Buying stock from your own company seems like a no-brainer, but is it really a wise decision? Our friends over at Business Insider weigh in.
Buying stock in your company seems like a logical investment at face value. What better way is there to show the higher-ups not only your loyalty but also your willingness to take a bet on them?
The problem is that you're only making yourself more financially vulnerable in the process.
It's time to take the plunge into investing to reap the rewards of your hard-earned money. LearnVest shares how you can start.
In your mind’s eye, picture all your friends, family, classmates and colleagues.
About half of them are doing something very smart, and the other half . . . well, they're doing the opposite.
And that very smart thing is investing.
Before you protest that investing is only for people with loads of spare cash, we'd like to inform you that everyone who draws a paycheck should be investing.
The 1 Minute That Will Revolutionize Your Finances
Unfortunately, according to a nationwide survey conducted by LearnVest and Chase Blueprint, only 48 percent of women and 56 percent of men have a 401(k) retirement account, and the percent of people who have their own individual retirement account (IRA) is even lower: 40 percent for women and 48 percent for men. And these stats are just for retirement investing alone — even fewer people are doing any nonretirement investing.
We're going to show why everyone who makes money should be investing, no matter how much money they make, and explain in what ways you should be investing and when.
Who knew a Starbucks opening would be indicative of a hot real estate investment? Business Insider shares more on this phenomenon.
"Wake up and smell the coffee," writes Michael Corbett, real estate expert and host of NBC's "Extra's Mansions & Millionaires!" in his book Before you Buy! The Homebuyer's Handbook for Today's Market.
RELATED: The Most Iconic American Houses On The Market
He's talking about big chains such as Starbucks and Whole Foods. If you see them opening in a new neighborhood, it's a sign that the neighborhood is up-and-coming, and therefore a smart real estate bet.
In his book he writes:
"One of the best ways to stretch your buying dollar is to find a neighborhood that is in transition. Called fringe or transitional neighborhoods, they are typically close to major metropolitan areas and were once neglected and less desirable. Is there a trendy restaurant where a tattoo parlor used to be? These neighborhoods are now beginning to enjoy a new life and your goal is the find them.
Has a Starbucks just opened on the corner or maybe a Whole Foods Market? These are all good signs that a neighborhood is on the upswing. You can bet that big chains like Starbucks spend a lot of money and time analyzing neighborhood potential before they open up a new store. So go ahead, tap into their market research and be their neighbor."
Check out these smart stories from Business Insider:
The Most Anti-Starbucks Menu Ever Created
Here's How You'll Use Square To Buy Coffee At Starbucks
Why Starbucks Baristas Have Higher 'Emotional Intelligence' Than Doctors
We all face different money issues at every life stage, so figure out what you need to save for with this helpful Wise Bread guide.
The recession has pushed almost all of us, regardless of age, a decade behind in building personal wealth. Don’t beat yourself up if you’re in your 20s and haven’t paid off student loans, or in your late 30s or early 40s and still paying off debt or saving up for a down payment. If your retirement account isn’t where you’d like it to be in your 50s, do the best you can to build it up. What matters is doing the best you can to make sound financial decisions so you can enjoy the important things in life without worrying too much about money. Here are few tips for women in their 20s, 30s, 40s, and 50s on saving and building wealth.
RELATED: 37 Savings Changes You Can Make Today
In Your 20s
I can’t stress this enough — start saving early. Even if you think you’re broke, give up lattes twice a week and put the $25 a month you save into a retirement account. The hilarious truth of the matter is that the earlier you start saving, when you can least afford it, the harder that money works for you to earn interest. Investing just five percent of a $40,000 salary annually from age 25 to 65 can pay off big in the long run. Assuming a six percent rate of return, at age 65, you’d have $479,241 in your 401(k), thanks to the magic of compound interest. Invest 10 percent of a $40,000 salary, and that number grows to $830,678 by age 65.
On to credit card debt, especially important in your 20s. I know about this one first hand. I thought I had a great handle on my credit card spending in my early 20s. So great, in fact, that over the next several years I didn’t bat an eyelash at charging multiple plane tickets to Europe, rounds of drinks with friends, and several pairs of new shoes.
