Guest Post: June @ Dinks.co
In any investment portfolio, it is usually a good idea to diversify your holdings in order to spread your risk. By avoiding a cash concentration on any one particular type of fund or investment, you can stave off potential disaster during a large loss in that market.
Diversifying your portfolio can help to ensure that all of your investments will not suffer losses in a bad economy, putting you on the path to being a millionaire. By considering a number of different assets and their relationship on the market, you can better spread the risk over your entire portfolio and safeguard your investments.
Peer-to-peer lending is one way that investors can diversify their portfolios. Through websites such as LendingClub, peer-to-peer lending offers a unique investment opportunity that can often outpace the return on some traditional forms of investing. Read on to learn more about diversification through products like peer-to-peer lending through sites like LendingClub.
What is Peer-to-Peer Lending?
Peer-to-peer lending, or p2p, is a process where one person lends money to another without the use of an official financial institution to act as the middleman. Because a traditional bank is not involved in the process, p2p lending does carry more risk for the investor than traditional lending, but it also brings with it a higher potential return on the investment.
The way that it works is relatively simple: borrowers take out loans funded by individual investors at a given interest rate. Investors have the ability to review borrowers’ profiles before deciding to approve the loan, and can approve the full request loan amount, a partial amount, or decline the loan. Other investors can also choose to fund the loan if it isn’t fully funded by a single investor.
For creditworthy borrowers, p2p lending sometimes offers better interest rates than those offered by traditional banks, and it’s possible to get a competitive rate even without an established credit score. However, be cautioned because you can still get declined for a p2p loan.
How does p2p Lending Open the Door for Alternative Investing?
This type of investment is a doorway for many people to get started in alternative investing, allowing them to try a new way to invest their money outside of traditional methods. This may ultimately lead to investors deciding to explore other types of alternative investments, such as precious metals, real estate, and mutual funds.
How Can You Diversify Using LendingClub's Model?
One such example of this investing model is LendingClub. Investors can diversify their portfolios with relatively small amounts of money by contributing to certain personal loan applications.
First, you must qualify as an investor, which means living in one of the approved states and meeting certain income and net worth requirements. Once approved, you can begin searching for and making loans through LendingClub’s website.
In order to invest, you need to find potential borrowers with unfulfilled loan applications. It’s relatively safe since borrowers on LendingClub’s platform must be approved with a minimum credit score of 660 among other qualifications. While that can be considered a baseline, there’s more to it if you want to make a safe investment.
Each borrower is issued a loan grade based on his or her credit report and other factors. Investors can then choose to lend money to borrowers (with a minimum of $25 per loan) at a specified interest rate. A loan application can stay on the platform for 14 days; after this time, the application will be deleted from the site.
So how does an investor make money on this? Well, once the loan is approved, the borrower starts making payments with interest within 30 days. The historical return on investment for LendingClub investors is between 4 and 6 percent, depending on the approved rate. These loan terms range from 3 to 5 years, so you can expect a short-term ROI as an investor.
If you are looking to diversify your portfolio, p2p lending sites such as LendingClub offer a way to break into the world of alternative investing. With strong annual returns and the possibility of increasing your return based on the level of risk you undertake, p2p lending is a good way to get into alternative investing for many people.
When starting out as a new investor there are many questions you may ask yourself. How to get started? How much money should I invest? Do I put it all in one company? What is a diversified portfolio? These are just a few of the important questions you will need to answer before starting your journey into investing into the stock market. Let’s first start with where do I invest my money? Or to rephrase, what trading or investing platform should I use?
There are many factors which will affect your choice of trading platforms to choose from. There are dozens of options available. Having dozens of options to choose from can make the selection process overwhelming, thus preventing you from ever starting. Ever go to a restaurant where there are 50 or more options to choose from on the menu? Then go to another restaurant where there are only 10? With all of the options to choose from it may take you forever to make a selection, or you’ll have to rely on the waiter’s opinion on what is good at the restaurant. Limiting your options reduces anxiety, so thank me later!
To get started I would recommend first assessing:
1) How involved do you want to be?
2) More or less Features
3) Higher or lower costs, and
4) How often you plan to make transactions buying and selling stock.
If you plan on following the Share Repurchase Newsletter portfolio as your only investment strategy, outside of your 401K of course, then selecting a platform with the most features and potentially higher fees may not be the right choice for you. We make 2 transactions per month when selling the 30th company in our portfolio, then adding a new selection for the month. Let’s start by discussing a few free and low cost trading platforms.
Low Cost - Low Feature Trading Platforms
Robinhood is a free stock trading platform which is only available via mobile devices. If you have an iOS (iPhone, iPad, iPod) or Android device, you can use the Robinhood app to buy and sell stock free of charge! There are very few trading platforms available where you are not charged commission for every individual transaction you make on their platform. For those who are just getting started with investing, this may be the best choice for you just to get your feet wet. How does a company stay in business offering services at no costs? Robinhood earns revenue by collecting interest on the cash and securities in Robinhood accounts, the same way you would make interest for money sitting in your savings account. There’s also a paid option within the platform called Robinhood Gold. With Robinhood Gold there’s a $10 Monthly charge, which provides you access to Pre-Market and After Hours trading. The stock market’s normal hours are from 9:30am to 4pm EST. With Pre-Market trading you have access to trade starting at 9am, and After-Market trading ends at 6pm EST instead of 4pm. Why would you want access to Pre or After-Market Trading? Companies announces Quarterly earnings before and after market. After earnings are announced, the price of an individual stock can rise significantly. A good recent example is the price of Nike ($NKE) stock. On June 29th Nike’s earnings were released After Market. At 4pm Nike’s stock price closed to normal trading at $53, and before the Market opened again at 9:30am the next morning, the stock rose to $56. That’s a 5% gain over night, with most of this gain occurring between 4pm and 6pm (After-Market trading hours)! If you’re not an active trader or a day trader, but a long-term investor like the Share Repurchase Newsletter, then none of this will really matter to you. Enjoy the free access in order to make your 1 purchase per month trading from your cell phone, and don’t worry about it for another 30 months.
