The Finance Blogger


Best short term investments for small amounts of money

April 21st, 2018 ernie Posted in Investments No Comments »

Consumers love to talk about the stocks that have increased in value exponentially. Very few actually participate and make a lot of money in these situations. But most of us cannot time the market, may be afraid to get involved in the market or just do not have the time to monitor investments like these. So what are consumers going to do, in order to make the best short term investments for them? It is actually quite simple. If you look at the debt that you currently have and you focus on paying the highest interest debts first you will actually be making a very good investment.

Best short term investments

Let’s talk about credit card debt for a moment.  The interest-rate on unpaid balances of credit card debt is typically 21% or even higher. Sure there are some credit cards that offer 7% or 10% for a short period of time. But if you carry the debt beyond that grace period, they quickly jump to 21% or higher. Now if you pay that debt off you are actually paying yourself a 21% interest-rate on any amount that you pay off. That is much better than anything you will get on average in the stock market.

Even if you have a car loan at 5%, or a personal loan at seven or 8%., most people will save themselves that interest by paying off the debt early. When the debt is repaid you have even more cash flow to utilize to pay off either debt or to buy some of the things that you really would like to have, or to set aside money for future expenses that will be of an emergency nature.

Once you have all of your debt repaid the next area of your focus is to save some money for emergencies that always show up at the worst times, and to pay yourself long term for retirement. Invest your retirement savings well, diversified, and in secure investments to ensure that your savings will be there in the long term and generate the kind of income you need when you do finally retire.

 

 

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Your home as an investment?

March 14th, 2015 prrichar1 Posted in Investments No Comments »

Your home as an investmentMany people consider their home as an investment, both for the current as well as for retirement. For many it is one of their single largest investments they will make in their lifetime when they purchase a home. However, over the last few years we have learned that investment in housing can also be risky hence the question is should you invest in housing? This really depends on whether it is your own home or an investment property that you plan to rent out. A home as an investment over the long term has proven to be one of the best.

Your home as an investment – Housing appreciation

Over the last 30 years the average home price has climbed just an average of 3.7% a year. The annual inflation rate on an average basis in that same period of time at 2.8%. This does not reflect the wide swings in both appreciation as well as in depreciation. In some years, the average house has increased by over 20% while another years it has dropped by that much and more! If you bought at the wrong time you would’ve lost a great deal of money.

Cost of maintaining a home

The cost of maintaining a home can be quite substantial. With the cost of utilities, property taxes, regular maintenance and repairs, any gain that you might earn is quickly eaten up by the cost of these expenses.

Cost of carrying a mortgage on your home

Even if you have a really low interest-rate the interest cost on a $100,000 mortgage at 4% is going to be for four thousand dollars per year. Although you need to have a place to live and would be paying rent instead of a mortgage the number suggest that your investment may not pay off as quickly as you thought.

One example of an individual living in New Jersey who owned his home over 20 years calculated that he spent $183,000 in improvement and $90,000 in property tax. He was able to sell his house for $377,000, and after taking into account what he paid for his house originally he barely walked away with any profit, even after taking into account the tax deduction for his mortgage interest payments. Of course he sold his house during a slow and if he had been able to wait he might have made more money as a market improvement. This is the issue with real estate you must be able to hold on for a long period of time to be able to take advantage of a major swing, uptick, in the market.

This is lots of food for thought for people who are planning on buying a house. It is your own property and you can do with it what you want within A reasonable level including local bylaws. When you’re renting an apartment, condo or even a house your controlled by the landlord and are very much limited by what you can do. It really comes down to a lifestyle decision with regards to buying a home however do not always assume that you’re going to make money and therefore cannot consider it an investment.

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Long Term Stock Value and Baby Boomers

December 7th, 2013 ernie Posted in Investments No Comments »

Biggest Financial MistakesWhat do you think the long term stock value impact of baby boomers is?  When baby boomers begin selling their stock and investments will this drive the value, the price of these investments down?  What is the demographic impact of aging baby boomers as they cash in their assets to pay for trips and vacations and healthcare as they get older?

There are roughly 76,000,000 baby boomers who were born between the years 1946 and 1964.  They are now nearing retirement.  As the baby boomer, we are used to fats and marketing concepts that cater to us, we are used to making change in just about everything and we are used to getting our own way about many things.  One of those things that we have done is created a massive financial savings machine in many countries which baby boomers are now going to cash in on.

Long Term Stock Value impact on the stock market?

Vacation properties, and locations were still birds like to spend their winters have seen significant increase in property values.  Baby boomers are cashing in their stocks and investments to pay for properties where they can spend their leisure time and enjoy themselves.  Locations such as Arizona Nevada and California along with Florida have seen a significant influx of baby boomers retiring.  This has driven the cost of homes, condos etc. sky high.

