How To Survive A Stock Market Correction As An Investing Blogger

by in Personal Finance on Aug 24th, 2015

Let’s say you’ve quit your job to be a financial blogger, more specifically, a blogger that mainly writes about how to make money in stocks. Or maybe you’re planning on quitting your job to be an investing blogger. Please reconsider! With a 15%+ correction in the Dow Jones within three days, things are looking dicey.

We’ve seen a proliferation of stock market bloggers who’ve never worked in the industry and who’ve only seen an up market since they started within the past five years, give advice to thousands of readers. Some might not even have any formal college education. This is a very precarious situation for readers and blogger alike.

If you are an investing blogger, you’re going to face difficult times if you don’t diversify your content because people will just stop visiting your site if all you’re talking about is your latest stock purchase that is going down. When you’re losing money in the stock market, the last thing people want to do is talk about the stock market!

Further, a lot of people start wondering whether investing with a robo advisor is safe. Everybody starts to doubt everything when they are losing money!  Read More

The Power Of Compounding For Building Greater Wealth

by in Personal Finance on Jan 26th, 2015

“Compound interest is the eighth wonder of the world. He who understands it, earns it … he who doesn’t … pays it.

Compound interest is the most powerful force in the universe.

Compound interest is the greatest mathematical discovery of all time.”

~Albert Einstein (source: quotesonfinance website)

I’ve been amazed at the power of compounding ever since my mom explained the Rule of 72 to me many years ago. This simple exercise shows how long it will take for your money to double at a particular interest rate. Divide the expected interest rate into 72 and you have an approximation of how long it will take for your investment to double at the given interest rate. For example, if your projected return is 9 percent, then you divide 9 into 72 and the result is 8. According to the rule of 72, it will take approximately 8 years for your money to double at a 9 percent interest rate.

More recently – as I see the traditional retirement age coming into view- I’m doing some portfolio analysis to assess our financial picture now and into the future. One of the thing that amazes me is a particular TIAA CREF retirement account I contributed to decades ago when I worked at San Diego State University. I contributed to this account during my ten years of employment and invested 75 percent of my allocation in a diversified stock fund and 25 percent in a fixed option. After those ten years were up, I never contributed again nor did I change the asset allocation.

Several decades later, the account value has increased 6 times. That means if I invested $35,000 during those ten years, that account would be worth $210,000 today. It still amazes me as I write this article how a mere $300 or so dollars per month invested conservatively for ten years grew to a respectable sum. When calculating the annual average rate of return on that account, it was approximately 6.75 percent. This is a very attainable rate of return.

Related: Check out the best robo advisors to help manage your money for a low price.  Read More

Understanding The World Of Binary Options Investing

by in Personal Finance on Dec 11th, 2013

During senior year of college, I was already highly immersed in the world of stock market investing. I used Ameritrade at the time and would purposefully schedule my classes until after the market closed in order to day trade online. I’m lucky I didn’t have a lot of money because I faired poorly in my trades, but I learned a tremendous amount that would later set me up for a career on Wall St. 

One of the desks I could have joined on the 50th floor of 1 New York Plaza was the derivatives desk. I’ve always thought of derivatives as only for hardcore math geeks, of which I was not. I disliked higher level math with a passion. But when I spoke to the team they seemed absolutely normal. I knew very little about options, so I was told to read, “Options As A Strategic Investment,” a 1,000+ page book by McMillan and fly back a month later for follow up interviews. They ended up asking me only one question from the entire book, “What is a butterfly spread?” I didn’t join the derivatives desk in the end, but ever since that experience I’ve always kept my eye on options as a way to hedge or juice my investments.

The following is a post that discusses the world of binary options, something I’m not too familiar with. I don’t recommend options investing for every day investors. Get the basics down first!

The idea of investing in stock and trying our hand at stock market trading is something that appeals to many of us, however, very few of us will make the jump from thinking about it, to actually doing it. There are many reasons for this – for some it is an issue of capital, for others its accessibility to the stock we want to invest in, and for others its fear, a fear of not having the savvy and the chops to navigate the financial markets and make a profit while doing so.

At the end of the day, investing and profiting from your investments is not an easy game. I suppose if it was everyone would be doing it! If you do find yourself been put off investing due to any of the reasons mentioned above but you would still like to get a piece of the stock market pie, there is an alternative investment vehicle one that allows you to invest and profit from the stock markets without having to overcome obstacles that hold many of us back.

This alternative investment vehicle is “Binary Option Trading” aka “all-or-nothing options.”

What is binary option trading? Read More

Investing, Travel, And Wealth; Secrets To Success

What is Your Definition of Wealth and Success?

by in Personal Finance on Aug 13th, 2013

Fresh off a two week vacation in Peru, I was reminded of two keys to a successful life…. balance and patience. As a true workaholic, it sometimes takes dragging me thousands of miles from home to to remember the true value of life; and it’s not about who acquires the most money. Clearly, money matters, but so do other aspects of life. Money is the method to achieve some goals, but not all. (It’s tough to travel without any cash :) .)

Now how is this article going to tie together investing, travel, and wealth?

Patience and Investing

An inspiring hike around one of the most amazing sites in the world, Machu Picchu gave new meaning to the word patience. It took close to 150 years to build this historic tribute to the Inca culture. The lessons embedded in this culture are important to us, centuries later.

Are you devastated if you don’t get a remarkable investment return one year?

Over the last hundred years or so, the U.S. stock market averaged about 9 percent per year. Yet during the past fifteen years the S & P 500 averaged 4.75 percent (according to Morningstar).