Loyal 3 is Now FolioFirst
On May 22nd Loyal3 changed to FolioFirst. When Loyal3 began it started as a free trading platform, with the major difference between it and Robinhood being the fact that you can purchase fractional or rather partial shares of stock, as well as access to getting in on IPOs (Intitial Public Offerings). Using Apple ($AAPL) as an example, back in June of 2014 Apple performed a 7 to 1 stock split. Prior to the Split, Apple’s stock was over $600 per share. For someone just getting started in investing, or who does not have enough money to purchase a full share of a stock like Apple, you could miss out on buying the stock waiting to save up your pennies. Since Loyal3 allowed you to buy fractional shares, you could buy as little as $10 worth of Apple Stock, whereas on most other platforms you would have to have the full $600+ in order to buy Apple Stock. Apple choosing to split its stock helped as it dropped it’s cost to the $90 range, and is currently over $140. Without the last split, Apple’s stock would be just over $1000 per share!
Now with FolioFirst, you still have access to buy fractional shares, however there’s now a monthly charge to trade your stock. Checkout our previous Blog Post: What Should I Do With My Loyal3 Trading Account , for more information on what changed with the transition from Loyal3 to FolioFirst. FolioFirst is currently only available to previous Loyal3 customers, but once open you can look forward to another breakdown of their features. Motif is a platform very similar to what FolioFirst offers, and is open to the public currently, so I will go into further details on their platform instead.
Motif Investing is another platform which allows you to buy fractional shares of stock. Let’s say you have $1,000 available to invest, and you’re interested in buying stock in Amazon ($AMZN). Currently Amazon’s stock is $968, so you would have enough money to purchase 1 full share, however there would be an additional $32 sitting in your account un-invested if you used a “traditional” trading platform. The same with a stock like AutoZone ($AZO) whose stock is $570. In this case you would have $430 that you wouldn’t be able to invest in AutoZone stock unless you deposited another $140 in your account to afford a 2nd share. Another great feature of Motif, which stands out versus your more traditional trading platforms, is that you can purchase the stock of up to 30 different companies at once, all for one fee (currently $9.95). When purchasing stock with a traditional platform like TD Ameritrade you would need to pay a commission on each individual company’s stock that you purchase. This alone can save you between $150 to $300 if you had to pay $5 or $10 per company for all 30. With Motif you can buy pre-made Motif’s which follow certain themes like companies which make Robots, Video Game companies, or even companies that help to promote a sustainable planet! There are many themes, and you can even create your own. Checkout the theme I created for my Nephew here. Once you’ve created or purchased a pre-made Motif, you can continue to rebalance the percentages invested in each company and add more money over-time (dollar cost averaging). You can rebalance a motif you’ve already invested in for just $4.95.
Higher Costs - More Features
In the case of the next set of trading/investment platforms, the concept of higher costs is based on the fact you need to pay a commission for each transaction without the option to bundle multiple stocks into one purchase. These are your more traditional brokerage firms which allow online trading and have physical banks, in addition to platforms which are Day Trading friendly. The following list of investment firms all have recently dropped their commission price around or near $4.95. Fidelity was the first to drop their fees, followed by an immediate drop in Charles Schwab’s commission to match that of Fidelity! TD Ameritrade and E*trade dropped their commission fees to $6.95 from its original cost of $9.99 shortly after Fidelity and Schwab. There seems to be an active price war as more investors are getting comfortable with online trading. With the costs of an individual trade virtually the same with these platforms, the additional features, customer support, minimum deposits, and bonus offers stand out more as far as making your selection. I will not go into grave detail for these accounts, but will provide a bit of my experience with these platforms.
TD Ameritrade’s Think or Swim Platform is my favorite platform to use. When I began learning how to trade stock back in the early 2000’s, this was the first platform I used. TD Ameritrade’s Think or Swim platform has an option to trade stocks and options using “play money”. This way you can get hands on experience on how to place simple and advanced trades, or even trade options and futures. You also have access to watch CNBC within the Think or Swim Desktop or Mobile App, allowing you to hear about the latest financial news throughout the day. For a new investor this platform may have more features than you are ready for. However, if you’re looking for a platform that can grow with you, assuming you want to eventually dive into Options Trading or Day Trading, then this is my #1 choice. There are many settings that you can use for charting, setting alerts, scheduling trades for a future date, and setting up trailing stops and whatnot. If all of this is foreign to you, and you are not willing to learn what all of these things even mean, then maybe a Robot is better for you! Skip to the next section for Hire a Robot!
As far as the other High Cost More Feature platforms, checkout their sites for the most up to date account minimums and bonus offers. I’ve used the following list personally:
TD Ameritrade (Trade free for 60 Days)
Looking into SureTrader in the future as well as LightSpeed, which I’ve heard are great platforms for Day Traders.
