Independence Day







Nothing like spending Independence Day with friends and family. I spent this weekend with several of my Fierce 50 sisters, including this special lady, Valerie Hansen of Maple Leopard. We hit it off immediately and had such a great time. Visit her fashion and travel blog Mapleleopard.com and follow her on Instagram @mapleleopard and on Facebook as Valerie Hansen.


Top • Dillard’s, similar here, here, here, here and here | Pants • Chico’s | Earrings • Chico’s | Hat • Chico’s | Lipstick • MAC Ruby Woo

Happy Birthday, America! Wearing a little red, white and blue to celebrate. If you live in the United States, Happy Independence Day! I hope your holiday is filled with fun, family and friends. I had an opportunity to escape the Arizona heat for a bit and enjoy some cool, coastal weather.  Such a nice reprieve from the weather and such a wonderful time celebrating midlife with my Fierce sisters.  I’m already looking forward to our next event!  I’ll be posting some of the shenanigans later this week.  A very special thank you to Rob Filogomo (@robgomoco ) for stepping in as photographer.  I had so much fun with you and Jody!

 





Money Monday – Grey Days and Social Security

Sweater • Similar here,here, here and here | Skirt • Ann Taylor, tall version here, another option here | Shoes • Similar here and here | Bag • Michael Kors (old), other Michael Kors options here and here, a similar bag here and a big splurge on this Saint Laurent bag here | Watch • Michael Kors (also here)

Happy Monday! Today is all about a monochromatic color scheme.  I love the chic look of one color.  Besides the ease of putting it all together (go to the closet and grab everything grey) it looks so put together.  On those days when I don’t feel very put-together, looking like I am is a nice confidence boost.

Speaking of putting it all together, a couple of weeks ago we started a conversation about Social Security.  There was so much to discuss it made sense to break the topic into a couple smaller pieces.  Last time we talked about the way your Social Security benefits are calculated.  It’s important to know why you’ll receive the amount of benefit you’ll receive.  Is it the right amount?  How would I know?  Last time we talked about that calculation.  You can revisit that discussion here.

Can you increase the amount of your benefit? The easiest answer?  Yes you can.  One trick is to make more money.  We showed you the way your benefit is determined by taking an average of your 35 best working years.  If 2017 is financially your best year yet, that amount will be included in the calculation and a year of lower earnings is going to drop out.  You can probably see intuitively that a larger number in the mix creates a higher overall average.  In really simple math (1+2)/2 = 1.5 and (1+3)/2 = 2.  The average is higher when you replace a smaller number with a larger one. That higher average leads to larger benefits upon retirement.

Many of us aren’t in a commission-based salary structure which allows us to earn more from our job.  The only way to make more money is to take a second job or start a profitable side-business.  You can always take one of those options to increase your monthly Social Security benefit.  It’s an option, but it doesn’t leave much room for family or a social life.  So what’s a girl to do?

There is another way to increase your monthly Social Security benefits – delaying their start date.  You are eligible to receive benefits, with restrictions, after your 62nd birthday. Each year you delay between the ages of 62 and 70 your benefit increases about 8%.  That’s pretty big.  Where else are you currently earning 8% on your money?  If you’ve ever looked at those statements Social Security sends you, they give you the estimated amount of your benefit, based on the earnings reported for you through your lifetime.  You can see that the estimated monthly benefit increases if you start taking Social Security at your full retirement age vs. age 62.  That benefit is even higher at age 70, and the 8% increase is why.  On top of that, Social Security benefits are also indexed for inflation, so theoretically you don’t lose purchasing power year after year.

Adding the total of benefits received if you start at 62 vs. starting at 67, you break even somewhere in your early 70s.  Holding off until age 70 to start benefits, you break even around age 80.  I’m arriving at these conclusions without considering the time value of money.  That means I’m not considering taking the money at 62 and investing it or using it to pay off debt with a potentially high interest rate like a credit card.  I’m just taking the total benefit starting at age 62 and adding it, month by month.  Then I take the estimated monthly benefits at ages 67 and 70, respectively, and do the same thing, then see at what ages those totals meet.

