Investing in stocks doesn't need to be scary

 

1. Diversify

    Learn about proper asset allocation. This is the practice of making sure all of our eggs aren't in the same basket. This reduces risk and can increase our returns over time.

2. Avoid high fees
    
    Don't buy investment products like annuities or mutual funds without knowing what fees we'll be paying. Shop for a broker or financial services company with reasonable fees. High fees will erode investment returns by a Large amount over time don't pay them.

3. Ignore headline news

    Most finance news is produced for daily consumption. Getting wrapped up in these short term market headlines is a big mistake. Reacting to daily news can lead to buying at the top or selling at the bottom of a market cycle.
    
4. Know what you're buying

    Know what the company does and be able to explain it to anyone in simple terms. This way, when market forces change or competition increases, we will be in a better position to understand the risks of continuing to hold our original investment.

5. Some risk is necessary

    In order to insure a reasonable return on our investments some risk is necessary. Keeping our savings in only stocks means we lose big when the market turns down. The opposite is true if we keep all of our savings in CDs and bonds. Large market moves up will be missed; we'll run the risk of not getting high enough returns to accumulate the savings needed for a secure retirement. Everyone has a different comfort level, balance your portfolio the way that is best for you. See you next week Finwiz.

More personal finance mistakes we should avoid

1. Spending more than we earn

   With credit cards, spending more than we earn is easier than ever. We must be committed to paying off the monthly balances we've charged. Carrying cash for purchases will keep us out of trouble if we can't make that commitment.

 2. Always financing large purchases

   Not that long ago it was customary to save up for big items. Paying cash for cars or even a home was something many people used to do. Today lots of us finance TV’s, iPods, and furniture because we can get a 6-12 month interest free loan. This is great if we are committed to paying off the balance before the end of the free period. Once that period ends the finance company is betting a group of us will opt to make minimum payments netting them a small fortune in compound interest. Don't be part of that group.

 3. Buying the newest gadget

   Don't buy the newest mobile phone or tablet on their release date. Wait a few months and many of these products are reduced or even included in our contracts for free. I've found several refurbished gadgets on eBay for close to 50% off original prices. Finwiz.

Saving every payday is a good goal

    Automatically transferring a certain percent of what we earn into savings is a time tested way to accumulate retirement funds. If we deposit 5 or 10 percent of our income every payday we don't see that money as immediately spendable. Open a Roth IRA or traditional IRA and make the same automatic transfers and that savings compounds tax free. Always take advantage of employer 401k plans. Employers may only match up to 2-3 percent of our yearly income but that is a 100 percent return for us with no risk. Remember to review savings goals from time to time. See you next time Finwiz.

The power of dividend paying stocks

  

   We shouldn't forget the power of a dividend paying stock. A three percent dividend sounds very boring at first, let's take another look. If we purchased 50 shares of a stock priced at $20 paying a dividend of $0.60 a share annually that means it yields three percent. Mathematically that's $0.60 X 50 = $30 on our $1000 investment. Most companies raise this dividend over time. Many companies have a track record of raising dividends for twenty years in a row. We make money if the stock price goes up, and we make money on the dividend over time. Big gains are made when both happen over time. When stock prices increase in value companies usually increase their dividends to keep their yields in line with competitors. If our stock purchase above increased in value to say $30 a share over a period of time and increased its dividend to keep the yield at around three percent it would now pay $0.90 per share. The yield on our original investment is now 4 1/2 percent not 3 percent. Mathematically that's $0.90 X 50 = $45 annually on our $1000 investment. Do some research and invest only in companies that have a record of increasing their divided over time. Don't forget to tell Finwiz what you find.

Four ways to become a better investor

1. Study with a purpose

     We need to study the areas of the stock market we are unfamiliar with. We don't want to invest in a company when we can't understand what it does or how it makes a profit. Studying different sectors of the stock market leaves us in a better place to spot an opportunity when it presents itself. 

2. Motivation

     We must stay motivated about our future goals. We must have the tenacity to set goals, continue to review them, and make changes if necessary. No one is going to do this for us.

     

3. Know your strengths and weaknesses

     Every investor creates a track record over time. Review this track record for strengths and weaknesses. Try to learn something from past mistakes and remember our strengths represent a competitive advantage in the market place.

4. Knowing the time factor

     It takes time to become an expert in all worthwhile endeavors.  We should expect becoming a better investor to be an ongoing process. After almost twenty years I still study and review on a weekly basis. Overtime we develop and refine our own individual style of investing. See you next time Finwiz.

Personal finance is something we need to teach ourselves because we won't learn it in school

   I learn new things about personal finance all the time. Continual education is a must in personal finance. The following is a list of subjects we should study over time.

1. Household budgeting
2. Investing
3. Purchasing a home, condo, or rental property
4. Retirement planning
                                                        5. Estate planning

  Failing to educate ourselves in these subjects has huge hidden costs. Making a plan to set aside a small block of time for daily or weekly study will make a large difference in our future financial success. See you next time Finwiz.

Increase the spending power of your dollars with coupons

   This is a great way to stretch our dollar at the grocery store. Some stores allow us to use store coupons and manufacturers' coupons on the same item- a practice called stacking- take advantage of this when you can. There are a few stores, like Bed Bath and Beyond, that take expired coupons so it's worth asking. A fairly new practice is for stores to issue a specific dollar off with minimum purchase, like $10 off $50 minimum purchase. Try not to spend more than the minimum amount. The store hopes you will, which is why they switched to these coupons instead of 20% entire purchase coupons. Finwiz.

Five things we can do with the raise we just got.

1. Pay off debt fast.

        This is the best way to get ahead in our personal finances. Money that would be paid as interest can be invested and creates a positive return over time.

2. Start funding a Roth IRA or 401k.

        Tax deferred accounts allow our invested capital to grow faster by investing those funds for many years and paying taxes later.

3. Increase our emergency fund goal.
        

        Build and continue to maintain an emergency fund. Increasing the amount we have in it over time is a good way to stay ahead of inflation.

4. Find a good charity

        Giving to causes we believe in is one of the best reasons to save in the first place. Make sure to check their credibility to avoid fraudulent organizations. Charity Navigator online is a great way to insure funds are used in a proper way.

5. Enjoy some for ourselves.

        We just got that raise for a reason, go have some fun. Doing something that takes us out of our comfort zone may open new doors or lead to a new hobby. Finwiz.

The only smart way to use credit cards

1. Use credit cards on preplanned budget items.

  If you don't have a budget do not use credit cards. It's too easy to pull them out for items you haven't expensed for or even really need.

2. Record our credit card spending through out the month.

  Making a ledger or using online resources to keep track of our ongoing monthly balance is a big help. This way we are clear about the debt we are accruing, we don't want to exceed our preplanned budget.

3. Pay our balances off every month.

  Paying interest on credit card balances is probably the most unwise use of money there is in managing personal finances.

4. If we don't have the ability or will power to follow steps 1-3 above don't use credit cards.

  Research shows that credit card users spend more than non-users. Spending more and carrying a monthly balance will get anyone into financial trouble quickly, Finwiz.