan. And the availability of credit has a great impact on the demand for homes. Without the ability to fund such a significant purchase, most people in the U.S. would remain long term renters and never own their own homes.

    The infographic below shows the history of the mortgage loan:

    Mortgage Loan Infographic

    This and other financial infographics created by loans.org

  • The Exchange for Commodities: The London Metal Exchange

    According to its website, "The London Metal Exchange is the world centre for industrial metals trading. The prices discovered on our three trading platforms are used as the global reference price and both the metal and investment communities use the LME to transfer or take on risk, 24 hours a day."

    Trading futures on an exchange offers market participants liquidity and reduces counterparty risk.

    Investors value the LME as a vibrant futures exchange but also for its close links to industry. The possibility of physical delivery via the world-wide network of LME-approved warehouses makes it the perfect hedging venue for industry and provides a reference price they trust.

    [read more here]

    This CNNMoney video shows what it's like to trade on the LME.

  • Financing a New Venture

    Once a business idea takes shape, the next step is funding. This infographic shows that 57% of business owners needing funds were unable to find a lender which prevented 53% of them from growing or expanding their business. Obviously, funding matters.

    infographic by loans.org

     

  • The Ups and Downs of Oil

    From the 1920 oil famine to the recent low prices, oil has had a volatile history.

    Today, oil is trading around $30/barrel and some say it could be lower in the future. For oil consumers, this has been good news but for oil producers, bad news indeed.

    From CNBC (Domm, 19 Feb 2016)

    The idea of a production freeze has many proponents, including Daniel Yergin, vice chairman of IHS. 

    "This is a day of reckoning for oil companies and oil countries, and they need to stabilize the market," Yergin said. 

    Getting such a deal approved poses challenges since many producers would have to agree to cap production. But there is hope talks could lead to a policy change at the next meeting of the Organization of Petroleum Exporting Countries in June. There has also been speculation members could seek an emergency meeting before then.

      "I think the market is beginning to stabilize and perceptions are changing," Yergin said. He noted that there are less negative prognosticators talking about oil prices sinking to $15 to $20 a barrel.

  • The American Dream: Owning Your Own Home

    Back in 2009, the Economist asked the following questions (16 Apr 2009):

    So attempts to expand home ownership have contributed to the wider economic crisis without succeeding in their own terms. How does that affect the arguments for supporting home ownership? Should it still be deemed a public good?

    Answers then were mostly, "No" and some insisted that America had too many homeowners.

    Today, we are singing a different song.

    According to the infographic below from the MGIC, people still believe that owning a home is the American dream.

    For discussion:

    Would you prefer to rent or own? Why?

     

     

    Embedded from MGIC Connects

  • Options on LinkedIn Shares

    LinkedIn announced earnings and investors drove the share price lower. But since the announcement, the shares are poised to rise, according to the video below.

    The trade described in this video is known as a BULL CALL SPREAD (or a "Call Debit Spread" because there is a net outlay of cash). The strategy involves buying calls on LinkedIn with a 110 strike price, and then financing the purchase with a sale of calls with a 120 strike price. The bet is that the price of LinkedIn shares will rise, but only by a little. That is, the bet is that the price of LinkedIn shares will rise above 110 per share but not as high as 120 per share.

    This strategy is a cheaper strategy than just buying the 110 calls outright, but it has less upside as well.

     

    For discussion:

    What is the benefit to an investor who chooses to enter in to this strategy?

  • People Trust Business More than Governments

    Trust of four institutions has grown since the Great Recession: government, businesses, NGOs, and media. According to the Edelman Trust Barometer, people trust businesses more than they trust government. That could have an impact on investing behavior and economic growth.

    The infographics below shows how global trust in business compares to government.

    For discussion:

    How would trust affect investor behavior?

     


    You will find more statistics at Statista

  • The Finances of Valentine's Day

    According to the National Retail Federation, this year is a good year for Valentines: From the January press release:

    According to the National Retail Federation’s Valentine’s Day Consumer Spending Survey conducted by Prosper Insights and Analytics, the average person celebrating Valentine’s Day will spend $142.31 on candy, flowers, apparel and more, up from $133.91 last year. Total spending is expected to reach $18.9 billion, a survey high.

    We'll see tomorrow how retailers fared after this weekend of sweets and flowers.

    For discussion: Which retailers should experience the best stock boost from Valentine's Day? How can you take advantage of this in your investment portfolio?


    You will find more statistics at Statista

  • Are You Saving Enough?

      

    Do you have enough saved to retire comfortably? If you don't know how to answer that question, consider these rules of thumb by Epperson, 11 Feb 2016 (from Fidelity):

    • In your 20s, put enough away so that by the time you turn 30, you'll have the equivalent of your salary saved.
    • By 40, aim to have three times your salary saved up.
    • By age 50, you should have enough saved to equal six times your salary.
    • By age 60, your savings should be eight times your salary.
    • And 10 times your salary by the full retirement age of 67.

    Unfortunately, surveys show that Millenials are not saving for retirement. From a recent CNBC article (Graham, 11 Feb 2016):

    Millennials are failing to save money and put something aside because of the rising cost of living, according to experts.

    Twenty nine percent of young people aged 18-34 are not saving any money month to month. Among 25-34 year olds, only 28 percent have started saving into a personal pension, according to an online survey commissioned by investment platform Rplan.

    For discussion:

    What can you do differently with your monthly budget to achieve these savings goals?

