Finance Rush – Investing

For anyone that knows me already, it’s no secret that I am forever optimistic when it comes to investing in the stock market.

But what about times like this when the stock market is crashing so badly? I mean, we’re looking at -30% loss in 30 days. The stock market had it’s biggest 1-day crash on Monday, March 16th, since 1987. That’s crazy, right?!

Is it time to panic?

No. It is not.

It’s really simply. This is a moment to embrace, not to fear. As Warren Buffett has famously said in the past, “Be fearful when others are greedy and be greedy when others are fearful.” I can’t emphasize this enough.

It’s important to clarify that this advice only applies if you are more than 5-10 years away from retiring. Why do I say this? It’s easy. Just look at the market history to find out:

And the Bull Market Continues to Surge Forward w/ Full Force

Let me summarize: The most the market has ever taken to recover from a crash in the past 94 years was 9.5 years. That was between 1968 and 1978. If you are retired or you are about to retire and you still have 20-30% in the market, or, heaven forbid, more than that, then I’m really sorry, but it’s a little bit too late to react to this right now. First of all, shame on you. Stay the course. Set your emotions aside and let the market take its course. If you are in a hospital bed or if you believe you could pass away in the next 5 years, please PLEASE make sure that you have the mechanism already in place to transfer your entire account and all of your assets to a loved one. Do not sell right now unless you absolutely need to.

Let me preface the rest of this post with the following: I cannot legally provide financial advice to people. This blog, however, is a great place for me to voice my opinions and viewpoints on investing. Most authors, when they make these types of statements will mention that you need to seek help from your financial advisor. No! Don’t do that. You are in control of your own money and only you. These statements always bother me. You can do just as well as any financial advisor with your OWN money if you are smart about it. It is not rocket science. It really isn’t.

With that said, it’s my strong belief that you should be taking a close look at all of your money across all of your bank & investment accounts right now. Ideally, you should have been doing this a couple months ago, even years ago. But it is never too late. Let me ask: Do you have a strategy right now?

If your answer is “No”, then that’s OK! Doing nothing is not a bad strategy at all. Things WILL recover. Even though I’m not an expert, as mentioned, I know a good opportunity when I see it, and I would be a lot more optimistic than pessimistic right now.

So, is it time to buy or sell right now… what do you think?

If you agree that it is time to buy, then please read on… 
If you think it is time to sell, then PLEASE do me a huge favor and DON’T do that. Just stop reading this post and go play some Solitaire or do a crossword puzzle or something.

Now, this takes a lot of discipline…, and I also have a really hard time doing this myself

, but I can’t emphasize enough how important it is to avoid going ‘all in’, all at once. This is still a subjective topic… Let me clarify that it’s OK to go ‘all in’, just NOT all at once. Even I made this mistake recently, but thankfully it wasn’t ‘ALL in’. Just mostly ‘all in’. The reason this is a subjective topic is because I am human just like everybody else, and we all believe we can “time the market” to a certain extent. You just need to be careful with how much you are investing, where it is being invested, and how often you are investing it.

Are we at the bottom of this madness? Who knows! Could it drop a lot more? Yes. Or no. Have we gotten past the worst already, in other words, if you go ‘all in’, is it that big of a deal? Nobody knows!
What bothers me are the people who go ‘all in’, get the timing right, and then start bragging about how they were so smart. This is what perpetuates stupidity. It’s so easy to think and believe that there is a secret method to timing the market. Well, let me help you out for a minute. There is not. 
In the end, while I think it’s much easier to go ‘all in’ than to stress yourself out over having to log into your account to do it multiple times, I think you have to make a judgement call on this based on your level of interest. If you create reminders and divvy up your money where all you have to do is some quick division based on the share prices at the time, you can take these actions without any emotion & they can even be done from your mobile phone in a matter of a couple minutes. Don’t stress yourself out with limit orders, either. Some TRADERS (big difference between a trader and a long term investor) will strongly advise against market orders, but for the average investor, it really doesn’t matter. Market orders are a lot easier, faster and less stressful. They are fair, too. In other words, the trade takes place instantaneously.

A friend of mine recently asked if it would be a good time to bet big on a stock that they strongly believe in: Tesla ($TSLA).

If you are going to bet big, please restrain yourself. I would encourage you to redefine your definition of “betting big”. Is it being done in the 30% portion of your portfolio? I hate to say it, but Tesla is still considered a speculative investment. I am tempted to bet big on Tesla myself right now. It is headed to $300/share when it was trading at $900 just 1 month ago. But if you don’t already have 70%+ of your money in the S&P500 (index fund or individual stocks like the dividend aristocrats are my favorite), then I would definitely do that first. I’m talking about across all accounts, including retirement accounts. Just don’t be irrational with any drastic decisions. This is your hard earned money after all….

If you still believe you need to bet big and take big risks to win big, and if you are thinking that now is that time, then you really need to check your ego at the door. I’ve been thinking about this often myself recently. But when you hear people bragging about huge gains from huge investments, there is an equal amount of people (50%) who tried the same thing, failed, and never said anything. I wonder why you never hear from them??? Don’t be foolish. Seriously folks.

If you have a large savings account and you already have a 6-month emergency fund secured, then you should really especially be looking at buying opportunities right now. Now is the time to act. Start transferring your savings money into your investment account NOW so that you can at least be prepared to invest it in the next couple of days. I would advise not investing it all at once as I had mentioned previously, if you can avoid it. What happens if the market continues to drop? Don’t say I didn’t warn you. Split it up among 3-4 investments over the next 4-6 weeks and stick to your plan.

Regarding that 70% (it could be 75% or 80%), if you don’t already have that established, I am a big fan of the S&P500 Dividend Aristocrats. You could take a shortcut and invest in the ProShares S&P 500^® Dividend Aristocrats ETF ($NOBL), or you could create and manage your own portfolio of high dividend stocks. I have posted about this multiple times in the past, but please make sure you have a DRIP plan established in your investment account to reinvest the dividends automatically. Just as an example, I am making $300-$500 every month in dividends alone.

