You’ve probably heard me say on this blog that the best way to save for retirement is to start early. The same goes for investing. One of the best ways to teach your kids about the stock market and get them thinking about their financial future is by allowing them to invest in the markets. Many of the major investment platforms offer custodial accounts, which allow parents to set up trading accounts for children under 18 and which require adult permission to complete transactions. Once you have the account, you can decide how to best teach your teenager the importance of risk and investing. If you have more than one teenager involved, maybe make a game out of it and see whose investments perform the best over a set amount of time. If your teenager is more goal oriented, maybe encourage them to use the account as a way to grow money for something like a car or product they want. Whatever you choose to do, be sure to guide them and set some limits. You may want to limit what investments they can put money into (no options, etc.). You will also want to encourage them to use properly vetted resources, such as popular investment books or well-sourced blogs. Heck, you yourself may want to use it as an opportunity to read back up on the latest investing trends and advice out there, if you haven’t already. Of course, you will also want to teach your children about risk as they will most likely experience some loss. It may be hard for them at first, but if you encourage them to be patient and learn from why the investment went down, then it will be a good thing in the long run. Just make sure they don’t lose too much, or for that matter, gain too much without learning about trends and why their investment performed the way it did. With the right guidance and some sound advice, your children can learn about the stock market and hopefully set themselves up for a solid financial future. What did you wish your parents taught you about investing growing up?
Thanks to technology, it’s easy to become an investor these days. All you need is Internet access and a device and you can open a brokerage account. Such ease can be exciting and make one feel as though they have more control over their finances and future. However, it can also be dangerous. The ability to invest your money with the touch of your finger can also lead to a nonchalantness about investing and money. It’s not uncommon for people to get a bit carried away with investing when they first start using apps such as E*Trade or Robinhood. A quick search of Google can turn up tragic stories of individuals who got caught up in the thrill of investing only to find themselves suddenly out thousands of dollars. Some of those sites (*ahem* Robinhood) even make an effort to get people to invest in riskier investments (*ahem* options) not so much for the investors sake, but because it turns a profit for the platform owner. Remember, despite how much research and homework you do and no matter how smart you think you are, there will always be risk involved with investing. The key is knowing the amount of risk you are willing to handle and knowing when you should walk away. For some–mostly those of you reading this blog–that’s easy to understand and do. For others, though, it can be easy to be swayed by slick marketing and stories of massive gains made by mavericks in the markets (it’s hard to verify those stories sometimes though). What does this mean for you? It’s a reminder to be smart when you invest and read up on investments and strategies and platforms before putting money out there. You should also be sure that you can handle the losses that inevitably come with investing if you do it long enough. If you are new to investing, I encourage you to read up as much as possible about it and to take time to research your investments and the risk you can handle. If you need to, speak with a certified investment professional or wealth manager. And, of course, be careful, but above all, be smart!
If you’ve been investing in the stock market over the years, then you’ve probably heard–and seen–that the stock market moves based on emotion. Things such as societal movements, politics, or financial predictions can force movements in the market to happen. This is also what makes the stock market–and other associated markets–unpredictable. If you don’t understand and respect that unpredictability you can lose a lot of money. However, you don’t have to use emotion to drive your investment decisions. In fact, you should try to keep your emotions as far away from your investment and financial decisions. Using your emotions to drive your decisions when it comes to money can lead to poor outcomes and to losses. Instead, as I’ve suggested more times than I’d care to count on this blog, you should educate yourself. Know your appetite for risk and research the stocks you plan to invest in. How have they performed in recent years? Is the company big or strong enough to survive slow business? Are you patient enough to stick through a loss for a long term gain? These are important questions and can help you to make smart, rational decisions when it comes to investing. I also strongly suggest you speak with an investment professional or a wealth manager or a certified financial planner if you have questions about investing or stocks that you are interested in investing in.