After seeing those numbers you have to play the odds.  Do you think, based on your health and family history, you’ll live well into your 80s or later?  Or maybe that 401(k) hasn’t grown as much as you’d hoped.  You may want to wait until age 70 to start your Social Security benefits.  But maybe you feel as thought the stress of your job is killing you and you need to get out sooner rather than later.  You’ll want to talk with your financial advisor, but taking distributions out of your retirement plan without starting Social Security may make more sense.  If your retirement plan isn’t earning an 8% return, maybe you start distributions from that account while letting your Social Security benefit grow.

Even after all of this, there is still more to discuss about Social Security!  Stay tuned while we pick it up in another Money Monday, here on Haute Business!

To your better wealth,




Review and apply for top credit cards at LendingTree.com!

Money Monday – Social Security Benefits




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I had a great chat with my mom the other day.  Of course, they’re always great chats.  Every once in awhile, as happened the other day, the topic turns to finance.  On this particular day, we talked about Social Security.  We’re pretty exciting like that.  Mom’s concern?  Many people don’t understand the options and choices that come with taking Social Security.  Is it automatic?  When should I start?  Why are my benefits reduced while I’m working?  What is “Full Retirement Age?”  For the next few weeks on Money Monday we break it down and make it easier to understand.

First, what exactly is Social Security?  Social Security is a government program which pays retirement benefits to qualified individuals.  To be qualified, you have to earn credits.  Each quarter you meet minimum earnings ($1,260 in 2016) you earn a credit.  Anyone born after 1929 needs 40 credits (10 years of work) to be eligible to receive Social Security benefits.  The amount of benefit you receive is based on your earnings history so it’s important to verify the accuracy of that information.  You can easily do that by creating an account on SSA.gov and follow the links to your earnings history.  Once you’re satisfied the history is correct, these are the earnings you’ll use in the worksheet above to estimate your monthly Social Security benefit.

The Social Security Administration (SSA) averages your highest 35 years of earnings, indexed for inflation, to calculate your benefits.  If you work less than 35 years, your total lifetime earnings will still be divided by 35 to get an average.  To show it in real numbers, let’s say you work 20 years at a salary (indexed for inflation) of $40,000 each year.   As a true average you take 20 years X $40,000 per year = $800,000 lifetime earnings.  Divide those earnings by the 20 years worked = an average salary of $40,000.  Pretty straightforward.

Social Security calculates your average differently: 20 years X $40,000 per year = $800,000 lifetime earnings.  Divide those earnings by 35 = $22,857.  Those are your average earnings for Social Security purposes.  But look what happens if you work an additional 5 years at $40,000:  25 years X $40,000 per year = $1,000,000.  Divide that by 35 and you have an average of $28,571.  That’s an increase of $5,714 annually.  The obvious example would be earning $40,000 each year for 35 years: 35 X $40,000 = $1,400,000.  Divide that by 35 = $40,000.  In that situation, SSA would use $40,000.  Clearly, working 35 years makes a difference.  (Making more per year would also make a difference.)

We see how SSA arrives at an average. How does this amount translate into Social Security benefits?  SSA provides an estimated benefits statement to eligible recipients.  They once were mailed annually but it’s much less often now.  You can see your benefits statement on SSA.gov.  You can also estimate your benefits using the SSA worksheet here.  This particular worksheet is designed for someone born in 1954.  As a result, if you were born before or after that date you can use the worksheet but actual results will differ a bit.  There are other calculators within the website to estimate benefits for those born in different years.  Also important to note: benefits are adjusted if you take Social Security at a time other than your Full Retirement Age (FRA), which is generally thought of as “normal” retirement age.  FRA is 65 if you were born before 1938 and gradually increases to age 67 for those born between 1938 and 1959.  We’ll talk about the significance of this age  next week. For now, let’s talk about how your benefits are calculated.

