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  • The median age in the U.S. is 36.8
  • The median income in the U.S. is $51,939
  • The average 401k match is $1 for $1 up to 6%

A 36.8 year old investing 10% of their $51,939 income with a $3,116.34 match:
With just average stock market returns of 10% would have $1,114,479.31 by retirement.

Join 13,800+ other readers who have learned how anyone, even beginners, can easily make this desire a reality. Download the free ebook: 7 Steps to Understanding the Stock Market.




Investing for Beginners 101: 7 Steps to Understanding the Stock Market

Welcome to this 7 step guide to understanding the stock market. I’ve created this easy-to-follow Investing for Beginners guide to simplify the learning process for entering the stock market.

By leaving out all the confusing Wall Street jargon and explaining things in simple terms, I’m hoping you’ll find this as the perfect solution, if you are willing to learn.

Before we get started, here is a breakdown of the 7 categories for the official Investing for Beginners guide.

1. Why to Invest?
2. How the Stock Market Works
3. The BEST Stock Strategy and Buying Your First Stock
4. P/E Ratio: How to Calculate the Most Widely Used Valuation
5. P/B, P/S: The Single Two Ratios Most Correlated to Success
6. Cashing In With a Dividend Is a Necessity
7. The Best Way to Avoid Risk, and Putting it all Together!!

Why is investing so important?

Let’s imagine a life without investing first. You work 9-5 for a boss all your life, maybe get a couple raises, a promotion, have a nice house, car, and kids. You go on vacation once a year, eat out regularly, and attempt to enjoy the finer things in life as best you can.

Now since you haven’t invested, you get old, become unattractive for hiring, and live with a measly social security allowance for the rest of your life. You might’ve made good money when you were young, but now you have nothing to show for your lifetime of work.

Now let’s say you did save some money for retirement, but again this money wasn’t invested and won’t be invested.

Let’s even stay optimistic and assume you saved $1400 a month for 26 years. This would leave you with $403,200 to live on, which on a $60,000 a year lifestyle would only last you 6.72 years. You’re retiring at 65 only to go broke at 71 and you’ve been a good saver all your life.

Well then what’s the point of saving you may ask? Now let me show you the same numbers but add investing into the equation.

The Power of Saving + Investing

Again, lets say you saved $1400 a month for 26 years. BUT, this money was invested continuously as part of a long term investment plan, solid in the fundamentals you learned from this investing for beginners guide.

Now, including dividends in long term stock market investments, I can confidently and conservatively say that you can average a 10% annual return on these investments.

The same $1400 a month compounded annually at 10% turns your net worth into $2,017,670.19 in 26 years!

But the story gets even better.

With this large sum of money at your retirement, again conservatively assuming a 3% yield on your dividends, you can collect $60,530 a year to live on WITHOUT reducing your saved amount.

investing for beginners

Answer: Compounding Interest

By letting the power of compounding interest assist you in saving, you leverage the resources available in the market and slowly build wealth over time.

It’s not some mystified secret or get rich quick shortcut; this is a time tested method to become wealthy and be financially independent, and it’s how billionaires like Warren Buffett have done it all their life.

For those who don’t want to think about tomorrow, I can’t help you. But tomorrow will come, it always does.

Would you rather spend the rest of your life with no plan, dependent on others and unsure of your future? Or would you rather be making progress towards a goal, living with purpose and anticipating the fruits of your labor you know you will one day reap for years after you sow?

The choice is yours, and only YOU will feel the consequences of that choice.

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The Best Free Value and Dividend Stock Screeners Compared: Example Screen

The competition for which tool is the best stock screener is intense. Like brokers—there’s many to choose from. Because I’m a proud dividend value investor, I want to compare some of the most popular free value and dividend stock screeners to see if there’s an overwhelming favorite.

An easy way to do this is by running an example screen. Let’s consider a popular screen, a Peter Lynch “Fast Growers” screen that is run by value investors and DGI (dividend growth investors). I’ll provide the initial feedback and make observations as we run it through these stock screeners.

An obvious criteria before we start is that these tools must have an option to screen for dividends and value stocks.

The value component is expected—any stock screener with fundamental analysis data is almost guaranteed to include it. But if a value stock screener doesn’t have the option to sort for dividends, we won’t include it.

Last note before we get started: I have to admit that out of all the stock screeners on this list, I currently only use Finviz, so I might be a little biased.

However, since we’re going to just run some example screens and make our observations, I will try to be as fair in my conclusions as I can be as we search for the best dividend stock screener tool on the web.