If you feel like you can really get into this and you’d like to have some fun watching your money grow over time, you could take charge of your own strategy & invest in individual stocks. Here are some the top performing dividend stocks in the S&P500 right now, in order from highest to lowest, which I own myself:

Abbvie
AT&T
Chevron
Leggett & Platt
Consolidated Edison
Nucor
Kimberly Clark
Johnson and Johnson
Coca Cola
Clorox
P&G
Target

Other stocks that are currently on my radar with the recent effects from COVID-19 that I believe present great opportunities for the 30% portion of a portfolio:

Hotels (Ex: Marriott)
Cruiseline companies (Ex: RCL, NCLH, CCL)
Airlines (DAL, BA, AAL, … strongly consider Boeing)
Another opportunity worth looking at would be US Foods (USFD), which is significantly down for no reason.

There are many more!

The last piece of advice that I’d like to provide goes back to 2014 and 2016 when I wrote some posts about a looming market crash. I was freaking out in 2018 when the market just kept going up & up. As soon as the bull market continued to surge forward in the beginning of 2020, I was beginning to think there was no end to it. A couple of economists were commenting on how unusual it was, and these articles made the circulation time and time again, but for the most part, for the majority of the people out there, including a lot of my coworkers, the market gains were being treated like they were normal. So if you are freaking out about losing money right now, take a deep breath and look back to 2014 and 2016 when we were already too high. 2018 was unrealistic. 2019 was insane. We are just now returning to 2018 levels. This is normal. There is nothing to freak out about here.

Do Not Panic!

There’s a high level of frustration when it comes to investing.

It’s not easy to know where to begin. I totally get it.

If you find yourself overwhelmed, don’t worry, you’re not alone!

Investing is a sensitive topic for anyone who feels they’re late to the game. It’s also frustrating when you find friends or family members bragging about their own successes. And here you are, sitting on the sidelines feeling hopeless, as if you’re already too late to the game. Why even start? Procrastination has already become the enemy. It’s not even worth it. It takes too much time, and it’s too complex anyway.

NO. NOT ANYMORE!!!!!!!

STOP.

TAKE ACTION AND DO SOMETHING!!!

If you’re reading this, you’re probably ready to take charge of investing on your own. Good! You’re in great company because it’s my passion to help you get started and to help guide you on how to be successful with investing.

The first step is to take action. Don’t like to use your computer to do this work? Don’t worry. You can do it from your phone these days. Don’t like to use your phone?

Okay. You can go now. How are you even reading this blog?

Just kidding. Please continue reading. Again, I’m here to help, so let’s get started.

There are 3 very easy steps to get started with investing:

1. Open up an investment account
2. Fund the investment account from a checking or savings account
3. Buy some stocks

That’s it!

I’m not going to elaborate too much on these three steps, because it really isn’t that difficult. The point of this blog article to help inspire people to start taking action. Once you get to step 3, you can start asking questions and figuring things out on your own. It really isn’t very difficult.

For step 1: Open an investment account
I would suggest an app called Robinhood, which you can download for free. There aren’t any commission fees when you buy or sell a stock! “What is a commission fee?”, you may ask. It’s simple! It’s the fee that the broker (that would be the owner of the investment account: aka Robinhood) would charge you to buy a stock. Yes. That is right. Brokers will typically charge you a small fee to be able to buy a stock. So, not only are you paying money to buy a stock, but you are paying the broker to be able to buy that stock! Not with Robinhood. Other options for step 1 include Fidelity, M1 Finance, TD Ameritrade, etc. I have some other blog posts about this topic for easy selection, although they are quite old, you should still be able to get some valuable information out of them. Let’s make this easy though. Just open up an account with RobinHood. Done.

For step 2, Fund the account.
It’s simple. Just link your checking or savings account and do an ACH transfer. Don’t do a wire transfer since it costs money. ACH transfers are free. You can’t expect this to take place instantaneously though. These transfers can take a couple of days.

Step 3: Buy your stock(s)!
Don’t let this be a daunting task. NO MORE PROCRASTINATING!! Make it fun! Just don’t put all of your eggs in one basket. To start, all of your eggs (that means dollars, folks!) will go into one stock, so technically it will be in one basket (that means one stock!). There are a lot of tips here, but let’s just keep it simple. Buy it and let it sit.

Good. You’re finally part of the club. No more sitting on the sidelines – feels good, right?

Cryptocurrencies have been exploding recently. Meanwhile, the stock market continues to go up and up. People from all over the world are putting their money into cryptocurrencies. Rumors have spread about crypto being a safe haven when the stock market crashes and there’s speculation that the value could expand significantly. Then there’s the widespread speculation that crypto could see a big boost when various companies jump on board with it. For example, Ripple (XRP) is being used for transactions at some banks in Japan already, and American Express is working with Ripple. In fact, Ripple’s value has doubled in just the last week alone.

Through talking with several friends, I’ve discovered that there are some common misconceptions about this stuff. For example, some people, even those who are heavily involved in the stock market, have thought that you need to buy an entire coin to get started. And when you look at Bitcoin’s price today ($16,800), that seems like a major roadblock!

In reality, you can buy as little or as much cryptocurrency as you want. For example, you can buy $100 USD of a Bitcoin (0.00595 BTC).