SSA takes your highest 35 years of earnings, adjusted for inflation, and divides that total by 420 (the number of months in 35 years).  Let’s use the amounts from the previous example to show how it’s done.  First, we take the 35-year average and convert it to a monthly amount:$800,000/420 = $1,904, rounded down to the next lowest dollar. (420 is the number of months in 35 years.)  Take the first $856 of that amount and multiply by 90%, to get $770.40.  Take the number we just calculated, $1,904, and subtract $856, to arrive at $1,049.  Multiply that amount by 32% to get 335.60 and add those numbers together; the result is $1,106.00.  This is your estimated monthly benefit if you retire at your FRA.   If you work those extra 5 years for lifetime earnings of $1,000,000 and run through the math, your estimated monthly benefit is $1,258.  That’s an increase of $152/month or $1,824/year.

Again, the calculated amount will be the amount you can expect to receive at Full Retirement Age and it changes if you choose to receive benefits at a different age, as we’ll discuss next week.  Also, your calculation will be slightly different if your 35-year average is greater than $5,157.  Rather than taking your 35-year average, subtracting $856 and multiplying the difference by 32%, you’ll use $5,157 -$856 = $4,301, multiply that number by 32% and arrive at $1,376.32.  The amount over $5,157 is multiplied by 15%.  That result + $1,376.32 + 770.40 = your estimated monthly benefit at your FRA.

As you’ve seen, a lot goes into the calculation of your potential monthly Social Security benefit.  There are several ways to change the amount you’ll receive.  We’ve seen how you can increase your benefit by working more years or earning more each year.  If you’ve had a lean season, you can recover by working more than 35 years, replacing those low-income years with years of more robust earnings.  Remember, SSA takes your highest 35 years’ earnings.

Be sure to check out next week’s Money Monday post.  We’ll discuss other ways you can increase your monthly SSA benefits.

To your better wealth,




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Money Monday – Leather Weather and Tax Planning

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Tunic • Nordstrom | Skirt • Similar here | Tights • Talbots | Shoes • Zappos | Bag • Louis Vuitton (mine is older; I’ve linked several pre-owned options below, some with an initial $25 sign-up credit!) | Sunglasses • Tory Burch | Lipstick • M·A·C Dark Side

One of the things I enjoy about cold weather is leather.  (You’ve probably noticed that already.)  With a sleek sweater and heels, a leather skirt works perfectly at work.  I like that it gives me a bit of an edgy look without going overboard about it.  Just remember, it’s easy to miss the mark with leather: if you plan to wear it to the office, keep it simple and keep the length modest.  You can move from chic to cheap in a matter of a couple inches.  However, with an appropriate style I wouldn’t hesitate to make leather an office look.

Speaking of the office, we’re getting close to the end of the year.  That means there is still a small amount of time for last-minute tax planning, especially if you have income that changes from year to year.  Take a look at your business profit and loss statement.  Your profit shouldn’t be a surprise. (If it is, I know a great CPA who can help you.  🙂 )  If you find your profit is higher than expected and you’re looking to drive down taxable income, there are still some things you can do to help achieve that goal.

If you own your own business, do you have business expenses you can pay before the end of the year?  If cash flow allows, pay them now.  If you need a new computer or printer, or possibly a larger piece of equipment, consider buying it now.  You’ll need to place that equipment into service (i.e., use it) before the end of the year to take a deduction for it.

If you file your tax returns on the cash basis as most small businesses do, can you hold off invoicing for services you performed until January?  If you receive payment for services, holding checks on your desk until January doesn’t count.  The tax law has a rule of “constructive receipt,” meaning if you have the money or could get the money (your customer asks you to swing by and pick up the check), just because you haven’t deposited it doesn’t allow you to keep it out of this year’s income.