Hire a Robot! - Roboadvisors
Ok maybe you’re a current Share Repurchase Newsletter Subscriber using your personal account or IRA to invest, you’ve maxed out your 401K match, and looking to invest more money. Or maybe you don’t want to be too involved in the investment process, and want someone else to handle all of the heavy lifting Well there are a few more platforms out there where you can just sit back and let the Robots take over! There are a group of platforms, which work similar to the Mutual Funds you’ll find in your 401K. You can deposit money on a regular basis automatically, there’s no charge for individual transactions, just a percentage commission based on the amount of money you have invested. These are known as Robo-advisors. I personally do not use Robo-advisors, as I make my own stock selections outside of what I invest in my 401K. Even within my 401K I am very selective of the Mutual Funds I select (mostly Vanguard, due to the lowest commissions…Warren Buffet agrees!).
There are even some 401K plans which allow you to use a Self-Directed 401K in order to select individual stocks, which I did participate in with a past job! Anyway, let’s get back to the Robo-advisors! The companies most people think of as a Roboadvisor are fairly new, as many of the ones I will mention have only been in existence in the past 5 to 10 years. Previously Robo-advisor software was sold to financial advisors, who then sold their services direct to the consumer, and made a commission between .09% and 3% of your total investable assets. Now consumers can access the software directly from these companies.
Vanguard and Charles Schwab are actually the largest two companies who provide "robo-advisor" capabilities, although they are not thought of in this manner. When Robo-advisors come to mind, these 5 companies are what typically come to mind in the US:
In fact, based on Assets Under Management (AUM), Vanguard is larger than Schwab and these 5 companies combined.
Make a Choice!
No matter which route you choose, investing is one of the best ways to build wealth and prepare for retirement. Checkout our previous post on How to Be a Millionaire to see how easy it is to become a Millionaire by retirement by investing between $5,000 to $10,000 a year in your 401K and/or IRA accounts.
If you are interested in learning how to read charts which help you to trade based on the markets psychology, checkout How Charts Can Help You in the Stock Market. Also take a look at The Only Investment Guide You’ll Ever Need, which is a book I recommend to anyone new to investing. Both books are listed on our Links Page and I highly recommend them.
This month we read - The Goal: A Process of Ongoing Improvement By Eliyahu M. Goldratt. The Goal is about global principles of manufacturing, which at first may sound really really boring, however Goldratt writes the book as a novel. In The Goal he tells the story of a Plant Manager who is on the brink of losing his job, and having his plant shutdown if improvements are not made in the next 3 months. Oh not only that, but his marriage seems to be on the same time line! Oh The Drama! Throughout the book the main character, Mr. Rogo, uses the people and things around him (kids, wife) to learn and apply the important principles which an old wise Physics teacher (Jonah). Soon after Mr. Rogo is greeted with the dilemma of a potential plant closing, he by chance reunites in the airport with Jonah, who seems to have all the right answers for him (despite seeing no relation between Physics and Manufacturing). The old professor provides him with 3 important principles to focus on, which comprise âThe Goalâ. Since we like to discuss Finances here at Share Repurchase, we will make the parallel between The Goal of a Manufacturing Business, with the goal of your Personal Finances! The three things which any company, individual, or family need to focus on are: Throughput, Inventory, and Operational Expense. These will be defined in the following paragraphs for how they relate to Personal Finance.
âGoldratt, or rather Jonah the Professor, defines throughput as the rate at which the system generates money through sales. The Goal for any business is to make money! If your business is not making money, it will eventually shut down. All activities within your business should focus on how it can contribute to making money. In relation to Personal Finance we can think of throughput as your income from your business, income from your salaried/hourly job, or passive income from investments like stock or real estate. When making a budget for yourself as an individual, or for your family, if you donât have any income then thereâs nothing to budget! This is the most important portion of your budget as it is the foundation, and other factors will soon become irrelevant if you do not have any income coming in. Just like any business can go bankrupt once it does not have enough cashflow for a sustained period of time, an individual can go bankrupt as well.
âWhat can a person do to increase Throughput in their Personal Finances? Well for the average American it will start with either: getting a raise, getting a promotion for a higher paying position, finding a new higher paying job, or getting a second job/side hustle to bring in more income. Increasing throughput is the most important factor in staying afloat in business as well as in your personal finances. When looking at your budget, think about the lifestyle YOU want to live. If you are satisfied with your current lifestyle, then maybe increasing throughput is not important to you. Or maybe you were given all of the necessary throughput you will need in your life from a family member or really great friend. How long will that last? Is it guaranteed? Can it cover you if a disaster (natural or health related) strikes? These are just a few things to consider when thinking about your current level of throughput (income) and how it will affect the remaining days/months/years of your life.
âThe next principle we will discuss is Inventory: all the money that the system has invested in purchasing things which it intends to sell. In regards to Personal Finance, we can think of it in a few ways: Savings and/or Discretionary Expenses. I say both Savings and discretionary expenses because this is what is left over (inventory) after the necessary spending or operating expense which we will discuss in the next section. If that is the case, then why would we focus on Inventory before Operating Expense? We can look at two examples, one from the book Profit First and the other from one of the greatest investors of all time, Warren Buffett. In the book Profit First (future Book of the Month) the author does not use the typical equation of Revenue - Expenses = Profit. He uses Revenue - Profit = Expenses. Using this formula instead, ensures that an individual makes a profit with their business, or in our Personal Finance case, their savings in a budget. We are taught early on to focus on our Income first, Expenses second, then with âwhatever is leftâ you should try and save it. For many the âwhatever is leftâ method ends in ânothing is leftâ, but since all of our Expenses (bills) are paid itâs not a huge deal. That is until it is a huge deal! Accidents, injuries, loss of income, and random other incidents and expenses will eventually come and ruin your budget if you use the traditional method of accounting for your income, expenses, and savings (profit). This is why Mike Michalowicz recommends to focus on Profit First.