Peter Lynch’s Fast Growers Screen

  • Market capitalization
  • 5 Year EPS growth
  • Current ratio
  • PEG ratio
  • P/E ratio
  • Debt to Equity ratio

For each dividend stocks screener that we examine, we will check to see if these options are available to run, and how detailed each screener allows you to go.

Dividend Stock Screener Criteria (yes/no)

  1. Dividend Yield
  2. Payout Ratio

To quality as an adequate dividend stock screener, we want to ensure that a screener also includes these 2 options as well.

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IFB99: How Acquisitions, Goodwill, and Divestitures All Work Together

Announcer:                        00:00                     You’re tuned in to the Investing for Beginners podcast. Finally, step by step premium investment guidance for beginners led by Andrew Sather and Dave Ahern to decode industry jargon, silence crippling confusion and help you overcome emotions by looking at the numbers, your path to financial freedom starts now.

Dave:                                    00:36                     All right folks, welcome to the Investing for Beginners podcast. This is episode 99 tonight we are going to talk about a stock that Andrew recently had some bad walk with and has sold. And we’re going to talk a little bit about some of the lessons that he learned from his investment with this company, including things like activist investors, divestitures and board resignations, and how those can affect what happens with a stock. So Andrew, why don’t you go ahead and tell us about the company and a little bit about your experience.

Andrew:                              01:08                     Yeah, sure. So I think when you talk about stock picks from the past, it’s much more useful to talk about your mistakes rather than your successes. Um, we can, we can all buy stock. I can go out for a multitude of reasons, but you know, if you can look at how you kinda messed up and maybe you can avoid that in the future and maybe some people can kind of recognize a situation like this and maybe stay clear or in the case of, of my, like my personal kind of experience with this and the way that maybe I wish I would have played it is I would have waited longer to, to get into this stock because it was clear that the fallout from the stock hadn’t completely finished. And so I’m keeping this stock on my radar and I’m watching to see how it progresses.

Andrew:                              02:04                     I’ll talk a little bit more about the details as we go along here, but it’s one of those where I would have wished for the dust to settle kind of a thing before, before I bought and one that’s a hold it. So it was by no means like a portfolio killer. I lost maybe 25 to 30% think a lot. So I’ve definitely had gains that have more than made up for that. But, uh, it’s still something that you still want to examine your mistakes and try them group from home. So the stock I’m going to talk about today is Noel brands, ticker symbol and w l. So one of the brand or one of the type of stocks that I really like to purchase, it has, you know, the brand names. It was one of those that kind of picked up a lot of different brands.

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What makes a Good Income Stock, and Are They Better than Growth Stocks?

An income stock is appealing to investors thinking about retirement because they can provide a consistent stream of income and are seen as more safe investments.

But, not every income stock is built the same.

Some income stocks end up being much better investments than others, and how investors can determine the difference often depends on how much they understand about what makes a good income stock and how they understand investing in the stock market in general.

Let me talk about the basics so that you can spot the difference between a good income stock and bad income stock, and hopefully point you in the right direction to achieving better returns for your income portfolio.

What’s an Income Stock

When you hear the words income stock in the stock market, the overall definition is any stock that pays a dividend. A dividend is simply an income stream on your investment.

The way that dividend payments are expressed in the stock market are through yields. A yield is the percentage of income you will receive if you buy a certain stock right now (at the price it’s currently trading at).

Let’s say you buy a stock that is currently trading in the stock market at $100, and it pays a $3 dividend. Since you need to invest $100 to get $3 in dividends per year, that investment is considered having a 3% yield ($3 / $100) = (0.03) = 3%.

The stereotype about income stocks is that they are “boring”, in mature industries, and have little potential for growth.

That’s absolutely not true, but it’s the reason why you’ll often see them trading at less expensive prices (lower P/E ratios).

Note: A P/E ratio is one of the most common ways to determine whether a stock is cheap or expensive, but it’s not the only way. Learning about P/E ratios is beneficial, as they help us understand the general difference between many income stocks and growth stocks.

Are Income Stocks Better or Worse Than Growth Stocks?

When you hear about income stocks, you’ll often also hear about growth stocks and how they are seen as the counter opposite to each other.

A growth stock is generally a company that it is in the beginning stages of its life on Wall Street, and often doesn’t pay a dividend because the company is so concerned with reinvesting their profits for higher growth.

Investors seeking income often shy away from growth stocks because they usually offer little or no yield.

Now, while it’d be nice to say that either growth stocks or income stocks are better than the other, that’s not really the case.

With growth stocks, you tend to see stocks that are very expensive compared to what they are currently earning in profits.