There are also non-business strategies, such as making additional donations to qualifying charities or churches, prepaying the second half of your property taxes or making your January 1 mortgage payment before December 31st.  Be sure to make those payments with enough lead time to allow vendors and creditors to post your payments by year end.  It makes things cleaner if your donation receipt or mortgage statement show record of your payment in 2016.  Otherwise you may find yourself with a letter from the Internal Revenue Service telling you their records differ from the amounts you reported.  That’s never fun.

One of the best options you have, whether you’re a business owner or an employee, is to put money into a retirement account.  As a Certified Financial Planner® I’m all for that.  Depending on the type of account you use, you can either defer income now and let it grow tax-deferred until you begin withdrawing it (preferably not until retirement age) or you can contribute after tax money and watch it grow tax-free, paying no tax later when you withdraw it!

There are many retirement plans to choose from, and I’ll devote a separate blog post to them.  You can still get a 2016 deduction for some of them, even if you don’t make a contribution before the end of the year.  If you work for a company with an employer-sponsored retirement plan such as a 401(k) or SIMPLE IRA, you have to defer salary into it in 2016 in order to receive any tax benefits in 2016.  Check with your employer today to see if there are any last minute options to defer any salary into the plan.  If not, check out the upcoming post on retirement plans to find out what you can do if you missed out.

To your better wealth,

Helen

 

Money Monday – Mortgages

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There isn’t much sexy or exciting about home mortgages.  For most of us, you put down 10-20% on a new home and finance the rest over 30 years.  If we plan to stay in the same home, we just make our payment every month and ride out the years.  Yawn.

Two things shake up that traditional scenario.  First, most Americans don’t stay in the same house for 30 years.  Second, many buy more house than they can afford, using adjustable rate mortgages (ARMs) while rates are low and getting a huge shock later as their payments increase with rising rates.

Adjustable Rate Mortgages

If you’re in the second group, or contemplating buying a home using an ARM, proceed with caution.  Many people have gone this route only to find they couldn’t keep their homes when interest rates increased.  Right now interest rates are low, meaning the pump is primed to see this happen.  If you’re looking to purchase a house, don’t just compute your mortgage payment at current rates.  Compute your payment under some “what if” scenarios.  What if interest rates increase to 4, 5, 6%?  What will your payment look like then?  Is there a maximum interest rate allowable in the mortgage you’re considering?  What is your payment in that worst case scenario?  Can you still afford this house?

These are important questions to ponder with an ARM.  Right now rates are low, but the Federal Reserve Bank (The Fed) has hinted at increasing rates.  If our economy shows signs of recovery, the hints will become reality and your payments will increase.  Will you be ready?

Traditional Mortgages

What if you’re in that first group?  If you move every few years, you’re at the mercy of prevailing interest rates at the time of the move.  How long you plan to stay in the new house may determine the type of mortgage you choose.  If you feel interest rates will stay low during the period of time you’ll stay in this home, you may take the risk of financing with an ARM to get what may be a slightly lower initial rate.  Again, I’d suggest you weigh the possibility of worst case scenarios.  We don’t all live a charmed life.  Rates can change, or your plans to move may be scrapped for one reason or another.  Can you afford the payment under the worst case scenario?

HARP

There is another group we haven’t discussed yet.  It’s the group I’m in.  Those of us in this group bought our homes several years ago and found ourselves with interest rates of 5% or higher.  I think mine was 6 5/8%.  I would love to have refinanced but thanks to the housing market tanking around 2009, even though we had financed 80%, we found ourselves underwater.  Enter HARP, the Home Affordable Refinance Program.  You have to be eligible (see harp.gov for details) but the process is well worth it.  Unlike the typical refinance, there are no appraisals or underwriting, you can be underwater, the refinance fees are reduced, and the process is (supposedly) streamlined.