Donât save what is left after spending; spend what is left after saving
Warren Buffett has a similar principle which he clearly suggests in the quote above. Your inventory (savings), although kept low in comparison to your income, is more important than your spending (Operating Expense). Make a decision on how much you will save each month, between 10-20% of your income, then with the remaining money take care of your day to day expenses. This guarantees 2 things: first you will have money saved for a rainy day, and secondly it will help you to reduce the your operating expense (bills) because you are already working with a lower amount of your income.
If you buy things you donât need, you will soon sell things you need
âAnother Buffett quote (above) which we can use to draw a parallel between Inventory and Personal Finance is discretionary spending. Discretionary spending is the money we spend after we have taken care of our âbasic needsâ: Food, Shelter, Clothing. When I mention food, I donât include going out to eat on a regular basis as food for your basic needs. Having 12 pairs of shoes which are not required for you to increase throughput (income). Even having a home with 10 br and 5ba when you are the only one living in it! These are all considered discretionary spending, as this is money spent to go above and beyond your basic needs. Just as with a Manufacturing company, if it decides to buy or make parts which it cannot immediately consume in order to increase throughput, then it is unnecessary spending which increases Inventory, which is not helpful towards The Goal. Another way we can think of inventory is when you buy items with the purpose of using it âsome dayâ, or buy way more than you need just because something is on sale, or buy too much of a product which has a short shelf life because it was a âgreat dealâ. None of it is worth the expense if youâre unable to use it before itâs no longer worth what you spent on it, or if you end up not making use of it. This money could have been saved and used for a future emergency, or better yet used to invest to help create more throughput through passive income. Keep this in mind next time you see a sale on something you do not truly need, or will not be able to realize the benefit of the product in a timely manner.
The third principle is focused on Operational Expense: all the money the system spends in order to turn inventory into throughput. In Personal Finance this is the part that most people will focus on the most: what are we spending our money on. Operational Expenses would include: food, rent/mortgage, lights, gas and car, as well as other basic expenses which will help you to continue to bring in income. If you donât own a car, this would be your bus pass, Uber or Taxi fair, bicycle, or whatever else you use to travel from point A to point B. For most Americans this section of your Personal Finances has the most number of components, but also should be the only negative component. Controlling your Operating Expense is so important because it has the 2nd largest effect on your personal Finances after throughput (income). It is also the hardest portion for most Americans to control. In a consumer driven society, the natural thing to do is spend money. Advertisers spend billions each year to try and get you to spend more money with their company versus having you spend your money with another business. This means your Goal (increasing income, saving/reducing unnecessary discretionary spending, and reducing operating expense) is in almost direct opposition of the advertising companies Goal in the majority of cases. Companies would love to increase your expenses and/or inventory, in order to increase their own throughput (income).
âAs long as you keep The Goal (YOUR Goal) in mind your business as well as your Personal Finances, will greatly benefit. As the Subtitle suggests, The Goal is a process of ONGOING improvement. Tweaking the steps and process over time is necessary. Always sticking with the status quo of how to get things done, especially when it is not achieving the desired affect, will eventually lead to ruin or bankruptcy. Challenge assumptions which are not working, and challenge yourself to improve those of which are working currently in order to get better over time. Thanks for reading and subscribing to the Share Repurchase Newsletter and Blog! Be sure to leave a comment below, and if you havenât yet, please subscribe to our Blog and Newsletter below. Next month we will review Profit First By Mike Michalowicz.
The 10 Pillars of Wealth by Alex Becker is a book about the mind-sets of the world's richest people. In this Book Becker discusses what many millionaires have in common, based on his experience and the experience of other millionaires he knows. In a similar manner to last week's review, Think and Grow Rich, many of these pillars deal with refocusing the mindset of those who want to acquire large sums of money. He has a crass approach in his book, however he makes many great points which are very similar to points made in Think And Grow Rich. We will highlight a few of the similar points, specifically in regards to the Freedom which money provides, and how important Time and People are to the entire equation.
Money can buy just about anything, but the most inportant thing it can buy is freedom from financial stress.
âThink and Grow Rich (1937 original Masterpiece Edition) by Napoleon Hill is a book about turning your desires into success, and thus its money equivalent. By researching and speaking with 100s of successful leaders and businessman, Hill collected one of the greatest philosophies on how to turn those desires into money. Now these principles, and this book as a whole, are not just about making money. Likely, there is nothing new in this book which you have not heard of before. However, there are also likely not many books or people who have put together such principles together, in an easy to read and understand format. As Dr. Miller Reese Hutchison, longtime associate of Thomas Edison, states in the foreword, this book should be adopted by all high schools as required reading before graduation. There were so many excellent quotes and nuggets of information, and each chapter provides a good amount of information which you will need to allow to soak in. As Dr. Hutchison also mentions, this is more of a Textbook than a novel, and one of which I will continue to read for years to come.
Think and Grow Rich
For those of you out of the loop, Loyal3 is a trading platform where you can buy and purchase stock. A few features which stood out for Loyal3 versus more well-known brokerages like TD Ameritrade, E*Trade, or even Ally Invest were: the options to buy and sell stocks at no cost, buy fractional shares instead of full shares of stock, and to do so on a monthly basis with as little as $10 per stock! Well sad to say Loyal3 is saying goodbye to all of its faithful investors! So, what do we do now? Well there are a few options you can proceed with, all of which have their own pros and cons: Hold, Transfer, Sell. We will go into details on each option.