Some of these expensive stocks (and their high P/E ratios) end up being worth the price as they continue to skyrocket from superior innovation and business success.

However, the thing about growth stocks is that most don’t justify their high prices and eventually see their share price crash or their business completely fail.

It’s for that exact reason that I generally prefer an income stock over a growth stock, all things being equal.

A stock that is in a financial condition where they can afford to pay a dividend often have a stable and proven) business model that should continue to be profitable and thus continue giving the investor and income stream that even grows over time.

In fact, and this runs against what many people on Wall Street generally believe, you can find businesses that have the characteristics of both an income stock and a growth stock—and it’s happened many times before.

Some smart managements out there understand that investors should receive an income for their investment even while a company is growing their revenues and profits, and do pay dividends even as rise through their “growth stage”.

I’d like to show you some ideas for how you can find both.

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Budgeting for Beginners: An Easy 5-Step Plan to Making a Budget in Excel

One of the most common things that I hear from people is “I don’t have any money”.  The advice from most personal finance people is “just budget”, but there’s countless “budgeting for beginners” templates that are anything but for beginners. It’s not helpful to someone just starting out.

So I’ve written this guide. If you like Excel and making spreadsheets, you’ll probably like it. This is how I personally manage a budget and how I’d recommend many beginners to budgeting and personal finance to start.

So, if we really examine why most people have any money… we can come up with some observations…

I oftentimes see my friends blow money mindlessly and then when it comes time for them to do something to benefit themselves, they claim to not have money.  I know people that will go out and spend hundreds of dollars at restaurants, at bars, on sporting tickets, video games, and other unnecessary items but claim that they are not able to save money each paycheck. 

When it comes down to it, this is nothing more than an excuse.  I used to be one of these people.  I was in awful credit card debt when I was in college, but I did the best thing that anyone can do…

Stop.  Spending.  Money.  Mindlessly.

I sat down, confronted my fears, and wrote down everything that I was spending money on.  You know that person I described earlier?  That was me.  Nowadays I have different priorities. 

Before my money even touches my checking account I have already had part of my check direct deposited into my savings account, my 401k, my Roth IRA and my Brokerage account. 

Those four accounts are never touched as all my bills and “fun money” are used from the remaining funds in my checking account.  A number one way that I was able to grab control of my finances was to begin budgeting. 

I tried many ways and failed, but it’s not how many times you fail, it’s that you continue to get back up and keep trying.  I finally found a method that works for myself and I think it will work for you too.  Below are five beginner steps that I followed that really helped me get a hold of my spending habits:

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IFB98: Why You Shouldn’t Be a Lone Wolf Investor

Announcer:                        00:00                     You’re tuned in to the Investing for Beginners podcast. Finally, step by step premium investment guidance for beginners led by Andrew Sather and Dave Ahern, to decode industry jargon. Silence crippling confusion and help you overcome emotions by looking at the numbers. Your path to financial freedom starts now.

Dave:                                    00:36                     All right folks, we’ll welcome to the Investing for Beginners podcast. This is episode ninety-eight. Tonight we’re going to talk about why you shouldn’t be a lone wolf investor. And I’m going to have Andrew kind of take us from there. All Right, Andrew, why don’t you go ahead and chat.

Andrew:                              00:50                     Yeah, I love it. So maybe I’m recording this because this is something I need to tell myself more than anything else. Having people around and having them influence your life can do a lot of things for you. Very, very well. They say the five people closest to you are the most important because they impact how you live your life and the big, big way. So I, I kind of present this topic and this idea based on some personal context. I guess I didn’t mean to get like super personal, but there’s a saying that as you get close to the turn of a decade you start to make big moves, right? So we’re here close to the end of 2020 and that full decade before.

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How to Calculate Altman Z Score from a Company’s Balance Sheet and 10-k

For investors looking to limit downside risk, the Altman Z Score can be an excellent formula for determining the true strength of a company.

What makes this risk management tool so great is that it focuses almost exclusively on the financials of the business, rather than how Wall Street perceives it through price action. This is in contrast to other risk management tools such as trailing stops or momentum indicators, which could be based more on emotion rather than business financial reality.  

In this post, I’ll go over both the positives and the limitations of the Altman Z Score by breaking it down into each of its 5 formula categories. I’ll also show you how to calculate the Altman Z score exactly by using a real life balance sheet and 10-k as an example.  

Has the Altman Z Score Formula been successful in calculating risk in the past?

This formula was published in 1968, and so we have a long period of time to evaluate its track record through various bull and bear markets.

Perhaps its strongest piece of supporting evidence was the fact that right before the financial crisis of 2008 the median Altman Z score formula across the stock market was 1.81. As we now know, the following years were troubling for many companies.