What do you get for your efforts?  You get a lower mortgage payment or a shorter repayment period, depending upon the terms you choose.  In our case, we chose a 15-year loan vs. our previous 30-year plan  Our new 15-year payments were about $50 more than our previous 30-year payments at the old interest rate.  Looking at the big picture, we’ll save more than $80,000 over the life of our loan!  It was so worth the effort!

Finally, if this sounds like something that might work for you, you need to start the process now.  The HARP program is scheduled to expire December 31, 2016.  If you qualify, the savings could be dramatic.  Where else can you find this kind of savings just by filling out a little paperwork?

To your better wealth,

Helen

Money Monday and Brexit

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I’m posting this Money Monday message early for a reason. You may or may not have been watching the drama unfold Thursday in Great Britain, which ended in that great nation’s decision to leave the European Union (the EU). If you follow business news, you also saw the markets take a predictable hit Friday as countries and investors scrambled to make sense of what it happened and how they might be affected.  As a result, your 401(k) may also have been affected. Interesting how a decision thousands of miles away can impact your portfolio.

In the aftermath, you may be wondering, “What now?” I find myself repeating my mantra of last January – don’t panic. As hugely sweeping as this decision is, from the psychology behind it to the financial uncertainty before it, the short-term impact on your retirement investments is most likely that – short term.

The historical trend of the market is up.  There may be “corrections,” drops, surges and times of stagnation, but over time the market increases, as will your wisely-invested portfolio.

If you took my advice in January, talking to your financial advisor and resisting the urge to sell everything and put your cash in a money market account, you were rewarded by March when the market improved dramatically despite the country’s sub-par economic performance.

I offer the same advice for tomorrow: before liquidating your stock portfolio have a talk with your financial advisor.  Stay calm, and let history be your guide.  Don’t be surprised if your advisor actually recommends buying right now.

If the shoes you’ve been saving for went on sale today, wouldn’t you be running to buy them?  Why do we never feel that way about stocks?  If they “go on sale” we are sure their values are heading for an abyss from which they will never recover.  In a well-diversified portfolio of quality investments (which should certainly describe your retirement accounts), not only will they recover, your account value will continue to increase over time.  Contrary to what your emotions are telling you, you might consider investing a little more if you’re not at your maximum allowable salary deferral.  This would potentially be a great time to take advantage of the “sale.”

This article, and any I write about financial matters, is not intended to be specific advice for anyone.  These are my general thoughts and opinions, which should in no way take the place of those offered by your trusted financial advisor.  My hope is to give you a different perspective and to open conversation between you and your advisor.  That relationship is key to your financial success.

To you better wealth,

Helen

The Stock Market’s Gone to the Bears – Oh My!

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Have you been watching the stock market lately? It’s a little scary! I have two words for you – don’t panic. Resist the urge to run and sell everything. The best thing to do when the market starts to tank (or just dip) is to contact your investment advisor.

If you have a retirement plan through work, you should have met with the plan’s advisor at least once every year when he/she talks with the group about the plan your employer sponsors.  Don’t remember that discussion? If you’ve not met the plan advisor, take a look at your most recent brokerage statement; your advisor’s name and phone number should be at the top of the first page.  Still can’t find it?  Talk with your employer and get connected right away.

Back to the market.  We’ve talked about this before.  The old adage for market success is “buy low, sell high.”  What do most investors do?  Exactly the opposite.  They hear the “hot tip” at a cocktail party and decide to act on it.  The problem is, by the time that hot tip hits the party circuit, it’s no longer hot.  Most often it’s already past its prime.  But their smart friend recommended it so they buy it.  At a high price.

Then the market drops, like we’ve experienced so many times before, and most recently right now.  What does everyone want to do?  Sell out to stop the bleeding.  You may understand that mindset at this moment when stock prices are dropping in real time. You may feel an almost overwhelming desire to sell everything before your portfolio drops to zero.  Before you do something drastic, talk with your broker.