We could speculate all day long about the direction this will go, but I think it’s safe to say we’re in the middle of a bubble. Until things shake out and all of the dust settles, we’ll never know exactly which coin or which blockchain technology will succeed. Bitcoin is referred to as a “junk coin” by a lot of people who have already gotten rich off of it. Not because they’ve sold it already and moved on, but because it’s simply not as robust or convenient of a coin compared to Ethereum (ETH) or some of the others out there. The technology behind Bitcoin is outdated. It was the first coin that started all of this madness, and with a market cap of almost $291B (yes, that is 291 billion, not 291 million), I don’t think it’s going to disappear overnight. Nobody knows. Bitcoin is used primarily as the conduit to move money in and out of the altcoins. So what’s an altcoin? It’s pretty much anything other than Bitcoin.

So, how can I get started w/ this stuff and what should I do?

First things first, you’ll need to transfer USD to one of the main coins (Bitcoin, Ethereum, Litecoin or Bitcoin Cash), which you can do by setting up an account on Coinbase.

https://www.coinbase.com/join/53a73d526c14424a9f000001

(That referral link gives both you and me $10 for signing up).

Coinbase for main account (you can buy BTC and ETH… LTC and BCH if you want).

The #1 recommended alternative exchange (from me) to buy alt-coins, which gives you a lot of options for alt-coins would be:

Binance

Sign up link for Binance:
https://www.binance.com/?ref=16187599

There are several others out there as well, including Kraken, Gemini, Local Bitcoins (LBC), CEX, Bittrex, Gatehub, etc.

Binance is a Chinese exchange, which scares me a little bit since cryptocurrencies were banned in China last year! Binance operates out of Hong Kong. China allows crypto companies to operate as long as their servers are not based in China, so Binance’s servers are in Korea.

I might suggest buying XRP Ripple on Binance, which you can buy w/ ETH. Ripple just became the #2 coin by market cap last week, overtaking LTC Litecoin. It’s rumored to be added to Coinbase soon, which could cause it to go up even more. American Express is using it and some banks in Japan have adopted it. It’s highly possible it will exceed Bitcoin’s market cap in the future. Here is an article from CNBC talking about another way to buy Ripple using Bitsane!

https://www.cnbc.com/2018/01/02/how-to-buy-ripple.html

Other coins to consider:

XRB RaiBlocks, growing fast. Recommended in December by my brother’s coworkers. Rumored to be added to the Binance exchange. When a coin is added to an exchange, it typically jumps up quite a bit. It went up 235% last week. It was up 13,250% last month. It’s one of the hottest coins right now.

You can buy XRB with BTC on BitGrail (initiate send BTC from Coinbase to BitGrail (first you find the address to send to in the Deposit section of BitGrail), confirm it has arrived, then buy XRB through the Markets section of BitGrail).

BLT Bloom, still very early stages. Goal is to combat the Equifax hack through providing decentralized control of credit. Using blockchain technology to protect credit & reinvent how credit scores are calculated! Absolutely fascinating.

Buying BLT Bloom tokens could take several hours to figure out how to purchase since I believe you need an ERC20 ETH wallet, even post ICO. You would buy it from ETH. Their ICO just happened on January 1st, 2018. The time you spend on figuring out how to buy it (post ICO) could be well worth it though. This is not a quick flip ICO coin! Right now, you have to go to one of the following exchange websites to buy it: IDEX, EtherDelta or RadarRelay. The developers of the coin are not focusing on getting it listed on exchanges right now. They’re developing the usage case for the coin. This is unlike a lot of the other coins that are ‘pretending’ to have great technology, but they are simply in it for the money, which I’m sure won’t last very long.

I used MyEtherWallet (MEW) to buy some Bloom tokens. You can transfer ETH from a non-ERC20 wallet, like CoinBase, into MEW before purchasing BLT. Again, this takes some time to get set up.

Bittrex and Gatehub are some of the other exchanges you may want to consider signing up for. I heard about these in 2017. Depending on what coins you want to buy, of course. Gatehub is ideal for buying Ripple! I tried to get on both of these, but there were some issues that I ran into, so I gave up on them temporarily. **Update: I was finally able to move forward w/ Gatehub – they require you to submit pictures of your passport though. This scared me a little bit, so I stopped w/ the signup.

To recap real quick, it’s better to decide what coins you want to buy first and then figure out which exchanges to buy them on. For example, I believe RaiBlocks (XRB) can only be purchased on BitGrail right now.

The COINCAP app on your phone tracks the value of every coin out there. There are a dozen other tracking apps out there. Since there are exchanges and coins all over the place right now, it can become hard to track the value of all of your coins. You can use an app called ‘Blockfolio’ to do this if you want, or you can just document everything on paper somewhere. Just be aware of what price you buy in at.

Coinbase has a nice app to download. To get the 2FA (2 Factor Authentication) to work, you need to download the Google Authenticator app on your phone. When it asks to get 2FA going, they will provide a QR Code. Scan it with your phone and it should open up Google Authenticator automatically to add the code for the exchange.

Final tips:

To save some money on the fees from Coinbase, you can buy/sell through GDAX. If you have a Coinbase login, then you automatically have access to GDAX since GDAX is Coinbase’s back-end. Do a Limit or Stop order on there (not a Market order) and there are no fees for the transfer. I would highly recommend leveraging the Limit orders since they aren’t subject to slippage. This is convenient when you are transferring one currency to another, especially to/from USD. GDAX can be a little confusing at first. I’d look on Google or YouTube for “How to use GDAX” and there’s probably lots of good info. available by now.

It took me awhile to figure out that Deposit/Withdraw is separate from Buy/Sell. There is a daily transfer limit ($10,000) from certain exchanges, like Coinbase, for Deposit/Withdraw. You can Buy/Sell as much as you want at anytime though. Keep in mind that the Deposit/Withdraw area of most exchange websites is separate from the Buy/Sell area. The Buy/Sell area is often called “Market” or “Exchange” or something like that.