I’ve touted the importance of diversification here in many posts over the past few years. While it may seem like diversification is the cure-all for any portfolio, I should remind you that regardless of whether you diversify or not, investing is still a risky endeavor that way more often than not involves a lot of luck. That’s not to say you still can research a stock or company you invest in and do your homework–that helps immensely to determine strong performing stocks and to avoid ones that tend to be more volatile. However, no matter how the stock has performed over the past 10 years, or whatever timeline your research covers, that still doesn’t mean it can’t go sideways. What diversification does is to help you to lessen the damage that can happen to your portfolio if a stock does go sideways. Diversification allows you portfolio to absorb the loss because that loss is, ideally, not a large overall portion of the investments in the portfolio. Furthermore, if you invested in other stocks on the rise, your loss could potentially be covered by the growth of other investments. Again, I want to reiterate, though, that diversification will not automatically lead to portfolio growth or success in investing. It will just make the inevitable losses (yes, every portfolio loses money at some point if you invest long enough) palatable and less damaging. No matter what you do investing, at it’s core, is a game of luck. So, are you feeling lucky?
As I’ve mentioned in the past, investing can be a great way to grow your nest egg. With a good understanding of your risk appetite and your goals–both long-term and short-term–you can make investment decisions that can put your money to work for you. However, making cautious investment decisions can seem boring at times, especially making decisions regarding long-term goals (i.e. saving for retirement while decades away). It can also be tempting at times to play with the markets a bit and experiment with taking on a little more risk than you normally do. Now, I’m not suggesting you risk thousands of dollars or that you take on huge amounts of risk. Rather, maybe you should consider investments a little bit riskier than what you are normally doing. Use it as a way to test your comfort levels and possibly determine if you are ready for a change. Also, as with any investment, be sure to do your research and educate yourself on the stocks or investments you are looking to buy. If the risk is too great, don’t invest in it. I want to be clear, though, I don’t think you should be that risky with your retirement money or any that is vital to your financial survival. Remember, it’s pretty easy to lose money in the stock market. It’s a volatile place. Again, I’m necessarily encouraging you to go full-bore into that with all your money, however I definitely think it might be worth checking out if you have some extra money you are willing to play with. That means money you are comfortable with possibly losing and which won’t impact your financials to do so. If you are serious about investing and want to learn from first hand experience, this can be a great learning opportunity. Again, I strongly discourage using retirement funds or money you actually need to live for these investing experiments. However, if you have money to spare, even if it’s just a few hundred dollars, and you want to experiment with some riskier investments, I think it could provide a lot of knowledge. Of course, if you have serious questions about the investments you intend to make, you should speak with a certified financial planner, wealth manager, or other investment professional.
It’s been a rough month for the stock market and for many peoples’ portfolios. There’s been a lot of money lost and a lot of stress added to the lives to many Americans, regardless of whether they are still working or retired. After all, the markets don’t really care where you are in life or what your plans are. With that in mind, now is a good time to assess your portfolio and take some time to determine where your appetite for risk lies. During your assessment, take some time to find out what changes you will need to make to your portfolio based on the risk and where your greatest losses have been. Are there certain stocks that have decreased further than others? Are there parts of your portfolio that have managed to perform consistently well despite the recent volatility? Has your appetite for risk changed at all over the past month or so? These are just some of the questions you should consider when looking at your portfolio. You will then want to clean out underperforming stocks or holdings and look for strong performing investments that meet the level of risk you are aiming for. As always, I strongly encourage you to talk with an investment professional or wealth manager when assessing your portfolio or thinking about making investment moves. They should be able to provide helpful advice and suggestions that can help position you to better reach your goals or benchmarks.
Yes, it’s another blog post about investing. What can I say, it’s a very hot topic right now. Given how many Americans have retirement savings and nest eggs tied up in the stock market, it’s also a very relevant topic. When it comes to investing, risk is a big part of things. Your understanding of it and how much you are willing to take on are foundational when it comes to making investing decisions. Given the recent market volatility, it’s fair to assume that many Americans’ tolerance for risk are being tested at the moment. Most likely, yours probably is too, particularly if you have a portfolio that is heavy into stocks. Thus, now is a good time to re-assess your appetite for risk and to make changes to your portfolio if you find that your appetite isn’t what it once was. This will most likely be greatly influenced by your financial situation as well as how close you are to retirement. Most likely, you will find your appetite for risk decreased the closer you are to retirement, but there is also a possibility that you may find your appetite for risk has increased. If that’s the case, feel free to make decisions that may be a bit more aggressive. Now, if you find that your appetite has changed and you want to talk with a professional about what to do next or what the right moves might be, I encourage you to speak with a certified wealth manager or financial planner.