My advisor muses he has the only product no one wants to buy when it’s on sale.  He’s so right.  If we could see the future we’d have comfort buying a low-priced, “on sale” stock. Hindsight is 20/20.  Wouldn’t everyone love to have purchased stock in Apple before the iPhone hit stores?  But prior to that Apple stock had its struggles.  In September 2001, Apple stock sold at more than $60/share.  Two years later a share sold for less than $15.  Would you really have purchased Apple stock at that time, seeing the downward trend?

I can’t guarantee the market is going to recover from last week’s drop.  I only know that historically it always has.  Sometimes the recovery is quick, sometimes not so much.  Well-run companies are well-run companies, and their stock, whether owned outright or within a mutual fund, usually rebounds.

My advice?  Get more information.  Talk to your advisor.  Read a good business and investment periodical.  Take your next step using knowledge rather than emotion.

To your better wealth,

Helen

Money Monday – Investing Part 3

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Today’s investment message is about time. As we cover the basics it’s important to consider the way time impacts your investments. A small amount of money, invested wisely, can grow into a tidy sum over time.

Let’s say you you invest $1,200 at the end of every year for a total of 40 years.  At the end of that time you’ve invested $48,000.  If you’re able to earn 5% on your money, you’ll have $153, 407.70 at the end of that time.  However, if you invest $100 at the end of every month, in 40 years you’ll have $161,432.12.  The difference is the extra time those smaller, consistent deposits are in your account, earning money for you.  In our example, that’s an extra $8,000 just for changing the timing of your deposits.

This is the mechanism behind employer-sponsored retirement accounts.  You pay in weekly, bi-weekly, semi-monthly, or monthly through consistent payroll deductions.  Your money goes into your retirement account where it grows, tax-deferred, until you’re ready to draw it out.  The additional benefit, depending on the type of plan, is the inclusion of an employer “match,” an amount your employer pays into your account for participating.  You’re already earning on your investment!

Of course the example is simplistic.  I’m not trying to account for brokerage fees.  If you’re charged on each transaction those can add up.  Many investments don’t earn a consistent rate of interest like we’ve assumed in our example.  What I am attempting to show, however, is the way time can help your investment grow if you start now and stay steady.  A small amount of money, invested wisely, can grow into a tidy sum over time.

To your better wealth,

Helen

Money Monday – Investing Part 2

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Investing involves goals.  When you decide to put your money into an investment, you should establish, and possibly write down, what you want to accomplish.  Are you hoping to build up a down payment on a home?  Fund college?  Retire?  Focusing on your goals will help you determine how to invest.

If you’re young with many years until retirement, you can choose riskier investments.  This is because you have time to recover if the market drops and the value of your investment declines.  Conversely, if you’ll be retiring soon you want to protect what you’ve built. You may not have time for the market to recover before you need to start drawing some of your investment as retirement income.  For that reason many investment advisors will suggest moving to investments with low risk, such as high-grade bonds.

This brings me to one of the biggest concepts to grasp if you invest in the stock market: if the market drops, you have not lost money. What you have lost is value, but that value can be recovered if you allow the market to adjust.  It may take time, but understand that the long-term trend of the stock market has been growth.  You lose money if you sell your stocks when its value has dropped.  If you’re invested in quality stocks, the key is patience.  Breathe.  Don’t panic.  Give the market time to recover.  Seek guidance from an experienced, trusted investment advisor.

We’ve all heard the basic premise of stock market investing: buy low, sell high.  It may surprise you to know that most people do exactly the opposite. They buy the hot stock everyone else has been talking about.  Unfortunately they are usually buying as that stock is nearing a peak in price.  When the stock drops off that peak, those same people will panic and sell, losing money.

If a company is strong, the time to buy its stock may be after it has had some decline in price. An investor friend of mine once observed that the funny thing about stock is no one wants to buy it when it’s on sale.  A strong company experiencing a temporarily low price in its stock may be “on sale.”  Do your research and/or discuss the stock with your investment advisor, but if the company stock is “on sale,” this may be the time to buy.