Several years later, I was still paying it off. The only way I dug myself out of debt was to get a second job in addition to my full-time job while I was finishing school. That meant a 60-plus-hour workweek, no social life, no excess spending, little sleep, and a lot of headaches for over a year. Trust me, you do not want to put yourself through the stress that excess debt causes. Before you whip out the credit card to travel or go out or buy a new gadget, ask yourself if you really need it. Force yourself to spend responsibly. If you want to travel, set aside 10 percent of your earnings and take one great trip a year.
Everyone's buzzing about the Facebook IPO, and after hearing about how many billionaires and millionaires the IPO will create, you might think that it's your chance to make money off this cash cow. But first, you need to educate yourself.
What's the deal about IPOs?
Facebook used to be a private company, which means its shares were not sold to the public. Once a firm goes public, it's on the stock market and it sells a part of itself to outside investors who can afford it. The term for going public is also known as an IPO or initial public offering.
Why would a company go public?
A company that sells shares to outside investors can stand to raise a lot of money. Current estimates of the Facebook IPO are at $5 billion. Companies can do a lot with the capital raised — they can use it to pay down long-term obligations, fund new opportunities, and even acquire competitors. Further, initial private investors who wish to exit can now sell their shares to public investors.
We're thrilled to present this smart Business Insider story here on Savvy!
It's no big secret that millennials are scared silly at the thought of investing in the stock market.
With employment still sputtering along and home ownership little more than a pipe dream, the so-called graduates of the recession are mainly focused on finding a job and investing in what they need to get by.
"We look at where they are almost similar to a generational thing we saw in the 1930s," said Chris Hobart, a financial adviser. "These investors look at money totally different than their parents did, and they see the stock market as being extremely scary and that the opportunity may not be worth the potential."
This wary outlook has made it harder for financial advisers to lure young investors into stocks and savings vehicles in general, wrote Jane Hodges in the Journal. Advisers are having to come up with new and unique ways to get millennials excited about financial planning, but what's surprising is that many of these tactics aren't all that new to begin with. Here, we outline a couple trends taking hold among Gen Y investors:
Investing like Buffett
Perhaps the biggest step in getting millennials to plan for the long-term is changing their mindset, said Hobart. (See why having the wrong mindset might be keeping you poor.)
"Adopting the Warren Buffett approach tends to get them interested," he said. "The idea is that they should find something that people need or want, understand why they need or want that and then buy it."
Drawing from everyday experience makes the act of investing feel more accessible to millennials, he said. It feels like less of a chore.
Hobart has also found that Gen Y — early 30-somethings included — tends to gravitate more toward privately-owned shares of tangible products such as oil and gas.
"Being a small owner of a small piece of land that produces oil represents a larger value," he said, noting Gen Y's desire for a sense of ownership despite its reliance on the Cloud and social media. "It gives the investment a solid feeling."
For what else is working, keep reading.
We're thrilled to present this smart Kiplinger story here on Savvy!
If you need a safe place to park your money now, you have a surprising variety of options to consider — even if the returns on some of them aren’t pretty.
Don’t expect rates to move up anytime soon. In response to the still-sluggish economy, the Federal Reserve has announced that it will keep short-term rates near zero through mid 2013 — and maybe longer.
We’ve listed the top spots for eking out interest on your savings, depending on your tolerance for risk and how long you can tie up your money.
Money Market Deposit Accounts
For your emergency fund — at least three to six months’ worth of living expenses — and any other savings that need to be safe and immediately available, look to accounts insured by the Federal Deposit Insurance Corp., such as money market deposit accounts. Each account is insured up to $250,000.
Money market deposit accounts generally provide checks and an ATM card for withdrawing cash or to use for purchases. You can also transfer funds electronically to/from a linked checking or savings account. You are limited to six transfers per month, not including cash withdrawals at the ATM. With yields on money market deposit accounts as meager as they are -- the average account pays less than 0.3% — rate-shopping is essential.