Various financial websites and blogs have posted that the Altman Z score formula has had an accuracy rate as high as 90% for bankrupted companies.

In an interesting report draft that was published online about the Altman z score’s results in the UK from around 1979 to 2003—using a modified UK version z score that was published around the beginning of that time period (1977) by Agarwal and Taffler.

In this UK version, a z score below 0 was indicative of high risk, while one above 0 was generally considered a signal of strength. Interestingly, one of the tables in the report draft reported a total failure rate for z<0 at 3.2, while the failure rate for z>0 was 0.1.

This seems to prove there’s strong evidence for the validity of the Altman Z Score formula due to its track record across time periods and even countries.

But, we know that no single metric is perfect, and we must examine the possible limitations for the Altman z score formula in any of its 5 formula categories.

How to Calculate the Altman Z Score

The Altman Z Score formula is 5 ways—I’ve denoted each with a “z” before the number. Each formula category can be examined with the following financial statements:

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How Most Total Return Calculations Don’t Report An Investor’s True Results

The returns in the stock market and an investor’s actual total return can be very different. If the investor plays his cards right, his total return could actually be better. In fact it should be. Let’s discuss why.

An investor wanting to calculate total return is simply trying to calculate his return on investment or ROI.

If I have $10 and I turn it into $14, I made $4 on my $10 and that $4 is my ROI. To convert that to math terms, we just take the two numbers and express them as a percentage (4/10 = 40% ROI).

When it comes to the stock market, the ROI calculation becomes a little more difficult. Because the prices in the stock market are changing almost every day, an investor’s total return, or ROI, also changes almost everyday.

It doesn’t really make sense to calculate that everyday, so many investors calculate total return on a yearly basis.

Calculating Total Return with CAGR

Another way this is commonly expressed (in the stock market) is with the acronym CAGR, which stands for Compounded Annual Growth Rate. CAGR tries to calculate total return but over a period of many years, and then express it on a per year basis.

For example, knowing I made 10% per year (CAGR) over 15 years gives me a lot more context than a 280% ROI over 15 years—even though both calculations mean the same thing.

Having an annual comparison allows us to compare things apples to apples and also compare it with everything we hear about the stock market, as the news and media often report on total return as a per year number.

Before we can move along with a practical way for the average investor to calculate his/her total return, we have to understand that there’s another factor that contributes to total return: dividends.

You might hear of dividends expressed as yield, and that’s because yield is just a way to tell you how much income you receive from an investment as a percentage. For example, if I make an investment for $100 and it pays me $2 per year in interest, then I have a 2% yield [(2/100) x 100].

With the stock market and dividends, yield is calculated the exact same way—just substitute the words “make an investment” with the words “buy a stock” and “pays me a dividend” instead of “pays me interest”.

The way that yield relates to total return is that it enhances it, and enhances it a lot if you are reinvesting that yield.

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How to Use Net Tangible Assets from a Company’s Balance Sheet

Part of balance sheet analysis is understanding the intricacies behind each asset and what they represent. Net tangible assets can be a very useful metric for evaluating a company’s future profitability, especially in capital intensive industries.

In this blog post, I’ll explain the basics behind net tangible assets and include a few easy and practical metrics for it.

Then we’ll discuss a bit of the history behind the metric and how this applies to how investors should consider valuing assets like these—amidst today’s economic environment that is increasingly depending on the internet.

To understand net tangible assets, you might understand its two parts: the net assets part and the tangible assets part.

Net assets is simple. It’s just like the term “net worth”. To calculate net assets, you simply take total assets and subtract total liabilities. In a balance sheet, net assets is the same as shareholder’s equity or book value.

The “tangible” definition of an asset is needed because not all assets are created equally. Nor is every asset valued equally.

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Important Balance Sheet and Income Statement Metrics for Analyzing Stocks

There’s many differences between the consolidated balance sheet and income statement in a company’s 10-k, and the vast number of figures in there can make them confusing for the investor just starting to analyze stocks.

In this blog post, I will help you separate the wheat from the chaff.

Let’s talk about the basics behind what the balance sheet and income statement are reporting about the profitability and overall long term health of the business.

Instead of looking at a sample balance sheet and income statement and trying to learn it all at once, I will show you the whole thing then narrow it down to what I feel are the most important metrics to uncovering how the business is performing.

Balance Sheet vs Income Statement Basics

The easiest way I can describe each statement is by relating them to your personal finances.

If any of you like to track your net worth, watching your debts as they relate to your assets like your house, then that is exactly like a company’s balance sheet.