A good hardware wallet to purchase in order to protect your coins is the Ledger Nano S if you start to get more into this. I have one that just arrived the other day, but I have no idea how easy or difficult it will be to use yet. However, I would only recommend a hardware wallet if you’re collecting more and more coins and gains and you’re paranoid about having the coins stolen – ie- if an exchange goes bust or gets hacked, which can definitely happen. Otherwise, you can just keep your coins on the exchanges (Coinbase, Binance, BitGrail, etc.) themselves.

How can I choose the right HSA account?

Well, if you spend the right amount of time researching the types of HSA accounts closely, it can result in the difference, over a lifetime, of literally thousands of dollars of extra money. It all comes down 3 things:

(1) minimizing fees,
(2) maximizing interest aka APY, and
(3) maximizing investments

“HSA accounts are a very under-researched corner of the market. Investors have few resources available to help them navigate the hundreds of plan providers that exist. HSA accounts have recently grown in popularity, but the lack of resources has likely contributed to their underutilization as a savings vehicle despite their valuable tax benefits.”

-2017 Health Savings Account Landscape, Moningstar
–https://corporate1.morningstar.com/ResearchLibrary/article/813893/2017-health-savings-account-landscape/

There is a nice article that you can read (http://www.morningstar.com/lp/hsa-landscape) on reviewing and selecting an HSA account based on one of two primary needs:

(1) Using an HSA as a spending vehicle to cover current medical expenses, or
(2) Using an HSA as an investment vehicle to save for future medical expenses.

Keep in mind that you can withdraw your HSA money for NON-MEDICAL reasons without any penalty after you are 65 years old. It will still be taxed though!

Essentially, what this means, is that if you plan to invest within your HSA account, it can effectively become another type of 401(k) or Traditional IRA account. This means that the money will go into the account tax-free and is later taxed when you take the money out!

So, assuming there aren’t any major medical issues until you’re 65, an HSA should be treated like another 401(k) account. Another thing to keep in mind is that as long as you keep your receipts from your medical expenses, you can reimburse your medical bills much later down the road. This can be 10-15 years down the road, after your HSA account has grown in value with the market! Of course, this all bears on whether or not you can afford to pay for medical bills out-of-pocket, after taxes, today, without tapping into the HSA account. This is not always very easy to do.

Wait a minute. Who can plan for not having any medical emergencies until they’re 65 years old? Beats me! I know I can’t. But that doesn’t mean the investment opportunity should be dismissed all together.

Now, if you withdraw the money prior to age 65 (for non-medical purposes), there is a 20% penalty for this. That is a huge penalty! It should be avoided at all costs. Of course, the primary point of an HSA is for medical purposes after all.

As a result of all this, I believe that some major consideration should go into selecting an HSA account in order to maximize the potential impact on the savings aspect for retirement. If you can invest the money, why not do it? Just be careful though, because one thing I’ve discovered is that every single time you offload money into an investment vehicle from your HSA account, you’ll be slapped with a $25 fee. Even if you’re transferring just $100 over to an investment account, it’s still $25, or 25%! A general rule of thumb with investing is that you should avoid paying high transactional fees. The total fees should be less than 1% of the overall transaction. On top of the $25 transaction fee to transfer money into an investment account (like TD Ameritrade), you have to pay a commission fee for buying a particular stock or security. This is typically around $7-10!

The downside is that it can be a real headache to research all of the HSA brokers out there. And there are a lot of options out there now that HSAs have been around for several years. If you’re looking to maximize the investment portion of your HSA account, my advice is to establish a base amount of money over several years first. These transaction fees can be pretty high, especially when you’re transferring small amounts of money…

Once you transfer money out of your HSA account and into an investment account, or if your HSA account includes investment choices already built into it, it’s really important that you have a good selection of funds to purchase. I can’t reiterate this point enough. For example, you might find an HSA account that offers no transaction fees to do the investments, but the investments themselves (often limited, unless you have a TD Ameritrade or other large broker account!) will have high administrative/management fees, along with high expense ratios. That’s right, it’s often an double-whammy when it comes to fees.

One study done by AARP back in 2011 showed that 71% of participants thought that they didn’t pay any 401(k) fees – something that simply isn’t true.
https://www.aarp.org/work/retirement-planning/info-02-2011/401k-fees-awareness-11.html

A few options are listed below:

-Elements Financial
https://www.elements.org/personal/savings/health-savings-account/

-Health Equity (received high rankings
https://healthequity.com/learn/hsa/

-Select Account
https://www.selectaccount.com/

-Lively (recommended at a co-worker’s spouse’s workplace)
https://livelyme.com/individuals-and-families/

Along with these accounts, the following article has been a really helpful resource:
https://20somethingfinance.com/best-hsa-account/

I recognize that everyone’s needs are different when it comes to choosing an HSA account. For some people, the investment part of an HSA won’t mean very much. I can see this being the case if you don’t plan on putting much money into the account, or maybe if you’re thinking you’ll be using your HSA regularly to pay for medical expenses. For others, the simple conveniences of having a debit card, maybe access to an additional Checking or Savings Account through an HSA would be important. Some HSA accounts offer automated receipt submittals, they have an app for your phone, etc.

My only word of caution would be to, please, look out for the fees.

I believe an HSA account should empower people to get ahead in life through leveraging the tax-advantaged savings aspect. If the fees are too high, the tax advantages go out the window. Please be careful with this. I know there are a lot of places that have high fees and they will readily take advantage of you, whether you know it or not. You may look at the fees as being a small thing today, but if you take into account the growth that could have been realized by not paying those small fees over the course of 10, 20, or 30 years, the difference can add up to thousands of dollars!

2) Bet against the stock market.

4) Bet on the upcoming energy revolution.

5) Keep your finger on the trigger for AI, IoT and Robot investments.

As the stock market hits new highs entering new territory every other day, we really need to stop and ask oursleves two questions:

1. If the stock market suddenly plunges, how long can I expect to wait before I can get back to these highs?
2. Is my portfolio balanced correctly?