BEST PICKS NOW: With a $2,500 deposit, you can earn 1.10% in a money market account at Incrediblebank.com, although you’ll trigger a $10 maintenance fee if your balance drops below $2,500. Other banks with good rates include AmTrust Direct ($500 to open an account) and MyBankingDirect ($5,000 to open an account). Both are affiliated with New York Community Bank, and both pay 1.15%, but at AmTrust Direct you need to maintain a $10,000 balance to qualify for that rate.
This reader posted in our Ask Savvy group — she's wondering about investing in restaurants. Any suggestions?
I was wondering how someone can invest or partner in a restaurant group or chain, is it only for the wealthy? Is there generally a minimum investment? I've noticed some celebrities are part owners/investers in restaurants, like Ashton Kutcher with Geisha House and Pete Wentz with Angels and Kings Bar.
It seems pretty lucrative and an alternative to a regular ole franchise.
Ask anything budget-, etiquette-, or planning-related — well, almost anything — by posting your questions in the Ask Savvygroup, and I'll find the right expert to help you out.
We're thrilled to present this smart Kiplinger story here on Savvy!
The recent market twisters may have you scrambling for shelter for your portfolio. According to online brokerage Betterment.com, during the market mayhem of early August, investors under age 35 were one-third more likely than older investors to move from stocks to bonds.
During the week of August 8, the first trading days following the downgrade of U.S. debt by rating agency Standard & Poor’s, the Dow Jones industrial average nauseated all onlookers — diving as much as 635 points, or 5.6%, on Monday, only to climb by as much as 430 points, or 4.0%, the next day.
But none of this is reason to panic — especially for young investors like us.
Our youth not only affords us fewer wrinkles and faster metabolisms, it also allows us a higher risk tolerance for investments. “When you’re young, if there’s a major market setback, you still have time to hit your wealth targets,” says Dr. Walt Woerheide, PhD, CFP, ChFC, professor of investments at The American College, a non-profit school for financial services professionals.
Also, we’ll need stocks’ potential rate of return to try to beat inflation over the long term, says Kimberly Foss, a financial planner and founder of Empyrion Wealth Management, in Roseville, Cal. She likens the situation to trying to go up a down escalator: “If you just go on, you’ll go backward; if you walk up at a mild pace, you’re not going to make your goal,” she says. “You need [stocks’] rapid pace, which is higher than inflation, to make your goal.”
Here are answers to some questions you may have about the market mayhem — and some sound lessons you can take away from the madness to get ahead in the long run:
What should I be doing with my portfolio now?
The short answer: not much. As shown by the aforementioned day-to-day Dow movements, knee-jerk reactions to current events are generally futile — and often counterproductive for your portfolio. Young investors who traded stocks for bonds as the market dove lost out when it bounced right back. Your best bet is always to stick with your long-term investing plan.
This question was posted by almondeyes83 in our SavvySugar Q and A community group. She wants to know how to take advantage of the rocky market. I reached out to Robert Brokamp, a retirement expert from The Motley Fool, the go-to website for investing, to share his expertise with us.
I'm a young investor and would like to take advantage of this market . . . but have no idea where to start! I am currently a full-time graduate student with a very small amount to invest. Since I am younger, I know that any money I invest is on a long-term track and can ride the fluctuations of this market. When I was working, I did contribute to a 401(k) plan — but I haven't rolled anything over because I am unsure of the best course to take. Any advice?
Here is what Robert had to say:
First off, only invest money you don’t need for at least five years. Also, you can transfer the money in your old 401(k) to an IRA, which will likely lead to lower costs and more investment options. As for where to invest the money, consider a total market US stock market index fund or exchange traded fund (ETF). You’ll essentially be a part-owner of thousands of American companies — from Coca-Cola and General Electric to Apple and Google. It will be a wild ride, but — if history is any guide — these companies will be worth more than they are today by the time you retire.
Ask anything budget-, etiquette-, or planning-related — well, almost anything — by posting your questions in the Ask Savvy group or SavvySugar Q and A, and I'll find the right expert to help you out.
