George Soros has been right about the future on more than one occasion. He predicted the fall of the British pound, which netted a tidy profit. Furthermore, he impressively forcast the current economic downturn, almost step-by-step.
He’s currently watching for the next downturn and staying away from the weak dollar. Instead, focusing on oil, energy and more.
In the investing world there are thousands of stocks, thousands of mutual funds, thousands of bonds, and thousands of other alternative investments. The ideal portfolio is comprised of a diverse selection out of the cornucopia of available options that provides the perfect amount of risk and return for an individuals unique situation. Developing this portfolio requires time. Time spent educating yourself to allow you to make the right decisions or time spent consulting with an investment adviser.
For anyone who does not have the time to devote to planing their financial security (and I’d love to hear what in your life takes priority over this) I recommend investing in Target Date Funds. These are mutual funds that have portfolios designed to fit the investment objectives of the average person your age. They continually adjust your portfolio over time to contain the proper investments for whatever stage in life you are at (actually they adjust for whatever stage in life the average person your age is at). So while these are not ideal, because they do not factor in the specifics of your life, they are a great investment choice because they require little work to setup and maintain.
Vanguard offers the best Target Date Funds and if you are in your twenties then I would recommend their 2050 Target Retirement Fund (the funds are dated with the year you foresee yourself retiring in). You can setup a Roth IRA with them for free with a minimum initial investment of $3,000. Once you have the account setup then you can contribute as little as $100 each time going forward. They will even setup automatic reoccurring withdrawals from your bank account to be invested in the fund.
Perhaps you could forgo the weekly round of Patron and recover $100 a month to send to your new investment account. By the time you hit retirement your $100 a month would be worth over $500,000. Get off the couch and start saving today!
Brad Harbach is a Technology Consultant for Accenture although one of his primary passions is personal finance. Brad uses this passion and his personal experiences to provide common sense financially, career-wise and for life in general on his blog at www.twentysomethingsense.com. Please visit the blog for his latest postings or email Brad at bradharbach@gmail.com.
What are DRIPs?
Direct Investment Plans, otherwise known as Dividend Reinvestment Plans, or DRIPs, provide a simple way to reduce risk, yet many people aren’t even aware of them.
With the financial markets in such turmoil, this is a great time to learn about Direct Investment Plans, which is why YoungMoney.com and The Moneypaper are introducing a new section dedicated to them. Simply click the “Direct Investment Plans” dropdown below “Investing” or go directly to www.youngmoney.com/drips. We’ve made it easy for you to sign up and get started. And, before jumping in, you can get a lot of information in our “About DRIPs” section.
As you know, many people have limited amounts to invest. Say you’d like to become an investor, but you have only $500 to invest each month or each quarter (or even $250). With DRIPs, you can establish a portfolio diversified among 10 different industries and stay within your budget! That’s because with DRIPs, you can start out with as little as a single share of stock and build holdings by investing as little as $50 or $25 in each company—to buy whole or fractional shares (depending on the market price of the stock).
Is this the right time to start investing?
One never knows–if one is making lump-sum investments. But, with DRIPs, now is always the right time to invest. That’s because DRIPs make it easy to make regular investments. When the market is up, your investment will buy fewer shares, and when the market is down, your investment will buy more shares. You’re essentially buying more shares when they are selling at bargain prices.
Only DRIPs make dollar-cost averaging and wide diversification of assets–time-tested investment strategies — efficient, economical, and easy to implement.
The bottom line: DRIPs ensure that the control over your investments remains in your hands — not a broker’s and not a mutual fund’s — and, over time, that you are likely to amass substantial holdings at a cost that is lower than the average price of the stock during the period in which you were investing.
I had never played the stock market before. And, to tell you the truth, after the recent ups and downs and horror stories of people losing their entire retirement savings, I was scared to even try. That is, until a friend told me about the Young Money Stock Market Game. It’s is a lifelike brokerage trading simulation where you can safely learn the ins and outs of Wall Street. But best of all, it’s free and anyone that plays can potentially win actual money.
I signed up to become a member and started to play. It only took me a few minutes to figure out how to buy, sell, and trade stock. I added stocks I was interested in to my WatchList, and even compared my portfolio to the S&P 500.
I made a few mistakes, but with 1,000,000 in virtual money I had more than enough to play with. Other games I looked at had a lot less money to start with than that. But one of the coolest things is that you can enter contests where you can play against your friends, strangers, or even other investors. You can even start your own contest.
So I entered the Young Money/ShareBuilder Stock Market Game Contest. The winner is decided by the percentage gain within their portfolio during the two-month contest period. First prize is $1000 cash—in real money!
I definitely feel more confident about playing the stock market and I think I’m ready to begin actual trading on Wall Street. If you want a great way to practice a lifelike brokerage simulation for free then I highly recommend this game. It will not only help with maneuvering the sometimes complex world of stocks, but it will give you a chance to win up to a thousand dollars.