The first question requires us to look at the stock market’s history before we can even begin to guess on a time frame. As you can see from the chart below, if the stock market suddenly drops, we could wait as long as 9.5 years (until 2020) to return to the same levels, just as was the case between 1968 to 1977.  This, however, was the absolute worst case scenario over 80 years of history in the stock market! It’s not out of the question that something like this could happen again, but I think we should more realistically, at least based on modern-day history with the invention of computers and e-commerce, expect to wait 2.5 to 4 years (see years 1986-2012 in the chart below). I always like to add an extra buffer, so my final answer would be 5-6 years to rebound from a market crash.

If you cannot, or do not want to, wait 5-6 years to get back to where you are now, then it’s important to evaluate your positions. And this brings us to the second question: Is my portfolio balanced correctly?

It’s really critical to evaluate your entire stock portfolio while the market is hitting new highs. If you find that you own stocks that you can’t see yourself owning, or you think you may not want to own in 5-6 years, then now is a good time to consider reducing or eliminating those positions. Especially if you’ve already, at least collectively, made a profit off of them. Just make sure your portfolio remains diversified.

Portfolio allocations should be balanced across the 7 industry sectors; Basic materials, Consumer goods, Financial, Healthcare, Services, Technology and Utilities. If you are only invested in a couple of these industries, try not to favor any particular industry. For example, if you find that the majority of your money is invested between $GOOG (Google), $YHOO (Yahoo!), $FB (Facebook) and $TWTR (Twitter), you should consider reducing or eliminating some of those positions.

Keep in mind that it’s very easy to love your winning stocks while they’re winning. It’s even easier to hate them while they’re losing!

With an unbalanced portfolio, it’s very important to keep a close eye on the market. This is your only option. The only problem with this strategy is that it can take too much time and it can also be pretty stressful. Your money could be put on a rocky roller-coaster ride if you are overexposed to any one particular industry sector. To avoid this, you will want to re-balance your portfolio.

A few closing notes:

If you’re still on the fence regarding a 5-6 year time period, you’ll have to ask yourself what types of large expenses you’re expecting to have over the next 5-6 years…

Will you be going on any major vacations? Any weddings? Will you be buying a new house or a new car? Will you be having a new baby? Try to map out all of these major events, then add up the money and create a worst case scenario. If you think you can budget for this without taking away from your stocks during 5-6 bad years in the market AND your portfolio is diversified and you’re happy with how it stands today, then congratulations, you can sit back and relax. You’re on the right track! Don’t do anything. Laziness, or shall I say patience, often pays off tremendously in the stock market. To quote Warren Buffet: “Inactivity strikes us as intelligent behavior.”

For more information on how to find the business sector your stocks belong to, you can visit the Industry Browser site from Yahoo! Finance:

• http://biz.yahoo.com/p/

Every other day we’re inundated with news on the ISIS terrorists, Ukraine vs. Russia, news about immigration reform, a mediocre jobs report; What’s next? Surely these horrible events would have an adverse effect on the stock market, right? Negative news after all results in fear and panic in the stock market. People should become fidgety and start selling off all of their stocks; It makes perfect sense. Wrong. Wrong. Wrong. Instead, the stock market continues to surge forward, and just like any other time, it’s not related to any one thing.

So what could be causing the market to continue moving up? Well, some of the experts have claimed that the reasons for continuous growth during all of this is obvious: The Fed continues to keep the interest rates low, which keeps bond prices high, generating more spending – boosting the stock market. A weak jobs report signals that people aren’t ready for the rate increases from the Fed, which propels the stock market even further.

But, what about the geopolitical tensions again? There are only hundreds of people dying from rocket launches and rapid fire assaults every single day, yet these headlines stay far away from the financial news… until… of course the market goes down! THEN these horror stories start making their way into the finance headlines.

In conclusion, it’s safe to say that negative news does not always result in market weakness. More than anything, when the market is high, it’s important to examine your portfolio closely to make sure it is healthy, diversified and safe. Be ready to welcome weakness so that you can add to your positions, too. And in order to add to your positions, or to create new ones, it’s important to have a strategy in place so that you can, at a bare minimum, have some money available before the market drops. Even if it means taking some of your profits off of the table now!

For a person in their 20’s or 30’s in America, with the market situation going into September 2014, I believe the best places to have your money right now is in five places:

The stock market continues to present some incredible opportunities!  We are still in the middle of a very strong bull market.  Last month, the “Sell in May and Go Away” theory proved to be completely wrong. I discovered just how clueless even the professional investors can be. A lot of very smart people got it wrong! What did these people do after they discovered they had it all wrong? They didn’t sit around waiting to say “Ah hah! I told you so!”.  No, they made corrections to their portfolios, and they made them quickly. This is exactly how you have to invest when you’re focusing on the short-term, trying to time the market. It’s a game a lot of us with full-time jobs just don’t have the time to play.

While it’s probably not the best idea to go “all in” with the stock market right now, you shouldn’t be doing nothing at all. Buy in stages. Sell in stages. The fact of the matter is that nobody knows what will happen, but based on the pure technical charts of the Dow Jones Industrial Average and the S&P 500 index, we all know that we’re long overdue for a correction.

Unfortunately, I don’t have the time every day to analyze all of the individual companies I have in my watch list, but I do have the time to see which stocks have been trending up, which stocks have been trending down, and which ones aren’t moving at all. I also have the time to hear what other people have to say about the market while I’m driving to/from work every day.

Here is some of Jim Cramer’s most recent news:

From a short-term investment standpoint:

Last week: With the situation in Iraq right now, oil prices could get hit hard. Result: It’s better to sit on the sidelines than to put more money in the market. Even better to take profits if possible. However, as of 6/17, tensions may be easing due to a stronger coalition. 6/17 was the first day of positive news. The market continues to go up, which is similar to the market situation when Russia went into Crimea. The market caught wind of the actual situation over there before the media could get a handle on it and continued to climb as a result.