Hold on Be Strong!
If you decide to keep the investments you have in your Loyal3 account, then your cash and stock holdings will automatically transfer over to FolioFirst. FolioFirst is a new trading platform, which according to Loyal3 has the following features
Commission-free trading on up to 2,000 trades per month, with over 200 publicly traded stocks and ETFs available to trade! This more than double the number of public stocks available on the Loyal3 platform, which currently has 70. In addition to increasing the number of available stocks to trade, the number of account types is increasing as well. With Loyal3, only individual brokerage accounts were available. With FolioFirst you will now have the option to open Individual Retirement Accounts (IRAs) and Joint Accounts. FolioFirst still provides some of the great benefits Loyal3 did, like the ability to purchase fractional shares, and commission-free trading, however there is one caveat. Although the individual trades themselves do not charge a commission (up to 2000 trades per month), there is a $5 account fee each month, and an annual $25 IRA reporting fee if you choose to open an IRA. Another change, also not a huge deal, is that the minimum purchase for an individual stock is now $25 with FolioFirst instead of $10 with Loyal3. Again, not a huge deal, but if you had monthly plans set to buy multiple stocks per month through Loyal3, then this would increase your minimum in order to keep a similar routine going. If you are an individual who has multiple stocks being purchased each month, one thing you can do is buy them all at once to decrease the minimum required per stock holding! If purchasing at least 10 different stocks at the same time, the minimum purchase per stock drops from $25 to $5. If you choose to go with FolioFirst, your cash and stock will be available on the new platform beginning May 22nd. If do not take any actions to purchase or sale any stock once it is transferred over, a $15 maintenance fee will apply beginning February 1st 2018 in your FolioFirst account.
If youâre a semi-active trader, FolioFirst is still a great option, even coming from Loyal3âs totally free platform, in comparison to other major brokerages. I say semi-active because just like Loyal3, FolioFirst does batch trading which occurs twice daily, which limits the amount of times you can trade one companyâs stock each day. It also limits your ability to control the price at which you buy and sell your stock. This is a great option if you regularly make a few trades per month, like in our Share Repurchase Newsletter. Each month we sell our oldest stock holding (1 trade) and buy a new stock (1 trade). Using a platform like Ally Invest at $5 per trade would cost you $10 each month for your 2 trades, or between $14 to $20 a month in fees with a platform like Fidelity, E*Trade, or Schwab. But, only $5 per month with FolioFirst! If you were to make 2000 individual trades in a month (the max with FolioFirst) with a company like Ally Invest or TD Ameritrade, it would cost you between $10,000 and $20,000 just in fees alone! These are obviously theoretical MAXIMUM numbers which the average investor will not reach, but you get the picture!
Whatâs so great about Fractional Shares? Glad you asked! Letâs say you want to invest $1,000 in Apple ($AAPL) stock, which in the past month peaked at $145.46 per share. With the ability to buy fractional shares, you can invest (not including fees) the full $1,000 in AAPL stock. After making your $1,000 buy, you would then own 6.8747422 shares of AAPL. Without fractional shares, you would only purchase 6 full shares, allowing you to invest just $872.76 of your $1,000 since you canât âaffordâ another full share. Thatâs $127.24 youâre unable to use to invest in AAPL, so you have to either let this cash sit and gain virtually nothing in your brokerage account, when it has the potential to gain value along with the rise (or fall) in Appleâs stock price. This is the case for over 90% of all brokerage accounts, but was not the case for Loyal3 (now FolioFirst). Best of all, if you choose to activate the brokerage features of FolioFirst, you have the option to test out the platform until August 1st 2017 at no charge. The $5 monthly fee is waived!
Transfer: Time to Switch
If you donât like the new changes going on with FolioFirst, you also have the option to transfer your cash and stock to other brokerage funds. To do so you will need to contact your alternate broker to have them send Loyal3 a Transfer Instruction Form (TIF). You have until May 15th to send in this form. One catch with this option is that you CANNOT transfer fractional shares! Referring back to the previous example of owning 6.8747422 shares of Apple stock, the 6 full shares would transfer to your new brokerage account. The remaining fraction is sold, putting $127.24 in back into your bank account. The remaining cash will be transferred to your checking account on May 19th if you have not transferred it yourself by this date. Sticking with FolioFirst will save you the time and energy of filling out forms, as well as allow you to continue to keep those fractional shares invested in the stock market.
There are some positives to transferring to other brokerages. Going to one of the major brokerage firms, like a TD Ameritrade of course, will give you thousands of stocks to choose from, more flexibility in the types of trades you can make, as well as improved user interfaces and trading apps. If you like a full featured trading platform, this would be a good time to make the switch. Another good option, which gives you the best of both worlds: free trading, more features, and ability to trade at specific price points that you choose, would be Robinhood. With Robinhood you have the ability to trade stocks commission-free, select a specific price (Limit Order) for Buying/Selling stock, however you do not have the option to purchase fractional shares. This makes Robinhood a pretty goad alternative for those who enjoy trading at no cost! Robinhood is limited feature wise in comparison to brokerages like Ally Invest, etcâ¦, but allows many features Loyal3 and FolioFirst do not (like Limit and Stop orders). Join Robinhood now and receive One Free Share of Stock!
Sell: I Give Up
Last but not least, you always have the option to sell! Sell all of your stock, the closing of Loyal3 is a sign the market is going to crash! 1999 all over again!!!! Well maybe not, but then again no one saw 1999 coming either. Maybe you can use that cash to pay off some bills, buy yourself or your spouse something nice, or buy yourself some time to think about what's the best route for you to take for your investment preferences and trading style.