Are they cashing in their investments in order to pay for these properties?  In some cases this is probably true, however many boomers are very cautious and know that they will need money to ensure their comfort as they get older.  They will be investing in conservative investments and avoiding high risk venture capital type investments.  While some analysts feel that the baby boomers will cash in their investments to support their Social Security benefits, we feel the most will keep their savings for as long as they can to give them the confidence that they can weather any financial emergency.

Americans and Canadians are living longer

We’ve all heard the message, our average age is increasing and we now can look to living well into her 80s, if not into her 90s in the next 20 years.  This is causing a great deal of concern for many baby boomers since they want to make sure that their money will last them which is increasing their caution with regards to how they spend their money.

Many baby boomers will continue working simply because they have not saved enough money, or enjoyed the social aspect of going to work everyday.  Many other baby boomers will spend their time doing volunteer work and helping others who are not as fortunate.

Saving enough for retirement

The fact of the matter is that the majority of baby boomers have not saved enough money for their retirement, which will force them to continue working to live the kind of life that they prefer.  Those that have a small amount of investments will likely sell those investments early on to pay for part of the retirement.  Since most of the wealth in terms of money invested in the stock market and the bond market is from the top 25% of the population, we believe that these people will be much more cautious about how they spend their money and will not cash in their investments aggressively.

While they might have to delay their retirement, they will not cash in their investments just because they want to make sure that they have enough money to last the retirement.  Based on this opinion were pretty sure that the stock market is not going to crash or fall apart as baby boomers age.  They will also pass along some of these investments to the children who will look at this money as an opportunity to pay some bills and also to satisfy their own retirement.

Stock rallies in 2012 and 2013 have clearly indicated that the stock market is still appreciating and is experiencing little impact from baby boomers selling their investments.  Bottom line is to remain diversified, focus on blue-chip stocks, with dividend income in companies that have a history of increasing dividends every year.  Generate income from these investments and live off the income without touching your principle is probably the best advice that people can fall at this point in time.

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Do You Trust Your Investment Advisor

July 21st, 2013 Debt Posted in Investments No Comments »

Do You Trust Your Investment AdvisorWe recently wrote a post about trusting your real estate agent and why sometimes you really have to think about what they are trying to get you to do. Do you trust your investment advisor? In fact you cannot always trust your real estate agent. So we wondered if you can trust your investment adviser? What are their motives and why would they help you. Basically everyone is in it for the money, so you really have to watch for recommendations that also put money in the pocket of the investment advisor you are using.

Do You Trust Your Investment Advisor

This post is about investment advisers and whether you should trust them or not. Ninety nine percent can probably be  trusted not to scam you out of your retirement nest egg, however there have been some that are notorious and have run away with or scammed millions from unsuspecting seniors. Fortunately these are not frequent and most people are pretty careful these days to avoid scams like these. But what about the guy who is pushing stocks and collecting commissions?

Every time you talk to him on the phone or visit his office is he making suggestions to sell or buy a stock? Perhaps he feels that your portfolio needs to be better balanced and you should add a few shares or sell a few shares. Either way it is more money for him in terms of commissions! If you have good quality stocks, bonds and mutual funds that are paying interest and dividends, what is wrong with the buy and hold approach.

Advisers are notorious for suggesting that your portfolio should be well balanced to manage risk. While this is true and you really do not want to get significant out of balance in one area of your portfolio, do you need to make adjustments every time there is a slight change? We think not and perhaps an adjustment once a year is more appropriate. If you are into volatile stocks, then buying and selling, generating commissions may be appropriate as long as you are making money. Here are some questions to consider.

Questions to Ask

Have all their recommendations turned out well? Do they get you to trade often? Do they sell a lot of mutual funds to you that are front end loaded with high MER’s? If the answer is yes, maybe they are doing too many trades and collecting too many commissions! On the ridiculous side you can actually use up all of your dividend and interest gains by paying commissions and even your stock gains as well.

Most people are pretty careful, but it is important to think for yourself and not just follow blindly everything that the financial advisor is suggesting. How will you make money after you have paid all of the charges? How long will it take to make a profit? How much risk is there associated with each purchase? Are these safe blue chip stocks that pay a good dividend? There are a lot of questions and we think that it is always a good idea to develop your own list of questions based on what is important to you and your objectives. Run the stock trade through each of these questions each time you plan to make a trade or your advisor suggests a trade.

Run Away

This is probably one of the best ways to protect yourself and avoid being scammed. If it does not feel right, then just do not do it. There is never any rush, even though they tell you that there will be never an opportunity like this one. If you are getting that story, then you probably should be running the other way!

For more general topics on investments, click here.

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