The stock market has been on a downward spiral for almost a week at this point, which has created a lot of worry among even the most amateur of investors. Most reports indicate that the fall is a result of Coronavirus concerns sweeping the globe at the moment, but there may be other factors combined with that. This downward movement–or market correction, depending on who you talk to–has done a serious number on many portfolios and retirement accounts and it’s unclear as to when or how things will recover. While you shouldn’t ignore the market downturn, just remember that you can’t use hindsight to make changes to your past decisions and there is nothing you can do to will a stock/investment to move upwards. Therefore, there is no point in worrying about what others are doing or what the pundits are screaming about at the moment. Rather than worrying about what others are doing or what the market might do, you should focus on making informed, educated decisions regarding your own investments and portfolio. That means doing research and understanding your appetite for risk and adjusting your investments properly. While you can use the news to educate yourself about what’s going on in the world, don’t let it drive your decision making. If you find that your still struggling to handle the market downturn, you should speak with a certified financial planner, wealth manager, or investment professional.
Tesla is on the rise. Just a day or so ago it became the first U.S. car maker to be valued at over $100 billion. The question many are asking themselves at this point is whether this is sustainable. That’s a good question. Many experts seem to be looking at Tesla as a technology company and not a car company, which may have something to do with it’s growth. It is also appearing to cultivate a loyal fanbase that is similar to that of Apple, which can mean constant and consistent customers, which helps to drive profits and growth further. However, at this point, it’s really hard to tell just how long Tesla’s rise will last and whether it will be massively overvalued when all is done. Now, you probably aren’t rushing to add Tesla stock to your portfolio (if you did a while ago and are riding the wave, then hats off to you!), as it’s well over $500 per share. But that doesn’t mean you can’t keep track of it. These instances happen from time to time where a company goes on a meteoric rise. Uber is a recent example and so is WeWork. Both companies rose fairly quickly, but have since struggled to maintain that high valuation and the increased scrutiny/controversy that comes along with it. It will be interesting to see how Tesla handles that. The company’s leader, Elon Musk, has been known to be innovative, but can also be a bit controversial at times. Could that eventually hurt the company? There’s also the fact that competitors may start to arise soon and that such competition will most likely come from big, established automakers–companies that have strong resources both engineering-wise and financially. While this post has been about Tesla, it’s really intended to get you thinking about companies that follow similar patterns and to use what you learn from watching those companies to make future investment decisions. What stood out about Tesla? What worried you? Will you know when to buy and when to possibly sell such holdings? Those are questions that you can use in deciding whether to invest in the next fast-rising tech stock. If you have questions about stocks you are interested in investing in, first off, do some research–there’s a lot out there on the Internet and plenty of reputable investment websites and professionals out there to follow. Also, talk to a certified financial advisor or investment professional as they will be able to provide some more technical knowledge and opinions.
Diversification is important to your portfolio. It spreads your risk around and prevents a market downturn from completely decimating your portfolio by ensuring that all your money isn’t tied up in one sector or one type of stock. Remember, some areas of the markets will get hit harder than others. I’ve mentioned various ways to diversify–such as investing in unrelated market sectors, investing in companies of various sizes, having different investment vehicles. What I haven’t really talked about is going international as part of your diversification. Having some investments in international companies–or companies based outside the U.S. and Canada–can be a smart move as it can allow you to take advantage of other markets that may be on the rise. There are lots of companies around the world that are well-known and just as financially strong, or growing exponentially, like American companies. There may also be some markets not found in the U.S. that can offer strong returns or which are growing quickly. Keep in mind that the U.S. won’t be able to dominate the markets forever and eventually foreign markets will emerge that can provide solid growth and returns. Now, I am not encouraging you to invest in any/all international markets or just any company not based in the U.S. You will still want to do research and make sure you are making a smart investment. And you will probably want to keep your international investments on the smaller side compared to your investment in U.S.-based markets and companies. If you are thinking about investing in international companies or markets, you should speak with a certified financial advisor, wealth manager, or investment professional to make sure it’s the right choice for you and your money.