There are obvious improvements in trading options, but one blatant difference in going from no fees to some fees, which was the biggest plus to having Loyal3. For more details, be sure to checkout Loyal3âs website, or click here to see Loyal3âs official announcement. What will you do with your Loyal3 account? Will you join FolioFirst if Loyal3 was not previously on your radar? Leave a comment below, and besure to subscribe to the Share Repurchase Newsletter and Blog!
This week The House of Representatives voted to repeal FCC Rules which prevented Internet Service Providers (ISP’s) from selling your personal browsing information without your permission. Last week the repeal passed through the Senate as well. What the FCC previously imposed prevented ISP’s from being able to sell your information without first gaining your permission (opting-in) to do so, but also has many limitations. With the repeal of these rules there are essentially no limitations and companies DO NOT have to ask you, you must ask them to stop (opting-out). To add insult to injury, there will be rules put into place to forbid the FCC from putting in similar rules in the future. Awesome (insert sarcasm)! So why does this even matter?
Apps vs ISPs
Let’s be clear…right now anything you do on the internet can be tracked by SOMEONE. For instance, when you first sign-up for a Facebook or other social media accounts, there are a few agreements which you have to check a box for in order to use their services. The average person doesn’t read past the first sentence or two, and many more don’t read anything at all. It’s now in our nature to just check the box and keep it moving. When you do this, often times you are agreeing to many clauses that you have no idea about, and many that you could care less about if you did read them. Some of these clauses do not prevent you from using their apps or websites, while others limit what you’re able to do with their services. Despite this, you have the power of choice! The choice to allow the companies to access this information, and the choice to limit access to certain information. Either way there’s a give and take, especially to use any “free” services like Facebook, Snapchat, Instagram, etc. I say “free” because it is free to you, but these companies make millions, if not billions from your “free” use of their services.
What’s the big deal?
Well now the ISP’s will have the same ability to sell the information they gather while you’re using these mostly free services, via the internet access that you already pay them for! Not only that, but unlike the individual apps and service providers, your ISP has access to ALL of your internet browsing history. When you use Facebook, Google and Snapchat do not have access to your browsing information. When you buy something on Amazon, Wal-Mart does not have any information on you visiting or purchasing anything from Amazon’s site. Your ISP does! Your ISP, whether your home internet or your mobile phone, has access to every app and website you visit which requires you to use the internet. The argument put forth for repealing these Privacy Rules is that companies like Google and Facebook have an “unfair” advantage over ISP’s since they are able to use and sell the information they gather. Take a look at your phone now and count how many apps you installed that did not already come on your phone…ok don’t count now, it will take you longer to count than it will to finish reading this! Those 100’s of apps most individuals have, especially millennials, only have access to the data you provide within those apps. They do not have access to each other, but your ISP has access to all of them!
What can I do?
The Alchemist, By Paulo Coelho, is about a Shepherd Boy named Santiago who one day decided to follow his dream. Not just a dream of what he wants to become, like becoming an astronaut or fireman, but an actual dream he received in his sleep. In this dream a young child led him to the Pyramids of Egypt, and was in the process of taking him to the location of a treasure. Santiago received this same dream twice, and each time he woke up before finding the treasure! With this dream and his love of traveling as a shepherd, he decided to take a chance and go after his "Personal Legend". A Personal Legend is something you have always wanted to accomplish, even as a child! Ironically, the Pyramids of Egypt was one of the first places I wanted to visit as a child, so I was reeled in immediately.
Throughout the story Santiago meets many new characters, all of which give him advice and suggestions on how he should or should not approach his dream, and live his life. However, one of the main driving forces was his dream! No matter what others may have told him, whether positive or negative, the dream and his focus on achieving the dream, kept him on track.
"When you want something, all the universe conspires to help you achieve it."
In 2011 Verizon, often considered the leader in wireless communication, decided to stop offering unlimited data plans to new subscribers. If you were a previous subscriber to an unlimited data plan, you were unable to upgrade your phone the traditional way without losing access to your unlimited data. This drove many customers, including myself, to find other ways to get the latest and greatest phones without having to lose their “grandfathered” data plans.
For a few years, there were ways for Verizon customers to work around this limitation through Verizon itself! One way you could do this is, if you had a family plan with multiple lines that did not have unlimited data plans, you could rotate your upgrades. Like many customers with family plans in the past 5 to 10 years, not all used smartphones, or needed to have the latest and greatest phone out there. If you had Grandma on your plan with her uneducated phone (non-smartphone AKA Flip Phone), you could use her upgrade, and switch the upgraded phone to your unlimited data plan. In doing this, you could either give Grandma your old smartphone, or reactivate her uneducated phone to her line! This satisfied your need/want for a new smartphone, without losing your unlimited data. Win-win! What was even better is that you could reactivate that uneducated phone and not have to pay for the data plan that you initially added to the line in order to purchase the new smartphone. Well Verizon, and I’m sure others got hip to this work around! About one or two years ago, Verizon started to link your contract to the actual data plan itself, and not whether or not you had a smartphone active on the line. If you upgraded to a smartphone, you would have to pay that extra $30+ a month whether or not the smartphone was active on that specific line or not. What a bummer!
Do you ever feel like you're doing too much? Do you ever have problems with saying no, whether at work or in your personal life? Do you always seem to have more tasks to complete than you have time to complete those tasks? Well you're not alone! In most cases saying no is much easier once you consider the eventual juggling act you may need to perform in order to satisfy all the yeses.