Would there be a Machu Picchu today if the Incas looked at their progress after 15 years and said, “This stinks, we aren’t finished yet, we quit”? Yet this is exactly what many investors did after the bear market of 2008-9. To those investors who sold and didn’t know when to get back in, they missed a great run up in stock prices over the subsequent years.

Let’s carry the example a bit further. How many bloggers quit after a year with the lament that their traffic and income is insufficient? Ramit Sethi of I Will Teach You to be Rich, admitted at a Fincon presentation that his website was nowhere at the three year mark.

Patience with oneself and one’s endeavors is a secret to success. Yet our culture thrives on instant gratification. That mentality leads to dissatisfaction. I’ve invested for decades through up and down markets. There were years when the market tanked and so did our investable assets. Although those were the times when I bit the bullet and added more to our investments. History demonstrates the miracle of compounding; the longer you continue to invest, through up and down markets the more your wealth grows. Many new businesses fail, not because the businesses are inherently poor, but because the owners’ don’t plan well enough, store enough capital, and hang in there during the slow initial stages. Read More

Risk Versus Reward: Stock Investing Is Not Dead

Where Are You Investing Your Money Today?

by in Personal Finance on Aug 13th, 2012

“When the weather changes, nobody believes the laws of physics have changed. Similarly, I don’t believe that when the stock market goes into terrible gyrations its rules have changed.” Benoit Mandelbrot

This brilliant mathematician speaks to the reality that the price of common stocks goes up and down. If you want the possibility of a high return, you need to take some risk.

Across the web there’s been talk about the death of equity investing.

Why? My guess is because investors have short term memories and believe since stock market returns’ under performed their historical averages during the first decade of the new millennium, they will continue to under perform.

Ironically, and the end of the 1990’s there was a similar belief, only in reverse. The media was filled with discussions about how we had moved into a new world of investing and the old rules didn’t apply. In 1999 after a decade of historical out performance of the equity markets, investors believed that the “new normal” would be stock returns in the double digit range.

Well, that didn’t quite pan out.

What happened in the first decade of this millennium is a reversion to the mean. After large out performance of stock investments, the equity markets under performed which moved long term returns closer to their historical averages.

Does that mean the future equity returns will now be lower than historical averages?

I guarantee that no one knows what the future holds!

What is the relationship between investing return and risk? Read More

Cash Out Your Roth IRA to Fund Your Small Business – Horrible Mistake or Blessing in Surprise?

by in Personal Finance on Jun 14th, 2012

If you haven’t noticed yet, I’m kind of in love with the Roth IRA.

Having launched the Roth IRA movement, it’s a safe assumption that I think everybody should have a Roth IRA.  Heck, if there was a way to open up a Roth IRA for my dog, I would definitely do it.

Several years ago a close friend of mine started investing into a Roth IRA.  I was super pumped because any time a young adult starts putting money into a Roth IRA, I don’t see the $50 per month they put into it. I see the potential of hundreds of thousands of dollars they will have tax free at retirement.  Getting started earlier on in life is so huge, and it motivates me to be the catalyst behind that.

My friend had been adding money into his Roth IRA for several years and was doing this while launching his brand new photography business.  I was really impressed by the fact that he was able to stay in the black from going off on his own and starting a new business while also putting a decent sum into his Roth IRA.

You Wanna Do What? Read More

A Cynic’s Argument For Why Facebook Stock Is A Buy

The IPO Quiet Period And An Exercise In Market Psychology

In order to read this post, you’ve got to be a little cynical.  When it comes to investing in the largest casino in the world, it’s important to think about multiple variable outcomes and logical conclusions to keep your sanity.  For example, one can ask themself today with the markets up 1.5+%, “Who was the dummy panic selling last week?  Bernanke is testifying on the Hill on Thursday and is going to keep this money train alive!

Thesis: Retail investors will do anything a perceived authority (media, bank, government) will tell them to do.  People will do whatever it takes to protect their reputation.  Therefore, retail investors will buy Facebook stock because the very banks who took the company public at $38 will defend the stock post quiet period.

The lead underwriters for Facebook’s IPO are: Morgan Stanley, Goldman Sachs, and JP Morgan.  As lead underwriters, you are in charge of booking, billing, pricing, and allocating shares.  Your goal as lead underwriter is to raise as much money from the public as possible, while simultaneously allowing for investors to profit once the stock goes public.  The best IPO is arguably the one that goes up 5-10% after listing, and shows a steady increase over time.

If you price your IPO too low, the stock will surge, leaving money on the table and a potentially annoyed corporate CFO.  But who really cares that much since they’re all rich now.  If you price the IPO too high, like underwriters have with Facebook, you will see the share price drop like a lead balloon.

Despite what seemed like endless demand at the time of pricing, underwriters for the Facebook IPO botched the deal.  Dropping 33% to $25.60 a share from $38 in just three weeks is unheard of, especially for a deal this size.  Institutional and retail investors alike, ran away like mice fleeing a sinking ship.  Something must be done!

QUIET PERIOD MEANS SHUT THE HELL UP! Read More

How Attending Conferences Is An Investment

Looking Beyond The Dollars Spent

Last year, I had to privilege of attending 1 1/2 conferences. The half was SXSW (South by Southwest), in which I did a Chevy sponsored road trip to the event, but unfortunately had to leave due to a few family emergencies. The second one, I feel, completely redeemed my earlier disappointment: the first annual Financial  Blogger Conference.

Neither one of these trips were cheap, especially when adding up the ticket price to travel (airfare or gas), and your hotel stay. You can potentially be out hundreds to possibly a couple thousand dollars per conference. However, there are people who go to 5-10 conferences a year! Not only is that a lot of traveling, that can be a lot of money. However, conferences aren’t just for personal fulfillment; attending can be considered an investment.

BIG BUCKS FOR BIG REWARDS Read More

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