–The Fed’s news on inflation at 0.4% (the highest since 2/13) today should have a direct impact on the mortgage interest rates. When inflation goes up, interest rates go up, which means the bank stocks will go up. Higher rates mean more money for the banks as they can make more money. There are no bank earnings to be posted any time soon, which also allows more room for imagination (growth) within the financial banking sector.

Intel’s good news last Thursday (raised 2nd quarter and full-year sales outlook) caused a spike in Microsoft and HP stocks. They could continue to rally throughout the year.

More risky stocks right now: Tesla, Amazon

Less risky stocks: Google, Apple, Facebook

It’s always easy to buy stocks, but what about selling them? It’s a completely different ball game, and it’s not one you should be focused on unless you’re on the brink of retirement or you know you’ve made some mistakes in your portfolio. Nobody in their 20’s or 30’s should be focused on selling stocks unless they’re playing around or comfortable with gambling. And just as a quick reminder, gambling (ie – trading, aka – short-term) and investing (aka – long term) are not and never will be related.

First, let me reiterate the focus of Finance Rush: To help younger people establish their own investment strategy using a diversified range of stocks invested continuously for the long-term. With a dollar cost averaging strategy, you will almost certainly come out ahead of everyone else. Why? Because everyone else will be investing in the wrong stocks within the wrong mediums (401(k) for example).

With that said, it’s completely appropriate and natural to try to time the market for buying and selling. It’s also natural to become fearful and greedy with your investments. I always like to refer to Warren Buffett on this:

Investors should remember that excitement and expenses are their enemies. And if they insist on trying to time their participation in equities, they should try to be fearful when others are greedy and greedy only when others are fearful.

When the market crashes, it’s easy to get fearful and to think you’re suddenly losing all your money and that you won’t get it back. My father, and God bless the poor man…, became extremely fearful with his money when the market crashed in 2008 and he ended up pulling everything out. It wasn’t such a bad idea at the time… for him. He was about to retire, he had placed too much trust in the market, he was unhappy, and he didn’t want to lose everything. In some ways you can’t fault him at all. Thankfully, he put it all back in with another broker knowing that he wouldn’t need to spend the money in the next 5-10 years.

Just remember that when one of your stocks or the market as a whole experiences a significant drop, hold onto your emotions and stay focused for the long term. Laziness is your best friend in these cases. You need to ask yourself if you still believe in the stock(s) you chose (which you should 100%… otherwise you never should have bought them in the first place), and you also need to ask yourself whether you can wait for the market to come back up again.

Everybody makes mistakes. One trap I fall into regularly is the failure to admit the times I’ve chosen a loser stock. Take OSG (Overseas Shipholding Group) for example.  OSG received excellent reviews in early 2012. When the stock started to decline, I couldn’t help from thinking “buy more!!” the whole time. There wasn’t any bad news being released, so I became more and more anxious and I constantly wanted to buy more and more! Later that year, the company announced they were hiding losses in their earnings reports, and as soon as the public heard about this, the stock took less than 2 months to plummet to zero. The company went bankrupt. I should have sold everything off, but instead, my emotions got the best of me. I honestly thought the company was too big to fail and that the stock would come back up. Hah! I was dead wrong. But you can bet I learned a lot from it.

$WTW (Weight Watchers) is another example. It was poised to be the “next big thing” in 2013 with their weight loss 360 program being advertised all over during the SuperBowl. The CEO wasn’t getting very good reviews at the time, but I still ended up buying a considerable amount of their stock in January 2013.  Soon after, a news story about another weight loss company had a major effect on $WTW and the stock started to drop very quickly. Then when the CEO left, it spiraled down and down again. I held onto it longer than I should have, but I used OSG as a reminder and sold around $37/share and again at $33/share while it was still dropping. Today, the stock is selling around $22/share compared to its $80 highs. Will it go back up again? It sure could!! Should you take advantage of the low price to buy now? The question instead should be whether you fundamentally believe in the company compared to all of the other companies and options available for the same thing. I used to believe in “weight loss” and $WTW was very visible in the market at the time. The company’s program was being adopted in the business world, and everyone in America was getting fatter and fatter. It made perfect sense, and I truly believed in their business model. Several months after owning the stock, I started realizing how many ways people can lose weight using free apps on their phones, taking pills, going on diets, exercising on their own, etc. Suddenly the company’s products & services weren’t nearly as attractive to me.

In summary, don’t panic when the market is crashing. Look at a market crash as another investment opportunity and not as the time to take all of your money out. Selling should be done while the market is high, not while it is low. It’s never a bad idea to take profits off the table to invest in another safe stock you believe in more. And lastly, if a stock or the market as a whole is crashing or about to crash, try to have some money available (outside of your dollar cost averaging strategy of course) to buy in to the market. So, rather than being focused on selling, be focused on what to buy next!

Inflation is an exciting topic for me. It highlights the #1 reason why people should be investing their hard-earned money in stocks. Well, pretty much anywhere but a checking account or a savings account right now.

First of all, what is inflation… and how does it happen? — According to Investopedia:

Inflation is the rate at which the general level of prices for goods and services is rising, and, subsequently, purchasing power is falling.

The more money in the hands of people means there are more purchasers, in other words, demand is more and more…BUT the supply is less and production is less. So inflation takes place. Prices rise because everyone has the money and they are ready to pay more, and those who don’t have the money suffer (ie – your savings account!).

I never used to worry about this until a few years ago when I realized I had accumulated my first $10,000. It was sitting inside a checking account. I knew the chances of needing to USE that money in the next 5-10 years were slim since I already had a steady job and I was continually saving money, so I started talking with some friends about investing, learning about online broker accounts, etc., and that’s when I first got started. Specifically when Visa had their IPO in 2008.