Essentialism by Greg McKeown, as its tag states, is about The Disciplined Pursuit of Less. McKeown outlines the importance of not only saying no, but saying yes to the right things, and regaining control of how you use your time.
For my current Newsletter and Blog subscribers I'd like to Thank You once again! For those of you who have subscribed to the Share Repurchase Newsletter specifically, pat yourselves on the back! If you followed our Strategy throughout 2016, purchasing our pick each month, you have enjoyed a total gain of 24% from Jan 19th to the close of market on January 13th. What a great year! We look forward to a great 2017 and will continue on our path providing the average investor an easy to follow strategy to invest their money in the stock market.
It's a New Year!!! With a change in the year, many Americans like to start new habits and paths to becoming a better version of themselves. In Part 1 of Avoiding the Christmas Hangover we discussed what the average American spends each year on gifts, and the impact it could have on your finances. In Part 2 we will discuss a few things you can do to change how you look at your spending on gifts every year at this time. We will discuss alternatives that not only make sense financially, but also show your kids how to become an investor instead of ONLY being a consumer.
I'm sure we all have those moments where we look back at our actions and think "I wish I knew then, what I know now", or "I wasted so much money on XYZ, I could have done ABC". Well we all have them, but you can change your behaviors, as well as break the cycle which may have been taught to you as a youngster.
As the New Year approaches, I'd like to thank everyone who liked our Facebook page, took the time to read our blog posts, subscribed to our blog via email, and shared with your friends/family. We reached 100 likes, Yaaaayyyyyy!!!!
I'm not the New Years resolution type, and I like to think that every day we wake up is a New Year, with a new opportunity for us to better ourselves. That means you can START working on your goals EVERYDAY that you wake up! In fact, you can start writing down your goals right now! Don't wait until January 1st to make positive steps in your life, no matter what those goals may be! But I do understand the power and need to reflect back using a certain measure of time, so that you can see how you have progressed from start to finish. Do what works best for you, but make sure you start ASAP and stick to it!
If you have any topics you're interested to hear discussed in 2017, feel free to leave a comment or send suggestions to email@example.com . Here's to an even stronger 2017! Let’s make it to 1000 Facebook likes!!!!! Let us grow together!
It's the most wonderful time of the year! Everyone around you is cheerful and filled with glee for the upcoming holiday season. Holidays, especially Christmas, bring back joyful memories of time spent with family, great food, and gifts given and received for many. But it's not all Egg Nog and Sugar Cookies for many Americans. Holidays can be a stressful time of the year as well. Family and Friends may have waited all year to give and receive that special gift for a person they love. Many families stress out about what to buy, when to buy, and most importantly...how to PAY for it all! On average, according to the American Research Group, Americans plan to spend over $900 on Christmas gifts this year! Depending on your level of income, $900 can be a big chunk of change. According to the Pew Research Center: Middle Income (Fort Myers) $33,000 - Upper Income (Fort Myers) $98,000 (80% of Americans are below Upper Income Level) Middle Class Family . 29% of Americans (lower income) make less than $33,000 a year. 51% of Americans make between $33,000 and $98,000 (middle income). Now these numbers are based on a Family of 2. For a family of 4: Middle $46,000 , Upper $138,000.
Anyone who knows me, knows that I'm....lets say efficient! Efficiency is the best Fish in Sea (just made that up). So why aren't we all more efficient by using the power of Automation??? Who knows, but it's certainly great for mundane tasks like budgeting! Almost everyone loves automation, whether you realize it or not. One great way to tell is the amount of people who use Direct Deposit. Unlike the approximate 30% of people who actually decide to create a budget, there are positive signs for the amount of people who use Direct Deposit.
Budgeting...Everyone's favorite thing to do! When we wake up in the morning, before we brush our teeth, it's the first thing we all think about right? Well probably not! According to many surveys only about one third of Americans actually have a detailed budget. So either two thirds of Americans have really stinky breath, or it's just not a part of our daily routine! For many, budgeting means "I know how much money I make, I know how much my bills are, and I try to pay them on time!", but it doesn't have to be this way! There's an easier way!
Instant Gratification, in relation to Personal Finance (and many other areas of life), can be detrimental to your Financial Health. It is the ultimate Budget Killer. Don’t let that initial feeling of “oooh ooooh I want it now” ruin your financial future. These little moments add up quickly over the course of a week, month, year, and eventually decades. Here are three areas I personally have worked on, but still require constant reminders to stay on pace with budgeting.
Previously, in Uber Lyft - The Alternative Commute, we discussed the total cost of ownership for having and using your own car to commute to/from work. For most of us driving 25 or more minutes a day is the norm, unless you live in an area like NYC or D.C. where public transportation is convenient. Then your commute may be even longer, but cheaper on a daily basis. Growing up in Atlanta, I personally used public transportation for years traveling back and forth to school. And let me tell you, waking up at 6am in late December/January in order to get to school by 8:30am, was not the highlight of my Middle/High School years. Even worse were the limitations if you are out late at night, and have to make sure you make it in time to your train station to catch the last bus of the night…not fun being “stranded”.
Then of course you could catch a Taxi, or drive yourself. But where’s the fun in that?!?!!? Now, getting back to your daily commute, how much could you save by Ride Sharing on a regular basis? Not just from post work events, and weekend fun, but everyday! For comparison, as mentioned in Part 1, the Total Cost of Ownership for a used and new car ranged from $6,500 to $8,350 per year to commute a total of 50 miles per day.