  • Finance Careers: Do the Math

    If you've ever said about your math classes, "When am I ever going to use that anyway?" then you're probably not a finance student. The ability to work with numbers and make sense of data are skills that are highly valuable in finance as well as other fields.

    From Monster.com:

    Quantitative analysts are modern alchemists who transform raw data into intelligent business strategies. The ability to slice and dice data cuts across industry lines. For instance, credit card company analysts develop mathematical algorithms to detect fraud, grocery store analysts interpret data on shoppers' habits and investment banking financial engineers support equity option trading.

    To break into the field, start with a business, finance, economics, math or engineering undergraduate degree, and then go for your master's or, preferably, a PhD in econometrics, statistics, industrial engineering, finance, math, operations research or quantitative analysis. Unless Wall Street is your goal, that degree doesn't need to be from a top engineering or business school, because the supply of US graduates comfortable with the high-level math analysts use is smaller than the supply of jobs, says Rita Raz, president of Analytic Recruiting. "Get a good master's from a state university, and you're marketable," she says.

    Unfortunately, American students struggle with math. The infographics below shows where we stand when it comes to numeracy skills. However, you could take this as good news too--the harder the field, the smaller the competition.

     

     


    You will find more statistics at Statista

    For discussion:

    What graduate programs in financial mathematics look appealing to you? What should you study as an undergrad to prepare you for this field?

  • Auto Loans and Leases

    According to a December 2015 report in the NY Times,

    CAR shoppers are increasingly favoring financial arrangements like leases and longer-term loans that allow them to buy costlier vehicles but with more manageable monthly payments.

    Leases are popular because car buyers can drive a new car for a fixed payment and then they have the right to return the car in two or three years and lease another new car.

    The downside to auto loans with longer terms and leases is that the cost of owning a car could be significantly higher than it would be if you buy a car and drive it for many, many years. That used to be how folks did it: buy a car, drive it until it costs too much to keep it in good repair, then trade it in on another car that you drive until it costs you too much to keep it in good repair.

    But if driving a new car is important to you, then leases or longer-term car loans may be the only alternative.

    Take a look at this infographic below showing what loans for the Fast and the Furious cars would be:


    Infographic produced by loans.org

    For discussion:

    What factors should you consider before entering a lease or longer-term auto loan?

  • What to Buy When Markets Drop

    Defensive stocks are less sensitive to market movements than aggressive stocks. The NASDAQ dictionary defines defensive securities as "Low-risk stocks or bonds that will provide a predictable and safe return on an investor's money?"

    This video lists several defensive stocks that did not fall as much as the market fell in the last downturn. So in this current market downturn, these might be some stocks to watch:

     

  • The World Since Superbowl I

    The world has changed since the first Superbowl was played in 1967. U.S. demographics have experienced a major shift. Compared to the days when the Superbowl began:

    • U.S. budgets have shifted away from basic necessities to services such as healthcare.

     

    • The economy has become a more service-based economy, with farming and fishing accounting for a small fraction of production.

     

    • Today's workers are more educated with 21% of working Americans having a Bachelor's degree compared with just 8% in 1967

     

    • Higher-skilled workers are able to demand a higher wage compared with the difference in wages years ago.

    (read more on BloombergBusiness here)


    This infographics shows some of the shifts in the U.S. economy since 1967:

     

     


    You will find more statistics at Statista

  • Impact of Negative Rates on Gold

    In an environment of negative interest rates, investors may look for a safe haven to hold their wealth. Gold is one option for those who wish to avoid the interest expense associated with holding cash.

    For discussion:

    What is "cost of carry?"

    How do negative rates affect the US dollar, and how does the US dollar affect the price of gold?

     

  • Know Your Credit Score

    According to Kiplinger's,

     

    FICO scores range from 300 to 850. You’ll need about 760 or better for the best mortgage rates, but a score of 720 should be sufficient to get you the best deal on an auto loan. About 10% of lenders now use VantageScore, which ranges from 501 to 990 and has corresponding letter grades from A to F. The best rates go to borrowers with scores in the A range (above 900). If you are denied a loan or given less than the best rate, a lender must tell you the score it used, along with the corresponding range and factors that adversely affected your score.

     

    Embedded from MGIC Connects

    For discussion:

    What can you do to protect your credit score? What can you do to improve your credit score?

  • What It Costs To Become President

    The race for the presidency is an expensive one. The chart below shows how well funded are the candidates. Interestingly, Clinton and Bush are the two top contenders when it comes to money, but Jeb Bush is not leading his party the way Clinton is leading hers.

    According to the NY Times (Confessore and Lichtblau, 15 Oct 2015):

    Establishment-backed presidential candidates in both parties, facing stronger-than-expected challenges from insurgent campaigns, are rapidly losing one of their few remaining advantages in politics: money.

    In the Republican and Democratic primaries alike, upstart candidates shunned by their parties’ major donors are now financially competitive with — and, in some cases, vastly outraising — opponents who have spent months or even years wooing the big-name donors and fund-raisers who have traditionally dominated the money race.


    You will find more statistics at Statista

  • All that Glitters...Gold

    Throughout history, gold has captured the imagination of humanity. The goal of treasure seekers and governments, gold is all that glitters. Today, though currencies are no longer linked to the value of gold and it is primarily used for jewelry today, it still holds allure for investors.

    For discussion:

    What is the price of an ounce of gold today? What factors drive the value of gold?

    What do you think the future holds for the value of gold? Why?