The most important thing that I have learned while playing the virtual stock market game is to diversify. You want to own lots of different kinds of stocks. That way if one of them doesn’t do well you aren’t completely sunk. I own some large, medium, and small cap investments. I also bought some domestic stocks and some international ones. I made sure that I spread my stocks across various industries: construction, energy, and telecomm to name a few. I also bought some companies that I had heard of and am interested in, such as Google and Bank of America.
It’s free, perhaps making this the one time you can play the stock market without any risk but still have the chance for some reward!
The Young Money Stock Market Game features real-time trading simulation and multiple contests. Beginning investors can practice stock market trading, compete with friends and investors, and win REAL money.
First Prize: $1,000 cash (1 winner)
Second Prize: $200 cash (3 winners)
Third Prize: $50 cash (5 winners)
Winners will be determined by the percentage gain within their portfolio during the contest period. The First Prize winner will be the investor with the highest percentage gain in a two-month period. Contests must enter by Friday, February 6, 2009 to be eligible to win. One portfolio may be created per email address.
Check out the Young Money Stock Market Game: http://www.youngmoney.com/stock_market_game
YoungMoney.com and ShareBuilder have partnered to offer their first joint Stock Market Game Contest of 2009.
The Grand Prize: $1,000 deposited in a ShareBuilder Account and a free ShareBuilder Advantage Subscription for a Year (1 winner)
First Prize: $200 deposited in a ShareBuilder account (3 winners)
Random Prize: $50 deposited in a ShareBuilder account (5 winners)
The Young Money Stock Market Game is a free community that allows members to practice trading in a lifelike brokerage simulation. By participating in the community, YoungMoney.com members learn the ins and outs of Wall Street by investing $1,000,000 in virtual money. The Young Money Stock Market Game features real-time trading simulation and multiple contests. Beginning investors can practice stock market trading, compete with friends and investors, and win real money.
ShareBuilder believes everyone should be able to invest and that’s why they have created an investment service that has eliminated account minimums, reduced commissions and doesn’t have maintenance fees. ShareBuilder is dedicated to making investing easy and affordable for everyone.
For more information, visit YoungMoney.com/stock_market_game
When I was younger I always looked forward to opening presents and dumping out my stocking. I still look forward to the gifts and my sister and I have kept up the tradition of stuffing stockings with little treasures that we have collected throughout the year. And this year—especially with some of the “sales” on stocks—I’m going to stuff her stocking with stocks.
Buying stocks as a gift is a fun way to teach children, grandchildren, or younger brothers or sisters about playing the stock market. This is truly a gift that keeps on giving. You can go through the annual report with them; it’s a fun way to share what you know about investing. This is also a great way to transfer wealth without heavy taxes.
Here are some tips for giving stocks in the stockings:
You can also play the Young Money Stock Market Game. It’s free and easy. All you have to do is sign up to become a Young Money member!
In many ways your first stock investment is like your first kiss: not sure what it is going to feel like and not sure what the consequences are going to be!
It is very easy for me to recall my first stock purchase as I have shared this story with thousands of people over the years.
It was in 1983 when I was a freshman in high school. I had a couple of thousand dollars from mowing lawns the previous summer. After looking at my Dad staring at the stock market pages every morning I wanted to know what the heck was he doing looking at such tiny lines of numbers and symbols. He told me I should take some of my hard earned money the past summer and buy Johnson & Johnson stock (ticker symbol: JNJ) because I knew their brands such as Band-Aids, their shampoo and Tylenol. I said OK and bought ten shares at roughly $43 per share with a brokerage commission of nearly $75.00! Funny how you remember the exact price of the first stock you purchased and the commission if you purchased stock before 1997.
Here’s where my first stock investment story gets nuts. No more than 30 days after I purchased stock in JNJ, the company was in the national news as a result of the famous “Tylenol Scare” incident. Seven people were killed from a person lacing Extra Strength Tylenol capsules with potassium cyanide in the Chicago area. As a result of this sad incident the price of JNJ’s stock plummeted to $28 per share! I told my Dad this stock market stuff is crazy and that I just lost $150 of hard earned money. He immediately responded with the fact that I should buy more because the stock had been unfairly sold off on this news. I said he was nuts. I neither bought more nor sold my stock but rather just sat on it. As is usual with parents the older you get the more you realize they are not that stupid. Just a few months later I wish I had listened and bought more. JNJ’s stock went on to climb year after year and I experienced two stock splits which gave me a total of 40 shares in a period of six years.
What a great lesson I learned. At my age I was in my investments for the long term not the daily swings of stocks.
So what was your first stock purchase? You know it like the back of your hand. I would love to hear it. And if you have not begun to invest yet I would encourage you to do so. Not only can you begin investing in stocks today with as little as $100 from online brokerages like ShareBuilder but you won’t have to pay $75 commissions like I had to back in the day. Go for it. You will be glad you did and you will have a story to share yourself.
As founder of Young Money, Todd Romer started investing in stocks at age 16 from money he saved mowing lawns. Todd is very passionate about teaching and encouraging today’s young adults to begin investing given the time value advantage. Todd has spoken to thousands of young adults about money and investing and remains part of the executive team of Young Money media today.