Cost of an Uber Ride
For those of you unfamiliar (shame on you!), Uber and Lyft are companies which provide a platform/application for ride sharing. By ride sharing, I mean everyday people like you and I, using their personal vehicles to provide rides for others. You can think of it as the soccer mom taxi! So whether you need a ride to/from the airport, an event, or just don't want to drive, Uber is a great way to get around your city.
With this in mind, what if you could use ride sharing everyday?!?!? Instead of putting miles on your own car, spending extra on maintenance for your car, and all of the other additional responsibilities of car ownership, why not ride share?
Tax season is over now, and the majority of Americans have already received their refunds. Now that you have this extra cash at your disposal, you have a new dilemma. Should I go on a nice vacation? Buy a new car? Spend it all on debt? There are so many options to choose from, but we want to go with the smart options for your budget and personal finance situation!
How should I use my Tax Refund?
1. Pay Down Debt
If you have debt that you have accrued over the past year (credit cards, collections, past due bills), knock these out IMMEDIATELY! Credit card debt is typically the highest interest debt that most Americans are holding onto. The interest rates may vary between 10-20% for most card holders. Why not get rid of this debt which is helping you stay in debt for longer? The average American, depending on whose statistics you use, is between $5,000 and $15,000. Why not knock out a nice chunk of debt with your Tax Refund, versus spending it on things that you "want". You will end up saving more money in the long run from all of the accrued interest you will end up paying. If you don't have any of the above issues...
2. Emergency Fund
Once your high interest debts are under control, you need to make sure you have sufficient money saved for a rainy day. In fact 90 rainy days is preferred! As mentioned in a previous post touching on Emergency Funds, having enough savings to cover 3 months of expenses is ideal. So if you don't have a sufficient emergency fund, use your refund to add to or complete it!
3. Save Money for a Downpayment
Thinking of making a big purchase some time soon? If so, why not use your refund to help with the downpayment of your future home, or a car you may need. Now don't go get a brand new car because you just want a new car! Especially if there are other concerns, as mentioned above. However, if you rely on your car to get to work in order to make money, then making sure you have reliable transportation is a big priority. In regards to a downpayment for a home, putting more money down will help to reduce the amount of interest you pay over the lifetime of your mortgage. If you have enough saved for a 20% downpayment, this will eliminate any need for Private Mortgage Insurance (PMI) payments in addition to your mortgage.
These are just the top options to use your refund for. Maybe you don't have any of these things to worry about, and you can afford to spend your money on a vacation...that's awesome! But what if you could have your refund money all throughout the year, instead of waiting until next year to get YOUR money back?
Why you Should LOWER or ELIMINATE your tax refund!
It's not just a game show, but a reality for some Americans! Ok lets slow down here...lets face it...you probably won't have the annual salary of a Millionaire. However, what you can do is save a Million dollars for RETIREMENT! Retiring with a Million dollars combined in your various retirement accounts (401K, HSA or IRA, etc...) is actually a reasonable and achievable goal! There are a few keys to making this successful for you.
The Power of Compounding!
Here's how you do it: START EARLY! The earlier you start saving for retirement, the more years you have for your savings to compound over time. The chart below shows the potential future value of an account which is contributed to consistently for 30 years. The first row represents the Investment Contribution per Year. The first column represents the average growth rate of the account. Using the chart below, an individual who maxes out their 401K ($18K per year) would only need an average annualized gain of 4% to become a millionaire at retirement!
Familiar with the Apple News app? Not only are you able to access newspapers like The New York Times, Wall Street Journal, and others through the Apple News app, but you can also access blogs like the Share Repurchase blog! This tutorial video provides the step-by-step process to create a New iCloud account, separate from your personal account if you choose (or are an Android user), and add your Blog as an RSS feed to Apple News Publisher.
In the past an IRA would be the next account I would recommend, but the HSA has taken 2nd place in my hierarchy of investment vehicles. An HSA, or Health Savings Account, is similar to a 401K or IRA in the sense that you can use it for investment/retirement purposes. The difference is an HSA requires a health insurance plan in order to open this account type. Your insurance plan must be a High Deductible Health Plan (HDHP) to meet HSA eligibility requirements. For 2016, you can contribute up to $3,350 per year as an individual, and $6,750 as a family, if all are covered by this account. A great site to keep up with HSA maximums, as well as other Tax Related concerns, is Fairmark.com . The reason I recommend an HSA over an IRA is for access reasons. If you were to try and access your 401K or IRA for medical reasons, there would be a penalty for withdrawal in most cases (medical hardship withdrawal)...but not for an HSA! Your HSA account is made for this reason, so save some withdrawal paperwork and take advantage.
3 Month Recap of the Share Repurchase Newsletter
Stocks started the year off in the red, but are now back in positive territory. Since the release of the Share Repurchase Newsletter in mid January, our portfolio is up 7.22%! Compare this to the S&P 500 (SPY), which is up 1.94% Year to Date, and 6.6% since the release of the Share Repurchase Newsletter as of the close on March 18th. Good start to the year in the overall market, as well as our portfolio, despite the grim start.
You have to start teaching your kids what it means to own their own business at an early age. While I don't have kids myself, I think the earlier the better. They may not understand all the nuances of what they're learning, but never underestimate them. Sometimes you just have to break it down.
Akeem The Dream
I enjoy discussing and learning about technology, stocks, sports, and beating my wife at Dominoes! As I learn, I love to share with family and friends so that we can share our knowledge. Thanks for being apart of the journey!