A balance sheet for a major corporation in the stock market might have certain assets that are specific to running a business, such as inventory or accounts receivables (sales that are made but haven’t turned into cash yet), but other than that a balance sheet at its core tells you what a company’s net worth is.

The income statement is very similar to the paycheck you receive from your job. At the very top is your gross, and this is like a company’s revenue. Then taxes are taken out, to arrive at your take home pay which is your net income.

Like an individual person has, a corporation has a net income figure that is calculated after taxes, but it also includes the expenses it takes to run a business—such as the cost to have employees and the costs of buying parts to create inventory.

Like with a person, we can tell the general financial condition of the entity simply by looking at the balance sheet and income statement.

If someone were to have lots of credit card debt and a small paycheck, it’s pretty safe to say that they won’t become Bill Gates anytime soon.

On the flip side, someone with large retirement accounts (which shows as assets) can raise their net income quite substantially by taking that income from investments rather than reinvesting it—and that person also has much less of a chance at going bankrupt if they lose their job.

We can do this with public corporations, and this process of looking at the balance sheet and income statement can help immensely when considering whether we want to invest in these companies through the stock market.

You might think this is common sense, but you’d be shocked at how many people don’t look at the balance sheet or income statement, or even both, when buying stocks. It’s obvious because they’ll buy stocks with terrible financials in either statement, and these type of stocks can sometimes be the most popular, expensive, and highly valued on Wall Street.

Common sense isn’t common.

Now let’s look at a sample balance sheet and income statement, then I’ll show you how to narrow down the key figures to arrive at the overall health of a business. You don’t have to know or learn all of them.

Then I’ll show you a few practical metrics you can use to analyze these two financial statements and pick stocks that are more financially healthy and thus more likely to succeed.

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Will a Finance Degree, Major, or Certification (CFA, MBA) make me rich?

The public perceptions about people with a finance degree and the realities of finance careers can sometimes be vastly different. Even students studying for a finance major might not realize what going into finance really entails. Then once you have the degree, you might wonder if a professional certification like the CFA or an MBA makes sense.

I don’t have all of the answers, but hopefully I can point you in the right direction so that you can solve them for yourself.

finance degree

One thing is certain about finance—it’s not what “they” think, and a finance degree can take you in a million different ways. Luckily, these days there’s a ton of great resources to help you build a solid financial career path such as r/financialcareers and Wall Street Oasis.

I don’t know how you got interested in finance in the first place. Maybe you really love numbers. Maybe the business world fascinates you. Maybe you’re an A-type personality who loves the thrill of working hard and seeing major results. Maybe you’re just drawn to the glitz and the glam. Maybe you like FinMemes. Maybe you just love money, and want more of it.

It we can be really honest with ourselves, we’d all like a little more money—and a great finance career can be a way to get there.

Here’s the thing. Studying for a finance degree and learning how to build wealth are actually 2 completely different things. Luckily for those with a finance degree (and especially a finance certification like the CFA), what you learn from studying about finance can also transfer over and help you a lot in building wealth. This is unique to finance that’s not a characteristic in other fields—a doctor doesn’t get to study about assets and ways to value them while in medical school, and so he might not put two-and-two together that he needs to build personal assets with that large income of his.

But here’s the bad thing about finance. As you take that finance degree and start towards a career path, you will get really good at your slice of that world (whether that’s Private Equity, Investment Banking, M&A, etc) but that won’t necessarily translate to building wealth.

Just as there are many heirs who blow their inheritance and squander family wealth, as someone working in finance you could take that gift of a great income and completely waste it in your best working years, and sometimes… it’s not even your fault.

The Truth About Finance Degrees

Truth of the matter is that most finance degrees or certifications won’t teach you about the personal side of finance and building wealth, it’s kind of expected to be common sense.

But while a finance degree might get you into Wall Street, it might not lead to you personally using Wall Street in the best ways to get yourself rich and not just your bosses. Just like the businesses on Wall Street buy more assets to earn higher profits, you need to buy assets to build income streams for yourself.

Here’s what you should know about building wealth.

Contrary to public perception (again), it’s not about hitting the jackpot on a penny stock or day trading yourself to death like a wolf of Wall Street. While people certainly do build fortunes overnight on Wall Street, most successful and financially comfortable people build their wealth slowly, over time.

And this is because of compound interest. As someone with a finance degree, this is something you should absolutely learn—especially if you’re just starting out and studying with a finance major at the moment.

The way compound interest works is that it’s all about money making more money. On Wall Street, this is the closest thing you’ll get to a free lunch.

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