Everyone is talking about the stock market. When times get tough, what should you do?
Stocks as a whole are very cheap, making this a great time to invest, especially if you’re young. Why? Well, almost everyone has heard, “buy low, sell high”—and, right now, prices are low…very low.
Is there room for stocks to still go lower? Sure. But really, how much lower? While the global economy may suffer for a while as companies and individuals become more fiscally responsible, the market as a whole is a forward looking trading mechanism. In other words, stocks trade on future value, news, and analysis. Some say that stocks trade on conditions nine to fifteen months out, not what is going on now.
Think about it this way: today’s stock prices are like the amount of milk that my college roommates would leave in the almost-empty gallon—meaning very little. And there is very little room for more declines in stocks. No one is ever going to pick a perfect low on any given stock, however, an opportunity to buy stocks for the long term (10+ years) or midterm (3-5 years) has never been better.
And in case you’re thinking of hiding your savings under a mattress, you should know that keeping your money in cash is not the answer—inflation eats away at its real value year after year. But, for the last 90 years stocks have provided, on average, a nearly 10% annual return. Not too shabby, right?
So if you’re looking to start investing, this may be the perfect opportunity.
As founder of Young Money, Todd Romer started investing in stocks at age 16 from money he saved mowing lawns. Todd is very passionate about teaching and encouraging today’s young adults to begin investing given the time value advantage. Todd has spoken to thousands of young adults about money and investing and remains part of the executive team of Young Money media today.
When I first graduated from college, I was lucky enough to land a job right away, despite the slow job market that year. Although my first job didn’t pay much, I still wanted to get started on investing, but I wasn’t sure how to begin. Luckily, I had my market savvy dad (and YMT resident Old Guy) to ask for guidance. Even during our slowing economy, the advice he gave me then still rings true. So for those of you who are thinking about getting in on the market while it’s low, here’s what he had to say to me:
Congratulations on getting a real job with a W-2! I’m delighted that you are following my advice and not going out and blowing your money on a pair of Jimmy Choo’s. You said “investing,” not “saving”, so I want to first say that you should always keep in mind the old adage: “Pay yourself first.” Build a budget with some percentage of your gross income dedicated to long term goals, like retirement or college for your kids (I know that’s really premature!). The tax code makes it easy by allowing you to deduct 401k and IRA contributions. So, the first question is: does your new employer have a 401k plan with a company match? If so, your employer is your savings partner and that’s the best deal. All 401k plans are not equal though, so you have to check out how your savings are going to be invested. If the options are company stock or an annuity, you might be better off just putting your money in an IRA. After that, your next step would be to set up another long term investment like a well diversified mutual fund. Even though it’s a long term investment, it’s best to think a little bit conservatively. Some of the bigger funds families offer “target date funds,” which try to build a portfolio appropriate to your planned retirement date. If you really hate thinking about this stuff, these may appeal to you. As always, do your homework and read up on several options. Just because you’ve graduated doesn’t mean the learning has to stop.
Even though today’s market seems like a scary place to invest, it just might be a good time for you to start. The very first investments we make should be the one’s we’ll keep the longest. It might be a wild ride, but if you stay the course, diversify, and reallocate as you age, your investment should pay off in the end.
Today in our weekly “Ask the Old Guy” segment, we’re asking my dad about something that’s probably been on your minds as much as it’s been on mine.
Toshihiko K., a recent Dickinson College graduate asks:
Dear Old Guy:
With the current state of the stock market, my retirement fund (a Roth IRA) is really doing poorly! I am wondering if it’s a good idea to keep funneling money into it, when it seems like all it does is lose money. So, should I keep investing every month like I always do or should I stop until the market gets better again?
Thanks for your help,
Toshihiko K.
Well, if he asked me, I would tell Toshihiko to keep contributing because it’s a long term investment, but let’s see what the much more seasoned investor had to say.
Dear Toshihiko:
Your question is a frequent one these days.
First a word of caution: No one can be sure of the future, but, there’s an old rule of thumb in the timing of investment decisions that states “when people are anxious get greedy, when people are greedy get anxious.” I think Warren Buffett said that. Anyway, there are several factors to consider.
You are talking about retirement investments, and since I’m assuming you’re not an “old guy” like me, you won’t be tapping into this money for around forty years. In other words you have a very long time to recover from losses. When working with that time frame, the most important thing is to keep up the discipline of systematic investments. Although your old investments are worth less today than when you bought them, what you buy today will lower your average cost. It’s hardest to buy when fear is everywhere, but, that, my friend, is when the money is made.
Also, remember that you should always stay well diversified. When you are building your retirement investment portfolio, it’s always wise to have investments in well diversified stock mutual funds and in a fixed income fund. There are many good ones out there and many services, like Morningstar for example, which rate their performance.
Keep it Smart,
Jim
The Young Money Talks “Old Guy”
You know what my dad and I think, but what do you think Toshihiko should do?
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