We’ll get more into researching stock in coming posts, but for now I wanted to voice one of my concerns about some of the investment peddlers I see advertising on TV and online.  They tell their followers to buy this or that “hot investment” right now. Yes, there may be gains, but mostly for the advertiser.  He buys the investment, then tells his readers to buy it, thereby pushing up the price in a classic supply and demand scenario.  The advertiser then sells his investment at its height before advising his readers to do the same.  Always exercise professional skepticism when listening to these ads.

Real research comes from analyzing stock yourself, and perhaps reading reputable investment publications.  There is a lot of quality information to be gleaned.  The challenge is everyone else is reading the same information and potentially taking the same investment action you’re taking.  That great, undervalued stock at a good bargain touted by the publication is being purchased by a number of readers, pushing its price up.

Don’t have time to research?  Mutual funds may be the answer for you.  Fund advisors have already done the research and put together a mix of stocks that, as a group, can be categorized as anything from low risk to very high risk.  This allows you to choose a group of stocks based on your risk tolerance and have a diversified portfolio on a small budget.  It is often the easiest way to venture into the market and test it out.

Have any thoughts or comments?  I’d love to hear them.  Have thoughts on future subjects?  Please let me know.  This is all about creating a dialogue from which we can all benefit.

To your better wealth,

Helen

 

 

 

 

 

 

 

 

 

Money Monday – Investing

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I had a couple of great questions posed to me on Instagram over the weekend, which prompted me to choose Investing as our next Money Monday series. The questions were:

1. What is the best way for a college student to invest in stock?
2. Will I please explain how investing works?

I’d like to start with how investing works. When you invest in something, you are putting your money into a venture in the hopes of making that money grow. The growth is called your gain. The amount of growth you have as compared to your initial investment is called your return, or your return on investment. The amount of money you put in, and could potentially lose, is the amount you risked.

Gains are expressed in their amounts as in, “I made $500 on that deal.” If you put in $1,000 and made $500, that’s fantastic. If you put in $100,000 and made $500, that’s not so great. Either way, you’re $500 ahead, but that’s only part of the picture. The amount you risked to get that $500 is also important.

Returns are usually expressed as a percentage of the amount invested. For example, if you put $100 into savings, and earn $3, you earned $3/$100 X 100% = 3%, or a 3% return on your money. Returns don’t have to be measured over a full year’s time, but that is the usual standard time frame used. You need a standard with which to compare your results. If you earned a total of 3% on your money over three days, that’s a lot different than earning a total of 3% over three years. If someone simply says they earned 3% on their money, I usually figure that’s the rate of return over a full year unless they say otherwise.

In almost every investment there is a potential to lose the money you put in. That’s the risk, and it is present in almost every investment. The degree of risk depends on how solid is the venture into which you’re putting your money. Your comfort level with the amount risk is your risk tolerance. Some people are comfortable with a large amount of risk; others are risk averse. The types of investments you’re willing to make without losing sleep at night help determine where you sit on the risk scale.

Usually, the more risky an investment, the better the return. Few people will place their money into a highly risky venture without the possibility of a larger payoff later, i.e. a higher return on their investment. Conversely, a very safe investment, such as a savings account or Treasury bills (T-bills) yields a very small return. You must balance your risk tolerance with the type of return you want to make and the amount of time you have to make it.

Investing is a very broad and very deep topic. Whole books are written on it. It’s going to take a few weeks to cover the things I think are important, and we’ll still only scratch the surface. If you’d like to move at a faster pace, I’d recommend reading a book on the subject. There are a huge number available. Browse online or at your neighborhood bookstore to find one that works for you. Otherwise, hang with me and we’ll keep working our way through the topic.

Please feel free to ask questions and suggest areas to go into with more depth. I write this blog for you and I want to make sure I talk about the things that interest you.

To your better wealth,

Helen