The reality of inflation didn’t really hit me until I saw a chart on inflation vs. investing. (See below again, or refer to my previous blog post on the topic here.) The only reason I bring this up is to help others get started with investing on their own, because if you’re not investing, you’re losing money to inflation, and that can never be a good thing.

Thankfully, the central bank (the Federal Reserve) helps to stop severe cases of inflation, and they will usually try to maintain 2-3% inflation increases per year through using what’s known as ‘inflation targeting’. The Federal Reserve will do this through using monetary or fiscal policies. Bank rate policy is an example of a monetary policy, which happens when interest rates for loans to commercial banks increases. So,,, when inflation starts to get out of control (typically after the government prints a lot of extra money, which is what just happened in the USA and what just now recently happened in Japan), the central banks will increase the borrowing rate for loans to commercial banks. This is known as a ‘dear money policy,’ where ‘dear’ means not easy to get, or costly. The commercial banks are then suddenly less likely to give loans to people, reducing the flow of money to the public.

If it’s harder to get money because of the banks, people aren’t going to buy as much stuff, and the demand will go down, driving prices down, helping to reduce inflation.  This is great!

But it isn’t happening…. yet. Instead, recently, rates have dropped so low that it’s becoming really attractive to get loans from banks (house loans, for example). And these rates are low on purpose; The government wants people to borrow more money to stimulate the economy. In fact, in September 2012, the Federal Reserve stated that these rates will likely remain low until mid-2015. And when the central bank injects $85 billion dollars per month into the economy, the money will of course eventually reach the people, who will then use it to borrow more money, etc.

The point I’m getting at is that WHILE it’s much easier and more attractive to borrow money right now (inflation), it’s very difficult to grow your savings with a bank since the APY (annual percent yield) rates for savings accounts and CDs (certificates of deposits) have dropped so dramatically over the past 5 years (from 6% to 0.5%), which parallel the low rates for Treasury securities. The government doesn’t want you to save money when inflation occurs, they want you to spend it!

Well, let’s fight this inflation together and let’s invest our money wisely with 4 things: A Roth IRA, Gold, Dividend Stocks and Real Estate.

Before I get into these 4 separate categories, let me provide a quick summary of my thoughts on how to (in general) invest your money right now. My answer is always to diversify your money across multiple areas using dollar cost averaging. In other words, I would suggest not just looking into stocks, but also looking into gold, index funds, CDs, bonds, and real estate. There’s a time and place for all of these though, and I would never suggest putting all of your eggs into multiple baskets at once. Start with one basket if you need to or don’t have the time. And start small if you have to. Just don’t put everything in it!

With there being a correct ‘time and place’ for everything, I came across an interesting article about the upcoming inflation (or deflation!), especially with regard to Japan’s recent news (see below). And I think that if you had to choose one or two places to put your money as a starting point right now, I would choose dividend stocks within an index fund, within a Roth IRA. Just keep an eye on the averages. Gold is the next best investment, along with real estate.

Protecting Yourself From Japanese Insanity 

And for somebody who is first getting started, I think it’s important to start with a solid base (ie – $10,000 or more, if possible) and then to add incrementally onto this over time. If you don’t have that much money, that’s also not a problem!! – and it is certainly NOT an excuse to further procrastinate toward getting started.

All of this can be really overwhelming, and a lot of people don’t think they’re capable of taking things into their own hands. The excuses I hear again and again and again (and again) are:

• I don’t have the time.
• I don’t have enough money.
• It’s too risky.

These are all horrible excuses, and let me tell you why!

• I don’t have the time.

If you don’t have the time to make yourself $1 million+ dollars over time, you can always pay somebody else to do it for you, but you will be wasting your money when you can easily do it yourself. Whenever people complain about not having enough time, they will also complain that it’s too difficult, or that it takes too much effort to research the stocks, etc. The other excuse related to this is “I don’t have the interest to do it.” In fact, one of my smartest friends insists that paying his financial advisor is much better than doing it himself because he doesn’t have the time and he doesn’t think it’s worth the effort. It’s very sad, but I can tell you that it’s NOT very difficult to do this yourself, and it certainly isn’t rocket science. Most financial advisors will charge 1% on top of the fees being charged for the funds in your account. The advisor also has a lot of other clients and although they may be convincing enough to claim they have your best interest in mind all of the time, they do not. Only you do. And if you can take care of it yourself (again, very easy to do), you will save thousands of dollars a year that can be put back into your investments and compound over time. How much can you save? Let’s assume that your advisor does a terrific job and grows a $500,000 account by 10 percent per year. After ten years, you’ll have paid the advisor $83,000 in fees and your account will be worth $1,172,867. However, if you handled it yourself, without paying the 1 percent, you’d have $1,296,871, over $124,000 more than with the advisor. So it’s not just the $83,000 in fees that you’re paying. That $83,000, when put to work, turns into an extra $41,000.

[Excerpts above taken from: Why You Should Fire Your Broker]

• I don’t have enough money.

Again, a horrible excuse. Unless of course you don’t have a job and you really can’t manage your money – in other words, you’re a shopaholic, you have debt problems like nobody’s business, you don’t have any common sense, and you’re generally not interested in money at all. If you don’t fall into any of these categories, or you really would like to begin with changing things, you can start by cutting back on some expenses, and there are several online resources to help. How about seeing if you can reduce your monthly bills? (cell phone, internet/cable, etc.), check out www.billshrink.com. Or how about saving in general? – here’s a great website to help with that!! www.feedthepig.org/savingstips. Saving money doesn’t need to be painful. You don’t always need to sacrifice that cup of coffee you’re buying every day, either. A great resource for finding a side job to bring in an additional $1,000 per month is Ramit Sethi’s Earn1K course: http://earn1k.com/

All it takes to get started with investing is $100 extra per month, and you can treat it like another bill. Just $100. Money that is invested or allocated automatically is money you never see in the first place. And it’s important to pay yourself forward FIRST in order to get ahead with growing your money, and I strongly believe in that.

• It’s too risky.

This is perhaps one of the best excuses from people who are trying to time the market, or from the people who have a small time horizon to invest, in other words people who are 60+ years old. Based on the [Stocks, Bonds, Bills and Inflation Yearbook] chart above, you can see there are periods in history where stocks have dropped and didn’t recover for 7+ consecutive years. So I agree that it’s too risky if your timeline is only 5 years. In fact, I would only suggest investing in stocks if you can keep your money in the market for a minimum of 10 years. Warren Buffet once wrote, “Inactivity strikes us as intelligent behavior”, and there is a reason why he said that. Because it’s really important to be patient! So, if you’re trying to time the market, you are going to fail. But if you’re trying to maximize your savings over the next 10+ years, then it is NEVER a bad time to begin investing, and there are really no excuses. This is also where dollar cost averaging comes into play, buying continually over time to avoid buying at the wrong times. And in this case, it’s important to avoid your own emotions, investing more money when you think the market is at an all-time low, or investing less when you think the market is at an all-time high. I have problems with this. There are exceptions, however, especially during recessions when you are 100% confident that everything is “on sale”! It’s really funny though, because I’ve known people who will insist that investing in the stock market is TOO RISKY, yet they’ll blow hundreds of dollars in a casino in Vegas!

Getting back to the 4 ways to hedge inflation, A Roth IRA, Gold, Dividend Stocks and Real Estate, I will summarize each with a brief description, along with some of my thoughts & suggestions:

ROTH IRA

You can open up a Roth IRA with an online broker (see my post on online brokers here), and it really isn’t that difficult to do. In fact, if you haven’t already, I would suggest opening a Roth IRA as soon as possible. (There are a few more days to contribute to a 2012 Roth IRA before April 15th, and if you can do it NOW – it’s worth it, because you’ll be able to increase your long-term savings by several thousands of dollars as opposed to waiting another year.) I used to hear great things about Roth IRAs back in college, and there was a lot of information going around about tax advantages, which I didn’t quite understand. Moreover, I didn’t care to know any of the details since I didn’t have many financial responsibilities or a full time job. I always thought a Roth IRA was a place to put your money where you could walk away from it. Opening up a Roth IRA account was a complete mystery.

Well, after you open a Roth IRA (several sites will make this very easy… you just have to sign up first – it takes less than an hour) – and you can send me an e-mail if you want – I can help you get started – there is 1 very important next step:

Find out where to put your money!

Just putting it into the Roth IRA is not enough. I made this mistake and I always laugh when I look back…

You will need to allocate your money into stocks, mutual funds, index funds, etc. within your Roth IRA account. I would suggest reliable dividend stocks (see my previous blog post below), but if you want to take a very lazy and safe approach – then you could always invest everything into the Permanent Portfolio (PRPFX), which would give you a very nice blend of stocks, bonds, cash and gold for a “fail-safe” portfolio. There are also a number of ETF (exchange traded funds) that could help put you ahead of the game while still being safe and reliable: 7 Funds to Own Forever.

GOLD

A great place to buy gold is within a Roth IRA or another investment account through the fund known as GLD. There are other funds as well, and you can also buy gold directly from a bank if you want. Gold is a very safe vehicle for protection against inflation, and it’s especially successful during recessions. If you really think the economy is recovering, or if you really think that having your money in stocks is the better investment, then gold might not be the best solution, but let’s face it: Nobody, not even the experts, can predict what will happen in the future. Because of this, I think it is always important to have some gold in your portfolio, and it’s even better if you can add this to your portfolio when you first get started!

DIVIDEND STOCKS

I love dividend stocks – and I can never get enough of them. There is so much proof that reliable dividend stocks come out ahead. The strategy to investing in dividend stocks is simple – buy a bunch of safe stocks (blue chip) that have reliable dividends (15+ years of increasing payout dividends) and hold onto them. I would go with the ‘Dogs of the Dow’ strategy, or even better, you could use the top 10 stocks in the S&P 500 as the ‘Dogs of the S&P 500’ strategy. A quick search on Google will give you plenty of information on this. I’m a huge fan, but I also think it’s important to stay away from unusually high dividends, since this is usually a sign that something is going wrong with the company. If you do buy into some high dividend stocks (NLY, PBI, CLMT for example), and there’s nothing wrong with doing this, just be prepared to keep a close eye on them, and try to find out why their dividend is high and how long it has been high. Don’t just jump to a conclusion after reading 1 article on the internet. EH – FAIL. Never do that.

I’ve written about this several times in the past, and I’ll continue to write about this, but never underestimate the power of reinvested dividends. The effect of compound interest is incredible, especially when you continue to do it for 10+ years. Look into DRIPs (dividend reinvestment plans) with your online broker to reinvest the dividends automatically. This type of program is usually free, and it’s very easy to do. Reliable dividend stocks can be in your Roth IRA, or pretty much any investment account you own.

REAL ESTATE

Right now is a GREAT time to buy a property, or a second property if you already have one. I’m considering “refinancing” to take advantage of the lower rates myself, and there is a lot of news going around about a housing recovery. I’d like to restructure my loan to get out of my FHA loan and into a conventional 30 year fixed. The problem is that my property is worth less than when I bought it, which means I will need to pay the difference. But, I think it would be silly to NOT take advantage of the lower rates right now. I also think the housing prices will start to rebound very soon.

If you can’t buy a property directly, that’s completely understandable. REITs (real estate investment trusts) are great ways to invest in real estate through your Roth IRA, Traditional IRA, or just about any other investment account.

GOOD LUCK!